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Rod: I found my file and here is where things stand: 1. On cross default threshold, they wanted it to be the same as the collateral threshold but my notes indicate that they were okay leaving it at $100,000. 2. In lieu of receiving financials from them, we had agreed to accept quarterly and annual Lease Operating Statements. Did I use the correct term? Do we need a definition for this or is it understood what these statements are? I am also assuming that they are internally prepared. Is that correct? My notes indicate that these would be provided within 90 days after quarter end. 3. We agreed to a collateral threshold for them of $500,000. 4. For the MAC trigger, is the only test the Net Cash Flow/Revenue test and if so, what would trigger the MAC? Are there other triggers? We used to have Funded Debt/Partners Capital, EBITDA Coverage Ratio and Minimum Partners Capital tests. Alos, here are my proposed definitions: Cash Flow means Net Income plus depreciation and non-cash charges minus capital expenditures as shown on the income statement. Net Income means gross revenues and other proper income credits, less all proper income charges, including taxes on income. Revenue is cash received from the sale of oil, gas and plant products. Should there be references to the Lease Operating Statements in these definitions? 5. All Performance Assurance would be rounded up to multiples of $10,000. This is all that I have. Let me know what you think. Carol
SG Interests V
Mark: Could you please take a quick look at this too and let me know if you have any comments? I'm at 33989. Thanks. Carol
Domain name transfer agreement
Jason: Could you help me review this? I thought that given your review of some of the other agreements that you might have some helpful suggestions about what to look out for from our standpoint. I have sent a copy of this to Mark Holsworth. Thanks. If we need to sit down with Mark Tawney and ask him questions about what this should cover, let me know. carol
Domain name transfer agreement
Rob: I am faxing to you our comments to the latest drafts of Schedules. Our credit person has agreed to make the MAC trigger as an additional Termination Event so long as (1) we limit the trigger to the S&P rating; (2) we provide a cure concept that the non-Affected Party controls subject to a cap; and (3) we remove the MAC trigger from the collateral threshold definition. I have included some proposed language. Also, with respect to the partnership agreement, I seem to recall that you were reluctant to send us a copy as we traditionally review LP agreements as a part of our due diligence. Is that still the case? I like what you did on the Termination Event but we need some comfort that you cannot alter or narrow the GP's liability that is provided by statute. Could you please give that some thought and we can talk further about it? Tomorrow is bad for me to talk but the rest of the week after tomorrow looks good if you have some time. Carol
Comments
Shari: I am negotiating an ISDA with Dresdner Bank and I have the following questions concerning their mark-up of the FX/Currency Option language: 1. In the EMU Protocol language they want to add a reference to Section 6. I'm not sure why but wanted your thoughts on this. Are there any circumstances under which we do not adopt the Protocol provisions? 2. They want to define the FX Definitions as the 1998 FX and Currency Option Definitions as amended and supplemented by the 1998 ISDA Euro Definitions. Is this okay? What is the effect of this? Should we change our form to do this? With respect generally to the FX and Currency Option Definitions, as a general rule are they always incorporated by reference into the terms of any FX and Currency Option transaction even if it is electronically confirmed? They wanted to add language to that section of our form specifically stating this. Thanks in advance for your help. Carol
FX/Currency Option Questions
Russell: Here is what their letter should say to us: Reference is made to the Guaranty Agreement dated as of September 1, 1998 from American Central Gas Companies, Inc. ("Guarantor") for the benefit of Enron North America Corp. ("Enron"). By letter addressed to you dated April 6, 2000 (the "Termination Letter"), Guarantor terminated its obligations under the Guaranty. The purpose of this letter is to notify Enron that such Termination Letter is null and void such that no termination of the Guaranty by Guarantor has occurred. In addition, Guarantor hereby agrees to amend the Guaranty by (1) changing the amount set forth in Section 1(b) from $1,000,000 to $2,000,000 and (2) by changing the text of the fourth paragraph in Section 6 to read as follows: "This Guaranty shall terminate on the date (such date being the "Termination Date") that is the earlier of (a) July __, 2000 or (b)
American Central
Steve: Here is what I have found out from our credit and confirms people. We are still confirming all trades with BT. Further, when our credit person spoke with yours, they indicated that this would continue until a Master with DB is put in place. Is all of this consistent with what you have heard?
BT Trades
John: I was reviewing an amendment that Susan bailey was working on concerning the ISDA Master between ECC and Petro Canada and wanted to make sure that you were comfortable leaving as is the following provisions that are in the Schedules: 1. They have amended the definition of Specified Indebtedness. I'm not sure I understand why if we have a threshold amount they need the first part of the language and wanted your thoughts on this. Alos, does the second part of the language need to be updated or revised in any manner? 2. They have deleted the concept of Credit event Upon Merger. 3. They have added to Specified Transaction a Physical Master Agreement which makes this part of the cross default to specified transaction Event of Default trigger. Should we specify a threshold? 4. They have added an additional termination event that contains some unusual ratings triggers. For example, are we rated by the 2 bond rating services that they describe, and if not, doesn't that trigger clause (2) of this additional Termination Event? I don;'t think the cure language works and I don't understand how it works with the collateral threshold since the trigger for that to go to zero is something else. 5. I'll just note that setoff rights do not currently apply if there is a Termination Event that is caused by Tax Event or Tax Event Upon Merger. 6. In the CSA, we have permitted cash and government securities which I think is problematic given our general rule in Canada that we only take LC's. 7. There is a Minimum Transfer Amount of $500,000. Please call me when convenient to discuss further. Carol
Petro Canada
Michael: I thought that you should be aware of this Transfer Agreement since it involves EEL. Mark Holsworth has reviewed it and I am taking a look at it. If you have any thoughts or questions, please call me. Hope all is going well with you and the group. Carol
Domain name transfer agreement
Mark: Can you give me a sense of when you think Margaux will close? The only reason I'm asking is because I will be taking maternity leave at some point in time in the next 2-21/2 months and I want to make sure that if necessary, I get someone else involved. Hope all is going well. Carol
Margaux
Mark: Enclosed is a revised draft of the Domain Transfer Agreement with my comments and questions inserted. Please call when convenient to discuss. Have you heard from Mark Palmer yet? Alos, Mark Haedicke asked me to let John Lavorato know that we were entering into this Agreement and I will leave him with a voice mail today. Carol Michael: Do you have any comments? Also, are you okay with NY law and should we add an arbitration provision?
