In re Enron Corporation Securities Litigation 01-CV …securities.stanford.edu/filings-documents/1020/ENE01/...Arthur Andersen LLP et al., C.A. No. H-02-1922; Richard P. Bergsieker

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

In re ENRON CORPORATION SECURITIESLITIGATION

This Document Relates To :

MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,

Plaintiffs ,

vs.

ENRON CORP ., et al .,

Defendants .

THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated ,

Plaintiffs ,

vs .

KENNETH L. LAY, et al .,

Defendants

[Caption continued on following page .]

Civil Action No. H-01-3624(Consolidated )

CLASS ACTION

STIPULATION OF SETTLEMENT

WASHINGTON STATE INVESTMENTBOARD, et al ., On Behalf of Themselves and AllOthers Similarly Situated,

Plaintiffs ,

vs .


Defendants

NATHANIEL PULSIFER, TRUSTEE OF THESHOOTERS HILL REVOCABLE TRUST,INDIVIDUALLY AND ON BEHALF OF ALLOTHERS SIMILARLY SITUATED ,

Plaintiffs,

vs .


Defendants .

OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP . ,

Plaintiffs ,

vs .

ANDREW S. FASTOW, et al . ,

Defendants .

§ Civil Action No. H-02-3401

§ CLASS ACTIO N

§ Civil Action No. 02-3010

§ CLASS ACTION

§ Civil Action No . H-04-0091


PIRELLI ARMSTRONG TIRE CORPORATIONRETIREE MEDICAL BENEFITS TRUST,DERIVATIVELY ON BEHALF OF ENRONCORPORATION, et al .

Plaintiffs ,

vs .


Civil Action No. H-01-3645

AND CONSOLIDATED ACTION S

Defendants .

This Stipulation of Settlement is dated as of January 12 2005 (the "Stipulation") (throughout

this Stipulation all capitalized terms used, but not immediately defined, are as defined in Part IV) .

The Stipulation memorializes two related settlements relating to certain insurance funds that will be

shared in accordance with this Stipulation. The first settlement (the "Newby Settlement") is made

and entered into by and among the following parties (the "Newby Settling Parties") : (i) the

Representative Plaintiffs (on behalf of themselves and each of their respective Settlement Class

Members), by and through their counsel of record ; (ii) the Outside Directors ; and (iii) Kenny L .

Harrison, a/k/a Ken L . Harrison ("Harrison") . The second settlement (the "CC Settlement") is made

and entered into by and among the following parties (the "CC Settling Parties") : (i) the Official

Committee of Unsecured Creditors of Enron Corporation (the "Creditors Committee") ; (ii) the

Outside Directors ; (iii) James Derrick ("Derrick") ; (iv) Harrison ; and (v) Richard Buy ("Buy") .

Derrick and Buy are settling with and being released by the Creditors Committee, but are not settling

with or being released by the Representative Plaintiffs . This Stipulation is intended by the foregoing

parties (the "Settling Parties") to fully, finally and forever resolve, discharge and settle the Released

Claims, upon and subject to the terms and conditions hereof .

1 . THE LITIGATIO N

The Released Defendants have been named as parties defendant in certain of the Actions .

The Outside Directors and Harrison moved to dismiss the Newby Action on the ground, among

others, that plaintiffs failed to adequately plead scienter . On March 12 and 25, 2003, the Court

granted the Outside Directors' motions to dismiss, inter alia, all claims made against them under the

Securities Exchange Act of 1934 (the "1934 Act Dismissed Claims") . The Outside Directors

contend that these rulings necessarily require dismissal of any 1934 Act claims that might be pursued

against them in the Newby Action. The Court denied Harrison's motion to dismiss . On April 24,

2003, the Court also granted the motion to dismiss of Derrick on all claims pending against Derrick .

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The Outside Directors and Harrison also moved to dismiss the Washington State Investmen t

Board Action on the ground, among others, that the statute of limitations had expired . At the time

the Newby Settlement was reached , their motions remained under submission .

The Creditors Committee was authorized by an order of the Bankruptcy Court dated Octobe r

1, 2002 to commence state law claims against certain former Enron officers and employees ,

including Derrick and Buy . The Creditors Committee thereafter commenced the Committee Action.

In addition, the Creditors Committee filed a motion on August 2, 2004, seeking to be substituted a s

real party in interest in the Derivative Actions in which the Outside Directors and Harrison ar e

named as defendants . The Court granted the motion on October 20, 2004 and substituted th e

Creditors Committee as the real party in interest for the Plaintiff in the Derivative Actions .

II. THE RELEASED DEFENDANTS' DENIALS OF WRONGDOING ANDLIABILITY

The Released Defendants have denied and continue to deny each and all of the claims and

allegations of wrongdoing made by Plaintiffs in the Actions and maintain furthermore that they have

meritorious defenses . The Released Defendants have expressly denied and continue to deny all

charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or

omissions alleged, or that could have been alleged, in the Actions, and the Released Defendants

vigorously contend that many of the factual allegations of the complaints relating to them were

materially inaccurate . The Released Defendants also have denied and continue to deny, inter alia ,

the allegations that the Plaintiffs or the Settlement Class Members were harmed by the Release d

Defendants' conduct alleged in the Actions . Pursuant to the terms of this Stipulation as set forth

below, this Stipulation shall in no event be construed or deemed to be evidence of or an admission o r

concession by the Released Defendants with respect to any claim of any fault or liability or

wrongdoing or damage whatsoever .

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Nonetheless, the Released Defendants have taken into account the uncertainty and risks

inherent in any litigation, especially in complex cases like the Actions . Accordingly, the Outside

Directors and Harrison have concluded that further conduct of the Actions would be protracted and

expensive, and that it is desirable that the Actions be fully and finally settled in the manner and upon

the terms and conditions set forth in this Stipulation . Derrick, Harrison and Buy have concluded that

further conduct of the Committee Action and the Derivative Actions would be protracted and

expensive, and that it is desirable that the Committee Action be fully and finally settled and that the

Derivative Actions be dismissed as to them in the manner and upon the terms and conditions set

forth in this Stipulation.

III. CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OFSETTLEMENT

The Plaintiffs believe that the claims asserted in the Actions have merit . However, counse l

for the Plaintiffs recognize and acknowledge the expense, length and difficulty of continued

proceedings necessary to prosecute the Actions against the Released Defendants through appeals

and/or potential further trial court proceedings . Counsel for Plaintiffs have taken into account the

risk of any litigation, especially complex cases such as the Actions, as well as the difficulties and

delays inherent in such litigation . Counsel for the Representative Plaintiffs also have taken into

account the Court's dismissal of certain of the claims against the Outside Directors . Counsel for the

Plaintiffs also are mindful of the inherent problems of proof under, and possible defenses to, the

violations asserted in the Actions . Counsel for the Representative Plaintiffs believe that the

settlement set forth in this Stipulation confers substantial benefits upon the Settlement Class

Members. Based on their evaluation, counsel for the Representative Plaintiffs have determined that

the settlement set forth in this Stipulation is in the best interests of the Representative Plaintiffs and

the Settlement Class Members .

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IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMEN T

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the

Representative Plaintiffs (by and through their respective counsel or attorneys of record on behalf o f

themselves and each of their respective Settlement Class Members), the Creditors Committee ,

Derrick, Harrison, Buy, and the Outside Directors as follows :

(a) the Actions and the Released Claims as against the Outside Directors and

Harrison shall be finally and fully compromised , settled and released , and the Actions shall be

dismissed with prejudice as to the Outside Directors and Harrison upon and subject to the terms an d

conditions of this Stipulation,

(b) the Committee Action and the Released Claims as against Derrick, Harriso n

and Buy shall be finally and fully compromised, settled and released, and the Committee Actio n

shall be dismissed with prejudice as to Derrick and Buy, upon and subject to the terms an d

conditions of this Stipulation .

(c) the Derivative Actions and the Released Claims as against the Outside

Directors, Derrick, Harrison and Buy shall be finally and fully compromised, settled and released ,

and the Derivative Actions shall be dismissed with prejudice as to the Outside Directors, Derrick ,

Harrison and Buy, upon and subject to the terms and conditions of this Stipulation .

1. Definitions

As used in this Stipulation the following terms have the meanings specified below . In the

event of any inconsistency between any definition set forth below and any definition set forth in any

other document related to the settlement set forth in this Stipulation, the definition set forth belo w

shall control .

1 .1 "Actions" means the Newby Action, Washington State Investment Board, et al . v .

Kenneth L. Lay, et al., Civil Action No . H-02-CV-3401 (S .D. Tex.) (the "WSIB Action") ; Nathanie l

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Pulsifer, Trustee of The Shooters Hill Revocable Trust , Individually and On Behalf of All Others

Similarly Situated v. Kenneth L. Lay, et al., Civil Action No . 02-3010 (S .D . Tex .); the Committee

Action and the Derivative Actions .

1 .2 "Authorized Claimant" means any Sett lement Class Member who is entitled to a

distribution from the Gross Settlement Fund pursuant to the terms of the Stipulation, any Plan of

Allocation, or any order of the Court .

1 .3 "Bankruptcy Court" means the United States Bankruptcy Court for the Souther n

District of New York , presiding over In re Enron Corp ., et. al., Case No. 01-16034 (AJG) .

1 .4 "CC Judgment" mean s a judgment substantially in the form attached hereto as Exhibit

"C" dismissing all claims in the Committee Action against Derrick and Buy .

1 .5 "CC Settling Parties" means the Creditors Committee, the Outside Directors, Derrick

Harrison and Buy .

1 .6 "Class Judgment" means a judgment substantially in the form attached hereto as

Exhibit "D" dismissing all claims in the Actions (other than the Committee Action and the

Derivative Actions) against the Outside Directors and Harrison .

1 .7 "Court" means the United States District Court for the Southern District of Texas ,

Houston Division .

1 .8 "Committee Action" means Official Committee of Unsecured Creditors of Enro n

Corp. v. Andrew S. Fastow, et al., Civil Action No. H-04-0091 (S .D . Tex.) .

1 .9 "Defendants" means each and all of the defendants that have been or may be name d

in any of the complaints in the Actions .

1 .10 "Derivative Actions" means the following cases pending in the United States Distric t

Court for the Southern District of Texas (Houston Division) : Pirelli Armstrong Tire Corporation

Retiree Medical Benefits Trust, Derivatively on Behalf of Enron Corporation, et al. v . Kenneth Lay,

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et al., Civil Action No . H-01-3645, in the United States District Court for the Southern District o f

Texas ; Detectives Endowment Association Annuity Fund, derivatively on behalf of Enron

Corporation v. Kenneth L. Lay et al., C.A. No . H-01-3892 ; Joseph E. Kassoway and Robert T

Kassoway Trust v . Andrew S. Fastow et al., C.A. No. H-01-3690 ; Fred Greenberg, derivatively o n

be half of Enron Corp. v. RobertA . Belfer et al., C.A. No . H-01-3998 ; Lynn Goffman et al. v. Robert

A. Belfer et al ., C.A. No . H-02-1838 ; David Trzebucki et al. v. Andrew S. Fastow et al., C.A. No. H-

02-1832 ; RickBarksy v. Arthur Andersen LLP et al., C.A. No . H-02-1922 ; Richard P. Bergsieker v.

Kenneth L. Lay et al., C .A. No. H-02-3427, and any other case assert ing derivative claims or claim s

that are the property of Enron .

1 .11 "Derivative Judgment" means the judgment substantially in the form attached heret o

as Exhibit "E" dismissing all claims against the Outside Directors, Derrick and Harrison in the

Derivative Actions .

1 .12 "Effective Date" means the first date by which all of the events and condition s

specified in ¶7 .1 of the Stipulation have occurred and have been met, respectively .

1 .13 "Enron" means Enron Corp ., a reorganized debtor .

1 .14 "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limited

Insurance Policy No. D0079A1 A98 ; Energy Insurance Mutual Limited Excess Policy No . 900630-

OODO ; Federal Insurance Company Excess Policy No . 8142-05-47, 8179-41-03SWH , and 8181-43-

14; Hartford/Twin City Fire Insurance Company Excess Policy No. NDA 0131301-98H; Greenwich

Insurance Company Excess Policy No . ELU 82248-01 ; Lloyd's of London Insurance Certificate No.

90l/LK9802531 ; St. Paul Mercury Insurance Company Excess Policy No . 568CM0934 ; Federal

Insurance Company Excess Policy No. 8181-43-14 ; Royal Insurance Company of America Policy

No . P SF000633 ; ACE Bermuda Insurance Ltd . Excess Policy No. EC-AD01-001 ; and Kemper

Insurance Indemnity Co . as participating in Federal Quota Share Policy No . 8179-41-03 .

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1 .15 "Escrow Agent" means the law firm of Lerach Coughlin Stoia Geller Rudman &

Robbins LLP or its successor(s) .

1 .16 "Escrow Agreement" means the agreement attached hereto as Exhibit "A" appointin g

the Escrow Agent for the Gross Settlement Fund .

1 .17 "Expense Fund" means a principal amount not to exceed Sixteen Million Dollar s

($16,000,000), plus any interest that may accrue thereon . The Expense Fund shall be paid from, an d

not in addition to, the Gross Settlement Fund .

1 .18 "Final" means, with respect to any order of court, including, without limitation, th e

Judgment, that such order represents a final and binding determination of all issues within its scope

and is not subject to further review on appeal or otherwise. Without limitation, an order becomes

"Final" when : (a) where no appeal has been filed, the prescribed time for commencing any appeal

has expired; or (b) where an appeal has been filed, either (i) the appeal has been dismissed and the

prescribed time, if any, for commencing any further appeal has expired, or (ii) the order has bee n

affirmed in its entirety and the prescribed time, if any, for commencing any further appeal has

expired. For purposes of this paragraph, an "appeal" includes appeals as of right, discretionar y

appeals, interlocutory appeals, proceedings involving writs of certiorari or mandamus, and any othe r

proceedings of like kind. Any appeal pertaining solely to any Plan of Allocation, or to an y

application for attorneys' fees and expenses pursuant to ¶¶6 .1 and 6.2, below, shall not in any way

delay or preclude the Judgment from becoming Final .

1 .19 "Funding Date" means the date fifteen days after the date that the Court grant s

preliminary approval of the Newby Settlement .

1 .20 "Gross Settlement Fund" means the Settlement Amount plus any interest that ma y

accrue thereon. For the avoidance of doubt, the term "Gross Settlement Fund" shall always include

the Expense Fund .

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1 .21 In this Stipulation the term "Harrison" means Ken L . Harrison and his attorneys ,

insurers, and each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy

estates of such persons, in each instance only in their capacity as such, but excluding the Non-

Settling Defendants in the Actions. "Harrison Payment" means the sum of $ 100,000 to be paid by

Harrison to the Creditors Committee in exchange for the release and dismissal of claims against him

in the Derivative Actions .

1 .22 "Insurance Agreement" means the Agreement Regarding Insurance Proceeds an d

Interpleader Action attached hereto as Exhibit "B."

1 .23 "Insurance Proceeds" means the sum of $200 million dollars which represents the

remaining limits of coverage under the Enron D&O Policies written by those insurance carrier s

above the layer of insurance provided by Hartford/Twin Cities Insurance Company (the "Insuranc e

Carriers") .

1 .24 "Interpleader Action" means the First Amended Third Party Counterclaim fo r

Interpleader filed by the Insurance Carriers and other insurance carriers in the Newby Action on

October 22, 2004, related to disposition of the Insurance Proceeds , pending in the Court .

1 .25 "Interpleader Judgment" means the judgment to be sought in the Interpleader Actio n

in accordance with the Insurance Agreement and in the form attached as Exhibit C to the Insurance

Agreement .

1 .26 "Lead Plaintiff' means The Regents of the University of California .

1 .27 "Newby Action" means the action brought on behalf of all purchasers (and thei r

beneficiaries) of any publicly traded equity and debt securities of Enron, including without limitation

the securities listed in footnote 1 of this Stipulation, from October 19, 1998 through November 27 ,

2001, inclusive (excluding Defendants, the officers and directors of Enron, and members of thei r

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immediate families or their successors, heirs, and legal representatives), proceeding as a consolidate d

action captioned Newby, et al. v . Enron Corp., et al., No. H-01-CV-3624 (S .D . Tex.) .

1 .28 "Newby Settling Parties" means, collectively, the Representative Plaintiffs (on behal f

of themselves and the Settlement Class Members) and each of the Outside Directors and Harrison .

1 .29 "Non-Outside Director Defendants" means the defendants other than the Outsid e

Directors that have been named as defendants in the complaints in the Actions .

1 .30 "Non-Settling Defendants" means each and all of the current Defendants except th e

Outside Directors and Harrison .

1 .31 "Notice and Claims Administrator" means Gilardi & Co . LLC or its successors .

1 .32 "Outside Directors" means Robert Belfer, Norman Blake, Ronnie Chan, Joh n

Duncan, Paulo Ferraz Pereira, Joe Foy, Wendy Gramm, Robert Jaedicke, Charles LeMaistre ,

Rebecca Mark-Jusbasche, John Mendelsohn, Jerome Meyer, Frank Savage, John Urquhart, Joh n

Wakeham, Charls Walker, Bruce Willison and Herbert Winokur and their attorneys, insurers, an d

each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates o f

such persons, in each instance only in their capacity as such, but excluding the Non-Settlin g

Defendants in the Actions .

1 .33 "Person" means an individual, corporation, limited liability corporation, professiona l

corporation, limited liability partnership, partnership, limited partnership, association, joint stoc k

company, estate, legal representative, trust, unincorporated association, government or any politica l

subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors ,

successors , representatives , or assignees of any of the foregoing .

1 .34 "Plaintiffs" means Lead Plaintiff, the Representative Plaintiffs (on behalf of

themselves and the Settlement Class Members), and the Creditors Committee (representing th e

interests of Enron) .

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1 .35 "Plaintiffs' Settlement Counsel" means Lerach Coughlin Stoia Geller Rudman &

Robbins LLP (and any successors thereof), William S . Lerach, Keith F . Park, Helen J . Hodges, 40 1

B Street, Suite 1600, San Diego, California 92101, Telephone (619) 231-1058 .

1 .36 "Plan of Allocation" means any plan or formula of allocation of the Gross Settlement

Fund, to be approved by the Court upon further notice to the Settlement Class, whereby the Ne t

Settlement Fund (as defined in ¶5 .1, below) shall in the future be distributed to Authorize d

Claimants. Any Plan of Allocation is not part of the Stipulation and the Outside Directors shall hav e

no responsibility or liability with respect thereto .

1 .37 "Preliminary Approval Order" means the order giving preliminary approval to the

Newby Settlement substantially in the form attached hereto as Exhibit "F ."

1 .38 "Proof of Claim and Release" means the form to be sent to Settlement Class

Members, upon further order(s) of the Court, by which Settlement Class Members may make claims

against the Settlement Class' portion of the Gross Settlement Fund for damages allegedly incurre d

by reason of their investment(s) in Publicly Traded Securities .

1 .39 "Released Claims " means: (1) with respect to the Newby Se tt lement, any and all

claims, demands, rights, liabilities and causes of action including "Unknown Claims" of any natur e

whatsoever (excluding claims under ERISA), asserted under the Securities Act of 1933, that

Representative Plaintiffs and/or any Settlement Class Member have, had, or may have against the

Outside Directors or Harrison based on, arising out of, or related to, directly or indirectly, bot h

purchases or other acquisitions of any Publicly Traded Securities, including stock, notes and foreign

debt securities, during the Settlement Class Period and all acts, facts, statements, or omissions that

were or could have been alleged in the Actions and (2) with respect to the CC Settlement, any and al l

claims, demands, rights, liabilities and causes of action (including "Unknown Claims") of any natur e

whatsoever that the Creditors Committee or Enron has, had, or may have against the Outside

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Directors, Derrick, Harrison and Buy that were or could have been alleged in the Committee Actio n

or the Derivative Actions .

1 .40 "Released Defendants" means the Outside Directors, Derrick, Harrison and Buy .

1 .41 "Representative Plaintiffs" means the Lead Plaintiff in the Newby Action and th e

named plaintiffs in the Actions (other than the Committee Action and the Derivative Actions) .

1 .42 "Settlement Amount" means: (1) the Insurance Proceeds, (2) the Stock Sales Gai n

Amount, and (3) the Harrison Payment .

1 .43 "Settlement Class" means all Persons (and their beneficiaries) who purchased o r

acquired any publicly traded equity or debt securities of Enron between September 9, 1997 and

November 27, 2001, inclusive, and including purchasers of all securities issued by Enron-relate d

entities during the Settlement Class Period, the value or repayment of which was dependent on the

credit, financial condition, or ability to pay of Enron Corp . (collectively, the "Publicly Trade d

Securities") .1 Excluded from the Settlement Class are Defendants, the officers and directors o f

Enron, and members of their immediate families or their successors, heirs, and legal representatives .

1 The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7 .875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources,L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31% Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8 .75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and €315,000,000 6 .375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500,000,000 7.375% due 06, Enron Euro Credit LinkedNotes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007 .25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp. II $475,000,000 6 .31 %Senior Secured Notes and €515,000,000 6 .19% Senior Secured Notes (collectively, the "ForeignDebt Securities") .

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Also excluded from the Settlement Class are those Persons who timely and validly request exclusio n

from the Settlement Class, to the extent that they are permitted to do so under Rule 23 of the Federa l

Rules of Civil Procedure, pursuant to the Mailed Notice (as defined in ¶3 .1, below) .

1 .44 "Settlement Class Member" or "Member of the Settlement Class" means a Person

who falls within the definition of the Settlement Class .

1 .45 "Settlement Class Period" means the period commencing on September 9, 1997

through November 27, 2001, inclusive .

1 .46 "Settling Parties" means, collectively, the Representative Plaintiffs (on behalf o f

themselves and the Settlement Class) and each of the Outside Directors and Harrison with respect to

the Newby Settlement, and the Creditors Committee, each of the Outside Directors, Derrick,

Harrison and Buy with respect to the CC Settlement. The Representative Plaintiffs (on behalf of

themselves and the Settlement Class Members) are not settling with or releasing Derrick and Buy .

1 .47 "Stock Sales Gain Amount" means ten percent (10%) of each of the Outside

Director's and Harrison's net gain on sales of Enron stock as recited in the Newby Action ("Sales of

Enron Stock") . The Stock Sales Gain Amount is limited to stock or stock options granted to th e

Outside Directors and Harrison during the Class Period as compensation for their services a s

directors or officers of Enron. For purposes of the calculation and payment of the Stock Sales Gai n

Amount, "Sales of Enron Stock" shall include sales of stock, exchange fund transactions and

cashless exercises of stock options, but shall not include collar transactions from which the Outsid e

Directors or Harrison received no proceeds during the Class Period. Until deposited in the Stock

Sales Escrow Account pursuant to the terms of this Stipulation, the Stock Sales Gain Amount shal l

bear interest at the rate of 5% per annum (i) from November 8, 2004, in the case of each of th e

Outside Directors, and (ii) from December 15, 2004, in the case of Harrison . All provisions in thi s

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Stipulation relating to the Stock Sales Gain Amount are several, and not joint, as to each of the


1 .48 "Termination Event" means any of the following : (a) with respect to the Newby

Settlement, such settlement does not receive approval from the Court in all material respects i n

accordance with the Stipulation, the approval does not become Final, or the Class Judgment is no t

entered substantially in the form attached hereto as Exhibit D ; (2) with respect to the CC Settlement ,

such settlement does not receive approval from the Bankruptcy Court in all material respects i n

accordance with the Stipulation, the approval does not become Final, the CC Judgment is not entered

substantially in the form attached hereto as Exhibit C, or the Derivative Judgment is not entere d

substantially in the form attached hereto as Exhibit E ; (3) the Interpleader Judgment is not entered in

the Interpleader Action substantially in the form attached as Exhibit C to the Insurance Agreement or

the Interpleader Judgment does not become Final, or (4) this Stipulation, or any material par t

thereof, is terminated in accordance with its terms .

1 .49 "Unknown Claims" means any Released Claim that any Plaintiff or any of th e

Settlement Class Members does not know or suspect to exist in his, her or its favor at the time of th e

release of the Released Defendants that if known by him, her or it, might have affected his, her or it s

settlement with and release of the Released Defendants, or might have affected his, her or it s

decision not to object to this settlement or not to exclude himself, herself or itself from th e

Sett lement Class. With respect to any and all Released Claims , the Settling Parties stipulate an d

agree that, upon the Effective Date, the Plaintiffs shall expressly waive, and each of the Settlemen t

Class Members shall be deemed to have waived and by operation of the Judgment shall have waived,

the provisions, rights and benefits of California Civil Code § 1542, which provides :

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR ATTHE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM

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MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THEDEBTOR .

The Plaintiffs shall expressly waive , and each of the Settlement Class Members shall be deemed t o

have waived and by operation of the Judgment shall have waived, any and all provisions, rights an d

benefits conferred by any law of any state or territory of the United States , or principle of common

law, that is similar, comparable or equivalent to California Civil Code § 1542 . The Plaintiffs and

Settlement Class Members may hereafter discover facts in addition to or different from those that

any of them now knows or believes to be true with respect to the subject matter of the Release d

Claims, but each Plaintiff shall expressly have, and each Settlement Class Member shall be deeme d

to have and by operation of the Judgment shall have, fully, finally, and forever settled and release d

any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-

contingent, whether or not concealed or hidden, that now exist, or heretofore have existed upon an y

theory of law or equity now existing or coming into existence in the future, including, but not limite d

to, conduct that is negligent, reckless, intentional, with or without malice, or a breach of any duty ,

law or rule, without regard to the subsequent discovery or existence of such different or additiona l

facts. The Plaintiffs acknowledge, and the Settlement Class Members shall be deemed to have

acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoing

waiver was separately bargained for and a key element of the settlement of which this release is a

part .

1 .50 "WSIB Action" means the action brought on behalf of all purchasers of the Publicl y

Traded Securities from September 9, 1997 through October 18, 1998, inclusive (excludin g

Defendants, the officers and directors of Enron, and members of their immediate families or thei r

successors, heirs, and legal representatives), captioned Washington State Investment Board, et al . v.

Kenneth L. Lay, et al., Civil Action No. H-02-3401 (S .D. Tex.) .

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2. The Settlement

a. The Gross Settlement Fund

2 .1 The Settlement Amount (plus any interest that may accrue thereon as provided fo r

herein) shall constitute the Gross Settlement Fund . The Outside Directors, Derrick, Harrison an d

Buy shall cause the Insurance Proceeds to be paid to the Escrow Agent pursuant to the Transfe r

Order (as defined in the Insurance Agreement) . The Outside Directors and Harrison shall pay th e

Stock Sales Gain Amount to the Escrow Agent, subject to Court oversight as of the Funding Date .

Harrison shall pay the Harrison Payment to the Escrow Agent, subject to Court oversight, as of th e

Funding Date . The Settlement Amount shall be managed and controlled by the Escrow Agent i n

accordance with the Escrow Agreement through the creation of three separate interest bearing

accounts : (a) the Insurance Proceeds Escrow Account into which the Insurance Proceeds shall b e

deposited, (b) the Stock Sales Gain Escrow Account into which the Stock Sales Gain Amount shal l

be deposited, and the (c) Harrison Escrow Account into which the Harrison Payment shall b e

deposited . Payments to the Escrow Agent shall be made in the form of a wire transfer into th e

appropriate escrow account . If the full Settlement Amount is not timely transferred to the Escrow

Agent, Lead Plaintiff and the Creditors Committee shall have the option to terminate this Stipulation .

2 .2 The Settling Parties agree and acknowledge that the Insurance Proceeds will b e

allocated in accordance with ¶2 of the Insurance Agreement. The Se tt ling Part ies further

acknowledge that this allocation is subject to the approval of the Court and the Bankruptcy Court . To

the extent that any amounts are disbursed from the Insurance Escrow Account for items in ¶¶2 .3(b) ,

(c), (d) and (f) below prior to the Effective Date, such amounts shall be treated as part of the 82 .8%

allocation to the Lead Plaintiff under ¶2 of the Insurance Agreement. For purposes of suc h

allocation, the Creditors Committee shall be entitled to interest on its 17 .2% share of the Insuranc e

Escrow Account at the rate earned by the Insurance Escrow Account during the relevant perio d

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(even though such interest will amount to more than 17 .2% of the interest earned by the Insuranc e

Escrow Account if amounts are disbursed to the Representative Plaintiffs prior to the Effectiv e

Date) .

2 .3 No amount may be disbursed from the Gross Settlement Fund unless and until th e

Effective Date, except that, subject to Court approval : (a) amounts maybe disbursed pursuant to th e

Insurance Agreement ; (b) the Expense Fund shall be available to the Representative Plaintiffs for th e

payment of expenses, excluding attorneys' fees, associated with the prosecution of the Actions (othe r

than the Committee Action or the Derivative Actions) ; (c) Representative Plaintiffs' Counsel shall b e

entitled to provisional reimbursement of 75% of their out-of-pocket costs (not to exceed 10% of th e

Settlement Amount), (d) reasonable costs of the notice ("Notice and Administrative Costs" )

described in ¶3 .1 may be paid from the Gross Settlement Fund as they become due ; (e) Taxes and

Tax Expenses (as defined in the Escrow Agreement) may be paid from the Gross Settlement Fund a s

they become due ; and (f) any Fee and Expense Award that is allowed by the Court pursuant to 6 . 1

and 6.2, below, may be paid from the Gross Settlement Fund in accordance with the provisions o f

¶¶6.1 through 6.2, below .

2.4 The Outside Directors will not be obligated to personally pay more than the Stock

Sales Gain Amount, nor will Harrison be required to pay more than the Harrison Payment and th e

Stock Sales Gain Amount pursuant to this Stipulation and the settlement set forth herein, but a

condition of the Newby Settlement and the CC Settlement is that the Insurance Proceeds be paid to

the Escrow Agent .

b. Other Settlement Term s

2 .5 The Outside Directors and Harrison will be subject as non-parties to discover y

requests from Lead Plaintiff and will provide reasonable cooperation to Lead Plaintiff. The Outside

Directors and Harrison shall provide sworn statements to Lead Plaintiff.

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c. The Escrow Agent

2.6 The Escrow Agent shall invest and disburse the Gross Settlement Fund in accordance

with the Escrow Agreement attached hereto as Exhibit A .

2.7 The Escrow Agent shall be authorized to execute only such tr ansactions as are

consistent with the terms of the Escrow Agreement, this Stipulation and order(s) of the Court .

3 . Preliminary Approval Order, Notice Order, Settlement Hearing andBankruptcy Court Approval

3 .1 After execution of this Stipulation and on or prior to J anuary 12, 2005, the Newby

Settling Parties shall submit this Stipulation together with its Exhibits to the Court, and th e

Representative Plaintiffs shall apply for entry of the Preliminary Approval Order substantially in the

form and content of Exhibit F attached hereto, requesting, inter alia, the preliminary approval of th e

settlement set forth in this Stipulation, and final approval of forms of notice to be mailed to al l

Settlement Class Members who can be identified with reasonable effort (the "Mailed Notice") and t o

be published (the "Summary Notice"), substantially in the forms and contents of Exhibits F- 1 and F-

2 hereto, respectively . The Mailed Notice shall include the general terms of the settlement set forth

in this Stipulation and shall set forth the procedure by which Persons who otherwise would b e

Members of the Settlement Class may request to be excluded from the Settlement Class . The date

and time of the Settlement Hearing shall be added to the Mailed Notice before it is mailed t o

Settlement Class Members .

3 .2 The Settling Parties, after the Mailed Notice and Summary Notice have been maile d

and published, respectively, in accordance with 3 .1, above, shall proceed with the final settlement

hearing (the "Settlement Hearing") in accordance with the Scheduling Order entered by the Court o n

December 22, 2004 .

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3 .3 The Outside Directors and Harrison hereby stipulate to certification of the Settlement

Class, pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, solely for purposes of thi s

Stipulation and the settlement set forth herein .

3 .4 The Creditors Committee and Enron shall present this Stipulation of Settlement to th e

Bankruptcy Court under Rule 9019 of the Federal Rules of Bankruptcy Procedure, seeking approva l

of the settlement of the Committee Action and the dismissal of all claims against the Released

Defendants .

3 .5 As a part of the Settlement Hearing, the Creditors Committee shall request the Court

to dismiss all claims against the Released Defendants alleged in the Derivative Actions i n

accordance with Rule 23 .1 .

4. Releases

4.1 Upon the Effective Date, the Representative Plaintiffs and each of the Settlement

Class Members, on behalf of themselves, their successors and assigns, and any other Person claiming

(now or in the future) through or on behalf of them, and regardless of whether any suc h

Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means, including ,

without limitation, by submitting a Proof of Claim and Release, any distribution from the Gros s

Settlement Fund, shall be deemed to have, and by operation of the Judgment shall have, fully ,

finally, and forever released, relinquished, and discharged all Released Claims against the Outsid e

Directors and Harrison, and shall have covenanted not to sue the Outside Directors or Harrison with

respect to all such Released Claims, and shall be permanently barred and enjoined from instituting ,

commencing, or prosecuting any such Released Claim against the Outside Directors or Harrison.

