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EXHIBIT 10.7
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is made and entered into as
of May 1, 1999, between Enron Corp., an Oregon corporation ("Enron"), and
Azurix Corp., a Delaware corporation ("Azurix"). Azurix and Enron may
hereinafter be referred to individually as a "Party" or collectively as the
"Parties."
RECITALS:
WHEREAS, Enron and Azurix desire by their execution of this Agreement
to evidence their understanding concerning the provision of certain services by
Enron to Azurix and its subsidiaries;
NOW, THEREFORE, for and in consideration of the mutual promises and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
hereby agree as follows:
1. Services. In order to assist the continued and orderly conduct of
certain corporate functions currently performed by Enron and its affiliates for
the benefit of the Referenced Subsidiaries (defined below), Enron agrees to
provide and Azurix agrees to purchase, subject to the terms and conditions set
forth herein, certain corporate staff and support services, as identified in
Exhibit A attached hereto (collectively, the "Services"), in each case if and
only to the extent requested by Azurix. "Referenced Subsidiaries" shall mean
Azurix and its subsidiaries from time to time. Such subsidiaries shall
initially include, without limitation, those subsidiaries listed on Exhibit B.
2. Term. This Agreement shall become effective and Enron shall make
the Services available to the Referenced Subsidiaries pursuant to the terms of
this Agreement for the period commencing on May 1, 1999, and terminating on
the date 180 days following written notice by either party to the other (or
earlier by mutual written agreement); provided, however, (i) the Referenced
Subsidiaries shall remain responsible for all out-of-pocket costs and expenses
incurred by Enron pursuant to agreements entered into by Enron for the benefit
of the Referenced Subsidiaries that could not be terminated prior to the date
of termination of this Agreement, and (ii) upon the mutual agreement of Azurix
and Enron, services may be provided beyond the termination date set forth in
the notice in order to allow the Referenced Subsidiaries the opportunity to
make alternative arrangements for such services. In
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the event any of the Services being performed hereunder are no longer
available, Enron, any Enron subsidiary or affiliate, then Enron shall be
relieved of its obligations under this Agreement to provide that particular
Service to the Referenced Subsidiaries. The foregoing shall include any
cessation of or failure of Services due to Year 2000 problems. Enron will
advise the Referenced Subsidiaries of any cessation of Services and shall use
commercially reasonable judgement in assisting the Referenced Subsidiaries in
securing alternative services for the Referenced Subsidiaries.
3. Nature and Quality of Services. The Parties understand and agree
that the Services shall be substantially identical in nature and quality to the
Services provided by Enron to its wholly-owned subsidiaries.
4. Payment. Azurix, as compensation for the performance of the
Services, agrees to reimburse Enron for: (i) all expenses actually incurred by
Enron and readily identifiable to the Referenced Subsidiaries relating to the
Services ("Direct Charges"), which calculation shall be based on the cost of
such Services to Enron and charged to the Referenced Subsidiaries in the same
manner as costs charged to other Enron subsidiaries or affiliated companies and
in accordance with the charge bases identified on Exhibit A, if applicable;
(ii) the actual cost of any goods or services purchased specifically for the
Referenced Subsidiaries by Enron from third parties unaffiliated with Enron
("Operating Charges"); (iii) the actual cost or charge for outsourced services
provided by any third party unaffiliated with Enron specifically for the
Referenced Subsidiaries under an Enron or Enron affiliate agreement with such
third party ("Outsourced Charges"); and (iv) an overhead allocation to the
Referenced Subsidiaries of administrative and general expenses of Enron
corporate staff and support services reasonably related to the amount of such
services provided to the Referenced Subsidiaries for which Azurix does not
receive Direct Charges ("Allocated Charge"). Such Allocated Charge shall be
payable in monthly installments.
If the compensation for the Services does not include sales, use,
excise, value-added or similar taxes, and if any such taxes are imposed on the
Services after the effective date of this Agreement, then such taxes shall be
promptly paid by Azurix.
Any change in the methodology due to regulatory, accounting or legal
reasons, to be used for determining any Direct Charges, Operating Charges,
Outsourced Charges, Allocated Charges or any other charge for Services provided
by Enron, any Enron affiliate or third party, for the Referenced Subsidiaries
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from that being used on the effective date of this Agreement shall be deemed
agreed to by Azurix without the necessity of getting Azurix's consent so long
as such changes are in good faith and are charged or allocated to the
Referenced Subsidiaries in the same manner as to the other Enron subsidiaries
or affiliated companies.
