sETTLEMENT

Richard and Bill:

Damage figures with prejudgment interest thru 3/31/01 are:

Farallon $21.8 million
Oaktree $13.2 million
Legg Mason $4.9 million

Farallon's damages are 62% of the total damages in Hennigan's case.

If the case were to settle for the total that Hennigan seeks, $29.3 million=
,
Farallon would get $18.2 million, and Oaktree would get $11.1 million.

If Enron were to contribute $1.25 million to an overall settlement as
suggested, we would be paying about 7% of Farallon's damages.

If everyone but us were to settle for the suggested retail price (assuming
that Hennigan would do such a deal), Farallon's remaining damages would be
$4.4 million.

The ratio of Farallon's damages to Legg Mason's is 4.4:1.

*********

I think our goal should be to settle Farallon for $1,000,000 and Legg Mason
for $200,000, and I think that should be achievable.

I would offer the other defendants a contribution from Enron of $750,00
(pointing out to the defendants that this is a substantial increase over ou=
r
opening offer to Hennigan of $450,000.) I would stick on $750,00 quite a
while, saying that we are very reluctant to pay any seven figure number, tr=
y
to get defendants to think that their biggest challenge is to get us to $1
million, then finally give in to that figure.

We have bargaining power. Any defendant who wants to settle has to have us=
in
it's group; therefore we can hold out for a smaller share.

If we so settle, we need mutual releases of all NSM-related claims among al=
l
settling defendants.

If the settling group is less than all defendants, the settlement must be
conditioned on obtaining a good faith settlement order.

Good luck.

Steve
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