4.2 Upon the Effective Date, Derrick and Buy shall each be deemed to have, and by

operation of the Judgment shall have, fully, finally and forever released, relinquished and discharge d

Enron, the Creditors Committee and counsel to each of the foregoing persons from all claims, arising

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out of, in any way relating to, or in connection with the institution, prosecution, assertion, settlement

or resolution of the Actions, or the Released Claims, or their participation or involvement a s

directors or officers of Enron or its predecessors or affiliates (including claims of indemnity), excep t

to enforce the releases and other terms and conditions contained in this Stipulation .

4.3 Upon the Effective Date, the Creditors Committee and Enron, on behalf o f

themselves , their successors and assigns , and any other Person claiming (now or in the future )

through or on behalf of them, shall be deemed to have, and by operation of the CC Judgment and th e

Derivative Judgment shall have, fully, finally, and forever released, relinquished, and discharged al l

Released Claims against the Released Defendants, and shall have covenanted not to sue the Release d

Defendants with respect to all such Released Claims, and shall be permanently barred and enjoine d

from instituting, commencing, or prosecuting any such Released Claim against the Release d

Defendants . Notwithstanding the foregoing release or any other provision in the Stipulation, nothin g

in the Stipulation is intended, nor shall it be construed to release or discharge Harrison from an y

matter that might be alleged as a defense to, avoidance of, or defensive counterclaim against

Harrison's claims asserted as Claim No . 2390500 (a/k/a Claim No. 0000023905) in the matter In re

Portland General Holdings, Inc., S .D.N.Y. Bankr. Case No. 03-14331C95(AJG) (the "Harrison

Proof of Claim") ; provided, however, that any net affirmative recovery against Harrison shall have

been released, discharged, and barred .

4.4 Upon the Effective Date, the Outside Directors and Harrison shall each be deemed t o

have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquishe d

and discharged each and all of the Settlement Class Members, Enron, the Creditors Committee an d

counsel to each of the foregoing persons from all claims , arising out of, in any way relating to, or in

connection with the institution, prosecution, assertion, settlement or resolution of the Actions, or th e

Released Claims, or their participation or involvement as a director of Enron or its predecessors o r

-19-

affiliates (including claims of indemnity), except to enforce the releases and other terms and

conditions contained in this Stipulation . Notwithstanding the foregoing release or any other

provision in the Stipulation, nothing in the Stipulation is intended, nor shall it be construed to release

or discharge any Person from the Harrison Proof of Claim or any matter Harrison might allege as a

defense to, avoidance of, or defensive counterclaim against any matter that might be alleged as a

defense to, avoidance of, or defensive counterclaim against the Harrison Proof of Claim ; provided,

however, that any recovery by Harrison other than a recovery on the Proof of Claim shall have been

released, discharged, and barred .

4.5 The Released Defendants agree that, if there are any Non-Settling Defendant(s) who

may in the future reach a settlement with the Plaintiffs (the "Later-Settling Defendant(s)"), the

Released Defendants will provide a release to such Later-Settling Defendant(s), its (their) partners,

principals, officer or directors, commensurate with any releases given by Plaintiffs to those Later-

Settling Defendant(s), to the extent that such releases are among the Released Claims and arise out

of the claims in the Actions . The release set forth in the foregoing sentence shall be conditioned on

Plaintiffs obtaining commensurate releases for the Released Defendants from the Later-Settling

Defendant(s) .

4.6 To the extent permitted by applicable law, all Persons shall be enjoined and barred

from commencing any action against the Outside Directors and Harrison seeking, as damages or

otherwise, the recovery of all or any part of any liability or settlement which they pay or are

obligated to pay or agree to pay to the Plaintiffs or the Settlement Class, as a result of such Persons '

participation in any acts, facts, statements or omissions that were or could have been alleged in the

Actions (whether under the Securities Act of 1933, the Securities Exchange Act of 1934, the Texas

Securities Act, common law, or other state or federal law) . Any Person so enjoined and barred shall

be entitled to an appropriate judgment reduction .

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4.7 Lead Plaintiff may, at its option, seek a ruling on the submission of propo rtionate

fault .

4.8 The Representative Plaintiffs agree that the Court's prior orders dismissing claim s

against the Released Defendants in the Actions will not be appealed, and that all orders dismissin g

any claims or causes of action against the Released Defendants will be treated as Final and will b e

allowed to become Final . The Representative Plaintiffs agree that they shall be permanently barre d

and enjoined from instituting, commencing, or prosecuting any such dismissed claim(s) against th e

Released Defendants .

4 .9 The Outside Directors, Derrick and Harrison agree that, in the absence of a

Termination Event, they shall not be entitled to any portion of the Insurance Proceeds or an y

payment or reimbursement from the proceeds of the Enron D&O Policies, and each of the m

expressly forever waives and relinquishes any and all such right, claim and interest . The Insurance

Carriers are intended to be direct beneficiaries of the waiver provided in this paragraph of this

Stipulation and, as such, shall be entitled to enforce it in an action before the Court . If this

Stipulation is terminated, the Outside Directors, Derrick and Harrison shall have all rights, claim s

and interests under the Enron D & 0 Policies that they had before the entry of the Stipulation .

5. Administration and Calculation of Claims, Final Awards andSupervision and Distribution of Gross Settlement Fund

5 .1 Within ten business days after the Effective Date, the Escrow Agent shall pay the ful l

amount in the Harrison Escrow Account and Creditor Committees' allocated portion of the Insurance

Escrow Account (pursuant to this Stipulation of Settlement and the Insurance Agreement) to Enron .

5 .2 Upon the Effective Date (or such other time as expressly authorized in thi s

Stipulation) and upon further notice to the Settlement Class and appropriate orders of the Court, the

Notice and Claims Administrator, subject to such supervision and direction of the Court and/or

Plaintiffs' Settlement Counsel as may be necessary or as circumstances may require, shall administe r

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and calculate the claims to be submitted by Settlement Class Members and shall oversee distributio n

of the Net Settlement Fund (as defined below) pursuant to the Plan of Allocation to Authorize d

Claimants . Subject to the terms of this Stipulation and any order(s) of the Court, the remainder of

the Gross Settlement Fund after the payment to Enron under ¶5 .1 shall be applied as follows :

(a) to pay all costs and expenses reasonably and actually incurred in connection

with locating Settlement Class Members and providing notice to them pursuant to ¶3 .1, above, in

connection with administering and distributing the Gross Settlement Fund to Authorized Claimants ,

and in connection with paying escrow fees and costs, if any ;

(b) to pay all costs and expenses, if any, reasonably and actually incurred i n

soliciting Settlement Class Members' claims and assisting with the filing and processing of suc h

claims ;

(c) to pay the Taxes and Tax Expenses described in the Escrow Agreement ;

(d) to pay any Fee and Expense Award that is allowed by the Court pursuant to

¶¶6.1 and 6.2, below, subject to and in accordance with the provisions of ¶¶6 .1 through 6 .4, below ;

(e) to distribute the balance of the Gross Settlement Fund after payment of item s

(a) through (d), above (the "Net Settlement Fund") to Authorized Claimants as allowed by the

Stipulation, any Plan of Allocation, or the Court .

5 .3 Upon the Effective Date and thereafter, and in accordance with the terms of the

Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court as may

be necessary or as circumstances may require, the Net Settlement Fund shall be distributed to

Authorized Claimants, subject to and in accordance with the following :

(a) Each Settlement Class Member who claims to be an Authorized Claiman t

shall be required to submit to the Notice and Claims Administrator a completed Proof of Claim an d

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Release signed under penalty of perjury and supported by such documents as specified in the Proo f

of Claim and Release and as are reasonably available to such Settlement Class Member .

(b) Except as otherwise ordered by the Court, all Settlement Class Members who

fail timely to submit a Proof of Claim and Release within such period as may be ordered by th e

Court, or otherwise allowed, shall be forever barred from receiving any payments pursuant to th e

Stipulation and the settlement set forth herein, but shall in all other respects be subject to and boun d

by the provisions of the Stipulation, the releases contained herein, and the Judgment .

(c) The Net Settlement Fund shall be distributed to Authorized Claimant s

substantially in accordance with a Plan of Allocation to be approved by the Court upon such furthe r

notice to the Settlement Class as may be required . Any such Plan of Allocation is not a part of thi s

Stipulation. No funds from the Net Settlement Fund shall be distributed to Authorized Claimants

until after all appeals from any order(s) of the Court approving the settlement as described herein

and from the Judgment and any further proceedings on remand have been resolved, or the time fo r

any such appeals has expired .

(d) All Persons who fall within the definition of the Settlement Class and who do

not timely and validly request to be excluded from the Settlement Class in accordance with the

instructions set forth in the Mailed Notice (as defined in ¶3 .1, above) shall be subject to and bound

by the provisions of the Stipulation, the releases contained herein, and the Judgment with respect to

all Released Claims, regardless of whether such Persons seek or obtain by any means, including ,

without limitation, by submitting a Proof of Claim and Release or any similar document, an y

distribution from the Gross Settlement Fund or the Net Settlement Fund .

5.4 Neither the Released Defendants nor their counsel shall have any responsibility for ,

interest in, or liability whatsoever with respect to the investment or distribution of the Gros s

Settlement Fund, the Plan of Allocation, the determination, administration, or calculation of claims ,

-23-

the payment or withholding of Taxes, the distribution of the Net Settlement Fund, or any losses

incurred in connection with any such matters , and the Escrow Agent shall indemnify and hol d

harmless the Released Defendants and their counsel for any losses or liabilities arising in connection

with such matters .

5 .5 No Person shall have any claim against the Representative Plaintiffs, Plaintiffs '

Settlement Counsel, the Creditors Committee, Enron, or Notice and Claims Administrator, based on

distributions from the Gross Settlement Fund or the Net Settlement Fund made substantially in

accordance with the Stipulation and the settlement contained herein, any Plan of Allocation, o r

further orders of the Court . No Person shall have any claim against the Released Defendants o r

counsel for the Released Defendants based on distributions made from the Gross Settlement Fund o r

the Net Settlement Fund .

5.6 If there is any balance remaining in the Net Settlement Fund after six (6) months from

the date of distribution of the Net Settlement Fund (whether by reason of tax refunds, uncashe d

checks or otherwise), Plaintiffs' Settlement Counsel may reallocate such balance among Authorize d

Claimants in an equitable and economic fashion, subject to Court approval . Any balance remainin g

thereafter may be donated to an appropriate non-profit organization, subject to Court approval .

5.7 It is understood and agreed by the Newby Settling Parties that any Plan of Allocation

of the Net Settlement Fund including, but not limited to, any adjustments to any Authorize d

Claimant's claim, is not a part of the Stipulation and is to be considered by the Court separately fro m

the Court's consideration of the fairness, reasonableness and adequacy of the settlement set forth i n

the Stipulation, and any order or proceeding relating to the Plan of Allocation shall not operate t o

terminate or c ancel the Stipulation or affect the finality of the Court's Judgment approving the

Stipulation and the settlement set forth herein, or any other orders entered pursuant to th e

Stipulation .

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6. Representative Plaintiffs ' Counsel's Attorneys ' Fees andReimbursement of Expenses

6 .1 Counsel for the Representative Plaintiffs may, upon such further notice to th e

Settlement Class as may be required, submit an application or applications (the "Fee and Expens e

Application") for distributions to them from the Gross Settlement Fund, for: (a) an award of

attorneys' fees; plus (b) reimbursement of expenses incurred in connection with prosecuting th e

Actions and not otherwise reimbursed from the Expense Fund; plus (c) any interest on such

attorneys' fees and expenses (until paid) at the same rate and for the same periods as earned by the

Settlement Fund, as appropriate, as may be awarded by the Court . Plaintiffs' Settlement Counsel

reserve the right to make additional applications for fees and expenses incurred from the Gros s

Settlement Fund.

6.2 Any amounts that are awarded by the Court pursuant to ¶6 .1, above (the "Fee and

Expense Award") shall be paid to Plaintiffs' Settlement Counsel from the Representative Plaintiffs '

share of the Gross Settlement Fund, as ordered, immediately after the Court executes an order (o r

orders) awarding such fees and expenses and permitting such distribution . Plaintiffs' Settlement

Counsel's law firm, as a condition of receiving such fees and expenses, on behalf of itself and eac h

partner and/or shareholder of it, agrees that the law firm and its partners and/or shareholders are each

responsible to make any refund required under ¶7 .5 and are subject to the jurisdiction of the Cour t

for the purpose of enforcing the provisions of this paragraph .

6.3 The procedure for, and the allowance or disallowance by the Court of, the Fee an d

Expense Application are not part of the settlement set forth in this Stipulation, and are to be

considered by the Court separately from the Court' s consideration of the fairness , reasonableness

and adequacy of the settlement set forth in this Stipulation . Any order or proceeding relating to the

Fee and Expense Application, or any appeal from any Fee and Expense Award or any other order

relating thereto or reversal or modification thereof, shall not operate to terminate or cancel th e

-25-

Stipulation, or affect or delay the finality of the Class Judgment and the settlement of the Actions a s

set forth herein .

6.4 The Creditors Committee , Enron, and the Released Defendants shall have no

responsibility for, and no liability whatsoever with respect to, any payment(s) to Plaintiffs '

Settlement Counsel pursuant to ¶¶6 .1 and 6 .2 above, and/or to any other Person who may assert

some claim thereto, or any Fee and Expense Award that the Court may make in the Actions .

7. Conditions of Settlement, Effect of Disapproval, Cancellation orTermination

7.1 The Effective Date of the Stipulation shall be conditioned on the occurrence of all o f

the following events :

(a) the Insurance Proceeds shall have been timely transferred to the Escrow Agen t

pursuant to the Transfer Order ;

(b) the Stock Sales Gain Amount shall have been paid to the Escrow Agent ;

(c) the Harrison Payment shall have been paid to the Escrow Agent ;

(d) the Newby Settlement has been approved by the Court in all material respects

in accordance with the Stipulation and such approval has become Final;

(e) the CC Settlement shall have been approved in all material respects in

accordance with the Stipulation and such approval has become Final ;

(f) the Class Judgment, the CC Judgment, the Derivative Judgment, and the

Interpleader Judgment have become Final ;

(g) the Court shall have entered a Bar Order substantially in the form of the Clas s

Judgment attached as Exhibit "D" hereto ; and

(h) no Termination Event has occurred at the time of the last to occur of th e

preceding events, and any remaining rights of termination under the Stipulation have been waived .

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7 .2 On the Effective Date, any and all remaining interest or right of the Released

Defendants in or to the Gross Settlement Fund, if any, shall be absolutely and forever extinguished .

7.3 If a Termination Event occurs, then the Stipulation shall be cancelled and terminated

without further action by the Settling Parties, unless counsel for all parties mutually agree in writin g

to proceed with the Stipulation.

7 .4 The Outside Directors and Harrison shall have the option to terminate the Stipulatio n

in its entirety in the event that purchasers who collectively purchased more than a certain amount o f

certain Publicly Traded Securities choose to exclude themselves from the Settlement Class, as set

forth in a separate agreement (the "Supplemental Agreement") executed among the Newby Settling

Parties .

7 .5 If the Stipulation is terminated in accordance with ¶7 .3, then

(a) unless otherwise ordered by the Court, within ten (10) business days afte r

written notification of such termination is sent by counsel for one or more of the Settling Parties t o

the Escrow Agent and the Settling Parties to the Escrow Agent and all other Settling Parties ,

Plaintiffs Settlement Counsel shall repay to the appropriate escrow account all amounts disburse d

from the Gross Settlement Fund pursuant to ¶ 12.3 (b), (c) and (f) and if said amount or any portio n

thereof is not returned within such ten (10) day period, then interest shall accrue thereon at th e

higher of the rate of five (5) percent per annum or the actual rate of interest ea rned on such funds ,

until the date that said amount is returned ;

(b) at the written request of counsel for any Settling Party, the Escrow Agent o r

its designee shall apply for any tax refund owed to the Gross Settlement Fund;

(c) the Escrow Agent shall pay the Gross Settlement Fund (less any amounts paid

pursuant to ¶¶2.3(d) and (e) of this Stipulation) in accordance with the direction of the Court in th e

-27-

Interpleader Action or otherwise, and in particular the Escrow Agent shall pay the Insuranc e

Proceeds in accordance with the Escrow Agreement ;

(d) the Settling Parties shall be restored to their respective positions in the Action s

as of October 11, 2004, with all of their respective claims and defenses, preserved as they existed on

that date;

(e) the terms and provisions of the Stipulation, with the exception of ¶¶6 .2 and

7 .5 (which shall continue in full force and effect), shall be null and void and shall have no further

force or effect with respect to the Settling Parties, and neither the existence nor the terms of thi s

Stipulation (nor any negotiations preceding this Stipulation nor any acts performed pursuant to, or i n

furtherance of, this Stipulation) shall be used in the Actions or in any other action or proceeding fo r

any purpose (other than to enforce the terms remaining in effect) ;

(f) any judgment or order entered by the Court in accordance with the terms of

the Stipulation shall be treated as vacated, nunc pro tunc ; and

(g) the Settlement Class, if it has been certified, shall be decertified . No order o f

the Court or modification or reversal on appeal of any order of the Court concerning any Fee an d

Expense Award shall constitute grounds for cancellation or termination of the Stipulation .

8. No Admissions

8.1 The Newby Settling Parties intend this Stipulation to be a final and complet e

resolution of all disputes between the Newby Settling Parties with respect to the Actions . The CC

Settling Parties intend this Stipulation to be a final and complete resolution of all disputes betwee n

the CC Settling Parties with respect to the Committee Action and the Derivative Actions . The

Stipulation is intended to compromise claims that are contested and shall not be deemed a n

admission by any Settling Party as to the merits of any claim or defense or any allegation made i n

the Actions .

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8 .2 Neither the Stipulation, nor any act performed or document executed pursuant to or in

furtherance of the Stipulation : (a) is or may be deemed to be or may be used as an admission of, o r

evidence of, the validity of any Released Claim, of any allegation made in the Actions, or of an y

wrongdoing or liability of the Released Defendants; or (b) is or may be deemed to be or may be use d

as an admission of, or evidence of, any liability, fault or omission of the Released Defendants in any

civil, criminal or administrative proceeding in any court, administrative agency or other tribunal .

Neither the Stipulation, nor any act performed or document executed pursuant to or in furtherance o f

the Stipulation shall be admissible in any proceeding for any purpose, except to enforce the terms o f

the Stipulation, and except that the Released Defendants may file the Stipulation and/or th e

judgments in any action that may be brought against it in order to support a defense or counterclai m

based on principles ofresjudicata, collateral estoppel, release, good faith settlement, judgment bar

or reduction or any other theory of claim preclusion or issue preclusion or similar defense o r

counterclaim .

9. Miscellaneous Provisions

9.1 The Settling Parties: (a) acknowledge that it is their intent to consummate thi s

Stipulation; and (b) agree to cooperate to the extent reasonably necessary to effectuate and

implement all terms and conditions of the Stipulation and to exercise their best efforts to accomplis h

the foregoing terms and conditions of the Stipulation .

9.2 In the event that any amount paid for the benefit of the Plaintiffs or the Settlemen t

Class under 2 .3, above, is determined to be a preference, voidable transfer, fraudulent transfer, o r

similar transaction by a Final order of a court of competent jurisdiction and the Plaintiffs ar e

required to return the Settlement Amount, or any portion thereof, then the Plaintiffs have the right t o

bring, revive, or reinstate all claims against such Released Defendant(s), by refunding the amount s

pursuant to such Final order .

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9 .3 Each Released Defendant warrants that, as to herself or himself only, the payment o f

the Sett lement Amount to the Escrow Agent will not render him or her insolvent .

9 .4 While the Released Defendants deny that the claims advanced in the Actions were

meritorious, the Released Defendants will not assert in any statement to the Court that the Action s

were not filed in good faith and/or are not being settled voluntarily after consultation with competen t

legal counsel. The Class Judgment will contain a statement that the Settling Parties do not contend

that during the course of the Actions, the parties and their respective counsel at any time failed t o

comply with the requirements of Federal Rule of Civil Procedure 11 .

9.5 The Settling Parties agree that the Settlement Amount and the other terms of th e

settlement as described herein were negotiated in good faith by the Settling Parties . Each party

hereby expressly warrants and represents that : (i) such party is not relying upon any statements ,

understandings, representations, expectations, or agreements other than those expressly set forth i n

this Stipulation; (ii) such party is represented and has been advised by qualified legal counsel i n

connection with this Stipulation, which such party makes voluntarily and of its own choice and no t

under coercion or duress; (iii) such party has made his or her own investigation of the facts and i s

relying solely upon his or her own information and knowledge and the advice of its counsel ; (iv)

such party has no expectation that any other party will disclose to him, her or it facts material to thi s

Stipulation; and (v) such party knowingly waives any claim to rescind or avoid this Stipulation base d

upon undisclosed facts, known or unknown . The Settling Parties agree and stipulate that each part y

is relying upon the representations and warranties in this paragraph in entering into this Stipulation .

These representations and warranties shall survive the execution of this Stipulation . The Settling

Parties further warrant and represent that they have not relied on any promise, representation ,

conduct or consideration other than those expressly set forth in this Stipulation .

-30-

9.6 The Settling Parties acknowledge that they are fully and completely informed of th e

facts relating to the subject matter of this Stipulation, and of their rights and liabilities ; that the

Settling Parties entered into this Stipulation voluntarily after having given careful consideration t o

the making of this Stipulation, that the Settling Parties have discussed the provisions of thi s

Stipulation with attorneys of their own choosing, and have executed it in reliance upon their ow n

judgment and the advice of their attorneys . No party makes any representation to or covenant with

any other party about the legal, tax or other consequences of this Stipulation . Each party has had

access to and separate representation by the legal, tax and other advisors of that party's ow n

choosing, and has freely and fully reviewed and negotiated the terms of this Stipulation .

Accordingly, no presumption shall apply that any party is the drafter of this Stipulation, nor shall an y

provision or ambiguity in a provision be construed against a party on the basis that the party i s

deemed to have drafted such provision .

9.7 Nothing in this Stipulation shall prohibit any comment on the accuracy of any publi c

description of the settlement .

9.8 All of the Exhibits to the Stipulation are material and integral parts hereof and ar e

fully incorporated herein by this reference.

9.9 The Stipulation may be amended or modified only by a written instrument signed by

or on behalf of all Settling Parties or their respective successors-in-interest .

9 .10 The Stipulation, the Exhibits attached hereto, and the Supplemental Agreemen t

constitute the entire agreement between Plaintiffs and the Released Defendants and n o

representations, warranties or inducements have been made to any party concerning the Stipulation

or its Exhibits or the Supplemental Agreement other than the representations, warranties an d

covenants contained and memorialized in such documents . It is understood by the parties hereto

that, except for the matters expressly represented herein, the facts or law with respect to which thi s

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Stipulation is entered into may turn out to be other than or different from the facts now known t o

each party or believed by such party to be true ; each party therefore expressly assumes the risk of th e

facts or law turning out to be so different, and agrees that this Stipulation shall be in all respect s

effective and not subject to termination by reason of any such different facts or law. Except as

otherwise provided herein, each party shall bear its own costs and attorneys fees .

9 .11 Plaintiffs' Settlement Counsel and Representative Plaintiffs represent and warrant tha t

Plaintiffs' Settlement Counsel, on behalf of the Settlement Class, are expressly authorized by th e

Representative Plaintiffs to take all appropriate action required or permitted to be taken by or o n

behalf of the Settlement Class pursuant to the Stipulation to effectuate its terms and also ar e

expressly authorized to enter into any modifications or amendments to the Stipulation on behalf of

the Settlement Class that they deem appropriate .

9 .12 Each counsel or other Person executing the Stipulation or any of its Exhibits on

behalf of any party hereto hereby warrants that such Person has the full authority to do so .

9 .13 The Stipulation may be executed by facsimile and in one or more counterparts . All

executed counterparts and each of them shall be deemed to be one and the same instrument . Counsel

for the parties to the Stipulation shall exchange among themselves original signed counterparts and a

complete set of executed counterparts shall be filed with the Court .

9 .14 The Stipulation shall be binding upon, and inure to the benefit of, the successors an d

assigns of the parties hereto, including any corporation or other entity into or with which any part y

merges, consolidates or reorganizes .

9 .15 The Court shall retain jurisdiction with respect to implementation and enforcement o f

the terms of the Stipulation .

9.16 The Stipulation, the Exhibits hereto, and the Supplemental Agreement shall b e

considered to have been negotiated, executed and delivered, and to be wholly performed, in the State

-32-

of Texas, and the rights and obligations of the parties to the Stipulation shall be construed an d

enforced in accordance with, and governed by, the internal, substantive laws of the State of Texa s

without giving effect to that State's choice of law principles . The Parties agree that the Honorabl e

Melinda Harmon, United States District Judge of the United States District Court for the Souther n

District of Texas shall be the exclusive forum and venue for the litigation of any and all dispute s

arising out of or relating to this Stipulation .

IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, b y

their duly authorized attorneys, dated as of January 12, 2005 .

LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

WILLIAM S. LERACHKEITH F. PARKDARREN J. ROBBINSHELEN J . HODGESBYRON S . GEORGIOUJAMES I . JACONETTEMICHELLE M . CICCARELLIJAMES R. HAILANNE L. BOXJOHN A. LOWTHERALEXANDRA S. BERNAYMATTHEW P . SIBENROBERT R. HENSSLER, JR .

/s/ Roger B . Greenberg * signed by permissionHELEN J . HODGE S

401 B Street , Suite 1600San Diego , CA 92101Telephone : 619/231-105 8


REGINA M. AME S9601 Wilshire Blvd., Suite 510Los Angeles , CA 90210Telephone : 310/859-3100310/278-2148 (fax )

-33-


G. PAUL HOWESJERRILYN HARDAWAYTexas Bar No . 00788770Federal I .D. No . 309641111 Bagby, Suite 4850Houston , TX 77002Telephone : 713/571-091 1

Lead Counsel for Plaintiffs

SCHWARTZ, JUNELL, GREENBERG& OATHOUT, LLP

ROGER B . GREENBERGState Bar No . 08390000Federal I .D. No . 3932

/s/ Roger B . GreenbergROGER B. GREENBERG

Two Houston Center909 Fannin, Suite 2000Houston, TX 77010Telephone : 713/752-0017

HOEFFNER & BILEK, LLPTHOMAS E. BILEKFederal Bar No. 9338State Bar No . 023135251000 Louisiana Street , Suite 1302Houston, TX 77002Telephone : 713/227-7720

Attorneys in Charge

BERGER & MONTAGUE, P .C.SHERRIE R . SAVETT1622 Locust StreetPhiladelphia, PA 19103Telephone : 215/875-3000

Attorneys for Staro Asset Management

-34-

WOLF POPPER LLPROBERT C . FINKEL845 Third AvenueNew York, NY 10022Telephone: 212/759-4600

Attorneys for Nathaniel Pulsifer

SCOTT + SCOTT, LLCDAVID R. SCOTT

NEIL ROTHSTEIN108 Norwich AvenueColchester, CT 06415Telephone: 860/537-381 8

Attorneys for the Archdiocese of MilwaukeeSupporting Fund, Inc .

CUNEO WALDMAN & GILBERT, LLPJONATHAN W . CUNEOMICHAEL G. LENETT317 Massachusetts Avenue, N.E.Suite 300Washington, D.C. 20002Telephone : 202/789-3960

Washington Counsel

GIBBS & BRUNS, L .L.P .ROBIN C. GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS

KwvKATHY D. PATRICK

-35-

1100 Louisiana, Suite 5300Houston, TX 77002Telephone : 713/650-8805713/750-0903 (fax)

Attorneys for Defendants Robert A. Belfer,Norman P. Blake, Jr., Ronnie C. Chan, John H .Duncan , Joe H. Foy, Wendy L. Gramm, RobertK. Jaedicke, Charles A. LeMaistre, JohnMendelsohn, Jerome Meyer, Frank Savage, JohnUrquhart, Charls E . Walker, John Wakeham,and Herbert Winokur, Jr.

GRAVES DOUGHERTY, HEARON & MOODYJOHN MCKETTAHELEN FOSTER

LEN FOSTER

401 Congress Ave., Suite 2200Austin, TX 7870 1Telephone: 512/480-5600512/478-1976 (fax)

Attorneys for Defendant Rebecca Mark-Jusbasch e

McKOOL SMITH, P .C .

1L-twi--5- 16~

LEWIS T. LECI/AIR 4A~iyhlp

-36-

300 Crescent Court, Suite 1500Dallas, Texas 75201Telephone 214/978-4000Fax 214/978-401 4

Attorney for the Official Committee ofUnsecured Creditors of Enron Corp .

SUSMAN GODFREY L.L.P .

KENNET MARK

S Attorneyfor Enron Corp., a reorganized debtor

NICKENS, KEETON, LAWLESS & FLACK, LLP

tJ .C. NI KENS

Attorney for Richard Bu y

TONKON TORP LLP

WT11[ath M Sin .fr. ice,WILLIAM F . MARTSON, JR!~ I

1600 Pioneer Tower888 SW Fifth AvenuePortland OR 97204Telephone : 503/802-2041Fax : 503 /972-374 1

Attorney for Defendant Ken L . Harrison

MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON

Mark J, O c' oil ~.,-37-

MARK J. RO HON127 "JP

655 Fifteenth Street, N .W., Suite 900Washington, D.C. 20005-5701Telephone: 202/626-581 9Fax: 202/628-085 8

Attorney for Paulo V. Ferraz Pereira

S:\Settlement\Enron .Set\Outside Directors Settlement\Settlement Agreement-Clean l .doc

-38-

CERTIFICATE OF SERVICE

I hereby cert ify that a copy of the foregoing STIPULATION OF SETTLEMENT documenthas been served by sending a copy via electronic mail to serve(ESL3624 .com on this 12th day ofJanuary, 2005 .

I further certify that a copy of the foregoing document has been served via overnight mail onthe following parties, who do not accept service by electronic mail on this 12th day of January, 2005 .

Carolyn S . SchwartzUnited States Trustee, Region 233 Whitehall Street, 21st FloorNew York, NY 10004

c~ta 1 t . ~tG 'cct~+.~ eq

DEBORAH S . GRANGER

EXHIBIT A


HOUSTON DIVISION



MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated ,

Plaintiffs ,

vs .


Defendants .


Plaintiffs,

vs .

ANDREW S. FASTOW, et al .

Defendants .

Civil Action No. H-01-3624(Consolidated)

CLASS ACTION

Civil Action No. H-04-009 1

COURT APPROVED ESCROW AGREEMENT CONCERNING INTERPLEADERFUNDS

EXHIBIT A

THIS SETTLEMENT ESCROW AGREEMENT ( the "Escrow Agreement ") is made and

effective as of the th day of , 2005 (the "Execution Date"), in accordance with th e

order of the Court herein dated , 2005, with Lerach Coughlin Stoia Geller Rudman &

Robbins LLP as escrow agent (the "Escrow Agent") .

RECITAL S

WHEREAS, Associated Electric & Gas Services Limited, Energy Insurance Mutual Limited ,

Federal Insurance Company, Greenwich Insurance Company, certain Underwriters at Lloyd's ,

London subscribing to Insurance Certificate No. 901/LK9802531 ("Underwriters"), St. Paul

Mercury Insurance Company, Royal Insurance Company ofAmerica, ACE Bermuda Insurance Ltd . ,

and Kemper Indemnity Insurance Company (the "Excess Carriers") provided excess directors an d

officers liability insurance coverage to Enron Corp . in the aggregate amount of $200 million, excess

of $150 million in underlying insurance ;

WHEREAS, on or about October 21, 2004, the Excess Carriers filed an Answer to the Firs t

Amended Third-Party Complaint for Contract Enforcement and Injunctive Relief Regarding D& O

Policy Proceeds and Third-Party Complaint for Interpleader, which was amended on or about

October 22, 2004 (the "Interpleader Action") ;

WHEREAS, on or about January 5, 2005 and January 12, 2005 with respect to Underwriters ,

and in accordance with the order of December 22, 2004 by the Court in the Interpleader Action, the

Excess Carriers deposited the limit of liability of their respective policies (the "Interpleader

Policies") with the Clerk (the "Clerk") of the United States District Court of the Southern District o f

Texas, Houston Division in compliance with the requirements of 28 U.S.C. § 1335 and applicable

law (the "Interpleader Fund") ;

WHEREAS, on , 2005, the United States District Court for the Southern Distric t

of Texas, Houston Division, entered a Transfer Order in the above-entitled action authorizing th e

-1-

transfer of the Interpleader Fund to a private escrow in order to more efficiently handle the

Interpleader Fund, subject to the Court retaining exclusive jurisdiction and control over the

Interpleader Fund and the escrow contemplated thereby; and

WHEREAS, it is intended for the Interpleader Fund to be a qualified settlement fund under

Section 468B of the Internal Revenue Code, as amended (the "Code"), upon entry of the Preliminary

Approval Order by the Court ; and

NOW, THEREFORE, in consideration of the covenants and representations set forth herein,

and for other good and valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, the Escrow Agent hereby covenants and agrees as follows:

1 . Definitions; Conflicting Terms. For purposes of this Escrow Agreement (includin g

the Recitals), all initially capitalized terms used and not otherwise defined herein shall have the

meanings attributed to such terms in the Agreement Regarding Insurance Proceeds and Interpleader

Action filed in the above-captioned actions and dated as of (the "Insurance Proceeds

Agreement") or the Stipulation of Settlement dated January 12, 2005 . To the extent that terms of

this Escrow Agreement conflict with the terms of the Insurance Proceeds Agreement or the

Stipulation of Settlement, the terms of this Escrow Agreement shall be controlling as to the matters

set forth herein .

