<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
ENRON CORP.
ENRON BW CORP.
and
AZURIX CORP.
dated as of
December 15, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I..........................................................................................................1
Section 1.1 The Merger.......................................................................................1
Section 1.2 Effective Time...................................................................................1
Section 1.3 Effects of the Merger............................................................................2
Section 1.4 Certificate of Incorporation and By-Laws of the Surviving Corporation............................2
Section 1.5 Directors........................................................................................2
Section 1.6 Officers.........................................................................................2
Section 1.7 Conversion of Merger Sub Common Stock............................................................2
Section 1.8 Conversion of Shares.............................................................................2
Section 1.9 Options; Stock Plans.............................................................................3
Section 1.10 No Fractional Shares.............................................................................3
Section 1.11 Stockholders' Meeting; SEC Filings...............................................................3
Section 1.12 Closing..........................................................................................4
ARTICLE II.........................................................................................................5
Section 2.1 Dissenting Shares................................................................................5
Section 2.2 Payment for Shares...............................................................................5
ARTICLE III........................................................................................................6
Section 3.1 Organization and Qualification; Subsidiaries.....................................................6
Section 3.2 Capitalization; Subsidiaries.....................................................................7
Section 3.3 Authority........................................................................................7
Section 3.4 No Conflict; Required Filings and Consents.......................................................8
Section 3.5 SEC Reports and Financial Statements.............................................................9
Section 3.6 Information.....................................................................................10
Section 3.7 Absence of Certain Changes......................................................................10
Section 3.8 Brokers.........................................................................................10
Section 3.9 Determination of Special Committee; Recommendation of Company Board;
Opinions of Financial Advisors..................................................................10
ARTICLE IV........................................................................................................11
Section 4.1 Organization and Qualification..................................................................11
Section 4.2 Authority.......................................................................................11
Section 4.3 No Conflict; Required Filings and Consents......................................................11
Section 4.4 Information.....................................................................................12
Section 4.5 Financing; Ownership of Merger Sub Common Stock.................................................13
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V.........................................................................................................13
Section 5.1 Conduct of Business of the Company..............................................................13
Section 5.2 Access to Information...........................................................................15
Section 5.3 Reasonable Best Efforts.........................................................................15
Section 5.4 Public Announcements............................................................................16
Section 5.5 Indemnification.................................................................................16
Section 5.6 Notification of Certain Matters.................................................................17
Section 5.7 Company Board Recommendation....................................................................18
Section 5.8 Exchange of Credit Agreement Obligations; Indenture.............................................18
Section 5.9 Employee Benefits...............................................................................19
ARTICLE VI........................................................................................................19
Section 6.1 Conditions to Obligations of Each Party under this Agreement....................................19
Section 6.2 Conditions to Obligations of Parent and Merger Sub under this Agreement.........................19
Section 6.3 Conditions to Obligation of the Company under this Agreement....................................20
ARTICLE VII.......................................................................................................20
Section 7.1 Termination.....................................................................................20
Section 7.2 Effect of Termination...........................................................................21
Section 7.3 Fees and Expenses...............................................................................21
Section 7.4 Amendment.......................................................................................21
Section 7.5 Extension; Waiver...............................................................................22
ARTICLE VIII......................................................................................................22
Section 8.1 Non-Survival of Representations and Warranties..................................................22
Section 8.2 Entire Agreement; Assignment....................................................................22
Section 8.3 Validity........................................................................................22
Section 8.4 Notices.........................................................................................22
Section 8.5 Governing Law...................................................................................24
Section 8.6 Descriptive Headings............................................................................24
Section 8.7 Counterparts....................................................................................24
Section 8.8 Parties in Interest.............................................................................24
Section 8.9 Certain Definitions.............................................................................24
Section 8.10 Specific Performance............................................................................25
Section 9.11 Causing Subsidiaries............................................................................25
</TABLE>
-ii-
<PAGE> 4
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Location
------------ --------
<S> <C>
affiliate...............................................................................................Section 8.9
Adverse Company Board Determination.....................................................................Section 5.7
Adverse Special Company Determination...................................................................Section 5.7
Cash Payments...........................................................................................Section 1.9
Certificates............................................................................................Section 2.2
Certificate of Designations.............................................................................Section 3.4
Closing................................................................................................Section 1.12
Closing Date...........................................................................................Section 1.12
Code....................................................................................................Section 3.7
Company Board................................................................................Introductory Paragraph
Company Disclosure Schedule.............................................................................Section 1.9
Consent.................................................................................................Section 3.4
control.................................................................................................Section 8.9
Credit Agreement........................................................................................Section 5.8
Dissenting Shares.......................................................................................Section 2.1
Effective Time..........................................................................................Section 1.2
Employee Benefit Arrangement............................................................................Section 5.1
ERISA...................................................................................................Section 3.7
Exchange Act............................................................................................Section 3.4
GAAP....................................................................................................Section 3.5
GCL..........................................................................................Introductory Paragraph
Governmental Entity.....................................................................................Section 3.4
HSR Act.................................................................................................Section 3.4
Indemnified Parties.....................................................................................Section 5.5
Indenture...............................................................................................Section 5.8
Lien....................................................................................................Section 3.2
Listed Plan.............................................................................................Section 3.7
Material Adverse Effect.................................................................................Section 3.1
Merger.......................................................................................Introductory Paragraph
Merger Consideration....................................................................................Section 1.8
Merger Sub Common Stock.................................................................................Section 4.5
Minority Approval Condition.............................................................................Section 6.1
Options.................................................................................................Section 1.9
Other Filings...........................................................................................Section 3.6
Parent Disclosure Schedule...............................................................................Article IV
Parent Knowledge Parties................................................................................Section 8.9
Parent Representatives..................................................................................Section 5.2
Paying Agent............................................................................................Section 2.2
Person..................................................................................................Section 8.9
person..................................................................................................Section 8.9
Preferred Stock.........................................................................................Section 3.2
Proxy Statement........................................................................................Section 1.11
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
Schedule 13E-3.........................................................................................Section 1.11
SEC....................................................................................................Section 1.11
SEC Reports.............................................................................................Section 3.5
Securities Act..........................................................................................Section 3.5
September 30, 2000 Balance Sheet........................................................................Section 3.5
Share...................................................................................................Section 1.8
significant subsidiaries................................................................................Section 3.1
Special Committee............................................................................Introductory Paragraph
Special Meeting........................................................................................Section 1.11
Stock Plans.............................................................................................Section 1.9
subsidiaries............................................................................................Section 8.9
subsidiary..............................................................................................Section 8.9
Support Agreement............................................................................Introductory Paragraph
Surviving Corporation...................................................................................Section 1.1
Surviving Corporation Common Stock......................................................................Section 1.7
Terminating Company Breach..............................................................................Section 7.1
Terminating Parent Breach...............................................................................Section 7.1
Violation...............................................................................................Section 3.4
Voting Debt.............................................................................................Section 3.2
</TABLE>
-iv-
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December
15, 2000, by and among Enron Corp., an Oregon corporation ("Parent"), Enron BW
Corp., a Delaware corporation and an indirect subsidiary of Parent ("Merger
Sub"), and Azurix Corp., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent and Merger Sub
have approved and adopted the merger of Merger Sub with and into the Company, as
set forth below (the "Merger"), in accordance with the General Corporation Law
of the State of Delaware (the "GCL") and upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, upon the execution and delivery of this Agreement, Atlantic
Water Trust, a Delaware business trust ("AWT"), is simultaneously entering into
and delivering a support agreement (the "Support Agreement");
WHEREAS, a special committee (the "Special Committee") of the Board of
Directors of the Company (the "Company Board") has unanimously determined that
the Merger and this Agreement are fair to and in the best interest of the
Company's stockholders (other than AWT and its affiliates);
WHEREAS, the Company Board at a meeting duly called and held has
unanimously determined that the Merger and this Agreement are fair to and in the
best interest of the Company's stockholders (other than AWT and its affiliates),
approved and adopted the Merger and resolved to recommend that the stockholders
of the Company approve and adopt this Agreement and the Merger; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the GCL, at the Effective Time Merger Sub shall
be merged with and into the Company. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation (the "Surviving Corporation").
