EXECUTION COPY

                              LOAN AGREEMENT
                                 Between
                            CITY OF CHULA VISTA
                                   And
                     SAN DIEGO GAS & ELECTRIC COMPANY

                       Dated as of October 1, 1997

                            Relating to
                             $25,000,000                          
                         City of Chula Vista                      
                  Industrial Development Revenue Bonds            
                  (San Diego Gas & Electric Company)              
                           1997 Series A
                            - cover page -
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                          LOAN AGREEMENT

                          TABLE OF CONTENTS

                                                            Page
PARTIES                                                        1
PREAMBLES                                                      1

                              ARTICLE I
                             DEFINITIONS

SECTION 1.1   DEFINITION OF TERMS                              2
SECTION 1.2   NUMBER AND GENDER                                2
SECTION 1.3   ARTICLES, SECTIONS, ETC.                         2

                              ARTICLE II 
                           REPRESENTATIONS

SECTION 2.1   REPRESENTATIONS OF THE CITY                      2
SECTION 2.2   REPRESENTATIONS OF THE BORROWER                  3

                              ARTICLE III 
             ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS

SECTION 3.1   AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND       
              PROCEEDS                                         4
SECTION 3.2   INVESTMENT OF MONEYS IN FUNDS                    4
SECTION 3.3   AMENDMENT OF DESCRIPTION OF THE PROJECT          4

                              ARTICLE IV
                LOAN TO BORROWER; REPAYMENT PROVISIONS  

SECTION 4.1   LOAN TO BORROWER                                 5
SECTION 4.2   REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE   5
SECTION 4.3   UNCONDITIONAL OBLIGATION                         6
SECTION 4.4   ASSIGNMENT OF CITY'S RIGHTS                      7
SECTION 4.5   AMOUNTS REMAINING IN FUNDS                       7

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SECTION 4.6   CREDIT FACILITY                                   7

                              ARTICLE V                           
                   SPECIAL COVENANTS AND AGREEMENTS

SECTION 5.1   RIGHT OF ACCESS TO THE PROJECT                    8
SECTION 5.2   THE BORROWER'S MAINTENANCE OF ITS EXISTENCE;        
              ASSIGNMENTS                                       8
SECTION 5.3   RECORDS AND FINANCIAL STATEMENTS OF BORROWER      9
SECTION 5.4   MAINTENANCE AND REPAIR                            9
SECTION 5.5   QUALIFICATION IN CALIFORNIA                       9
SECTION 5.6   TAX EXEMPT STATUS OF BONDS                        9
SECTION 5.7   NOTICE OF RATE PERIODS                           10
SECTION 5.8   REMARKETING OF THE BONDS                         11
SECTION 5.9   NOTICES TO TRUSTEE AND CITY                      12
SECTION 5.10   CONTINUING DISCLOSURE                           12

                              ARTICLE VI
                    EVENTS OF DEFAULT AND REMEDIES                

SECTION 6.1   EVENTS OF DEFAULT                                12
SECTION 6.2   REMEDIES ON DEFAULT                              13
SECTION 6.3   AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES    15
SECTION 6.4   NO REMEDY EXCLUSIVE                              15
SECTION 6.5   NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER       15

                             ARTICLE VII
                             PREPAYMENT

SECTION 7.1   REDEMPTION OF BONDS WITH PREPAYMENT MONEYS       15
SECTION 7.2   OPTIONS TO PREPAY INSTALLMENTS                   16
SECTION 7.3   MANDATORY PREPAYMENT                             16
SECTION 7.4   AMOUNT OF PREPAYMENT                             16
SECTION 7.5   NOTICE OF PREPAYMENT                             16

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                              ARTICLE VIII
             NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION

SECTION 8.1   NON-LIABILITY OF CITY                            17
SECTION 8.2   EXPENSES                                         17
SECTION 8.3   INDEMNIFICATION                                  18

                              ARTICLE IX
                             MISCELLANEOUS

SECTION 9.1   NOTICES                                          18
SECTION 9.2   SEVERABILITY                                     18
SECTION 9.3   EXECUTION OF COUNTERPARTS                        19
SECTION 9.4   AMENDMENTS, CHANGES AND MODIFICATIONS            19
SECTION 9.5   GOVERNING LAW                                    19
SECTION 9.6   AUTHORIZED BORROWER REPRESENTATIVE               19
SECTION 9.7   TERM OF THE AGREEMENT                            19
SECTION 9.8   BINDING EFFECT                                   19 
                                                                  
TESTIMONIUM                                                    20 
                                                                  
SIGNATURES AND SEALS                                           20 
                                                                  
EXHIBIT A  Description of the Project                         A-1
                               - iii -
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                            LOAN AGREEMENT
          THIS LOAN AGREEMENT, dated as of October 1, 1997, by and 
between the CITY OF CHULA VISTA, a municipal corporation and charter 
city duly organized and existing under the laws and Constitution of 
the State of California (the "City"), and SAN DIEGO GAS & ELECTRIC 
COMPANY, a corporation organized and existing under the laws of the 
State of California (the "Borrower"),
                         W I T N E S S E T H :
          WHEREAS, the City is a municipal corporation and charter 
city, duly organized and existing under a freeholders' charter 
pursuant to which the City has the right and power to make and 
enforce all laws and regulations in accordance with and as more 
particularly provided in Sections 3, 5 and 7 of Article XI of the 
Constitution of the State of California and Section 200 of the 
Charter of the City (the "Charter"); and
          WHEREAS, the City Council of the City, acting under and 
pursuant to the powers reserved to the City under Sections 3, 5 and 
7 of Article XI of the Constitution and Section 200 of the Charter, 
has enacted Chapter 3.48 of the Chula Vista Municipal Code, pursuant 
to Ordinance No. 1970 adopted on February 9, 1982, as amended from 
time to time (the "Law"), establishing a program to provide 
financial assistance for the acquisition, construction and 
installation of facilities for industrial, commercial or public 
utility purposes; and
          WHEREAS, the Borrower has duly applied to the City for 
financial assistance to refinance the costs of acquisition, 
construction and installation of certain facilities for the 
distribution of electric energy, as more fully described in Exhibit 
A hereto (the "Project"), by prepaying a loan (the "Prior Loan") 
made to the Borrower with the proceeds of The City of San Diego 
Industrial Development Revenue Bonds (San Diego Gas & Electric 
Company) 1987 Series A (the "Prior Bonds"), resulting in the 
refunding of the Prior Bonds; and
          WHEREAS, the City after due investigation and deliberation 
has determined that the Project and the refinancing thereof, and the 
resulting refunding of the Prior Bonds, will directly benefit the 
citizens of the City by substantially promoting the public interests 
recited in the Law and has adopted its resolutions authorizing the 
provision or lending of financial assistance to the Borrower to 
refinance the costs of acquisition, construction and installation of 
the Project and to prepay the Prior Loan, and the issuance and sale 
of its bonds, including its Industrial Development Revenue Bonds 
(San Diego Gas & Electric Company) 1997 Series A (the "Bonds"), for 
such purposes; and
          WHEREAS, the City proposes to assist in such refinancing 
upon the terms and conditions set forth herein;
          NOW, THEREFORE, in consideration of the premises and the 
respective representations and covenants herein contained, the 
parties hereto agree as follows:
                                   - 1 -

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                                ARTICLE I
                               DEFINITIONS
          SECTION 1.1     DEFINITION OF TERMS  Unless the context 
otherwise requires, the terms used in this Agreement shall have the 
meanings specified in Section 1.01 of the Indenture of Trust, of 
even date herewith relating to the Bonds (the "Indenture"), by and 
between the City and First Trust of California, National 
Association, as trustee (the "Trustee"), as originally executed or 
as it may from time to time be supplemented or amended as provided 
therein.
          SECTION 1.2     NUMBER AND GENDER  The singular form of 
any word used herein, including the terms defined in Section 1.01 of 
the Indenture, shall include the plural, and vice versa.  The use 
herein of a word of any gender shall include all genders.
          SECTION 1.3     ARTICLES, SECTIONS, ETC.  Unless otherwise 
specified, references to Articles, Sections and other subdivisions 
of this Agreement are to the designated Articles, Sections and other 
subdivisions of this Agreement as originally executed.  The words 
"hereof," "herein," "hereunder" and words of similar import refer to 
this Agreement as a whole.  The headings or titles of the several 
articles and sections, and the table of contents appended to copies 
hereof, shall be solely for convenience of reference and shall not 
affect the meaning, construction or effect of the provisions hereof.

