Case No. 01-16034 (AJG), Jointly Administered.United States Bankruptcy Court, S.D. New York.
June 12, 2003.
ORDER PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE AUTHORIZING ISSUANCE OF A POSTPETITION GUARANTEE
ARTHUR J. GONZALEZ, United States Bankruptcy Judge
Upon consideration of the Motion for an Order Pursuant to Section 363
of the Bankruptcy Code Authorizing Issuance of a Postpetition Guarantee, dated May 16, 2003 (as supplemented on June 4, 2003, the “Motion”), filed by Enron Corp. (the “Debtor”), as debtor and debtor in possession, seeking authority to provide a guarantee (the “Guarantee”) to American Water Services, Inc. and American Water Works Company, Inc. (collectively, “American Water”) on account of the indemnity obligation of Azurix Corp. (“Azurix”) to American Water; and it appearing that the Court has jurisdiction to consider the Motion; and it appearing that the relief requested in the Motion is in the best interest of Enron, its estates and creditors; and it appearing that due notice of the Motion has been given and no further notice need be given; and upon the proceedings before the Court; and good and sufficient cause appearing;
IT IS HEREBY FOUND AND DETERMINED THAT:
A. Azurix is not currently a debtor under any provision of title 11 of the United States Code (the “Bankruptcy Code”).
B. The PSA sets forth indemnity obligations in the event that losses occurred based upon a breach of certain representations, warranties, covenants or agreements set forth in the Purchase and Sale Agreement (“PSA”) relating to the sale of Azurix’s North American operations to American Water in November 2001 (the “Indemnification Obligations”).[1]
C. Under the terms of the PSA, upon the sale of Wessex Water Ltd. (“Wessex”) to an unrelated entity, the PSA provides that Azurix will furnish American Water with either a letter of credit or a guaranty from Enron.
D. The Guarantee Agreement attached hereto as Exhibit 1, the Master Agreement attached to the Motion as Exhibit C, the Collateral Security and Reimbursement Agreement attached hereto as Exhibit 2, and the Control Agreement attached hereto as Exhibit 3 are the result of extensive, good faith negotiations.
E. Enron has demonstrated good, sufficient and sound business purpose and justification for issuing the Guarantee and agreeing to execute the Collateral Guarantee Agreements.
F. The issuance of the Guarantee and the collateralization of Azurix’s obligation to Enron with respect thereto reflected in the Collateral Security and Reimbursement Agreement constitute the exchange of reasonably equivalent value between Azurix and Enron
G. The Guarantee Agreement and the Collateral Guarantee Agreements are not intended to hinder, delay or defraud any creditors of Azurix or Enron
H. The Guarantee Agreement and Collateral Guarantee Agreements are fair and reasonable to all parties and in no way unjustly enrich any of the parties.
I. The issuance of the Guarantee and the collateralization of Azurix’s obligations to Enron with respect thereto constitute the contemporaneous exchange of new value and legal, valid and effective transfers.
J. The Guarantee Agreement complies in all material respects with the requirements of Section 12.03 of the PSA.
K. The payments and exchanges made pursuant to the Guarantee Agreement and the Collateral Guarantee Agreements are not on account of an antecedent debt owed by Azurix.
L. The relief requested in the Motion and awarded herein is in the best interests of Enron, its estate and creditors.
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED DECREED THAT:
1. The Motion is granted.
2. All objections (if any) to the Motion or to the relief requested herein that have not been withdrawn, waived or settled, and all reservations of rights included therein, are overruled.
3. Enron is authorized pursuant to Section 363 of the Bankruptcy Code to enter into the Guarantee Agreement and the Collateral Guarantee Agreements and to take such actions as are necessary to effectuate the terms thereof including, without limitation, any required payments under the Guarantee Agreement, enforcement of its rights under the Collateral Guarantee Agreements, and negotiation of disputes arising under, and enforcement of remedies in connection with such disputes under, the Guarantee Agreement and Collateral Guarantee Agreements.
4. The Guarantee is entitled to status as an administrative expense of the Guarantor.
5. This Court shall retain jurisdiction to interpret and enforce this order and any and all obligations arising under the Guarantee Agreement or the Collateral Guarantee Agreements.
EXHIBIT 1 GUARANTEE AGREEMENT
This Guarantee Agreement dated as of ________, 2003 (this “Guarantee”) is entered into by Enron Corp., as debtor-in-possession (the “Guarantor”), for the benefit of American Water Services, Inc. and American Water Works Company, Inc. (collectively, the “GuaranteedParties”).
WHEREAS, the Guaranteed Parties and Azurix Corp. (“Azurix”) entered into that certain Purchase and Sale Agreement dated as of August 2, 2001 (as amended, the “Purchase Agreement”) for the sale of Azurix North America Corp. and Azurix Industrials Corp.;
WHEREAS, pursuant to Section 12.03 of the Purchase Agreement, upon the occurrence of certain specified events, including the ownership of Wessex Water Services Ltd. by a person other than Azurix or one of its subsidiaries, Azurix agreed to provide the Guaranteed Parties with (at Azurix’s sole election) either (a) a letter of credit or (b) a guarantee from the Guarantor substantially similar to the guarantee provided in Section 12.01 of the Purchase Agreement;
WHEREAS, Wessex Water Services Ltd. is no longer owned by Azurix or one of its subsidiaries and Azurix has, as a result, asked the Guarantor to provide this Guarantee in accordance with Section 12.03 of the Purchase Agreement; and
WHEREAS, the Guarantor desires to provide this Guarantee and has received good and valuable consideration therefor from Azurix, the receipt and sufficiency of which are hereby acknowledged by the Guarantor.
NOW, THEREFORE, the Guarantor has agreed to guarantee the Guaranteed Obligations (as hereinafter defined). Accordingly, the Guarantor agrees as follows:
Section 1. Definitions. Each capitalized term used herein, and not otherwise defined herein, has the meaning given thereto in the Purchase Agreement.
