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EXHIBIT 10.5
STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement") dated as of June __, 1999, but effective as set forth in Section 1
below, is between AZURIX CORP., a Delaware corporation ("Azurix"), and Atlantic
Water Trust, a Delaware business trust (the "Holder").
W I T N E S S E T H:
WHEREAS, the Holder is the owner of all the issued and outstanding
shares of common stock of Azurix (the "Common Stock");
WHEREAS, following the initial public offering referred to below, the
Common Stock will be registered under Section 12 of the Securities Exchange Act
of 0000 (xxx "Xxxxxxxx Xxx");
WHEREAS, under the provisions of the Securities Act of 1933 (the
"Securities Act") and the General Rules and Regulations promulgated by the
Securities and Exchange Commission (the "SEC") thereunder, the Holder is or may
be limited in the manner of selling the shares of Common Stock owned by the
Holder, absent registration under the Securities Act of the sale of such Common
Stock or the availability of another exemption from the registration
requirements of the Securities Act; and
WHEREAS, Azurix wishes to establish certain other restrictions on the
sale of Common Stock owned by the Holder, and Azurix and the Holder desire to
set forth certain registration rights as to such shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereby agree as follows:
1. Agreement Not to Sell or Transfer Restricted Stock For a
Period of Time. This Agreement shall become effective
commencing on the date of the closing of the initial public
offering of Common Stock pursuant to an effective registration
statement. The Holder agrees that it will not offer, sell,
contract to sell or otherwise dispose of any shares of Common
Stock or any security convertible into or exchangeable for
Common Stock except pursuant to a registration statement under
the Securities Act or an applicable exemption therefrom.
2. Demand Registration.
a. Request for Registration. As used in this Agreement,
"Restricted Stock" shall mean all shares of Common
Stock owned by the Holder on the effective date
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of this agreement, together with any securities
issued or issuable with respect to any such Common
Stock by way of stock dividend or stock split or in
connection with a combination of shares,
recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular
Restricted Stock, once issued such securities shall
cease to be Restricted Stock when (i) a registration
statement with respect to the sale of such
securities shall have become effective under the
Securities Act and such securities shall have been
disposed of in accordance with such registration
statement, (ii) such securities shall have been
distributed to the public pursuant to Rule 144 (or
any successor provision) under the Securities Act,
(iii) such securities shall have been otherwise
transferred, new certificates representing such
securities not bearing a legend restricting further
transfer shall have been delivered by Azurix and the
subsequent disposition of such securities shall not
require registration or qualification of such
securities under the Securities Act or any similar
state law then in force, (iv) such securities shall
have ceased to be outstanding or (v) the Holder or
Holders thereof and Azurix shall agree in writing
that such Restricted Stock shall no longer be
Restricted Stock. The Holder and any permitted
assignee of the Holder's rights and duties
hereunder, including Enron Corp., an Oregon
corporation ("Enron"), are referred to herein as the
"Holders." Subject to the conditions and limitations
set forth in Section 5 of this Agreement, at any
time after the limitation period referred to in
Section 1 hereof, the Holder or Holders of
Restricted Stock may make a written request for
registration under the Securities Act of all or part
of its or their Restricted Stock pursuant to this
Section 2 ("Demand Registration"), provided that the
number of shares of Restricted Stock proposed to be
sold shall have an aggregate offering price of at
least $25,000,000. Such request will specify the
aggregate number of shares of Restricted Stock
proposed to be sold and will also specify the
intended method of disposition thereof. Within ten
days after receipt of such request, Azurix will give
written notice of such registration request to all
other Holders of Restricted Stock and include in
such registration all Restricted Stock with respect
to which Azurix has received written requests for
inclusion therein within fifteen business days after
the receipt by the applicable Holder of Azurix's
notice. Each such request will also specify the
aggregate number of shares of Restricted Stock to be
registered and the intended method of disposition
thereof. No other party, including Azurix (but
excluding another Holder of Restricted Stock), shall
be permitted to offer securities under any such
Demand Registration unless the Holder or Holders
requesting the Demand Registration shall consent in
writing.
