RE: Enfolio Master Firm Purchase/Sale Agreement

Thanks, Dan. I've scanned and they look good to me, but I'll pass on to my
client for the final say-so. I believe we can get this done fairly soon.
Grant.

-----Original Message-----
From: Dan.J.Hyvl@enron.com [mailto:Dan.J.Hyvl@enron.com]
Sent: Thursday, March 22, 2001 2:36 PM
To: grant_kolling@city.palo-alto.ca.us
Cc: Kim.Ward@enron.com
Subject: RE: Enfolio Master Firm Purchase/Sale
Agreement

Grant,
Sorry for the delay in responding to your additional
inquiries.
7. Re 4.2(iv)(b) - I would propose the clause to
read: "(b) file a
petition or otherwise commence, authorize or acquiesce in
the commencement
of a proceeding or cause under any bankruptcy or similar law
of the
protection of creditors, or have such petition filed against
it and such
proceeding remains undismissed for 30 Days, provided if a
petition is filed
against the Affected Party and the Affected Party is
actively pursuing all
steps to have such proceeding dismissed and provides the
other party with
reasonable documentation supporting its actions to cause
such proceeding to
be dismissed, then such Affected Party shall have an
additional 30 Days to
effectuate such dismissal,"
8. Re 4.2 (v) and 4.2 (vi) - "20 or more Gas Days"
is acceptable.
13. I will change the definition of "Act" as you
suggest.
21. I propose that language be added whereby the
parties shall first
attempt to settle the matters to be resolved by the use of
binding
Arbitration by mon-binding mediation and if that does not
resolve the issue
to the satisfaction of the parties, such matter shall
thereafter be
resolved by the use of binding Arbitration. Is this an
acceptable
resolution?
22. We cannot agree to any list of parties who are
authorized to
enter into transactions under the contract. Our position is
that whoever
answers the trading phone during trading hours is authorized
to bind the
company. However, we will provide the City with an initial
contact list of
the people on the trading floor whom the city can contact as
of the date
the contract is signed; however, the persons who are
authorized to enter
into a transaction with the city will not be limited to the
initial contact
list. Of course, the city could always attempt to contact
someone on the
initial contact list. Will an initial contact list be
acceptable?

Please let me have your thoughts concerning the above.
Dan.

"Kolling, Grant"

<grant_kolling@city.palo-a To:
"'Dan.J.Hyvl@enron.com'"
lto.ca.us<
<Dan.J.Hyvl@enron.com<
cc:

03/16/2001 05:09 PM
Subject: RE: Enfolio Master Firm

Purchase/Sale Agreement

Dan, please accept my apologies for replying so late. I was
out of town
again, and am back at trying to complete 5+ days of work
within 3 days.

Thanks for accepting a lot of our requests. Let me follow
up with a couple
of additional inquiries.

7. Re 4.2(iv), please suggest language as you've indicated
in sentence 2.
Anything along the lines you've proposed likely will be
agreeable.

8. Re 4.2(v) and (vi). How about 20 days?

13. Definition of "Act." I suggest you refer to Article 11,
sections 5 and
9 of the California Constitution, to be more specific.
Section 3 is not
regularly cited as the line of authority to the best of my
knowledge,
though
I can see how the language could lead one to cite it.

21. In California, the concept of binding mediation is not
recognized, if
I
have understood our outside counsel at prior mediations in
which I've
participated. Mediation is non-binding. As a practical
matter, it can
cost
almost as much in terms of time, money and effort to proceed
to mediation,
but the "rules of engagement" are not as tight as are found
in arbitration.
We avoid the rigid procedures. I believe Enron should
consider this
approach at times. Having gone through a couple, I would
not recommend to
my client that we would proceed any further once the
mediator makes a
proposal that's acceptable to the parties. The cost of
arbitration is not
worth it. That's why we in California tend to prefer
mediation to
arbitration.

