Exhibit D(2)
TAX MATTERS AGREEMENT
AMONG
ENRON CORP.,
AND
PRISMA ENERGY INTERNATIONAL INC.
WITH
THE DISPUTED CLAIMS RESERVE,
as an intended Third Party Beneficiary
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................1
ARTICLE II PREPARATION AND FILING OF RETURNS................................3
2.1. Consent to File..................................................3
2.2. Cooperation......................................................4
2.3. Standard of Care; Limited Warranty...............................4
ARTICLE III CERTAIN DIVIDENDS...............................................5
3.1. Obligation to Make Dividends.....................................5
ARTICLE IV MISCELLANEOUS....................................................6
4.1. Term of this Agreement...........................................6
4.2. Assignability....................................................6
4.3. Disputed Claims Reserve as Third Party Beneficiary; No Other
Third Party Beneficiaries........................................6
4.4. Additional Cooperation...........................................7
4.5. Binding Effect...................................................7
4.6. Governing Law....................................................7
4.7. Submission to Jurisdiction; Consent to Service of Process........8
4.8. Waiver of Jury Trial.............................................8
4.9. Counterparts.....................................................9
TAX MATTERS AGREEMENT
THIS TAX MATTERS AGREEMENT ("Agreement") is made and entered into this 31st
day of August, 2004, to be effective as set forth in Section 4.1 of this
Agreement, among Enron Corp. ("Enron") and Prisma Energy International Inc.
("Prisma"). Enron and Prisma may be collectively referred to hereinafter as the
"Parties" and individually as a "Party." The Disputed Claims Reserve shall be an
intended third party beneficiary of this Agreement.
PREAMBLE
WHEREAS, Enron is the "common parent" corporation of an "affiliated group"
of corporations (as such terms are used in section 1504(a) of the Code); and
WHEREAS, Enron, certain Enron affiliates, and Prisma have executed that
certain Contribution and Separation Agreement, dated August 31, 2004, pursuant
to which Enron will contribute certain equity interests in certain affiliated
and associated companies to Prisma in exchange for shares in Prisma (the
"Contribution and Separation Agreement"); and
WHEREAS, the Parties to this Agreement wish to confirm in writing their
understanding as to certain matters and procedures pertaining to U.S. federal
income tax.
NOW, THEREFORE, the Parties to this Agreement, for good and valuable
consideration, agree as follows:
ARTICLE I
DEFINITIONS
In addition to any defined terms which may have their meanings ascribed to
them elsewhere in this Agreement, the following defined terms shall have the
following meanings:
"Action" shall have the meaning given it in the Contribution and
Separation Agreement.
"Applicable Law" shall have the meaning given it in the Contribution
and Separation Agreement.
"Bankruptcy Cases" shall have the meaning given it in the Contribution
and Separation Agreement.
"Bankruptcy Court" shall have the meaning given it in the Contribution
and Separation Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal tax laws. Reference to the
Code also includes any applicable and corresponding provisions of the Treasury
Regulations.
"Consolidated Return(s)" means the consolidated U.S. federal income
tax return of the Enron Consolidated Group for each taxable year as filed or to
be filed by Enron on behalf of the Enron Consolidated Group.
"Disputed Claims Reserve" means the reserve and escrow created by the
Disbursing Agent pursuant to Section 21.3(a) of the Plan to hold Cash, Plan
Securities, Operating Trust Interests, Remaining Asset Trust Interests,
Litigation Trust Interests and Special Litigation Trust Interests for the
benefit of holders of Disputed Claims (as such terms are defined in the Plan).
"Enron Consolidated Group" means the "affiliated group" of
corporations of which Enron is the "common parent corporation" and the Enron
Subsidiaries that are "includible corporations," as such terms are defined in
Code section 1504(a)(1).
"Enron Subsidiary" means any entity in which Enron owns a direct or
indirect interest, other than Prisma or a Prisma Subsidiary.
"IRS" means the Internal Revenue Service.