b. Priority on Demand Registrations. If the Holders of a
majority in number of shares of the Restricted Stock
to be registered in a Demand Registration so elect,
the offering of such Restricted Stock pursuant to
such Demand Registration shall be in the form of an
underwritten offering. In such event, if the managing
underwriter or underwriters of such offering advise
Azurix and the Holders in writing that in their
opinion the aggregate amount of
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Restricted Stock requested to be included in such
offering is so large that it will materially and
adversely affect the success of such offering or the
then prevailing price of the Common Stock, Azurix
will include in such registration the aggregate
number of shares of Restricted Stock which in the
opinion of such managing underwriter or underwriters
can be sold without any such material adverse effect,
and such number of shares shall be allocated pro rata
among the Holders of Restricted Stock on the basis of
the number of shares of Restricted Stock requested to
be included in such registration by their Holders. To
the extent shares of Restricted Stock so requested to
be registered are excluded from the offering, then
the Holders of such Restricted Stock shall have the
right to one additional Demand Registration under
this Section with respect to such Restricted Stock,
provided that the failure of such Restricted Stock to
be registered is through no fault of such Holder.
c. Selection of Underwriters and Counsel. If any Demand
Registration is in the form of an underwritten
offering, the Holders of a majority in number of
shares of Restricted Stock to be registered will
select and obtain the services of the investment
banker or investment bankers and manager or managers
that will administer the offering and the counsel to
such investment bankers and managers; provided that
such investment bankers, managers and counsel must be
approved by Azurix, which approval shall not be
unreasonably withheld.
3. Piggyback Registration. If Azurix proposes to file a
registration statement under the Securities Act with respect
to an offering for its own account of any class of its equity
securities (other than a registration statement on Form S-8
(or any successor form) or any other registration statement
relating solely to employee benefit plans or filed in
connection with an exchange offer, a transaction to which Rule
145 under the Securities Act applies or an offering of
securities solely to Azurix's existing stockholders), then
Azurix shall in each case give written notice of such proposed
filing to the Holders of Restricted Stock as soon as
practicable (but no later than five business days) before the
anticipated filing date, and such notice shall offer such
Holders the opportunity to register such number of shares of
Restricted Stock as each such Holder may request. Each Holder
of Restricted Stock desiring to have such Holder's Restricted
Stock included in such registration statement shall so advise
Azurix in writing within five business days after the date of
Azurix's notice, setting forth the amount of such Holder's
Restricted Stock for which registration is requested. If
Azurix's offering is to be an underwritten offering, Azurix
shall, subject to the further provisions of this Agreement,
use its reasonable efforts to cause the managing underwriter
or underwriters of a proposed underwritten offering to permit
the Holders of the Restricted Stock, requested to be included
in the registration for such offering, to include such
securities in such offering on the same terms and conditions
as any similar securities of Azurix included therein.
