============= Page 1 of 25 ============= MIR r•.>: n olr 2 Credit .~ proval Resort far the Geoenl mid P, g,, Page I Bank Effective of Texas. N.A. Fewam ommn 3055 7/15/94 Traded: NA Borrower Name Lc Address 7a : ID Nod Office No. Cite err No. S IC/NE Industry Code Kenneth L Lay & Linda P. lay SS No. . Houston, Texas 77019 49 0.44-1753 0236/Shtlmn 4324810 Principals/Guaranwn Title Amount of Gty GTR ONW Treasury Maaagancau Exposure-. C RA Code: I KLL & LPL Investments. Ltd. S Unlimited S 22,000,000 3 prod= Nature of Business Credit Exposure Borrower Risk Rating C ompany Revenues Strategy Exacting Rating 415 5 Chairman & CEO of Enron Corp. lne Dec. Proposed Rating 4/5 Main_ X Out. New Credit Requern Protected Avg. Both Facilities Maturity Collateral Loan Bass of Risk Type Amount Outstanding Rue Date Description Value Loan Value Rnpaug I CLN S 9,000,000 S 6.000.000 LIBOR+I75bp; 364 days Listed stock R 58.000.000 70% Mki Value 4 2 CLN- S 8.000.000 S 6.000.000 Prime-SObp 364 days other wa®enu 58,000,000 70% Win Value 4 3 5 S 4 S S 5 S 16,000.000 S 12.000.000 6 S 17.000,000 Exiling Commitment Total (from Page 2. Section I) 7 533.000.000 Total Amount (sum Lima 5 & 6) Total Corporate Exposure Sclao0al Line Acmvity 8 $13.500.000 Leas: Existing Credit Renewed/Replaced by New Request S 19.500.000 9 519.500.000 Tool Proposed Direct Exposure (This name ony,thia sate only) Pre Authorimd Lea ( PAL) Payout Rcq'dl# of days 10 SO Phus: Indirect d Related Exposure (from Page 2, Section 11) Amount Was it met? I I SO Plus: Other NationsBank Exposure (from Page 2, Section IIl) Effective Due Whetr7 12 519.500.000 Sum of liar 9, 10 & 11. Equals TCE Maturity Date 12 mo. avg. ounta Are Notes Cross Defaulted? Is Collateral Specifically Cross Pledged? Crdi Qalirr Asameam. (m°t cbwk am) Yes No Yes _ No X Yea _ No X 1. Eawaag or Propmed PN'ry/Col .i Q X Yes Except Nos. Yes Except Nos. Eaeepmm (See Pave 2) 2. ft" d Lm Apuemm[ C AbarLed? X loon/Commltaaent Fee Agreement(j) (By requested Fadl sty No.) 3. Coma Caeylaa . I- AtaceeGt X 4. Amsl kn.awlRma Mean PrtPrd) X None 5. b t m be Amal Term Im grow.? X 4 limo w bat sob.idmiahJfiloaa X W Pty o tenth Purpose of Credit (By requested Facility No.) 7. Fimmils mebdc molts bw Dice t6.e X boev.er/panma 1) To purchase or carry margin securities. t. h this as IO.T inuxamm? 8 X 2) For business invrrmcou and personal expenses (will not be used in purchase or carry margin sock). 9. Doer bme r have tomign gin sot' X (Carry of Risk _) Terms of Payment (By requested Facility No.) 10. t Crodn related m a (i.mBar* X Both Facilities: Correspond- bank wander or tamed iemvr! Interest only payable the earlier of quarterly or u the maturity of each L IBOR contract II. 4 Credit mianed m a N.deaB.et 0 X Principal due at maturity: D%rco r er reload imatlt7 (Dew Credit Limit 8 Source of Repayment (By Requested Facility No. - Primary Ahermte) (Dam Approwl• _) Both Facilities: 12. b tma Real Estate depmdes 7 X Primary: Sale of marketable seutrities - -~ 13. ti this a Bared Naueui Credi? X Alternate: Personal cash now; exercise of in-mo-money stock options .~ , ( "' N. Is Iota (et the prpmc of acqueiog or ~ ~ /k4 stored by 14CMI imkpble ,uoem l Dpavn by/ Bank Counsel X Loan Agreement Required: 7 15. Doe the Ins acid EDICIA Sup-ay X Ors ~ Yes X No Borrower Counsel Lm m valte l.-al (B Bulled. DM-93) - If Yes. vbwb eee7 (Code) Line Officers (Concurred/Approved) Credit Policy (Coowrred/Approved) Raw Lad (655): land Derv ()5S): lop--d Proo (13 11); that 0- 14 Family & Nam. Equity MS); Name Initial Date Name I nitial Date Coax Cod, Mddhmily & Once N-F- (tD%); Con 14 Family Raidemal (f5%) I. Shelton 7 j (R IS A. Pryde f Approving Office's Comments A Conditions K Wilson M. Rely W. Helms Energy CFG Acknowledgement: )o Tamalis a BOA/FBI/LAY: 29467 ============= Page 2 of 25 ============= Borrower Name : Kan,Ydi L Lay d. Line... Lay 1 :tedit Approval Repon for the General and Pnvaze Bunks Page '- IE-ATIONSHIP SUMMARY (• - Faciliuea Being Renewed/Replaced) Existing Commioneaca Maturity Risk Collateral loan Basis of Amount CFG Rate TT- Ouunwwlp gs Due g Description Value Lou, Value 1 5500.000 PB Prune CLN , 3&3,935 12112194 I unsecured NA NA •2 511.300.000 PB LIBOR+175bp CLN S 8,108.600 12112/94 4 Listed Stock 11.500,000 70% Mkt Value •3 52,000,000 PB UBOR+17Sbp CLN S 0 12112/94 4 Lived Stock 2.000,000 70% Mkt Value 4 5.3,000.000 PB Prime ARM IC/PBCM S 0 16 years 5 Homestead 3,000,000 75% Appraised Value 5 S 517,000.000 Total Section 1. (to page I, line 6) 1. Indirect and Related Exposure Included in TCE (This State Only - Use Second Page if Necessary) Maturity Risk Type of Borrower Name CFG Amount Rate T- Outsardings Due Raunsz GTY 1 S S 2 S S 3 S S 4 S S 5 S S S 0 Total Section 11. (to page 1. line 10) U. Other NwonsRank Exposure (Exposure Outside of this State or CFG) Risk MA-M Borrower Name CFG Amount Rant- Type oultst-ndmirs Date t S S 2 $ S 3 4 S S 0 Total Samoa m. (to page 1, line 11) Material Doarmetmrian, Collateral, and Underwriting Exceptions (••w• - Permanent Waiver Not Pertained; Win Coothme as Excepion Until Obtained) 3aepuea Type Waive Esapdm Type Waive EmeQuw I W111 era pa ouool F/S a Other Docl 16 No vipny ap~a anti/. Doc 10 La azd 11th slue in era be mqu:wd ft--W thin Ud ono kalm w-.mtm if thawed (0149) (627. 814. CZYl. Q5/6o) mq'd by C PG (CZ /14) 11 Aaigtmes dL a will m be 2 Will tat got appaed as required Doe 17 HoeliCavdo a6lWvd: No duo. as Doc ebmmed aedIw eamded 0177. C24h1O) (626. 023/1 075/6b) Ud req'd per C FG poly (02 f11) 12 No oogfeo.dm leom tram Sr. 3 CAR m doe, within 30 days (0213) DOC I7 No msrnxtim relred does pa Doe horbold:r s Jr. lb. .0wond ((74/1 I) 4 Will Q 1a proper bait-mg Doe/ .... CFG policy (C23Aq turbsiadm (CD/4, =6w Ud 19 No oev, it. £ ip- a Doe/ I lm it a.dtaimd or dwo raped 5 Win tat ps row (Q7IS) Doe mq'd 0127, 03117, C21/6W Ud trcilsy ~!u®4 robsdWed leees, 6 Will rot w Gtys s g'd by policy ta Doc1 dew I°a. bdd'ma m~rma. (-ii ublic bamws) (BT+. C 2X6. Ud 1 Secowiry insvazem ill oa be Coo • (617, B11. 025)1. E17. F32. E3 t. E72) C75/6a) daimd (DJr, SJA) (0241) 21 'CE will eacad home IWis 7 Will tat pee im semeb (UCC-10 Doe 2 TW. or dole doa®morioa will Con "e• (A13. CS, CIA. 025/21 (82317) oer be obumd (0242) 3 Tats of ads ®d esrabfis6od 8 Will not have Loon Agm®eet if Dccl 3 No stable mllaenl will w be a Coo limns (as ddbod) id. ever.. ant m. -q *d by policy (325. C23/3. 025/60 Ud ptosession a saarny inset will rat is. Up., ins, ody Period 9 Will rot got A/R Ibmg ail apiop Doe be perfected (C ZAM (61)-13.815. 829. B31. 825/3) (C23/9) 4 Negwiabk collateral will m be Con 4 Cub dew twinge rags violated 10 Will ntx got ievemay oonifiestes Doe endorsed (82414) per CFG a Csmeral Policy Guides and ..M. (823/9) S Fiauwing Stateawea apised a rot Con Supplnoem ((75/4) I I Will rot bevy Batwing Base Doer fled pp c(y (0145) 5 Credit adraras mesrds muioam ad.ara Cenifieue (0'3/9/ 6 Title lssarow will not be Obtaitod Coo ratio allwcd a req. ®rgm rot 12 Will rot get Cor*z Status Doe (024/6) thainsd (B21-A.CZ5/5) Reps (C23/IN 7 Honed Insurance will not be Coll 6 Will tot get aeko wldgeoes of 13 Rag U-l(Stk. er MW Sec.) (023111) Doe aboird (C24Jn mllamxl -wise- (C25/6d) 14 Win rot ha- Puoiregioro Ceeif. Doe ... I Flood lean/flood iarvanee will m Con •••• 7 No COmmitmen I.