Message-ID: <29357564.1075846734988.JavaMail.evans@thyme> Date: Tue, 8 Aug 2000 11:01:00 -0700 (PDT) From: susan.scott@enron.com To: steven.harris@enron.com Subject: IGS Cc: jeffery.fawcett@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: jeffery.fawcett@enron.com X-From: Susan Scott X-To: Steven Harris X-cc: Jeffery Fawcett X-bcc: X-Folder: \Susan_Scott_Dec2000_June2001_1\Notes Folders\'sent mail X-Origin: SCOTT-S X-FileName: sscott3.nsf In Mark Baldwin's June 19 letter, he proposed the following fee schedule for project development: Retainer: $1000/month plus expenses Accepted project (meets TW's predetermined financial hurdles): Proposal $5000 Each month TW actively negotiating project: $1500/month (each project) Letter of Intent: $5000 Signed Agreement: $10,000 Incentive Fee: To be determined When I spoke with Mark, he explained that this schedule was based on reaching certain milestones in the development of individual projects. In his letter he also proposed monthly fees for regulatory services ($5000/mo.) and market development services (including SoCal OIR related services -- $3000/mo.). This e-mail addresses the project development fee structure only. The recently expired Market Development agreement with IGS provided for a one-time retainer of $15,000 and a monthly retainer of $5000, plus expenses, and an incentive fee structure for any agreement between Transwestern and third party "identified by IGS under this agreement." As you know, the "identified by" language presented us with some ambiguity in the case of the Southern Energy Gallup Expansion contract, in which both IGS and the TW Commercial Group worked on the deal. Fortunately, the ambiguity worked to Transwestern's advantage in that case, but my understanding is that in ongoing dealings with IGS both parties would prefer more specificity in any future consulting agreement. Mark's proposal represents a step in the right direction because it provides for payment on a per-project basis. This immediately eliminates the "identified by" problem because we won't be obligated to pay him unless and until he identifies a project we're interested in him working on. I propose that we define some general terms and conditions in an enabling agreement. If Mark brings us a project we want to pursue, we will pay him according to these terms (and any other terms and conditions tailored to the specific project, as needed). For each project, we would simply enter into a short letter agreement referencing the enabling agreement. I've outlined the agreement below as a starting point for discussion. The numbers are Mark's; we'll have to discuss whether they are appropriate. I've omitted any payment for a letter of intent because since they are nonbinding, letters of intent are of little value to Transwestern. Call me after you've reviewed this and let's discuss how you want to proceed. From time to time during the term of the enabling agreement, IGS may present brief, preliminary project proposals to Transwestern. If Transwestern desires IGS's assistance in developing a particular project, it will so notify IGS in writing and shall execute an agreement with IGS adopting the following terms and conditions: 1. Retainer for project development: $1000/month plus expenses. Project development shall include but not be limited to: research, due diligence, market analysis, negotiation with counterparties (to the extent specifically authorized by Transwestern), reporting to marketing representatives of Transwestern as requested by Transwestern, and preparing a detailed written proposal. Transwestern and IGS may agree in writing to other project-specific requirements. Transwestern shall continue to pay the retainer each month until a definitive agreement is signed with the counterparty or Transwestern notifies IGS in writing that it has decided to terminate the project. 2. If Transwestern accepts the project described in IGS's written proposal (or with modifications after reviewing the written proposal), it shall pay IGS a fee of [the lesser of] $5000 [or ___% of the net present value of the project]. "Accepting the project" means that the project meets Transwestern's financial, regulatory and other criteria and the Transwestern Commercial Group has obtained the necessary officer approval to pursue the project to completion. Accepting the project and paying IGS pursuant to this paragraph in no way obligates Transwestern to pursue the project to completion. 3. If Transwestern signs a definitive agreement with a counterparty for the project, it shall pay IGS $10,000. Additionally, the parties may negotiate an additional incentive fee (to be agreed upon and documented at the outset of the project). (I will also include provisions on termination, confidentiality, etc.).