EXHIBIT 99.3
Execution Copy
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CANADIAN MASTER AGREEMENT
BETWEEN
ENRON CANADA CORP.
AND
UBS WARBURG ENERGY (CANADA) LTD.
DATED AS OF FEBRUARY 8, 2002
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TABLE OF CONTENTS
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Introduction................................................................................1
Article I The Transactions......................................................2
1.1. Transactions to Occur at Closing.......................................2
1.2. Royalties and Other Amounts............................................2
1.3. UBS Not Successor to Enron Canada; Assumed Liabilities.................2
1.4. Closing................................................................3
1.5. Allocation.............................................................3
1.6. Assignments Not Permitted..............................................3
Article II Representations And Warranties........................................3
2.1. Representations and Warranties by Enron Canada.........................3
(a) Organization, Standing and Power.............................3
(b) Authority; Binding Agreements................................4
(c) Conflicts; Consents..........................................4
(d) Intellectual Property; Information Technology................4
(e) Litigation, Liabilities, etc.................................7
(f) Compliance; Governmental Authorizations......................7
(g) Employees and Compensation...................................7
(h) Certain Employees............................................8
(i) Benefit Plans................................................8
(j) Taxes........................................................8
(k) Brokers......................................................8
(l) Wholly-Owned Subsidiary......................................9
(m) Solvency.....................................................9
(n) Residence of Enron Canada....................................9
(o) Title to the Purchased Assets................................9
(p) Leases.......................................................9
(q) Employees...................................................10
(r) Insolvency Proceedings......................................10
(s) Investment Canada Act.......................................10
(t) Competition Act.............................................10
(u) Sufficiency of Assets.......................................11
2.2. Representations and Warranties by UBS Canada..........................11
(a) Organization and Standing...................................11
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(b) Authority; Binding Agreements...............................11
(c) Conflicts; Consents.........................................11
(d) Brokers.....................................................12
(e) Wholly-Owned Subsidiary.....................................12
Article III Additional Agreements................................................12
3.1. Non-Competition.......................................................12
3.2. Expenses..............................................................12
3.3. Further Assurances....................................................12
3.4. Access and Information................................................12
3.5. Confidentiality.......................................................13
3.6. Employee Matters......................................................13
3.7. Taxes.................................................................14
3.8. Bulk Sales............................................................14
3.9. Further Assurances Regarding Sufficiency of Assets....................14
Article IV Indemnification......................................................15
4.1. Indemnification.......................................................15
4.2. Certain Limitations...................................................17
4.3. Procedures Relating to Third Party Claims.............................17
4.4. Procedures Related to Claims other than Third Party Claims............18
4.5. Calculation of Indemnity Payments.....................................18
4.6. Right of Set-Off......................................................18
Article V Miscellaneous........................................................18
5.1. Entire Agreement......................................................18
5.2. Descriptive Headings; Certain Interpretations.........................19
5.3. Notices...............................................................19
5.4. Counterparts..........................................................20
5.5. Survival..............................................................21
5.6. Benefits of Agreement.................................................21
5.7. Amendments and Waivers................................................21
5.8. Assignment............................................................21
5.9. Enforceability........................................................21
5.10. GOVERNING LAW; JURISDICTION...........................................22
5.11. No Partnership........................................................22
Article VI Definitions.........................................................22
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CANADIAN MASTER AGREEMENT, dated as of February 8, 2002,
between Enron Canada Corp., a corporation continued under the
laws of Canada ("Enron Canada"), and UBS Warburg Energy
(Canada) Ltd., a corporation incorporated and organized under
the laws of Canada ("UBS Canada").
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INTRODUCTION
Enron Corp. ("Enron"), Enron Net Works L.L.C. ("Net
Works"), Enron North America Corp. ("ENA," and together with Enron and Net
Works, the "Enron Parties") and Enron Canada are or have been engaged in the
business of trading and marketing, and making markets in, Gas and Power
Commodities and related risk management and financial services in North America
(the "Gas and Power Business," and such business as conducted by Enron Canada,
the "Canadian Gas and Power Business"). "Gas and Power Commodities" means
natural gas (excluding natural gas liquids) and electricity, as well as any
swap, cap, floor, collar, futures contract, forward contract, option and any
other derivative instrument, contract or arrangement based on any of the
foregoing Gas and Power Commodities and including, but not limited to, contracts
for the forward delivery of physical output or assets or physical load
obligations. The Gas and Power Business, as it refers to business conducted by
UBS Canada and its Affiliates after the Closing Date, excludes the
already-existing risk management and financial services business of UBS AG
("UBS") and its Affiliates (including its business relating to interest rate,
foreign exchange and equity derivatives), as it may be conducted from time to
time, including as it may be conducted with counterparties in the Gas and Power
Business.
The Enron Parties and UBS have entered into a Master
Agreement, dated as of January 14, 2002 (as it may be amended, modified and in
effect from time to time, the "Master Agreement"), pursuant to which the parties
thereto have agreed that UBS will license from the Enron Parties certain
intellectual property used in the Gas and Power Business, receive from them
information technology support services necessary to operate the Gas and Power
Business as contemplated in the License Agreement, lease certain office space
from them for the conduct of the Gas and Power Business and employ certain of
their personnel relating to the Gas and Power Business.
This Agreement is being entered into in connection with
Section 4.2(g) of the Master Agreement, which provides that either prior to or
simultaneously with the closing of the transactions contemplated by the Master
Agreement, the closing shall occur of the arrangements between Enron's Canadian
Affiliates and UBS or its Canadian Affiliate, which arrangements provide UBS or
such Affiliate with such intellectual property and technology and related
services, trading professionals and support personnel and office space and
fixtures, furniture and equipment, such that UBS (or its Affiliate) shall have
the ability to conduct the Gas and Power Business in Canada and with Canadian
counterparties in substantially the manner historically conducted by Enron and
its Affiliates, all pursuant to documentation reasonably satisfactory in form
and substance to UBS and Enron.
Immediately prior to the execution of this agreement, Enron
Canada has entered into the Canadian IT Agreements with, inter alia, the Enron
Parties pursuant to which the rights of Enron Canada to certain intellectual
property have been terminated and other intellectual rights, data and other
intangibles have been transferred by Enron Canada to the Enron Parties so that
such intellectual property rights, data and intangibles are included in the
rights licensed to UBS and its Affiliates under the License Agreement.
In consideration of the mutual benefits to be derived from
this Agreement and of the representations, warranties, conditions, agreements
and promises contained herein and other good and valuable consideration, the
parties agree as follows:
Article I
THE TRANSACTIONS
1.1. Transactions to Occur at Closing. On the terms and
subject to the conditions set forth in this Agreement, substantially
simultaneously with the execution and delivery of this Agreement:
(a) Enron Canada sells, assigns and transfers to UBS
Canada, and UBS Canada purchases, all of Enron Canada's right, title and
interest in and to the Purchased Assets in consideration of the Purchase Price
pursuant to the General Conveyance;
(b) Enron Canada and UBS Canada are entering into the
agreements and delivering the documents set forth on Schedule 1.1(b) (such
agreements and documents, the General Conveyance, this Agreement and any other
document or agreement contemplated hereby or thereby between any of UBS Canada
and its Affiliates on the one hand, and Enron Canada, on the other, are referred
to as the "Canadian Agreements");
(c) Enron Canada grants to UBS Canada an exclusive
irrevocable license to use the Equipment in consideration of the License Fee
pursuant to the Use Agreement; and
(d) UBS Canada is paying, or causing to be paid, to Enron
Canada the Purchase Price and the License Fee. Immediately prior to the Closing,
UBS is paying, or causing to be paid to Enron Canada, on behalf of Enron, the
Cdn $5,517,045 payable to Enron Canada pursuant to the Canadian IT Agreements as
consideration for the transactions provided for therein. Such payments shall be
made by wire transfer of immediately available funds to an account designated
prior to the date hereof.
