-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Q0ZpDVrJxdlpaQB8YKN8BH4ugTk8hXNr2vFAgfz6+tQyyVTCxMmtBvogZnG46NdM Zh55XCrMgVtFuCo016flqA== 0000911916-94-000066.txt : 19940701 0000911916-94-000066.hdr.sgml : 19940701 ACCESSION NUMBER: 0000911916-94-000066 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IWC RESOURCES CORP CENTRAL INDEX KEY: 0000790523 STANDARD INDUSTRIAL CLASSIFICATION: 4941 IRS NUMBER: 351668886 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15420 FILM NUMBER: 94519031 BUSINESS ADDRESS: STREET 1: 1220 WATERWAY BLVD CITY: INDIANAPOLIS STATE: IN ZIP: 46202 BUSINESS PHONE: 3176391501 10-K 1 WATER COMPANY'S 10-K Document Summary: Document: 0805E Author: Addressee: Operator: Creation Date: 03/30/1994 Modification Date: 03/30/1994 Identification key words: Comments: UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1993, or ( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-15420 IWC RESOURCES CORPORATION (Exact name of registrant as specified in its charter) Indiana 35-1668886 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1220 Waterway Boulevard, Indianapolis, Indiana 46202 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (317) 639-1501 NONE Securities registered pursuant to Section 12(b) of the Act Common Stock Title of Class Securities registered pursuant to Section 12(g) of the Act Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or in any amendment to this Form 10-K. (X) $145,127,631 State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of January 31, 1994 6,835,593 Indicate the number of shares of common stock outstanding March 1, 1994 DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents have been incorporated by reference into this annual report on Form 10-K: PARTS OF FORM 10-K INTO WHICH IDENTITY OF DOCUMENT DOCUMENT IS INCORPORATED Annual Report to Shareholders of Registrant for the Year Ended December 31, 1993 Parts I and II Definitive Proxy Statement to be filed for the 1994 Annual Meeting of Shareholders of Registrant Part III 0805s IWC RESOURCES CORPORATION INDIANAPOLIS, INDIANA ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION December 31, 1993 PART I Item 1. BUSINESS PRODUCTS AND SERVICES IWC Resources Corporation (Resources or, together with its subsidiaries, the Company) is a holding company which owns and operates seven subsidiaries, including three waterworks systems which supply water for residential, commercial, and industrial uses and for fire protection service in Indianapolis, Indiana and surrounding areas. The territory served by the three utilities covers an area of approximately 185 square miles and includes areas in Marion, Hancock, Hamilton, Hendricks, and Boone counties. At year end, Indianapolis Water Company (IWC) was providing service to 219,600 customers. Harbour Water Corporation (Harbour), in the Morse Reservoir area of Hamilton County, was serving 2,309 customers. Zionsville Water Corporation (Zionsville), located northwest of Indianapolis, was serving 2,233 customers. In addition to the three water utilities, Resources has four other wholly owned subsidiaries, IWC Services, Inc., Utility Data Corporation, Waterway Holdings, Inc., and SM&P Conduit Co., Inc. IWC Services, Inc. offers water-related services to contractors and other water and wastewater utilities. Utility Data Corporation provides customer billing, customer relations, and data processing services to the Company's water utilities, the city of Indianapolis sewer operations, and to several other unaffiliated utilities. The Company, principally through Waterway Holdings, Inc., owns approximately 360 acres of real estate located primarily in the Geist Reservoir area that it intends to sell or develop in the future. SM&P Conduit Co., Inc., which was acquired in June 1993, provides underground facility locating services for utility companies including electric, telephone, gas, cable television, water and sewer utilities. In November 1993, a subsidiary of the Company became majority partner in White River Environmental Partnership (Partnership). In December 1993, the Partnership was awarded a five-year contract by the city of Indianapolis to manage and operate its two Advanced Wastewater Treatment plants commencing January 30, 1994. At December 31, 1993, this Partnership was still in the development stage and had no significant assets. The Company's majority-owned subsidiary, L&K Noe Pin-Point Boring, Inc., which provided directional boring services, was liquidated in 1993. The Company continues to explore the possibility of involving itself in other water utilities and utility-related activities through the acquisition or formation of additional subsidiaries. However, the Company does not intend to enter into any business that would impair the Company's primary commitment to maintain and develop its water utilities to meet the current and future needs of their customers. INDUSTRY SEGMENT FINANCIAL INFORMATION The Company's operations include two business segments: regulated water utilities and unregulated utility-related services. The water utilities segment includes the operations of the Company's three water utility subsidiaries. The utility-related services segment provides utility line locating services, data processing and billing and payment processing, and other utility-related services to both unaffiliated utilities and to the Company's water utilities. The discussion of segment information, including selected financial data included on pages 31 through 32 of the 1993 Annual Report under "Segment Information", is incorporated herein by reference. SECURITIES AND RATE REGULATION The utility subsidiaries of the Company are subject to regulation by the Indiana Utility Regulatory Commission (Commission) which has jurisdiction over rates, standards of service, accounting procedures, issuance of securities and related matters. The Commission consists of five Commissioners, appointed by the Governor of Indiana from a list of persons selected by a 7-member nominating committee whose members are: appointed by the Governor (3); and the majority (2) and minority (2) leaders of the Indiana House and Senate. Decisions of the Commission are appealable directly to the Indiana Court of Appeals. Securities. The issuance of securities by Resources is not subject to approval by the Commission. The issuance of securities by, and changes in the equity capital of, the Company's utility subsidiaries, including IWC, must be approved. Water Rates. Rates charged by the Company for water service are approved by the Commission. It is the Company's policy to seek rate relief when necessary to maintain its service and financial soundness. The Company is not permitted to submit petitions for general rate relief more frequently than every fifteen months and the Commission is not required to act upon petitions within any particular time period. Rate Case. On May 17, 1993, Indianapolis Water Company and Zionsville Water Corporation, both wholly owned subsidiaries of the Company, filed a petition with the Commission for approval of a merger of the two companies and a new schedule of rates and charges applicable to their interconnected systems. The increase in combined revenues sought by the companies is approximately $8.9 million, or 14%. This request for new rates includes the increased costs associated with adoption of accrual accounting for postretirement benefits other than pensions. On November 10, 1993, the Utility Consumer Counselor, representing ratepayers, prefiled its testimony and exhibits in the case, the effect of which, if adopted by the Commission, would result in a decrease in current rates of approximately $4.6 million, or 7.2%. Hearings before the Commission were concluded in December 1993, and the Company anticipates a final order in the second quarter of 1994. COMPETITIVE CONDITIONS The Company conducts its water utility operations, subject to regulation by the Commission, under indeterminate permit and related franchise rights, all of which may be revoked for cause. Under such permit and franchise rights, the Company may lay, maintain and operate its mains and conduits in public streets and ways throughout the area which it serves. Although the permit and franchise rights granted to the Company are not exclusive, other than private wells, there are presently no other significant competitors operating within most of the Company's service area, and the Company does not anticipate that any significant general competition will develop within the area. As the Indianapolis metropolitan area has expanded to include surrounding communities or previously rural areas, the Company has faced competition for new customers from town or rural water utilities. The continuing regulation of the Commission covers, among other things, matters relating to rates, service, acquisition of properties, accounting practices, and the issuance of securities by IWC, Harbour or Zionsville. The Company does not pay a franchise tax and is not required to renew its franchise rights periodically. The Company's unregulated utility-related services are currently provided in eight states. Data processing and billing and payment processing services are provided to the city of Indianapolis, the Company's water utilities, and to other unaffiliated utilities located in the state of Indiana. Underground facility locating services are provided in the states of Indiana, Ilinois, Missouri, Ohio, Texas, Wisconsin, Arkansas and Minnesota. Services provided by this segment are subject to competitive conditions and are generally contracted for a period of three to five years. RECENT AND PROPOSED CHANGES IN FACILITIES During the year ended December 31, 1993, the Company added $18,988,000 (including $5,021,000 from the acquisition of SM&P) to utility plant and other property, including 58 miles of new mains and 515 fire hydrants. During the past five years, additions to utility plant and other property have averaged $22,694,000 annually. The Company plans capital expenditures of approximately $125,000,000 during the five-year period 1994-1998 primarily for further extensions and improvements to the Company's utility distribution systems and further additions and improvements to its treatment, pumping and storage facilities. In 1993, the Company installed an additional filter at its Harding Station facility, on the south side of its service area, increasing the facility's treatment capacity to 5.5 MGD, at an approximate cost of $415,000. Construction of an additional well at Harbour was started in 1993 to increase the reliable supply to the existing filter plant, at an approximate cost of $40,000. For possible capital expenditures relating to environmental matters, which are not included above, see "Environmental Matters." CAPACITY OF FACILITIES AND SOURCES OF WATER SUPPLY The combined maximum daily capacity of the Company's treatment plants, together with the maximum daily capacity of its two primary well fields, is 219 million gallons per day (MGD). During 1993, the average consumption was 118 MGD and the maximum consumption was 154 MGD. See "Operating Information by Industry Segment." The principal sources of IWC's present water supply are (a) the White River, which flows through Indianapolis from north to south and is supplemented by Morse Reservoir on a tributary, Cicero Creek, (b) Fall Creek, which flows from the northeast and is supplemented by Geist Reservoir, and (c) the city of Indianapolis' Eagle Creek Reservoir, located on Eagle Creek in northwest Marion County, from which water is purchased under a long-term contract. See "Properties-Source of Water Supply." The three large surface reservoirs are essential to providing an adequate supply during dry periods. Two are used to supplement low stream flows in the White River and Fall Creek, respectively, and water is drawn directly from the third. The reservoirs are rated at a dependable capacity designed to maintain an adequate supply during a repetition of the worst two-year drought ever recorded in the Indianapolis area. The theoretical dependable supply impounded by the three combined reservoirs represents about 65 percent of the total dependable supply available today with the balance coming from natural stream flow and wells. Wells constitute the source of supply for Harbour. The Zionsville system is connected to IWC's system. In 1993, the Company completed its aquifer protection plan for the south well field in southwest Marion County. This plan will guide the Company's development of its newest major source of supply (40 to 50 MGD), and result in a land use plan to protect the aquifer system from potential contamination sources. SEASONAL NATURE OF BUSINESS Typically, the seasonal nature of the Company's business results in a higher proportion of operating revenues being realized in the second and third quarters of the year than the first and fourth quarters of the year. ENVIRONMENTAL MATTERS The Company's utility operations are subject to pollution control and water quality control regulations, including those issued by the Environmental Protection Agency (EPA), the Indiana Department of Environmental Management (IDEM), the Indiana Water Pollution Control Board and the Indiana Department of Natural Resources. Under the Federal Clean Water Act and Indiana's regulations, the Company must obtain National Pollutant Discharge Elimination System (NPDES) permits for discharges from its White River, White River North, Fall Creek, and Thomas W. Moses treatment stations. The Company's current NPDES permits were to expire June 30, 1989, for White River and Fall Creek stations and December 31, 1990, for Thomas W. Moses treatment station. Applications for renewal of the permits have been filed with, but have not been acted upon by, IDEM (these permits continue in effect pending review of the applications). The Company received an NPDES permit for its White River North Station on April 1, 1991, and it has complied with the reporting requirements for the initial 12-month period of the permit. IDEM has authority to reopen this permit and it could propose in some or all of these permits additional limitations that could be difficult and expensive. Accordingly, the full impact of such restrictions cannot be assessed with certainty at this time. The Company anticipates, however, that the capital costs and expense of compliance with any such permits are likely to be significant. Under the federal Safe Drinking Water Act (SDWA), the Company is subject to regulation by EPA of the quality of water it sells and treatment techniques it uses to make the water potable. EPA promulgates nationally applicable maximum contaminants levels (MCLs) for "contaminants" found in drinking water. Management believes that the Company is currently in compliance with all MCLs promulgated to date. EPA has continuing authority, however, to issue additional regulations under the SDWA, and Congress amended the SDWA in July 1986 to require EPA, within a three-year period, to promulgate MCLs for over 80 chemicals not then regulated. EPA has been unable to meet the three-year deadline, but has promulgated MCLs for many of these chemicals and has proposed additional MCLs. Management of the Company believes that it will be able to comply with the promulgated MCLs and those now proposed without any change in treatment technique, but anticipates that in the future, because of EPA regulations, the Company may have to change its method of treating drinking water to include ozonation and/or granular activated carbon (GAC). In either case, the capital costs could be significant (currently estimated at $37,000,000 for ozonation and $90,000,000 for GAC), as would be the Company's increase in annual operating costs (currently estimated at $1,600,000 for ozonation and $4,300,000 for GAC). Actual costs could exceed these estimates. The Company would expect to recover such costs through its water rates; however, such recovery may not necessarily be timely. Under a 1991 law enacted by the Indiana Legislature, a water utility, including the utility subsidiaries of the Company, may petition the Indiana Utility Regulatory Commission (Commission) for prior approval of its plans and estimated expenditures required to comply with provisions of, and regulations under, the Federal Clean Water Act and SDWA. Upon obtaining such approval, the utility may include, to the extent of its estimated costs as approved by the Commission, such costs in its rate base for ratemaking purposes and recover its costs of developing and implementing the approved plans if statutory standards are met. The capital costs for such new systems, equipment or facilities or modifications of existing facilities may be included in the utility's rate base upon completion of construction of the project or any part thereof. While use of this statute is voluntary on the part of a utility, if utilized, it should allow utilities a greater degree of confidence in recovering major costs incurred to comply with environmental related laws on a timely basis. EMPLOYEES At December 31, 1993, the Company had 904 employees including the addition of 499 employees as a result of the acquisition of SM&P. Approximately one-half of the Company's water utility employees are members of the International Brotherhood of Firemen and Oilers Local 131, AFL-CIO (Union). The three-year contract between IWC and the Union is due to expire December 31, 1994. OPERATING INFORMATION BY INDUSTRY SEGMENT Operating information by industry segment for each of the past five years follows: Operating Revenues-Industry Segment (in thousands) 1993 1992 1991 1990 1989 Water Utilities: Residential $41,513 40,633 38,901 34,231 31,924 Commercial and Industrial 18,032 16,696 15,393 14,225 13,589 Public Fire Protection 945 2,157 1,953 1,743 1,718 Other 3,849 3,966 3,683 3,43l 2,984 Total Water Utilities 64,339 63,452 59,930 53,630 50,215 Utility-Related Services(1) 17,982 - - - - Total Operating Revenues $82,321 63,452 59,930 53,630 50,215 ====== ====== ====== ====== ====== (1) Reporting by segment was adopted in 1993 as a result of the acquisition of SM&P. Utility-related services for prior periods are not material and, accordingly, have not been reclassified to conform with the 1993 presentation. Operating Statistics-Water Utilities 1993 1992 1991 1990 1989 Water Sold (million gallons) Residential 20,232 20,664 22,493 20,168 19,645 Commercial and Industrial 15,337 14,660 15,312 14,835 14,856 Public Fire Protection 39 29 32 46 50 Other 717 808 912 820 715 Total Water Sold 36,325 36,161 38,749 35,869 35,266 ====== ====== ====== ====== ====== Daily Pumpage (million gallons) Maximum 154 161 202 177 181 Minimum 93 90 91 95 92 Average 118 115 124 117 116 Utility Customers (end of year, in thousands) 224 219 214 210 204 Fire Hydrants (end of year) 24,730 24,215 23,465 23,124 22,229 Miles of Mains (end of year) 2,817 2,759 2,673 2,624 2,533 Item 2. PROPERTIES GENERAL DESCRIPTION The Company's water utilities' properties consist of land, easements, rights (including water rights), buildings, reservoirs, canal, wells, supply lines, purification pla3ts, pumping stations, transmission and distribution pipes, mains and conduits, meters and other facilities used for the collection, purification, and storage of water, and the distribution of water to its customers. The water systems extend from well fields and raw water reservoirs on Cicero Creek and Fall Creek, north and northeast of Indianapolis, and from the intake structure in Indianapolis' Eagle Creek Reservoir, northwest of Indianapolis, to the service connections of the ultimate consumers. The principal properties are all located in or near Indianapolis and, except for Eagle Creek Reservoir, which is owned by the city of Indianapolis, are all owned by the Company, in fee, with the exception of its easements. Substantially all its utility property rights and interests, both tangible and intangible, are subject to the lien securing first mortgage bonds. The Company's utility-related properties consist of data processing equipment used to provide data processing and billing and payment processing to both unaffiliated utilities and to the Company's water utilities, and land, building, vehicles and locating equipment used to provide line locating services to unaffiliated utilities. The Company also owns parcels of land which it holds for possible sale or development. A general description of the principal properties is set forth in the following paragraphs. SOURCE OF WATER SUPPLY WHITE RIVER: White River, supplemented by Morse Reservoir, furnished 70% of IWC's water supply during 1993, of which 64% was provided by IWC's White River plant and 6% was provided by IWC's new White River North plant (placed in service in 1991). The drainage area of the White River above the intake of IWC's canal is approximately 1,200 square miles. In 1956, IWC completed Morse Reservoir on Cicero Creek, a tributary of the White River. It is located on approximately 1,692 acres of land owned by IWC of which about 1,500 acres are inundated. The storage capacity of this reservoir is approximately 6.9 billion gallons. With the reservoir supplementing the natural flow, it is estimated by IWC that the combined dependable flow in the White River can be maintained at a volume sufficient to produce 88 MGD. IWC owns and maintains a dam across White River at Broad Ripple which serves to divert the flow into the canal. Water diverted at the Broad Ripple dam flows by gravity in an open canal to the White River treatment and pumping station. IWC's White River North plant has its intake directly on the White River. FALL CREEK: Fall Creek, supplemented by Geist Reservoir, provided 20% of IWC's water supply in 1993. The area of the watershed drained by Fall Creek upstream from the Fall Creek Station intake is approximately 300 square miles. In 1943, IWC completed the Geist Reservoir on Fall Creek. The reservoir is situated on about 1,983 acres of land owned by IWC, of which 1,890 acres are inundated, and has a storage capacity of approximately 6.1 billion gallons. With the reservoir supplementing the natural flow in Fall Creek, it is estimated by IWC that the combined dependable flow in Fall Creek can be maintained at a volume sufficient to provide 25 MGD. At the Fall Creek Station, IWC owns and maintains a concrete dam which diverts the flow of the creek into the station intake. EAGLE CREEK RESERVOIR: Raw water purchased from Eagle Creek Reservoir, a multipurpose reservoir owned and operated by the city of Indianapolis, provided 8% of IWC's water supply in 1993. On October 18, 1971, IWC and the City signed a 50-year contract, with an option for an additional 25 years, providing for the withdrawal, subject to certain restrictions, of up to 12.4 MGD on an annual average basis. IWC owns and maintains a raw water intake structure, pumping station, and pipeline within the reservoir property, which delivers the allotted supply to its Thomas W. Moses Treatment Plant. WELLS: IWC owns 37 wells, of which 31 are supplementary or auxiliary supply and six are primary sources of supply. The Company owns a total of 823 acres of well station land, of which 777 acres are located in Marion County and 46 acres are located in Johnson County. It is estimated that the aggregate dependable annual average yield under a repetition of the most severe two-year drought on record is approximately 14 MGD from the wells. In 1993, wells provided approximately 2% of IWC's water supply utilized. The source of supply for Harbour consists of five wells having a total rated capacity and actual pumping capacity of 3.8 MGD. Zionsville purchases its entire treated water supply from IWC. PURIFICATION Treatment of surface water in IWC's system involves coagulation and flocculation, after which the water flows through the sedimentation basins and then to gravity-type rapid filters. IWC has four primary surface water filtration and purification plants--two for the White River supply sources, one for the Fall Creek supply source, and one for the Eagle Creek supply source--equipped with rapid filters having a maximum operating capacity aggregating 180 MGD and two ground water treatment plants totaling 9 MGD. The water treatment plant for Harbour Water Corporation consists of four packaged filter iron removal units with a combined rated capacity of 3.5 MGD, including the new east plant which increased rated capacity by 1.5 MGD. PUMPING IWC owns seven principal pumping stations and eleven booster stations. The principal pumping stations have a total of 37 primary distribution pumps and have a maximum capacity of 311 MGD. The booster stations have 39 pumps, all of which are electrically driven with a maximum capacity of 99 MGD. IWC has not to date experienced, nor does it anticipate, any shortage of electrical energy to run its pumps. The