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5. Representations, Warranties and Covenants
- General Representations and Covenants. Each of Enron and Counterparty
represents, warrants to, and agrees with, the other (which representation shall
be deemed repeated each time a Transaction is executed) that (a) Status
and Capacity: (i) it is duly organised and validly existing under
the laws of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing; and (ii) it has all requisite
corporate or governmental or other power and capacity to execute and perform its
obligations under each Transaction; (b) Authority: (i) the
execution of each Transaction and the performance of its obligations under each
Transaction has been duly authorised by all necessary corporate, governmental or
other organisational action on its part; and (ii) each Transaction is its
legally valid and binding obligation, enforceable against it in accordance with
its terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors rights generally and subject, as
to enforceability, to equitable principles of general application (regardless of
whether an enforcement is sought in a proceeding in equity or at law));(c)
Eligible Contract Participant: (i) it constitutes an
"eligible contract participant" as such term is defined in Section 1(a)(12) of
the United States Commodity Exchange Act; and (ii) it is an "accredited
investor" as such term is defined in Rule 501 of Regulation D of the United
States Securities and Exchange Commission; (d) Purpose: it
is entering into each Transaction for bona fide commercial purposes and not in
any event for the purposes of speculating or gaming; (e) No
Reliance: (i) the other party to each Transaction (1) is not acting
as a fiduciary or financial, investment or commodity trading advisor for it; and
(2) has not given to it (directly or indirectly through any other person) any
assurance, guarantee or representation whatsoever as to the merits (either
legal, regulatory, tax, financial, accounting or otherwise) of each Transaction,
or the expected performance or result of each Transaction; and (ii) in
connection with the negotiation and execution of each Transaction (1) it is
acting as a principal (and not as an agent or in any other capacity, fiduciary
or otherwise); (2) it is not relying upon any advice, counsel or representations
(whether written or oral) of the other party other than the representations
expressly set forth in these GTCs, incorporated herein or set out on the
Website; (3) it has made and will make its own assessment and decisions
regarding the entering into each Transaction based upon its own judgment and
upon the advice from such professional advisors as it has deemed, or will deem,
necessary to consult; (4) all of its decisions regarding each Transaction have
been the result of arm’s length negotiations between the parties; and (5) it has
a full understanding of all the terms, conditions and risks (economic and
otherwise) of each Transaction, and it is capable of assuming and willing to
assume (financially, legally and otherwise) those risks; (f)
Transactions: in connection with each Transaction, (i)
neither the other party nor any of the other party’s Affiliates makes any
representation whatsoever with respect to the Reference Entity on which it is
relying or entitled to rely; (ii) it is obligated to perform in accordance with
these GTCs irrespective of the existence or amount of the other party’s credit
exposure to the Reference Entity, and the other party need not suffer any loss
or provide evidence of any loss as a result of the occurrence of a Bankruptcy
Event or Credit Event; (iii) each Transaction does not create on the part of
either party either a direct or an indirect obligation of the Reference Entity;
and (iv) unless it is otherwise bound by a confidentiality obligation or
agreement, a party receiving any information from the other party with respect
to each Transaction shall not become the subject of any obligation of
confidentiality in respect of that information and the transferor of that
information shall indemnify and hold harmless the transferee for any loss,
liability, claim damage and expenses whatsoever incurred by the transferee
arising out of the breach of law or understanding or agreement with respect to
the confidentiality of the information to which the transferor may be a party.