1.2. Royalties and Other Amounts. Payments made by UBS
pursuant to Article V and VI of the License Agreement shall be apportioned among
the Enron Parties and Enron Canada as set forth in Section 5.10 of the License
Agreement.
1.3. UBS Not Successor to Enron Canada; Assumed
Liabilities. Neither UBS Canada nor any of its Affiliates shall be the successor
to Enron Canada, and other than obligations under contracts to the extent
expressly assumed pursuant to Section 5(1) of the General Conveyance (the
"Assumed Obligations"), neither UBS Canada nor any of its Affiliates does or
will assume (or intend to assume) or become or agree to become liable to pay,
perform or discharge any obligation or liability whatsoever of Enron Canada or
its subsidiaries, 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
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"Enron Canada Liabilities"). The Enron Canada Liabilities shall be retained by
Enron Canada and its subsidiaries.
1.4. Closing. The closing (the "Closing") for the
consummation of the transactions contemplated by this Agreement is taking place
simultaneously with the execution and delivery of this Agreement at the offices
of Covington & Burling, 1330 Avenue of the Americas, New York, New York 10019,
or such other place as Enron Canada and UBS Canada shall agree (such date of the
Closing being hereinafter called the "Closing Date"). The Closing shall be
deemed to be effective as of the close of business on the Closing Date.
1.5. Allocation. Enron Canada and UBS Canada agree to
allocate the Purchase Price in accordance with the provisions of Schedule 1.5.
Enron Canada and UBS Canada agree to execute and file all tax returns and
prepare all financial statements, returns and other instruments on the basis of
this allocation.
1.6. Assignments Not Permitted. Nothing in this Agreement
shall be construed as an attempt to assign to UBS Canada any contracts, leases,
licenses, permits, approvals or other authorizations or agreements which would
otherwise be Purchased Assets (the "Contractual Rights") but which, as a matter
of law or by its terms, are not assignable in whole or in part without the
consent of the other party or parties thereto and in respect of which no such
consent has been given. In order that UBS Canada may receive and realize the
full benefits of or under the Contractual Rights, Enron Canada shall at the
request and expense and under the direction of UBS Canada, in the name of Enron
Canada or otherwise as UBS Canada shall reasonably specify: (i) hold the
Contractual Rights in trust for the benefit of UBS Canada; (ii) take all such
reasonable action and do or cause to be done all such reasonable things as UBS
Canada may reasonably consider necessary in order that the value of the
Contractual Rights is preserved for, and the benefits thereof enure to, UBS
Canada in the manner contemplated Section 4(1) of the General Conveyance; and
(iii) promptly pay over to UBS Canada all moneys collected by or paid to Enron
Canada (if any) under or in respect of every such Contractual Right.
Article II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties by Enron Canada. Enron
Canada represents and warrants to UBS Canada as follows:
(a) Organization, Standing and Power. Enron Canada (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 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. Enron Canada 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.
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(b) Authority; Binding Agreements. The execution, delivery
and performance of this Agreement, the other Canadian Agreements to which it is
a party, and all other agreements, documents and instruments contemplated in
connection with this Agreement and the other Canadian Agreements to which Enron
Canada is a party and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action of each of Enron Canada and its shareholders. Enron Canada has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the other Canadian Agreements to which it
is a party and to consummate the transactions contemplated hereby and thereby
and Enron Canada has duly executed and delivered this Agreement and the other
Canadian Agreements. This Agreement is, and the other Canadian Agreements when
executed and delivered will be, the legal, valid and binding obligations of
Enron Canada enforceable in accordance with their respective terms.
(c) Conflicts; Consents. None of the execution and delivery
of this Agreement, the other Canadian Agreements, the consummation of the
transactions contemplated hereby or thereby, or compliance by Enron Canada with
any of the provisions hereof or thereof, will (A) conflict with or result in a
breach of the certificate or articles of incorporation, any unanimous
shareholders agreement or by-laws or comparable organizational documents of
Enron Canada, (B) conflict with or result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the provisions
of any material note, bond, lease, hypothecation, mortgage, indenture, license,
franchise, permit, agreement or other instrument or obligation to which Enron
Canada is a party, or by which its properties or assets may be bound or
affected, or (C) violate any law, statute, rule or regulation or order, writ,
injunction or decree applicable to Enron Canada or its 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). No material consent
or approval by, or any notification of or filing with, any person, firm,
corporation, partnership, limited liability company, trust, joint venture,
association or entity (governmental or private) is required in connection with
the execution, delivery and performance by Enron Canada of this Agreement, the
other Canadian 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, other than any consents,
approvals or filings that have been received or made prior to the date hereof
(and which are as set forth on Schedule 2.1(c)).
(d) Intellectual Property; Information Technology.
(i) True and complete copies of the Canadian IT Agreements
have been provided to UBS Canada and such agreements have
not been amended or modified.
(ii) Except as set forth in Schedule 2.1(d), the Proprietary
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 effective date of
the Canadian IT Agreements owned by Enron Canada and used or
held for use, or that are currently owned by Enron Canada
and held for use or intended to be used or held for use, in
connection with the Canadian Gas and Power Business.
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(iii) Except as set forth in Schedule 2.1(d), Enron Canada
has validly transferred to the Enron Parties all ownership
and other Intellectual Property Rights (as applicable) in
the Proprietary Software and Data owned by Enron Canada and
(all such rights, collectively, the "Transferred Canadian
Intellectual Property Rights") necessary to operate the
Canadian Gas and Power Business, other than such rights as
were licensed by the Enron Parties to Enron Canada for such
purpose.
(iv) As of the effective date of the Canadian IT Agreements,
Enron Canada possessed full and exclusive right, title,
interest and ownership, including all Intellectual Property
Rights associated therewith, in and to the Proprietary
Software and Data, which in all cases were then free and
clear of all Liens other than Permitted Liens and the
interest of the Enron Parties and their Affiliates under the
Termination Agreements.
(v) Other than having granted the Canadian IT Agreements,
Enron Canada has not granted any options, exclusive
licenses, assignments or agreements of any kind relating to
(A) ownership of the Proprietary Software or Data or (B) the
marketing or distribution of works or rights embodying the
Proprietary Software or Data.
(vi) To the knowledge of Enron Canada, there has not been
and there is not any material unauthorized use, infringement
or misappropriation of any of the Transferred Canadian
Intellectual Property Rights by any third party, including
any employee or former employee. Enron Canada has taken
reasonable measures to protect and preserve the security,
confidentiality, value and ownership of the Transferred
Canadian 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 Canadian
Gas and Power Business as conducted and proposed to be
conducted. All employees and consultants of Enron Canada or
its Controlled 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 Transferred Canadian
Intellectual Property Rights and to vest in Enron Canada
exclusive ownership of such Transferred Canadian
Intellectual Property Rights prior to the effective date of
the Canadian IT Agreements. To the knowledge of Enron
Canada, all Trade Secrets of Enron Canada are presently
valid and protectable and are not part of the public domain
or knowledge, nor, to the knowledge of Enron Canada, 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.
(vii) Prior to the effective date of the Canadian IT
Agreements, none of the Source Code of any Proprietary
Software was subject to or held in escrow or is in the
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possession of any third party other than the Enron Parties
or as may have been authorized by Enron Canadian on or after
the effective date of the Canadian IT Agreements.