Moreover, if the registration of which Azurix gives notice
does involve an underwriting, the right of each Holder to
registration pursuant to this Section 3 shall, unless Azurix
otherwise assents, be conditioned upon such Holder's
participation as a seller in such
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underwriting and its execution of an underwriting agreement
with the managing underwriter or underwriters selected by
Azurix. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering deliver a written
opinion to the Holders of Restricted Stock that either because
of (A) the kind of securities which the Holders, Azurix and
any other person or entities intend to include in such
offering or (B) the size of the offering which the Holders,
Azurix and other persons intend to make, the success of the
offering or the then prevailing price of the Common Stock
would be materially and adversely affected by inclusion of the
Restricted Stock requested to be included, then (i) in the
event that the size of the offering is the basis of such
managing underwriter's opinion, the number of shares to be
offered for the accounts of Holders of Restricted Stock shall
be reduced pro rata or to the extent necessary to reduce the
total amount of securities to be included in such offering to
the amount recommended by such managing underwriter or
underwriters; provided that if securities are being offered
for the account of other persons or entities as well as
Azurix, such reduction shall not represent a greater fraction
of the number or kind of securities intended to be offered by
Holders of Restricted Stock than the fraction of similar
reductions imposed on such other persons or entities over the
amount of securities of such kind they intended to offer; and
(ii) in the event that the combination of securities to be
offered is the basis of such managing underwriter's opinion,
(x) the Restricted Stock to be included in such offering shall
be reduced as described in clause (i) above (subject to the
proviso in clause (i)) or, (y) if the actions described in
clause (x) would, in the judgment of the managing underwriter,
be insufficient to substantially eliminate the adverse effect
that inclusion of the Restricted Stock requested to be
included would have on such offering, such Restricted Stock
will be excluded from such offering. Any Restricted Stock
excluded from an underwriting shall be withdrawn from
registration and shall not, without the consent of Azurix and
the manager of the underwriting, be transferred in a public
distribution prior to the earlier of 90 days (or such other
shorter period of time as the manager of the underwriting may
require) after the effective date of the registration
statement or 150 days after the date the Holders of such
Restricted Stock are notified of such exclusion.
4. Registration Procedures. Whenever, pursuant to Section 2 or 3,
the Holders of Restricted Stock have requested that any
Restricted Stock be registered, Azurix will, subject to the
provisions of Section 5, use all reasonable efforts to effect
the registration and the sale of such Restricted Stock in
accordance with the intended method of disposition thereof as
promptly as practicable, and in connection with any such
request, Azurix will:
a. in connection with a request pursuant to Section 2,
prepare and file with the SEC, not later than 60 days
after receipt of a request to file a registration
statement with respect to Restricted Stock, a
registration statement on any form for which Azurix
then qualifies and which counsel for Azurix shall
deem appropriate and which form shall be available
for the sale of such Restricted Stock in accordance
with the intended method of distribution thereof, and
use its reasonable efforts to cause such registration
statement to
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become effective; provided that if Azurix shall
furnish to the Holders making such a request a
certificate signed by either the chief financial
officer or the chief accounting officer of Azurix
stating that in his good faith judgment it would be
significantly disadvantageous to Azurix for such a
registration statement to be filed on or before the
date filing would be required, Azurix shall have an
additional period of not more than 90 days within
which to file such registration statement; and
provided further, (i) that before filing a
registration statement or prospectus or any
amendments or supplements thereto, Azurix will
furnish to one counsel selected by the Holders of a
majority in number of shares of the Restricted Stock
covered by such registration statement copies of all
such documents proposed to be filed, which documents
will be subject to the review of such counsel, and
(ii) that after the filing of the registration
statement, Azurix will promptly notify each selling
Holder of Restricted Stock of any stop order issued
or, to the knowledge of Azurix, threatened by the SEC
and take all reasonable actions to prevent the entry
of such stop order or to remove it if entered;
b. in connection with a registration pursuant to Section
2, prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be
necessary to keep such registration statement
effective for a period of not less than 270 days or
such shorter period as shall terminate when all
Restricted Stock covered by such registration
statement has been sold (but not before the
expiration of the 90-day period referred to in
Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable), and comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such
registration statement during such period in
accordance with the intended methods of disposition
