EXHIBIT 99.2
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COMPREHENSIVE LICENSE AGREEMENT
AMONG
ENRON CORP.
ENRON NORTH AMERICA CORP.
ENRON NET WORKS L.L.C.
AND
UBS AG
DATED AS OF FEBRUARY 8, 2002
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TABLE OF CONTENTS
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Page
Introduction 1
Article I Non-Exclusive and Exclusive Licenses Granted By the Enron Parties...............................2
1.1. Non-Exclusive License to Proprietary Software...................................................2
(a) Grant..................................................................................2
(b) Term...................................................................................3
1.2. Exclusive License to Proprietary Software.......................................................3
(a) Grant..................................................................................3
(b) Term of Exclusivity....................................................................3
1.3. Delivery of Proprietary Software, Data and Certain Third Party Software.........................4
1.4. Modification and Development Rights; Ownership..................................................4
(a) [Reserved].............................................................................4
(b) Ownership of Proprietary Software......................................................4
(c) Change Management Committee............................................................4
1.5. Ownership of Modifications and Developments.....................................................5
1.6. Enron Parties' Trade Secrets and Confidential Information.......................................5
(a) Right to Access and Use of Trade Secrets and Confidential Information..................5
(b) Limited Confidential Release of Enron Parties Employees................................5
(c) Notice to Enron Parties' Employees.....................................................5
1.7 Stand-Alone License to Use C-Logic Software.....................................................6
(a) Grant.................................................................................6
(b) Term..................................................................................6
(c) Termination............................................................................6
(d) Definition.............................................................................6
(e) C-Logic Software Not Subject to Other Provisions.......................................6
(f) Warranty Disclaimer and Limitations....................................................6
(g) Indemnification........................................................................6
1.8 Stand-Alone License to Use Enron Content........................................................7
(a) Grant.................................................................................7
(b) Restriction on Use.....................................................................7
(c) Term...................................................................................7
(d) Enron Content Not Subject to Other Provisions..........................................7
(e) Warranty Disclaimer and Limitations....................................................7
(f) Non-Infringement; Indemnification......................................................7
Article II [Reserved].....................................................................................8
Article III Hardware and Other Assets.......................................................................8
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3.1. Hardware........................................................................................8
3.2. Other Assets....................................................................................8
3.3. Trademarks......................................................................................8
Article IV [Reserved]......................................................................................8
Article V Royalties.......................................................................................8
5.1. Payment of Royalties and Delivery of Royalty Statement..........................................8
5.2. Infrastructure Set-Up; Disaster Recovery Facility Cost; Third Party License Costs...............9
5.3. Quarterly Financial Information.................................................................9
5.4. Right of Set-Off................................................................................9
5.5. Confidential Information.......................................................................10
5.6. Accounting for Gas and Power Business Unit.....................................................10
5.7. No Liability for Conduct of Business...........................................................10
5.8. Payments of Royalties..........................................................................10
5.9. Agreed Upon Procedures.........................................................................11
5.10. Allocation of Proceeds.........................................................................11
5.11. Definitions....................................................................................11
Article VI Acceleration of Royalties and Extension of License............................................14
6.1. Acceleration Provisions.......................................................................14
(a) UBS Call Option.......................................................................14
(b) Enron Right...........................................................................15
(i) Sale Exercise................................................................15
(ii) Termination Exercise.........................................................16
(iii) Securitization Exercise......................................................16
(iv) Acceleration Exercise........................................................16
(c) UBS Sale Option.......................................................................16
(d) Procedural Matters....................................................................16
(e) Enron Marketing Information Rights....................................................17
6.2. Option for Assignment and License of Proprietary Software and Other Intellectual Property
or for Perpetual Licenses.......................................................................17
Article VII Non-Competition...............................................................................18
7.1. Non-Competition................................................................................18
7.2. Affiliate Transactions.........................................................................22
7.3. Injunctive Relief..............................................................................22
7.4. Third Party Proprietary Software and Data Usage Restrictions Agreement.........................22
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Article VIII Initial Obligations of the Parties.............................................................22
8.1. UBS's Entry into Licenses of Third Party Software..............................................22
8.2. Termination of Right of Enron Affiliates and Third Parties.....................................22
8.3. Cooperation Necessary for IT Integration.......................................................22
Article IX [Reserved].....................................................................................23
Article X Launch of Web Site and UBS's Commencement of Gas and Power Business............................23
10.1. Commencement...................................................................................23
(a) Logical Segregation and Security......................................................23
10.2. Cooperation, Conferences and Meetings..........................................................23
Article XI Transition Services............................................................................24
11.1. Establishment of Additional Security by the Parties............................................24
11.2. Enron Transition Services......................................................................24
11.3. UBS Transition Services........................................................................24
11.4. Employees......................................................................................25
11.5. Fees and Expenses..............................................................................25
(a) Out-of-Pocket Fees and Expenses.......................................................25
(b) Employees.............................................................................25
(c) Overhead..............................................................................26
(d) Accounting............................................................................26
(e) Payment...............................................................................26
11.6. Audit..........................................................................................26
11.7. Maintenance of Records; Access to Information and Materials....................................26
11.8. Limitation.....................................................................................27
11.9. Nature of Relationship; Release................................................................27
(b) Release by the Enron Parties..........................................................27
11.10. Intellectual Property..........................................................................27
11.11 Third Party Beneficiary........................................................................27
Article XII Migration of Deliverables to UBS Data Center...................................................27
12.1. Agreed Plan of Migration.......................................................................27
12.2. Requirements for Disentanglement...............................................................28
(a) Logical and Physical Segregation, Security............................................28
(b) Trading and Operations; Credit and Market Risk; Finance...............................28
(c) [Reserved]............................................................................28
(d) Further Assurances Regarding Sufficiency of Assets....................................28
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12.3. Cooperation, Conference and Meetings...........................................................29
Article XIII [Reserved].....................................................................................29
Article XIV [Reserved].....................................................................................29
Article XV Costs..........................................................................................29
15.1. Costs..........................................................................................29
Article XVI License to Other Intellectual Property; Maintenance of Intellectual Property..................29
16.1. Non-Exclusive and Exclusive Licenses to the Licensed Patents...................................29
(a) Licenses to Licensed Patents..........................................................29
(i) Non-Exclusive Grant..........................................................29
(ii) Term.........................................................................29
(iii) Exclusive Grant..............................................................30
(iv) Term of Exclusivity..........................................................30
(v) Ownership of Licensed Patents................................................30
(vi) Ownership of Patent Improvements.............................................30
16.2. Disposition of Certain Domain Names............................................................31
16.3. Protection of Rights in the Proprietary Software...............................................31
16.4. No Exclusive License to the Proprietary Software to Third Parties..............................31
16.5. Protection and Maintenance of Rights in Licensed Patents.......................................32
16.6. No Exclusive License to the Licensed Patents to Third Parties..................................33
16.7. [Reserved].....................................................................................33
16.8. [Reserved].....................................................................................33
16.9. Protection and Maintenance of Trade Secrets....................................................33
16.10. No Exclusive License to the Trade Secrets......................................................33
Article XVII [Reserved].....................................................................................34
Article XVIII Representations, Warranties and Related Covenants..............................................34
18.1. Representations and Warranties by the Enron Parties............................................34
(a) Organization, Standing and Power......................................................34
(b) Authority; Binding Agreements.........................................................34
(c) Conflicts; Consents...................................................................34
(d) Intellectual Property.................................................................35
(e) Information Technology................................................................38
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(f) Litigation, Liabilities, etc..........................................................38
(g) Compliance; Governmental Authorizations...............................................38
(h) Taxes.................................................................................39
(i) Brokers...............................................................................39
(j) Sufficiency of Assets.................................................................39
18.2. Representations and Warranties by UBS..........................................................39
(a) Organization and Standing.............................................................39
(b) Authority; Binding Agreements.........................................................39
(c) Conflicts; Consents...................................................................39
(d) Brokers...............................................................................40
Article XIX Indemnification................................................................................40
19.1. Indemnification................................................................................40
19.2. Certain Limitations............................................................................43
19.3. Procedures Relating to Third Party Claims......................................................43
19.4. Procedures Related to Claims Other Than Third Party Claims.....................................44
19.5. Calculation of Indemnity Payments..............................................................44
19.6. Certain Litigation.............................................................................44
Article XX Term and Termination...........................................................................44
20.1. Term...........................................................................................44
20.2. Termination at Will by UBS.....................................................................44
20.3. Termination for Cause by the Enron Parties.....................................................45
20.4. Events Upon Termination........................................................................45
Article XXI Cooperation....................................................................................45
Article XXII Amendments to Master Agreement.................................................................46
22.1. Amendments.....................................................................................46
22.2. Miscellaneous..................................................................................48
Article XXIII Other Remedy...................................................................................48
23.1. Injunctive Relief..............................................................................48
23.2. Sole Remedy....................................................................................48
Article XXIV Tax Matters....................................................................................49
24.1. Taxes..........................................................................................49
Article XXV Confidentiality................................................................................50
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25.1. Confidentiality Obligations....................................................................50
25.2. Disclosure and Use.............................................................................51
Article XXVI Miscellaneous Provisions.......................................................................51
26.1. Entire Agreement...............................................................................51
26.2. UBS Not Successor to the Enron Parties; No Assumed Liabilities.................................51
26.3. Notices........................................................................................52
26.4. Counterparts...................................................................................53
26.5. Survival.......................................................................................53
26.6. Benefits of Agreement..........................................................................53
26.7. Amendments and Waivers.........................................................................53
26.8. Assignment.....................................................................................53
26.9. Enforceability.................................................................................54
26.10. Governing Law; Jurisdiction....................................................................54
26.11. No Partnership.................................................................................54
26.12. Audit 54
(a) UBS Data..............................................................................54
(b) Records...............................................................................55
26.13. Certain Post-Closing Adjustments to the Hardware...............................................55
26.14. Security 56
26.15. Control of the Enron Parties...................................................................56
26.16. Relationship of the Parties....................................................................56
Article XXVII Definitions; Interpretations...................................................................56
27.1. Definitions....................................................................................56
27.2. Descriptive Headings; Certain Interpretations..................................................65
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COMPREHENSIVE LICENSE AGREEMENT, dated as of February 8, 2002,
among Enron Corp., an Oregon corporation and
debtor-in-possession under Chapter 11 Case No. 01-16034 (AJG),
jointly administered, in the United States Bankruptcy Court
for 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
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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").
The Enron Parties have been engaged in the business of
structuring, origination, distribution, trading and marketing, and making
markets in, a wide range of commodities, financial instruments and derivative
products and related risk management and financial services (the "Trading
Businesses"). Included in the Trading Businesses is the business of structuring,
origination, distribution, 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"). The Trading Businesses, excluding the
Gas and Power Business, are referred to as the "Other Businesses".
The purpose of this Comprehensive License Agreement (this
"Agreement") is to provide UBS with the information technology infrastructure
and intellectual property to operate the Gas and Power Business and to use in
the other businesses of UBS and the UBS Affiliates, as permitted by the licenses
herein. As set forth below more specifically, the Enron Parties will license to
UBS their Proprietary Software for all purposes on a non-exclusive basis for 20
years, and for use in connection with the Gas and Power Business on an exclusive
basis for 10 years. UBS intends to hire certain employees of the Enron Parties,
including the information technology and other support personnel to operate the
Gas and Power Business. As part of this Agreement, the Enron Parties shall
transfer title to certain trademarks and equipment.
UBS will pay the Enron Parties a royalty for the license and
related services and equipment. Accordingly, while the royalty payments
described herein are specifically designated to cover the license and related
services and equipment, the parties hereto further acknowledge that UBS wishes
to license, and possibly ultimately to acquire these assets as a necessary part
of its overall plan to operate the Gas and Power Business. In addition to the
rights specifically licensed, UBS believes that other valuable assets (whether
or not recognized in the accounting records of either UBS or the Enron Parties,
either before or after the Effective Date) exist and are necessary to the
successful operation of the Gas and Power Business. Such additional assets
include, but are not limited to, customer relationships, a skilled workforce in
place and the overall enterprise or "going concern" value of the Gas and Power
Business. The parties hereto acknowledge that, in accordance with the terms
hereof, this Agreement specifically allows UBS to use these additional assets,
without limitation, and that such assets are not separable from the Gas and
Power Business itself. The parties hereto further acknowledge that the royalty
payments include sufficient compensation for these inseparable assets, and that
no further payment for any such assets shall be made. Subject to the terms
hereof, UBS may elect, by acceleration of its royalty payments as set forth
herein, to become the owner of all rights in the Proprietary Software and Data.
Thereafter, UBS would license back to the Enron Parties broad rights to use the
Proprietary Software except in connection with the Gas and Power Business.
Alternatively, UBS could elect upon acceleration to extend to perpetuity the
terms of its exclusive and non-exclusive licenses, in either case as more fully
set forth in this Agreement.
The Gas and Power Business to be conducted by UBS and the UBS
Affiliates after the Effective Date excludes the already-existing risk
management and financial services business of UBS and the UBS Affiliates
(including its business relating to interest rate, foreign exchange and equity
derivatives) and other businesses, including as such businesses may be conducted
with counterparties in the Gas and Power Business.
After a hearing on January 18, 2002, on January 22, 2002, the
Bankruptcy Court entered an order approving the transactions contemplated by
this Agreement and the Master Agreement, and finding, inter alia, that UBS is a
good faith purchaser of the assets that the Enron Parties are to license and
transfer to it.
ARTICLE I
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NON-EXCLUSIVE AND EXCLUSIVE LICENSES GRANTED BY THE ENRON PARTIES
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1.1. Non-Exclusive License to Proprietary Software.
(a) Grant. Subject to the terms and conditions of this
Agreement, the Enron Parties hereby grant UBS and the UBS Affiliates a personal
(solely until the Conversion Date, at which time the grant will no longer be
personal), non-transferable and non-assignable (except as otherwise provided in
Section 26.8), worldwide, irrevocable (except as otherwise provided in Article
XX), non-exclusive (except as otherwise provided in Section 1.2) license to use
the Proprietary Software in the following manner: (i) to display, perform,
modify and reproduce the Proprietary Software; (ii) to create derivative works
based on the Proprietary Software; (iii) to authorize the operation and use of
the Proprietary Software by a third party developer, hosting service or similar
agent (until the Conversion Date, solely on behalf of UBS or the UBS Affiliates
and thereafter without such restriction); (iv) to distribute and sublicense
Client Software subject to a license or sublicense no less favorable to the
licensor than the terms of any licenses pursuant to which the Enron Parties have
previously licensed such Client Software unless with the prior written consent
of the Enron Parties; (v) commencing on the Conversion Date to distribute and
sublicense the Proprietary Software and (vi) commencing on the Conversion Date
to use the Proprietary Software to provide service bureau, application service
provider or business enterprise services. For the avoidance of doubt, the grant
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in this Section 1.1(a) does not include the right to publicly distribute the
Proprietary Software other than Client Software prior to the Conversion Date.
Notwithstanding the foregoing, the grant in this Section 1.1(a) includes the
right to make and authorize others to make such incidental use of the
Proprietary Software in connection with (i) through (vi) solely on behalf of UBS
or the UBS Affiliates, subject to the prior written consent of the Enron
Parties, which shall not be unreasonably withheld or delayed.
(b) Term. The license to the Proprietary Software shall be for
a term of 20 years beginning on the Effective Date unless earlier terminated or
unless converted to a perpetual license pursuant to Article VI.
1.2. Exclusive License to Proprietary Software.
(a) Grant. Subject to the terms and conditions of this
Agreement and the Sublicense Agreement, the Enron Parties hereby grant UBS and
the UBS Affiliates a personal (solely until the Conversion Date, at which time
the grant will no longer be personal), non-transferable and non-assignable
(except as otherwise provided in Section 26.8) worldwide, irrevocable (except as
otherwise provided in Article XX), exclusive license to use the Proprietary
Software in connection with the Gas and Power Business in the following manner:
(i) to display, perform, modify and reproduce the Proprietary Software; (ii) to
create derivative works based on the Proprietary Software; (iii) to authorize
the operation and use of the Proprietary Software by a third party developer,
hosting service or similar agent (until the Conversion Date, solely on behalf of
UBS or the UBS Affiliates and thereafter without such restriction); (iv) to
distribute and sublicense Client Software subject to a license or sublicense no
less favorable to the licensor than the terms of any licenses pursuant to which
the Enron Parties have previously licensed such Client Software unless with the
prior written consent of the Enron Parties; (v) commencing on the Conversion
Date to distribute and sublicense the Proprietary Software and (vi) commencing
on the Conversion Date to use the Proprietary Software to provide service
bureau, application service provider or business enterprise services. For the
avoidance of doubt, the grant in this Section 1.2(a) does not include the right
to publicly distribute the Proprietary Software other than Client Software prior
to the Conversion Date. Notwithstanding the foregoing, the grant in this Section
1.2(a) includes the right to make and authorize others to make such incidental
use of the Proprietary Software in connection with (i) through (vi) solely on
behalf of UBS and the UBS Affiliates, subject to the prior written consent of
the Enron Parties, which shall not be unreasonably withheld or delayed.
(b) Term of Exclusivity. The term of exclusivity granted in
Section 1.2(a) above shall be for a period of 10 years, beginning on the
Effective Date, unless earlier terminated or unless converted to a perpetual
license pursuant to Article VI. During such term of exclusivity, UBS and the UBS
Affiliates shall have all rights afforded to exclusive licensees under the
copyright laws of the United States, Canada or other applicable jurisdictions
including the right to file suit or otherwise enforce its rights against any
third parties for copyright infringement or misappropriation of the Proprietary
Software to the extent the infringing use relates to the Gas and Power Business
and to recover any damages, royalties, profits, legal fees and costs relating
thereto. At the reasonable request of UBS or any UBS Affiliates from time to
time, the Enron Parties shall appear as parties in any such action, suit,
defense or proceeding (and UBS shall pay the Enron Parties' reasonable
3
documented out-of-pocket expenses paid by the Enron Parties in connection with
such appearance).
1.3. Delivery of Proprietary Software, Data and Certain Third
Party Software. Not later than two Business Days after the Effective Date, the
Enron Parties shall deliver or will cause to be delivered to UBS, at a location
designated by UBS prior to the Effective Date, a current and complete copy of
the Source Code and Object Code for the Proprietary Software, and, as soon
thereafter as practicable, all associated Documentation, and all Data related to
the Gas and Power Business. On the Effective Date, all Third Party Software for
which the Enron Parties have obtained valid and binding consents to assign
licenses to UBS (or for which such consents to assignment to UBS are
unnecessary) shall be delivered in the same manner and assigned to UBS
(excluding Source Code if Source Code is not licensed to the Enron Parties), and
thereafter the Enron Parties shall so deliver and assign any other Third Party
Software promptly upon receipt of consents for the assignment thereof. For the
avoidance of doubt, the Enron Parties shall have no obligation to obtain
consents to assignment of Third Party Software.
1.4. Modification and Development Rights; Ownership.
(a) [Reserved]
(b) Ownership of Proprietary Software. UBS hereby acknowledges
and agrees that, subject to the licensed rights granted herein and except as
otherwise provided herein, the Enron Parties shall retain all right, title and
interest (including all Intellectual Property Rights) in and to the Proprietary
Software.
