Re: Change to standard ISDA Schedule

Dear All,

David Minns has obtained local counsel (ISDA's counsel) on this issue (see
email below). It appears that we can retain the additional wording without
affecting the effectiveness of the close-out netting under the ISDA Master.

Regards, Edmund

---------------------- Forwarded by Edmund Cooper/LON/ECT on 02/28/2001 02:20
PM ---------------------------

David Minns@ENRON_DEVELOPMENT
02/27/2001 11:57 PM
To: Edmund Cooper@ECT
cc: Alan Aronowitz/HOU/ECT@ECT

Subject: Re: Change to standard ISDA Schedule

Edmund let me compliment you on your thoroughness in picking up the issue
with the standard Clause 2(a)(iii) alteration and the Australian Payments
Systems and Netting Act.

The good news is that you may retain your standard wording with Australian
counterparties and not sustain additional exposure. I asked external
counsel to provide a second opinion to confirm my analysis, which I enclose
for your records.

Alan Aronowitz/HOU/ECT@ECT

Hope you find it of assistance.

David Minns
Senior Legal Counsel
Enron Australia
Phone 612 9229 2310

From: Alan Aronowitz@ECT on 21/02/2001 05:35 PM CDT
To: David Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt
cc:

Subject: Change to standard ISDA Schedule

FYI.
----- Forwarded by Alan Aronowitz/HOU/ECT on 02/21/2001 04:35 PM -----

Edmund Cooper
02/21/2001 12:23 PM

To: ECT London European Trading, T Paul Johnson/EU/Enron@Enron, Janet
Wood/EU/Enron@Enron, Matthew Dawson/LON/ECT@ECT, Michael Slade/LON/ECT@ECT,
Jonathan Marsh/EU/Enron@Enron, Mark Evans/Legal/LON/ECT@ECT
cc:
Subject: Change to standard ISDA Schedule

Dear All,

In the course of current ISDA Master Agreement negotiations with an
Australian counterparty it has come to my attention that the ISDA netting
opinion for Australia specifies that certain Sections of the ISDA Master
should not be altered; otherwise reliance on the opinion, and close-out
netting, could be jeopardised. In particular the opinion specifies that
Section 2(a)(iii) should not be altered.

Enron has a standard alteration to Section 2(a)(iii) in Part 5 of its
standard form Schedule, viz.

"(a) Conditions Precedent. The condition precedent set forth in clause (1)
of Section 2(a)(iii) shall not apply to payments owed by a party if the other
party shall have satisfied in full all its payment obligations under Section
2(a)(i) and shall at the relevant time have no future payment obligations
whether absolute or contingent, under Section 2(a)(i)."

Obviously, in the case of Australian counterparties this condition precedent
should not be included in our documentation.

In addition, there are a number of other countries (including Germany, Italy,
South Korea and Switzerland) where the effectiveness of the ISDA netting
opinion presupposes that certain Sections of the Master, including Section
2(a)(iii), are not altered in any material respect. To that end I would
suggest that our standard condition precedent does make a material alteration
and that it should not be included in ISDA Master Agreements with
counterparties trading from these jurisdictions.

Certainly from the London end, I think that when we start negotiations with a
new counterparty we should check the ISDA opinions to ensure that we don't
trip ourselves up.

Regards,

Edmund