RE: ISDA Master between ECT Investments and DLJIC

----- Forwarded by Sara Shackleton/HOU/ECT on 06/14/2000 02:03 PM -----

Shari Stack
06/06/2000 04:13 PM

To: Sara Shackleton/HOU/ECT@ECT
cc:
Subject: RE: ISDA Master between ECT Investments and DLJIC

Sara- They called me again today for a response. I told Suanne that I thought
you would be the one working on this and gave her your telephone number.

Thanks,

Shari

----- Forwarded by Shari Stack/HOU/ECT on 06/06/2000 04:06 PM -----

Shari Stack
06/02/2000 03:47 PM

To: Susan Flynn/HOU/ECT@ECT, Susan Bailey/HOU/ECT@ECT
cc:
Subject: RE: ISDA Master between ECT Investments and DLJIC

This response just came in on an ISDA I had worked on several months ago. I
don't have the time to keep this so I am passing it on.

Thanks,

Shari

----- Forwarded by Shari Stack/HOU/ECT on 06/02/2000 03:46 PM -----

"Dunn, Suanne" <SDunn@dlj.com<
06/02/2000 02:35 PM

To: Shari.Stack@enron.com
cc:
Subject: RE: ISDA Master between ECT Investments and DLJIC

Hi Shari,

I'm sorry it has taken me so long to get back to you. I had to get a few
people involved and it took a lot longer than I anticipated. However, I
have things organized now and have summarized my comments below. In
addition, we reviewed your form of guarantee. I have attached a mark up of
your guarantee to conform with our form of guarantee and where possible
amended our form of guarantee to conform with yours. (I believe there were
some conversations between my trader and your credit officer about
increasing the amount under your guarantee to $35,000,000.)

I think it would be helpful if we used my comments below and the blackline
of the guarantees as an agenda for a call to finalize the Agreement. Please
let me know when you would be available.

I look forward to hearing from you.

Best regards,
Suanne

Part 1(b) Threshold Amount: I know we agreed in concept to have the
Threshold Amount apply collectively to each party and their Credit Support
Provider, but I'm not sure we get there with your amendment. May I suggest
the following:

Threshold Amount means, with respect to Party A and its
Credit Support Provider, collectively, U.S. $100,000,000; and with respect
to Party B and its Credit Support Provider, collectively, U.S. $100,000,000.

Part 1(g) Credit Event Upon Merger: Thank you for adding the last sentence,
however, may I suggest clarifying it further as follows:

If such additional Eligible Credit Support is not provided,
or if additional Eligible Credit Support is deemed inadequate by Y in its
sole discretion, then the provisions of Section 5(b)(iv) shall apply without
amendment.

Part 2(b) Payee Representations: I am still waiting for a response from my
tax department.

Part 3(a) Agreement to Deliver Documents: (a) The W-8 ECI is not in effect
until next year, so we will only be able to deliver a W-8. In addition, we
believe the delivery requirements are a little onerous and we would prefer
to deliver the forms upon execution and thereafter upon request. ECT's
delivery requirements should be substantially similar. © We will provide
you with a copy of DLJIC's Memorandum of Association. We would also like to
receive similar documentation from ECT evidencing its authority to execute
the Agreement.

Part 4© Calculation Agent. Below please find sample language:

Calculation Agent. The Calculation Agent will be Party A
and Party B jointly or, in the event of a dispute, a reputable, unaffiliated
financial institution appointed by the parties. Notwithstanding anything to
the contrary contained in this Agreement, upon the occurrence of an Event of
Default or Termination Event with respect to a party, the Non-defaulting
Party or the non-Affected Party, as the case may be, or, in the
circumstances where there are two Affected Parties, as agreed between the
parties, shall be the sole Calculation Agent.

Part 4(i) Jurisdiction. We can agree to this clause provided that you agree
to conduct proceedings in New York City.