Domain Transfer Agreement
Susan and Susan: Could someone make sure that you check Marie's chair this week while she is gone for anything that needs to be acted on before she gets back? Thanks. Carol
Marie Heard's Work
Scott: Mark Holsworth suggested that I send this draft Agreement to you which provides for Enron's transfer of the domain name weather-desk.com. I am particular concerned about our ability to make the reps in Section 3. What I am sending you reflects our comments to the other party's draft. I look forward to hearing from you.
Domain Name Transfer Agreement
David: Enclosed for your review is a draft amendment letter for the above counterparty. All of the requested chnages are driven by the fact that BPA is a federal agency. I look forward to hearing from you. Carol
Bonneville Power Administration
Taffy: Could you please schedule a meeting for next week for our entire group (including Jason Peters) for 11/2 hours to go over changes that need to be made to our forms? It might be nice given the amount of time to schedule around the lunch hour and order lunch. Thanks. Carol
Forms Meeting
Does anyone know why in our form of LC we have language that seems to qualify Section 13(b) of the UCP which sets forth the amount of time that the issuing bank has to honor drafts? I don't see anywhere in our form where we modify this Section. Here ios the current version that we are using. Carol
LC Question
David: Enclosed is a draft of the GPU Energy ETA amendment letter. Leslie Hansen is working with them on the "affiliate" issue so there may be more to add to it. Please let me know if you are okay with these amendments. carol
GPU Energy Amendment Letter
John: As we discussed, here is a draft of a proposed amendment letter which covers the issues that we talked about. Depending upon how Leslie handles the affiliate issue, more may be added to this. Alos, as I ,mentioned to you, this needs to be approved by the head of our Online group before I can sign off on it. I am in the process o getting that approval. Carol
Draft Amendment Letter
Sara: Here are the final forms of Annex A for ENA and ECC. Susan: Please make sure that these are put into the form bank. Carol
Annex A - Final Forms
Susan: In preparation for our forms meeting next week could you please have your secretary prepare sets of the latest versions of the following for the group (Jason included): 1. ISDA Schedule 2. CSA Schedule plus LC provisions 3. Industrial Master 4. Annex A - ENA and ECC 5. Annex B to Omnibus Form (include all collateral variations) 6. Canadian and US Tax Annexes 7. Guaranty Form Did I miss any forms that we should talk about? If they could be distributed by Monday - Noon, that would be great. Thanks. Carol
Forms Meeting
Maria and Adele: I am embarrassed to say that our fax dept. misplaced the fax that I sent to you with my comments. Could you please fax it back to me before our call?
Missing Fax
David: Enclosed is a new draft of the Kennecott amendment letter. Mark and I have discussed the counterparty termination language and have come up with the language that I have high;lighted. Upon your approval, I plan to use the same language for the Duke and Cinnergy letters.
Kennecott ETA Amendment Letter
Susan: I hope to finalize the Master today on our conference call. Could you please start pulling together the ENA and Enron Corp certificates? They are alos requesting a W-9. I would like to have all of these ready and executed by this time next week. I will send you the Enron Guaranty after it has been finalized. Thanks. Call if you have any questions. My contacts there are Adele Raspe and Maria Salvatore, her legal assistant. Carol
PSE&G
Susan: I would like to talk to you briefly next week sometime about what in your opinion would be the best way to train the new legal assistant that we plan to hire. In particular, could you give some thought as to what worked the best for you and what didn't work. I will keep whatever you say confidential. I also have discussed with Mark that I want you to play a significant role in the training process given the outstanding progress that you have made in the last year. Could you also give that some thought and let me know what you think? Thanks. Carol
New Legal Assistant Training
Alicia and Trina: Here are my thoughts on the latest drafts of the swap docs: Put Confirm 1. Looks like some type of price protection mechanism is contemplated in the Master Derivatives Agreement and I'm assuming it would go into this confirm 2. In the definitions of ISDA and Equity Definitions, please add amendments and supplements Harrier/Talon Schedule 1. We need to discuss footnotes 2, 3, 6, 9, 12, 13 2. I think that the mechanics for putting up the LC that is described in the Additional Termination Event that was added as clause (iv) needs to be drafted somewhere to address, for example, drawing conditions, what happens when Enron's credit rating improves, the comment made in footnote 6 etc. 3. In Part 4, Section (a) and in all of the notice sections the notice that goes to the AGC of the Trading Group goes to Enron North America Corp. not Enron Corp. 4. In Part 5, Section (l)(Recording) please add after the word "parties" the phrase "in connection with the Transactions hereunder." 5. In Part 5, Section (o) (Confidentiality), is the class of permitted discloses in clause (iv) too broad? Talon/Enron Schedule 1. In Part 1, Section (h) should a carve out from the definition of Identified Event be the new Termination Event that was added? 2. Why is Part 5, Section (n) in this Schedule? 3. Same comments as above Master Derivatives Agreement 1. Is the defined term Net Premiums worded right for purposes of the $400,000,000 limitation? For some reason, I'm thinking that a and b should be reversed. Talon Note 1. In Section 3.2, I'm not sure that the reference in the second paragraph to Part 5(m)(i) of the Enron Schedule applies since the setoff rights only benefit Enron and its affiliates. Also, what does it mean to refer to the Enron Guaranty here? Enron Guaranty 1. In Section 4, I think that it is fair for them to request that setoff only apply to the Guaranteed Agreements and unless I'm missing something, I think we can give on that point. That's all that I have. Have you discussed with Ben the point that we talked about last week concerning the difference between the calculation of "Net Talon Loss" versus "Loss"? I'm available tomorrow to talk about these points. Carol
Comments to Swap Docs
Susan: What is the status of this? I would like to see a draft of the assignment and Termination Agreement soon. Can you please prepare something for review sometime Monday? Thanks. carol
KN Marketing and Onoek
Susan: Has this Master been executed? I forgot what we specified as the effective date of the Transfer and Assignment Agreement with ARMS but we need to make absolutely sure that the effective date covers all trades that are done by ARMS and that there is no gap between that effective date and the effective date of our Master. Also, please make sure that Tana knows when the Utilicorp Master becomes effective so she can notify the online folks. Thanks.
