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Enron Mail |
For Your Information.
Dana ----- Forwarded by Dana Gibbs/Houston/Eott on 07/07/00 09:33 AM ----- "Baird, Bob" <RBaird@velaw.com< 07/06/00 09:40 PM To: Lori Maddox/Houston/Eott@Eott, Steve Duffy/Houston/Eott@Eott, Dana Gibbs/Houston/Eott@Eott cc: Dana Gibbs/Houston/Eott@Eott, "Pena, Carlos" <cpena@velaw.com< Subject: S-1 Steve and Lori: I spoke with Dana this afternoon, and I really think that the wisest, by far, way to approach Koch on this is to call Tye tomorrow and tell him we are exercising our rights to delay the filing of the S-1 under the following clause of the registration rights provisions of the Purchase and Sale Agreement: "and provided further, that if the General Partner determines in its good faith judgment that a postponement for up to four months of the filing or effectiveness of the requested registration or the sales pursuant to an effective registration would be in the best interests of EEP and its Partners due to a pending transaction, investigation or other event, the filing or effectiveness of such registration statement or any sales pursuant thereto may be deferred for up to four months, but not thereafter." Dana makes three points. First, there are some unresolved environmental issues involving properties purchased from Koch, and although we do not believe there's a big problem right now (we think Koch is liable under its indemnity agreement), we have not confirmed the extent of the problem nor Koch's willingness to honor its commitment, and it would be better to pin this down before making any decision on whether or to what extent they are material. Second, there are uncertainties relating to the Koch contract that we will probably have a much better handle on next month; these are serious issues, but it is premature to disclose them until we have a better handle on them. Third, we are looking at a possible material acquisition, and we may even be entering into an agreement in principal or otherwise moving down the probability curve sometime soon, but it is clearly premature to announce this. Thus, we have both positive and negative events, the materiality of which is subject to some uncertainty. As you know, as long as EOTT has a proper corporate purpose for not disclosing material inside information and insiders are not trading, it can keep the information confidential, even if it is material, for a limited period of time. Filing a registration statement that omits possibly material information is not advisable even if sales are not being made at the time of filing, since market participants can reasonably rely on the information in the registration statement in making purchases or sales. Since some of the information may be negative and some may be positive, there would arguably be exposure to EOTT from both buyers and sellers in the market were it to file a registration statement that omitted material information. Although I am not saying any of this information is material at this time, it arguably could be or could develop to the point where it is. This is just a bad time to be filing a registration statement. This is the very situation that the above quoted language was designed to deal with. Clearly we have a pending investigation (of the environmental issue), a pending transaction (the possible acquisition) and another event (the contractual issues). Obviously EOTT should not disclose the information to Koch just as it should keep it confidential from others. Thus, the best approach is to call Tye Darland tomorrow and tell him that we are exercising our rights under the above quoted language and tell him that for obvious reasons we cannot tell him exactly what the "pending investigation, transaction or other event" is. Dana believes that the situations will all have a decent chance of clarifying themselves within about a month. So I would say that you can calm Koch down by saying that at this point we do not think there is any realistic possibility that we will take another four months, and in fact we think we are talking about a few days, but we just don't know at this point. We can say we are poised to file quickly after we determine that the postponement period is ended. Robert S. Baird Vinson & Elkins L.L.P. One American Center 600 Congress Avenue Austin, Texas 78701-3200 Office phone: 512/495-8451 Fax: 512/236-3210 Home phone: 512/347-8065 Car phone: 512/627-8065 Pager: 1-888-487-2651 Voice mail: 512/495-8696, x8451 Internet: rbaird@velaw.com
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