RE: Enfolio Master Firm Purchase/Sale Agreement ,
 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-alto.ca.us>
	03/02/2001 03:43 PM
		 
		 To: "'Dan.J.Hyvl@enron.com'" <Dan.J.Hyvl@enron.com>, "Kolling, Grant" 
<grant_kolling@city.palo-alto.ca.us>
		 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.

 - 0071988 RESO Enron.doc
grant_kolling@city.palo-alto.ca.us