high service pumping facilities for Harbour consist of six electric motor-driven pumps housed in the same buildings as the treatment plants and have a maximum capacity of approximately 3.5 MGD. FILTERED WATER STORAGE The Company's aggregate storage capacity for finished water is approximately 55 million gallons. IWC owns six filtered-water underground reservoirs at its five principal pumping stations which have an aggregate storage capacity of 39 million gallons. The filtered water in storage has been treated and is available to be pumped into the distribution system. Also, there are three elevated storage tanks with an aggregate storage capacity of over four million gallons and two ground storage tanks with an aggregate storage capacity of 12 million gallons. The filtered water in the two ground storage tanks has been pumped by the principal pumping stations and is available to the respective booster stations to be pumped into the distribution system served by these stations. The three outlying elevated storage tanks "ride on" the distribution system and provide water by gravity flow. There is one ground storage tank for Harbour located adjacent to the treatment plant with a storage capacity of 50,000 gallons. There is also an elevated storage tank in the distribution system which "rides on" the system and has a capacity of 250,000 gallons. Zionsville has one elevated storage tank located in the town of Zionsville with a storage capacity of 400,000 gallons. TRANSMISSION AND DISTRIBUTION The Company's utility transmission and distribution systems are composed of 2,817 miles of mains, most of which are cast iron and ductile iron. During the past ten years, an aggregate of 654 miles of mains, or approximately 23% of the total, were added to the systems. In general, the mains are located in city streets, other public ways and occasionally in easements. The supply mains are located partly in city streets and partly in rights-of-way and land owned by the Company. The Company furnishes public fire protection service through hydrants owned by the Company and located generally within the limits of street rights-of-way. UTILITY-RELATED PROPERTIES The Company's data processing equipment is located at IWC's general office in Indianapolis, Indiana. The Company also owns land and a building in Noblesville, Indiana which is the headquarters for its line locating services, and leases (operating leases) fourteen buildings located in eight states which are used as district offices. Vehicles and locating equipment used in these operations are located at the various operating offices. REAL ESTATE INTERESTS At December 31, 1993, the Company owned approximately 360 acres of undeveloped non-utility land. Most of the holdings consist of land located generally north and west of Geist Reservoir in Hamilton County, and several additional parcels in Marion County. The Company continues to explore the possible sale or development of this land. OFFICE BUILDING The Company's main office building and service center was constructed in 1957 on 20 acres of land located approximately two miles from the center of the main business district of Indianapolis. The building houses the general and local commercial offices of the Company and provides a garage and building for storage of materials and vehicles, as well as shop space for repairs to automotive and other equipment. To provide for additional space and enhancement of customer service, the Company, in 1993, began construction of an office building adjacent to its existing building which will house certain general office employees. The new building is scheduled for completion in May 1994 at an approximate cost of $2,000,000. Item 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company's business, to which the Company is a party or of which any of their property is the subject, except for the rate case described on page 3 under SECURITIES AND RATE REGULATION - Rate Case. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fourth quarter of 1993 to a vote of security holders of the Registrant, through the solicitation of proxies or otherwise. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information regarding the trading market for the Company's Common Shares, the range of selling prices for each quarterly period during the past two years with respect to the Common Shares, the approximate number of holders of shares of Common Shares as of December 31, 1993, the frequency and amount of dividends paid during the past two years with respect to the Common Shares and other matters is included under the captions "Stock Statistics" and "Distribution of Shareholders" on page 39 of the 1993 Annual Report, which information is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA The data included on page 34 of the 1993 Annual Report under "Selected Financial Data" is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the 1993 Annual Report on pages 35 through 38 is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements included in the 1993 Annual Report and listed in Item 14.1. of this Report are incorporated herein by reference from the 1993 Annual Report. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item regarding nominees for Director of the Company is incorporated herein by reference to the Company's definitive proxy statement for its 1994 annual meeting of common stockholders filed with the Commission pursuant to Regulation 14A (the "1994 Proxy Statement"). The following table sets forth the current officers of IWC Resources Corporation and its principal subsidiary, Indianapolis Water Company, their ages, and (as presented below in parentheses) their positions during the past five years. There is no family relationship between any of the officers of the Company. All officers are elected for a term of one year. IWC RESOURCES CORPORATION Name Age Position James T. Morris 50 Chairman of the Board, Chief Executive Officer and President (President and Chief Operating Officer) J. A. Rosenfeld 62 Executive Vice President (Senior Vice President and Treasurer; Financial Consultant) Kenneth N. Giffin 50 Senior Vice President- Governmental Relations and Real Estate John M. Davis 42 Vice President, General Counsel and Secretary Alan R. Kimbell 62 Vice President-Marketing James P. Lathrop 48 Controller Jane G. Ryan 53 Assistant Secretary INDIANAPOLIS WATER COMPANY James T. Morris 50 Chairman of the Board and Chief Executive Officer (President and Chief Operating Officer) Joseph R. Broyles 51 President and Chief Operating Officer (Executive Vice President; Senior Vice President-Operations) Paul J. Doane 71 Executive Vice President (Senior Vice President-Operations; Vice President-Operations) J. A. Rosenfeld 62 Executive Vice President (Senior Vice President and Treasurer) Kenneth N. Giffin 50 Senior Vice President-Governmental Relations (Senior Vice President- Human Resources and Corporate Relations; Vice President-Human Resources and Corporate Relations) John M. Davis 42 Vice President, General Counsel and Secretary Robert F. Miller 49 Vice President-Engineering (Principal Projects Engineer) David S. Probst 55 Vice President-Business Development (Vice President-Engineering Services; Vice President-Customer Service) Tim K. Bumgardner 45 Vice President-Operations (Vice President-Production; Director of Purification) Ronald H. Carrell 57 Vice President - Customer Service (Director of Customer Services; Director of Corporate Communications) Martha L. Wharton 64 Vice President-Customer Relations (Assistant Secretary) L. M. Williams 50 Vice President - Human Resources (Director of Human Resources and Industrial Relations) James P. Lathrop 48 Assistant Treasurer Jane G. Ryan 53 Assistant Secretary (Executive Secretary) All of the above have been employed by the Company for more than five years except for J. A. Rosenfeld and John M. Davis. Mr. Rosenfeld has been employed since January, 1992 and was previously employed by Melvin Simon & Associates. Mr. Davis has been employed since June, 1993 and was previously employed by KPMG Peat Marwick. Item 11. EXECUTIVE COMPENSATION The information required by this Item regarding compensation of the Company's officers and directors is incorporated herein by reference to the Company's 1994 Proxy Statement. The Compensation Committee Report to Shareholders and Comparative Stock Performance sections of the Company's 1994 Proxy Statement shall not be deemed "filed" herewith. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) The Company knows of no person who is the beneficial owner of more than 5% of the Company's Common Stock. Information required by this item applicable to the Company's Redeemable Preferred Stock follows: Title Name and Address Amount and Nature Percent of of of Beneficial of Class Beneficial Owner Ownership Class Redeemable Patrick J. Baker 17,204 shares 33-1/3% Preferred 1913 W. 116th St. Stock Carmel, IN 46032 Daniel S. Baker (1) 17,204 shares 33-1/3% 7285 Waterview Pt. Noblesville, IN 46060 Diana L. Sosbey 17,204 shares 33-1/3% 8596 Twin Pt. Cir. Indianapolis, IN 46236 (1) Mr. Daniel S. Baker is President of SM&P Conduit Co., Inc., a wholly owned subsidiary of the Company. (b) The information required by this Item regarding the number of shares of the Company's Common Stock, beneficially owned by the nominees for Director and the officers of the Company is incorporated herein by reference to the Company's 1994 Proxy Statement. (c) The Company knows of no arrangements the operation of which may at a subsequent date result in a change of control of the Company. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item regarding certain relationships and related transactions is incorporated herein by reference to the Company's 1994 Proxy Statement. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The documents listed below are filed as a part of this report except as otherwise indicated: 1. Financial Statements. The following described consolidated financial statements found on the pages of the 1993 Annual Report indicated below are incorporated into Item 8 of this Report by reference. Description of Financial Location in 1993 Statement Item Annual Report Independent Auditors' Report Page 33 Consolidated Balance Sheets, December 31, 1993 and 1992 Pages 18 and 19 Consolidated Statements of Shareholders' Equity, Years ended December 31, 1993, 1992 and 1991 Page 20 Consolidated Statements of Earnings, Years ended December 31, 1993, 1992 and 1991 Page 21 Consolidated Statements of Cash Flows, Years ended December 31, 1993, 1992 and 1991 Page 22 Notes to Consolidated Financial Statements, Years ended Pages 23 December 31, 1993, 1992 and 1991 through 33 2. Financial Statement Schedules. (a) Independent Auditors' Report on Financial Statement Schedules (b) Supplemental Schedules for the Years ended December 31, 1993, 1992 and 1991 The supplementary schedules of short-term borrowings and supplementary income statement information required by Rule 12-10 and Rule 12-11, respectively, of Regulation S-X for 1993, 1992 and 1991 are as follows: 1. Schedule IX Short-term Borrowings 2. Schedule X Supplementary Income Statement Information (c) Other Financial Statement Schedules The schedules of property, plant and equipment and accumulated depreciation as required by Rule 12-06 are omitted for 1993, 1992 and 1991 because neither total additions nor total retirements during these years exceeded 10% of the ending balances and the other information required by this rule is set forth in the consolidated financial statements or notes thereto. All other schedules for which provision is made in Regulation S-X have been omitted for the reason that they are not required, are not applicable, or the required information is set forth in the consolidated financial statements or notes thereto. Independent Auditors' Report The Board of Directors and Shareholders IWC Resources Corporation: Under date of January 26, 1994, we reported on the consolidated balance sheets of IWC Resources Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules as listed in Item 14 of the Form 10-K. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in the notes to the consolidated financial statements, the Company changed its method of revenue recognition in 1991 and, effective January 1, 1993, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions. KPMG PEAT MARWICK Indianapolis, Indiana January 26, 1994 Schedule IX IWC Resources Corporation Short-term Borrowings Years Ended December 31, 1993, 1992 and 1991 (in thousands) Description 1993 1992 1991 Short-term Bank Borrowings: Balance at end of year $21,779 5,071 16,618 ====== ====== ====== Weighted average interest rate 3.70% 3.12% 6.5% ====== ====== ====== Maximum amount outstanding during year (1) $23,673 18,873 16,618 ====== ====== ====== Average amount outstanding during year (1) $15,257 15,735 10,787 ====== ====== ====== Weighted average interest rate during the year (1) 3.21% 5.02% 7.42% ====== ====== ====== (1) Calculated as determined using end of month amounts or rates during the year. Schedule X IWC Resources Corporation Supplementary Income Statement Information Years Ended December 31, 1993, 1992 and 1991 (in thousands) Account Charges to Expense Description 1993 1992 1991 Maintenance and repairs $3,768 $2,994 $3,176 ===== ===== ===== The other items required to be disclosed in this schedule, depreciation and property taxes, are omitted because they are included in the consolidated financial statements or notes thereto. OTHER MATTERS For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statement on Form S-8 No. 33-33021 (filed August 17, 1989): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. IWC RESOURCES CORPORATION Registrant Date March 25, 1994 J. A. Rosenfeld, Executive Vice President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date March 25, 1994 James T. Morris, Chairman of the Board, Chief Executive Officer and President and Director Date March 25, 1994 Robert B. McConnell, Chairman of the Executive Committee Date March 25, 1994 J. A. Rosenfeld, Executive Vice President (Principal Financial Officer) Date March 25, 1994 James P. Lathrop, Controller (Principal Accounting Officer) Date March 25, 1994 Joseph R. Broyles, President and Chief Operating Officer, Indianapolis Water Company and Director Date March 25, 1994 Joseph D. Barnette, Jr., Director Date March 25, 1994 Thomas W. Binford, Director Date March 25, 1994 Murvin S. Enders, Director Date March 25, 1994 Otto N. Frenzel III, Director Date March 25, 1994 Elizabeth Grube, Director Date March 25, 1994 J. B. King, Director Date March 25, 1994 J. George Mikelsons, Director Date March 25, 1994 Thomas M. Miller, Director Date March 25, 1994 Jack E. Reich, Director Date March 25, 1994 Fred E. Schlegel, Director 3. Exhibits. The following exhibits are filed as part of this Report: 3-A-1 Restated Articles of Incorporation of Registrant, as amended to date. The copy of this exhibit filed as Exhibit 3-A to Registrant's Registration Statement on Form S-8 effective August 17, 1989 "Registration No. 33-30221," is incorporated by reference. 3-B Bylaws of Registrant, as amended to date. The copy of this exhibit filed as Exhibit 3-B to Registrant's Registration Statement on Form S-8 effective August 17, 1989 "Registration No. 33-30221," is incorporated by reference. 4.1 Sixteenth Supplemental Indenture dated as of November 1, 1985, between Fidelity Bank, National Association, and IWC. The copy of this exhibit filed as Exhibit 4-A1 to IWC's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, is incorporated herein by reference. 4.2 Ninth Supplemental Indenture dated as of August 1, 1967. The copy of this exhibit filed as Exhibit 4-B5 to IWC's Annual Report on Form 10-K for the fiscal year ended December 31, 1980, is incorporated herein by reference. 4.3 Eleventh Supplemental Indenture dated as of December 1, 1971. The copy of this exhibit filed as Exhibit 4-B6 to IWC's Annual Report on Form 10-K for the fiscal year ended December 31, 1980, is incorporated herein by reference. 4.4 Seventeenth Supplemental Indenture dated as of March 1, 1989, between Fidelity Bank, National Association, and IWC. The copy of this exhibit filed as Exhibit 4-A9 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 4.5 Eighteenth Supplemental Indenture dated as of March 1, 1989, between Fidelity Bank, National Association, and IWC. The copy of this exhibit filed as Exhibit 4-A10 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 4.6 Nineteenth Supplemental Indenture dated as of June 1, 1989, between Fidelity Bank, National Association, and IWC. The copy of this exhibit filed as Exhibit 4-A9 to Registrant's Registration Statement on Form S-2 effective December 12, 1991 (Registration No. 33-43939), is incorporated herein by reference. 4.7 Fourteenth Supplemental Indenture dated as of January 15, 1978, between the Fidelity Bank (formerly Fidelity-Philadelphia Trust Company) and IWC, including as Appendix A the "Restatement of Principal Indenture of Indianapolis Water Company," which, except as otherwise specified, restates the granting clauses and all other sections contained in the First Mortgage dated July 1, 1936, between Fidelity-Philadelphia Trust Company and Registrant as amended by the Fourth, Fifth, Sixth, Eighth, Twelfth and Fourteenth Supplemental Indentures. A copy of this exhibit filed as Exhibit 4-B1 to IWC's Annual Report on Form 10-K for the fiscal year ended December 31, 1980, is incorporated herein by reference. 4.8 Twentieth Supplemental Indenture dated as of December 1, 1992, between Fidelity Bank, National Association, and IWC. The copy of this Exhibit filed as Exhibit 4-A9 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, is incorporated herein by reference. 4.9 Twenty-First Supplemental Indenture dated as of December 1, 1992, between Fidelity Bank, National Association, and IWC. The copy of this Exhibit filed as Exhibit 4-A10 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, is incorporated herein by reference. 4.10 Rights Agreement, dated as of February 9, 1988, between IWC Resources Corporation and Bank One, Indianapolis, NA (as Rights Agent), which includes the Form of Certificate of Designations of Series A Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C. The copy of this exhibit filed as Exhibit 4 to the Registrant's Current Report on Form 8-K dated February 9, 1988, is incorporated by reference. 4.11 Indenture of Trust dated as of March 1, 1989, between IWC, City of Indianapolis, Indiana, and Merchants National Bank & Trust Company of Indianapolis, as Trustee. The copy of this exhibit filed as Exhibit 10-F to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 4.12 Indenture of Trust dated as of March 1, 1989, between IWC, Town of Fishers, Indiana, and Merchants National Bank & Trust Company of Indianapolis, as Trustee. The copy of this exhibit filed as Exhibit 10-G to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 4.13 Indenture of Trust dated as of December 1, 1992, between City of Indianapolis, Indiana, and IWC to National City Bank, Indiana, as Trustee. The copy of this Exhibit filed as Exhibit 10-J to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, is incorporated herein by reference. 4.14 Indenture of Trust, City of Indianapolis, Indiana, and Indianapolis Water Company to National City Bank, Indiana, as Trustee, dated as of April 1, 1993. 4.15 Twenty-Second Supplemental Indenture dated as of April 1, 1993, between Indianapolis Water Company and Fidelity Bank, National Association. 10.1 Agreement dated October 18, 1971, between IWC and the Department of Public Works of the City of Indianapolis, Indiana, relating to the purchase of water at Eagle Creek Reservoir. The copy of this exhibit filed as Exhibit 5 to IWC's Statement (No. 2-55201), effective January 14, 1976, is incorporated herein by reference. *10.2 The description of "split dollar" life insurance policies owned by IWC with respect to certain officers of Registrant is incorporated hereby by reference to the Company's 1988 Proxy Statement. *10.3 Form of Executive Supplemental Benefits Plan of IWC. The copy of this exhibit filed on Exhibit 10-D to IWC's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, is incorporated herein by reference. 10.4 Loan Agreement dated as of March 1, 1989, between IWC and the City of Indianapolis, Indiana. The copy of this exhibit filed as Exhibit 10-D to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 10.5 Loan Agreement dated as of March 1, 1989, between IWC and Town of Fishers, Indiana. The copy of this exhibit filed as Exhibit 10-E to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 10.6 Guaranty Agreement dated as of March 1, 1989, between Registrant and Merchants National Bank & Trust Company of Indianapolis re: City of Indianapolis, Indiana Industrial Development Bonds. The copy of this exhibit filed as Exhibit 10-H to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 10.7 Guaranty Agreement dated as of March 1, 1989, between Registrant and Merchants National Bank & Trust Company of Indianapolis re: Town of Fishers, Indiana Industrial Development Bonds. The copy of this exhibit filed as Exhibit 10-I to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 10.8 Loan Agreement dated as of December 1, 1992, between IWC and City of Indianapolis, Indiana. The copy of this exhibit filed as Exhibit 10-K to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, is incorporated herein by reference. 10.9 Guaranty Agreement dated as of December 1, 1992, between Resources and National City Bank, Indiana, as Trustee. The copy of this exhibit filed as Exhibit 10-L to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, is incorporated herein by reference. 10.10 Note Agreement dated as of March 1, 1994, between Registrant and American United Life Insurance Company. 10.11 Loan Agreement dated as of April 1, 1993, between Indianapolis Water Company and City of Indianapolis. 10.12 Guaranty Agreement between Registrant and National City Bank, Indiana, as Trustee, dated as of April 1, 1993. 10.13 Agreement for the Operation and Maintenance of the City of Indianapolis, Indiana, Advanced Wastewater Treatment Facilities dated as of December 20, 1993, among the City of Indianapolis, White River Environmental Partnership, the Registrant and certain other parties. 10.14 White River Environmental Partnership Agreement between IWC Services, Inc., JMM White River Corporation and LAH White River Corporation, dated as of August 20, 1993. 10.15 Plan and Agreement of Merger among Registrant, Resources Acquisition Corp., S. M. & P. Conduit Co., Inc., and its shareholders dated as of June 14, 1993. 10.16 Executive Employment Agreement between Registrant and James T. Morris, dated as of December 31, 1993 (substantially similar agreements in favor of J.A. Rosenfeld, Joseph R. Broyles and Kenneth N. Giffin have been omitted pursuant to Instruction 2 to Item 601 of Regulation S-K). 13 Registrant's Annual Report to Stockholders for the year ended December 31, 1993. This exhibit, except for the portions thereof that have expressly been incorporated by reference into this Report, is furnished for the information of the Commission and shall not be deemed "filed" as part hereof. 21 Subsidiaries. 23 Consent of Independent Certified Public Accounts. 4. Reports on Form 8-K. No reports on Form 8-K were filed during the three months ended December 31, 1992. _______ * This exhibit relates to executive compensation or benefit plans. EXHIBIT INDEX The following Exhibits are filed as part of this Report and not incorporated by reference from another document: 3A-1 Restated Articles of Incorporation of Registrant, as amended to date. 4.14 Indenture of Trust, City of Indianapolis, Indiana, and Indianapolis Water Company to National City Bank, Indiana, as Trustee, dated as of April 1, 1993. 4.15 Twenty-Second Supplemental Indenture dated as of April 1, 1993, between Indianapolis Water Company and Fidelity Bank, National Association. 10.10 Note Agreement dated as of March 1, 1994, between Registrant and American United Life Insurance Company. 10.11 Loan Agreement dated as of April 1, 1993, between Indianapolis Water Company and City of Indianapolis. 10.12 Guaranty Agreement between Registrant and National City Bank, Indiana, as Trustee, dated as of April 1, 1993. 10.13 Agreement for the Operation and Maintenance of the City of Indianapolis, Indiana, Advanced Wastewater Treatment Facilities dated as of December 20, 1993, among the City of Indianapolis, White River Environmental Partnership, the Registrant and certain other parties. 10.14 White River Environmental Partnership Agreement between IWC Services, Inc., JMM White River Corporation and LAH White River Corporation, dated as of August 20, 1993. 