Message-ID: <16997345.1075853227594.JavaMail.evans@thyme>
Date: Thu, 3 Aug 2000 09:32:00 -0700 (PDT)
From: randal.maffett@enron.com
To: richard.sanders@enron.com
Subject: Barbara Branson/Dan Williams Inquiry re: Ecogas payments
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Richard - in response to your memo dated 7/18/00:

First of all I'm confused by her attorney's letter dated 6/27/00 regarding 
the reference of a per share prices of $8.68 and/or $4.34.  I don't have a 
clue where this number came from.  Nowhere in the Securities Purchase 
Agreement (SPA) is there any reference to a "per share" price.  Under Sec. 
2.03 all prices referenced are in millions of dollars aggregate format.
Pursuant to Sec. 2 of the Securities Purchase Agreement (SPA) dated 7/14/99 
ECTMI purchased from the selling shareholders +/- 85% of the stock of Ecogas 
for an Initial Payment of $23.75 million.  Of this amount $3 million was 
withheld [pursuant to Sec. 2.03(g)] pending Ecogas' successful termination of 
Montauk's "right of first offer" on or before 12/31/99.  This milestone was 
NOT achieved until March 28, 2000 when a restructuring of various 
Ecogas/Montauk/GSF (the former jv partnership between Ecogas and Montauk) 
issues was completed.  Therefore, of the $24 million Initial Payment, $3 
million was forfeited for Ecogas' inability to meet its obligations pursuant 
to the SPA.
In summary, Article II, Secs. 2.03(b) and (c) of the SPA includes provisions 
for an Intermediate Payment and Final Payment, respectively, subject to 
certain milestones being met.  These milestones can be described basically as 
a two-part test.  The first criteria requires Ecogas to be producing and 
selling in excess of 27,000 MMBtu/d of natural gas (methane) and the second 
criteria being a requirement for Ecogas to be doing son in a profitable 
manner (i.e., an EBITDA test).  Both test criteria are applicable to both the 
Intermediate and Final payments which means the criteria would have to be 
satisfied on 4/14/00 and 1/14/01.  In theory, both payments and the criteria 
requirements are part of very complex calculations involving the translation 
of a number of defined terms within the SPA.  Practically speaking, they can 
be summarized as a) gas production and sales in excess of 27,000 MMBtu/d and 
b) enough positive/excess cash flow above and beyond operating expenses, G&A 
and CapEx to provide a minimum rate of return.  For the record, on 4/14/00 
Ecogas' production and sales rate was approximately 3500-4000 MMBtu/d, 
significantly below the 27,000 MMBtu/d requirement and their cash flow was 
actually negative.  Theoretically, the criteria could still be met insofar as 
the Final Payment is concerned since the "deadline" is not until 1/14/01.

The obvious issue here is their false misconception that they are due 
"installment payments."  Both the Intermediate and Final Payments referenced 
above are predicated upon Ecogas achieving two very specific 
performance-based milestones, neither of which of close to being satisfied as 
of 4/14/00, the Intermediate Payment date.  As I said above, the Final 
Payment is still outstanding but is likewise subject to Ecogas successfully 
achieving the same perfomance-based criteria.

If they persist and want to have the actual data, I would suggest you have 
them contact Jerrel Branson (Barbara's former husband) and have him explain 
the details and/or supply the information.  His number in Jackson Hole, WY is 
(307)734-8664.

RANDY