22. I have to insist on behalf of my client that we
assemble some list.
Surely, Enron can submit a list of people that will be
initially approved
to
engage in authorized transactions. We can do the same.
We've had an
unfavorable experience with another Texas-based
energy company regarding the scope of its representative's
authority. We
don't want to litigate the issue of due authority. That
list would help
It's not a matter of the city claiming the authority to back
out of the
contract, because someone arguably didn't have the
authority. There are a
ton of cases which would make it extremely difficult to make
that claim.

Thanks. Grant.
-----Original Message-----
From: Dan.J.Hyvl@enron.com
[mailto:Dan.J.Hyvl@enron.com]
Sent: Thursday, March 08, 2001 3:13 PM
To: grant_kolling@city.palo-alto.ca.us
Cc: Kim.Ward@enron.com
Subject: RE: Enfolio Master Firm Purchase/Sale
Agreement

<< File: 2001-002ctr.doc << << File: 0071988 RESO
Enron.doc
<<
(See attached file: 2001-002ctr.doc)

Grant,
I have reviewed your requested changes and
have made
the changes which
do not require explanation or clarification.
Those changes
are reflected
in the above document. Let me go over your list
of items:
1. I have deleted the word "DRAFT".
2. I have left a blank for the date within
the month
of March 2001
when the contract would be executed by the City.
3. I have changed the word "may" to
"shall".
4. Maximum Daily Delivery Point Quantity
does not fit
in a
Deficiency Default, it is just the maximum
quantity that can
be handled by
a party at a particular point. I do not think
their is an
omission.
5. I have added the word "reasonable".
6. The procedue for how the Termination
Payment is
determined is
provided, if the City disagrees with the method
and values
provided in the
statement and is unable to convince the Company to
revise,
the statement,
then the issue is to be resolved in arbitration.
At the
point that a
Termination Payment calculation is necessary, a
long drawn
out period
should not be necessary to attain closure.
7. We need to limit the duration to 30
days, neither
party should
be required to wait 60 days before it could
accelerate the
other party's
obligations under the Contract. We might be able
to add
language to extend
the period if we had some documentation stating
the steps
that a party was
pursuing to cause the proceeding to be dismissed
and the
other party was
otherwise kept whole from a credit exposure.
8. I have kept the 30 days because 5 days
is too
short a period.
During a holiday period, one scheduling error
could cover
the entire
period. Article 3 has language which provides a
remedy for
a party if a
scheduling default extends for more than 5 days
during any
month.
9. The reason is because Enron Corp. is the
rated
entity and no
separate rating applies to ENA.
10. I have changed "a" to "the"
11. I have eliminated the 60 day limitation
on the
duration of an
event of Force Majeure.
12. This merely addressed the possibility of
a
imbalance amount being
due when a pipeline aggregates imbalances using
multiple
points, and the
language would allocated the payment based on the
amount of
the imbalance
that a particular party may have caused. I think
the
language is clear as
written.
13. The definition of Act was one of the
items that I
had requested
that you review and complete as necessary so that
all
appropriate statutes
were referenced. I am still waiting for your
language. I
started filling
it in using language that had been provided by the
City.
14. I added the word "reasonable".
15. I have made the requested change
relating to
GAAAP.
16. This is a late payment provision and as
such a
believe that the
provision should be more than a party's rating, as
such I
have kept the 2%
over prime language.
17. These amounts were determined by the
credit group
and any change
needs to be discussed with that group. BBB- is
considered
investment
grade and I understand that Enron Corp.'s rating
is BBB.
ENA is not a
rated entity and that is why the language relates
to Enron
Corp.'s rating.
18. The elimination of the opinion of
counsel did not
change the
requirements relating to the representations that
we expect
the City to
have made. If the City cannot make these
representations,
then we need to
know that before we execute the Contract.
19. I have added the word "reasonable".
20. The party that has the Transport
Agreement with
the Transporter
should have the legal right to obtain the
information based
on its
contract.
21. It is our position that any dispute be
arbitrated.
We can agree
to meditation if we can make the outcome binding
on the
parties. I am
willing to discuss any changed language that you
might care
to offer.
22. We have found that personnel of both our
Company
and that of our
Customers change so rapidily that the list is not
workable
and merely
allows a party to back out of transactions it does
not like
on the basis
that the person who agreed to such transaction was
not on
the list.
Therefore , we object to any listing of approved
parties who
can transact.
We believe that each party should be responsible
for the
actions of its
employees and should stand behind any transactions
that
those parties may
enter into pursuant to the terms and provisions of
the
Contract.