(c) Change Management Committee. The parties shall promptly
establish a Change Management Committee ("CMC") consisting of two
representatives, one from the Enron Parties and one from UBS. The CMC shall meet
or confer regularly at times and places or in the manner agreed among its
members. The CMC shall track, process and approve all modifications of any of
the shared data networks, shared active directories, shared domain management,
shared e-mail, shared voicemail, shared private branch exchange, shared EC
Outlook services, shared Lim Database services and other shared services or
systems (collectively, the "Shared IT Services") used or to be used by the Enron
Parties to provide services to UBS pursuant to Section 11.2 until December 31,
2002 (the "Shared IT Service Modifications"). All proposals for such
modifications of the Shared IT Services shall be presented to the CMC for
approval in advance of implementation. Both UBS and the Enron Parties may submit
such proposals. The members of the CMC shall review and discuss each such
proposal in good faith, and shall seek to reach a mutual view as to the
disposition of each proposal. As appropriate, the CMC shall communicate and
consult with representatives of each of the parties for evaluation of any such
proposal. If a unanimous vote of the members of the CMC regarding any such
proposal for modification cannot be reached following such communication and
consultation, the final decision will be made by the representative of UBS. The
Enron Parties agree that they shall take all reasonable actions in furtherance
of proposals submitted by UBS and shall promptly effectuate such proposals so
long as such actions do not materially disrupt the operation of Enron's
business. All costs related to services provided pursuant to proposals (i)
requested by UBS and (ii) that relate to actions that would not have been taken
by any of the Enron Parties in the ordinary course of their respective
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businesses, in each case that are provided by the Enron Parties hereunder, shall
be at UBS's sole cost and expense.
1.5. Ownership of Modifications and Developments. The Enron
Parties hereby acknowledge and agree that UBS shall own all right, title and
interest (including any and all Intellectual Property Rights) in and to (a) any
and all modifications, enhancements, improvements, upgrades, updates, and
derivative works of the Proprietary Software and (b) inventions, copyrightable
works or other subject matter incorporating or based on any portion of the
Proprietary Software, in each case developed or created by or at the direction
of UBS or the UBS Affiliates.
1.6. Enron Parties' Trade Secrets and Confidential
Information.
(a) Right to Access and Use of Trade Secrets and Confidential
Information. The Enron Parties hereby acknowledge and agree that UBS and the UBS
Affiliates and UBS's and the UBS Affiliates' employees must have access to and
must be able to use for the benefit of UBS and the UBS Affiliates all Trade
Secrets and Confidential Information of the Enron Parties relating to or used in
connection with or to support the Gas and Power Business or the information
technology of the Enron Parties and their Affiliates, as well as all
Confidential Information known to or in the possession of any current (only
those employees providing services to UBS and the UBS Affiliates) or former
employees of the Enron Parties and their Affiliates. In the case of Trade
Secrets and Confidential Information relating to the Gas and Power Business,
notwithstanding which party disclosed such information to the other, the
parties' obligations to protect the confidentiality of such information shall be
as if UBS disclosed such information and the Enron Parties and their Affiliates
received such information but as if the Enron Parties and their Affiliates had
never previously possessed such information.
(b) Limited Confidential Release of Enron Parties' Employees.
Subject to the terms and conditions of this Agreement, the Enron Parties hereby
permit UBS and the UBS Affiliates and their respective employees access to and
use of Trade Secrets and Confidential Information relating to the Trading
Businesses and to facilitate such access by releasing the Enron Parties' and
their Affiliates' employees hired by UBS or any UBS Affiliate from their
obligations of confidentiality, as to the Enron Parties and their Affiliates,
with respect to such Trade Secrets and Confidential Information and, to the
extent legally permissible, substituting UBS or such UBS Affiliate as the party
to whom such duty of confidentiality is owed.
(c) Notice to Enron Parties' Employees. In furtherance of
their obligations under this Section 1.6, within five Business Days of the
Effective Date, the Enron Parties shall send each of their current employees a
notice, in a form reasonably satisfactory to UBS, notifying such employees of
their limited release from their obligations of confidentiality to the Enron
Parties and their Affiliates. In addition, within three Business Days of receipt
of a written request from UBS, the Enron Parties shall send a substantially
similar notice to any former employee of the Enron Parties or any of their
Affiliates hired by UBS or any UBS Affiliate in the Gas and Power Business after
the Effective Date.
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1.7. Stand-Alone License to Use C-Logic Software.
(a) Grant. Subject to the terms and conditions of this Section
1.7, the Enron Parties hereby grant to UBS and the UBS Affiliates a personal,
non-transferable and non-assignable, worldwide, non-exclusive license to (i) use
internally the C-Logic Software (as defined below) solely for processing data of
UBS and the UBS Affiliates for their sole benefit and not for the benefit of any
third party and (ii) to make a reasonable number of copies of the C-Logic
Software necessary to use the C-Logic Software as licensed hereunder and to make
a reasonable number of backups for disaster recovery purposes. UBS and the UBS
Affiliates shall not reverse engineer, distribute, sublicense or otherwise make
the C-Logic Software available to third parties.
(b) Term. The license to the C-Logic Software granted herein
shall terminate on the date of the earlier of: (i) the 20th anniversary of the
Effective Date; (ii) the termination of this Agreement; and (iii) the effective
date of termination by the Enron Parties as provided in this Section 1.7.
(c) Termination. Without prejudice to any other rights
hereunder, the Enron Parties may immediately terminate the license granted in
this Section 1.7 if UBS or any UBS Affiliate breaches the terms of use of the
C-Logic Software set forth in this Section 1.7 and fails to cure such breach
within 30 days following written notice to UBS of any such breach.
(d) Definition. For purposes of this Section 1.7, the "C-Logic
Software" refers to the Object Code form of the following modules of the
software application known by the Enron Parties as CommodityLogic and any
related documentation available from the Enron Parties (if any): NomLogic,
ConfirmLogic and InvoiceLogic.
(e) C-Logic Software Not Subject to Other Provisions. For the
avoidance of doubt, C-Logic Software does not constitute Proprietary Software,
Third Party Software, Internal Use Software, or any Deliverable, and is not
subject to any provisions of this Agreement other than this Section 1.7.
(f) Warranty Disclaimer and Limitations. NOTWITHSTANDING
ANYTHING ELSE HEREIN, THE ENRON PARTIES PROVIDE THE C-LOGIC SOFTWARE AS IS,
WITHOUT WARRANTY OF ANY KIND. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
THE ENRON PARTIES DISCLAIM ALL WARRANTIES WITH RESPECT TO THE C-LOGIC SOFTWARE
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. THE ENTIRE RISK ARISING
OUT OF THE USE OR PERFORMANCE OF THE C-LOGIC SOFTWARE REMAINS WITH UBS.
(g) Indemnification. UBS agrees to indemnify and hold harmless
each Enron Party and its Affiliates, shareholders, partners, directors,
officers, employees and other agents and representatives from and against any
and all Losses of any kind arising from, by reason of or in connection with UBS'
or any UBS Affiliate's use or reproduction of the C-Logic Software or UBS' or
any UBS Affiliate's reliance on results of the C-Logic Software.
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1.8. Stand-Alone License to Use Enron Content.
(a) Grant. Subject to the terms and conditions of this Section
1.8, and subject to the terms and conditions of this Agreement expressly
referenced in this Section 1.8, the Enron Parties hereby grant to UBS and the
UBS Affiliates a personal (solely until the Conversion Date, at which time the
grant will no longer be personal), non-transferable and non-assignable (except
as otherwise provided in Section 26.8), worldwide, irrevocable (except as
otherwise provided in Section 26.8), non-exclusive license to use, reproduce,
modify, distribute, display, perform and make derivative works of the Enron
Content in connection with the Gas and Power Business.
(b) Restriction on Use. Nothing in this Section 1.8 shall
constitute a grant to UBS of any right in connection with the Enron Content to
use the mark "Enron" or any mark confusingly similarly thereto, or to use the
name of any person who, at the time of such use, is an employee of Enron,
without the prior written approval of the Enron Parties. The Enron Parties
reserve all rights in and to the Enron Content not expressly granted in
subsection (a) above.
(c) Term. The license to the Enron Content granted herein
shall be perpetual.
(d) Enron Content Not Subject to Other Provisions. For the
avoidance of doubt, Enron Content does not constitute Proprietary Software,
Third Party Software, Internal Use Software, or any Deliverable, and is not
subject to any provisions of this Agreement other than this Section 1.8 except
as expressly provided in this Section 1.8.
(e) Warranty Disclaimer and Limitations. NOTWITHSTANDING
ANYTHING ELSE HEREIN, EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE ENRON PARTIES
PROVIDE THE ENRON CONTENT AS IS, WITHOUT WARRANTY OF ANY KIND. TO THE MAXIMUM
EXTENT PERMITTED BY APPLICABLE LAW, THE ENRON PARTIES DISCLAIM ALL WARRANTIES
WITH RESPECT TO THE ENRON CONTENT INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE ENTIRE RISK ARISING
OUT OF THE USE OR PERFORMANCE OF THE ENRON CONTENT REMAINS WITH UBS.
(f) Non-Infringement; Indemnification. UBS agrees to indemnify
and hold harmless each Enron Party and its Affiliates, shareholders, partners,
directors, officers, employees and other agents and representatives from and
against any and all Losses of any kind arising from, by reason of or in
connection with UBS' or any UBS Affiliate's use, reproduction or distribution of
the Enron Content or any derivative works thereof, subject to the provisions of
Article XIX.
7
ARTICLE II
[RESERVED]
ARTICLE III
-----------
HARDWARE AND OTHER ASSETS
-------------------------
3.1. Hardware. As part of the arrangements under this
Agreement, the Enron Parties shall sell, convey, transfer, assign and deliver to
UBS on the Effective Date, all of the Enron Parties' right, title and interest
in and to all of the Hardware, free and clear of all Liens and UBS shall accept
and take title to all of the Enron Parties' right, title and interest in and to
the Hardware. The Enron Parties shall do, execute, acknowledge and deliver all
such acts, bills of sale, assignments, confirmations, consents and any and all
such further instruments and documents, in form reasonably satisfactory to UBS,
as shall be reasonably necessary or advisable to vest in UBS all of the right,
title and interest of the Enron Parties in and to the Hardware.
3.2. Other Assets. The Enron Parties shall sell, convey,
transfer, assign and deliver to UBS on the Effective Date, all of the Enron
Parties' right, title and interest in and to all of the assets listed on Exhibit
3.2 (the "Other Assets"), free and clear of all Liens and UBS shall accept and
take title to all of the Enron Parties' right, title and interest in and to the
Other Assets.
3.3. Trademarks. The Enron Parties shall sell, convey,
transfer, assign and deliver to UBS on the Effective Date, all of the Enron
Parties' right, title and interest in and to all of the Marks, free and clear of
all Liens and UBS shall accept and take title to all of the Enron Parties'
right, title and interest in and to the Marks, including all goodwill symbolized
thereby and associated therewith.
ARTICLE IV
[RESERVED]
ARTICLE V
---------
ROYALTIES
---------
5.1. Payment of Royalties and Delivery of Royalty Statement.
In full consideration of all the licenses, services and equipment provided by
the Enron Parties hereunder, UBS shall, not later than the Royalty Statement
Date with respect to each Calculation Period, subject to Section 6.1, (a) pay or
cause to be paid to Enron in the manner set forth herein (i) the Royalty
Percentage of Income Before Income Taxes (if positive) for such Calculation
Period less (ii) the amount of Cumulative Losses as of the end of such
Calculation Period (the "Royalty") (and no Royalty shall be payable if such
amount is not positive) and (b) deliver to Enron the Royalty Statement with
respect to such Calculation Period by the time of payment of such Royalty. In
the event of a termination of this license pursuant to Article XX or a sale of
the Gas and Power Business pursuant to Section 6.1, UBS shall pay or cause to be
paid to Enron a Royalty (if positive) determined with respect to the period
following the last Calculation Period and ending on the date notice of such
termination is given or such sale is consummated, treating such period as though
it were a Calculation Period and making equitable adjustments in that regard
(e.g., allocating an Overhead Amount and applicable elements of Business Costs
based on the number of days in the stub period as compared to the number of days
in the Calculation Period) (a "Stub Period Royalty"). The Royalty as set forth
8
in such Royalty Statement shall be conclusive and binding on the parties hereto
for all purposes, absent an error identified in the performance of the Agreed
Upon Procedures. Notwithstanding the foregoing, in the event that, at any time
following expiration of the 10-year exclusivity period provided for in Section
1.2(b), (i) any of the Enron Parties license to any other Person the Proprietary
Software in connection with the Gas and Power Business of such Person or any of
its Affiliates and (ii) the royalty rates with respect to such license shall be
more favorable to such other Person than the Royalty payable hereunder, then the
Royalty payable hereunder shall be adjusted downward on a most-favored-nation
basis. Enron shall promptly notify UBS of any such lower royalty rate and shall
provide UBS all such information as UBS shall reasonably request in order to
determine such rate.
5.2. Infrastructure Set-Up; Disaster Recovery Facility Cost;
Third Party License Costs. UBS shall be entitled to deduct from the Royalty (or,
if the Option has been exercised and such costs and expenses have not yet been
fully recovered through Royalty deductions, from the Exercise Price and then, as
necessary, from Enron's share of proceeds of a Sale Exercise or an exercise of
the Sale Option), all costs and expenses incurred by UBS or any of the UBS
Affiliates, (a) up to a maximum of $20,000,000, associated with (i) setting up
the infrastructure for the Gas and Power Business, (ii) the licensing of Third
Party Software not assigned by the Enron Parties under this Agreement (other
than renewal and maintenance fees consistent with historical charges to the
Enron Parties) necessary to operate the Gas and Power Business in substantially
the same manner as such business was conducted by the Enron Parties and their
Affiliates during the third quarter of 2001 and (iii) establishing a disaster
recovery facility and systems for the Gas and Power Business, (b) associated
with UBS's funding on behalf of Enron of payments made (or with UBS or the UBS
Affiliates making such payments on their own behalf) to Enron's Canadian
Affiliate to acquire certain assets relating to the Gas and Power Business or
otherwise in connection with the transactions contemplated by Section 4.2(g) of
the Master Agreement, which costs and expenses are deemed to be $4,000,000, (c)
as bonuses paid pursuant to Section 3.8(d) of the Master Agreement, up to
$5,000,000 and (d) amounts provided in the Lease Agreements to be so deducted.
Notwithstanding the foregoing, the $20,000,000 cap set forth in the preceding
clause (a) shall be reduced to the extent of payments made by the Enron Parties
to third parties after the date of the Master Agreement and prior to the
Effective Date in respect of the assignment to UBS of the license for Third
Party Software or obtaining for UBS's use such Third Party Software (excluding
payments in respect of licensing or maintenance fees consistent with historical
charges to the Enron Parties), to the extent approved in advance by UBS in
writing.
5.3. Quarterly Financial Information. Within 45 days after the
fiscal quarters ended March 31 and September 30 (each, a "Quarter") included in
any Calculation Period in respect of which a Royalty may be payable, UBS shall
provide to Enron information regarding UBS's good faith estimate of Income
Before Income Taxes, Net Trading Revenues, Business Costs and Funding Costs for
such immediately preceding Quarter, subject to normal year-end adjustments,
which information need not be subject to any Agreed Upon Procedures (the
"Quarterly Financial Information").
5.4. Right of Set-Off. In addition to the set-off contemplated
by Section 5.2 (but without duplication thereof) UBS (or the UBS Affiliates on
its behalf) may set off any amounts owed to UBS (or any of the UBS Affiliates)
9
by Enron, Enron Canada or any of Enron's other Affiliates pursuant to the Master
Agreement, this Agreement or any other Related Agreement against the Royalty,
the amounts to be paid by UBS to Enron pursuant to Section 6.1 and any other
amounts paid or to be paid to an Enron Party, Enron Canada or any other
Affiliate of any of them pursuant to this Agreement or any other Related
Agreement. Notice of such set-off shall be given in writing to Enron.
5.5. Confidential Information. The Royalty Statements, the
amount of the Royalties, the amounts to be paid by UBS to Enron pursuant to
Section 6.1 and the derivation of any thereof and any other financial and other
information provided to Enron or its Affiliates in connection with this
Agreement constitute Confidential Information and as such shall be subject to
Article XXV of this Agreement; provided that such information may be provided to
a liquidating trust for the benefit of creditors (including its trustee), to the
Creditor's Committee (as defined in the Master Agreement) and to the Bankruptcy
Court, subject in each case to confidentiality arrangements reasonably
satisfactory to UBS having been entered into to protect the confidentiality of
such information.
5.6. Accounting for Gas and Power Business Unit. Until the
earlier of the Conversion Date and the giving of a notice of termination
pursuant to Section 20.2 (including pursuant to Section 6.1(b)(ii)), and for so
long as UBS and the UBS Affiliates are conducting the Gas and Power Business,
UBS or the UBS Affiliates shall account for such business as a separate business
unit (the "Business Unit"); provided, however, that UBS may also conduct through
the Business Unit trading business in gas and power commodities that extends
beyond the Gas and Power Business, without such expansion constituting part of
the Gas and Power Business and UBS shall maintain accounting records that permit
UBS to make in good faith the financial calculations required by this Agreement.
In the event that UBS or any of the UBS Affiliates acquires any stock or assets
of, or merges with or engages in any other similar business combination or
investment transaction with a Person engaged directly or indirectly in the Gas
and Power Business (in part or in whole), so long as such new Gas and Power
Business (the "New Business") is not being operated primarily using the systems
licensed hereunder, UBS and the UBS Affiliates shall not be obligated to include
in the accounting of the foregoing Business Unit any of the New Business
(including as it may exist from time to time) or to make any adjustments to
Income Before Income Taxes as a result thereof, and Income Before Income Taxes
shall be calculated excluding the New Business.
5.7. No Liability for Conduct of Business. The parties agree
that UBS and the UBS Affiliates shall have no liability to any Enron Party or
any of their Affiliates (or any successors in interest to any Enron Party or
such Affiliates) by reason of the manner in which UBS and the UBS Affiliates
operate or manage the Gas and Power Business, except as otherwise specifically
set forth herein or in the Related Agreements.
5.8. Payments of Royalties.
Payments of Royalties, including any accelerated Royalties
under Article VI, shall be made in cash or, at the election of UBS, in the form
of loans (which do not include securities that have been registered and sold
pursuant to the Securities Act of 1933, as amended) made to Enron or its
Controlled Affiliates (delivered to Enron or, at its direction, to another Enron
10
Party which is not the issuer of such debt), or any combination thereof. The
amount of debt that may be used to pay such amounts in the aggregate, is
limited, however, to debt having a principal amount of $100 million. If UBS
shall elect to use debt to make any such payment, it shall so notify Enron no
more than 90 days and no less than 70 days before making such payment,
specifying the date of such payment and the percentage of the Royalty to be paid
in cash and the percentage to be paid in debt. On or prior to the date of
payment, UBS shall assign a value to the debt to be used by it to make such
payment. Based on such value, the total value of such debt as a percentage of
the Royalty being paid shall not exceed the percentage of such Royalty being
paid attributable to the U.S. electricity-related portion of the Gas and Power
Business, such attribution being determined by UBS in its sole judgment.
No later than 45 days prior to the day on which the Royalty
payment is to be made, Enron shall notify UBS whether Enron elects to receive
and retain the debt, in whole or in part, or receive the debt, but have it sold
for cash on Enron's behalf. If Enron elects to have the debt sold for cash, UBS,
as agent for Enron, shall sell such debt on Enron's behalf. UBS shall use
reasonable efforts to sell such debt on or within five Business Days after the
Royalty payment date. If UBS has not been able to find a buyer for such debt by
such time, such debt shall be deemed to have proceeds to Enron (or to the Enron
Party directed to receive the debt as aforesaid) of $1.00 and such debt shall be
delivered to Enron. If the proceeds to Enron of such sales are less than the
amount owed for the portion of the Royalty not being paid in cash, it shall be
deemed that the assumptions of UBS utilized in the valuation of the debt were
not validated through the sale process and UBS shall promptly pay such shortfall
to Enron in the form of either cash or additional debt, at the option of UBS,
which debt UBS shall cause to be sold on Enron's behalf within ten days, such
that the total proceeds to Enron shall not be less than the Royalty due to it
hereunder. Such payment shall be the exclusive remedy of Enron with respect to
the valuation of debt delivered pursuant to this Section 5.8. If the proceeds
exceed such amount owed, the excess shall be held by Enron and credited against
future Royalties (including accelerated Royalties) or proceeds from the Sale
Exercise or Sale Option owed to Enron at the next available opportunity. In all
cases under this Section 5.8, Enron shall have received its total cash proceeds
for the Royalty no later than five Business Days following the Royalty Statement
Date.
