Based on my conversation with Ann-Ellen Hornidge last night (counsel to 
Bondholders), we need to reconsider our strategy regarding how to prevent the 
$4.5 million letter of credit from being drawn.  There is currently a letter 
of credit issued in the amount of $3.0 million.  This letter of credit is to 
increase by $4.5 million (to a total of $7.5 million) on the Completion 
Date.   Although our rights are set forth in the Subordinated Loan Agreement, 
and the Subordinated Loan Agreement contains a definition of Completion Date, 
the letter of credit uses Completion Date as defined in the Indenture.  

The definition of Completion Date in the Indenture and the Subordinated Loan 
Agreement both contain references to the EPC Contract and the required 
tests.  They both contain the same language of events that happen in the 
event that the EPC Contract is terminated.  Nevertheless, although the 
definitions of Completion Date in the Indenture and Subordinated Loan 
Agreement are identical, there is a subtle difference that could have a 
severe consequences.  (Someone should investigate why this difference 
occurred).  Enron North America is not a party to the Indenture.  Thus, for 
purposes of the Indenture, the EPC Contract (and the required tests) can be 
amended and changed provided that all parties agreed (this would be the 
trustee and Can Fibre Lackawanna).  This would be a default under our 
Subordinated Loan agreement, but we have no remedies.  For purposes of 
certification under the Letter of Credit, all the trustee needs to receive is 
the documentation stating that the Completion Date has occured.

Obviously, this is not what we want.  Richard and Andy - please provide your 
thoughts on how to prevent this from happening.  My suggestion is that we 
immediately take control of Can Fibre via the Section 38 proceeding.  We 
revoke all authority (and notify all parties of such) to amend or execute any 
changes to the EPC Contract with Board approval (which would be us).  We 
could show some accomadation about any new EPC Contract, but as to the key 
factors, we would stick to the language in the documents that say the test 
have to be as close to the originals.

Obviously, this has to be scrubbed from a legal perspective regarding how to 
can control and how to limit our exposure.  We also need to anticipate any 
reactions (for example, changing control is probably a default under the 
senior loan and they can enforce some remedy).  The point is that if we do 
nothing, there is a good chance that we lose $4.5 million.  We need to be 
very aggressive.