Message-ID: <2919591.1075840834015.JavaMail.evans@thyme>
Date: Wed, 19 Dec 2001 12:59:59 -0800 (PST)
From: s..muller@enron.com
To: louise.kitchen@enron.com, legal <.schuler@enron.com>
Subject: FW: Reps/Warranties
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X-From: Muller, Mark S. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=MMULLER>
X-To: Kitchen, Louise </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Lkitchen>, Schuler, Lance (Legal) </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Lschule>
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as we discussed this is  the proposed solution...i may need you to speak to=
 someone at umbrella..call lance if you have a question

 -----Original Message-----
From: =09Schuler, Lance (Legal) =20
Sent:=09Wednesday, December 19, 2001 1:23 PM
To:=09Muller, Mark S.; Detmering, Tim
Cc:=09Golden, Jeff; Daniels, Eddy; Koehler, Anne C.; Cook, Mary
Subject:=09Reps/Warranties

As we have discussed, we are not in a position to commit to convey all prop=
erties, assets, rights, etc. that are used in Enron's current business of t=
rading physical and financial natural gas and electricity and associated ri=
sk management products.  As the document is currently drafted, all items go=
, unless specifically excluded.  The danger to the estate is that, because =
the catch-all phrase is so broad, we know now that many items will not be i=
dentified, and then cannot be recovered.  The sellers will continue their b=
usiness, subject to the negotiated noncompete; however, most everything cou=
ld be deemed to be "used" in the business.  The requested reps/warranties a=
pply not just to the assets they are to receive, but to the business stated=
 above.  So they are, for example, demanding that we identify and list ever=
y employment and consulting agreement pursuant to which someone is performi=
ng services in the operation of the Business, and each contract with a term=
 of one year or more that has been made in connection with the Business, un=
less relating solely to identified excluded assets.  These constructs would=
 pick up literally thousands of other contracts - even confidentiality agre=
ements for example.

We propose the following solution:
1.  We have prepared a schedule of specific assets that should be transferr=
ed to Netco.
2.  We would give a sufficiency rep to assure the Buyer that the listed ass=
ets are all the material assets necessary for Netco to operate a business s=
imilar to the Business referenced above. We have communicated to the potent=
ial buyer that Netco would need to attain certain assets, and these would b=
e identified in writing in the rep.  For example, certain third-party licen=
ses, and some hardware items.
3.  The rep would have to be tailored to exclude certain items such as offi=
ce space.
4.  We would give negotiated reps on the specified Assets, and in limited, =
appropriate circumstances on the Business.  Other than the asset list, we w=
ould not list all of any specified requirement, but only necessary exceptio=
ns to the reps, as negotiated.
5.  We would give a broad "further assurance" covenant to provide, without =
further cost to Netco but subject to any required consents, anything that i=
s later identified as being appropriate for their conducting the business.
6.  We view this as an MBO type transaction involving the sale of assets, w=
hereby the people going to Netco know the underlying business best, and can=
 identify specifically the assets that should go, both for the contract to =
begin with, but also in a very short period of time post-closing (by using =
the further assurance clause).



W. Lance Schuler
Enron North America Corp.
1400 Smith Street
Houston, Texas  77002
Phone: 713/853-5419
Fax:  281/664-4890
Email:  lance.schuler-legal@enron.com