"Non-consolidated Return" means any U.S. Corporation Income Tax Return
on IRS Form 1120, and all required accompanying schedules and statements,
required to be prepared and filed by Enron on behalf of an entity controlled by
Enron other than the Enron Consolidated Return.
"Order" shall have the meaning given it in the Contribution and
Separation Agreement.
"Partnership Return" means any U.S. Return of Partnership Income on
IRS Form 1065, and all required accompanying schedules and statements, required
to be prepared and filed by Enron on behalf of an entity controlled by Enron.
"Plan" shall mean the Joint Plan of Affiliated Debtors pursuant to
Chapter 11 of the U.S. Bankruptcy Code for Enron Corp., as proposed by Enron,
including, without limitation, the exhibits and schedules attached thereto, as
the same may be modified and supplemented from time to time.
"Prisma Subsidiary" means any entity in which Prisma at any time owns
a direct or indirect interest.
"Returns" means, individually and in the aggregate, Consolidated
Returns, Non-consolidated Returns, Partnership Returns and any other filings
required by the
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Code or Treasury Regulations relating to Enron's or Enron Subsidiary's direct or
indirect ownership of stock in Prisma and the Prisma Subsidiaries.
"Tax Records" shall have the meaning given in Section 9.1 of the
Contribution and Separation Agreement.
"Treasury Regulations" mean the U.S. federal income tax regulations
issued as the U.S. Treasury Department's official interpretation of the Code.
The term shall include proposed regulations. temporary regulations and final
regulations.
ARTICLE II
PREPARATION AND FILING OF RETURNS
2.1. Consent to File.
(a) Enron and Prisma agree that Enron shall prepare and file all
required Returns that Enron or an Enron Subsidiary is legally obligated to file
and which relate to Prisma and/or the Prisma Subsidiaries. Enron shall prepare
and file such applications for extension of time to file such Returns as maybe
reasonably necessary in order to meet Enron's obligations hereunder and the
Code. Prisma agrees to furnish, and to use reasonable efforts to cause each
Prisma Subsidiary to furnish, to Enron all information as Enron may from time to
time reasonably request that is necessary to allow Enron to file all required
Returns. Prisma agrees to execute, and to use reasonable efforts to cause each
Prisma Subsidiary to execute, all election forms and other documents which may
be necessary or appropriate to evidence such elections or otherwise as Enron may
from time to time request.
(b) Enron and Prisma agree that Enron shall be authorized to and
shall undertake those actions which are reasonably necessary in connection with
fulfilling Enron's obligations under section 2.1 (a) with respect to preparing
and filing Returns, including, without limitation:
(i) taking any and all action necessary or incidental to
the preparation and filing of Returns;
(ii) making elections and adopting accounting methods;
(iii) filing all extensions of time, including extensions of
time for payment of tax under section 6161 and other sections of the Code;
(iv) filing claims for refund or credit;
(v) giving waivers or bonds;
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(vi) managing audits and other administrative proceedings
conducted by the IRS or any other taxing authority;
(vii) executing closing agreements, settlement agreements,
offers in compromise, and all other documents;
(viii) obtaining private letter rulings or technical advice
memoranda; and
(ix) contesting (both administratively and judicially) the
proposal of adjustments to tax liability and the assessment of any
deficiency.
It is intended that neither Prisma nor any Prisma Subsidiary shall have any
authority to act for or to represent themselves in any such matter to which this
paragraph relates.
2.2. Cooperation.
(a) Prisma agrees to cooperate and to cause each Prisma
Subsidiary to cooperate, with Enron in filing any Return or consent or taking
any other action contemplated by this Agreement and agree to take such action as
Enron may request in connection therewith.
(b) The authorization and obligations set forth in this Article
II shall survive the termination of this Agreement with respect to any tax year
(or portion thereof) ending on or prior to termination of this Agreement.
(c) Prisma shall cause each Prisma Subsidiary to permit Enron to
perform the acts that Enron is permitted or required to perform hereunder.