2. Appointment of EscrowAgent. Pursuant to the terms hereof, Lerach Coughlin Stoia

Geller Rudman & Robbins LLP is hereby appointed as the Escrow Agent, and Lerach Coughlin

Stoia Geller Rudman & Robbins LLP accepts the duties and obligations of the Escrow Agent set

forth herein .

3. Establishment of Escrow Account . The Escrow Agent will establish three escrow

accounts (collectively, the "Escrow Account"), which account shall constitute the Escrow Account

contemplated by the Transfer Order . The Escrow Account shall consist of three segregate d

-2-

accounts : (i) the "Insurance Proceeds Escrow Account"; (ii) the "Stock Sales Gain Escrow

Account" ; and (iii) the "Harrison Escrow Account ." At such time or times as is required by the

Transfer Order and in one or more payments, the Clerk shall transfer the Interpleader Fund as

required by the Transfer Order. The Escrow Agent agrees (x) to accept delivery of the Interpleader

Fund, (y) on the day ofreceipt thereof, to acknowledge receipt ofsame in writing to counsel for the

Excess Carriers, and (z) to hold the Interpleader Fund in the Insurance Proceeds Escrow Account i n

accordance with the terms and conditions of this Escrow Agreement and the Transfer Order . The

Stock Sales Gain Escrow Account and the Harrison Escrow Account shall be funded in accordanc e

with the terms of the Stipulation of Se tt lement .

4. Investment of Insurance Proceeds .

(a) The Escrow Agent shall invest the Interpleader Fund in instruments backed b y

the full faith and credit of the United States Government or fully insured by an agency thereof and

shall reinvest the proceeds of these instruments as they mature in similar instruments at their the n

current market rates . Any and all interest, dividends and other earnings on the Interpleader Fun d

following the delivery of such funds to the Escrow Agent (collectively, "Interest") shall become par t

of and be included in the Interpleader Fund .

(b) The Escrow Agent shall be autho rized to execute only such transactions as are

consistent with the terms of the Stipulation of Settlement and order(s) of the Court .

(c) All funds held by the Escrow Agent shall be deemed and considered to be in

custodia legis, and shall remain subject to the oversight and jurisdiction of the Court, until such tim e

as such funds shall be distributed pursuant to the Stipulation of Settlement and/or order(s) of th e

Court .

5 . Distribution of Proceeds . The Interpleader Fund, the Stock Sales Gain Escrow

Account and the Harrison Escrow Account shall be distributed by the Escrow Agent only at suc h

-3-

time or times and in such manner as is expressly set forth in orders of the Court pursuant to the terms

of the Stipulation of Settlement and the Insurance Proceeds Agreement, or as the Court may

otherwise direct. However, if a final and non-appealable order of this Court or any other court

dismisses the Interpleader Action without granting the relief requested by the Excess Carriers in the

Interpleader Action, then the Escrow Agent shall pay the then-remaining balance of the Interpleader

Fund to the Excess Carriers in the full amount of the limit of liability of their respective Excess

Policy unless and until there are insufficient amounts in the Interpleader Fund to do so, in the

following order: (i) the participants of the Quota Share Policy, (ii) ACE Bermuda, (iii) Royal,

(iv) Federal (policy no . 8181-43-14), (v) St. Paul ; (vi) Lloyd's, and (vii) Greenwich.

6. Taxes

6.1 The Settling Parties and the Escrow Agent agree to treat the Gross Settlement Fund as

being at all times a "qualified settlement fund" within the meaning of Treas . Reg . § 1 .468B-1 . The

Escrow Agent shall timely make such elections as necessary or advisable to carry out the provisions

of this ¶6 .1, including the "relation-back election" (as defined in Treas . Reg. § 1 .468B-1) back to the

earliest permitted date . Such elections shall be made in compliance with the procedures and

requirements contained in § 1 .468B-1 . It shall be the responsibility of the Escrow Agent timely and

properly to prepare and deliver the necessary documentation for signature by all necessary parties,

and thereafter to cause the appropriate filing to occur .

(a) For the purpose of §468B of the Internal Revenue Code of 1986, as amended ,

and the regulations promulgated thereunder, the "administrator" shall be the Escrow Agent . The

Escrow Agent shall satisfy the administrative requirements imposed by Treas . Reg . § 1 .468B-2 by,

e.g., (i) obtaining a taxpayer identification number, (ii) satisfying any information reporting or

withholding requirements imposed on distributions from the Gross Settlement Fund, and (iii) timely

and properly filing applicable federal, state and local tax returns necessary or advisable with respec t

-4-

to the Gross Settlement Fund (including, without limitation, the returns described in Treas . Reg .

§ 1 .468B-2(k)) and paying any taxes reported thereon . Such returns (as well as the election described

in this ¶6.1) shall be consistent with this ¶6 .1 and in all events shall reflect that all Taxes as defined

in subsection (b) below (including any estimated Taxes, interest or penalties) on the income earned

by the Gross Settlement Fund shall be paid out of the Gross Settlement Fund as provided in ¶6.1(b)

hereof.

(b) All (i) taxes (including any estimated taxes, interest or penalties) arising with

respect to the income earned by the Gross Settlement Fund, including, without limitation, any taxes

or tax detriments that may be imposed upon the Outside Directors or their counsel with respect to

any income earned by the Gross Settlement Fund for any period during which the Gross Settlement

Fund does not qualify as a "qualified settlement fund" for federal or state income tax purposes

(collectively, "Taxes"), and (ii) expenses and costs incurred in connection with the operation and

implementation of this ¶6 .1, including, without limitation, expenses of tax attorneys and/or

accountants and mailing and distribution costs and expenses relating to filing (or failing to file) the

returns described in this ¶6 .1 (collectively, "Tax Expenses"), shall be paid out of the Gross

Settlement Fund . In all events no person other than the Escrow Agent shall have any liability or

responsibility for the Taxes or the Tax Expenses . The Escrow Agent shall indemnify and hold

harmless the Settling Parties and their counsel for Taxes and Tax Expenses (including, without

limitation, Taxes payable by reason of any such indemnification) . Further, Taxes and Tax Expenses

shall be treated as, and considered to be, a cost of administration of the Gross Settlement Fund and

shall timely be paid by the Escrow Agent out of the Gross Settlement Fund without prior order from

the Court, and the Escrow Agent shall be obligated (notwithstanding anything herein to the contrary)

to withhold from distribution to Authorized Claimants any funds necessary to pay such amounts,

including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as any

-5-

amounts that may be required to be withheld under Treas . Reg. § 1 .468B-2(1)(2)) ; neither the Settling

Parties nor their counsel are responsible therefor, nor shall they have any liability therefor . The

Settling Parties agree to cooperate with the Escrow Agent, each other, and their tax attorneys and

accountants to the extent reasonably necessary to carry out the provisions of this ¶6 .1 .

7. Termination of the Escrow Agreement. This Escrow Agreement shall terminate

upon the Escrow Agent's full and proper distribution of the Interpleader Fund, the Stock Sales Gain

Escrow Account and the Harrison Escrow Account in accordance with Orders of the Court and/or

this Escrow Agreement .

8. Concerning the Escrow Agent. The Escrow Agent further covenants and agrees that :

(a) To induce the Escrow Agent to act as such hereunder, the Escrow Agent shal l

be entitled to rely, if it is acting in good faith, upon any order, judgment, certification, demand,

notice, instrument or other writing delivered to it hereunder without being required to determine the

authenticity or the correctness of any fact stated therein or the propriety or validity or the service

thereof. The Escrow Agent may, if it is acting in good faith, act in reliance upon any instrument or

signature believed by it to be genuine and may assume that any person purporting to give receipt or

advice or make any statement or execute any document in connection with the provisions hereof has

been duly authorized to do so .

(b) The Escrow Agent is serving in the capacity of an escrow holder only and

having possession of the Interpleader Fund subject to the terms of this Escrow Agreement, the

Insurance Proceeds Agreement, the Settlement and/or orders of the Court .

(c) The Escrow Agent (and any successor Escrow Agent) may be removed or

may resign upon order of the Court . Upon entry of such an order in accordance with the foregoing

sentence, the Escrow Agent (and any successor Escrow Agent) shall deliver the entirety of the

Interpleader Fund, including all earnings thereon, in accordance with the order of the Court ,

-6-

whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising

in connection with this Escrow Agreement .

(d) In the event of any disagreement resulting in adverse claims or demands being

made in connection with the Interpleader Fund, or in the event that the Escrow Agent in good faith is

in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain the

Interpleader Fund until the Escrow Agent has received an order of the Court directing delivery of the

Interpleader Fund .

(e) Any action or proceeding arising out of or relating to this Escrow Agreement

is related to the proceedings pending before this Court and, therefore, the sole and exclusive venue

for the resolution of any such claims in any such action or proceeding shall be in this Court .

(f) The Escrow Agent may not assign any of its rights or obligations hereunder

without the written consent of the Insurance Carriers, and any attempted transfer or assignment in

violation of this provision shall be null and void .

(g) This Escrow Agreement may only be modified by order of this Court .

(h) This Escrow Agreement shall be construed in accordance with and governed

by the laws of the State of Texas.

9. Notices.

(a) All notices, requests, demands and other communications hereunder

(including service ofprocess in any action or proceeding referred to in ¶8(e)) shall be in writing and

shall be deemed to have been duly given if personally delivered with a receipt therefor, delivered by

facsimile or overnight courier service, or after five (5) days from being mailed, certified mail, return

receipt, postage prepaid to the addresses set forth below :

If to the Escrow Agent :

Keith F . ParkLERACH COUGHLIN STOIA GELLER

-7-

RUDMAN & ROBBINS LLP401 B Street , Suite 160 0San Diego, CA 9210 1

10 . Entire Agreement . This Escrow Agreement sets forth the entire agreement and

understanding of the part ies in respect of the transactions contemplated hereby .

11 . Headings . The headings of the sections and paragraphs in this Escrow Agreement

have been inserted for convenience of reference only and shall in no way restrict or otherwis e

modify any of the terms or provisions hereof .

IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Agreement to be dul y

executed as of the date first above written.


WILLIAM S. LERACHKEITH F. PARKDARREN J . ROBBINSHELEN J . HODGESBYRON S. GEORGIOUJAMES I. JACONETTEMICHELLE M. CICCARELLIJAMES R. HAILANNE L. BOXJOHN A. LOWTHERALEXANDRA S. BERNAYMATTHEW P. SIBENROBERT R . HENSSLER, JR .

KEITH F. PARK

401 B Street, Suite 1600San Diego , CA 92101Telephone : 619/231-105 8

-8-


REGINA M. AMES9601 Wilshire Blvd ., Suite 510Los Angeles , CA 90210Telephone : 310/859-3100310/278-2148 (fax )


G. PAUL HOWESJERRILYN HARDAWAYTexas Bar No . 00788770Federal I .D. No. 309641111 Bagby, Suite 4850Houston, TX 77002Telephone : 713/571-091 1

Escrow Agent

S :\Settlement\Enron .Set\Outside Directors Settlement\AGT000I6866-Clean .do c

-9-

EXHIBIT A-1


HOUSTON DIVISION


Civil Action No . H-01-3624(Consolidated )

CLASS ACTIONThis Document Relates To :


Plaintiffs ,

vs .

ENRON CORP., et al .,

Defendants .

ORDER AUTHORIZING THE TRANSFER OF INSURANCE PROCEED S

EXHIBIT A-1

WHEREAS on December 22, 2004, the Court ordered the Excess Insurers to deposit the sum

of $200 million of interpleaded insurance proceeds into the registry of the Court in compliance wit h

the requirements of 28 U.S .C. § 1335 and applicable law ; and

WHEREAS after due consideration of theMotion for Preliminary Approval of the Sett lement

by and among the Representative Plaintiffs and the Outside Directors, the Court has grante d

preliminary approval, entered the Preliminary Approval Order and with good cause appearin g

therefor ;

NOW THEREFORE IT IS HEREBY ORDERED :

This Order (the "Transfer Order") incorporates by reference the definitions in the Stipulatio n

of Settlement dated as of January 12, 2005 (the "Stipulation") and the Agreement Regardin g

Insurance Proceeds and Interpleader Action ("Insurance Proceeds Agreement") and all capitalize d

terms used herein shall have the same meanings as set forth in the Stipulation and the Insuranc e

Proceeds Agreement.

The Clerk of the Court is ordered to transfer the Insurance Proceeds, which were deposite d

pursuant to the Order entered December 22, 2004 in compliance with the requirements of 28 U .S .C .

§ 1335 and applicable law, to an account which shall be styled "United States District Court for the

Southern District of Texas - Insurance Interpleader Account" and shall be controlled and

administered by Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Escrow Agent . Within

one (1) business day from entry of this Order, the Escrow Agent shall provide the Clerk of the Cour t

with instructions for deposit .

IT IS SO ORDERED .

DATED:THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDG E

S:\Sett1ement\Enron .Set\0utside Directors Settlement\ORD Auth Transfer P ro ceeds.do c

-1-

EXHIBIT B

UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

In Re ENRON CORPORATION SECURITIES,DERIVATIVE & "ERISA" LITIGATION ,

MARK NEWBY, ET AL. ,

Plaintiffs

vs .

ENRON CORPORATION, ET AL . ,

Defendant s


Plaintiff,

vs .

ANDREW S . FASTOW , ET AL. ,

Defendants . §

MDL 1446

CIVIL ACTION NO . H-01-3624AND CONSOLIDATED CASES

CIVIL ACTION NO. H-04-009 1

AGREEMENT REGARDING INSURANCE PROCEEDS AND INTERPLEADERACTION

This Agreement Regarding Insurance Proceeds and Interpleader Action (the "Agreement" )

is entered into between and among the Regents of the University of California, on behalf of the

Class in . Newby v. Enron , et al. ; the Official Committee of Unsecured Creditors of Enron Corp ., on

behalf of Enron Corp ., a reorganized debtor and its affiliated reorganized debtors; and Richard Buy,

604310v1 /007457

Richard Causey, Mark Frevert, Joseph Hirko, Kevin Howard, Michael Krautz, Kenneth Lay, Jeffrey

McMahon, Lou Pai, Rex Shelby, Jeffrey Skilling, Joseph Sutton, Greg Whalley and Scott Yeager .

DEFINITION OF TERM S

The following terms shall have the indicated mean ings in this Agreement:

1 . "Additional Distribution Date" means the date ten (10) calendar days after the

Interpleader Judgment is entered by the Court in substantially the form attached hereto as Exhibi t

«C„

2. "Arrearages" shall mean the unpaid invoices, or portions thereof, submitted to th e

Insurance Carriers by the Non-Settling Defendants for reimbursement of legal fees, expert fees ,

and/or other fees and expenses incurred in connection with their defense of the Cases .

3. "Bankruptcy Court" means the United States Bankruptcy Court for the Southern

District of New York presiding over In re Enron Corp., et al., Case No, 01-16034 (AJG) .

4. "Cases" means the NewbyAction and related civil cases (including those coordinated

for pretrial proceedings in MDL 1446), certain investigations and actions by the Securities &

Exchange Commission, investigations by Congress, the Enron Task Force and others related to

Enron , and criminal prosecutions including United States ofAmerica v. Richard A . Causey, Jeffrey

K Skilling, and Kenneth L. Lay ; Cr. No. H-04-25, and United States of America v. Kenneth Rice,

Joseph Hirko, Kevin Hannon , Kevin Howard, Scott Yeager, Rex Shelby, and Michael Krautz, Cr,

H-03-93-04 .

604310v1/007457 2

5. "Committee Action" means Official Committee of Unsecured Creditors of Enro n

Corp. v. Fastow, et al., Civil Action No. H-04-0091, in the United States District Court for the

Southern District of Texas, Houston Division .

6 . "Court" means the United States District Court for the Southern District of Texas ,

Houston Division, presiding over the Newby Action and related civil cases, including th e

coordinated pretrial proceedings in In re Enron Corporation Securities, Derivative & ERISA

Litigation, MDL No. 1446.

7. "Creditors' Committee" means the Official Committee of Unsecured Creditors of

Enron Corp .

8. "Deposit Order" means the Order Authorizing Deposit of Insurance Proceed s

Pursuant to Interpleader Statute entered by the Court in the Newby Action on December 22, 2004 .

9. "Derivative Actions" means Pirelli Armstrong Tire Corporation Retiree Medical

Benefits Trust, derivatively on behalf of Enron Corp . v. Lay, Civil Action No. H-01-3645, in the

United States District Court for the Southern District of Texas, Houston Division ; Detectives

Endowment Association Annuity Fund, derivatively on behalf of Enron Corp . v. Lay, Civil Action

No. H-01 -3892, in the United States District Court for the Southern District of Texas, Housto n

Division ; Kassoway v. Fastow, Civil Action No. H-01-3 690, in the United States District Court for

the SouthernDistrict of Texas , Houston Division ; Greenberg, derivatively on behalfofEnron Corp .

v. Belfer, Civil Action No. H-01 -3998, in the United States District Cou rt for the Southern District

of Texas, Houston Division ; Goffman v. Belfer, Civil Action No . H-02-1838, in the United States

District Court for the Southern District of Texas, Houston Division ; Trzebucki v. Fastow, Civil

604310v1/007457 3

Action No . H-02-1832, in the United States District Court for the Southern District of Texas,

Houston Division; Barsky v. ArthurAndersen LLP, Civil Action No. H-02-1922, in the United States

District Court for the Southern District of Texas, Houston Division ; and Bergsieker v. Lay, Civil

Action No . H-02-3427, in the United States District Court for the Southern District of Texas,

Houston Division .

10 . "Effective Date" means the date upon which the last signatory to this Agreement

executes this Agreement .

11. "Enron" means Enron Corp ., a reorganized debtor.

12. "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limite d

Policy No. D0079A1A98; Energy Insurance Mutual, Limited Policy No . 900630-OODO ; Federal

Insurance Company Policy No . 8142-05-47, Policy No. 8181-43-14, and Policy No. 8179-41-03

SWH; Hartford/Twin City Insurance CompanyPolicyNo, NDA0131301-98H; Greenwich Insurance

Company Policy No . ELU 82248-01 ; Lloyds of London Insurance Certificate No . 901/LK980253 1 ;

St. Paul Mercury Insurance Company Policy No. 568CM0934; Royal Insurance Company of

America Policy No. P SF 000633 ; and ACE Bermuda Insurance Limited Policy No . EC ADO 1-001 .

13 . "Final Judgment" means the Interpleader Judgment, as of the time the Interpleader

Judgment has become final and is no longer subject to appellate review.

14. "Insurance Carriers" means Associated Electric & Gas Insurance Services Limited,

Energy Insurance Mutual Limited, Federal Insurance Company, Hartford/Twin City Insurance

Company, Greenwich Insurance Company, certain Underwriters at Lloyd's, London subscribing t o

60431Ovl/007457 4

insurance certificate no. 901/LK9802531, St . Paul Mercury Insurance Company, Royal Insurance

Company of America, ACE Bermuda Insurance Ltd., and Kemper Indemnity Insurance Company .

15. "Insurance Proceeds" means $200,000,000, which represents the remaining limits

of coverage under the Enron D&O Policies written by those Insurance Carriers above the layer of

insurance provided by Hartford/Twin City Insurance Company .

16 . "Interpleader Action" means the First Amended Third-Party Counterclaim fo r

Interpleader filed by the Insurance Carriers in the Newby Action on October 22, 2004, related to

disposition of the Insurance Proceeds, pending in the Court .

17. "Interpleader Judgment" means the judgment to be sought in the Interpleader Action

in accordance with this Agreement and in the form attached hereto as Exhibit "C" .

18. "Lead Plaintiff 'means the Regents of the University of California, on behalf of the

class in the Newby Action .

19 . "Non-Settling Defendants" means Richard Buy (who, although one of the Non-

Settling Defendants, also is a Settling Defendant with respect to the Creditors' Committee), Richar d

Causey, Mark Frevert, Joseph Hirko, Kevin Howard, Michael Krautz, Kenneth Lay, Jeffre y

McMahon, Lou Pai, Rex Shelby, Jeffrey Skilling, Joseph Sutton, Greg Whalley and Scott Yeager .

20. "Order Date" means the date upon which the Court enters the Preliminary Approva l

Order.

21 . "Outside Directors" means Robert A. Belfer, Norman P. Blake, Jr ., Ronnie C . Chan,

John H . Duncan, Paulo Ferraz Pereira, Joe H . Foy, Wendy L. Gramm, Robert K . Jaedicke, Charles

604310v1/007457 5

A. LeMaistre, John Mendelsohn, Jerome J . Meyer, Frank Savage, John Wakeham, Charls E . Walker,

Bruce G. Willison, Herbert S . Winokur, John A Urquhart, and Rebecca Mark-Jusbasehe .

22, "Parties" means the Plaintiffs and the Non-Settling Defendants .

23 . "Plaintiffs" means Lead Plaintiff and the Creditors' Committee .

24. "Preliminary Approval Order" means the Order Giving Preliminary Approval to the

Settlement substantially in the form attached hereto as Exhibit "D ."

25 . "Preliminary Distribution Date" means the date ten (10) calendar days after the Order

Date.

26. "Set Aside Amounts" means the amounts identified in Exhibit "A" attached hereto .

27. "Settlement" means the Stipulation of Settlement between Lead Plaintiff and th e

Outside Directors to settle all claims asserted against the Outside Directors and between th e

Creditors' Committee and the Outside Directors, James Derrick and Richard Buy to settle all claim s

asserted against the Outside Directors, James Derrick, and Richard Buy .

28 . "Settling Defendants" are Robert A. Belfer, Norman P . Blake, Jr., Ronnie C. Chan,

John H. Duncan, Paulo Ferraz Pereira, Joe H . Foy, Wendy L. Gramm, Robert K. Jaedicke, Charles

A. LeMaistre, John Mendelsohn, Jerome J. Meyer, Frank Savage, John Wakeham, Charls E . Walker,

Bruce G. Willison, Herbert S . Winokur, Jr ., Ken Harrison, John A . Urquhart, Rebecca P . Mark-

Jusbasche, and, as to the Creditors' Committee only, James Derrick and Richard Buy .

29 . "TRO and Preliminary Injunction" means the Temporary Restraining Order and

Preliminary Injunction issued by the Court in the Newby Action on October 18, 2004 (including al l

extensions thereof) and December 8, 2004, respectively .

604310v11007457 6

RECITALS

WHEREAS , Lead Plaintiff brought the Newby Action against, among others, the

Outside Directors .

WHEREAS, the Creditors' Committee brought the Committee Action against, among

others, James Derrick and Richard Buy, and the Creditors' Committee was substituted as th e

plaintiff and real party-in-interest in the Derivative Actions against, among others, the Outsid e

Directors .

WHEREAS, the Outside Directors, James Derrick and Richard Buy are insureds under

the Enron D&O Policies .

WHEREAS, Lead Plaintiff and the Creditors' Committee have entered into th e

Settlement with the Outside Directors, James Derrick and Richard Buy, pursuant to which th e

Outside Directors, James Derrick and Richard Buy have agreed to cause to be paid to Lead

Plaintiff and the Creditors ' Committee the Insurance Proceeds .

WHEREAS, payment of the Insurance Proceeds to Lead Plaintiff and the Creditors '

Committee in accordance with the Settlement will deplete all remaining proceeds under the

Enron D&O Policies.

WHEREAS, the Non-Settling Defendants are defendants in one or more of the Cases .

The Non-Settling Defendants also are insureds under the Enron D&O Policies . Until the

Settlement and the issuance of the TRO and Preliminary Injunction, the Non-Settling Defendant s

had their defense costs in the Cases reimbursed , in whole or in part, by the Insurance Carriers

under the Enron D&O Policies . By virtue of the Settlement, the Non-Settling Defendants will no

604310v1/007457 7

longer be able to have their defense costs'in the Cases reimbursed by the Insurance Carriers

under the Enron D&O Policies . But for this Agreement, the Non-Settling Defendants would

seek payment of unpaid past and future defense costs in the Cases from the Insurance Carriers

under the Enron D&O Policies, would object to the Settlement and would oppose entry of the

Interpleader Judgment , and would appeal any rulings unfavorable to them in connection with the

Settlement and the Interpleader Judgment. In addition, certain of the Non-Settling Defendants

would attempt to bring arbitration actions against the Insurance Carriers with respect to the

Settlement and the Enron D&O Policies .

WHEREAS , faced with demands from the Outside Directors and others with respect t o

the proceeds of the Enron D&O Policies, including the Insurance Proceeds, the Insuranc e

Carriers commenced the Interpleader Action, which seeks to determine to whom the Insuranc e

Proceeds should be paid.

WHEREAS, by the Deposit Order the Court directed those Insurance Carriers above the

Hartford/Twin Cities layer to deposit the Insurance Proceeds into the registry of the Court .

NOW THEREFORE, FOR AND IN CONSIDERATION OF THE MUTUA L

COVENANTS AND AGREEMENTS CONTAINED HEREIN, THE PARTIES AGREE TO

THE ALLOCATION OF THE INSURANCE PROCEEDS, THE RESOLUTION OF THE

INTERPLEADER ACTION, AND OTHER MATTERS DESCRIBED HEREIN ON TH E

FOLLOWING TERMS :

1 . Transfer of the Insurance Proceeds to an Escrow Account . The Parties jointly

will submit to the Court an Order Authorizing Transfer of Insurance Proceeds to Escrow Accoun t

604310v1/007457 8

(the "Transfer Order"), along with an Escrow Agreement, substantially in the form attached hereto

as Exhibit "E." Upon entry of the Transfer Order, and subject to the terms of the Escro w

Agreement, the Insurance Proceeds will be transferred from the registry of the Court to an escro w

account (the "Escrow Account") . At all times, the Insurance Proceeds in the Escrow Account will

be invested in securities of the United States Government bearing minimal risk of loss and with

durations consistent with the obligations for distribution of the Insurance Proceeds provided in this

Agreement . All earnings on the Insurance Proceeds while held both in the registry of the Court and

in the Escrow Account shall be held in the registry and/or the Escrow Account and shall be

distributed to Plaintiffs as provided in this Agreement .

2 . Allocation of the Insurance Proceeds . The Insurance Proceeds shall be allocated

as follows :

A. Set Aside Amounts . The Set Aside Amounts shall be paid from th e

Insurance Proceeds to those Non-Settling Defendants listed on Exhibit "A," severally and not

jointly, in the amounts provided on Exhibit "A ." Each Non-Settling Defendant listed on Exhibit "A"

shall be entitled to receive up to fifty percent (50%) of his Set Aside Amount on the Preliminary

Distribution Date . Each Non-Settling Defendant listed on Exhibit "A" shall be entitled to receive

up to the remaining fifty percent (50%) of his Set Aside Amount on the earlier of (1) the Additional

Distribution Date or (2) April 15, 2005 . No Set Aside Amount shall be paid to any Non-Settling

Defendant unless and until the Preliminary Approval Order is entered by the Court expressly

authorizing the payment from the Insurance Proceeds of the Set Aside Amounts to those Non-

Settling Defendants listed on Exhibit "A ." The Set Aside Amounts shall be paid to those Non-

604310v11007457 9

Settling Defendants listed on Exhibit "A" through their respective counsel of record. No interest

or other earnings shall accrue on any portion of the Insurance Proceeds, including the Set Aside

Amounts, for the benefit of the Non-Settling Defendants . The Set Aside Amounts shall be used by

those Non-Settling Defendants listed on Exhibit "A" exclusively to pay costs of defense, including

attorneys' fees and expert fees, in the Cases, regardless of when incurred, and for no other purpose .

B. Arrearage Payment. The total sum of three million five hundred thousan d

dollars ($3,500,000) shall be paid from the Insurance Proceeds to the Non-Settling Defendants, to

be allocated among them as they agree, in full satisfaction of the Arrearages (the "Arrearage

Payment") . The Non-Settling Defendants shall be entitled to receive up to fi fty percent (50%) of

the Arrearage Payment on the Preliminary Distribution Date . The Non-Settling Defendants shall

be entitled to receive up to the remaining fifty percent (50%) of the Arrearage Payment on the earlier

of (1) the Additional Distribution Date or (2) April 15, 2005 . No portion of the Arrearage Payment

shall be paid to any Non-Settling Defendant unless and until the Preliminary Approval Order is

entered by the Court expressly authorizing the payment from the Insurance Proceeds of the

Arrearage Payment to the Non-Settling Defendants . The Arrearage Payment shall be paid to the

Non-Settling Defendants through the trust account maintained by the law firm of Nickens, Keeton,

Lawless, Farrell & Flack LLP, and once paid to such trust account Plaintiffs shall have no obligation

or responsibility for allocating the Arrearage Payment among the Non-Settling Defendants . No

interest or other earnings shall accrue on any portion of the Insurance Proceeds, including the

Arrearage Payment, for the benefit of the Non-Settling Defendants .

60431Dv1/007457 10

C. Payment to Plaintiffs . With the exception of the Set Aside Amounts and th e

Arrearage Payment, the Insurance Proceeds, including all interest or other earnings thereon, shal l

be paid to Plaintiffs in the ratio of 82 .8% to Lead Plaintiff and 17 .2% to the Creditors' Committee .

The Insurance Proceeds shall be distributed to Plaintiffs from the Escrow Account as provided i n

the Stipulation of Settlement between Plaintiffs and the Settling Defendants .

3 . Settlement and/or Judgment Credit. In any settlement between Lead Plaintiff

and/or the Creditors' Committee, on the one hand, and those Non-Settling Defendants listed on

Exhibit "B," on the other hand, or in satisfaction of any judgment in favor of Lead Plaintiff and/or

the Creditors' Committee against those Non-Settling Defendants listed on Exhibit "B," the Non-

Settling Defendants listed on Exhibit `B" shall receive a credit towards such settlement(s) or

judgment(s), severally and not jointly, in the amount of defense costs, including attorneys' fees and

expert fees, actually paid by each of them on or after July 1, 2004 in the Cases from their personal

resources which has not been reimbursed by the Insurance Carriers, the Set Aside Amounts, or the

Arrearage Payment ; provided, however, that under no circumstances shall the total credit against

such settlement(s) or judgment(s) exceed the amount set forth for each Non-Settling Defendant

listed on Exhibit "B ."

4 . Right to Audit . Plaintiffs shall be entitled to audit the use of the Set Aside Amount s

by the Non-Settling Defendants listed on Exhibit "A" to determine that the Set Aside Amounts were

used to pay costs of defense, including attorneys' fees and expert fees, in the Cases . In the event

that any Non-Settling Defendant listed on Exhibit "B" attempts to seek the settlement or judgment

credit provided in paragraph 3 of this Agreement, Lead Plaintiff and/or the Creditors' Committee ,

6043100/007457 11

as applicable, shall be entitled to audit his payment of defense costs from personal resources to

verify that the amounts were actually paid for defense costs and were not reimbursed by the

Insurance Carriers, the Set Aside Amounts, or the Arrearage Payment . Any dispute between

Plaintiffs and any of the Non-Settling Defendants over use of the Set Aside Amounts or amounts

for which a settlement or judgment credit is sought shall be brought before and decided by the Court

sitting without a jury. Notwithstanding the foregoing, nothing in this paragraph shall be deemed a

waiver of any applicable privilege relating to the documents evidencing any Non-Settling

Defendant's payment of defense costs .

5 . Support for the Interpleader Judgment and the Settlement . The Parties agre e

to entry of the Interpleader Judgment in the form attached hereto as Exhibit "C" and to have their

respective counsel cooperate to file pleadings and appear at hearings as necessary to obtain entry

of the Interpleader Judgment . The Non-Settling Defendants shall not file or otherwise make an

objection to the Settlement in either the Court or the Bankruptcy Court or in any court to which an

appeal is taken, nor shall the Non-Settling Defendants provide support to any other person who does

object to the Settlement.