Section 2. The Guarantee. The Guarantor hereby unconditionally and irrevocably guarantees to the Guaranteed Parties the due and punctual payment by Azurix (and its permitted assigns) of all amounts payable by Azurix to the Guaranteed Parties (or either of them) in accordance with the provisions of the Purchase Agreement (including, without limitation, Section 10.03 of the Purchase Agreement); provided, however, that the aggregate amount of the obligations under this Guarantee shall not exceed the lesser of (i) 35% of the Purchase Price, as finally adjusted pursuant to the Purchase Agreement or (ii) $60.0 million (such amounts, as limited by the foregoing, are referred to as the “Guaranteed Obligations”). If Azurix shall fail or be unable to pay any Guaranteed Obligations as and when the same shall become due and payable, the Guarantor shall be obligated to pay or cause to be paid such Guaranteed Obligations to the Guaranteed Parties (or either of them). This Guarantee is a guarantee of payment, performance and compliance of the Guaranteed Obligations and not of collectibility and is in no way conditioned or contingent upon any attempt to collect from or enforce performance or compliance by Azurix or upon any other event or condition whatsoever. The Guaranteed Parties shall notify the Guarantor in writing of any demand for payment from the Guarantor, which demand shall state the amount of the Guaranteed Obligations for which demand is made and shall provide reasonable evidence of the Guaranteed Obligation for which demand is made. Unless earlier terminated pursuant to Section 5 hereof, this Guarantee shall remain in effect until the fourth anniversary of the Closing Date, i.e. November 7, 2005, and, if not earlier terminated in accordance with Section 5 hereof, shall terminate on such date.
Section 3. Representations and Warranties. The Guarantor represents and warrants to the Guaranteed Parties that:
3.01 Due Incorporation The Guarantor is duly incorporated and in good standing under the laws of Oregon.
3.02 Corporate Action; No Breach The Guarantor has all requisite corporate power and authority to execute and deliver this Guarantee and to perform its obligations hereunder. The execution and delivery by the Guarantor of this Guarantee and the performance by the Guarantor of its obligations hereunder have been duly and validly authorized by all requisite corporate action on the part of the Guarantor and by the Court (as hereafter defined). This Guarantee has been duly executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforcement hereof may be limited by insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting the enforcement of creditors’ rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable Law).
Section 4. Miscellaneous.
4.01 No Waiver. No failure on the part of the Guaranteed Parties (or either of them) to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Guaranteed Parties (or either of them) of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
4.02 Notices. All notices, requests, instructions, directions and other communications provided for herein (including, without limitation, any modifications of, or waivers, requests or consents under, this Guarantee) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the address specified below. All such communications shall be deemed to have been duly given when transmitted by telex (and the appropriate answer back is received) or personally delivered or, in the case of a telecopy or mailed notice, upon receipt, in each case given or addressed as aforesaid.
If to the Guarantor:
Enron Corp. 1400 Smith Street Houston, Texas 77002 Attention: General Counsel Telecopy: (713) 646-6227
Copy to:
Weil, Gotshal Manges LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201 Attention: Martin A. Sosland Telecopy: (214) 746-7777
If to the Guaranteed Parties:
American Water Services, Inc. c/o American Water Works Company, Inc. 1023 Laurel Oak Road Voorhees, New Jersey 08043 Attention: W. Timothy Pohl General Counsel and Secretary Telephone: (856) 346-8200 Telecopy: (856) 346-8299
Copy to:
Simpson Thacher Bartlett 425 Lexington Avenue New York, New York 10017 Attention: Mario A. Ponce Telephone: (212) 455-3442 Telecopy: (212) 455-2502
4.03 Successors and Assigns. The Guarantor may not assign this Guarantee or its obligations hereunder without the express written consent of the Guaranteed Parties. The Guaranteed Parties may not assign this Guarantee or their obligations hereunder without the express written consent of the Guarantor, except that each of the Guaranteed Parties may assign this Agreement, or any interest herein, without the consent of the Guarantor, to one or more Affiliates to which the obligations under the Purchase Agreement have been assigned in accordance with Section 13.04 of the Purchase Agreement. This Guarantee shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Guarantor.
4.04 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Guarantee.
4.05 Governing Law; Jurisdiction This Guarantee, the rights and obligations of the parties, and any claims arising hereunder, whether contractual, tort-based or otherwise, shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to the conflict of laws principles thereof. THIS GUARANTEE IS MADE BY GUARANTOR IN RELIANCE UPON THE FACT THAT (a) THE GUARANTOR AND GUARANTEED PARTIES AGREE TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT IN THE SOUTHERN DISTRICT OF NEW YORK WHICH IS PRESIDING OVER IN RE ENRON CORP., ET AL, CASE NO. 01-16034 (AJG) (THE “COURT”) FOR ANY AND ALL DISPUTES, CONTROVERSIES, CONFLICTS, LITIGATION OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND (b) ANY LITIGATION OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT WILL BE COMMENCED ONLY IN THE COURT, IN EACH CASE FOR SO LONG AS THE COURT IS PRESIDING OVER IN RE ENRON CORP., ET AL, CASE NO. 01-16034 (AJG).
4.06 No Third Party Beneficiaries. THIS GUARANTEE IS SOLELY FOR THEBENEFIT OF THE GUARANTEED PARTIES AND NO OTHER PERSON SHALL HAVE ANYRIGHTS HEREUNDER.
Section 5. Termination Notwithstanding anything contained in this Guarantee to the contrary, this Guarantee may be terminated at any time by mutual written consent of the Guarantor and the Guaranteed Parties. In addition, this Guarantee shall automatically terminate and be of no further force and effect upon a settlement between the Guaranteed Parties and Azurix, pursuant to which Azurix is no longer obligated to provide indemnity and/or this Guarantee under the Purchase Agreement.
Section 6. Obligation as Administrative Expense. Guarantor agrees that, upon the approval of this Guarantee by the Court, it will constitute an obligation of the Guarantor entitled to status as an administrative expense of the Guarantor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be executed as of the date first above written.