5.9. Agreed Upon Procedures. Following the Effective Date, the
parties will work in good faith to establish "agreed upon procedures" in
accordance with the statements on standards for attestation engagements by the
American Institute of Certified Public Accountants with respect to the Royalty
Statement (the "Agreed Upon Procedures"); provided, however, that such
procedures must be established no later than the 60th day following the
Effective Date.
5.10. Allocation of Proceeds. The Enron Parties agree to
apportion any payments received by them pursuant to Articles V and VI hereof
fairly and equitably among each of the Enron Parties and Enron Canada to the
extent of their relative direct or indirect contributions to the value of the
transactions contemplated by the Master Agreement and the License Agreement, if
any, as determined by order of the Bankruptcy Court.
5.11. Definitions. With respect to this Article V and Article
VI, the following words have the meanings set forth below:
11
"Business Costs" means all costs and expenses of conducting
the Gas and Power Business or incidental thereto, and shall include, but not be
limited to premises costs, legal, audit and other professional fees and
expenses, personnel costs and all other expenses of operating the Gas and Power
Business, including general and administrative costs and taxes other than income
taxes, as determined in accordance with U.S. GAAP except as otherwise provided
herein. Any unusual, non-recurring or extraordinary costs or expenses, as
determined in accordance with U.S. GAAP on a pretax basis (collectively
"Extraordinary Costs"), shall be included as Business Costs. For purposes of
this definition of Business Costs, personnel costs shall include all costs of
salary, bonuses (including deferred bonuses), employee benefits and any related
payroll taxes, all in accordance with standard UBS Warburg procedures as in
effect from time to time (including for both revenue generating and support
personnel). Currently, UBS Warburg employs certain bonus plans which provide for
awards of instruments linked to UBS equity, and other financial instruments,
which include vesting provisions whereby an employee may forfeit some or all of
certain bonus payments. Notwithstanding the vesting and forfeiture provisions,
it is understood that it is the practice of UBS Warburg to accrue as an expense
(personnel cost) the full value of amounts awarded in respect of a period during
that period, and to notify participants of the amounts and terms of such awards
early in the following period. Accordingly, notwithstanding any contrary
provisions or interpretations under U.S. GAAP, for purposes of the calculation
of personnel costs, the full value of such awards made or deemed to be made in
respect of a given year shall be accrued as an expense of that year, so long as
consistent with current UBS Warburg practice. For the purpose of calculating
Royalties, there shall not be included in Business Costs: (i) Royalties, (ii)
any costs or expenses deducted against the Royalty pursuant to Section 5.2 and
(iii) the $10,587,000 of bonuses to be paid in accordance with Section 3.8(c) of
the Master Agreement. UBS's calculation of Business Costs shall be conclusive
and binding on the parties hereto for all purposes, absent an error identified
in the performance of the Agreed Upon Procedures.
"Calculation Period" means consecutive periods of six months
beginning on each January 1 or July 1. The first Calculation Period shall
commence on January 1, 2002. The final Calculation Period shall end upon
termination of the license provided hereunder.
"Cumulative Losses" shall initially be zero. Immediately upon
the commencement of each Calculation Period (including a stub period, as
applicable for the Stub Period Royalty), the amount of Cumulative Losses shall
be (a) increased by the amount of negative Income Before Income Taxes, if any,
for the immediately preceding Calculation Period multiplied by the Royalty
Percentage in effect for such period and (b) decreased by (i) the amount of
positive Income Before Income Taxes, if any, for such immediately preceding
Calculation Period multiplied by the Royalty Percentage in effect for such
period and (ii) the amount of Cumulative Losses utilized to reduce the Exercise
Price pursuant to clause (b) of the proviso to Section 6.1(a); provided that the
amount of Cumulative Losses shall not be decreased below zero.
"Extraordinary Costs" has the meaning set forth in the
definition of Business Costs.
"Funding Costs" for any period shall be equal to sum of the
amounts calculated for each day in such period equal for each such day to the
total assets (excluding cash) minus total liabilities of the Gas and Power
12
Business on such day multiplied by Daily Adjusted LIBOR, with Daily Adjusted
LIBOR being the 30-day London Interbank Offered Rate (as determined by UBS)
established on the first day (other than a day that is a Saturday, Sunday or
legal holiday in London) on which banks are open for business in London of the
month during which such day occurs, plus 100 basis points, divided by 360. In no
event shall Funding Cost for any day be less than zero.
"Income Before Income Taxes" means, with respect to any
Calculation Period, (i) Net Trading Revenue of UBS and its Affiliates of the Gas
and Power Business for such period less (ii) the Business Costs of UBS and its
Affiliates of the Gas and Power Business for such period and less (iii) the
Overhead Amount, as determined in accordance with U.S. GAAP except as otherwise
provided herein and subject to normal year-end adjustments.
"Net Trading Revenues" means the realized and unrealized
trading income of the Gas and Power Business resulting from changes in fair
value of trading positions and the settlement of positions upon maturity, plus
any other revenue incidental to the Gas and Power Business, less Funding Costs
and less any provision for reserves, as determined in accordance with U.S. GAAP
except as otherwise provided herein. Reserves shall be established in accordance
with accounting policies to be established from time to time for UBS and its
Affiliates, and will include reserves for credit risk, operational risk,
liquidity, and model (or valuation) risk. The policies used to establish these
reserves shall be based on policies adopted by UBS management for the Gas and
Power Business from time to time. All assumptions, judgments or subjective
assessments required in establishing the necessary reserves shall be made at the
sole, good faith discretion of UBS and, absent an error identified in the
performance of the Agreed Upon Procedures, shall be final and binding upon the
parties. Net Trading Revenues shall exclude the $5,587,000 paid to UBS by Enron
at Closing as contemplated by Section 4.2(i) of the Master Agreement. UBS's
calculation of Net Trading Revenues shall be conclusive and binding on the
parties hereto for all purposes, absent an error identified in the performance
of the Agreed Upon Procedures.
"Overhead Amount" shall initially be $25,000,000 and shall be
increased for each Calculation Period based on increases in the U.S. consumer
price index for such period.
"Royalty Percentage" shall initially mean 33.0%. The Royalty
Percentage shall be reset from time to time as set forth in this paragraph. The
Royalty Percentage with respect to each Calculation Period ending at least 7-1/2
years, but no more than ten years, after the Effective Date shall be increased
so as to equal 105% of the Royalty Percentage in effect with respect to the
previous Calculation Period (after first giving effect to the adjustment
pursuant to the next sentence). If a tranche of the Option (as defined in
Section 6.1) shall be exercised and consummated, the Royalty Percentage with
respect to the Calculation Period during which the relevant Exercise Notice is
given shall be decreased so as to equal (i) two thirds of what such Royalty
Percentage otherwise would have been had such option not been exercised, in the
case of the exercise of the first tranche of the Option, or (ii) one half of
what such Royalty Percentage otherwise would have been had such option not been
exercised, in the case of the exercise of the second tranche of the Option.
13
"Royalty Statement" means, with respect to any Calculation
Period, a statement, prepared by UBS or on its behalf, setting forth the amount
of Income Before Income Taxes for the applicable Calculation Period and the
Royalty for such Calculation Period and UBS's basis in reasonable detail for
determining such amounts (so that the amount of Income Before Income Taxes,
Cumulative Losses, Net Trading Revenue, Business Costs and Funding Costs and the
significant components of such amounts (excluding Net Trading Revenue) shall be
stated in the Royalty Statement), upon which statement an independent public
accounting firm of national stature selected by UBS shall have performed the
Agreed Upon Procedures and such firm's letter to that effect shall accompany the
statement.
"Royalty Statement Date" with respect to any Calculation
Period means 90 days after the last day of such Calculation Period.
"U.S. GAAP" shall mean United States generally accepted
accounting principles, as in effect from time to time, as applied by UBS in
accordance with internal policy.
ARTICLE VI
ACCELERATION OF ROYALTIES AND EXTENSION OF LICENSE
--------------------------------------------------
6.1. Acceleration Provisions.
(a) UBS Call Option. Beginning on January 1, 2005 and through
the date 10 years and three months after the Effective Date (the "Option
Termination Date", and such period, the "Option Period"), UBS shall have the
option (the "Option") to accelerate into lump sums the Royalties that may be due
in the future, exercisable by it in three tranches, by paying a sum for each
tranche (the "Exercise Price") equal to 5.75 times the Base Amount (as defined
below) as of the date the relevant Exercise Notice (or Enron Exercise Notice) is
given, divided by (i) three for the first tranche, (ii) two for the second
tranche, and (iii) one for the third tranche; provided that (a) solely as it
pertains to the calculation of the Exercise Price and only in connection with an
exercise of the Option that is not an Acceleration Exercise, the incentive bonus
paid or accrued for trading professionals with respect to each of the
Calculation Periods used in determining the Exercise Price will be deemed to be
the lesser of (i) actual incentive bonuses paid or accrued for trading
professionals with respect to such Calculation Period and (ii) the greater of
(A) 20% of the aggregate Net Trading Revenues for such Calculation Period and
(B) 25% of the aggregate Income Before Income Taxes for such Calculation Period,
excluding for purposes of calculating Income Before Income Taxes the amount of
such incentive bonuses included as an expense in such Calculation Period and (b)
the Exercise Price shall be reduced by the Cumulative Losses, if any, as of the
beginning of the Calculation Period during which the relevant Exercise Notice
(or an Enron Exercise Notice) is given. The Exercise Price may be positive or be
zero, but shall not be negative.
"Base Amount" at any date shall have the following meaning:
(i) if the sum of Income Before Income Taxes for two consecutive Calculation
Periods immediately prior to such date is greater than zero, then Base Amount
shall mean (a) the sum of Income Before Income Taxes for the two consecutive
Calculation Periods immediately preceding such date multiplied by (b) the
Royalty Percentage in effect during the Calculation Period ended immediately
prior to such date and (ii) if the sum of Income Before Income Taxes for the two
consecutive Calculation Periods immediately prior to such date is not greater
14
than zero dollars, then Base Amount shall mean (a) the sum of Income Before
Income Taxes for the three consecutive Calculation Periods immediately preceding
such date multiplied by two thirds multiplied by (b) the Royalty Percentage in
effect during the Calculation Period ended immediately prior to such date.
(b) Enron Right. Beginning (1) upon the seventh anniversary of
the Effective Date and through the Option Termination Date, if at any time
during such period UBS has not exercised and closed two of the tranches of the
Option and (2) upon the eighth anniversary of the Effective Date and through the
Option Termination Date, if at any time during such period UBS has not then
exercised or previously exercised and closed all three of the tranches of the
Option, then in the case of (1) and (2), Enron shall have the right (the "Enron
Right"), by giving written notice (the "Enron Exercise Notice") of Enron's
exercise of the Enron Right to UBS, to require UBS to effect (on a commercially
reasonable timetable) any of the following as UBS shall choose (and UBS may
alter its choice as it determines appropriate): (i) to sell the Gas and Power
Business to a third party that is not a UBS Affiliate (the "Sale Exercise"),
(ii) to terminate this Agreement (the "Termination Exercise"), (iii) to provide
a mechanism for securitizing the Royalties payable hereunder as securities that
are freely transferable among institutional investors (the "Securitization
Exercise") or (iv) to accelerate into one lump sum the Royalties that may be due
in the future (the "Acceleration Exercise").
(i) Sale Exercise. If UBS elects to satisfy Enron's
exercise of the Enron Right with the Sale Exercise, then UBS
shall conduct an auction or such other process to effect the
sale of the Gas and Power Business or substantially all of its
assets and liabilities to one or more third parties pursuant
to a process that UBS determines in its good faith judgment is
designed to maximize the consideration received for the Gas
and Power Business or its assets. In such case, the following
matters set forth in this paragraph (i) (the "Sale
Procedures") shall apply. Enron shall receive a proportionate
amount of the proceeds received by UBS (or, as the case may
be, UBS and Enron in the aggregate) in such sale, after taking
into effect any taxes (other than income taxes and other than
the Texas franchise tax to the extent treated as an income tax
for purposes of U.S. GAAP) and reasonable transaction costs,
based on the Royalty Percentage in effect at such time as
Enron exercises the Enron Right and pursuant to the terms of
such transaction less the amount of Cumulative Losses, if any,
at the closing of the sale. UBS shall use its commercially
reasonable efforts to structure the sale of the Gas and Power
Business in a manner tax efficient to UBS and Enron, so long
as such structure would not be detrimental to UBS in its good
faith judgment. UBS and Enron shall reasonably cooperate with
each other in connection with such auction and sale (or other
process). Upon consummation of such sale and the payment of
such amount of proceeds to Enron, the Enron Parties shall be
entitled to no further Royalties under this Agreement (except
any Stub Period Royalty), and the licenses hereunder, which
may be transferred at UBS's election to either UBS or to the
third party buyer as part of such sale, shall automatically
thereupon, in exchange for the consideration to Enron
specified in the third sentence of this paragraph, become
fully paid up, and UBS shall have right at the time of such
sale to effect its options under clauses (a) or (b) of Section
6.2 and to retain in perpetuity the non-exclusive licenses
granted under this Agreement. As part of such sale, UBS and
the UBS Affiliates
15
shall be entitled to use such Intellectual Property Rights on
a non-exclusive basis to wind down and transition the Gas and
Power Business and to such other rights (and be subject to its
obligations) under Article XX and this Agreement as though the
license were being terminated by UBS pursuant to Section 20.2.
(ii) Termination Exercise. If UBS elects to satisfy
Enron's exercise of the Enron Right with the Termination
Exercise, then UBS shall terminate this Agreement pursuant to
Section 20.2, and all licenses granted by or to it hereunder,
pursuant to Article XX hereof, and the Enron Parties shall be
entitled to no further Royalties under this Agreement (except
any Stub Period Royalty) and the parties shall be entitled to
the rights set forth in Article XX.
(iii) Securitization Exercise. If UBS elects to
satisfy Enron's exercise of the Enron Right with the
Securitization Exercise, then the parties shall cooperate to
give effect to UBS's structure therefor, provided there is no
reduction in the Royalty as a result of such structure.
(iv) Acceleration Exercise. If UBS elects to satisfy
Enron's exercise of the Enron Right with the Acceleration
Exercise, then UBS shall pay a sum equal to the Exercise
Price, and the Exercise Price shall be calculated in
accordance with clause (iii) of the first paragraph of Section
6.1(a), excluding clause (a) of the proviso therein.
(c) UBS Sale Option. Beginning upon the end of the 60th month
following the Effective Date, UBS shall have the option (the "Sale Option") at
any time to sell the Gas and Power Business. If UBS shall proceed to conduct
such sale, it shall conduct an auction or such other process to effect the sale
of the Gas and Power Business or substantially all its assets and liabilities to
one or more third parties pursuant to a process that UBS determines in its good
faith judgment is designed to maximize the consideration received for the Gas
and Power Business or its assets and the Sale Procedures shall apply.
(d) Procedural Matters. Each tranche of the Option shall be
exercisable during the Option Period by UBS giving written notice (the "Exercise
Notice") to Enron at any time during the three-month period immediately
following the end of any Calculation Period, but only one tranche shall be
exercisable during any two consecutive Calculation Periods. An Exercise Notice
may be revoked at any time prior to the closing of the tranche relating to such
Exercise Notice. The parties shall use their reasonable best efforts to take all
actions, including procuring all necessary or advisable third party consents, as
applicable to each of them, to give effect as expeditiously as possible to the
transactions contemplated to occur at the closing of such tranche. Such closing
shall occur within five Business Days following Enron's receipt of the Exercise
Notice, but the closing shall be postponed for such time as is necessary to
obtain any necessary regulatory approvals, permits and clearances of waiting
periods, including any clearance under the HSR Act. At the closing of such
tranche, subject to the satisfaction of the matters contemplated to occur at
such closing as provided herein, UBS shall cause the Exercise Price (if any) to
be paid to Enron, such payment to be accompanied by a statement prepared by or
on behalf of UBS setting forth the calculation of such Exercise Price. Similar
16
procedures shall apply if UBS elects to satisfy Enron's exercise of the Enron
Right with the Acceleration Exercise. Once either (i) UBS has exercised all
three tranches of the Option and has paid the Exercise Price (if any) with
respect thereto or (ii) the Acceleration Exercise has occurred and UBS has paid
the Exercise Price (if any) in connection therewith, Royalties shall no longer
accrue or be payable for each Calculation Period beginning with the Calculation
Period in which the final Exercise Notice or Enron Exercise Notice, as the case
may be, was delivered. Enron's exercise of the Enron Right shall take precedence
over UBS's exercise of the Option, in the case where the Enron Right and the
Option have both been exercised but not closed.
(e) Enron Marketing Information Rights.
Beginning upon the third anniversary of the Effective Date and
continuing no later than the Option Termination Date, if at any time any tranche
of the Option is exercisable by UBS and UBS does not timely deliver the Exercise
Price to Enron following delivery of an Exercise Notice exercising the Option,
Enron on behalf of the Enron Parties shall be entitled to the marketing
information rights set forth in this Section 6.1(e), unless there has been an
exercise of the Enron Right or the Sale Option or a delivery of a notice of
termination pursuant to Article XX.
Enron shall be entitled to provide the historical financial
information included in the Royalty Statements, the accompanying Agreed Upon
Procedures letter provided pursuant to Section 6.1 and the Quarterly Financial
Information provided pursuant to Section 5.3 to potential buyers of the Royalty
interest of Enron in connection with the marketing efforts of Enron to sell such
interest. UBS shall be entitled to review and approve all summary financial
information and marketing material used by Enron in such marketing efforts, such
approval not to be unreasonably withheld or delayed. The date of receipt of such
approval shall constitute the first day of the three month period constituting
the "UBS Approval".
Prior to providing any such information to any Person, Enron
and the recipient of the information shall have entered into a confidentiality
agreement with UBS, in form and substance reasonably satisfactory to UBS. Such
information shall not be provided to more than 10 recipients in any marketing
effort. No such information may be provided to any competitor of UBS or any of
the UBS Affiliates, including any Person engaged in a business that competes
with the Gas and Power Business. The marketing effort shall be limited to the
three-month period beginning on the date the UBS Approval is delivered; provided
that if by the end of such period Enron shall not have entered into a definitive
agreement to sell the Royalty interest, Enron shall have the information rights
provided in this Section 6.1(e) again when the conditions hereof are met and
Enron owns the Royalty interest. Enron's information rights contained in this
Section 6.1(e) will not be available more than once in any 12-month period. The
marketing efforts by Enron shall comply in all material respects with Applicable
Laws. Except as to Section 25.2, nothing in this Section shall alter the rights
and obligations of the parties in other provisions of this Agreement.
6.2. Option for Assignment and License of Proprietary Software
and Other Intellectual Property or for Perpetual Licenses. Upon the earliest to
occur of the closing with respect to the third tranche of the Option, the
closing of the Securitization Exercise, the closing of the Sale Exercise, the
closing of the Sale Option and the closing of the Acceleration Exercise (such
17
closing being referred to as the "Conversion Date"), UBS may elect by written
notice to the Enron Parties either (a) to have the parties execute the
Assignment and License Agreement in substantially the form attached hereto as
Exhibit 6.2 or (b) to have the non-exclusive licenses granted to UBS and the UBS
Affiliates under Sections 1.1(a) and 16.1(a)(i) and the exclusive licenses
granted to UBS and the UBS Affiliates under Sections 1.2(a) and 16.1(a)(iii)
become perpetual.