by the Selling Holders thereof set forth in such
registration statement;
c. as soon as reasonably practicable, furnish to each
selling Holder, prior to filing a registration
statement, copies of such registration statement as
proposed to be filed, and thereafter furnish to such
selling Holder such number of copies of such
registration statement, each amendment and supplement
thereto (in each case, if specified by such Holder,
including all exhibits thereto), the prospectus
included in such registration statement (including
each preliminary prospectus) and such other documents
as such selling Holder may reasonably request in
order to facilitate the disposition of the Restricted
Stock owned by such selling Holder;
d. with reasonable promptness, use its reasonable
efforts to register or qualify such Restricted Stock
under such other securities or blue sky laws of such
jurisdictions within the United States as any selling
Holder reasonably (in light of such selling Holder's
intended plan of distribution) requests and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder
to consummate the disposition in
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such jurisdictions of the Restricted Stock owned by
such selling Holder; provided that Azurix will not be
required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be
required to qualify but for this subsection d., (ii)
subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any
such jurisdiction;
e. with reasonable promptness, use reasonable efforts to
cause the Restricted Stock covered by such
registration statement to be registered with or
approved by such other governmental agencies or
authorities as may be necessary by virtue of the
business and operations of Azurix to enable the
selling Holder or Holders thereof to consummate the
disposition of such Restricted Stock;
f. promptly notify each selling Holder of such
Restricted Stock, at any time when a prospectus
relating thereto is required to be delivered under
the Securities Act, of the occurrence of any event
known to Azurix requiring the preparation of a
supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such
Restricted Stock, such prospectus will not contain an
untrue statement of a material fact or omit to state
any material fact required to be stated therein or
necessary to make the statements therein not
misleading and promptly make available to each
selling Holder any such supplement or amendment;
g. in connection with a request pursuant to Section 2,
enter into an underwriting agreement in customary
form, the form and substance of such underwriting
agreement being subject to the reasonable
satisfaction of Azurix;
h. with reasonable promptness make available for
inspection by any selling Holder, any underwriter
participating in any disposition pursuant to such
registration statement, and any attorney, accountant
or other agent retained by any such selling Holder or
underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate
documents and properties of Azurix (collectively, the
"Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility,
and cause Azurix's officers and employees to supply
all information reasonably requested for such purpose
by any such Inspector in connection with such
registration statement; provided, however, that the
selection of any Inspector other than a selling
Holder shall be subject to the consent of Azurix,
which shall not be unreasonably withheld. Each
Inspector that actually reviews Records supplied by
Azurix that include information that Azurix
determines, in good faith, to be confidential
("Confidential Information") shall be required, prior
to any such review, to execute an agreement with
Azurix providing that such Inspector shall not
disclose any Confidential Information unless such
disclosure is required by applicable law or legal
process. Each selling Holder of Restricted Stock
agrees that Confidential Information obtained by it
as a
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result of such inspections shall not be used by it as
the basis for any transactions in securities of
Azurix unless and until such information is made
generally available to the public. Each selling
Holder of Restricted Stock further agrees that it
will, upon learning that disclosure of Confidential
Information is sought in a court of competent
jurisdiction, give notice to Azurix and allow Azurix,
at its expense, to undertake appropriate action to
prevent disclosure of the Confidential Information.
Each selling Holder also agrees that the due
diligence investigation made by the Inspectors shall
be conducted in a manner which shall not disrupt to
any significant extent the operations of Azurix or
the work performed by Azurix's officers and
employees;
i. in the event such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a
comfort letter or letters from Azurix's independent
public accountants in customary form and covering
such matters of the type customarily covered by
comfort letters as the managing underwriter
reasonably requests;
j. otherwise use its reasonable efforts to comply with
all applicable rules and regulations of the SEC, and
make available to its security holders, as soon as
reasonably practicable, an earnings statement
covering a period of twelve months, beginning within
three months after the effective date of the
registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the
Securities Act; and
k. with reasonable promptness, use its reasonable
efforts to cause all such Restricted Stock to be
listed on each securities exchange on which the
Common Stock of Azurix is then listed, provided that
the applicable listing requirements are satisfied.
