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EXHIBIT 10.23
COST SHARING AGREEMENT
ENRON CORP. TRADEMARKS
THIS COST SHARING AGREEMENT ("Agreement") is made and entered into
between Enron Corp. ("Enron"), an Oregon corporation having its principal place
of business in Houston, Texas and the entities (collectively, the "Subsidiaries"
and individually, a "Subsidiary")) listed on the signature page of this
Agreement (together, Enron and the Subsidiaries shall be referred to hereinafter
as the "Participants"), to be effective the first day of January, 1999.
WHEREAS, Enron and the Subsidiaries constitute an integrated natural
gas and electricity company that produces electricity and natural gas, develops,
constructs and operates energy and water facilities worldwide and delivers
physical commodities and risk management and financial services to customers
around the world; and
WHEREAS, Enron and the Subsidiaries conduct their operations under
corporate names that include the name ENRON, and utilize logos and other
trademarks and service marks which either include or are associated with the
name and xxxx ENRON that are listed on Schedule A to this Agreement (All of the
names and marks which either include or are associated with the name and xxxx
ENRON are cumulatively referred to herein as the "Trademarks"); and
WHEREAS, Enron is the legal owner of the Trademarks; and
WHEREAS, Enron has granted to each of the Subsidiaries a non-exclusive,
non- transferable license to use some or all of the Trademarks in such
Subsidiary's respective area of interest and Territory (each such agreement
being referred to herein as the "Licenses" and the term "Territory" herein
having the same meaning as in each License); and
WHEREAS, pursuant to the terms of the Licenses, each
Subsidiary-Licensee agrees to undertake certain obligations with respect to use
of the Trademarks licensed to it, including assumption of certain financial
obligations, in consideration for the grant of the license to use the
Trademarks; and
WHEREAS, the Participants wish to enter into an agreement to share
certain costs and risks of developing, enhancing, maintaining and defending the
licensed Trademarks in their areas of interest and Territories, all as set forth
more specifically below (hereinafter, the "Cost Sharing Arrangement"); an
WHEREAS, the Participants intend for this Agreement to constitute a
"qualified cost sharing arrangement" within the meaning of U.S. Treas.
Reg. Section 1.482-7 as well as under applicable OECD guidelines.
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NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, the receipt and sufficiency of such consideration
being hereby acknowledged, Enron and the Subsidiaries do hereby agree as
follows:
1. AGREEMENT TO SHARE COSTS
1.1 Subject to the terms and conditions set forth herein, and to the
extent that the Participants may lawfully do so, the Participants hereby agree
to share the General Benefit Trademark Costs, ad defined in section 1.3, in the
Cost Shares determined in accordance with section 1.4 below, [AND TO MAKE THE
BUY-IN AND BUY-OUT PAYMENTS DESCRIBED IN ARTICLE 2.]
1.2 Trademark Costs
(a) For purposes of this Agreement, the term Trademark Costs means
costs incurred to develop, maintain, enhance, promote, or
defend the licensed Trademarks. For purposes of illustration
but not limitation, Trademark Costs may include the cost of
developing advertising content, publishing, broadcasting or
displaying advertising, agency fees, cost of developing or
producing print materials, brochures, promotional materials,
signs and logos, costs of registration, prosecution or defense
of claims of infringement or ownership.
(b) Trademark Costs shall include, but are not limited to, the
following items:
(i) Operating Expenses. All expenses directly related to
the Trademarks not included in cost of goods sold
except for interest expense, foreign income taxes (as
defined in U.S. Treas. Reg. Section 1.901-2(a),
domestic income taxes, depreciation or amortization
expense; plus
(ii) Leased Property. A reasonable charge for the use of
any tangible property made available to the Cost
Sharing Arrangement. If any such property is
furnished by an entity under common ownership or
control with a Participant within the meaning of
IRC Section 482, then the charge for the use of such
tangible property shall be an arm's- length amount as
determined under U.S. Treas. Reg. Section 1.482-2(c).