ARTICLE VII
-----------
NON-COMPETITION
---------------
7.1. Non-Competition.
(a) Each of UBS and the Enron Parties acknowledge and
recognize the highly competitive nature of the Gas and Power Business and of the
business of UBS and the UBS Affiliates. Accordingly, in consideration of the
payments contemplated to be made pursuant to this Agreement, the transactions
contemplated by this Agreement and the premises contained herein, none of the
Enron Parties shall, nor shall they permit any of their Controlled Affiliates
to:
(i) at any time during the period beginning
immediately following the Effective Date and ending on the
date the Royalty has been fully paid under Article VI or
Section 20.2 (the "Restricted Period") directly or indirectly
engage, or have any controlling ownership interest in, or be
employed by or associated in any manner (other than possible
investments in public entities of no more than 5% or private
entities of no more than 10%) with any Competing Business;
(ii) at any time during the Restricted Period
directly or indirectly, either as principal, agent, employer,
advisor (whether paid or unpaid), controlling shareholder,
general partner or in any other capacity whatsoever, either
for its own benefit or for the benefit of any other Person,
discourage any supplier, customer or trading counterparty of
Enron's Gas and Power Business from doing business with UBS or
any of the UBS Affiliates in its Gas and Power Business;
provided, that the foregoing shall not limit the Enron Parties
or their Controlled Affiliates from engaging in business
activities not otherwise prohibited by this Section 7.1;
(iii) at any time during the Restricted Period
directly or indirectly, either as principal, agent, employer,
advisor (whether paid or unpaid), controlling shareholder,
general partner or in any other capacity whatsoever, either
for its own benefit or for the benefit of any other Person,
either (A) hire, attempt to hire, contact or solicit with
respect to hiring, any employee of UBS or any of UBS
Affiliates engaged in the conduct of the Gas and Power
Business, or (B) induce or otherwise counsel, advise or
encourage any employee of UBS or any UBS Affiliate engaged in
the conduct of the Gas and Power Business to leave the
employment of UBS or any UBS Affiliate; provided, that, the
prohibition on hiring shall expire on the second anniversary
of the Effective Date.
18
For purposes of this Section 7.1, "Competing Business" shall
mean any Person engaged in whole or in part in any business that directly
competes with the Gas and Power Business; provided, however, that the following
activities of Enron and its Controlled Affiliates that are in accordance with
and consistent with historical practices, shall not be prohibited:
(A) the structuring, origination, marketing
or distributing of Gas and Power Commodities arising
out of the continuation or winding down of activities
of the Enron Parties or their Controlled Affiliates;
(B) the provision, servicing, fulfilling,
monetizing, restructuring, or optimizing of any
existing energy contract obligations, assets or
positions of the Enron Parties or their Controlled
Affiliates;
(C) the provision of energy asset management
services, including, but not limited to, energy asset
optimization, back office outsourcing, asset
development, fuel switching, balancing among other
services customary to such agreements provided to
North American local distribution companies,
municipal electric utilities, investor owned
utilities, independent power plants and exploration
and production companies;
(D) the provision of such commodities or
services through retail transactions with consumers
including industrial, commercial and residential
customers;
(E) as necessary for provision of demand
side management and distributed generation to North
American retail customers;
(F) as necessary as fuel or off-take for any
facilities owned or controlled by Enron;
(G) as necessary as part of the provision of
a primarily capital markets or financing activity,
product or service for the Enron Parties or their
customers;
(H) energy emissions products and services,
green energy or renewables or any such similar energy
type;
(I) the conduct of business by Portland
General Corporation, Northern Border Partners, L.P.
("NBP"), EOTT Energy Partners, L.P. ("EEP"), Citrus
Corp., and Mariner Energy, Inc. and their respective
subsidiaries and, if applicable, general partners in
their conduct of the business of NBP or EEP, as
applicable;
(J) the provision of services under (i) the
IT Services Agreement, by and among AEP Energy
Services, Inc., Houston Pipe Line Company and Enron
North America Corp., dated as of December 27, 2000,
as amended by that certain Amendment, dated as of May
31, 2001 (the "HPL Agreement"), and (ii) the IT
19
Services Agreement, by and between Bridgeline
Holdings, L.P. and Enron North America Corp., dated
as of March 1, 2000 (the "Bridgeline Agreement") as
well as potential transition services to Dynegy, Inc.
and its affiliates in connection with its acquisition
of Northern Natural Gas Company;
provided, however, that each of Enron and its Controlled
Affiliates shall be relieved of the restrictions in this Section 7.1 to the
extent it determines in good faith that compliance would subject it to a
substantial risk of a breach of fiduciary duty owed to minority equity holders;
and
provided, further, however, that the following activities of
the Enron Parties and their Controlled Affiliates, whether in accordance with
historic practices, winding down or otherwise, shall be prohibited in all
circumstances regardless of any exceptions otherwise permitted pursuant to this
Section 7.1:
(A) making a two-way market in any Gas or
Power Commodities; and
(B) operating, sponsoring or owning any
economic interest (other than the Royalty or an
equity investment of less than five percent in a
Person) in any electronic trading platform used for
two-way electronic trading of any Gas or Power
Commodities, but excluding being a customer of such a
trading platform (the matters being prohibited by
clauses (A) and (B) being "Prohibited Activities").
(b) The Enron Parties agree that they shall not directly or
indirectly approve the conduct of any Competing Business by any Affiliate that
is not a Controlled Affiliate, by any entity to which they may have a fiduciary
duty or by any of the entities referred to in Clause (I) above or use the
ability of such entities to engage in a Competing Business to avoid the Enron
Parties' obligation under this Section 7.1.
(c) It is the desire and intent of the parties hereto that the
provisions of this Section 7.1 shall be enforced to the fullest extent
permissible under Applicable Law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, it is expressly
understood and agreed that, although the Enron Parties and UBS consider the
restrictions contained in this Section 7.1 to be reasonable, if a final
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Section 7.1 is
unenforceable against any party, the provisions of this Section 7.1 shall be
deemed amended to apply as to such maximum time and territory and to such
maximum extent as such court may judicially determine or indicate to be
enforceable.
(d) UBS agrees, at any time during the Restricted Period, that
it shall not, nor shall it permit any of the UBS controlled Affiliates to:
(i) other than through the Gas and Power Business or
as set forth in clause (v) below, directly or indirectly
engage, or have any ownership interest in, any Trading
Businesses primarily trading Gas and Power Commodities in
North America or engaged in the Prohibited Activities;
20
provided, however, that the foregoing shall not be violated by
UBS or the UBS controlled Affiliates owning, directly or
indirectly securities of any Person if such party does not,
directly or indirectly, beneficially own, collectively, ten
percent or more of any class of securities of such Person;
(ii) transfer any traders or other key personnel of
the Gas and Power Business to any Person in which UBS,
directly or indirectly, has any ownership interest if (A) such
Person is engaged in the trading business relating to Gas and
Power Commodities or (B) the transferred trader or other key
personnel has been identified by Enron to UBS as a critical
employee and two of such critical employees have been
transferred in the preceding 18-month period, or after giving
effect to such transfer, more than 10% of the trading
professionals or 10% of the other employees who are actually
hired by UBS, as applicable, have been so transferred since
the date of this Agreement; and
(iii) incorporate lines of business or expenses
unrelated to the Gas and Power Business into the calculation
of Royalties, including by acquisition of such line of
business; or
(iv) directly or indirectly, either as principal,
agent, employer, advisor (whether paid or unpaid), controlling
shareholder, general partner or in any other capacity
whatsoever, either for its own benefit of or the benefit of
any other Person, either (A) contact or solicit with respect
to hiring any employees of Enron or Controlled Affiliates
engaged in the conduct of the Gas and Power Business or (B)
induce or otherwise counsel, advise or encourage any employee
of Enron or any Controlled Affiliate engaged in the conduct of
the Gas and Power Business to leave the employment of Enron or
such Controlled Affiliate; provided, that UBS and the UBS
controlled Affiliates may take the actions otherwise
prohibited by this clause (iv) until the date 75 days after
the Effective Date.
(v) Notwithstanding the foregoing, nothing herein
shall prohibit UBS or a UBS controlled Affiliate from
acquiring a business engaged in the Trading Business relating
to Gas and Power commodities so long as (i) a "chinese wall"
is maintained between the employees engaged in the Gas and
Power Business and the employees engaged in the acquired
business and (ii) the provisions of subsection (d)(ii) are
adhered to; provided, however, that if the Proprietary
Software is the primary trading platform of such Trading
Business for Gas and Power commodities, such Gas and Power
Business shall be included in the Gas and Power Business for
purposes of determining the Royalty and the Exercise Price
under this Agreement.
(e) Bridgeline Services. Notwithstanding anything to the
contrary in clauses (a) and (b) of this Section 7.1, the Enron Parties and their
Affiliates shall be permitted to continue their existing relationship with
Bridgeline Holdings, L.P. ("Bridgeline") under the Bridgeline Agreement and
otherwise so long as Bridgeline's business is limited to the historical
21
practices of the businesses set forth under items (A) through (H) and item (J)
under clause (a) of Section 7.1 provided that such businesses are not engaged in
any Prohibited Activities.
7.2. Affiliate Transactions. UBS agrees that any transaction
between the Gas and Power Business and any other UBS Affiliate shall be on terms
no less favorable to the Gas and Power Business than would be obtained in an
arm's-length transaction with a third party that is not a UBS Affiliate.
7.3. Injunctive Relief. The parties acknowledge that damages
at law would be an inadequate remedy for the breach by a party of any provision
of Section 7.1, and agree, in the event of such breach, that the non-breaching
party may obtain temporary and permanent injunctive relief restraining such
other party 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 the parties or their Affiliates from
pursuing other remedies available at law or in equity for such breach or
threatened breach of Section 7.1 of this Agreement.
7.4. Third Party Proprietary Software and Data Usage
Restrictions Agreement. The Enron Parties shall cause any third party to whom
Source Code for any of the Proprietary Software applications is assigned or
licensed, whether in connection with an Enron Change of Control or otherwise, to
execute a proprietary software and data usage restriction agreement in the form
attached hereto as Exhibit 7.4.
ARTICLE VIII
------------
INITIAL OBLIGATIONS OF THE PARTIES
----------------------------------
8.1. UBS's Entry into Licenses of Third Party Software.
Immediately following the Effective Date, UBS shall seek those licenses to the
Third Party Software which the Enron Parties did not deliver licensor's consent
to assignment of licenses on the Effective Date, with the cooperation and
assistance of the Enron Parties as UBS may reasonably request.
8.2. Termination of Rights of Enron Affiliates and Third
Parties. In the event that the Enron Parties become aware of any use, whether by
license, service bureau services or otherwise, by any of their Affiliates or
third parties of the Proprietary Software in connection with the Gas and Power
Business (except as permitted by the Sublicense Agreement and except as set
forth on Exhibit 8.2), then the Enron Parties shall take any and all actions
required to terminate any and all rights in such use of such Affiliates or third
parties.
8.3. Cooperation Necessary for IT Integration. The Enron
Parties shall cooperate fully with UBS in order to assist UBS in (i) achieving
the requirements of Section 10.1 and (ii) in all other respects as deemed
reasonably necessary by UBS and the UBS Affiliates to achieve the purposes of
this Agreement. Such cooperation shall include provision of any access that UBS
and the UBS Affiliates may reasonably deem appropriate to Enron's data centers
or other information technology facilities supporting the Gas and Power
Business.
22
ARTICLE IX
----------
[RESERVED]
ARTICLE X
---------
LAUNCH OF WEB SITE AND UBS'S COMMENCEMENT OF GAS AND POWER BUSINESS
-------------------------------------------------------------------
10.1. Commencement. UBS shall determine, in its sole
discretion, the date for commencement of the Gas and Power Business (the first
day of which operation shall be referred to as the "Launch Date" herein).
(a) Logical Segregation and Security. The Enron Parties shall
cooperate in all reasonable and necessary ways to assist UBS including providing
reasonable access to the Enron Parties' facilities, systems and equipment, in
adopting and implementing the integration and security measures set forth on
Exhibit 10.1(a) and in accomplishing in a timely manner the following:
(i) Software and Data to be used by both the Enron
Parties and UBS and the UBS Affiliates pursuant to Article
VIII shall be logically segregated so that instances of the
Software and Data used by UBS and the UBS Affiliates to
operate the Gas and Power Business are securely separate and
distinct from other instances thereof and from other materials
of the Enron Parties.
(ii) Software and Data to be used only for UBS and
the UBS Affiliates pursuant to Article VIII shall be
physically segregated so that all instances of such Software
and Data are securely separate and distinct from other
materials of the Enron Parties.
(iii) The phrase "separate and distinct" with respect
to two sets of materials, as used in this Section 10.1(a),
includes the requirement that technological permissions to
operate one set of materials are not sufficient to permit the
operation of the second set of materials.
(iv) The logical segregation of materials shall be
accomplished in accordance with at least such security
standards as are reasonable in the electronic trading and
financial services industries and as are sufficient for
compliance with all Applicable Law.
(v) The security standards referred to in Section
10.1(a)(iv) shall include the requirement that the Software
and Data or instances thereof used for UBS and the UBS
Affiliates are secured, including by firewalls or otherwise,
from other systems or subsystems and from access by third
parties and by Enron Employees whose access thereto is not
expressly authorized pursuant to this Agreement.
10.2. Cooperation, Conferences and Meetings. The parties shall
meet and confer regularly as appropriate to cooperate in the attainment of the
provisions of Section 10.1 and to assess the progress of execution of those
provisions.
23
ARTICLE XI
----------
TRANSITION SERVICES
-------------------
11.1. Establishment of Additional Security by the Parties.
Beginning no later than immediately following the Launch Date, the parties
hereto shall commence adoption and implementation of the security measures set
forth in Exhibit 11.1. The parties shall use their reasonable best efforts to
achieve compliance with such measures not later than three months after the
Launch Date. The Enron Parties will provide prompt and thorough support for
security investigations as requested by UBS. Notwithstanding the foregoing,
security tasks, including user permissioning, monitoring and audit of
Deliverables shall be the sole responsibility of UBS.
11.2. Enron Transition Services.
(a) Beginning no later than the Launch Date and continuing
until December 31, 2002 (the "Transition Services Period"), the Enron Parties
shall provide the transition services, including data networks, active
directories, domain management, e-mail, voicemail, private branch exchange, EC
Outlook services, Lim Database services and on-call support, set forth in
Section 11.1, this Section 11.2 and in Exhibit 11.2 (the "Enron Transition
Services") and shall satisfy the service levels provided herein and therein.
(b) The Enron Transition Services shall be provided 24 hours
per day, seven days per week, every day of the year. Except as otherwise
specifically set forth in Exhibit 11.2, the Enron Transition Services shall be
performed in accordance with such reasonable policies and directives as may be
issued from time to time by UBS and with the same standard of care as that of a
reasonably prudent service provider under the circumstances.
(c) The Enron Parties agree in good faith to provide any other
reasonable transitional service or support that arises as a result of this
Agreement and the Related Agreements but has not been specified in Section 11.1,
this Section 11.2 or in Exhibit 11.2 in order to permit the operation of the Gas
and Power Business, including the Web Site, in substantially the same manner in
which it was conducted prior to the filing of the Petitions, and including
services for the transition of employees (such as human resources and payroll).
In connection with the provision of the Enron Transition Services, the Enron
Employees shall not undertake any trading action or commercial activity without
the written instruction of UBS.
11.3. UBS Transition Services.
(a) During the Transition Services Period, UBS shall provide
the information technology management services and financial advisory services
and any other services that the parties mutually agree to with respect to
trading and risk management for the existing trading book of the Enron Parties
and Enron Canada reasonably necessary to support (i) the Enron Parties'
provision of the Enron Transition Services, (ii) the continued use in the
ordinary course of business consistent with historical practices by the Enron
Parties and Enron Canada of the Deliverables to the extent such use by the Enron
Parties is permitted by this Agreement and (iii) the Enron Parties' and Enron
Canada's provision, servicing, fulfilling, monetizing, restructuring or
optimizing of any existing energy contract obligations, assets or positions of
the Enron Parties and Enron Canada in connection with the Enron Parties' and
Enron Canada's unwinding of the trading positions held by the Enron Parties and
24
Controlled Affiliates on the Effective Date (the "UBS Transition Services", and,
collectively with the Enron Transition Services, the "Services"). The initial
scope, nature or delivery mechanism for the UBS Transition Services will be
developed jointly by UBS and the Enron Parties within 14 days of the Effective
Date and shall be updated periodically as agreed by the parties.
(b) The UBS Transition Services shall be performed by UBS in
accordance with such reasonable policies and directives as may be issued from
time to time by the Enron Parties and with UBS using the same standard of care
as that used by a reasonably prudent service provider under the circumstances.
(c) In connection with providing the UBS Transition Services,
UBS shall provide to the Enron Parties reasonable access from time to time at
reasonable times to the personnel and facilities of UBS primarily dedicated to
the Gas and Power Business. Enron may request UBS Transition Services solely for
the purposes described above by providing a written request containing (i) the
services to be provided and (ii) if applicable, the specific persons the Enron
Parties are requesting to perform such services. Enron shall identify the
specific access needed and the date or dates and times that Enron requires such
access. In connection with the provision of the UBS Transition Services, the UBS
and UBS Affiliates' employees shall not undertake any trading action or
commercial activity without the prior written instruction of the Enron Parties.
11.4. Employees. Each of the Enron Parties and UBS shall
appoint and make available or cause one or more of its Affiliates to appoint an
appropriate number of employees to provide the Services. The Enron Parties may
at their expense cause third parties to provide the Enron Transition Services;
provided, however, that each of the Enron Parties shall remain responsible for
the provision of the Enron Transition Services in accordance with this Article
XI.
11.5. Fees and Expenses. As compensation for the provision of
the Services by the party providing the Services (the "Service Provider"), the
party receiving the Services (the "Service Recipient") agrees to pay to the
Service Provider fees as set forth in this Section 11.5.
(a) Out-of-Pocket Fees and Expenses. The Service Recipient
shall reimburse the Service Provider for all documented reasonable out-of-pocket
fees and expenses paid by the Service Provider (including fees and expenses paid
to any independent contractor or other third party) reasonably incurred in
connection with Services actually requested by and rendered to the Service
Recipient and its Affiliates pursuant to this Article XI; provided, that such
reimbursement shall be limited to the Service Provider's actual costs incurred
and paid by the Service Provider or any of its Affiliates.
(b) Employees. Unless the parties separately agree in writing
to another basis for determining reimbursable costs related to the engagement of
a Service Provider's employees in providing Services, the Service Recipient
shall pay the Service Provider's "fully-burdened cost" of its employees actually
engaged in providing Services, calculated on a per-hour basis. For purposes of
this Article XI, "fully-burdened cost" of the Service Provider's employees shall
be based on the annualized amount of salary, statutorily required payments,
taxes and the cost of benefits (including bonuses, health insurance, life
insurance, disability, workers compensation, and any other employee benefits
25
that the Service Provider may offer its employees during the Transition Services
Period). The Service Provider shall require employees providing Services to keep
detailed time records with respect to the performance of Services for the
purpose of determining the amount of payment owed by the Service Recipient
pursuant to the terms of this Article XI, and the Service Provider shall provide
reasonable detail regarding its calculation of such fully-burdened cost with any
invoice for such amounts (which detail can be provided by grade level rather
than individual employees, if appropriate).
(c) Overhead. The Service Recipient shall pay the Service
Provider's reasonably allocated overhead cost associated with the cost of office
space, utilities, computer systems, supplies and equipment used in actually
performing the Services. The Service Provider shall provide reasonable detail
regarding its calculation of such allocated overhead with any invoice for such
amounts.
(d) Accounting. The Service Provider shall keep a full and
complete account of all costs, expenses and expenditures incurred by it in
connection with the provision of Services hereunder.
