1
EXHIBIT 4.3
STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (the "Agreement")
dated as of June 9, 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 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
2
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
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
3
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 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
4
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 under-writer'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
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
5
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 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;
6
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
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
7
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 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
8
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 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
9
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.
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
10
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 under-writers 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 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
11
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 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
12
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.
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
13
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.
IN WITNESS WHEREOF, Azurix and the Holder have caused this Agreement to be
signed by their respective officers thereunto duly authorized.
AZURIX CORP.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Director
ATLANTIC WATER TRUST
By: /s/ XXXXXXX XXXXXXX
-----------------------
Name: Xxxxxxx XxXxxxx
Title: As Attorney-in-Fact