(c) Trademark Costs shall be considered "intangible development
costs" within the meaning of U.S. Treas. Reg. Section
1.482-7(d)(l).
1.3 Specific Benefit versus General Benefit Trademark costs.
(a) Specific Benefit Trademark Expenses. Trademark Costs that
primarily benefit particular Participants and that produce
only incidental or ancillary benefit to other Participants
constitutes Specific Benefit Trademark Costs.
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The Participants that are likely to receive the primary
benefit of Specific Benefit Trademark Costs shall bear the
full amount of such costs.
(b) General Benefit Trademark Expense. All Trademark Costs other
than Specified Benefit Trademark Costs constitute General
Benefit Trademark Costs. Such costs shall be shared by the
Participants as provided in section l.4 of this Agreement.
1.4 Determination of Cost Shares.
(a) In general. The Share of the General Benefit Trademark
Costs to be paid by each Subsidiary for any taxable year (a
"Subsidiary Share") shall equal the total General Benefit
Trademark Costs multiplied by a fraction, the numerator of
which shall be projected Subsidiary Earnings Before Interest
and Tax ("EBIT"), computed in accordance with generally
accepted accounting principles ("GAAP"), as set forth in the
annual operating budget and the denominator of which shall be
projected total Worldwide EBIT of Enron and affiliates,
computed in accordance with GAAP, as set forth in such budget.
For purposes of this Agreement, the term Subsidiary EBIT shall
mean, in the case of each Subsidiary that is a Participant,
the total EBIT of such Subsidiary in its Territory for the
taxable year. Negative EBIT of any Participant shall be
treated as zero EBIT, except that if Enron's total Worldwide
EBIT is zero, the fractions described in this paragraph shall
be computed by substituting the word "Revenue" for the word
"EBIT". The Share of the General Benefit Trademark Costs to be
paid by Enron and any of its affiliates (other than the
Subsidiaries) for any taxable year (the "Enron Share") shall
equal total General Benefit Trademark Costs minus the total of
all Subsidiary Shares.
(b) Periodic Adjustment. Notwithstanding anything to the
contrary provided in section 1.4(a) hereof, the Participants
shall evaluate the Cost Shares, no less frequently than
annually, to determine whether the General Benefit Trademark
Costs are shared in a manner that is proportionate to the
benefits reasonably anticipated to be derived by each
participant from the Agreement, taking into account changes in
economic conditions, the business operations and practices of
the Participants, the terms of each License, and the ongoing
development of the licensed Trademarks. If the Participants
determine that the General Benefit Trademark Costs are shared
in a manner that is not likely to reflect the relative
benefits reasonably expected to be received by each, then the
Participants shall make adjustments to the Cost Shares, on a
prospective basis, or terminate the Agreement in accordance
with Article 4 hereof, as appropriate.
(c) Further Cost Sharing by Participant. Nothing in this
Agreement shall prevent any Participant from charging any
affiliate a share of such
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Participant's Cost Share based on the benefits such affiliate
may reasonably expect to derive from use of the licensed
Trademarks.
(d) Time and Method of Payment. Enron shall charge each
Subsidiary annually for its annual Cost Share determined in
accordance with this section 1.4. The Subsidiaries shall pay
such invoiced amount to Enron by any reasonable means
including, without limitation, wire transfer, offset of
intercompany account, or by furnishing evidence of a
Subsidiary's having directly paid for authorized General
Benefit Trademark Costs. All invoices from and payments to
Enron under this Agreement shall be in U.S. dollars unless
otherwise agreed. Except at otherwise agreed by the
Participants, all payments made pursuant to this Agreement
shall be net of any federal, state or local tax, levy, duty,
impost, withholding or similar assessment of any kind. Amounts
not paid within 90 days shall bear interest at [LIBOR OR] the
Applicable Federal rate as defined in IRC Section 1274(d),
whichever is greater.
(e) Accounting. Enron shall maintain adequate books and
records to establish, with reasonable completeness and detail,
the nature and amount of each General Benefit Trademark Cost.