2.3. Standard of Care; Limited Warranty. Enron shall perform all
duties to be performed by Enron under this Agreement with a degree of skill,
diligence and prudence with which Enron and its personnel have performed such
services for the Enron Consolidated Group subsequent to December 2, 2001 and
prior to each Closing Date (as that term is defined in the Contribution and
Separation Agreement) and shall be of substantially equivalent quality. THE
PRECEDING IS THE ONLY WARRANTY CONCERNING THE DUTIES TO BE PERFORMED BY ENRON
UNDER THIS AGREEMENT AND ANY RESULTS, WORK PRODUCT OR PRODUCTS RELATED THERETO,
AND IS MADE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND REPRESENTATIONS
EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF FITNESS
FOR A PARTICULAR PURPOSE, OR MERCHANTABILITY.
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ARTICLE III
CERTAIN DIVIDENDS
3.1. Obligation to Make Dividends. Prisma shall be obligated to make
dividends, to the extent permitted by law, pro rata to all shareholders in such
aggregate amounts so that, on the first business day of the third month
following the close of each calendar year (each such date, a "Testing Date"):
(a) the cumulative amount of dividends from Prisma actually
received by Enron (after deduction of any withholdings for taxes or similar
charges) is not less than the sum of:
(i) the sum of the products, for each taxable year of Enron
that closed prior to the Testing Date and during any portion of which Enron
or any Enron affiliate owned Prisma shares, of
(A) the highest U.S. federal corporate income tax rate
in respect of such taxable year, times
(B) the sum of all amounts that, for U.S. federal income
tax purposes, are required to be included in the gross income of
Enron or any Enron Subsidiary in respect of such taxable year by
reason of the direct or indirect ownership of Prisma or Prisma
Subsidiary shares by Enron or an Enron Subsidiary (whether such
inclusion is attributable to a distributive share of partnership
income, an actual or deemed dividend, or otherwise), plus
(ii) the amounts of any interest, penalty, or addition to
tax incurred by Enron or any Enron Subsidiary to the extent that such
amounts result from incorrect, insufficient or untimely information
provided by Prisma, and
(b) the cumulative amount of dividends from Prisma actually
received by the Disputed Claims Reserve (after deduction of any withholdings for
taxes or similar charges) is not less than the sum of:
(i) the sum of the products, for each taxable year of the
Disputed Claims Reserve that closed prior to the Testing Date and during
any portion of which the Disputed Claims Reserve owned Prisma shares, of
(A) the highest U.S. federal corporate income tax rate
in respect of such taxable year, times
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(B) the sum of all amounts that, for U.S. federal income
tax purposes, are required to be included in the gross income of
the Disputed Claims Reserve in respect of such taxable year by
reason of the direct or indirect ownership of Prisma or Prisma
Subsidiary shares by the Disputed Claims Reserve (whether such
inclusion is attributable to a distributive share of partnership
income, an actual or deemed dividend, or otherwise), plus
(ii) the amounts of any interest, penalty, or addition to
tax incurred by the Disputed Claims Reserve to the extent that such
amounts result from incorrect, insufficient or untimely information
provided by Prisma.
For the avoidance of doubt, any dividends described hereunder shall be deemed
dividends of Prisma as such term is used in the Memorandum and Articles of
Association of Prisma.
ARTICLE IV
MISCELLANEOUS
4.1. Term of this Agreement.
(a) This Agreement shall become effective coincident with the
effectiveness of the Contribution and Separation Agreement as set forth therein.
(b) This Agreement shall terminate effective upon the date upon
which none of Enron, any Enron Subsidiary or the Disputed Claims Reserve owns
any direct or indirect ownership interest in Prisma or any Prisma Subsidiary.
(c) Notwithstanding subsection 4.1(b), this Agreement will
continue in effect with respect to any taxable period, or portion thereof,
ending on or before the termination of this Agreement. For the avoidance of
doubt, such continued effectiveness will include, without limitation, the
requirement to make dividends under Section 3.1 and the requirement to produce
records under Section 4.4.