                               ARTICLE II
                             REPRESENTATIONS
          SECTION 2.1     REPRESENTATIONS OF THE CITY.  The City 
makes the following representations as the basis for its 
undertakings herein contained: 
          (a)  The City is a municipal corporation and charter city 
in the State of California.  Under the provisions of the Law, the 
City has the power to enter into the transactions contemplated by 
this Agreement and to carry out its obligations hereunder.  The 
Project constitutes a "project" as that term is defined in the Law. 
 By proper action, the City has been duly authorized to execute, 
deliver and duly perform this Agreement and the Indenture.
          (b)  To refinance the cost of the Project, the City will 
issue the Bonds which will mature, bear interest and be subject to 
redemption as set forth in the Indenture.
          (c)  The Bonds will be issued under and secured by the 
Indenture, pursuant to which the City's interest in this Agreement 
(except certain rights of the City to give approvals and consents 
and to receive payment for expenses and indemnification and certain 
other payments) will be pledged to the Trustee as security for 
payment of the principal of, premium, if any, and interest on the 
Bonds.

                             - 2 -

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          (d)  The City has not pledged and will not pledge its 
interest in this Agreement for any purpose other than to secure the 
Bonds under the Indenture.
          (e)  The City is not in default under any of the 
provisions of the laws of the State of California or the City's 
Charter which default would affect its existence or its powers 
referred to in subsection (a) of this Section 2.1.
          (f)  The City has found and determined and hereby finds 
and determines that all requirements of the Law with respect to the 
issuance of the Bonds and the execution of this Agreement and the 
Indenture have been complied with and that refinancing the Project 
by issuing the Bonds, refunding or replacing the Prior Bonds and 
entering into this Agreement and the Indenture will be in 
furtherance of the purposes of the Law.
          (g)  On May 21, 1996, the City Council of the City adopted 
Resolution No. 18302 authorizing the issuance and sale of the Bonds.
          (h)  On July 23, 1996, the City Council adopted Resolution 
No. 18384 authorizing the execution and delivery of a bond purchase 
agreement and official statement in connection with the sale of the 
Bonds.
          SECTION 2.2     REPRESENTATIONS OF THE BORROWER.  The 
Borrower makes the following representations as the basis for its 
undertakings herein contained:
          (a)  The Borrower is a corporation duly formed under the 
laws of the State of California, is in good standing in the State of 
California and has the power to enter into and has duly authorized, 
by proper corporate action, the execution and delivery of this 
Agreement and all other documents contemplated hereby to be executed 
by the Borrower.
          (b)  Neither the execution and delivery of this Agreement, 
the consummation of the transactions contemplated hereby, nor the 
fulfillment of or compliance with the terms and conditions hereof 
and thereof, conflicts with or results in a breach of any of the 
terms, conditions or provisions of the Borrower's Articles of 
Incorporation or By-laws or of any corporate actions or of any 
agreement or instrument to which the Borrower is now a party or by 
which it is bound, or constitutes a default (with due notice or the 
passage of time or both) under any of the foregoing, or results in 
the creation or imposition of any prohibited lien, charge or 
encumbrance whatsoever upon any of the property or assets of the 
Borrower under the terms of any instrument or agreement to which the 
Borrower is now a party or by which it is bound.
          (c)  The Project consists and will consist of those 
facilities described in Exhibit A hereto, and the Borrower shall 
make no changes to such portion of the Project or to the operation 
thereof which would affect the qualification of the Project as a 
"project" under the Law or impair the exemption from gross income of 
the interest on the Bonds for federal income tax purposes.  In 
particular, the Borrower shall comply with all requirements of the 
San Diego Gas & Electric Company Engineering Certificate, dated the 
Issue Date (the "Engineering Certificate"), which is hereby 
incorporated by reference herein.  The Project consists of 
facilities for the local furnishing of electric energy and gas as 
described in the Engineering Certificate.
                               - 3 -

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The Borrower intends to utilize such portion of the Project as 
facilities for the local furnishing of electric energy and gas 
throughout the foreseeable future.
          (d)  The Borrower has and will have title to the Project 
sufficient to carry out the purposes of this Agreement.
          (e)  The economic useful life of the Project is as set 
forth in the Engineering Certificate.
          (f)  All certificates, approvals, permits and 
authorizations with respect to the construction of the Project of 
agencies of applicable local governmental agencies, the State of 
California and the federal government have been obtained; and 
pursuant to such certificates, approvals, permits and authorizations 
the Project has been constructed and is in operation.
                       ARTICLE III
          ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS
          SECTION 3.1     AGREEMENT TO ISSUE BONDS; APPLICATION OF 
BOND PROCEEDS.  To provide funds to enable the Borrower to refinance 
a portion of the cost of the Project by prepaying the Prior Loan, 
the City agrees that it will issue under the Indenture, sell and 
cause to be delivered to the purchasers thereof, the Bonds, bearing 
interest as provided and maturing on the date set forth in the 
Indenture.  The City will thereupon apply the proceeds received from 
the sale of the Bonds as provided in Section 3.02 of the Indenture.
          SECTION 3.2     INVESTMENT OF MONEYS IN FUNDS.  Any moneys 
in any fund held by the Trustee shall, at the written request of an 
Authorized Borrower Representative, be invested or reinvested by the 
Trustee as provided in the Indenture.  Such investments shall be 
held by the Trustee and shall be deemed at all times a part of the 
fund from which such investments were made, and the interest 
accruing thereon and any profit or loss realized therefrom shall, 
except as otherwise provided in the Indenture, be credited or 
charged to such fund.
          SECTION 3.3     AMENDMENT OF DESCRIPTION OF THE PROJECT.  
In the event that the Borrower desires to amend or supplement the 
Project, as described in Exhibit A hereto, and the City approves of 
such amendment or supplement, the City will enter into, and will 
instruct the Trustee to consent to, such amendment or supplement 
upon receipt of:
               (i)  a certificate of an Authorized Borrower         
     Representative describing in detail the proposed changes and   
     stating that they will not have the effect of disqualifying any 
     component of the Project as a facility that may be financed    
     pursuant to the Law;
              (ii)  a copy of the proposed form of amended or       
     supplemented Exhibit A hereto; and

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             (iii)  an Opinion of Bond Counsel that such proposed   
     changes will not affect the exclusion from gross income of     
     interest on the Bonds for federal income tax purposes.

