Subject: FW: Revised Loss Definition.DOC
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked]
Date: Fri, 26 Oct 2001 08:18:11 -0700 (PDT)

Kim and Dan,
In an effort to come to closure on the one final issue I propose the following language.  
"(e)	Payments on Early Termination.  For the purpose of Section 6(e):  (i) Market Quotation shall apply to natural gas and crude oil Transactions with a remaining term at the time of the Early Termination of less than one year and Loss will apply to all other Transactions, and (ii) the Second Method will apply."

I believe that this provision would cover the vast majority of SAC's trades with Enron which are the types of trades which Enron considers most liquid.  This also addresses our concern of not having to obtain quotations on illiquid positions.  We would be willing to modify the Loss definition as set forth below (as proposed in my last email) which also addresses some of your concerns with the standard version of the Loss definition (while recognizing that it does not address all your concerns).  We believe this to be a fair compromise that attempts to address the concerns of both parties.  Please review the proposal and let me know if we can send a final blacklined copy of the agreement for your review.

Regards,
Brent 

"The definition of Loss shall be amended and restated in its entirety as follows: 

"Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith and in a commercially reasonable manner its total losses and costs (or gain, in which case expressed as a negative number), without duplication, in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them).   to be equal to the actual replacement cost to that party in entering into a replacement transaction.  Loss does not include any loss of bargain, cost of funding or, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading positions.  Furthermore, Loss does not include loss of bargain, or  a party's legal fees and out-of-pocket expenses referred to under Section 11.  A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable.  A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant market."