- oa binding ad/or Apam it (316, 023/12) be Obaimd (024/7) mmmimea 1025/64 15 No current boudary/era-built survey Doe 9 Back will tat be sbowm u 'petty in Con I No real esore presale/peelmse a ptu as req'd by CFO (82113) isnvt' m iar.ase pdiey(a) (CUM reguiremcm per CFG (C23f7) Approving Officer's Comments & Conditions (Initialed) (Continued from Page 1) sat ee.ond-fsSR of he+.l .. c r t ~ u ou -- - oa _~ fj..y~t J BOA/FBI/LAY: 29468 ============= Page 3 of 25 ============= CAR COLLATERAL SECTION BORROWER: Kenneth L Lay & Linda P. Lay Law Pam & Anoroey Prcpanng Colluual Docunbeotatioa DATE: 7/15/94 COLLATERAL DESCRIPTION VALUATION METHOD A. SO BOOK VALUE LOAN VALUE (Denote, New Collateral) (l-fide Borrowing Base Form OR Date of A rAtsaiMnarmal Sntemem APPRAISAL % Amount See Addendum Total Debt Secured Total Collateral Value so $0 By Above Collateral RESPOND (YIN) TO BACH QUESTION (s. w) moos not appliobie m collateral homed above. If W. pine explain below. ( N ) 1. Is all debt (direct and 'mdirat) moat cWuerafimdl , ( - ) 2. Have UCC-I1 aearehas reported a perfected senior Iim position for the bank? ( Y ) 3. Have lima on real property (real eaorc, oil & pa, fissures, a c.) mdicatmg proper priority been confirmed by: ( ) title binder? ( Y ) title poticyw ( ) accuracy's opinion? ( Y ) 4. Has collateral requiring poaeraion for perfection been received? ( Y ) 5. Have legal opinions been received (required for credin $250.000 or more and collateral outside of Team)? Eapianatiom I Real estate collateral above in homearod property and tarmot be crossed m other debt Abo, the margin stock facilities be crossed u-er Regulation U. Names of Add') Support Entity For This Capacity INDIRECT LIABILITY NET WORTH TOTAL (Guarantors. Endorsers, Request (Guarantor. Statement NA-11ONSBANK Ca-Makers, General Parmcn) (YIN) Co-Maker, enc.) (Lii m= e) Amount Date - EXPOSURE .. KLL & LPL Invemnenn, Lid. Y Guarantor Unlimited 7/15/94 522.000,000 711194 516,000.000 APPROVAL AUTHORITIES BOAJFBULAY:29469 ============= Page 4 of 25 ============= CAR Collateral Section Borrower. Kenneth L. Lay and Linda P. Lay Date: 7/15/94 BOOK LOAN COLLATERAL DESCRIPTION VALUATION SOURCE VALUE % VALUE $8.000,000 Purpose Loan 228,936 sh Enron Corp. 7/14/94 close ($33-1/4) $7,612,122 70% $5,328,485 84,658 sh TCW Core Equity Fund 7/14/94 close ($11.08) $938,011 70% $656,607 34,477 sh TCW Latin America Fund 7/14194 close ($12.16) 4Z $419,240 70% $293,468 58,608 sh TCW Asia Pacific Fund 7/14194 close ($9.08) $532,161 70% $372,512 5,000 sh EOTT Energy Partners 7/14/94 close ($18.25) Y ~~ . $91250 70% $63,875 TCW Investment Partners I Purchase Price f 't -j S b $65,000 0% $0 TCW Royalty Partnership IV Purchase Price $4,080 0% $0 The Meridian Fund Purchase Price ~. b $500,000 0% $0 Ella-Airtex Partners Purchase Price $285,000 0°% $0 Green Land Properties Purchase Price $75,000 0% $0 Hilcorp Acquisition Partners Purchase Price $105,694 0% $0 Twin-Oaks - Bordeaux XII Partners Purchase Price $120,000 0% $0 $8.000,000 Non-Purpose Loan 252,485 sh Enron Corp. 7/14194 close ($33-1/4) $8,395,126 70% $5.876,588 83,064 sh Compaq Computer 7/14/94 close ($35-7/8) $2,979,921 70% $2,085,945 3,000 sh Baker Hughes 7/14/94 close ($21-1/2) $64,500 70% $45,150 30,000 sh Enron Oil & Gas 7/14194 close ($21-3/4) $652,500 70% $456,750 5,000 sh Eli Lilly & Company 7/14194 close ($50-5/8) $253,125 70% $177,188 15,000 sh Aire Cure Environmental 7/14194 close ($3-3/8) $50,625 70% $35,438 5,000 sh Copytele, Inc. 7/14194 close ($9.5116) $46,563 70% $32,594 10,000 sh Fiberchem Inc. 7/14/94 close ($1) $10,000 70% $7,000 Mortgage Loan 1st lien deed of trust on property & Appraisal to be completed r8_~8no- $4,000,00d 75% -$3,000,000 improvements to be constructed on 31st (Purchase price) floor of The Huntingdon located at - - , Houston, Texas Totals $27,199,917 $18,431,600 Debt Secured by Above Collateral $12,250,000 BOA/FBI/LAY: 29470 ============= Page 5 of 25 ============= /Y1 n . L Kenneth L. Lay and Linda P. Lay .d . '' ..~. CAR Comments July 15, 1994 Executive Summary This CAR requests a renewal and increase of two credit facilities totalling $16MM for Ken and Linda Lay. These one-year revolving credit facilities are structured as follows: Facility A (Purpose Credit): $8MM (50% advance) Facility B (Non-Purpose Credit): $8MM (70% advance) Borrowings will be made by Kenneth L. and Linda P. Lay, but KLL & LPL Investments, Ltd. (a family limited partnership established for estate planning reasons) will pledge assets to secure the facilities and guarantee the indebtedness. The purpose of Facility A is to fund purchases of margin stock, primarily that of Enron Corp. As this will be a purpose credit under Regulation U, advances will be limited to 50% of the collateral value. Facility B, also secured by listed stock (Compaq, Eli Lilly, Baker Hughes) and other investments, will have a 70% advance ratio and will be used for business investments (excluding margin stock) and personal expenses. Both credit facilities will have a margin call (via a collateral maintenance agreement) at a 75% LTV, requiring Lay to pledge additional acceptable collateral or reduce j. T the loan balance to return to a 70% LTV. Advances under Facility A to fund other ' investments will be allowed provided that the overall LTV, based on Enron stock held as collateral, does not exceed 65% (for purposes of a margin call, value will only be given to .w.--L, acceptable liquid collateral). Pricing will be LIBOR+ 175bp (based on 30, 60, 90 or 180 day LIBOR) or Prime-50bp at Lay's option. Repayment terms for both facilities: interest only due l d i t h f i i h i li l h i f h LIBOR ue a pr nc pa e ear quarter y or t rat on o contract, w t t er. o e exp eac e, maturity. The proposed risk rating is '4' based on the marketability and collateral coverage of the Enron Corp. stock or other listed stock' held as collateral. Including the credit exposure proposed in a CAR submitted concurrently, credit exposure strategy for the Lay relationship is ~ ~„ maintain at $19.5MM. Ken Lay is Chairman and CEO of Enron Corp., a large Energy Group customer. After Joe Musolino introduced Lay to the Private Bank in 1993, NationsBank has become Lay's primary bank. Of $14MM in total credit facilities, the bank has funded Cpo approximately $9MM to enable Lay to exercise Enron stock options, purchase other stock and ~ ~ for general purposes. All borrowings have been handled as agreed. Relationship ROE including this request is 59%. ~~ ) ^--, v w'' t n Transaction Analysis Use of Proceeds. Lay intends to use Facility A to fund purchase margin securities (primarily Enron stock via options) and other investments. Lay currently has a $7.5MM non- ~( G purpose credit facility at Charter Bank ($4MM outstanding) secured by approximately $12MM ~, in Enron and other listed stock. This collateral will be transferred to NationsBank to secure _ .