EXHIBIT 99.1
Execution Copy
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MASTER AGREEMENT
AMONG
ENRON CORP.
ENRON NORTH AMERICA CORP.
ENRON NET WORKS L.L.C.
AND
UBS AG
DATED AS OF JANUARY 14, 2002
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TABLE OF CONTENTS
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Introduction...................................................................................1
Article I The Transactions.........................................................2
1.1. Transactions to Occur at Closing..........................................2
1.2. UBS Not Successor to the Enron Parties; No Assumed Liabilities............2
1.3. Closing...................................................................2
1.4. Deposit...................................................................2
Article II Representations And Warranties...........................................3
2.1. Representations and Warranties by the Enron Parties.......................3
(a) Organization, Standing and Power................................3
(b) Authority; Binding Agreements...................................3
(c) Conflicts; Consents.............................................3
(d) Intellectual Property; Information Technology...................4
(e) Reserved........................................................4
(f) Litigation, Liabilities, etc....................................4
(g) Compliance; Governmental Authorizations.........................4
(h) Employees and Compensation......................................4
(i) Certain Employees...............................................5
(j) Benefit Plans...................................................5
(k) Taxes...........................................................5
(l) Brokers.........................................................5
(m) Certain Regulatory Matters......................................5
(n) Financial Information...........................................5
(o) VaR Matters.....................................................6
2.2. Representations and Warranties by UBS.....................................6
(a) Organization and Standing.......................................6
(b) Authority; Binding Agreements...................................6
(c) Conflicts; Consents.............................................6
(d) Brokers.........................................................7
Article III Additional Agreements....................................................7
3.1. Bankruptcy Actions........................................................7
3.2. Non-Solicitation; Maintenance of Confidentiality..........................8
i
3.3. Expenses..................................................................8
3.4. Conduct of Gas and Power Business.........................................9
3.5. Further Assurances........................................................9
3.6. Access and Information....................................................9
3.7. Confidentiality..........................................................10
3.8. Employee Matters.........................................................11
3.9. Taxes....................................................................12
Article IV Conditions Precedent....................................................13
4.1. Conditions of Obligations of UBS and Enron Parties.......................13
4.2. Conditions of Obligations of UBS.........................................14
(a) Representations, Warranties and Covenants......................14
(b) Certificates...................................................14
(c) Related Agreements.............................................14
(d) Consents, Amendments and Terminations..........................15
(e) Employment Agreements and Offer Letters........................15
(f) Leases.........................................................15
(g) Canada.........................................................15
(h) Order Regarding Royalty Acceleration...........................15
(i) Employee Bonuses...............................................15
4.3. Conditions of Obligations of the Enron Parties...........................15
(a) Representations, Warranties and Covenants......................16
(b) Certificates...................................................16
(c) Related Agreements.............................................16
(d) Other Documents................................................16
Article V Indemnification.........................................................16
5.1. Indemnification..........................................................16
5.2. Certain Limitations......................................................18
5.3. Procedures Relating to Third Party Claims................................18
5.4. Procedures Related to Claims other than Third Party Claims...............18
5.5. Calculation of Indemnity Payments........................................19
5.6. Right of Set-Off.........................................................19
Article VI Miscellaneous...........................................................19
6.1. Entire Agreement.........................................................19
ii
6.2. Termination..............................................................19
6.3. Descriptive Headings; Certain Interpretations............................20
6.4. Notices..................................................................20
6.5. Counterparts.............................................................21
6.6. Survival.................................................................22
6.7. Benefits of Agreement....................................................22
6.8. Amendments and Waivers...................................................22
6.9. Assignment...............................................................22
6.10. Enforceability...........................................................22
6.11. GOVERNING LAW; JURISDICTION..............................................22
6.12. No Partnership...........................................................23
6.13. Termination of Confidentiality Agreement.................................23
Article VII Definitions............................................................23
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MASTER AGREEMENT, dated as of January 14, 2002, among Enron
Corp., an Oregon corporation and debtor-in-possession under
Chapter 11 Case No. 01-16034 (AJG), jointly administered,
in the Southern District of New York ("Enron"), Enron North
America Corp., a Delaware corporation and
debtor-in-possession under Chapter 11 Case No. 01-16035
(AJG), jointly administered, in the United States
Bankruptcy Court for the Southern District of New York
("ENA"), Enron Net Works L.L.C., a Delaware limited
liability company and debtor-in-possession under Chapter 11
Case No. 01-16078 (AJG), jointly administered, in the
United States Bankruptcy Court for the Southern District of
New York ("Net Works," and together with Enron and ENA,
individually an "Enron Party," and collectively, the "Enron
Parties"), and UBS AG, a Swiss corporation ("UBS").
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INTRODUCTION
The Enron Parties are or have been engaged in the business
of trading and marketing, and making markets in, Gas and Power Commodities and
related risk management and financial services in North America (the "Gas and
Power Business"). "Gas and Power Commodities" means natural gas (excluding
natural gas liquids) and electricity, as well as any swap, cap, floor, collar,
futures contract, forward contract, option and any other derivative instrument,
contract or arrangement based on any of the foregoing Gas and Power Commodities
and including, but not limited to, contracts for the forward delivery of
physical output or assets or physical load obligations. The Gas and Power
Business, as it refers to business conducted by UBS and its Affiliates after the
Closing Date, excludes the already-existing risk management and financial
services business of UBS and its Affiliates (including its business relating to
interest rate, foreign exchange and equity derivatives), as it may be conducted
from time to time, including as it may be conducted with counterparties in the
Gas and Power Business.
The Enron Parties, along with certain of their Affiliates,
have filed voluntary petitions (the "Petitions") for relief commencing cases
(collectively, the "Chapter 11 Case") under chapter 11 of Title 11 of the United
States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for
the Southern District of New York (the "Bankruptcy Court").
UBS desires to license from the Enron Parties certain
intellectual property used in the Gas and Power Business, receive from them
information technology support services necessary to operate the Gas and Power
Business as contemplated in the License Agreement, lease certain office space
from them for the conduct of the Gas and Power Business and employ certain of
their personnel relating to the Gas and Power Business, and the Enron Parties
desire the same, all in the manner and subject to the terms and conditions set
forth herein and in accordance with sections 105, 363 and 365 of the Bankruptcy
Code.
Enron and certain of its subsidiaries intend to continue in
the management and possession of their assets and businesses as
debtors-in-possession in the Chapter 11 Case pursuant to Sections 1107 and 1108
of the Bankruptcy Code and subject to the terms and conditions of this
Agreement.
In consideration of the mutual benefits to be derived from
this Agreement and of the representations, warranties, conditions, agreements
and promises contained herein and other good and valuable consideration, the
parties agree as follows:
Article I
THE TRANSACTIONS
1.1. Transactions to Occur at Closing. On the terms and
subject to the conditions set forth in this Agreement and subject to the
approval of the Bankruptcy Court pursuant to sections 105, 363 and 365 of the
Bankruptcy Code, the following transactions shall occur at the Closing (as
defined herein):
(a) the Enron Parties and UBS shall enter into the
Comprehensive License Agreement substantially in the form attached as Exhibit A
hereto (the "License Agreement"); and
(b) the Enron Parties (or their Affiliates, as applicable)
and UBS (or its Affiliates, as applicable) shall enter into the other Related
Agreements.
1.2. UBS Not Successor to the Enron Parties; No Assumed
Liabilities. Neither UBS nor any of its Affiliates shall be the successor to any
Enron Party, and other than obligations under contracts to the extent expressly
assumed pursuant to agreements entered into by UBS in connection with this
Agreement or the Related Agreements (the "Assumed Obligations"), neither UBS nor
any of its Affiliates does or will assume (or intend to assume) or become or
agree to become liable to pay, perform or discharge any obligation or liability
whatsoever of the Enron Parties or their Affiliates, whether relating to the Gas
and Power Business or otherwise, whether accrued or fixed, absolute or
contingent, known or unknown, determined or determinable (all such obligations
and liabilities being, collectively, the "Enron Parties Liabilities"). The Enron
Parties Liabilities shall be retained by the Enron Parties.
1.3. Closing. The closing (the "Closing") for the
consummation of the transactions contemplated by this Agreement shall take place
at the offices of Covington & Burling, 1330 Avenue of the Americas, New York,
New York 10019, or such other place as Enron and UBS shall agree, at 10:00 a.m.
(Eastern time zone) on the first Business Day following the date on which all
conditions set forth in Article IV shall have been satisfied or waived, or such
other date and time agreed to by Enron and UBS (such date of the Closing being
hereinafter called the "Closing Date"). The Closing shall be deemed to be
effective as of the close of business on the Closing Date.