ENRON CORP., as Debtor-In-Possession
By: _________________________ Name: _______________________ Title: ______________________
EXHIBIT 2 COLLATERAL SECURITY AND REIMBURSEMENT AGREEMENT
This Collateral Security and Reimbursement Agreement, dated as of _____, 2003 (this “Agreement”), is by and between Azurix Corp., a Delaware corporation (“Azurix”) and Enron Corp., an Oregon corporation (“Enron”).
BACKGROUND
WHEREAS, American Water Services, Inc., a Delaware corporation (“AWS”), and American Water Works Company, Inc., a Delaware corporation (“Parent” and, together with AWS, the “Guaranteed Parties”), and Azurix entered into that certain Purchase and Sale Agreement, dated as of August 2, 2001 (as amended, the “Purchase Agreement”) for the sale of Azurix North America Corp. and Azurix Industrials Corp. to AWS;
WHEREAS, the transactions contemplated by the Purchase Agreement were consummated on November 7, 2001;
WHEREAS, pursuant to Section 12.03 of the Purchase Agreement, upon the occurrence of certain specified events, including the ownership of Wessex Water Services Ltd. by a person other than Azurix or one of its subsidiaries, Azurix agreed to provide the Guaranteed Parties with (at Azurix’s sole election) either (a) a letter of credit or (b) a guarantee from Enron (the “Guarantee”) substantially similar to the guarantee provided in Section 12.01 of the Purchase Agreement;
WHEREAS, Wessex Water Services Ltd. is no longer owned by Azurix or one of its subsidiaries and Azurix has, as a result, asked Enron to provide the Guarantee in accordance with Section 12.03 of the Purchase Agreement; and
WHEREAS, Enron is willing to provide the Guarantee in return for the consideration set forth herein, including the creation and funding by Azurix of the Account (as defined below) to be managed by Enron as provided for herein, the pledge by Azurix of the Account as provided for herein, and the reimbursement obligation undertaken herein by Azurix.
STATEMENT OF AGREEMENT NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves, their successors and assigns, hereby agree as follows:
1. Definitions. All terms not otherwise defined herein shall have the meaning ascribed to such terms in the Uniform Commercial Code in effect in the State of New York. The following terms shall have the following meanings when used herein:
“Account” shall mean the following Azurix account:
Bank: __________________________ ABA# ___________________________ Account# _______________________ ATTN: __________________________
“Agreement” shall have the meaning given such term in the introductory paragraph of this Agreement.
“Approved Securities Intermediary” shall mean the financial institution at which the Account is opened, or any successor thereto.
“Azurix” shall have the meaning given such term in the introductory paragraph of this Agreement.
“Collateral” shall mean the Account and any funds, financial assets, Instruments, securities or other Investment Property deposited therein, from time to time in accordance with this Agreement and the Control Agreement.
“Control Agreement” shall mean the Blocked Account Control Agreement, substantially similar to the agreement attached hereto as Exhibit A, by and among the Approved Securities Intermediary, Azurix and Enron.
“Deficiency” shall mean the amount by which the value of cash and Permitted Investments maintained in the Account, at any time, is less than an amount equal to 101% of the Face Amount.
“Enron” shall have the meaning given such term in the introductory paragraph of this Agreement.
“Event of Default” shall mean any of the following:
(a) Azurix shall file a petition in voluntary liquidation or bankruptcy; or Azurix shall file a petition or answer or consent seeking the reorganization of Azurix, or the readjustment of any of the liabilities or debts of Azurix; or Azurix shall commence any case or proceeding under applicable insolvency or bankruptcy laws now or hereafter existing; or Azurix shall consent to the appointment of any receiver, administrator, custodian, liquidator or trustee of all or any part of the property or assets of Azurix; or any corporate action shall be taken by Azurix for the purpose of effecting any of the foregoing;
(b) By order or decree of any court of competent jurisdiction, Azurix shall be adjudicated as bankrupt or insolvent; or any petition for any proceedings in bankruptcy or liquidation or for the reorganization or readjustment of liabilities or debts of Azurix shall be filed, or any case or proceeding shall be commenced, under any applicable bankruptcy or insolvency laws now or hereafter existing, against Azurix, or any receiver, administrator, custodian, liquidator or trustee shall be appointed for Azurix or for all or any part of the property of Azurix and such case or proceeding shall remain undismissed for a period of sixty (60) days, or any order for relief shall be entered in a proceeding with respect to Azurix under the provisions of applicable bankruptcy or insolvency laws;
(c) Azurix shall (i) default in any payment of principal of or interest of any material Indebtedness, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created, or (ii) defaults in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity date; or
(d) Azurix shall fail to perform any material covenant set forth herein or in the Control Agreement within fifteen (15) days after being provided notice of such failure.
“Face Amount” shall mean 35% of the Purchase Price, less any disbursements validly made pursuant to Section 6(a) hereof; provided,however, that in no event shall the Face Amount exceed $60.0 million.
“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Guarantee” shall have the meaning given such term in the second recital of this Agreement.
“Guarantee Period” shall mean the period commencing on the date hereof and ending on the date thirty (30) days after the full and final discharge of the Guarantee, so long as no claims against Enron, as Guarantor, are outstanding thereunder or, if earlier, the date of termination of this Agreement pursuant to Section 20 hereof.
“Guaranteed Parties” shall have the meaning given such term in the first recital of this Agreement.
“Guarantee Proceeding” shall have the meaning given such term in Section 9(a) of this Agreement.
“Indebtedness” shall mean all obligations for borrowed money and all obligations of any person evidenced by bonds, debentures, notes or similar instruments.
“Lien” shall have the meaning given such term in the Purchase Agreement.
“Litigation” shall have the meaning given such term in Section 10(a)(v) of this Agreement.
“Permitted Investments” shall mean those categories of investments listed on Exhibit B; provided, however, that no investment shall be a “Permitted Investment” unless it is a financial asset under Article 8 of the Uniform Commercial Code.
“Purchase Agreement” shall have the meaning given such term in the first recital of this Agreement.
“Purchase Price” shall have the meaning given such term in the Purchase Agreement.