~ Facility B, which will be used to fund non-margin stock investments and personal expenses. _ Also, Lay will likely use a portion of Facility B to reduce unsecured debt owed to Enron. Lay ' ai v intends to keep a $5MM line at Charter secured by approximately $7MM in Enron stock, but c ~^ future financing needs will be funded under the new NationsBank facilities. The following table details Lay's credit availability with the closing of this transaction: Page 1 BO.,/FBI/LAY: 29471 ============= Page 6 of 25 ============= NationsBank Credit Facilities: Commitment Outstand. Purpose Line of Credit (50% LTV, 75 % margin call) $8,000,000 $5,000,000 Non-Purpose Line of Credit (70% LTV, 75% margin call) 8,000,000 $4,000,000 Unsecured Revolver 500,000 400,000 Total NationsBank Exposure $16,500,000 $9,400,000 Non-NationsBank Credit Facilities: Charter Bank - Stock-Secured Line $5,000,000 $3,500,000 Texas Commerce - Unsecured Line 250,000 250,000 Enron Corp. - Unsecured Line 4,000.000 4.000,000 TOTAL CREDIT AVAILABILITY $25,750,000 $17,150,000 Family Limited Partnership. For estate planning purposes, Lay intends to transfer the majority of his assets and liabilities to KLL & LPL Investments, Ltd., a Texas limited partnership. The partnership has the authority to pledge assets for Lay's personal debt and guarantee Lay's personal debt. Lay's counsel, Baker & Botts, will provide an opinion regarding consideration issues. Linda Zimmerman has reviewed the partnership documents and has not noted any major issues. This facility will be governed by a credit agreement which will contain a covenant that the partnership will not dissolve or transfer assets without bank approval. Collateral Analysis: Enron Corp. is one of only a few vertically integrated natural gas companies offering worldwide service. Enron's interests include gas pipelines, exploration and production, natural gas liquids, processing, marketing, and power generation. Enron's strategy of growth through vertical integration has allowed it to experience five years of solid performance over which compounded earnings per share have grown at a rate of 32 % annually. The Board of Directors has approved two 2-for-1 stock splits in the past two years and, for the third year in a row, increased the dividend. Over a five year period Enron has given its shareholders a total return of about 252%, compared to a total return of 90% for the S&P 500 and 27% for its industry peer group. FY93 is typical of Enron's performance over this period. Net income increased more than 26%, exclusive of a non-cash charge to adjust for an increase in the federal income tax rate. Earnings per shale grew 20% after preferred dividends and exclusive of the income tax charge. Leverage continued to decline from a high of nearly 70 % at FYE87 to 47 % at FYE93. Total return to shareholders in 1993 amounted to 28 % versus an average of 17 % for its peers and less than 10% for the S&P 500. Value Line gives the company timeliness and safety ratings of "3" on a scale of 1-highest to 5-lowest. Further, Value Line validates Enron's forecasted growth of 15 % or better for the next three to five years. Enron's debt is rated at Baa2 by Moody's, BBB by S&P. On July 5, 1994, Enron closed at $32.625 per share, with a 52-week high of $37.00 per share and a 52-week low of $27.00 per share. Enron's current market capitalization is in excess of $8 billion. Although Enron's price has fluctuated somewhat during the past year, its beta is 0.85 (somewhat less volatile than the market as a whole). While the overall market has declined nearly 10% in 1994, Enron stock has appreciated 10% . Page 2 BOA/FBI/LAY: 29472 ============= Page 7 of 25 ============= Rule 144/Trading Volume Analysis. Lay beneficially owns less than 1/2% of Enron's outstanding shares. However, due to Lay's position as Chairman and CEO, he must follow the control restrictions of Rule 144. After satisfying the standard public reporting requirements, the number of shares Lay may sell during any three month period may not exceed the greater of the following: 1) 1% of the shares of the class outstanding. There are approximately 250MM shares of Enron Corp. common stock outstanding with a total market value of over $8 billion. (1 % = 2.5MM shares ® $33 per share = 82MM) 2) Average weekly trading volume as reported on all national securities exchanges during the previous four-week period. Per Bloomberg reporting system, the average weekly trading volume for the previous four weeks ending 5/19/94 was approximately 2.3MM shares. (Avg. Weekly Volume = 2.3MM shares @ 33 per share = $76MM) 3) Average weekly trading volume reported in the consolidated reporting system during the previous four-week period. Same as item two above. Liquidation Analysis. The following liquidation analysis will be done based on the assumptions that Lay has pledged 818M shares of Enron stock as collateral for the line and the call price is $22.00 per share. This price is 33% below the current market price. With an average daily trading volume of nearly 500M, Enron is considered a highly liquid stock. The sales factor to be used for highly liquid stocks is 25 %. The following illustrates the liquidation scenario: w} w,.! c _,AL Ae G'>vy.*$ w t 400M ADTV x 25 % sales factor = 100M shares/day at $22/share; -v. -r-JJ $} /$2.2MM = 6 days to liquidate entire loan Repayment Sources. The primary repayment source for this debt is the timely liquidation of marketable securities by Lay. Lay has approximately $13MM in equity in his $23MM unrestricted Enron stock. Lay is subject to Rule 144 restrictions on the sale of Enron stock, but with 250MM Enron shares outstanding and an average daily trading volume of 400M shares, Lay's ownership position is well below Rule 144 sale limits. Lay also has $6MM in other marketable securities which secure $2.5MM in debt. An alternate repayment source for this loan is Lay's cash compensation from his employment with Enron. Lay recently renewed an employment contract with Enron which provides for a fixed annual salary of $990M through February 1999. However, according to Enron's board of directors, approximately 70% of Lay's compensation is "at risk", growing or shrinking based strictly upon the performance of Enron and return to stockholders. During 1993, Lay received cash payments of approximately $2.5MM in excess of his base salary which represented "at risk" compensation. This incentive compensation was based upon Enron's superior performance (28% total return for Enron stockholders in 1993 versus 10% for the S&P 500). Another substantial source of repayment is Lay's Enron stock options which have a current vested value of nearly $20MM. The following table details the value