5. Invoicing. Enron shall invoice Azurix by the 15th working day of
each month for all Direct Charges, Operating Charges, Outsourced Charges and
Allocated Charges, all with respect to the preceding month. All invoices shall
reflect in reasonable detail a description of the Services performed during the
preceding month, and shall be due and payable on the last day of the month of
the invoice. In the event of a dispute as to the propriety of invoiced amounts,
Azurix shall pay all undisputed amounts on each invoice, but shall be entitled
to withhold payment of any amount in dispute and shall promptly notify Enron of
such dispute. Enron or its applicable affiliate shall provide Azurix with
records relating to the disputed amount so as to enable the Parties to resolve
the dispute. Azurix shall pay interest at an annual rate of 18% on any disputed
amounts which it should have paid but withheld.
6. Confidentiality. Each party shall exert the same efforts and
maintain the same precautions that it exerts and maintains with respect to its
own confidential and proprietary information with respect to all information
received from the other party in connection with the performance of the
Services; provided, however, that a party may disclose such information (i) if
required to do so by applicable laws, rules, regulations, or orders (including
any laws, rules, regulations or orders to which either party voluntarily
subjects itself and any applicable securities exchange rules), or (ii) if such
information was or becomes generally available to such party on a
non-confidential basis, provided that the source of such information was not
known by such party to be bound by a confidentiality obligation.
7. Information from Azurix. Any information necessary for Enron or any
third party to perform any Services shall be submitted by Azurix in a manner
consistent with the practices utilized by the Referenced Subsidiaries during
the period immediately prior to the effective date of this Agreement, which
manner shall not be altered except by mutual written agreement of the Parties.
Should Azurix's failure to supply such input render Enron's or any third
party's performance of any Services unreasonably difficult, Enron or such third
party, upon reasonable notice to Azurix, may refuse to perform such Services
until such input is supplied.
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8. Sole Beneficiaries. Azurix acknowledges that the Services shall be
provided only with respect to the business of Azurix and its subsidiaries or
affiliates. Azurix will not request performance of any Services for the benefit
of any entity other than Azurix and its subsidiaries or affiliates. Azurix
represents and agrees that it will use the Services only in accordance with all
applicable federal, state and local laws and regulations and communications and
common carrier tariffs, and in accordance with the reasonable conditions,
rules, regulations and specifications which may be set forth in any manuals,
materials, documents or instructions in existence on the effective date of this
Agreement and furnished by Enron to Azurix. Enron reserves the right to take
all actions, including termination of any particular Services, that Enron
reasonably believes to be necessary to assure compliance with applicable laws,
regulations and tariffs.
9. User Codes and Passwords. Enron will assign to the Referenced
Subsidiaries all user codes, passwords or numbers, or other control or
identifying cards or numbers, necessary for Enron to perform the Services.
Azurix assumes full responsibility for selection and use of any such codes,
passwords, cards or numbers that may be permitted or required in connection
with the Services involved.
10. LIMITED WARRANTY; LIMITATION OF LIABILITY. ALL PRODUCTS OBTAINED
FOR THE REFERENCED SUBSIDIARIES ARE AS IS, WHERE IS, AS TO ENRON, WITH ALL
FAULTS, OTHER THAN FAULTS DUE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ENRON. NEITHER ENRON NOR ANY ENRON AFFILIATE PERFORMING ANY SERVICES HEREUNDER
MAKE ANY WARRANTIES OR REPRESENTATIONS WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING THE WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE SERVICES RENDERED FOR OR PRODUCTS OBTAINED FOR THE
REFERENCED SUBSIDIARIES, INCLUDING WITHOUT LIMITATION THOSE RENDERED BY OR
OBTAINED FROM A THIRD PARTY. NOTWITHSTANDING THE FOREGOING, TO THE EXTENT A
WARRANTY PROVIDED BY A THIRD PARTY MANUFACTURER OR PROVIDER OF GOODS OR
SERVICES TO ENRON OR ITS AFFILIATES CAN BE PASSED-ON TO THE REFERENCED
SUBSIDIARIES, NOTHING HEREIN IS INTENDED TO LIMIT SAME AND THE REFERENCED
SUBSIDIARIES SHALL HAVE THE RIGHT TO THE
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BENEFITS (SUBJECT TO THE TERMS AND CONDITIONS THEREOF) OF ALL SUCH THIRD PARTY
WARRANTIES.