- Reference Entity Relationships. Each of Enron and Counterparty
acknowledge, agree and understand that:
- ENRON AND COUNTERPARTY MAY TRADE ACTIVELY WITH MANY OF THE REFERENCE
ENTITIES, AND AFFILIATES OF REFERENCE ENTITIES, AND MAINTAIN OTHER RELATIONSHIPS
WITH SUCH ENTITIES. AS A RESULT OF THESE TRADING ACTIVITIES AND RELATIONSHIPS,
ENRON AND COUNTERPARTY MAY HAVE INTERESTS WITH RESPECT TO SUCH ENTITIES THAT ARE
ADVERSE TO THE INTERESTS OF THE OTHER PARTY IN CREDIT PRODUCT TRANSACTIONS. FOR
EXAMPLE, IT IS POSSIBLE THAT ENRON OR COUNTERPARTY WILL, BY EXERCISING ITS
RIGHTS UNDER ITS AGREEMENTS WITH A REFERENCE ENTITY, AN AFFILIATE OF A REFERENCE
ENTITY, OR A PERSON WITH OBLIGATIONS RELATING TO A REFERENCE ENTITY, TAKE
ACTIONS THAT RESULT IN THE OCCURRENCE OF A BANKRUPTCY EVENT OR CREDIT EVENT WITH
RESPECT TO THAT REFERENCE ENTITY. IF ENRON OR COUNTERPARTY ENTERS INTO A
TRANSACTION TO SELL THE CREDIT PRODUCT RELATING TO THAT REFERENCE ENTITY, THE
OCCURRENCE OF SUCH BANKRUPTCY EVENT OR CREDIT EVENT MAY TRIGGER SUCH PARTY’S
OBLIGATION TO PAY UNDER THAT TRANSACTION. EACH OF ENRON AND COUNTERPARTY MAY
CONTINUE TO CONDUCT ITS TRADING ACTIVITIES AND ITS RELATIONSHIPS WITH REFERENCE
ENTITIES IN THE SAME MANNER AS SUCH ACTIVITIES AND RELATIONSHIPS WOULD BE
CONDUCTED NOTWITHSTANDING THESE GTCs OR ANY TRANSACTION HEREUNDER AND WILL ACT
IN ITS OWN BEST INTERESTS IN CONNECTION WITH SUCH RELATIONSHIPS. IN DOING SO,
ENRON AND COUNTERPARTY MAY OR MAY NOT TAKE INTO ACCOUNT THE INTERESTS OF THE
OTHER PARTY IN TRANSACTIONS AND ENRON AND COUNTERPARTY’S PARTICIPATION IN
TRANSACTIONS MAY INVOLVE CERTAIN ACTUAL OR POTENTIAL CONFLICTS OF INTEREST; AND
- AS A RESULT OF ITS RELATIONSHIPS WITH CERTAIN REFERENCE ENTITIES, ENRON AND
COUNTERPARTY MAY ROUTINELY RECEIVE INFORMATION REGARDING THE CREDITWORTHINESS OF
SUCH ENTITIES. ENRON AND COUNTERPARTY MAY NOT PROVIDE ANY SUCH INFORMATION TO
THE OTHER PARTY. ENRON AND COUNTERPARTY MAY, HOWEVER, USE SUCH INFORMATION IN
CONNECTION WITH ITS OWN ACTIVITIES REGARDING REFERENCE ENTITIES. ANY SUCH USE BY
ENRON AND COUNTERPARTY COULD ADVERSELY AFFECT THE OTHER PARTY. IN ADDITION,
ENRON MAY, BUT WILL NOT BE OBLIGED TO, TAKE SUCH INFORMATION INTO ACCOUNT IN
DETERMINING THE PRICE OF CREDIT PRODUCTS.
- Enron Quotations. Counterparty further acknowledges, agrees and
understands that:
- ENRON MAY, FOR ANY REASON, TEMPORARILY OR PERMANENTLY CEASE TO QUOTE PRICES
FOR CERTAIN REFERENCE ENTITIES WITHOUT PRIOR NOTICE TO COUNTERPARTY. WITHOUT
LIMITATION OF THE FOREGOING, SUCH ACTION MIGHT BE TAKEN IF ENRON BELIEVES IT TO
BE REQUIRED OR WARRANTED UNDER APPLICABLE LAWS OR REGULATIONS OR ENRON’S
INTERNAL POLICIES AND PROCEDURES, DUE TO MARKET CONDITIONS OR FOR OTHER REASONS.
UNDER SUCH CIRCUMSTANCES, COUNTERPARTY MAY BE UNABLE TO ENTER INTO NEW
TRANSACTIONS IN RESPECT OF SUCH REFERENCE ENTITIES; AND
- BID AND OFFER PRICES FOR CREDIT PRODUCTS QUOTED BY ENRON ARE QUOTED SOLELY
FOR THE PURPOSE OF ENABLING COUNTERPARTY AND OTHER COUNTERPARTIES OF ENRON TO
TRADE SUCH CREDIT PRODUCTS, IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET
FORTH IN THESE GTCs, AND SHOULD NOT BE USED OR RELIED UPON FOR ANY OTHER PURPOSE
INCLUDING, BUT NOT LIMITED TO, VALUATION OF POSITIONS OR EVALUATION OF THE
CREDITWORTHINESS.
6. ISDA Framework
a. No Executed ISDA Master Agreement. If the parties have
not executed a 1992 ISDA Master Agreement, Enron and Counterparty agree to use
all reasonable efforts promptly to negotiate and execute an agreement in the
form of the 1992 ISDA Master Agreement (Multicurrency-Cross Border) (the
"ISDA Form"), with such modifications as Enron and Counterparty may in
good faith agree, as amended and supplemented from time to time (the "Master
Agreement").