“Solvent” means, with respect to any Person (including a corporation, partnership or other entity), as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition (i) “debt” means liability on a “claim,” and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
2. Guarantee and Disbursement Obligation Enron will promptly deliver the Guarantee, substantially in the form and substance attached hereto asExhibit C, to the Guaranteed Parties upon receipt of evidence of the creation and funding of the Account by Azurix and of the execution of the Control Agreement by Azurix and the Approved Securities Intermediary, in each case in accordance with Section 3. Azurix will promptly reimburse Enron for any amounts owed or actually paid by Enron (subject to Section 9 hereof) to the Guaranteed Parties pursuant to the Guarantee; provided, however, that any payments made by Azurix to Enron in reimbursement of amounts owed or payments made by Enron to the Guaranteed Parties shall derive first from the Account.
3. Funding of Account and Pledge.
(a) Funding. Azurix agrees to deposit on the date hereof, cash or other Permitted Investments valued in the aggregate at Fifty-Six Million One Hundred Seventy-Three Thousand and Two Hundred Seventy-One Dollars ($56,173,271) to the Account, which sum equals 101% of the Face Amount as of the date hereof. Azurix further agrees that it shall be solely responsible for any Deficiency and that it shall deposit, on any date on which a Deficiency exists, such amount of cash or other Permitted Investments to cure such Deficiency; provided, however, that such Deficiency shall first be cured, to the extent possible, by the retention in the Account of interest or dividends otherwise payable to Azurix pursuant to Section 6(b) hereof.
(b) Control Agreement. Azurix agrees on the date hereof to execute the Control Agreement and to cause the Approved Securities Intermediary to execute the Control Agreement. Enron agrees to execute on the date hereof the Control Agreement.
(c) Pledge. Azurix hereby pledges, assigns and grants to Enron a first priority security interest in all of Azurix’s right, title and interest in the Collateral to secure the prompt payment and performance of the reimbursement obligation in Section 2. The security interest of Enron under this Agreement extends to all Collateral of the kind described in the definition thereof that may be deposited in the Account at any time during the continuation of this Agreement and all proceeds thereof; provided, however, that, to the extent of any disbursements from the Account made pursuant to the terms hereof, the security interest granted herein shall be deemed released; provided, further, that any release shall be deemed null and void, and the security interest granted herein shall reattach to the Collateral, in the event and to the extent any disbursements are required to be returned to Azurix, including as a result of forced disgorgement by a Governmental Authority. Azurix specifically agrees to deliver to the Approved Securities Intermediary all Collateral consisting of Instruments and certificated securities, in each case properly endorsed for transfer to the Approved Securities Intermediary or in blank.
4. Management of Account During the Guarantee Period. Enron will manage the Account in accordance with the disbursement instructions in Section 6 and the investment instructions in Section 7. Enron and Azurix agree that the ownership of the Account and of the Collateral will remain with Azurix, subject to the disbursement instructions in Section 6, the security interest granted in Section 3, and the terms of the Control Agreement.
5. Compensation for Guarantee.
(a) Administrative Fee. Azurix will pay Enron an annual administrative fee of $2,500, payable on each of (i) the date the Account is funded pursuant to Section 3, (ii) November 7, 2003, and (iii) November 7, 2004, in each case so long as the Agreement has not been terminated as of such date; provided, however, that Enron shall refund to Azurix, upon termination of this Agreement on any day other than November 7, 2003 or November 7, 2004, the portion of the prepaid administrative fee for the year during which the termination occurred, an amount determined by multiplying $2,500 by a fraction, the numerator of which is the number of days unexpired in the yearly period, and the denominator of which is 365.
(b) Guarantee Fee. Azurix will pay Enron a guarantee fee calculated, and payable in arrears, on the last business day of each quarter during the term of this Agreement commencing with the quarter ending June 30, 2003 (prorated to be payable for the number of days in the quarter for which the Guarantee was outstanding), equal to the product obtained by multiplying 1.75% of the average daily balance of the Face Amount of the Guarantee during the immediately preceding quarter by 90/360; provided that, for purposes of this calculation, the average daily balance of the value of the cash and Permitted Investments held in the Account will not exceed 100% of the Face Amount; provided, further that, Azurix shall pay Enron, upon termination of this Agreement on any day other than the last day of a quarter, as the guarantee fee for the quarter during which the termination occurred, an amount determined in accordance with the foregoing calculation, except that in lieu of 90/360, the fraction would equal the number of days that have expired in the quarter, as of the termination date, divided by 360.
6. Disbursement Instructions During Guarantee Period. Amounts from the Account (either as a disbursement of cash held in the Account or proceeds from the sale of other assets held in the Account) during the Guarantee Period will be disbursed by Enron giving instructions to the Approved Securities Intermediary to disburse funds to Azurix or Enron, as applicable, in accordance with the disbursement instructions set fort in this Section 6. During the Guarantee Period, neither party will have access to the Collateral for any purpose other than as permitted by these disbursement instructions.
(a) Withdrawal/Reimbursement Obligation. If Enron owes or has already paid any amounts to the Guaranteed Parties pursuant to the Guarantee during the Guarantee Period, Enron may give instructions to the Approved Securities Intermediary to withdraw from the Account and disburse to Enron that same amount of cash (or to sell other assets in the Account and distribute the proceeds thereof) in satisfaction of Azurix’s reimbursement obligation under Section 2. If Azurix pays any amounts to the Guaranteed Parties under the indemnity obligation in Section 10 of the Purchase Agreement (subject to Section 9 hereof), and if such payment reduces the notional amount of the Guarantee, upon receipt from Azurix of reasonable evidence of such payment and reduction of the Guarantee, Enron will instruct the Approved Securities Intermediary to disburse to Azurix from the Account the amount of cash by which the notional amount of the Guarantee has been reduced, up to the full amount of any payment made by Auzrix.
(b) Interest. So long as there is no Deficiency in the Account (in which case interest and dividends will first be used to cure any such Deficiency), Enron will instruct the Approved Securities Intermediary to disburse to Azurix from the Account all interest and dividends earned on the assets held in the Account on a quarterly basis in arrears commencing with the quarter ending June 30, 2003. Enron will instruct the Approved Securities Intermediary to deduct from the amount to be disbursed to Azurix, and instruct the Approved Securities Intermediary to pay to Enron, the administrative fee in accordance with Section 5(a) and the guarantee fee in accordance with Section 5(b).
