fyi
---------------------- Forwarded by Sara Shackleton/HOU/ECT on 10/11/99 05:02 
PM ---------------------------


Barton Clark
10/11/99 03:36 PM
To: Sean Black/HOU/ECT@ECT
cc: Sara Shackleton/HOU/ECT@ECT 
Subject: Re: Spark Spread Confirmation  

RE your inquiry about the General Terms and Conditions of Confirmation ( 
Annex A to the Confirmation ) and Credit and Other Special Provisions (Annex 
B to the Confirmation) that were attached to the 9/1/99 "Summary of Proposed 
Agreement Between Enron and Catalytica Combustion Systems, Inc. ("CCSI")" ( 
which I understand was sent to Catalytica) , I went through all the E-Mails I 
had sent or received that attached the Confirmation or the Summary of 
Proposed Agreement as an exhibit, but I can't seem to find one that included 
these Annexes A and B. I've asked a clerk in the department to deliver to 
both you and Sara the copy of Annexes A and B that were attached to the paper 
version of the 9/1 Summary of Proposed Agreement in my files. Perhaps one of 
you will recollect from whom the Annexes were obtained, so we can retrieve 
them in electronic format and append them to the most current draft 
Confirmation.

Regarding your question about credit terms, they are embodied in Annex B. 
Regarding our exposure to Catalytica credit between execution and payment, 
remember that we will not execute the Option Repurchase Agreement until we 
receive CCSI's cash via wire transfer ( this was the deal Brad agreed to when 
he suggested we delete the receipt of CCSI's payment as an express condition 
to effectiveness of the Xonon Implementation Agreement with GE, the 
effectiveness of which agreement is in turn an express condition to 
effectiveness of the Option Repurchase Agreement). In short, my understanding 
is that we would not deliver the Option Repurchase or execute and deliver the 
Xonon Implementation Agreement until we had a good wire transfer from CCSI of 
the full payment amount. Perhaps we should add that stipulation expressly to 
the Option Repurchase Agreement and consider whether it would then be 
appropriate to delete Annex B. Note in this regard, however, that if CCSI 
were to default under other provisions of the derivative, I believe we would 
be seeking payment from CCSI for termination expenses and the like, but I 
don't know if this justifies the credit provision.