Utilicorp
Brant: Their lawyer finally called me. We have a few open credit issues on our side that I need for you to think about: 1. Are you okay with the cross default threshold on both sides being 3% of stockholders' equity? They didn't like $100,000,000. 2. For corporate policy reasons, they cannot take advantage of affiliate setoff. Since I wasn't sure what relationships ENA and its affiliates had with this counterparty, I wasn't sure how strongly you felt about it. Please advise. Carol
El Paso Energy
Rob: On the recording language issue, we can agree to the following: Instead of limiting it to trading, marketing and scheduling personnel, we can agree that it is limited to all telephone communications that are made to or from each party's trading floor. This is because all calls that originate out of our trading area are always recorded no matter who picks up on the other line. Does that work for you? I'm still checking on the confirmation/transaction tape issue. Also, our credit person will agree to the Moody's trigger in the MAC language that we discussed.
Recording Issue
Susan and John: We have finalized the amendment with Transcanada. What we executed before still works. We modified slightly the LC form. They are faxing me their form of Guaranty and will send to Susan the docs.
TransCanada
Marie: I would like to fax and mail out the Annex A letters to the new counterparties to make sure that they all get them. My secretary is available to help with the mail out which I would hope could be sent out no later than the end of the day Thursday given that we are going to be away. I will let her know that you may be asking her to help. I would alos want someone while we are gone to check all of the return faxes against our list so that they all go out to the right numbers. Stop by if any of this is not do-able Tahnks. Carol
Annex A
Peter: Weyerhaeuser Company Limited, a company located in Ontario, wants to change the standard securities rep that we have in our current ISDA Schedule to the following: "It is a Qualified Party within the meaning of the Ontario Securities Commission, Rule 91-505 Over-the-Counter Derivatives." Our current rep is attached. Is this something that we can agree to? Carol
ISDA Securities Rep
Sara: When ENA enters into an ISDA Master with a Canadian counterparty, is that counterparty expected to make the ESP and Options rep? Does ENA make the Canadian Securities Act rep? Carol
ESP Reps
Susan: Could you please follow-up with Russell Martinson before our credit meeting tomorrow and see where things stand? As I indicated ion my e-mail to him, we need to make sure that the effective date for the Transfer Agreement is dated so that all ARMS deals are covered. Thanks. Carol
Utilicorp
Scott: I have been monitoring drafts of the swap docs. Are you or someone else in your group reviewing the other docs that involve Enron Corp. such as the Certificate Purchase Agreement that appears to have a bunch of reps that Enron has to make? I( have not been paying to much attention to the docs that don't involver the swap. Carol
Margaux
Michael: Our guys are meeting with Risk Management Solutions tomorrow morning. Scott Brown of V&E and I will be talking to them about the Agreement this afternoon. Have you heard anything back from John Sherriff? Carol
Domain Transfer Agreement
Lucy: We thought that it would be a good idea to meet with the "weather" group to introduce ourselves and alos to go over some of the basics, such as procedures for getting confidentiality agreements processed etc. Could you send me a list of who you think we should include in this meeting and Sara and I will do the rest? Will a lunch work? Carol
Weather Meeting
Susan: Please update me on this. I realize you've been busy on other matters but please carve out some time to complete this so we can put this behind us. Thanks.
Columbia
Nora: You may want to let the folks at Milbank and V&E know to send you stuff instead of Scott. My contacts in Houston from V&E are Trina and Alicia and in London is Jeff Eldredge. Mark Evans is my internal legal contact in London. Carol
Project Margaux - Revised Swap Documentation
Susan: Please e-mail to Rob Rieth the information he needs to complete Part 5, Section (n) of the ISDA Schedule (wire transfer info). Rob, With respect to Paragraph 13 (n) of the CSA Schedule, I think that we have already dealt with that in Paragraph 13 (l). Carol
Schedule Info`
Mark and Taffy: I went ahead and registered for this and another class (ENA Orientation) to save a spot for Samantha. We have until June 8th to cancel. Carol
Class Confirmation - Wellhead to Burner Tip
Maria: Could you please send me a redline of the Guaranty Agreements and LC (either by fax or e-mail) that crosses through and/or underlines the changes that were made? Also, please send me a redline (either by fax or e-mail) of both the CSA (when it is ready) and ISDA Schedules that underlines or crosses through the changes that were made so that I can sign off on this. The fax that I received did not indicate all chnages that were made in this way. Thanks.