of these options based on a $33 current stock price. Unvested options generally vest over a four year period. Page 3 BOA/FBI/LAY: 29473 ============= Page 8 of 25 ============= Pro-Forma Pro-Forma CURRENT 10% Increase 20% Decline VALUE in Stock Price in Stock Price ENRON CORP. ($33/share) Exercisable Options: 763,600 shares 0 $12.50* $15,653,800 $18,173,680 $10,614,040 31,200 shares 0 513.75 $600,600 S703,560 $394,680 112,500 shares 0 515.50 51,968,750 52,340,000 $1,226,250 240,000 shares 0527.1875 $1,395,000 $2,187,000 $0 48,000 shares 0 $28.25 $228,000 $386,400 $0 TOTAL;EXERCISAB $14;84&,150:: -- $2379064( $12,234;97. ENRON CORP. ($33/share) Unexercisable Options: 31,200 shares 0 513.75 $600,600 $703,560 $394,680 75,000 shares @ $15.50 $1,312,500 $1,560,000 $817,500 360,000 shares @ $27.1875 $2,092,500 $3,280,500 $0 84,000 shares @ $33.50 $0 $235,200 50 1,200,000 shares @ $33.00 $o $3,960,000 $0 TOTAL UNEXERCISABLE $4,00.5,600 $9,7392& $2;212, _..., COMPAQ COMPUTER ($33/share) 4,000 shares @ $20.33 $50,680 $63,880 $24,280 4,000 shares @ $16.25 $67,000 $80,200 $40,600 1,231 shares 0 $8.125 $30,621 $34,683 $22,496 TOTAL FXERCISABE E 548 391 $t7S 763 $87.376 *733,600 shares at $12.50 vest and are erercisable beginning August 23, 1994. Other Key Critical Issues: Leverage. The primary risk of this credit is Lay's leverage, as virtually all of his Enron stock is encumbered. However, this risk is mitigated by Lay's significant cash flow generation ability and liquidity. Also, Lay stated to the RM that he intends to reduce his leverage from the current 50% of assets to 25%-30% of assets over the next 3-4 years. Sources of Lay's liquidity are as follows: 1) Lay's primary liquidity, consisting of large capitalization stocks and mutual funds, is currently worth $29MM. Outstanding debt (stock secured and unsecured debt) reliant on this liquidity is approximately $16.7MM ($12.1MM is secured, $4.6MM -is unsecured); given a required margin on secured debt of 75 %, Lay currently has excess margin of approximately $13MM. 2) The value of Lay's currently exercisable Enron and Compaq stock options is approximately $20MM. Assuming a substantial decline of 20% in the price of Enron's stock, Lay would still have the ability to realize $12MM in option value. Approximately 20% of the unvested Enron options vest each year, representing a source of ongoing liquidity. 3) Lay also has other liquidity totalling over $SMM, including deferred income from Enron, an Eaton ESOP, restricted Eaton stock, and retirement savings. While these assets are clearly less liquid than listed stock, this is another source of liquidity which could be used to retire debt. Page 4 BOA/FBI/LAY: 29474 ============= Page 9 of 25 ============= Concentration of Wealthfincome. Lay's wealth is concentrated in Enron common stock and his recurring cash flow is dependent upon his employment at Enron. This risk is mitigated by the strong performance of Enron under Lay's leadership. As evidence of Enron's confidence in Lay, the board of directors renewed Lay's employment contract with Enron for five years, which included a 1.2MM share stock option grant. Wall Street has likewise rewarded Enron's performance as the company's stock has increased 296% over the past five years, compared to 97% for the S&P 500 and 23% for Enron's industry peers. This strong performance could make the stock vulnerable to a market correction, but the stock is up 10% this year while the market has declined. The company is expected to continue to perform well due to its diversification across most segments of the natural gas business in addition to the strengthening of natural gas prices. Ability to Meet Margin Calls. Of the total credit available to Lay, approximately $9MM is unfunded. However, given Lay's total pledgeable liquidity and the advance ratios on these credit facilities, his current availability is limited to $4.5MM. While Lay's unencumbered liquidity is marginal, the value of all encumbered liquidity is over 176 % of outstanding secured and unsecured debt, providing significant capacity to meet margin calls. Furthermore, Lay has nearly $20MM in option value that will be realizable beginning August 23, 1994. Lay has stated that, in the event of a margin call, he would liquidate Enron savings, ESOP and deferred income plans, exercise options, and sell Enron stock if necessary. As of July 1, 1994, Lay's total secured debt LTV was 41%. The value of the collateral securing this debt would have to decline by 45 % before a margin call would occur. This scenario is unlikely given the strong performance of Enron, and Lay's ongoing effort to diversify his liquidity. Assuming maximum fundings under all credit facilities (limited by advance ratios) and assuming a 20% decline in the value of encumbered liquidity, the value of Lay's encumbered liquidity would have to decline by 27% before Lay would face a margin call. At the point of a margin call, Lay would still have 25% equity in the collateral. Death, Estate Taxes, Etc. This transaction will complete the majority of Lay's estate planning. He currently has $47MM in life insurance (mostly second-to-die policies) which is currently sufficient to pay off all debt and estate taxes after the deaths of both Ken and Linda Lay. Relationship Summary Ken Lay is a high-profile executive who leads one of the largest fully integrated natural gas companies in the world. Lay has been with Enron since 1985 and has been Chairman and CEO for over five years. Lay is also a director of Eli Lilly and Company, Compaq Computer Corporation, Enron Oil & Gas Company, EOTT Energy Corp., and Trust Company of the West. Lay currently has banking relationships with Texas Commerce Bank and Charter Bank. Cash Flow: Lay's cash compensation from Enron totaled $6,766M for 1993, consisting primarily of his salary ($987M), incentive bonus ($1,375M), deferred income ($200M), long term incentive bonus ($900M), less deferred salary ($588M). Lay also exercised $2.2MM in stock options during 1993, received a one-time payment of $1.1MM and exercised stock appreciation rights of $545M. The incentive bonus is paid to Mr. Lay based on the results Page 5 BOAIFB!