                             ARTICLE IV
                 LOAN TO BORROWER; REPAYMENT PROVISIONS
          SECTION 4.1     LOAN TO BORROWER.  The City and the 
Borrower agree that the application of the proceeds of sale of the 
Bonds to refund and retire a portion of the Prior Bonds and the 
first mortgage bonds of the Borrower relating thereto will be deemed 
to be and treated for all purposes as a loan to the Borrower of an 
amount equal to the principal amount of the Bonds.
          SECTION 4.2     REPAYMENT AND PAYMENT OF OTHER AMOUNTS    
                          PAYABLE.
          (a)  The Borrower covenants and agrees to pay to the 
Trustee as a Repayment Installment on the loan to the Borrower 
pursuant to Section 4.1 hereof, on each date provided in or pursuant 
to the Indenture for the payment of principal (whether at maturity 
or upon redemption or acceleration) of, premium, if any, and/or 
interest on the Bonds, until the principal of, premium, if any, and 
interest on the Bonds shall have been fully paid or provision for 
the payment thereof shall have been made in accordance with the 
Indenture, in immediately available funds, for deposit in the Bond 
Fund, a sum equal to the amount then payable as principal (whether 
at maturity or upon redemption or acceleration), premium, if any, 
and interest upon the Bonds as provided in the Indenture.
Each payment required to be made pursuant to this Section 4.2(a) 
shall at all times be sufficient to pay the total amount of interest 
and principal (whether at maturity or upon redemption or 
acceleration) and premium, if any, then payable on the Bonds; 
provided that any amount held by the Trustee in the Bond Fund on any 
due date for a Repayment Installment hereunder shall be credited 
against the installment due on such date to the extent available for 
such purpose; and provided further that, subject to the provisions 
of this paragraph, if at any time the amounts held by the Trustee in 
the Bond Fund are sufficient to pay all of the principal of and 
interest and premium, if any, on the Bonds as such payments become 
due, the Borrower shall be relieved of any obligation to make any 
further payments under the provisions of this Section.  
Notwithstanding the foregoing, if on any date the amount held by the 
Trustee in the Bond Fund is insufficient to make any required 
payments of principal of (whether at maturity or upon redemption or 
acceleration) and interest and premium, if any, on the Bonds as such 
payments become due, the Borrower shall forthwith pay such 
deficiency as a Repayment Installment hereunder.
The obligation of the Borrower to make any payment under this 
Section 4.2(a) with respect to the Bonds shall be deemed to have 
been satisfied to the extent of any corresponding payment by the 
Credit Provider under the Credit Facility, if any, for such Bonds.
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          (b)  The Borrower also agrees to pay to the Trustee until 
the principal of, premium, if any, and interest on the Bonds shall 
have been fully paid or provision for the payment thereof shall have 
been made as required by the Indenture, (i) the annual fee of the 
Trustee for its ordinary services rendered as trustee, and its 
ordinary expenses incurred under the Indenture, as and when the same 
become due, (ii) the reasonable fees, charges and expenses of the 
Trustee, the Registrar and the reasonable fees of any paying agent 
on the Bonds as provided in the Indenture, as and when the same 
become due, (iii) the reasonable fees, charges and expenses of the 
Trustee for the necessary extraordinary services rendered by it and 
extraordinary expenses incurred by it under the Indenture, as and 
when the same become due.  The Borrower shall also pay the cost of 
printing any Bonds required to be furnished by the City.
          (c)  The Borrower also agrees to pay, within 60 days after 
receipt of request for payment thereof, all expenses required to be 
paid by the Borrower under the terms of the bond purchase agreement 
executed by it in connection with the sale of the Bonds, and all 
reasonable expenses of the City related to the financing of the 
Project which are not otherwise required to be paid by the Borrower 
under the terms of this Agreement; provided that the City shall have 
obtained the prior written approval of the Authorized Borrower 
Representative for any expenditures other than those provided for 
herein or in said bond purchase agreement.
          The Borrower also agrees to pay to the City within five 
days following the Issue Date an issuance fee in the amount of 
$62,500.
          (d)  The Borrower hereby agrees to provide or cause to be 
provided in immediately available funds, for deposit into the Bond 
Purchase Fund maintained by the Tender Agent, all amounts necessary 
to purchase Bonds tendered for purchase in accordance with Sections 
2.01(d) and 2.01(e) of the Indenture. 
          (e)  In the event the Borrower should fail to make any of 
the payments required by subsections (a) through (d) of this 
Section, such payments shall continue as obligations of the Borrower 
until such amounts shall have been fully paid.  The Borrower agrees 
to pay such amounts, together with interest thereon until paid, to 
the extent permitted by law, at the rate of one percent (1%) per 
annum over the rate borne by any Bonds in respect of which such 
payments are required to be made pursuant to said subsection (a), 
and one percent (1%) per annum over the average rate then borne by 
the Bonds as to all other payments.  Interest on overdue payments 
required under subsection (a) or (d) above shall be paid to 
Bondholders as provided in the Indenture.
          (f)  Upon written request of the Trustee, the Borrower 
shall pay any Repayment Installment directly to the Paying Agent.
          (g)  Any unpaid obligation of the Borrower under 
subsections (b) through (e) of this Section 4.2 shall survive the 
payment and discharge of the Bonds and the termination of this 
Agreement.
          SECTION 4.3     UNCONDITIONAL OBLIGATION.  The obligations 
of the Borrower to make the payments required by Section 4.2 hereof 
and to perform and observe the
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other agreements on its part contained herein shall be absolute and 
unconditional, irrespective of any defense or any rights of set-off, 
recoupment or counterclaim it might otherwise have against the City, 
and during the term of this Agreement, the Borrower shall pay 
absolutely net the payments to be made on account of the loan as 
prescribed in Section 4.2 and all other payments required hereunder, 
free of any deductions and without abatement, diminution or set-off. 
 Until such time as the principal of, premium, if any, and interest 
on the Bonds shall have been fully paid, or provision for the 
payment thereof shall have been made as required by the Indenture, 
the Borrower (i) will not suspend or discontinue any payments 
provided for in Section 4.2 hereof; (ii) will perform and observe 
all of its other covenants contained in this Agreement; and (iii) 
will not terminate this Agreement for any cause, including, without 
limitation, the occurrence of any act or circumstances that may 
constitute failure of consideration, destruction of or damage to the 
Project, commercial frustration of purpose, any change in the tax or 
other laws of the United States of America or of the State of 
California or any political subdivision of either of these, or any 
failure of the City or the Trustee to perform and observe any 
covenant, whether express or implied, or any duty, liability or 
obligation arising out of or connected with this Agreement or the 
Indenture, except to the extent permitted by this Agreement.
          SECTION 4.4     ASSIGNMENT OF CITY'S RIGHTS.  As security 
for the payment of the Bonds, the City will assign to the Trustee 
the City's rights, but not its obligations, under this Agreement, 
including the right to receive payments hereunder (except (i) the 
rights of the City to receive notices under this Agreement, (ii) the 
right of the City to receive certain payments, if any, with respect 
to fees, expenses and indemnification and certain other purposes 
under Sections 4.2(c), 4.2(e), 6.3, 8.2 and 8.3 hereof, and (iii) 
the right of the City to give approvals or consents pursuant to this 
Agreement) and the City hereby directs the Borrower to make the 
payments required hereunder (except such payments for fees, expenses 
and indemnification) directly to the Trustee.  The Borrower hereby 
assents to such assignment and agrees to pay the Repayment 
Installments directly to the Trustee (subject to the provisions of 
Section 4.2(f)) without defense or set-off by reason of any dispute 
between the Borrower and the City or the Trustee.
          SECTION 4.5     AMOUNTS REMAINING IN FUNDS.  It is agreed 
by the parties hereto that after payment in full of (i) the Bonds, 
or after provision for such payment shall have been made as provided 
in the Indenture, (ii) the fees and expenses of the City in 
accordance with this Agreement, (iii) the fees, charges and expenses 
of the Trustee, the Registrar and Paying Agents in accordance with 
the Indenture and this Agreement and (iv) all other amounts required 
to be paid under this Agreement and the Indenture, any amounts 
remaining in any fund held by the Trustee under the Indenture shall 
belong, subject to the requirements of Section 6.06 of the 
