---------------------- Forwarded by Richard B Sanders/HOU/ECT on 09/27/99 
10:26 AM ---------------------------


"David A. Barr" <dab@sprintmail.com> on 09/26/99 10:34:46 AM
Please respond to dab@sprintmail.com
To: Kevin Hyatt/HOU/ECT@ECT
cc: David W Delainey/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT, Cliff 
Baxter/HOU/ECT@ECT 
Subject: Re: Meeting with Ft. James



Kevin,

Good summary!

I think in addition to putting together the three cases as you discussed 
below, I
think we may also want / need to show how the FJ's "savings target" that they 
told
us we had to meet was constantly changing over the two years (from $100k 
annually
to $225k to $500k to $1mm then my latest project from $1.5-2mm).  I think this
correlates to what you are depicting in the cases.  It almost appears 
everytime we
had a potential project which may be able to reach X dollars in savings to FJ 
they
would raise it.

Please provide questions or comments.  Thanks.

Regards,
David Barr

Kevin Hyatt wrote:

> On Tues. 9/21 I met with Phil Zirngibl, the Alliance manager for Ft. 
James.  I
> informed him Enron wanted the original $10mm back.  It was our belief that  
FJ
> did not act in good faith in "expeditiously and fairly evaluating" all of
> Enron's energy proposals.  Phil argued that Enron saw substantial revenue 
from
> the commodity (gas & coal) deals that were executed.  I argued that 
commodity
> deals were never the "intent" of the Alliance as outlined in the 
"Objectives of
> the Parties."  I told him we didn't need an Alliance agreement to do 
commodity
> deals.
>
> Phil was only prepared to argue the definition of "substantial assets" as it
> related to the asset sale.  I told him Kalamazoo was substantial to us 
because
> that was where we had a significant energy project.  It was also substantial
> because the mill was ranked in the top 3 in terms of natural gas 
consumption.
> FJ let us work on the Kzoo project for 9 months before informing us the mill
> would be sold.  I told Phil this is not how Alliance partners treat each 
other.
>
> I asked Phil if he was prepared to offer any proposal to resolve the 
situation.
> His response was FJ was happy with the Alliance and wanted to continue with 
it
> "as is."  My response was that was not acceptable to Enron.
>
> I told him the list of potential mediators for the dispute was being sent to
> their counsel Greg Chaffee.
>
> Next Steps:
>
> I think we need to pick out a couple of strong project examples to use in 
our
> case to present to the mediator.  Rather than just show the list of 
potential
> deals Enron pitched and the lost opportunity value, I think a stronger case 
to
> get our original $10mm back is to say here are 3 examples, here is the 
value to
> both parties, and FJ still did not do the project (or they chose to do it
> themselves).  This should go a long way to proving "bad faith".
>
> I will get with David Barr and start assembling this information along with 
the
> entire project list and the various "reasons" FJ chose not to do the 
projects.
>
> Based on this initial meeting, if the parties can't resolve the dispute 
within
> 30 days, the dispute goes to non-binding mediation.  The parties are to meet
> with the mediator within 21 days of the dispute being referred to the 
mediator.
> Per the Alliance agreement, the mediation meeting should take place anytime
> between now and November 10.
>
> Let me know if you have questions.