/LAY: 29475 ============= Page 10 of 25 ============= achieved by Enron during each year. In addition, Enron provides for a long term incentive bonus, based on the performance of the company generally over a four-year period. Other income, totalling $557M, consisted of Enron dividends ($376M), other dividends ($15M), rental income ($101M) directors fee income ($65M). Total cash received in 1993 after federal income taxes was $5.2MM. Recurring uses of cash ($4,298M) consist of estimated taxes ($2,060M), living expenses ($1,720M), home maintenance ($446M) and alimony payments ($72M). Lay's debt service totalled $1,029M consisting of $528M on stock-secured debt, $315M for his homes in Houston, Aspen, and Galveston, S149M for investment properties, and other debt service of $37M. It should be noted that living expenses and children expenses are discretionary items that Mr. Lay could reduce if necessary. As of 7/1/94, Lay's liquid assets totaled $29MM of which unrestricted Enron Corp. stock W"Z accounted for $23MM. Other marketable securities accounted for $6MM and include u( listed stock and mutual funds. Although Lay's liquid assets are concentrated in Enron J stock, his liquidity remains strong due to the marketability of this stock. Leverage: As of 7/1/94, total liabilities were $21.8MM consisting of stock-secured debt ($12.1MM), unsecured debt ($4.6MM), homestead/vacation home debt ($4.4MM) and investment property debt ($708M). Lay has no contingent liabilities. It should be noted that total liquid assets of $29MM covered total debt of $19.7MM 1.5 times. As of 711194, Lay's net worth was $24MM, while his adjusted net worth was $14MM. Page 6 BOA/FBI/LAY: 29476 ============= Page 11 of 25 ============= w 0>n w D N Borrower/Sponsor: Kenneth L. Lay Prepared by: James Shelton Statement Date: February 3, 1994 Date Prepared: 4/26/94 PAit >:L::..Asxat:.1!atta d :.lW ttsu OUR ` $scu sed:pabtlElsacrl tm;~tl:lzaaeta;<;::;:::.>: Cf t1a1~1a :; •• w~Itss~:Y"e€:: ~' ..:. ~lmrisststa 1. Cash 32 100% 32 32 2. Deferred Income 2,412 90% 2,171 2,171 3. Enron Savings/ESOP 1,146 78% 860 860 4. Restricted Enron Stock 1,551 60% 776 779 47M shares @ 833 5. Unrestricted Enron Stock 23,430 76% 17,673 10,153 7,420 710M shares @ $33 6. Enron Oil & Gas Stock 1 692 75% 519 619 7. Marketable Securities 6,320 70% 3,724 2,532 3,724 B. IRA/Keough + 170 76% 128 120 9. Homestead - 3195 Inwood 3,489 76% 2,617 2,560 57 10. Vacation Home - Aspen, CO 2,561 70% 1,793 1,320 473 11. Bayhouse - Galveston. TX 433 70% 303 287 18 12. Furniture/Personal Property 1,225 25% 306 306 13. Automobiles 189 60% 85 85 14. Boats 39 60% 20 20 15. Investment Property 1,520 50% 780 708 62 16. Cash Value Life Insurance 12 100% 12 12 17. Savings Bonds 2 100% 2 2 18. Other Securities 620 60% 310 310 Subtotals: 44,823 31,988 17,680 16,983 PART II: 0 H J Unsecured Debts & Creditors Total Unsecured Availability Outstandi s Enron Corp. 4,000 Subtotals: 0 4,000 K Contingent Liabilities expected to be paid Subtotals: 0 0 Adjusted Not Worth 12,963 g:\xl\newlorrna\wkreeval. xle ============= Page 12 of 25 ============= Recurring Sources of Cash 1 . Salaries, Bonuses 3,537 2,874 1. $987 salary; $2,275 bonuses; $200 def. 2. Dividends & Interest 263 390 2. salary; less $588 in deferrals 3. Stock Options 6,026 2,251 3. 4. Recurring Real Estate Inflows: 102 101 4. Net Rents - NOI R/E Partnership Distributions Other Recurring - NOl 5. Other Partnership Distributions 5. 6. Other (incl. Bus. income, Trust 57 65 6. Director's Fees Income, NOI, Tax Refunds, Gifts, etc.) 7. SUBTOTAL 0 9,985 5,681 0 7. (lines 1 through 6) Recurring Uses of Cash B. Home Maintenance 257 446 8. Inwood, Aspen, Galveston homes 9. Planned Investments, Partnership 9. Contributions & Capital Calls 10. Estimated Living Expenses 1,213 1,720 10. 11. Estimated Taxes 3,189 2,060 11. 12. Alimony 72 72. 12. 13. SUBTOTAL 0 4,731 4,298 0 13. (lines 8 through 12) 14. CASH FL. AVAIL. FOR DEBT SERV. 0 5.254 1,383 0 14. (fine 7 - line 13) 15. Real Estate Debt Service 188 149 15. Investment Property 16. Home Mortgage Payments 350 315 16. Inwood, Aspen, Galveston homes 17. Auto & Other Installments 41 37 17. 18. Sched. Cont. Liab. Pymts. 18. 19. Other Scheduled Debt Service 533 528 19. 20. SUBTOTAL - DEBT SERVICE 0 1,092 1.029 0 20. (lines 15 through 19) 21. SUBTOTAL - RECURRING USES 0 5,823 5,327 0 21. (line 13 + line 20) 22. NET RECURRING CASH FLOW 0 4,162 354 0 22. (Line 7 - line 2t) 23. DEBT SERVICE COVERAGE SDIV/01 4.8 1.3 #DIV/OI 23. (line 14 divided by line 20) Non-Recurring Sources (Uses)' 24. Real Estate Sales 24. 25. New Real Estate Investment (528) 25. 26. Sale of Mkt. Sec./Stk Apprec Rights 545 26. 27. Purchase of Mkt. Sec. (4,572) 27. 28. Other purch. & capital outlays 28. 095 1 29. One-time Employment Agreement Pymt 29. Other 30. SUBTOTAL _ 0 0 , (3,460) 0 30. (lines 24 through 29) 31. NET CASH FLOW BEFORE 31. FINANCING ACTIVITIES 0 4,162 (3,106) 0 (line 22 - line 30) Financing Sources (Uses) 32. Real Estate Financing 198 32. 33. Margin Financing 4,572 33. Includes increase in unsecured debt 34. Homestead Financing 34. 35. Discretionary Debt Payments 35. 36. Contingent Liability Payments 36. 37. Other 37. 38. SUBTOTAL 0 0 4,770 0 38. (lines 32 through 37) 39. NET CASH FLOW (DEFICIT) 0 4,162 1,664 0 39. (line 31-38) ACTUAL CHANGE IN CASH g:\xl\ BONFBULAY: 29478 NationsB nk Private BatlCllflgi tttsona) C~ . 4vv Wuri~sI .et Name of corm,war nacre nneth L. Lay Prepared by: James Shelton ============= Page 13 of 25 ============= INCOME STATEMENT Kenneth L. Lay January 25,1-994 ANNUAL MONTHLY CASH COMPENSATION Enron Corp - Salary 5 960,000 Flex Perq 27,000 Employment Agreement 1,095,128 Incentive Bonus 1,375,000 L-Term Incentive 900,000 Deferred Salary 199,784 Stock Appreciation Rights 545,580 Stock Options 2,251,239 less: FICA/Medicare 5,715 FIT 2,052,493 PAC 2,400 Salary/Bonus Deferral 587.526 $4,705,597 Compaq Computer Corporation 10,750 Trust Company of the West 54.000 4,770,347 397,529 INVESTMENT INCOME Stock Dividends: Baker Hughes 1,455 Eli Lilly 4,840 Enron Corp 375,747 Enron Oil & Gas 3,600 Intersport Ltd. 4,500 390,142 Rental Income: Missouri Home 4,200 1918 Huldy 15,000 2406 Kingston 9,600 1852 Marshall 2,200 1856 Marshall 23,450 1741 Sul Ross 7,551 1918 Sul Ross 32,825 1750 Viking 6.000 100.826 490,968 40,914 TOTAL INCOME $5,261,315 S438,443 BOA/FB!/LAY: 29479 ============= Page 14 of 25 ============= MONTHLY CASH FLOW ANALYSIS FOR THE I 'H L. LAY FAMILY CONTINUING COST OF FIRST MARRIAGE Alimony ONGOING COST OF SECOND & LAST MARRIAGE Residence expense and upkeep Inwood house Aspen house Galveston bay house Other living expenses Children Cars and boats Social clubs Interest on loans Investment property: Columbia, Missouri - RR 1, 7220, Hwy. AB Houston , Houston , Houston , Houston Houston , Houston TOTAL 1125/94 S 6,000 34,622 21,320 7,488 117,952 21,057 3,086 4,304 44,036 1,634 1,315 556 1,273 2,620 1,219 3,585 186 $272,253 BOA/FBI/LAY: 29480 ============= Page 15 of 25 ============= Income Statement Kenneth L.. Lay J2naarv 25, 1994 PaEe 2, cont'd. POTENTIAL INCOME/ASSETS Baker Hughes Stock Options 1,000 shares @ 21.95 1,000 shares @ 23.50 1,000 shares @ 25.00 2,000 shares @ 23.00 Compaq Computer Stock Options 4,000 shares @ 61.00 4,000 shares @ 48.75 1,231 shares @ 24.38 Enron Corp Stock Options 800,000 shares @ 12.50 62,400 shares @ 13.75 187,500 shares @ 15.50 200,000 sham @ 27.1875 400,000 share @ 27.1875 48,000 shares @ 28.25 ~asl BOA/FBI/LAY: 29481 ============= Page 16 of 25 ============= 3LL i8 '94 36 IPr1I -P, D- IPl1GYq'S ' I( BALANCE SHEET Kenneth L & Linda P. Lay June 09, 1934 ASSETS Non-Real Estate lnvesbne t}s Checking Accourns Naticnsaank 8,702 Pitkin County BanWAsp.n 3,833: Unity Bank 5,000 Deferred Income Account 2,457,453 