Document:

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                                                                    EXHIBIT 10.6
                                CREDIT AGREEMENT

          CREDIT AGREEMENT (this "Agreement") dated as of May 1, 1999 between
Enron Corp., an Oregon corporation ("Lender"), and Azurix Corp., a Delaware
corporation ("Borrower"). The parties hereby agree as follows:

          1. Advances. Subject to the terms and conditions of this Agreement,
Lender will make advances ("Advances"), including Advances for the payment of
interest under this Agreement, from its available funds to Borrower from time to
time during the period from the date of this Agreement up to but not including
the Termination Date, as defined in Section 11, in an aggregate principal amount
up to but not exceeding the sum of One Hundred Eighty Million Dollars
(U.S.$180,000,000) at any one time outstanding. The aggregate principal amount
outstanding is further limited by the provisions in Section 2. Within the limits
of this Agreement, Borrower may borrow, prepay pursuant to Section 5, and
reborrow under this Section 1. The parties hereto agree that any Advances by the
Lender will be made in reliance on the agreements of the Lender and the Borrower
contained herein and on the terms and conditions and in the manner provided
herein. Advances shall be made on notice given to Lender by Borrower prior to
10:00 a.m. New York time not later than one business day before the Advance.

          2.   Limits on the Principal Amount Outstanding. The principal amount
               outstanding under this Agreement will be further limited to no
               more than:

               a)   U.S.$ 60,000,000 at any time during the calendar year 1999.

               b)   U.S.$120,000,000 at any time during the calendar year 2000.

               c)   U.S.$180,000,000 at any time during the calendar year 2001.

In addition, no additional amounts shall be advanced after, and all principal
and interest outstanding under the Note, all interest thereon and all other
amounts payable under this Agreement shall be due and payable 90 days after, the
first date on which both of the following occur (demand and any further notices
are expressly waived by the Borrower):

               i)   Lender and affiliates of Lender do not individually or
                    collectively, directly or indirectly, own or have the power
                    to vote at least one-third of the capital stock of Borrower
                    having ordinary voting power for the election of directors,
                    and

               ii)  Fewer than one-third of the directors of Borrower are
                    persons who are employees, officers or directors of Lender
                    or of any affiliate of Lender.

          3. Interest. Interest shall accrue on a daily basis on the outstanding
and unpaid principal amount of the Advances at a rate per annum equal to the Fed
Funds Rate (as defined below) plus 1.50%: provided however, that upon the
occurrence and during the continuation of any Event of Default (as hereinafter
defined), interest on the unpaid principal sum shall accrue at a rate per annum
equal to the Fed Funds Rate (as hereinafter defined) plus 3.5% . For the
purposes of this Agreement, the "Fed Funds Rate" shall be defined as the rate
published in Federal Reserve

<PAGE>   2

Statistical Release H.15 as the Federal funds (effective) rate for that day. In
the event that the Fed Funds Rate is not available for a particular day,
employees of Lender's Treasury group shall use the last published Fed Funds Rate
as the Fed Funds Rate for that day.

          Interest shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Interest shall be paid at the offices of
Lender at 1400 Smith Street, Houston, Texas 77002, or each other addresses that
the Lender may specify by notice to the Borrower, in funds immediately available
to Lender on the first Business Day of each quarter.

          4. Priority of Indebtedness/Note. The indebtedness of Borrower owing
to Lender resulting from Advances made under the provisions of this Credit
Agreement and the Note shall not be subordinate or subordinated to any other
borrowings made by Borrower. All Advances made by Lender under this Agreement
shall be evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in substantially the form annexed hereto as Exhibit
A (the "Note"), with appropriate insertions therein. The Note shall be used to
evidence each borrowing, repayment and reborrowing hereunder. The Note shall (i)
be dated the date of the first Advance evidenced thereby and (ii) be stated to
mature as to principal on the Termination Date. Lender is hereby authorized by
Borrower to endorse on the schedule attached to the Note the amount of each
Advance and of each payment of principal received by Lender on account of the
Advances, which endorsement shall, in the absence of manifest error, be
conclusive as to the outstanding balance of the Advances made by Lender,
provided, however, that the failure to make such notation with respect to any
Advance or payment shall not limit or otherwise affect the obligations of
Borrower under this Agreement or the Note.

          5. Prepayments. Borrower may prepay the Note in whole or in part on
any Business Day.

          6. Use of Proceeds. The proceeds of the Advances hereunder shall be
used by Borrower to pay for general, administrative and operating expenses.