1.4. Deposit. The $25 million check delivered as a deposit
on behalf of UBS to Enron shall be returned uncashed to UBS upon the Closing or
the termination of this Agreement in accordance with Article VI; provided that
if this Agreement is properly terminated pursuant to Section 6.2(a)(vi) and none
of clauses (i) through (v) of Section 6.2(a) are applicable, such deposit shall
be retained by Enron.
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Article II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties by the Enron Parties.
The Enron Parties jointly and severally represent and warrant to UBS as follows:
(a) Organization, Standing and Power. Each of the Enron
Parties (i) is an entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and (ii) has all requisite
corporate or limited liability company power and authority to own, lease and
operate its properties and to carry on its business as conducted prior to the
filing of the Petitions. Each of the Enron Parties is duly qualified to do
business and is in good standing in each jurisdiction in which such
qualification is necessary because of the property owned, leased or operated by
it or because of the nature of its business as conducted prior to the filing of
the Petitions, other than any failure to be so qualified that has not had and
could not reasonably be expected to have a Material Adverse Effect.
(b) Authority; Binding Agreements. The execution, delivery
and performance of this Agreement, the Related Agreements to which it is a
party, and all other agreements, documents and instruments contemplated in
connection with this Agreement to which each Enron Party is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate or limited liability company
action of each Enron Party. Each Enron Party has all requisite corporate or
limited liability company power and authority to execute, deliver and perform
its obligations under this Agreement and the Related Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby and
each Enron Party has duly executed and delivered this Agreement. Upon the entry
of the Bankruptcy Court Order, this Agreement will be and the Related Agreements
and such other agreements, documents and instruments executed in connection
herewith when executed and delivered will be, the legal, valid and binding
obligations of each Enron Party enforceable in accordance with their respective
terms.
(c) Conflicts; Consents. Assuming (i) the issuance of the
Bankruptcy Court Order, (ii) compliance with the notification requirements of
the Hart-Scott-Rodino Antitrust Act of 1976, as amended (the "HSR Act"), if any,
and (iii) obtaining the waivers and consents set forth in Schedule 2.1(c), none
of the execution and delivery of this Agreement, the Related Agreements, the
consummation of the transactions contemplated hereby or thereby, or compliance
by any Enron Party with any of the provisions hereof or thereof, will (A)
conflict with or result in a breach of the certificate of incorporation or
by-laws or comparable organizational documents of any Enron Party, (B) conflict
with or result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the provisions of any material note,
bond, lease, hypothecation, mortgage, indenture, license, franchise, permit,
agreement or other instrument or obligation to which an Enron Party is a party,
or by which its properties or assets may be bound or affected, or (C) violate
any law, statute, rule or regulation or order, writ, injunction or decree
applicable to an Enron Party or such party's properties or assets (except, with
respect to (B) and (C), such defaults or violations that would not reasonably be
expected to have a Material Adverse Effect). Except (i) as set forth on Schedule
2.1(c), (ii) for the Bankruptcy Court Order and (iii) for filings pursuant to
the HSR Act, if any, no material consent or approval by, or any notification of
or filing with, any person, firm, corporation, partnership, limited liability
3
company, trust, joint venture, association or entity (governmental or private)
is required in connection with the execution, delivery and performance by the
Enron Parties of this Agreement, the Related Agreements or any of the other
agreements, documents and instruments contemplated in connection with this
Agreement or the consummation of the transactions contemplated hereby or
thereby.
(d) Intellectual Property; Information Technology. The
Enron Parties hereby make the representations and warranties set forth in
Sections 18.1(d) and (e) of the License Agreement, mutatis mutandis, as if such
representations and warranties were included herein.
(e) Reserved.
(f) Litigation, Liabilities, etc. Except as set forth in
Schedule 2.1(f), there are not any suits, actions, claims, complaints,
litigation, investigations or legal or administrative or arbitration proceedings
in respect of the Gas and Power Business, pending or, to the knowledge of an
Enron Party, threatened, whether at law or in equity, or before or by any
federal, foreign, state, local or other governmental department, commission,
board, bureau, agency or instrumentality (other than matters that would not
reasonably be expected to have a Material Adverse Effect). There are not any
judgments, decrees, injunctions, rulings, awards or orders of any court,
governmental department, commission, agency, instrumentality or arbitrator or
against an Enron Party, any of its Affiliates, or any of their respective assets
or properties, relating to or affecting the Gas and Power Business (other than
matters that would not reasonably be expected to have a Material Adverse
Effect). None of UBS or any if its Affiliates shall assume or become responsible
for any liability or obligation of the Enron Parties or any of their Affiliates
of any kind as a result of its entry into and performance of this Agreement and
the Related Agreements, other than the Assumed Obligations.
(g) Compliance; Governmental Authorizations. Except as set
forth in Schedule 2.1(g) and except for any instances that would not reasonably
be expected to have a Material Adverse Effect, each Enron Party is in compliance
in all material respects with all applicable and legally binding federal, state,
local and foreign laws, ordinances, regulations, rulings, awards, statutes,
interpretations and orders (including those relating to environmental protection
and occupational safety and health (the "Environmental Laws")) (collectively,
"Laws") applicable to the conduct of the Gas and Power Business. To the
knowledge of the Enron Parties, there are no present or past conditions relating
to the Enron Parties or the Gas and Power Business that could reasonably be
expected to lead to any liability material to the future conduct by UBS of the
Gas and Power Business or UBS or its Affiliates or otherwise could reasonably be
expected to have a Material Adverse Effect, for violation of any applicable
Laws.
(h) Employees and Compensation. (i) None of the execution
or performance of this Agreement or the Related Agreements, the Bankruptcy Court
approval of this Agreement or the Related Agreements, or the consummation of the
transactions contemplated hereby or thereby will (A) entitle any shareholder,
director, officer, employee, independent contractor, consultant or agent of
Enron or any of its Affiliates to severance pay or termination benefits or any
other payment for which UBS or any of its Affiliates may be liable, (B)
accelerate the time of payment or vesting, or trigger any payment or funding (or
increase the amount) of compensation or benefits due to any such shareholder,
director, officer, employee, independent contractor, consultant or agent or
4
former shareholder, director, officer, employee, independent contractor,
consultant or agent for which UBS or any of its Affiliates may become liable or
(C) obligate UBS or any of its Affiliates to pay or otherwise be liable for any
compensation, vacation days, pension contribution or any other pension or
welfare benefits to any such shareholder, director, officer, employee,
independent contractor, consultant or agent for periods before the Closing Date,
or if later, the date on which such Person commences employment with UBS, or for
personnel whom UBS does not actually employ.
(i) Certain Employees. The names, places and dates of
employment and a description of job title and the current base annual salary
rates and the base annual salary rates, bonuses, deferred or contingent cash
compensation and other like benefits paid (in cash or otherwise) in 2000 and
2001 of all Eligible Employees (as defined in Section 3.8) have been provided to
UBS.
(j) Benefit Plans. Neither UBS nor any of its Affiliates
(A) shall be responsible for any existing or future liability under any plan,
program, or arrangement maintained by an Enron Party or any of its Affiliates or
under which an Enron Party or any of its Affiliates has or may have any
obligation to contribute, with respect to any Enron Employee, whether such plan,
program or arrangement is formal or informal, written or unwritten, and whether
or not such plan, program, or arrangement is an "employee benefit plan" subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(collectively, "Enron Benefit Plans"); (B) shall be obligated to administer or
maintain any Enron Benefit Plan; (C) shall be responsible for or have any
liability whatsoever for any pending claims, lawsuits or proceedings brought
under or relating to ERISA; and (D) shall be responsible for any liability to
any Governmental Entity, including the Pension Benefit Guaranty Corporation, the
IRS and the Department of Labor, relating to the operation of the Gas and Power
Business prior to the Closing.
(k) Taxes. None of the Deliverables is subject to any Lien
arising in connection with any failure or alleged failure to pay any Tax nor, to
the Enron Parties' knowledge, is any taxing authority in the process of imposing
any Lien for Taxes upon any of the Deliverables other than a Lien for Taxes not
yet due and payable.
(l) Brokers. Except for The Blackstone Group and Houlihan
Lokey Howard & Zukin, the fees and expenses of which shall be borne by Enron, no
agent, broker, investment banker, person or firm acting on behalf the Enron
Parties or any of their Affiliates or under the authority of any of the Enron
Parties or any of their Affiliates is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
any of the parties hereto in connection with any of the transactions
contemplated hereby for which UBS or any of its Affiliates could be liable.