Enron Savings Plan 255,575 Enron ESOP 625,514 IRA's 42,945 Keough Account 127,690 Savings Bonds 2,400 Enron Corp stock (restricted: 39,640 x 311/8) 1240,020 (unrestricted: 457,371 x 31 1/3) 14,251,235 EOTT Energy Partners, LP. (5,000 x 19 314) 93,750 Envirotl, Inc. 8%CV PR C (50,000 x 1,000) 50,000 Envirofil, Inc. PV $0.0002 (2.327 x 22497) 5,235 First Cash, Inc. 10% Convertible Sub Notes 50,000 Hitcorp Acquisition Partners 250.000 Houston County Drt9inq Prospects 15,000 Intersport Ltd. Convertible Sub Notes 50,000 Jalate Ltd. stock (5.000 x 9 S/8) 48,125 K LL & LPL. Investments, Ltd. (see Schedule A) 11,854.428 National Serv-tce Co. (common: 2,633) 100.000 (preferred: 1,254) 38,867 Native Power Corp. Equity 100,000 Old Baldy Club stock (250 x 113.44) 28,360 St. Arnold Brewery Co. 75,000 Tatham Offshore Inc. stock (2.500 x 16 114) 40,625 Telescan, Inc. stock (25,000 x 61/4) 156,250 TCW Care Equity Fund 998,678 TCW Asia Pacific Ltd. Partnership 562,643 TCW Investment Partners t' 105,000 TCW Royalty Partnership IV 4,080 TCW Latin America Equity Fund 483,874 U.S. Delivery System Inc. stock (5,000 x 12 314) 63,750 Residence - 3195 Inwood Dr., Houston, TX 3,439,100 . Furniture/Personal property 950,000 Aspen - 0165 Shady Lane, Aspen, CO. 2,561.676 Furnlture/Personal property 125,000 Bayhouse - 3441 Petite Circle, Galveston, TX. 432,900 Furniture/Personal property 150,000 Automobiles 1990 Nissan Wagon 8,575 1990 Jeep Wrangler 9,396 Page 1 P. 1/4 BOAIFBI/LAY: 29482 ============= Page 17 of 25 ============= fl.L 08 ' 9a a8: S 1 rE IRON L' P, . Cl-IAIRrAN' S CF'r IC P. 2/4 1988 Mercedes 300E 20,375 1994 Ford Mustang 28.075 1990 Range Rover 26,975 1993 Mercedes 800 SL 103,000 8oats/F7easru, CtatT 190318' Duffield 16,000 1990 20' Correct Craft 17,085 1994 21' Boston Whaler 46,600 Real Estate /nveslrnentt 11 Acres Farmland - Fayette Co.. Beecher CNy, L 11,000 1750 Ylkinp Dr., Houston, TX 60.000 Texas Land 80,000 Green Land Properties, Ltd. 75,000 Twin Oaks-Bordsaroc Xi Investor, Lad. 120,000 1832 Marshall, Houston, TX 124,700 1741 SW Ross, Houston, TX 154,150 1918 Huldy, Houston, TX 162,700 Dymaxion Apartments, Austin, TX 170.000 RRI, 7220, Hwy. AB, Columbia, MO. 183,000 1856 Marshall, Houston, TX 203,500 2406 Kingston, Houston, TX 205.200 1918 Sul Ross, Houston, TX 259,958 3429 Petite Circle. Galveston, TX 367,500 TOTAL ASSETS $44,344,088 UABIUTIES 1852 Marshall„.Houston, TX George Rosenau 73,384 1918 Huldy, Houston, TX Denton C. Priest Trust 93,185 1741 Sul Ross, Houston, TX TCS/Houston, Houston, TX 94,483 RRI, 7220, Hwy. AB, Columbia, MO. Macon Rig. & Loan. Macon, MO. 127.150 1856 Marshall, Houston, TX Mills Levenson 145,854 1918 Sul Ross, Houston, TX F. E. Dickson 29,915 Derby Suiter 138,754 3429 Petite Circle, Galveston, TX. Page 2 BOAIFBIILAY: 29483 ============= Page 18 of 25 ============= ilk 08 '94 08:51p.r apcri P. Ci- IPt"pri'S OFFICE Charter Sank, Houston, TX. 3441 Petite Circle, Galveston. TX Prudential Home Mtge. Pasadena, CA. 0165 Shady Lane. Aspen. CC. The Boston Ca, Boston.. MA_ ., Houston. TX Bank One Mortg. Corp., Irdlanapolia, tN. TCBMouston, Houston, TX Notes Payvbl. ILL & LPL Investments. Ltd. (see Schedule A) Enron Corp. Nations8ank TOTAL 11ABILmES NET WORTH TOTAL LIABILITIES AND NET WORTH Pate" kwonWAs:seft Baker Hughes Stock Options 1,000 shares 21.95 - 10125/84 1,000 shares ® 28.50 -10/25/90 1,000 shares 25.00 -1 0123191 1,000 shares 23.00 - 10128192 1.000 shares ® 23.00 ---10128193 Compaq Computer Stock Options 12,000 shares ® 20.33 - 05/24/90 8,000 shares 8.46 - 05114192 6,000 shares 1825 - 04123193 3,693 shares 8.12 - 04/23/93 Enron Corp. Stock Options 783,800 shares 12.50 - 08/23/99 62,400 shares ® 13.75 - 02111191 187,500 shares 15.50 - 02110192 200,000 shares ® 27.1875 - 02/01x193 400,000 shams ® 27.1875 - 02/09/93 48,000 shares 28.25 -12/13!93 84,000 shares 33.50 - 02/07194 1.200,000 shares 4D 34.00 - 02108/94 Page 3 P.3x. 275,625 281,048 t.32Q.000 Z49C,335 5Z500 3,969,392 4.000.000 8,492,639 $21,594,694 =12,740.394 =44.344,088 BOA/FBI/LAY: 29484 ============= Page 19 of 25 ============= 3th.. 08 '134 08' 51f 'i E r-FON _ rRP. CHAIRMAN'S OFFICE: SCHEDULE A Satan= Shoat KL.L A LPL ht L jam wk 19" Nary-Real ES9M D1 sstmen Checking Account Charter Bank Aire Cum Environmental stock (15.000 x 3 3/0) Baker Huphes, stock (3,738 x 19 314) Compaq Computer Corp. stock (83,054 x 34 310) Copytele Inc. stock (5,000 x 10) EU lily Company stock (5,000 x 55) (deferred: 451.0103 x55) Enron Cap stock (252,485 x 311/8) Enron ON & Gas Company stock (15,000 x 43 3/4) Fberchem fns stock (10,000 x 1 3 TOTAL ASSETS UABIUTIES Noes Payable Charter Bank Houston TOTAL UABIUTIES NET WORTH TOTAL LIABILITIES AND NET WORTH Page 1 500 50,635 63,961 2055,325 50,000 275,000 24,505 7,858,595 666,250 19,375 3,969,392 P. 4/4 $11.854,428 $3,959,392 57,885,036 511.854,428 BOA/FBI/LAY: 29485 ============= Page 20 of 25 ============= QUICK REFERENCE GUIDE FOR ANALYZING STOCK SECURED LOANS 1. Kev Facts Borrower: Kenneth L. Lay Advance/Call Ratios:50/75 Loan Amount: $13,500,000 Collateral: Enron Corp. Maturity: I year Terms: See attached CAR Comments Pledgor, if not Borrower. N/A Pricing: LIBOR+175bp Call Price Per Share: $22 Price: Current price: $32.625(on 7/5/94) Hi-Low past year 7/$27 Low past three years:$12.50 Recent stock splits: 2/1 Sept 1993 Dividend yield: 2.6% PIE Ratio: 20 Historical EPS: $1.37 Projected EPS: $1.67 Book value per share: $9.93 NET DAYS TO LIQUIDATE: # of shares Price/share Collateral MV ADTV Sales Factor ENE 818,000 $22.00 $18MM 400,000 25% Net Davs to Liquidate: ENE: 400,000 x 25% = 100,000 shares per day x $22/sh call price, _ $2.2MM $13.5MM/$2.2MM = 6 days to liquidate entire loan. 111. Control and Restricted Stock Issues N/A Is stock restricted?: NO If restricted, how long has it been owned by borrower?: _ Has borrower sold the stock short or entered into a put arrangement during the ownership period?: NO Is stock subject to underwriter's lockout?: NO BOA/FBI/LAY: 29486 ============= Page 21 of 25 ============= Calculate limits on sales imposed by Rule 144 ("Dribble Rule"): Under Rule 144, the maximum number of shares sold during any 90 day period is limited to the greater of (i) 1 % of total shares outstanding, or (ii) the average weekly trading volume during the previous four weeks: (i) 2.5MM shares (ii) 2.3MM shares The maximum number of shares that can be sold is 2.5MM or over $80MM every 90 days. Compare to volume limits on stock in Section II and utilize most restrictive. Control: Is borrower a director or senior officer of issue pledged?: YES Borrower's ownership percentage of issue?: 112% Is borrower party to aggregation group which has agreements to buy or sell stock of issuer?: NO Do family member of borrower own stock in issuer?: Yes How much?: <112% Does NB have lending(mvestment relationships with the issuer? YES (Energy Grout,) Has qualified legal counsel been engaged to review stock's restrictions, etc.?: Yes IV. Margin Maintenance