Indenture, to the Borrower and be paid to the Borrower by the 
Trustee.
          SECTION 4.6     CREDIT FACILITY.  No initial Credit 
Facility shall be provided with respect to the Bonds.  The Borrower 
may provide and subsequently terminate or remove a Credit Facility 
with respect to the Bonds pursuant to the provisions of Section 5.07 
of the Indenture; provided, however, that, except in connection with 
the redemption of Bonds, the Borrower shall not intentionally cause 
the termination or substitution of any Credit Facility with
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respect to Bonds during a Term Rate Period or a Variable Term 
Segment with respect to such Bonds.  Not less than twenty-five days 
prior to the termination, removal, substitution or delivery of any 
Credit Facility with respect to the Bonds, the Borrower shall mail 
written notice of such termination, removal, substitution or 
delivery to the Trustee.  Not less than fifteen days prior to the 
delivery of any substitute or new Credit Facility for the Bonds, the 
Borrower shall mail written notice of such substitution or delivery 
to each Rating Agency.
                           ARTICLE V
                 SPECIAL COVENANTS AND AGREEMENTS
          SECTION 5.1     RIGHT OF ACCESS TO THE PROJECT.  The 
Borrower agrees that during the term of this Agreement the City, the 
Trustee and the duly authorized agents of either of them shall have 
the right at all reasonable times during normal business hours to 
enter upon the site of the Project described in Exhibit A hereto to 
examine and inspect such Project; provided, however, that this right 
is subject to federal and State of California laws and regulations 
applicable to such site.  The rights of access hereby reserved to 
the City and the Trustee may be exercised only after such agent 
shall have executed release of liability (which release shall not 
limit any of the Borrower's obligations hereunder) and secrecy 
agreements if requested by the Borrower in the form then currently 
used by the Borrower, and nothing contained in this Section or in 
any other provision of this Agreement shall be construed to entitle 
the City or the Trustee to any information or inspection involving 
the confidential know-how of the Borrower.
          SECTION 5.2     THE BORROWER'S MAINTENANCE OF ITS         
EXISTENCE; ASSIGNMENTS.  (a) The Borrower agrees that during the 
term of this Agreement it will maintain its corporate existence in 
good standing and will not dissolve or otherwise dispose of all or 
substantially all of its assets and will not consolidate with or 
merge into another corporation or permit one or more other 
corporations to consolidate or merge into it; provided, that the 
Borrower may, without violating the covenants contained in this 
Section, consolidate with or merge into another corporation, or 
permit one or more other corporations to consolidate with or merge 
into it, or sell or otherwise transfer to another corporation all or 
substantially all of its assets and thereafter dissolve, provided 
that (1) either (A) the Borrower is the surviving corporation or (B) 
the surviving, resulting or transferee corporation, as the case may 
be, (I) assumes and agrees in writing to pay and perform all of the 
obligations of the Borrower hereunder and (ii) qualifies to do 
business in the State of California; and (2)the Borrower shall 
deliver to the Trustee an Opinion of Bond Counsel to the effect that 
such consolidation, merger or transfer and dissolution does not in 
and of itself adversely affect the exclusion from gross income for 
federal income tax purposes of interest on the Bonds.
          (b)  With the prior written consent of the City (which 
consent shall not be unreasonably withheld), the rights and 
obligations of the Borrower under this Agreement may be assigned by 
the Borrower, in whole or in part, subject, however, to each of the 
following conditions:
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               (i)  No assignment (other than pursuant to a merger, 
consolidation or combination described in Section 5.2(a)) shall 
relieve the Borrower from primary liability for any of its 
obligations hereunder, and in the event of any assignment not 
pursuant to Section 5.2(a), the Borrower shall continue to remain 
primarily liable for the payments specified in Section 4.2 hereof 
and for performance and observance of the other agreements on its 
part herein provided to be performed and observed by it.
              (ii)  Any assignment from the Borrower shall retain 
for the Borrower such rights and interests as will permit it to 
perform its obligations under this Agreement, and any assignee from 
the Borrower shall assume the obligations of the Borrower hereunder 
to the extent of the interest assigned.
             (iii)  The Borrower shall, within thirty days after 
delivery of such assignment, furnish or cause to be furnished to the 
City and the Trustee a true and complete copy of each such 
assignment together with an instrument of assumption.
              (iv)  The Borrower shall cause to be delivered to the 
City and the Trustee an Opinion of Bond Counsel that such assignment 
will not, in and of itself, result in the interest on the Bonds 
being determined to be includable in the gross income for federal 
income tax purposes of the owners thereof (other than a "substantial 
user" of the Project or a "related person" within the meaning of 
Section 147(a) of the Code).
          SECTION 5.3     RECORDS AND FINANCIAL STATEMENTS OF 
BORROWER.  The Borrower agrees (a) to keep and maintain full and 
accurate accounts and records of its operations in accordance with 
generally accepted accounting principles, (b) to permit the Trustee 
for itself or on behalf of the holders of the Bonds and its 
designated officers, employees, agents and representatives to have 
access to such accounts and records and to make examinations thereof 
at all reasonable times and (c) upon request of the Trustee, to 
provide the Trustee with the Borrower's most recent audited 
financial statements.
          SECTION 5.4     MAINTENANCE AND REPAIR.  The Borrower 
agrees that as long as it owns the Project it will (i) maintain, or 
cause to be maintained, the Project in as reasonably safe condition 
as its operations shall permit and (ii) maintain, or cause to be 
maintained, the Project in good repair and in good operating 
condition, ordinary wear and tear excepted, making from time to time 
all necessary repairs thereto and renewals and replacements thereof.
          SECTION 5.5     QUALIFICATION IN CALIFORNIA.  The Borrower 
agrees that throughout the term of this Agreement it, or any 
successor or assignee as permitted by Section 5.2, will be qualified 
to do business in the State of California.
          SECTION 5.6     TAX EXEMPT STATUS OF BONDS.  (a) It is the 
intention of the parties hereto that interest on the Bonds shall be 
and remain excluded from gross income for federal income tax 
purposes.  To that end, the covenants and agreements of the City and 
the Borrower in this Section and in the Tax Certificate are for the 
benefit of the Trustee and each and every person who at any time 
will be a holder of the Bonds.  Without limiting the generality
                                 - 9 -
<PAGE>
of the foregoing, the Borrower and the City agree that there shall 
be paid from time to time all amounts required to be rebated to the 
United States pursuant to Section 148(f) of the Code and any 
temporary, proposed or final Treasury Regulations as may be 
applicable to the Bonds from time to time.  This covenant shall 
survive payment in full or defeasance of the Bonds.  The Borrower 
specifically covenants to pay or cause to be paid for and on behalf 
of the City to the United States at the times and in the amounts 
determined under Section 6.06 of the Indenture the Rebate 
Requirement as described in the Tax Certificate.  The City shall not 
be liable to make any such payment except from funds provided by the 
Borrower for such purpose.
          (b)  The City covenants and agrees that it has not taken 
and will not take any action which results in interest to be paid on 
the Bonds being included in gross income of the holders of the Bonds 
for federal income tax purposes, and the Borrower covenants and 
agrees that it has not taken or permitted to be taken and will not 
take or permit to be taken any action which will cause the interest 
on the Bonds to become includable in gross income for federal income 
tax purposes; provided that neither the Borrower nor the City shall 
have violated these covenants if interest on any of the Bonds 
becomes taxable to a person solely because such person is a 
"substantial user" of the Project or a "related person" within the 
meaning of Section 147(a) of the Code; and provided further that 
none of the covenants and agreements herein contained shall require 
either the Borrower or the City to enter an appearance or intervene 
in any administrative, legislative or judicial proceeding in 
connection with any changes in applicable laws, rules or regulations 
or in connection with any decisions of any court or administrative 
agency or other governmental body affecting the taxation of interest 
on the Bonds.  The Borrower acknowledges having read Section 6.06 of 
the Indenture and agrees to perform all duties imposed on it by such 
Section, by this Section and by the Tax Certificate.  Insofar as 
Section 6.06 of the Indenture and the Tax Certificate impose duties 