6 . Access to Document Database . The Settling Defendants and the Non-Settlin g

Defendants shall provide Plaintiffs with access to the document database maintained by such

defendants in accordance with a protocol to be negotiated no later than fifteen (15) days after entry

of the Preliminary Approval Order . Plaintiffs shall not have access to those portions of the

document database containing attorney comments or reflecting attorney mental impressions .

Plaintiffs acknowledge and agree that the access to the Settling Defendants' and Non-Settling

604310v1/007457 12

Defendants' document database shall not constitute in any respect grounds to assert waiver by eithe r

the Settling Defendants or the Non-Settling Defendants of the attorney-client privilege, the work

product doctrine, or any other applicable privilege.

7 . No _lease of Non-Settling Defendants. Notwithstanding anything to the contrar y

in this Agreement, this Agreement is not intended to, nor does it, release any claims against any o f

the Non-Settling Defendants, and nothing in this Agreement shall be deemed to operate as a releas e

or settlement of any such claims .

8 . No Further Claim to Insurance Proceeds or the Enron D&O Policies . With the

exception of the Set Aside Amounts and the Arrearage Payment, the Non-Settling Defendants shall

not be entitled to any portion of the Insurance Proceeds or any payment or reimbursement from the

Insurance Carriers under the Enron D&O Policies, and each Non-Settling Defendant expressly

forever waives and relinquishes any and all right, claim and interest in and to the Enron D&O

Policies . The Non-Settling Defendants covenant and agree not to make any claim or file or

prosecute any suits, arbitrations, or other proceedings against the Insurance Carriers with respect to

the Insurance Proceeds . The Insurance Carriers are intended to be direct beneficiaries of the waiver

and covenant not to sue provided in this paragraph of this Agreement and, as such, shall be entitled

to enforce it in an action before the Court . Notwithstanding the foregoing, the releases, waivers, and

covenant not to sue in this paragraph do not apply to (a) any liability or responsibility of the

Insurance Carriers pursuant to any discovery period or extended reporting period purchased by

Enron under any of the Enron D&O Policies if and to the extent that a new and separate Limit of

liability applies to claims first made during such discovery period or extended reporting period ,

604310v11007457 13

and/or (b) any potential liability of any of the Insurance Carriers under policies of insurance issue d

to Portland General Corporation (including without limitation AEGIS Policy No . DOI 19A1 A96 and

EIM Policy No . 9003 5 3-96DO) .

9 . Dismissal of the Krantz Action . Promptly after the Preliminary Distribution Date,

Non-Settling Defendants Michael Krautz, Scott Yeager, and Kevin Howard shall take all action

necessary to cause the dismissal of the action styled Krautz v. Greenwich Insurance Company, No.

04-CV-83 89 , in the United States District Court for the Southern District ofNew York (the "Krautz

Action") .

10 . Termination of this Agreement, In the event that (a) the Settlement is not finally

approved in all material respects by the Court and the Bankruptcy Court and the time for appeals

has expired or, if any appeals are taken, the Settlement is not approved by any court to which an

appeal is taken; (b) the Interpleader Judgment is not entered in the Interpleader Action in the form

attached hereto as Exhibit "C" or does not become aFinal Judgement; or (c) the Settlement, or any

material part thereof, is terminated in accordance with its terms (the foregoing are "Termination

Events"), this Agreement shall automatically terminate and become null and void and each party

hereto shall have restored to it all of the rights and obligations existing before the Effective Date .

In addition, upon a Termination Event, each Non-Settling Defendant listed on Exhibit "A" shall

promptly return to the Escrow Account his Set Aside Amount, and each Non-Settling Defendant

who received any portion of the Arrearage Payment shall promptly return to the Escrow Account

any amount received as an Arrearage Payment .

604310v1/007457 14

11 . Breach of Agreement. Any disputes or controversies arising out of or related to this

Agreement shall be brought exclusively in and shall be heard by the Court sitting without a j ury, the

Parties expressly waiving all rights to a trial by jury .

12. Informed Agreement, Construction , and Absence of Presump tions. The Parties

acknowledge that they are fully and completely informed of the facts relating to the subject matter

of this Agreement, and of their rights and liabilities ; that the Parties entered into this Agreement

voluntarily after having given careful consideration to the making of this Agreement ; that the Parties

have discussed the provisions of this Agreement with attorneys of their own choosing, and have

executed it in reliance upon their own judgment and the advice of their attorneys. No party makes

any representation to or covenant with any other party about the legal, tax or other consequences of

this Agreement. Each party has had access to and separate representation by the legal, tax and other

advisors of that party's own choosing, and has freely and fully reviewed and negotiated the terms

of this Agreement . Accordingly, no presumption shall apply that any party is the drafter of this

Agreement, nor shall any provision or ambiguity in a provision be construed against a party on the

basis that the party is deemed to have drafted such provision . Nothing in this Agreement shall be

deemed to constitute an admission, concession or waiver by any party as to the interpretation of the

Enron D&O Policies or any other insurance policies at issue in this or any other action .

13 . Modification of Agreement . This Agreement may not be modified or amended,

and there shall be no waiver of its provisions, except by a written instrument executed by the Parties .

14. No Reliance on Other Parties. Each party hereby expresslywarrants and represents

that: (i) he or it is not relying upon any statements, understandings, representations, expectations ,

604310v1J007457 is

or agreements other than those expressly set forth in this Agreement ; (ii) he or it is represented and

has been advised by qualified legal counsel in connection with this Agreement, which such party

makes voluntarily and of its own choice and not under coercion or duress ; (iii) he or it has made his

or its own investigation of the facts and is relying solely upon his or its own information and

knowledge and the advice of its counsel ; (iv) he or it has no expectation that any other party will

disclose to him or it facts material to this Agreement; and (v) he or it knowingly waives any claim

to rescind or avoid this Agreement based upon undisclosed facts, known or unknown . The Parties

agree and stipulate that each party is relying upon the representations and warranties in this

paragraph in entering into this Agreement. These representations and warranties shall survive the

execution of this Agreement . The Parties further warrant and represent that they have not relied on

any promise, representation, conduct or consideration other than those expressly set forth in this

Agreement.

15 . Governing Law. This Agreement shall be interpreted by, governed by, and

enforced under the substantive law of the State of Texas (without regard for its rules concerning

conflicts of law), except insofar as federal law may provide that the Bankruptcy Code or the Federal

Rules of Bankruptcy Procedure supply the governing law .

16. Counterparts. This Agreement may be executed in multiple counterparts, which

shall constitute and be construed as one and the same instrument . Signatures by facsimile may be

deemed executed .

604310v1 /007457 16

Dated :II i

(f C?S Regents of the University of Califo rnia, LeadPlaintiff

"! AIVYID 6 {~M~~~i:;~ T1 it • %4

Dated : LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

_.O.r

William S. LerachCounsel for Lead Plaintiff

Dated : OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP .

Dated : McKOOL SMITH, P .C .

Lewis T. LeClairCounsel for the Creditors' Committe e

Dated : RICHARD B . BUY

604310vlro07457 17

Dated: RICHARD A. CAUSE Y

Dated; MARK A. FREVERT

Dated: JEFFREY MCMAHON

Dated: LAWRENCE GREGORY WHALLEY

Dated: NICKENS, KEETON, LAWLESS, FARRELL &FLACK, LLP

Jacks C. NickensAttorney-in-charge for DefendantsRichard B . Buy, Richard A. Causey, Mark A.Frevert, Jeffrey Mcmahon ,and Lawrence Gregory Whalle y

Dated: JEFFREY K. SKILLING

60431 0VI/007457 18

Dated : O'MELVENY & MYERS LLP

Jeffrey W. KilduffAttorney-in-Charge for DefendantJeffrey K. Skilling

Dated :

Dated :

KENNETH L. LAY

CARRINGTON, COLEMAN, SLOMAN &BLUMENTAL, LLP

James E. Coleman, Jr.Attorney-in-Charge for DefendantKenneth L. Lay

Dated :

Dated:

JOSEPH M . HIRKO

STOEL RIVES LLP

David H . AngeliAttorney-in-Charge for DefendantJoseph M. Hirko

604310v11007457 19

Dated :

Dated:

LOU L. PAI

ZUCKERMAN SPAEDER, LLP

Roger ZuckermanAttorney-in-Charge for DefendantLou L. Pai

Dated :

Dated :

MICHAEL KRAUTZ

COLLIER SHANNON SCOTT , PLLC

Barry J. PollackAttorney-in-Charge forMichael Kraut z

Dated : KEVIN HOWARD

604310V 1 07457 20

Dated : ZIMMERMAN & LEVINE, PC

Jim E. LavineAttorney-in-Charge forKevin Howard

Dated :

Dated :

Dated :

SCOTT YEAGER

HAMEL BOWERS & CLARK, LLP

Lee HamelAttorney-in-Charge forScott Yeager

Dated :

Dated:

REX SHELB Y

MCMANEMIN & SMITH, P .C .

Edwin J . TomkoAttorney-in-Charge forRex Shelby

604310v1/007457 21

EXHIBIT "A"

EXHIBIT "A"

SET ASIDE AMOUNTS

Non-Settling Defendant Amount

Richard Buy $50,00 0

Richard Causey $500,000

Mark Frevert $500,000

Kevin Howard $500,000

Michael Krautz $500,000

Kenneth Lay $2,500,000

Jeffrey McMahon $200,000

Jeffrey Skilling $2,500,000

Rex Shelby $1,000,00 0

Greg Whalley $250,000

Scott Yeager $1,000,000

605896v1/007457

EXHIBIT "B"

EXHIBIT "B"

CREDIT FOR NON-SETTLING DEFENDANTS AGAINSTSETTLEMENT OR JUDGMENT

Non-Settling Defendant Amount

Richard Buy $50,000

Richard Causey $1,000,000

Mark Frevert $1,500,00 0

Joseph Hirko $3,500,000

Kenneth Lay $1,000,000

Jeffrey McMahon $200,000

Lou Pai $6,000,000

Jeffrey Skilling $1,000,000

Joseph Sutton $5,000,000

Greg Whalley $250,000

605899v1 /007457

EXHIBIT "C"


HOUSTON DIVISION




Plaintiffs ,

vs .


Defendants .


Plaintiffs ,

vs.


Defendant s


§ Civil Action No . H-O1-3624§ (Consolidated)

§ CLASS ACTION

FINAL JUDGMENT

EXHIBIT C


Plaintiffs,

vs.


Defendant s


Plaintiffs ,

vs.

ANDREW S. FASTOW, et al .,

Civil Action No . H-02-340 1

CLASS ACTION


Defendants .

The Court has considered the Motions for Judgment on the Pleadings and Motions for

Summa ry Judgment that have been filed concerning whether the relief sought in the First Amended

Third-Party Counterclaim for Interpleader filed by Associated Electric & Gas Insurance Services

("AEGIS"), Energy Insurance Mutual, Limited ("EIM"), Federal Insurance Comp any, Greenwich

Insurance Comp any, ce rtain Underwriters at Lloyd's, London subsc ribing to insurance cert ificate

No. 901 /LK980253 1, St. Paul Mercury Insurance Company, Royal Insurance Company of America,

ACE Bermuda Insurance Ltd ., and Kemper Indemnity Insurance Comp any (the "Excess Insurers"),

who issued excess policies of Directors and Officers Liability Insurance to Enron that are the subject

of the Interpleader Action ("Excess Policies"),' should be granted and whether the $200 mil lion in

insurance proceeds deposited into the Court regist ry pursuant to 28 U .S .C. § 1335 (the "Excess

Insurance Proceeds ") may be used to fund the proposed se ttlement of the Newby and Official

Creditors ' Committee actions.

The Court finds that the interpleader relief sought by the Excess Insurers pursu ant to 28

U.S.C. §§1335, 1397, 2361 and Fed. R. Civ . P . 22 should be gr anted . The Court further finds that

the claims being settled in the Newby and Official Creditors' Committee actions are covered by the

Excess Policies, and the terms of the Se ttlement are fair and reasonable .

Accordingly, the Motions for Summary Judgment and for Judgment on the Pleadings are

GRANTED in their entirety. It is ADJUDGED, ORDERED AND DECREED as follows :

The Excess Policies are : Greenwich Insurance Company Excess Policy No . ELU 82248-01 ;Lloyd's of London Insurance Certificate No. 901/LK9802531 ; St . Paul Mercury Insurance CompanyExcess Policy No . 568CM0934; Federal Insurance Company Excess Policy No . 8181-43-14; RoyalInsurance Company of America Policy No . P SF000633 ; ACE Bermuda Insurance Ltd . ExcessPolicy No . EC-AD01-001 ; Federal Insurance Company Excess Policy No . 8179-41-03SWH, and8181-43-14 and Kemper Excess Policy No . 3DP-00-1003-00 .

-1-

1 . The interpleaded Excess Insurance Proceeds shall be used to fund the pending Newby

and Official Creditors' Committee settlements .

2 . The Excess Insurers and any and all of their current and former agents,

representatives or related companies (including but not limited to, subsidiaries and parent

companies) are hereby discharged from any further liability or responsibility under or with respect t o

the Excess Policies ; provided, however, this discharge does not apply to any liability or

responsibility of the Excess Insurers pursuant to any discovery period or extended reporting period

purchased by Enron under any of the Excess Policies if and to the extent that a new and separate

limit of liability applies to claims first made during such discovery period or extended reporting

period .

3 . The Excess Insurers and any and all of their current and former agents ,

representatives or related companies (including but not limited to, subsidiaries and parent

companies) are hereby discharged from any further liability or responsibility under or with respect to

the Enron D&O Policies relating to (i) the actions that have been consolidated as part of MDL 1446,

including the Newby and Official Creditors Committee litigation and the claims identified in the

Interpleader Action, or (ii) the same or interrelated Wrongful Acts (as defined in the Enron D&O

Policies) alleged in such actions ; provided, however, that no liability of any Excess Insurer under

policies of insurance issued to Portland General Corporation (including without limitation AEGIS

Policy No . DO119AIA96 and EIM Policy No. 900353-96DO) is discharged .

4. Pursuant to 28 U .S.C. § 2361, this Court finds good cause to make permanent an

injunction precluding claims against the Excess Insurers under or with respect to the Excess Policies .

Accordingly, all defendants to the First Amended Complaint in Interpleader filed by the Excess

-2-

Insurers, and any others claiming rights under the Excess Policies and/or the Excess Insurance

Proceeds, and receiving notice of this Final Judgment, are hereby barred and enjoined from :

(a) asserting any claims, rights, causes of action, or demands of whatever nature,

whether known or unknown, foreseen or unforeseen, under the Excess Policies against the Excess

Insurers and each of their parents, subsidiaries, affiliates, insurers, reinsurers, directors, officers,

employees, agents, representatives, attorneys, and their respective heirs, executors, administrators,

successors and assigns ; and

(b) instituting, commencing or prosecuting any arbitration proceeding, or an y

legal proceeding in any state or federal court, against the Excess Insurers and each of their parents,

subsidiaries, affiliates, insurers, reinsurers, directors, officers, employees, agents, representatives,

attorneys, heirs, executors, administrators, successors and assigns, with respect to or for any claims,

causes of action, rights, attorneys' fees, costs, expenses, judgments, settlements, liabilities and

damages, of whatever nature, whether known or unknown, foreseen or unforeseen, that have been,

could have been, or could be asserted in any form, either directly or indirectly, based upon, arising

out of, relating to, concerning, resulting from or in consequence of, or in connection with :

(i) the Excess Policies and/or the Excess Insurance Proceeds ;

(ii) liability under the Enron D&O Policies that relates to actions that hav e

been consolidated as part of MDL 1446, including the Newby and Official Creditors Committee

litigation and the claims identified in the Interpleader Action ; provided , however, that no liabi lity of

any Excess Insurer under policies of insurance issued to Port land General Corporation (including

without limitation AEGIS Policy No. . DOI19AIA96 and EIM Policy No. 900353-96D0) is

discharged ;

-3-

(iii) any past, present or future notice of claim or notice of potential clai m

under the Excess Policies;

(iv) any claim for coverage for "Loss" under the Excess Policies ,

including, but not limited to costs, defense, indemnity or any other payments, services or benefit s

under the Excess Policies or which otherwise relate to the Excess Policies ;

(v) any aspect of the Excess Insurers ' performance (or lack o f

performance) of any duties or obligations under the Excess Policies, whether such duties or

obligations are contractual, extra-contractual, tort, or otherwise, including without limitation any

claims, demands or causes of action relating to any alleged claims handling, claims adjustment,

payments, exhaustion, negligence, breach of contract, breach of duty or duties, breach of good faith

and fair dealing, bad faith, interference with contractual relationships, deceptive trade practices,

conduct in violation of any insurance code or any other alleged misconduct, omission or wrongdoin g

of any kind ;

(vi) any alleged right to recover any payments of any defense fees, costs ,

charges or expenses made by the Insureds under the Excess Policies; o r

(vii) any and all duties, liabilities and obligations under the Excess Policies .

(c) Notwithstanding the foregoing, the injunction pursuant to this Paragraph 4

does not apply to any liability or responsibility of the Excess Insurers pursuant to any discovery

period or extended reporting period purchased by Enron under any ofthe Enron D&O Policies if an d

to the extent that a new and separate limit of liability applies to claims first made during suc h

discovery period or extended reporting period .

-4-

5 . If they have not already done so, defendants Ken L. Harrison, Michael Krautz, Scott

Yeager, Kevin Howard shall immediately dismiss with prejudice the actions they filed against th e

Excess Insurers in the United States Dist rict Court for the Southern District of New York .

6. The complaints filed against the Excess Insurers by Robert A . Belfer, Norman P .

Blake, Jr ., Ronnie Chan, John H . Duncan, Paulo Ferraz Pereira, Joe H. Foy, Wendy L . Gramm,

Robert K. Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome J . Meyer, Frank Savage, Joh n

Wakeham, Charls E . Walker , Bruce G. Willison, Herbert S. Winokur, John A. Urquhart, and

Rebecca Mark-Jubasche are hereby dismissed with prejudice, with each party to bear its ow n

attorneys' fees and costs .

7. The Escrow Agent is directed to disburse the Excess Insurance Proceeds in

accordance with the Stipulation of Settlement .

Signed this day of , 2005.

MELINDA HARMONUNITED STATES DISTRICT JUDG E

S :\Scttlement\Enron .Set\Outside Directors Settlement\Interpleader Judge .doc

-5-

EXHIBIT "D"


HOUSTON DIVISION

In re ENRON CORPORATION SECURITIES

LITIGATION



Plaintiffs ,

vs .


Defendants .

THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,

Plaintiffs,

vs .


Defendants

[Caption continued on following page.]

Civil Action No. H-01-3624(Consolidated )

CLASS ACTION

ORDER PRELIMINARILY APPROVING SETTLEMEN T

EXHIBIT D

WASHINGTON STATE INVESTMENT § Civil Action No. H-02-3401BOARD, et al ., On Behalf of Themselves and All §Others Similarly Situated , § CLASS ACTION

Plaintiffs, §

VS . §

KENNETH L. LAY, et al., §

Defendants . §

NATHANIEL PULSIFER, TRUSTEE OF THE § Civil Action No. 02-301 0

§SHOOTERS HILL REVOCABLE TRUST,§ CLASS ACTIONINDIVIDUALLY AND ON BEHALF OF ALL§OTHERS SIMILARLY SITUATED ,

Plaintiffs, §

vs . §

KENNETH L. LAY, et al ., §

Defendants . §

WHEREAS, consolidated class actions are pending before this Court, including In re Enron

Corporation Securities Litigation, Civil Action No . H-0 1-3624, which includes, among others, case s

entitled Newby, et al. v. Enron Corp., et al. ; The Regents of the University of California, et al. v.

Kenneth L. Lay, et al. ; Washington State Investment Board and Employer- Teamsters Local Nos. 175

and 505 Pension Trust Fund, et al. v. Kenneth L. Lay, et al . ; and Nathaniel Pulsifer, Trustee of The

Shooters Hill Revocable Trust, Individually and On Behalf of All Others Similarly Situated v.

Kenneth L. Lay, et al. ; and

WHEREAS, the Settling Parties have applied to the Court, pursuant to Rule 23 of the Federal

Rules of Civil Procedure, for an order approving the settlement of the Actions as to them in

accordance with the Stipulation of Settlement among them dated as of January 12, 2005 (th e

"Stipulation"), which, together with the Exhibits annexed thereto, sets forth the terms and conditions

for a proposed settlement of the Actions as to the Outside Directors and Harrison (the "Settlement" )

and for dismissal of the Actions with prejudice as to the Outside Directors and Harrison ;

WHEREAS, the Stipulation provides for the conditional ce rtification of the Settlement Clas s

solely for purposes of the Settlement; and

WHEREAS, the Court has read and considered the Stipulation and the Exhibits annexe d

thereto and has read and considered all other papers filed and proceedings had herein, and i s

otherwise fully informed in the premises , and with good cause appearing therefore ;

NOW, THEREFORE, IT IS HEREBY ORDERED :

1 . This Order (the "Preliminary Approval Order") incorporates by reference th e

definitions in the Stipulation and the Agreement Regarding Insurance Proceeds and Interpleade r

Action ("Insurance Proceeds Agreement"), and all capitalized terms used herein shall have the same

meanings set forth in the Stipulation and the Insurance Proceeds Agreement .

-1-

2. The Court preliminarily approves the Stipulation, including the releases contained

therein, and the Settlement as being fair, reasonable, and adequate to the Settlement Class .

3 . The Court approves the distribution from the Insurance Proceeds to those Non-

Settling Defendants listed on Exhibit A to the Insurance Proceeds Agreement, severally and not

jointly, of the amounts provided on Exhibit A . Each Non-Settling Defendant listed on Exhibit A

shall be entitled to receive up to fifty percent (50%) of his Set Aside Amount ten (10) calendar days

from the date of this Preliminary Approval Order . Each Non-Settling Defendant listed on Exhibit A

shall be entitled to receive up to the remaining fifty percent (50%) of his Set Aside Amount on th e

earlier of (a) ten (10) calendar days after the entry of the Interpleader Judgment by this Court

substantially in the form attached to the Insurance Proceeds Agreement as Exhibit C or (b) April 15,

2005. Further, the Court approves the distribution from the Insurance Proceeds to the Non-Settling

Defendants (as defined in the Insurance Proceeds Agreement) of the total sum of three million, fiv e

hundred thousand dollars ($3,500,000) . The Non-Settling Defendants (as defined in the Insurance

Proceeds Agreement) shall be entitled to receive up to fifty percent (50%) of the Arrearage Payment

ten (10) calendar days from the date of this Preliminary Approval Order . The Non-Settling

Defendants (as defined in the Insurance Proceeds Agreement) shall be entitled to receive up to the

remaining fifty percent (50%) of the Arrearage Payment on the earlier of (a) ten (10) calendar days

after entry of the Interpleader Judgment by this Court substantially in the form attached to the

Insurance Proceeds Agreement as Exhibit C or (b) April 15, 2005 .

4. Solely for purposes of the Stipulation and the Settlement, the Court now finds and

concludes that :

(a) With respect to all Released Claims, particularly in light of the Settlement : (1)

the members of the Settlement Class are so numerous that joinder of all class members in the

Actions is impracticable ; (2) there are questions of law and fact common to the Settlement Class ; (3 )

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the claims of the Representative Plaintiffs are typical of the claims of the Settlement Class ; and (4) in

negotiating and entering into the Stipulation, the Representative Plaintiffs and their counsel hav e

fairly and adequately represented and protected the interests of all Settlement Class Members ; and

(b) With respect to all Released Claims : (1) the questions of law and fact that ar e

common to the Settlement Class predominate over any individual questions ; and (2) a class action is

superior to other available methods for the fair and efficient adjudication of this controversy ,

considering (i) the interests of the Settlement Class Members in individually controlling th e

prosecution of separate actions, (ii) the extent and nature of any litigation concerning the controvers y

already commenced by Settlement Class Members, (iii) the desirability or undesirability o f

concentrating the litigation of these claims in this particular forum , and (iv) the difficulties likely t o

be encountered in the management of the Actions .

5. Solely for the purposes of the Stipulation and the Settlement, the Settlement Class i s

hereby certified pursuant to Rule 23 of the Federal Rules of Civil Procedure in accordance with the

following definitions as set forth in the Stipulation :

"Settlement Class" means all Persons (and their beneficiaries) who purchased or acquired

any publicly traded equity or debt securities of Enron between September 9,1997 and November 27,

2001, inclusive, and including purchasers of all securities issued by Enron-related entities during the

Settlement Class Period, the value or repayment of which was dependent on the credit, financial

condition, or ability to pay of Enron Corporation (collectively, the "Publicly Traded Securities") . '

' The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7.875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources ,

-3-

Excluded from the Settlement Class are Defendants, the officers and directors of Enron, and

members of their immediate families or their successors, heirs, and legal representatives . Also

excluded from the Settlement Class are those Persons who timely and validly request exclusion fro m

the Settlement Class, to the extent that they are able to do so under Rule 23 of the Federal Rules o f

Civil Procedure, pursuant to the Mailed Notice .

6. Solely for purposes of the Stipulation and the Sett lement, the Representative Plaintiffs

are hereby certified as the class representatives pursuant to Rule 23 of the Federal Rules of Civi l

Procedure .

7. The Court approves , as to form and content , the Notice of Pendency and Partial

Settlement of Class Action annexed hereto as Exhibit F-1 (the "Mailed Notice") .

8 . The Court approves, as to form and content, the Summary Notice for Publication

annexed hereto as Exhibit F-2 (the "Summary Notice") .

9 . The date and time of the Settlement Hearing shall be added to the Mailed Notice and

the Summary Notice before they are mailed and published, respectively, in accordance wit h

paragraph 10, below .

10 . The Court finds that the mailing, publication and distribution of the Mailed Notic e

and Summary Notice substantially in the manner and form set forth in paragraph 10, below ,

L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8.75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and £315,000,000 6 .375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500,000,000 7 .375% due 06, Enron Euro Credit LinkedNotes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007.25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6 .31 %Senior Secured Notes and €515,000,000 6 .19% Senior Secured Notes (collectively, the "ForeignDebt Securities") .

-4-

constitutes the best notice practicable under the circumstances, including individual notice to all

Settlement Class Members who can be identified through reasonable effort, and constitutes valid,

due and sufficient notice to all persons entitled thereto, complying fully with the requirements of

Rule 23 of the Federal Rules of Civil Procedure and due process .

11 . The Notice and Claims Administrator is empowered to supervise and administer the

notice procedure, as set forth below :

(a) Commencing on or before , 2005, the Notice and Claims

Administrator shall mail or cause to be mailed, by first class mail, postage prepaid, copies of the

Mailed Notice to all Settlement Class Members who can be identified by Plaintiffs' Settlement

Counsel with reasonable effort at each such Settlement Class Member's last known address ; and

(b) On or before , 2005, the Notice and Claims Administrator

shall cause the Summary Notice to be published twice in the Investor's Business Daily and twice in

the Houston Chronicle .

12. At or prior to the Settlement Hearing (as defined below), Plaintiffs' Settlement

Counsel shall file with the Court and serve on counsel for the Outside Directors and Harrison proof

by declaration or affidavit of the mailing and publication described in paragraph 10, above .

13. Settlement Class Members who wish to exclude themselves from the Settlement

Class must do so in accordance with the instructions contained in the Mailed Notice .

14. All Persons who fall within the definition of the Settlement Class and who do not

timely and validly request to be excluded from the Settlement Class in accordance with the

instructions set forth in the Mailed Notice shall be subject to and bound by the provisions of the

Stipulation, the releases contained therein, and the Judgment with respect to all Released Claims,

regardless of whether such Persons seek or obtain by any means, including, without limitation, b y

-5-

submitting a Proof of Claim and Release or any similar document, any distribution from the Gross

Settlement Fund or the Net Settlement Fund .

15. A hearing (the "Settlement Hearing") shall be held on , 2005 at

a.m ./p.m., before the Honorable Melinda Harmon , United States Dist rict Judge, at the United States

District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk

Avenue, Houston, Texas 77002, to determine : (a) whether the proposed Sett lement as set forth in the

Stipulation is fair, reasonable and adequate and should be approved by the Court; (b) whether an

Order of Final Judgment and Dismissal, substantially in the form of Exhibit B to the Stipulation,

should be entered herein ; (c) whether the establishment of the Expense Fund should be approved ;

and (d) whether the allocation of the Gross Settlement Fund between the Newby Action and the

WSIB Action, on the one hand, and the Creditors Commi ttee Action, on the other, should be

approved.

16. All papers in suppo rt of the Settlement shall be fi led at least seven (7) days prior to

the Settlement Hearing .

17. Any Settlement Class Member may appear and show cause (if he, she or it has any)

why the Court should or should not : (a) approve the proposed Settlement as set forth in the

Stipulation as fair, reasonable and adequate ; (b) enter the Order of Final Judgment and Dismissal

substantially in the form annexed as Exhibit B to the Stipulation ; (c) approve the establishment of

the Expense Fund ; or (d) approve the allocation of the Gross Settlement Fund between the Newby

Action, the Pulsifer Action and the WSIB Action, on the one hand, and the Creditors Committee

Action, on the other; provided, however that no person shall be heard with respect to, or shall be

entitled to contest, the foregoing matters unless on or before , 2005, that person

has served by hand or by first class mail notice of his, her or its intention to appear, setting forth

briefly each objection and the basis therefor, together with copies of any papers and briefs in suppor t

-6-

of said objections and proof of membership in the Settlement Class, upon Keith F . Park, Lerach

Coughlin Stoia Geller Rudman & Robbins LLP, 401 B Street, Suite 1600, San Diego, California

92101 (on behalf of Lead Plaintiff in the Newby Action and plaintiffs in the WSIB Action), upon

Lew LeClair, McKool Smith PC, 300 Crescent Court, Suite 1500, Dallas, Texas 75201(on behalf of

the Creditors Committee); and upon Kathy Patrick, Gibbs & Bruns, L .L.P., 1100 Louisiana, Suite

5300, Houston, Texas 77002 (on behalf of the Outside Directors) ; and upon William F. Martson, Jr. ,

Tonkon Torp LLP, 888 SW Fifth Avenue, Suite 1600, Portland, Oregon 97204 (on behalf of

Harrison) and has filed said objections, papers and briefs with the Court . Unless otherwise ordered

by the Court, any Settlement Class Member who does not make his, her, or its objection in the

manner provided for herein shall be deemed to have waived such objection and shall forever be

foreclosed from making any objection to the foregoing matters .

18. The Court may adjourn the Settlement Hearing from time to time and without further

notice to the Settlement Class . The Court reserves the right to approve the Settlement at or after the

Settlement Hearing with such modifications as may be consented to by the Settling Parties and

without further notice to the Settlement Class . The Court further reserves the right to enter the Order

of Final Judgment and Dismissal, inter alia, dismissing the Actions with prejudice as to the Settling

Defendants and against Representative Plaintiffs and the Settlement Class at or after the Settlement

Hearing and without further notice to the Settlement Class .

19. Upon the Effective Date, the Representative Plaintiffs and each of the Settlement


(now or in the future) through or on behalf of them, and regardless of whether any such

Representative Plaintiff or Settlement Class Member ever seeks ; or obtains by any means, including,

without limitation, by submitting a Proof of Claim and Release or any similar document, any

distribution from the Gross Settlement Fund, shall be deemed to have, and by operation of th e

-7-

Judgment shall have, fully, finally, and forever released, relinquished, and discharged all Released

Claims against the Outside Directors and Harrison and shall have covenanted not to sue the Outside

Directors or Harrison with respect to all such Released Claims, and shall be permanently barred and

enjoined from instituting , commencing, or prosecuting any such Released Claim against the Outside

Directors or Harrison.

20. Except as otherwise provided in the Stipulation no person who is not a Settlement

Class Member or counsel for one or more of the Representative Plaintiffs shall have any rights to

any port ion of the Gross Settlement Fund .

21 . Banks, brokerage firms, institutions , and other Persons who are nominees that

purchased Publicly Traded Securities of Enron for the beneficial interest of other Persons during the

Settlement Class Period shall, within ten (10) calendar days of receiving the Mailed Notice (a) send

the Mailed Notice to all such beneficial owners, or (b) if they have not already done so in connection

with the settlement with Andersen Worldwide Societe Cooperative ("AWSC"), send a list of the

names and addresses of such beneficial owners to the Notice and Claims Administrator, in which

event the Notice and Claims Administrator shall promptly mail the Mailed Notice to such beneficial

owners . The Mailed Notice will advise such nominees that their reasonable costs in providing the

Mailed Notice to such beneficial owners, to the extent not already reimbursed in connection with the

prior settlement with AWSC, will be reimbursed by Plaintiffs' Settlement Counsel from the Gross

Settlement Fund.