          7. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:

               (a) The Borrower shall fail to pay principal or interest on the
          Note when it shall become due and payable or shall breach any of the
          material provisions of any written Agreement with Lender, including
          but not limited to this Credit Agreement and the Note; or

               (b) The Borrower shall generally not pay its debts as such debts
          become due, or shall admit in writing its inability to pay its debts
          generally, or shall make a general assignment for the benefit of
          creditors; or any proceeding shall be instituted by or against the
          Borrower seeking to adjudicate it as bankrupt or insolvent, or seeking
          liquidation, winding up, reorganization, arrangement, adjustment,
          protection, relief or composition of it or its debts under any law
          relating to bankruptcy, insolvency or reorganization or relief of
          debtors, or seeking the entry of an order for relief or the
          appointment of a receiver,

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          trustee or other similar official for it or for any substantial part
          of its property and, in the case of any such proceeding instituted
          against it (but not instituted by it), shall remain undismissed or
          unstayed for a period of 60 days; or the Borrower shall take any
          corporate action to authorize any of the actions set forth above in
          this subsection (b); or

          (c)  Any event or events having a material adverse effect on (i) the
          ability of the Borrower to meet its obligations under this Agreement
          or (ii) the business, operations, assets or financial condition of the
          Borrower.

then, and in any such event, Lender may by notice to the Borrower, declare the
Note, all interest thereon and all other amounts payable under this Agreement to
be forthwith due and payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest, notice of intent to accelerate or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, however,
that in the event of an actual or deemed entry of an order for relief with
respect to Borrower under the Bankruptcy Code, the Note, all such interest and
all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.

          8. Notices, Etc. All notices and other communications provided for
under this Agreement shall be in writing (including telegraphic communication)
and telecopied, telegraphed, or delivered, if to Lender, at its address at 1400
Smith Street, Houston, Texas 77002, Attention: Senior Vice President, Finance
and Treasurer, telecopy number (713) 646-5930 and if to Borrower, at its address
at 333 Clay Street, Houston, Texas 77002, Attention: Vice Chairman and Chief
Financial Officer, telecopy number (713) 646-6367; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party complying as to delivery with the terms of this Section 8.

          9. No Waiver; Remedies. No failure on the part of Lender to exercise,
and no delay in exercising, any right, power, or remedy under this Agreement or
the Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement or the Note preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in this Agreement or the Note are cumulative and not exclusive of any
remedies provided by law.

          10. Governing Law. This instrument shall be construed under the laws
of the State of Texas, and the obligation of Borrower to make payments of
interest as provided for herein is expressly limited so that the aggregate
amount of all the interest paid by Borrower on the Note shall never exceed the
highest contract rate allowed by the laws of the State of Texas as construed by
the highest court or courts having jurisdiction thereof (the "Highest Lawful
Rate"); and if, at the time any such payment of interest is due or is paid, the
payment of such sum would make the total interest exceed interest calculated at
the Highest Lawful Rate, the amount so payable by Borrower shall be reduced to
an amount which does not exceed the Highest Lawful Rate; and, similarly, if the
maturity of the Note is accelerated for any reason before the due date stated,
earned interest may never include more than interest calculated at the Highest
Lawful Rate, it being the intention of the

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parties to conform strictly to the laws of the State of Texas now in force, and
in the event it should be held that the interest payable under the Note or
otherwise is in excess of interest calculated at the Highest Lawful Rate, the
interest payable hereunder (whether included in the face amount or otherwise)
shall be reduced to the Highest Lawful Rate, and any amount in excess of
interest calculated at the Highest Lawful Rate shall be cancelled automatically
and shall be either refunded (if theretofore paid) or credited to the principal
amount due on the Note.

          11. Termination Date. The "Termination Date" means December 15, 2001.
This Agreement may be terminated early upon mutual consent of the Lender and
Borrower; provided, however, that the provisions of this Agreement shall survive
as to any Advances maturing after the effective termination date. Upon
cancellation of the last such Advance, this Agreement shall be of no further
force and effect.

          12. Captions. The captions of the various sections of this Agreement
have been inserted only for the purposes of convenience, and shall not be deemed
in any manner to modify, explain, enlarge or restrict any provisions of this
Agreement.

          13. Business Day. As used herein, Business Day means any day other
than a Saturday, a Sunday or a state or federal bank holiday in Houston, Texas
or New York, New York.

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          14.  Entire Agreement. THIS AGREEMENT AND THE NOTE TOGETHER CONSTITUTE
               A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
               BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
               PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
               PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
               PARTIES.

          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                             AZURIX CORP.

                                             By: /s/ EDWARD N. ROBINSON
                                                 -------------------------------
                                                 Name:  Edward N. Robinson
                                                        ------------------------
                                                 Title: Executive Director
                                                        ------------------------

                                             ENRON CORP.