Each selling Holder of Restricted Stock agrees that, upon receipt of
any notice from Azurix of the happening of any event of the kind described in
subsection f. hereof, such selling Holder will forthwith discontinue disposition
of Restricted Stock pursuant to the registration statement covering such
Restricted Stock until such selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subsection f. hereof, and, if
so directed by Azurix, such selling Holder will deliver to Azurix (at Azurix's
expense) all copies, other than permanent file copies then in such selling
Holder's possession, of the prospectus covering such Restricted Stock current at
the time of receipt of such notice. In the event Azurix shall give any such
notice, Azurix shall extend the period during which such registration statement
shall be maintained effective pursuant to this Agreement (including the period
referred to in subsection b.) by the number of days during the period from and
including the date of the giving of such notice pursuant to subsection f. hereof
to and including the date when each selling Holder of Restricted Stock covered
by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by subsection f. hereof. Each
selling Holder also agrees to notify Azurix if any event relating to such
selling Holder occurs which would require the preparation of a supplement or
amendment to the prospectus so that such prospectus will not contain an untrue
statement of a material fact or omit to
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state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
5. Conditions and Limitations.
a. Azurix's obligations under Section 2 shall be subject
to the following limitations:
i. Azurix need not file a registration
statement either (x) during the period
starting with the date 60 days prior to
Azurix's estimated date of filing of, and
ending 90 days after the effective date of,
any registration statement pertaining to
securities of Azurix (other than a
registration of securities in a Rule 145
transaction or exchange offer or with
respect to an employee benefit plan or
dividend reinvestment plan), provided that
if such Azurix registration statement is not
filed within 90 days after the first date on
which Azurix notifies a Holder of Restricted
Stock that it will delay a Demand
Registration pursuant to this clause (x),
Azurix may not further postpone such Demand
Registration pursuant to this clause; or (y)
during the period specified in the first
proviso of subparagraph a. of Section 4;
ii. Azurix shall not be required to furnish any
audited financial statements other than
those audited statements customarily
prepared at the end of its fiscal year, or
to furnish any unaudited financial
information with respect to any period other
than its regularly reported interim
quarterly periods unless in the absence of
such other unaudited financial information
the registration statement would contain an
untrue statement of material fact or omit to
state a material fact required to be stated
therein or necessary to make the statements
therein not misleading;
iii. except as provided in Section 2.b., Azurix
shall not be required to file more than one
Demand Registration during any 12-month
period commencing with the effective date of
this Agreement, plus one additional such
Demand Registration; provided, however, that
a registration statement will not count as a
Demand Registration until it has become
effective; and
iv. Azurix shall have received the information
and documents specified in Section 6 and
each selling Holder shall have observed or
performed its other covenants and conditions
contained in such section and Section 8.
b. Azurix's obligation under Section 3 shall be subject
to the limitations and conditions specified in such
section and in clauses (i), (ii) and (iv) of
subsection a. of this Section 5, and to the condition
that Azurix may at any
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time in its sole discretion terminate its proposal to
register its shares and discontinue its efforts to
cause a registration statement to become or remain
effective.
6. Information from and Certain Covenants of Holders of
Restricted Stock. Notices and requests delivered to Azurix by
Holders for whom Restricted Stock is to be registered pursuant
to this Agreement shall contain such information regarding the
Restricted Stock to be so registered, the Holder and the
intended method of disposition of such Restricted Stock as
shall reasonably be required in connection with the action to
be taken. Any Holder whose Restricted Stock is included in a
registration statement pursuant to this Agreement shall
execute all consents, powers of attorney, registration
statements and other documents reasonably required to be
signed by it in order to cause such registration statement to
become effective. Each selling Holder covenants that, in
disposing of such Holder's shares, such Holder will comply
with Regulation M of the SEC adopted pursuant to the Exchange
Act.
7. Registration Expenses. All Registration Expenses (as defined
herein) will be borne by Azurix. Underwriting discounts and
commissions applicable to the sale of Restricted Stock shall
be borne by the Holder of the Restricted Stock to which such
discount or commission relates, and each selling Holder shall
be responsible for the fees and expenses of any legal counsel,
accountants or other agents retained by such selling Holder
and all other out-of-pocket expenses incurred by such selling
Holder in connection with any registration under this
Agreement.