Until Enron and Counterparty execute the Master Agreement,
these GTCs together with the Confirmation for each Transaction shall (a)
supplement and form a part of an agreement in the form of the ISDA Form as if
the parties had executed an agreement in such form (but without any Schedule
except for the insertion of a new Section 15 "ISDA Form Elections and
Amendments" as specified below) on the Trade Date of the first of such
Transactions between Enron and Counterparty, and (b) constitute a "Confirmation"
for the purposes of the ISDA Form and each Transaction detailed therein shall
constitute a "Transaction" for the purposes of the ISDA Form. All provisions
contained in the ISDA Form shall govern each Confirmation except as expressly
modified thereby. In the event of any inconsistency between the ISDA Form and
these GTCs, these GTCs shall govern. In the event of any inconsistency between
these GTCs and a Confirmation, the Confirmation shall govern for the purposes of
the Transaction to which the Confirmation relates; provided that
in respect of Transactions entered into on EnronOnline in the event of any
inconsistency between a Confirmation and Enron’s electronic records (or paper
copies of such electronic records), such electronic records shall govern for the
purposes of the Transaction to which such electronic records relate.
b. Executed ISDA Master Agreement. If Enron and
Counterparty have executed, or subsequently execute, the Master Agreement, (a)
these GTCs will supplement and form a part of the Master Agreement and (b) these
GTCs together with the Confirmation for each Transaction, shall constitute a
"Confirmation" for the purposes of the Master Agreement and each Transaction
detailed therein shall constitute a "Transaction" for the purposes of the Master
Agreement. All provisions contained in the Master Agreement shall govern each
Confirmation except as expressly modified thereby. In the event of any
inconsistency between the Master Agreement and these GTCs, these GTCs shall
govern. In the event of any inconsistency between these GTCs and a Confirmation,
the Confirmation shall govern for the purposes of the Transaction to which the
Confirmation relates; provided that in respect of Transactions
entered into on EnronOnline, in the event of any inconsistency between a
Confirmation and Enron’s electronic records (or paper copies of such electronic
records), such electronic records shall govern for the purposes of the
Transaction to which such electronic records relate.
c. ISDA Form Elections and Amendments. The following
provisions shall be deemed inserted as a new Section 15 for the purposes of the
ISDA Form:
"15. ISDA Form Elections and Amendments
(a) Early Termination. For the purposes of Section 6(e)
of this Agreement, the Second Method and Loss shall apply. "Termination
Currency" means one of the Contractual Currencies in which payments are
required to be made pursuant to a Terminated Transaction selected by the
Non-defaulting Party or the non-Affected Party, as the case may be, or, in the
circumstances where there are two Affected Parties, as agreed between the
parties, or, failing such agreement, or if the currency so selected is not
freely available, the Termination Currency shall be U.S. Dollars.
(b) Governing Law/Jurisdiction. This Agreement and each
Transaction shall be governed by and construed in accordance with the laws of
England. The final paragraph of Section 13(b) of this Agreement is hereby
deleted.
(c) Netting of Payments. Section 2(c)(ii) of this
Agreement shall not apply to all Transactions.
(d) Confidentiality. The identity of a party as a party
to this Agreement or a Transaction (or proposed Transaction) and any information
which renders the identity of such party reasonably capable of being identified
as such by any third party is confidential and shall not be disclosed to any
third party by either party (nor shall any public announcement regarding the
identity of such party in respect of this Agreement or a Transaction be made by
either party), except for such information (i) as may become generally available
to the public (except by reason of a breach of this Section), (ii) as may be
required or appropriate in response to any summons, subpoena, or otherwise in
connection with any litigation or to comply with any applicable law, order,
regulation, ruling or accounting disclosure rule or standard, (iii) as may be
furnished to the disclosing party’s Affiliates, auditors, attorneys or advisors
who are required to keep the information that is disclosed in confidence.
(e) Credit Support Documents.
- Counterparty shall at Enron’s request from time to time and at Enron’s
option either (a) within one (1) Local Business Day of receipt of such request
by Enron, provide to Enron a letter of credit in respect of Counterparty’s
obligations under this Agreement or any Transaction, in such form and for such
amount and from such issuer as is acceptable to Enron in its absolute
discretion; or (b) within such period as is specified by Enron, provide for the
benefit of Enron a guarantee in respect of this Agreement or any Transaction,
from such party and in such form and for such amount as is acceptable to Enron
in its absolute discretion. In the event that Counterparty provides a letter of
credit or guarantee in accordance with this provision, such document shall
constitute a Credit Support Document with respect to Counterparty for the
purposes of this Agreement and the issuer of the letter of credit or the
guarantor under the guarantee shall constitute a Credit Support Provider with
respect to Counterparty for the purposes of this Agreement.