(c) Purchase Price Adjustment. If the Purchase Price increases as a result of the Purchase Price adjustment called for in the Purchase Agreement, Azurix will deposit in the Account the amount required for the value of the cash and Permitted Investments held in the Account to equal the Face Amount (as so adjusted). If the Purchase Price decreases as a result of the Purchase Price adjustment called for in the Purchase Agreement, Enron will instruct the Approved Securities Intermediary to disburse to Azurix from the Account the amount required for the value of the cash and Permitted Investments held in the Account to equal the Face Amount (as so adjusted), provided that no administrative or guarantee fees are owed, in which case, they will be deducted from such amount to be disbursed.
7. Investment Instructions During the Guarantee Period. During the Guarantee Period, the Account may be invested only in Permitted Investments.
8. Disbursement Instructions Upon Termination of the Guarantee Period.
Upon termination of the Guarantee Period, so long as Azurix has discharged its obligations under Section 2 hereof, Enron shall provide the Shifting Control Notice (as such term is defined in the Control Agreement) to the Approved Securities Intermediary in accordance with Section 2 of the Control Agreement, and Azurix will manage the Account and will have sole authority to direct the investment and disbursement of the Account including, but not limited to, liquidation of the Account and distribution of the proceeds to Azurix.
9. Notice and Joint Defense.
(a) Notice. Enron will notify Azurix promptly after receipt of a demand for payment from either of the Guaranteed Parties under the Guarantee; and Azurix will notify Enron promptly after receipt of a notice of an indemnity claim or other claim for payment under the Purchase Agreement from either of the Guaranteed Parties (any such demand or claim by the Guaranteed Parties is referred to as a “Guarantee Proceeding”).
(b) Joint Defense. Enron and Azurix will use commercially reasonable efforts to defend against any Guarantee Proceeding and to do so in a cooperative manner, including by taking steps necessary to join the other party in the Guarantee Proceeding if such other party is not yet a party thereto and desires to be a party thereto. Enron will have the right to participate in, or, by giving written notice to Azurix, to assume, the defense of any Guarantee Proceeding at Azurix’s expense and with Enron’s choice of counsel. Azurix will cooperate in good faith in such defense (and shall be permitted to participate at its own expense). Notwithstanding the foregoing, each party may hire its own separate counsel (at Azurix’s expense) to defend itself in the Guarantee Proceedings and may assert a separate defense if either party shall have been advised by such counsel that there is one or more legal defenses available to it that are different from or additional to those available to the other. Without the prior written consent of Enron or Azurix, as applicable, which consent shall not be unreasonably withheld, neither Azurix nor Enron will enter into any settlement of any claim (or make any payments or distributions on claims) made against it pursuant to the Purchase Agreement.
10. Representations and Warranties.
(a) Azurix makes the following representations and warranties:
(i) Azurix is a corporation duly incorporated, validly existing and in good standing in the State of Delaware and has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(ii) This Agreement has been duly approved by all necessary corporate action of Azurix, has been executed by a duly authorized officer of Azurix, and, constitutes a valid and binding agreement of Azurix enforceable against Azurix in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws now or hereinafter in effect relating to or affecting creditors’ rights generally, by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) or the discretion of the court before which any proceeding therefor may be brought. No authorization, consent, approval, or other action by, and no notice to or filing with any Governmental Authority is required for (a) the due execution, delivery and performance by Azurix of this Agreement or (b) the grant by Azurix or the perfection of the security interest granted by this Agreement (other than the execution and delivery of the Control Agreement). Assuming execution and delivery by all the parties thereto of the Control Agreement, the pledge of the Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Collateral, securing payment of the reimbursement obligation in Section 2, superior and prior to the rights of all other Persons therein and subject to no other Liens.
(iii) The execution, delivery, and performance by Azurix of this Agreement does not violate, conflict with, or cause a default under the articles of incorporation or bylaws of Azurix, any applicable law or regulation, any court order or administrative ruling or decree to which Azurix is a party or any of its property is subject, or any agreement, contract, indenture, or other binding arrangement to which Azurix is a party or any of its property is subject.
(iv) Azurix is the legal and beneficial owner of the Collateral (and is the Entitlement Holder of all Collateral constituting Investment Property held in the Account) free and clear of any Lien, except for the security interest created by this Agreement, and has the full right, power and authority to pledge, assign and grant a first priority security interest in the Collateral. No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Collateral or any part thereof. Other than the Control Agreement, there are no agreements entered into between the Approved Securities Intermediary, on the one hand, and Azurix or any of its affiliates, on the other hand, with respect to the Collateral. All Collateral held by a Securities Intermediary (as defined in the Uniform Commercial Code) is in a Control Account (as defined in the Uniform Commercial Code).
(v) No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of Azurix, threatened against Azurix, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, “Litigation”) that challenges Azurix’s right or power to enter into or perform any of its obligations under this Agreement or the Control Agreement, or the validity or enforceability of this Agreement or the Control Agreement or any action taken thereunder. Except as set forth on Schedule 8(a)(v) hereto, there is no Litigation pending or threatened that seeks damages in excess of $50,000 or injunctive relief against, or alleges criminal misconduct of, Azurix.
(vi) Both before and after giving effect to the transactions contemplated hereby and by the Control Agreement, to the best knowledge and belief of Azurix, Azurix is and will be Solvent.
(vii) Azurix’s balance sheet at December 31, 2002 is true and correct in all material respects and has been prepared in accordance with generally accepted accounting principles.
(b) Enron makes the following representations and warranties:
(i) Enron is a corporation duly incorporated, validly existing and in good standing in the State of Oregon and has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(ii) This Agreement has been duly approved by all necessary corporate action of Enron, including any necessary approval of the bankruptcy court having jurisdiction over the Enron bankruptcy proceeding, has been executed by duly authorized officers of Enron, and constitutes a valid and binding agreement of Enron.
