Subject: Joshua Tree Financing Structure
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Mon, 13 Nov 2000 01:25:00 -0800 (PST)

----- Forwarded by Sara Shackleton/HOU/ECT on 11/13/2000 09:24 AM -----

	Teresa G Bushman
	11/10/2000 05:19 PM
		 
		 To: Sara Shackleton/HOU/ECT@ECT, Dan J Hyvl/HOU/ECT@ECT, Harry M 
Collins/HOU/ECT@ECT
		 cc: 
		 Subject: Joshua Tree Financing Structure

Per my voicemails.  Please provide comments sometime on Monday if possible.  
Thanks very much for your assistance.

Teresa

Teresa G. Bushman
Enron North America Corp.
1400 Smith Street, EB 3835A
Houston, TX  77002
(713) 853-7895
fax (713) 646-3393
[email-masked]

----- Forwarded by Teresa G Bushman/HOU/ECT on 11/10/2000 04:56 PM -----

	Nora Dobin@ENRON
	11/10/2000 11:14 AM
		 
		 To: Tim Proffitt/HOU/ECT@ECT, Chris Herron/Corp/Enron@Enron, Cris 
Sherman/HOU/ECT@ECT, Kevin Liss/Corp/Enron@ENRON, Teresa G 
Bushman/HOU/ECT@ECT, Scott Josey/Corp/Enron@ENRON, John Thompson/LON/ECT@ECT, 
Jesus Melendrez/Corp/Enron@Enron
		 cc: Brenda L Funk/HOU/ECT@ECT, [email-masked]
		 Subject: Joshua Tree Financing Structure

In preparation for the 2:00 p.m. meeting today regarding the Bank of America 
term sheet, please consider the following:

(1) Proposed Trust/LLC Structure.  Trust would own 99% of LLC with ENA as 
managing member owning other 1%.   LLC would purchase/own VPPs.

 Legal prefers the two-tier structure but 

 (i)  would prefer the use of a Delaware business trust with Wilmington Trust 
Company as the trustee instead of a Texas trust to own equity in underlying 
LLC/LP, and 

 (ii) as to the proposed Delaware limited liability company which would own 
the VPPs, asks the tax and commercial teams to consider (a) whether this 
entity might or will derive significant income from Texas based 
properties/operations or otherwise be subject to material Texas franchise 
tax, and (b) if so, whether we should use a Texas limited partnership instead 
of the LLC.

(2) Proposed Certificate and Trust Terms and Conditions.  

Clarify that certificate holders commit to fund their pro rata portion of 
aggregate A and B loans/investments (similar to contribution obligations of 
equity owners of  LLC, i.e., LLC terms expressly provide that Trust and ENA 
must make pro rata (to their respective ownership interests) contributions to 
LLC for purchase price of VPPs].
Identity of A and B holders, e.g., banks get A and [who?] get B?

(3) LLC Terms.

Is proposed 99% and 1% ownership of LLC by Trust and ENA (as managing 
member), respectively, ok?  Same ownership percentages if we use LP?

VPP commercial and legal teams need to determine acceptability of proposed 
terms of:

(i) Master Balancing Agreement between LLC and ENA,  Note re item 1 of 
Mandatory Cost Advances:  only require ENA to make specified expenditures 
where it has control of, or not prohibited by, specific situation or 
governing contract.
(ii) Master Natural Gas Purchase and Sale Agreement between LLC and [need to 
determine correct Enron  counterparty since Enron Gas Marketing, Inc. does 
not exist] (provide for Texas governing law?),
(iii) Master Crude Oil Purchase and Sale Agreement between LLC and Enron 
Reserve Acquisition Corp. (correct counterparty?  provide for Texas governing 
law?), and
(iv) Eligibility/engineering criteria for new VPPs.  Query regarding item 
10:  why can't LLC buy a VPP from a seller in  bankruptcy on a free-and-clear 
basis?

Clarify whether specified New Company Asset Procedures are alternatives (i.e.
, either proposed new VPPs (1) meet specified eligibility criteria as 
certified by ENA or independent third party, or (2) new VPP are approved by 
Engineering Banks (with no objection by majority of Trust certificate 
holders, rather thaneither proposed new VPPs (i) meet specified eligibility 
criteria as certified by ENA and independent third party, or (ii) new VPP are 
approved by Engineering Banks (with no objection by majority of Trust 
certificate holders). 

Enron Corp. Performance Guaranty.  Presumably "performance" guaranty is one 
of payment or can be reduced to a pre-agreed payment amount.  Try for Texas 
governing law.  Start with Enron Corp. standard form of guarantee with 
revolver reps and covenants.

(4) Swaps (interest rate and energy price)

Should these be assets of Trust or LLC/LP?  Any related tax issues?
Who is swap counterparty (ENA?)
Is non-ISDA format acceptable?  If so, is Texas law (as opposed to NY law 
typically covering an ISDA) ok?

(5) Production Pricing Flexibility

 Consider consistency between pricing parameters contained in VPP purchase 
documents on the one hand (e.g., Crescendo), and financing documents on the 
other hand (e.g., Master Purchase Agreements under (3) above and swaps under 
(4) above).

Regards, NJD

Nora J. Dobin
Senior Counsel
Enron Global Finance
Enron Corp.
1400 Smith Street
Houston, Texas  77002

713/345-7723 (phone)
713/853-9252 (fax)
E-mail:  [email-masked]