Privileged and Confidential

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.