(iii) The execution, delivery, and performance by Enron of this Agreement does not violate, conflict with, or cause a default under the articles of incorporation or bylaws of Enron, any applicable law or regulation, any court order or administrative ruling or decree to which Enron is a party or any of its property is subject, or any agreement, contract, indenture, or other binding arrangement to which Enron is a party or any of its property is subject.
11. Covenants. Azurix and Enron, as applicable, will at all times comply with the covenants and agreements contained in this Section 11, from the date hereof and for so long as this Agreement has not been terminated:
(a) Sale, Disposition or Encumbrance of Collateral
Azurix will not encumber any of the Collateral or create any Lien on or in respect of the Collateral (or permit or suffer any of the Collateral to be encumbered or permit or suffer to exist any Lien on any of the Collateral) or sell, pledge, assign, lend or otherwise dispose of or transfer (except as permitted by Enron in accordance with the disbursement instructions) any of the Collateral to or in favor of any person other than Enron.
(b) Delivery. Enron shall deliver to Azurix copies of any disbursement instructions given to the Approved Securities Intermediary in accordance with Section 6 of this Agreement. Enron shall confer with Azurix concerning the compliance with Sections 6 and 7 of this Agreement of any disbursement instructions prior to giving such instructions to the Approved Securities Intermediary.
(c) Further Assurances. Each of Azurix and Enron shall execute and deliver all such assignments, instruments, financing statements, endorsements, requests and instructions to register transfer or other documents and give further assurances and do all other acts and things as the other party may reasonably request or as may be necessary or desirable to perfect and maintain a valid, enforceable, first priority, perfected security interest in and control of the Collateral for the benefit of Enron as described herein, all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law, and to protect, enforce, or otherwise give effect to Enron’s rights and remedies hereunder. Azurix will pay any applicable filing fees, recordation taxes and related expenses relating to the perfection of Enron’s security interest in the Collateral. Azurix hereby authorizes Enron to file any such financing statements without the signature of Azurix where permitted by law.
(d) Settlement Negotiations. During the term of this Agreement, Azurix will provide to Enron weekly updates with regard to settlement negotiations with the Guaranteed Parties.
12. Event of Default. Upon an Event of Default, Enron shall have the right to:
(a) reduce any claim to judgment; or
(b) exercise any and all rights afforded by the laws of any applicable jurisdiction, including, without limitation, those under the Uniform Commercial Code, or as otherwise afforded by any agreement or by any other laws or equity, or otherwise.
13. Notice. All notices and other communications hereunder shall be in writing and shall be deemed to have been validly served, given or delivered when transmitted by facsimile transmission facilities, and addressed to the party to be notified as follows:
If to Azurix:
Azurix Corp. 1400 Smith Street Houston, Texas 77002 Attention: General Counsel Telecopy: (713) 345-5330
Copy to:
King Spalding 1100 Louisiana, Suite 4000 Houston, Texas 77002 Attention: Randolph C. Coley Telecopy: (713) 751-3290
If to Enron:
Enron Corp. 1400 Smith Street Houston, Texas 77002 Attention: General Counsel Telecopy: (713) 646-6227
Copy to:
Weil, Gotshal Manges LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201 Attention: Robert C. Feldman Facsimile: (214) 746-7777
or to such other address as each party may designate for itself by like notice.
14. Amendment or Waiver. This Agreement may be changed, waived, discharged or terminated only by a writing signed by the parties hereto. No delay or omission by any party in exercising any right with respect hereto shall operate as a waiver. A waiver on any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion.
15. Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
16. Governing Law. This Agreement, the rights and obligations of the parties, and any claims arising hereunder, whether tort-based or otherwise, shall be construed and interpreted in accordance with the internal laws of the State of New York without giving effect to the conflict of laws principles thereof. THIS AGREEMENT IS ENTERED INTO BY THE PARTIES IN RELIANCE UPON THE FACT THAT (a) THE PARTIES AGREE TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT IN THE SOUTHERN DISTRICT OF NEW YORK WHICH IS PRESIDING OVER IN RE ENRON CORP., ET AL, CASE NO. 01-16034 (AJG) FOR ANY AND ALL DISPUTES, CONTROVERSIES, CONFLICTS, LITIGATION OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND (b) ANY LITIGATION OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT WILL BE COMMENCED ONLY IN THE COURT, IN EACH CASE FOR SO LONG AS THE COURT IS PRESIDING OVER IN RE ENRON CORP., ET AL, CASE NO. 01-16034 (AJG).
17. Entire Agreement. This Agreement, together with the Control Agreement, constitutes the entire agreement between the parties relating to the holding, investment and disbursement of the Collateral and sets forth in their entirety the obligations and duties of the parties with respect to the Collateral.
18. Binding Effect. All of the terms of this Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the respective heirs, successors and permitted assigns of Azurix and Enron; provided, however, that no party hereto shall transfer or assign this Agreement without the prior written consent of the other party hereto.
19. Execution in Counterparts. This Agreement may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement or direction.
20. Termination.
(a) This Agreement shall terminate and neither party shall have any further obligation or liability whatsoever with respect to this Agreement or the Collateral after the first to occur of: (i) the mutual written agreement of Azurix and Enron or (ii) the expiration of the Guarantee Period; provided, however, that this Agreement shall be automatically reinstated to the extent the Guarantee is reinstated, and shall remain in full force and effect until such time as the Guarantee is no longer in effect (and has not been reinstated); provided, further, that the parties shall take all actions necessary to effect the reinstatement of the terms of this Agreement (including the reinstatement of the Account) upon such event.
(b) Notwithstanding the foregoing, no termination of this Agreement shall affect: (i) the binding nature and enforceability of Sections 9, 13, 16 and 20, or (ii) any claim or cause of action of any party hereto that existed prior to, or at any time of, such termination.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
AZURIX CORP.
By:___________________________ Name:_________________________ Title:________________________
ENRON CORP.