Enron shall afford the Subsidiaries reasonable access to
inspect, verify, copy and audit such records for any
legitimate purpose. Nothing in this subparagraph shall be
construed to create rights in any third party. Any
disagreement shall be resolved by [members of senior
management for the affected Participants].
2. BUY-IN AND BUY-OUT
2.1 Buy-In.
(a) In General. If any Participant ("Buy-in Transferor") makes
available to any other Participant ("Buy-in Transferee") the
ownership or use of any trademark created or acquired outside
the scope of this Agreement in which it has an interest
("Non-Cost Shared Xxxx"), then the Transferee shall pay to the
Transferor a Buy-In Payment. The Buy-In Payment, if any, shall
be equal to the arm's-length price for the applicable rights
in the applicable Territory in the Non-Cost Shared Xxxx
determined under the rules of U.S. Texas Reg. Section 1.482-1
and Section 1.482-4 through Section 1.482.6.
(b) Payment Mechanics. The Buy-In Payment shall be made on the
same terms as are set forth in the applicable License.
2.2 Buy-Out.
(a) In General. If a Participant "("Buy-Out Transferor")
transfers, abandons or relinquishes an interest in any
licensed Trademark in favor of any other Participant ("Buy-Out
Transferee"), then each Buy-Out Transferee shall
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make a Buy-Out Payment to the Transferor. The Buy-Out Payment,
if any, shall be equal to the arm's-length price for the
transferred rights in the Trademark determined under the rules
of Treas. Reg. Section 1.482-1 and Section 1.482-4 through
Section 1.482.6.
(b) Payment Mechanics. The Buy-Out Payment shall be made on such
terms as the Buy-Out Transferor and the Buy-Out Transferee
agree including cross licenses, lump sum, installment or
royalty payments.
3. USE OF TRADEMARKS
3.1 Each Subsidiary's rights with respect to the Trademarks shall be
governed by the License to which Enron and such Subsidiary are parties. Nothing
in this Agreement shall be deemed to affect such rights.
4. TERM AND TERMINATION
4.1 This Agreement shall become effective on the effective date hereof
and shall remain in full force and effect for one (1) year thereafter, unless
earlier terminated in accordance with Section 4.2 hereof; provided, however,
this Agreement shall be renewed for additional terms of one (1) year each unless
the Participants mutually agree in writing at least thirty (30) days prior to
the expiration of the initial or any renewal term hereof, to allow the term of
this Agreement to expire on the date of the expiration of the then current term.
Any renewal term of this Agreement shall also be subject to early termination
from any Event of Default as set forth in Section 4.2 hereof.
4.2 Events of Default. Notwithstanding any other right of termination
to which a Participant may be entitled pursuant to this Agreement or an
applicable License, upon the occurrence of one or more of the following Events
of Default, the Participant hereto not in default shall have the right to
terminate this Agreement as it applies to such defaulting Participant, in
writing, effective immediately upon the occurrence of the event indicated or the
running of any prescribed period:
(a) If a Subsidiary fails to pay any amount payable to Enron
hereunder when due and such default continues for more than
fifteen (15) days after dispatch of notice thereof to such
Subsidiary;
(b) If a Participant materially breaches any of the terms of this
Agreement or the License and does not cure such breach to the
satisfaction of the other party hereto within fifteen (15)
days after notice of the same;
(c) If a Participant makes application for relief as a debtor
under any bankruptcy or similar act, is involuntarily placed
in bankruptcy and does not within one hundred and twenty (120)
days thereafter have the bankruptcy proceeding dismissed, it
is adjudicated bankrupt or insolvent, or enters into a
composition with its creditors;
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(d) If a Participant pledges or encumbers any of its rights or
interests granted under this Agreement to any creditor or
other third party without the consent of Enron or assigns any
of its rights under this Agreement except as specifically
authorized hereunder; or
(e) If a Participant during the term of this Agreement (i)
dissolves, voluntarily liquidates or winds up its business,
(ii) merges or consolidates with or into any corporation or
corporations other than Enron or Enron's wholly-owned
subsidiaries or affiliates, (iii) otherwise directly or
indirectly sells or disposes of all or substantially all of
its business or assets, or (iv) effects and reorganization or
debt restructuring without the permission of Enron.