22 . All reasonable costs and expenses incurred in identifying and providing notice to

Settlement Class Members and in administering the Gross Settlement Fund shall be paid as set forth

in the Stipulation .

23 . The Court retains jurisdiction over all proceedings arising out of or related to the

Stipulation and/or the Settlement.

-8-

24. If for any reason the Settlement does not become effective in accordance with the

terms of the Stipulation, this Preliminary Approval Order shall be rendered null and void and shal l

be vacated nunc pro tunc, and the provisions of ¶¶6 .2 and 7 .5 of the Stipulation shall apply .

25 . Without further order of the Court, the Settling Parties may agree to reasonabl e

extensions of time to carry out any of the provisions of this Preliminary Approval Order or th e

Stipulation.

26. Pending final determination as to whether the Settlement as set forth in the Stipulation

should be approved, no Settlement Class Member shall commence, prosecute, pursue or litigate any

Released Claim against the Outside Directors or Harrison, whether directly, representatively or in

any other capacity, and regardless of whether or not any such Settlement Class Member has

appeared in the Actions.

IT IS SO ORDERED .

DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDGE

S :\Settlement\Enron .Set\Outside Directors Settlement\preliminary app ord-Clean .do c

-9-

EXHIBIT 0-1


HOUSTON DIVISION


Civil Action No. H-O1-3624(Consolidated )



Plaintiffs ,

vs .


Defendants.


Plaintiffs ,

vs.


Defendants .


CLASS ACTION

NOTICE OF PENDENCY AND PARTIAL SETTLE MENT OF CLASS ACTION

EXHIBIT D-1

WASHINGTON STATE INVESTMENTBOARD, et al., On Behalf of Themselves andAll Others Similarly Situated,

Plaintiffs ,vs .


Defendants .

NATHANIEL PULSIFER, TRUSTEE OFTHE SHOOTERS HILL REVOCABLETRUST, INDIVIDUALLY AND ONBEHALF OF ALL OTHERS SIMILARLYSITUATED,

Plaintiffs,

vs.


Defendants

§


CLASS ACTION

Civil Action No . 02-301 0

CLASS ACTION

TO: (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED BELOW) DURING THE PERIOD FROM SEPTEMBER 9,1997THROUGH AND INCLUDING NOVEMBER 27, 200 1

This Notice of Pendency and Partial Settlement of Class Action (the "Notice") is given

pursuant to Rule 23 of the Federal Rules of Civil Procedure to inform you of the proposed partial

settlement of these Actions (the "Settlement") and the hearing (the "Settlement Hearing") to be held

by the United States District Court for the Southern District of Texas (the "Court") to consider the

fairness, reasonableness and adequacy of the Settlement as set forth in the Stipulation of Settlement

among the Representative Plaintiffs and the Outside Directors (as further defined below) and Ken

Harrison ("Harrison"), dated as of January 12, 2005 (the "Stipulation"), on file with the Court . All

capitalized terms not defined prior to their use in this Notice have the meanings set forth in Section

VIII, below .

1 . STATEMENT OF PLAINTIFFS' RECOVERY

The Settlement will result in the creation of a cash settlement fund consisting of tw o

components . The first component is the remaining amount of available proceeds from Enron's

directors and officers liability insurance policies which amount is Two Hundred Million Dollars .

Subject to the approval of the Court, this amount will be reduced by $13 million (the "Set Aside

Amount") and the remainder allocated 82 .8% to the Settlement Class and 17 .2% to the Official

Committee of Unsecured Creditors of Enron Corp . The second component consists of the individual

contributions of the Outside Directors and Harrison in the approximate aggregate amount of $13

million . The total amount available to the Settlement Class by reason of this settlement is estimated

to be $168 million and, subject to deduction for costs of notice and administration and certain taxes

and tax related expenses and for attorneys' fees, costs and expenses as approved by the Court, wil l

-1-

be available for distribution to Settlement Class Members (as defined below). As described more

fully below, the amount of any distribution to Settlement Class Members on a per share basis will

depend on future Court proceedings and it is therefore not possible to estimate the amount of any

such distribution at the present time . See Section XI .

II. STATEMENT OF POTENTIAL OUTCOM E

Representative Plaintiffs, the Outside Directors and Harrison do not agree on the averag e

amount of damages per share that would have been recoverable from the Outside Directors or

Harrison if Representative Plaintiffs were to have prevailed on each claim asserted . The issues on

which the parties disagree include: (1) whether the Outside Directors or Harrison engaged in conduct

that would give rise to any liability to the Settlement Class under the federal or Texas securities

laws, Texas common law, or any other laws ; (2) whether the Outside Directors or Harrison have

valid defenses to any such claims of liability ; (3) the appropriate economic model for determining

the amount by which the Publicly Traded Securities were allegedly artificially inflated (if at all)

during the Settlement Class Period ; (4) the amount by which the Publicly Traded Securities were

allegedly artificially inflated (if at all) during the Settlement Class Period ; (5) the effect of various

market forces influencing the trading price of Publicly Traded Securities at various times during the

Settlement Class Period; (6) the extent to which external factors, such as general market conditions,

influenced the trading price of Publicly Traded Securities at various times during the Settlement

Class Period ; (7) the extent to which the various matters that Representative Plaintiffs alleged were

materially false or misleading influenced (if at all) the trading price of Publicly Traded Securities at

various times during the Settlement Class Period ; (8) the extent to which the various allegedly

adverse material facts that Representative Plaintiffs alleged were omitted influenced (if at all) the

trading price of the Publicly Traded Securities at various times during the Settlement Class Period ;

-2-

(9) whether the statements made or facts allegedly omitted were false, material or otherwise

actionable under the federal securities or other laws .

III. STATEMENT OF ATTORNEYS' FEES AND EXPENSES SOUGH T

At a future date, upon further notice to the Settlement Class, counsel for the Representativ e

Plaintiffs will apply to the Court for an award of attorneys' fees from the Gross Settlement Fund . No

attorneys' fees are being sought at this time . However, the Stipulation provides for the allocation of

Sixteen Million Dollars ($16,000,000) (the "Expense Fund") of the settlement fund for

reimbursement of expenses incurred and expected to be incurred by Plaintiffs' Settlement Counsel in

prosecuting the Actions. The Court will be asked to approve the establishment of the Expense Fund

at the Settlement Hearing .

IV. REASONS FOR SETTLEMENT

The Representative Plaintiffs and their counsel believe that this Settlement is fair, reasonable ,

and adequate to the Members of the Settlement Class . The Representative Plaintiffs and their

counsel have reached this conclusion after investigating and considering, among other things, the

strengths and weaknesses of the Representative Plaintiffs' claims against the Outside Directors and

Harrison and the Outside Directors' and Harrison's defenses to those claims, the fact that certain of

the claims asserted against the Outside Directors have been dismissed by Court Order dated March

12 and March 25, 2003, the uncertainties of this complex litigation, and the benefit provided by the

Settlement to the Members of the Settlement Class . See Section VII .

V. IDENTIFICATION OF ATTORNEYS' REPRESENTATIVES

Any questions regarding the Settlement should be directed to Plaintiffs' Settlement Counsel

or their staff-

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RICK NELSONLERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP401 B Street, Suite 1600San Diego, CA 92101-4297Telephone: (800) 449-4900

PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO A

PROPOSED PARTIAL SETTLEMENT OF THESE ACTIONS AND, IF YOU ARE A

SETTLEMENT CLASS MEMBER, CONTAINS IMPORTANT INFORMATION AS TO YOU R

RIGHTS CONCERNING THE SETTLEMENT AS FURTHER DESCRIBED BELOW .

EXCLUSION DEADLINE : REQUESTS FOR EXCLUSION MUST BE FILED SO AS T O

BE RECEIVED NO LATER THAN , 2005 . SECURITIES BROKERS AND

OTHER NOMINEES: PLEASE SEE THE INSTRUCTIONS ON PAGE BELOW .

VI. BACKGROUND OF THE LITIGATION

The Outside Directors have been named as defendants in the Newby Action . They moved to

dismiss the Newby Action on the ground that the complaint failed to state a claim upon which relie f

could be granted because plaintiffs failed to adequately plead the Outside Directors' scienter . On

March 12 and 25, 2003, the Court granted the Outside Directors' motion to dismiss all claims agains t

them asse rted under the Securities Exchange Act of 1934 (the "1934 Act") and under the Texas

Securities Act. The Outside Directors contend that this ruling necessari ly requires dismissal of any

1934 Act or Texas Securities Act claims that might be pursued against the Outside Directors in the

Newby Action, The Outside Directors were also named as defend ants in the Washington State

Investment Board case . Their motion to dismiss was under submission when the settlement wa s

reached. Harrison's motion to dismiss the Newby Action was denied and his motion to dismiss th e

Washington State Investment Board case was under submission when the settlement was reached .

-4-

VII. BACKGROUND OF THE SETTLEMENT

Counsel for the Representative Plaintiffs have conducted an investigation relating to the

claims and underlying events alleged in the complaints . Counsel for the Representative Plaintiffs

also have conducted considerable formal and informal discovery in the Actions and in related

litigation and have analyzed the evidence obtained therein, and have researched the applicable law

with respect to the claims alleged in the complaints and the potential defenses thereto .

The Representative Plaintiffs, by their counsel, have conducted arm's-length negotiations

with counsel for the Outside Directors and Harrison with a view toward settling the issues in dispute

and achieving the best result possible consistent with the interests of the Settlement Class .

Based upon their investigation, counsel for the Representative Plaintiffs have concluded that

the terms of the Settlement as set forth in the Stipulation are fair, reasonable, and adequate to the

Representative Plaintiffs and the Settlement Class, and in the best interest of the Representative

Plaintiffs and the Settlement Class, and have agreed to settle the Actions as to the Outside Directors

and Harrison pursuant to the terms and provisions of the Stipulation, after considering (i) the benefits

that the Representative Plaintiffs and the Settlement Class will receive from the Settlement ; (ii) the

attendant risks of litigation ; and (iii) the desirability of permitting the Settlement to be consummated

as provided by the terms of the Stipulation .

The Outside Directors and Harrison have denied and continue to deny each and all of the

claims and allegations of wrongdoing made by the Representative Plaintiffs in the Actions and

maintain furthermore that they have meritorious defenses . The Outside Directors and Harrison have

expressly denied and continue to deny all charges of wrongdoing or liability against them arising out

of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the

Actions . The Outside Directors and Harrison also have denied and continue to deny, inter alia, the

allegations that the Representative Plaintiffs or the Settlement Class Members were harmed by th e

-5-

Outside Directors' and Harrison's conduct alleged in the Actions . Pursuant to the terms of the

Stipulation, the Stipulation shall in no event be construed or deemed to be evidence of or an

admission or concession by the Outside Directors and Harrison with respect to any claim of any faul t

or liability or wrongdoing or damage whatsoever.

Nonetheless, the Outside Directors and Harrison have concluded that further conduct of the

Actions would be protracted and expensive, and that it is desirable that the Actions be fully and

finally settled in the manner and upon the terms and conditions set forth in the Stipulation . The

Outside Directors and Harrison also have taken into account the uncertainty and risks inherent in any

litigation, especially in complex cases like the Actions . The Outside Directors and Harrison have,

therefore, determined that it is desirable and beneficial to them that the Actions be settled in th e

manner and upon the terms and conditions set forth in the Stipulation .

THIS NOTICE IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS ,

AN EXPRESSION OF ANY OPINION BY THE COURT WITH RESPECT TO THE TRUTH O F

THE ALLEGATIONS IN THE ACTIONS OR THE MERITS OF THE CLAIMS OR DEFENSE S

ASSERTED. THIS NOTICE IS SOLELY TO ADVISE YOU OF THE PENDENCY OF THE

ACTION AND THE PROPOSED PARTIAL SETTLEMENT THEREOF AND OF YOUR

RIGHTS IN CONNECTION THEREWITH .

VIII. DEFINITIONS

As used in this Notice, the following terms have the meanings specified below . Any

capitalized terms not specifically defined in this Notice shall have the mean ings set forth for such

terms in the Stipulation .

"Actions" means, for purposes of this notice , the Newby Action, Washington State

Investment Board, et al. v. Kenneth L. Lay, et al., Civil Action No. H-02-3401 (S .D. Tex.) (the

"WSIB Action") ; Nathaniel Pulsifer, Trustee of The Shooters Hill Revocable Trust, Individually an d

-6-

On Behalf ofAll Others Similarly Situated v . Kenneth L. Lay, et al ., Civil Action No . 02-3010 (S .D .

Tex.).

2. "Authorized Claimant" means any Settlement Class Member who is entitled to a



3 . "Bankruptcy Court" means the United States District Court for the Southern District

of New York, presiding over In re Enron Corp., et. al., Case No. 01-16034 (AJG) .

4. "Court" means the United States District Court for the Southern District of Texas,

Houston Division .

5. "Defendants" means each and all of the defendants that have been or may be named


6 . "Committee Action" means Official Committee of Unsecured Creditors of Enron

Corp. v. Andrew S. Fastow, et al., Civil Action No. H-04-0091 (S .D. Tex.) .

7. "Derivative Actions" means Pirelli Armstrong Tire Corporation Retiree Medica l

Benefits Trust, Derivatively on Behalf of Enron Corporation, et al. v. Kenneth Lay, et al., Civil

Action No. H-01-3645, in the United States District Court for the Southern District of Texas ;

Detectives Endowment Association Annuity Fund, derivatively on behalf of Enron Corporation v .

Kenneth L. Lay et al., C .A. No. H-01-3892; Joseph E. Kassoway and Robert T. Kassoway Trust v.

Andrew S. Fastow et al., C.A. No. H-01-3690 ; Fred Greenberg, derivatively on behalf of Enron

Corp. v. Robert A. Belfer et al., C.A. No. H-01-3998; Lynn Goffman et al. v. Robert A . Belfer et al.,

C.A. No. H-02-1838; David Trzebucki et al. v. Andrew S. Fastow et al., C.A. No. H-02-1832; Rick

Barksy v. ArthurAndersen LLP et al., C.A. No. H-02-1922; Richard P. Bergsieker v. Kenneth L . Lay

et al., C.A. No. H-02-3427 and any other case asserting derivative claims or claims that are the

property of Enron .

-7-

8. "Effective Date" means the first date by which all of the events and condition s

specified in paragraph 7 .1 of the Stipulation have occurred and have been met, respectively .

9. "Enron" means Enron Corp ., a reorganized debtor .

10. "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limited

Insurance Policy No. D0079A1 A98; Energy Insurance Mutual Limited Excess Policy No . 900630-

OODO; Federal Insurance Company Excess Policy No . 8142-05-47; Hartford/Twin City Fir e

Insurance Company Excess Policy No. NDA 0131301-98H; Greenwich Insurance Company Exces s

Policy No. ELU 82248-01 ; Lloyd's of London Insurance Certificate No . 901/LK9802531 ; St . Pau l

Mercury Insurance Company Excess Policy No . 568CM0934; Federal Insurance Company Excess

Policy No. 8181-43-14; Royal Insurance Company of America Policy No . P SF000633 ; ACE

Bermuda Insurance Ltd . Excess Policy No . EC-ADO 1-001 ; and Kemper Insurance Indemnity Co . as

participating in Federal Quota Share Policy No . 8179-41-03 .

11 . "Expense Fund" means a principal amount not to exceed Sixteen Million Dollar s

($16,000,000), plus any interest that may accrue thereon . The Expense Fund shall be paid from, and


12. The term "Harrison" means Ken L. Harrison and his attorneys, insurers, and each and

all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of such persons ,

in each instance only in their capacity as such, but excluding the Non-Settling Defendants in the

Actions .

13. "Judgment " means, for purposes of this notice, a judgment to be rendered by the

Court, substantially in the form attached to the Stipulation as Exhibit D .

14 . "Lead Plaintiff means The Regents of the University of California .

15 . "Newby Action" means the actions brought on behalf of all purchasers (and their

beneficiaries) of any publicly traded equity and debt securities of Enron Corporation, as defined i n

-8-

that action, from October 19, 1998 through November 27, 2001, inclusive (excluding Defendants ,

the officers and directors of Enron, and members of their immediate families or their successors ,

heirs, and legal representatives ), proceeding as a consolidated action captioned Newby, et al. v .

Enron Corp., et al., No . H-01-3624 (S .D. Tex .) .

16. "Insurance Proceeds" means the sum of $200 million dollars which represents th e

remaining limits of coverage under the Enron D&O Policies written by those insurance carrier s

above the layer of insurance provided by Hartford/Twin Cities Insurance Company (the "Insurance

Carriers").

17. "Interpleader Action" means the First Amended Third Party Counterclaim fo r

Interpleader filed by the Insurance Carriers in the Newby Action on October 22, 2004, related to


18. "Non-Outside Director Defendants" means the defendants other than the Outsid e

Directors that have been named in the complaints in the Actions .

19. "Non-Settling Defendants" means each and all of the current Defendants except th e


20. "Notice and Claims Administrator" mean s Gilardi & Co. LLC or its successors.

21 . "Outside Directors" means Robert Belfer, Norman Blake, Ronnie Chan, Joh n

Duncan, Paulo Ferraz Pereira, Joe Foy, Wendy Gramm, Robert Jaedicke, Charles LeMaistre ,

Rebecca Mark-Jusbasche, John Mendelsohn, Jerome Meyer, Frank Savage, John Urquhart, John

Wakeham, Charls Walker, Bruce Willison and Herbert Winokur and their attorneys, insurers, and

each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of

such persons, in each instance only in their capacity as such, and any person or entity in which an y

of the above has or had a controlling interest or which is or was related to or affiliated with any o f

the above, but excluding the Non-Settling Defendants in the Actions .

-9-

22. "Person" means an individual, corporation, limited liability corporation, professional

corporation, limited liability partnership, partnership, limited partnership, association, joint stock

company, estate, legal representative, trust, unincorporated association, government or any political

subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors,

successors, representatives, or assignees of any of the foregoing .

23. "Plaintiffs' Settlement Counsel" means Lerach Coughlin Stoia Geller Rudman &

Robbins LLP (and any successors thereof), William S . Lerach, Keith F . Park, Helen J . Hodges, 401

B Street, Suite 1600, San Diego, California 92101 .

24. "Plan of Allocation" means any plan or formula of allocation of the Gross Settlement

Fund, to be approved by the Court upon further notice to the Settlement Class, whereby the Net

Settlement Fund shall in the future be distributed to Authorized Claimants . Any Plan of Allocation

is not part of the Stipulation and the Outside Directors and Harrison shall have no responsibility or

liability with respect thereto .

25. "Proof of Claim and Release" means the form to be sent to Settlement Class


against the Settlement Fund for damages allegedly incurred by reason of their investment(s) in the

Publicly Traded Securities .

26. "Released Claims" means : any and all claims, demands, rights, liabilities and causes

of action (including "Unknown Claims" as defined in ¶33, below) of any nature whatsoever

(excluding claims under ERISA), asserted under the Securities Act of 1933, that Representative

Plaintiffs and/or any Settlement Class Member have, had, or may have against the Outside Directors

or Harrison based on, arising out of, or related to, directly or indirectly, both purchases or other

acquisitions of any Publicly Traded Securities, including stock, notes and foreign debt securities ,

-10-

during the Settlement Class Period and all acts, facts, statements, or omissions that were or coul d

have been alleged in the Actions .

27. "Representative Plaintiffs" means the Lead Plaintiff in the Newby Action and the

named plaintiffs in the Actions.

28. "Settlement Amount" means: (1) the Insurance Proceeds and (2) the Stock Sales Gai n

Amount .

29. "Settlement Class" means all Persons (and their beneficiaries) who purchased or

acquired any publicly traded equity or debt securities of Enron between September 9, 1997 and

November 27, 2001, inclusive, and including purchasers of all securities issued by Enron-related


credit, financial condition, or ability to pay of Enron Corporation (collectively, the "Publicly Traded

Securities").' Excluded from the Settlement Class are Defendants, the officers and directors of



I The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7 .875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources,L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8 .75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and €315,000,000 6 .375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500,000,000 7 .375% due 06, Enron Euro Credit LinkedNotes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007.25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6.31%Senior Secured Notes and @515,000,000 6 .19% Senior Secured Notes (collectively, the "ForeignDebt Securities") .

-11-

from the Settlement Class, to the extent that they are permitted to do so under Rule 23 of the Federal

Rules of Civil Procedure, pursuant to this notice .

30 . "Settlement Class Member" or "Member of the Settlement Class" mean a Person who

falls within the definition of the Settlement Class .

31 . "Settlement Class Period" means the period commencing on September 9, 1997


32. "Settling Parties" means, collectively, the Representative Plaintiffs (on behalf of

themselves and the Settlement Class Members) and each of the Outside Directors and Harrison .

33. "Stock Sales Gain Amount" means ten percent (10%) of each of the Outside

Director's and Harrison's net gain on sales of Enron stock as recited in the Newby Action ("Sales of

Enron Stock") . The Stock Sales Gain Amount is limited to stock or stock options granted to th e

Outside Directors and Harrison during the Class Period as compensation for their services as

directors or officers of Enron . For purposes of the calculation and payment of the Stock Sales Gain

Amount, "Sales of Enron Stock" shall include sales of stock, . exchange fund transactions and

cashless exercises of stock options, but shall not include collar transactions from which the Outside

Directors or Harrison received no proceeds during the Class Period . Until deposited in the Stock

Sales Escrow Account pursuant to the terms of the Stipulation, the Stock Sales Gain Amount shall

bear interest at the rate of 5% per annum (i) from November 8, 2004, in the case of each of the

Outside Directors, and (ii) from December 15, 2004, in the case of Harrison . All provisions in the



34. "Unknown Claims" means any Released Claim that any Plaintiff or Settlement Class

Member does not know or suspect to exist in his, her or its favor at the time of the release of the

Released Defendants that if known by him, her or it, might have affected his, her or its settlemen t

-12-

with and release of the Released Defendants, or might have affected his, her or its decision not to

object to this settlement or not to exclude himself, herself or itself from the Settlement Class . With

respect to any and all Released Claims, the Settling Parties stipulate and agree that, upon th e

Effective Date, the Plaintiffs shall expressly waive, and each of the Settlement Class Members shal l

be deemed to have waived and by operation of the Judgment shall have waived, the provisions ,

rights and bene fits of Californ ia Civil Code § 1542, which provides :

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH TH E

CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR A T

THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM

MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH TH E

DEBTOR.

The Plaintiffs shall expressly waive, and each of the Settlement Class Members shall be deemed t o

have waived and by operation of the Judgment shall have waived , any and all provisions , rights and

benefits conferred by any law of any state or territory of the United States, or p rinciple of common

law, that is similar , comparable or equivalent to Californ ia Civil Code § 1542 . The Plaintiffs and


any of them now knows or believes to be true with respect to the subject matter of the Release d

Claims, but each Plaintiff shall expressly have, and each Settlement Class Member shall be deeme d

to have and by operation of the Judgment shall have, fully, finally, and forever settled and release d


contingent, whether or not concealed or hidden, that now exist, or heretofore have existed upon an y

theory of law or equity now existing or coming into existence in the future, including, but not limite d

to, conduct that is negligent, reckless, intentional , with or without malice, or a breach of any duty,

law or rule, without regard to the subsequent discovery or existence of such different or additiona l

-13-

facts . The Plaintiffs acknowledge, and the Sett lement Class Members shall be deemed to have

acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoin g


part .

35. "WSIB Action" means the action brought on behalf of all purchasers of the Publicl y

Traded Securities from September 9, 1997 through October 18, 1998, inclusive (excluding


successors, heirs, and legal representatives), captioned Washington State Investment Board, et al . v.

Kenneth L . Lay, et al., Civil Action No . H-02-3401 (S .D. Tex.) .

IX. THE SETTLEMENT CLAS S

By Order dated , 2005, the Court certified the Settlement Clas s

pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, for the purpose of the Settlement

only, and directed that this Notice be given to Members of the Settlement Class . If you fall within

the definition of the Settlement Class set forth above at Section VIII then you are a Settlement Class

Member.

X. THE RIGHTS OF SETTLEMENT CLASS MEMBERS

If you are a Settlement Class Member, you may receive the benefit of, and you will be bound

by, the terms of the proposed Settlement described in Section XI of this Notice, upon approval ofthe

proposed Settlement by the Court .

If you are a Member of the Settlement Class and if you do not wish to be included in th e

Settlement Class and do not wish to participate in the proposed Settlement described in this Notice ,

you may request to be excluded with respect to all Released Claims.

-14-

To request to be excluded in accordance with the preceding paragraph, you must send a

signed, written request to be excluded, postmarked no later than , 2005, and addressed

as follows :

In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-510 0

You must set forth the name of this Action (In re Enron Corporation Securities Litigation,

Civil Action No . H-01-3624 (Consolidated)), your name, address and telephone number, and state

that you "request exclusion from the Settlement Class in In re Enron Corporation Securities

Litigation, Civil Action No. H-01-3624 (Consolidated) ." You must also set forth the number and

type of Publicly Traded Enron securities that you purchased and sold during the Settlement Class

Period and the prices at which the shares were purchased and sold, along with the name and address

of the record owner of such shares if different from your own. NO PERSON OR ENTITY MAY

EXCLUDE HIMSELF, HERSELF, OR ITSELF FROM THE SETTLEMENT CLASS AFTER

, 2005 .

If you validly request exclusion from the Settlement Class (a) you will be excluded from the

Settlement Class, (b) you will not share in the proceeds of the Settlement described herein, (c) you

will not be bound by any judgment entered in the Actions insofar as such judgment relates to the

Actions, and (d) you will not be precluded, by reason of your decision to request exclusion from the

Settlement Class, from otherwise prosecuting an individual claim, if timely and otherwise valid,

against the Outside Directors based on the matters complained of in the Actions . If you are a

Settlement Class Member, you may, but are not required to, enter an appearance through counsel of

your own choosing at your own expense, provided that such counsel must file an appearance on your

behalf on or before , 2005, and must serve copies of such appearance on the

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attorneys listed in Section XIV below . If you do not enter an appearance through counsel of your

own choosing, you will be represented by Plaintiffs' Settlement Counsel .

XI. TERMS OF THE PROPOSED SETTLEMEN T

A settlement has been reached in the Actions between the Representative Plaintiffs and the

Outside Directors, the terms and conditions of which are set forth in the Stipulation and the Exhibits

thereto. The following description of the proposed Settlement is only a summary, and reference is

made to the text of the Stipulation, on file with the Court, for a full statement of its provisions .

A. The Settlement Fun d

The entire settlement fund (the "Gross Settlement Fund") consists of the aggregate principa l

amount of Two Hundred Thirteen Million Dollars ($213,000,000) in cash, plus interest thereon, that

has been placed into an interest-bearing account pursuant to the terms of the Stipulation . The

Stipulation provides for the establishment of an Expense Fund in the amount of Sixteen Million

Dollars ($16,000,000), which shall be paid from, and not in addition to, the Gross Settlement Fund .

At the Settlement Hearing, the Court will be asked to approve the establishment of the Expense

Fund. The Expense Fund will be used, subject to the Court's approval(s), to reimburse Plaintiffs'

Settlement Counsel for the expenses that they have incurred and expect to incur in the prosecution of

the Actions. A portion of the Gross Settlement Fund will also be used to pay for this Notice as well

as taxes and tax return preparation expenses regarding the interest earned on the Gross Settlement

Fund .

The Court will be asked to allocate the insurance Proceeds (after deduction of the Set Aside

Amount) 82 .5% to the Settlement Class and 17 .5% to the settlement of the Committee Action and

the Derivative Actions.

After further notice to the Settlement Class and an opportunity to be heard, Plaintiffs'

Settlement Counsel will seek approval by the Court of a Plan of Allocation that will govern th e

-16-

calculation of Settlement Class Members' claims . In the future, Settlement Class Members will be

sent a Proof of Claim and Release form to establish their claims against the Gross Settlement Fund .

Plaintiffs' Settlement Counsel anticipate that distributions to the Settlement Class will occur

in connection with additional recoveries against the remaining Defendants in the Actions .

B. Releases

If the proposed Settlement is approved by the Court, the Court will enter an order (the "Order

of Final Judgment and Dismissal") that will dismiss the Actions with prejudice as to the Outside

Directors and Harrison . In addition, upon the Effective Date, the Representative Plaintiffs and each

of the Settlement Class Members, on behalf of themselves, their successors and assigns, and any

other Person claiming (now or in the future) through or on behalf of them, and regardless ofwhether

any such Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means,

including, without limitation, by submitting a Proof of Claim and Release, any distribution from that

portion of the Gross Settlement Fund allocated to the Settlement Class, shall be deemed to have, an d

by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and

discharged all Released Claims against the Outside Directors and Harrison and shall have covenanted

not to sue the Outside Directors or Harrison with respect to all such Released Claims, and shall be

permanently barred and enjoined from instituting, commencing, or prosecuting any such Released

Claim against the Outside Directors or Harrison . In addition, subject to certain limitations set forth

in the Stipulation, the Outside Directors and Harrison will release the Representative Plaintiffs, the

Settlement Class Members and Plaintiffs' Settlement Counsel from any claims relating to the

prosecution of the Actions . The Court shall retain jurisdiction over these Actions, including, without

limitation, all matters with respect to implementation and enforcement of the terms of the

Stipulation .

-17-

XII. NOTICE TO BANKS, BROKERS AND OTHER NOMINEE S

Banks, brokerage firms, institutions, and other persons who are nominees that purchase d

Enron Publicly Traded Securities for the beneficial interest of other persons as of any date from

September 9, 1997 through and including November 27, 2001 are requested to, within ten (10)

calendar days of receipt of this Notice, (1) provide the Notice and Claims Administrator with th e

names and addresses of such beneficial purchasers (IF YOU HAVE NOT ALREADY DONE SO IN

CONNECTION WITH THE NOTICE TO SETTLEMENT CLASS MEMBERS SENT IN TH E

FALL OF 2003 REGARDING THE PARTIAL SETTLEMENT WITH ANDERSEN

WORLDWIDE SOCIETE COOPERATIVE ("AWSC")), or (2) forward a copy of this Notice to

each such beneficial purchaser and provide Plaintiffs' Settlement Counsel with written confirmatio n

that the Notice has been so forwarded . Upon submission of appropriate documentation, Plaintiffs '

Sett lement Counsel will reimburse your reasonable costs and expenses of complying with this

provision (to the extent you have not already been reimbursed for providing a list of beneficial

purchasers in connection with the previous partial settlement with AWSC) . Additional copies of this

Notice may be obtained from the Notice and Claims Administrator by writing to :

In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-5100

Correspondence to Plaintiffs' Settlement Counsel should be addressed as follows :

WILLIAM S . LERACHKEITH F . PARKHELEN J. HODGESLERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

401 B Street , Suite 1600San Diego , CA 92101-4297

-18-

XIII. APPLICATION FOR ATTORNEYS' FEES AND EXPENSES

Plaintiffs' Settlement Counsel do not intend to apply for an award of attorneys' fees at thi s

time. As noted above, however, Plaintiffs' Settlement Counsel will ask the Court at the Settlement

Hearing to approve the establishment of the Expense Fund in the amount of $16,000,000.

Reimbursement of expenses from the Expense Fund will only occur upon further Court order . Any

application for attorneys' fees and reimbursement of expenses not otherwise recovered from th e

Expense Fund will only occur after notice of that application has been given to the Settlement Clas s

and an opportunity to be heard . Any such sums as awarded by the Court will be paid from the Gross

Settlement Fund .

XIV. THE SETTLEMENT HEARING

A hearing (the "Settlement Hearing") will be held on , 2005 a t

m., before the Honorable Melinda Harmon, United States District Judge, at the United

States District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515

Rusk Avenue, Houston, Texas 77002, for the purpose of determining (a) whether the proposed

Settlement as set forth in the Stipulation is fair, reasonable and adequate and should be approved by

the Court; (b) whether an Order of Final Judgment and Dismissal, substantially in the form o f

Exhibit B to the Stipulation, should be entered herein; and (c) whether the establishment of th e

Expense Fund should be approved . The Court may adjourn the Settlement Hearing from time t o

time and without further notice to the Settlement Class .

Any Settlement Class Member who has not requested exclusion may appear at the Settlement

Hearing and be heard on any of the foregoing matters ; provided, however, that no such person shall

be heard unless his, her or its objection is made in writing and is filed, together with proof o f

membership in the Settlement Class and copies of all other papers and briefs to be submitted by him ,

-19-

her or it to the Court at the Settlement Hearing, with the Court no later than ,

2005, and showing due proof of service on Plaintiffs' Settlement Counsel :

WILLIAM S. LERACHKEITH F. PARKHELEN J . HODGES


401 B Street, Suite 1600San Diego , CA 92101-4297

and upon the following counsel for the Outside Directors :

GIBBS & BRUNS, L.L.P .ROBIN C . G1BBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston, TX 77002

Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr., Ronnie C . Chan, John H . Duncan, Joe H. Foy, Wendy L. Gramm,Robert K . Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charls E . Walker, John Wakeham, and' HerbertWinokur, Jr.