IN NO EVENT SHALL EITHER ENRON OR THE REFERENCED SUBSIDIARIES BE
LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM ANY ERROR IN THE PERFORMANCE OF SERVICES
OR FROM THE BREACH OF THIS AGREEMENT, REGARDLESS OF FAULT. TO THE EXTENT ANY
THIRD PARTY HAS LIMITED ITS LIABILITY TO ENRON FOR SERVICES UNDER AN
OUTSOURCING OR OTHER AGREEMENT, THE REFERENCED SUBSIDIARIES AGREE TO BE BOUND
BY SUCH LIMITATION OF LIABILITY FOR ANY PRODUCT OR SERVICE PROVIDED TO ENRON BY
SUCH THIRD PARTY UNDER SUCH AGREEMENT.
11. Force Majeure. Enron shall have no obligation to perform the
Services if its failure to do so is caused by or results from any act of God,
governmental action, natural disaster, strike, failure of essential equipment,
Y2K problem, or any other cause or circumstance beyond the control of Enron.
Enron agrees that upon restoring service following any failure of any equipment
necessary for Enron or its affiliates to provide any Services, Enron will allow
the Referenced Subsidiaries to have equal priority, in accordance with prior
practice, with respect to access to the restored service.
12. Severability. In the event any portion of this Agreement shall be
found by a court of competent jurisdiction to be unenforceable, that portion of
the Agreement will be null and void and the remainder of the Agreement will be
binding on the Parties as if the unenforceable provisions had never been
contained herein.
13. Assignment. This Agreement shall not be assignable by either of
the Parties hereto except by operation of law or with the written consent of
the non-assigning Party.
14. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the Parties relating to the performance of the Services and all
prior or contemporaneous written or oral agreements are merged herein. This
Agreement may not be amended or otherwise modified except by a writing signed
by both Parties.
15. Choice of Law. This Agreement shall be governed by the laws of the
State of Texas,
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without regard to any conflict-of-law rule or principle that might refer the
construction or interpretation of this Agreement to the laws of another state.
16. Notice. 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 facsimile, as follows:
If to Enron: Enron Corp.
0000 Xxxxx Xxxxxx
X.0. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Senior Vice President, Chief Accounting
and Information Officer
Facsimile No.: 000-000-0000
With a copy to: Senior Vice President and General
Counsel
Facsimile No.: 000-000-0000
If to Azurix: Azurix Corp.
000 Xxxx Xxxxxx 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Accounting Officer
Facsimile No. 000-000-0000
With a copy to: General Counsel
Facsimile No. 000-000-0000
Notice given by personal delivery shall be effective upon actual receipt by the
Party to whom addressed. Notice given by facsimile or telegram 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.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties hereto have caused this Services
Agreement to be signed on their behalf by their duly authorized officers.
ENRON CORP.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President and Chief Accounting
and Information Officer
AZURIX CORP.
By: /s/ XXXXXX X. XXXX
---------------------------------------------
Name: Xxxxxx X. Xxxx
Title: Vice Chairman
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EXHIBIT A
ENRON RC # COMPANY # 901 CHARGE BASES
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581 Facility Maintenance Azurix's Floor Space - Square Feet*
629 Corporate Security Azurix's Floor Space - Square Feet*
898 Building Services Azurix's Floor Space - Square Feet*
2234 Facility Operations Azurix's Floor Space - Square Feet*
75 ECAS Administration Azurix's Usage of Services
566 Construction Azurix's Usage of Services
580 Facility Planning Azurix's Usage of Services
692 Churn/Relocation Azurix's Usage of Services
703 Audio Visual & Locks Azurix's Usage of Services
1829 International Security Azurix's Usage of Services
2334 Bus/Parking Subsidy Azurix's Usage of Services
2441 ABS Utility Azurix's Usage of Services
2455 Rent Azurix's Floor Space - Square Feet
746 Furniture Azurix's Usage of Services
0781/0782 Aviation Azurix's Usage of Services
103 Shipping/Receiving Azurix's Usage of Services
228 Copy Center Azurix's Usage of Services
492 Mail Center Azurix's Usage of Services
586 Concierge Services Azurix's Usage of Services
2255 Convenience Copiers Azurix's Usage of Services
2453 Cafeteria Axurix's Usage of Services
215 Records Azurix's Usage of Services
0508 Real Estate Azurix's Usage of Services
0502 Travel Azurix's Usage of Services
0752 Legal Azurix's Usage of Services or
occasioned by Azurix
*sublease or lease covered by separate agreement
COMPANY # 001 ENRON MANAGEMENT COMPANY
--------------------------------------
0208/0649 Compensation/Benefits % of Benefits
COMPANY # 011 ENRON CORP.