(e) Payment. The Service Provider shall invoice the Service
Recipient within 30 days following the end of each quarterly period for the fees
and expenses accrued during such quarterly period. Amounts due to the Service
Provider shall be paid within 60 days of the invoice date.
11.6. Audit. The Service Recipient and its designated
representatives, after 15 days' notice in writing to the Service Provider, shall
have the right during normal business hours to audit, at the Service Recipient's
expense, the books and records of the Service Provider for the sole purpose of
examining compliance by the Service Provider with the terms of this Article XI.
The Service Recipient shall not commence such audits more than twice. The
Service Recipient shall have 60 days after the invoice date in which to make an
audit of such records for the Transition Services Period. Absent fraud or
intentional concealment or misrepresentation by the Service Provider or its
employees, the Service Provider shall neither be required nor permitted to
adjust any item on such invoice unless a claim therefor is presented or
adjustment is initiated within 60 days after the date of such invoice, and in
the absence of such timely claims or adjustments, the invoices rendered shall be
conclusively established as correct.
11.7. Maintenance of Records; Access to Information and
Materials.
(a) Each of the parties hereto shall maintain accurate books
and records in accordance with U.S. GAAP covering all actions and Services
provided under and pursuant to this Article XI.
(b) Each of the parties hereto shall have access to any
records, information or other input from the party receiving the Services as
necessary for the Service Provider to perform the Services. If the Service
Recipient fails to make available or supply such information or input and such
failure renders the Service Provider's performance of any Services unreasonably
difficult, the Service Provider, upon reasonable notice to the applicable party,
shall not be obligated to perform such Services.
26
11.8. Limitation. Each of the parties hereto acknowledges that
the Services shall be provided only with respect to the business of the parties
hereto. The parties shall not be required to perform any Services for the
benefit of any Person other than the Enron Parties and Enron Canada, UBS and the
UBS Affiliates, provided that the foregoing restriction shall not apply to UBS's
and UBS Affiliates' provision of the UBS Transition Services to the Enron
Parties with respect to support of the HPL Agreement, the Bridgeline Agreement
and the potential services agreement with Northern Natural Gas Company in
connection with its acquisition by Dynegy, Inc.
11.9. Nature of Relationship; Release.
(a) The relationship of the Service Provider with the Service
Recipient established under this Article XI will be that of an independent
contractor and in no event shall any party hereto be deemed a partner,
co-venturer or agent of the other party hereto.
(b) Release by the Enron Parties. Each of the Enron Parties
hereby (i) releases UBS and the UBS Affiliates, and their respective
shareholders, partners, directors, officers, employees and other agents and
representatives from and against any and all liabilities, judgments, claims
(including claims of creditors and Affiliates of the Enron Parties),
settlements, losses (including diminutions in value), damages, fees, Liens,
Taxes, penalties, obligations and expenses (including reasonable fees and
disbursements of counsel, consultants, accountants and other professionals)
(collectively, "Losses") that such Enron Party may have at any future time by
reason of any cause, matter or thing whatsoever, directly or indirectly, related
to any action taken or omitted to be taken by UBS or any UBS Affiliate (except
for the willful misconduct of UBS or any UBS Affiliate) in connection with the
provision of the UBS Transition Services; and (ii) covenants not to sue UBS and
the UBS Affiliates, shareholders, partners, directors, officers, employees and
other agents and representatives for any matter released pursuant to clause (i)
of this Section 11.9(b).
11.10. Intellectual Property. Any Intellectual Property
developed or acquired by the Enron Parties solely in connection with the
provision of services pursuant to this Article XI, including any changes or
other Enhancements of existing Proprietary Software, Documentation and Data,
shall become Proprietary Software, Documentation and Data for all purposes under
this Agreement.
11.11. Third Party Beneficiary. For purposes of Article XI,
Enron Canada is a third party beneficiary of the rights granted to the Enron
Parties herein.
ARTICLE XII
-----------
MIGRATION OF DELIVERABLES TO UBS DATA CENTER
--------------------------------------------
12.1. Agreed Plan of Migration. No later than 10 days
following the Launch Date, UBS shall adopt, with the cooperation of the Enron
Parties, a written plan for the migration of the Deliverables to the Data Center
(the "Migration Plan") whereby UBS, with the cooperation of the Enron Parties,
shall cause such migration to occur so that UBS and the UBS Affiliates may
continue to operate the Gas and Power Business as contemplated by this Agreement
and the Master Agreement. The Migration Plan shall include a timetable for the
27
migration of all the elements of the Deliverables necessary to operate the Gas
and Power Business to the Data Center (including the physical transfer of the
Hardware and the installation and logical and physical segregation and security
of the Software, Documentation and Data).
12.2. Requirements for Disentanglement.
(a) Logical and Physical Segregation, Security. UBS, with the
cooperation and assistance of the Enron Parties, shall provide for the
following:
(i) The Deliverables shall be logically and
physically segregated so that all instances of the
Deliverables are securely separate and distinct from any
materials of the Enron Parties and are operated on Hardware on
the premises of UBS.
(ii) The phrase "separate and distinct" with respect
to two sets of materials, as used in this Section 12.2,
includes the requirement that technological permissions to
operate one set of materials are not sufficient to permit the
operation of the second set of materials.
(iii) The logical and physical segregation of the
Deliverables shall be accomplished in accordance with at least
such security standards as are reasonable in the electronic
trading and financial services industries and as are
sufficient for compliance with all Applicable Law.
(iv) The security standards referred to in Section
12.2(a)(iii) shall include the requirement that the
Deliverables are secured, including by firewalls or otherwise,
from other systems or subsystems and from access by third
parties, including by Enron Employees.
(b) Trading and Operations; Credit and Market Risk; Finance.
The items set forth in clause (a) alone shall be completed in a manner such that
UBS and the UBS Affiliates shall be able to operate the Gas and Power Business
in accordance with the internal standards and procedures of UBS and any UBS
Affiliates and Applicable Law, as determined by UBS and any UBS Affiliates in
their sole reasonable discretion.
(c) [Reserved]
(d) Further Assurances Regarding Sufficiency of Assets. In the
event UBS determines in its reasonable discretion that the representations and
warranties contained in Sections 18.1(d)(i) and 18.1(j) are not satisfied, the
Enron Parties shall promptly (i) transfer, assign and deliver to UBS such
Hardware free and clear of all Liens and (ii) unless prohibited by Applicable
Law or contract, grant such Intellectual Property Rights in respect of, and
deliver copies of, any Proprietary Software, Marks, Licensed Patents and Data
owned or licensed by Enron or its Affiliates, in each case, as may be necessary
in order to permit UBS to operate the Gas and Power Business in substantially
the same manner as such business was conducted by the Enron Parties and their
Affiliates during the third quarter of 2001.
28
(e) If (i) there is any Proprietary Software lacking
Sufficient Documentation as of the Effective Date; (ii) the employees of the
Enron Parties or their Affiliates accepting employment with UBS are not
reasonably knowledgeable regarding maintenance and support of such Proprietary
Software; (iii) the employees knowledgeable regarding the maintenance and
support of such Proprietary Software remain employees of the Enron Parties or
their Affiliates; (iv) UBS provides written notice to the Enron Parties of such
facts promptly after becoming aware thereof and (v) written notice of such facts
is given to the Enron Parties not later than 120 days after the Effective Date;
then not later than 20 Business Days after receipt of such notice, the Enron
Parties shall create and deliver to UBS Sufficient Documentation for such
Proprietary Software. "Sufficient Documentation" for Proprietary Software means
Documentation that is current, accurate and reasonably sufficient in detail and
content to identify and reasonably explain to a software engineer of ordinary
skill and experience the maintenance and support of such Proprietary Software;
12.3. Cooperation, Conference and Meetings. The parties shall
meet and confer regularly as appropriate to cooperate in the attainment of the
provisions of Section 12.2 and to assess the progress of execution of those
provisions.
ARTICLE XIII
[RESERVED]
ARTICLE XIV
[RESERVED]
ARTICLE XV
COSTS
-----
15.1. Costs. Costs and expenses hereunder shall be borne by
the party that incurs them unless otherwise expressly provided herein.
ARTICLE XVI
LICENSE TO OTHER INTELLECTUAL PROPERTY; MAINTENANCE OF INTELLECTUAL PROPERTY
----------------------------------------------------------------------------
16.1. Non-Exclusive and Exclusive Licenses to the Licensed
Patents.
(a) Licenses to Licensed Patents.
(i) Non-Exclusive Grant. Subject to the terms and
conditions of this Agreement, the Enron Parties hereby grant
UBS and the UBS Affiliates a worldwide, irrevocable (except as
otherwise provided in Article XX) non-exclusive (except as
otherwise provided in Section 16.1(a)(iii)) license to use and
practice the Licensed Patents in the following manner: (i) the
right to make, have made, use, research, develop and market
and (ii) commencing on the Conversion Date to sell, offer for
sale, import, export, or otherwise exploit products, processes
and services and other invention claimed in or covered by the
Licensed Patents.
(ii) Term. Unless earlier terminated as provided in
Article XX, the non-exclusive license granted in Section
16.1(a)(i) above shall be for a term of 20 years from the
29
Effective Date or the expiration of the last valid and
subsisting claim of the Licensed Patents, whichever is
earlier. The Enron Parties hereby acknowledge and agree that
UBS may terminate this non-exclusive license in whole or in
part at any time and for any or no reason.
(iii) Exclusive Grant. Subject to the terms and
conditions of this Agreement and the Sublicense Agreement, the
Enron Parties hereby grant UBS and the UBS Affiliates a
worldwide, irrevocable (except as otherwise provided in
Article XX), exclusive license to use and practice the
Licensed Patents in connection with the Gas and Power Business
in the following manner: (i) the right to make, have made,
use, research, develop and market and (ii) commencing on the
Conversion Date to sell, offer for sale, import, export, or
otherwise exploit products, processes and services and other
invention claimed in or covered by the Licensed Patents.
(iv) Term of Exclusivity. Unless earlier terminated
as provided in Article XX, the exclusive license granted in
Section 16.1(a)(iii) above shall be for a term of 10 years
from the Effective Date or the expiration of the last valid
and subsisting claim of the Licensed Patents, whichever is
earlier. The Enron Parties hereby acknowledge and agree that
UBS may terminate this exclusive license in whole or in part
at any time and for any or no reason. During such period of
exclusivity, UBS and the UBS Affiliates shall have all rights
afforded to exclusive licensees under the patent or other laws
of the applicable country or jurisdiction and any applicable
international treaty or convention, including, if available,
the right to file suit or otherwise enforce its rights in
their name or in the name of the Enron Parties against any
third parties for patent infringement or misappropriation of
the Licensed Patents and to recover any damages, royalties,
profits, legal fees and costs relating thereto, and to defend
against any claim of invalidity or unenforceability of any
claim of any Licensed Patent. At the request of UBS or the UBS
Affiliates, the Enron Parties shall appear as a party in any
such action, suit, defense or proceeding (and UBS shall pay
the documented reasonable out-of-pocket expenses paid by the
Enron Parties and reasonably incurred in connection with such
appearance).
(v) Ownership of Licensed Patents. UBS hereby
acknowledges that, except as otherwise provided herein, the
Enron Parties retain all right, title and interest in and to
the Licensed Patents and that UBS's use of the Licensed
Patents shall not create in UBS any right, title and interest
in the Licensed Patents, except as a licensee, and that all
use of the Licensed Patents will inure solely to the benefit
of the Enron Parties.
(vi) Ownership of Patent Improvements. The Enron
Parties acknowledge and agree that UBS shall own all Patent
Improvements developed, conceived, created, discovered or
acquired by or at the direction of UBS or the UBS Affiliates.
30
16.2. Disposition of Certain Domain Names. Not less than 90
days following the first public announcement by UBS or a UBS Affiliate that the
Web Site is operational, the Enron Parties shall permanently cease public use of
the domain names www.enrononline.com, www.enronline.net and www.enrononline.net.
At the end of such 90 day period, the Enron Parties shall transfer to UBS such
domain names. UBS shall not connect any web site or other service to such domain
names. The Enron Parties do not hereby grant any license to use the ENRON
trademark or any other trademark embodied in such domain names.
16.3. Protection of Rights in the Proprietary Software. During
the term of, and subject to, the licenses granted under Sections 1.1(a) and
1.2(a), the Enron Parties shall (and shall cause their licensees to) take all
actions necessary to maintain all Intellectual Property Rights in the
Proprietary Software in full force and effect. The Enron Parties shall not (and
shall not permit any licensees thereof to) do any act or knowingly omit to do
any act whereby the Enron Parties' Intellectual Property Rights in the
Proprietary Software shall be lost or become invalid, including without
limitation permitting any copyrights in the Proprietary Software to fall into
the public domain. UBS shall provide the Enron Parties with prompt notice of any
alleged, actual or threatened infringement or misappropriation of, or any actual
or threatened invalidity action against, the Intellectual Property Rights in the
Proprietary Software of which UBS may become aware, and the Enron Parties shall
provide UBS with prompt notice of any alleged, actual or threatened infringement
or misappropriation of, or any actual or threatened invalidity action against,
the Intellectual Property Rights in the Proprietary Software of which the Enron
Parties may become aware. The Enron Parties shall take prompt action to enforce
or defend against such alleged, actual or threatened infringement,
misappropriation or invalidity action, unless the Enron Parties receive notice
that UBS or any UBS Affiliate intends to exercise its rights as exclusive
licensee under Section 1.2(b) to pursue such action or defense. If the Enron
Parties should not take action to enforce or defend their rights in the
Proprietary Software within a reasonable period following receipt of notice of
an actual infringement or misappropriation of, or any invalidity action against,
the Intellectual Property Rights in the Proprietary Software, then UBS and any
of its Affiliates shall have the right (but not the obligation) to institute and
prosecute any such action or defense. Each party hereto shall use reasonable
best efforts to assist and cooperate with the other party pursuing such action,
including appearing as a party to such action or defense. Each party shall bear
its own costs and expenses relating to such action or defense. Any amounts
recovered in connection with such proceeding shall be distributed, first, to the
party pursuing such action or defense to cover its costs and expenses relating
thereto and, second, to the other party to cover its costs and expenses, if any,
incurred in connection with the proceeding. Any remaining amount shall be
divided between the parties in proportion to the relative Loss suffered by each,
respectively, as a result of the infringement, misappropriation or invalidity
challenge. Each party shall obtain the other party's approval before entering
into any compromise, settlement or stipulation that affects the other parties'
Intellectual Property Rights in any way with respect to such proceeding, which
approval the other party shall not unreasonably withhold. In no event shall
either party take any position or submit any argument in any such proceeding
that may in any way lessen, impair or undermine the Intellectual Property Rights
in the Proprietary Software or any party's rights herein.
16.4. No Exclusive License to the Proprietary Software to be
Granted to Third Parties. Except as otherwise provided under this Agreement, the
Enron Parties covenant and agree that they shall not grant (i) an exclusive
license in the Proprietary Software to any third party during the term of this
31
Agreement or (ii) any right to a third party or take any other action that may
be inconsistent with, or that may impair or undermine in any way, the rights
that the Enron Parties have granted to UBS and the UBS Affiliates under this
Agreement, including without limitation, actions that would preclude the Enron
Parties' performance of their obligations upon UBS's exercise of the Option
under Section 6.1.
16.5. Protection and Maintenance of Rights in Licensed
Patents. During the term of, and subject to, the licenses granted under Sections
16.1(a)(i) and (iii), the Enron Parties shall (and shall cause their licensees
to) take all actions necessary to maintain the Licensed Patents in full force
and effect, including, without limitation, using all proper statutory notices
and markings in order to so maintain the Licensed Patents in full force free
from any claim of abandonment for non-use or invalidity, and the Enron Parties
shall not (and shall not permit any licensees thereof to) do any act or
knowingly omit to do any act whereby any Licensed Patents shall be lost, lapse
or become invalidated. The Enron Parties shall cause to be taken all reasonably
necessary steps in any proceeding before the United States Patent and Trademark
Office or in any patent or corresponding government office or agency in any
foreign jurisdiction to prosecute and maintain each granted or issued patent and
each pending patent application or registration for any of the Licensed Patents,
including, without limitation, payment of all requisite fees and taxes, and
shall provide UBS with copies of all correspondence to and from such offices or
agencies relating thereto. UBS shall provide the Enron Parties with prompt
notice of any alleged, actual or threatened infringement or misappropriation of,
or any actual or threatened invalidity action against, any of the Licensed
Patents of which UBS may become aware, and the Enron Parties shall provide UBS
with prompt notice of any alleged, actual or threatened infringement or
misappropriation of, or any actual or threatened invalidity action against, any
of the Licensed Patents of which the Enron Parties may become aware. The Enron
Parties shall take prompt action to enforce or defend against such alleged,
actual or threatened infringement, misappropriation or invalidity action, unless
the Enron Parties receive notice that UBS or any UBS Affiliate intends to
exercise its rights as exclusive licensee under Section 16.1(a)(iv) to pursue
such action or defense. If the Enron Parties should not take action to enforce
their rights in the Licensed Patents within a reasonable period of time of
receiving notice of an actual infringement or misappropriation of, or any
invalidity action against, any of the Licensed Patents, then UBS and any UBS
Affiliate shall have the right (but not the obligation) to institute and
prosecute any such action. Each party hereto shall use reasonable best efforts
to assist and cooperate with the other party pursuing such action or defense,
including appearing as a party to such action or defense. Each party shall bear
its own costs and expenses relating to such action or defense. Any amounts
recovered in connection with such proceeding shall be distributed, first, to the
party pursuing such action or defense to cover its costs and expenses relating
thereto and, second, to the other party to cover its costs and expenses, if any,
incurred in connection with the proceeding. Any remaining amount shall be
divided between the parties in proportion to the relative Loss suffered by each,
respectively, as a result of the infringement, misappropriation or invalidity
challenge. Each party shall obtain the other party's approval before entering
into any compromise, settlement or stipulation with respect to such proceeding,
which approval the other party shall not unreasonably withhold. In no event
shall either party take any position or submit any argument in any such
proceeding that may in any way lessen, impair or undermine any of the Licensed
Patents or any party's rights herein.
32
16.6. No Exclusive License to the Licensed Patents to Third
Parties. Except as otherwise provided under this Agreement, the Enron Parties
covenant and agree that they shall not grant (i) an exclusive license in any of
the Licensed Patents to any third party during the term of this Agreement or
(ii) any right to a third party or take any other action that may be
inconsistent or that may impair or undermine in any way the rights that the
Enron Parties have granted to UBS and the UBS Affiliates under this Agreement,
including without limitation, actions that would preclude the consummation of
the outright transfer of all the Intellectual Property Rights in the Licensed
Patents to UBS and the UBS Affiliates upon UBS's exercise of the Option under
Section 6.1.
16.7. [Reserved]
16.8. [Reserved]
16.9. Protection and Maintenance of Trade Secrets. During the
term of, and subject to, the right of access to and use of Trade Secrets granted
to UBS and the UBS Affiliates under Section 1.6, the Enron Parties shall take
all actions necessary to maintain and protect any Trade Secrets relating to the
Gas and Power Business and to the Proprietary Software and Data. The Enron
Parties shall not (and shall not permit others to) do any act or knowingly omit
to do any act whereby any such Trade Secrets are lost, misused, misappropriated,
or becomes public. UBS shall provide the Enron Parties with prompt notice of any
alleged, actual or threatened misuse or misappropriation of the Trade Secrets of
which UBS may become aware, and the Enron Parties shall provide UBS with prompt
notice of any alleged, actual or threatened misuse or misappropriation of the
Trade Secrets of which the Enron Parties may become aware. The Enron Parties
shall take prompt action against such alleged, actual or threatened misuse or
misappropriation, unless the Enron Parties receive notice that UBS or any UBS
Affiliate intends to exercise its rights as exclusive licensee to pursue such
action. If the Enron Parties should not take action to enforce their rights in
the Trade Secrets within a reasonable period of time following receipt of notice
of an actual or threatened misuse or misappropriation of the Trade Secrets, then
UBS and any UBS Affiliate shall have the right (but not the obligation) to
institute and prosecute any such action. Each party shall use reasonable best
efforts to assist and cooperate with the other party pursuing such action,
including appearing as a party to such action. Each party shall bear its own
costs and expenses relating to such action. Any amounts recovered in connection
with such proceeding shall be distributed, first, to the party pursuing such
action to cover its costs and expenses relating thereto and, second, to the
other party to cover its costs and expenses, if any, incurred in connection with
the proceeding. Any remaining amount shall be divided between the parties in
proportion to the relative Loss suffered by each, respectively, as a result of
such misuse or misappropriation. Each party shall obtain the other party's
approval before entering into any compromise, settlement or stipulation with
respect to such proceeding, which approval the other party shall not
unreasonably withhold. In no event shall either party take any position or
submit any argument in any such proceeding that may in any way lessen, impair or
undermine such Trade Secrets or any party's rights herein.