(viii) Prior to the effective date of the Canadian IT
Agreements, Enron Canada had taken all measures appropriate,
in the reasonable judgment of Enron Canada, to protect the
Transferred Canadian Intellectual Property Rights. Enron
Canada has treated the Proprietary Software and Data as
confidential information or as trade secrets.
(ix) To the knowledge of Enron Canada, 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. To the
knowledge of Enron Canada, no claims with respect to the
Proprietary Software or the Data have been asserted or, to
the knowledge of Enron Canada, are threatened by any Person
nor is there any basis for bona fide claims (A) to the
effect that the conduct of the Canadian Gas and Power
Business as historically conducted infringes any copyright
or patent of any Person, (B) against the use by Enron Canada
or its Affiliates of any Proprietary Software or Data, or
(C) challenging the ownership, validity or effectiveness of
any of the Transferred Canadian Intellectual Property Rights
in any of the Proprietary Software or Data.
(x) As of the date of this Agreement, no licensing fees,
royalties, or payments are due or payable by Enron Canada
for the use of the Proprietary Software or Data.
(xi) Prior to the effective date of the Canadian IT
Agreements, Enron Canada did not take any action that would
have the effect of waiving any rights to the Proprietary
Software or Data.
(xii) No Transferred Canadian Intellectual Property Right is
subject to any outstanding order, judgment, decree,
stipulation or agreement, other than the Canadian IT
Agreements restricting in any manner use of the Proprietary
Software or Data. Neither Enron Canada nor to the knowledge
of Enron Canada its 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 Transferred Canadian Intellectual
Property Right. Neither Enron Canada nor to the knowledge of
Enron Canada its 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 Transferred Canadian Intellectual Property
Right.
(xiii) All IT Hardware is owned by Enron Canada free and
clear of Liens.
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(xiv) In accordance with the Canadian IT Agreements, Enron
Canada has delivered or will deliver to the Enron Parties
any Documentation of the Proprietary Software. As of the
effective date of the Canadian IT Agreements, the
Proprietary Software contained no bugs, faults, or other
defects of functionality or performance that were known and
material; the Proprietary Software contained no viruses,
Trojan horses, trap doors, time bombs or other devices that
disable the Proprietary Software or permit unauthorized
access; and Enron Canada delivered or made available to the
Enron Parties all reports, analyses and investigations
performed by or on behalf of Enron Canada or its Affiliates
concerning the processing capacity of the Proprietary
Software.
(e) Litigation, Liabilities, etc. Except as set forth in
Schedule 2.1(e), there are not any suits, actions, claims, complaints,
litigation, investigations or legal or administrative or arbitration proceedings
in respect of the Canadian Gas and Power Business, pending or, to the knowledge
of Enron Canada, threatened, whether at law or in equity, or before or by any
federal, provincial, foreign, state, local or other governmental department,
commission, board, bureau, agency or instrumentality (other than matters that
would not reasonably be expected to have a Material Adverse Effect). There are
not any judgments, decrees, injunctions, rulings, awards or orders of any court,
governmental department, commission, agency, instrumentality or arbitrator or
against Enron Canada, any of its Affiliates, or any of their respective assets
or properties, relating to or affecting the Canadian Gas and Power Business
(other than matters that would not reasonably be expected to have a Material
Adverse Effect). None of UBS Canada or any if its Affiliates shall assume or
become responsible for any liability or obligation of Enron Canada or any of
their Affiliates of any kind as a result of its entry into and performance of
this Agreement and the Canadian Agreements, other than the Assumed Obligations.
None of UBS Canada or any of its Affiliates shall be responsible for any
liability to any Governmental Entity relating to the operation of the Canadian
Gas and Power Business prior to the Closing.
(f) Compliance; Governmental Authorizations. Except as set
forth in Schedule 2.1(f) and except for any instances that would not reasonably
be expected to have a Material Adverse Effect, Enron Canada is in compliance in
all material respects with all applicable and legally binding federal,
provincial, state, local, municipal and foreign laws, ordinances, regulations,
rulings, awards, statutes, interpretations and orders (including those relating
to environmental protection and occupational safety and health (the
"Environmental Laws")) (collectively, "Laws") applicable to the conduct of the
Canadian Gas and Power Business. To the knowledge of Enron Canada, there are no
present or past conditions relating to Enron Canada or the Canadian Gas and
Power Business that could reasonably be expected to lead to any liability
material to the future conduct by UBS Canada of the Canadian Gas and Power
Business or UBS Canada or its Affiliates or otherwise could reasonably be
expected to have a Material Adverse Effect, for violation of any applicable
Laws.
(g) Employees and Compensation. None of the execution or
performance of this Agreement or the other Canadian Agreements or the
consummation of the transactions contemplated hereby or thereby will (A) entitle
any shareholder, director, officer, employee, independent contractor, consultant
or agent of Enron Canada or any of its Affiliates to severance pay or
termination benefits or any other payment for which UBS Canada or any of its
Affiliates may be liable, (B) accelerate the time of payment or vesting, or
trigger any payment or funding (or increase the amount) of compensation or
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benefits due to any such shareholder, director, officer, employee, independent
contractor, consultant or agent or former shareholder, director, officer,
employee, independent contractor, consultant or agent for which UBS Canada or
any of its Affiliates may become liable or (C) obligate UBS Canada or any of its
Affiliates to pay or otherwise be liable for any compensation (including
severance), vacation days, pension contribution or any other pension or welfare
benefits (including under the Enron Benefit Plans) to any such shareholder,
director, officer, employee, independent contractor, consultant or agent for
periods before the Closing Date, or if later, the date on which such Person
commences employment with UBS Canada, or for personnel whom UBS Canada does not
actually employ (in the case of (A), (B) or (C) except to the extent UBS Canada
or any of its Affiliates expressly agrees with any employee in the relevant
employment agreement or offer letter to provide any such payments or benefits).
(h) Certain Employees. The names, places and dates of
employment (including date of hire) and a description of job title and the
current base annual salary rates and the base annual salary rates, bonuses,
deferred or contingent cash compensation and other like benefits paid (in cash
or otherwise) in 2000 and 2001 of all Eligible Employees have been provided to
UBS.
(i) Benefit Plans. Neither UBS Canada nor any of its
Affiliates (A) shall be responsible for any existing or future liability under
any plan, program, or arrangement maintained by Enron Canada or any of its
Controlled Affiliates or under which Enron Canada or any of its Controlled
Affiliates has or may have any obligation to contribute, with respect to any
Enron Employee, whether such plan, program, or arrangement is formal or
informal, written or unwritten, and whether or not such plan, program, or
arrangement is an "employee benefit plan" under any applicable laws
(collectively, "Enron Benefit Plans"); (B) shall be obligated to administer or
maintain any Enron Benefit Plan; (C) shall be responsible for or have any
liability whatsoever for any pending claims, lawsuits or proceedings brought
under or relating to any Enron Benefit Plan and (D) shall be responsible for any
liability to any Governmental Entity relating to the Enron Benefit Plans.
(j) Taxes. None of the Equipment, the owned Purchased
Assets or leasehold interests in the leased Purchased Assets is subject to any
Lien arising in connection with any failure or alleged failure to pay any Tax
nor, to Enron Canada's knowledge, is any taxing authority in the process of
imposing any Lien for Taxes upon any of the Equipment, such owned Purchased
Assets or leasehold interests in the leased Purchased Assets other than a Lien
for Taxes not yet due and payable. Enron Canada is a registrant for the purposes
of the tax imposed under Part IX of the Excise Tax Act (Canada), and its
registration number is 138273487RT0001.
(k) 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 Enron Canada
or any of its Controlled Affiliates or under the authority of Enron Canada or
any of its Controlled 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 Canada or any of its Affiliates could be
liable.