(m) Certain Regulatory Matters. None of the Enron Parties
is an "investment company" (nor are any of the Enron Parties required to
register as an "investment company") under the Investment Company Act of 1940,
as amended.
(n) Financial Information. (i) Other than statements
setting forth the earnings before interest and taxes of the Gas and Power
Business, the Enron Parties do not prepare financial statements (which for
purposes of this representation means balance sheets, statements of cash flows
5
or income statements) for the Gas and Power Business on a stand alone basis in
the ordinary and usual course (whether on a daily, weekly, monthly, or other
regular period).
(ii) The financial information provided to UBS by Enron
concerning the operation of the Gas and Power Business prior to the filing of
the Petitions accurately reflects in all material respects the financial results
of the Gas and Power Business and was prepared in accordance with the books and
records of Enron.
(o) VaR Matters. The documentation describing the
functionality of the value at risk model provided to UBS in its due diligence
prior to the signing of this Agreement describes substantially the same value at
risk model (the "VaR Model") used in the Gas and Power Business since January 1,
2001. The Enron Parties have full and exclusive right, title, interest and
ownership, including all Intellectual Property Rights associated therewith, in
and to the VaR Model. No licensing fees, royalties or payments shall be due or
payable by the Enron Parties, other than pursuant to the License Agreement, for
the use, maintenance and upgrade of the VaR Model in any manner.
2.2. Representations and Warranties by UBS. UBS represents
and warrants to the Enron Parties as follows:
(a) Organization and Standing. UBS is a company duly
organized and validly existing under the laws of Switzerland.
(b) Authority; Binding Agreements. The execution, delivery
and performance of this Agreement, the Related Agreements and all other
agreements, documents and instruments contemplated in connection with this
Agreement to which UBS is a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action of UBS. UBS has all requisite power and authority to execute,
deliver and perform this Agreement and the Related Agreements and to consummate
the transactions contemplated hereby and thereby and UBS has duly executed and
delivered this Agreement. Upon the entry of the Bankruptcy Court Order, this
Agreement will be, and upon execution and delivery, the Related Agreements and
such other agreements, documents and instruments to which UBS is a party will
be, the legal, valid and binding obligation of UBS, enforceable in accordance
with their respective terms.
(c) Conflicts; Consents. Assuming (i) compliance with the
information requirements of the HSR Act, if any, (ii) the issuance of the
Bankruptcy Court Order and (iii) the issuance and continued effectiveness of
Power Marketing Authorization by the Federal Energy Regulatory Commission
("FERC") for UBS, none of the execution and delivery of this Agreement, the
Related Agreements, the consummation of the transactions contemplated hereby or
thereby or compliance by UBS with any of the provisions hereof or thereof will
(i) conflict with or result in a breach of the constitutive documents of UBS,
(ii) conflict with or result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the provisions of any
note, bond, lease, hypothecation, mortgage, indenture, license, franchise,
permit, agreement or other instrument or obligation to which UBS is a party, or
by which UBS or its properties or assets, may be bound or affected (except for
such conflicts, breaches or defaults as to which requisite waivers or consents
shall be obtained before the Closing), or (iii) violate any law, statute, rule
6
or regulation or order, writ, injunction or decree applicable to UBS or its
properties or assets, in each case in clause (ii) or (iii), which conflict,
breach, default, right or violation could reasonably be expected to materially
impair its ability to consummate the transactions contemplated hereby. Except
(a) as set forth on Schedule 2.2(c), (b) for consents, approvals, or
authorizations of, or declarations or filings with, the Bankruptcy Court, (c)
for filings pursuant to the HSR Act, if any, and (d) the issuance and continued
effectiveness of Power Marketing Authorization for UBS, no material consent or
approval by, or any notification of or filing with, any person, firm,
corporation, partnership, limited liability company, trust, joint venture,
association or entity (governmental or private) is required in connection with
the execution, delivery and performance by UBS of this Agreement, the Related
Agreements or any of the other agreements, documents and instruments
contemplated in connection with this Agreement or the consummation of the
transactions contemplated hereby or thereby.
(d) Brokers. Except for UBS Warburg, the fees and expenses
of which shall be borne by UBS, no agent, broker, investment banker, person or
firm acting on behalf of UBS or under the authority of UBS is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby for which the Enron Parties will be liable.
Article III
ADDITIONAL AGREEMENTS
3.1. Bankruptcy Actions.
(a) As promptly as practicable, but in no event later than
January 16, 2002, by 5:00 p.m. the Enron Parties shall file with the Bankruptcy
Court their proposed Bankruptcy Court Order designated to be subject to further
changes prior to commencement of the continued hearing on January 18, 2002.
(b) Enron shall provide UBS with drafts of the proposed
Bankruptcy Court Order prior to 5:00 p.m. on January 15, 2002. Enron shall
incorporate UBS's comments on the proposed Bankruptcy Court Order made available
to Enron prior to January 18, 2002 except to the extent they alter this
Agreement or are otherwise inconsistent with applicable law, and shall provide
the revised proposed order to UBS, counsel to the Creditors' Committee and the
Bankruptcy Court. To the extent practicable under all the circumstances, Enron
shall incorporate subsequent comments from UBS received prior to the time the
Bankruptcy Court determines to issue its order in respect of this Agreement.
(c) Enron and UBS acknowledge that Enron validly served and
filed its motion for the Bankruptcy Court Order and that the Bankruptcy Court
ordered the bidding with respect to the Gas and Power Business closed on January
11, 2002. Enron shall hereafter continue to comply (or obtain an order from the
Bankruptcy Court waiving compliance) with all requirements under the Bankruptcy
Code, Federal Rules of Bankruptcy Procedure and orders of the Bankruptcy Court
in connection with obtaining the Bankruptcy Court Order.
(d) Each of the Enron Parties and UBS shall use their
reasonable best efforts to cooperate, assist and consult with each other to
secure the entry of the Bankruptcy Court Order no later than January 22, 2002,
7
and to consummate the transactions contemplated by this Agreement. Neither the
Enron Parties nor UBS shall file any pleadings or take any position in the
Chapter 11 Cases contrary to the approval of the Bankruptcy Court Order and the
consummation of the transactions contemplated hereby unless Enron and UBS
approve such pleading or position. In the event that the Procedural Order, the
Bankruptcy Court Order or any other orders of the Bankruptcy Court relating to
this Agreement shall be appealed by any party (or a petition for certiorari or
motion for reconsideration, amendment, clarification, modification, vacation,
stay, rehearing or reargument shall be filed with respect to any such order),
the Enron Parties and UBS will cooperate in taking such steps diligently to
defend against such appeal, petition or motion and the Enron Parties and UBS
shall use their reasonable best efforts to obtain an expedited resolution of any
such appeal, petition or motion.
(e) The Enron Parties shall not take any action to cause
one or more of its Affiliates that is a debtor in a Chapter 11 or Chapter 7
bankruptcy case to breach any obligation as if they were a Controlled Affiliate
hereunder.
3.2. Non-Solicitation; Maintenance of Confidentiality.
(a) From the date of this Agreement to the Closing, none of
the Enron Parties shall, nor shall they permit any of their respective
Controlled Affiliates, officers, directors or other representatives (which
representatives are acting on Enron's behalf), directly or indirectly to,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any person or group (other than UBS
and its representatives) concerning any sale, license, joint venture,
partnership or other transfer of the Deliverables or of the Gas and Power
Business or any part thereof or similar transaction involving an Enron Party.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer, director or
other representative (which representative is acting on Enron's behalf) of an
Enron Party, or any of its Controlled Affiliates, whether or not such person is
purporting to act on behalf such Enron Party, Controlled Affiliate, or
otherwise, shall be deemed to be a breach of this Section 3.2(a) by such Enron
Party. In the event that an Enron Party, or any Affiliate thereof receives a
proposal relating to any such transaction, Enron shall promptly notify UBS of
such proposal and the details thereof.
(b) Enron shall not (without the prior written consent of
UBS, which shall not be unreasonably withheld or delayed) release any Person
from, or waive any provisions of, any confidentiality agreement entered into in
connection with the bidding process provided for in the Bidding Procedures, and
shall use reasonable best efforts to obtain the return (or receive written
confirmation of the destruction) of any confidential materials supplied to any
party in the bidding process other than UBS.
3.3. Expenses. Each party hereto shall pay its respective
investment banking, legal and accounting and other advisors' fees and expenses
incurred in connection with the preparation, execution and delivery of this
Agreement and all other agreements, documents and instruments executed pursuant
hereto and any other costs and expenses incurred by such party, except as
otherwise expressly set forth herein, whether or not Closing occurs.