4.3. Upon the expiration of this Agreement, all rights and
privileges granted to Participants under this Agreement shall immediately
terminate. Upon termination of this Agreement as it applies to a particular
Participant (other than on expiration), all rights and privileges granted
to such Participant under this Agreement shall immediately terminate.
Termination or expiration of this Agreement shall not release any
Participant from any continuing or accrued obligations imposed by this
Agreement, e.g., continuing obligations relating to the treatment of
confidential or proprietary information.
5. MISCELLANEOUS
5.1 The validity, construction and performance of this Agreement shall
be governed by and construed in accordance with the laws of the State of Texas
and the United States in all respects.
5.2 The waiver, express or implied, by any Participant of any right
arising hereunder or of any failure to perform or breach hereof by another
Participant hereto shall not constitute or be deemed a waiver of any other right
hereunder or of any other failure to perform or breach hereof by such other
Participant, whether of a similar or dissimilar nature thereto.
5.3 This Agreement may be amended at any time by mutual agreement of
the Participants.
5.4 A Participant shall not be liable to another Participant for any
loss, injury, delay, damages, or other casualty suffered or incurred by the
latter due to strikes, riots, storms, fires, explosions, acts of God, war,
action of any government or any other cause similar thereto which is beyond the
reasonable control of the former, and any failure or delay by either party
hereto in performance of any of its obligations under this Agreement due to one
or more of the foregoing causes shall not be considered a breach of this
Agreement.
5.5 Except as otherwise provided in this Agreement all notices required
or permitted to be given hereunder shall be in writing and shall be valid and
sufficient if
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dispatched by registered mail or airmail (where appropriate),
postage prepaid, in any post office in the United States of America or in such
Subsidiary's respective Territory, as the case may be, or by facsimile (if
confirmed by registered mail or airmail (where appropriate), postage prepaid),
as follows:
If to Licensor: Enron Corp
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to a Subsidiary: See Signature Page
Any Participant may change its address by a written notice to the other
Participants in the manner set forth above. Notices given as herein provided
shall be considered to have been given ten (10) days after the mailing thereof
or if by facsimile, on the next business day of the receiver form the date sent.
5.6 This Agreement embodies the entire agreement of the Participants
with respect to the subject matter hereof and supersedes and cancels any and all
prior understandings or agreements, verbal or otherwise, in relation hereto,
which may exist between the Participants. No oral explanation or oral
information by either of the Participants hereto shall alter the meaning or
interpretation of this Agreement. No amendment or change hereof or addition
hereto shall be effective or binding on either of the Participants hereto unless
reduced to writing and executed by the respective duly authorized
representatives of each of the Participants hereto.
5.7 This Agreement may be executed in one or more counterparts, each of
which shall be considered an original, but all of which together shall
constitute one the same instrument.
IN WITNESS WHEREOF, the Participants hereto have executed this
agreement by and through their respective duly authorized representatives to be
effective as of the 1st day of January, 1999.
ENRON CORP. AND CONSOLIDATED U.S. SUBSIDIARIES
By: /s/ XXXXXXX X. XXXXXX
---------------------------------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President, Chief Accounting, Information
and Administrative Officer
Executed this 8th day of June, 1999
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SUBSIDIARIES PARTICIPATING IN COST SHARING AGREEMENT
AZURIX CORP.
By: /s/ XXXXXX X. XXXXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Director
Executed this 9th day of June, 1999
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SCHEDULE A
TRADEMARKS AND TRADEMARK APPLICATIONS
EXHIBIT A TO TRADEMARK COST SHARING AGREEMENT
BETWEEN ENRON AND SUBSIDIARIES
