Securities Purchase Agreement (Highstar/ENA)

Per my earlier e:mail.

Thanks

Steve Van Hooser
Enron North America Corp.
1400 Smith
EB3877
Houston, Texas 77002
713-853-7238
----- Forwarded by Steve Van Hooser/HOU/ECT on 04/24/01 08:52 PM -----

"Jay Sonnenberg" <jsonnenberg@bracepatt.com<
04/23/01 09:07 PM

To: <bob.percopo@aig.com<, <christopher.lee@aig.com<,
<michael.walsh@aig.com<, <Jgrushkin@milbank.com<, <wbice@milbank.com<
cc: "Clark Thompson" <cthompson@bracepatt.com<, <Heather.Kroll@enron.com<,
<ozzie.pagan@enron.com<, <steve.van.hooser@enron.com<
Subject: Securities Purchase Agreement (Highstar/ENA)

This time with attachments...

Attached are both clean and marked copies of the revised draft of the
Securities Purchase Agreement, which incorporates the changes discussed in
our meetings last week in NY. As to the revised draft, please note the
following:

1) The revised draft does not consider any of the changes to the structure
of the deal that will be required to solve the brokerage issues discussed
earlier today among the lawyers. We are not sure at this point as to how
these problems will be overcome, but will get back to you with our thoughts
as soon as we can, and any assistance from the Buyer's perspective would be
much appreciated. In the meantime, ENA has told us to try to keep moving
forward to the extent we can on the SPA.

2) There are still a number of issues in the SPA which the parties have not
yet resolved. Included in these open points are the following:

a) ENA feels very strongly about the need for a cap on liabilities and
that the proposed amount of the cap in this case is already one of the
highest agreed to in recent transactions.

b) Reps and warranties - after considerable discussion among various
parties at ENA, we have left out a number of the "Material Adverse Effects"
and "Knowledge" qualifiers that were proposed in our original draft, as
discussed in NY. However, we have added back a few where it was the strong
consensus at ENA that these were market terms accepted in prior similar
transactions. The standard for applying materiality is still open - in some
cases we left the Buyer's proposed "could reasonably be expected" language;
in other places we went back to the "is likely to have" language because in
prior transactions, buyers have accepted the much stronger "would have"
standard, which we should probably have insisted on from the beginning. We
have also limited the real estate and environmental reps as discussed because
of the insurance that ENA has already purchased and paid for to protect the
Buyer from these risks. The IP reps were deleted because of the lack of any
material known IP related to the Facilities.

c) We have limited the opinions to be delivered to certain regulatory
opinions only and omitted the Buyer's opinion entirely because of the size of
this deal and the feeling that further internal opinions from ENA did not
provide the Buyer with any further assurances.

Please call us with any questions or comments on the SPA or the above. We
are also still waiting for your conceptual list of comments on the Asset
Management Agreement.

Best regards,

Clark and Jay

Jay Sonnenberg
Bracewell & Patterson, L.L.P.
711 Louisiana St., Suite 2900
Houston, TX 77002-2781
(713) 221-1417 (Ph)
(713) 221-2158 (Fax)

- #1269388 vRED - SECURITIES PURCHASE AGREEMENT (AIG).doc
- #1269388 v8 - SECURITIES PURCHASE AGREEMENT (AIG).doc