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(l) Wholly-Owned Subsidiary. Enron Canada is a wholly-owned
indirect subsidiary of Enron. During the one-year period ending on the date
hereof, the Canadian Gas and Power Business has been conducted only through
Enron Canada and not any of its present or former subsidiaries, except with
respect to the Sundance B power purchase arrangement under the Electric
Utilities Act (Alberta) owned by Enron Canada Power Corporation during calendar
year 2001.
(m) Solvency. Enron Canada is solvent and, after giving
effect to the transactions contemplated by the Canadian Agreements, will not be
rendered insolvent, is and (after giving effect to the transactions contemplated
by the Canadian Agreements) will be able to pay its debts as they mature and has
(and has reason to believe it will continue to have) sufficient capital (and not
unreasonably small capital) to carry on its business and all businesses in which
it is about to engage (taking into account the transactions contemplated hereby
and the obligation of UBS AG to perform the UBS Transition Services (as defined
in the License Agreement)). The assets and properties of Enron Canada at a fair
valuation and at their present fair salable value are, and (after giving effect
to the transactions contemplated by the Canadian Agreements) will be, greater
than the indebtedness of Enron Canada, including subordinated and contingent
liabilities computed at the amount which, to Enron Canada's knowledge,
represents an amount which can reasonably be expected to become an actual or
matured liability.
(n) Residence of Enron Canada. Enron Canada is not a
non-resident of Canada within the meaning of the Income Tax Act (Canada).
(o) Title to the Purchased Assets. Enron Canada has legal
and beneficial ownership of the owned Purchased Assets and legal and valid
leasehold interests in the leased Purchased Assets, in each case, free and clear
of all Liens, except for Permitted Liens. No other Person owns any property and
assets included in the Purchased Assets except for the lessors of the Leased
Property and personal property leased by Enron Canada pursuant to the Operating
Leases.
(p) Leases. Enron Canada is not a party to, or under any
agreement to become a party to, any leases with respect to real property which
is used or to be used in the Canadian Gas and Power Business other than the
Leases, copies of which have been provided to UBS. Each Lease is in good
standing, creates a good and valid leasehold estate in the Leased Properties
thereby demised and is in full force and effect without amendment, except as
disclosed in Schedule 2.1(p)(ii). With respect to each Lease (i) all rents and
additional rents have been paid, (ii) no material waiver, indulgence or
postponement of the lessee's obligations has been granted by the lessor, (iii)
there exists no event of default or 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 material default under the Lease by Enron Canada
or, to its knowledge, the other party under the Lease, and (iv) to the knowledge
of Enron Canada, all of the material covenants to be performed by any other
party under the Lease have been fully performed in all material respects.
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(q) Employees.
(i) No collective agreement is currently being negotiated
by Enron Canada or any other Person in respect of the Canadian Gas and Power
Business or the Enron Employees and there is no collective agreement in force
with respect to the Enron Employees.
(ii) No trade union, council of trade unions, employee
bargaining agency or affiliated bargaining agent holds bargaining rights with
respect to any of the Enron Employees by way of certification, interim
certification, voluntary recognition, or succession rights, or has applied or,
to the knowledge of Enron Canada, threatened to apply to be certified as the
bargaining agent of the Enron Employees. To the knowledge of Enron Canada there
are no threatened or pending union organizing activities involving the Enron
Employees. There is no labor strike and no employee or union organized work
slowdown or stoppage pending or involving or, to the knowledge of Enron Canada,
threatened against Enron Canada in respect of the Canadian Gas and Power
Business and no such event has occurred within the last five years.
(iii) There are no outstanding assessments, penalties,
fines, Liens, charges, surcharges, or other amounts in arrears pursuant to any
workplace safety and insurance legislation in respect of the Canadian Gas and
Power Business and Enron Canada has not been reassessed in any material respect
under such legislation during the past three years and to the knowledge of Enron
Canada no audit of the Canadian Gas and Power Business is currently being
performed pursuant to any applicable workplace safety and insurance legislation.
There are no claims or potential claims which may materially adversely affect
Enron Canada's accident cost experience in respect of the Canadian Gas and Power
Business.
(r) Insolvency Proceedings. Except as set forth in Schedule
2.1(r), Enron Canada (i) has not admitted in writing its inability to pay its
debts generally or made a general assignment for the benefit of creditors, (ii)
has not instituted or had instituted against it any proceeding seeking (x) to
adjudicate it a bankrupt or insolvent, (y) liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors including any plan of compromise or arrangement or other
corporate proceeding involving or affecting its creditors, or (z) the entry of
an order for relief or the appointment of a receiver, trustee or other similar
official for it or for any substantial part of its properties and assets, or
(iii) has not taken and, to the knowledge of Enron Canada, is not planning to
take any corporate action to authorize any of the above actions.
(s) Investment Canada Act. The aggregate value of the
assets being acquired by UBS Canada, or any of its Affiliates, relating to the
Canadian Gas and Power Business, does not exceed Cdn $5 million, determined as
prescribed by the Investment Canada Regulations.
(t) Competition Act. With respect to the assets in Canada
being acquired by UBS Canada, or any of its Affiliates, relating to the Canadian
Gas and Power Business, (i) the aggregate value of those assets does not exceed
Cdn $35 million and (ii) the annual gross revenues from sales in or from Canada
generated from those assets does not exceed Cdn $35 million, in each case
determined as prescribed by the Notifiable Transactions Regulations under the
Competition Act for the purposes of section 110(2) of that Act.
10
(u) Sufficiency of Assets. Except as set forth on Schedule
2.1(u), together the Transferred Canadian Intellectual Property Rights, the
Purchased Assets, any Intellectual Property Rights of the Enron Parties licensed
to Enron Canada prior to the date of this Agreement and the Third Party Software
constitute all the assets (other than employees) necessary to operate the
Canadian Gas and Power Business in substantially the same manner as such
business was conducted by Enron Canada and its Affiliates during the third
quarter of 2001.
2.2. Representations and Warranties by UBS Canada. UBS
Canada represents and warrants to Enron Canada as follows:
(a) Organization and Standing. UBS Canada is a corporation
duly organized and validly existing under the laws of Canada.
(b) Authority; Binding Agreements. The execution, delivery
and performance of this Agreement, the Canadian Agreements and all other
agreements, documents and instruments contemplated in connection with this
Agreement to which UBS Canada 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 Canada. UBS Canada has all requisite
power and authority to execute, deliver and perform this Agreement and the
Canadian Agreements and to consummate the transactions contemplated hereby and
thereby and UBS Canada has duly executed and delivered this Agreement and the
other Canadian Agreements. This Agreement is, and upon execution and delivery,
the Canadian Agreements and such other agreements, documents and instruments to
which UBS Canada is a party will be, the legal, valid and binding obligation of
UBS Canada, enforceable in accordance with their respective terms.
(c) Conflicts; Consents. None of the execution and delivery
of this Agreement, the Canadian Agreements, the consummation of the transactions
contemplated hereby or thereby or compliance by UBS Canada with any of the
provisions hereof or thereof will (i) conflict with or result in a breach of the
constitutive documents of UBS Canada, (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 material note, bond, lease, hypothecation,
mortgage, indenture, license, franchise, permit, agreement or other instrument
or obligation to which UBS Canada is a party, or by which UBS Canada or its
properties or assets, may be bound or affected (except for such conflicts,
breaches or defaults as to which requisite waivers or consents shall be obtained
before the Closing), or (iii) violate any law, statute, rule or regulation or
order, writ, injunction or decree applicable to UBS Canada 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. No material consent or
approval by, or any notification of or filing with, any person, firm,
corporation, partnership, limited liability company, trust, joint venture,
association or entity (governmental or private) is required in connection with
the execution, delivery and performance by UBS Canada of this Agreement, the
Canadian 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, other than any consents, approvals
or filings that are set forth on Schedule 2.2(c).
11
(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 Canada or under the authority of UBS Canada 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 Enron Canada will be
liable.
(e) Wholly-Owned Subsidiary. UBS Canada is a wholly-owned
direct or indirect subsidiary of UBS.
Article III
ADDITIONAL AGREEMENTS
3.1. Non-Competition. Enron Canada and UBS Canada hereby
agree to the provisions set forth in Article VII of the License Agreement,
mutatis mutandis, as if such provisions were included herein, with Enron Canada
named therein as one of the Enron Parties and UBS Canada named therein as UBS.
3.2. Expenses. Each party hereto shall pay its respective
investment banking, legal and accounting and other advisors' fees and expenses
incurred in connection with the preparation, execution and delivery of this
Agreement and all other agreements, documents and instruments executed pursuant
hereto and any other costs and expenses incurred by such party, except as
otherwise expressly set forth herein.
3.3. Further Assurances. In case at any time after the
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement and the other Canadian Agreements, each of the
parties to this Agreement shall, and Enron Canada shall cause its Controlled
Affiliates to, insofar as such matters are within the control of such party,
take or cause to be taken all such necessary action, including, the execution
and delivery of such further instruments and documents, as may be reasonably
requested by any party for such purposes or otherwise to complete or perfect the
transactions contemplated hereby.
3.4. Access and Information. Enron Canada shall, and shall
cause its Controlled Affiliates to, make available to UBS Canada and its
Affiliates any data and other information in the possession of Enron Canada and
its Controlled Affiliates relating to the Gas and Power Business and Enron
Canada shall reasonably assist UBS Canada and its Affiliates in arranging
discussions with (and the calling as witnesses in any proceedings related to the
Gas and Power Business, of) officers, employees and agents of Enron Canada and
its Controlled Affiliates: (i) to defend or prosecute any claims relating to the
exercise of the rights granted under the License Agreement or under this
Agreement or any other Canadian Agreement; or (ii) for any other purpose
reasonably requested by UBS Canada relating to the operation of the Gas and
Power Business prior to the Closing Date. As used in this Section 3.4,
Controlled Affiliates means Controlled Affiliates who have or have had material
involvement with the Gas and Power Business or its business, operations,
properties or assets. Enron Canada and UBS Canada will coordinate and cooperate
with one another in exchanging such information and supplying such assistance as
may be reasonably requested by each in connection with all such filings and
submissions under all applicable Laws, as may be required for them to purchase
12
and sell the Purchased Assets in accordance with the terms of this Agreement and
the transactions contemplated under the License Agreement, including the filing
of any notice pursuant to the Investment Canada Act. In connection therewith,
Enron Canada and UBS Canada will provide each other with all notices and
information supplied to or filed by either of them with any Governmental Entity
(except for notices and information which Enron Canada or UBS Canada, in each
case acting reasonably, considers highly confidential and sensitive which may be
filed on a confidential basis), and all notices and correspondence received by
either of them from any Governmental Entity. Enron Canada shall provide UBS
Canada at its request with all information that Enron Canada has in its
possession or under its direction or control which may be required or useful in
connection with any applications or notifications required by UBS Canada in
connection with the purchase and sale of the Purchased Assets and the
transactions contemplated under the License Agreement or under this Agreement or
any other Canadian Agreement. Enron Canada agrees to use all commercially
reasonable efforts to transfer the data and telecommunications lines pursuant to
the General Conveyance but cannot guarantee that the data and telecommunications
lines will ultimately transfer to UBS Canada.
3.5. Confidentiality. Enron Canada and UBS Canada hereby
agree to the provisions set forth in Article XXV of the License Agreement,
mutatis mutandis, as if such provisions were included herein, with Enron Canada
named therein as one of the Enron Parties and UBS Canada named therein as UBS.
3.6. Employee Matters.
(a) Except for the employees listed on Schedule 3.6, Enron
Canada shall, and shall use its reasonable best efforts to cause its Controlled
Affiliates to, provide such assistance as is reasonably requested by UBS Canada
or its Affiliates in the process of UBS Canada or its Affiliates hiring such of
the Eligible Employees as UBS Canada desires, subject to applicable Law. Enron
Canada shall not, and shall not permit its Controlled Affiliates to, take any
action to discourage any of the Eligible Employees from becoming an employee of
UBS Canada or its Affiliates. UBS Canada and its Affiliates shall have no
obligation to offer employment to or hire any particular Eligible Employees.
(b) Enron Canada shall provide to UBS Canada or an
Affiliate thereof the employment files and records of any Eligible Employee
hired by UBS Canada or one of its Affiliates (subject to obtaining any legally
required written permission of any affected Eligible Employee and to other
applicable Law) promptly after Closing and (subject as aforesaid) Enron Canada
may keep a copy of such files and records, which shall constitute Confidential
Information for it under the License Agreement.
(c) Enron Canada, on behalf of itself and its Controlled
Affiliates, hereby releases each Eligible Employee hired by UBS Canada or any
Affiliate thereof as contemplated by this Agreement and the Master Agreement,
effective as of the date of such hiring, from (i) any continuing employment
obligations (whether under any employment contract or otherwise), (ii) any
noncompetition, nonsolicitation and confidentiality obligations (other than
obligations of confidentiality related to claims by or against Enron Canada
arising from the termination of, or the exercise of any remedies under, any
agreements of Enron Canada referred to in item 1 of Schedule 2.1(u)), to the
extent they are not assigned to UBS Canada or an Affiliate thereof, and (iii)
13
any liabilities arising out of such Eligible Employee's lawful performance of
his or her duties while an employee of Enron Canada and/or its Affiliates for
matters relating to the periods prior to such hiring by UBS Canada or Affiliate
thereof; provided however, that nothing herein shall constitute or be deemed to
be a release of any Eligible Employee from liability arising out of (w) any
material unauthorized trading activities, (x) any actions taken that were a
material violation of Enron Canada's corporate policies, (y) any gross
negligence, willful misconduct or knowing violation of law on the part of such
Eligible Employee or (z) any matter to the extent of the respective rights of
the Enron Parties under Chapter 5 of Title 11 of the United States Code or
similar Laws, including, without limitation, commencing any avoidance action
against any such Eligible Employee.
(d) Enron Canada shall pay to each Eligible Employee hired
by UBS Canada or any of its Affiliates all vacation pay accrued to the Closing
Date.
3.7. Taxes.
(a) Enron Canada and UBS Canada 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. Enron Canada and UBS Canada will reasonably cooperate
with one another to lawfully minimize such taxes. Nothing in this Section 3.7(a)
shall affect the provisions of Section 3.7(c).
(b) Notwithstanding any other provision contained in this
Agreement, the covenants contained in this Section 3.7 shall survive until 30
days after the expiration of the applicable statute of limitations (including
extensions).
(c) UBS Canada shall be responsible for all taxes imposed
on UBS Canada or any of its Affiliates under Part IX of the Excise Tax Act
(Canada) in respect of the payments described in Sections 1.1(a), (c) and (d).
(d) Notwithstanding anything to the contrary contained in
Section 3.9(d) of the Master Agreement, the payments described in Sections
1.1(a), (c) and (d) of this Agreement shall be made free and clear of, and
without reduction for, any withholding taxes or other governmental charges.
3.8. Bulk Sales. Each of Enron Canada and UBS Canada waive
compliance with the Bulk Sales Act (Ontario) and any other similar bulk sales
Laws.
3.9. Further Assurances Regarding Sufficiency of Assets. In
the event UBS Canada determines in its reasonable discretion that the
representations and warranties contained in Sections 2.1(d)(i) and 2.1(u) are
not satisfied, Enron Canada shall promptly (i) transfer, assign and deliver to
UBS Canada such IT Hardware free and clear of all Liens other than Permitted
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, Data and Canadian Intellectual Property Rights owned or
14
licensed by Enron Canada or its Affiliates, in each case, as may be necessary in
order to permit UBS Canada to operate the Canadian Gas and Power Business in
substantially the same manner as such business was conducted by Enron Canada and
its Affiliates during the third quarter of 2001. In the event that any
consultants of Enron Canada or its Controlled Affiliates involved in the design,
review, evaluation or development of products or intellectual property rights
constituting or embodied in the so-called "PETE" software have not entered
agreements sufficient to vest in Enron Canada exclusive ownership of such
Intellectual Property Rights, then Enron Canada shall assist UBS Canada, at the
expense of UBS Canada, to secure such agreements as UBS Canada may elect.
Article IV
INDEMNIFICATION
4.1. Indemnification.
(a) Enron Canada agrees to indemnify and hold harmless UBS
Canada and its Affiliates, shareholders, partners, directors, officers,
employees and other agents and representatives (the "UBS Indemnified Parties")
from and against any and all liabilities, judgments, claims (including claims of
creditors of Enron Canada), settlements, losses (including dimunitions in
value), damages, fees, Liens, Taxes, penalties, obligations and expenses
(including reasonable fees and disbursements of counsel) (collectively,
"Losses") incurred or suffered by any such person arising from, by reason of or
in connection with:
(i) any misrepresentation or breach of any representation or
warranty of Enron Canada contained in this Agreement or any
of the other Canadian Agreements;
(ii) any breach of any covenant or agreement of Enron Canada
contained in this Agreement or any of the other Canadian
Agreements, other than breaches the consequences of which
are immaterial in the context of this Agreement;
(iii) any and all liabilities or obligations of Enron Canada
or its subsidiaries, or the failure of any of Enron Canada
or its subsidiaries to pay or discharge the same, including
(A) any and all Enron Canada Liabilities and (B) any
liabilities resulting from a claim by a Governmental Entity
or Enron Employee, whether or not hired by UBS, that relate
to the employment of Enron Employees, including any
discharge thereof, but excluding the Assumed Obligations;
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 other Canadian Agreements, or the performance by the
Enron Parties of their respective obligations under this
Agreement or any other Canadian 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
15
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) the failure of the Enron Canada, UBS Canada or any of
their Affiliates to comply with any bulk sales laws
applicable to the transactions contemplated by this
Agreement or the License Agreement;
(v) third-party claims in connection with the provision to
Enron Canada of the UBS Transition Services and the services
provided pursuant to Part A of the Canadian Transition
Services Agreement (except for claims arising from the
willful misconduct of UBS or the UBS Affiliates);
(vi) any act by an employee of Enron Canada (or any
Controlled Affiliate of Enron Canada), 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 (in each case as
defined in the License Agreement);
(vii) any Taxes (A) attributable to the Canadian Gas and
Power Business or the Deliverables for any period or portion
thereof ending on or before the Closing Date or (B) imposed
on Enron Canada, any Canadian Affiliate of Enron Canada or
any Enron Canada Tax Group; and
(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 4.1(a);
provided, however, that the UBS Indemnified Parties shall not be entitled to
indemnification under clause (i) above (other than Losses relating to a breach
of Section 2.1(j)) until the aggregate amount of Losses (together with Losses
under clause (i) of Section 5.1(a) of the Master Agreement and clause (i) of
Section 19.1(a) of the License Agreement, without duplication) exceeds
$5,000,000 (the "UBS Threshold"), at which point the UBS Indemnified Parties
shall be entitled to indemnification for all Losses, without giving effect to
the UBS Threshold, that in the aggregate exceed $2,500,000; provided further
that the maximum amount for which the UBS Indemnified Parties shall be entitled
to indemnification under clause (i) above (together with clause (i) of Section
5.1(a) of the Master Agreement and clause (i) of Section 19.1(a) of the License
Agreement, without duplication) shall be $100,000,000. Payments of indemnity
pursuant to this Section 4.1(a) shall be made only through set offs made
pursuant to Section 4.6. The disclosure of any matter by Enron Canada pursuant
to the exceptions for disclosure in the representations and warranties of Enron
Canada shall not limit the indemnity pursuant to clause (iii) above, such that
the UBS Indemnified Parties shall be indemnified for the matters set forth in
Schedule 2.1(e) and Schedule 2.1(f) to this Agreement.
16
(b) UBS Canada agrees to indemnify and hold harmless Enron
Canada and its Controlled Affiliates, directors, officers, employees and other
agents and representatives (the "Enron Indemnified Parties") from and against
any and all liabilities, judgments, claims, settlements, losses, damages, fees,
Liens, Taxes, penalties, obligations and expenses (including reasonable fees and
disbursements of counsel) (collectively, "Enron Losses") incurred or suffered by
any such person arising from, by reason of or in connection with:
(i) any misrepresentation or breach of any representation or
warranty of UBS Canada contained in this Agreement or in any
of the other Canadian Agreements;
(ii) any breach of any covenant or agreement of UBS Canada
contained in this Agreement or in any of the other Canadian
Agreements, other than breaches the consequences of which
are immaterial in the context of this Agreement;
(iii) any and all liabilities or obligations of UBS Canada
for the Assumed Obligations or the failure by it to pay or
discharge the same; and
(iv) any and all actions, suits, proceedings, demands,
orders, rulings, decrees, judgments, costs and legal and
other expenses incident to any of the matters referred to in
clauses (i) through (iii) of this Section 5.1(b);
provided, however, that the Enron Indemnified Parties shall not be entitled to
indemnification under clause (i) above until the aggregate amount of Enron
Losses (together with Enron Losses under clause (i) of Section 5.1(b) of the
Master Agreement and clause (i) of Section 19.1(b) of the License Agreement,
without duplication) exceeds $5,000,000 (the "Enron Threshold"), at which point
the Enron Indemnified Parties shall be entitled to indemnification for all Enron
Losses, without giving effect to the Enron Threshold, that in the aggregate
exceed $2,500,000; provided further that the maximum amount for which the Enron
Indemnified Parties shall be entitled to indemnification under clause (i) above
(together with clause (i) of Section 5.1(b) of the Master Agreement and clause
(i) of Section 19.1(b) of the License Agreement, without duplication) shall be
$100,000,000.
4.2. Certain Limitations. The remedies provided in this
Article IV shall be the exclusive remedies of the parties for any claims for
monetary damages under this Agreement, other than any claim relating to fraud.
4.3. Procedures Relating to Third Party Claims.
(a) In order for an indemnified party to be entitled to any
indemnification provided for under this Article IV 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
17
as a result of such failure. Each party shall provide to the other parties, upon
such other parties' written request, reasonable access during normal business
hours to the books, records and personnel in their possession or under their
control which are reasonable necessary to verify such claim. UBS Canada shall
defend all Third Party Claims against it for which it may seek indemnity
hereunder or under the License Agreement with a degree of diligence consistent
with UBS's customary defense of litigation against it.
(b) If a Third Party Claim is made against an indemnified
party, the indemnified party shall allow the indemnifying party to consult with
the indemnified party regarding the defense of such Third Party Claim, including
any settlement thereof, and the indemnifying party shall be entitled to
participate in the defense thereof, it being understood that the indemnified
party shall control the defense of such Third Party Claim and shall not be
required to take any action that may jeopardize any attorney-client privilege.