8
3.4. Conduct of Gas and Power Business. From the date
hereof until the Closing Date, except as expressly contemplated by this
Agreement, or as otherwise consented to by UBS in writing, the Enron Parties
shall (i) maintain and keep the Deliverables in as good repair, working order
and condition as immediately prior to the date hereof, except for depreciation
due to ordinary wear and tear; (ii) keep in full force and effect insurance
comparable in amount and scope of coverage to that maintained immediately prior
to the date hereof; (iii) comply in all material respects with all applicable
requirements of Law, except as could not reasonably be expected to have a
Material Adverse Effect; (iv) not enter into or amend, modify, terminate (except
as a result of expiration of its term) or waive compliance with any provision of
any contract or commitment relating to the Deliverables other than as
specifically contemplated by this Agreement; (v) not take, or fail to take, any
action which would result in a breach in any material respect of any of the
warranties or an inaccuracy in any material respect in any of the
representations contained in Section 2.1 or a failure of any of the conditions
set forth in Sections 4.1 and 4.2 to be satisfied; (vi) not hypothecate,
mortgage, pledge or subject to any Lien any of the Deliverables or grant any
interest in, right to or any license of, any of the Deliverables; (vii) not
enter into any agreement or make any commitment to take any of the type of
action prohibited in the foregoing clauses; and (viii) promptly notify UBS upon
becoming aware of any such state of affairs, action or omission.
3.5. Further Assurances. (a) Each party hereto agrees to
use, and the Enron Parties agree to cause each of their Controlled Affiliates to
use, its reasonable best efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws, to consummate and make effective the transactions contemplated
by this Agreement as expeditiously as practicable and to ensure that the
conditions set forth in Article IV hereof are satisfied, insofar as such matters
are within the control of such party. In case at any time after the Closing Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties to this Agreement shall, and the Enron Parties
shall cause their Controlled Affiliates to, insofar as such matters are within
the control of such party, take or cause to be taken all such necessary action,
including, the execution and delivery of such further instruments and documents,
as may be reasonably requested by any party for such purposes or otherwise to
complete or perfect the transactions contemplated hereby.
(b) Within five business days after the date hereof or at
such other time as the Enron Parties and UBS mutually agree is appropriate, the
Enron Parties and UBS shall each prepare and file, or cause to be prepared and
filed, with the Federal Trade Commission, the Department of Justice, or the
relevant foreign entities, as the case may be, all requisite applications and
amendments thereto together with related information, data and exhibits
necessary to satisfy any applicable requirements of the HSR Act, if any, or any
applicable foreign antitrust or competition laws. Each party shall use
commercially reasonable efforts to promptly respond to any requests for
additional information in connection with such filings and shall take all other
reasonable actions to cause the waiting periods under the HSR Act or any
applicable foreign antitrust or competition laws to terminate or expire at the
earliest possible date after the date of filing.
3.6. Access and Information. (a) From the date hereof until
the first to occur of the Closing Date and the termination of this Agreement,
the Enron Parties shall, and shall cause their Controlled Affiliates to, permit
9
UBS, its Affiliates and its and their representatives to make such investigation
of the business, operations and properties of the Enron Parties and their
Controlled Affiliates relating to the Gas and Power Business as such persons
reasonably deem necessary or desirable in connection with the transactions
contemplated hereby. Such investigation shall include, without limitation,
access to the respective officers, employees, agents and representatives
(including legal counsel (subject to the protection of privilege) and
independent accountants) of the Enron Parties and their Controlled Affiliates
relating to the Gas and Power Business and the properties, books, records and
commitments of the Enron Parties and their Controlled Affiliates relating to the
Gas and Power Business. The Enron Parties shall, and shall cause their
Controlled Affiliates to, furnish UBS and its representatives with such
financial, operating and other data and information, and copies of documents,
with respect to the Gas and Power Business or any of the transactions
contemplated hereby, as UBS shall from time to time reasonably request;
provided, however, that the Enron Parties shall not be obligated to provide any
Customer Data the disclosure of which is prohibited pursuant to any
confidentiality agreement. Such access and investigation shall be made upon
reasonable notice and at reasonable places and times. Such access and
information shall not in any way affect or diminish any of the representations
or warranties hereunder.
(b) Following the Closing Date, the Enron Parties shall,
and shall cause their Controlled Affiliates to, make available to UBS any data
and other information in the possession of the Enron Parties and their
Controlled Affiliates relating to the Gas and Power Business and the Enron
Parties shall reasonably assist UBS in arranging discussions with (and the
calling as witnesses in any proceedings related to the Gas and Power Business,
of) officers, employees and agents of the Enron Parties and their Controlled
Affiliates: (i) to defend or prosecute any claims relating to the exercise of
the rights granted under the License Agreement; or (ii) for any other purpose
reasonably requested by UBS relating to the operation of the Gas and Power
Business prior to the Closing Date. As used in this Section 3.6, Controlled
Affiliates means Controlled Affiliates who have or have had material involvement
with the Gas and Power Business or its business, operations, properties or
assets.
3.7. Confidentiality. (a) Until the Closing, UBS and the
Enron Parties each agree that all financial or other information about UBS, any
of its Affiliates or the Enron Parties or any of their Affiliates, or other
information of a confidential or proprietary nature, disclosed to the other at
any time in connection with the proposed transaction shall be kept confidential
by the party receiving such information and shall not be disclosed to any person
or used by the receiving party (other than to its Affiliates, agents, employees,
lenders, the Creditors' Committee and its professionals, or counsel or in
connection with the transactions contemplated by this Agreement) except: (i)
with the prior written consent of the disclosing party; (ii) as may be required
by applicable law, court or administrative process; (iii) such information which
may have been acquired or obtained by such party (other than through disclosure
by the other party in connection with the transactions contemplated by this
Agreement or resulting from the breach by a third party of a confidentiality
agreement without knowledge by the receiving party of the breach); or (iv) such
information which is or becomes generally available to the public other than as
a result of a violation of this provision. On and after the Closing, the Enron
Parties and UBS shall comply with the confidentiality provisions of the License
Agreement.
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(b) The parties acknowledge that each party's damages at
law would be an inadequate remedy for the breach by any of the other parties of
any provision of this Section 3.7, and agree in the event of such breach that
the non-breaching parties may obtain temporary and permanent injunctive relief
restraining such breaching parties from such breach, and, to the extent
permissible under applicable statutes and rules of procedure, a temporary
injunction may be granted immediately upon the commencement of any such suit.
Nothing contained in this Agreement shall be construed as prohibiting a party
from pursuing other remedies available at law or in equity for such breach or
threatened breach of this Section 3.7 of this Agreement.
3.8. Employee Matters.
(a) The Enron Parties shall, and shall cause its Controlled
Affiliates to, use commercially reasonable efforts to retain through the Closing
all employees necessary or appropriate in UBS's judgment for UBS to operate the
business contemplated by the License Agreement, including trading professionals
covered by Section 4.2 and employees in the areas of information technology,
operations, credit, market risk, research/fundamentals, human resources,
accounting and legal functions (the "Eligible Employees"). The Enron Parties
shall, and shall use their reasonable best efforts to cause their Controlled
Affiliates to, provide such assistance as is reasonably requested by UBS in the
process of UBS or its Affiliates hiring such of the Eligible Employees as UBS
desires, subject to applicable law. The Enron Parties shall not, and shall not
permit their Controlled Affiliates to, take any action to discourage any of the
Eligible Employees from becoming an employee of UBS or its Affiliates. UBS shall
have no obligation to offer employment to or hire any particular Eligible
Employees.
(b) Beginning on the date hereof, the Enron Parties shall
permit and facilitate UBS's and its Affiliates' communication and meetings with
the Eligible Employees, at reasonable times and upon reasonable notice and at
Enron locations or other locations reasonably requested by UBS, concerning UBS's
plans, operations, business, customer relations and general personnel matters
and to interview the Eligible Employees and review such information concerning
the Eligible Employees as UBS may reasonably request (subject to obtaining any
legally required written permission of any affected Eligible Employee and to
other applicable Law). The Enron Parties shall provide to UBS the employment
files and records of any Eligible Employee hired by UBS (subject to obtaining
any legally required written permission of any affected Eligible Employee and to
other applicable Law).