By:___________________________ Name:_________________________ Title:________________________
EXHIBIT A CONTROL AGREEMENT EXHIBIT B PERMITTED INVESTMENTS EXHIBIT C GUARANTEE EXHIBIT 3 BLOCKED ACCOUNT CONTROL AGREEMENT (“Shifting Control”)
AGREEMENT dated as of __________, 2003, by and among Azurix Corp., a Delaware corporation (“Company”), Enron Corp., an Oregon corporation (“Secured Party”) and JPMorgan Chase Bank (“Securities Intermediary”).
The parties hereto refer to Account No. _____, in the name of Company maintained at Securities Intermediary (the “Account”) and hereby agree as follows:
1. Company and Secured Party notify Securities Intermediary that by separate agreement Company has granted Secured Party a security interest in the Account and all assets held from time to time therein (the “Collateral”). Securities Intermediary acknowledges being so notified.
2. As of and from the date of this Agreement (and without Company’s or any other person’s consent), Securities Intermediary shall exclusively honor all written or electronic withdrawal, payment, transfer or other fund disposition or other instructions (including Entitlement Orders, as defined in the Uniform Commercial Code) which Secured Party is entitled to give under the Account Documentation (as hereinafter defined) (collectively, “instructions”), as given by any two Authorized Representatives of Secured Party (but not those from Company) concerning the Account, and Company shall have no right or ability to access or withdraw or transfer funds from the Account or otherwise to give instructions (as previously defined); provided, however, Securities Intermediary shall not allow the Account to be classified as anything but a money market account. Upon receipt of a notice, signed on behalf of both Secured Party and Company, in substantially the same form as Exhibit A hereto (a “Shifting Control Notice”), Securities Intermediary shall honor all instructions which Company is entitled to give under the Account Documentation (as hereinafter defined) (collectively, “instructions”) received from Company (but not those from Secured Party) concerning the Account. The parties hereto expressly agree that no term or provision of the Account Documentation shall alter the obligations of the Securities Intermediary hereunder to accept instructions from only that party from whom the Securities Intermediary is allowed to take instructions hereunder.
For the purposes hereof, the term “Authorized Representatives of Secured Party” shall refer in the singular to Mary Perkins, Cathy Moehlman, Sam Round, Carol McSpadden, Robin Veariel or Ray Bowen. In the event that Secured Party shall find it advisable to designate a replacement for any of its Authorized Representatives, written notice of any such replacement shall be given to Securities Intermediary and Company.
3. Securities Intermediary will provide to Secured Party, with a duplicate copy to Company, statements in accordance with the Account Documentation.
4. Securities Intermediary acknowledges that it has not received any notice of any other security interest in the Collateral. In the event any such notice is received, Securities Intermediary shall promptly notify Secured Party. Company herein represents that the Collateral is free and clear of any lien or encumbrance and agrees that, with the exception of the security interest granted to Secured Party, no lien or encumbrance shall be placed by it on the Collateral without the express written consent of both Secured Party and Securities Intermediary.
5. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and it and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, and the law of Securities Intermediary’s jurisdiction for the purposes of Section 8-110 of the Uniform Commercial Code in effect in the State of New York (the “UCC”) shall be, the law of the State of New York. Securities Intermediary shall treat all property at any time held by Securities Intermediary in the Account as financial assets within the meaning of the UCC. Securities Intermediary acknowledges that this Agreement constitutes written notification to Securities Intermediary, pursuant to the UCC and any applicable federal regulation for the Federal Reserve Book Entry System, of Secured Party’s security interest in the Collateral. Company, Secured Party and Securities Intermediary are entering into this Agreement to provide for Secured Party’s control of the Collateral and to confirm the first priority of Secured Party’s security interest in the Collateral. Securities Intermediary agrees to promptly make and thereafter maintain all necessary entries or notations in its books and records to reflect Secured Party’s security interest in the Collateral.
6. This Agreement supplements, rather than replaces, Securities Intermediary’s account agreement, terms and conditions and other standard documentation in effect from time to time with respect to the Account or services provided in connection with the Account (the “Account Documentation”), which Account Documentation will continue to apply to the Account and such services, and the respective rights, powers, duties, obligations, liabilities and responsibilities of the parties thereto and hereto, to the extent not expressly conflicting with the provisions of this Agreement (however, in the event of any such conflict, the provisions of this Agreement shall control). Secured Party may request Securities Intermediary to provide other services (such as automatic daily transfers) with respect to the Account until a Shifting Control Notice is given; however, if such services are not authorized or otherwise covered under the Account Documentation, Securities Intermediary’s decision to provide any such services shall be made in its sole discretion (including without limitation being subject to Company and/or Secured Party executing such Account Documentation or other documentation as Securities Intermediary may require in connection therewith).
7. Securities Intermediary agrees not to exercise or claim any right of offset, banker’s lien or other like right against the Account or the Collateral for so long as this Agreement is in effect (and waives and releases all security interests, liens, encumbrances, claims, rights of set off or other similar rights Securities Intermediary may have) except with respect to (i) returned or charged-back items, (ii) reversals or cancellations of payment orders and other electronic fund transfers, (iii) Securities Intermediary’s charges, fees and expenses with respect to the Account or the services provided hereunder in accordance with the fee arrangement in effect from time to time pursuant to Section 11 or (iv) overdrafts in the Account. Securities Intermediary further agrees that, for so long as this Agreement is in effect, it shall not invade the Account or the Collateral to cover margin debits or calls in any other accounts of Company.