Requirements Is loan governed by Collateral Maintenance Agreement? YES Standard NB documents?: Yes Attorney prepared?: No Maximum Advance Ratio: 50% Call Ratio: 75% Is the loan governed by Regulation U?: Yes Does structure conform to Reg U?: YES Margin call price per share, if applicable: $22 No. of days granted to cure margin call: 5 Method of notification required: Letter List unique features of CMA: Does borrower have other debt at other financial institutions secured by this stock?: Yes List securities pledged and lender: See attached CAR Advance/Call Ratios: 70/75 Margin call price per share, if applicable: Have the limits imposed by Rule 144 been factored into the liquidation scenario for all secured, if applicable?: Yes Borrower's Liquidity: 2$9MM Cash or Equivalents: $30M Unencumbered Marketable Securities: $0 Exchange Traded: NYSE Has perfected security interest in collateral been attained?: YES Is loan set up for daily monitoring of values? YES Has "road map" for Liquidation Scenario been documented?: Yes BOA/FBI/LAY: 29487 ============= Page 22 of 25 ============= ENRON CORP 'Id 3U K UM 1 27 33 21 0 ( 2 YU 3 0 ' 456 mes- . . . . ~ m `) ~ 00 6.01 , &2 I t 9e l 1 s. 17! 18 7 2 , 1 5. SJI 12.41 till l n.0 _ how ail I j i IgT !, 4937 1>~ SAFETI' 1 --------I BETA .85 (IM-Worad 1! Ar.alToel jib -- ---~° -I Z Prix Oii1 RaeF1 2re s8 (.46%) is a (.4%) 4% tt- Yridar Decisions 12 " 1. is* a. J. PL * r - 'J ,aff. ,, +¢ r r a a a o o o loam data 2 x ~a o-a 1 0.2 19201 7-23 aa.0ao3 -_ JIM 20:. EL .or.. .^ 121 122 117 P.re.r as tea 112 T10 11e "none ad ' . WVUS 1%. 133e21 132214 4833rd ZO 1978 11979 1980 1981 1942 119433. 1964 , 12851 1986 1987 119881 1989 i 1=119; 19921 19931 19941 1995; • 2411, 9748 1041 14.04 1704 mB MM 25.19 42.7111 57.3 4274 3157 Ilt3 45.82 8524 OL79 2.671 ?Zm UI am IlV.WaasprIkA Qi t.41 134 2.10 222 227 247 104 117 23 1 1.77 232 143 I 2.11 I z. 254I 321 za! 4101-C ss P s - pr.. Sex .77 LX 1.11 13 ~ 417 t. I 1.3 t. .01 .15 dD6 .19 .46 .9 IA 19 1.61 LAS le'il¢Prri• 2! Jt - a ' .t S1 54 .801 5.2 .tQ 42 42 42 12 A A 11 17 u t v Deed rc e. IS 1 S! 23 2A! 247 to i.0 130 5.71 la A 156 117 2.73 540 241 2.76 ISO 1W CW 31 l~rdrtp pr a La 120 5.17 Llt - 7.41 710 37= 5.90 7.30 SM I SD2 I 721 741 LD1 94 Is 913 i1i.1 124 leek V26= i s! 110.79 I 1 t77.3 1 1 1 .m 1 8 I K44 2013 20113 2DLM .ti 24840 Sam WO 000100010 AN&A"W 711W LO S5 '• 71) LT Sl ...U 7.5 103 111E NF Il 314 112 1!s 224 ar w Aep Awrlt P1[ ftAb ' 18! 2Q a is 14 B - A .70 X MW NF • -- taF zSD 125 121 13 1Ye IWs 1'RIW2 11A 10% 1 '5.0% L2% S0% '11% aSi 53% 49% l1% 322 25% AIt7 gVdVllr = !RC $9 2 75100 10251 756/4 91LD s n S;EO 43161 1370 c a 79720 1100 i/W Irwser {»tiRA ...,F . 191 mi Due Is 1 10 m5. TOW DOW Sm0t2 U Dow s2SZj ma LT Walued Sy ML 113% 110% 111% 127% 122% 7D% UM I4% 4225. MA 14!% U. . -UK (TOW' tsa W--x:258 (49% d 0401) 21I.4 7160 407.1 39x1 3193 387 3551 355.0 311 42' Mf 90 D.paeir_ o" ): -;4 331 23.0 50.0 70.0 25.7 414 ICU 1100 214.2 314 II in Na PNO 0- Lm-4. 11eealhlsd Aruad fwaW $194 flit 462% 4&I% 27.2% 2111% 223% SA 24.1% 251% 25.0% 111300211JQ ho Q.fI / tfr/en 5.18884/ Ma» 31% z7% TL 12% 9% .4% 1% t4% 42% t0% U% M Ne ft! 411 4 1171 82501 85312 8491 9S 2nD 82842 84743 8;45.1 d21N4 aR10 8422 IN, iUi, C 1 POP • .441K. Pld Shock $1 9.7 Sl Plc D&d 3169 mi bi a 3100X cu 486 677 O 31030 1 1115.5 2242.7 3287.1 3482 M3U 315.40 29121 31(5.0 2BLL 252.1 20 2!m Leir .00 ~31a• e s rw. a., v . . n. Y1o 13.462 curio am - 73'% d ce'fl 2mt.1 1672 /4327 12119 473712 MO 14812 11425.2 254 2 MIA - 2'160 3219 41s'0rs41 " - - 4OW Caw.ron Sloe[ [249,016.$79s. (46% d C.. 1) 112% L7% 4 9% 53% 421% 41% LI% LIS L5% 141% IMS 113% %L *fed low 1 11 - 133%. 149% 127% 35% m 19% 2.4% 51% L1% 15.4% 114 110% 1LQ% % Bnt.d Not 1119! "-k C1 mi sue h* Hued) 5.9% S.7% NF NF NF NF iaF 2.1% ' is% 7A% t0% '10% ishe2kee1bC2ssEL L1i, P061110i4 1M1 1182 1191193 53% 63% MW NF WE /aF NF 91% 101% 52% I!Z 41% %AN MedabNathd '-4715; 2184 141.7 140.2 tluss4ES& Emr1 Corpaa0m b a mepr is.¢aNd rear' lad 1E%; E I', I a P1odr~bn (60%-oi. Each a i 0*.. 4 w veWr 7292 6101 167.7 W 5.4 11!1.7 " Nr0 CXQ 2729 1 E see.. m prdl Mbc 1e,.. ra&,, a S sadal (o raise 15%; Got P1D=m (dmrale O s 4th). 3%. Fanign .a-g 100 apbIPM ufL W daI rate 427E Has abate 7 26% d d S 0 w 1 0 ear 5802 1177.3 821.1 . p o Ox mK mrr9 pi *WK. poom dams), 48X; Gas C1rn.rlt Assets Tii f '1T$3 NU nrrket. 1i1s1oe 0a. A &FA*; m&-" ieaeala ppekra. 25.510 09118 M 1. air 20% d Sock 55U ptoty). Corn A-- Accts Payable 1325.0 102.3 14772 dunr.ade pow pieta), 247; ianudo ai Gas a Powr Senrion C.EQ: ILL ray. Pin. RD. iG10er. >rmrp- Dearaea Aiddgi~ D., Du. 74,0 -- 132.4 ((app, ryy.• WW"" yea pp_ a Igridt pWu. ppakes, . P.0. Drs 1111, IiraaaorI. TX 71251-1125. 7.5..713.16.34111... r: Car 6103 18403 1120. '13 C1 cwt t.. NU3 1478? MMetTTt rats, 3nron made the most of a'good year Trinidad gas E EOG also is openatcr ik.-a lts this ear 983 St i y . rong resu . for natural gas n 1 AI83JAL 8A1U had his bed 111-U RL Y . in most lines generated en overall advance to develop reserves with sigmfcant L r V ddslpa~i4 141o 3 s% 33% 4.0% R.v.aa 5 of 30% in fully diluted .srning9 per share tial offshore Tudia. And another India *&E . Foe 1.0% • 63% 120% for the year. (018 figures exclude non- dertaking teams Fmron with GE and 1tt~F 15.0% .1 .) The only tel to. build a 2015 megawatt gas it d l i ~ s' DMus d 2S% 1.3% 219% Back Vskm 20% ' 9.5% 89% ems n an ow ga g t apparent drags were depressed' margins on m plant x' arts of the bore- te sts in di i l WA/RB91' 101180,03 W A Rd p n re es, ns nntmml gas ping and liquids sa ast l L e on. mused high gas feedstock costs and low near helps to IInance aspans .atdr Ilex tt 'k" Doe f 3rr ear Enr n received $217 million for iiZ arisons m b t a Th NGL 1961 36177 3235 5254 3594 136 0 y co p e es s ng prices. etained interest in Northern 13% b t ' 4902 1439 1300 1SD0 2021 63~ r u a L, tame in the second and thud quartas pertly y reflecting the absent of seasonal: Border Partners, LP., now a limited party 1900 1994 1157 1307 . 1904 2274 2150 2100 2200 2810 7972 1100 weakening in gas prices typical in past nership. Currently, it's readying a t EOTT t 1905 2650 2400 29 5080 108 eres sammera. New price spikes imply healthy offering of a 58% in round $200 mt'Biam f LP d P EAR= PER S3S A a or a artners, . 1994 results, although Boron haas hedge F1a ear's gas production by sell- This new limited partnership w ll opt most of this .ad.r ila.3l Jtn]0 SsPSO Oar 11 tat y me V Enron9r EOTT Energy snbe~ary ISM 1 3 , ing forward at recent prices. il •W .1 .1 2 4 tXS A number of projects offer op- the largest North American a'nde A 1183 . S Z 14 .35 1.71 ~~~ ty to keep profits growing. By gathering and marketing Operations orts a reee id 1964 3 .3 .a a0 1.6 p ence supp June, Baron will have added daily eapaci- Investor conf 1996 . . .73 X J3' - 1.1 ty of 240 million cu. f . to its Argentina in= in the price of Enron stock. Man: lans with in- th h WARTBLT RYCEU PO C a F d p ares its grow pipeline, which contributed over 54 a agement s • ids. 31 .kaiO X30 D w-" Ysr. e 37asr share last year. By year-end, a 530 vector s, and we see no reason t o dispute ets of 15% or better for 1994 and t it G d 1900 .155 .155 .155 .155 -12 arg s as a MMef7D expansion of the Flori Transmission system is to be completed possibly the next 3 to 5 years- The price of _ 1901 .155 .151 .155 .163 .83 163 163 175 67 1= 163 Domestic production is growing steadily at the neutrally ranked stock, though, leaves . . . . . 