16.10. No Exclusive License to the Trade Secrets. Except as
otherwise provided under this Agreement, the Enron Parties covenant and agree
that they shall not (i) grant any license or access to the Trade Secrets
relating to the Gas and Power Business to any third party during the term of
this Agreement or (ii) grant any right to a third party or take any other action
33
that may be inconsistent or that may impair or undermine in any way the rights
that the Enron Parties have granted to UBS under this Agreement, including
without limitation, actions that would preclude the consummation of the outright
transfer of all Intellectual Property Rights and rights in the Trade Secrets to
UBS upon UBS's exercise of the Option under Section 6.1.
ARTICLE XVII
[RESERVED]
ARTICLE XVIII
REPRESENTATIONS, WARRANTIES AND RELATED COVENANTS
-------------------------------------------------
18.1. Representations and Warranties by the Enron Parties. The
Enron Parties severally and not jointly 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. This Agreement,
the Related Agreements and such other agreements, documents and instruments
executed in connection herewith to which an Enron Party is a party 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) to the
Master Agreement, 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
34
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 Applicable Law 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) to the Master Agreement,
(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 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.
(i) Except as set forth in Exhibit 18.1(d)(i), the
Software and Data include all software, data and all other
tangible or intangible information or materials, including all
Customer Data, that were prior to the filing of the Petitions
used or held for use, or that are currently held for use or
intended to be used or held for use, in connection with the
Gas and Power Business.
(ii) Except as set forth in Exhibit 18.1(d)(ii), the
Enron Parties have and are validly licensing or transferring
to UBS and the UBS Affiliates all ownership, license rights
and other Intellectual Property Rights (as applicable) in the
Proprietary Software and Data (all such rights, collectively,
the "Enron Intellectual Property Rights") necessary to operate
the Gas and Power Business.
(iii) Except as set forth in Exhibit 18.1(d)(iii),
the Enron Parties have full and exclusive right, title,
interest and ownership, including all Intellectual Property
Rights associated therewith, in and to all Proprietary
Software and Data, which in all cases are free and clear of
all Liens.
(iv) The Enron Parties are licensees of Third Party
Software that is assigned to UBS by such Enron Parties in
connection with the transactions contemplated by this
Agreement.
(v) [Reserved]
(vi) All licenses, agreements and other sources of
rights that are assigned to UBS by such Enron Parties in
connection with the transactions contemplated by this
Agreement pursuant to which the Enron Parties hold any license
rights or other rights in Software or Data are in full force
and effect and are valid and binding on Enron Parties and to
the knowledge of the Enron Parties on all counterparties
thereto.
(vii) [Reserved]
(viii) Except as set forth in Exhibit 18.1(d)(viii),
Exhibit 27-2 and Exhibit 27-3, there are no other
registrations, filings or recordations necessary or required
35
with respect to the Proprietary Software, the Licensed Patents
or the Marks, except in connection with abandoned trademark
registrations or applications. All required fees and taxes to
record and maintain ownership of patented or registered
Proprietary Software and Data have been paid. The Enron
Parties are not in violation of, and will not, as a result of
the execution, delivery or performance of this Agreement be in
violation of or lose any rights pursuant to, any license or
agreement affecting any rights described in this Section
18.1(d)(viii).
(ix) Except as set forth in Exhibit 18.1(d)(ix), all
granted and issued patents and all trademarks, service marks
and domain names listed in Exhibit 27-2 and Exhibit 27-3 and
all copyrights held by the Enron Parties or their Affiliates
are valid and enforceable. Except in the ordinary course of
business through their licensing agreements, neither the Enron
Parties nor their Affiliates have granted any options,
exclusive licenses, assignments or agreements of any kind
relating to (A) ownership of Proprietary Software or Data or
(B) the marketing or distribution of works or rights embodying
Proprietary Software or Data except as set forth in Exhibit
18.1(d)(ix).
(x) To the knowledge of the Enron Parties, there has
not been and there is not any material unauthorized use,
infringement or misappropriation of any of the Enron
Intellectual Property Rights by any third party, including any
employee or former employee. The Enron Parties have taken
reasonable measures to protect and preserve the security,
confidentiality, value and ownership of the Enron Intellectual
Property Rights, including trade secrets and other
confidential information and to obtain authorization, through
terms and conditions, notices, consents or otherwise, to use
Customer Data in the Gas and Power Business as conducted and
proposed to be conducted. All employees and consultants of the
Enron Parties or their Affiliates involved in the design,
review, evaluation or development of products or intellectual
property rights have executed nondisclosure and assignment of
inventions agreements sufficient to protect the
confidentiality and value of the Enron Intellectual Property
Rights and to vest in the Enron Parties or their Affiliates
exclusive ownership of such Enron Intellectual Property
Rights. To the knowledge of the Enron Parties, all Trade
Secrets of the Enron Parties and their Affiliates are
presently valid and protectable and are not part of the public
domain or knowledge, nor, to the knowledge of the Enron
Parties, have they been used, divulged on a non-confidential
basis or appropriated for the benefit of any Person other than
the Enron Parties and their Affiliates or otherwise to the
detriment of the Enron Parties or their Affiliates.
(xi) With respect to software licensed from third
parties that are assigned to UBS or any UBS Affiliate, the
Enron Parties currently comply with all material terms and
conditions of the applicable license agreements. Except as set
forth on Exhibit 18.1(d)(xi), all of the Third Party Software
is either (A) generally available, off-the-shelf,
non-customized software, (B) assignable at will by the Enron
Parties to UBS or any UBS Affiliate or (C) customization of
36
the off-the-shelf software that is freely assignable to UBS in
connection with this Agreement.
(xii) [Reserved]
(xiii) Except as set forth in Exhibit 18.1(d)(xiii),
no copy of the Source Code of any Proprietary Software is
subject to or held in escrow or is in any third party's
possession.
(xiv) The Enron Parties have taken all measures
appropriate, in the reasonable judgment of Enron Parties, to
protect the Enron Intellectual Property Rights. The Enron
Parties have treated the Proprietary Software and Data as
confidential information or as trade secrets.
(xv) To the knowledge of the Enron Parties, none of
the Proprietary Software or Data infringes any copyright or
copyright applications or patents of others, and none of the
Proprietary Software or Data constitutes an infringement or
misappropriation of proprietary information, trade secrets or
any other Intellectual Property Right of others. Except as set
forth on Exhibit 18.1(d)(xv), to the knowledge of the Enron
Parties, no claims with respect to the Proprietary Software or
the Data have been asserted or, to the knowledge of the Enron
Parties, are threatened by any Person nor is there any basis
for bona fide claims (A) to the effect that the conduct of the
Gas and Power Business as historically conducted infringes any
copyright or patent of any Person, (B) against the use by the
Enron Parties or their Affiliates of any Proprietary Software
or Data, or (C) challenging the ownership, validity or
effectiveness of any of the Enron Intellectual Property Rights
in any of the Proprietary Software or Data.
(xvi) No licensing fees, royalties, or payments are
due and payable by the Enron Parties for the use of the
Proprietary Software or Data other than maintenance fees
incurred in the ordinary course of business.
(xvii) None of the Enron Parties has taken any action
that would have the effect of waiving any rights to the
Proprietary Software or Data.
(xviii) None of the Enron Parties nor, to the
knowledge of the Enron Parties, any third party is in default
under any licenses, agreements or other sources of rights with
respect to the Proprietary Software or Data, and to the
knowledge of the Enron Parties, there exists no event,
occurrence, condition or act which with the giving of notice,
the lapse of time or the happening of any other event or
condition, would become a default thereunder.
(xix) No Enron Intellectual Property Right is subject
to any outstanding order, judgment, decree, stipulation or
agreement restricting in any manner the licenses granted
hereunder by the Enron Parties. Except as set forth in Exhibit
18.1(d)(xix), neither the Enron Parties nor their Affiliates
have entered into any agreement outside of the ordinary course
of business to indemnify any other Person against any charge
of infringement of any Enron Intellectual Property Right.
37
Neither the Enron Parties nor their Affiliates have entered
into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce
rights with respect to, any Enron Intellectual Property Right.
(e) Information Technology.
(i) All Hardware is either (A) owned by one of the
Enron Parties free and clear of Liens or (B) leased by one of
the Enron Parties under agreements that permit the Enron
Parties to perform all their obligations under this Agreement,
including their obligations to provide services, grant
licenses and transfer rights to UBS and the UBS Affiliates.
(ii) (A) As of the date of delivery thereof in
accordance with this Agreement, the Deliverables will include
any Documentation of the Proprietary Software; (B) as of the
Effective Date, the Proprietary Software contains no bugs,
faults, or other defects of functionality or performance that
are known and material; (C) as of the Effective Date, the
Proprietary Software contains no viruses, Trojan horses, trap
doors, time bombs or other devices that disable the Software
or permit unauthorized access; (D) as of the Effective Date,
the Enron Parties have delivered or made available to UBS all
reports, analyses and investigations performed by or on behalf
of the Enron Parties or their Affiliates concerning the
processing capacity of the Proprietary Software.
(f) Litigation, Liabilities, etc. Except as set forth in
Schedule 2.1(f) to the Master Agreement, there are no 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
no judgments, decrees, injunctions, rulings, awards or orders of any court,
Governmental Entity or arbitrator against any Enron Party, any of their
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 of
the UBS Affiliates shall assume or become responsible for any liability or
obligation of any kind of the Enron Parties or any of their Affiliates as a
result of the entry by UBS or the UBS Affiliates into and performance of this
Agreement and the Related Agreements.
(g) Compliance; Governmental Authorizations. Except as set
forth in Schedule 2.1(g) to the Master Agreement 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 Laws
(including those relating to environmental protection and occupational safety
and health (the "Environmental 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 of the Gas and Power Business or UBS or the UBS Affiliates or otherwise
38
could reasonably expected to have a Material Adverse Effect, for violation of
any Applicable Laws.
(h) 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.
(i) 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 UBS Affiliate could be liable.
(j) Sufficiency of Assets. Except as set forth on Exhibit
18.1(j), together the Deliverables, the Other Assets, the Enron Transition
Services, the real estate leased or subleased to UBS, the Trade Secrets, the
Licensed Patents, the Marks and the Third Party Software constitute all assets
(other than employees) necessary to operate the Gas and Power Business in
substantially the same manner as such business was conducted by the Enron
Parties and their Affiliates during the third quarter of 2001.
18.2. 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. This Agreement, the Related Agreements and such other
agreements, documents and instruments executed in connection herewith to which
UBS is a party when executed and delivered 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 neither the execution and delivery of this Agreement and the
Related Agreements and 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
39
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 Effective Date), or (iii) violate any law, statute,
rule 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) to the Master Agreement, (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 consent or
approval by, or any notification of or filing with, any Person 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 XIX
-----------
INDEMNIFICATION
---------------
19.1. Indemnification.
(a) The Enron Parties jointly and severally agree to indemnify
and hold harmless UBS and the UBS Affiliates and their respective shareholders,
partners, directors, officers, employees and other agents and representatives
(each, a "UBS Indemnified Party") from and against any and all Losses incurred
or suffered by any UBS Indemnified Party at the time such Losses are incurred or
suffered, 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, the Related Agreements or in any other
agreement, document, instrument or certificate delivered or
entered into by any Enron Party on the Effective Date in
connection herewith or therewith;
(ii) any breach of any covenant or agreement of any
Enron Party or Enron Canada contained in this Agreement, the
Related Agreements or in any other agreement, document,
instrument or certificate delivered or entered into by any
Enron Party or Enron Canada on the Effective Date in
connection herewith or therewith, provided that Losses arising
from any breach of any covenant or agreement of any Enron
Party contained in Article XI shall not include any
40
diminutions in value and fees and disbursements of counsel,
consultants, accountants and other professionals;
(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 or any UBS Affiliate, 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; provided,
however, that no UBS Indemnified Party shall be indemnified
under this clause (iii) for any Losses to the extent arising
from, by reason of or in connection with (x) any agreement,
transaction, claim or other action between such UBS
Indemnified Party and any Enron Party or any of their
Affiliates except to the extent that it is an agreement,
transaction, claim or other action under, related to, arising
out of or resulting from this Agreement or any of the Related
Agreements, or the performance by the Enron Parties of their
respective obligations under this Agreement or any Related
Agreement, or (y) any failure to pay or discharge all or any
portion of any pre-petition liability or obligation of the
Enron Parties or their Affiliates now held or hereafter
acquired by UBS or its Affiliates or (z) any amounts recovered
by or on behalf of Enron or its Affiliates or their respective
estates or otherwise claimed or received by or on behalf of
Enron or its Affiliates or their respective estates from any
Eligible Employee.
(iv) any and all liabilities, obligations, claims or
demands of any nature whatsoever (including in respect of
Taxes, royalty or other payments, actual or threatened
litigation, suits, claims or demands resulting from improper
use of any intellectual property or otherwise), or the failure
of any of the Enron Parties or their Affiliates to pay or
discharge the same, which arose or were incurred on or before
the Effective Date or which are based on events occurring or
conditions existing on or before the Effective Date, in each
case under the Altra License;
(v) third-party claims in connection with the
provision of the UBS Transition Services (except for claims
arising from the willful misconduct of UBS or the UBS
Affiliates);
(vi) any act by an employee of any Enron Party (or
any Affiliate of any Enron Party), which results in, or is
intended by such employee to result in malicious access into
any of UBS's or any UBS Affiliate's systems, data, or Trade
Secrets or Confidential Information;
(vii) any Taxes (A) attributable to the Gas and Power
Business or the Deliverables for any period or portion thereof
ending on or before the Effective Date or (B) imposed on any
Enron Party, any Affiliate of an Enron Party or any Enron Tax
Group;
41
(viii) 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 (vii) of this Section 19.1(a);
provided, however, that the UBS Indemnified Parties shall not be entitled to
indemnification under clause (i) above until the aggregate amount of Losses
(together with Losses under Section 5.1(a) of the Master Agreement and Section
4.1(a) of the Canadian Master 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 Section 5.1(a)(i) of the
Master Agreement and clause (i) of Section 4.1(a) of the Canadian Master
Agreement, without duplication) shall be $100,000,000.
Payments of indemnity pursuant to this Section 19.1(a) shall
be made only through setoffs made pursuant to Section 5.4
(b) UBS agrees to indemnify and hold harmless each Enron Party
and its Affiliates, shareholders, partners, directors, officers, employees and
other agents and representatives (each, an "Enron Indemnified Party") from and
against any and all Losses incurred or suffered by any Enron Indemnified Party
at the time such Losses are incurred or suffered, arising from, by reason of or
in connection with:
(i) any breach of any representation or warranty of
UBS contained in this Agreement, in the Related Agreements or
in any other agreement, document, instrument or certificate
delivered or entered into by UBS on the Effective Date in
connection herewith;
(ii) any breach of any covenant or agreement of UBS
or UBS Warburg Energy (Canada) Ltd. contained in this
Agreement, in the Related Agreements or in any other
agreement, document, instrument or certificate delivered or
entered into by UBS or UBS Warburg Energy (Canada) Ltd. on the
Effective Date in connection herewith;
(iii) any and all third party 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) and (ii) of this Section
19.1(b);
(iv) any act by an employee of UBS or any UBS
Affiliate, which results in, or is intended by such employee
to result in malicious access into any of the Enron Parties'
or any of their Affiliates' systems, data, or Trade Secrets or
Confidential Information;
(v) third party claims in connection with the
provision of the Enron Transition Services (except claims
arising or resulting from the willful misconduct of the Enron
Parties);
42
provided, however, that the Enron Indemnified Parties shall not be entitled to
indemnification under clause (i) above until the aggregate amount of Losses
(together with Losses under Section 5.1(b) of the Master Agreement and Section
4.1(b) of the Canadian Master Agreement, without duplication) exceeds $5,000,000
(the "Enron Threshold"), at which point the Enron 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 Enron Indemnified Parties shall be entitled to
indemnification under clause (i) above (together with Section 5.1(b)(i) of the
Master Agreement and clause (i) of Section 4.1(b) of the Canadian Master
Agreement, without duplication) shall be $100,000,000.
19.2. Certain Limitations. The remedies provided in this
Article XIX 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 XIX and Article V of the Master 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 (as such term is defined in the Master
Agreement) resulting from such claim may only be recovered once.
19.3. Procedures Relating to Third Party Claims.
(a) In order for an indemnified party to be entitled to any
indemnification provided for under this Article XIX 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 that are reasonably necessary to verify such claim. UBS shall defend all
Third Party Claims against it for which it may seek indemnity hereunder or under
the Master 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).
(c) In the event an action is commenced against UBS or a UBS
Affiliate for infringement of Intellectual Property Rights for which indemnity
is due under this Article XIX, then (a) in the case such action is brought in
the courts of a state of the United States, UBS or the UBS Affiliate defendant
43
will promptly seek removal to an appropriate United States District Court for
subsequent referral to the Bankruptcy Court, and Enron will take all actions
reasonably appropriate to support and justify such removal and referral to the
Bankruptcy Court, on the grounds, among others, that Enron is a necessary party
to the action, that the success of the transaction is essential to its
reorganization, and that the bankruptcy court has "related to" jurisdiction over
the dispute under 28 U.S.C. ss. 157 and (b) in the case such action is brought
in a United States District Court, then UBS or the UBS Affiliate defendant will
move to stay the action in such district court and the Enron Parties will
simultaneously commence a declaratory judgment action in the Bankruptcy Court
against the plaintiff, seeking adjudication of the dispute between the plaintiff
and UBS or the UBS Affiliate defendant, as to which the Enron Parties have or
may reasonably be expected to have an indemnification obligation, on the same
grounds.
19.4. 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 XIX 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.
19.5. 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 (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).
19.6. Certain Litigation. Any settlement of Item 1 of Schedule
2.1(f) of the Master Agreement involving anything other than cash payments by an
Enron Party or any Affiliate will be subject to the reasonable approval of UBS.
ARTICLE XX
----------
TERM AND TERMINATION
--------------------
20.1. Term. The term of this Agreement shall commence on the
Effective Date and shall terminate upon the 20th anniversary of the Effective
Date, unless terminated earlier in accordance with this Agreement. Any
termination of this Agreement shall be without prejudice to the rights of any
party to this Agreement to receive such amounts as may then be owed to it
hereunder and to recover such damages as may be due it by reason of any breach
of this Agreement by the other party hereto. Termination of this Agreement is
not a condition precedent to recovering damages for breach of this Agreement.