8. Notwithstanding anything to the contrary in this Agreement: (i) Securities Intermediary shall have only the duties and responsibilities with respect to the matters set forth herein as is expressly set forth in writing herein and shall not be deemed to be an agent, bailee or fiduciary for any party hereto; (ii) Securities Intermediary shall be fully protected in acting or refraining from acting in good faith without investigation on any notice (including without limitation a Shifting Control Notice), instruction or request purportedly furnished to it by Company or Secured Party in accordance with the terms hereof, in which case the parties hereto agree that Securities Intermediary has no duty to make any further inquiry whatsoever; (iii) it is hereby acknowledged and agreed that Securities Intermediary has no knowledge of (and is not required to know) the terms and provisions of the separate agreement referred to in paragraph 1 above or any other related documentation or whether any actions by Secured Party (including without limitation the sending of a Shifting Control Notice), Company or any other person or entity are permitted or a breach thereunder or consistent or inconsistent therewith, (iv) Securities Intermediary shall not be liable to any party hereto or any other person for any action or failure to act under or in connection with this Agreement except to the extent such conduct constitutes its own willful misconduct or gross negligence (and to the maximum extent permitted by law, shall under no circumstances be liable for any incidental, indirect, special, consequential or punitive damages); and (v) Securities Intermediary shall not be liable for losses or delays caused by force majeure, interruption or malfunction of computer, transmission or communications facilities, labor difficulties, court order or decree, the commencement of bankruptcy or other similar proceedings or other matters beyond Securities Intermediary’s reasonable control.
9. Company hereby agrees to indemnify, defend and save harmless Securities Intermediary against any loss, liability or expense (including reasonable fees and disbursements of counsel who may be an employee of Securities Intermediary) (collectively, “Covered Items”) incurred in connection with this Agreement or the Account (except to the extent due to Securities Intermediary’s willful misconduct or gross negligence) or any interpleader proceeding relating thereto or incurred (i) at Company’s or Secured Party’s direction or instruction (including without limitation Securities Intermediary’s honoring of a Shifting Control Notice) or (ii) due to any claim by Secured Party of an interest in the Account or the assets held therein.
10. Securities Intermediary may terminate this Agreement (a) in its discretion upon the sending of at least thirty (30) days’ advance written notice to the other parties hereto or (b) because of a material breach by Company or Secured Party of any of the terms of this Agreement or the Account Documentation, upon the sending of at least five (5) days advance written notice to the other parties hereto. Upon expiration of such 30— or 5-day notice period, Securities Intermediary shall be under no further obligation except to (i) hold the Collateral in accordance with the terms of this Agreement, pending receipt of written instructions from Company and Secured Party, jointly, regarding the further disposition of the Collateral or (ii) interplead the Collateral into the Bankruptcy Court for further disposition. Notwithstanding the foregoing, no termination of this Agreement shall affect any claim or cause of action of any party hereto that existed prior to, or at any time of, such termination. This Agreement may be terminated at any time by mutual written consent of Secured Party and Company with notice to Securities Intermediary. In addition, this Agreement shall terminate upon receipt by Securities Intermediary of notice, signed on behalf of both Secured Party and Company as to the expiration or termination of the Guarantee, dated as of the date hereof, made by Enron Corp. for the benefit of American Water Services, Inc. and American Water Works Company, Inc. (the “Guarantee”) and the lapse of the Guarantee Period (as defined in the Collateral Reimbursement and Security Agreement, dated as of the date hereof, by and between Company and Secured Party. Any amendment or waiver of this Agreement shall be effected solely by an instrument in writing executed by all the parties hereto. The provisions of paragraphs 8 and 9 above shall survive any such termination. No termination of this Agreement shall affect any claim or cause of action of any party hereto that existed prior to, or at any time of, such termination.
11. Company shall compensate Securities Intermediary for the opening and administration of the Account and services provided hereunder in accordance with the fee arrangement between Securities Intermediary and Secured Party as agreed from time to time, with consent from Company, not to be unreasonably withheld.
12. This Agreement: (i) may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument; and (ii) shall become effective when counterparts hereof have been signed and delivered by the parties hereto. If any term or provision of this Agreement is determined to be invalid or unenforceable, the remainder of this Agreement shall be construed in all respects as if the invalid or unenforceable term or provision were omitted. All notices under this Agreement shall be in writing and sent (including via facsimile transmission) to the parties hereto at their respective addresses or fax numbers set forth below (or to such other address or fax number as any such party shall designate in writing to the other parties from time to time).
13. Governing Law. This Agreement, the rights and obligations of the parties, and any claims arising hereunder, whether tort-based or otherwise, shall be construed and interpreted in accordance with the internal laws of the State of New York without giving effect to the conflict of laws principles thereof. THIS AGREEMENT IS ENTERED INTO BY THE PARTIES IN RELIANCE UPON THE FACT THAT (a) THE PARTIES AGREE TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT IN THE SOUTHERN DISTRICT OF NEW YORK (THE “BANKRUPTCY COURT”) WHICH IS PRESIDING OVER IN RE ENRON CORP., ET AL, CASE NO. 01-16034 (AJG) FOR ANY AND ALL DISPUTES, CONTROVERSIES, CONFLICTS, LITIGATION OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND (b) ANY LITIGATION OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT WILL BE COMMENCED ONLY IN THE COURT, IN EACH CASE FOR SO LONG AS THE COURT IS PRESIDING OVER IN RE ENRON CORP., ET AL, CASE NO. 01-16034 (AJG).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.
AZURIX CORP.
By: ______________________ Name: Title:
Address for Notices: Azurix Corp. 1400 Smith Street Houston, Texas 77002 Attn: General Counsel Fax No.: (713) 345-5330
JPMORGAN CHASE BANK
By: ______________________ Name: Title:
Address For Notices JPMorgan Chase Bank [Address] Attention: _______________ Fax No.: _________________
ENRON CORP.
By: ______________________ Name: Title:
Enron Corp. 1400 Smith Street Houston, Texas 77002 Attn: General Counsel Fax No.: (713) 646-6227
EXHIBIT A BLOCKED ACCOUNT AGREEMENT SHIFTING CONTROL NOTICE
_______________, ___
JPMorgan Chase Bank [Address] Attention: __________
Re: Blocked Account Control Agreement dated as of __________, 2003 (the “Agreement”) by and among Azurix Corp., Enron Corp., and JPMorgan Chase Bank
Ladies and Gentlemen:
This constitutes a Shifting Control Notice as referred to in paragraph 2 of the Agreement, a copy of which is attached hereto.
ENRON CORP. By: __________________________ Signature
______________________________ Name
______________________________ Title:
AZURIX CORP. By: _____________ Signature
______________________________ Name
______________________________ Title: