This is a long email, you may want to print out to read.

Settlement Conference Call Issues:

We are set for the 8:30 conference call tomorrow morning.  I'll come to your
offices.   Have Leslie and Tom had any discussions about the calculation of 
the
proof of claim?  I assume not given that they want EPMI to sign the
confidentiality agreement that I faxed to you yesterday.  The confidentiality
agreement essentially says that we'll treat any communications and documents
shared in the settlement discussions as confidential.  The only problem I have
with the scope is that for the pure factual exchange about how they are
calculating our proof of claim (the unpaid electricity sold in May, June and
July), that is not confidential or proprietary information and we shouldn't 
have
to go take discovery to prove it up if we aren't able to reach a settlement.
However, that discovery should not be burdensome, and I doubt that the Trustee
will agree to go forward with the settlement conference unless we sign the
agreement.

     Action Required:

     1.   I would appreciate it if you would look at the agreement and let me
know whether you're willing to sign it.  If so, please execute it and fax it 
to
me so that I can get it to the Trustee before the call tomorrow so that we 
don't
waste any time.

     2.   If you don't want to enter into it, then please let me know so that 
I
can let them know and determine whether there is anything we can discuss with
the trust tomorrow.

     3.   Could you please let me know what phone number that I should give 
the
Trustee and counsel for them to call us tomorrow at 8:30 am.  If you'd prefer
that we place the call, let me know and I'll get the phone number -- (but I
suggest that the cost of the call be on their ticket.)

Termination Notice Issues:

     We have taken a look at the law in Texas in connection with their
anticipated allegation that we did not provide notice consistent with the 
terms
of the Master Agreement, they did not receive the June 25 letter, and,
consequently, we did not properly terminate the transactions under the Master
Agreement and are not entitled to use the termination payment provisions of 
the
Master Agreement.

     The bottom line is that if we can prove actual receipt, then sending it 
to
the wrong address will not negate the effectiveness of the notice.  Texas
Utilities Electric Co. v. Aetna Casualty & Surety Co., 786 S.W.2d 792 (Tex. 
App.
-- Dallas 1990).  The standard used in most cases is "substantial compliance"
rather than "strict compliance."  "An address that is correct in all respects,
except that it is not the address in the notice section of the contract can
fully perform the function of the specified address, absent the special
circumstance that a particular separate address for distinct purpose is 
brought
to the attention of the contracting party."  Ray v. Metropolitan Life Ins. 
Co.,
858 F. Supp. 626, 628 (S.D. Tex. 1994).  I assume that there was no discussion
about the address given in the Master Agreement and no discussion about the
importance of using that address for the June 25 non-payment notice.

     Section 8.3 of the Master Agreement states that "Notice by facsimile . . 
.
shall be deemed to have been received by the close of the Business Day on 
which
it was transmitted . . . ."  Thus, by the terms of the Master Agreement 
itself,
EPMI's transmission confirmation should be sufficient to prove that it was
transmitted and received.

     If PCA disputes receipt, we have the burden to prove receipt.  Although a
notice provision that allows delivery by mail of fax shifts the risk of
non-delivery of the notice from the sender to the intended receiver, if the
sending party fails to use the address specified in the contract, the risk of
non-delivery shifts back to the sender.  See, e.g., University Emergency
Medicine Foundation v. Rapier Investments, Ltd., 197 F.3d 18, 23 (1st Cir.
1999).

     In terms of what evidence we can present to prove that the fax was sent 
and
actually received, obviously the fax and confirmation sheet are the most
important pieces of evidence we have.  In addition, we would want to have
testimony from the author (James Fallon and/or Jeff Hodge) and the person who
actually faxed it (Jeff's secretary (?) who made the hand written notation on
the fax cover sheet).  In Ray, Judge Hughes stated:  "[t]he evidence showed 
that
it [the letter] was prepared and processed as were all of the other letters 
sent
to Energy Resources.  The likelihood that the letter was not received is 
remote,
especially since all the other correspondence was received."  858 F. Supp. at
628.   Proof that all the other confirmation notices were received at the CT
address and acted upon by PCA will help us carry the burden of proof on actual
receipt.

     Our waiver or modification argument based upon course of dealing is not 
as
strong as I had hoped.  The Master Agreement provides in section 8.6 that 
"[n]o
. . . modification to this Master Agreement shall be enforceable unless 
reduced
to writing and executed by the Parties."  Courts have upheld these
non-modification provisions.  See, e.g., Brookside Farms v. Mama Rizzo's Inc.,
873 F. Supp. 1029 (S.D. Tex 1995).  In Brookside, the court articulated the
black letter law  just described, but then found that the non-waiver clause 
did
not protect the party asserting it because of certain equitable factors.  If 
the
PCA New York office was closed or defunct at the time the June 25th letter was
sent , we could rely on that to try to escape the non-waiver clause ruling in
Brookside.

Motion to Compel Arbitration:

A quick and interesting update:  As you recall, the Trustee has asked for an
extension of the briefing schedule to allow them to determine whether we will
settle the case.  Richard was agreeable to a "short" extension.  When I
communicated this back, Jane Parver indicated that the Trustee would want
discovery of the intent of the parties in connection with the arbitration
clause.  From previous conversations with Elizabeth, my sense is that the
"intent" evidence is nonexistent because it was not "negotiated," or the
evidence will not necessarily help us because at the time the Master Agreement
was entered into, EPMI wanted a more limited arbitration clause.  If I
understand correctly, similar agreements now have broader language to require
arbitration or any and all disputes.  Please let me know if I'm incorrect in 
my
assumption.

I assume that we will go along with the "short" extension of two weeks, but if
Parver follows through on her statement, she's going to want a deposition of
someone knowledgeable of the intent of the arbitration clause.

I look forward to seeing you tomorrow.  Thanks.



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