I've finished marking up the drafts, and thought perhaps a few thoughts would 
give you some insight into the reasons for my revisions . Unfortunately, I 
was engaged in discussions about the course to pursue in light of Arthur 
Anderson's comments until almost 10pm, when I lost my typing help, so not 
much headway was made in inputting the changes last night. My secretary is 
supposed to be in early ( it is now nearly 8:00 and she still isn't in ! ), 
and I will enlist whatever other help I can get to turn these documents 
around.

For those not involved in the discussions last night, Roger advised us that 
Arthur Anderson had changes to the Xonon Technology Implementation Agreement 
designed to make clear ENA had no primary or secondary obligations under the 
XTIA. The principal change suggested by AA - the deletion of the last 
sentence of the BOLD language in Section 2.2 - removed the obligation for ENA 
to pick up any obligations under the agreement owed by West LB in excess of 
the "Cap". Note that this same change applies in the Agreement in Principle 
related to the purchase of turbines. 

XTIA Revision 4G.  AA's change did not appear to address comprehensively the 
principle AA espoused, ie, clarifying ENA had no primary or secondary 
obligations under the agreements. After much discussion and some 
consideration, I decided to prepare alternative markups of the XTIA - one 
that attempts to meet the AA directive while preserving a level of comfort 
for GE. I attempted this by increasing the limit on West LB's liability in 
Article 10 to $20 million from $9.9 million so that GE's recourse against 
West LB is the same as it had against West LB and ENA in the prior drafts, 
and by obligating West LB, in the default provisions, to pony up for an ENA 
default. I also extensively modified the Section 2.2 language ( taken 
verbatim from the LM 6000 deal ) to eliminate the limited recourse provisions 
favoring West LB, and in doing so made it easier to conclude that references 
to ENA in the agreement are references to ENA acting in an agency, and not 
its individual capacity. This notion is still pretty vague in the revision 
because I did not want to create too much discomfort in GE, since ENA 
explicitly acting in an agency capacity would mean there was no recourse 
against it ( since ultimate recourse would lie with the principal, West LB). 
Roger suggested I delete the limit on ENA's liability in Article 10 to remove 
the implication it had any, which I did ( and which means we have no upside 
protection if we are construed to have obligations under the XTIA.

The upshot is that in my opinion the 4g revision goes as far as possible 
toward placating AA while still retaining a possibility of selling it to GE. 
The sheer number of changes required by the substance of AA's comment, 
however, is bound to be disconcerting to GE at this stage of negotiations, 
particularly when GE's expectation was for a  markup incorporating the new 
business terms agreed yesterday afternoon (calling for payment of the 
Development Funds to be completed by September 30,2000, with the possibility 
of a refund of a portion of the Development Fund Payment if the December 31 
Milestone is not timely completed) and some clean ups/clarifications.

Note that in both revision 4g and 4ga, Section4.3 now provides that the Xonon 
credit created is only exercisable by CCSI on and after December 31,2000, so 
that the credit amount can reflect the deduction of any Milestone 4 refund 
amount paid by GE if it does not complete that Milestone on time. I think the 
dollar value of the credit should be adjusted downward if a portion of the 
Development Funds paid on September 30 are in fact refunded in December. We 
need to make sure to make provision in the Acquisition and Development 
Agreement that any Milestone 4 refund received by West LB is paid over to 
ENA, since West LB will have been repaid its advances on September 30,2000.

XTIA Revision 4GA . This alternate revision to the XTIA takes a minimalist 
approach, and incorporates only the new business terms, some minor clean 
up/clarifications, and the AA change to Section 2.2 and the change to Article 
10 ( to remove a cap for ENA's laibility) suggested by Roger. It seems to me 
it does not address meaningfully the AA admonition that ENA may not have 
primary or secondary liability under the XTIA if it wants to stay outside of 
the rigors of FAS 97-10. However, it has the singular advantage of looking a 
lot like what GE and West LB expect to see in the revision.

Option Repurchase Agreement. This revision was complicated by the possible 
refund of the a portion of the Development Funds by GE if it failed to 
complete Milestone 4 by December 31,2000 ( an attempt to retain some 
accountability for GE's performance given that it is being paid for that 
Milestone on September 30 to satisfy CCSI ). Because the option repurchase 
must occur on or before September 30, it isn't clear what will happen 
December 31, so its hard to figure out what to pay if the contract is not 
cancelled by September 30 or what the credits are worth on that date. 

Since CCSI is the direct recipient of the credits under the XTIA, I first 
thought ENA could hang onto  $2.1 million ( the amount formerly allocated to 
Milestone 4 before its payment obligation was collapsed into Milestone 3) by 
deducting the refund from the amount payable  to CCSI on the option 
repurchase date and leaving CCSI to bear the risk of GE's repayment of any 
refund in order to make CCSI whole. If GE did meet the Milestone on time and 
so did not pay the refund amount directly to CCSI, I thought ENA could always 
make CCSI whole by paying the $2.1 million  in December when the refund 
matter was decided. That approach- subtracting the refund amount from the 
September 30 payment to CCSI- was decidedly unsatisfactory since the option 
repurchase formula could result - depending on the Milestones paid on the 
option repurchase date - in a negative payment to CCSI for the option. 

What I settled on in this draft was to go ahead and pay CCSI the amount of 
the premiums it has paid to September 30 plus $200,000 if the turbine 
contract has not been cancelled on September 30. This would include repayment 
to CCSI on September 30 of premiums paid by CCSI under the spark spread on 
September 30. Assuming CCSI made all its premium payments and West LB made 
all of its Development Fund advances, ENA would have received $9.9 million 
from CCSI by September 30, paid out $9.9 million plus interest to West LB by 
September 30, and purchased the spark spread from CCSI for $10.1 million. If 
the turbine contract is not cancelled but GE has to pay the refund, I think 
the $2.1 million ought to go to West LB or its designee (ENA).

If we cancel the turbine contract and do not go forward with Pastoria, the 
dollar amount of the credits vested in CCSI  and exercisable after December 
31,2000, are equal to the Development Funds advanced less the refund amount.  
Since the document now reads that the $2.1 refund amount goes back to West LB 
or its designee, if GE pays the refund and CCSI is holding a  Xonon credit of 
only $7.8 million,it seems to me it will be necessary  to pay the refund over 
to CCSI instead of ENA in order to make up for the fact that it paid $9.9 in 
premium and only received $7.8 in credit in September. This quick 
"liquidation" of $2.1 of the credit seems to be an ancillary benefit to CCSI 
occasioned by GE's refund. We could provide in the agreements that GE makes 
this payment directly to CCSI or we can continue to have the right to receive 
the payment from GE under the XTIA and the obligation to pay it to CCSI under 
the Repurchase Agreement.