I will be out of the office on Friday, but
will be in
all next week if
you care to discuss any of these matters.

"Kolling, Grant"

<grant_kolling@city.palo-a
To:
"'Dan.J.Hyvl@enron.com'"
lto.ca.us<
<Dan.J.Hyvl@enron.com<, "Kolling, Grant"

<grant_kolling@city.palo-alto.ca.us<
03/02/2001 03:43 PM
cc:
Kim.Ward@enron.com

Subject: RE: Enfolio Master Firm

Purchase/Sale Agreement

<<0071988 RESO Enron.doc<<

Dan:

First, I've attached the proposed resolution which
authorizes the City
Manager to execute the Enfolio agreement.

More importantly, I need to inform you that our
senior
management has
reviewed the referenced contract; I have been
asked to
present additional
changes to the agreement for Enron's consideration
and to
raise questions
about certain of its terms and conditions.

Let me start from page 1, top to bottom, and
proceed to the
end of the
exhibits.

1. There is the word "DRAFT" above the title of
the Enfolio
agreement
which
should be deleted.

2. The introductory paragraph, line 5, should not
contain
the words "1st
of
January, 2001." It should be left blank, until
the parties
have signed the
contract. Otherwise, the City will be in breach
as of the
date it signs
the
contract, because Article 2, section 2.1 requires
the City
to proffer the
to-be-approved-by-Council resolution as of 1/1/01.

3. Article 2, Section 2.4, line 2. The City
(Customer)
wants Enron
(Company) to confirm every recorded telephonic
Transaction,
as defined.
Therefore, the City requests the word "may" should
be
changed to "shall."

4. Article 3, Sections 3.1 and 3.2, first
sentence:
Buyer's Requested
Quantity refers to the DCQ or MaxDQ. Seller's
failure to
Schedule the
Buyer's Requested Quantity shall constitute a
Seller's
Deficiency Default.
How does a Maximum Daily Delivery Point Quantity
fit into a
Seller's
Deficiency Default if the Buyer's Requested
Quantity does
not include a
Maximum Daily Delivery Point Quantity? What is
the reason
for the
omission?

5. Article 4, Section 4.1, lines 15 and 23: Line
23 refers
to "reasonable
attorneys' fees" yet line 15 refers to "attorneys'
fees."
To be internally
consistent, line 15 should say "reasonable
attorneys' fees."

6. Section 4.1, right hand column, lines 3-4. A
statement
showing the
determination of the Termination Payment will be
prepared.
It's unclear
whether the City is entitled to review and
challenge the
determination
before a dispute is referred to arbitration. The
City
should be entitled
to
receive a copy of the determination and to
question it
before it is
obligated to pay the Termination Payment. Please
clarify,
or permit the
City to exercise these rights.

7. Section 4.2(iv) specifies that a Triggering
Event will
exist if a
bankruptcy petition is undismissed within 30 days.
Is this
(under
bankruptcy laws) the minimum period of time within
which one
may seek
dismissal of a bankruptcy petition? Please refer
to the 11
USC section
that
backs up this provision, or change to 60 days.

8. Section 4.2(v) and (vi): Please change "30
days" to "5
days." The
City
is concerned with the number of days that Enron
may be
permitted to fail to
Schedule before a Triggering Event is triggered by
Enron.