20.2. Termination at Will by UBS. UBS may terminate this
Agreement and all licenses granted by or to it hereunder in its sole discretion,
for any reason or no reason, at any time upon 30 days prior written notice to
the Enron Parties. In the event of any termination of this Agreement during the
term of exclusivity and prior to the Conversion Date, (i) UBS shall permit the
44
employees of UBS dedicated to the Gas and Power Business to be reinstated to
Enron and its Affiliates and shall release such employees, as necessary, of any
ongoing obligations to UBS or the UBS Affiliates; (ii) UBS shall reinstate to
Enron and its Affiliates, at UBS's cost, real estate and computer Hardware
acquired by UBS hereunder, subject to the reasonable satisfaction of the
transitional requirements of UBS in connection with an orderly winding down of
the Gas and Power Business; (iii) UBS and its Affiliates shall grant a
worldwide, fully paid-up, royalty-free, non-exclusive, perpetual, irrevocable,
sublicensable license to the Enron Parties under their Intellectual Property
Rights to use, display, perform, copy, modify, import, distribute and otherwise
exploit any and all modifications and improvements, upgrades, updates and
derivative works of the Proprietary Software and any inventions, copyrightable
works or other subject matter incorporating any portion of the Proprietary
Software, in each case developed or created by or at the direction of UBS or the
UBS Affiliates and owned by UBS as provided in Section 1.5.; and (iv) at any
time during the first year following the termination date, UBS and the UBS
Affiliates shall be subject to noncompetition restrictions generally on the same
basis as the non-competition provisions of Sections 7.1(a), (b) and (c), with
the same exclusions and limitations as set forth therein.
20.3. Termination for Cause by the Enron Parties. The Enron
Parties may terminate this Agreement immediately upon notice to UBS upon the
occurrence of one or more of the following events:
(a) UBS has materially breached this Agreement, which breach
it has not substantially cured within 30 days following written notice
describing such breach received from the Enron Parties; or
(b) UBS (i) is the subject of a petition filed under the
bankruptcy laws of the United States; (ii) has made a general assignment for the
benefit of its creditors; (iii) has had a receiver appointed for any part of its
property; or (iv) dissolves or otherwise ceases to do business.
20.4. Events Upon Termination. In connection with any
termination of this Agreement, the Enron Parties shall take all reasonable
actions, including the granting to UBS and the UBS Affiliates of such limited
Intellectual Property Rights as may be required, to enable UBS and the UBS
Affiliates to unwind the positions held by them prior to such termination. In
connection with the winding down of the Gas and Power Business, UBS may in its
discretion service, fulfill, monetize, restructure, optimize, dispose of or hold
to maturity any then-existing energy contract obligations or positions of UBS
and the UBS Affiliates.
ARTICLE XXI
-----------
COOPERATION
-----------
21.1. The Enron Parties and UBS each individually agree, at
any time and from time to time after the date hereof upon the request of another
party hereto, to do, execute, acknowledge and deliver, or to cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may reasonably be
required for the performance of the obligations and consummation of the
transactions contemplated by this Agreement. Without limiting the foregoing, the
45
Enron Parties and UBS acknowledge that significant cooperative efforts will be
necessary among them to effect the purpose, intent and spirit of this Agreement,
and accordingly agree to negotiate in good faith and enter into further
agreements that may be appropriate or necessary to fulfill the purpose, intent
and spirit of this Agreement. Without limitation of the foregoing, the Enron
Parties shall take all such reasonable action and do or cause to be done all
such reasonable things as UBS may reasonably consider necessary in order that
the value of all rights of the Enron Parties under express or implied warranties
from suppliers, manufacturers, retailers or other third parties of the Hardware
or Other Assets, to the extent such warranties are not transferred to UBS or the
UBS Affiliates under this Agreement, is preserved for, and the benefits thereof
enure to, UBS to the extent that such rights are preserved for and such benefits
enure to the Enron Parties.
ARTICLE XXII
------------
AMENDMENTS TO MASTER AGREEMENT
------------------------------
The Enron Parties and UBS desire to amend certain provisions
of the Master Agreement as set forth in this Article XXII.
22.1. Amendments.
(a) Section 3.8(b) of the Master Agreement is hereby amended
by adding the following as the ending of the last sentence thereof:
"promptly after Closing and (subject as aforesaid)
the Enron Parties may keep a copy of such files and records, which
shall constitute Confidential Information under the License
Agreement".
(b) Section 3.8(c) of the Master Agreement is hereby amended
by replacing clause (z) thereof with the following:
"(z) any matter to the extent of the respective
rights of the Enron Parties under Chapter 5 of the Bankruptcy Code,
including, without limitation, commencing any avoidance action against
any such Eligible Employee".
(c) Section 3.8(d) of the Master Agreement is hereby amended
by replacing the amount "$11,000,000" specified therein with the amount
"$10,587,000" and by replacing the amounts "$6,000,000" specified therein with
the amounts "$5,587,000".
(d) Section 3.9(a) of the Master Agreement is hereby amended
by adding, in the sixth line, (i) a comma after the word "shall" and before the
word "at" and (ii) a comma after the word "expense" and before the word
"properly".
(e) Section 3.9(c) of the Master Agreement is hereby amended
by adding, in the thirteenth line, (i) a comma after the word "by" and before
the word "and" and (ii) a comma after the word "of" and before the word "Enron".
(f) The first proviso of clause (ii) of Section 3.9(d) of the
Master Agreement is hereby replaced in its entirety with the following:
46
"provided, however, that before effecting any such
withholding on payments to Enron Canada, UBS will consult with Enron
Canada regarding the need to withhold and alternatives that could
reduce such withholding and shall use its reasonable best efforts to
adopt such an alternative requested by Enron Canada, so long as such
alternative is not detrimental to UBS in UBS's good faith judgment;".
(g) Section 4.2(i) of the Master Agreement is hereby amended
by replacing the amount "$6,000,000" specified therein with the amount
"$5,587,000".
(h) The references to "clause (i) of Section 19.1(a) of the
License Agreement" in Section 5.1(a) of the Master Agreement are hereby each
replaced in their entirety with the following:
"clause (i) of Section 19.1(a) of the License
Agreement and clause (i) of Section 4.1(a) of the Canadian Master
Agreement".
(i) Clause (ii) of Section 5.1(a) of the Master Agreement is
hereby amended by adding, in the first line, the words "or Enron Canada Corp."
after the words "Enron Party" and before the word "contained".
(j) Clause (iii) of Section 5.1(a) of the Master Agreement is
hereby amended by adding the following at the end thereof:
"provided, however, that no UBS Indemnified Party
shall be indemnified under this clause (iii) for any Losses to the
extent arising from, by reason of or in connection with (x) any
agreement, transaction, claim or other action between such UBS
Indemnified Party and any Enron Party or any of their Affiliates
except to the extent that it is an agreement, transaction, claim or
other action under, related to, arising out of or resulting from this
Agreement or any of the Related Agreements, or the performance by the
Enron Parties of their respective obligations under this Agreement or
any Related Agreement, or (y) any failure to pay or discharge all or
any portion of any pre-petition liability or obligation of the Enron
Parties or their Affiliates now held or hereafter acquired by UBS or
its Affiliates or (z) any amounts recovered by or on behalf of Enron
or its Affiliates or their respective estates or otherwise claimed or
received by or on behalf of Enron or its Affiliates or their
respective estates from any Eligible Employee;"
(k) Clause (iv) of Section 5.1(a) of the Master Agreement is
hereby (i) renumbered as clause (v) and (ii) amended by replacing the words
"clause (i) through (iii)" with the words "clauses (i) through (iv)".
(l) Section 5.1(a) of the Master Agreement is hereby amended
by adding, after Clause (iii), the following Clause (iv):
"(iv) any and all liabilities, obligations, claims or
demands of any nature whatsoever (including in respect of Taxes,
royalty or other payments, actual or threatened litigation, suits,
claims or demands resulting from improper use of any intellectual
47
property or otherwise), or the failure of any of the Enron Parties or
their Affiliates to pay or discharge the same, which arose or were
incurred on or before the Effective Date or which are based on events
occurring or conditions existing on or before the Effective Date, in
each case under the License and Adoption Agreement, dated as of
December 28, 2001, by and between Net Works and Altra Software
Services, Inc.;"
(m) The references to "clause (i) of Section 19.1(b) of the
License Agreement" in Section 5.1(b) of the Master Agreement are hereby replaced
in their entirety with the following:
"clause (i) of Section 19.1(b) of the License
Agreement and clause (i) of Section 4.1(b) of the Canadian Master
Agreement".
(n) Clause (ii) of Section 5.1(b) of the Master Agreement is
hereby amended by adding (i) in the first line, the words "or UBS Warburg Energy
(Canada) Ltd." after the word "UBS" and before the word "contained", and (ii) in
the fourth line, the words "or UBS Warburg Energy (Canada) Ltd." after the word
"UBS" and before the word "on".
(o) The following definition is added to Article VII of the
Master Agreement:
"Canadian Master Agreement" means the Canadian Master
Agreement, dated as of the Effective Date, between Enron Canada, a
corporation continued under the laws of Canada and UBS Warburg Energy
(Canada) Ltd., a corporation incorporated under the laws of Canada."
22.2. Miscellaneous. Except as set forth above, there are no
other changes, revisions or amendments to the Master Agreement and the Master
Agreement remains in full force and effect and this Article shall not by
implication or otherwise limit, impair, constitute a waiver or amendment of, or
otherwise affect the rights and remedies of the parties hereto under the Master
Agreement.
ARTICLE XXIII
-------------
OTHER REMEDY
------------
23.1. Injunctive Relief. Due to the critical nature of the
Enron Parties' obligations hereunder to UBS's and the UBS Affiliates' continued
business operations, and the absolute reliance by UBS and the UBS Affiliates' on
the Enron Parties to perform the Enron Parties' obligations hereunder and
continue operations as set forth herein on a timely basis, the Enron Parties
agree that UBS and the UBS Affiliates may obtain an injunction to force
compliance with the provisions of this Agreement.
23.2. Sole Remedy. Apart from the remedy specified in Section
23.1 and except in the case of fraudulent behavior by one party, each party's
sole remedy for breach of this Agreement is the indemnity provided pursuant to
Article XIX.
48
ARTICLE XXIV
------------
TAX MATTERS
-----------
24.1. 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
24.1(a) shall affect the provisions of Section 24.1(c).
(b) Notwithstanding any other provision contained in this
Agreement, the Master Agreement and the other Related Agreements the covenants
contained in this Section 24.1 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 Master Agreement and the other Related Agreements, UBS shall be
responsible for all taxes imposed on UBS or the UBS 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 a Royalty that is
paid and required to be paid to Enron Canada 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 to claim input tax credits
in respect of such taxes and so long as the payor of a Royalty to Enron Canada
is registered for purposes of Part IX of the Excise Tax Act (Canada), Enron
Canada 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, object to such denial and shall provide reasonable
cooperation in respect of such objection.
(d) All payments by UBS and the UBS Affiliates, as the case
may be, under this Agreement, the Master 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) 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; provided, however, that
before effecting any such withholding on payments to Enron Canada UBS will
consult with Enron Canada regarding the need to withhold and alternatives that
could reduce such withholding and shall use its reasonable best efforts to adopt
such an alternative requested by Enron Canada, so long as such alternative is
not detrimental to UBS in UBS's good faith judgment; and provided further,
however, that UBS, to the extent requested by, and at the cost of, Enron Canada,
will cooperate with Enron Canada in connection with refund claims that Enron
49
Canada 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
and beneficial owner of such payment 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
hereof represent the fair market value of the licenses granted hereunder. 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 hereof as does
not exceed, in the aggregate, the depreciated book value of the assets
transferred pursuant to Article III hereof as reflected on the Enron Parties'
books and records as of the date of such transfer.
(f) For the avoidance of doubt, for purposes of this Section
24.1, "Royalty" includes any payment made to Enron Canada by UBS or any UBS
Affiliate pursuant to Article V or VI hereof, or any portion of such a payment.
ARTICLE XXV
-----------
CONFIDENTIALITY
---------------
25.1. Confidentiality Obligations. The Enron Parties and UBS
each acknowledge and agree that in the course of negotiating the terms of this
Agreement and the Related Agreements and in the performance of this Agreement
and the Related Agreements, from time to time each such party has disclosed and
will disclose and has provided and will provide access to proprietary,
confidential or nonpublic information of such party ("Discloser") and each has
received and will receive ("Recipient") and has had access and will have access
to proprietary, confidential or nonpublic information of the other party. For
purposes of this Agreement, "Confidential Information" means all information
disclosed to Recipient or its agents or employees in the course negotiating the
terms of this Agreement and the Related Agreements and in the performance of
this Agreement and the Related Agreements in any manner, whether orally,
visually or in tangible form (including, without limitation, documents, devices
and computer readable media) and all copies thereof, whether created by
Discloser or Recipient, and whether or not marked by Discloser as
"Confidential", "Proprietary" or the substantial equivalent thereof. However,
Confidential Information shall not include any information that Recipient can
demonstrate: (a) was in Recipient's possession prior to disclosure to Recipient;
(b) was generally known, in the trade or business in which it is practiced by
Discloser, at the time of disclosure to Recipient hereunder, or becomes so
generally known after such disclosure, through no act of Recipient or its
employees, agents or independent contractors; (c) has come into the possession
of Recipient from a third party who is not known by Recipient to be under any
obligation to Discloser to maintain the confidentiality of such information; (d)
was developed by Recipient independently of and without reference to
Confidential Information or information that Discloser has disclosed in
confidence to any third party. If a particular portion or aspect of Confidential
Information becomes subject to any of the foregoing exceptions, all other
50
portions or aspects of such information shall remain subject to all of the
provisions of this Agreement.
25.2. Disclosure and Use. Except as expressly provided in
Article I, this Section 25.2, Section 5.5 (including for the Creditor's
Committee as provided therein) or (i) as required by a court of competent
jurisdiction (including the Bankruptcy Court), governmental entity or any
liquidating trust for the benefit of creditors of the Enron Parties (provided
that such liquidating trust enter into a confidentiality agreement on
substantially the same terms as this Article XXV), or (ii) with the prior
written consent of UBS, which shall not be unreasonably withheld or delayed, to
any potential lender of the Enron Parties solely in connection with obtaining
financing from such lender (subject in each case to confidentiality arrangements
reasonably satisfactory to UBS having been entered into to protect the
confidentiality of such Confidential Information), Recipient shall not use or
disclose Confidential Information and shall prevent the use or disclosure of
such information by Recipient's employees, agents, Affiliates and independent
contractors. Recipient shall disclose Confidential Information only to those of
its employees, agents and independent contractors who have a need to know such
information for the performance of this Agreement or as necessary for any party
to exercise its rights hereunder. Recipient shall require all employees, agents
and independent contractors who have access to Confidential Information to
execute a confidentiality agreement limiting their use of such information and
prohibiting them from disclosing such information to third parties. Recipient
agrees not to reproduce or copy by any means Confidential Information without
Discloser's prior written permission in each case, except as reasonably required
to perform under this Agreement or to exercise its rights hereunder. In the
event that Recipient is ordered to disclose Discloser's Confidential Information
pursuant to a requirement or order of any governmental authority, Recipient
shall notify Discloser and take reasonable steps itself or in cooperation with
Discloser to contest such requirement or order or otherwise reasonably protect
Discloser's Confidential Information.
ARTICLE XXVI
------------
MISCELLANEOUS PROVISIONS
------------------------
26.1. Entire Agreement. This Agreement, the Related Agreements
and the other agreements, documents and instruments contemplated in connection
herewith and therewith 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.
26.2. UBS Not Successor to the Enron Parties; No Assumed
Liabilities. Neither UBS nor any UBS Affiliates shall be the successor to any
Enron Party, and, other than obligations under contracts to the extent expressly
assumed pursuant to the agreements entered into by UBS in connection with this
Agreement or the Related Agreements, neither UBS nor any UBS Affiliate 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") and the Enron Parties Liabilities
shall be retained by the Enron Parties.
51
26.3. 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, New York 10171
Facsimile: (212) 821-5804
Attention: Robert C. Dinerstein
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
52
with a copies to:
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Facsimile: (713) 646-3393
Attention: Lance Schuler
with a copy to:
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.
26.4. 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.
26.5. Survival. Articles XVIII, XIX, XX, XXIII, XXIV, XXV and
XXVI, Sections 1.5, 5.2, 5.5 and 5.7 shall survive any termination of this
Agreement.
26.6. 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. Enron Canada shall be a
third party beneficiary of each provision of this Agreement expressed herein to
be for its benefit. Except as set forth in the previous sentence and as
otherwise expressly set forth herein, 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.
26.7. Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement or any
Related 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. Failure of any party to enforce any
provision of this Agreement or any Related Agreement shall not be construed as a
waiver of its rights under such or any other provision of this Agreement or any
Related Agreement. No waiver of any provision of this Agreement or any Related
Agreement in any instance shall be deemed to be a waiver of the same or any
other provision in any other instance.
26.8. 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 (i)
53
that UBS may pledge or assign all or part of its rights and obligations
hereunder (A) to any UBS Affiliate, so long as UBS guarantees the payment and
performance by such UBS Affiliate hereunder, (B) upon or following the
Conversion Date to any one or more Persons without limitation or restriction and
(C) in connection with any Change of Control of UBS or UBS Warburg and (ii) that
any Enron Party may assign its rights hereunder to any Person that does not
operate, sponsor or own any economic interest (other than a Royalty or an equity
investment of less than five percent in a Person) in any electronic trading
platform used for two-way electronic trading of any Gas or Power Commodities.
Following any such permitted assignment, the term "UBS" shall mean such UBS
assignee and the term "Enron Party" shall mean such assignee. Any purported
assignment not permitted by this Section 26.8 shall be void.
26.9. 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.
26.10. 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
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND TO ITS
BANKRUPTCY COURT FOR ANY DISPUTES OVER WHICH IT CONTINUES TO EXERCISE
JURISDICTION. IN THE EVENT THERE IS NO FEDERAL JURISDICTION, EACH PARTY
IRREVOCABLY CONSENTS TO SUBMIT TO THE JURISDICTION OF THE SUPREME COURT OF THE
STATE OF NEW YORK, COUNTY OF NEW YORK.
26.11. No Partnership. Each party to this Agreement agrees
that this Agreement, the Related Agreements and all other arrangements,
agreements and transactions contemplated hereby or 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 UBS Affiliate, 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 a partner or
commit any other act or file any document with any Governmental Entity that is
inconsistent with the foregoing.
26.12. Audit.
(a) UBS Data. The Enron Parties shall cooperate with UBS or
with any regulatory authority in connection with the examination of UBS or any
UBS Affiliate, and shall provide any data or information relating to the
business of UBS or any UBS Affiliate in response to such regulatory examination,
which may reasonably be required or requested by UBS or any UBS Affiliate in
connection with an audit or required or requested by any regulatory authority
54
with jurisdiction over the business of UBS or any UBS Affiliate. The Enron
Parties shall retain, in accordance with their respective document retention
policies, all documents relating to the Gas and Power Business not provided to
UBS and the UBS Affiliates.
(b) Records. The Enron Parties shall make available such of
its internal memoranda, maintenance logs, usage reports, accounting records,
written policies (i) as reasonably deemed necessary by UBS or any UBS Affiliate
in connection with any investigation or review by any regulatory agency (or its
agents) with jurisdiction over UBS or any UBS Affiliate and (ii) all
documentation related to the provision of Services hereunder (collectively,
"Records"). Until the later of December 31, 2003 and the date on which Enron
destroys or disposes of such Records in accordance with its document retention
policies, such Records shall be held, open to reasonable inspection and subject
to audit and/or reproduction, during normal working hours, by UBS or its
authorized representative, to the extent necessary to adequately permit
evaluation and verification of any invoices, payments or claims submitted by the
Enron Parties or any of the Enron Parties' subcontractors.