Section 1.2 Effective Time. At the Closing, the Company shall execute,
in the manner required by the GCL, and deliver to the Secretary of State of the
State of Delaware a duly executed certificate of merger, and the parties shall
take such other and further actions as may be required by
<PAGE> 7
law to make the Merger effective. The time the Merger becomes effective in
accordance with applicable law is referred to as the "Effective Time."
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in the GCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Certificate of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 5.5 of this Agreement, the
By-Laws of the Company in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation until amended in accordance with the provisions
thereof and applicable law.
Section 1.5 Directors. Subject to applicable law, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately following the Effective Time and shall hold
office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
Section 1.6 Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation
immediately following the Effective Time and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
Section 1.7 Conversion of Merger Sub Common Stock. At the Effective
Time, each share of common stock, par value $1.00 per share, of Merger Sub
("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become 1/1000 of a validly issued,
fully paid and non-assessable share of common stock, par value $.01 per share,
of the Surviving Corporation ("Surviving Corporation Common Stock").
Section 1.8 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof, each share
of common stock, par value $.01 per share, of the Company (each, a "Share")
issued and outstanding immediately prior to the Effective Time (other than (i)
any Shares held by Parent, Merger Sub, any wholly owned subsidiary of Parent or
Merger Sub, in the treasury of the Company or by any wholly owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on the
part of the holder thereof, shall be cancelled and retired and shall cease to
exist with no payment being made with respect thereto and (ii) Dissenting
Shares), shall be cancelled and retired and, subject to Section 1.10 relating to
fractional shares, shall be converted into the right to receive 1/39,268,266 of
a share of the Surviving Corporation Common Stock (together with the cash paid
pursuant to Section 1.10 for
-2-
<PAGE> 8
fractional shares, the "Merger Consideration"), payable to the holder thereof,
without interest thereon, upon surrender of the certificate formerly
representing such Share.
Section 1.9 Options; Stock Plans. Prior to execution of this Agreement,
the Company Board (or, if appropriate, one or more committees thereof) has
adopted appropriate resolutions and has taken all other actions necessary or
desirable to provide for the cancellation, effective at the Effective Time, of
all of the outstanding stock options (the "Options") heretofore granted under
any stock option plan of the Company (the "Stock Plans") or under any agreement,
without any payment therefor except as otherwise provided in this Section 1.9.
As of the Effective Time, all Options (whether vested or unvested) shall be
cancelled, to the extent such Options remain outstanding as of immediately prior
to the Effective Time (and to the extent exercisable shall no longer be
exercisable) and shall entitle each holder thereof, in cancellation and
settlement therefor, to a payment, if any, in cash by the Company (less any
applicable withholding taxes), as soon as practicable following the Effective
Time, equal to the product of (i) the total number of Shares subject to such
Option (without regard to whether such Option was vested or unvested) and (ii)
the excess, if any, of $8.375 over the exercise price per Share subject to such
Option (the "Cash Payments"). All Options outstanding as of the date of this
Agreement are listed in Section 3.2 of the disclosure schedule delivered to
Parent by the Company prior to the date hereof (the "Company Disclosure
Schedule"). The Company and Parent agree that the Cash Payments are the sole
payments that will be made with respect to or in relation to the Options. The
Company may take all such steps as may be required to cause the transactions
contemplated by this Section 1.9 and any other dispositions of Company equity
securities (including derivative securities) in connection with this Agreement
by each individual who is a director or officer of the Company to be exempt
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, such steps to be taken in accordance with the No-Action Letter dated
January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
Section 1.10 No Fractional Shares. Notwithstanding anything herein to
the contrary, no certificates of scrip evidencing shares of Surviving
Corporation Common Stock shall be issued in connection with the Merger, and any
such fractional share interests to which a holder of record of a Share
immediately prior to the Effective Time would otherwise be entitled shall not
entitle such holder to vote or to any rights of a stockholder of the Surviving
Corporation. In lieu of any such fractional shares, each holder of record of
Shares at the Effective Time who but for the provisions of this Section 1.10
would be entitled to receive a fractional interest of a share of Surviving
Corporation Common Stock by virtue of the Merger (after aggregating all such
fractional interests attributable to such holder into whole shares and
fractional shares of Surviving Corporation Common Stock) shall be paid $8.375 in
cash without any interest thereon for each Share held of record by such holder
immediately prior to the Effective Time, as hereinafter provided (rounding up
the aggregate cash to be paid such holder, to the extent necessary, to the next
$.01).
Section 1.11 Stockholders' Meeting; SEC Filings.
(a) The Company, acting through the Company Board, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as soon as
practicable following the date hereof, which
-3-
<PAGE> 9
obligation shall not be affected by a change in the Company Board's or
the Special Committee's recommendation of this Agreement or the Merger
pursuant to Section 5.7;
(ii) prepare and file with the Securities and Exchange
Commission ("SEC") as promptly as practicable a preliminary proxy
statement relating to this Agreement, and use its reasonable best
efforts (A) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary proxy
statement and cause a definitive proxy statement (the "Proxy
Statement") to be mailed to its stockholders and (B) to obtain the
necessary approvals of the Merger and adoption of this Agreement by its
stockholders; and
(iii) except as provided otherwise in Section 5.7, include in
the Proxy Statement the recommendation of the Company Board that
stockholders of the Company vote in favor of the approval of the Merger
and adoption of this Agreement.
(b) Each of the parties shall use its reasonable best efforts to
prepare and file with the SEC as promptly as practicable a Schedule 13E-3 (the
"Schedule 13E-3") in connection with the transactions contemplated by this
Agreement and use its reasonable best efforts to obtain and furnish the
information required to be included by the SEC in the Schedule 13E-3 and, after
consultation with each other, to respond promptly to any comments made by the
SEC with respect to the Schedule 13E-3.
(c) Notwithstanding anything to the contrary herein, if an Adverse
Company Board Determination or Adverse Special Committee Determination (as each
such term is defined in Section 5.7) occurs after the satisfaction of the
Minority Approval Condition (as defined in Section 6.1) but before the Closing,
then the Minority Approval Condition shall not be deemed satisfied unless the
Minority Approval Condition shall be satisfied as well at a subsequent special
meeting of stockholders with respect to which such Adverse Company Board
Determination or Adverse Special Committee Determination shall have been
disclosed in the applicable proxy materials. The Company agrees to promptly
call, give notice of, convene and hold such a special meeting of stockholders as
soon as practicable after such Adverse Company Board Determination or Adverse
Special Committee Determination, subject to compliance with the GCL and
applicable securities laws.
Section 1.12 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m., on a date to be specified by the parties, which shall
be as soon as practicable, but in no event later than the third business day,
after satisfaction or waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Vinson & Elkins L.L.P., 2300
First City Tower, 1001 Fannin, Houston, Texas 77002, unless another date or
place is agreed to in writing by the parties hereto.