175 188 71 175 175 111M3 which is also drilling little room for any e*T+nga shortfall. Enron Oil & Gas . . . . . 4934 .186 , more wells in a plan that may double Edmund B. Swort, CFA April 1, 13914 (A)'92 era r•nea'93 *a 1 d d aadrq IG'3 . (31.434 14 (73c5 '67. (364t 41st a coat 4 y 24. CMidsd payrns.lout ~~rp~y a RnerreYae 5a-g51 84 so Gw1.ca QUWWO s narn ao11o2ed to sari a/ annual I FWy loud F isa 112 "C12. 71c 90 4,c 11. 22c •32. 3c'93. &WA March 2D. Am 2A SaM 24 Dar 20. Smet. Prka 3t.O/y .1. r/aai rrtrga "span 8172 :an Apt n DNd envamnst OW ar.ieeia. (D) r+ m4- Prtea Grwvt Peraiaaiacu S 6 ,ax.a.rnL bat ' (41 ak 1,. (4.t cl Need owe" mee rq aoou May 1 Goes bona ad(ttsw for stack saa3 Ear1W+4a PredemeA ty 3 1 7 .1 + 1 3. ( F.otr mart . _ma.re tan ~aacv o.awi.a 8"h+t ar aa>r+>er a not r.wrau a my .mra v om~or arv+.a,.,« ,~ ~dt'in~TilTL-1191t7I1111flFK BOAIFBI/LAY: 29488 ============= Page 23 of 25 ============= Credit Approval Report for the Private Bank Page 3 Customer: Kenneth L. Lay Risk Rating: 4 CPM Analysis Date: 15-Jut-94 Relationship Profitability Summary Statistics Net Interest Spread Loan Fees Equity Funding Credit Reserve Funding Credit Net Interest Income-Credits Other Fee Income Less: Provision Expense Net Credit Income-Assets Less: FDIC Insurance Loan & LC Prod. Costs Total Product Margin-Assets After Tax Cont. InclExp. to ROA $291,837 1.17% $30,000 0.12% $18,073 0.07% $2.631 0.01% $342,541 1.37% $0 0.00% $18,300 -0.07% $324,241 1.30% $0 0.00% $447 0.00% $323,793 1.30% Net Credit Income-Liabilities $5,604 0.02% Treas. MgtAnalysie/Other Dep Fees $0 0.00% Less: FDIC Insurance $260 0.00% Trees. Mgt/Dep Prod. Costs $1,057 0.00% Total Product Margin-Liabilities $4,287 0.02% Other Service Fees Equity Credit from Other Services Other Service Production Costs Total Product Margin-Services Relationship Contribution Margin Equity Credit-Fixed Assets, etc. Lass: Profit Center Expense Corporate Overhead Tax Expense Total Relationship Earnings Target Earnings and ROE $0 0.00% $0 0.00% $0 0.00% $0 0.00% $328,081 1.31% $189 0.00% $20,000 -0.08% $3,217 -0.01% _$115,.920 -0.46% $189,133 1.22 % vs. $63,521 and ROE Variance $125,612 After Tax Cont. to ROE Balance Summary 56.97% Average Commitments $19,500,000 5.86% Average Funded Loans $15,500,000 3.53% Total Assets $15,469,596 0.51% Allocated Equity-Assets $314,320 66.87% Allocated Equity-Other $3,283 0.00% Total Book Deposits $100,000 -3.57% Total Collected Deposits $94,060 63.30% 0.00% -0.09% Services Used by Customer Proj. Ann. Fees 63.21% _ Letters of Credit Fees $0 _ Treas. Mgmt. & Dep. Fees $0 1.09% _ Funds Management Fees $0 0.00% _ Investment Banking Fees $0 -0.05% Trust Fees $0 -0.21% _ Foreign Exchange Fees $0 Products/Services; Not Incl. in Relationship Profitabtty 0.00% 0.00% _ Lease Outstand'mgs of $0 0.00% _ Factoring Outatandmgs of $0 0.00% Consumer Credit Outs. of $0 Residential Mtg. Outs, of $0 _ Other Significant Profit of $0 64.05% IMerchant Visa, Indirect Loans, etc.) -0.63% -22.63% Key Variables 1 Year Variable COF 4.95% 59.55% Commercial Float % 17.60% Prime Rate 7.25% 20.00% Corporate OH Rate 14.78% Tax Rate 38.00%I 39.55% Existing or Proposed Policy/Collateral Exceptions: Approving umcer: 4/27/94 rel. of CPM v. 2a BOA/FBI/LAY: 29489 ============= Page 24 of 25 ============= Variable Loan Product Margin Screen and Key Input Company Name: Kenneth L. Lay Relationship Manager: James H. Shelton Interest Income Upfront Fees Unused Fees LC Fees Cost of Funds Net Spread Eqty & Res Credit Provision Expense Net Credit Income Prod. Cost/FDIC Total Prod Margin Tax Adj. ROE (1) Assigned Equity Outstandings Unused Commitments Interest Rate (365) Cost of Funds Risk Rating Maturity in Months 7115194 4127/94 rel. of CPM v. 21 Facility Facility Facility Facility Facility ONE TWO THREE FOUR FIVE $380,208 $380,208 $36,753 $212,917 $0 $0 $0 $0 $30,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $270,000 $270,000 $23,750 $154,500 $0 $110,208 $110,208 $13,003 $88,417 $0 $5,794 $5,794 $1,095 $8,021 $0 $6,000 $6,000 $900 $5,400 $0 $110,002 $110,002 $13,199 $91,038 $0 $112 $112 $112 $112 $0 $109,890 $109,890 $13,087 $90,926 $0 79.44% 79.44% 48.30% 44.74% 0.00% $85,760 $85,760 $16,800 $126,000 $0 $6,000,000 $6,000,000 $500,000 $3,000,000 $0 $2,000,000 $2,000,000 $0 $0 $0 6.34% 6.34% 7.35% 7.10% #N/A 4.50% 4.50% 4.75% 5.15% #N/A 4 4 5 5 0 12 12 12 180 0 Kenneth L. Lay's Relationship ROE is 59.55%. The Target ROE of 20.00% could be achieved by: DECREASING the spread on Facility ONE by 333 by or, DECREASING the annual fees on Facility ONE by 202,600 or, DECREASING the Commercial DDA balance by 5,964,916 based on a current Commercial DDA Ledger Balance of 0. (1) Tax Adjusted ROE equals Total Product Margin less Taxes divided by Assigned Equity. BOA/FBI/LAY: 29490 ============= Page 25 of 25 ============= Company Name: Kenneth L. Lay Product Margin Summary 16-Jul-94 Relationship Manager: James H. Shelton - Nat Interest Income Equity Gross and Reserve Spread Credits Loan Fees Other Provision Production Fee Income Expense Costs/FDIC Contribution Product Equity to ROE Margin Allocation After Tax CONTRIBUTION FROM CREDIT FACILITIES Variable Credit Facilities: Funded Loans 291,837 20,088 30,000 18,300 447 323,177 303,600 66.00% Unused Credits ' 616 0 616 10,720 3.57% Match-Funded Credit Facilities: Funded Loans 0 0 0 0 0 0 0 IN/A Unused Credits I 0 0 0 0 IN/A Letters of Credit 0 0 0 0 0 INI' Total Contribution From Credits 291,837 20,704 30,000 0 18,300 447 323,793 314,320 63.875. CONTRIBUTION FROM LIABILITIES & TREASURY MANAGEMENT Commercial Analysis Accounts 0 0 0 0 tN/A IN/A Other Comm./Personae ODAs 5,804 0 1,317 4,287 IN/A IN/A CDs and IRAs 0 0 0 0 IN/A MIA Savings Accounts 0 0 0 0 IN/A IN/A REPO Sweep Accounts 0 0 0 0 IN/A IN/A Total Contribution from Liab. & T. M. 6,804 0 0 0 0 1,317 4,287 IN/A IN/A CONTRIBUTION FROM OTHER SERVICES Funds Management Services 0 0 0 0 0 IN/A Investment Banking Services 0 0 0 0 0 IN/A Trust Services 0 0 0 0 0 IN/A Foreign Exchange 0 0 0 0 0 IN/A Total Contribution from Other Services 0 0 0 0 0 0 0 0 IN/A Total Relationship Contribution 297,441 20,704 30,000 0 18,300 1,764 328,081 314,320 64.71% Income/Expense RELATIONSHIP ALLOCATIONS Miscellaneous Equity Allocation 189 3,283 O Profit Center Expense 20,000 tT Corporate Overhead 3,217 Income Tax Expense 115,920 j 189,133 317,603 69.65% A -G 1~ Profitability Excluding other Services 189,133 317,603 69.66% 4/27/94 rel. o f CPM v. 2a