10.15 Plan and Agreement of Merger among Registrant, Resources Acquisition Corp., S. M. & P. Conduit Co., Inc., and its shareholders dated as of June 14, 1993. 10.16 Executive Employment Agreement between Registrant and James T. Morris, dated as of December 31, 1993 (substantially similar agreements in favor of J.A. Rosenfeld, Joseph R. Broyles and Kenneth N. Giffin have been omitted pursuant to Instruction 2 to Item 601 of Regulation S-K). 13 Registrant's Annual Report to Stockholders for the year ended December 31, 1993. This exhibit, except for the portions thereof that have expressly been incorporated by reference into this Report, is furnished for the information of the Commission and shall not be deemed "filed" as part hereof. 21 Subsidiaries. 23 Consent of Independent Certified Public Accounts. See Item 14 of this Report for a list of other Exhibits that have been filed as part of this Report through incorporation by reference from other documents. EX-3 2 EX 3(A); RESTATED ARTS OF INCORP OF IWCR Exhibit A RESTATED ARTICLES OF INCORPORATION OF IWC RESOURCES CORPORATION IWC Resources Corporation (hereinafter referred to as the "Corporation"), having duly elected to be governed by IC 23-1-18 through IC 23-1-54 (except for IC 23-1-18-3, IC 23-1-21 and IC 23-1-53-3) effective April 1, 1986, and desiring to amend and restate its Articles of Incorporation effective April 1, 1986, pursuant to the provisions of the Indiana Business Corporation Law (hereinafter referred to as the "Corporation Law"), submits the following Restated Articles of Incorporation: ARTICLE I Name The name of the Corporation is IWC Resources Corporation. ARTICLE II Purposes and Powers Section 1. Purposes of the Corporation. The purposes for which the Corporation is formed are (a) to engage in the general business of holding the stock, securities or other obligations of various other corporations or entities, either in existence or subsequently formed, and to carry on such activities of every kind and nature as may be allied or incidental to such general business, and (b) to engage in the transaction of any or all lawful business for which corporations may now or hereafter be incorporated under the Corporation Law. Section 2. Powers of the Corporation. The Corporation shall have (a) all powers now or hereafter authorized by or vested in corporations pursuant to the provisions of the Corporation Law, (b) all powers now or hereafter vested in corporations by common law or any other statute or act, and (c) all powers authorized by or vested in the Corporation by the provisions of these Restated Articles of Incorporation or by the provisions of its Bylaws as from time to time in effect. ARTICLE III Terms of Existence The period during which the Corporation shall continue is perpetual. ARTICLE IV Registered Office and Agent The street address of the Corporation's registered office at the time of adoption of these Restated Articles of Incorporation is 1220 Waterway Boulevard, Indianapolis, Indiana 46202, and the name of its Resident Agent at such office at the time of adoption of these Restated Articles of Incorporation is Dale B. Luther. ARTICLE V Shares The total number of shares which the Corporation has authority to issue shall be 12,000,000 shares, consisting of 10,000,000 common shares (the "Common Shares") and 2,000,000 special shares (the "Special Shares"). The Corporation's shares do not have any par or stated value, except that, solely for the purpose of any statute or regulation imposing any tax or fee based upon the capitalization of the Corporation, all of the Corporation's shares shall be deemed to have a par value of $1.00 per share. ARTICLE VI Terms of Shares Section 1. General Terms of All Shares. The Corporation shall have the power to acquire (by purchase, redemption or otherwise), hold, own, pledge, sell, transfer, assign, reissue, cancel or otherwise dispose of the shares of the Corporation in the manner and to the extent now or hereafter permitted by the laws of the State of Indiana, including the power to purchase, redeem or otherwise acquire the Corporation's own shares, directly or indirectly, and without pro rata treatment of the owners or holders of any class or series of shares, unless, after giving effect thereto, the Corporation would not be able to pay its debts as they become due in the usual course of business or the Corporation's total assets would be less than its total liabilities (and without regard to any amounts that would be needed, if the Corporation were to be dissolved at the time of the purchase, redemption or other acquisition, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those of the holders of the shares of the Corporation being purchased, redeemed or otherwise acquired, unless otherwise expressly provided with respect to a series of Special Shares in the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof describing the terms of such series). Shares of the Corporation purchased, redeemed or otherwise acquired by it shall constitute authorized but unissued shares, unless prior to any such purchase, redemption or other acquisition, or within thirty (30) days thereafter, the Board of Directors adopts a resolution providing that such shares constitute authorized and issued but not outstanding shares. The Board of Directors of the Corporation may dispose of, issue and sell shares in accordance with, and in such amounts as may be permitted by, the laws of the State of Indiana and the provisions of these Restated Articles of Incorporation and for such consideration, at such price or prices, at such time or times and upon such terms and conditions (including the privilege of selectively repurchasing the same) as the Board of Directors of the Corporation shall determine, without the authorization or approval by any shareholders of the Corporation. Shares may be disposed of, issued and sold to such persons, firms or corporations as the Board of Directors may determine, without any preemptive or other right on the part of the owners or holders of other shares of the Corporation of any class or kind to acquire such shares by reason of their ownership of such other shares. When the Corporation receives the consideration specified in a subscription agreement entered into before incorporation, or for which the Board of Directors authorized the issuance of shares, as the case may be, the shares issued therefor shall be fully paid and nonassessable. The Corporation shall have the power to declare and pay dividends or other distributions upon the issued and outstanding shares of the Corporation, subject to the limitation that a dividend or other distribution may not be made if, after giving it effect, the Corporation would not be able to pay its debts as they become due in the usual course of business or the Corporation's total assets would be less than its total liabilities (and without regard to any amounts that would be needed, if the Corporation were to be dissolved at the time of the dividend or other distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those of the holders of shares receiving the dividend or other distribution, unless otherwise expressly provided with respect to a series of Special Shares in the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 3(a) of this Article VI describing the terms of such series). The Corporation shall have the power to issue shares of one class or series as a share dividend or other distribution in respect of that class or series or one or more other classes or series. Section 2. Terms of Common Shares. The Common Shares shall be equal in every respect insofar as their relationship to the Corporation is concerned, but such equality of rights shall not imply equality of treatment as to redemption or other acquisition of shares by the Corporation. Subject to the rights of the holders of any outstanding Special Shares issued under this Article VI, the holders of Common Shares shall be entitled to share ratably in such dividends or other distributions (other than purchases, redemptions or other acquisitions of Common Shares by the Corporation), if any, as are declared and paid from time to time on the Common Shares at the discretion of the Board of Directors. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, after payment shall have been made to the holders of the Special Shares of the full amount to which they shall be entitled under this Article VI, the holders of Common Shares shall be entitled, to the exclusion of the holders of the Special Shares of any and all series, to share, ratably according to the number of shares of Common Shares held by them, in all remaining assets of the Corporation available for distribution to its shareholders. Section 3. Terms of Special Shares. (a) Special Shares may be issued from time to time in one or more series, each such series to have such distinctive designation and such preferences, limitations and relative voting and other rights as shall be set forth in these Restated Articles of Incorporation. Subject to the requirements of the Corporation Law and subject to all other provisions of these Restated Articles of Incorporation, the Board of Directors of the Corporation may create one or more series of Special Shares and may determine the preferences, limitations and relative voting and other rights of one or more series of Special Shares before the issuance of any shares of that series by the adoption of an amendment to these Restated Articles of Incorporation that specifies the terms of the series of Special Shares. All shares of a series of Special Shares must have preferences, limitations and relative voting and other rights identical with those of other shares of the same series and, if the description of the series set forth in these Restated Articles of Incorporation so provides, no series of Special Shares need have preferences, limitations or relative voting or other rights identical with those of any other series of Special Shares. Before issuing any shares of a series of Special Shares, the Board of Directors shall adopt an amendment to these Restated Articles of Incorporation, which shall be effective without any shareholder approval or other action, that sets forth the preferences, limitations and relative voting and other rights of the series, and authority is hereby expressly vested in the Board of Directors, by such amendment: (i) To fix the distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (ii) To fix the voting rights of such series, which may consist of special, conditional, limited or unlimited voting rights, or no right to vote (except to the extent prohibited by the Corporation Law); (iii) To fix the dividend or distribution rights of such series and the manner of calculating the amount and time for payment of dividends or distributions, including, but not limited to: (1) the dividend rate, if any, of such series; (2) any limitations, restrictions or conditions on the payment of dividends or other distributions, including whether dividends or other distributions shall be noncumulative or cumulative or partially cumulative and, if so, from which date or dates; (3) the relative rights of priority, if any, of payment of dividends or other distributions on shares of that series in relation to Common Shares and shares of any other series of Special Shares; and (4) the form of dividends or other distributions, which may be payable at the option of the Corporation, the shareholder, or another person (and in such case to prescribe the terms and conditions of exercising such option), or upon the occurrence of a designated event in cash, indebtedness, stock or other securities or other property, or in any combination thereof, and to make provisions, in the case of dividends or other distributions payable in stock or other securities, for adjustment of the dividend or distribution rate in such events as the Board of Director shall determine; (iv) To fix the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed or converted, which may be (A) at the option of the Corporation, the shareholder or another person or upon the occurrence of a designated event; (B) for cash, indebtedness, securities, or other property or any combination thereof; and (C) in a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events; (v) To fix the amount or amounts payable upon the shares of such series in the event of any liquidation, dissolution or winding up of the Corporation and the relative rights of priority, if any, of payment upon shares of such series; and to determine whether or not any such preferential rights upon dissolution need be considered in determining whether or not the Corporation may make dividends, repurchases or other distributions; (vi) To determine whether or not the shares of such series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of such series and, if so entitled, the amount of such fund and the manner of its application; (vii) To determine whether or not the shares of such series shall be made convertible into, or exchangeable for, shares of any other class or classes of shares of the Corporation or shares of any other series of Special Shares, and, if made so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (viii) To determine whether or not the issued of any additional shares of such series or of any other series in addition to such series shall be subject to restrictions in addition to restrictions, if any, on the issue of additional shares imposed in the provisions of these Restated Articles of Incorporation fixing the terms of any outstanding series of Special Shares theretofore issued pursuant to this Section 3 and, if subject to additional restrictions, the extent of such additional restrictions; and (ix) Generally to fix the other preferences or rights, and any qualifications, limitations or restrictions of such preferences or rights, of such series to the full extent permitted by the Corporation Law; provided, however, that no such preferences, rights, qualifications, limitations or restrictions shall be in conflict with these Restated Articles of Incorporation or any amendment thereof. (b) Special Shares of any series that have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible, have been converted into shares of the Corporation of any other class or series, may be reissued as a part of such series or of any other series of Special Shares, subject to such limitations (if any) as may be fixed by the Board of Directors with respect to such series of Special Shares in accordance with Section 3(a) of this Article VI. Section 4. Terms of Series A Junior Participating Preferred Stock. I. Designation and Amount The Corporation shall have a series of Special Shares which shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 100,000. Such number of shares may be increased or decreased by amendment to these Articles of Incorporation without shareholder approval; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. II. Dividends and Distribution (A) Subject to the rights of the holders of any shares of any series of Special Shares (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Shares of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Shares or a subdivision of the outstanding shares of Common Shares (by reclassification or otherwise), declared on the Common Shares since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in shares of Common Shares); provided that, in the event no dividend or distribution shall have been declared on the Common Shares during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. III. Voting Rights The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designation creating a series of Special Shares or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Shares and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no voting rights. IV. Certain Restrictions (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section II are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section IV purchase or otherwise acquire such shares at such time and in such manner. V. Reacquired Shares Any share of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Special Shares and may be reissued as part of a new series of Special Shares subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any other Certificate of Designations creating a series of Special Shares or any similar stock or as otherwise required by law. VI. Liquidation, Dissolution or Winding Up Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Shares, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the aggregate amount of which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. VII. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Shares is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares), into a greater or lesser number of shares of Common Shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. VIII. Redemption The shares of Series A Preferred Stock shall not be redeemable. IX. Rank The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Special Shares. X. Amendment The Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preference or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single series. Section 5. Terms of Series B Convertible Redeemable Preferred Stock. I. Designation and Amount The Corporation shall have a series of Special Shares which shall be designated as "Series B Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of shares constituting the Series B Preferred Stock shall be 60,000. Such number of shares may be increased or decreased by amendment to these Articles of Incorporation without shareholder approval; provided, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock. II. Dividends and Distributions (A) Subject to the rights of the holders of any shares of any series of Special Shares (or any similar stock) ranking prior and superior to the Series B Preferred Stock and the Common Shares with respect to dividends, the holders of shares of Series B Preferred Stock shall be entitled to participate with the holders of the Common Shares in the receipt of dividends and distributions and to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, dividends equal to the per share amount of each cash dividend, and the per share amount (payable in kind) of each non-cash dividend or other distribution, other than a dividend payable in shares of Common Shares or a subdivision of the outstanding shares of Common Shares (by reclassification or otherwise), declared on the Common Shares. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in shares of Common Shares). The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. III. Voting Rights The holders of shares of Series B Preferred Stock shall have the following voting rights: (A) Each share of Series B Preferred Stock shall entitle the holder thereof to one (1) vote on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, by the provisions creating any other series of Special Shares or any similar stock, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Shares and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no voting rights. IV. Conversion (A) General. Any holder of outstanding Series B Preferred Stock may, at any time, convert all but not less than all of said shares owned by said holder into Common Shares, at the Conversion Rate (as such term is defined below) as then in effect. (B) Conversion Rate and Adjustments. The initial Conversion Rate shall be one (1) Common Share for each share of Series B Preferred Stock (the "Conversion Rate"). In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. V. Redemption (A) Mandatory Redemption. On July 14, 1998 (the "Redemption Date") the Corporation shall redeem all of the shares of Series B Preferred Stock then outstanding out of funds legally available therefor at a redemption price equal to $23.25 per share, subject to adjustment as set forth below (as adjusted, the "Redemption Price"), together with an amount equal to unpaid dividends thereon to the date of redemption. In the event of any change in the Series B Preferred Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, exchanges of shares or the like, the Redemption Price shall be appropriately adjusted. (B) Notice of Redemption. At least thirty (30) days prior to the Redemption Date, the Corporation shall notify the holders of the Series B Preferred Stock of the procedures to be followed in connection with the redemption; provided, however, that the failure to give such notice (the "Redemption Notice") shall not affect any of the Corporation's rights hereunder or the validity of such redemption. The Redemption Notice shall be sent to the holders of the Series B Preferred Stock at their addresses as they appear on the records of the Corporation. The holders of the Series B Preferred Stock may continue to exercise the right of conversion provided in Article IV hereof until the Redemption Date notwithstanding the Corporation's giving of the Redemption Notice. (C) Procedures for Redemption. If, on or prior to the Redemption Date, all funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust with a bank or trust company for the account of the holders of the shares so to be redeemed (so as to be and continue to be available therefor), then on and after the Redemption Date, notwithstanding that any certificate for shares of the Series B Preferred Stock so called for redemption shall not have been surrendered for cancellation, all shares of the Series B Preferred Stock shall be deemed to be no longer outstanding, and all rights with respect to such shares of the Series B Preferred Stock shall forthwith cease and terminate, except the right of the holders thereof to receive out of the funds so set aside in trust the amount payable on redemption thereof without interest thereon. In case the holders of shares of the Series B Preferred Stock which shall have been redeemed shall not within one year (or any longer period if required by law) after the Redemption Date claim any amount so deposited in trust for the redemption of such shares, such bank or trust company shall, upon demand and if permitted by applicable law, pay over to the Corporation any such unclaimed amount so deposited with it, and shall thereupon be relieved of all responsibility in respect thereof, and thereafter the holders of such shares shall, subject to applicable escheat laws, look only to the Corporation for payment of the Redemption Price thereof without interest thereon. (D) Status After Redemption. Shares of Series B Preferred Stock redeemed, purchased or otherwise acquired for value by the Corporation shall, after such acquisition, have the status of authorized and unissued shares of Special Shares of the Corporation and may be reissued by the Corporation at any time as shares of any class or series of Special Shares other than as shares of Series B Preferred Stock. VI. Liquidation, Dissolution or Winding Up Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to the aggregate amount to be distributed per share to holders of shares of Common Shares. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the aggregate amount of which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. VII. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Shares is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. VIII. Rank The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Special Shares. IX. Amendment The Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preference or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Series B Preferred Stock, voting together as a single series. ARTICLE VII Voting Rights Section 1. Common Shares. Except as otherwise provided by the Corporation Law and subject to such shareholder disclosure and recognition procedures (which may include voting prohibition sanctions) as the Corporation may by action of the Board of Directors establish, the Common Shares have unlimited voting rights and each Common Share shall, when validly issued by the Corporation, entitle the record holder thereof to one vote at all shareholders' meetings on all matters submitted to a vote of the shareholders of the Corporation. Section 2. Special Shares. Except as required by the Corporation Law or by the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof describing the terms of Special Shares or a series thereof, the holders of Special Shares shall have no voting rights or powers. Special Shares shall, when validly issued by the Corporation, entitle the record holder thereof to vote as and on such matters, but only as and on such matters, as the holders thereof are entitled to vote under the Corporation Law or under the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof describing the terms of Special Shares or a series thereof (which provisions may provide for special, conditional, limited or unlimited voting rights, including multiple or fractional votes per share, or for no right to vote, except to the extent required by the Corporation Law) and subject to such shareholder disclosure and recognition procedures (which may include voting prohibition sanctions) as the Corporation may by action of the Board of Directors establish. ARTICLE VIII Approval of Business Combinations Section 1. Supermajority Vote. Except as provided in Sections 2 and 3 of this Article VIII, neither the Corporation nor its Subsidiaries, if any, shall become a party to any Business Combination with a Related Person without the prior affirmative vote at a meeting of the Corporation's shareholders: (a) Of not less than sixty-six and two-thirds percent (66-2/3%) of all the votes entitled to be cast by the holders of the outstanding shares of all classes of Voting Stock of the Corporation considered for purposes of this Article VIII as a single class, and (b) Of an Independent Majority of Shareholders. Such favorable votes shall be in addition to any shareholder vote which would be required without reference to this Section 1 and shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified by law or elsewhere in these Restated Articles of Incorporation or the Bylaws of the Corporation or otherwise. Section 2. Fair Price Exception. The provisions of Section 1 of this Article VIII shall not apply to a Business Combination if all of the conditions set forth in subsections (a) through (d) are satisfied. (a) The fair market value of the property, securities or other consideration to be received per share by holders of each class or series of capital stock of the Corporation in the Business Combination is not less, as of the date of the consummation of the Business Combination (the "Consummation Date") than the higher of the following: (i) the highest per share price (with appropriate adjustments for recapitalizations and for stock splits, stock dividends and like distributions) including brokerage commissions and solicitation fees paid by the Related Person in acquiring any of its holdings of such class or series of capital stock within the two year period immediately prior to the first public announcement of the proposed Business Combination ("Announcement Date") plus interest compounded annually from the date that the Related Person became a Related Person (the "Determination Date"), or if later from a date two years before the Consummation Date, through the Consummation Date, at the rate publicly announced as the "prime rate" of interest of Citibank, N.A. (or of such other major bank headquartered in New York as may be selected by a majority of the Continuing Directors) from time to time in effect, less the aggregate amount of any cash dividends paid and the fair market value of any dividends paid in other than cash on each share of such stock from the date from which interest accrues under the preceding clause through the Consummation Date up to but not exceeding the amount of interest so payable per share; OR (ii) the fair market value per share of such class or series on the Announcement Date as determined by the highest closing sale price during the 30-day period immediately preceding the Announcement Date if such stock is listed on a securities exchange registered under the Securities Exchange Act of 1934 or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to such stock during the 30-day period preceding the Announcement Date on the National Association of Securities Dealers, Inc. Automated Quotation System or any similar system then in use, or if no such quotations are available, the fair market value of such stock immediately prior to the first public announcement of the proposed Business Combination as determined by the Continuing Directors in good faith. In the event of a Business Combination upon the consummation of which the Corporation would be the surviving corporation or company or would continue to exist (unless it is provided, contemplated or intended that as part of such Business Combination or within one year after consummation thereof a plan of liquidation or dissolution of the Corporation will be effected), the term "other consideration to be received" shall include (without limitation) Common Shares and/or the shares of any other class of stock retained by shareholders of the Corporation other than Related Persons who are parties to such Business Combination; (b) The consideration to be received in such Business Combination by holders of each class or series of capital stock of the Corporation other than the Related Person involved shall, except to the extent that a shareholder agrees otherwise as to all or part of the shares which he or she owns, be in the same form and of the same kind as the consideration paid by the Related Person in acquiring the majority of the shares of capital stock of such class or series already Beneficially Owned by it; (c) After such Related Person became a Related Person and prior to the consummation of such Business Combination: (i) such Related Person shall have taken steps to insure that the Board of Directors of the Corporation included at all times representation by Continuing Directors proportionate to the ratio that the number of shares of Voting Stock of the Corporation from time to time owned by shareholders who are not Related Persons bears to all shares of Voting Stock of the Corporation outstanding at the time in question (with a Continuing Director to occupy any resulting fractional position among the directors); (ii) such Related Person shall not have acquired from the Corporation, directly or indirectly, any shares of the Corporation (except upon conversion of convertible securities acquired by it prior to becoming a Related Person or as a result of a pro rata stock dividend, stock split or division of shares or in a transaction which satisfied all applicable requirements of this Article VIII); (iii) such Related Person shall not have acquired any additional shares of Voting Stock of the Corporation or securities convertible into or exchangeable for shares of Voting Stock except as a part of the transaction which resulted in such Related Person's becoming a Related Person; and (iv) such Related Person shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation or any Subsidiary, or made any major change in the Corporation's business or equity capital structure or entered into any contract, arrangement or understanding with the Corporation except any such change, contract, arrangement or understanding as may have been approved by the favorable vote of not less than a majority of the Continuing Directors of the Corporation; and (d) A proxy or information statement complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder, as then in force for corporations subject to the requirements of Section 14 of such Act (even if the Corporation is not otherwise subject to Section 14 of such Act), shall have been mailed to all holders of shares of the Corporation's capital stock entitled Act), shall have been mailed to all holders of shares of the Corporation's capital stock entitled to vote with respect to such Business Combination. Such proxy or information statement shall contain on the face page thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if deemed advisable by a majority of the Continuing Directors, a fair summary of an opinion of a reputable investment banking firm addressed to the Corporation as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the holders of shares of Voting Stock other than any Related Person (such investment banking firm to be selected by a majority of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid a reasonable fee for its services upon receipt by the Corporation of such opinion). Section 3. Director Approval Exception. The provisions of Section 1 of this Article VIII shall not apply to a Business Combination if: (a) The Continuing Directors of the Corporation by not less than a sixty-six and two-thirds percent (66-2/3%) vote (i) have expressly approved a memorandum of understanding with the Related Person with respect to the Business Combination prior to the time that the Related Person with respect to the Business Combination prior to the time that the Related Person became a Related Person and the Business Combination is effected on substantially the same terms and conditions as are provided by the memorandum of understanding, or (ii) have otherwise approved the Business Combination (this provision is incapable of satisfaction unless there is at least one Continuing Director); or (b) The Business Combination is solely between the Corporation and another corporation, one hundred percent of the Voting Stock of which is owned directly or indirectly by the Corporation. Section 4. Definitions. For purposes of this Article VIII: (a) A "Business Combination" means: (i) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any Subsidiaries (in a single transaction or a Series of Related Transactions) of all or substantially all, or any Substantial Part, of its or their assets or businesses (including, without limitation, securities issued by a Subsidiary, if any); (ii) The purchase, exchange, lease or other acquisition by the Corporation or any Subsidiaries (in a single transaction or a Series of Related Transactions) of all or substantially all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person; (iii) Any merger or consolidation of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person or into or with another Person which, after such merger or consolidation, would be an Affiliate or an Associate of a Related Person, in each case irrespective of which Person is the surviving entity in such merger or consolidation; (iv) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of shares of Voting Stock of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spinoff, splitoff or splitup of the Corporation or any Subsidiary thereof; provided, however, that this Section 4(a)(iv) shall not relate to any transaction that has been approved by a majority of the Continuing Directors; or (v) The acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of shares of Voting Stock or securities convertible into shares of Voting Stock or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to acquire any of the foregoing or any combination of the foregoing shares of Voting Stock or voting securities of a Subsidiary, if any. (b) A "Series of Related Transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. (c) A "Person" shall mean any individual, firm, corporation or other entity and any partnership, syndicate or other group. (d) "Related Person" shall mean any Person (other than the Corporation or any Subsidiary of the Corporation or the Continuing Directors, singly or as a group) who or that at any time described in the last sentence of this first paragraph of this subsection (d): (i) is the Beneficial Owner, directly or indirectly, of more than ten percent (10%) of the voting power of the outstanding shares of Voting Stock and who has not been the Beneficial Owner, directly or indirectly, of more than ten percent (10%) of the voting power of the outstanding shares of Voting Stock for a continuous period of two years prior to the date in question; or (ii) is an Affiliate of the Corporation and at any time within the two- year period immediately prior to the date in question (but not continuously during such two-year period) was the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the voting power of the outstanding shares of Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of the Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Related Person, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. A Related Person shall be deemed to have acquired a share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. For the purposes of determining whether a Person is the Beneficial Owner of ten percent (10%) or more of the voting power of the then outstanding Voting Stock, the outstanding Voting Stock shall be deemed to include any Voting Stock that may be issuable to such Person pursuant to a right to acquire such Voting Stock and that is therefore deemed to be Beneficially Owned by such Person pursuant to Section 4(e)(ii)(A). A Person who is a Related Person at (i) the time any definitive agreement relating to a Business Combination is entered into, (ii) the record date for the determination of shareholders entitled to notice of and to vote on a Business Combination, or (iii) the time immediately prior to consummation of a Business Combination shall be deemed a Related Person. A Related Person shall not include any Person who possesses more than ten percent (10%) of the voting power of the outstanding shares of Voting Stock of the Corporation at the time of filing these Restated Articles of Incorporation. In addition, a Related Person shall not include the Board of Directors of the corporation acting as a group. (e) A Person shall be a "Beneficial Owner" of any shares of Voting Stock: (i) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) which such Person or any of its Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (f) An "Affiliate" of, or a person Affiliated with, a specific Person, means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. (g) The term "Associate" used to indicate a relationship with any Person, means (i) any corporation or organization (other than this Corporation or a majority-owned Subsidiary of this Corporation) of which such Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of five percent (5%) or more of any class of equity securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, (iii) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person, or (iv) any investment company registered under the Investment Company Act of 1940, as amended, for which such Person or any Affiliate of such Person serves as investment advisor. (h) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Related Person set forth in paragraph (d) of this Section 4, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (i) "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is not associated with the Related Person and was a member of the Board prior to the time that the Related Person became a Related Person, and any successor of a Continuing Director who is not associated with the Related Person and is recommended to succeed a Continuing Director by not less than two-thirds of the Continuing Directors then on the Board. (j) "Independent Majority of Shareholders" shall mean the holders of the outstanding shares of Voting Stock representing a majority of all the votes entitled to be cast by all shares of Voting Stock other than shares Beneficially Owned or controlled, directly or indirectly, by a Related Person. (k) "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation or another corporation entitled to vote generally on the election of Directors, and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares. (l) "Substantial Part" means properties and assets involved in any single transaction or a Series of Related Transactions having an aggregate fair market value of more than ten percent (10%) of the total consolidated assets of the Person in question as determined immediately prior to such transaction or Series of Related Transactions. Section 5. Director Determinations. A majority of the Continuing Directors shall have the power to determine for the purposes of this Article VIII, on the basis of information known to them: (a) the number of shares of Voting Stock of which any Person is the Beneficial Owner, (b) whether a Person is an Affiliate or Associate of another, (c) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner," (d) whether the assets subject to any Business Combination constitute a Substantial Part, (e) whether two or more transactions constitute a Series of Related Transactions, and (f) such other matters with respect to which a determination is required under this Article VIII. Section 6. Amendment of Article VIII or Certain Other Provisions. Any amendment, change or repeal of this Article VIII, Sections 1 or 6 of Article IX, Sections 2 or 10 of Article X, or any other amendment of these Restated Articles of Incorporation which would have the effect of modifying or permitting circumvention of this Article VIII or such other provisions of these Restated Articles of Incorporation, shall require the affirmative vote, at a meeting of shareholders of the Corporation: (a) Of at lease two-thirds (2/3) of the votes entitled to be cast by the holders of the outstanding shares of all classes of Voting Stock of the Corporation considered for purposes of this Article VIII as a single class; and (b) Of an Independent Majority of Shareholders; Provided, however, that this Section 6 shall not apply to, and such vote shall not be required for, any such amendment, change or repeal recommended to shareholders by the favorable vote of not less than two-thirds (2/3) of the Directors who then qualify as Continuing Directors with respect to all Related Persons and any such amendment, change or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Corporation Law. Section 7. Fiduciary Obligations Unaffected. Nothing in this Article VIII shall be construed to relieve any Related Person from any fiduciary duty imposed by law. Section 8. Article VIII Nonexclusive. The provisions of this Article VIII are nonexclusive and are in addition to any other provisions of law or these Restated Articles of Incorporation or the Bylaws of the Corporation relating to Business Combinations, Related Persons or similar matters. ARTICLE IX Directors Section 1. Number. The Board of Directors at the time of adoption of these Restated Articles of Incorporation is composed of fifteen (15) members, and the number of Directors shall be fixed by the Bylaws and may be changed from time to time by amendment to the Bylaws. Whenever the Bylaws provide that the number of Directors shall be nine (9) or more, the Bylaws may also provide for staggering the terms of the members of the Board of Directors by dividing the total number of Directors into two (2) or three (3) groups (with each group containing one-half (1/2) or one-third (1/3) of the total, as near as may be) whose terms of office expire at different times. Notwithstanding the first sentence of this Section 1, any amendment to the Bylaws that would effect (a) any increase in the number of Directors over such number as then in effect, (b) any reduction in the number of Directors from nine (9) or more to fewer than nine (9), or (c) any elimination or modification of the groups or terms of office of the Directors as the Bylaws then in effect may provide, shall also be approved by the affirmative vote of a majority of the entire number of Directors of the Corporation who then qualify as Continuing Directors with respect to all Related Persons (as such terms are defined for purposes of Article VIII hereof). Section 2. Election of Directors by Holders of Special Shares. The holders of one (1) or more series of Special Shares may be entitled to elect all or a specified number of Directors, but only to the extent and subject to limitations as may be set forth in the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof describing the terms of the series of Special Shares. Section 3. Qualifications. Directors need not be shareholders of the Corporation or residents of this or any other state in the United States. Section 4. Vacancies. Vacancies occurring in the Board of Directors shall be filled in the manner provided in the Bylaws or, if the Bylaws do not provide for the filling of vacancies, in the manner provided by the Corporation Law. The Bylaws may also provide that in certain circumstances specified therein, vacancies occurring in the Board of Directors may be filled by vote of the shareholders at a special meeting called for that purpose or at the next annual meeting of shareholders. Section 5. Liability of Directors. A Director's responsibility to the Corporation shall be limited to discharging his duties as a Director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the Director reasonably believes to be in the best interests of the Corporation, all based on the facts then known to the Director. In discharging his duties, a Director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: (a) One (1) or more officers or employees of the Corporation whom the Director reasonably believes to be reliable and competent in the matters presented; (b) Legal counsel, public accountants, or other persons as to matters the Director reasonably believes are within such person's professional or expert competence; or (c) A committee of the Board of which the Director is not a member if the Director reasonably believes the Committee merits confidence; but a Director is not acting in good faith if the Director has knowledge concerning the matter in question that makes reliance otherwise permitted by this Section 5 unwarranted. A Director may, in considering the best interests of the Corporation, consider the effects of any action on shareholders, employees, suppliers and customers of the Corporation, and communities in which offices or other facilities of the corporation are located, and any other factors the Director considers pertinent. A Director is not liable for any action taken as a Director, or any failure to take any action, unless (a) the Director has breached or failed to perform the duties of the Director's office in compliance with this Section 5, and (b) the breach or failure to perform constitutes willful misconduct or recklessness. Section 6. Nonmonetary Factors in Acquisition Proposals. In connection with the exercise of its judgement in determining what is in the best interests of the Corporation and its Stockholders when evaluating a proposal by another person or persons to acquire some material part or all of the business or properties of the Corporation (whether by merger, consolidation, purchase of assets, stock reclassification or recapitalization, spinoff, liquidation or otherwise) or to acquire some material part or all of the stock of the Corporation (whether by a tender or exchange offer or some other means), the Board of Directors of the Corporation shall, in addition to considering the adequacy of the consideration to be paid in connection with any such transaction, consider all of the following factors and any other factors that it deems relevant: (a) the social and economic effects of the transaction on the Corporation and its subsidiaries and their employees, customers, creditors and communities in which the Corporation and its subsidiaries operate or are located; (b) the business and financial condition and earnings prospects of the acquiring person or persons, including, but not limited to, debt service and other existing or likely financial obligations of the acquiring person or persons and their affiliates and associates, and the possible effect of such conditions upon the Corporation and its subsidiaries and the communities in which the Corporation and its subsidiaries operate or are located; and (c) the competence, experience, and integrity of the acquiring person or persons and its or their management and affiliates and associates. ARTICLE X Provisions for Regulation of Business and Conduct of Affairs of Corporation Section 1. Meetings of Shareholders. Meetings of the Shareholders of the Corporation shall be held at such place, either within or without the State of Indiana, as may be stated in or fixed in accordance with the Bylaws of the Corporation and specified in the respective notices or waivers of notice of any such meetings. Section 2. Special Meetings of Shareholders. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by the Corporation Law, may be called at any time by the Board of Directors or the person or persons authorized to do so by the Bylaws and shall be called by the Board of Directors if the Secretary of the Corporation receives one (1) or more written, dated and signed demands for a special meeting, describing in reasonable detail the purpose or purposes for which it is to be held, from the holders of shares representing at least twenty-five percent (25%) of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. If the Secretary receives one (1) or more proper written demands for a special meeting of shareholders, the Board of Directors may set a record date for determining shareholders entitled to make such demand. Section 3. Meetings of Directors. Meetings of the Board of Directors of the Corporation shall be held at such place, either within or without the State of Indiana, as may be authorized by the Bylaws and specified in the respective notices or waivers of notice of any such meetings or otherwise specified by the Board of Directors. Unless the Bylaws provide otherwise (a) regular meetings of the Board of Directors may be held without notice of the date, time, place, or purpose of the meeting and (b) the notice for a special meeting need not describe the purpose or purposes of the special meeting. Section 4. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or shareholders, or of any committee of such Board, may be taken without a meeting, if the action is taken by all members of the Board or all shareholders entitled to vote on the action, or by all members of such committee, as the case may be. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each Director, or all the shareholders entitled to vote on the action, or by each member of such committee, as the case may be, and, in the case of action by the Board of Directors or a committee thereof, included in the minutes or filed with the corporate records reflecting the action taken or, in the case of action by the shareholders, delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Action taken under this Section 4 is effective when the last director, shareholder or committee members, as the case may be, signs the consent, unless the consent specifies a different prior or subsequent effective date, in which case the action is effective on or as of the specified date. Such consent shall have the same effect as a unanimous vote of all members of the Board, or all shareholders, or all members of the committee, as the case may be, and may be described as such in any document. Section 5. Bylaws. The Board of Directors shall have the exclusive power to make, alter, amend or repeal, or to waive provisions of, the Bylaws of the Corporation by the affirmative vote of a majority of the entire number of Directors at the time, except as expressly provided in Section 1 of Article IX hereof and as provided by the Corporation Law. All provisions for the regulation of the business and management of the affairs of the Corporation not stated in these Restated Articles of Incorporation shall be stated in the Bylaws. The Board of Directors may also adopt Emergency Bylaws of the Corporation and shall have the exclusive power (except as may otherwise be provided therein) to make, alter, amend or repeal, or to waive provisions of, the Emergency Bylaws by the affirmative vote of both (a) a majority of the entire number of Directors at the time and (b) a majority of the entire number of Directors who then qualify as Continuing Directors with respect to all Related Persons (as such terms are defined for purposes of Article VIII hereof). Section 6. Interest of Directors. (a) A conflict of interest transaction is a transaction with the Corporation in which a Director of the Corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the Corporation solely because of the Director's interest in the transaction if any one (1) of the following is true: (1) The material facts of the transaction and the Director's interest were disclosed or known to the Board of Directors or a Committee of the Board of Directors and the Board of Directors or committee authorized, approved, or ratified the transaction. (2) The material facts of the transaction and the Director's interest were disclosed or known to the Board of Directors or a Committee of the Board of Directors and the Board of Directors or committee authorized, approved, or ratified the transaction. (3) The transaction was fair to the Corporation. (b) For purposes of this Section 6, a Director of the Corporation has an indirect interest in a transaction if: (1) another entity in which the Director has a material financial interest or in which the Director is a general partner is a party to the transaction; or (2) another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is, or is required to be, considered by the Board of Directors of the Corporation. (c) For purposes of Section 6(a)(1), a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the Directors on the Board of Directors (or on the committee) who have no direct or indirect interest in the transaction, but a transaction may not be authorized, approved, or ratified under this section by a single Director. If a majority of the Directors who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum shall be deemed present for the purpose of taking action under this Section 6. The presence of, or a vote cast by, a Director with a direct or indirect interest in the transaction does not affect the validity of any action taken under Section 6(a)(1), if the transaction is otherwise authorized, approved, or ratified as provided in such subsection. (d) For purposes of Section 6(a)(2), a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of the holders of shares representing a majority of the votes entitled to be cast. Shares owned by or voted under the control of a Director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in Section 6(b), may be counted in such a vote of shareholders. Section 7. Nonliability of Shareholders. Shareholders of the Corporation are not personally liable for the acts or debts of the Corporation, nor is private property of shareholders subject to the payment of corporate debts. Section 8. Indemnification of Officers Directors and Other Eligible Persons. (a) To the extent not inconsistent with applicable law, every Eligible Person shall be indemnified by the Corporation against all Liability and reasonable Expense that may be incurred by him in connection with or resulting from any Claim, (i) if such Eligible Person is Wholly Successful with respect the Claim, or (ii) if not Wholly Successful, then if such Eligible Person is determined, as provided in either Section 8(f) or 8(g), to have acted in good faith, in what he reasonably believed to be the best interests of the Corporation or at least not opposed to its best interests and, in addition, with respect to any criminal Claim is determined to have had reasonable cause to believe that his conduct was lawful or had no reasonable cause to believe that his conduct was unlawful. The termination of any Claim, by judgement, order, settlement (whether with or without court approval), or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not create a presumption that an Eligible Person did not meet the standards of conduct set forth in clause (ii) of this subsection (a). The actions of an Eligible Person with respect to an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 shall be deemed to have been taken in what the Eligible Person reasonably believed to be the best interests of the Corporation or at least not opposed to its best interests if the Eligible Person reasonably believed he was acting in conformity with the requirements of such Act or he reasonably believed his actions to be in the interests of the participants in or beneficiaries of the plan. (b) The term "Claim" as used in this Section 8 shall include every pending, threatened or completed claim, action, suit or proceeding and all appeals thereof (whether brought by or in the right of the Corporation or any other corporation or otherwise), civil, criminal, administrative or investigative, formal or informal, in which an Eligible Person may become involved, as a party or otherwise: (i) by reason of his being or having been an Eligible Person, or (ii) by reason of any action taken or not taken by him in his capacity as an Eligible Person, whether or not he continued in such capacity at the time such Liability or Expense shall have been incurred. (c) The term "Eligible Person" as used in this Section 8 shall mean every person (and the estate, heirs and personal representatives of such person) who is or was a Director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other organization or entity, whether for profit or not. An Eligible Person shall also be considered to have been serving an employee benefit plan at the request of the Corporation if his duties to the Corporation also imposed duties on, or otherwise involved services by, him to the plan or to participants in or beneficiaries of the plan. (d) The terms "Liability" and "Expense" as used in this Section 8 shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against (including excise taxes assessed with respect to an employee benefit plan), and amounts paid in settlement by or on behalf of, an Eligible Person. (e) The term "Wholly Successful" as used in this Section 8 shall mean (i) termination of any claim against the Eligible Person in question without any finding of liability or guilt against him, (ii) approval by a court, with knowledge of the indemnity herein provided, of a settlement of any Claim, or (iii) the expiration of a reasonable period of time after the making or threatened making of any Claim without the institution of the same, without any payment or promise made to induce a settlement. (f) Every Eligible Person claiming indemnification hereunder (other than one who has been Wholly Successful with respect to any claim) shall be entitled to indemnification (i) if special independent legal counsel, which may be regular counsel of the Corporation or other disinterested person or persons, in either case selected by the Board of Directors, whether or not a disinterested quorum exists (such counsel or person or persons being hereinafter called the "Referee"), shall deliver to the Corporation a written finding that such Eligible Person has met the standards of conduct set forth in clause (ii) of Section 8(a), and (ii) if the Board of Directors, acting upon such written finding, so determines. The Board of Directors shall, if an Eligible Person is found to be entitled to indemnification pursuant to the preceding sentence, also determine the reasonableness of the Eligible Person's Expenses. The Eligible Person claiming indemnification shall, if requested, appear before the Referee, answer questions that the Referee deems relevant and shall be given ample opportunity to present to the Referee evidence upon which he relies for indemnification. The Corporation shall, at the request of the Referee, make available facts, opinions or other evidence in any way relevant to the Referee's finding that are within the possession or control of the Corporation. (g) If an Eligible Person claiming indemnification pursuant to Section 8(f) is found not to be entitled thereto, or if the Board of Directors fails to select a Referee under Section 8(f) within a reasonable amount of time following a written request of an Eligible Person for the selection of a Referee, or if the Referee or the Board of Directors fails to make a determination under Section 8(f) within a reasonable amount of time following the selection of a Referee, the Eligible Person may apply for indemnification with respect to a Claim to a court of competent jurisdiction, including a court in which the Claim is pending against the Eligible Person. On receipt of an application, the court, after giving notice to the Corporation and giving the Corporation ample opportunity to present to the court any information or evidence relating to the claim for indemnification that the Corporation deems appropriate, may order indemnification if it determines that the Eligible Person is entitled to indemnification with respect to the Claim because such Eligible Person met the standards of conduct set forth in clause (ii) of Section 8(a). If the court determines that the Eligible Person is entitled to indemnification, the court shall also determine the reasonableness of the Eligible Person's Expenses. (h) The rights of indemnification provided in this Section 8 shall be in addition to any rights to which any Eligible Person may otherwise be entitled. Irrespective of the provisions of this Section 8, the Board of Directors may, at any time and from time to time, (i) approve indemnification of any Eligible Person to the full extent permitted by the provisions of applicable law at the time in effect, whether on account of past or future transactions, and (ii) authorize the Corporation to purchase and maintain insurance on behalf of any Eligible Person against any Liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability. (i) Expenses incurred by an Eligible Person with respect to any Claim, may be advanced by the Corporation (by action of the Board of Directors, whether or not a disinterested quorum exists) prior to the final disposition thereof upon receipt of any undertaking by or on behalf of the recipient to repay such amount unless he is determined to be entitled to indemnification. (j) The provisions of this Section 8 shall be deemed to be a contract between the Corporation and each Eligible Person, and an Eligible Person's rights hereunder shall not be diminished or otherwise adversely affected by any repeal, amendment or modification of this Section 8 that occurs subsequent to such person becoming an Eligible Person. (k) The provisions of this Section 8 shall be applicable to Claims made or commenced after the adoption hereof, whether arising from acts or omissions to act occurring before or after the adoption hereof. Section 9. Amendment or Repeal. Except as otherwise expressly provided for in these Restated Articles of Incorporation, the Corporation shall be deemed, for all purposes, to have reserved the right to amend, alter, change or repeal any provision contained in these Restated Articles of Incorporation to the extent and in the manner now or hereafter permitted or prescribed by statute, and all rights herein conferred upon shareholders are granted subject to such reservation. Section 10. Removal of Directors. Any or all of the members of the Board of Directors may be removed, for good cause, at a meeting of the shareholders called expressly for that purpose, by the affirmative vote of the holders of outstanding shares representing at least sixty-six and two- thirds percent (66-2/3%) of all the votes then entitled to be cast at an election of Directors. Directors may not be removed in the absence of good cause. Amended January 26, 1988 EX-4.14 3 INDENTURE OF TRUST; IWC TO NAT'L CITY BANK INDENTURE OF TRUST CITY OF INDIANAPOLIS, INDIANA AND INDIANAPOLIS WATER COMPANY TO National City Bank, Indiana, As Trustee DATED AS OF APRIL 1, 1993 $11,600,000 City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project) Table of Contents RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . 1 GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE I Definitions and Exhibits . . . . . . . . . . 4 Section 101. Terms Defined. . . . . . . . . . . . . . 4 Section 102. Rules of Interpretation. . . . . . . . . 7 Section 103. Exhibits. . . . . . . . . . . . . . . . . 8 ARTICLE II The Bonds . . . . . . . . . . . . . . . . . . 8 Section 201. Terms of Bonds. . . . . . . . . . . . . . 8 Section 202. Issuance of Bonds; Denominations. . . . . 8 Section 203. Payments on Bonds. . . . . . . . . . . . 9 Section 204. Execution; Limited Obligation. . . . . . 9 Section 205. Authentication. . . . . . . . . . . . . . 10 Section 206. Delivery of Bonds. . . . . . . . . . . . 10 Section 207. Mutilated, Lost, Stolen or Destroyed Bonds. . . . . . . . . . . . . . . . . . 11 Section 208. Registration and Exchange of Bonds; Persons Treated as Owners. . . . . . . . 11 Section 209. Form of Bonds. . . . . . . . . . . . . . 12 ARTICLE III Application of Bond Proceeds; Redemption Fund . . . . . . . . . . . . . . . . . . . . 12 Section 301. Deposit of Funds. . . . . . . . . . . . . 12 Section 302. Redemption Fund. . . . . . . . . . . . . 12 ARTICLE IV Revenues and Funds . . . . . . . . . . . . . 13 Section 401. Source of Payment of Bonds. . . . . . . . 13 Section 402. Creation of Bond Fund. . . . . . . . . . 13 Section 403. Payments into Bond Fund. . . . . . . . . 13 Section 404. Use of Moneys in Bond Fund. . . . . . . . 13 Section 405. Investment of Funds. . . . . . . . . . . 14 Section 406. Rebate Fund. . . . . . . . . . . . . . . 14 Section 407. Rebate Deposits. . . . . . . . . . . . . 15 Section 408. Rebate Disbursements. . . . . . . . . . . 15 Section 409. Trust Funds. . . . . . .. . . . . . . . 15 Section 410. Nonpresentment of Bonds. . . . . . . . . 16 ARTICLE V Redemption of Bonds Before Maturity . . . . . 16 Section 501. Determination of Taxability Redemption. . 16 Section 502. Extraordinary Event Redemption. . . . . . 16 Section 503. Notice of Redemption. . . . . . . . . . . 17 Section 504. Cancellation. . . . . . . . . . . . . . . 19 ARTICLE VI General Covenants . . . . . . . . . . . . . . 19 Section 601. Payment of Principal, Premium, if any, and Interest. . . . . . . . . . . . . . 19 Section 602. Performance of Covenants. . . . . . . . . 19 Section 603. Ownership; Instruments of Further Assurance. . . . . . . . . . . . . . . . 19 Section 604. Rights under Loan Agreement and First Mortgage Bonds. . . . . . . . . . . . . 20 Section 605. Designation of Additional Paying Agents. 20 Section 606. Recordation; Application of Uniform Commercial Code. . . . . . . . . . . . . 20 Section 607. List of Bondholders. . . . . . . . . . . 21 ARTICLE VII Possession and Use of the Project . . . . . . 21 Section 701. Subordination to Rights of Company. . . . 21 ARTICLE VIII Remedies . . . . . . . . . . . . . . . . . . 21 Section 801. Events of Default. . . . . . . . . . . . 21 Section 802. Acceleration Rights. . . . . . . . . . . 22 Section 803. Other Remedies; Rights of Bondholders. . 22 Section 804. Right of Bondholders to Direct Proceedings. . . . . . . . . . . . . . . 23 Section 805. Appointment of Receivers. . . . . . . . . 23 Section 806. Application of Moneys. . . . . . . . . . 23 Section 807. Remedies Vested in Trustee. . . . . . . . 25 Section 808. Rights and Remedies of Bondholders. . . . 25 Section 809. Termination of Proceedings. . . . . . . . 26 Section 810. Waivers of Events of Default. . . . . . . 26 Section 811. Cooperation of Municipality. . . . . . . 26 ARTICLE IX The Trustee . . . . . . . . . . . . . . . . . 26 Section 901. Acceptance of Trusts. . . . . . . . . . . 26 Section 902. Certain Rights of Trustee. . . . . . . . 26 Section 903. Fees, Charges and Expenses of Trustee and Paying Agent. . . . . . . . . . . . . . 28 Section 904. Notice to Bondholders if Default Occurs. 29 Section 905. Intervention by Trustee. . . . . . . . . 29 Section 906. Successor Trustee. . . . . . . . . . . . 29 Section 907. Resignation by Trustee. . . . . . . . . . 29 Section 908. Removal of Trustee. . . . . . . . . . . . 30 Section 909. Appointment of Successor Trustee by Bondholders; Temporary Trustee. . . . . 30 Section 910. Concerning Any Successor Trustees. . . . 30 Section 911. Trustee Protected in Relying upon Resolution, etc. . . . . . . . . . . . . 31 Section 912. Successor Trustee as Trustee of Funds, Paying Agent and Bond Registrar. . . . . 31 ARTICLE X Supplemental Indentures . . . . . . . . . . . 31 Section 1001. Supplemental Indentures Not Requiring Consent of Bondholders. . . . . . . . . 33 Section 1002. Supplemental Indentures Requiring Consent of Bondholders. . . . . . . . . 32 ARTICLE XI Amendments to the Loan Agreement . . . . . . 32 Section 1101. Amendments, etc., to Loan Agreement, the Twenty-First Supplemental Indenture, the First Mortgage Indenture or the Guaranty Not Requiring Consent of Bondholders . 32 Section 1102. Amendments, etc., to Loan Agreement, the Twenty-First Supplemental Indenture, the First Mortgage Indenture or the Guaranty Requiring Consent of Bondholders. . . . 32 Section 1103. No Amendment May Alter First Mortgage Bonds. . . . . . . . . . . . . . . . . 33 ARTICLE XII Miscellaneous . . . . . . . . . . . . . . . . 33 Section 1201. Satisfaction and Discharge. . . . . . . 33 Section 1202. Application of Trust Money. . . . . . . 34 Section 1203. Consents, etc., of Bondholders. . . . . 34 Section 1204. Parties Interested Herein. . . . . . . . 35 Section 1205. Severability. . . . . . . . . . . . . . 35 Section 1206. Notices. . . . . . . . . . . . . . . . . 35 Section 1207. Trustee as Paying Agent and Registrar. . 35 Section 1208. Counterparts. . . . . . . . . . . . . . 35 Section 1209. Applicable Law. . . . . . . . . . . . . 36 Section 1210. Holidays. . . . . . . . . . . . . . . . 36 Section 1211. Captions and Table of Contents. . . . . 36 Exhibit A: Form of Bond, form of Trustee's Certificate of Authentication and form of Assignment. Exhibit B: Description of the Project. INDENTURE OF TRUST This INDENTURE OF TRUST has been executed as of April 1, 1993, by and among the CITY OF INDIANAPOLIS, INDIANA (the "Municipality"), INDIANAPOLIS WATER COMPANY, an Indiana corporation (the "Company"), and National City Bank, Indiana, a national banking association authorized to accept trusts of this character with its principal office located in Indianapolis, Indiana, as Trustee (the "Trustee"). RECITALS 1. Definitions of certain of the terms used in these Recitals are set out in Article I hereof and Article I of the Loan Agreement. 2. IC 36-7-11.9 and IC 36-7-12 authorize municipalities in the State of Indiana to issue revenue bonds to finance the cost of providing economic development facilities and also authorize the municipalities to issue revenue bonds to refund such bonds. 3. In 1974, the Company initiated a program of expansion of its Indianapolis water distribution facilities. A portion of those facilities, now known as the Thomas W. Moses Treatment Plant and described on Exhibit B attached hereto (the "Project"), were financed through the City of Indianapolis, Indiana 6-1/4% Economic Development Water Facilities Revenue Bonds, 1974 Series (Indianapolis Water Company Project) (the "1974 Bonds"). 4. To finance a portion of the costs of the Project, the Company borrowed from the Municipality funds derived from the sale of the 1974 Bonds, and the Company, as evidence of its obligation to repay the funds, issued and delivered to the Municipality its First Mortgage Bonds, Economic Development Series A. 5. The Company has determined that the 1974 Bonds can be refinanced at a net savings to the Company and has further determined that such refinancing will result in other benefits to the Company. 6. Pursuant to IC 5-1-5, IC 36-7-11.9 and IC 36-7-12, the Municipality is authorized and empowered to issue revenue bonds to refund and refinance revenue bonds previously issued by it. The Municipality is obtaining funds to loan to the Company to assist with the refunding and refinancing of the 1974 Bonds through the sale of its $11,600,000 aggregate principal amount of City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project). 7. Under the Loan Agreement and pursuant to this Indenture, the Municipality will issue $11,600,000 of its Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project), will sell the Bonds to the Purchaser and will lend the proceeds from the sale of the Bonds to the Company. The Bonds will be payable solely out of the revenues and other amounts derived from the First Mortgage Bonds (as hereinafter defined) and under the Loan Agreement, and pursuant to the Guaranty Agreement under which the principal of, premium, if any, and interest on the Bonds will be guaranteed by IWC Resources Corporation, an Indiana corporation (the "Guarantor"). The Bonds shall not in any respect be a general obligation of, an indebtedness of, or constitute a charge against the general credit of the Municipality, the State of Indiana or any political subdivision thereof. 8. To evidence its obligation to repay the Loan, the Company will deliver the First Mortgage Bonds to the Municipality. 9. This Indenture provides for the issuance of the Bonds, the assignment by the Municipality of the First Mortgage Bonds and its rights under the Loan Agreement (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and its rights relating to any amendments to the Loan Agreement) to the Trustee. 10. The Bonds and the Trustee's Certificate of Authentication for the Bonds will be substantially in the form set forth in Exhibit A hereto. 