New Drafts
Adele and Maria: Here are my final comments: 1. In the ISDA Schedule, Part 4, Section (f)(iii), we cannot accept a 30 day waiting period. Why can't the Guaranty be furnished when the Reorg becomes effective? 2. In each Guaranty, there is an extra zero in the "cap" amount. 3. In the PSE&G Guaranty, the Counterparty notice section should be just like what is in the Master for primary notices and copies. 4. In the LC, in the new language on the second page, change Uniform Customs to UCP. That's all I have. Subject to resolving point #1, please e-mail to me the Enron Guaranty and please coordinate with Susan Flynn on getting final versions executed and obtaining other closing items. I will review your opinion shortly.
FINAL Comments
Maria: I think that 2 minor chnages need to be made to the Enron Guaranty and probably the PSE&G Guaranty: 1. Change in the first paragraph "Enron North America Corp., a Delaware corporation to Enron North America Corp., a Delaware corporation and its successors and assigns 2. In the definition of "Agreement" include language that would pick up amendments, supplements, replacements and restatements thereof so its reads :"such ISDA Master Agreement, together with each Confirmation exchanged between the parties thereto and together with any and all amendments, supplements, replacements and restatements thereof, hereinafter the "Agreement") Let me know if you have a problem with this.
Enron Guaranty
Fred: Here is what we sent to Harry Stout. Lisa has been requesting from them a copy of the pleadings to make sure that all of our requested changes have been made and as of yesterday, I don't think that she had received anything. I will keep you posted on the status of these amendments. Lisa is the best person to advise you on the status of the bankruptcy proceedings and the timing of getting an order signed so that you can commence trading. Carol
Amendments from Stacy Dickson - Resending, 1st attempt failed
Russell: I have left repeated voice mail messages with Katie Flaherty, their attorney, and received no response. I think that someone needs to make a commercial call so that we can resolve the issues raised in my 4/28 letter. Carol
Energy One Ventures
Dave: The above counterparty has requested the following changes to the ETA: 1. Make the reps in section 2(d) reciprocal 2. Make the assignment provision in Section 6(b) reciprocal 3. In Section 6(c), insert the word "its" between the words "all" and "third". Please advise. Carol 3.
Midland Cogeneration Venture LP
Tana: Could you please talk to Anthony about the need for video conferencing as he mentioned something to Suzanne about needing that and let Suzanne know if we will be hooking anyone else in and if so, who and how? Alos, does a total of 20 people (which includes our group) sound right to you? Finally, what time do you want to start? We have the room from 11:30 to 2? Please let Suzanne know the above details. Thanks. Carol
Global Contracts Meeting
David: Just wanted to let you know that Jason is doing a fantastic job helping us out! He is eager and willing to do whatever we give him and a quick learner. You made an excellent choice and we appreciate it. Thanks.
Jason Peters
John: Please send Susan Flynn contact information for this counterparty so that we can send them our form of CA for the financial info that they intend to give us. I'm assuming that this is in connection with swaps that we will be doing with them. If there is anything else that we need to describe in the CA please let Susan know. Thanks.
Southern Company
Mike: I am waiting for our credit person to respond to some questions that I had in compiling our comments. As soon as i hear back from him, I will send you my comments by fax. Please e-mail me with your fax number. Thanks.
Comments
Susan: Could you please when you return on Monday circulate a list of issues that we need to discuss regarding the forms? Susan Flynn was keeping track of some of those issues after you left. I would like to try to get those issues addressed next week with the people that we need to talk to so that we can turn a draft of the ISDA Schedules, so please make this a priority. Thanks.
Forms Meeting
Cyndie: Tana Jones forwarded to me and Susan Flynn your e-mail regarding this. Could you please contact Susan Flynn at 39075 about this and she will take car of preparing the paperwork to take care of the ISDA's. Thanks. Carol
CES/Merchant Energy
Pam: How are things with you? I am doing great and feeling great! I've got about another 8 weeks to go and I'm looking forward to getting this part over with. I hope to work until pretty close to the end if my doctor lets me. Are you free for lunch anytime soon? I would love to see you and catch up. E-mail me back with some good dates and hopefully we can get together. Tell Patti I said hi. Carol
How Are You?
Mark: I just wanted to update you on where things stand currently with respect to the Domain Name Transfer Agreement that we are negotiating with Risk Management Solutions, Inc. After visiting with Scott about the reps and warranties, he became concerned about the overall scope of the agreement and in particular, what in addition to the URL domain name (weather-desk.com) EEL was being asked to transfer and the restrictions that RMS wanted to place on EEL with respect to this Domain Name and "any variations thereof." We went back to RMS and told them basically that all we were willing to do was transfer them the URL domain name with no strings attached. I'm not sure that this will be acceptable to them given their future intentions which is to acquire from another third party the name "weatherdesk.com" , register it and use it with respect to the products that they offer. All of these discussions that we have had over the past week with respect to our domain name have lead Seth, Scott and I to question what Enron's intent is with respect to the name or any variations thereof given the fact that according to Scott we have submitted applications to register similar names. We were hoping that you could help us answer this question or at least lead us to the right people that could. It seems odd that we would be wiling to transfer this name and yet feel that it is important to pursue registering these other names. I look forward to hearing from you.
