Subject: Valentis
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Thu, 19 Apr 2001 10:43:00 -0700 (PDT)

Here are the credit worksheets for Valentis (25% of the trade and Independent 
amount should be allocated here) and CD Holdings (75% allocated here).  This 
will work for the ISDA, and I am hearing from Caroline that they are ok with 
posting this up front amount in cash.  So, for purposes of the Deemed ISDA, 
we may as well include all of the credit provisions, but make the $2MM a 
"Special Independent Amount" applicable to the counterparty, which may be 
increased by Enron up to $5MM. This Special Independent Amount should be 
added to the Independent Amount as that term is used in the ISDA in order to 
give us the ability to demand more collateral at will with respect to the 
long term hedge.  Given the fact that the c/p can post cash instead of LC's I 
see no reason for us to always have the Special Independent Amount in cash.  
That is, if we are $2MM out of the money on the position, I do not have a 
problem returning their cash, so long as it is in increments of the rounding 
amount. 

So I think we should just go ahead and put credit into these Deemed ISDAs, 
and require that the failure of the parties to execute an ISDA within 60 days 
will constitute a termination event.

Caroline, again, the c/p will have to verbally agree to Loss instead of 
market quotation, to the special margining provisions with respect to this 
particular long term trade, etc.  Let's discuss how this will work, since it 
is different from what I proposed on the phone.

Sara, after you have had a chance to look at these, give me a call so we can 
discuss.

Thanks.
Paul