-4-
<PAGE> 10
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
Section 2.1 Dissenting Shares. Notwithstanding Section 1.8, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262 of the GCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses such holder's right to appraisal. If after the Effective Time such holder
fails to perfect or withdraws or loses such holder's right to appraisal, such
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration. The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of Shares,
and Parent shall have the right to conduct all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, or otherwise negotiate, any such demands.
Section 2.2 Payment for Shares.
(a) From and after the Effective Time, such bank or trust company as
shall be mutually acceptable to Parent and the Company shall act as paying agent
(the "Paying Agent") in effecting the payment of the Merger Consideration in
respect of certificates (the "Certificates") that, prior to the Effective Time,
represented Shares entitled to payment of the Merger Consideration pursuant to
Article I. At the Effective Time, Parent or Merger Sub shall deposit, or cause
to be deposited, in trust with the Paying Agent the aggregate Merger
Consideration to which holders of Shares shall be entitled at the Effective Time
pursuant to Article I.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates a form of letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Merger Consideration in respect thereof. Upon the surrender of
each such Certificate, the Paying Agent shall pay the holder of such Certificate
the Merger Consideration multiplied by the number of Shares formerly represented
by such Certificate, in consideration therefor, and such Certificate shall
forthwith be cancelled. Until so surrendered, each such Certificate (other than
Certificates representing Shares held by Parent or Merger Sub, any wholly owned
subsidiary of Parent or Merger Sub, in the treasury of the Company or by any
wholly owned subsidiary of the Company or Dissenting Shares) shall represent
solely the right to receive the aggregate Merger Consideration relating thereto.
No interest or dividends shall be paid or accrued on the Merger Consideration.
If the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition to such right to receive such Merger
Consideration that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person surrendering such
Shares shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment of the Merger Consideration to a person other than the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such taxes have been paid or are not
applicable.
-5-
<PAGE> 11
(c) Promptly following the date that is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest or dividends thereon.
Notwithstanding the foregoing, none of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered immediately
prior to such date on which any payment pursuant to this Article II would
otherwise escheat to or become the property of any Governmental Entity (as
hereinafter defined), the cash payment in respect of such Certificate shall, to
the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and cancelled in return for the payment of the
aggregate Merger Consideration relating thereto, as provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, except as
set forth by specific reference to the applicable Section of this Article III in
the Company Disclosure Schedule, as follows:
Section 3.1 Organization and Qualification; Subsidiaries. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. Each of the Company's "significant
subsidiaries" (as such term is defined in Rule 1-02 of Regulation S-X of the
SEC) is a corporation or company duly incorporated or organized, validly
existing and (where applicable) in good standing under the laws of the
jurisdiction of its incorporation or organization. The Company and each of its
significant subsidiaries has the requisite corporate power and authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in (where
applicable) good standing, in each jurisdiction in which the nature of its
business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or in
good standing, would not reasonably be expected to have a Material Adverse
Effect on the Company. The term "Material Adverse Effect," as used in this
Agreement, means, with respect to the Company, an effect, change, event,
development or occurrence that has had or will have a material adverse effect on
the financial condition, results of operations, business or assets of the
Company and its subsidiaries taken as a whole excluding (a) matters, effects,
changes, events, developments or occurrences that are known to any of the Parent
Knowledge Parties as of the date
-6-
<PAGE> 12
of this Agreement, and (b) adverse changes in general economic or industry
conditions or in the financial or capital markets.
Section 3.2 Capitalization; Subsidiaries. The authorized capital stock
of the Company consists of 500,000,000 Shares and 50,000,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). As of the close of
business on December 13, 2000, 117,342,939 Shares were issued and outstanding,
all of which are entitled to vote on this Agreement, and 35,660 Shares were held
in treasury. As of the date hereof, there are no shares of Preferred Stock
issued and outstanding. The Company has no shares reserved for issuance, except
that, as of December 13, 2000, there were 7,336,217 Shares reserved for issuance
pursuant to outstanding Options granted under the Stock Plans. Section 3.2 of
the Company Disclosure Schedule sets forth the number, exercise prices and
expiration dates of each grant of outstanding Options. All the outstanding
Shares are, and all Shares that may be issued pursuant to the exercise of
outstanding Options will be, when issued and paid for in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable and are not subject to, nor were they issued in violation of, any
preemptive rights. Except as set forth in Section 3.2 of the Company Disclosure
Schedule, there are no bonds, debentures, notes or other indebtedness having
general voting rights (or convertible into securities having such rights)
("Voting Debt") of the Company or any of its subsidiaries issued and
outstanding. Except as set forth above or in Section 3.2 of the Company
Disclosure Schedule and except for the transactions contemplated by this
Agreement, there are no existing options, warrants, calls, subscriptions or
other rights, agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of the Company or any of its
subsidiaries, obligating the Company or any of its subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, the Company or any
of its subsidiaries or securities convertible into or exchangeable for such
shares or equity interests and neither the Company nor any of its subsidiaries
is obligated to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment. Except as
contemplated by this Agreement, there are no outstanding contractual obligations
of the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any Shares or the capital stock of the Company or any of its significant
subsidiaries. Each of the outstanding shares of capital stock of each of the
Company's subsidiaries held directly or indirectly by the Company is duly
authorized, validly issued, fully paid and nonassessable (except, in the case of
non-United States subsidiaries, for immaterial failures to be such), and, except
as disclosed in the SEC Reports, such shares of the Company's subsidiaries are
owned by the Company or by a subsidiary of the Company in each case free and
clear of any lien, claim, option, charge, security interest, limitation,
encumbrance and restriction of any kind (any of the foregoing being a "Lien").
Set forth in the SEC Reports is a complete and correct list of each significant
subsidiary of the Company.
Section 3.3 Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Company Board and no other corporate proceedings on the part of the Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of this Agreement by the affirmative vote of the holders of a majority
of the then outstanding Shares entitled to vote thereon, to the extent required
-7-
<PAGE> 13
by applicable law and the satisfaction of the Minority Approval Condition and,
with respect to compliance with Section 5.8, the approval by the Company Board
of the Certificate of Designations establishing the preferred stock referred to
in Section 5.8 (the "Certificate of Designations")). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due and
valid authorization, execution and delivery of this Agreement by Parent and
Merger Sub, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, moratorium, reorganization,
receivership or similar laws affecting the rights of creditors generally.
Section 3.4 No Conflict; Required Filings and Consents.
(a) Assuming (i) the filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and the rules and regulations
thereunder (the "HSR Act"), are made and the waiting periods thereunder have
been terminated or have expired, (ii) the requirements of the Securities
Exchange Act of 1934, as amended, including the rules and regulations of the SEC
promulgated thereunder (the "Exchange Act") and any applicable state securities,
"blue sky" or takeover law are met, (iii) the filing of the Certificate of
Designations and the certificate of merger and other appropriate merger
documents, if any, as required by the GCL, is made, (iv) approval of this
Agreement by the holders of a majority of the Shares is received and the
Minority Approval Condition is satisfied, and (v) the filings required under the
competition and foreign investment and other applicable laws, each as set forth
on Section 3.4 of the Company Disclosure Schedule, and the approvals and
consents thereunder have been obtained (or waiting periods thereunder have been
terminated or have expired), except as disclosed in Section 3.4 of the Company
Disclosure Schedule, none of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
or compliance by the Company with any of the provisions hereof will (i) conflict
with or violate the Certificate of Incorporation or By-Laws of the Company or
the comparable organizational documents of any of its significant subsidiaries,
(ii) result in a breach or violation of, a default under or the triggering of
any payment or the increase in any other obligations pursuant to, any of the
Company's existing Employee Benefit Arrangements (as hereinafter defined) or any
grant or award made under any of the foregoing, subject to compliance with
Article I with respect to Options and grants of restricted Shares, (iii)
conflict with or violate any statute, ordinance, rule, regulation, order,
judgment, decree, permit or license applicable to the Company or any of its
subsidiaries, or by which any of them or any of their respective properties or
assets may be bound or affected, or (iv) assuming satisfaction of the condition
set forth in Section 6.1(e), require the consent from or the giving of notice to
a third party pursuant to, result in a violation or breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in any loss of any benefit, the
triggering of any payment by, or the increase in any other obligation of, the
Company or any of its subsidiaries or the creation of any material Lien on any
of the property or assets of the Company or any of its subsidiaries (any of the
foregoing referred to in clause (ii), (iii) or this clause (iv) being a
"Violation") pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of their respective properties may be bound or
affected, except in the case of (ii), (iii) and (iv) for any of the foregoing
-8-
<PAGE> 14
that would not reasonably be expected to have a Material Adverse Effect on the
Company or prevent or materially delay consummation of the transactions
contemplated hereby.