As used herein, the term Registration Expenses means
all out-of-pocket expenses incident to Azurix's performance of
or compliance with this Agreement (whether or not the
registration in connection with which such expenses are
incurred ultimately becomes effective), including without
limitation all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection
with blue sky qualifications of the Restricted Stock), rating
agency fees, printing expenses, messenger and delivery
expenses incurred by Azurix, the fees and expenses incurred in
connection with the listing of the securities to be registered
on each securities exchange on which similar securities issued
by Azurix are then listed, and fees and disbursements of
counsel for Azurix and its independent certified public
accountants (including the expenses of any special audit or
comfort letters required by or incident to such performance),
securities acts liability insurance (if Azurix elects to
obtain such insurance), the reasonable fees and expenses of
any special experts retained by Azurix in connection with such
registration and the fees and expenses of other persons
retained by Azurix.
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8. Indemnification; Contribution.
a. Indemnification by Azurix. Azurix agrees to indemnify
and hold harmless each selling Holder of Restricted
Stock, its officers, directors and agents and each
person, if any, who controls such selling Holder
within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs
of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a
material fact contained in any registration statement
or prospectus relating to the Restricted Stock or in
any amendment or supplement thereto or in any
preliminary prospectus relating to the Restricted
Stock, or arising out of or based upon any omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, except insofar
as such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof
based upon information furnished in writing to Azurix
by such selling Holder or on such selling Holder's
behalf expressly for use therein (including, without
limitation, information with respect to the selling
Holder or its underwriters, managers or advisers) and
provided further, that with respect to any untrue
statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, the
indemnity agreement contained in this subsection
shall not apply to the extent that any such loss,
claim, damage, liability or expense results from the
fact that a copy of the final prospectus was not sent
or given to the person asserting any such losses,
claims, damages, liabilities or expenses at or prior
to the written confirmation of the sale of the
Restricted Stock concerned to such person. Azurix
also agrees to include in any underwriting agreement
with any underwriters of the Restricted Stock
provisions indemnifying and providing for
contribution to such underwriters, their officers and
directors and each person who controls such
underwriters on substantially the same basis as the
provisions of this Section 8 indemnifying and
providing for contribution to the selling Holders.
b. Indemnification by Holders of Restricted Stock. Each
selling Holder agrees to indemnify and hold harmless
Azurix, its officers, directors and agents and each
person, if any, who controls Azurix within the
meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and
expenses (including reasonable costs of
investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a
material fact contained in any registration statement
or prospectus relating to the Restricted Stock or in
any amendment or supplement thereto or in any
preliminary prospectus relating to the Restricted
Stock, or arising out of or based upon any omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided (i)
that such losses, claims, damages, liabilities or
expenses arise out of, or are based
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upon, any such untrue statement or omission or
allegation thereof based upon information furnished
in writing to Azurix by such selling Holder or on
such selling Holder's behalf expressly for use
therein (including, without limitation, information
with respect to the selling Holder or its
underwriters, managers or advisers), (ii) that with
respect to any untrue statement or omission or
alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement
contained in this subsection shall not apply to the
extent that any such loss, claim, damage, liability
or expense results from the fact that a copy of the
final prospectus was not sent or given to the person
asserting any such losses, claims, damages,
liabilities or expenses at or prior to the written
confirmation of the sale of the Restricted Stock
concerned to such person, and (iii) that no selling
Holder shall be liable for any indemnification under
this Section 8 in an aggregate amount which exceeds
the total net proceeds (before deducting expenses)
received by such selling Holder from the offering.
