Sheila, do you think we should meet with Rick Buy about this?  Or, should we 
talk about it without Rick and then respond accordingly?  The bottom line is, 
that the non-compete probably should stay as is, even in the case of RAC.  
Let's discuss.  Michelle


------------------------------------------------------------------------------
---------------------------

Michelle Cash
Enron North America Corp.
1400 Smith Street, EB 3823
Houston, Texas  77002
(713) 853-6401
michelle.cash@enron.com

This message may contain confidential information that is protected by the 
attorney-client and/or work product privileges.
----- Forwarded by Michelle Cash/HOU/ECT on 06/23/2000 04:46 PM -----

	Ted Murphy
	06/21/2000 06:25 PM
		 
		 To: Rick Buy, Sheila Walton/HOU/ECT@ECT, Michelle Cash/HOU/ECT@ECT
		 cc: 
		 Subject: My Contract


	


I have reviewed the proposed contract and have the following comments:

 1) The numbers appear acceptable but only in context with the rest of my 
comments
 2) The language is such as to even give an illusion that I could act in an 
independent and objective manner
 3) There is no consideration given for the obligations to not compete, 
solicit customers and employees, and speak harsh words
 4) The length of the non-compete is ludicrous, i.e. it is so long that it 
makes no sense for Enron to pay someone for it and the marginal 6 months adds 
very   little incremental protection to Enron from a competition 
perspective.  This might be appropriate for a member of the Executive 
Committee.
 

Let me go into some more detail on the above.
Point #2
All of Senior Management has told outside constituents (The Board, 
Shareholders, Investment Analysts, Rating Agencies, Regulatory Agencies, 
Banks and Counterparties) that the RAC Group is independent of the Business 
Units.  That is, given that our job is to provide objective analysis of the 
business activities, it has provided great comfort to these interested 
parties that our judgment is not influenced by the people who are taking risk 
on behalf of the firm.  Individual compensation is the foundation of this 
independence.  These parties have made judgments to provide capital (dollar 
or otherwise) to us based on the knowledge that this group in this 
independent configuration exists and is effective.  It has been specifically 
cited in reports as a strength and we are asked to make dozens of 
presentations each year to that effect.   This is especially true in the 
Market Risk function because, unlike other transactions in the firm, there is 
no analysis and approval chain for risk taking other than coarse buckets and 
the valuation, direction, and volatility are so opaque.  Independence is a 
cornerstone of the G-30 recommendations on derivatives.  I believe that these 
parties are much more concerned with what they can't see as opposed to what 
they can. 
I believe that our claim to have an independent function would be jeopardized 
if my bonus were a function of earnings targets and a PRC full of trading 
MD's.
This should be a simple guaranteed minimum.  

Point #3
If Enron wants the right to keep me on the shelf for up to 12 months, then 
Enron needs to pay for it.  While I understand that sign on bonuses and 
retention bonuses are discouraged, I have firm evidence that low level 
commercial people are receiving both without any senior management approval.  
The amount should approximate the market price for the job (all in) for the 
period of the non-compete.  This follows to point #4 - I don't expect anyone 
to pay me such additional amounts equal to my "target" compensation for 12 
months ($500,000!!!!).   The right answer is to shorten the non-compete to a 
maximum of 6 months and pay me for that.  I think that it would be equally 
stupid for Enron to not have the right to put me on the shelf for a 
considerable period of time given that I have and must continue to have 
complete access to all positions, p&l and the underlying contracts.   I would 
consider giving Enron the option (for a smaller premium) to have me 
non-compete which, if exercised, would trigger a larger payment.

There are some other smaller points that I have discussed with Sheila Walton 
which can be addressed later.

Please give your consideration to these items asap as I my old contract has 
expired.

Ted