LJM2 APPROVAL SHEET Tb'~ Approval Sheet snould oe used to aoprO'.e Enrons participation ifl 3flY tt2flsactiotis involving UM Cavman. L.P rLJMU't cx Co-Investment. L.P. ("UMY~. UM I and UM will collectively be referred to as UM. This Approval Sheet is tn addition to ~not in Lieu of) any ocher Enron approvals that ma~ be required. GENERAL Deal name: Campaign :K Date Aoproval Sheet completed. Dec:rnber S. 000 Enron person completing this form: Nicole Alvino Expected closing date: December 000 Business Unit: Enron Corp. Business Unit Originator: Dan Bovie This transaction relates to OUM I and/or 9UM2. This cransaction is ~ a sale by Enron Da purchase by Enron Da co-sale with Enron Da co-purchase with Enron and/cr 0other: monetization structure Person(s) negotiating for Enron: Dan Boyle Person~s) negotiating for UM: Kathy Lynn Legal counsel for Enron: Vinson & Elkins Leeal counsel for UM: Kirklan'i & Ellis DEAL DESCRIPTION Enron monetized is aaset position in Cacalytica and Avici in two identical FASI3 125 deals. UM provked a tt:tai of 5.9MMequit~ and Barclays provided 592.5MM debt. lEnrun received cash and funds fitiw fiorn ihe transaciicn. TRANSACTION SUMMARY ______________ Catalytica Transaction Steps (The steps are identical for the Avici structure) Purchase 100% of the equity in LAB Trust, the special purpose vehicle in the FASB 125 structured monetization of Enro&s interest in Citalytica Energy Services Inc. ("CESrD. Enron owns appzo~imately 17% of CESI and values it at 560 milltoti. The FASB 125 structure is as follows: * The Catalytica stake is trsnsf'trred to JSE AS5CL LLC ("Asset LLC') * Asset LLC issues an economic interest in itself to KGB. LLC ("Transferor LLC') * Asset LLC issues a voting interest (controlling disposition. voting. etc. bf the Catalytica Stake) back to EV2. LLC (a wholly-owned Enron entity) * Transferor LLC issues the economic 'nterest in As.sec LLC to LAB Tiust in exclianie for cash (funded 97% debt. 3% equitY) * LAB Trust enters into a total return swap w'th ENA (guaranteed by Enroni to cover principal and interest en the LAB Trust debt * At macuntv. an auction is held to dispose of the economic interest in Asset LLC. Proceeds from the auction are tLted to repay the trust debt and equity * The auction proceeds are distributed to the debt (with the total return swap .upplemenung any shortfalls it1 interest or arincipal re~aymenc) and then any remainder to the equity (until the equity has received its 15~ dividends) * Enron retains the right to repurchase the eoui(y (at par plus accrued dividenos) and therefore retains upside beyond .i return to the equity AF100239 "FOIA CONFIDENTIAL * GOVERNMENT rREATMENT REQUESTED EXHIBIT BY ANDREW FASTOW" * 7626 CrimNo H-04-0025 LJM APPROVAL SHEET Page 2 H C~n.u' Fu,artJMCa,nu. ZKUMA.pun. in AM 00240 "FOIA CONFIDENTIAL TREATMENT REQUESTED BY ANDREW FASTOW" LJM APPROVAL SHEET Page 3 ____ TaS ____ EHL ENA ENE -Hoidines Ud -* EB[C EB lC-Apacne~ Dci LLC ~etwg, S.~p ECONOMICS The Trust in the FA~SB 125 su-ucrure issued Nntes at L+75bps and Certificates at an annualized rate ot~ 15% which mature on June 11. 2002. ENA provided a ToM Return Swap on the Notes. Interest will be paid and Libor will be reset monthly to allow maximum flexibility to the business units to unwind the inonetizations as the assets are sold to other 3~ parties. A.F100241 -~ ~*fl ~ ~ "FOIA CONFIDENTIAL TREATMENT REQUESTED BY ANDREW FASTOW I LJM APPROVAL SHEET ISSUES CHECKLIST Sale Options a. If this transaction is a sale of an asset by Enron. which of the following options were considered and resected. 8Condor ~JEDI IT ~Third Party ~Direct Sale. Please explain: No ocher transaction ould be clcsed in a timely enouzn manner to meet the targeted corporate obiectives. b Will this transaction be the most beneficial alternative to Enron? 0Yes '~o. it no. please exolain:______________ c. Were any other bidsioffers received in connection with thiS traflsactiO& ~'Ze5 0No. Please explain: Time contszraint oreciuded ENE form actively seeking other bids 2. Pnor Obli2ations a. Does this transaction involve a Qualified investment (as defined in the lED! II partnership agreementt~' DYes 0No. It yes. please explain how mis issue was resolved: _______________________________________________________________ b. Was this transaction required to be offered to any other Enron affiliate or other party pursuant to a contractual or other obligation? DYes ~No. If yes, please explain: Terms of Transaction a. What are the benefits (financial and otherwise) ti Enron in this transaction? ~Cash flow DE:irnings 0Other: Funds Flow b Was this transaction done strictly on an arms-length basis? 0Yes DNo. If no. please explain: c. Was Enrc,n advised by any th:rd party that this transaction was not fair, from a financial perspective. to Enron' DYes 0No. If yes. please explain: ____________ d. Are all LAM etpcnses and out-of-pocket ccsts (including legiti fees) being paid by LAM? DYes 8No. If no. is this market standard cr has the economic impact of paying any exoen~es and o.it-of-pocket cc,sc~ been considered when responding to items lb. and 3.b. above? 0Yes ONo. Compliance a. Will this ir~insaction require disclosute as a Certain Transaction in Enron's proxy statement? EYes DNui. b. Will ihi~ transaction result in any compensation (as defined by the proxy rules) being paid to any Enrun eii'ployee? DYe~i 0No. c. Have all Enron employees' involvement in this transaction on behalf of LJM been waived by Enrons Office of the Chairman in accordance with Enrons Conduct of Business Affairs Policy? EYes DNa. If no. please explain: d. Was this transaction reviewed and approved by Enrons Chief Accounting Officer? 0Yes DNo. e. Was this transaction reviewed and approved by Enron's Chief Risk Officer? 0Yes DNo. f. Has the Audit Committee of the Enron Corp. Board of Directors reviewed all EnronILJM transactions within the pasi :welve months? DYes ~No. (The Audit Committee has not held a meeting since LJM2's formationi Ha.e all recommendations of the Audit Committee relating to Enron/LJM transactions been taken into account in this tran~action? DYes DNa. xEiOQ24 FOIA CONFIDENTIAL TREATMENT REQUESTED BY ANDREW FASTOW' LJM APPROVAL SHEET Page 5 'PROVALS L.~.iSIflCSS Unit Business Unai Lezal Eriron Corp Legal Global Finance Lezal RAC Ac:ounting Executive Ben Glisan Rex Roze?s Jorain Mintz Rick Buy Rick Czusev let? Skillin~ Signature ~~~~1 /4/ - w-rv~ A Daic AFLQO24~ "FOIA CONF~OENTIAL TREATMENT REOUESTE~ BY ANDREW FASTO~"