Re: Fehr Option Agreement

Here are my observations:

I agree with Rusty re: the put option complicating things for us. Second,
there has to be an absolute end to this agreement at some point. If we want
to have an automatic extension by commencing construction, there still needs
to be a date certain after which we can go forward without them no matter
what. In other words, if we want to add the language Rusty suggested, it
should be limited to x months after the expiration of the option agreement.
We'll need to run this back through Accounting.

I really don't like the inclusion of the language in paragraph 5. If we add
the language requested in paragraph 5, we need to run this agreement back
through Accounting, and we may need to add some other additional language.

I don't know if Rusty and Fred think we may need a zoning change for this
parcel.

Kay

Rusty Stevens
09/14/2000 04:45 PM
To: karen.way@piperrudnick.com, Kay Mann/Corp/Enron@Enron
cc: Fred Mitro/HOU/ECT@ECT

Subject: Fehr Option Agreement

I am in receipt of the Fehr's comments to our option agreement. In reviewing
them, I have the following comments:

The paragraph (2) change that says they can compel us to buy their land upon
a Triggering Event occurring is not going to work, because this is a put
option on their part which hurts our hard cost avoidance issues. We
carefully reworded previous put option language to avoid this. Also, how
can we be bound to a deal when the agreement has expired ? I think we would
need to say that "if we decide to build the plant after the option period
expires, then that would serve to extend the term of this agreement, however,
if the option agreement expires unexercised for a one year period then we
won't be bound to the deal.

If the provisions of his comment (5) are indeed parallel to another similar
paragraph in the document I don't have a problem with it, but "specific
performance" scares me in general. Your (collective) call.

Lets wrap this one up fast. I want to resolve it soon so I can use it as
leverage with Ledford and not have him influence them. He picked a good to
go on vacation, but is back in on Monday. I also told the Fehr's that if we
could do this before the 15th I would go for $185,000 vs. $175,000. Since we
were about five days longer than promised, I can justify the delay to end of
next week, but I don't want them to think I was just blowing smoke on the
extra $10,000.

Fred : Refresh my memory on who I need to go to for the option payment check
?