9. Section 4.2(ix): this language discusses a
default by
Enron Corp.
(ENA's parent?), but no mention is made of ENA's
default in
this regard?
Please explain.

10. Section 4.5, line 4: Is "a Company" supposed
to refer
to "the Company"
?

11. Article 5. The City is uncomfortable with the
force
majeure provision
as drafted. It states that the parties must
perform even if
a FM event
(earthquake) would prevent either or both parties
from
performing with the
60-day period stated therein. There is no such
limitation
under California
law in the absence of a contract provision to the
contrary.

12. Article 7, Section 7.2: Could Enron
translate the last
sentence? We
don't understand it.

13. Appendix "1": Act: Please explain why
Section 3 is
referred to?

14. Appendix "1", Claims, line 4: Please add
"reasonable"
before
"attorneys' fees.

15. Appendix "1", GAAP: This should read: "GAAP
means
generally accepted
accounting principles, consistently applied, with
respect to
Company, and
governmental generally accepted accounting
principles,
consistently
applied,
with respect to Customer."

16. Appendix "1", Interest Rate: Please delete
"two
percent over". The
City has a AAA bond rating, therefore, the City
believes
the 2% over prime
should not apply to it.

17. Appendix "1", Material Adverse Change: What
does Enron
believe the
City's Net Worth to be? The $400 million
threshold is
mentioned. Also,
what is ENA's bond rating? Is "BBB-" an
investment grade
rating?

18. Representations and Warranties: Because we
have agreed
that the
opinion of counsel will not be required, the reps
and
warranties are being
deleted. But the "Representations and Warranties"
is
nevertheless included
in the agreement. Item (i) should be deleted,
because the
City has not
undertaken a court search as is our custom and
practice
whenever we issue
an
opinion. We would like to delete "and (vii) it is
not ...
Party."

19. Operational Flow Orders, line 8: Please add
"reasonable" before
"attorneys' fees."

20. Financial Matters, line 8: What is meant by
"to the
extent it has a
legal right of access thereto and/or ...etc."

21. Arbitration, Disputes to be Arbitrated. We
do not as a
matter of
legal
policy agree to arbitration, but we will mediate
disputes.
Is Enron
amenable to mediation? This process is less
formal and less
costly in my
opinion.

22. Authority for Transactions. Staff would like
the
Agreement to include
a list of employees for Company and Customer who
are
authorized to trade on
behalf of their employers. Could a statement be
added to
this section to
this effect? Then, we could attach the list(s) as
an
Exhibit C.

Thank you so much for considering these issues.
There are
others which I
hope to receive from staff next week and which I
will
forward to you for
response.

Look forward to hearing from you soon. I will be
out of
town after today
until Wednesday, March 7.

Sincerely,

Grant Kolling
-----Original Message-----
From: Dan.J.Hyvl@enron.com
[mailto:Dan.J.Hyvl@enron.com]
Sent: Tuesday, February 27, 2001
6:16 AM
To: grant_kolling@city.palo-alto.ca.us
Cc: Kim.Ward@enron.com
Subject: Re: Enfolio Master Firm
Purchase/Sale
Agreement

<< File: 2001-002ctr.doc <<
(See attached file: 2001-002ctr.doc)

Grant,
I have incorporated the language
you provided
to me in
the attached
document. I have been informed by the
Corporate
Secretary's
office that
they will issue a Certificate of
Incumbency
showing that the
person
executing the contract for ENA is
authorized to
execute
contracts for ENA.
No other party signs as to form or
terms, however,
the
officer executing
for ENA will require that the deal
person and I
initial on
the line next to
his signature. I have reviewed the
proposed draft
resolution. ENA will
accept the enacted resolution and will
not require
that the
City Attorney
issue an opinion. If the attached
contract is
acceptable,
please print off
2 originals, have them approved, signed
and
forward to me
for ENA's
approval and signature. Once the
contract is
fully
executed, I will return
one fully executed original to you for
the City's
file.

(See attached file: 0071988 RESO Enron.doc)