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1140/1284 Enron Events % of Downtown HC
658/1946/1949 Development & Training Azurix's Usage of Services
2397 Employee Communications % of total employees
319 VP - Compensation/Benefits % of Headcount
2326 Stock Option Plan Grant Elections
0071/2242/0632-0246 Human Resources % of Headcount New Hires
2349 Audit Fees Direct
0647/2453/2454/2460 Wellness % of Downtown HC
610 Corp. Secretary # of Companies - Legal Entities
0866/1263/1264/1956 REGULATORY AFFAIRS Azurix's Usage of Services/Allocation
MARKETING AFFAIRS Azurix's Usage of Services/Allocation
COMPANY # 969 ECM
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2411 Insurance Prop. Val./Rev/HC
451 Treasurer
Bank Fees
1990 Vehicle Funding
RISK ASSESSMENT & CONTROL
0258/0826/1128/1129/1130/113
1/1281/1958 Azurix's Usage of Services
INFORMATION TECHNOLOGY % of Headcount
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Other Services:
o From time to time, the Referenced Subsidiaries shall utilize the
international offices of Enron and its affiliates for certain projects, in
each case subject to the mutual agreement of Azurix and Enron or its
affiliates, as applicable.
o Such other services to be mutually agreed by Azurix and Enron.
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EXHIBIT B
Azurix Xxxx Holdings Ltd.
Azurix Xxxx Investment Ltd.
Azurix Xxxx Ltd.
Enron Argentina Holding Inc.
Azurix Misiones SRL
Azurix Cancun B.V.
Azurix Cancun SRL
Enron Water Israel Ltd.
Azurix Suez Ltd.
Azurix Colombia Holdings Ltd.
Azurix Colombia Investments Ltd.
Azurix Colombia Ltd.
Azurix Isla Mujeres B.V.
Operadora de Buenos Aires SRL
Operadora de Misiones SRL
Azurix Xxxxxxx Water Investments Ltd.
Azurix Chengdu Holdings Ltd.
Azurix Chengdu Ltd.
Azurix Misiones Holdings Ltd.
Azurix Misiones Ltd.
Azurix U.K. Ltd.
Azurix Rio Holdings Ltd.
Azurix Rio Investments Ltd.
SPE-Sociedade PAULISTA de Energia Ltda.
SEC-Sociedade Carioca de Energia Ltda.
Azurix Kuwait Ltd.
Azurix AGOSBA Holdings Ltd.
Azurix AGOSBA Ltd.
Azurix AGOSBA SRL
Azurix Chaoyang Water Holdings Ltd.
Azurix Chile Holdings Ltd.
Azurix Chile Ltd.
Azurix Suzhou Water Holdings Ltd.
Azurix Vietnam Holdings Ltd.
Azurix Vietnam Investments Ltd.
Azurix Vietnam Ltd.
Azurix Jordan Ltd.
Azurix Lebanon Ltd.
Azurix Tangiers Ltd.
Azurix Philippines Holdings Ltd.
Azurix Philippines Investments Ltd.
Azurix Philippines Ltd.
Azurix Guam Corporation
Azurix Panama Holdings Ltd.
Azurix Panama Investments Ltd.
Azurix China Holdings Ltd.
Azurix China Investments Ltd.
Azurix Projects Holdings Ltd.
Azurix Projects Ltd.
Azurix Saigon Holding Co.
Azurix Saigon Ltd.
Azurix Ltd.
Azurix Europe Ltd.
Wessex Water Ltd.
Wessex Water Services Ltd.
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