4.2. Assignability. The rights and obligations under this Agreement of
the Parties, including any rights to dividends under Section 3.1 arising under
this Agreement, may not be assigned or otherwise transferred by a Party without
the prior written and unanimous consent of all other signatories to this
Agreement.
4.3. Disputed Claims Reserve as Third Party Beneficiary; No Other
Third Party Beneficiaries. The Disputed Claims Reserve is an intended, and the
only, third party beneficiary of this Agreement, with full rights of enforcement
with respect to all rights granted to it pursuant to the terms hereof. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Disputed Claims Reserve and the Parties any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of
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its provisions and conditions are for the sole and exclusive benefit of the
Disputed Claims Reserve and the Parties.
4.4. Additional Cooperation. Prisma shall make available and Prisma
shall cause all of its Subsidiaries to make available and shall use reasonable
efforts to cause non-controlled Subsidiaries to make available, to Enron and the
Disputed Claims Reserve all materials (including, without limitation, all books
and records, accounting information, financial statements, returns, supporting
schedules, work papers, correspondence, and other documents) relating to the
Returns filed for the taxable years during which this Agreement was in effect
during regular business hours for a period that is not less than the period
during which Prisma is required to retain Tax Records pursuant to the
Contribution and Separation Agreement.
4.5. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the Parties hereto; but
no assignment shall relieve any party's obligations hereunder without the
written consent of the other parties.
4.6. Governing Law. THIS AGREEMENT, THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT, AND ANY CLAIM OR CONTROVERSY DIRECTLY OR
INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER
THEORY), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL
IN ALL RESPECTS BE GOVERNED BY AND INTERPRETED, CONSTRUED, AND DETERMINED IN
ACCORDANCE WITH, THE APPLICABLE PROVISIONS OF THE U.S. BANKRUPTCY CODE AND THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY CONFLICTS OF LAW
PROVISION THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER
JURISDICTION).
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4.7. Submission to Jurisdiction; Consent to Service of Process.
(a) Without limiting any party's right to appeal any Order of the
Bankruptcy Court, (i) the Bankruptcy Court shall retain exclusive jurisdiction
to enforce the terms of this Agreement and to decide any claims or disputes
which may arise or result from, or be connected with, this Agreement, any breach
or default hereunder, or the transactions contemplated hereby, and (ii) any and
all Actions related to the foregoing shall be filed and maintained only in the
Bankruptcy Court, and the Parties hereby consent to and submit to the
jurisdiction and venue of the Bankruptcy Court and shall receive notices at such
locations as indicated in Section 10.11 of the Contribution and Separation
Agreement; provided, however, that if the Bankruptcy Cases have closed, the
parties agree to unconditionally and irrevocably submit to the exclusive
jurisdiction of the United States District Court for the Southern District of
Texas sitting in ▇▇▇▇▇▇ County or the Civil Trial Division of the District
Courts of the State of Texas sitting in ▇▇▇▇▇▇ County and any appellate court
from any thereof for the resolution of any such claim or dispute.
(b) The Parties hereby unconditionally and irrevocably waive, to
the fullest extent permitted by Applicable Law, any objection which they may now
or hereafter have to the laying of venue of any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby
brought in any court specified in paragraph (a) above, or any defense of
inconvenient forum for the maintenance of such dispute. Each of the Parties
agrees that a judgment in any such dispute maybe enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.
(c) Each of the Parties hereby consents to process being served
by any party to this Agreement in any suit, Action or proceeding by the mailing
of a copy thereof in accordance with the provisions of Section 10.11 of the
Contribution and Separation Agreement.
4.8. Waiver of Jury Trial. THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT THAT THEY MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN
ANY LEGAL PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON
CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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4.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
PRISMA ENERGY INTERNATIONAL INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Chairman
ENRON CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. Jr.
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. Jr.
Title: Executive Vice President, Chief
Financial Officer and Treasurer