(b) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
or compliance by the Company with any of the provisions hereof will require any
consent, waiver, approval, authorization or permit of, or registration or filing
with or notification to (any of the foregoing with respect to any Governmental
Entity (as hereinafter defined) or any other third party being a "Consent"), any
government or subdivision thereof, domestic or foreign (including supranational)
or any administrative, governmental, legislative or regulatory authority,
agency, commission, tribunal, court or body, domestic or foreign (including
supranational) (a "Governmental Entity"), except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of the Certificate
of Designations and a certificate of merger pursuant to the GCL, (iii)
compliance with the HSR Act, (iv) such filings, authorizations, orders and
approvals, if any, as set forth in Section 3.4 of the Company Disclosure
Schedule or (v) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not
reasonably be expected to have a Material Adverse Effect on the Company or
prevent or materially delay consummation of the transactions contemplated
hereby.
Section 3.5 SEC Reports and Financial Statements.
(a) The Company and its subsidiaries have filed with the SEC all forms,
reports, schedules, registration statements and definitive proxy statements
required to be filed by them with the SEC since December 31, 1999 (as amended
since the time of their filing and prior to the date hereof, collectively, the
"SEC Reports"). As of their respective dates, the SEC Reports (including, but
not limited to, any financial statements or schedules included or incorporated
by reference therein) complied in all material respects with the requirements of
the Exchange Act or the Securities Act of 1933, as amended, including the rules
and regulations of the SEC promulgated thereunder (the "Securities Act")
applicable, as the case may be, to such SEC Reports, and none of the SEC Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in each
case, any note thereto) contained in the SEC Reports filed after December 31,
1999 present fairly in all material respects the consolidated financial position
and the consolidated results of operations and cash flows of the Company and its
subsidiaries as of the dates or for the periods presented therein and were
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved (except as
set forth in the notes contained therein and subject, in the case of unaudited
statements, to recurring audit adjustments normal in nature and amount).
(c) Except as reflected in the SEC Reports or reserved against in the
balance sheet of the Company and its subsidiaries as of September 30, 2000
including the notes thereto (the "September 30, 2000 Balance Sheet") or as set
forth in Section 3.5(c) of the Company Disclosure Schedule, as of the date
hereof, neither the Company nor any of its subsidiaries have any material
liabilities of a nature that would be required to be reflected on a balance
sheet in accordance with
-9-
<PAGE> 15
GAAP, other than liabilities incurred in the ordinary course of business
consistent with past practice since the date of the September 30, 2000 Balance
Sheet, including borrowings under credit agreements existing as of September 30,
2000.
(d) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications existing as of the date hereof
that have not yet been filed with the SEC (but which it would or will be
required to file with the SEC) to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Securities Act or the Exchange Act.
Section 3.6 Information. None of the information supplied by the
Company for inclusion or incorporation by reference in (i) the Proxy Statement
(or any amendment thereof), (ii) the Schedule 13E-3 or (iii) any other document
required to be filed with the SEC or any other Governmental Entity in connection
with the transactions contemplated by this Agreement (the "Other Filings") will,
at the respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to stockholders, at the time of the Special Meeting and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to statements made therein based on information supplied by Parent,
Merger Sub or AWT in writing specifically for inclusion in the Proxy Statement.
The Proxy Statement and the Schedule 13E-3 will comply as to form in all
material respects with the provisions of the Exchange Act, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent, Merger Sub or AWT in writing
specifically for inclusion in the Proxy Statement or the Schedule 13E-3.
Section 3.7 Absence of Certain Changes. Except as disclosed in Section
3.7 of the Company Disclosure Schedule or the SEC Reports, since December 31,
1999 through the date hereof there has not been any Material Adverse Effect on
the Company.
Section 3.8 Brokers. Except for the engagement of Salomon Smith Barney
Inc. and Wasserstein Perella & Co., Inc. none of the Company, any of its
subsidiaries, or to the Company's knowledge any of their respective officers,
directors or employees has any liability for any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by this
Agreement. The Company has previously delivered to Parent a copy of the
Company's engagement letters with Salomon Smith Barney Inc. and Wasserstein
Perella & Co., Inc.
Section 3.9 Determination of Special Committee; Recommendation of
Company Board; Opinions of Financial Advisors. The Special Committee has
unanimously determined that the Merger and this Agreement are fair to and in the
best interest of the Company's stockholders (other than AWT and its affiliates).
The Company Board, at a meeting duly called and held, has unanimously (i)
determined that this Agreement and the Merger are fair to and in the best
interests of the Company's stockholders (other than AWT and its affiliates),
(ii) approved this Agreement and the Merger, which approval satisfies in full
the requirements of the GCL that the Agreement be approved by the Company Board,
and (iii) resolved to recommend approval and adoption of this Agreement and the
Merger to the Company's stockholders; provided that such recommendation may
-10-
<PAGE> 16
be withdrawn, modified or amended to the extent the Company Board shall have
determined in good faith, after consultation with the Special Committee's
financial advisors, that the Merger and this Agreement are no longer in the best
interests of the Company's stockholders (other than AWT and its affiliates). The
Company is delivering to Parent the opinions of Salomon Smith Barney Inc. and
Wasserstein Perella & Co., Inc., the Special Committee's financial advisors, to
the effect that, as of the date hereof, the consideration to be received in the
Merger by the Company's stockholders (other than AWT and its affiliates) is fair
to the Company's stockholders (other than AWT and its affiliates) from a
financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
Section 4.1 Organization and Qualification. Each of Parent and Merger
Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of its state of incorporation. Each of Parent and Merger Sub has
the requisite corporate power and authority to own, operate or lease its
properties and to carry on its business as it is now being conducted, and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such power or authority, or the
failure to be so qualified, licensed or in good standing, would not reasonably
be expected to prevent or materially delay consummation of the transactions
contemplated hereby.
Section 4.2 Authority. Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized and approved by all necessary corporate action on the part of Parent
and Merger Sub. This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and, assuming the due and valid authorization, execution
and delivery by the Company, constitutes a valid and binding obligation of each
of Parent and Merger Sub enforceable against each of them in accordance with its
terms, except as enforceability may be limited by bankruptcy, moratorium,
reorganization, receivership or similar laws affecting the rights of creditors
generally.
Section 4.3 No Conflict; Required Filings and Consents.
