Message-ID: <18050933.1075859792812.JavaMail.evans@thyme>
Date: Wed, 21 Mar 2001 06:08:00 -0800 (PST)
From: chris.gaffney@enron.com
To: mark.haedicke@enron.com, peter.keohane@enron.com
Subject: G6 Energy Corp. - Legal Risk Memo
Cc: lisa.assaf@enron.com
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Mark/Peter -  Attached is the legal risk memorandum for the G6 Energy Corp. 
("G6") transaction.  I have assigned a Legal Risk Rating of 4 to this matter.

I understand the desire to keep legal risk memoranda brief.  However, given 
the complex structure of the transaction, which as you may recall includes an 
equity investment, option to increase equity holding, provision of services 
and exclusive rights to commodity supply, my legal risk memorandum is longer 
than usual.

The following are the principal legal risks to the contemplated transaction:
Conflict of Interest - This is an issue for various reasons including the 
exclusive supply arrangement, ability for affiliates of ECC to compete with 
G6, and ECC's ability to influence the pricing of its equity option.
Authority/Capacity - As ECC will have actual knowledge of G6's 
authority/capacity to transact, ECC may not be able to rely on all of the 
standard rules/defenses typically available to it in the trading context.
Corporate Governance - The main issues here are: dealing with the municipal 
shareholders, ability (or lack thereof) for ECC to control G6, directors' 
liability and shareholders' liability.
Standard of Care/ Services - Given the nature of certain of the services 
being provided, the standard of care and other protections to ECC are key.
Exit Strategy - As with any equity investment, exit strategy is highly 
important.  This is heightened given the potential for the municipal 
shareholders to vote as a group and/or mismanage G6.
Non-Competition - The services agreement contains a limited non-compete that 
binds ECC and its controlled subsidiaries.
Tax - The transaction structure captures tax losses at the G6 level. 

The attached memorandum discusses the foregoing in greater detail and also 
set out the mitigants to each of the identified risks.   In most instances 
the mitigants should serve significantly lessen the corresponding legal risks 
associated with the transaction.  Please let me know if you would like to 
discuss this matter further.   It is my expectation that the DASH for this 
transaction will be circulated during the week of April 9th.

Regards
CJG