Part 5(g) Setoff. We can agree to your setoff clause with the following
amendments:

in line 2, insert "sole" prior to "non-Affected Party"

in line 3 and 5, please insert "(whether at such time or in
the future or upon the occurrence of a contingency)" following "amounts
owed" in each line

Part 5(r) Consent to Recording. Please add the following clause as
requested:

© Consent to Recording. The parties agree that each
may electronically record all telephone conversations between them and that
any such recordings may be submitted in evidence to any court or in any
proceeding for the purpose of establishing any matters pertinent to any
Transaction, provided, however, that notwithstanding the terms of this
clause, the parties do not waive any rights they may have under the
applicable rules of evidence.

CSA (b)(ii) Eligible Collateral. I believe we discussed adding Treasuries
with maturities greater than one year. We propose Treasuries under one year
with a Valuation Percentage of 99%, 1-5 years at 97% and 5-10 years at 95%.

CSA (b)(iv)(B) Thresholds. Please remove "Potential Event of Default"

CSA (d) Conditions Precedent. We asked that Tax Event and Tax Event Upon
Merger be excluded as Specified Conditions. There is no reason to stop
collateralizing a Transaction upon the occurrence of these events, because
if at the end of the remedy period the Transaction is terminated, then the
posted collateral will be returned, if applicable, according to the normal
procedures of the CSA. If the Transaction is terminated and the settlement
amount is not paid, then the non-Affected Party has the right to liquidate
the Collateral to satisfy its claim and you would want all Transactions,
including the affected transaction, to be fully collateralized at that time.

CSA (f) Dispute Resolution. (i) We can agree to two Local Business Days to
resolve a dispute. (ii) We suggested that the parties look to market
standard screens before polling dealers to determine Value. This is our
standard definition of Value:

Value. For the purpose of Paragraph 5(i)(C) and 5(ii), the
Value of Posted Collateral other than Cash will be equal to the sum of (i)
the face value of the Posted Collateral multiplied by the product of (A)
either (x) the closing bid price as quoted by Bloomberg Financial Markets or
Dow Jones Telerate Services as of Resolution Time or (y) the sum of the
arithmetic mean of the closing bid prices quoted by three mutually-agreed
upon Reference Market-Makers for the relevant security on the relevant date
and (B) the applicable Valuation Percentage plus (ii) the accrued interest
on such security (except to the extent Transferred to a party pursuant to
any applicable provisions of this Agreement or included in the applicable
price referred to in (i) of this clause) as of such date.

(iii) We can agree to transfer only the undisputed amount.

CSA (g) Holding and Using Posted Collateral. I have several thoughts on
this section. The Credit Rating for a party should include both S&P and
Moody's and a party's ability to hold Posted Collateral should be based on
the lower of those two. However, if the Posted Collateral is a letter of
credit, then a party should be entitled to hold the letter of credit
regardless of their Credit Rating. Under the terms of (g)(i), the party and
it's Custodian are individually entitled to hold Posted Collateral.
However, there are no requirements for a Custodian. I believe the
requirement of a Qualified Institution should apply to the Custodian. If
there is a ratings requirement for the party in order for it to hold Posted
Collateral and the party is no longer in compliance with that ratings
requirement, then in order to comply with the general terms of the CSA, the
party would have to transfer the Posted Collateral to a Custodian which met
the requirements of a Custodian or else it would be in breach of the
agreement (which would be an Event of Default if not remedied within 30
days). Therefore, if you apply the requirements of a Qualified Institution
to a Custodian under (g)(i), then (g)(ii)(2) and (3) can be removed.
Finally, we would like the requirements of the Custodian to be a rating of
at least A/A2 and having total assets of at least US $10,000,000,000.

CSA (h)(iii) Alternative to Interest Amount. Subparagraph (A) should not
apply. In the event that the downgraded party is the Secured Party (and
they were at the time of downgrade holding Posted Collateral) and Posted
Collateral is moved to a Custodian, there is no reason why the Pledgor, who
was not downgraded, should be penalized by not receiving interest payments
in the form of cash when they are paid on the Posted Collateral. As a
matter of fact, it is my understanding that it is more difficult
operationally to reinvest such funds and much easier to pay them to the
Pledgor.

CSA (m) Other Provisions. The definition of Federal Funds Effective Rate is
not necessary. Please amend the definition of Letter of Credit to reflect
the requirements of the issuing bank to include a rating of A/A2 and having
total assets of at least US $10,000,000,000. The definition of Material
Adverse Change should be amended to reflect the rating of both Moody's and
S&P.