- Enron shall, within fifteen (15) Business Days of the Trade Date of the
first Transaction entered into between Enron and Counterparty under which Enron
is the Seller, deliver a guarantee of Enron Corp. substantially in the form
attached as Schedule
Cto the Enron Credit Derivatives General Terms and
Conditions (Version 1 - 1 February 2001) (the "GTCs") entered into
between Enron and Counterparty. Such guarantee shall constitute a Credit Support
Document with respect to Enron for the purposes of this Agreement and Enron
Corp. shall constitute a Credit Support Provider with respect to Counterparty
for the purposes of this Agreement.
(f) Limitation of Liability. NO PARTY SHALL BE REQUIRED
TO PAY SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL, CONSEQUENTIAL OR INDIRECT
DAMAGES (WHETHER OR NOT ARISING FROM A PARTY’S NEGLIGENCE) TO THE OTHER PARTY,
EXCEPT TO THE EXTENT THAT THE PAYMENTS REQUIRED TO BE MADE PURSUANT TO THIS
AGREEMENT IS DEEMED TO BE SUCH DAMAGES. IF AND TO THE EXTENT ANY PAYMENT MADE
PURSUANT TO THIS AGREEMENT IS DEEMED TO CONSTITUTE LIQUIDATED DAMAGES, THE
PARTIES ACKNOWLEDGE AND AGREE THAT DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
DETERMINE AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE APPROXIMATION OF THE
AMOUNT OF SUCH DAMAGES, AND NOT A PENALTY.
NOTWITHSTANDING THE FOREGOING AND FOR THE AVOIDANCE OF DOUBT
NOTHING IN THIS SUBSECTION SHALL AFFECT THE ENFORCEABILITY OF SECTION 6(E) OF
THIS AGREEMENT.
NOTHING IN THIS AGREEMENT SHALL HAVE THE EFFECT OF LIMITING OR
RESTRICTING EITHER PARTY’S LIABILITY ARISING AS A RESULT OF ITS FRAUD. ANY
LIMITATIONS OR RESTRICTIONS ON THE LIABILITY OF EITHER PARTY IN THIS SUB-SECTION
SHALL ONLY APPLY TO THE EXTENT PERMITTED BY APPLICABLE LAW.
(g) Set-off. Without affecting the provisions of this
Agreement requiring the calculation of certain net payment amounts, all payments
under this Agreement will be made without setoff or counterclaim; provided,
however, that upon the designation of an Early Termination Date as a result of
an Event of Default or Termination Event under Section 5(b)(iv) or Section
5(b)(v) of this Agreement and determination of the amount payable in accordance
with Section 6(e) of this Agreement, in addition to and not in limitation of any
other right or remedy (including any right to setoff, counterclaim, or otherwise
withhold payment) under applicable law:
the Non-defaulting party or non-Affected Party, as applicable,
("X") shall be entitled, at its option and in its discretion, to set-off
any sums or obligations (whether or not arising under this Agreement and whether
matured or unmatured) owed or due by the Defaulting Party or Affected Party, as
applicable, ("Y") to X, or an Affiliate of X against any sums or
obligations (whether or not arising under this Agreement and whether matured or
unmatured) owed or due by X to Y (the "Original Obligations") (in each
case such amounts calculated after the deduction of any tax withholding). For
this purpose, X may convert one currency into another. Any such setoff shall
reduce the Original Obligations to the extent so set-off. Any such set off will
not create any lien, charge, encumbrance, or security interest in favour of any
party hereunder. This Section shall be without prejudice and in addition to any
right of set-off, combination of accounts, lien or other right to which any
party is at any time otherwise entitled (whether by operation of law, contract
or otherwise).
(h) Transfers. This Agreement and each Transaction
entered into hereunder shall be binding upon and inure for the benefit of the
parties and their respective successors and permitted assigns. Subject to the
following provisions of this Section, neither party shall have the power to
assign or otherwise transfer (whether by security or otherwise) all or any of
its rights, interest or obligations under this Agreement or any Transaction
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed, and any purported assignment or transfer in
violation of this provision shall be void and of no force and effect. For the
avoidance of doubt, it shall not be unreasonable to withhold consent to a
proposed transfer or assignment if the non-transferring or non-assigning party
would (a) be required to gross-up its payments to the proposed transferee or
assignee or would be required to receive payments from the proposed transferee
or assignee net of any withholding or deduction that would not otherwise be
required under this Agreement or under applicable law in the absence of the
proposed assignment or transfer; (b) if the creditworthiness of the proposed
transferee (taking into account credit enhancements) is materially weaker than
that of the party proposing the transfer; or (c) the non-transferring party’s
collective exposure in respect of all Transactions entered into under this
Agreement will, or may, substantially increase as a result of the proposed
transfer (e.g. due to the loss of the benefits of netting).