Domain Transfer Agreement
Richard: In reviewing our ISDA forms we had the following questions for you with respect to the arbitration and process agent language: 1. Do any changes need to be made to our arbitration language? I have enclosed what we currently use. Also, should we keep in waiver of jury trial even if arbitration is chosen for situations where the award needs to be enforced in court? Is it necessary to have a statement that the award can be enforced in court? 2. We have assumed that there is no need to add our appointment of process agent language if our counterparty is either organized in the US or Canada or maintains a branch or office in the US or Canada. Is this a correct assumption? Enclosed is our process agent language. I look forward to hearing from you. As we discussed last week, we will arrange a time that you can talk generally to our group about arbitration issues and questions. Carol
ISDA Forms
Greg: Can you help me answer this question? Also, we have been through our ISDA forms and had the following questions with respect to Canadian law matters? 1. We have assumed that for all ISDA Masters where Canadian law applies, we should not insert our arbitration provision. Is this correct? 2. With respect to the Trade Option exemption and Eligible Swap Participant reps that we normally insert in our form (which I have enclosed below), we have assumed that the only time that these reps should not be inserted is when the Master is between ECC and a Canadian or Foreign counterparty? Is this correct? What we are unsure about is whther these reps are needed when ECC's counterparty is a US entity. We look forward to hearing from you. Carol
ISDA Securities Rep
Shari: Before I call their attorney about this I would like to talk with you briefly about the open issues and how negfotiations in the past have gone. Please stop by. I'll be tied up most of the afternoon until around 5 or so. Carol
Deutsche Bank
John and Molly: I have reviewed the ISDA Master that we have with Range Resources and here is a summary of the steps that need to be taken assuming that we have already notified them that they needed to post collateral: 1. An Event of Default occurs upon their failure to post collateral within 2 Business Days after notice of such failure is given to them by us. 2. Once an Event of Default occurs, then we can elect an early Termination Date. The "Loss: method applies here. As I mentioned in my voice mail, we need to coordinate closely with whoever will be doing the Loss calculation (and it should not be Fred or someone in his group) to make sure that they have the appropriate back up. We would send a notice declaring an Early Termination Date once the Event of Default had occurred and then subsequently provide them with our calculation of the Termination Amount. As I mentioned in my voice mail message, I need copies of all of the letters that we have sent to them along with copies of the confirmations of all outstanding trades. All notices will need to be sent by federal express delivery such that they won't be effective until the day after they have been sent out.
Range Resources
Tana: I have asked Suzanne to reserve the following dates for the big conference room on 30 for our upcoming lunch seminars: Friday, May 5th, Thursday, May 25th and Friday, June 16th. Sara and I are going to try and set something up with the weather group for the May 5th date if that works for them. Can we plan on scheduleing something with the confirms group and the global contracts group for the other 2 dates? Sara and I need to talk about what to do with the credit group. Carol
Upcoming Seminars
Susan: I spoke with Utilicorp's contract person today and we have decided to do the following: 1. Leave the ISDA dated May 3, 2000 2. Change the Assignment Effective Date in the Transfer Agreement to whatever date we agree upon with Utilicorp. Apparently, the ISDA has not been signed yet but will be by them in the next few days. Until Russell comes back, they cannot sign the Transfer Agreement. Could you please do the following this week: 1. Have the enclosed new form of Transfer Agreement signed and sent to Russell. Leave the date on Page 1 blank. 2. Send to Russell the additional certificate that he is requesting attaching ENA's resolutions. Thanks.
Aquila/Utilicorp
Susan: Please add the following to your memo: I(B) Footnotes #4 and 5 - revisit why FDI Act language is added. Consult with Richard Sanders regarding Process Agent, arbitration and Waiver of Jury Trial issues Footnote #22 - Sara to draft language providing for a mutual Termination Event Consult with Shari Stack regarding the need for the additional reps in footnote #55 Sara to confirm that language for footnote #73 can be used as part of our form for all counterparties II(A) Confirm that "ratings test" language in definitions of Letter of Credit and Letter of Credit Default works and is what credit wants Decide how "foreign bank" language in definition of Letter of Credit should work Confirm that our new Custodian language works for credit II(B) Can footnote #2 be deleted? Thanks.
Forms Issue
John: I have finally heard back from my credit person on all of the credit points that I wanted him to confirm. The only change that he raised was on the cross default where he said that the threshold was $100,000,000 for the Credit Support Providers and $10,000,000 for each party. I will send you a new mark up on that. Otherwise, everything else credit wise was as stated in your draft.
Credit Issues
Sandy: Susan Bailey passed on to me your comments to the ISDA draft and I can respond to some but not all of such comments at this point: 1. With respect to your Canadian securities rep, I am checking with our counsel in Canada about whether we can use your language instaed of ours. 2. With respect to the Options rep and the ESP rep in part %, Section (b), I believe that both parties need to make such reps. The rep in Part 5 (b)(g)(ii) is to cover the Trade Option exemption and it is different from the ESP rep below it. 3. With respect to the language in Part 5, Section (a), this is different from the setoff language. What this is saying is that if a party has fulfilled all of its payment obligations and an Event of Default occurs with respect to it (the "Defaulting Party"), the other party cannot withhold any payment that it owes to the Defaulting Party. This is different from the exercise of setoff rights. 4. I would like to discuss with you or your legal representative the removal of the arbitration language as it is Enron's policy to have arbitration apply. 5. We would prefer to keep the Termination Currency specified in US Dollars. 6. Our tax group believes that we need the language in Part 3(a)(i), (ii). Why do you want to delete it? I look forward to hearing from you.