(a) Assuming (i) the filings required under the HSR Act are made and
the waiting periods thereunder have terminated or have expired, (ii) the
requirements of the Exchange Act and any applicable state securities, "blue sky"
or takeover law are met, (iii) the filing of the Certificate of Designations and
the certificate of merger and appropriate merger documents, if any, as required
by the GCL, is made and (iv) the filings required under the competition and
foreign investment and other applicable laws, each as set forth in Section 3.4
of the Company Disclosure Schedule, and the approvals and consents thereunder
have been obtained (or waiting periods thereunder have been
-11-
<PAGE> 17
terminated or have expired), none of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent or Merger Sub of
the transactions contemplated hereby or compliance by Parent or Merger Sub with
any of the provisions hereof will (i) conflict with or violate the
organizational documents of Parent or Merger Sub, (ii) conflict with or violate
any statute, ordinance, rule, regulation, order, judgment, decree, permit or
license applicable to Parent or Merger Sub or any of their subsidiaries, or by
which any of them or any of their respective properties or assets may be bound
or affected, or (iii) result in a violation pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Merger Sub or any of their
subsidiaries is a party or by which Parent or Merger Sub or any of their
subsidiaries, AWT or Marlin Water Trust or any of their respective properties or
assets may be bound or affected, except for any of the foregoing that would not
reasonably be expected to prevent or materially delay consummation of the
transactions contemplated hereby.
(b) None of the execution and delivery of this Agreement by Parent and
Merger Sub, the consummation by Parent and Merger Sub of the transactions
contemplated hereby or compliance by Parent and Merger Sub with any of the
provisions hereof will require any Consent of any Governmental Entity, except
for (i) compliance with any applicable requirements of the Exchange Act and any
state securities, "blue sky" or takeover law, (ii) the filing of the Certificate
of Designations and a certificate of merger pursuant to the GCL, (iii)
compliance with the HSR Act, (iv) such filings, authorizations, orders and
approvals, if any, as set forth in Section 3.4 of the Company Disclosure
Schedule or (v) where the failure to obtain such Consent would not reasonably be
expected to prevent or materially delay consummation of the transactions
contemplated hereby.
Section 4.4 Information. None of the information supplied or to be
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
(i) the Proxy Statement, (ii) the Schedule 13E-3 or (iii) the Other Filings
will, at the respective times filed with the SEC or such other Governmental
Entity and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to stockholders, at the time of the
Special Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or Merger Sub with respect to statements made
therein based on information supplied by the Company in writing specifically for
inclusion in the Proxy Statement. The Proxy Statement and the Schedule 13E-3
will comply as to form in all material respects with the provisions of the
Exchange Act, except that no representation is made by Parent or Merger Sub with
respect to statements made therein based on information supplied by the Company
in writing specifically for inclusion in the Proxy Statement or the Schedule
13E-3. Without limiting the foregoing, all of the information that has been
provided by Parent to the Company, the Special Committee or the financial or
legal advisors to the Special Committee as to (a) contacts that any Parent
Knowledge Parties has received from, or communications or discussions that
Parent has engaged in with, other parties concerning a possible acquisition of
the Company or its subsidiaries, any subsidiary of the Company or any of their
respective assets or (b) any plans that any Parent Knowledge Parties may have
with respect to the Company, any of its subsidiaries or any of their respective
assets has been complete and accurate in all material respects.
-12-
<PAGE> 18
Section 4.5 Financing; Ownership of Merger Sub Common Stock.
Parent and Merger Sub collectively will have at the Effective Time and Parent
will make available to Merger Sub sufficient funds to enable the Surviving
Corporation to pay the aggregate Merger Consideration to the Paying Agent
pursuant to Section 2.2. As of the date hereof there are, and as of immediately
prior to the Effective Time there shall be, 1,000 shares of Merger Sub Common
Stock issued and outstanding.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as required by
this Agreement or otherwise with the prior written consent of Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of its subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
all reasonable efforts, and will cause each of its subsidiaries to use its
reasonable efforts, to preserve intact the business organization of the Company
and each of its subsidiaries and to preserve the current relationships of the
Company and its subsidiaries with suppliers, customers and others having
significant business relationships with the Company and its subsidiaries.
Without limiting the generality of the foregoing, and except as
otherwise required or expressly permitted by this Agreement or as set forth in
Section 5.1 of the Company Disclosure Schedule, the Company will not, and will
not permit any of its subsidiaries to, prior to the Effective Time, without the
prior written consent of Parent, which consent shall not be unreasonably
withheld or delayed:
(a) adopt any amendment to its certificate of incorporation or by-laws
or comparable organizational documents or adopt a plan of merger, consolidation,
reorganization, dissolution or liquidation;
(b) sell, pledge or encumber any stock owned by it in any of its
subsidiaries;
(c) (i) issue, reissue or sell, or authorize the issuance, reissuance
or sale of (A) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of Shares, in accordance with the terms of the instruments governing such
issuance on the date hereof, pursuant to the exercise of Options outstanding on
the date hereof, or (B) any other securities in respect of, in lieu of, or in
substitution for, Shares or any other capital stock of any class outstanding on
the date hereof or (ii) make any other changes in its capital structure (other
than incurrence of indebtedness under existing credit facilities or otherwise in
the ordinary course of business);
(d) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock other than between any of the
Company and any of its subsidiaries;
-13-
<PAGE> 19
(e) in the case of the Company, split, combine, subdivide, reclassify
or redeem, purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(f) increase, or accelerate payment of, the compensation or benefits
payable or to become payable to its directors, officers or, except in the
ordinary course of business consistent with past practice in accordance with
regular review and promotion cycles, employees (whether from the Company or any
of its subsidiaries), or pay or award any benefit not required by any existing
plan or arrangement to any officer, director or, except in the ordinary course
of business consistent with past practice in accordance with regular review and
promotion cycles, employee (including, without limitation, the granting of stock
options, stock appreciation rights, shares of restricted stock or performance
units pursuant to the Stock Plans or otherwise), or grant any severance or
termination pay to any officer, director or other employee of the Company or any
of its subsidiaries (other than as required by existing agreements or policies),
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company or any of its subsidiaries or establish, adopt,
enter into, amend, or waive any performance or vesting criteria or amend the
exercise or grant price for any equity-based awards under any Plan for the
benefit or welfare of any current or former directors, officers or employees of
the Company or its subsidiaries or their beneficiaries or dependents (any of the
foregoing being an "Employee Benefit Arrangement"), except, in each case, to the
extent required by applicable law or regulation;
(g) acquire, mortgage, encumber, sell, pledge, lease, license or
dispose of any assets, except in the ordinary course of business consistent with
past practice;
(h) (i) incur, assume or prepay any long-term debt or incur or assume
any short-term debt, except that the Company and its subsidiaries may incur or
prepay debt in the ordinary course of business in amounts and for purposes
consistent with past practice under existing lines of credit, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any third party except in the
ordinary course of business consistent with past practice, (iii) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, contingent
or otherwise), except in the ordinary course of business consistent with past
practice and (except as would not be material) in accordance with their terms,
(iv) make any loans, advances or capital contributions to, or investments in,
any person or entity other than the Company, its subsidiaries or entities in
which the Company, directly or indirectly, has a significant equity interest,
except for loans, advances, capital contributions or investments in the ordinary
course, consistent with past practice, (v) accelerate or delay collection of
notes or accounts receivable in advance of or beyond their regular due dates or
the dates when the same would have been collected in the ordinary course of
business consistent with past practice, or (vi) change any method or principle
of accounting in a manner that is inconsistent with past practice except to the
extent required by GAAP as advised by the Company's regular independent
accountants;
(i) settle or compromise any suit or claim or threatened suit or claim
where the amount to be paid by the Company and its subsidiaries is greater than
$25 million;
(j) other than in the ordinary course of business consistent with past
practice or if the result would not reasonably be expected to have a Material
Adverse Effect on the Company, (i) modify, amend or terminate any material
contract, (ii) waive, release, relinquish or assign any
-14-
<PAGE> 20
material contract (or any of the rights of the Company or any of its
subsidiaries thereunder), right or claim, or (iii) cancel or forgive any
indebtedness owed to the Company or any of its subsidiaries; provided, however,
that neither the Company nor any of its subsidiaries may under any circumstance
waive or release any of its rights under any confidentiality agreement to which
it is a party;
(k) make any election concerning taxes not required by law (other than
any such elections consistent with past practice) or settle or compromise any
liability concerning taxes (other than as required by law or as would not
reasonably be expected to have a Material Adverse Effect on the Company);
(l) acquire (by merger, consolidation, acquisition of stock or assets,
combination or other similar transaction) any material corporation, partnership
or other business organization or division or assets thereof;
(m) enter into any material contract or agreement other than in the
ordinary course of business consistent with past practice;
(n) except as may be required as a result of a change in law or in
GAAP, make any change in its methods of accounting, including accounting
policies and procedures concerning taxes, other than reasonable and usual
changes in the ordinary course of business and consistent with past practice;
(o) convene any regular or special meeting (or any adjournment thereof)
of the stockholders of the Company other than the meetings contemplated by
Section 1.11 or as required by law; or
(p) agree in writing or otherwise to take any of the foregoing actions
prohibited under this Section 5.1.
Section 5.2 Access to Information. From the date of this Agreement
until the Effective Time, the Company will, and will cause its subsidiaries, and
each of their respective officers, directors and employees, to, give Parent and
Merger Sub and their respective officers and employees (collectively, the
"Parent Representatives") reasonable access during normal business hours, to the
offices and other facilities and to the books and records of the Company and its
subsidiaries and to furnish Parent, Merger Sub and the Parent Representatives to
the extent available with such financial and operating data and such other
information with respect to the business and operations of the Company and its
subsidiaries as Parent and Merger Sub may from time to time reasonably request.
The Company shall furnish promptly to Parent and Merger Sub a copy of each
report, schedule, registration statement and other document filed by it or its
subsidiaries pursuant to the requirements of federal or state or foreign
securities laws after the date of this Agreement until the Effective Time.
Section 5.3 Reasonable Best Efforts.
(a) Subject to the terms and conditions provided herein, each of the
Company, Parent and Merger Sub shall, and the Company shall cause each of its
subsidiaries to, cooperate and use its respective reasonable best efforts to
make, or cause to be made, all filings necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions
-15-
<PAGE> 21
contemplated by this Agreement, including but not limited to cooperation in the
preparation and filing of the Proxy Statement, the Schedule 13E-3, any required
filings or requests for additional information under the HSR Act or other laws,
or other foreign filings and any amendments to any thereof. In addition, if at
any time prior to the Effective Time any event or circumstance relating to
either the Company or Parent or Merger Sub or any of their respective
subsidiaries should be discovered by the Company or Parent, as the case may be,
which should be set forth in an amendment to the Proxy Statement or the Schedule
13E-3, the discovering party will promptly inform the other party of such event
or circumstance.
(b) Each of the parties will use its reasonable best efforts to obtain
as promptly as practicable all Consents of any Governmental Entity or any other
person required in connection with, and waivers of any Violations that may be
caused by, the consummation of the transactions contemplated by this Agreement;
provided, however, that the Company shall not be required to, and shall not,
seek a consent of the holders of notes issued under the Indenture (as defined in
Section 5.8) unless consented to in writing by Parent.
(c) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its respective reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the foregoing, Parent agrees that it will not take any action
that would cause AWT to be in breach of the Support Agreement and will not take
any action that would require AWT to transfer Shares under Section 9.01 or 9.03
of the Atlantic Water Trust Amended and Restated Trust Agreement. If at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the parties hereto shall take or cause to be
taken all such necessary action, including, without limitation, the execution
and delivery of such further instruments and documents as may be reasonably
requested by the other party for such purposes or otherwise to consummate and
make effective the transactions contemplated hereby.
Section 5.4 Public Announcements. The Company, on the one hand, and
Parent and Merger Sub, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Merger and the other transactions contemplated
hereby, agree to provide to the other party for review a copy of any such press
release or statement, and shall not issue any such press release or make any
such public statement prior to such consultation and review, unless required by
applicable law or any rules or regulations of any securities exchange.
Section 5.5 Indemnification.
(a) Parent shall indemnify each current director and officer of the
Company and its subsidiaries (the "Indemnified Parties") who was or is a party
or is threatened to be a party to any action, suit or proceeding by reason of
the fact that such person is or was a director or officer of the Company or its
subsidiaries to the fullest extent permitted by Delaware law.
(b) Parent agrees that all rights to indemnification and advancement of
expenses now existing in favor of any Indemnified Party and any other person who
was a director or officer of the Company and its subsidiaries as provided in
their respective charters or by-laws shall survive the
-16-
<PAGE> 22
Merger and shall continue in full force and effect for a period of not less than
the longer of six years from the Effective Time and any applicable statute of
limitations. After the Effective Time, Parent agrees to cause the Surviving
Corporation to honor all rights to indemnification and advancement of expenses
referred to in the preceding sentence.
(c) Parent agrees that the Surviving Corporation shall cause to be
maintained in effect for not less than six years (except as provided in the last
sentence of this Section 5.5(c)) from the Effective Time the current policies of
the directors' and officers' liability insurance maintained by the Company;
provided that the Surviving Corporation may substitute therefor other policies
not less advantageous (other than to a de minimis extent) to the beneficiaries
of the current policies and provided that such substitution shall not result in
any gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time. The provisions of the immediately preceding sentence shall be
deemed to have been satisfied if prepaid policies have been obtained by the
Company prior to the Effective Time, which policies provide such directors and
officers with coverage for an aggregate period of six years with respect to
claims arising from facts or events that occurred on or before the Effective
Time, including, without limitation, in respect of the transactions contemplated
by this Agreement.
(d) From and after the Effective Time, any Indemnified Party wishing to
claim indemnification under paragraphs (a) or (b) of this Section 5.5, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify Parent thereof. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) Parent or the Surviving Corporation shall have the right, from and
after the Effective Time, to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent, provided that Parent
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that such person is not entitled to
indemnification under applicable law.
(e) The Indemnified Parties are intended to be beneficiaries of the
provisions of this Section 5.5 and are entitled to enforce its provisions.
Section 5.6 Notification of Certain Matters. Parent and the Company
shall promptly notify each other of (i) the occurrence or non-occurrence of any
fact or event that would be reasonably likely (A) to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (B) to cause
any covenant, condition or agreement under this Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of the Company or
Parent, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder in any material
respect; provided, however, that no such notification shall modify the
representations or warranties of any party or the conditions to the obligations
of any party hereunder. Without limiting the foregoing, from the date hereof
through the Effective Time or earlier termination of this Agreement, Parent
agrees to provide promptly to the Company to the attention of the Special
Committee written notice of any proposal received by Parent or any of its
-17-
<PAGE> 23
subsidiaries from third parties and made known to any Parent Knowledge Parties
concerning a possible acquisition by a third party of the Company or its
securities, any subsidiary of the Company or any of their respective assets.
Each such notice shall include copies of any written correspondence and the
material details of any discussions. Each of the Company, Parent and Merger Sub
shall give prompt notice to the other parties hereof of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
Section 5.7 Company Board Recommendation. The Company Board shall not
withdraw, modify or change or propose publicly to withdraw, modify or change, in
a manner adverse to Parent or Merger Sub, the recommendation by the Company
Board of the Merger or this Agreement unless the Company Board shall have
determined in good faith, after consultation with the Special Committee's
financial advisors, that the Merger or this Agreement are no longer in the best
interests of the Company's stockholders (other than AWT and its affiliates) (an
"Adverse Company Board Determination"). The Special Committee shall not make or
publicly propose to make, in a manner adverse to Parent or Merger Sub, a
recommendation as to the Merger or this Agreement or withdraw, modify or change
or propose publicly to withdraw, modify or change, in a manner adverse to Parent
or Merger Sub, its determination that the Merger and this Agreement are fair to
and in the best interest of the Company's stockholders (other than AWT and its
affiliates) unless the Special Committee shall have determined in good faith,
after consultation with the Special Committee's financial advisors, that the
Merger or this Agreement is no longer in the best interests of the Company's
stockholders (other than AWT and its affiliates) (an "Adverse Special Committee
Determination").
Section 5.8 Exchange of Credit Agreement Obligations; Indenture. Unless
otherwise agreed to in writing by Parent and the Company, immediately prior to
the Closing, (i) Parent will exchange with the Company up to the then aggregate
principal amount of the borrowings under the Credit Agreement dated as of May 1,
1999 between Parent and the Company, as amended (the "Credit Agreement"), for
preferred stock of the Company having the terms set forth on Exhibit A and
having an initial liquidation preference equal to the amount of the aggregate
principal amount of the borrowings under the Credit Agreement so exchanged by
Parent to the Company, and (ii) the Company agrees that at the Closing it will
designate one or more of its subsidiaries as an Unrestricted Subsidiary (as such
term is defined in the Indenture), in each case, so that the consummation of the
Merger will not result in a default or event of default under the terms of any
notes issued under the Indenture dated as of February 18, 2000 between the
Company and Chase Bank of Texas, National Association, as Trustee (the
"Indenture"), if such exchange and such designation would avoid such a default
and event of default. The Company and Parent agree to consult with each other to
determine the amount to be exchanged and which subsidiaries of the Company, if
any, should be so designated.
-18-
<PAGE> 24
Section 5.9 Employee Benefits. Parent acknowledges that, after the
Effective Time, the Surviving Corporation and its subsidiaries will continue to
be obligated under employee benefit plans in effect as of the Effective Time in
accordance with the terms of those plans. Parent may take action to cause the
Surviving Corporation and its subsidiaries to amend, modify, alter or terminate
those plans only in accordance with their terms.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Obligations of Each Party under this
Agreement. The respective obligations of Parent, Merger Sub and the Company to
consummate the Merger are subject to the satisfaction of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company shall have
duly approved the adoption of this Agreement in accordance with the GCL (the
"Statutory Approval Condition").
(b) Injunctions; Illegality. The consummation of the Merger shall not
be restrained, enjoined or prohibited by any order, judgment, decree, injunction
or ruling of a court of competent jurisdiction or any Governmental Entity; and
there shall not have been any statute, rule or regulation enacted, promulgated
or deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the consummation of the
Merger illegal.
(c) Governmental Approvals. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger shall have expired or
terminated and all approvals or consents listed on Schedule 3.4 of the Company
Disclosure Schedule and Section 4.3 of the Parent Disclosure Schedule shall have
been received or obtained (or waiting periods thereunder have been terminated or
expired).
(d) Minority Approval. Subject to Section 1.11(c), a majority of the
Shares cast either for or against the adoption of this Agreement (excluding
Shares owned by Parent, Merger Sub, AWT or any subsidiary thereof) shall have
been cast for the adoption of this Agreement (the "Minority Approval
Condition").
(e) No Indenture Event of Default. Consummation of the Merger will not
result in a default or event of default under the terms of any senior notes
issued under the Indenture; provided, that Parent or the Company may assert this
condition only if such default or event of default would occur notwithstanding
compliance by such party with Section 5.8.
Section 6.2 Conditions to Obligations of Parent and Merger Sub under
this Agreement. The obligations of Parent and Merger Sub to consummate the
Merger are subject to the satisfaction of each of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company that is qualified by Material Adverse Effect on the
Company shall be true and correct and each of the representations and warranties
of the Company that is not so qualified shall be true and
-19-
<PAGE> 25
correct except where the failure to be so true and correct would not reasonably
be expected to have a Material Adverse Effect on the Company, in each case, as
of the date of this Agreement and (except for the representations and warranties
contained in Sections 3.5 or 3.9) as of the Closing Date (except to the extent
such representations and warranties speak as of a specific date in which case
such representations and warranties shall not be so true and correct as of such
specific date).
(b) Covenants. The Company shall have observed and performed in all
material respects all of its material covenants under this Agreement.
(c) Consents. All Consents required to be filed or obtained by the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement and the consummation of the transactions contemplated by this
Agreement shall have been filed and obtained, except where the failure to file
or obtain such Consent would not reasonably be expected to have a Material
Adverse Effect on the Company.
Section 6.3 Conditions to Obligation of the Company under this
Agreement. The obligations of the Company to consummate the Merger are subject
to the satisfaction of each of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date (except to
the extent such representations and warranties speak as of a specific date in
which case such representations and warranties shall be so true and correct as
of such specific date).
(b) Covenants. Parent and Merger Sub shall have observed and performed
in all material respects all of their material covenants under this Agreement.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding any approval thereof by the stockholders of the Company
(with any termination by Parent also being an effective termination by Merger
Sub):
(a) by the mutual written consent of the Company and Parent;
(b) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied (a "Terminating Company Breach"); provided that, if such
Terminating Company Breach is curable by the Company through the exercise of its
reasonable best efforts and for so long as the Company continues to exercise
such reasonable best efforts, Parent may not terminate this Agreement under this
Section 7.1(b);
-20-
<PAGE> 26
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement or if any representation or warranty shall have become untrue, in
either case, such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied (a "Terminating Parent Breach"); provided that if
such Terminating Parent Breach is curable by Parent or Merger Sub through the
exercise of their reasonable best efforts and for so long as Parent and Merger
Sub continue to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 7.1(c);
(d) by either Parent or the Company, if (i) the Special Meeting (or the
stockholders' meeting contemplated by Section 1.11(c)) shall have been held and
either the Statutory Approval Condition or the Minority Approval Condition shall
have not been satisfied or (ii) the Merger shall not have been consummated on or
before May 31, 2001;
(e) by Parent or the Company if any court or other Governmental Entity
shall have issued an order, decree, judgment or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable;
(f) by either the Company or Parent, if the Company Board approves a
Superior Proposal (as defined in Section 8.9) or the Special Committee
recommends a Superior Proposal; or
(g) by Parent, if there shall have been an Adverse Company Board
Determination or an Adverse Special Committee Determination.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers, employees, stockholders or affiliates, other than the
provisions of this Section 7.2 and Section 7.3 and Article VIII, which shall
survive any such termination. Nothing contained in this Article VII shall
relieve any party from liability for any willful breach of any covenant of this
Agreement or any knowing and intentional breach of any representation or
warranty of this Agreement occurring before termination.
Section 7.3 Fees and Expenses.
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses.
(b) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the reasonable costs and expenses (including reasonable attorneys' and
expert witness fees) incurred in connection with such action.