Enron may, without the consent of Counterparty, (i) assign
and/or transfer the whole or any part of its rights or obligations under any
Transaction(s) or this Agreement to one or more Affiliates and (ii) assign
and/or transfer the whole or any part of its rights or obligations under any
Transaction(s) and this Agreement to any person in connection with a financing
transaction (including, without limitation, any monetisation, securitisation or
sub-participation of Enron’s rights and/or obligations under any or all of the
Transactions entered into pursuant to this Agreement).
(i) Taxes
A. Payor Representations
In connection with making all payments under this Agreement and
each Transaction, each party makes the following payor representation:
It is not required by any applicable law, as modified by the
practice of any Relevant Jurisdiction, to make any deduction or withholding for
or on account of any Tax from any payment (other than any interest payments
under this Agreement) to be made by it to the other party under this Agreement
and each Transaction. In making this representation, it may rely on the accuracy
of the Tax representations and covenants made by the other party.
For the purposes of this representation, "Relevant
Jurisdiction" means any jurisdiction (i) in which the party is incorporated,
organised, managed and controlled, or is considered to have a seat, (ii) where a
branch or office through which the party is acting for the purposes of the
relevant Transaction is located, (iii) in which the party executes the relevant
Transaction, or (iv) from or through which a payment is made hereunder.
B. Payee Representations
In connection with receiving all payments under this Agreement
and each Transaction, Counterparty makes the following payee
representations:
It is fully eligible for the benefits of the "Business Profits"
or "Industrial and Commercial Profits" provision, as the case may be, the
"Interest" provision or the "Other Income" provision (if any) of the
Counterparty Residence Treaty (if any) with respect to any payment described in
such provisions and received or to be received by it in connection with this
Agreement and each Transaction, and (unless the Counterparty Branch Jurisdiction
(if any) or the Counterparty Residence Jurisdiction is the United Kingdom) no
such payment is attributable to a trade or business carried on by it through a
permanent establishment in the United Kingdom.
In connection with receiving all payments under this Agreement
and each Transaction, Enron makes the following payee representations:
It is fully eligible for the benefits of the "Business Profits"
or "Industrial and Commercial Profits" provision, as the case may be, the
"Interest’ provision or the "Other Income" provision (if any) of the
Counterparty Residence Treaty (if any) with respect to any payment described in
such provisions and received or to be received by it in connection with this
Agreement and each Transaction, and (unless the Counterparty Residence
Jurisdiction is the United Kingdom) no such payment is attributable to a trade
or business carried on by it through a permanent establishment in the
Counterparty Residence Jurisdiction.
"Counterparty Residence Treaty" means the income tax
treaty between the United Kingdom and the Counterparty Residence Jurisdiction
provided that, where there is no such treaty, there shall be no Counterparty
Residence Treaty.
"Counterparty Residence Jurisdiction" means the
jurisdiction in which the Counterparty Office is located.
"Counterparty Office" means (a) in respect of payments
under a Transaction, the office specified as such on the Website and/or in the
applicable Confirmation, and recorded in Enron’s electronic records in respect
of such Transaction and (b) in respect of all other payments made under this
Agreement, the Head Office of Counterparty.
"Head Office of Counterparty" means the office
specified as such on the Website and/or recorded in Enron’s electronic
records.
C. Withholding Tax Exemption Form
Upon request, each party shall provide the other with (or, if a
party has assigned its rights under this Agreement or any Transaction, procure
the provision of) a properly completed and executed exemption form, certificate
or other document that will allow the other party to make any payment hereunder
without deduction or withholding for Tax, including, but not limited to, the
United States Internal Revenue Service Form W-8, 1001 and/or 4224 and
appropriate successor forms thereto.
(j) Delivery of Documents - Corporate Capacity and Signatory
Authority. Upon execution of the GTCs, and if a Confirmation so requires
Each party shall deliver to the other party a certificate or other documents
evidencing its corporate capacity to enter into this Agreement (including the
GTCs), and Transactions hereunder, and the authority of the person(s) executing
this Agreement (including the GTCs). Such documents shall be subject to the
representation made under Section 3(d) of this Agreement. "
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