ISDA Comments
Rhett: You may recall a few weeks ago I asked you about some language that one of our counterparties wanted as an amendment to the term "Indemnifiable Tax". Another counterparty, Deutsche Bank, has requested the following which I think is very similar to what we were looking at before: Notwithstanding the foregoing, "IndemnifiableTax" also means any Tax imposed by reasons of a Change in Tax Law by a government or taxing authority of a Relevant Jurisdiction of the payer, unless the payee is incorporated, organized, managed and controlled or considered to have its seat in such jurisdiction, or is acting for purposes of this Agreement through a branch or office located in such jurisdiction. In the ISDA Users' guide, they explain that the effect of this language is to eliminate the payee's risk of bearing new taxes imposed by the payer's jurisdiction even if the payee's activities in such jurisdiction is the basis for such taxes. (except if the circumstances in the definition occur). It thus results in the payer having to gross up for such taxes. Do you think that we can or should accept this?
ISDA Tax Issue
Steve: I am faxing to you my response to your Guarnty comments. While we are waiting on my credit person, would it be possible to get a redraft of the schgedules from you since a good portion of the comments that we discussed I beleieve we agreed to and would help me focus on what is left to discuss with my people? We have alos modified recently our form of LC and I have enclosed it for your review. Thanks.
ISDA Issues
Mark, Jason and Sara: Deutsche Bank has requested that we make various "Securities Act" reps in the ISDA Schedule in the event that we do equity derivatives. These reps require us and them to say: 1. To the extent that a Transaction involves the purchase and sale of securities, it will not be registered and the securities cannot be sold except pursuant to a reg statement or exemption. 2. Each party is a QIB or an accredited investor. 3. Unless otherwise set forth in a Confirmation, any securities that a party is required to deliver shall not at the time of delivery constitute restricted securities or be subject to restrictions on transfer. What do you think about this? Carol
Securities Act Reps
Suxzanne: Marie and I have a big fax and mailout that needs to be done this week. We are trying to get as much done as possible before we leave but I will need your help today, tomorrow and Thursday to make sure this gets done. The clerks will be faxing and I need for you and/or Marie's assistant to check the confirmation pages against our master list to make sure that they all have been sent out correctly. We are also doing a mail out. Could you please check with Marie Heard to see what you can do to help her out? Thanks.
Mail Out
Randy: Frank Davis will be contacting you today to give you guest access so that you can view the website. This would be the best way for you to view the products that are traded. Carol
Guest Access
Susan and Susan: In an effort to better manage your work flows, Sara and I would like to meet with you for about 30 minutes this week to get an idea of what's on your plate and what we can do to ease the work load. Could you please give this some thought and let Taffy know when you want to meet so she can get it set up? Thanks. Carol
Work Flows Meeting
Susan: Please order the existence and good standing certificates from Texas and Delaware that we will need as back-up for Mark's opinion. I anticipate having him sign it this week so please see if you can get faxed copies of these before Friday. Thanks. Carol
PSE&G Opinion
Susan: Could you have Taffy type up a new issues list based on your initial e-mail and the e-mail that I sent to you for tomorrow's group meeting so that I can pass it around? Thanks. Carol
Issues List
Steve: Our tax counsel has recommended that we not agree to the amendment to the definition of "Indemnifiable Tax" that you have proposed in your draft. Do you have a tax person that he can talk to and get this issue resolved? Carol
Indemnifiable Tax Language
Rhett: The above is a Canadian counterparty that we are negotiating an ISDA with. They had some problems with the tax language that we had in our ISDA schedule (which I have enclosed). Can I give them your name and number as a contact? Their tax person's name is Sheri Dunn. Carol
Weyerhaeuser Company Limited
Susan: I have marked up the amendment. On the CSA, I think we should just attach new collateral provisions which I have drafted and am enclosing with this e-mail. Could you please ask taffy to do a comparison of the new and old? I've attached both. Carol
Torch
Brant and Sara: Here is a very rough draft of a proposed letter agreement for NGTS. It requires some work but hopefully it's a start. It cannot be finalized until we see all of the physical and financial confirms and agreements and should NOT be sent to NGTS until Sara and I are comfortable that it works. Carol
NGTS
Adele: I have given the opinion to Susan to get signed. We are waiting to receive the Texas good standing certificate which we were told may come by tomorrow. Susan will send you everything else by fed ex tonight and it is my understanding that we are considering the Master to be effective with our opinion to follow. Thanks for your help on this. It was a pleasure to work with you and Maria.
ENA Opinion
Mark and Jeff: Trina and i talked about the issue that you raised with me today. Our preference is to structure the language so that it would only trigger an Event of Default under the Swap if the Enron merger caused an Event of Default under the Revolver. At the end of the day, we both felt that this is a call that someone on the commercial side should make, such as either Ben Glisan or Mike Jakubik. Carol
Enron Merger Trigger
Russell: We have received excerpts from Global's LLC Agreement. Its members are Global Petroleum Corp., YPF Distribution Company and Montello Oil Corporation. It is managed by a Board of 3 reps selected by each member and for this purpose, Global and Montello are treated as 1 member and YPF is treated as 1 member. I still need to talk to you about why we want an ownership change trigger in the ISDA and if we do, at what level. carol
Global Companies LLC
Suzanne: I may be in tomorrow but I will leave you a voice mail message one way or another. If I don't come in and I haven't used my discretionary day, please use that, otherwise treat it as a vacation day. Hope you have a great weekend. Be safe! If it is slow tomorrow afternoon, I have no problem with you leaving around 4:30 or so. Carol
Misc
Jeff: I am assuming that someone on the Enron Corp. side has signed off on the new "jurisdiction" language that has now been inserted into the swap assignment and schedule as this language is a fairly radical change from what we had in there before. Please confirm. Carol
Latest Swap Docs
John: Per ypur voice mail this is the lateset version of the ETA amendment letter without Leslie's chnages. Please confirm that this part of it is opkay with you and your counsel. Thanks.
