Apparently, if Pettitte gets injured, he will not exercise his player option for 2008. Randy Hendricks:

"Both teams know that if Andy gets hurt, he won't take the option," Hendricks told the Chronicle. "The Astros flat turned me down."

Some info on what Houston offered:

Nevertheless, Pettitte still felt the tug of home, though the Astros, who had nearly acquired starter Jon Garland from the White Sox on Thursday, didn't seem as interested in the lefty. Hendricks wrote in an E-mail that he proposed a one-year deal at $14 million with a player option for $14 million in 2008 to Houston. "The Astros declined," Hendricks wrote. Houston offered $12 million.

Also, there is talk that the Orioles made a late run at him, as well:

A recruiting call might have helped, too - Torre called Pettitte to tell the lefty how much the Yankees wanted him. The Orioles apparently made a late, unsuccessful run at Pettitte, offering four years and $66 million, according to a baseball official. Hendricks would neither confirm nor deny any Baltimore involvement.

Via Pro Sports Daily.