(c) The Enron Parties, on behalf of themselves and their
Controlled Affiliates, hereby release each Eligible Employee hired by UBS or any
Affiliate thereof as contemplated by this Agreement, effective as of the date of
such hiring, from (i) any continuing employment obligations (whether under any
employment contract or otherwise), (ii) any noncompetition, nonsolicitation and
confidentiality obligations, to the extent they are not assigned to UBS or an
Affiliate thereof, and (iii) any liabilities arising out of such Eligible
Employee's lawful performance of his or her duties while an employee of an Enron
Party and/or its Affiliates for matters relating to the periods prior to such
hiring by UBS or Affiliate of UBS; provided however, that nothing herein shall
constitute or be deemed to be a release of any Eligible Employee from liability
arising out of (w) any material unauthorized trading activities, (x) any actions
taken that were a material violation of an Enron Party's corporate policies, (y)
any gross negligence, willful misconduct or knowing violation of law on the part
11
of such Eligible Employee, or (z) any special payments to such Eligible
Employees made in the month prior to the Bankruptcy filing.
(d) By the first anniversary of the Closing, UBS shall
cause to be paid cash stay put or retention bonuses equal to $11,000,000 in the
aggregate (before tax withholdings or other required deductions) to the group of
employees agreed to by Enron and UBS in the Gas and Power Business hired by UBS
or its Affiliates, with the particular employees receiving such bonuses, the
amounts thereof and the time of payment within such year being determined by UBS
in its sole discretion. UBS shall pay interest to Enron at a rate per annum
equal to 30 day LIBOR (as determined by UBS) on any portion of the $6,000,000
referred to in Section 4.2(i) to the extent it has not been spent by UBS
pursuant to this Section 3.8(d), it being understood that for purposes of
calculating interest, the $6,000,000 shall be deemed to be applied to pay such
stay put or return bonuses prior to any other UBS funds.
3.9. Taxes. (a) The Enron Parties and UBS shall each bear
50% of all stamp, transfer, excise, documentary, sales, use, registration and
other similar taxes and fees (including any penalties and interest) arising out
of or in connection with the transactions contemplated by this Agreement and the
other agreements, documents and instruments executed pursuant hereto. The party
responsible for filing any necessary tax returns and other documentation with
respect to any such Taxes shall at its own expense properly file such return or
other documentation and provide to the other parties evidence of filing and
payment of all such taxes. The Enron Parties and UBS will reasonably cooperate
with one another to lawfully minimize such taxes. Nothing in this Section 3.9(a)
shall affect the provisions of Section 3.9(c).
(b) Notwithstanding any other provision contained in this
Agreement, the License Agreement and the other Related Agreements, the covenants
contained in this Section 3.9 shall survive until 30 days after the expiration
of the applicable statute of limitations (including extensions).
(c) Notwithstanding any other provision contained in this
Agreement, the License Agreement and the other Related Agreements, UBS shall be
responsible for all taxes imposed on UBS or its Affiliates under Part IX of the
Excise Tax Act (Canada) in respect of the transactions pursuant to the License
Agreement and the other Related Agreements; provided, however, that UBS shall
not be responsible for such taxes imposed in respect of any Royalty that is paid
and required to be paid to Enron Canada Corp. by a non-resident (for the
purposes of such Act) of Canada that is not registered for purposes of such Part
IX. UBS agrees to cause any payor (that is registered for purposes of Part IX of
the Excise Tax Act (Canada)) of a Royalty to Enron Canada Corp. to claim input
tax credits in respect of such taxes and so long as the payor of a Royalty to
Enron Canada Corp. is registered for purposes of Part IX of the Excise Tax Act
(Canada), Enron Canada Corp. agrees to indemnify the Royalty payor for any
Losses arising from the denial by Canada Customs and Revenue Agency of all or
part of such credits; provided that the Royalty payor shall, to the extent
requested by and at the cost of Enron Canada Corp., object to such denial and
shall provide reasonable cooperation in respect of such objection.
(d) All payments by UBS and its Affiliates, as the case may
be, under this Agreement, the License Agreement and the other Related Agreements
shall be made free and clear of, and without reduction for, any withholding
taxes or other governmental charges. The preceding sentence shall not apply (i)
12
to a payment made to a payee that for purposes of the relevant withholding tax
or governmental charge is no longer a resident of the country of which it was a
resident on the Effective Date, (ii) to a Royalty payment, if any, made and
required to be made to Enron Canada Corp.; provided, however, that before
effecting any such withholding on payments to Enron Canada Corp., UBS will
consult with Enron Canada Corp. regarding the need to withhold and alternatives
that could reduce such withholding and shall use its best efforts to adopt such
an alternative requested by Enron Canada Corp., so long as such alternative is
not detrimental to UBS in UBS's judgment; and provided further, however, that
UBS, to the extent requested by, and at the cost of, Enron Canada Corp., will
cooperate with Enron Canada Corp. in connection with refund claims that Enron
Canada Corp. seeks to pursue in respect of any amounts withheld by UBS or its
Affiliates, and (iii) to a payment made to a payee to the extent that such
withholding taxes or other governmental charges in respect of such payee exceed
the amount of such taxes or charges that would have been imposed if the payee
had been Enron.
(e) Except to the extent inconsistent with either a change
of law or a written determination by a taxing authority addressed to a party to
this Agreement, the parties agree that the payments made pursuant to Article V
of the License Agreement represent the fair market value of the licenses granted
thereunder. The parties shall treat such payments, for all United States and
Canadian income tax purposes, as royalties (within the meaning of Section
61(a)(6) of the Internal Revenue Code of 1986, as amended) in respect of such
licenses and shall refrain from taking any position inconsistent with such
treatment. The foregoing shall not apply to so much of the payments made
pursuant to Article V of the License Agreement as does not exceed, in the
aggregate, the depreciated book value of the assets transferred pursuant to
Article III of the License Agreement as reflected on the Enron Parties' books
and records as of the date of such transfer.
Article IV
CONDITIONS PRECEDENT
4.1. Conditions of Obligations of UBS and Enron Parties.
The respective obligations of each party to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction of the following
conditions:
(a) The Procedural Order shall not have been vacated,
stayed, amended reversed and/or modified.
(b) The Bankruptcy Court shall have approved and entered in
the Chapter 11 Case the Bankruptcy Court Order (together with any related
findings of fact or conclusions of law) approving this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby. The Bankruptcy
Court Order shall not have been vacated, stayed, amended, reversed and/or
modified. The Bankruptcy Court Order shall contain (or be accompanied by)
findings of fact and conclusions of law by the Bankruptcy Court that, among
other things, find and conclude that (i) the transactions contemplated hereby
and by the Related Agreements are in good faith and otherwise satisfy the
provisions of Section 363, including Section 363(m), and 365 of the Bankruptcy
Code and (ii) Enron has complied with the notice requirements of Rules 2002,
6004, 6006 and 9014 of the Federal Rules of Bankruptcy Procedure and any
13
applicable rules of the Bankruptcy Court with respect to the transactions
contemplated by this Agreement and by the Related Agreements.
(c) The waiting period applicable to the transactions
contemplated hereby and by the Related Agreements under the HSR Act, if
applicable, shall have expired or been terminated, all necessary foreign filings
shall have been made, all applicable waiting and other time periods (including
any extensions thereof) under any applicable legislation or regulation of any
relevant foreign jurisdiction shall have expired, lapsed or been terminated and
all statutory or regulatory obligations in any relevant foreign jurisdiction
shall have been complied with in each case in connection with the transactions
contemplated hereby, and all necessary authorizations from any foreign
Governmental Entity shall have been obtained and all such authorizations shall
remain in full force effect and there shall be no notice of any intention to
revoke, suspend or adversely restrict or modify any of the same.
(d) No action, suit or proceeding (including any proceeding
over which the Bankruptcy Court has jurisdiction under 28 U.S.C. sec. 1334)
brought by any Governmental Entity shall be pending to enjoin, restrain or
prohibit the transactions contemplated hereby or by the Related Agreements, or
that would be reasonably likely to prevent or make illegal the transactions
contemplated hereby or by the Related Agreements.
(e) No Governmental Entity shall have issued any order,
decree or ruling and there shall not be any statute, rule or regulation,
restraining, enjoining or prohibiting the consummation of the transactions
contemplated hereby or by the Related Agreements.
(f) The Bankruptcy Court Order shall provide and declare
that the Related Agreements shall be, upon execution of such agreements, the
legal, valid and binding obligation of the Enron Parties enforceable in
accordance with their terms.