ETA Amendment Letter
Sara: Sempra Energy Trading Corp. has requested that in lieu of them signing every single confirm that we send them that they sign periodically a statement that lists all of the outstanding deals where they acknowledge that they agree to the terms of such deals. Do you see any problem with that? Carol
Sempra
Dave: Per my voice mail message, this entity would like to sign the same amendment letter that kinder Morgan signed which I have attached. Please let me know if this is okay with you. Thanks.
Kinder Morgan Texas pipeline Inc.
Rob: Our credit person is okay incorporating the Specified Transaction concept without a threshold. Please call me at your convenience to discuss the remaining open issues. Thanks.
Credit Issue
Taffy: Did HR confirm that everything had been worked out regarding Samantha? Also, we need to do something with the remaining files in Marie's old office. Could you please coordinate this with Susan Flynn and Susan Bailey? Thanks. Carol
Samantha Boyd
Steven : I have finally had a chance to go over the outstanding credit issues with Rod Nelson, our credit person, and here are his responses: 1. We cannot agree to the additional language in the cross-default provision. We need a trigger that is not subject to interpretation and second-guessing and the language that you proposed does just that. 2. On credit event upon merger, we would prefer to define the standard for "materially weaker" as below investment grade. Is that a problem for you? 3. With respect to payment netting, we would prefer that netting apply to Transactions that are of the same product line (i.e. all commodity swaps). Is that a problem for you? We thought that your operational issue had to do more with netting across product lines. 4. In the Credit Support Annex, we would prefer that the number of days to resolve disputes over exposure and/or value be 2 business days instead of 1. I am in the process of reviewing the new drafts of ISDA and CSA Schedules and will get back to you shortly on remaining comments. Carol
Credit Comments
Sue: Sorry that I didn't get back to you over the weekend but with Arthur's baseball schedule and all the running around that we were trying to do, things were a bit hectic. I'm officially brain dead today so I thought that I would take a break and write to one of my favorite people. Things on the baby front are progressing well. On our last ultrasound we got the news taht we were hoping for with respect to the placenta problem and so I've got the green light basically to do whatever I want to do although I am still taking it easy and swimming alot. The baby weighed about 4 pounds a few weeks ago and everything looked great so I was quite relieved. Now I'm trying to spend what little free time I have getting ready. the people here at work are having a baby shower a week from Friday so hopefully that will help since other than some of Arthur's clothes I am starting from scratch. Work is going well although I am looking forward to winding down in a few weeks. I'm hoping that I can work up until the very end to maximize my time off but we will see how that goes. I really feel great except for being uncomfortable at night and not getting much sleep but i suppose that this is good practice for when the baby comes. Arthur is doing great. We got him 2 gerbils as a substitute for a larger pet! They're pretty cute, small, clean and so far easy to maintain. He is still heavily into baseball and was just selected for the All-star team which we were absolutely thrilled about as was he! He called dad practically every day that he was trying out for the team to give him an update and I'm hoping that dad can fly down for the tournament this weekend. Arthur would be on cloud nine if he came. We'll see. Mom and dad offerred to keep Arthur for a week over the summer and we are looking into that. I'm toying with the possibility of sending him when the baby is born, but I'll just have to see how it works out. I would really love for you and mom to come once the baby is born. Do you have any thoughts on that? You are obvious;y welcome at any time, but i sense from mom taht she would prefer to wait until sometime in august. Let me know what you think. How is Cindy doing? Do you know what she needs for her new addition? Do you want to get her a joint gift? Let me know. I'm happy to do either something on my own or jointly with you. How's Cate? Give her my best. What's new with you and your career situation? I hope that you are enjoying what you are doing. I certainly am and I am still undecided about what I am going to do once that baby is born, although I would really like to take the rest of the year off. I've got to run to my "baby class" tonight. Take care and I will try to catch up with you sometime. I love you! Carol
How Are you?
Scott and Bruce: I understand from talking to Jane this morning that we will be able to work with you as our counsel on the above transaction that we are working with ACE on. My understanding from our commercial people is that we should be getting a redraft of the insurance policy sometime today with ACE which we will need your help in reviewing. Leslie Hansen and I will be working on this from the legal end, with Leslie's focus being on the "power" issues and mine on the "derivative" issues. As I mentioned to Scott last week, we will alos need your help in making sure that the derivative taht we draft is not construed to be insurance. A draft of the confirmation taht we anticipate using will be sent out later this week. In terms of timing, our goal is to be on-line by June 15th which will require us to try to get all documentation finalized as soon as possible. I will keep you posted on any updates to our schedule. Please feel free to call me or Leslie (713-853-6121) with any questions. If there are others that we need to add to our distribution, please let me know.