An indemnified party shall not agree to settle any Third Party Claim for
monetary damages without the consent of the indemnifying party (which consent
shall not be unreasonably withheld or delayed).
4.4. 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 IV 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.
4.5. Calculation of Indemnity Payments. The amount of any
indemnity payment shall be decreased to take account of the net present value of
any reasonably expected net Tax benefits to the indemnified party (using a
discount rate of 10% per annum) and increased to take account of the net present
value of any net Tax cost to the indemnified party that is reasonably expected
by the indemnified party (using a discount rate of 10% per annum) arising from
the receipt of any payment hereunder (grossed up for such increase) as
calculated in good faith by the indemnified party.
4.6. Right of Set-Off. The parties hereto understand that
any amounts owing to UBS Canada or any of its Affiliates hereunder or under any
other Canadian Agreement may be satisfied as contemplated by Section 5.4 of the
License Agreement.
Article V
MISCELLANEOUS
5.1. Entire Agreement. This Agreement, the other Canadian
Agreements and the other agreements, documents and instruments contemplated in
connection with this Agreement and the schedules and exhibits hereto and thereto
contain the entire agreement among the parties with respect to the transactions
contemplated hereby and thereby and supersede all prior agreements or
understandings among the parties. For the avoidance of doubt, nothing contained
herein shall limit Enron Canada's rights pursuant to the License Agreement.
18
5.2. 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", unless otherwise specified, refer to lawful money of the United
States of America and "Cdn $" refers to lawful money of Canada; and (vii) a
reference in this Agreement to an Article, Section, Exhibit or Schedule is to
the Article, Section, Exhibit or Schedule of this Agreement.
5.3. 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 Canada, to:
UBS Warburg Energy (Canada) Ltd.
c/o UBS Warburg
299 Park Avenue
New York, NY 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
19
Stikeman Elliott
199 Bay Street, Suite 5300
Toronto, Ontario M5L 1B9
Facsimile: (416) 947-0866
Attention: Daphne J. MacKenzie
If to Enron Canada to:
Enron Canada Corp.
Suite 3500
400 - 3rd Avenue S.W.
Calgary, Alberta T2P 4H2
Facsimile: (403) 974-6991
Attention: Kyle Kitagawa
with copies to:
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Facsimile: (713) 646-3393
Attention: Mark Muller and Lance Schuler
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Mary R. Korby
Blake, Cassels & Graydon LLP
Suite 3500, East Tower, Bankers Hall
855 - 2nd Street Southwest
Calgary, Alberta T2P 4J8
Facsimile: (403) 260-9700
Attention: Robert Anderson
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.
5.4. 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.
20
5.5. Survival. All representations and warranties contained
in this Agreement or in any document, certificate or instruments delivered
pursuant hereto or in connection herewith (unless otherwise expressly provided
herein or therein) shall survive the execution and delivery of this Agreement
and the Closing and shall remain in full force and effect until the first
anniversary of the date of this Agreement; provided that the representations and
warranties in paragraphs (b), (f) and (i) of Section 2.1 shall survive for the
periods permitted by law, and the representations and warranties in paragraph
(j) of Section 2.1 shall survive until the expiration of the applicable statute
of limitations (taking into account any applicable extensions); provided further
that no party's indemnification obligations under Section 4.1 shall terminate
with respect to any item as to which the person to be indemnified or the related
party thereto shall have, before the expiration of the applicable period,
previously made a good faith claim by delivering a notice of such claim to the
indemnifying party.
5.6. 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. This Agreement is for the
sole benefit of the parties hereto and their respective successors and assigns
and not for the benefit of any third party, except as otherwise expressly
provided in Section 3.6(c). Enron Canada acknowledges to each of the Eligible
Employees hired by UBS Canada or any Affiliate thereof their direct rights
against Enron Canada under Section 3.6(c). If a court determines that Section
3.6(c) does not create direct rights in favor of such Eligible Employees, then
UBS Canada acts as agent on behalf of each of the Eligible Employees hired by
UBS Canada or any Affiliate thereof in contracting for their respective rights
under Section 3.6(c). If the foregoing agency is ineffective in procuring their
respective rights under Section 3.6(c) for any reason, then UBS Canada acts as
bare trustee on behalf of each of the Eligible Employees hired by UBS Canada or
any Affiliate thereof and holds for their benefit their rights under Section
3.6(c).
5.7. Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
5.8. 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
that UBS Canada may pledge or assign all or part of its rights and obligations
hereunder to any Affiliate thereof, so long as UBS Canada guarantees the payment
and performance by such Affiliate hereunder. Following any such permitted
assignment, the term "UBS Canada" shall mean such assignee. Any purported
assignment not permitted by this Section shall be void.
5.9. 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
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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.
5.10. 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
BANKRUPTCY COURT OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION
RELATING THERETO EXCEPT IN THE BANKRUPTCY COURT OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OTHER THAN TO SEEK RECOGNITION OR
ENFORCEMENT OF AN INJUNCTION OR OTHER ORDER ISSUED BY EITHER SUCH COURT).
5.11. No Partnership. Each party to this Agreement agrees
that this Agreement, the other Canadian Agreements and all other arrangements,
agreements and transactions contemplated thereby are not intended to constitute,
either severally or in the aggregate, a partnership between Enron Canada or any
of its Affiliates, on the one hand and UBS Canada or any of its Affiliates, on
the other hand; and, each party to this Agreement further agrees that it will
not hold itself out or permit any of its subsidiaries to hold itself out as such
a partner or commit any other act or file any document with any Governmental
Entity that is inconsistent with the foregoing.
Article VI
DEFINITIONS
As used herein, the terms below shall have the following
meanings:
"Affiliate" of a Person means any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person.
"Agreement" means this Canadian Master Agreement.
"Assumed Contracts" has the meaning ascribed thereto in the
General Conveyance.
"Assumed Obligations" has the meaning set forth in Section
1.3. "Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of New York.
"Canadian Agreements" has the meaning set forth in Section
1.1.
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"Canadian Gas and Power Business" has the meaning set forth
in the introduction hereof.
"Canadian IT Agreements" means, collectively, (i) the
Termination, Release and Transfer Agreement (Trading Software) by and among ENA,
Enron Capital & Trade Resources International Corp. "ECTRIC", Enron Financial
Energy Trading LLC, and Enron Canada, dated as of the date hereof and (ii) the
Termination, Release and Transfer Agreement (Internet Trading) by and among
Enron Reserve Acquisition Corp., Enron Canada, ECTRIC, Enron Clean Fuels
Company, Enron Coal Services, Enron Power Trading Limited and ENA, dated as of
the date hereof.
"Canadian Intellectual Property Rights" has the meaning set
forth in Section 2.1(d)(ii).
"Canadian Transition Services Agreement" means the Letter
Agreement dated the date hereof between Enron Canada, UBS Canada and UBS AG.
"Closing" has the meaning set forth in Section 1.4.
"Closing Date" has the meaning set forth in Section 1.4.
"Contractual Rights" has the meaning set forth in Section
1.6.
"Controlled Affiliate" shall mean, with respect to Enron
Canada, any Person that, directly or indirectly, through one or more
intermediaries, is controlled by Enron Canada.
"Customer Data" means solely the contact and identifying
information relating to a customer or client of Enron Canada or its Affiliates
relating to the Canadian Gas and Power Business.
"Data" means all databases, network diagrams, system
specifications, configuration data and other data and Trade Secrets relating to
the Canadian Gas and Power Business or the technical or business infrastructure
relating thereto transferred pursuant to the Canadian IT Agreements and except
for the purposes of Sections 2.1(d)(i) and 2.1(u), any additional such data,
databases, network diagrams, system specifications, configuration data and other
data and Trade Secrets to be transferred, assigned or delivered to UBS Canada
hereunder in connection with Section 3.9. 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.