11. All things necessary to make the Bonds, when authenticated by the Trustee and issued as provided in this Indenture, the valid, binding and legal obligations of the Municipality according to the import thereof, and to constitute this Indenture a valid assignment and pledge of the properties and amounts assigned and pledged to the payment of the principal of and premium, if any, and interest on the Bonds and a valid assignment and pledge of the rights of the Municipality under the Loan Agreement (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and its rights relating to any amendments to the Loan Agreement) and the First Mortgage Bonds have been done and performed, and the creation, execution and delivery of this Indenture and the creation, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized. NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSES THAT: GRANTING CLAUSES In order to secure the payment of the principal of and premium, if any, and interest on the Bonds and in order to secure the performance and observance of all the covenants and conditions in this Indenture and in the Bonds, and in order to declare the terms and conditions upon which the Bonds are issued, authenticated, delivered, secured and accepted by all persons who shall from time to time be or become holders thereof, and for and in consideration of the premises, the Loan, the mutual covenants of the parties, the acceptance by the Trustee of the trust hereby created, and the purchase and acceptance of the Bonds by the holders, the Municipality and the Company have executed and delivered this Indenture and by this Indenture assign and pledge and grant a security interest in the following to the Trustee, its successors and assigns forever: First Granting Clause All of the right, title and interest of the Municipality in, to and under the First Mortgage Bonds and the Loan Agreement (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and its rights relating to any amendments to the Loan Agreement), including all sums payable with respect to the indebtedness evidenced by the First Mortgage Bonds and the Loan Agreement, and all proceeds thereof; provided that the assignment made by this clause shall not impair or diminish any obligation of the Municipality under the Loan Agreement. Second Granting Clause All moneys and securities from time to time held by the Trustee under the terms of this Indenture, including without limitation the Guaranty, the moneys held in trust funds, and any and all other property pledged, assigned or transferred to the Trustee at any time for additional security by the Municipality or the Company or with their written consent, and all proceeds thereof, excepting, however, moneys deposited in the Rebate Fund pursuant to Section 406 hereof. The Trustee is authorized to receive the additional property at any time and to hold and apply that property under this Indenture. TO HAVE AND TO HOLD FOREVER IN TRUST, NEVERTHELESS, upon the terms of this Indenture, to secure the payment of the principal of and premium, if any, and interest on the Bonds, and to secure the observance and performance of all the terms of this Indenture, and for the benefit and security of the holders of the Bonds, without preference, priority or distinction as to lien or otherwise, except as provided in this Indenture, of any one Bond over any other Bond or as among principal, premium and interest. The terms and conditions upon which the Bonds are to be issued, authenticated, delivered, secured and accepted by all persons who shall from time to time be or become the holders thereof, and the trusts and conditions upon which the pledged property, rights, interests, moneys and revenues are to be held and disbursed, are as follows: ARTICLE I Definitions and Exhibits Section 101. Terms Defined. As used in this Agreement, the following terms shall have the following meanings unless the context otherwise requires. "Bond" or "Bonds" means one or more of the City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project) to be issued under this Indenture in the aggregate principal amount of $11,600,000. "Bond Fund" means the Fund created and established under Section 402 of this Indenture. "Bondholder" or "Holder" or "Owner" or "Owner of the Bonds" means the registered owner of any Bond. "Bond Register" means the registration books of the Municipality kept by the Trustee to evidence the registration and transfer of the Bonds. "Business Day" means each Monday through Friday on which the national banks located in Indianapolis, Indiana are open for the transaction of normal banking business. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means Indianapolis Water Company, an Indiana corporation. "Determination of Taxability" means the occurrence of any of the following: (a) the filing by the Company of its certificate with the Trustee indicating to the satisfaction of the Trustee that an Event of Taxability has occurred; (b) notification to the Trustee that an authorized officer or official of the Internal Revenue Service has issued a statutory notice of deficiency or document of substantially similar import to the effect that an Event of Taxability has occurred; or (c) notification to the Trustee from any Bondholder or former Bondholder to the effect that the Internal Revenue Service has assessed as includable in the gross income of such Bondholder or former Bondholder interest on a Bond due to the occurrence of an Event of Taxability; provided, however, that in respect of clauses (b) and (c) above, a Determination of Taxability shall not be deemed to have occurred unless and until the Company has been notified of the allegation that an Event of Taxability and a Determination of Taxability have occurred and either (i) the Company fails to commence a contest of such allegation in good faith and by appropriate legal proceedings within 90 days following such notification, or (ii) the Company does commence such contest within such time, but thereafter fails to pursue it diligently, in good faith and by appropriate legal proceedings to a final order or judgment by a court or administrative body of competent jurisdiction, or (iii) such contest results in a final order or judgment of a court or administrative body of competent jurisdiction to the effect that an Event of Taxability has occurred and the time for any appeal of such order or judgment has expired. "Event of Default" means those events of default specified in Section 801. "Event of Taxability" means any event, condition or circumstance which has the effect or result that interest on a Bond is not excludable for federal income tax purposes from the gross income of a Bondholder or a former Bondholder under Section 103 of the Code, other than for a period during which the Bondholder or a former Bondholder is or was a "substantial user" of the Project or a "related person" for purposes of Section 147(a) of the Code, and the regulations thereunder. An Event of Taxability does not include any event, condition or circumstance which results in the interest on a Bond being a preference item subject to an alternate minimum tax, or in any other tax consequences that do not involve the inclusion for federal income tax purposes of interest on the Bonds in the income of Bondholders generally but instead depend upon a Bondholder's particular tax status. "First Mortgage Bonds" means the First Mortgage Bonds issued under the Twenty-Second Supplemental Indenture to the Company's First Mortgage Indenture and designated Indianapolis Water Company First Mortgage Bonds, Economic Development Series E. "First Mortgage Indenture" means the First Mortgage Indenture dated as of July 1, 1936 between the Company and Fidelity Bank, National Association (formerly the Fidelity-Philadelphia Trust Company), Philadelphia, Pennsylvania, as trustee, as heretofore amended and supplemented by twenty-one supplemental indentures and as to be amended and as to be supplemented by the Twenty-Second Supplemental Indenture. "First Mortgage Indenture Trustee" means the trustee serving as such under the First Mortgage Indenture. "Guarantor" means IWC Resources Corporation, the guarantor under the Guaranty. "Guaranty" means the Guaranty Agreement dated as of April 1, 1993, under which IWC Resources Corporation guarantees the payment of the principal of, premium, if any, and interest on the Bonds. "Loan Agreement" means the Loan Agreement dated as of the date of this Indenture between the Company and the Municipality and all amendments and supplements thereto. "Majority" means, when used with reference to the Owners or Holders of Bonds outstanding, in excess of fifty percent (50%) of the principal amount of the Bonds outstanding. "1974 Bonds" means the 6-1/4% City of Indianapolis, Indiana Economic Development Revenue Bonds, 1974 Series (Indianapolis Water Company Project). "Municipality" means the City of Indianapolis, Indiana. "Officer's Certificate" means a certificate of the Municipality signed by the Mayor or Clerk or by any other person designated by resolution of the Municipality to act for either of those officers, either generally or with respect to the execution of any particular document or other specific matter, a certified copy of which resolution shall be filed with the Trustee. "Outstanding" or "Bonds outstanding" or "outstanding Bonds" means all Bonds which have been duly authenticated and delivered by the Trustee under this Indenture, except: (a) Bonds cancelled after purchase or because of payment at or redemption prior to maturity; (b) Bonds for the payment or redemption of which funds or securities shall have been deposited with the Trustee (whether upon or prior to the maturity or redemption date of those Bonds) and with respect to which all actions required to be taken at the time of such deposit as set forth in Section 1201 have been taken including, without limitation, the requirement that if those Bonds are to be redeemed prior to the maturity thereof, notice of the redemption shall have been given or arrangements satisfactory to the Trustee shall have been made for notice, or waiver of notice satisfactory in form to the Trustee shall have been filed with the Trustee; and (c) Bonds in lieu of which others have been authenticated under Section 207 and Section 208. "Person" means natural persons, firms, associations, corporations and public bodies. "Project" means the facilities described in Exhibit B hereto. "Purchaser" means Smith Barney, Harris Upham & Co. Incorporated. "Qualified Investments" means investments authorized under Section 3.3 of the Loan Agreement. "Rebate Fund" means the Fund created and established under Section 406 of this Indenture. "Record Date" means with respect to an interest payment date, the fifteenth (15th) day of the calendar month immediately preceding such interest payment date (whether or not a Business Day). "Redemption Fund" means the Fund created and established under Section 302 of this Indenture. "Trust Estate" means the property, rights, moneys, securities and other amounts conveyed to the Trustee pursuant to the Granting Clauses hereof. "Trustee" means National City Bank, Indiana, and any successor trustee or co-trustee. "Twenty-Second Supplemental Indenture" means the supplemental indenture dated as of April 1, 1993, between the Company and the First Mortgage Indenture Trustee, under which the First Mortgage Bonds are to be issued. "Written Request" with reference to the Municipality means a request in writing signed by the Mayor or Clerk or any other officer or officers of the Municipality satisfactory to the Trustee. Section 102. Rules of Interpretation. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole including exhibits and not to any particular Article, Section or other subdivision. (2) The terms defined in this Article include the plural, as well as the singular. (3) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles. (4) Any terms not defined herein but defined in the Loan Agreement shall have the same meaning herein as in the Loan Agreement. Section 103. Exhibits. The following Exhibits are a part of this Agreement: Exhibit A: Form of Bond, form of Trustee's Certificate of Authentication and form of Assignment. Exhibit B: Description of the Project. ARTICLE II The Bonds Section 201. Terms of Bonds. No Bonds may be issued under this Indenture except in accordance with this Article. The total aggregate principal amount of Bonds shall not exceed $11,600,000 (other than Bonds issued pursuant to Section 207). Section 202. Issuance of Bonds; Denominations. Each of the Bonds shall be designated "City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bond, Series 1993 (Indianapolis Water Company Project)." The Bonds shall be issuable as fully registered bonds without coupons in the denominations of $5,000 or any integral multiple thereof and shall be lettered and numbered R-1 upward. Each Bond initially issued hereunder shall be dated the date of issuance thereof and shall bear interest from the date of issuance. Bonds issued in exchange for Bonds surrendered for transfer or exchange or in place of mutilated, lost, stolen or destroyed Bonds will bear interest from the last date to which interest has been paid in full on the Bonds being transferred, exchanged or replaced or, if no interest has been paid, from the date of their initial issuance. Interest on the Bonds shall be paid to the persons who were the Owners of such Bonds as of the close of business on the Record Date next preceding such interest payment date at the registered addresses of such Owners as they shall appear on the registration books maintained by the Trustee notwithstanding the cancellation of any such Bonds upon any exchange or transfer thereof subsequent to the Record Date and prior to such interest payment date. Payment of interest to all Bondholders shall be by check drawn on the principal office of the Trustee and mailed on the due date thereof by first class United States mail to such Bondholder, or, at the written election of the registered owner of $1,000,000 or more in aggregate principal amount of Bonds delivered to the Trustee at least one Business Day prior to the Record Date for which such election will be effective, by wire transfer to the registered owner or by deposit into the account of the registered owner if such account is maintained by the Trustee. The interest on the Bonds shall be payable on each May 1, and November 1 commencing on November 1, 1993. The Bonds shall mature on May 1, 2001 and shall bear interest from the date of their initial issuance until paid in full at the per annum rate of 5.20%, computed on the basis of a year of 360 days (consisting of 12 months of 30 days each). To the extent permitted by law, overdue interest on the Bonds shall also bear interest at such rate until paid in full. Section 203. Payments on Bonds. The principal of and premium, if any, and interest on the Bonds shall be payable in any coin or currency of the United States of America which, at the date of payment thereof, is legal tender for the payment of public and private debts. Principal of and premium, if any, and interest on the Bonds shall be payable at the principal office of the Trustee, in the City of Indianapolis, Indiana, or of any alternate paying agent named in the Bonds or subsequently appointed. Payment of the interest on the Bonds on any payment date shall be made to the person appearing on the Bond registration books of the Trustee as the registered Owner and shall be paid by check or draft mailed to the registered Owner on the due date at the address on such registration books without any presentation of the Bonds. Payment of the principal of and premium, if any, on any Bond shall be made upon presentation and surrender of the Bond as the same shall become due and payable. Section 204. Execution; Limited Obligation. The Bonds shall be executed on behalf of the Municipality with the manual or facsimile signature of its Mayor and attested with the manual or facsimile signature of its Clerk and shall have impressed or printed thereon the corporate seal of the Municipality. In case any officer whose signature appears on the Bonds shall cease to hold that office before the delivery of the Bonds, the signature shall nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. The Bonds, and interest thereon, shall be limited obligations of the Municipality payable by it solely from the payments to be made under the Loan Agreement and on the First Mortgage Bonds (except to the extent paid out of moneys attributable to the proceeds of the Bonds or the income from the temporary investment thereof) and shall be a valid claim of the Holder of the Bonds only against the moneys held by the Trustee. In addition, payment of the Bonds shall be guaranteed by the Guarantor under the Guaranty. The payments to be made under the Loan Agreement and on the First Mortgage Bonds which are assigned for the payment of the Bonds shall be used for no other purpose than to pay the principal of and premium, if any, and interest on the Bonds, except as may be otherwise expressly authorized in this Indenture. The Bonds shall not in any respect be a general obligation of, an indebtedness of, or constitute a charge against the general credit of the Municipality, the State of Indiana, or any political subdivision thereof, and they shall not be payable in any manner from funds raised by taxation. Section 205. Authentication. No Bond shall be valid or obligatory for any purpose or entitled to any benefit under this Indenture unless the certificate of authentication on the Bond has been executed by the Trustee, and the executed certificate of the Trustee on the Bond shall be conclusive evidence that the Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized representative of the Trustee, but it shall not be necessary that the same representative sign the certificate of authentication on all of the Bonds. Section 206. Delivery of Bonds. Upon the execution and delivery of this Indenture, the Municipality shall execute and deliver to the Trustee the Bonds in the aggregate principal amount of $11,600,000 and the Trustee shall authenticate the Bonds and deliver them to the Municipality or to such other person or persons as directed by the Municipality as provided in this Section 206. Prior to the delivery by the Trustee of the Bonds, there shall be filed with the Trustee: 1. A copy, certified by the Clerk of the Municipality, of the Ordinance adopted by the Municipality authorizing the execution and delivery of the Loan Agreement and this Indenture and the issuance of the Bonds. 2. Original executed counterparts of the Loan Agreement, this Indenture, the Twenty-Second Supplemental Indenture and the Guaranty. 3. The First Mortgage Bonds as required by the Loan Agreement, executed by the Company and assigned by the Municipality to the Trustee for and on behalf of the Municipality. 4. A Written Request of the Municipality to the Trustee requesting the Trustee to authenticate and deliver the Bonds to the person or persons therein identified upon payment to the Trustee, but for the account of the Municipality, of a sum specified in such request and authorization. 5. An opinion of bond counsel to the effect that the Bonds are valid and binding limited obligations of the Municipality and that the interest thereon is excludable from the gross income of the recipients thereof for federal income tax purposes under Section 103 of the Code, except when the Bonds are held by a "substantial user" of the Project or a "related person." 6. Such documents, instruments and other materials requested by the Trustee for the purpose of evidencing the discharge, termination and release of all obligations and liabilities of the Company created by or relating to the 1974 Bonds. 7. Such other items as shall be required by bond counsel employed in connection with the issuance of the Bonds. The proceeds of the Bonds shall be paid to the Trustee and deposited as provided in Section 301 hereof. Section 207. Mutilated, Lost, Stolen or Destroyed Bonds. If any Bond is mutilated, lost, stolen or destroyed, the Municipality may execute and the Trustee may authenticate a new Bond for the same original principal amount provided that, in the case of a mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and in the case of a lost, stolen or destroyed Bond, there shall be first furnished to the Trustee evidence of the loss, theft or destruction satisfactory to the Trustee, together with indemnity satisfactory to the Trustee. In the event a mutilated, lost, stolen or destroyed Bond shall have matured, instead of issuing a duplicate Bond the Trustee may pay the same without surrender thereof. The Municipality and the Trustee may charge the Holder or Owner of the Bond with their reasonable fees and expenses in this connection. Section 208. Registration and Exchange of Bonds; Persons Treated as Owners. The Municipality shall cause books for the registration and for the transfer of the Bonds to be kept by the Trustee, which is hereby appointed the Bond registrar of the Municipality. Upon surrender for transfer of any Bond at the principal office of the Trustee, endorsed for transfer or accompanied by an assignment executed by the registered Owner or his authorized attorney, the Trustee shall authenticate and deliver in the name of the transferee a new fully registered Bond or Bonds for the same original principal amount, which fully registered Bond or Bonds shall have been executed by the Municipality. Bonds may be exchanged at the principal office of the Trustee for the same original principal amount of Bonds of other authorized denominations. The Municipality shall execute and the Trustee shall authenticate and deliver new Bonds which the Bondholder making the change is entitled to receive, bearing numbers not then outstanding. The Trustee shall not be required to transfer or exchange any Bond during any period beginning on a Record Date and ending on the interest payment date with respect to such Record Date or to transfer or exchange any Bond after the first mailing of notice calling such Bond or a portion thereof for redemption, nor any Bond during the fifteen-day period next preceding the giving of such notice of redemption. As to any Bond, the person in whose name the Bond is registered shall be deemed the absolute Owner for all purposes, and payment of either principal of or interest or premium on the Bond shall be made only to or upon the written order of the registered Owner or his legal representative. In each case the Bondholder requesting registration, exchange or transfer shall pay any resulting tax or other governmental charge. Section 209. Form of Bonds. The Bonds shall be substantially in the form set forth in Exhibit A hereto with any appropriate notations, omissions and insertions permitted or required by this Indenture or deemed necessary by the Trustee. ARTICLE III Application of Bond Proceeds; Redemption Fund Section 301. Deposit of Funds. Pursuant to Section 3.1 of the Loan Agreement, the Municipality shall deposit with the Trustee all proceeds from the sale of Bonds and the Trustee shall deposit all such proceeds into the Redemption Fund created under Section 302 hereof. Section 302. Redemption Fund. The Municipality shall establish with the Trustee a separate account to be designated as the "Indianapolis Water Company, Series 1993 (Indianapolis) Redemption Fund." Moneys on deposit in the Redemption Fund shall be paid out by the Trustee as provided in Section 3.2 of the Loan Agreement solely for the purpose of discharging, retiring and redeeming the 1974 Bonds and terminating all obligations and liabilities of the Company created by or relating to the 1974 Bonds; provided, however, that any moneys remaining in the Redemption Fund after such discharge, retirement, redemption and termination shall be promptly released and distributed to the Company. Moneys on deposit in the Redemption Fund may be invested only in Qualified Investments in accordance with Section 3.3 of the Loan Agreement and the income or loss shall be credited or charged to the Redemption Fund. ARTICLE IV Revenues and Funds Section 401. Source of Payment of Bonds. The Bonds and all payments to be made by the Municipality hereunder are not general obligations of the Municipality, but are limited obligations payable by it solely out of the revenues and other amounts derived from the First Mortgage Bonds and under the Loan Agreement. In addition, the Bonds shall be guaranteed by the Guarantor under the Guaranty. Section 402. Creation of Bond Fund. There is created with the Trustee a trust fund to be designated as the "Indianapolis Water Company, Series 1993 (Indianapolis) Bond Fund." Amounts deposited into the Bond Fund shall be used to pay the principal of and premium, if any, and interest on the Bonds and as otherwise authorized in this Indenture. Section 403. Payments into Bond Fund. There shall be deposited into the Bond Fund all payments received pursuant to the First Mortgage Bonds and all other moneys received by the Trustee under the Loan Agreement or the Guaranty which are required or directed to be paid into the Bond Fund. Section 404. Use of Moneys in Bond Fund. Except as provided in Section 1201 hereof, moneys in the Bond Fund shall be used solely for the payment of the principal of and premium, if any, and interest on the Bonds, for the redemption of all or a portion of the Bonds prior to maturity, for the purchase of Bonds or portions thereof for the purpose of cancellation, for any fees and expenses of the Trustee and any paying agent and for any fees and expenses of the Municipality caused by any default of the Company under the Loan Agreement. Whenever the amount in the Bond Fund is sufficient to redeem all of the Bonds then unpaid and to pay the premium, if any, and interest to accrue thereon prior to redemption, the