                                             By: /s/ JEFFREY MCMAHON
                                                --------------------------------
                                                 Jeffery McMahon
                                                 Senior Vice President,
                                                 Finance and Treasurer

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<PAGE>   6

                                    EXHIBIT A

                                 PROMISSORY NOTE

                                                                  Houston, Texas
$180,000,000                                                         May 1, 1999

          FOR VALUE RECEIVED, the undersigned, Azurix Corp., a Delaware
corporation ("Borrower"), DOES HEREBY PROMISE to pay to the order of Enron Corp.
("Lender") at its office at 1400 Smith Street, Houston, Texas 77002, in lawful
money of the United States and in funds immediately available to Lender, the
principal amount of One Hundred Eighty Million and No/100 Dollars
(U.S.$180,000,000) or the aggregate unpaid principal amount of all Advances (the
"Advances") made to Borrower by Lender pursuant to Section 1 of the Agreement
hereinafter referred to, whichever is less, on or before December 15, 2001.
Borrower further promises to pay interest in like money, at said office, from
the date hereof on the unpaid principal amount hereof until such principal
amount shall become due and payable, at the rates per annum and on the dates
provided in Sections 2 and 3 of the Agreement, on or before December 15, 2001.

          Each Advance made by the Lender to the Borrower pursuant to the
Agreement, and all payments made on account of principal thereof, shall be
recorded by the Lender and endorsed on the Schedule attached hereto which is
part of this Promissory Note or in such other records as the Lender may
designate.

          This Promissory Note is the Note described in and issued pursuant to
the Agreement dated as of May 1, 1999, between Borrower and Lender (the
"Agreement"), and is entitled to the benefits thereof. The Agreement, among
other things, (i) provides for the making of Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed the U.S. dollar
amount first above mentioned, the indebtedness of the Borrower resulting from
each such Advance being evidenced by this Promissory Note, and (ii) contains
provisions for prepayments on account of the principal of this Promissory Note
upon the terms and conditions specified in the Agreement. The indebtedness of
Borrower owing to Lender resulting from Advances made under the provisions of
the Agreement and this Note shall be senior to and not subordinate to any other
borrowings made by Borrower. Terms used herein which are defined in the
Agreement shall have their defined meanings when used herein.

          This Note shall be governed by and construed in accordance with the
laws of the State of Texas. If this Note shall be collected by any legal
proceedings or shall be placed in the hands of an attorney for collection after
maturity, the undersigned promises to pay to the owner and holder hereof all
reasonable attorney's fees and costs of collection.

THIS AGREEMENT AND THE CREDIT AGREEMENT TOGETHER CONSTITUTE A WRITTEN LOAN
AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF

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PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                                              AZURIX CORP.

                                              By:
                                                 -------------------------------
                                                  Name:
                                                       -------------------------
                                                  Title:
                                                        ------------------------

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                           SCHEDULE TO PROMISSORY NOTE

          This Grid is attached to and made part of the Promissory Note dated
May 1, 1999 executed by Azurix Corp. to Enron Corp., and records advances,
payments and other information required therein.

<TABLE>
<CAPTION>
                                                UNPAID          NAME OF
                              AMOUNT OF        PRINCIPAL        PERSON
               AMOUNT OF      PRINCIPAL       BALANCE OF        MAKING
   DATE         ADVANCE         REPAID           NOTE          NOTATION
--------------------------------------------------------------------------------
<S>           <C>            <C>             <C>              <C>
</TABLE><PAGE>   1
                                                                    EXHIBIT 10.7

                       FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO THE CREDIT AGREEMENT (this "Amendment") dated as of
January 4, 2000, between Enron Corp., an Oregon corporation (the "Lender"), and
Azurix Corp., a Delaware corporation (the "Borrower").

     The Lender and the Borrower are parties to a Credit Agreement dated as of
May 1, 1999 (the "Agreement"). Capitalized terms used in this Amendment and not
otherwise defined have the meanings given to them in the Agreement. The Lender
and the Borrower now desire to amend the Agreement in certain respects.
Accordingly, the Lender and the Borrower hereby agree as follows:

     1.   Amendment to Section 1. Section 1 of the Agreement is hereby amended
by replacing the last sentence thereof with the following:

     "The Borrower shall request that the Lender make an Advance hereunder by
     delivering a notice to such effect on or before 9:00 a.m. Houston time at
     least one Business Day prior to the date requested for the funding of such
     Advance. Such notice shall further state the specific purposes for which
     such Advances will be used and (a) whether and to what extent such Advance
     will be used to pay general, administrative and operating expenses,
     including interest (a "GAO Advance"), and (b) whether and to what extent
     such Advance will be used to pay expenses other than general,
     administrative and operating expenses (a "Non-GAO Advance"). Subject to the
     maximum aggregate principal amount of GAO Advances permitted to be
     outstanding pursuant to Section 2 hereof and compliance with the other
     terms and conditions of the Agreement, the Lender shall make any GAO
     Advance properly requested by the Borrower pursuant to this Section 1. The
     Lender shall not be obligated to make any Non-GAO Advance requested by the
     Borrower pursuant to this Section 1. Any determination to make a Non-GAO
     Advance shall be in the sole discretion of the Lender."

