RE: Mandatory Setoff Language

sounds ok to me

Elizabeth Sager
713-853-6349

-----Original Message-----
From: Keohane, Peter
Sent: Thursday, July 19, 2001 3:05 PM
To: Sager, Elizabeth
Cc: Haedicke, Mark E.; Flaman, Derek; Crawford, Sharon
Subject: FW: Mandatory Setoff Language

Please see the attached note. As our mass market retail contracts for Enron Direct Canada are much more unilateral in our favour, as this is more acceptable and consistent in this market segment, the existing set-off language in those forms provides broad rectangular set-off only in our favour. My inclination is to leave it that way for these forms unless you think otherwise. Peter.

-----Original Message-----
From: Crawford, Sharon
Sent: Thursday, July 19, 2001 11:46 AM
To: Keohane, Peter
Subject: Mandatory Setoff Language

SENT ON BEHALF OF DEREK FLAMAN:

Further to our meeting on July 17, I have reviewed both the new mandatory setoff language as set forth in Mark Haedicke's memo dated July 12, 2001 (the "New Setoff Language") and the setoff language contained in the Enron Direct retail forms (the "Retail Setoff Language"). The following are the most notable differences between the two:

1. The New Setoff Language is drafted for "triangular" setoff purposes. The Retail Setoff Language is drafted for "rectangular" cross-affiliate setoff; as such, Enron Direct may setoff any amounts owed by Enron Direct or any of its affiliates to counterparty or any of counterparty's affiliates against any amounts owed to Enron Direct or any of its affiliates by counterparty or any of counterparty's affiliates.

2. The New Setoff Language provides the non-defaulting party with the right of setoff - note that the non-defaulting party could be either an Enron entity or counterparty. The Retail Setoff Language provides only Enron Direct with the right of setoff - counterparty has no setoff rights.

Given that: (a) the aforementioned differences are beneficial to Enron/Enron Direct, and (b) my understanding is that such differences are generally palatable to counterparties in the retail industry, please advise whether the New Setoff Language should be inputted into the Enron Direct retail forms.

Regards,
Derek