EBS opp'ty w/BMC

Chaz & Steve,

I was able to review our recently completed conference call w/BMC with
Jennifer Medcalf.

During the call, Bernie Goicoechea and Ann(e?) Munson expressed that during
their last few months of interaction with Enron Net Works, they have
attempted to understand the exact issues and concerns which Net Works has
with regard to selection/use of BMC's products. Bernie voiced that he hasn't
been able to get more detail on the problems or nature of concerns that Net
Works has, beyond what you and I know. The BMC account team feels that
without specifics, they cannot address the issues accurately or in a timely
fashion.

The Enron Net Works team has expressed concern that various BMC products are
not Windows 2000 certified (at least, not the ones they are focused on, and
not in writing). Net Works also have some other concerns relative to the
(Net Works) team's feelings that the BMC products (in some areas) "...haven't
kept up with the industry", and that they (Net Works) have some residual
issues with the BMC account support in general. Bottom Line, expressed by
Net Works, is that there is a low probability of their purchasing enough BMC
software product this year to enable EBS to clinch its deal with BMC.

You related Jim Crowder's suggestion related to the use of indemnification
and liquidated damages clauses being implemented. Jennifer and I discussed
this situation, and our meetings with your team, in context. We have a
possible alternative for you to consider: perhaps EBS might provide a hedge
for Net Works in the form of "advance purchase" of BMC product.

For example, EBS is poised to buy about $1 million worth of BMC software, but
needs to show BMC a firm purchase commitment for about $3 million in total
Enron purchases from BMC. A way in which you could reach the $3 million mark
with BMC; while also allowing the relationships between Net Works and BMC
time to "click" might be this: EBS buys all $3 million worth of BMC
software, but $1 million is used to actually take product now, and the other
$2 million is used as a "future purchases" fund, in which EBS buys, but does
not take immediate delivery of, the (remaining $2 million worth of) current
software...

THEN, future Enron Net Works (and any other ENE business unit) purchases of
BMC software would be executed such that EBS is paid, and the software is
delivered from/by BMC. That way, EBS gets its $2 million back, the other
business units aren't spending any of today's dollars for product which they
seem to have some concerns about (but they can get current/certified product
when they need it in the future). In addition, you secure the business with
BMC right now. I'm sure you could also figure out how to account for the
time value of money in this, so that there is further leverage advantage to
you.

If all else fails, you may wish to consider something like this...In the
meantime, we will continue along the current path and keep you posted on
progress.

Thanks,

Jeff

Jeff Youngflesh
Director, Business Development
Global Strategic Sourcing
Enron Corp.
333 Clay Street, 11th Floor
Houston, TX 77002
t: 713-345-5968
f: 713-646-2450
c: 713-410-6716