GRAVES DOUGHERTY HEARON & MOODY PCJOHN J . MCKETTA IIIHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin, TX 78701

Attorneys for Rebecca Mark-Jusbasch e

TONKON TORP LLPWILLIAM F . MARTSON, JR .1600 Pioneer Tower888 SW Fifth AvenuePortland OR 9720 4

Attorney-in-charge for Defendant Ken L. Harrison

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MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON655 Fifteenth Street, N.W ., Suite 900Washington, D.C. 20005-570 1

Counsel for Paulo V . Ferraz Pereira

Unless otherwise ordered by the Court, any Settlement Class Member who does not make his, her o r

its objection in the manner provided shall be deemed to have waived all objections to the foregoin g

matters .

XV. EXAMINATION OF PAPERS AND INQUIRIES

This Notice contains only a summary of the terms of the proposed Se ttlement . For a more

detailed statement of the matters involved in the Actions, reference is made to the pleadings, to the

Stipulation and to other papers filed in this action, which may be inspected at the Office of the Clerk

of the United States District Court, Bob Casey United States Courthouse, 515 Rusk Avenue,

Houston, Texas 77002, during business hours of any business day .

Inquiries regarding the Actions should be addressed to Plaintiffs' Settlement Counsel at th e

address set forth above .

DO NOT CONTACT THE COURT REGARDING THIS NOTICE.

DATED : 12005 BY ORDER OF THE COUR TUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS

S:\Settlement\Enron .Set\Outside Directors Settlement\F1-00017104 .doc

-21-

EXHIBIT D-2


HOUSTON DIVISION




Plaintiffs ,

vs .


Defendants .


Plaintiffs,

vs .


Defendants .

[Caption continued on following page.]

Civil Action No . H-O1-3624

(Consolidated)

CLASS ACTION

SUMMARY NOTICE FOR PUBLICATION

EXHIBIT D-2

WASHINGTON STATE INVESTMENTBOARD , et al ., On Behalf of Themselves andAll Others Similarly Situated,

Plaintiffs,vs .

KENNETH L . LAY, et at .,

Defendants .


Plaintiffs ,

vs .



CLASS ACTION

Civil Action No . 02-301 0

CLASS ACTION

Defendants .

TO: (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED IN THE NOTICE OF PENDENCY AND PARTIALSETTLEMENT OF CLASS ACTION DESCRIBED BELOW) DURING THE PERIODFROM SEPTEMBER 9, 1997 THROUGH AND INCLUDING NOVEMBER 27, 200 1

YOU ARE HEREBY NOTIFIED that the Representative Plaintiffs in the above litigatio n

(the "Actions") have entered into a Stipulation of Settlement (the "Stipulation") with the Outsid e

Directors of Enron Corp . (the "Outside Directors"), Ken Harrison ("Harrison") and certain othe r

related entities or persons as further defined in the Stipulation to resolve the issues raised in th e

Actions as to the Outside Directors and Harrison .

PLEASE BE FURTHER ADVISED that pursuant to an Order of the United States Distric t

Court, dated , 2005, a hearing will be held on , 2005 at _.m . ,

before the Honorable Melinda Harmon, United States District Judge, at the United States Distric t

Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk Avenue,

Houston, Texas 77002, for the purpose of determining whether, among other things : (1) the propose d

settlement of the Actions as to the Outside Directors and Harrison, allocation of $187 million : 82 .5%

to the Settlement Class and 17.5% to the Official Unsecured Creditors Committee of Enron and th e

payment individually by the Outside Directors and Harrison of $13 million and certain other

consideration should be approved by the Court as fair, reasonable and adequate ; (2) the Actions should

be dismissed with prejudice as to the Outside Directors and Harrison pursuant to the terms of the

Stipulation; and (3) a portion of the Gross Settlement Fund should be allocated for the payment of

expenses, excluding attorneys' fees, associated with the prosecution of the Actions . If you meet the

definition of the Settlement Class as set forth above and are not a defendant, an officer or director o f

Enron, or a member of their immediate families or their successors, heirs, and legal representatives ;

your rights may be affected by the settlement of the Actions . If you have not received a Notice of

-1-

Pendency and Part ial Settlement of Class Action (the "Mailed Notice ") you may obtain a copy by

contacting: In re Enron Corporation Securities Litigation , c/o Gilardi & Co. LLC, P.O. Box 5100,

Larkspur , CA 94977-5100 .

You will be bound by any judgment rendered in the Actions with respect to the Outsid e

Directors and Harrison with respect to claims asserted in the actions identified above, and with

respect to other claims that you had, have, or may have against the Outside Directors and Harrison

(and certain persons and entities related to them) based on matters related to Enron Corporation,

unless you request to be excluded from the Settlement Class, in writing, in accordance with the

instructions set forth in the Mailed Notice, postmarked by , 2005 . Any objection to

the Settlement must be filed with the Court by , 2005, and must show due proof of

service on each of the counsel listed below:


KEITH F. PARKHELEN J. HODGES401 B Street, Suite 1600San Diego , CA 92101-429 7

GIBBS & BRUNS, L .L.P .ROBIN C. GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMA1,JNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston, TX 77002

Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr ., Ronnie C . Chan, John H. Duncan, Joe H. Foy, Wendy L. Gramm,Robert K. Jaedicke, Charles A. LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charls E . Walker, John Wakeham, and HerbertWinokur, Jr .

-2-

GRAVES DOUGHERTY HEARON & MOODY PCJOHN J . MCKETTA II IHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin , TX 7870 1

Attorneys for Rebecca Mark-Jusbasche

TONKON TORP LLPWILLIAM F . MARTSON, JR .1600 Pioneer Tower888 SW Fifth AvenuePortland OR 9720 4

Attorney-in-charge for Defendant Ken L . Harrison

MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON655 Fifteenth Street, N.W., Suite 900Washington , D.C. 20005-570 1

Counsel for Paulo V. Ferraz Pereira

PLEASE DO NOT CONTA CT THE COURT REGARDING THIS NOTICE.

DATED: , 2005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS

S :\Settlement\Enron,SeMutside Directors Settlement\F2-00017106 .doc

-3-

EXHIBIT "E"


HOUSTON DIVISION




Plaintiffs,

vs .


Defendants .

Civil Action No . H-O1-3624(Consolidated)

CLASS ACTION

ORDER AUTHORIZING THE TRANSFER OF INSURANCE PROCEED S

EXHIBIT E

WHEREAS on December 22, 2004, the Court ordered the Excess Insurers to deposit the sum

of $200 million ofinterpleaded insurance proceeds into the registry of the Court in compliance with

the requirements of 28 U .S.C . §1335 and applicable law; and

WHEREAS after due consideration of the Motion for Preliminary Approval of the Settlement

by and among the Representative Plaintiffs and the Outside Directors, the Court has grante d

preliminary approval, entered the Preliminary Approval Order and with good cause appearin g

therefor ;

NOW THEREFORE IT IS HEREBY ORDERED :

This Order (the "Transfer Order") incorporates by reference the definitions in the Stipulation

of Settlement dated as of January 12, 2005 (the "Stipulation") and the Agreement Regardin g

Insurance Proceeds and Interpleader Action ("Insurance Proceeds Agreement") and all capitalize d

terms used herein shall have the same meanings as set forth in the Stipulation and the Insuranc e

Proceeds Agreement.

The Clerk of the Court is ordered to transfer the Insurance Proceeds, which were deposite d

pursuan t to the Order entered December 22, 2004 in compliance with the requirements of 28 U.S.C .

§ 1335 and applicable law, to an account which shall be styled "United States District Court for the

Southern District of Texas - Insurance Interpleader Account" and shall be controlled and

administered by Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Escrow Agent . Within

one (1) business day from entry of this Order, the Escrow Agent shall provide the Clerk of the Court

with instructions for deposit.

IT IS SO ORDERED .

DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDG E

S :\Settlement\Enron .Set\Outside Directors Settlement\ORD Auth Transfer Proceeds .doc

-1-

EXHIBIT E-1


HOUSTON DIVISION


Civil Action No. H-01-3624(Consolidated)



Plaintiffs ,

vs .


Defendants .


Plaintiffs ,

vs .

ANDREW S. FASTOW, et al .

Defendants .

CLASS ACTION


COURT APPROVED ESCROW AGREEMENT CONCERNING INTERPLEADERFUNDS

EXHIBIT E-1

THIS SETTLEMENT ESCROW AGREEMENT (the "Escrow Agreement") is made and

effective as of the _th day of , 2005 (the "Execution Date"), in accordance with the

order of the Court herein dated , 2005, with Lerach Coughlin Stoia Geller Rudman &

Robbins LLP as escrow agent (the "Escrow Agent") .

RECITAL S

WHEREAS, Associated Electric & Gas Services Limited, Energy Insurance Mutual Limited,

Federal Insurance Company, Greenwich Insurance Company, certain Underwriters at Lloyd's,

London subscribing to Insurance Certificate No . 901/LK9802531 ("Underwriters"), St . Paul

Mercury Insurance Company, Royal Insurance Company ofAmerica, ACE Bermuda Insurance Ltd .,

and Kemper Indemnity Insurance Company (the "Excess Carriers") provided excess directors and

officers liability insurance coverage to Enron Corp . in the aggregate amount of $200 million, excess

of $150 million in underlying insurance ;

WHEREAS, on or about October 21, 2004, the Excess Carriers filed an Answer to the First

Amended Third-Party Complaint for Contract Enforcement and Injunctive Relief Regarding D&O

Policy Proceeds and Third-Party Complaint for Interpleader, which was amended on or about

October 22, 2004 (the "Interpleader Action") ;

WHEREAS, on or about January 5, 2005 and January 12, 2005 with respect to Underwriters ,

and in accordance with the order of December 22, 2004 by the Court in the Interpleader Action, the

Excess Carriers deposited the limit of liability of their respective policies (the "Interpleader

Policies") with the Clerk (the "Clerk") of the United States District Court of the Southern District of

Texas, Houston Division in compliance with the requirements of 28 U .S.C. § 1335 and applicable

law (the "Interpleader Fund") ;

WHEREAS, on , 2005, the United States District Court for the Southern District

of Texas, Houston Division, entered a Transfer Order in the above-entitled action authorizing the

-1-

transfer of the Interpleader Fund to a private escrow in order to more efficiently handle th e

Interpleader Fund, subject to the Court retaining exclusive jurisdiction and control over th e

Interpleader Fund and the escrow contemplated thereby ; and

WHEREAS, it is intended for the Interpleader Fund to be a qualified settlement fund under

Section 468B of the Internal Revenue Code , as amended (the "Code"), upon entry of the Preliminary

Approval Order by the Court ; and

NOW, THEREFORE, in consideration of the coven ants and representations set forth herein ,

and for other good and valuable consideration , the receipt and sufficiency of which is hereby

acknowledged, the Escrow Agent hereby covenants and agrees as follows :

1 . Definitions; Conflicting Terms . Forpurposes of this Escrow Agreement (includin g

the Recitals), all initially capitalized terms used and not otherwise defined herein shall have the

meanings attributed to such terms in the Agreement Regarding Insurance Proceeds and Interpleader

Action filed in the above-captioned actions and dated as of (the "Insurance Proceeds

Agreement") or the Stipulation of Settlement dated January 12, 2005 . To the extent that terms of

this Escrow Agreement conflict with the terms of the Insurance Proceeds Agreement or the

Stipulation of Settlement, the terms of this Escrow Agreement shall be controlling as to the matters

set forth herein .

2. Appointment ofEscrowAgent . Pursuant to the terms hereof, Lerach Coughlin Stoia

Geller Rudman & Robbins LLP is hereby appointed as the Escrow Agent, and Lerach Coughli n

Stoia Geller Rudman & Robbins LLP accepts the duties and obligations of the Escrow Agent set

forth herein .

3. Establishment of Escrow Account . The Escrow Agent will establish three escrow

accounts (collectively, the "Escrow Account"), which account shall constitute the Escrow Account

contemplated by the Transfer Order. The Escrow Account shall consist of three segregated

-2-

accounts: (i) the "Insurance Proceeds Escrow Account" ; (ii) the "Stock Sales Gain Escrow

Account" ; and (iii) the "Harrison Escrow Account ." At such time or times as is required by the

Transfer Order and in one or more payments, the Clerk shall transfer the Interpleader Fund as

required by the Transfer Order. The Escrow Agent agrees (x) to accept delivery of the Interpleader

Fund, (y) on the day of receipt thereof, to acknowledge receipt of same in writing to counsel for the

Excess Carriers, and (z) to hold the Interpleader Fund in the Insurance Proceeds Escrow Account in

accordance with the terms and conditions of this Escrow Agreement and the Transfer Order . The

Stock Sales Gain Escrow Account and the Harrison Escrow Account shall be funded in accordance

with the terms of the Stipulation of Settlement .

4. Investment of Insurance Proceeds .

(a) The Escrow Agent shall invest the Interpleader Fund in instruments backed by

the full faith and credit of the United States Government or fully insured by an agency thereof and

shall reinvest the proceeds of these instruments as they mature in similar instruments at their then

current market rates . Any and all interest, dividends and other earnings on the Interpleader Fund

following the delivery of such funds to the Escrow Agent (collectively, "Interest") shall become part

of and be included in the Interpleader Fund .

(b) The Escrow Agent shall be authorized to execute only such transactions as are

consistent with the terms of the Stipulation of Settlement and order(s) of the Court .

(c) All funds held by the Escrow Agent shall be deemed and considered to be in

custodia legis, and shall remain subject to the oversight and jurisdiction of the Court, until such time

as such funds shall be distributed pursuant to the Stipulation of Settlement and/or order(s) of the

Court .

5 . Distribution of Proceeds. The Interpleader Fund, the Stock Sales Gain Escrow

Account and the Harrison Escrow Account shall be distributed by the Escrow Agent only at such

-3-

time or times and in such manner as is expressly set forth in orders of the Court pursuant to the terms

of the Stipulation of Settlement and the Insurance Proceeds Agreement, or as the Court may

otherwise direct . However, if a final and non-appealable order of this Court or any other court

dismisses the Interpleader Action without granting the relief requested by the Excess Carriers in the

Interpleader Action, then the Escrow Agent shall pay the then-remaining balance of the Interpleader

Fund to the Excess Carriers in the full amount of the limit of liability of their respective Excess

Policy unless and until there are insufficient amounts in the Interpleader Fund to do so, in the

following order: (i) the participants of the Quota Share Policy, (ii) ACE Bermuda, (iii) Royal,

(iv) Federal (policy no . 8181-43-14), (v) St . Paul ; (vi) Lloyd's, and (vii) Greenwich .

6 . Taxes

6 .1 The Settling Parties and the Escrow Agent agree to treat the Gross Settlement Fund a s

being at all times a "qualified settlement fund" within the meaning of Treas . Reg . § 1 .468B-1 . The

Escrow Agent shall timely make such elections as necessary or advisable to carry out the provisions

of this ¶6 .1, including the "relation-back election" (as defined in Treas . Reg . § 1 .468B-1) back to the

earliest permitted date . Such elections shall be made in compliance with the procedures and

requirements contained in §1 .468B-1 . It shall be the responsibility of the Escrow Agent timely and

properly to prepare and deliver the necessary documentation for signature by all necessary parties,

and thereafter to cause the appropriate filing to occur .

(a) For the purpose of §468B of the Internal Revenue Code of 1986, as amended ,

and the regulations promulgated thereunder, the "administrator" shall be the Escrow Agent . The

Escrow Agent shall satisfy the administrative requirements imposed by Treas . Reg . § 1 .468B-2 by,

e.g., (i) obtaining a taxpayer identification number, (ii) satisfying any information reporting or

withholding requirements imposed on distributions from the Gross Settlement Fund, and (iii) timely

and properly filing applicable federal, state and local tax returns necessary or advisable with respect

-4-

to the Gross Settlement Fund (including, without limitation, the returns described in Treas . Reg .

§ 1 .468B-2(k)) and paying any taxes reported thereon. Such returns (as well as the election described

in this ¶6 .1) shall be consistent with this ¶6 .1 and in all events shall reflect that all Taxes as defined

in subsection (b) below (including any estimated Taxes, interest or penalties) on the income earned

by the Gross Settlement Fund shall be paid out of the Gross Settlement Fund as provided in ¶6 .1(b)

hereof.

(b) All (i) taxes (including any estimated taxes, interest or penalties) arising with

respect to the income earned by the Gross Settlement Fund, including, without limitation, any taxes

or tax detriments that may be imposed upon the Outside Directors or their counsel with respect to

any income earned by the Gross Settlement Fund for any period during which the Gross Settlement

Fund does not qualify as a "qualified settlement fund" for federal or state income tax purposes

(collectively, "Taxes"), and (ii) expenses and costs incurred in connection with the operation and

implementation of this ¶6 .1, including, without limitation, expenses of tax attorneys and/or

accountants and mailing and distribution costs and expenses relating to filing (or failing to file) the

returns described in this ¶6 .1 (collectively, "Tax Expenses"), shall be paid out of the Gross

Settlement Fund . In all events no person other than the Escrow Agent shall have any liability or

responsibility for the Taxes or the Tax Expenses . The Escrow Agent shall indemnify and hold

harmless the Settling Parties and their counsel for Taxes and Tax Expenses (including, without

limitation, Taxes payable by reason of any such indemnification) . Further, Taxes and Tax Expenses

shall be treated as, and considered to be, a cost of administration of the Gross Settlement Fund an d

shall timely be paid by the Escrow Agent out of the Gross Settlement Fund without prior order from

the Court, and the Escrow Agent shall be obligated (notwithstanding anything herein to the contrary)

to withhold from distribution to Authorized Claimants any funds necessary to pay such amounts,

including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as an y

-5-

amounts that maybe required to be withheld under Treas . Reg. §1,468B-2(l)(2)) ; neither the Settling

Parties nor their counsel are responsible therefor, nor shall they have any liability therefor. The

Settling Parties agree to cooperate with the Escrow Agent, each other, and their tax attorneys and

accountants to the extent reasonably necessary to carry out the provisions of this ¶6 .1 .

7. Termination of the Escrow Agreement. This Escrow Agreement shall terminate

upon the Escrow Agent's full and proper distribution of the Interpleader Fund, the Stock Sales Gai n

Escrow Account and the Harrison Escrow Account in accordance with Orders of the Court and/o r

this Escrow Agreement .

8. Concerning the Escrow Agent. The Escrow Agent further covenants and agrees that :

(a) To induce the Escrow Agent to act as such hereunder, the Escrow Agent shal l

be entitled to rely, if it is acting in good faith, upon any order, judgment, certification, demand ,

notice, instrument or other writing delivered to it hereunder without being required to determine th e

authenticity or the correctness of any fact stated therein or the propriety or validity or the servic e

thereof. The Escrow Agent may, if it is acting in good faith, act in reliance upon any instrument or

signature believed by it to be genuine and may assume that any person purporting to give receipt or

advice or make any statement or execute any document in connection with the provisions hereof has

been duly authorized to do so .

(b) The Escrow Agent is serving in the capacity of an escrow holder only an d

having possession of the Interpleader Fund subject to the terms of this Escrow Agreement, th e

Insurance Proceeds Agreement, the Settlement and/or orders of the Court .

(c) The Escrow Agent (and any successor Escrow Agent) may be removed o r

may resign upon order of the Court . Upon entry of such an order in accordance with the foregoing

sentence , the Escrow Agent (and any successor Escrow Agent) shall deliver the entirety of the

Interpleader Fund, including all earn ings thereon , in accordance with the order of the Court ,

-6-

whereupon the Escrow Agent shall be discharged of and from any and all further obligations arisin g

in connection with this Escrow Agreement .

(d) In the event of any disagreement resulting in adverse claims or demands bein g

made in connection with the Interpleader Fund, or in the event that the Escrow Agent in good faith i s

in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain th e

Interpleader Fund until the Escrow Agent has received an order ofthe Court directing delivery of the

Interpleader Fund .

(e) Any action or proceeding arising out of or relating to this Escrow Agreement

is related to the proceedings pending before this Court and, therefore, the sole and exclusive venu e

for the resolution of any such claims in any such action or proceeding shall be in this Court .

(f) The Escrow Agent may not assign any of its rights or obligations hereunder

without the written consent of the Insurance Carriers, and any attempted transfer or assignment i n

violation of this provision shall be null and void .

(g) This Escrow Agreement may only be modified by order of this Court .

(h) This Escrow Agreement shall be construed in accordance with and governe d

by the laws of the State of Texas .

9. Notices.

(a) All notices, requests, demands and other communications hereunder

(including service ofprocess in any action or proceeding referred to in ¶8(e)) shall be in writing and

shall be deemed to have been duly given if personally delivered with a receipt therefor, delivered by

facsimile or overnight courier service, or after five (5) days from being mailed, certified mail, return

receipt, postage prepaid to the addresses set forth below :

If to the Escrow Agent :

Keith F. ParkLERACH COUGHLIN STOIA GELLER

-7-

RUDMAN & ROBBINS LLP401 B Street, Suite 1600San Diego, CA 92101

10 . Entire Agreement. This Escrow Agreement sets forth the entire agreement an d

understanding of the parties in respect of the transactions contemplated hereby .

11 . Headings . The headings of the sections and paragraphs in this Escrow Agreement

have been inserted for convenience of reference only and shall in no way restrict or otherwis e

modify any of the terms or provisions hereof.

IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Agreement to be duly

executed as of the date first above written .


WILLIAM S . LERACHKEITH F . PARKDARREN J . ROBBINSHELEN J . HODGESBYRON S. GEORGIOUJAMES I . JACONETTEMICHELLE M. CICCARELLIJAMES R . HAILANNE L. BOXJOHN A. LOWTHERALEXANDRA S . BERNAYMATTHEW P. SIBENROBERT R . HENSSLER, JR .

5KEITH F. PARK

401 B Street, Suite 1600San Diego, CA 92101Telephone : 619/231-105 8

-8-


REGINA M. AMES

9601 Wilshire Blvd ., Suite 510Los Angeles, CA 90210Telephone : 310/859-3100310/278-2148 (fax )


G. PAUL HOWESJERRILYN HAR,DAWAYTexas Bar No. 00788770Federal I.D. No . 309641111 Bagby, Suite 4850Houston , TX 77002Telephone : 713/571-091 1

Escrow Agent

S :\Settlement\Enron .Set\0utside Directors Settlement \AGT00016866 -Clean .doc

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EXHIBIT C

UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

In Re ENRON CORPORATIONSECURITIES, DERIVATIVE & ` ERISA"LITIGATION,

MARK NEWBY, ET AL. ,

vs .

Plaintiffs

ENRON CORPORATION , ET AL . ,

Defendant s

OFFICIAL COMMITTEE OFUNSECURED CREDITORS OF ENRONCORP.,

Plaintiff,

vs. §

ANDREW S . FASTOW, ET AL., §

Defendants .

CIVIL ACTION NO. H-01-3624AND CONSOLIDATED CASE S


EXHIBIT C TO STIPULATION OF SETTLEMEN T(PROPOSED) ORDER AND JUDGMENT DISMISSING CLAIMS AGAINST JAMES

DERRICK AND RICHARD BUY

The Court having been presented with the Stipulation of Settlement and having been

advised that the Official Committee of Unsecured Creditors of Enron Corp . has settled all claims

asserted in civil action No. H-04-0091 (the "Action") against James Derrick and Richard Bu y

and that such claims should be dismissed with prejudice :

MDL 1446

Dallas 185301 v1

It is hereby ORDERED, ADJUDGED AND DECREED that all claims in the Action

asserted against James Derrick and Richard Buy are hereby dismissed with prejudice, but that the

Action shall proceed against all remaining defendants .

In the event that the Effective Date under the parties Stipulation of Settlement (th e

"Stipulation") does not occur, this Order and Judgment and Dismissal shall be rendered null an d

void and shall be vacated nunc pro tunc, and the provisions of 7 .5 of the Stipulation shall apply .


S :\Settlement\Enron . Set\Outside Directors Settlement \Ex C-CC Judgment.doc

Dallas 185301v1

EXHIBIT D


HOUSTON DIVISIO N




Plaintiffs,

vs .


Defendants .


Plaintiffs ,

vs .


Defendants .


§

§

§

Civil Action No. H-O1-3624(Consolidated)

CLASS ACTION

[PROPOSED] ORDER OF FINAL JUDGMENT AND DISMISSAL

EXHIBIT D

WASHINGTON STATE INVESTMENT

BOARD, et al ., On Behalf of Themselves andAll Others Similarly Situated,

Plaintiffs ,vs .


Defendant s


Plaintiffs,

vs .



CLASS ACTION

Civil Action No. 02-301 0

CLASS ACTION

Defendants.

This matter having come before the Court for hearing, pursuant to the Order of this Court,

dated , 2005, on the application of the Settling Parties for approval of the settlement

(the "Settlement") set forth in the Stipulation of Settlement dated as of January 12, 2005 (the

"Stipulation"), and due and adequate notice having been given to the Settlement Class (as defined in

the Stipulation) as required in said Order, and the Court having considered all papers filed and

proceedings had herein and otherwise being fully informed in the premises and good cause

appearing therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that :

1 . This Order incorporates by reference the definitions in the Stipulation, and all

capitalized terms used herein shall have the same meanings as set forth in the Stipulation .

2. This Court has jurisdiction over the subject matter of the Actions and over all

Members of the Settlement Class .

3 . The notice given to the Settlement Class of the Settlement and the other matters se t

forth in the Stipulation was the best notice practicable under the circumstances, including individual

notice to all Members of the Settlement Class who could be identified through reasonable effort .

Said notice provided due and adequate notice of these proceedings and of the matters set forth in the

Stipulation, including the proposed Settlement, to all persons entitled to such notice, and said notice

fully satisfied the requirements of Rule 23 of the Federal Rules of Civil Procedure and due process .

4. Nothing in the Stipulation, the Order Preliminarily Approving Settlement, entered on

, 2005, or this Order of Final Judgment and Dismissal is to be construed as precludin g

any Person who remains a Settlement Class Member or who requests exclusion from the Settlement

Class from either being a member of any other classes, subclasses or settlement classes which have

been or may be certified by the Court in the Actions or opting out of or seeking exclusion from

membership in any such other classes .

5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby

approves the Settlement as set forth in the Stipulation, finds that said Settlement is, in all respects ,

fair, reasonable and adequate with respect to the Settlement Class, and directs that the Settlement be

consummated in accordance with the terms and conditions set forth in the Stipulation .

6. This Court hereby dismisses the Actions in their entirety as to the Outside Director s

and Harrison and against the Representative Plaintiffs and the Settlement Class, with prejudice an d

without costs (except as otherwise provided in the Stipulation) .

7. Upon the Effective Date, the Representative Plaintiffs and each of the Settlemen t

Class Members, on behalf of themselves, their successors and assigns, and any other Person claimin g


Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means, including ,

without limitation, by submitting a Proof of Claim and Release, any distribution from the Gros s

Settlement Fund, shall be deemed to have, and by operation of this Order of Final Judgment and

Dismissal shall have, fully, finally, and forever released, relinquished, and discharged all Released


Directors or Harrison with respect to all such Released Claims, and shal I be permanently barred an d

enjoined from instituting, commencing, or prosecuting any such Released Claim against the Outsid e

Directors or Harrison .

8 . All Persons, including without limitation the other Defendants in the Actions and any

other persons or entities later named as Defendants in the Actions, are hereby permanently enjoined ,

barred and restrained from commencing, prosecuting or asserting any action, for contribution ,

indemnity or otherwise, against the Outside Directors or Harrison, seeking, as damages or otherwise ,

the recovery of all or any part of any liability or any settlement which they pay or are obligated to

pay or agree to pay to the Settlement Class, as a result of such persons' participation in any acts ,

-2-

facts, statements or omissions that were or could have been alleged in the Actions (whether under the

Securities Act of 1933 or the Securities Exchange Act of 1934, state law, foreign law or otherwise)

as claims, cross-claims, counterclaims, third-party claims or otherwise . Any person so enjoined and

barred shall be entitled to appropriate judgment reduction .

9. Upon the Effective Date, all obligations of the Outside Directors and Harrison to th e

Representative Plaintiffs and the Settlement Class Members arising out of, based upon, or otherwise

related to the transactions and occurrences that were alleged, or could have been alleged, on behalf

of the Representative Plaintiffs and the Settlement Class Members in the complaints in the Actions

shall be fully, finally, and forever discharged, and all Persons shall be permanently barred and

enjoined from instituting, prosecuting, pursuing or litigating in any manner (regardless of whether

such Persons purport to act individually, representatively, or in any other capacity and regardless of

whether such Persons purport to allege direct claims, claims for contribution, indemnification, or

reimbursement, or any other claims) any such obligations .

10. Upon the Effective Date, the Outside Directors and Harrison shall be deemed to have,

and by operation of this Order of Final Judgment and Dismissal shall have, fully, finally and forever

released, relinquished and discharged each and all of the Settlement Class Members and counsel to

the Representative Plaintiffs from all claims, arising out of, in any way relating to, or in connection

with the institution, prosecution, assertion, settlement or resolution of the Actions or the Released

Claims except to enforce the releases and other terms and conditions contained in the Stipulation .

11 . This Order of Final Judgment and Dismissal is a final judgment in the Actions as to

all claims among the Outside Directors and Harrison, on the one hand, and the Representative

Plaintiffs and all Settlement Class Members, on the other . This Court finds, for purposes of Rule

54(b) of the Federal Rules of Civil Procedure, that there is no just reason for delay and expressly

directs entry of judgment as set forth herein .

-3-

12. Without affecting the finality of this Order of Final Judgment and Dismissal in any

way, this Court retains continuing jurisdiction over (a) implementation of the Settlement; (b) any

award or distribution of the Gross Settlement Fund, including interest earned thereon ; and (c) all

other proceedings related to the implementation and enforcement of the terms of the Stipulation

and/or the Settlement.

13. Pursuant to §21 D(c)(I) of the Private Securities Litigation Reform Act of 1995, th e

Court hereby finds that each Settling Party, and his, her, or its respective counsel, has complied with

each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to all complaints,

responsive pleadings, and dispositive motions related to the Released Claims, and that insofar as

they relate to the Released Claims, the Actions were not brought for any improper purpose and are

not unwarranted by existing law or legally frivolous .

14. In the event that the Effective Date does not occur, this Order of Final Judgment and

Dismissal shall be rendered null and void and shall be vacated nunc pro tune, and the provisions of

¶7.5 of the Stipulation shall apply .

15. Without further order of the Court, the parties may agree to reasonable extensions of

time to carry out any of the provisions of the Stipulation .

IT IS SO ORDERED .


S :1Settlement\Enron .Set\Outside Directors Settlement\Ex-D-00017 J 07.do e

-4-

EXHIBIT E

IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

In Re ENRON CORPORATIONSECURITIES , DERIVATIVE &"ERISA" LITIGATION,

This document relates to :

PIRELLI ARMSTRONG TIRECORPORATION RETIREE MEDICALBENEFITS TRUST, Derivativelyon behalf of EnronCorporation,

Plaintiff,

VS.

KENNETH L. LAY, ROBERT A .BELFER, NORMAN P . BLAKE, JR.,RONNIE C. CHAN, JOHN H .DUNCAN, WENDY L . GRAMM,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE ,JOHN MENDELSOHN, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JOHN WAKEHAM, HERBERT S .WINOKUR, JR., ANDREW S .FASTOW, and ENRON CORPORATION,an Oregon corporation,

Defendants .

§

MDL 1446

CIVIL ACTION NO. H-O1-364 5LEAD CASE CONSOLIDATED WIT H

[CAPTION CONTINUED ON NEXT PAGE ]

EXHIBIT E TO STIPULATION OF SETTLEMEN T

[PROPOSED] ORDER AND JUDGMENT DISMISSING DERIVATIVE CLAIMSAGAINST THE OUTSIDE DIRECTORS, JAMES DERRICK, KEN L . HARRISON AND

RICHARD BUY

Dallas I85302v8

DETECTIVES ENDOWMENTASSOCIATION ANNUITY FUND,Derivatively on behalf ofEnron Corporation,

Plaintiff,

VS .