26.13. Certain Post-Closing Adjustments to the Hardware.
(a) Until March 8, 2002, the parties hereto shall provide
PricewaterhouseCoopers ("PwC") reasonable access during regular business hours
to their respective facilities, personnel and records (in the case of UBS, that
primarily relate to the Gas and Power Business as of immediately prior to the
Effective Date), as may be reasonably requested by PwC to adequately permit the
evaluation and verification by PwC of the accuracy of the description of the
items set forth on Exhibit 27-1. In the event that PwC determines that the
description of any item set forth on Exhibit 27-1 is inaccurate, Enron and UBS
shall, working together in good faith, (i) consider any reasonable
recommendations of PwC to correct any such inaccuracies (including exchanges, as
appropriate, between UBS and Enron of comparable computers, servers,
workstations, routers, hubs, switches and other information technology
equipment) and (ii) make such adjustments as may agreed by the parties hereto in
connection therewith.
(b) Prior to March 8, 2002, Enron and UBS will work together
in good faith to identify any surplus personal computers ("Surplus Computers")
located on the 5th and 6th floors of the building known as "Enron Center South"
located at 1500 Louisiana, Houston, Harris County, Texas 77002. UBS shall convey
to Enron any personal computers that the parties hereto reasonably determine to
be Surplus Computers reasonably promptly following such determination.
(c) If at any time prior to March 8, 2002, Enron provides
written notice to UBS of Enron's determination, in Enron's sole discretion, that
it is necessary or appropriate that UBS return the hard drives of any personal
computers conveyed to UBS pursuant to this Agreement, the parties hereto shall
take such reasonable steps as may be necessary, in UBS' sole discretion, to
facilitate the reasonably prompt removal and replacement of such hard drives in
a manner minimizing any disruption to UBS and the conduct of the Gas and Power
Business.
(d) The parties shall execute, acknowledge and deliver, or to
cause to be done, executed, acknowledged and delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
55
may reasonably be required any connection with this Section 26.13. The Enron
Parties agree to promptly pay UBS' reasonable documented out-of-pocket expenses
paid by UBS in connection with this Section 26.13.
26.14. Security. Until the earlier of (i) the date the
applicable data, programs or other property is no longer located at the Enron
Parties' premises and (ii) December 31, 2003, UBS or any UBS Affiliate, and
representatives of any regulatory agency with jurisdiction over UBS or any UBS
Affiliate, shall have the right to enter the Enron Parties' premises, or such
other premises where the Enron Transition Services are provided, unannounced but
within site security guidelines for the purpose of verification of security
access and operational procedures. UBS's or any UBS Affiliate's personnel or
agents designated for this purpose will not be unreasonably delayed in their
access to the physical facilities, and will confine their activities to those
areas housing UBS's or any UBS Affiliate's data, programs and other property.
26.15. Control of the Enron Parties. Each of the Enron Parties
agrees that if any action is to be taken or any decision is to be made by the
Enron Parties pursuant to this Agreement, the decision of ENA shall be deemed to
control and bind all of the Enron Parties. Enron and Net Works agree to hold
harmless ENA for all Losses, claims and liabilities arising out of any action
taken or decision made by ENA pursuant to the authority granted to ENA in this
section, except to the extent that such Losses arise out of the gross negligence
or willful misconduct of ENA. At any time, ENA can relinquish its rights
hereunder and, in its sole discretion, appoint one of the other Enron Parties as
its successor.
26.16. Relationship of the Parties. The relationship hereby
established between UBS and the UBS Affiliates and the Enron Parties is and
shall be solely that of independent contractors. Nothing in this Agreement is
intended or shall be deemed to (i) constitute a partnership, agency, franchise
or joint venture relationship between the parties hereto, (ii) give either party
hereto the power to direct or control the day-to-day activities of the employees
of the other party, (iii) cause any employees or agents of either party to be
deemed to be employees or agents of the other party for any purpose, or (iv)
allow either party to create or assume any obligation on behalf of the other
party except as expressly provided herein. In addition, neither party shall have
any power to act for or represent the other, except as expressly provided in
this Agreement.
ARTICLE XXVII
-------------
DEFINITIONS; INTERPRETATIONS
----------------------------
27.1. Definitions.
As used herein, the terms below shall have the following
meanings:
"Acceleration Exercise" has the meaning set forth in Section
6.1(b).
"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.
"Agreement" has the meaning set forth in the Introduction
hereof.
56
"Agreed Upon Procedures" has the meaning set forth in Section
5.9.
"Altra License" means the License and Adoption Agreement,
dated as of December 28, 2001, by and between Net Works and Altra Software
Services, Inc.
"Applicable Law" means any applicable statute, ordinance,
code, rule, regulation, ruling, award, interpretation or order enacted, adopted,
promulgated, applied or followed by any Governmental Entity.
"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" has the meaning set forth in Article
VII of the Master Agreement.
"Bridgeline" has the meaning set forth in Section 7.1(e).
"Bridgeline Agreement" has the meaning set forth in Section
7.1(a).
"Business Day" means any day (other than a day that is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York, New York.
"Business Costs" has the meaning set forth in Section 5.11.
"Business Unit" has the meaning set forth in Section 5.6.
"Calculation Period" has the meaning set forth in Section
5.11.
"Canadian Master Agreement" means the Canadian Master
Agreement, dated as of the Effective Date, between Enron Canada, a corporation
continued under the laws of Canada and UBS Warburg Energy (Canada) Ltd., a
corporation incorporated under the laws of Canada.
"Change of Control" means with respect to any Person: (a) any
consolidation or merger of such Person with or into any other Person, or any
other corporate reorganization or transaction or series of related transactions
(including the acquisition of ownership interests of such Person), whether or
not such Person is a party thereto, in which the holders of the majority of the
ownership interests of such Person immediately prior to such consolidation,
merger, reorganization or other transaction or series of related transactions,
beneficially own (within the meaning of the rules adopted by the Securities and
Exchange Commission under the Exchange Act) ownership interests representing
less than a majority of the voting power of such Person immediately after such
consolidation, merger, reorganization or other transaction; (b) individuals who,
at the date hereof, constitute the board of directors (or persons holding
comparable positions) (the "Continuing Directors") of such Person cease for any
reason to constitute a majority thereof, provided that any director of such
Person who is not in office at the date hereof but whose election by the board
of directors of such Person or whose nomination for election by the holders of
the ownership interests of such Person was approved by a vote of at least
two-thirds of the directors of such Person then still in office who either were
57
directors of such Person at the date hereof or whose election or nomination for
election was previously so approved shall be deemed to be a Continuing Director
for purposes of this Agreement; or (c) a sale, lease, license or other
disposition of all or substantially all of the assets of such Person.
"Chapter 11 Case" has the meaning set forth in the
Introduction hereof.
"Client Software" means such portion of the Proprietary
Software intended for use by counterparties or other business partners of the
Person operating the Proprietary Software, and which operates based on a
client/server or similar information technology architecture, together with all
related documentation intended for the use of such counterparties or other
business partners.
"C-Logic Software" has the meaning set forth in Section 1.7.
"CMC" has the meaning set forth in Section 1.4(c).
"Competing Business" has the meaning set forth in Section
7.1(b).
"Confidential Information" has the meaning set forth in
Section 25.1.
"Controlled Affiliate" has the meaning set forth in the Master
Agreement.
"Conversion Date" has the meaning set forth in Section 6.2.
"Cumulative Losses" has the meaning set forth in Section 5.11.
"Customer Data" means solely the contact and identifying
information relating to a customer or client of the Enron Parties or their
Affiliates relating to the Gas and Power Business.
"Data" means all databases, network diagrams, system
specifications, configuration data and other data relating to the Proprietary
Software, the Gas and Power Business or the technical or business infrastructure
relating thereto. Notwithstanding anything in the Agreement to the contrary,
Data shall not include financial, transactional or other information regarding
customers or counterparties other than Customer Data.
"Data Center" means a data center or data centers, in one or
more locations, that is or are within the sole control of UBS, or the UBS
Affiliates, for its or their use in the Gas and Power Business (and otherwise as
permitted by the licenses granted by the Enron Parties herein) and which UBS or
any UBS Affiliate has designated as the location or locations where the Hardware
will be moved.
"Deliverables" means collectively, all Proprietary Software,
Third Party Software to the extent assigned, Data and Hardware.
"Discloser" has the meaning set forth in Section 25.1.
58
"Documentation" means all documentation, technical notes,
specifications, technical manuals, user manuals, schematics, diagrams, flow
charts, file descriptions and other Data and information that describes the
function or use of any of the Software.
"EEP" has the meaning set forth in Section 7.1.
"Effective Date" means the Closing Date, as defined in Section
1.3 of the Master Agreement.
"ENA" has the meaning set forth in the preamble hereto, and
includes any successor thereto by operation of law or otherwise.
"Enhancement" means any extension or further development of an
existing feature or capability, or any creation of a new capability or feature.
"Enron" has the meaning set forth in the preamble hereto, and
includes any successor thereto by operation of law or otherwise.
"Enron Canada" means Enron Canada Corp., a corporation
continued under the laws of Canada and a wholly-owned indirect subsidiary of
Enron.
"Enron Change of Control" means (a) any Change of Control of
any Enron Party or (b) a sale, lease or other disposition by any one or more of
the Enron Parties of all or substantially all of the assets that constitute the
Other Businesses.
"Enron Content" means the textual and graphic content
displayed at the following URLs and related subpages to the extent that any of
the Enron Parties is the sole owner of the Intellectual Property Rights therein:
http://www.enrononline.com/jsp/marketing/Markets/Power/USEast/index.jsp;
http://www.enrononline.com/jsp/marketing/Markets/Power/USWest/index.jsp;
http://www.enrononline.com/jsp/marketing/Markets/NaturalGas/Canadian/index.jsp
http://presenter.fyi-broadband.net/Playerx.asp?opt=txt&presID=1030&MediaID=1018;
http://presenter.fyi-broadband.net/Playerx.asp?opt=txt&presID=1031&MediaID=1031;
http://presenter.fyi-broadband.net/Playerx.asp?opt=txt&presID=1017&MediaID=1042;
http://presenter.fyi-broadband.net/Playerx.asp?opt=txt&presID=1028&MediaID=1021.
"Enron Employees" has the meaning set forth in Article VII of
the Master Agreement.
"Enron Exercise Notice" has the meaning set forth in Section
6.1(b).
"Enron Group" means the Enron Parties and any Affiliate of the
Enron Parties.
"Enron Indemnified Party" has the meaning set forth in Section
19.1(b).
"Enron Intellectual Property Rights" has the meaning set forth
in Section 18.1(d)(ii).
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"Enron Parties Liabilities" has the meaning set forth in
Section 26.2.
"Enron Party" and the correlative term "Enron Parties" have
the meaning set forth in the preamble hereto.
"Enron Right" has the meaning set forth in Section 6.1(b)
"Enron Tax Group" means any consolidated, combined or unitary
group of which any member of the Enron Group is or has been a member with
respect to any Tax.
"Enron Transition Services" has the meaning set forth in
Section 11.2(a).
"Enron Threshold" has the meaning set forth in Section
19.1(b).
"Environmental Laws" has the meaning set forth in Section
18.1(g).
"EOL" means the Enron Online web site.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Notice" has the meaning set forth in Section 6.1(d).
"Exercise Price" has the meaning set forth in Section 6.1(a).
"Extraordinary Costs" has the meaning set forth in Section
5.11.
"FERC" has the meaning set forth in Section 18.2(c).
"Funding Costs" has the meaning set forth in Section 5.11.
"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 to the Master Agreement.
"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.
"Hardware" means all computers, servers, workstations,
routers, hubs, switches, and other information technology equipment, including
data communications lines and other network equipment listed in Exhibit 27-1,
and all associated firmware and documentation and except for the purposes of 3.1
and 18.1(j), any additional such equipment and associated firmware and
documentation to be transferred, assigned or delivered to UBS hereunder in
connection with Section 12.2(d).
"HSR Act" has the meaning set forth in Section 18.1(c).
"HPL Agreement" has the meaning set forth in Section 7.1(a).
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"Income Before Income Taxes" has the meaning set forth in
Section 5.11.
"Indemnification Notice" has the meaning set forth in Section
19.3(a).
"Intellectual Property" and "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.
"Internal Use Software" means all computer software programs
and applications, databases and systems and user documentation in use on or in
connection with any computer owned or leased by the Enron Parties or their
Affiliates or server hosted for the Enron Parties or their Affiliates.
"Launch Date" has the meaning set forth in Section 10.1.
"Lease Agreements" has the meaning set forth in the Master
Agreement.
"Licensed Patents" means all patents and patent applications
listed in Exhibit 27-2, and, except for the purposes of Section 18.1(j),
together with all other patents, patent applications, patent rights, inventions,
invention disclosures, technology, know-how, formulae, customer lists, and
business methods or processes, including, without limitation, all registrations,
registration applications, extensions, divisions, reissues, renewals or
continuations thereof, to be licensed to UBS hereunder in connection with
Section 12.2(d).
"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 a financing statement filed by the
lessor of equipment to evidence its leasehold interest in such equipment shall
not constitute a Lien.
"Losses" has the meaning set forth in Section 11.9(b).
"Marks" means all trademarks, service marks and trade names
listed in Exhibit 27-3.
"Master Agreement" means the Master Agreement, dated as of
January 14, 2002, among Enron, ENA, Net Works, and UBS.
"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.
"Migration Plan" has the meaning set forth in Section 12.1.
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"Net Trading Revenues" has the meaning set forth in Section
5.11.
"Net Works" has the meaning set forth in the preamble hereto.
"New Business" has the meaning set forth in Section 5.6.
"NBP" has the meaning set forth in Section 7.1.
"Object Code" means the form of a software application
resulting from the compiling, assembly, or other translation or processing of
the Source Code of the application by a computer into machine language or
intermediate code, which is not convenient to human understanding of the program
logic, but which is appropriate for execution or interpretation by a computer.
"Option" has the meaning set forth in Section 6.1.
"Option Period" has the meaning set forth in Section 6.1(a).
"Option Termination Date" has the meaning set forth in Section
6.1(a).
"Other Assets" has the meaning set forth in Section 3.2.
"Other Businesses" has the meaning set forth in the
Introduction hereof.
"Overhead Amount" has the meaning set forth in Section 5.11.
"Patent Improvements" means any modifications, enhancements,
development, revision, variation, alteration, and, if applicable, new model of
any Licensed Patents product or service developed, conceived, acquired,
invented, discovered or owned subsequent to the Effective Date execution of this
Agreement, including, without limitation, any inventions, discoveries, designs,
works of authorship and other know-how relating thereto, that are made,
conceived, developed, generated, documented or reduced to practice.
"Person" or "person" means any individual, corporation,
partnership, association, limited liability company, trust, joint venture,
unincorporated organization, or other entity (governmental or private) or group
(as defined in Section 13(d)(3) of the Exchange Act).
"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.
"Prohibited Activities" has the meaning set forth in Section
7.1(a).
"Proprietary Data" means Data that Persons other than the
Enron Parties either do not possess or, if such Persons possess such Data, may
not use such Data without the license or authorization of the Enron Parties.
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"Proprietary Software" means the software listed in Exhibit
27-4, including both Source Code and Object Code, associated Documentation, all
works in progress relating to corrections, modifications, or enhancements
thereto, and, except for the purposes of Section 3.1 and 18.1(j), any additional
software or associated Documentation to be licensed or delivered pursuant to
Section 12.2(d).
"PwC" has the meaning set forth in Section 26.13.
"Quarterly Financial Information" has the meaning set forth in
Section 5.3.
"Recipient" has the meaning set forth in Section 25.1.
"Records" has the meaning set forth in Section 26.12(b).
"Related Agreements" means the Master Agreement, the
Sublicense Agreement and any other document or agreement contemplated hereby or
thereby between any of UBS and/or UBS Affiliates on the one hand, and Enron and
its Affiliates on the other.
"Restricted Period" has the meaning set forth in Section
7.1(a)(i).
"Royalty" has the meaning set forth in Section 5.1.
"Royalty Percentage" has the meaning set forth in Section
5.11.
"Royalty Statement" has the meaning set forth in Section 5.11.
"Royalty Statement Date" has the meaning set forth in Section
5.11.
"Sale Exercise" has the meaning set forth in Section 6.1(b).
"Sale Option" has the meaning set forth in Section 6.1(c).
"Securitization Exercise" has the meaning set forth in Section
6.1(b).
"Service Provider" has the meaning set forth in Section 11.5.
"Service Recipient" has the meaning set forth in Section 11.5.
"Services" has the meaning set forth in Section 11.3(a).
"Shared IT Service Modifications" has the meaning set forth in
Section 1.4(c).
"Shared IT Services" has the meaning set forth in Section
1.4(c).
"Software" means collectively, all Proprietary Software and
all Third Party Software.
"Source Code" means the original base code, together with
associated libraries, command files and any other proprietary intermediate
software, capable of being read by trained qualified persons, which can be used
63
to create executable code, supplied on magnetic media in a format which can be
read and printed by UBS's equipment and which is accessible for modification
and, where software not owned by the Enron Parties, such as compilers, code
generators, menu-building or graphic routines, is necessary to enable the base
code to be translated into executable code, details of this software, including
the identifier of the version currently used with the base code, together with
all related technical information and associated Documentation and notes.
"Stub Period Royalty" has the meaning set forth in Section
5.1.
"Sublicense Agreement" means the Sublicense Agreement, dated
as of February 8, 2002, among Enron, ENA, Net Works and UBS, and attached hereto
as Exhibit 1.2(a).
"Surplus Computers" has the meaning set forth in Section
26.13.
"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.
"Termination Exercise" has the meaning set forth in Section
6.1(b).
"Third Party Claim" has the meaning set forth in Section
19.3(a).
"Third Party Data" means Data other than Proprietary Data,
regardless of whether in the public domain.
"Third Party Software" means all software, including both
Source Code and Object Code to the extent possessed by any of the Enron Parties,
and associated Documentation, which is licensed by any of the Enron Parties from
a third party licensor and listed on Exhibit 27-5.
"Trade Secrets" means confidential information of value in the
Gas and Power Business (other than financial information and information
relating to transactions, in each case, regarding customers of the Gas and Power
Business, to the extent prohibited by Law or contract), including historical and
current financial, marketing, pricing and business data, financial and economic
analytical models, historic and current research, data, ideas, compositions,
financial, business and technical documentation, specifications, plans,
proposals, research records, inventions, works of authorship, invention records
and technical data, and all other know-how whether or not protected by patent or
copyright law.
"Trading Businesses" has the meaning set forth in the
Introduction hereof.
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"Transition Services Period" has the meaning set forth in
Section 11.2(a).
"UBS" has the meaning set forth in the preamble hereto, and
includes any successor thereto by operation of law or otherwise.
"UBS Affiliates" means (i) any Affiliate of UBS or (ii) any
Person of which UBS or any Affiliate of UBS holds (other than solely for
investment purposes) any ownership interests.
"UBS Approval" has the meaning set forth in Section 6.1(e).
"UBS Indemnified Party" has the meaning set forth in Section
19.1(a).
"UBS Threshold" has the meaning set forth in Section 19.1(a).
"UBS Transition Services" has the meaning set forth in Section
11.3(a).
"UBS Warburg" means UBS Warburg LLC, a Delaware limited
liability company.
"U.S. GAAP" has the meaning set forth in Section 5.9.
"Web Site" means the internet web site with a URL and domain
name to be determined by UBS that shall be the successor to EOL in connection
with the Gas and Power Business and shall function in a manner facilitation
UBS's conduct of the Trading Business.
27.2. 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 or Exhibit is to the Article, Section or
Exhibit of this Agreement.
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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/ Mitchell S. Taylor
------------------------------------
Name: Mitchell S. Taylor
ENRON NORTH AMERICA CORP.
By: /s/ Mitchell S. Taylor
------------------------------------
Name: Mitchell S. Taylor
ENRON NET WORKS L.L.C.
By: /s/ Mitchell S. Taylor
------------------------------------
Name: Mitchell S. Taylor
UBS AG
By: /s/ Robert C. Dinerstein
------------------------------------
Name: Robert C. Dinerstein
By: /s/ Patrick J. O'Donnell
------------------------------------
Name: Patrick J. O'Donnell
Title: MD
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