Message-ID: <30616646.1075842193089.JavaMail.evans@thyme> Date: Thu, 17 May 2001 06:40:00 -0700 (PDT) From: stephanie.panus@enron.com To: carol.clair@enron.com Subject: ISDA Agreement between Enron Canada Corp. and CASCO Inc. Cc: russell.diamond@enron.com, mary.cook@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: russell.diamond@enron.com, mary.cook@enron.com X-From: Stephanie Panus X-To: Carol St Clair X-cc: Russell Diamond, Mary Cook X-bcc: X-Folder: \Carol_StClair_June2001\Notes Folders\All documents X-Origin: STCLAIR-C X-FileName: cstclai.nsf See below comments from Casco. ----- Forwarded by Stephanie Panus/NA/Enron on 05/17/2001 01:39 PM ----- "Tonon, Lina" 05/17/2001 01:30 PM To: "'stephanie.panus@enron.com'" cc: "'terry.gabriele@casco.ca'" , "'jack.jagdeo@casco.ca'" , "'cheryl.beebe@cornproducts.com'" , "'peter.johnson@cornproducts.com'" Subject: ISDA Agreement between Enron Canada Corp. and CASCO Inc. MESSAGE FROM STEVEN W. SMITH Stephanie: Russell Diamond has raised a number of issues on the ISDA Schedule with Terry Gabrielle of Canada Starch. I have discussed these issues with Mr. Gabrielle and thought it would be helpful if I set out Canada Starch's position on those issues. You will appreciate that it is important to Canada Starch that its ISDA Master Agreement and Schedule be consistent with those utilized in the Corn Products International family of companies. Accordingly, Canada Starch has very limited flexibility in moving away from the standard form of Schedule prescribed by Corn Products International for use by its subsidiary companies. 1. CASCO has not defined a cross default amount CASCO is suggesting a Threshold Amount of Cdn.$10 Million. 2. CASCO is requesting Market Quotation, as opposed to Market Loss We have reviewed the arguments for and against the use of Market Quotation versus the use of "Loss" and CASCO is of the view that the obtaining of Market Quotations from Reference Market-Makers is the more fair method to use. Accordingly, CASCO proposes to use Market Quotation, which incidentally is the Corn Products International Standard provision. 3. CASCO is not including additional cure language for Credit Event Upon Merger The suggested "cure" language of Enron is not consistent with the Corn Products International standard provision. CASCO's view is that Enron is free to offer these proposed solutions to CASCO in the event of a Credit Event Upon Merger and CASCO will determine whether or not to accept either of these "remedies" at that time. CASCO is not prepared to accept these remedies in advance of such Credit Event Upon Merger occurring. 4. CASCO is restricting the ability to net payments to only transactions of the same type CASCO is required to restrict netting on this basis because it does not have the systems in place to net across transactions of different types. 5. Cross default - CASCO is requesting to aggregate defaults for purposes of determining if the threshold has been exceeded CASCO's position is consistent with that provided in the Corn Products International standard and we believe is a fair method by which to deal with defaults which may individually be relatively minor in nature but in the aggregate, exceed the Threshold Amount. 6. CASCO is not accepting affiliate setoff Once again, affiliate setoff is not contemplated by the Corn Products International standard agreement. Moreover, CASCO questions the fairness of binding its affiliates to a setoff provision to which it might not be aware. Moreover, we have advised CASCO that the legal enforceability of an affiliate setoff provision is questionable. 7. CASCO, potentially, want to confirm physical transactions under the ISDA We assume that you are referring to the section of Part 7 Commodity Transactions which contemplates physical settlement. If that is the case, CASCO has put forward this provision because it is consistent with the Corn Products International standard. 8. CASCO has not included transfer, applicable rate and limitation of liability language in the schedule Each of these items were excluded because they are not consistent with the Corn Products International standard. With respect to the transfer provisions, CASCO is of the view that it is prepared to consider a transfer request from Enron once it knows the particular circumstances of the transfer. CASCO is not prepared to approve transfers in advance of knowing the details, not withstanding the continued existence of a guarantee. With respect to the change to Applicable Rate, as mentioned above, this change is not part of the Corn Products International standard and it is not clear to CASCO why this change should be made. With respect to the limitation of liability language, not only is this section not consistent with the Corn Products International standard, but it is also inconsistent with any other ISDA Master Agreement entered into by CASCO. 9. CASCO is not accepting the Credit Support Annex It is CASCO's understanding that the ISDA Master Agreement between CASCO and Enron was meant to be based on the creditworthiness of CASCO, without any Credit Support Annex or other form of Credit Support Provider being involved (other than the guaranty of Canada Starch Operating Company Inc.) Accordingly, CASCO is not prepared to enter into a Credit Support Annex. 10. There seems to be concerns with Enron's $15MM Guaranty cap It is CASCO's understanding that the ISDA Master Agreement is meant to be a foundation document for all future Transactions (as defined in the ISDA Master Agreement) which occur between CASCO and Enron Canada Corp. Accordingly, it seems inconsistent to CASCO to place a limit on the guaranty which Enron Corp. is prepared to provide. Any such limit would necessarily require CASCO to re-visit the guaranty and the appropriateness of the limit before any subsequent transaction is entered into. It is CASCO's experience in other ISDA Master Agreements that the guarantees provided by the Credit Support Provider of its counterparty are unconditional as to both time and amount. Stephanie, I hope the foregoing helps explain CASCO's position on the various outstanding issues in the ISDA Schedule. Taking into the account the foregoing comments, I look forward to receiving your comments on the draft Schedule which I forwarded to you on March 26, 2001. Lina Tonon Legal Assistant to Steven W. Smith Osler, Hoskin & Harcourt LLP Direct: 416-862-6610 Fax: 416-862-6666 ********************************************************************** This e-mail message is privileged, confidential and subject to copyright. Any unauthorized use or disclosure is prohibited. Ce message ,lectronique est privil,gi,, confidentiel et soumis . des droits d'auteur. Il est interdit de l'utiliser ou de le divulguer sans autorisation. **********************************************************************