LOAN AGREEMENT     

                                        Between



                                  CITY OF CHULA VISTA

                                           And

                             SAN DIEGO GAS & ELECTRIC COMPANY

                                Dated as of August 1, 1996




                                      Relating to

                                      $38,900,000
                                  City of Chula Vista
                         Industrial Development Revenue Bonds
                          (San Diego Gas & Electric Company)
                                     1996 Series A








                                    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                            7
SECTION 4.4.       ASSIGNMENT OF CITY'S RIGHTS                         7
SECTION 4.5.       AMOUNTS REMAINING IN FUNDS                          7
SECTION 4.6.       CREDIT FACILITY                                     8

                                   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                        10
SECTION 5.6.       TAX EXEMPT STATUS OF BONDS                         10
SECTION 5.7        NOTICE OF RATE PERIODS                             11
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                                  13
SECTION 6.2.       REMEDIES ON DEFAULT                                14
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                                             16

                                   ARTICLE VII

                                   PREPAYMENT

SECTION 7.1.       REDEMPTION OF BONDS WITH PREPAYMENT
                   MONEYS                                             16
SECTION 7.2.       OPTIONS TO PREPAY INSTALLMENTS                     16
SECTION 7.3.       MANDATORY PREPAYMENT                               16
SECTION 7.4.       AMOUNT OF PREPAYMENT                               17
SECTION 7.5.       NOTICE OF PREPAYMENT                               17

                                    ARTICLE VIII

                   NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION

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

                                  ARTICLE IX

                                MISCELLANEOUS

SECTION 9.1.       NOTICES                                            19
SECTION 9.2.       SEVERABILITY                                       19
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                 20
SECTION 9.7.       TERM OF THE AGREEMENT                              20
SECTION 9.8.       BINDING EFFECT                                     20

TESTIMONIUM                                                           21

SIGNATURES AND SEALS                                                  21

EXHIBIT A   Description of the Project                               A-1



                                 LOAN AGREEMENT


                 THIS LOAN AGREEMENT, dated as of August 1, 1996, 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) 1986 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) 1996 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:

                                    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.

                   (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 as described in the Engineering Certificate.  The 
Borrower intends to utilize such portion of the Project as facilities 
for the local furnishing of electric energy 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

                        (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.

                  (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 $97,250.00.

                 (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 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 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:

                          (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 103(b)(13) of the 1954 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 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 103(b)(13) of the 
1954 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.

                   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.

                 (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, the Trustee may (and, at the request of the Remarketing Agent 
or the holders of at least 25% aggregate principal amount of Outstanding 
Bonds, shall) or 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 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.

                 (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 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 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 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.

                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 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.


                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:



Ann Y. Moore
Acting City Attorney



By__________________________________

                                        SAN DIEGO GAS & ELECTRIC COMPANY



                                        By______________________________
                                              Senior Vice President,
[SEAL]                                       Chief Financial Officer and 
Treasurer

Attest:



__________________________________
Assistant Secretary


                                    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.

Local Gas Facilities

                     Acquisition and construction of additions and 
improvements to the Borrower's gas distribution (operating at pressures 
at or below 400 psig) facilities, located within its gas retail service 
area in San Diego County, required for the distribution of gas for 
delivery to the Borrower's customers located therein.  Such facilities 
include the acquisition and construction of new, high-pressure 
distribution mains, and new customer service lines or the extension, 
replacement or relocation of such existing mains or portions or 
components thereof, regulator stations controlling the passage of gas 
from distribution mains of higher pressure to distribution mains of 
lower pressure and the volume and pressure of gas within the mains, 
together with all necessary valves, controls, meters, and other 
measuring and regulating devices, and facilities, plant, property, and 
other equipment and improvements (including land and land-rights) 
necessary for the installation, protection, maintenance, control and 
operation of the foregoing.