and responsibilities on the City or the Borrower, they are 
specifically incorporated herein by reference.
          (c)  Notwithstanding any provision of this Section 5.6 or 
Section 6.06 of the Indenture, if the Borrower shall provide to the 
City and the Trustee an Opinion of Bond Counsel to the effect that 
any specified action required under this Section 5.6 and Section 
6.06 of the Indenture is no longer required or that some further or 
different action is required to maintain the exclusion from federal 
income tax of interest on the Bonds, the Borrower, the Trustee and 
the City may conclusively rely on such opinion in complying with the 
requirements of this Section, and the covenants set forth in this 
Section 5.6 shall be deemed to be modified to that extent.
          SECTION 5.7     NOTICE OF RATE PERIODS.  The Borrower 
shall designate and give timely written notice to the Trustee as 
required by the Indenture prior to any change in Rate Periods for 
the Bonds.  In addition, if the Borrower shall elect to change Rate 
Periods in accordance with the Indenture and the Bonds under 
circumstances requiring the delivery of an Opinion of Bond Counsel, 
the Borrower shall deliver such opinion to the Trustee concurrently 
with the giving of notice with respect thereto, and no such change 
shall be effective without an Opinion of Bond Counsel to the effect 
that such change is authorized or permitted by the Indenture and the 
Law and will not adversely affect the Tax-Exempt status of the 
interest on the Bonds.
                                 - 10 -
<PAGE>
          SECTION 5.8     REMARKETING OF THE BONDS.
         (a)  The Borrower agrees to perform all obligations and 
duties required of it by the Indenture with respect to the 
remarketing of the Bonds, and, to appoint as set forth below a 
Remarketing Agent and a Tender Agent meeting the qualifications and 
otherwise meeting the requirements set forth in this Section 5.8.
          (b)  Tender Agent.
          (i)  Appointment and Duties:  In order to carry out the 
duties and obligations of the Tender Agent contained in the 
Indenture, the Borrower shall appoint a Tender Agent or Tender 
Agents in order to carry out such duties and obligations, subject to 
the conditions set forth below.  Each Tender Agent shall designate 
to the Trustee its principal office and signify its acceptance of 
the duties and obligations imposed upon it under the Indenture by 
entering into a Tender Agreement with the Borrower and such other 
parties as shall be appropriate, which may be combined with a 
Remarketing Agreement into a single document, delivered to the City, 
the Trustee, the Borrower and the Remarketing Agent, under which the 
Tender Agent shall agree, particularly (but without limitation):  
(A) to perform the duties and comply with the requirements imposed 
upon it by the Tender Agreement, the Indenture and this Agreement; 
and (B) to keep such books and records with respect to its 
activities as Tender Agent as shall be consistent with prudent 
industry practice and to make such books and records available for 
inspection by the City, the Trustee and the Borrower at all 
reasonable times.
          (ii)  Qualifications:  The Tender Agent shall be a 
financial institution organized and doing business under the laws of 
the United States or of a state thereof, authorized under such laws 
to exercise corporate trust powers, having a combined capital and 
surplus of at least Fifty Million Dollars ($50,000,000), and subject 
to supervision or examination by federal or state authority.  If 
such financial institution publishes a report of condition at least 
annually, pursuant to law or to the requirements of any supervising 
or examining authority above referred to, then for the purposes of 
this Section the combined capital and surplus of such financial 
institution shall be deemed to be its combined capital and surplus 
as set forth in its most recent report of condition so published.
          (c)  Remarketing Agent.  In order to carry out the duties 
and obligations contained in the Indenture, the Borrower, by an 
instrument in writing (which may be the Remarketing Agreement) 
signed by an Authorized Borrower Representative, shall select the 
Remarketing Agent for the Bonds subject to the conditions set forth 
below.  The Remarketing Agent shall designate to the Trustee its 
principal office and signify its acceptance of the duties and 
obligations imposed upon it under the Indenture by a written 
instrument of acceptance (which may be the execution of a 
Remarketing Agreement) delivered to the City, the Trustee and the 
Borrower under which the Remarketing Agent shall agree, particularly 
(but without limitation):  (i) to perform the duties and comply with 
the requirements imposed upon it by the Remarketing Agreement, the 
Indenture and this Agreement; and (ii) to keep such books and 
records with respect to its activities as Remarketing Agent as shall 
be consistent with prudent industry practice and to make such books 
and records available for inspection by the City, the Trustee and 
the Borrower at all reasonable times.
                                - 11 -
<PAGE>
          (d)  Remarketing Agreement.  In order to provide for the 
remarketing of the Bonds, the Borrower shall enter into a 
Remarketing Agreement with the Remarketing Agent and such other 
parties as shall be appropriate, which may be combined with a Tender 
Agreement into a single document.  The Remarketing Agreement shall 
include the following:  (i) a requirement that the Remarketing 
Agreement shall not be terminated by the Borrower without cause for 
a period of at least six months after the effective date thereof; 
and (ii) a statement to the effect that the Remarketing Agent is not 
acting in an agency capacity with respect to the Borrower in 
establishing interest rates and Rate Periods as described in Section 
2.01 of the Indenture, but is acting as agent of the City pursuant 
to the Law with respect to such functions.
          SECTION 5.9  NOTICES TO TRUSTEE AND CITY.  The Borrower 
hereby agrees to provide the Trustee and the City with notice of any 
event of which it has knowledge which, with the passage of time or 
the giving of notice, would be an Event of Default, such notice to 
include a description of the nature of such event and what steps are 
being taken to remedy such Event of Default.
          SECTION 5.10  CONTINUING DISCLOSURE.  The Borrower hereby 
covenants and agrees, upon the adjustment of the Rate Period for the 
Bonds to a Term Rate Period pursuant to Section 2.01(c)(iv) of the 
Indenture and the remarketing of such Bonds in accordance with the 
Indenture, to comply with the continuing disclosure requirements for 
the Bonds as promulgated under Rule 15c2-12, as it may from time to 
time hereafter be amended or supplemented.  Notwithstanding any 
other provision of this Agreement, failure of the Borrower to comply 
with the requirements of Rule 15c2-12 applicable to the Bonds, as it 
may from time to time hereafter be amended or supplemented, shall 
not be considered an Event of Default hereunder or under the 
Indenture; however, any Bondholder or beneficial owner of any Bonds 
may take such actions as may be necessary and appropriate, including 
seeking mandate or specific performance by court order, to cause the 
Borrower to comply with its obligations pursuant to this Section 
5.10.
                              ARTICLE VI
                    EVENTS OF DEFAULT AND REMEDIES
          SECTION 6.1     EVENTS OF DEFAULT.  Any one of the 
following which occurs and continues shall constitute an Event of 
Default pursuant to this Agreement:
          (a)  failure by the Borrower to pay any amounts required 
to be paid under Section 4.2(a) or 4.2(d) hereof at the times 
required to avoid causing an Event of Default pursuant to the 
Indenture; or
          (b)  failure of the Borrower to observe and perform any 
covenant, condition or agreement on its part required to be observed 
or performed by this Agreement, other than making the payments 
referred to in (a) above, which continues for a period of 60 days 
after written notice, which notice shall specify such failure and 
request that it be remedied, given to the Borrower by the City or 
the Trustee, unless the
                              - 12 -
<PAGE>
     City and the Trustee shall agree in writing to an extension of 
     such time; provided, however, that if the failure stated in the 
     notice cannot be corrected within such period, the City and the 
     Trustee will not unreasonably withhold their consent to an     
     extension of such time if corrective action is instituted      
     within such period and diligently pursued until the default is 
     corrected; or
          (c)  an Act of Bankruptcy of the Borrower; or
          (d)  a default under any Credit Facility if the Credit    
     Provider notifies the Trustee in writing that such default     
     shall be treated as an Event of Default hereunder.
The provisions of subsection (b) of this Section are subject to the 
limitation that the Borrower shall not be deemed in default if and 
so long as the Borrower is unable to carry out its agreements 
hereunder by reason of strikes, lockouts or other industrial 
disturbances; acts of public enemies; orders of any kind of the 
government of the United States or of the State of California or any 
of their departments, agencies, or officials, or any civil or 
military authority; insurrections, riots, epidemics, landslides; 