4.2. Conditions of Obligations of UBS. The obligations of
UBS to consummate the transactions contemplated by this Agreement are subject to
the satisfaction on or prior to the Closing of the following further conditions
unless waived in writing by UBS:
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of the Enron Parties contained herein shall be
true and correct in all material respects as of the date hereof and as of the
Closing Date as if made on and as of the Closing Date, except with respect to
representations and warranties made as of a specified date, which shall be true
and correct as of such date, and the Enron Parties shall have performed and
complied in all material respects with all covenants and agreements required to
be performed or complied with on or prior to the Closing Date.
(b) Certificates. UBS shall have received a certificate of
an executive officer of each Enron Party, confirming the matters set forth in
the first sentence of Section 4.2(a) in form and substance reasonably
satisfactory to UBS.
(c) Related Agreements. The Related Agreements shall have
been executed and delivered by the Enron Parties.
14
(d) Consents, Amendments and Terminations. The Enron
Parties shall have procured and delivered to UBS duly executed and delivered
copies of all waivers, consents, terminations and approvals set forth on
Schedule 2.1(c), all in form and substance reasonably satisfactory to UBS.
(e) Employment Agreements and Offer Letters. Lawrence Greg
Whalley and the other persons agreed to by Enron and UBS shall have entered into
an employment and noncompetition and nonsolicitation agreement or offer letters
with UBS, as appropriate for such individuals, in each case in form and
substance satisfactory to UBS in its sole discretion.
(f) Leases. Enron shall have entered into lease agreements
(the "Lease Agreements") in form and substance reasonably satisfactory to UBS
providing UBS with such office space of Enron and its Affiliates as UBS believes
is necessary or desirable for operation of the business contemplated by the
License Agreement, and such Lease Agreements shall reflect the terms set forth
on Schedule 4.2(f) hereto.
(g) Canada. The closing shall have occurred (or shall occur
substantially simultaneously with the Closing) of the arrangements entered into
between Enron's Canadian Affiliates and UBS or its Canadian Affiliate, which
arrangements shall provide UBS or such Affiliate with such intellectual property
and technology and related services, trading professionals and support personnel
and office space and fixtures, furniture and equipment, such that UBS (or its
Affiliate) shall have the ability to conduct the Gas and Power Business in
Canada and with Canadian counterparties in substantially the manner historically
conducted by Enron and its Affiliates, all pursuant to documentation reasonably
satisfactory in form and substance to UBS and Enron. Such arrangements shall not
entail expenditures to be funded by UBS or its Affiliates in excess of
$4,000,000, beyond the royalties already provided for in the License Agreement,
other than real estate lease payments pursuant to any assumed leases in Calgary
and Toronto and employee expense of UBS. The closing of the foregoing
arrangements shall only be a condition to Closing if UBS shall so fund
$4,000,000.
(h) Order Regarding Royalty Acceleration. The Bankruptcy
Court Order shall provide that, upon exercise by UBS of the option set forth in
Sections 6.1 and 6.2 of the License Agreement, at UBS's election under Section
6.2 of the License Agreement, either (i) all right, title and interest of the
Enron Parties in the Deliverables transferred to UBS or its Affiliates upon the
closing of such exercise shall fully and irrevocably vest in UBS (or such
Affiliates) or (ii) the licenses provided in the License Agreement become
perpetual as provided therein, and that the transfer or license of the
Deliverables, or the making of the licenses perpetual, is in good faith and
otherwise satisfies the provisions of Section 363 and 365 of the Bankruptcy
Code.
(i) Employee Bonuses. Enron shall have paid to UBS
$6,000,000 cash, which amount shall be applied by UBS in accordance with Section
3.8(d).
4.3. Conditions of Obligations of the Enron Parties. The
obligations of the Enron Parties to consummate the transactions contemplated by
this Agreement are subject to the satisfaction on or prior to the Closing of the
following further conditions unless waived in writing by Enron:
15
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of UBS contained herein shall be true and correct
in all material respects as of the date hereof and as of the Closing Date as if
made on and as of the Closing Date, except with respect to representations and
warranties made as of a specified date, which shall be true and correct as of
such date, and UBS shall have performed and complied in all material respects
with all covenants and agreements required to be performed or complied with on
or prior to the Closing Date.
(b) Certificates. Enron shall have received a certificate
of a duly authorized officer of UBS confirming the matters set forth in Section
4.3(a) in form and substance reasonably satisfactory to Enron.
(c) Related Agreements. The License Agreement and the Lease
Agreements shall have been executed and delivered by UBS.
(d) Other Documents. Enron shall have received such other
customary documents, certificates or instruments as it may reasonably request.
Article V
INDEMNIFICATION
5.1. Indemnification. (a) The Enron Parties jointly and
severally agree to indemnify and hold harmless UBS and its Affiliates,
shareholders, partners, directors, officers, employees and other agents and
representatives (the "UBS Indemnified Parties") from and against any and all
liabilities, judgments, claims (including claims of creditors of the Enron
Parties), settlements, losses (including dimunitions in value), damages, fees,
Liens, Taxes, penalties, obligations and expenses (including reasonable fees and
disbursements of counsel) (collectively, "Losses") incurred or suffered by any
such person arising from, by reason of or in connection with:
(i) any misrepresentation or breach of any representation or
warranty of any Enron Party contained in this Agreement;
(ii) any breach of any covenant or agreement of any Enron
Party contained in this Agreement, other than breaches the
consequences of which are immaterial in the context of this
Agreement;
(iii) any and all liabilities or obligations of any of the
Enron Parties or their Affiliates, or the failure of any of
the Enron Parties or their Affiliates to pay or discharge
the same, including (A) any and all Enron Parties
Liabilities and (B) any liabilities resulting from a claim
by a Governmental Entity or Enron Employee, whether or not
hired by UBS, that relate to the employment of Enron
Employees, including any liability under the Worker
Adjustment and Retraining Notification Act or otherwise
relating to the discharge of Enron Employees;
(iv) any Taxes (A) attributable to the Gas and Power
Business or the Deliverables for any period or portion
thereof ending on or before the Closing Date or (B) imposed
16
on any Enron Party, any Affiliate of an Enron Party or any
Enron Tax Group; and
(v) any and all actions, suits, proceedings, demands,
orders, rulings, decrees, judgments, costs and legal and
other expenses incident to any of the matters referred to in
clauses (i) through (iv) of this Section 5.1(a);
provided, however, that the UBS Indemnified Parties shall not be entitled to
indemnification under clause (i) above (other than Losses relating to a breach
of Section 2.1(k)) until the aggregate amount of Losses (together with Losses
under clause (i) of Section 19.1(a) of the License Agreement, without
duplication) exceeds $5,000,000 (the "UBS Threshold"), at which point the UBS
Indemnified Parties shall be entitled to indemnification for all Losses, without
giving effect to the UBS Threshold, that in the aggregate exceed $2,500,000;
provided further that the maximum amount for which the UBS Indemnified Parties
shall be entitled to indemnification under clause (i) above (together with
clause (i) of Section 19.1(a) of the License Agreement, without duplication)
shall be $100,000,000. Effective upon the Closing, payments of indemnity
pursuant to this Section 5.1(a) shall be made only through set offs made
pursuant to Section 5.6. The disclosure of any matter by the Enron Parties
pursuant to the exceptions for disclosure in the representations and warranties
of such parties shall not limit the indemnity pursuant to clause (iii) above,
such that the UBS Indemnified Parties shall be indemnified for the matters set
forth in Schedules 2.1(f) and (g) to this Agreement.
(b) UBS agrees to indemnify and hold harmless each Enron
Party and its Affiliates, shareholders, partners, directors, officers, employees
and other agents and representatives (the "Enron Indemnified Parties") from and
against any and all liabilities, judgments, claims, settlements, losses,
damages, fees, Liens, Taxes, penalties, obligations and expenses (including
reasonable fees and disbursements of counsel) (collectively, "Enron Losses")
incurred or suffered by any such person arising from, by reason of or in
connection with:
(i) any misrepresentation or breach of any representation or
warranty of UBS contained in this Agreement;
(ii) any breach of any covenant or agreement of UBS
contained in this Agreement, other than breaches the
consequences of which are immaterial in the context of this
Agreement;
(iii) any and all liabilities or obligations of UBS for the
Assumed Obligations or the failure by it to pay or discharge
the same; and
(iv) any and all actions, suits, proceedings, demands,
orders, rulings, decrees, judgments, costs and legal and
other expenses incident to any of the matters referred to in
clauses (i) through (iii) of this Section 5.1(b);
provided, however, that the Enron Indemnified Parties shall not be entitled to
indemnification under clause (i) above until the aggregate amount of Enron
Losses (together with Enron Losses under clause (i) of Section 19.1(b) of the
License Agreement, without duplication) exceeds $5,000,000 (the "Enron
17
Threshold"), at which point the Enron Indemnified Parties shall be entitled to
indemnification for all Enron Losses, without giving effect to the Enron
Threshold, that in the aggregate exceed $2,500,000; provided further that the
maximum amount for which the Enron Indemnified Parties shall be entitled to
indemnification under clause (i) above (together with clause (i) of Section
19.1(b) of the License Agreement, without duplication) shall be $100,000,000.