KENNETH L. LAY, JEFFREY K .SKILLING, ROBERT A. BELFER,NORMAN P. BLAKE, RONNIE C .CHAN, JOHN H. DUNCAN, WENDYL.GRAMM, KEN L . HARRISON,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE, JOHN MENDELSOHNJEROME J . MEYER, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JOHN A. URQUHART, JOHNWAKEHAM, HERBERT WINOKUR,JR., ANDREW S. FASTOW ,MICHAEL KOPPER, MARK FREVERT,CLIFF BAXTER, KEN STEVENKEAN, STANLEY HORTON,RICHARD BUY, ARTHUR ANDERSENLLP, and ENRON CORPORATION,

CIVIL ACTION NO . H-01-3892

Defendants .

JOSEPH E. KASSOWAY, Trusteeof the Joseph E . Kassowayand Robert T. Kassoway Trust ,

Plaintiff,

VS .

ANDREW S. FASTOW, KENNETHLAY, JEFFREY K . SKILLING,ROBERT A . BELFER, NORMAN P.BLAKE, JR., RONNIE C . CHAN,JOHN H. DUNCAN, WENDY L .GRAMM, KEN L . HARRISON,

CIVIL ACTION NO. H-01-3690


Dallas 185302v8

ROBERT K. JAEDICKE, CHARLES §A. LEMAISTRE, JOHN §MENDELSOHN,JEROME J . MEYER, §FRANK SAVAGE, JOHN R. §URQUHART, JOHN WAKEHAM, §HERBERT S . WINOKUR, JR., §and ENRON CORPORATION, §

Defendants . §

FRED GREENBERG, Derivativelyon behalf of EnronCorporation,

Plaintiff,

VS.

ROBERT A. BELFER, NORMAN P .BLAKE, JR ., RONNIE C . CHAN,JOHN H. DUNCAN, ANDREW S .FASTOW, WENDY L . GRAMM,ROBERT K. JAEDICKE, KENNETHL. LAY, CHARLES A . LEMAISTRE,JOHN MENDELSOHN, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JEFFREY K. SKILLING, JOHNWAKEHAM,HERBERT S . WINOKUR,JR., and LJM2 CO-INVESTMENTLP,

Defendants .

LYNN GOFFMAN AND HARVEY L. §YOUNG, Derivatively and on §behalf of Enron Corporation, §

Plaintiff, §

VS. §

ROBERT A. BELFER, NORMAN P. §

[CAPTION CONTINUED ON NEXT PAGE]


Dallas 185302v8

BLAKE, JR., RONNIE C . CHAN,JOHN H. DUNCAN, WENDY L.GRAMM, ROBERT K. JAEDICKE,KENNETH L. LAY, CHARLES A .LEMAISTRE, M .D., JOHNMENDELSOHN, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JEFFREY SKILLING, JOHN A .URQUHART, JOHN WAKEHAM,HERBERT S . WINOKUR, JR. ,ENRON CORPORATION, andANDREW FASTOW,

Defendants .


DAVID TRZEBUCKI and CHERYLTRZEBUCKI, Individually andDe rivatively on behalf ofnominal defendant Enro nCorporation,

Plaintiff,

VS .

ANDREW S . FASTOW, KENNETHL. LAY, JEFFREY J . SKILLING,ROBERT A. BELFER, ROBERT P .BLAKE, JR., RONNIE C . CHAN,JOHN H. DUNCAN, JOHNMENDELSOHN, WENDY L. GRAMM,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE, FRANK SAVAGE,JOHN WAKEHAM, HERBERT S .WINOKUR, JR., ANDERSONWORLDWIDE SOCIETECOOPERATIVE, a SwissCooperative, DYNEGY INC .,MICHAEL KOPPER ,KATHY LYNN, ANNE YEAGER,KRISTINA MORDAUNT, ENRONCORPORATION, an Oregon

CIVIL ACTION NO . H-02-183 2


Dallas 185302v8

corporation, PAULO FERRAZPEREIRA,

Defendants .

RICK BARSKY ,

Plaintiff,

VS .

ARTHUR ANDERSEN, LLP, D .STEPHEN GODDARD, JR. ,DAVID DUNCAN, KENNETH L . LAY,JEFFREY K. SKILLING, ANDREWS.FASTOW, RICHARD A . CAUSEY,JAMES V. DERRICK, JR. ,MICHAEL J. KOPPER, MARK A.FREVERT, STANLEY C . HORTON,KENNETH D. RICE, RICHARDB . BUY, LOU L . PAI, ROBERT A .BELFER, NORMAN P . BLAKE, JR.,RONNIE C. CHAN, JOHN H .DUNCAN, WENDY L . GRAMM,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE, JOE H . FOY,JOSEPH M. HIRKO, KEN L .HARRISON, MARK E . KOENIG,REBECCA P . MARK-JUSBASCHE,MICHAEL S. McCONNELL,JEFFREY McMAHON, CINDY K .OLSON, BRUCE WILLISON,FRANK SAVAGE, HERBERT S .WINOKUR, JR., JEROME J .MEYER, CHARLES E . WALKER,PAULO V. FERRAZ PEREIRA,JOHN WAKEHAM, JOSEPH W .SUTTON, BEN F . GLISAN,JR. and KRISTINA MORDAUNT ,

Defendants .

[CAPTION CONTINUED ON NEXT PAGE]


Dallas I85302v8

RICHARD P. BERGSIKER,

Plaintiff,

vs.

KENNETH L. LAY, JEFFREY K .SKILLING, ANDREW S . FASTOW,LOU L. PAI, RICHARD B. BUY,RICHARD A . CAUSEY, KENNETHD. RICE, KEVIN HANNON, GREGWHALLEY, MICHAEL S .McCONNELL, MARK A. FREVERT,MARK E. HAEDICKE, CINDY OLSONand MARY K. JOYCE,


Defendants .

Dallas 185302v8

This matter having come before the Court for hearing, pursuant to this Court's Scheduling

Order dated December 22, 2004, on the Notice and Motion of the Official Committee of Unsecured

Creditors of Enron Corp . (the "Creditors Committee") for the dismissal of all pending derivative

claims against the Outside Directors, James Derrick, Ken L . Harrison, and Richard Buy (the

"Released Defendants") as set forth in the Stipulation of Settlement dated as of January 12, 2005 (the

"Stipulation"), and due and adequate notice having been given to interested parties pursuant to the

procedures of Rule 9019 of the Federal Rules of Bankruptcy Procedure, and the Court having

participated in a joint hearing with the United States Bankruptcy Court for the Southern District o f

New York (the "Bankruptcy Court") on the settlement between the Creditors Committee, the

Outside Directors, James Derrick, Ken L. Harrison and Richard Buy (the "Settlement") and the

Court having considered all papers filed and proceedings had herein and otherwise being fully

informed in the premises and good cause appearing therefore, IT IS HEREBY ORDERED,

ADJUDGED AND DECREED that :

1 . This Order incorporates by reference the definitions in the Stipulation, and all

capitalized terms used herein shall have the same meanings as set forth in the Stipulation, unless

expressly defined herein .

2 . The notice given to interested parties of the Settlement and the matters set forth in th e

Stipulation, including the notice issued pursuant to Rule 9019 of the Federal Rules of Bankruptcy

Procedure and the notice given to the Settlement Class pursuant to this Court's order of January _,

2005 was the best notice practicable under the circumstances . Said notice provided due and

adequate notice of these proceedings and of the matters set forth in the Stipulation, including the

proposed Settlement, to all persons entitled to such notice, and to the extent that Rule 23 .1 is

applicable, said notice fully satisfied the requirements of Rule 23 .1 of the Federal Rules of Civil

Procedure and due process .

-1-

3. Pursuant to Rule 23 .1 of the Federal Rules of Civil Procedure, this Court directs that

all claims against the Released Defendants in the above referenced causes of action (the "Derivative

Claims") be dismissed with prejudice in accordance with the terms and conditions set forth in the

Stipulation .

4 . This Court hereby dismisses the Derivative Claims in their entirety as to the Released

Defendants and against Enron Corp . and the Creditors Committee, with prejudice and without costs

(except as otherwise provided in the Stipulation) .

5 . Upon the Effective Date, the Creditors Committee and Enron, on behalf of

themselves, their successors and assigns, and any other Person claiming (now or in the future)

through or on behalf of them, shall be deemed to have, and by operation of this Order and Judgment

shall have, fully, finally, and forever released, relinquished, and discharged all Released Claims

against the Released Defendants, and shall have covenanted not to sue the Released Defendants with

respect to all such Released Claims, and shall be permanently barred and enjoined from instituting,

commencing, or prosecuting any such Released Claim against the Released Defendants .

Notwithstanding the foregoing release, nothing in this Order and Judgment is intended, nor shall it

be construed to release or discharge Harrison from any matter that might be alleged as a defense to,

avoidance of, or defensive counterclaim against Harrison's claims asserted as Claim No . 2390500

(a/k/a Claim No . 0000023905) in the matter In re Portland General Holdings, Inc ., S .D.N.Y. Bankr.

Case No. 03-14331C95(AJG) (the "Harrison Proof of Claim") ; provided, however, that any net

affirmative recovery against . Harrison shall have been released, discharged, and barred . (The

foregoing sentence is referred to herein as the "Enron Defensive Proviso .")

6. Upon the Effective Date, all obligations of the Released Defendants to the Creditors

Committee or Enron Corp . arising out of, based upon, or otherwise related to the transactions and

occurrences that were alleged, or could have been alleged, on behalf of Enron Corp . or the Creditor s

-2-

Committee in the Derivative Actions shall be fully, finally, and forever discharged, with the

exception of the Enron Defensive Proviso, and all Persons shall be permanently barred and enjoined

from instituting, prosecuting, pursuing or litigating in any manner any such claims .

7 . Upon the Effective Date, the Outside Directors and Harrison shall each be deemed to

have, and by operation of this Order and Judgment shall have, fully, finally, and forever released,

relinquished and discharged Enron, the Creditors Committee and counsel to each of the foregoing

persons from all claims, arising out of, in any way relating to, or in connection with the institution,

prosecution, assertion, settlement or resolution of the Actions, or the Released Claims, or their

participation or involvement as a director of Enron or its predecessors or affiliates (including claims

of indemnity) . Notwithstanding the foregoing release or any other provision in this Order and

Judgment, nothing in this Order and Judgment is intended, nor shall it be construed to release or

discharge any Person from the Harrison Proof of Claim or any matter Harrison might allege as a

defense to, avoidance of, or defensive counterclaim against any matter that might be alleged as a

defense to, avoidance of, or defensive counterclaim against the Harrison Proof of Claim ; provided,

however, that any recovery by Harrison other than a recovery on the Proof of Claim shall have been

released, discharged, and barred . (The foregoing sentence is referred to herein as the "Harrison Proof

of Claim Proviso .")

8 . Upon the Effective Date, all obligations of the Creditors Committee or Enron Corp .

to the Released Defendants, arising out of, based upon, or otherwise related to the transactions and

occurrences that were alleged, or could have been alleged, on behalf of the plaintiffs, Enron Corp . or

the Creditors Committee in the Derivative Actions, or related to their participation or involvement as

an officer or director of Enron or its predecessors or affiliates (including claims of indemnity) shall

be fully, finally, and forever discharged, with the exception of the Harrison Proof of Claim Proviso ,

-3-

and all Persons shall be permanently barred and enjoined from instituting, prosecuting, pursuing o r

litigating in any manner any such claims .

9. This Order and Judgment Dismissing Derivative Claims is a final judgment in the

Derivative Actions as to the Released Claims among the Outside Directors, James Derrick, Ken L .

Harrison, and Richard Buy on the one hand, and Enron Corporation and the Creditors Committee, on

the other hand. This Court finds, for purposes of Rule 54(b) of the Federal Rules of Civil Procedure,

that there is no just reason for delay and expressly directs entry of judgment as set forth herein .

10 . In the event that the Effective Date does not occur, this Order of Final Judgment and

Dismissal shall be rendered null and void and shall be vacated nunc pro tunc, and the provisions o f

¶7.5 of the Stipulation shall apply .

IT IS SO ORDERED .


S :\Settlement\Enron .Set\Outside Directors Settlement\Ex-E-Judg Dismiss Deriv Claims.doc

-4-

EXHIBIT F


HOUSTON DIVISION




Plaintiffs,

vs .


Defendants .


Plaintiffs,

vs .


Defendants .


Civil Action No . H-O1-3624(Consolidated)

CLASS ACTION

ORDER PRELIMINARILY APPROVING SETTLEMENT

EXHIBIT F


Plaintiffs ,

vs .


Defendants

NATHANIEL PULSIFER, TRUSTEE OF THESHOOTERS HILL REVOCABLE TRUST,INDIVIDUALLY AND ON BEHALF OF ALLOTHERS SIMILARLY SITUATED ,

Plaintiffs ,

vs.



CLASS ACTION

Civil Action No. 02-301 0

CLASS ACTION

Defendants.

WHEREAS, consolidated class actions are pending before this Court, including In re Enron

Corporation Securities Litigation, Civil Action No. H-01-3624, which includes, among others, cases

entitled Newby, et al. v. Enron Corp., et al. ; The Regents of the University of California, et al . v.

Kenneth L . Lay, et al. ; Washington State Investment Board and Employer-Teamsters Local Nos . 175

and 505 Pension Trust Fund, et al. v. Kenneth L. Lay, et al. ; and Nathaniel Pulsifer, Trustee of The

Shooters Hill Revocable Trust, Individually and On Behalf of All Others Similarly Situated v .

Kenneth L. Lay, et al. ; and

WHEREAS, the Settling Parties have applied to the Court, pursuant to Rule 23 of the Federa l

Rules of Civil Procedure, for an order approving the settlement of the Actions as to them in

accordance with the Stipulation of Settlement among them dated as of January 12, 2005 (the

"Stipulation"), which, together with the Exhibits annexed thereto, sets forth the terms and conditions

for a proposed settlement of the Actions as to the Outside Directors and Harrison (the "Settlement")

and for dismissal of the Actions with prejudice as to the Outside Directors and Harrison ;

WHEREAS, the Stipulation provides for the conditional certification of the Settlement Class

solely for purposes of the Settlement ; and

WHEREAS, the Court has read and considered the Stipulation and the Exhibits annexed

thereto and has read and considered all other papers filed and proceedings had herein, and is

otherwise fully informed in the premises, and with good cause appearing therefore ;

NOW, THEREFORE, IT IS HEREBY ORDERED:

1 . This Order (the "Preliminary Approval Order") incorporates by reference the

definitions in the Stipulation and the Agreement Regarding Insurance Proceeds and Interpleader

Action ("Insurance Proceeds Agreement"), and all capitalized terms used herein shall have the same

meanings set forth in the Stipulation and the Insurance Proceeds Agreement .

-1-

2. The Court preliminarily approves the Stipulation, including the releases contained

therein, and the Settlement as being fair, reasonable, and adequate to the Settlement Class .

3 . The Court approves the distribution from the Insurance Proceeds to those Non-

Settling Defendants listed on Exhibit A to the Insurance Proceeds Agreement, severally and not

jointly, of the amounts provided on Exhibit A . Each Non-Settling Defendant listed on Exhibit A

shall be entitled to receive up to fifty percent (50%) of his Set Aside Amount ten (10) calendar days

from the date of this Preliminary Approval Order . Each Non-Settling Defendant listed on Exhibit A

shall be entitled to receive up to the remaining fifty percent (50%) of his Set Aside Amount on the

earlier of (a) ten (10) calendar days after the entry of the Interpleader Judgment by this Court

substantially in the form attached to the Insurance Proceeds Agreement as Exhibit C or (b) April 15,

2005. Further, the Court approves the distribution from the Insurance Proceeds to the Non-Settling

Defendants (as defined in the Insurance Proceeds Agreement) of the total sum of three million, five

hundred thousand dollars ($3,500,000) . The Non-Settling Defendants (as defined in the Insurance

Proceeds Agreement) shall be entitled to receive up to fifty percent (50%) of the Arrearage Payment

ten (10) calendar days from the date of this Preliminary Approval Order . The Non-Settling

Defendants (as defined in the Insurance Proceeds Agreement) shall be entitled to receive up to the

remaining fifty percent (50%) of the Arrearage Payment on the earlier of (a) ten (10) calendar days

after entry of the Interpleader Judgment by this Court substantially in the form attached to the

Insurance Proceeds Agreement as Exhibit C or (b) April 15, 2005 .

4. Solely for purposes of the Stipulation and the Settlement, the Court now finds and

concludes that :

(a) With respect to all Released Claims, particularly in light ofthe Settlement : (1)

the members of the Settlement Class are so numerous that joinder of all class members in the

Actions is impracticable ; (2) there are questions of law and fact common to the Settlement Class ; (3 )

-2-

the claims of the Representative Plaintiffs are typical of the claims of the Settlement Class ; and (4) in

negotiating and entering into the Stipulation, the Representative Plaintiffs and their counsel hav e

fairly and adequately represented and protected the interests of all Settlement Class Members ; and

(b) With respect to all Released Claims : ( 1) the questions of law and fact that are

common to the Settlement Class predominate over any individual questions ; and (2) a class action is

superior to other available methods for the fair and efficient adjudication of this controversy ,

considering (i) the interests of the Settlement Class Members in individually controlling th e

prosecution of separate actions, (ii) the extent and nature of any litigation concerning the controvers y

already commenced by Settlement Class Members, (iii) the desirability or undesirability o f

concentrating the litigation of these claims in this particular forum, and (iv) the difficulties likely t o

be encountered in the management of the Actions .

5 . Solely for the purposes of the Stipulation and the Se ttlement, the Settlement Class is

hereby certified pursuant to Rule 23 of the Federal Rules of Civil Procedure in accordance with the

following definitions as set forth in the Stipulation :

"Settlement Class" means all Persons (and their beneficiaries) who purchased or acquire d

any publicly traded equity or debt securities of Enron between September 9, 1997 and November 27 ,

2001, inclusive, and including purchasers of all securities issued by Enron-related entities during th e

Settlement Class Period, the value or repayment of which was dependent on the credit, financial

condition , or ability to pay of Enron Corporation (collectively, the "Publicly Traded Securities") . '

` The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7.875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust IT Trust Originated Preferred Securities and Enron Capital Resources ,

-3-

Excluded from the Settlement Class are Defendants, the officers and directors of Enron, and

members of their immediate families or their successors, heirs, and legal representatives . Also

excluded from the Settlement Class are those Persons who timely and validly request exclusion from

the Settlement Class, to the extent that they are able to do so under Rule 23 of the Federal Rules o f

Civil Procedure, pursuant to the Mailed Notice .

6. Solely for purposes of the Stipulation and the Settlement, the Representative Plaintiffs

are hereby certified as the class representatives pursuant to Rule 23 of the Federal Rules of Civi l

Procedure .

7. The Court approves, as to form and content, the Notice of Pendency and Partia l

Settlement of Class Action annexed hereto as Exhibit F-I (the "Mailed Notice") .

8. The Court approves, as to form and content , the Summary Notice for Publication

annexed hereto as Exhibit F-2 (the "Summary Notice") .

9 . The date and time of the Settlement Hearing shall be added to the Mailed Notice and

the Summary Notice before they are mailed and published, respectively, in accordance wit h

paragraph 10, below .

10. The Court finds that the mailing, publication and distribution of the Mailed Notice

and Summary Notice substantially in the manner and form set forth in paragraph 10, below ,

L.P. 9% Cumulative Preferred Secu rities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11 /15/04, Yosemite £200,000,000 8 .75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7.797% Senior Secured Notes due 03 and £315,000,000 6.375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500 ,000,000 7 .375% due 06 , Enron Euro Credit LinkedNotes Trust £200 ,000,000 6 . 5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007.25% due 06 , and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6 .31 %Senior Secured Notes and £515,000 ,000 6 . 19% Senior Secured Notes (collectively , the "ForeignDebt Securities") .

-4-

constitutes the best notice practicable under the circumstances, including individual notice to al l

Settlement Class Members who can be identified through reasonable effort, and constitutes valid,

due and sufficient notice to all persons entitled thereto, complying fully with the requirements o f

Rule 23 of the Federal Rules of Civil Procedure and due process .

11 . The Notice and Claims Administrator is empowered to supervise and administer th e

notice procedure, as set forth below :

(a) Commencing on or before , 2005, the Notice and Claims

Administrator shall mail or cause to be mailed, by first class mail, postage prepaid, copies of th e

Mailed Notice to all Settlement Class Members who can be identified by Plaintiffs' Settlement

Counsel with reasonable effort at each such Settlement Class Member's last known address ; and

(b) On or before , 2005, the Notice and Claims Administrator

shall cause the Summary Notice to be published twice in the Investor 's Business Daily and twice i n

the Houston Chronicle .

12. At or prior to the Settlement Hearing (as defined below), Plaintiffs ' Settlement

Counsel shall file with the Court and serve on counsel for the Outside Directors and Harrison proo f

by declaration or affidavit of the mailing and publication described in paragraph 10, above .

13 . Settlement Class Members who wish to exclude themselves from the Settlement

Class must do so in accordance with the instructions contained in the Mailed Notice .

14. All Persons who fall within the definition of the Settlement Class and who do not

timely and validly request to be excluded from the Settlement Class in accordance with the

instructions set forth in the Mailed Notice shall be subject to and bound by the provisions of the

Stipulation, the releases contained therein, and the Judgment with respect to all Released Claims,

regardless of whether such Persons seek or obtain by any means, including, without limitation, b y

-5-

submitting a Proof of Claim and Release or any similar document, any distribution from the Gross

Settlement Fund or the Net Settlement Fund .

15. A hearing (the "Settlement Hearing") shall be held on , 2005 at

a.m./p.m., before the Honorable Melinda Harmon, United States District Judge, at the United States

District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk

Avenue, Houston, Texas 77002, to determine : (a) whether the proposed Settlement as set forth in the

Stipulation is fair, reasonable and adequate and should be approved by the Court ; (b) whether an

Order of Final Judgment and Dismissal, substantially in the form of Exhibit B to the Stipulation,

should be entered herein ; (c) whether the establishment of the Expense Fund should be approved ;

and (d) whether the allocation of the Gross Settlement Fund between the Newby Action and the

WSIB Action, on the one hand, and the Creditors Committee Action, on the other, should be

approved.

16. All papers in support of the Settlement shall be filed at least seven (7) days prior to

the Settlement Hearing .

17. Any Settlement Class Member may appear and show cause (if he, she or it has any )

why the Court should or should not : (a) approve the proposed Settlement as set forth in the

Stipulation as fair, reasonable and adequate ; (b) enter the Order of Final Judgment and Dismissal

substantially in the form annexed as Exhibit B to the Stipulation ; (c) approve the establishment of

the Expense Fund; or (d) approve the allocation of the Gross Settlement Fund between the Newby

Action, the Pulsifer Action and the WSIB Action, on the one hand, and the Creditors Committee

Action, on the other; provided, however that no person shall be heard with respect to, or shall be

entitled to contest, the foregoing matters unless on or before , 2005, that person

has served by hand or by first class mail notice of his, her or its intention to appear, setting forth

briefly each objection and the basis therefor, together with copies of any papers and briefs in suppor t

-6-

of said objections and proof of membership in the Settlement Class, upon Keith F . Park, Lerach

Coughlin Stoia Geller Rudman & Robbins LLP, 401 B Street, Suite 1600, San Diego, California

92101 (on behalf of Lead Plaintiff in the Newby Action and plaintiffs in the WSIB Action), upon

Lew LeClair, McKool Smith PC, 300 Crescent Court, Suite 1500, Dallas, Texas 75201(onbehalfof

the Creditors Committee) ; and upon Kathy Patrick, Gibbs & Bruns, L .L.P., 1100 Louisiana, Suite

5300, Houston, Texas 77002 (on behalf of the Outside Directors) ; and upon William F . Martson, Jr .,

Tonkon Torp LLP, 888 SW Fifth Avenue, Suite 1600, Portland, Oregon 97204 (on behalf of

Harrison) and has filed said objections, papers and briefs with the Court . Unless otherwise ordered

by the Court, any Settlement Class Member who does not make his, her, or its objection in the

manner provided for herein shall be deemed to have waived such objection and shall forever be

foreclosed from making any objection to the foregoing matters .

18. The Court may adjourn the Settlement Hearing from time to time and without furthe r

notice to the Settlement Class . The Court reserves the right to approve the Settlement at or after the

Settlement Hearing with such modifications as may be consented to by the Settling Parties and

without further notice to the Settlement Class . The Court further reserves the right to enter the Order

of Final Judgment and Dismissal, inter alia, dismissing the Actions with prejudice as to the Settling

Defendants and against Representative Plaintiffs and the Settlement Class at or after the Settlement

Hearing and without further notice to the Settlement Class .

19. Upon the Effective Date, the Representative Plaintiffs and each of the Settlement



Representative Plaintiff or Settlement Class Member ever seeks ; or obtains by any means, including,

without limitation, by submitting a Proof of Claim and Release or any similar document, any

distribution from the Gross Settlement Fund, shall be deemed to have, and by operation of th e

-7-

Judgment shall have, fully, finally, and forever released, relinquished, and discharged all Released


Directors or Harrison with respect to all such Released Claims, and shall be permanently barred and

enjoined from instituting, commencing, or prosecuting any such Released Claim against the Outside

Directors or Harrison .

20. Except as otherwise provided in the Stipulation no person who is not a Settlement

Class Member or counsel for one or more of the Representative Plaintiffs shall have any rights to

any portion of the Gross Settlement Fund .

21 . Banks, brokerage firms, institutions, and other Persons who are nominees tha t

purchased Publicly Traded Securities of Enron for the beneficial interest of other Persons during the

Settlement Class Period shall, within ten (10) calendar days of receiving the Mailed Notice (a) send

the Mailed Notice to all such beneficial owners, or (b) if they have not already done so in connection

with the settlement with Andersen Worldwide Societe Cooperative ("AWSC"), send a list of the

names and addresses of such beneficial owners to the Notice and Claims Administrator, in which

event the Notice and Claims Administrator shall promptly mail the Mailed Notice to such beneficial

owners . The Mailed Notice will advise such nominees that their reasonable costs in providing the

Mailed Notice to such beneficial owners, to the extent not already reimbursed in connection with the

prior settlement with AWSC, will be reimbursed by Plaintiffs' Settlement Counsel from the Gross

Settlement Fund .

22. All reasonable costs and expenses incurred in identifying and providing notice to

Settlement Class Members and in administering the Gross Settlement Fund shall be paid as set forth

in the Stipulation .

23. The Court retains jurisdiction over all proceedings arising out of or related to the

Stipulation and/or the Settlement .

-8-

24. If for any reason the Settlement does not become effective in accordance with the

terms of the Stipulation, this Preliminary Approval Order shall be rendered null and void and shal l

be vacated nunc pro tunc, and the provisions of ¶¶6 .2 and 7.5 of the Stipulation shall apply .

25. Without further order of the Court, the Settling Parties may agree to reasonable

extensions of time to carry out any of the provisions of this Preliminary Approval Order or the

Stipulation.

26. Pending final determination as to whether the Settlement as set forth in the Stipulatio n

should be approved, no Settlement Class Member shall commence, prosecute, pursue or litigate an y

Released Claim against the Outside Directors or Harrison, whether directly, representatively or i n

any other capacity, and regardless of whether or not any such Settlement Class Member ha s

appeared in the Actions .

IT IS SO ORDERED .


S :\Settlement\Enron .Set\Outside Directors Settlement\preliminary app ord-Clean .do c

-9-

EXHIBIT F-1


HOUSTON DIVISION


Civil Action No . H-01-3624(Consolidated)



Plaintiffs ,

vs.


Defendants .


Plaintiffs ,

vs .


Defendants .


CLASS ACTION

NOTICE OF PENDENCY AND PARTIAL SETTLEMENT OF CLASS ACTIO N

EXHIBIT F-1

WASHINGTON STATE INVESTMENTBOARD, et al., On Behalf of Themselves andAll Others Similarly Situated,

Plaintiffs,vs .


Defendants


Plaintiffs ,

vs .



CLASS ACTION

Civil Action No . 02-3010

CLASS ACTION

Defendants .

TO: (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED BELOW) DURING THE PERIOD FROM SEPTEMBER 9,1997THROUGH AND INCLUDING NOVEMBER 27, 200 1

This Notice of Pendency and Partial Settlement of Class Action (the "Notice") is given

pursuant to Rule 23 of the Federal Rules of Civil Procedure to inform you of the proposed partial

settlement of these Actions (the "Settlement") and the hearing (the "Settlement Hearing") to be held

by the United States District Court for the Southern District of Texas (the "Court") to consider the

fairness, reasonableness and adequacy of the Settlement as set forth in the Stipulation of Settlement

among the Representative Plaintiffs and the Outside Directors (as further defined below) and Ken

Harrison ("Harrison"), dated as of January 12, 2005 (the "Stipulation"), on file with the Court . All

capitalized terms not defined prior to their use in this Notice have the meanings set forth in Section

VIII, below.

1 . STATEMENT OF PLAINTIFFS' RECOVERY

The Settlement will result in the creation of a cash settlement fund consisting of tw o

components . The first component is the remaining amount of available proceeds from Enron's

directors and officers liability insurance policies which amount is Two Hundred Million Dollars .

Subject to the approval of the Court, this amount will be reduced by $13 million (the "Set Aside

Amount") and the remainder allocated 82 .8% to the Settlement Class and 17 .2% to the Official

Committee of Unsecured Creditors of Enron Corp . The second component consists of the individual

contributions of the Outside Directors and Harrison in the approximate aggregate amount of $13

million . The total amount available to the Settlement Class by reason of this settlement is estimated

to be $168 million and, subject to deduction for costs of notice and administration and certain taxes

and tax related expenses and for attorneys' fees, costs and expenses as approved by the Court, wil l

-I-

be available for distribution to Settlement Class Members (as defined below) . As described more

fully below, the amount of any distribution to Settlement Class Members on a per share basis will

depend on future Court proceedings and it is therefore not possible to estimate the amount of any

such distribution at the present time. See Section XI .

II. STATEMENT OF POTENTIAL OUTCOM E

Representative Plaintiffs, the Outside Directors and Harrison do not agree on the average

amount of damages per share that would have been recoverable from the Outside Directors or

Harrison if Representative Plaintiffs were to have prevailed on each claim asserted . The issues on

which the parties disagree include : (1) whether the Outside Directors or Harrison engaged in conduct

that would give rise to any liability to the Settlement Class under the federal or Texas securities

laws, Texas common law, or any other laws ; (2) whether the Outside Directors or Harrison have

valid defenses to any such claims of liability; (3) the appropriate economic model for determining

the amount by which the Publicly Traded Securities were allegedly artificially inflated (if at all)

during the Settlement Class Period ; (4) the amount by which the Publicly Traded Securities were

allegedly artificially inflated (if at all) during the Settlement Class Period ; (5) the effect of various

market forces influencing the trading price of Publicly Traded Securities at various times during the

Settlement Class Period; (6) the extent to which external factors, such as general market conditions,

influenced the trading price of Publicly Traded Securities at various times during the Settlement

Class Period ; (7) the extent to which the various matters that Representative Plaintiffs alleged wer e

materially false or misleading influenced (if at all) the trading price of Publicly Traded Securities at

various times during the Settlement Class Period ; (8) the extent to which the various allegedly

adverse material facts that Representative Plaintiffs alleged were omitted influenced (if at all) the

trading price of the Publicly Traded Securities at various times during the Settlement Class Period ;

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(9) whether the statements made or facts allegedly omitted were false, material or otherwise

actionable under the federal securities or other laws .

III. STATEMENT OF ATTORNEYS' FEES AND EXPENSES SOUGH T

At a future date, upon further notice to the Settlement Class, counsel for the Representative

Plaintiffs will apply to the Court for an award of attorneys' fees from the Gross Settlement Fund . No

attorneys' fees are being sought at this time. However, the Stipulation provides for the allocation of

Sixteen Million Dollars ($16,000,000) (the "Expense Fund") of the settlement fund for

reimbursement of expenses incurred and expected to be incurred by Plaintiffs' Settlement Counsel in

prosecuting the Actions . The Court will be asked to approve the establishment of the Expense Fund

at the Settlement Hearing .

IV. REASONS FOR SETTLEMENT

The Representative Plaintiffs and their counsel believe that this Settlement is fair, reasonable,

and adequate to the Members of the Settlement Class . The Representative Plaintiffs and thei r

counsel have reached this conclusion after investigating and considering, among other things, the

strengths and weaknesses of the Representative Plaintiffs' claims against the Outside Directors and

Harrison and the Outside Directors' and Harrison's defenses to those claims, the fact that certain of

the claims asserted against the Outside Directors have been dismissed by Court Order dated March

12 and March 25, 2003, the uncertainties of this complex litigation, and the benefit provided by the

Settlement to the Members of the Settlement Class . See Section VII.

