RE: Canadian Retail

Is signing a unanimous consent in Houston an issue? Mark

Stephen H Douglas/ENRON@enronXgate
05/01/2001 05:08 PM

To: Peter Keohane/CAL/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT
cc: Vicki Sharp/HOU/EES@EES
Subject: RE: Canadian Retail

Mark Powell's recollection of the reasoning behind having an all-Canadian
officer and director slate is correct and we generally like to isolate all of
the business decision makers of a foreign subsidiary in the country where the
subsidiary is incorporated. The concern is that having officers and
directors located outside of the country of incorporation of the subsidiary
could provide a basis for a country other than the one where the subsidiary
is incorporated to assert taxing jurisdiction (the PE issue). That said, I
appreciate the control concern and so long as the authority of the
non-Canadian Director is never exercised outside of Canada (of course, this
presents a proof issue) having a non-Canadian Director is permissible (from a
tax perspective, that is). Let me know whether such a restriction would be
compatible with the expressed control concern. Steve. (x30938)

-----Original Message-----
From: Keohane, Peter
Sent: Tuesday, May 01, 2001 12:08 PM
To: Haedicke, Mark
Cc: Douglas, Stephen H.; Sharp, Vicki
Subject: Re: Canadian Retail

I don't think there is a bright line, so that should not be a problem per
se. The idea was to make it as "Canadian" as possible for tax purposes. I
would of course defer to Steve.

From: Mark E Haedicke on 05/01/2001 11:15 AM CDT
To: Peter Keohane/CAL/ECT@ECT, Stephen H Douglas/Enron@EnronXGate
cc: Vicki Sharp/HOU/EES@EES
Subject: Canadian Retail

Steve and Peter: From a control point of view, we should have at least one
director based in Houston. Does that present any significant tax risk? Let
us know. Mark Haedicke
----- Forwarded by Mark E Haedicke/HOU/ECT on 05/01/2001 11:11 AM -----

Mark Powell 05/01/2001 10:24 AM To: David W Delainey/HOU/EES@EES, Rob
Milnthorp/CAL/ECT@ECT, James Derrick/Enron@EnronXGate, Mark E
Haedicke/HOU/ECT@ECT, Vicki Sharp/HOU/EES@EES, Peter Keohane/CAL/ECT@ECT cc:
Beth Apke/HOU/EES@EES, Morris Richard Clark/Enron@EnronXGate, Andrew
Wu/HOU/EES@EES Subject: Canadian Retail

A. Corporate Structure - To facilitate the meshing of EES' existing Canadian
affiliate (Enron Energy Services Canada Co. Ltd. ("EES Canada")) and Enron
Canada Corp.'s mass market retail venture (Enron Direct Limited Partnership
("Enron Direct Canada")), I propose a simple corporate structure as follows:

Enron Direct Canada's business will be set up as a subsidiary of EES Canada.
This will involve:
a. a general conveyance of the assets of Enron Direct Canada to its general
partner, Enron Direct Canada Corp.;
b. the sale of the shares of Enron Direct Canada Corp. from Enron Canada
Corp. to EES Canada; and
c. a services agreement whereby Enron Canada Corp. provides key services to
Enron Direct Canada.

By setting up Enron Direct Canada as a distinct subsidiary of EES Canada,
both entities will continue to operate as they do today.

As such, (i) Enron Direct Canada will continue to be operated by the staff
currently in place in Calgary, but within the EES corporate structure, and
(ii) EES Canada's existing business will continue to be operated as it is
currently.

B. Governance - I understand from Peter that a few years back, it was
decided, for corporate law and, more importantly, tax-related "permanent
establishment" issues, that all directors and officers of Enron Canada Corp.
would be Canadian-resident employees of Enron Canada Corp. Accordingly,
Enron Canada Corp. was re-organized with a nominee board of directors now
consisting of Rob (as the senior Canadian commercial employee) and Peter (as
the senior Canadian legal employee) with officers being the Vice-Presidents
or Managing Directors in Canada responsible for the various commercial or
commercial-support groups.

Following this model, Rob Milnthorp and an employee from the legal department
would appear to be the appropriate directors of the EES' Canadian
subsidiaries. In the short term, the Iegal employee/designee would be me;
however, the new lawyer hired to work for Enron Direct Canada would assume
the role.

With respect to the officers, no changes are required with respect to Enron
Direct Canada. With respect to EES Canada, I propose that Rob be appointed
as the Chairman, President and CEO and I be appointed as Secretary for the
interim.

Unless I hear otherwise, I will proceed on the basis of these proposals.

Regards,

Mark Powell