Update on Insurance/Derivative Transaction
Rod: There are 2 open issues on Dresdner Bank: 1. Netting - they are saying that operationally they cannot net across product lines. Are you okay with this? 2. Calculation Agent - they want to be the Calculation Agent. Since we have no CSA with them, this means that they would be doing all of the calculations required under each transaction that we enter into with them. Specifically, the CA does the following: - calculates the Floating Price and the Floating Amount, Fixed Amount or Cash Settlement Amount payable - gives notice of Settlement and Payment Dates - determines whether a Market Disruption Event has occurred Also, my notes indicate that we agreed to increase the Guaranty cap to $25,000,000 from $15,000,000. Is that okay with you? They had initially requested no cap. On Reliant Energy Services, Inc., you were going to think about the following credit issues: 1. Specified Transaction - they want to include physical energy deals. You were going to think about this and whether we needed a cap. They wanted to amend the definition of Specified Indebtedness to deal with this, but I think you and I felt taht it should be dealt with in the definition of Specified Transaction. 2. Cross Default threshold - is 3% of equity okay? 3. On Credit Event Upon Merger, they want to define "materially weaker" as either (1) being below investment grade by either S&P or Moody's or (2) being failed to be rated by either S&P or Moody's. 4. On setoff, they did not have the "affiliate" language. 5. In the CSA, they want the collateral that is posted to secure both financial deals and physical gas and power deals entered into between ENA and Reliant Energy Services, Inc. 6. In the collateral threshold, they have proposed a matrix of S&P and Moody's ratings, with the threshold amount being the lower of the 2 ratings. AA-/Aa3 and above $20,000,000 A-/A3 to A+/A1 $15,000,000 BBB/Baa2 to BBB+/Baa1 $10,000,000 BBB-/Baa3 $5,000,000 Also, they have defined MAC to be going below BBB- by S&P or below Baa3 by Moody's or a failure to be rated by either S&P or Moody's. 7. In the LC provisions, they have different cure periods for each of the types of Letter of Credit Defaults that can occur. Here is a summary of the events and the time periods for transferring substitute colateral: - If issuer's credit rating is downgraded - 1 business Day after written demand by the Secured Party - if issuer fails to comply with its obligations under the LC or disaffirms or rejects the LC - 1 Business day after the pledgor receives notice of dishonor - if LC fails to be in full force and effect or issuer declares bankruptcy - 3 Business Days after written demand by Secured Party In our form, we require substitute collateral to be posted within 2 Business Days of the occurrence of the above events, except for a downgrade where the time period is 5 Business Days On SG Interests, you were going to talk to them about certain credit issues. Please let me know when you can where you stand on the above. Thanks. Carol
Dresdner Bank, Reliant, SG Interests
Sara and Jason: Here are my initial thoughts on how we can possibly shorten the weather confirms that are done under a Master Agreement. It seems like we could amend the Masters to include the following definitions which seem to be used in each conform: Payment Date NCDC NWS HDD CDD The Fallback Reference Weather Station procedures - the confirm would identify just the Fallback Reference Weather Station Data Sources Let me know what you think. Carol Alos, is it necessary to specify bank account information if that is already set forth in the Master?
Weather Confirms
Shari: The confirms desk has asked us to think about a way that we could shorten the confirms that are sent out under Master Agreements by amending each Master to include definitions/provisions that are common to all confirms. Below is what I have come up with. Do you see any problems with this? Carol
Weather Confirms
Mark and Jarrod: Regarding this project of streamlining weather confirms, Shari asked about the new language that we were gong to use to define the procedures for determining the Fallback reference Weather Station. Has that language ever been finalized? This is one of the things that I thought we could pull out of the confirms so before we send out any Master Agreement amendments, we should try to get this language finalized. Carol
Fallback Reference Weather Station
Scott, Bruce, Sam and John: Gaurav has informed me that the next draft of the ACE insurance policy will be distributed by ACE sometime tomorrow. What we would like to do is schedule a time on Monday that we could talk with you about it with the hope that we could have a discussion with ACE soon afterward. Could you please e-mail to me and Gaurav Babbar some times on Monday that work for you as a group and we will get something set up. Thanks. Carol
Ace Insurance Policy
Marie: I left Mary Gosnell a message making sure that she was of what we are doing and that she needed to provide you with any additional new counterparties that we have done trades with since last weeks list was compiled. Alos, could you please give Bob Bowen a call later today or first thing tomorrow if we haven't heard from him? Finally, it's my understanding that the comparison Annex A that we will attach to the letter will be the new Annex A that has been compared to the old annex a with the name change. Thanks. Carol
Mary Gosnell
Tana: I need to get copies pof all of the letters that have been executed that Mark and I have done. Do you have them? David F. wants me to prepare a summary of the amendments that we have agreed to. 'Carol
ETA Amendment Letters
Tina: The swap group which I am a part of needs one full set of closing docs separate from any set that Dan Lyons and his group may need. I'm in EB 3892. Thanks. CArol
Project Motown Docs
Leslie: I left in your chair comments/questions I had on what you drafted. Some of my comments may reflect my inability to understand exactly what we are doing. When you send this around, could you please send a copy to Joe Hunter on the confirms desk? Alos, Rod Nelson is our credit person. Finally, on the LeBeouf side, please include Bruce Wright in addition to Scott, John and Sam. Bruce's e-mail address is pwright@llgm.com. Thanks. Carol
Comments
Gaurav: Please add Bruce Wright's name on our side from LeBeouf. His e-mail address is pwright@llgm.com. I have e-mailed Rick Gieryn to let him know to add him to tomorrow's distribution. Carol
Additional Name
Rhett: I am going to send to you some revised tax reps that Dresdner Bank would like to use in lieu of what we currently have drafted. Could you please review them and let me know if they are acceptable? Thanks. carol
Dresdner Bank Tax Reps