Here is Sullivan & Cromwell's reply.
---------------------- Forwarded by Mark Taylor/HOU/ECT on 10/23/99 03:29 PM 
---------------------------


"David Gilberg" <GILBERGD@sullcrom.com> on 10/21/99 10:41:12 PM
To: Mark Taylor/HOU/ECT@ECT
cc:  
Subject: Re: Online Trading - GTC/Master variation



If the PA and ETA are still structured as they were when I last saw them, the 
PA (which will be manually signed) binds the counterparty to the ETA and the 
ETA says that transactions will be governed by a master agreement, if any, or 
GTCs, if no master.  Assuming that is still the case, it seems to me that a 
letter sent to the counterparty, but not signed by it, will likely not 
override the PA and ETA already agreed to.  This seems particularly 
problematic if the reason for trying to override the ETA is to take advantage 
of better credit terms in the GTCs.  It seems to me that we would be better 
off either changing the ETA or supplementing it on-line; that way, we would 
at least have a click agreement, which the counterparty has agreed to be 
bound by.  Perhaps we should discuss further.  Thanks.

>>> "Mark Taylor" <mtaylo1@ect.enron.com> 10/21 11:34 AM >>>


This issue comes up when the Credit Group is not happy with the credit
provisions built into the already executed Master Agreement - they want the
ability to use the GTC with the credit provisions that allow us to call for a
letter of credit whenever we want to instead of having the online trade 
governed
by the master (as provided for automatically in the ETA).  What do you think
about Edmund's solution?

Mark
---------------------- Forwarded by Mark Taylor/HOU/ECT on 10/21/99 10:29 AM
---------------------------


Edmund Cooper
10/20/99 12:08 PM

To:   Jeffrey T Hodge/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT
cc:   Leslie Hansen/HOU/ECT@ECT, David Forster/LON/ECT@ECT, Amita
      Gosalia/LON/ECT@ECT, Justin Boyd/LON/ECT@ECT
Subject:  Online Trading - GTC/Master variation

Dear Jeff and Mark,

Justin and I have been discussing the way we should approach variation of the
ETA in respect of counterparties with whom we have an existing master 
agreement,
but for whom we want to have transactions governed by the applicable GTC for 
the
product in question.

The initial plan was to issue a letter to the counterparty asking it to sign 
and
return a letter agreement which would vary the provision of ETA which states
that a master agreement will govern all transactions.  We have now 
reformulated
our position and drafted a letter (attached below) which will simply be sent 
to
the relevant counterparty, but which will not require it to sign and return 
any
documents.

We believe that this letter will provide for an effective variation of the ETA
by stating that the counterparty's acceptance of the GTC on the EOL system 
will
mean that that GTC will govern transactions, and not the master agreement.  We
do not think that we need to make an explicit reference to the ETA.  Obviously
for this to work, such counterparty will have to be presented with the 'Accept
GTC' button at the usual juncture in the system.

In addition, we thought it best to remove an explantory paragraph stating that
we will be writing to the counterparty at a future date to revise the credit
provisions of the master (the whole reason for having the counterparty accept
the GTC over the master!!).

Obviously we welcome your thoughts on this issue and the attached draft.  I 
also
presume you will need to take a view as to whether varying the ETA in this way
will be effective under New York law.

Best regards,

Edmund.

(See attached file: EOL variation letter.doc)



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