"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.
"Eligible Employees" means the employees necessary or
appropriate in UBS Canada's judgment for UBS Canada to operate the Canadian Gas
and Power Business, including trading professionals and employees in the areas
of information technology, operations, credit, market risk,
research/fundamentals, human resources, accounting and legal functions.
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"Enron" has the meaning set forth in the preamble hereto.
"Enron Benefit Plans" has the meaning set forth in Section
2.1(i).
"Enron Canada" has the meaning set forth in the preamble
hereto.
"Enron Canada Liabilities" has the meaning set forth in
Section 1.3.
"Enron Canada Tax Group" means any consolidated, combined
or unitary group of which Enron Canada or any Canadian Affiliate thereof is or
has been a member with respect to any Tax.
"Enron Employees" means employees of Enron Canada or the
Canadian Gas and Power Business (whose duties primarily relate to the Canadian
Gas and Power Business).
"Enron Losses" has the meaning set forth in Section 4.1(b).
"Enron Party" and the correlative term "Enron Parties" has
the meaning set forth in the introduction hereto.
"Environmental Laws" has the meaning set forth in Section
2.1(f).
"Equipment" has the meaning set forth in the Use Agreement.
"Gas and Power Business" has the meaning set forth in the
introduction hereof.
"Gas and Power Commodities" has the meaning set forth in
the introduction hereof.
"General Conveyance" means the general conveyance agreement
between Enron Canada and UBS Canada dated as of the date hereof.
"Governmental Entity" means any federal, state, provincial,
local, county or municipal government, governmental, judicial, regulatory or
administrative agency, commission, board, bureau or other authority or
instrumentality, domestic or foreign.
"Indemnification Notice" has the meaning set forth in
Section 4.3(a).
"Intellectual Property" and "Intellectual Property Rights"
means any patent rights, copyrights, trade secrets, trademarks, service marks,
trade names, trade dress, trade styles, designs, and other source or business
identifiers, moral rights, know-how, and other similar rights recognized under
any laws or international treaties or conventions, and in any country or
jurisdiction in the world, as intellectual creations to which rights of
ownership accrue, and all registrations, applications, disclosures, renewals,
extensions, continuations or reissues of the foregoing now or hereafter in
force.
"Laws" has the meaning set forth in Section 2.1(f).
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"IT Hardware" means all computers, servers, workstations,
routers, hubs, switches, and other information technology equipment, including
data communications lines and other network equipment listed in Schedule
1.1(a)(i), and all associated firmware and documentation and except for the
purposes of Sections 2.1(d)(i) and 2.1(u), any additional such equipment and
associated firmware and documentation to be transferred, assigned or delivered
to UBS Canada hereunder in connection with Section 3.9.
"Leased Property" means the lands and premises listed and
described in Schedule 2.1(p)(i).
"Leases" means the leases of the Leased Properties
described in Schedule 2.1(p)(ii).
"License Agreement" means the Comprehensive License
Agreement, dated as of the date hereof, among Enron Corp., Enron North America
Corp., Enron Net Works L.L.C. and UBS AG, as such agreement may be amended,
modified and in effect from time to time.
"License Fee" means Cdn $50,000.
"Lien" means any lien, pledge, charge, option, restriction
on transfer, claim, mortgage, deed to secure debt, deed of trust, statutory
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 4.1(a).
"Master Agreement" has the meaning set forth in the
introduction hereof.
"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.
"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.
"Operating Leases" means the operating leases relating to
certain personal property used by Enron Canada described in Section 8 of Exhibit
18.1(j) to the License Agreement.
"Permitted Liens" means Liens for taxes, assessments and
other governmental charges that are not due and payable or that may thereafter
be paid without penalty or Liens imposed by law, such as materialmen's,
mechanics', workers', repairmen's employees', carriers', vendors',
warehousemen's and other like Liens arising in the ordinary cause of business in
respect of obligations that are not yet due and payable.
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"Person" or "person" means any individual, corporation,
partnership, association, limited liability company, trust, joint venture,
unincorporated organization, or other entity or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended).
"Petitions" means the voluntary petitions for relief filed
by Enron, along with certain of its Affiliates (not including Enron Canada),
commencing cases under chapter 11 of title 11 of the United States Code in the
Bankruptcy Court.
"Proprietary Software" means software developed and owned
by Enron Canada, but specifically excluding the so-called "PETE" software
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 Sections 2.1(d)(i) and 2.1(u), any additional
software or associated Documentation to be transferred to the Enron Parties
pursuant to Section 3.9.
"Purchased Assets" means:
(a) the IT Hardware and all other equipment, furniture,
furnishing, accessories and supplies of all kinds, including associated office
supplies, owned by Enron Canada and used in connection with the Canadian Gas and
Power Business listed and described in Schedule 1.1(a)(i), together with all
express or implied warranties and rights in maintenance contracts relating to
any of the foregoing, but excluding the furniture and equipment located at the
lands and premises listed and described under the heading Toronto, Ontario in
Schedule 2.1(p)(i);
(b) the full benefit of the contracts, leases of personal
property and other agreements listed in Schedule 1.1(a)(ii);
(c) the leasehold interest of Enron Canada in and to the
Leased Property and all right, title and interest of Enron Canada in, and the
benefit of Enron Canada to and under, the Leases;
(d) the permits, approvals, licenses and similar
authorizations of the Governmental Entities listed in Schedule 1.1(a)(iii); and
(e) the personal computers, personal digital assistants,
fax machines, telephones (cellular and otherwise), and similar home office
equipment located at the homes of the transferred employees and not otherwise
identified on Schedule 1.1(a)(i) and the data and telecommunications lines
related thereto, together with all express or implied warranties and rights in
maintenance contracts relating to any of the foregoing.
"Purchase Price" means Cdn $831,755.
"Royalty" has the meaning given to such term in the License
Agreement.
"Software" means collectively, all Proprietary Software and
all Third Party Software.
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"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
to create executable code, supplied on magnetic media in a format which can be
read and printed by UBS Canada's equipment and which is accessible for
modification and, where software not owned by the Enron Canada, 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.
"Tax" means any and all federal, state, local, provincial,
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 Canada, including, without limitation, taxes imposed on, or
measured by, income, franchise, profits, gross income or gross receipts, and
also ad valorem, value added, sales, use, service, real or personal property,
capital stock, stock transfer, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, environmental,
transfer and gains taxes and customs duties.
"Third Party Claim" has the meaning set forth in Section
4.3(a).
"Third Party Software" means all software, including both
Source Code and Object Code to the extent possessed by Enron Canada, and
associated Documentation, which is licensed by any of the Enron Parties from a
third party licensor listed on Schedule 6.2.
"Trade Secrets" means confidential information of value in
the Canadian Gas and Power Business (other than financial information and
information relating to transactions, in each case, regarding customers of the
Canadian 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, and except for the purposes of
Sections 2.1(d)(i) and 2.1(v), any additional such confidential information to
be transferred, assigned or delivered to the Enron Parties hereunder in
connection with Section 3.9.
"UBS" has the meaning set forth in the introduction hereto.
"UBS Canada" has the meaning set forth in the preamble
hereto.
"Use Agreement" means the Use Agreement dated as of the
date hereof between Enron Canada and UBS Canada.
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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 CANADA CORP.
By: /s/ Kyle Kitigawa
----------------------------------------
Name: Kyle Kitigawa
UBS WARBURG ENERGY (CANADA) LTD.
By: /s/ Per Dyrvik
----------------------------------------
Name: Per Dyrvik
Title: Managing Director
By: /s/ Louis Eber
----------------------------------------
Name: Louis Eber
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