Section 7.4 Amendment. This Agreement may be amended by the Company,
Parent and Merger Sub at any time before or after any approval of this Agreement
by the stockholders of the Company but, after any such approval, no amendment
shall be made that by law requires further approval by such stockholders without
the further approval of such stockholders, including the satisfaction of the
Minority Approval Condition. Any amendment to this Agreement must be
-21-
<PAGE> 27
evidenced by an instrument in writing signed on behalf of all the parties.
Notwithstanding the foregoing, this Agreement shall not be amended and the
Company shall not extend or waive any of the obligations of Parent or Merger Sub
hereunder without the approval of the Special Committee.
Section 7.5 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any party hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein by any party or in any
document, certificate or writing delivered pursuant hereto by any party or (iii)
waive compliance with any of the agreements of any party or with any conditions
to its own obligations. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party; provided, however, that the signature of Parent
shall constitute approval by Merger Sub of any such extension of waiver.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 2.1 and Section 5.5 shall survive the Effective Time indefinitely
(except to the extent a shorter period of time is explicitly specified therein).
Section 8.2 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of each other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 8.3 Validity. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement, each of which shall
remain in full force and effect or the validity or enforceability of such
provisions in any other jurisdiction.
Section 8.4 Notices. All notices, requests, claims, demands and other
communications hereunder must be in writing and shall be deemed to have been
duly given only when delivered in person, by overnight courier or facsimile to
the respective parties as follows:
-22-
<PAGE> 28
If to Parent or Merger Sub:
J. Mark Metts
Executive Vice President, Corporate Development
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Facsimile: (713) 646-8512
with a copy to:
James V. Derrick
Executive Vice President and General Counsel
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Facsimile: (713) 853-3920
and:
Scott N. Wulfe
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Facsimile: (713) 615-5637
If to the Company:
Herbert S. Winokur, Jr.
Chairman of the Special Committee
c/o Capricorn Management, G.P.
30 East Elm Street
Greenwich, CT 06830
Facsimile: (203) 861-6671
-23-
<PAGE> 29
with a copy to:
John C. Ale
Executive Director and General Counsel
Azurix Corp.
333 Clay Street, Suite 1000
Houston, TX 77002-7361 Facsimile: 713-345-5330
and:
Randall H. Doud
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Facsimile: 212-735-2000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
Section 8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
Section 8.6 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 8.7 Counterparts. This Agreement may be executed in two or more
counterparts, and by facsimile, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
Section 8.8 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except with respect
to Section 5.5, nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.9 Certain Definitions. As used in this Agreement:
(a) the term "Acquisition Proposal" shall mean any proposal or offer
relating to the acquisition or purchase of all of the outstanding equity
securities of the Company, any tender offer or exchange offer that, if
consummated, would result in any Person beneficially owning all of the equity
securities of the Company, or any merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any purchase or sale of a
substantial portion of the consolidated assets (including without limitation
stock of subsidiaries owned directly or indirectly by the Company) of the
Company and its subsidiaries, taken as a whole;
-24-
<PAGE> 30
(b) the term "affiliate", as applied to any Person, shall mean any
other person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise;
(c) the term "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act);
(d) the term "subsidiary" or "subsidiaries" means, with respect to the
Company or Parent, any corporation, partnership, joint venture or other legal
entity of which the Company or Parent, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
stock or other equity interests the holders of which are generally entitled to
50% or more of the vote for the election of the board of directors or other
governing body of such corporation or other entity and which is consolidated
with the Company or Parent, as applicable, for financial reporting purposes
under GAAP; and
(e) the term "Superior Proposal" shall mean a bona fide written
Acquisition Proposal that the Company Board or the Special Committee concludes
in good faith (after consultation with the Company's or the Special Committee's
financial advisors) would, if consummated, provide greater value to the
Company's stockholders from a financial point of view than $8.375 per Share and
for which financing is committed or which, in the good faith judgment of the
Company Board or the Special Committee (after consultation with its financial
advisors), is capable of being financed by the Person making the Acquisition
Proposal.
(f) the term "Parent Knowledge Parties" shall be those individuals
identified on Section 8.9(f) of the Company Disclosure Schedule.
Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
Section 8.11 Causing Subsidiaries. Whenever this Agreement obligates
the Company to cause, or to use reasonable efforts or reasonable best efforts to
cause, any of its subsidiaries to undertake any action or to refrain from any
course of action, that obligation is subject to any duties owed to minority
shareholders or equity owners and (where required by applicable law) other
stakeholders, such as customers or employees, and to the presence on the boards
of directors of various subsidiaries of representatives of such persons and to
undertakings or legal requirements for the independent conduct of the business
of subsidiaries.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-25-
<PAGE> 31
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
ENRON CORP.
By: /s/J. MARK METTS
----------------------------
Name: J. Mark Metts
Title: Executive Vice President,
Corporate Development
ENRON BW CORP.
By: /s/J. MARK METTS
----------------------------
Name: J. Mark Metts
Title: President
AZURIX CORP.
By: /s/JOHN L. GARRISON, JR.
----------------------------
Name: John L. Garrison, Jr.
Title: President and Chief
Executive Officer
-26-
<PAGE> 32
EXHIBIT A
SUMMARY OF TERMS
AZURIX
PREFERRED STOCK
ISSUER: Azurix Corp.
SHARES: 100 shares of a new series of 11% cumulative
preferred stock, par value $.01 per share, of
the Issuer (the "Preferred Stock") issued on the
Closing Date under the Merger Agreement.
LIQUIDATION PREFERENCE: The liquidation preference per share shall equal
(i) the quotient of the amount of the aggregate
principal amount of the borrowings exchanged by
Parent under the Credit Agreement pursuant to
Section 5.10 of the Agreement divided by 100,
plus (ii) accrued and unpaid dividends, if any,
on such share.
PRIORITY: The Preferred Stock shall rank senior to all
other classes and series of the Company's stock
as to liquidation preference and dividend
rights.
DIVIDENDS: Cumulative dividends shall cumulate and accrue
quarterly on each March 31, June 30, September
30 and December 31 at a rate equal to 2.75% per
quarter (11% per annum) of the Liquidation
Preference as of such date (including accrued
and unpaid dividends as of such date). Dividends
accrued until the Optional Redemption Date (as
defined below) may be paid at the Company's
election at any time thereafter. Dividends
accrued after the Optional Redemption Date shall
be payable in cash on the dates on which they
accrue.
VOTING RIGHTS: Except as otherwise required by applicable law,
holders of the Preferred Stock shall not have
voting rights except that the holders of a
majority of the Shares must approve, voting
separately as a class, (i) any amendment to the
terms of the Preferred Stock and (ii) any
proposed issuance of capital stock of the Issuer
that ranks senior to or pari passu with the
Preferred Stock.
<PAGE> 33
OPTIONAL REDEMPTION: The shares of Preferred Stock shall not be
redeemable by the Issuer until the Optional
Redemption Date. The "Optional Redemption Date"
shall be the first date that the Preferred Stock
may be redeemed or repurchased by the Company
and still not constitute Redeemable Stock (as
such term is defined in the Indenture).
Following the Optional Redemption Date, the
Issuer shall have the right, upon not less than
30 days prior written notice, to redeem the
shares of Preferred Stock in whole or in part at
a price per share equal to the then Liquidation
Preference (with dividends accrued for any
partial dividend period) (the "Redemption
Price").
MANDATORY REDEMPTION: The Company shall be obligated to redeem all
outstanding Preferred Stock on the second
anniversary of the Optional Redemption Date at
the Redemption Price.
-2-
