Message-ID: <5009716.1075844575155.JavaMail.evans@thyme> Date: Mon, 13 Nov 2000 01:25:00 -0800 (PST) From: sara.shackleton@enron.com To: angela.davis@enron.com Subject: Joshua Tree Financing Structure Cc: teresa.bushman@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: teresa.bushman@enron.com X-From: Sara Shackleton X-To: Angela Davis X-cc: Teresa G Bushman X-bcc: X-Folder: \Sara_Shackleton_Dec2000_June2001_1\Notes Folders\Sent X-Origin: SHACKLETON-S X-FileName: sshackle.nsf ----- 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 teresa.g.bushman@enron.com ----- 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, rainj@tklaw.com 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: nora.dobin@enron.com