5.2. Certain Limitations. The remedies provided in this
Article V shall be the exclusive remedies of the parties for any claims for
monetary damages under this Agreement, other than any claim relating to fraud.
This Article V and Article XIX of the License Agreement each provide
indemnification among the parties hereto and, with respect to any claim that may
be brought under either Article, such claim may be brought under either Article,
or both, but any Loss or Enron Loss resulting from such claim may only be
recovered once.
5.3. Procedures Relating to Third Party Claims. (a) In
order for an indemnified party to be entitled to any indemnification provided
for under this Article V arising from, by reason of, or otherwise in connection
with an asserted or unasserted claim or demand made or which might be made by
any Person against the indemnified party (a "Third Party Claim"), the
indemnified party must send reasonably prompt notice to the indemnifying parties
in writing of the Third Party Claim, including the nature and basis of such
claim to the extent known by the indemnified party (the "Indemnification
Notice"); provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying parties have been materially and actually prejudiced as a result of
such failure. Each party shall provide to the other parties, upon such other
parties' written request, reasonable access during normal business hours to the
books, records and personnel in their possession or under their control which
are reasonable necessary to verify such claim. UBS shall defend all Third Party
Claims against it for which it may seek indemnity hereunder or under the License
Agreement with a degree of diligence consistent with UBS's customary defense of
litigation against it.
(b) If a Third Party Claim is made against an indemnified
party, the indemnified party shall allow the indemnifying party to consult with
the indemnified party regarding the defense of such Third Party Claim, including
any settlement thereof, and the indemnifying party shall be entitled to
participate in the defense thereof, it being understood that the indemnified
party shall control the defense of such Third Party Claim and shall not be
required to take any action that may jeopardize any attorney-client privilege.
An indemnified party shall not agree to settle any Third Party Claim for
monetary damages without the consent of the indemnifying party (which consent
shall not be unreasonably withheld or delayed).
5.4. Procedures Related to Claims other than Third Party
Claims. In the event any indemnified party should have a claim for
indemnification against the indemnifying parties under this Article V that does
not involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying parties. The failure by any
indemnified party so to notify the indemnifying parties shall not affect the
indemnification provided hereunder except to the extent the indemnifying parties
have been materially and actually prejudiced as a result of such failure.
18
5.5. Calculation of Indemnity Payments. The amount of any
indemnity payment shall be decreased to take account of the net present value of
any reasonably expected net Tax benefits to the indemnified party (using a
discount rate of 10% per annum) and increased to take account of the net present
value of any net Tax cost to the indemnified party that is reasonably expected
by the indemnified party (using a discount rate of 10% per annum) arising from
the receipt of any payment hereunder (grossed up for such increase) as
calculated in good faith by the indemnified party.
5.6. Right of Set-Off. UBS (or its Affiliates on its
behalf) may set off any amounts owed to UBS (or any of its Affiliates) by any
Enron Party or any of its Controlled Affiliates pursuant to this Article V, any
of the other provisions of this Agreement, any Related Agreement or any other
document or agreement contemplated hereby or thereby against any amounts to be
paid to an Enron Party pursuant to the License Agreement or any other Related
Agreement.
Article VI
MISCELLANEOUS
6.1. Entire Agreement. This Agreement, the Related
Agreements and the other agreements, documents and instruments contemplated in
connection with this Agreement and the schedules and exhibits hereto and thereto
contain the entire agreement among the parties with respect to the transactions
contemplated hereby and thereby and supersede all prior agreements or
understandings among the parties.
6.2. Termination. (a) This Agreement shall terminate on the
earliest to occur of any of the following events:
(i) the mutual written agreement of UBS and Enron;
(ii) by written notice of UBS or Enron to the other, if the
Closing shall not have occurred prior to 11:59 p.m. (New
York time) on the 60th day after the date hereof, provided
that the right to terminate this Agreement pursuant to this
Section 5.2(a)(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall
have been the cause of the failure of the Closing Date to
have occurred on or prior to such date;
(iii) by written notice of UBS to Enron, if (A) the Sale
Hearing is not held on or prior to January 18, 2002 or (B)
the Bankruptcy Court Order shall not have been entered by
the Bankruptcy Court on or prior to January 22, 2002, and as
of the time of such termination has not been entered;
(iv) by written notice of UBS to Enron upon (A) the
conversion of the Chapter 11 Case to cases under chapter 7
of the Bankruptcy Code, (B) the filing of a plan of
reorganization by Enron which does not provide for the
transactions among the parties hereto (and their Affiliates)
provided for in the License Agreement or (C) the appointment
of a Chapter 11 trustee in the Bankruptcy case; provided
that, so long as the events described in (A) or (C) shall
not impair the ability of any of the Enron Parties to
19
perform their obligations hereunder and under the Relevant
Agreements and to consummate the transactions contemplated
hereby or thereby, such events alone shall not entitle UBS
to terminate this Agreement;
(v) by written notice of UBS to Enron, if any Enron Party
shall have materially breached any of its representations,
warranties or agreements contained herein; provided that any
such breach or breaches is not curable or, if curable, is
not cured within 10 business days after UBS gives Enron
written notice identifying such breach or breaches; or
(vi) by written notice of Enron to UBS, if UBS shall have
materially breached any of its representations, warranties
or agreements contained herein; provided that any such
breach or breaches is not curable or, if curable, is not
cured within 10 business days after Enron gives UBS written
notice identifying such breach or breaches.
(b) Nothing in this Section 6.2 shall relieve any party of
any liability for a breach of this Agreement prior to the termination hereof.
Except as aforesaid, upon the termination of this Agreement in accordance with
its terms, all rights and obligations of the parties under this Agreement shall
terminate, except their obligations under Sections 1.4, 3.3 and 3.7.
6.3. Descriptive Headings; Certain Interpretations. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Except as otherwise expressly provided in this
Agreement, the following rules of interpretation apply to this Agreement: (i)
the singular includes the plural and the plural includes the singular; (ii) "or"
and "any" are not exclusive and "include" and "including" are not limiting;
(iii) a reference to any agreement or other contract includes permitted
supplements and amendments; (iv) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued thereunder; (v) a
reference to a person includes its permitted successors and assigns; (vi) "$"
and "dollars" refer to lawful money of the United States of America; and (vii) a
reference in this Agreement to an Article, Section, Exhibit or Schedule is to
the Article, Section, Exhibit or Schedule of this Agreement.
6.4. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient if
delivered personally or sent by facsimile (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to UBS, to:
UBS AG
c/o UBS Warburg
299 Park Avenue
New York, NY 10171
Facsimile: (212) 821-5804
Attention: Robert C. Dinerstein
20
with copies to:
Covington & Burling
1330 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 841-1010
Attention: Michael B. Hopkins
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: (212) 558-3588
Attention: Joseph B. Frumkin
If to an Enron Party to:
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Facsimile: (713) 646-2733
Attention: Mark Muller
with copies to:
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Facsimile: (713) 646-3393
Attention: Lance Schuler
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Mary R. Korby
or to such other address or facsimile number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in this
Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
6.5. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
21
6.6. Survival. All representations and warranties contained
in this Agreement or in any document, certificate or instruments delivered
pursuant hereto or in connection herewith (unless otherwise expressly provided
herein or therein) shall survive the execution and delivery of this Agreement
and the Closing and shall remain in full force and effect until the first
anniversary of the date of this Agreement; provided that the representations and
warranties in paragraphs (b), (g) and (j) of Section 2.1 shall survive for the
periods permitted by law, and the representations and warranties in paragraph
(k) of Section 2.1 shall survive until the expiration of the applicable statute
of limitations (taking into account any applicable extensions); provided further
that no party's indemnification obligations under Section 5.1 shall terminate
with respect to any item as to which the person to be indemnified or the related
party thereto shall have, before the expiration of the applicable period,
previously made a good faith claim by delivering a notice of such claim to the
indemnifying party.
6.7. Benefits of Agreement. All of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement is for the
sole benefit of the parties hereto and their respective successors and assigns
and not for the benefit of any third party, except as otherwise expressly
provided in Section 3.8(c).