Exhibit A Letter of Credit Provisions. (b) Please delete the parenthetical
in line 3 to 4 and conform (i) to the amended definition of Letter of Credit
with respect to the requirements of the issuing bank. (d)(ii) Y should be
entitled to draw under the LC in accordance with the provisions of Paragraph
8 of the CSA and not only upon the occurrence of an Event of Default. The
first sentence of this section should be amended accordingly. (e) Please
clarify the intent of this section. It is rather confusing as written.

Schedule I. The statement to be presented to the issuing bank should
conform to the circumstances under Paragraph 8 of the CSA under which the
Secured Party can demand payment and not just be limited to an Event of
Default.

<<Enron Gty to DLJ.doc<< <<Enron Multiple.DOC<<

< -----Original Message-----
< From: Shari.Stack@enron.com [SMTP:Shari.Stack@enron.com]
< Sent: Friday, April 21, 2000 4:02 PM
< To: SDunn@Dlj.com
< Subject: ISDA Master between ECT Investments and DLJIC
<
<
< Hi Suanne,
<
< I am pleased to attach the revised ISDA Schedule and CSA which contains
< most of the revisions DLJ requested. I would also like to let you know
< about the following:
<
< 1. Payee Tax Representation: I sent DLJ's suggested clause to my Tax Dep't
< and they said that feel such language is insufficient to permit us to not
< have to withhold with respect to interest and dividend payments, each of
< which could arise during the course of our trading relationship. My
< colleague in the Tax Dep't said he would prefer that DLJ certify that it
< is
< a foreign taxpayer entitled to receive payments under the document without
< reduction for withholding or other taxes. He said that DLJ would not be
< able to certify to this if the form of the document is the usual very
< broad
< form whereby it permits transactions of every type (both on and off market
< swaps - off market swaps being swaps involving a lending aspect) and thus
< the underlying document might have to be curtailed.
<
< 2. Documents to be Delivered: For the time being, I have made a reference
< in Part 3 to "Corporate Documents" to be given by DLJ. Please let me know
< what these will be.
<
< 3. Calculation Agent: I still need to get the language from you that makes
< the both parties the CA.
<
< 4. Set-Off: As you requested, I had a look at amending our clause to more
< closely reflect the ISDA Set-Off Clause but with the inclusion of the
< Non-Defaulting Party's Affiliates. Upon review - the clause in the
< document
< is very similar to the ISDA clause except for the 1st two sentences which
< bring in the Non-Defaulting Party's Affiliates (which we have agreed to
< have). The only other sentence in the clause that differs from the ISDA is
< the one which talks about conversion of the Early Termination Amounts. Our
< language goes ahead and makes it clear that all amounts need to to be
< converted to the Termination Currency. I think that is helpful.
<
< Thus I would propose to leave the Set-Off clause unamended.
<
< 5. Securities Rep's: We have been able to incorporate these with just a
< very few minor changes.
<
< 6. Resolution Time (CSA): I have discussed this with my Credit Officer and
< he thinks we really do need to have at least 2 Business Days to resolve a
< dispute.
<
< 7. Transfer of Collateral (all or just undisputed amount): Unfortunately
< my
< Credit Officer was unable to agree to transferring the whole amount
< requested, if part of the amount is in dispute.
<
< 8.Holding & Using Posted Collateral: I have reviewed this and the language
< we have proposed goes a lot further than what is in the printed CSA. For
< instance there is objective criteria contained in our language which is
< helpful to the Pledgor since it sets out that a party must have a certain
< credit rating to hold collateral. Also it sets out where collateral may be
< held. I would be happy to go through our suggested clause (g) and explain
< our reasons for asking to leave our proposed language in the CSA Schedule.
<
< The only other documents left to resolve are the Guarantees. I look
< forward
< to receiving your comments on ours (I believe we agreed to agree on a
< format and use it for both Guarantees).
<
< Kind regards,
<
< Shari
<
< (See attached file: 342a-ctr.doc) << File: 342a-ctr.doc <<

- Enron Gty to DLJ.doc
- Enron Multiple.DOC