Here are a few alternatives to handling Lal Echterhoff's situation:

(1)  We give cash difference in black-scholes value between one year and three year options calculated as of the termination date of 5/31/01.  The analysis isn't very pretty:  the total difference for all affected shares (165,000) is only $1652.  These options are so far in the money that the time value is de minimus.

 
(2)  We could have them cancel their old options and purchase on the open market some options with longer terms.  The lowest strike price available for January 04 leaps is $30 and the term still isn't quite long enough - most affected options have a strike price between $15 and $20.  This alternative would need tax, accounting, and SEC research and would cost about $4mm in total.

(3)  We could just purchase January 04 leaps with a strike price of $50 and not ask them to cancel their old options - this would cost aobut $2.2mm.  Still a problem with term not syncing with their old options, but it would give them the opportunity to "double-dip" in value if the stock ran up between now and May 31, 2002.

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If you would like me to do any further due diligence on any of the three above, let me know.

I still recommend the previously drafted email to Lal reiterating that the plan provisions prevail.  Morally, it may not be correct, but it would take an exorbitant amount of "feel-good" and money to get any further improvements in our ranking as the best place to work; Everyone knows what Enron is when they come here and we're very open about it.  We are efficiently Darwinistic, not feel-good-anything-you-want.  I don't think we should apologize to those who don't read their agreements or plan documents or the fine print (the caveats were there).

I do feel bad that this happened, and we should make sure the right people sign-off on this sort of thing in the future.

Regards,
Aaron