6.8. Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
6.9. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
hereto without the prior written consent of the other parties hereto; except
that UBS may pledge or assign all or part of its rights and obligations
hereunder to any Affiliate thereof, so long as such UBS guarantees the payment
and performance by such Affiliate hereunder. Following any such permitted
assignment, the term "UBS" shall mean such assignee. Any purported assignment
not permitted by this Section shall be void.
6.10. Enforceability. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
6.11. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF. EACH PARTY HERETO
IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE JURISDICTION OF THE
BANKRUPTCY COURT FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT
22
AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY
LITIGATION RELATING THERETO EXCEPT IN THE BANKRUPTCY COURT).
6.12. No Partnership. Each party to this Agreement agrees
that this Agreement, the Related Agreements and all other arrangements,
agreements and transactions contemplated thereby are not intended to constitute,
either severally or in the aggregate, a partnership between any of the Enron
Parties, on the one hand and UBS or any of its Affiliates, on the other hand;
and, each party to this Agreement further agrees that it will not hold itself
out or permit any of its subsidiaries to hold itself out as such a partner or
commit any other act or file any document with any Governmental Entity that is
inconsistent with the foregoing.
6.13. Termination of Confidentiality Agreement. Upon the
execution and delivery of this Agreement by all parties hereto, the
confidentiality letter agreement, dated November 30, 2001, between UBS and
Enron, shall terminate and shall have no further force or effect.
Article VII
DEFINITIONS
As used herein, the terms below shall have the following
meanings:
"Affiliate" of a Person means any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person.
"Bankruptcy Code" has the meaning set forth in the
introduction hereof.
"Bankruptcy Court" has the meaning set forth in the
introduction hereof.
"Bankruptcy Court Order" means an order of the Bankruptcy
Court, in form and substance acceptable to Enron and UBS, approving (i) the
entry by the Enron Parties and UBS into the transactions contemplated by this
Agreement, including without limitation the entry into the Related Agreements
and (ii) the payments by Enron pursuant to Section 4.2(i).
"Bidding Procedures" means the bidding procedures in the
Chapter 11 Case established by order of the Bankruptcy Court on December 19,
2001.
"Chapter 11 Case" has the meaning set forth in the
introduction hereof.
"Closing" has the meaning set forth in Section 1.3.
"Closing Date" has the meaning set forth in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Affiliate" shall mean, with respect to any
Enron Party, any Person that, directly or indirectly, through one or more
intermediaries, is controlled by such Enron Party; provided that if any such
23
Person shall have filed a voluntary petition for relief commencing a case under
Chapter 7 or 11 of the Bankruptcy Code or shall be the subject of such a case,
involuntarily, then such Person shall be deemed not to be a Controlled Affiliate
solely with respect to actions taken or failed to be taken by such person after
such filing or such person becoming subject to such case.
"Creditors' Committee" means the official committee of
unsecured creditors appointed in the Chapter 11 Case
"Customer Data" has the meaning given to such term in the
License Agreement.
"Deliverables" has the meaning given to such term in the
License Agreement.
"Eligible Employees" has the meaning set forth in Section
3.8(a).
"Enron" has the meaning set forth in the preamble hereto.
"Enron Benefit Plans" has the meaning set forth in Section
2.1(j).
"Enron Employees" means employees of the Enron Parties or
the Gas and Power Business (whose duties primarily relate to the Gas and Power
Business).
"Enron Losses" has the meaning set forth in Section 5.1(a).
"Enron Party" and the correlative term "Enron Parties" has
the meaning set forth in the preamble hereto.
"Enron Parties Liabilities" has the meaning set forth in
Section 1.2.
"Enron Tax Group" means any consolidated, combined or
unitary group of which any Enron Party or any Affiliate of an Enron Party is or
has been a member with respect to any Tax.
"Environmental Laws" has the meaning set forth in Section
2.1(g).
"ERISA" has the meaning set forth in Section 2.1(j).
"FERC" has the meaning set forth in Section 2.2(c).
"Gas and Power Business" has the meaning set forth in the
introduction hereof.
"Gas and Power Commodities" has the meaning set forth in
the introduction hereof.
"Governmental Entity" means any federal, state, provincial,
local, county or municipal government, governmental, judicial, regulatory or
administrative agency, commission, board, bureau or other authority or
instrumentality, domestic or foreign.
24
"Hardware" has the meaning given to such term in the
License Agreement.
"Hazardous Materials" has the meaning set forth in Section
2.1(g).
"HSR Act" has the meaning set forth in Section 2.1(c).
"Indemnification Notice" has the meaning set forth in
Section 5.3(a).
"Intellectual Property Rights" means any patent rights,
copyrights, trade secrets, trademarks, service marks, trade names, business
names, trade dress, trade styles, designs, logos, and other source or business
identifiers, moral rights, know-how, and other similar rights recognized under
any laws or international treaties or conventions, and in any country or
jurisdiction in the world, as intellectual creations to which rights of
ownership accrue, and all registrations, applications, disclosures, renewals,
extensions, continuations or reissues of the foregoing now or hereafter in
force.
"Laws" has the meaning set forth in Section 2.1(g).
"Lease Agreements" has the meaning set forth in Section
4.2(f).
"License Agreement" has the meaning set forth in Section
1.1.
"Lien" means any lien, pledge, charge, option, restriction
on transfer, claim, mortgage, deed to secure debt, deed of trust, conditional
sale or other title retention agreement, or other security interest, security
title or encumbrance of any kind; provided that neither (i) a financing
statement filed by the lessor of equipment to evidence its leasehold interest in
such equipment nor (ii) restrictions imposed as a result of the filings of the
Petitions, shall constitute a Lien.
"Losses" has the meaning set forth in Section 5.1(a).
"Material Adverse Effect" means a material adverse effect
on the ability to operate the Gas and Power Business in a manner consistent with
the operation of the Gas and Power Business prior to the filing of the Petitions
in the first three quarters of 2001.
"Person" or "person" means any individual, corporation,
partnership, association, limited liability company, trust, joint venture,
unincorporated organization, or other entity or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended).
"Petitions" has the meaning set forth in the introduction
hereof.
"Power Marketing Authorization" means authorization by FERC
under Section 205 of the Federal Power Act to make sales of electricity at
market-based rates, which authorization is subject to conditions not materially
less favorable to UBS than the authorizations routinely issued by FERC to other
power marketers.
"Procedural Order" means the order of the Bankruptcy Court
of December 19, 2001 approving the Bidding Procedures and scheduling the Sale
Hearing for January 11, 2002.
25
"Related Agreements" means the License Agreement, the Lease
Agreements and any other document or agreement contemplated hereby or thereby
between any of UBS and its Affiliates on the one hand, and Enron and its
Affiliates, on the other.
"Royalty" has the meaning given to such term in the License
Agreement.
"Sale Hearing" means the hearing scheduled and held by the
Bankruptcy Court on the approval of this Agreement and the transactions
contemplated hereby.
"Securities Act" means the Securities Act of 1933, as
amended.
"Tax" means any and all federal, state, local, foreign and
other taxes, levies, fees, imposts, duties, governmental fees and charges of
whatever kind (including any interest, penalties or additions to the tax imposed
in connection therewith or with respect thereto), whether or not imposed on
Enron, including, without limitation, taxes imposed on, or measured by, income,
franchise, profits, gross income or gross receipts, and also ad valorem, value
added, sales, use, service, real or personal property, capital stock, stock
transfer, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, environmental, transfer and gains
taxes and customs duties.
"Third Party Claim" has the meaning set forth in Section
5.3(a).
"Transaction Approval Motion" has the meaning set forth in
Section 3.1(a).
"UBS" has the meaning set forth in the preamble hereto.
"VaR Model" has the meaning set forth in Section 2.1(o).
26
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
ENRON CORP.
By: /s/ Mark S. Muller
---------------------------------------
Name: Mark S. Muller
Title: Executive Vice President,
Corporate Development
ENRON NORTH AMERICA CORP.
By: /s/ Mitchell S. Taylor
---------------------------------------
Name: Mitchell S. Taylor
Title: Agent and Attorney-in-Fact
ENRON NET WORKS L.L.C.
By: /s/ Jeffrey R. Golden
---------------------------------------
Name: Jeffrey R. Golden
Title: Agent and Attorney-in-Fact
UBS AG
By: /s/ Robert C. Dinerstein
---------------------------------------
Name: Robert C. Dinerstein
By: /s/ Robert Mills
---------------------------------------
Name: Robert Mills
27