Message-ID: <30653468.1075849627227.JavaMail.evans@thyme>
Date: Mon, 18 Dec 2000 03:33:00 -0800 (PST)
From: kim.godfrey@enron.com
To: jennifer.stewart@enron.com
Subject: Re: Compaq Update
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fyi - our position is either pay the $2.5 million termination fee or pay the 
$4.1 million toward Compaq future purchases.  You will see a bcc of my EMail 
to Bob and Rob.  My reason for the blind copy is that I want to ensure that 
this communication is between Bob and our group.  

Kim 
----- Forwarded by Kim Godfrey/Enron Communications on 12/18/00 11:35 AM -----

	Jim Crowder
	12/17/00 07:23 PM
		
		 To: Kim Godfrey/Enron Communications@Enron Communications
		 cc: Bryan Williams/Enron Communications@Enron Communications, Everett 
Plante/Enron Communications@Enron Communications, Marie Thibaut/Enron 
Communications@Enron Communications
		 bcc: 
		 Subject: Re: Compaq Update
		

832k is not going to have a dramatic impact on our business.  Stick with the 
2.5 number and ensure that Global Sourcing holds the line.c



	Kim Godfrey
	12/15/00 09:01 AM
		 
		 To: Everett Plante/Enron Communications@Enron Communications, Jim 
Crowder/Enron Communications@Enron Communications
		 cc: Marie Thibaut/Enron Communications@Enron Communications, Bryan 
Williams/Enron Communications@Enron Communications
		 Subject: Compaq Update


	


Everett and Jim,

I have phone calls into both of you to gain your feedback and support on 
appropriate next steps with Compaq.   Everett, I am asking for your input as 
it is your cost center that purchases the Compaq servers and hence one of the 
relationship owners.  During the meeting yesterday - the following happened :
 a) Keith McAuliffe announced that he is leaving Compaq effective immediately 
(his replacement has yet to be named).  My perception is that Keith took the 
hit for Compaq missing their 4th quarter Server Business Unit sales 
projections.   EBS is not their only account who did not meet projected 
targets.  
 b) Bob Jordan - Director NA Sales reporting to Jerry Earle will expand his 
existing Enron sales relationship to include ownership of the EBS Server 
Agreement 
 c) EBS Server Agreement - Under the agreement Compaq was to buy EBS 
Services.   For the first two quarters - the Compaq purchase amount was fixed 
at $1.72 million and starting with the third month then would be based on an 
8% value of the total EBS Server spend for the prior two quarters.  EBS sent 
Compaq an invoice for $4,134,229 on November 7th.   Compaq has not paid the 
invoice.  Lou Casari's team is handling the delinquency and notifying 
Compaq.  Compaq ( Keith M.'s stewardship) had agreed to pay.  Bob stated that 
EBS has not performed to Compaq's satisfaction under the Server Agreement and 
Compaq does not believe that Compaq should be accountable to buy any EBS 
services (Bob's first negotiation position).   
 d) EBS and Compaq have different viewpoints on what should be included in 
the EBS Server Spend amount.    
  Compaq (Bob Jordan) value  - EBS purchase of $5.1 million for servers and 
hardware in 2000
  EBS (added)    - EBS purchase value would add an additional $1.0 million 
for servers and hardware in 2000
  EBS (added)   - EBS purchase of $4.9 million for servers and hardware in 
1999
  EBS (added)   - EBS purchase of $3.1 million in Compaq professional 
services (costs for Server deployment)

 From these viewpoints - if one was to set a Compaq purchase amount then the 
following might occur
  EBS total is $14.1 million spend for 1999/2000  at 8% would equal a Compaq 
purchase amount of $1.128 million (w/out the 2 fixed quarters)
  Compaq total is $5.1 million spend  at 8% would equal a Compaq purchase 
amount of $408,000
  EBS Viewpoint - Per the signed EBS Server Purchase Agreement - the amount 
is $4,134,229. (I did not concede) 

 e) 2000 income.   Per the signed EBS Server Purchase Agreement - Compaq had 
to pay for the Compaq Purchase amount before or by Dec 31, 2000 but could 
defer identifying the services to be used against the amount until Dec 31, 
2002.  If Compaq had not used the services by Dec 31, 2002 then they lost the 
right to spend against the amount.  To gain 2000 income recognition, EBS 
worked with Keith M and Rob Senders to invoice for $832,000 to cover EBS 
consulting services provided to Compaq.   Again, under Keith M's stewardship 
- they verbally agreed to pay. 

Now with the above information - my offered next steps :
 a) Until everything is done - maintain the "stick" of the EBS invoice ($4.1 
million).  This is being done.
 b) Termination fee - the contract does not state a termination fee.   It 
does state a value of $2.5 million max for liquidated damages.  Prior 
conversations have discussed Compaq paying a $2.5 million termination fee 
(again with Keith M).   This could be recognized as yr 2000 income. 
 c) Consulting Fee - The recognition of the $832,000 would be a 20% return on 
services of $4.1 million.   This is a good return for a commodity 
transaction.  So.... do we accept a lower amount to maintain a healthier 
relationship.   

 So...... please let me know your thougths.   We have countered with the $2.5 
million with the understanding that the lower end would be $832,000.  

Please let me know your thoughts

Kim Godfrey
Director, Enterprise Services
Enron Broadband Services
phone : 713 345 8813
cell :      713 501 8105
fax:        713 853 7354