Each selling Holder also agrees to include in any
underwriting agreement with underwriters of the
Restricted Stock provisions indemnifying and
providing for contribution to such underwriters,
their officers and directors and each person who
controls such underwriters on substantially the same
basis as the provisions of this Section 8
indemnifying and providing for contribution to
Azurix. Azurix agrees that if Atlantic Water Trust is
the selling Holder, Enron may provide the
indemnification and contribution required to be
provided by Atlantic Water Trust under this Section 8
in lieu of Atlantic Water Trust.
c. Conduct of Indemnification Proceedings. If any action
or proceeding (including any governmental
investigation) shall be brought or asserted against
any indemnified party in respect of which indemnity
may be sought from an indemnifying party, the
indemnifying party shall assume the defense thereof,
including the employment of counsel reasonably
satisfactory to such indemnified party, and shall
assume the payment of all expenses. Such indemnified
party shall have the right to employ separate counsel
in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party
unless (i) the indemnifying party has agreed to pay
such fees and expenses, or (ii) the indemnifying
party shall have failed to assume the defense of such
action or proceeding and employ counsel reasonably
satisfactory to such indemnified party or (iii) the
named parties to any such action or proceeding
(including any impleaded parties) include both such
indemnified party and such indemnifying party, and
such indemnified party shall have been advised by
counsel that there may be one or more legal defenses
available to such indemnified party which are
different from or additional to those available to
the indemnifying party (in which case, if such
indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at
the expense of the indemnifying party, the
indemnifying party shall not have the right to assume
the defense of such action or proceeding on behalf of
such indemnified party, it being understood, however,
that the indemnifying party
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shall not, in connection with any one such action or
proceeding or separate but substantially similar or
related actions or proceedings in the same
jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of
attorneys (together with appropriate local counsel)
at any time for such indemnified party or parties,
which firm shall be designated in writing by such
indemnified party or parties). The indemnifying party
shall not be liable for any settlement of any such
action or proceeding effected without its written
consent, but if settled with its written consent, or
if there is a final judgment for the plaintiff in any
such action or proceeding, the indemnifying party
agrees to indemnify and hold harmless such
indemnified party from and against any loss or
liability (to the extent stated above) by reason of
such settlement or judgment.
d. Contribution. If the indemnification provided for in
this Section 8 is unavailable to Azurix or the
selling Holders in respect of any losses, claims,
damages, liabilities or judgments referred to
therein, then each such indemnifying party, in lieu
of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims,
damages, liabilities and judgments, in such
proportion as is appropriate to reflect the relative
fault of each such party in connection with such
statements or omissions, as well as any other
relevant equitable considerations. The relative fault
of each such party shall be determined by reference
to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission
or alleged omission to state a material fact relates
to information supplied by such party, and the
parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such statement or omission.
Azurix and the selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 8.d. were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigation or defending any
such action or claim. Notwithstanding the provisions of this Section
8.d., no selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Restricted
Stock of such selling Holder were offered to the public exceeds the
amount of any damages which such selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
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13
9. Amendments. This Agreement may be amended or modified upon the
written consent thereto of Azurix and the Holders of not less
than 66-2/3% of Restricted Stock.
10. Assignments. This Agreement shall be binding on and inure to
the benefit of the respective successors and assigns of the
parties hereto.
11. Entire Agreement; Governing Law. This Agreement constitutes
the entire agreement of the parties relating to the subject
matter hereof; all prior or contemporaneous written or oral
agreements are merged herein; this Agreement shall be governed
by the laws of the State of Texas.
12. Notices. Any notice, request, instruction, correspondence or
other document to be given hereunder by either party to the
other (herein collectively called "Notice") shall be in
writing and delivered personally or by telegram or telecopier,
as follows:
If to Azurix:
Azurix Corp.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: General Counsel
Telecopier No.: (000) 000-0000
If to the Holder:
Atlantic Water Trust
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Trust Administration
Telecopier No.: (000) 000-0000
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. Any party may change any address
to which Notice is to be given to it by giving Notice as provided above of such
change of address.
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14
IN WITNESS WHEREOF, Azurix and the Holder have caused this Agreement to
be signed by their respective officers thereunto duly authorized.
AZURIX CORP.
By:
----------------------------------------
Name:
Title:
ATLANTIC WATER TRUST
By:
----------------------------------------
Name:
Title: As Attorney-in-Fact