V. IDENTIFICATION OF ATTORNEYS' REPRESENTATIVE S

Any questions regarding the Settlement should be directed to Plaintiffs' Settlement Counsel

or their staff:

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RICK NELSO NLERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP401 B Street, Suite 1600

San Diego, CA 92101-4297Telephone: (800) 449-4900

PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO A

PROPOSED PARTIAL SETTLEMENT OF THESE ACTIONS AND, IF YOU ARE A

SETTLEMENT CLASS MEMBER, CONTAINS IMPORTANT INFORMATION AS TO YOUR

RIGHTS CONCERNING THE SETTLEMENT AS FURTHER DESCRIBED BELOW .

EXCLUSION DEADLINE : REQUESTS FOR EXCLUSION MUST BE FILED SO AS TO

BE RECEIVED NO LATER THAN , 2005 . SECURITIES BROKERS AND

OTHER NOMINEES : PLEASE SEE THE INSTRUCTIONS ON PAGE BELOW.

VI. BACKGROUND OF THE LITIGATION

The Outside Directors have been named as defendants in the Newby Action . They moved t o

dismiss the Newby Action on the ground that the complaint failed to state a claim upon which relief

could be granted because plaintiffs failed to adequately plead the Outside Directors' scienter . On

March 12 and 25, 2003, the Court granted the Outside Directors' motion to dismiss all claims against

them asserted under the Securities Exchange Act of 1934 (the "1934 Act") and under the Texas

Securities Act . The Outside Directors contend that this ruling necessarily requires dismissal of any

1934 Act or Texas Securities Act claims that might be pursued against the Outside Directors in the

Newby Action. The Outside Directors were also named as defendants in the Washington State

Investment Board case. Their motion to dismiss was under submission when the settlement was

reached. Harrison's motion to dismiss the Newby Action was denied and his motion to dismiss the

Washington State Investment Board case was under submission when the settlement was reached .

-4-

VII. BACKGROUND OF THE SETTLEMEN T

Counsel for the Representative Plaintiffs have conducted an investigation relating to the

claims and underlying events alleged in the complaints . Counsel for the Representative Plaintiffs

also have conducted considerable formal and informal discovery in the Actions and in related

litigation and have analyzed the evidence obtained therein, and have researched the applicable law

with respect to the claims alleged in the complaints and the potential defenses thereto .

The Representative Plaintiffs, by their counsel, have conducted arm's-length negotiations

with counsel for the Outside Directors and Harrison with a view toward settling the issues in dispute

and achieving the best result possible consistent with the interests of the Settlement Class .

Based upon their investigation, counsel for the Representative Plaintiffs have concluded that

the terms of the Settlement as set forth in the Stipulation are fair, reasonable, and adequate to the

Representative Plaintiffs and the Settlement Class, and in the best interest of the Representative

Plaintiffs and the Settlement Class, and have agreed to settle the Actions as to the Outside Director s

and Harrison pursuant to the terms and provisions of the Stipulation, after considering (i) the benefits

that the Representative Plaintiffs and the Settlement Class will receive from the Settlement ; (ii) the

attendant risks of litigation ; and (iii) the desirability of permitting the Settlement to be consummated

as provided by the terms of the Stipulation .

The Outside Directors and Harrison have denied and continue to deny each and all of the

claims and allegations of wrongdoing made by the Representative Plaintiffs in the Actions and

maintain furthermore that they have meritorious defenses . The Outside Directors and Harrison have

expressly denied and continue to deny all charges of wrongdoing or liability against them arising out

of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the

Actions . The Outside Directors and Harrison also have denied and continue to deny, inter alia, the

allegations that the Representative Plaintiffs or the Settlement Class Members were harmed by th e

-5-

Outside Directors' and Harrison's conduct alleged in the Actions . Pursuant to the terms of th e

Stipulation, the Stipulation shall in no event be construed or deemed to be evidence of or a n

admission or concession by the Outside Directors and Harrison with respect to any claim of any fault

or liability or wrongdoing or damage whatsoever.

Nonetheless, the Outside Directors and Harrison have concluded that further conduct of the

Actions would be protracted and expensive, and that it is desirable that the Actions be fully and

finally settled in the manner and upon the terms and conditions set forth in the Stipulation. The

Outside Directors and Harrison also have taken into account the uncertainty and risks inherent in any

litigation, especially in complex cases like the Actions . The Outside Directors and Harrison have,

therefore, determined that it is desirable and beneficial to them that the Actions be settled in th e

manner and upon the terms and conditions set forth in the Stipulation .

THIS NOTICE IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS ,

AN EXPRESSION OF ANY OPINION BY THE COURT WITH RESPECT TO THE TRUTH O F

THE ALLEGATIONS IN THE ACTIONS OR THE MERITS OF THE CLAIMS OR DEFENSES

ASSERTED. THIS NOTICE IS SOLELY TO ADVISE YOU OF THE PENDENCY OF THE

ACTION AND THE PROPOSED PARTIAL SETTLEMENT THEREOF AND OF YOUR

RIGHTS IN CONNECTION THEREWITH .

VIII. DEFINITIONS

As used in this Notice , the following terms have the meanings specified below. Any

capitalized terms not specifically defined in this Notice shall have the meanings set forth for suc h

terms in the Stipulation .

I . "Actions" means, for purposes of this notice, the Newby Action, Washington State

Investment Board, et al . v. Kenneth L. Lay, et al., Civil Action No . H-02-3401 (S .D. Tex.) (the

"WSIB Action") ; Nathaniel Pulsifer, Trustee of The Shooters HillRevocable Trust, Individually and

-6-

On BehalfofAll Others Similarly Situated v. Kenneth L. Lay, et al., Civil Action No . 02-3010 (S .D.

Tex.) .

2 . "Authorized Claimant" means any Settlement Class Member who is entitled to a



3 . `Bankruptcy Court" means the United States District Court for the Southern District

of New York, presiding over In re Enron Corp ., et. al., Case No. 01-16034 (AJG) .

4. "Court" means the United States District Court for the Southern District of Texas,

Houston Division .

5 . "Defendants" means each and all of the defendants that have been or may be named


6. "Committee Action" means Official Committee of Unsecured Creditors of Enron

Corp. v. Andrew S. Fastow, et al., Civil Action No . H-04-0091 (S .D. Tex.).

7 . "Derivative Actions" means Pirelli Armstrong Tire Corporation Retiree Medica l

Benefits Trust, Derivatively on Behalf of Enron Corporation, et at . v. Kenneth Lay, et al., Civil

Action No. H-01-3645, in the United States District Court for the Southern District of Texas ;

Detectives Endowment Association Annuity Fund, derivatively on behalf of Enron Corporation v .

Kenneth L . Lay et al., C .A. No. H-01-3892; Joseph E. Kassoway and Robert T. Kassoway Trust v.

Andrew S. Fastow et at., C.A. No. H-01-3690 ; Fred Greenberg, derivatively on behalf of Enron

Corp. v. Robert A . Belfer et al., C.A. No. H-01-3998; Lynn Goffman et al. v. Robert A . Belfer et al.,

C.A. No. H-02-1838; David Trzebucki et al, v. Andrew S. Fastow et al., C.A. No. H-02-1832; Rick

Barksy v. Arthur Andersen LLP et al., C.A. No. H-02-1922; Richard P. Bergsieker v. Kenneth L . Lay

et at., C.A. No . H-02-3427 and any other case asserting derivative claims or claims that are the

property of Enron .

-7-

8 . "Effective Date" means the first date by which all of the events and conditions

specified in paragraph 7 .1 of the Stipulation have occurred and have been met, respectively .

9. "Enron" means Enron Corp ., a reorganized debtor.

10. "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limited

Insurance Policy No. D0079A1 A98 ; Energy Insurance Mutual Limited Excess Policy No . 900630-

OODO; Federal Insurance Company Excess Policy No . 8142-05-47; Hartford/Twin City Fire

Insurance Company Excess Policy No . NDA 0131301-9814 ; Greenwich Insurance Company Excess

Policy No. ELU 82248-01 ; Lloyd's of London Insurance Certificate No . 901/LK9802531 ; St . Paul

Mercury Insurance Company Excess Policy No . 568CM0934 ; Federal Insurance Company Excess

Policy No. 8181-43-14; Royal Insurance Company of America Policy No . P SF000633; ACE

Bermuda Insurance Ltd . Excess Policy No . EC-AD01-001 ; and Kemper Insurance Indemnity Co . as

participating in Federal Quota Share Policy No . 8179-41-03 .

11 . "Expense Fund" means a principal amount not to exceed Sixteen Million Dollars

($16,000,000), plus any interest that may accrue thereon . The Expense Fund shall be paid from, and


12. The term "Harrison" means Ken L. Harrison and his attorneys, insurers, and each and

all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of such persons,

in each instance only in their capacity as such, but excluding the Non-Settling Defendants in the

Actions .

13. "Judgment" means, for purposes of this notice, a judgment to be rendered by the

Court, substantially in the form attached to the Stipulation as Exhibit D .

14. "Lead Plaintiff' means The Regents of the University of California .

15 . "Newby Action" means the actions brought on behalf of all purchasers (and their

beneficiaries) of any publicly traded equity and debt securities of Enron Corporation, as defined i n

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that action , from October 19, 1998 through November 27, 2001, inclusive (excluding Defendants,

the officers and directors of Enron , and members of their immediate families or their successors,

heirs, and legal representatives), proceeding as a consolidated action captioned Newby, et al. v.

Enron Corp ., et al., No. H-01 -3624 (S.D. Tex .) .

16. "Insurance Proceeds" means the sum of $200 million dollars which represents the

remaining limits of coverage under the Enron D&O Policies w ritten by those insurance carriers

above the layer of insur ance provided by Hartford/Twin Cities Insurance Company (the "Insurance

Carriers") .

17. "Interpleader Action" means the First Amended Third Party Counterclaim for

Interpleader filed by the Insurance Carriers in the Newby Action on October 22, 2004 , related to


18. "Non-Outside Director Defendants" means the defendants other th an the Outside

Directors that have been named in the complaints in the Actions .

19. "Non-Settling Defendants" means each and all of the current Defendants except the


20 . "Notice and Claims Administrator" means Gilardi & Co. LLC or its successors .

21 . "Outside Directors" means Robert Belfer, Norman Blake , Ronnie Chan, Joh n

Duncan, Paulo Ferraz Pereira, Joe Foy, Wendy Gramm, Robert Jaedicke, Charles LeMaistre,

Rebecca Mark-Jusbasche, John Mendelsohn, Jerome Meyer, Frank Savage, John Urquhart, John

Wakeham, Charls Walker, Bruce Willison and Herbert Winokur and their attorneys, insurers, and

each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of

such persons, in each instance only in their capacity as such, and any person or entity in which any

of the above has or had a controlling interest or which is or was related to or affiliated with any of

the above, but excluding the Non-Settling Defendants in the Actions .

-9-

22. "Person" means an individual, corporation, limited liability corporation, professional

corporation, limited liability partnership, partnership, limited partnership, association, joint stock

company, estate, legal representative, trust, unincorporated association, government or any political

subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors,

successors, representatives, or assignees of any of the foregoing .

23. "Plaintiffs' Settlement Counsel" means Lerach Coughlin Stoia Geller Rudman &

Robbins LLP (and any successors thereof), William S . Lerach, Keith F . Park, Helen J . Hodges, 401

B Street, Suite 1600, San Diego, California 92101 .

24. "Plan of Allocation" means any plan or formula of allocation of the Gross Settlement

Fund, to be approved by the Court upon further notice to the Settlement Class, whereby the Net

Settlement Fund shall in the future be distributed to Authorized Claimants . Any Plan of Allocation

is not part of the Stipulation and the Outside Directors and Harrison shall have no responsibility or

liability with respect thereto .

25. "Proof of Claim and Release" means the form to be sent to Settlement Class


against the Settlement Fund for damages allegedly incurred by reason of their investment(s) in the

Publicly Traded Securities .

26. "Released Claims" means: any and all claims, demands, rights, liabilities and cause s

of action (including "Unknown Claims" as defined in 133, below) of any nature whatsoever

(excluding claims under ERISA), asserted under the Securities Act of 1933, that Representative

Plaintiffs and/or any Settlement Class Member have, had, or may have against the Outside Directors

or Harrison based on, arising out of, or related to, directly or indirectly, both purchases or other

acquisitions of any Publicly Traded Securities, including stock, notes and foreign debt securities ,

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during the Settlement Class Period and all acts, facts, statements , or omissions that were or could

have been alleged in the Actions .

27 . "Representative Plaintiffs" means the Lead Plaintiff in the Newby Action and the

named plaintiffs in the Actions .

28. "Settlement Amount" means: (1) the Insurance Proceeds and (2) the Stock Sales Gai n

Amount .

29. "Settlement Class" means all Persons (and their beneficiaries) who purchased o r

acquired any publicly traded equity or debt secu rities of Enron between September 9, 1997 and

November 27, 2001, inclusive, and including purchasers of all securities issued by Enron-related


credit, financial condition, or ability to pay of Enron Corporation (collectively, the "Publicly Traded

Securities").' Excluded from the Settlement Class are Defendants, the officers and directors of



The Publicly Traded Securities include without limitation Enron's publicly traded debt and

equity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,

7.875% Notes, 6.95% Notes, 7% Exchangeable Notes, 6.625% Notes, 7.375% Notes, 8.375%

Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated Preferred

Securities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources,

L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey

$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8 .75% Series 2000-A Linked

Enron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and €315,000,000 6 .375% Senior Secured Notes

due 03, Enron Credit Linked Notes II $500,000,000 7.375% due 06, Enron Euro Credit Linked

Notes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,000

7.25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6 .31 %

Senior Secured Notes and £515,000,000 6 .19% Senior Secured Notes (collectively, the "Foreign

Debt Securities") .

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from the Settlement Class, to the extent that they are permitted to do so under Rule 23 of the Federal

Rules of Civil Procedure, pursuant to this notice .

30. "Settlement Class Member" or "Member ofthe Settlement Class" mean a Person who

falls within the definition of the Settlement Class .

31 . "Settlement Class Period" means the period commencing on September 9, 1997


32. "Settling Parties" means, collectively, the Representative Plaintiffs (on behalf of

themselves and the Settlement Class Members) and each of the Outside Directors and Harrison .

33. "Stock Sales Gain Amount" means ten percent (10%) of each of the Outsid e

Director's and Harrison's net gain on sales of Enron stock as recited in the Newby Action ("Sales o f

Enron Stock") . The Stock Sales Gain Amount is limited to stock or stock options granted to the

Outside Directors and Harrison during the Class Period as compensation for their services as

directors or officers of Enron . For purposes of the calculation and payment of the Stock Sales Gain

Amount, "Sales of Enron Stock" shall include sales of stock, exchange fund transactions and

cashless exercises of stock options, but shall not include collar transactions from which the Outside

Directors or Harrison received no proceeds during the Class Period . Until deposited in the Stock

Sales Escrow Account pursuant to the terms of the Stipulation, the Stock Sales Gain Amount shall

bear interest at the rate of 5% per annum (i) from November 8, 2004, in the case of each of the

Outside Directors, and (ii) from December 15, 2004, in the case of Harrison . All provisions in the



34. "Unknown Claims" means any Released Claim that any Plaintiff or Settlement Class

Member does not know or suspect to exist in his, her or its favor at the time of the release of the

Released Defendants that if known by him, her or it, might have affected his, her or its settlemen t

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with and release of the Released Defendants , or might have affected his, her or its decision not to

object to this settlement or not to exclude himself, herself or itself from the Settlement Class. With

respect to any and all Rele ased Claims, the Settling Parties stipulate and agree that, upon the

Effective Date, the Plaintiffs shall expressly waive, and each of the Settlement Class Members shall

be deemed to have waived and by operation of the Judgment shall have waived, the provisions,

rights and benefits of California Civil Code § 1542, which provides :

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE

CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT

THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM

MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE

DEBTOR.

The Plaintiffs shall expressly waive, and each of the Settlement Class Members shall be deemed to

have waived and by operation of the Judgment shall have waived, any and all provisions, rights and

benefits conferred by any law of any state or territory of the United States, or principle of common

law, that is similar, comparable or equivalent to California Civil Code § 1542 . The Plaintiffs and


any of them now knows or believes to be true with respect to the subject matter of the Released

Claims, but each Plaintiff shall expressly have, and each Settlement Class Member shall be deemed

to have and by operation of the Judgment shall have, fully, finally, and forever settled and released


contingent, whether or not concealed or hidden, that now exist, or heretofore have existed upon any

theory of law or equity now existing or coming into existence in the future, including, but not limited

to, conduct that is negligent, reckless, intentional, with or without malice, or a breach of any duty,

law or rule, without regard to the subsequent discovery or existence of such different or additional

-13-

facts . The Plaintiffs acknowledge, and the Settlement Class Members shall be deemed to hav e

acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoin g


part.

35 . "WSIB Action" means the action brought on behalf of all purchasers of the Publicly

Traded Securities from September 9, 1997 through October 18, 1998, inclusive (excluding


successors, heirs, and legal representatives), captioned Washington State Investment Board, et al. v.

Kenneth L. Lay, et al., Civil Action No. H-02-3401 (S .D. Tex.) .

IX. THE SETTLEMENT CLAS S

By Order dated , 2005, the Court certified the Settlement Class

pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, for the purpose of the Settlemen t

only, and directed that this Notice be given to Members of the Se tt lement Class . If you fall withi n

the definition of the Settlement Class set forth above at Section VIII then you are a Settlement Clas s

Member.

X. THE RIGHTS OF SETTLEMENT CLASS MEMBERS

If you are a Settlement Class Member, you may receive the benefit of, and you will be boun d

by, the terms of the proposed Settlement described in Section XI of this Notice, upon approval of th e

proposed Settlement by the Court .

If you are a Member of the Settlement Class and if you do not wish to be included in th e

Settlement Class and do not wish to participate in the proposed Settlement described in this Notice ,

you may request to be excluded with respect to all Released Claims .

-14-

To request to be excluded in accordance with the preceding paragraph, you must send a

signed, written request to be excluded, postmarked no later than , 2005, and addressed

as follows :

In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-510 0

You must set forth the name of this Action (In re Enron Corporation Securities Litigation,

Civil Action No . H-01-3624 (Consolidated)), your name, address and telephone number, and state

that you "request exclusion from the Settlement Class in In re Enron Corporation Securities

Litigation, Civil Action No . H-01-3624 (Consolidated) ." You must also set forth the number and

type of Publicly Traded Enron securities that you purchased and sold during the Settlement Class

Period and the prices at which the shares were purchased and sold, along with the name and address

of the record owner of such shares if different from your own. NO PERSON OR ENTITY MAY

EXCLUDE HIMSELF, HERSELF, OR ITSELF FROM THE SETTLEMENT CLASS AFTE R

, 2005 .

If you validly request exclusion from the Settlement Class (a) you will be excluded from the

Settlement Class, (b) you will not share in the proceeds of the Settlement described herein, (c) you

will not be bound by any judgment entered in the Actions insofar as such judgment relates to the

Actions, and (d) you will not be precluded, by reason of your decision to request exclusion from the

Settlement Class, from otherwise prosecuting an individual claim, if timely and otherwise valid,

against the Outside Directors based on the matters complained of in the Actions . If you are a

Settlement Class Member, you may, but are not required to, enter an appearance through counsel of

your own choosing at your own expense, provided that such counsel must file an appearance on your

behalf on or before , 2005, and must serve copies of such appearance on th e

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attorneys listed in Section XlV below . If you do not enter an appearance through counsel of your

own choosing, you will be represented by Plaintiffs' Settlement Counsel .

XI. TERMS OF THE PROPOSED SETTLEMENT

A settlement has been reached in the Actions between the Representative Plaintiffs and the

Outside Directors, the terms and conditions of which are set forth in the Stipulation and the Exhibits

thereto . The following description of the proposed Settlement is only a summary, and reference is

made to the text of the Stipulation, on file with the Court, for a full statement of its provisions .

A. The Settlement Fun d

The entire settlement fund (the "Gross Settlement Fund") consists of the aggregate principa l

amount of Two Hundred Thirteen Million Dollars ($213,000,000) in cash, plus interest thereon, that

has been placed into an interest-bearing account pursuant to the terms of the Stipulation. The

Stipulation provides for the establishment of an Expense Fund in the amount of Sixteen Million

Dollars ($16,000,000), which shall be paid from, and not in addition to, the Gross Settlement Fund .

At the Settlement Hearing, the Court will be asked to approve the establishment of the Expense

Fund. The Expense Fund will be used, subject to the Court's approval(s), to reimburse Plaintiffs'

Settlement Counsel for the expenses that they have incurred and expect to incur in the prosecution of

the Actions . A portion of the Gross Settlement Fund will also be used to pay for this Notice as well

as taxes and tax return preparation expenses regarding the interest earned on the Gross Settlement

Fund .

The Court will be asked to allocate the Insurance Proceeds (after deduction of the Set Aside

Amount) 82 .5% to the Settlement Class and 17 .5% to the settlement of the Committee Action and

the Derivative Actions.

After further notice to the Settlement Class and an opportunity to be heard, Plaintiffs'

Settlement Counsel will seek approval by the Court of a Plan of Allocation that will govern th e

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calculation of Settlement Class Members' claims. In the future, Settlement Class Members will be

sent a Proof of Claim and Release form to establish their claims against the Gross Settlement Fund.

Plaintiffs' Settlement Counsel anticipate that distributions to the Settlement Class will occur

in connection with additional recoveries against the remaining Defendants in the Actions .

B. Releases

If the proposed Settlement is approved by the Court, the Court will enter an order (the "Order

of Final Judgment and Dismissal") that will dismiss the Actions with prejudice as to the Outside

Directors and Harrison . In addition, upon the Effective Date, the Representative Plaintiffs and eac h

of the Settlement Class Members, on behalf of themselves, their successors and assigns, and any

other Person claiming (now or in the future) through or on behalf of them, and regardless ofwhether

any such Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means,

including, without limitation, by submitting a Proof of Claim and Release, any distribution from that

portion of the Gross Settlement Fund allocated to the Settlement Class, shall be deemed to have, an d

by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and

discharged all Released Claims against the Outside Directors and Harrison and shall have covenanted

not to sue the Outside Directors or Harrison with respect to all such Released Claims, and shall be

permanently barred and enjoined from instituting, commencing, or prosecuting any such Released

Claim against the Outside Directors or Harrison. In addition, subject to certain limitations set forth

in the Stipulation, the Outside Directors and Harrison will release the Representative Plaintiffs, the

Settlement Class Members and Plaintiffs' Settlement Counsel from any claims relating to the

prosecution of the Actions . The Court shall retain jurisdiction over these Actions, including, without

limitation, all matters with respect to implementation and enforcement of the terms of the

Stipulation .

-17-

XII. NOTICE TO BANKS, BROKERS AND OTHER NOMINEES

Banks, brokerage firms, institutions , and other persons who are nominees that purchased

Enron Publicly Traded Secu rities for the beneficial interest of other persons as of any date from

September 9, 1997 through and including November 27, 2001 are requested to, within ten (10)

calendar days of receipt of this Notice , ( 1) provide the No tice and Claims Administrator with the

names and addresses of such beneficial purchasers (IF YOU HAVE NOT ALREADY DONE SO IN

CONNECTION WITH THE NOTICE TO SETTLEMENT CLASS MEMBERS SENT IN THE

FALL OF 2003 REGARDING THE PARTIAL SETTLEMENT WITH ANDERSEN

WORLDWIDE SOCIETE COOPERATIVE ("AWSC")), or (2) forward a copy of this Notice to

each such beneficial purchaser and provide Plaintiffs ' Sett lement Counsel with wri tten confirmation

that the Notice has been so forwarded . Upon submission of appropriate documentation , Plaintiffs'

Settlement Counsel will reimburse your reasonable costs and expenses of complying with this

provision (to the extent you have not already been reimbursed for providing a list of beneficial

purchasers in connection with the previous partial se ttlement with AWSC) . Additional copies ofthis

Notice may be obtained from the Notice and Claims Administrator by writing to :

In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-5100

Correspondence to Plaintiffs ' Settlement Counsel should be addressed as follows :

WILLIAM S. LERACHKEITH F. PARKHELEN J . HODGES


401 B Street , Suite 1600San Diego, CA 92101-4297

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XIII. APPLICATION FOR ATTORNEYS' FEES AND EXPENSES

Plaintiffs' Settlement Counsel do not intend to apply for an award of attorneys' fees at thi s

time. As noted above, however, Plaintiffs' Settlement Counsel will ask the Court at the Settlement

Hearing to approve the establishment of the Expense Fund in the amount of $16,000,000 .

Reimbursement of expenses from the Expense Fund will only occur upon further Court order . Any

application for attorneys' fees and reimbursement of expenses not otherwise recovered from the

Expense Fund will only occur after notice of that application has been given to the Settlement Clas s

and an opportunity to be heard. Any such sums as awarded by the Court will be paid from the Gros s

Settlement Fund .

XIV. THE SETTLEMENT HEARING

A hearing (the "Settlement Hearing") will be held on , 2005 at

__.m., before the Honorable Melinda Harmon, United States District Judge, at the Unite d

States District Court for the Southern District of Texas, Bob Casey United States Courthouse, 51 5

Rusk Avenue, Houston, Texas 77002, for the purpose of determining (a) whether the proposed

Settlement as set forth in the Stipulation is fair, reasonable and adequate and should be approved by

the Court ; (b) whether an Order of Final Judgment and Dismissal, substantially in the form of

Exhibit B to the Stipulation, should be entered herein ; and (c) whether the establishment of th e

Expense Fund should be approved . The Court may adjourn the Settlement Hearing from time t o

time and without further notice to the Settlement Class .

Any Settlement Class Member who has not requested exclusion may appear at the Settlement

Hearing and be heard on any of the foregoing matters ; provided, however, that no such person shal l

be heard unless his, her or its objection is made in writing and is filed, together with proof of

membership in the Settlement Class and copies of all other papers and briefs to be submitted by him,

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her or it to the Court at the Settlement Hearing, with the Court no later than

2005, and showing due proof of service on Plaintiffs' Settlement Counsel :

WILLIAM S . LERACHKEITH F . PARKHELEN J. HODGESLERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

401 B Street, Suite 1600San Diego , CA 92101-429 7

and upon the following counsel for the Outside Directors :

GIBBS & BRUNS , L .L.P .ROBIN C. GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston, TX 77002

Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr., Ronnie C . Chan, John H . Duncan, Joe H. Foy, Wendy L. Gramm,Robert K. Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charls E . Walker, John Wakeham, and HerbertWinokur, Jr.

GRAVES DOUGHERTY HEARON & MOODY PCJOHN J. MCKETTA IIIHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin, TX 78701


TONKON TORP LLPWILLIAM F . MARTSON, JR.1600 Pioneer Tower888 SW Fifth AvenuePortland OR 9720 4

Attorney-in-charge for Defendant Ken L. Harrison

-20-

MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON655 Fifteenth Street, N.W., Suite 900Washington , D.C. 20005-570 1

Counsel for Paulo V . Ferraz Pereira

Unless otherwise ordered by the Court, any Settlement Class Member who does not make his, her o r

its objection in the manner provided shall be deemed to have waived all objections to the foregoing

matters .

XV. EXAMINATION OF PAPERS AND INQUIRIES

This Notice contains only a summary of the terms of the proposed Settlement . For a more

detailed statement of the matters involved in the Actions, reference is made to the pleadings, to the

Stipulation and to other papers filed in this action, which may be inspected at the Office of the Clerk

of the United States District Court, Bob Casey United States Courthouse, 515 Rusk Avenue,

Houston, Texas 77002, during business hours of any business day.

Inquiries regarding the Actions should be addressed to Plaintiffs' Settlement Counsel at th e

address set forth above .

DO NOT CONTACT THE COURT REGARDING THIS NOTICE.

DATED: , 2005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS

S :\Settlement\Enron .Set\Outside Directors Se ttlement\FI-00017104 .doc

-21-

EXHIBIT F-2


HOUSTON DIVISION




Plaintiffs ,

vs .


Defendants .


Plaintiffs ,

vs.


Defendants .


Civil Action No. H-O1-3624(Consolidated)

CLASS ACTION

SUMMARY NOTICE FOR PUBLICATION

EXHIBIT F-2

WASHINGTON STATE INVESTMENTBOARD, et al ., On Behalf of Themselves andAll Others Similarly Situated,

Plaintiffs ,vs .


Defendants .


Plaintiffs,

vs .

KENNETH L. LAY, et at .,


CLASS ACTION

Civil Action No . 02-3010

CLASS ACTION

Defendants .

TO : (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED IN THE NOTICE OF PENDENCY AND PARTIALSETTLEMENT OF CLASS ACTION DESCRIBED BELOW) DURING THE PERIODFROM SEPTEMBER 9, 1997 THROUGH AND INCLUDING NOVEMBER 27, 200 1

YOU ARE HEREBY NOTIFIED that the Representative Plaintiffs in the above litigatio n

(the "Actions") have entered into a Stipulation of Settlement (the "Stipulation") with the Outside

Directors of Enron Corp . (the "Outside Directors"), Ken Harrison ("Harrison") and certain other

related entities or persons as further defined in the Stipulation to resolve the issues raised in the

Actions as to the Outside Directors and Harrison.

PLEASE BE FURTHER ADVISED that pursuant to an Order of the United States Distric t

Court, dated , 2005, a hearing will be held on , 2005 at _ .m.,

before the Honorable Melinda Harmon, United States District Judge, at the United States District

Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk Avenue,

Houston, Texas 77002, for the purpose of determining whether, among other things : (1) the proposed

settlement of the Actions as to the Outside Directors and Harrison, allocation of $187 million : 82.5%

to the Settlement Class and 17 .5% to the Official Unsecured Creditors Committee of Enron and the

payment individually by the Outside Directors and Harrison of $13 million and certain other

consideration should be approved by the Court as fair, reasonable and adequate; (2) the Actions should

be dismissed with prejudice as to the Outside Directors and Harrison pursuant to the terms of the

Stipulation; and (3) a portion of the Gross Settlement Fund should be allocated for the payment of

expenses, excluding attorneys' fees, associated with the prosecution of the Actions . If you meet the

definition of the Settlement Class as set forth above and are not a defendant, an officer or director of

Enron, or a member of their immediate families or their successors, heirs, and legal representatives ;

your rights may be affected by the settlement of the Actions . If you have not received a Notice of

-1-

Pendency and Partial Settlement of Class Action (the "Mailed Notice") you may obtain a copy by

contacting : In re Enron Corporation Securities Litigation , c/o Gilardi & Co . LLC , P.O . Box 5100 ,

Larkspur , CA 94977-5100 .

You will be bound by any judgment rendered in the Actions with respect to the Outside

Directors and Harrison with respect to claims asserted in the actions identified above, and with

respect to other claims that you had, have, or may have against the Outside Directors and Harriso n

(and certain persons and entities related to them) based on matters related to Enron Corporation ,

unless you request to be excluded from the Settlement Class, in writing, in accordance with th e

instructions set forth in the Mailed Notice, postmarkedby , 2005. Any objection to

the Settlement must be filed with the Court by , 2005 , and must show due proof of

service on each of the counsel listed below :


KEITH F. PARKHELEN J . HODGES401 B Street, Suite 1600San Diego , CA 92101-4297

GIBBS & BRUNS , L .L.P .ROBIN C . GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston , TX 77002

Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr ., Ronnie C. Chan, John H. Duncan, Joe H . Foy, Wendy L . Gramm,Robert K. Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charts E . Walker, John Wakeham, and HerbertWinokur, Jr.

-2-

GRAVES DOUGHERTY HEARON & MOODY PCJOHN J. MCKETTA IIIHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin, TX 7870 1


TONKON TORP LLPWILLIAM F . MARTSON, JR .1600 Pioneer Towe r888 SW Fifth AvenuePort land OR 97204

Attorney-in-charge for Defendant Ken L . Harrison

MILLER & CHEVALIER, CHARTEREDMARK J. ROCHON655 Fifteenth Street, N .W., Suite 900Washington, D .C. 20005-570 1

Counsel for Paulo V. Ferraz Pereira

PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE .

DATED: , 2005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXA S

S :\Settlement\Enron .Set\Outside Directors Settlement\F2-00017106 .doc

-3-

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing STIPULATION OF SETTLEMENT documenthas been served by sending a copy via electronic mail to serve@ESL3624 .com on this 12th day ofJanuary, 2005 .

I further certify that a copy of the foregoing document has been served via overnight mail onthe following parties, who do not accept service by electronic mail on this 12th day of January, 2005 .

Carolyn S . SchwartzUnited States Trustee, Region 233 Whitehall Street, 21st FloorNew York, NY 10004

im"I'L J. ),A vDEBORAH S. GRANGER

Documents

In re Enron Corporation Securities Litigation 01-CV …securities.stanford.edu/filings-documents/1020/ENE01/...Arthur Andersen LLP et al., C.A. No. H-02-1922; Richard P. Bergsieker