     2.   Amendment to Section 2. Section 2 of the Agreement is amended by
deleting the period after clause c) thereof and adding the following proviso
after such clause c):

     "; provided, however, that, until the earlier of (i) the date on which the
     Borrower issues and sells debt securities or enters into credit facilities
     usable for general corporate purposes, and (ii) March 31, 2000 (the date
     which is the earlier of the dates referred to in (i) and (ii) shall
     hereinafter be referred to as the "Non-GAO Advance Availability Termination
     Date"), the Lender may in its sole discretion make and permit the aggregate
     outstanding principal amount of Advances to be equal to an amount of up to
     One Hundred Eighty Million Dollars (U.S. $180,000,000); provided, further,
     however, that in no event shall the aggregate outstanding principal amount
     of either the GAO Advances or the Non-GAO Advances exceed One Hundred
     Twenty Million Dollars (U.S. $120,000,000), respectively."

     3.   Amendment to Section 3. The first sentence of Section 3 of the
Agreement is amended and restated in its entirety to read as follows:

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     "Interest shall accrue on the outstanding and unpaid principal amount of
     the Advances on a daily basis at a rate per annum equal to the Fed Funds
     Rate (as defined below) plus (a) in respect of GAO Advances, 1.5%, and (b)
     in respect of Non-GAO Advances, 3.75%; provided, however, that upon the
     occurrence and during the continuation of any Event of Default (as
     hereinafter defined), interest on the unpaid principal amount of any
     Advance shall accrue at the rate set forth above plus an additional 2% per
     annum."

     4.   Amendment to Section 5. Section 5 of the Agreement is amended by
adding the following sentence at the end of that Section:

     "The Borrower shall repay all Non-GAO Advances (a) upon and to the extent
     that the Borrower receives proceeds (i) from the issuance and sale of any
     debt securities, or (ii) under any credit facilities usable for general
     corporate purposes, and (b) to the extent not repaid pursuant to clause (a)
     hereof, on or before March 31, 2000."

     5.   Amendment to Section 6. Section 6 of the Agreement is amended by
adding the following proviso to the end thereof:

     ", including interest; provided, however that the Borrower may use the
     proceeds of any Non-GAO Advance made hereunder before the Non-GAO Advance
     Termination Date to pay the expenses specified in the applicable notice
     pursuant to which such Advance was requested."

     6.   Amendment to Section 7. Section 7 of the Agreement is hereby amended
by replacing the period at the end of clause c) thereof with "; or" and adding
the following clause (d) thereto:

     "(d)(i) Any principal, interest, fees or other amounts due in respect of
     any indebtedness of the Borrower is not paid when due, whether by scheduled
     maturity, required prepayment, acceleration, demand or otherwise, and such
     failure is not cured within the applicable grace period, if any, and the
     aggregate amount of all such indebtedness of the Borrower so in default
     exceeds Ten Million Dollars (US$10,000,000); (ii) any other event shall
     occur or condition shall exist under any agreement or instrument relating
     to any Indebtedness of the Borrower the effect of which is to accelerate or
     to permit the acceleration of the maturity of any such indebtedness,
     whether or not any such indebtedness is actually accelerated and the
     aggregate amount of all indebtedness of the Borrower so in default exceeds
     Ten Million Dollars (US$10,000,000); or (iii) any indebtedness of the
     Borrower shall be declared to be due and payable, or required to be prepaid
     (other than by a regularly scheduled prepayment) prior to the stated
     maturity thereof, and the aggregate amount of all indebtedness of the
     Borrower so accelerated exceeds Ten Million Dollars (US$10,000,000)."

     7.   Amendment to Section 8. Section 8 of the Agreement is amended and
restated in its entirety to read as follows:

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          "8. Notices, Etc. All notices and other communications provided for
     under this Agreement shall be in writing (including facsimile transmission)
     and telecopied or delivered, if to the Lender, at its address at 1400 Smith
     Street, Houston, Texas 77002, Attention: Jeffrey McMahon telecopy number
     (713) 646-5930 and if to the Borrower, at its address at 333 Clay Street,
     Houston, Texas 77002, Attention: General Counsel, telecopy number (713)
     345-5330; or, as to each party, at such other address as shall be
     designated by such party in a written notice to the other party complying
     as to delivery with the terms of this Section 8."

8.   Continuation. The Agreement, as modified by this Amendment, is continued in
full force and effect.

     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

ENRON CORP.                                AZURIX CORP.

By: /s/ JEFFREY MCMAHON                    By: /s/ ANDREA L. MAINELLI
   --------------------------------           ------------------------------
   Name: Jeffrey McMahon                      Name: Andrea L. Mainelli
   Title: Executive Vice President,           Title: Managing Director, Finance
          Finance and Treasurer

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