lightning; earthquake; fire; hurricanes; storms; floods; washouts; 
droughts; arrests; restraint of government and people; civil 
disturbances; explosions; breakage or accident to machinery, 
transmission pipes or canals; partial or entire failure of 
utilities; or any other cause or event not reasonably within the 
control of the Borrower; it being agreed that the settlement of 
strikes, lockouts and other industrial disturbances shall be 
entirely within the discretion of the Borrower, and the Borrower 
shall not be required to make settlement of strikes, lockouts and 
other industrial disturbances by acceding to the demands of the 
opposing party or parties when such course is, in the judgment of 
the Borrower, unfavorable to the Borrower.  This limitation shall 
not apply to any default under subsections (a), (c) or (d) of this 
Section.
          SECTION 6.2     REMEDIES ON DEFAULT.  Whenever any Event  
of Default shall have occurred and shall continue, the following 
remedies may be pursued:
          (a)  The Trustee may, and upon the written request of any 
     Credit Provider or the holders of not less than 25% in         
     aggregate principal amount of Bonds then outstanding, shall, by 
     notice in writing delivered to the Borrower with copies of such 
     notice being sent to the City and each Credit Provider, declare 
     the unpaid balance of the loan payable under Section 4.2(a) of 
     this Agreement and the interest accrued thereon to be          
     immediately due and payable and such principal and interest    
     shall thereupon become and be immediately due and payable.     
     Upon any such acceleration, the Bonds shall be subject to      
     mandatory redemption as provided in Section 4.01(b)(3) of the  
     Indenture.  After any such declaration of acceleration, the    
     Trustee shall immediately take such actions as necessary to    
     realize moneys under any Credit Facility.
          (b)  The Trustee shall have access to and the right to    
     inspect, examine and make copies of the books and records and  
     any and all accounts, data and federal income tax and other tax 
     returns of the Borrower.
                                - 13 -
          (c)  The City or the Trustee may take whatever action at  
     law or in equity as may be necessary or desirable to collect   
     the payments and other amounts then due and thereafter to      
     become due or to enforce performance and observance of any     
     obligation, agreement or covenant of the Borrower under this   
     Agreement.
          The provisions of clause (a) of the preceding paragraph, 
however, are subject to the condition that if, at any time after the 
loan shall have been so declared due and payable, and before any 
judgment or decree for the payment of the moneys due shall have been 
obtained or entered as hereinafter provided, there shall have been 
deposited with the Trustee a sum sufficient (together with any 
amounts held in the Bond Fund) to pay all the principal of the Bonds 
matured prior to such declaration and all matured installments of 
interest (if any) upon all the Bonds, with interest on such overdue 
installments of principal as provided herein, and the reasonable 
expenses of the Trustee, and any and all other defaults known to the 
Trustee (other than in the payment of principal of and interest on 
the Bonds due and payable solely by reason of such declaration) 
shall have been made good or cured to the satisfaction of the 
Trustee or provision deemed by the Trustee to be adequate shall have 
been made therefor, then, and in every such case, the holders of at 
least a majority in aggregate principal amount of the Bonds then 
outstanding, by written notice to the City and to the Trustee, may, 
on behalf of the holders of all the Bonds, rescind and annul such 
declaration and its consequences and waive such default; provided 
that no such rescission and annulment shall extend to or shall 
affect any subsequent default, or shall impair or exhaust any right 
or power consequent thereon; and provided further that there shall 
not be rescinded or annulled any such declaration which follows an 
event described in Section 6.1(d) without the written consent of the 
Credit Provider.
          In case the Trustee or the City shall have proceeded to 
enforce its rights under this Agreement and such proceedings shall 
have been discontinued or abandoned for any reason or shall have 
been determined adversely to the Trustee or the City, then, and in 
every such case, the Borrower, the Trustee and the City shall be 
restored respectively to their several positions and rights 
hereunder, and all rights, remedies and powers of the Borrower, the 
Trustee and the City shall continue as though no such action had 
been taken (provided, however, that any settlement of such 
proceedings duly entered into by the City, the Trustee or the 
Borrower shall not be disturbed by reason of this provision).
          In case the Borrower shall fail forthwith to pay amounts 
due by reason of this Section 6.2 upon demand of the Trustee, the 
Trustee shall be entitled and empowered to institute any action or 
proceeding at law or in equity for the collection of the sums so due 
and unpaid, and may prosecute any such action or proceeding to 
judgment or final decree, and may enforce any such judgment or final 
decree against the Borrower and collect in the manner provided by 
law the moneys adjudged or decreed to be payable.
In case proceedings shall be pending for the bankruptcy or for the 
reorganization of the Borrower under the federal bankruptcy laws or 
any other applicable law, or in case a receiver or trustee shall 
have been appointed for the property of the Borrower or in the case 
of any other similar judicial proceedings relative to the Borrower, 
or the creditors or property of the Borrower, then the Trustee shall 
be entitled and empowered, by intervention in such proceedings or 
otherwise, to file and prove a claim or claims for the whole amount 
owing and
                                - 14 -
<PAGE>
unpaid pursuant to this Agreement and, in case of any judicial 
proceedings, to file such proofs of claim and other papers or 
documents as may be necessary or advisable in order to have the 
claims of the Trustee allowed in such judicial proceedings relative 
to the Borrower, its creditors or its property, and to collect and 
receive any moneys or other property payable or deliverable on any 
such claims, and to distribute such amounts as provided in the 
Indenture after the deduction of its charges and expenses.  Any 
receiver, assignee or trustee in bankruptcy or reorganization is 
hereby authorized to make such payments to the Trustee, and to pay 
to the Trustee any amount due it for compensation and expenses, 
including expenses and fees of counsel incurred by it up to the date 
of such distribution.
          SECTION 6.3     AGREEMENT TO PAY ATTORNEYS' FEES AND 
EXPENSES.  In the event the Borrower should default under any of the 
provisions of this Agreement and the City or the Trustee should 
employ attorneys or incur other expenses for the collection of the 
payments due under this Agreement or the enforcement of performance 
or observance of any obligation or agreement on the part of the 
Borrower herein contained, the Borrower agrees to pay to the City or 
the Trustee the reasonable fees of such attorneys and such other 
expenses so incurred by the City or the Trustee.
          SECTION 6.4     NO REMEDY EXCLUSIVE.  No remedy herein 
conferred upon or reserved to the City or the Trustee is intended to 
be exclusive of any other available remedy or remedies, but each and 
every such remedy shall be cumulative and shall be in addition to 
every other remedy given under this Agreement or now or hereafter 
existing at law or in equity or by statute.  No delay or omission to 
exercise any right or power accruing upon any default shall impair 
any such right or power or shall be construed to be a waiver 
thereof, but any such right and power may be exercised from time to 
time and as often as may be deemed expedient.  In order to entitle 
the City or the Trustee to exercise any remedy reserved to it in 
this Article, it shall not be necessary to give any notice, other 
than such notice as may be herein expressly required.  Such rights 
and remedies as are given the City hereunder shall also extend to 
the Trustee, and the Trustee and the holders of the Bonds shall be 
deemed third party beneficiaries of all covenants and agreements 
herein contained.
          SECTION 6.5     NO ADDITIONAL WAIVER IMPLIED BY ONE 
WAIVER.  In the event any agreement or covenant contained in this 
Agreement should be breached by the Borrower and thereafter waived 
by the City or the Trustee, such waiver shall be limited to the 
particular breach so waived and shall not be deemed to waive any 
other breach hereunder.
                              ARTICLE VII
                               PREPAYMENT
          SECTION 7.1     REDEMPTION OF BONDS WITH PREPAYMENT 
MONEYS.  By virtue of the assignment of certain of the rights of the 
City under this Agreement to the Trustee as is provided in Section 
4.4 hereof, the Borrower agrees to and shall pay directly to the 
Trustee any amount permitted or required to be paid by it under this 
Article VII.  The Trustee shall use the moneys so paid to it by the 
Borrower to effect redemption of the Bonds in
                                - 15 -

<PAGE>
accordance with Article IV of the Indenture on the date specified 
for such redemption pursuant to Section 7.5 hereof.
          SECTION 7.2     OPTIONS TO PREPAY INSTALLMENTS.  The 
Borrower shall have the option to prepay the amounts payable under 
Section 4.2 hereof, in whole or in part, by paying to the Trustee, 
for deposit in the Bond Fund, the amount set forth in Section 7.4 
hereof, under the circumstances set forth in Section 4.01(a) of the 
Indenture; provided, however, that if any event specified in Section 
4.01(a)(1)(A) through (D) of the Indenture gives rise to the 
Borrower's exercise of its option to prepay such amounts payable 
hereunder, the amount of such loan payment prepaid shall not exceed 
the original cost of the portion of the Project affected by such 
event.
          SECTION 7.3     MANDATORY PREPAYMENT.   (a) The Borrower 
shall have and hereby accepts the obligation to prepay Repayment 
Installments to the extent mandatory redemption of the Bonds is 
required pursuant to Section 4.01(b) of the Indenture.  The Borrower 
shall satisfy its obligation hereunder by prepaying such Repayment 
Installments within one hundred eighty (180) days after the 
occurrence of any event set forth in paragraphs (1) through (3) of 
said Section 4.01(b) giving rise to such required prepayment, and 
immediately upon the occurrence of any event set forth in paragraph 
(3) thereof giving rise to such required prepayment.  The amount 
payable by the Borrower in the event of a prepayment required by 
this Section shall be determined as set forth in Section 7.4 and 
shall be deposited in the Bond Fund.
          SECTION 7.4     AMOUNT OF PREPAYMENT.  In the case of a 
prepayment of the entire amount due hereunder pursuant to Section 
7.2 or 7.3 hereof, the amount to be paid shall be a sum sufficient, 
together with other funds and the yield on any securities deposited 
with the Trustee and available for such purpose, to pay (1) the 
principal of all Bonds outstanding on the redemption date specified 
in the notice of redemption, plus interest accrued and to accrue to 
the payment or redemption date of the Bonds, plus premium, if any, 
pursuant to the Indenture, (2) all reasonable and necessary fees and 
expenses of the City, the Trustee, the Registrar, the Tender Agent 
and any Paying Agent accrued and to accrue through final payment of 
the Bonds, and (3) all other liabilities of the Borrower accrued and 
to accrue under this Agreement.
In the case of partial prepayment of the Repayment Installments, the 
amount payable shall be a sum sufficient, together with other funds 
deposited with the Trustee and available for such purpose, to pay 
the principal amount of and premium, if any, and accrued interest on 
the Bonds to be redeemed, as provided in the Indenture, and to pay 
expenses of redemption of such Bonds.
          SECTION 7.5     NOTICE OF PREPAYMENT.  The Borrower shall 
give forty-five days' prior written notice to the City and the 
Trustee specifying the date upon which any prepayment pursuant to 
this Article VII will be made.  If, in the case of a mandatory 
prepayment pursuant to Section 7.3 hereof, the Borrower fails to 
give such notice of a prepayment required by this Section 7.5, such 
notice may be given by the City or by any holder or holders of ten 
percent (10%) or more in aggregate principal amount of the Bonds 
Outstanding, and shall be given by the Trustee, but solely at the 
times and under the
                                - 16 -
<PAGE>
circumstances provided in Section 4.01(b) of the Indenture.  The 
City and the Trustee, at the request of the Borrower or any such 
Bondholder or Bondholders, shall forthwith take all steps necessary 
under the applicable provisions of the Indenture (except that the 
City shall not be required to make payment of any money required for 
such redemption) to effect redemption of all or part of the then 
outstanding Bonds, as the case may be, on the earliest practicable 
date thereafter on which such redemption may be made under 
applicable provisions of the Indenture.
          Notwithstanding anything to the contrary in this 
Agreement, each notice contemplated in this Section 7.5 that is 
given with respect to an optional prepayment pursuant to Section 7.2 
hereof may state that it is subject to and conditional upon receipt 
by the Trustee on or prior to the proposed prepayment date of 
amounts sufficient to effect such prepayment and, if a notice so 
states, such notice shall be of no force and effect and the 
prepayment need not be made and the Repayment Installments will not 
become due and payable on the proposed prepayment date unless such 
amounts are so received on or prior to the proposed prepayment date.
                          ARTICLE VIII
       NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION
          SECTION 8.1     NON-LIABILITY OF CITY.  The City shall not 
be obligated to pay the principal of, or premium, if any, or 
interest on the Bonds, or to discharge any other financial liability 
(including but not limited to financial liability under Section 5.6 
hereof) in connection herewith, except from Revenues.  The Borrower 
hereby acknowledges that the City's sole source of moneys to repay 
the Bonds will be provided by the payments made by the Borrower 
pursuant to this Agreement (excluding payments to the City or the 
Trustee pursuant to Section 4.2(b), 4.2(c), 4.2(e), 5.6, 6.3, 8.2 
and 8.3 of this Agreement), together with other Revenues, including 
investment income on certain funds and accounts held by the Trustee 
under the Indenture, and hereby agrees that if the payments to be 
made hereunder shall ever prove insufficient to pay all principal 
of, and premium, if any, and interest on the Bonds as the same shall 
become due (whether by maturity, redemption, acceleration or 
otherwise), then upon notice from the Trustee, the Borrower shall 
pay such amounts as are required from time to time to prevent any 
deficiency or default in the payment of such principal, premium or 
interest, including, but not limited to, any deficiency caused by 
acts, omissions, nonfeasance or malfeasance on the part of the 
Trustee, the Borrower, the City or any third party.
          SECTION 8.2     EXPENSES.  The Borrower covenants and 
agrees to pay within fifteen (15) days after billing therefor and to 
indemnify the City and the Trustee against all costs and charges, 
including fees and disbursements of attorneys, accountants, 
consultants, including financial consultants, engineers and other 
experts incurred, in the absence of willful misconduct, in 
connection with this Agreement, the Bonds or the Indenture.  The 
City shall notify the Borrower in writing prior to engaging any 
professional or expert for which the City plans to bill the 
Borrower.
                                - 17 -
<PAGE>
          SECTION 8.3     INDEMNIFICATION.  The Borrower releases 
the City and the Trustee from, and covenants and agrees that neither 
the City nor the Trustee shall be liable for, and covenants and 
agrees, to the extent permitted by law, to indemnify, defend and 
hold harmless the City and the Trustee and their officers, employees 
and agents from and against, any and all losses, claims, damages, 
liabilities or expenses, of every conceivable kind, character and 
nature whatsoever arising out of, resulting from or in any way 
connected with (1) the Project, or the conditions, occupancy, use, 
possession, conduct or management of, or work done in or about, or 
from the planning, design, acquisition, installation or construction 
of the Project or any part thereof; (2) the issuance of any Bonds or 
any certifications, covenants or representations made in connection 
therewith and the carrying out of any of the transactions 
contemplated by the Bonds, the Indenture and this Agreement;  (3) 
the Trustee's acceptance or administration of the trusts under the 
Indenture, or the exercise or performance of any of its powers or 
duties under the Indenture or this Agreement; or (4) any untrue 
statement or alleged untrue statement of any material fact or 
omission or alleged omission to state a material fact necessary to 
make the statements made, in light of the circumstances under which 
they were made, not misleading, in any official statement or other 
offering circular utilized by the City or any underwriter or 
placement agent in connection with the sale of any Bonds; provided 
that such indemnity shall not be required for damages that result 
from negligence or willful misconduct on the part of the party 
seeking such indemnity.  The indemnity of the Trustee required by 
this Section shall be only to the extent that any loss sustained by 
the Trustee exceeds the net proceeds the Trustee receives from any 
insurance carried with respect to the loss sustained.  The Borrower 
further covenants and agrees, to the extent permitted by law, to pay 
or to reimburse the City and the Trustee and their officers, 
employees and agents for any and all reasonable costs, including but 
not limited to attorneys fees, liabilities or expenses incurred in 
connection with investigating, defending against or otherwise in 
connection with any such losses, claims, damages, liabilities, 
expenses or actions, except to the extent that the same arise out of 
the negligence or willful misconduct of the party claiming such 
payment or reimbursement.  The provisions of this Section shall 
survive the retirement of the Bonds or resignation or removal of the 
Trustee.
                            ARTICLE IX
                          MISCELLANEOUS
          SECTION 9.1     NOTICES.  All notices, certificates or 
other communications shall be deemed sufficiently given on the 
second day following the day on which the same have been mailed by 
first class mail, postage prepaid, addressed to the City, the 
Borrower or the Trustee, as the case may be, as set forth in the 
Indenture.  A duplicate copy of each notice, certificate or other 
communication given hereunder by either the City or the Borrower to 
the other shall also be given to the Trustee.  The City, the 
Borrower and the Trustee may, by notice given hereunder, designate 
any different addresses to which subsequent notices, certificates or 
other communications shall be sent.
          SECTION 9.2     SEVERABILITY.  If any provision of this 
Agreement shall be held or deemed to be, or shall in fact be, 
illegal, inoperative or unenforceable, the same shall
                                  - 18 -
<PAGE>
not affect any other provision or provisions herein contained or 
render the same invalid, inoperative, or unenforceable to any extent 
whatever.
          SECTION 9.3     EXECUTION OF COUNTERPARTS.  This Agreement 
may be simultaneously executed in several counterparts, each of 
which shall be an original and all of which shall constitute but one 
and the same instrument; provided, however, that for purposes of 
perfecting a security interest in this Agreement under Article 9 of 
the California Uniform Commercial Code, only the counterpart 
delivered, pledged, and assigned to the Trustee shall be deemed the 
original.
          SECTION 9.4     AMENDMENTS, CHANGES AND MODIFICATIONS.  
Except as otherwise provided in this Agreement or the Indenture, 
subsequent to the initial issuance of Bonds and prior to their 
payment in full, or provision for such payment having been made as 
provided in the Indenture, this Agreement may not be effectively 
amended, changed, modified, altered or terminated without the 
written consent of the Trustee.
          SECTION 9.5     GOVERNING LAW.  This Agreement shall be 
governed exclusively by and construed in accordance with the 
applicable laws of the State of California.
          SECTION 9.6     AUTHORIZED BORROWER REPRESENTATIVE.  
Whenever under the provisions of this Agreement the approval of the 
Borrower is required or the City or the Trustee is required to take 
some action at the request of the Borrower, such approval or such 
request shall be given on behalf of the Borrower by an Authorized 
Borrower Representative, and the City and the Trustee shall be 
authorized to act on any such approval or request and neither party 
hereto shall have any complaint against the other or against the 
Trustee as a result of any such action taken.
          SECTION 9.7     TERM OF THE AGREEMENT.  This Agreement 
shall be in full force and effect from the date hereof and shall 
continue in effect as long as any of the Bonds are outstanding or 
the Trustee holds any moneys under the Indenture, whichever is 
later; provided, however, that the rights of the Trustee and the 
City under Section 8.2 and 8.3 hereof shall survive the termination 
of this Agreement, the retirement of the Bonds and the removal or 
resignation of the Trustee.  All representations and certifications 
by the Borrower as to all matters affecting the Tax-Exempt status of 
the Bonds shall survive the termination of this Agreement.
          SECTION 9.8     BINDING EFFECT.  This Agreement shall 
inure to the benefit of and shall be binding upon the City, the 
Borrower, the Trustee and their respective successors and assigns; 
subject, however, to the limitations contained in Section 5.2 
hereof.
                                 - 19 -
<PAGE>
          IN WITNESS WHEREOF, the City of Chula Vista has caused 
this Agreement to be executed in its name and its seal to be 
hereunto affixed and attested by its duly authorized officers, and 
San Diego Gas & Electric Company has caused this Agreement to be 
executed in its name and its seal to be hereunto affixed by its duly 
authorized officers, all as of the date first above written.
                                 CITY OF CHULA VISTA




                                 By _____________________________ 
                                            Mayor
[SEAL]
Attest:  
____________________________                                      
City Clerk

APPROVED AS TO FORM:

JOHN M. KAHENY
CITY ATTORNEY



By _____________________________                                   
Deputy City Attorney
                                 SAN DIEGO GAS & ELECTRIC COMPANY


                                 By _______________________________ 
 Vice President and Controller
[SEAL]
Attest:

_________________________________                            
Assistant Secretary

                               - 20 -
<PAGE>
                          EXHIBIT A
                 Description of the Project
Local Electric Facilities
          Acquisition and construction of additions and 
improvements to the Borrower's electric distribution facilities 
(12 KV and under) and related substations, and customer service 
connections located within the Borrower's electric retail service 
area, required by the Borrower to provide for the transfer and 
distribution of electric energy to its customers located therein, 
including all necessary poles, foundations, cable, conduit, 
transformers, switches, controls, meters, substations, land and 
land rights and other like facilities and equipment, as well as 
necessary other equipment required for the proper installation, 
protection, maintenance, control and operation of the foregoing 
local electric distribution facilities.  These facilities will be 
required to meet the needs of new customers, maintain and improve 
system capabilities, and make overhead to underground conversions.

                              - A-1 -

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