Trustee shall, at the request of the Company, take the necessary steps to redeem the Bonds on the earliest possible redemption date for which the required redemption notice may be given. However, any moneys in the Bond Fund may be used to redeem a part of the Bonds outstanding so long as the Company is not in default with respect to any payments under the Loan Agreement or the First Mortgage Bonds, but only to the extent those moneys are in excess of the amount still required for payment of the portion of the Bonds previously called for redemption, the premium thereon, if any, and interest, and any past due interest and principal. Section 405. Investment of Funds. Moneys in the Bond Fund may be invested in Qualified Investments as provided for in Section 3.3 of the Loan Agreement. Any such investments shall be held by or under control of the Trustee and shall be deemed at all times a part of the Bond Fund, and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, and any loss resulting from such investments shall be charged to such fund. The Trustee shall sell and reduce to cash funds a sufficient portion of investments under the provisions of this Section 405 whenever the cash balance in the Bond Fund is insufficient to pay the principal of and premium, if any, and interest on the Bonds as and when payable. The Company and the Municipality covenant to each other and to and for the benefit of the Holders of the Bonds that no use will be made of the proceeds from the issue and sale of the Bonds which would cause the Bonds to be classified as arbitrage bonds within the meaning of Section 103(b)(2) and Section 148 of the Code. The parties reserve the right, however, to make any investment of proceeds permitted by the laws of the State of Indiana, if Section 148 or regulations thereunder are repealed or relaxed or are held void by final judgment of a court of competent jurisdiction, so long as the investment would not result in making the interest on the Bonds subject to federal income taxation. In making investments, the parties may rely on an opinion of counsel of recognized competence in such matters. The Trustee may make any and all investments permitted by this Section 405 through its own bond department. Section 406. Rebate Fund. The Trustee shall establish and maintain, so long as any Bonds are outstanding, a separate segregated fund to be known as the "Rebate Fund" and said Rebate Fund shall have established therein a Rebate Principal Account and a Rebate Income Account. The Trustee shall make information regarding the Bonds and investments hereunder available to the Company and shall make deposits and disbursements from the Rebate Fund in accordance with the provisions of Sections 407 and 408 hereof. The Trustee shall invest, as directed in writing by the Company, the moneys in the Rebate Fund in Qualified Investments and shall deposit income from such investment immediately upon receipt thereof in the Rebate Income Account. Anything in this Indenture to the contrary notwithstanding, the immediately preceding sentence of this Indenture and Section 407 and 408 hereof may be superseded or amended by new investment instructions delivered by the Company or the Municipality and accompanied by an opinion of Bond Counsel addressed to the Trustee in writing to the effect that the use of the new investment instructions will not cause the interest on the Bonds to become includable in the gross income of the Holders thereof for federal income tax purposes under Section 103 of the Code. The Rebate Fund shall not be pledged as security for the payment of the principal of, premium, if any, and interest payable on the Bonds and all funds deposited to the Rebate Fund shall remain in the Rebate Fund until either (a) the money is disbursed to the United States pursuant to Section 408 hereof or (b) a determination is made by the Company and notice thereof given by the Company to the Trustee in writing that such funds are not owed to the United States under Rebate Requirements of Section 148 of the Code. Section 407. Rebate Deposits. If a deposit to the Rebate Principal Account is required as a result of the obligations of the Company pursuant to Section 3.4 of the Loan Agreement, the Trustee shall upon receipt of written directions from the Company accept such payment for the benefit of the Company. If amounts in excess of that required to be rebated to the United States accumulate in the Rebate Fund, the Trustee shall upon written direction from the Company transfer such amount to the Company. Records of the determinations required by this Indenture and relating to the Rebate Fund and the investment instructions must be retained by the Trustee until six (6) years after the Bonds are no longer outstanding. Section 408. Rebate Disbursements. Not later than thirty (30) days after April 28, 1998, and every five (5) years thereafter, the Company shall determine and advise the Trustee as to the amount required to be on deposit in the Rebate Principal Account and the Trustee, at the written direction of the Company, shall pay to the United States at least ninety percent (90%) of the amount required to be on deposit in the Rebate Principal Account on such payment date and one hundred percent (100%) of the amount on deposit in the Rebate Income Account as of such payment date. Not later than thirty (30) days after the final retirement of the Bonds, the Trustee, at the written direction of the Company, shall pay to the United States one hundred percent (100%) of the balance remaining in the Rebate Principal Account and the Rebate Income Account. Each payment shall be accompanied by a copy provided by the Company of the Form 8038 originally filed with respect to the Bonds and a statement of the Company summarizing the determination of the amount to be paid to the United States. Section 409. Trust Funds. All moneys and securities received by the Trustee under the provisions of this Indenture shall be trust funds and shall not be subject to lien or attachment of any creditor of the Municipality or of the Company. Section 410. Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereon becomes due, either at maturity, or at the date fixed for redemption thereof, or otherwise, if funds sufficient to pay such Bond shall have been made available to the Trustee for the benefit of the Holder thereof, all liability of the Municipality to the Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds for five years, without liability for interest thereon, for the benefit of the Holder of such Bond, who shall thereafter be restricted exclusively to such funds, for any claim of whatever nature on his part under this Indenture or on, or with respect to, such Bond. Any moneys so deposited with and held by the Trustee not so applied to the payment of Bonds within five years after the date on which the same shall become due, shall be repaid by the Trustee to the Company and thereafter Bondholders shall be entitled to look only to the Company for payment, and then only to the extent of the amount so repaid, and the Company shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. Nor shall the Company be liable for any portion of such money that it delivers to the State of Indiana pursuant to IC 32-9. ARTICLE V Redemption of Bonds Before Maturity Section 501. Determination of Taxability Redemption. The Bonds are subject to mandatory redemption in whole (or in part as provided below) on the earliest practicable date (selected by the Trustee) within one hundred and eighty (180) days following a Determination of Taxability. The redemption price shall be 100% of the principal amount thereof plus accrued interest to the redemption date. Fewer than all the Bonds may be redeemed if redemption of fewer than all would result in the interest payable on the Bonds remaining outstanding being not includable in the gross income for federal income tax purposes of any owner other than a "substantial user" or "related person." If fewer than all Bonds are redeemed, the Trustee will select the Bonds to be redeemed by lot or by such other random means as the Trustee shall determine in its discretion. Section 502. Extraordinary Event Redemption. The Bonds shall be redeemed, in whole but not in part, at any time at a redemption price of 100% of the principal amount so redeemed, plus accrued interest to the redemption date, and without redemption premium, if within one year after the occurrence of any of the following events, the Company shall elect to prepay the First Mortgage Bonds: (a) All or substantially all of the Project shall have been damaged or destroyed to such extent that, in the opinion of the Company expressed in a Company's certificate filed with the Trustee following such damage or destruction, (i) it is not practicable or desirable to rebuild, repair or restore the Project within a period of six consecutive months following such damage or destruction, or (ii) the Company is or will be thereby prevented from carrying out its normal operations at the Project for a period of at least six consecutive months; or (b) Any court or administrative body of competent jurisdiction shall enter a judgment, order or decree requiring the Company to cease all or substantially all of its operations at the Project to such extent that, in the opinion of the Company expressed in a Company's certificate filed with the Trustee, the Company is or will be thereby prevented from carrying on its normal operations for a period of at least six consecutive months. The Bonds shall also be redeemed at a redemption price of 100% of the principal amount so redeemed, plus accrued interest to the redemption date, and without redemption premium, in the event of and subject to the notice provisions of Section 503 hereof, immediately upon the redemption of First Mortgage Bonds by reason of an event described in Article III, Section 2 of the Twenty-Second Supplemental Indenture, relating to eminent domain. Section 503. Notice of Redemption. (a) Notice of the call for redemption identifying the Bonds to be redeemed (and, in the case of partial redemption of any Bonds, the respective principal amounts thereof to be redeemed), the redemption date and the redemption price shall be given to Bondholders by mailing the redemption notice by registered or certified mail at least thirty days but no more than sixty days prior to the date fixed for redemption to the registered Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books; provided, however, that failure to give notice by mailing, or any defect therein, with respect to any Bond shall not affect the validity of any proceedings for the redemption of any other Bonds or portions thereof. Reference is hereby made to Section 5.5 of the Loan Agreement, which provision sets forth the obligations of the Company with respect to notice to the Trustee of the Company's exercise of its rights to prepay the First Mortgage Bonds. On and after the redemption date specified in the notice, the Bonds that were called for redemption shall not bear interest, shall no longer be protected by this Indenture and shall not be deemed to be outstanding, and the Holders thereof shall have the right only to receive the redemption price plus accrued interest to the date fixed for redemption; provided, however, that all actions required by Section 1201 of this Indenture have been taken. (b) In addition to the redemption notice required above, if there is more than one Bondholder of all the Bonds, further notice (the "Additional Notice") shall be given by the Trustee as set out below. No defect in the Additional Notice or any failure to give all or any portion of the Additional Notice shall in any manner defeat the effectiveness of a call for redemption if notice is given as prescribed in paragraph (a) above. (1) Each Additional Notice of redemption shall contain the information required in paragraph (a) above for an official notice of redemption plus (i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of the Bonds as originally issued: (iii) the rate of interest borne by each Bond being redeemed; (iv) the maturity date of each Bond being redeemed; and (v) any other descriptive information needed to identify accurately the Bonds being redeemed. (2) Each Additional Notice shall be published one time in a financial newspaper or journal which regularly carries notices of redemption of other obligations similar to the Bonds (e.g., The Bond Buyer) such publication to be made at least 30 days prior to the date fixed for redemption. (3) Upon the payment of the redemption price of the Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. (4) Each Additional Notice of redemption shall be sent at least 35 days before the redemption date by registered or certified mail or overnight delivery service to the Paying Agents, if any, to all registered securities depositories then in the business of holding substantial amounts of obligations similar to the Bonds (such depositories now being Depository Trust Company of New York, New York, Midwest Securities Trust Company of Chicago, Illinois, Pacific Securities Depository Trust Company of San Francisco, California and Philadelphia Depository Trust Company of Philadelphia, Pennsylvania), to Standard and Poor's Corporation, Moody's Investors Service, Inc. and to one or more national information services that disseminate notices of redemption of obligations such as the Bonds. (5) In addition, the Trustee shall at all reasonable times make available to any interested party complete information as to which Bonds have been redeemed or called for redemption. Section 504. Cancellation. All Bonds that have been redeemed shall be cancelled by the Trustee and disposed of by the Trustee. A cancelled Bond shall not be reissued and a counterpart of the certificate evidencing its disposition shall be furnished by the Trustee to the Municipality and the Company. ARTICLE VI General Covenants Section 601. Payment of Principal, Premium, if any, and Interest. The Municipality shall promptly pay, but solely from payments under the Loan Agreement and on the First Mortgage Bonds and from funds otherwise available therefor in the Bond Fund the principal of and premium, if any, and interest on every Bond at the place, on the dates and in the manner provided herein and in the Bonds. The Bonds do not represent or constitute a debt of the Municipality within the meaning of the provisions of the Constitution or Statutes of the State of Indiana or a pledge of or charge against the credit of the Municipality or grant to the Owners or Holders thereof any right to have the Municipality levy taxes or appropriate any funds for the payment of the principal thereof or interest thereon. Section 602. Performance of Covenants. The Municipality will perform its obligations under this Indenture, the Bonds and the proceedings of its governing body pertaining to the Bonds. The Municipality represents that it is authorized under the Constitution and laws of the State of Indiana to issue the Bonds, to execute this Indenture and to assign all its right and title and interest in and to the First Mortgage Bonds and the Loan Agreement under this Indenture; that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been taken, and that the Bonds in the hands of the Holders and Owners thereof are and will be valid and binding obligations of the Municipality. The Company covenants that it will faithfully perform at all times all covenants, undertakings, stipulations and provisions which it has expressly undertaken to perform in this Indenture. Section 603. Ownership; Instruments of Further Assurance. The Municipality represents that it lawfully owns the First Mortgage Bonds and that the pledge and assignment thereof and the assignment of its interests in the Loan Agreement to the Trustee hereby made are valid and lawful. The Municipality covenants that it will defend the title to the First Mortgage Bonds and its interest in the Loan Agreement assigned to the Trustee, for the benefit of the Holders and Owners of the Bonds against the claims and demands of all persons whomsoever. The Municipality covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, pledging, assigning and confirming unto the Trustee the First Mortgage Bonds, the Loan Agreement and all payments thereon and thereunder pledged hereby to the payment of the principal of and premium, if any, and interest on the Bonds. The Municipality covenants that, except as provided herein and in the Loan Agreement, it will not sell, convey, mortgage, encumber or otherwise dispose of any part of the revenues and receipts payable under the First Mortgage Bonds and the Loan Agreement or its rights under the Loan Agreement. The Company represents, warrants and covenants that it will have good and marketable title to the Project, subject to the lien of the First Mortgage Indenture and the liens and encumbrances permitted thereby. The Company covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, pledging, assigning and confirming unto the Trustee the property described herein and assigned or pledged hereby and the rights assigned hereby. Section 604. Rights under Loan Agreement and First Mortgage Bonds. The Municipality agrees that the Trustee in its name or in the name of the Municipality may enforce all rights, remedies and privileges granted to the Municipality and all obligations of the Company under and pursuant to the Loan Agreement and the First Mortgage Bonds for and on behalf of the Bondholders, whether or not the Municipality is in default hereunder. Section 605. Designation of Additional Paying Agents. The Municipality will cause the necessary arrangements to be made through the Trustee for the designation of alternate paying agents, if any, and for the payment of the Bonds. Section 606. Recordation; Application of Uniform Commercial Code. The Municipality, the Company and the Trustee shall cause this Indenture and all supplements hereto as well as such other security instruments, financing statements and all supplements thereto and other instruments or documents as may be reasonably required from time to time to be kept, recorded and filed in such manner and in such places as may be required by law in order to preserve fully and protect the security of the Owners of the Bonds and the rights of the Trustee hereunder, and to perfect the lien of, and the security interest created by, this Indenture. This Indenture is a security agreement in support of any financing statement which may be executed and filed with respect to the Trust Estate, or any part thereof, and should an Event of Default occur, the Trustee may assert any or all of the remedies accorded a secured party under the Uniform Commercial Code of Indiana. The Company covenants and agrees to execute and to furnish to the Trustee such financing statements and continuations thereof as the Trustee may reasonably deem necessary or appropriate. Section 607. List of Bondholders. The Trustee as bond registrar will keep on file at the principal office of the Trustee a list of names and addresses of the Holders of all Bonds. At reasonable times and under reasonable regulations established by the Trustee, said list may be inspected and copied by the Company, by the Purchaser or by Holders (or a designated representative thereof) of 10% or more in principal amount of Bonds then outstanding, such ownership and the authority of any such designated representative to be evidenced to the reasonable satisfaction of the Trustee. ARTICLE VII Possession and Use of the Project Section 701. Subordination to Rights of Company. This Indenture and the rights and privileges hereunder of the Trustee and the Holders of the Bonds are specifically made subject and subordinate to the rights and privileges of the Company set forth in the Loan Agreement. So long as not otherwise provided in this Indenture, the Company shall be suffered and permitted to possess, use and enjoy the Project and appurtenances so as to carry out its obligations under the Loan Agreement. ARTICLE VIII Remedies Section 801. Events of Default. If any of the following events occurs, it is hereby declared an "Event of Default": (a) default in the due and punctual payment and for a period of five (5) days thereafter of any interest on any Bonds; or (b) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond, whether at stated maturity thereof, or at the date for redemption thereof, or otherwise; or (c) any Event of Default as defined in Section 6.1 of the Loan Agreement shall have occurred; or (d) failure by the Municipality or the Company to perform any other obligations under the Bonds or in this Indenture continuing for sixty (60) days after written notice specifying the failure given to the Municipality and the Company by the Trustee, which shall give such notice at the written request of the Holders of not less than ten percent (10%) in aggregate principal amount of the Bonds then outstanding; provided, however, that with respect to this clause (d) and with respect to Section 6.1(d) of the Loan Agreement if failure of performance shall be such that it cannot be corrected within such period, it shall not constitute an Event of Default if: (i) such failure of performance, in the reasonable opinion of the Trustee, is correctable without material adverse effect on the Bonds; (ii) corrective action is instituted by or on behalf of the Municipality or the Company within such period and is diligently pursued until such failure of performance is corrected; and (iii) in the reasonable opinion of the Trustee, correction of such failure of performance has not taken an unreasonable amount of time. The Trustee may request (and may rely upon) from the Company or the Municipality a certificate to the effect that the Company or the Municipality has instituted corrective action and will diligently pursue such action and believes that its failure of performance can be corrected through such action; or (e) an Event of Default as defined in Section 4.1 of the Guaranty shall have occurred; or (f) acceleration for any reason of the maturity of any bonds issued by the Company under the First Mortgage Indenture. Section 802. Acceleration Rights. Upon the happening of any Event of Default specified in Section 801 herein, the Trustee may, and shall upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding, by notice in writing delivered to the Municipality and the First Mortgage Indenture Trustee, declare the entire principal amount of the Bonds then outstanding and the interest accrued thereon, immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Bonds to the contrary notwithstanding. Section 803. Other Remedies; Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy by suit at law or in equity to enforce the payment of the principal of and premium, if any, and interest on the Bonds then outstanding, to enforce this Indenture or to enforce its rights under the First Mortgage Indenture. If an Event of Default shall have occurred, and if requested so to do by the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding and indemnified as provided in Section 902(i) hereof, the Trustee must exercise such one or more of the rights and powers conferred by this Section 803 as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondholders. No remedy given under this Indenture to the Trustee or to the Bondholders is intended to be exclusive of any other remedy. Each remedy shall be cumulative and shall be in addition to any other remedy given hereunder or existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair the right or power or shall be construed to be a waiver of any Event of Default; and every right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any Event of Default, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies relating to that Event of Default. Section 804. Right of Bondholders to Direct Proceedings. The Holders of a majority in aggregate principal amount of the Bonds then outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, the method and place of conducting all proceedings to be taken in connection with the enforcement of this Indenture, or for the appointment of a receiver or any other proceedings hereunder; provided, that such direction shall be in accordance with the provisions of law and of this Indenture and that the Trustee is indemnified as provided in Section 902(i) of this Indenture. Section 805. Appointment of Receivers. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bondholders under this Indenture, the Trustee shall be entitled, to the extent permitted by law, to the appointment of a receiver or receivers of the Trust Estate and of the revenues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. Section 806. Application of Moneys. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article VIII shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances and fees incurred or made by the Trustee and the sums required to be paid by the Company pursuant to this Indenture, the Bonds, the Loan Agreement or the First Mortgage Bonds (other than payment of principal, premium and interest on the Bonds or the First Mortgage Bonds), be deposited into the Bond Fund and applied as follows without preference, priority or distinction as between any Bond and any other Bond: (a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all moneys shall be applied: First--To the payment of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available is not sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on that installment, to the persons entitled thereto, without any discrimination or privilege; and Second--To the payment of the unpaid principal of and premium, if any, on the Bonds which shall have become due (other than portions of the Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), in the order of their due dates, with interest from the respective dates upon which they become due and, if the amount available is not sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on that installment, to the persons entitled thereto, without any discrimination or privilege. (b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all moneys shall be applied to the payment of the principal of and premium, if any, and interest then due and unpaid on the Bonds (other than portions of the Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), without preference or priority, ratably, according to the amounts due respectively for principal, premium and interest, to the persons entitled thereto, without any discrimination or privilege. (c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded, then, subject to the provisions of subsection (b) of this Section 806 in the event that the principal of the Bonds shall later become due or be declared due and payable, the money shall be applied in accordance with subsection (a) of this Section 806. Moneys shall be applied under this Section 806 at the times that the Trustee shall determine, having regard for the amount of moneys available for application and the likelihood of additional moneys becoming available for application in the future. The Trustee shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which application is to be made and on that date interest on the amounts of principal to be paid shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any Bond until the Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Section 807. Remedies Vested in Trustee. All rights of action (including the right to file proofs of claim) under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants the Holders of the Bonds and any recovery of judgment shall, subject to the provisions of Section 806 hereof, be for the equal benefit of the Holders of the Bonds. Section 808. Rights and Remedies of Bondholders. No Holder of any Bond may institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy hereunder, unless (a) a default has occurred of which the Trustee has been notified as provided in subsection (g) of Section 902 hereof, or of which by that subsection it is deemed to have notice, (b) that default shall have become an Event of Default and the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceedings in its own name, (c) they have offered to the Trustee indemnity as provided in Section 902(i) hereof, and (d) the Trustee shall thereafter fail or refuse to exercise its powers, or to institute such action, suit or proceeding. The notification, request and offer of indemnity are, at the option of the Trustee, conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture, or for the appointment of a receiver or for any other remedy hereunder. No one or more Holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by their action or to enforce any right hereunder except in the manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the Holders of all Bonds then outstanding. Section 809. Termination of Proceedings. If the Trustee shall have proceeded to enforce any right under this Indenture and the proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then the Municipality, the Company, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder. Section 810. Waivers of Events of Default. The Trustee may in its discretion waive any Event of Default (except to the extent that the Trustee is required by the Bondholders pursuant to Section 803 hereof to exercise certain rights or powers) and its consequences and rescind any declaration of acceleration of maturity of principal of and interest on the Bonds, and shall do so upon the written request of the Holders of not less than a majority in aggregate principal amount of the Bonds then outstanding; provided, however, that there shall not be waived (a) any default in the payment of the principal of or premium on any Bond or (b) any default in the payment when due of the interest on any Bond unless prior to such waiver or rescission, all arrears of interest, principal and premium, and all fees and expenses of the Trustee in connection with such default, shall have been paid or provided for. In case of any such waiver or rescission, the Municipality, the Company, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder, respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon. Section 811. Cooperation of Municipality. In the event of a default hereunder, the Municipality shall cooperate with the Trustee and use its best efforts to protect the Bondholders. ARTICLE IX The Trustee Section 901. Acceptance of Trusts. The Trustee accepts the trusts imposed upon it by this Indenture. The Trustee shall exercise the rights and powers vested in it by this Indenture and shall use the same degree of care as a prudent man would exercise or use in the circumstances in the conduct of his own affairs. Section 902. Certain Rights of Trustee. (a) The Trustee may perform any of its duties by or through attorneys, agents, receivers or employees but shall not be answerable for the conduct of the same if appointed in accordance with the standard specified in Section 901 and shall be entitled to advice of counsel concerning all matters hereunder and may pay reasonable compensation to all attorneys and agents as may reasonably be employed and shall be entitled to reimbursement therefor from the Company. The Trustee may act upon the opinion or advice of any attorney (who may be the attorney or attorneys for the Municipality or the Company). The Trustee shall not be responsible for any loss or damage resulting from any action or nonaction in good faith in reliance upon such opinion or advice. (b) The Trustee shall not be responsible for any recital in this Indenture, or in the Bonds (except the certificate of the Trustee endorsed on the Bonds) or in any related document (other than documents relating solely to and executed only by the Trustee), or for the validity of the execution by the Municipality of this Indenture or of any supplements or instruments of further assurance, or for the sufficiency of the security for the Bonds or as to the maintenance of the security therefor except as provided in Section 606 hereof; and the Trustee shall not be bound to make any investigation as to the performance or observance of any covenants, conditions or agreements on the part of the Municipality or on the part of the Company under the Loan Agreement. The Trustee shall have no obligation to perform any of the duties of the Municipality under the Loan Agreement, and the Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with the provisions of this Indenture. (c) The Trustee shall not be accountable for the use of any Bonds. The Trustee may be or become the Owner of Bonds with the same rights which it would have if not Trustee. (d) The Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any Bond, shall be conclusive and binding upon all future Owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. (e) As to the existence or nonexistence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon an Officer's Certificate of the Municipality. Prior to the occurrence of a default of which the Trustee has been notified or of which it is deemed to have notice, the Trustee may accept an Officer's Certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same. The Trustee may accept an Officer's Certificate of the Municipality to the effect that an ordinance or resolution has been adopted by the Municipality as conclusive evidence that such ordinance or resolution has been adopted and is in full force and effect. (f) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and the Trustee shall not be answerable for other than its gross negligence or willful default. (g) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default (other than nonpayment of the principal and interest on the Bonds) unless the Trustee shall be specifically notified in writing of the Event of Default by the Municipality, by the Holders of at least twenty-five percent (25%) in aggregate principal amount of all Bonds then outstanding or by the Company and all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the principal corporate trust office of the Trustee. (h) The Trustee may demand, in respect of the authentication of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that required by the terms hereof which the Trustee deems desirable. (i) Before taking any action, the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses which it may incur and to protect it against all liability, except liability which is adjudicated to have resulted from its gross negligence or willful default in connection with any action so taken. (j) All moneys received by the Trustee or any paying agent shall be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law. (k) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. Section 903. Fees, Charges and Expenses of Trustee and Paying Agent. The Trustee and any paying agent shall be entitled to prompt payment upon demand or reimbursement for usual and customary fees for their services rendered hereunder as set forth in fee schedules or similar documents effective during the term of this Indenture and available from the Trustee and all advances, counsel fees and other expenses reasonably and necessarily made or incurred by them in connection with such services. Upon an Event of Default, but only upon an Event of Default, the Trustee and any paying agent shall have a right of payment prior to payment on account of interest or principal of or premium, if any, on the Bonds for the foregoing advances, fees, costs and expenses incurred. Section 904. Notice to Bondholders if Default Occurs. If an Event of Default occurs of which the Trustee is required to take notice or if notice of an Event of Default be given by the Municipality, the Bondholders or the Company as provided in Section 902(g) hereof, the Trustee shall give prompt written notice thereof by first class United States mail, postage prepaid, to the Owners of all Bonds then outstanding. Section 905. Intervention by Trustee. In any judicial proceeding to which the Municipality is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of the Holders of the Bonds, the Trustee may intervene on behalf of the Bondholders and, subject to the provisions of Section 902(i) hereof, shall do so if requested in writing by the Holders of at least twenty-five percent (25%) in aggregate principal amount of all Bonds then outstanding. The rights and obligations of the Trustee under this Section 905 are subject to the approval of a court of competent jurisdiction. Section 906. Successor Trustee. Any corporation or association into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party shall become successor Trustee hereunder, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto; provided, however, that if the successor corporation is not a trust company or bank within the State of Indiana that satisfies the requirements of Section 909 hereof, the Trustee shall resign from the trusts hereby created prior to such sale, merger, consolidation or transfer. Section 907. Resignation by Trustee. The Trustee and any successor Trustee may at any time resign by giving thirty days' written notice to the Municipality, the Company and by registered or certified mail to the registered Owners of the Bonds then outstanding, and the resignation shall take effect upon the appointment of a successor or temporary Trustee by the Bondholders or by the Municipality as provided herein and such successor or temporary Trustee's acceptance of such appointment. The Trustee may petition a court of appropriate jurisdiction to have a successor Trustee appointed. Section 908. Removal of Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee and to the Municipality and signed by the Owners of a majority in aggregate principal amount of all Bonds then outstanding. Any such removal shall take effect upon the appointment of a successor or temporary Trustee by the Bondholders or by the Municipality as provided herein and such successor or temporary Trustee's acceptance of such appointment. Section 909. Appointment of Successor Trustee by Bondholders; Temporary Trustee. In case the Trustee shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Owners of a majority in aggregate principal amount of all Bonds then outstanding by an instrument or concurrent instruments in writing; provided, nevertheless, that in case of such vacancy the Municipality by an instrument executed by its Mayor and attested by its Clerk under its seal may appoint a temporary Trustee to fill the vacancy until a successor Trustee is appointed by the Bondholders; and any temporary Trustee shall immediately be superseded by the successor Trustee appointed by the Bondholders. Every temporary or successor Trustee shall be a trust company or bank in good standing within the State of Indiana, duly authorized to exercise trust powers and subject to examination by federal or state authority, and having a reported capital and surplus of not less than $75,000,000. The appointment of every temporary or successor Trustee shall be subject to the prior approval of the Company, which approval may not be unreasonably withheld. Notwithstanding any other provision of this Indenture, no removal, resignation or termination of the Trustee shall take effect until a successor shall be appointed. Section 910. Concerning Any Successor Trustees. Every successor Trustee shall deliver to its predecessor, the Municipality and the Company an instrument in writing accepting its appointment, and thereupon such successor without any further act, deed or conveyance, shall become fully vested with all the properties, rights, powers, trusts, duties and obligations of its predecessor; but the predecessor shall, nevertheless, on the Written Request of the Municipality, or of the successor Trustee, execute and deliver an instrument transferring to the successor Trustee all the properties, rights, powers and trusts of the predecessor; and every predecessor Trustee shall deliver all securities and moneys held by it as Trustee to its successor. If any instrument in writing from the Municipality is required by any successor Trustee for more fully and certainly vesting in the successor the rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed and delivered by the Municipality. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed or recorded by the successor Trustee in each recording office, if any, where the Indenture has been filed or recorded. Section 911. Trustee Protected in Relying upon Resolution, etc. The resolutions, opinions, certificates and other instruments provided for in this Indenture may be accepted by the Trustee as conclusive evidence of the facts and conclusions stated therein and shall be full warrant, protection and authority to the Trustee for the release of property and the withdrawal of cash. Section 912. Successor Trustee as Trustee of Funds, Paying Agent and Bond Registrar. In the event of a change in the office of Trustee, the predecessor Trustee which has resigned or been removed shall cease to be trustee of the funds provided hereunder and bond registrar and paying agent for principal of and premium, if any, and interest on the Bonds, and the successor Trustee shall become such Trustee, bond registrar and paying agent. ARTICLE X Supplemental Indentures Section 1001. Supplemental Indentures Not Requiring Consent of Bondholders. The Municipality, the Company and the Trustee may without the consent of, or notice to, any of the Bondholders enter into an indenture or indentures supplemental to this Indenture, which is consistent with the terms hereof, for any one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in this Indenture or in any supplemental indenture which is not to the prejudice of the Trustee or the Holders of the Bonds; (b) To grant to the Trustee any additional rights, remedies, powers or authority that may lawfully be granted to the Trustee; (c) To subject to this Indenture additional collateral; (d) To modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification hereof and thereof under any federal statute hereafter in effect or under any state Blue Sky Law, and in connection therewith, if they so determine, to add to this Indenture or any indenture supplemental hereto, such other terms, conditions and provisions (which, in the judgment of the Trustee, are not to the prejudice of the Holders of the Bonds) as may be permitted or required by said federal statute or Blue Sky Law; and (e) To effect any other change which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Holders of the Bonds. Section 1002. Supplemental Indentures Requiring Consent of Bondholders. Exclusive of supplemental indentures covered by Section 1001 hereof and subject to the terms of this Section, the Holders of at least a majority in aggregate principal amount of the Bonds then outstanding may consent to the execution and delivery by the Municipality, the Company and the Trustee of such other indenture or indentures supplemental hereto for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms of this Indenture or any supplemental indenture; provided, however, that the unanimous written consent of the Bondholders shall be required for any amendment which would permit: (a) an extension of the stated maturity or reduction in the principal amount of, or reduction in the rate or extension of the time of paying of interest on, or reduction of any premium payable on the redemption of, any Bond, (b) a reduction in the aggregate principal amount of Bonds the Holders of which are required to consent to any such supplemental indenture, or (c) the material modification of the rights, duties or immunities of the Trustee. ARTICLE XI Amendments to the Loan Agreement Section 1101. Amendments, etc., to Loan Agreement, the Twenty-Second Supplemental Indenture, the First Mortgage Indenture or the Guaranty Not Requiring Consent of Bondholders. The Municipality and the Trustee with the consent of the Company shall, without the consent of or notice to the Bondholders, consent to any amendment, change or modification of the Loan Agreement, the Twenty-Second Supplemental Indenture, the First Mortgage Indenture or the Guaranty as may be required (a) by the provisions of any such instrument and this Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission or (c) in connection with any other change which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Holders of the Bonds. Section 1102. Amendments, etc., to Loan Agreement, the Twenty-Second Supplemental Indenture, the First Mortgage Indenture or the Guaranty Requiring Consent of Bondholders. Except for the amendments, changes or modifications as provided in Section 1101 hereof, neither the Municipality nor the Trustee shall consent to any other amendment, change or modification of the Loan Agreement, the Twenty-Second Supplemental Indenture, the First Mortgage Indenture or the Guaranty without the consent of the Holders of at least a Majority in aggregate principal amount of the Bonds then outstanding. Section 1103. No Amendment May Alter First Mortgage Bonds. Under no circumstances shall any amendment to the Loan Agreement alter the provisions of the First Mortgage Bonds relating to the payment of principal, premium, and interest thereon, without the written consent of the Holders of all the Bonds at the time outstanding. ARTICLE XII Miscellaneous Section 1201. Satisfaction and Discharge. All rights and obligations of the Municipality and the Company under the Loan Agreement, the First Mortgage Bonds and this Indenture shall terminate and those instruments shall cease to be of further effect, and the Trustee shall cancel the First Mortgage Bonds and deliver them to the Company, shall execute and deliver all appropriate instruments evidencing the satisfaction of this Indenture, and shall assign and deliver to the Company any moneys and investments in all funds established hereunder (except moneys or investments held by the Trustee for the payment of principal of, interest on, or premium, if any, on the Bonds and except for moneys held in the Rebate Fund which shall be disbursed and applied only as provided in Sections 406, 407, and 408) when (a) all fees and expenses of the Trustee and any paying agent shall have been paid or provided for; (b) the Municipality and the Company shall have performed all of their obligations under the Loan Agreement, First Mortgage Bonds and this Indenture; (c) there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient without reinvestment, or direct noncallable obligations of the United States of America the principal of and the interest on which when due without reinvestment will provide moneys which, together with the moneys, if any, deposited with the Trustee, shall be sufficient, to pay when due the principal or redemption price, if applicable, and interest due and to become due on the Bonds prior to the redemption date or maturity date thereof, as the case may be; provided, that if any Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given or arrangement satisfactory to the Trustee shall have been made for notice, or waiver of notices satisfactory in form to the Trustee shall have been filed with the Trustee; and (d) the Trustee shall have received an opinion of Bond Counsel addressed to the Trustee to the effect that such actions shall not cause the interest on the Bonds to become includable under Section 103 of the Code in the gross income of the Holders thereof for federal income tax purposes. Section 1202. Application of Trust Money. All money or direct obligations of the United States of America deposited with or held by the Trustee pursuant to Section 1201 hereof shall be held in trust for the Holders of the Bonds, and applied by it, in accordance with the provisions of the Bonds and this Indenture, to the payment, either directly or through any paying agent, to the persons entitled thereto, of the principal and premium, if any, and interest on the Bonds for whose payment the money has been deposited with the Trustee. Any income or interest earned by, or increment to, the investments held under Section 1201 hereof shall to the extent not required for the purposes of this Section 1202, be transferred to the Bond Fund. Section 1203. Consents, etc., of Bondholders. Any consent, request, direction, approval, objection or other instrument required by this Indenture to be executed by the Bondholders may be in any number of concurrent writings and may be executed by the Bondholders in person or by agent appointed in writing. Proof of the execution of any such instrument or of the writing appointing any agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken under such request or other instrument. The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before him the execution thereof, by affidavit of any witness to such execution. For all purposes of this Indenture and of the proceedings for the enforcement hereof, any such person shall be deemed to continue to be the Holder of such Bonds until the Trustee shall have received notice in writing to the contrary. In determining whether the holders of the required principal amount of Bonds outstanding have taken any action under this Indenture, Bonds owned by the Company or any person controlling, controlled by or under common control with the Company shall be disregarded and deemed not to be outstanding. In determining whether the Trustee shall be protected in relying on any such action, only Bonds which the Trustee knows to be so owned shall be disregarded. Any action, consent or other instrument shall be irrevocable and shall bind any subsequent owner of such Bond or any Bond delivered in substitution therefor. Section 1204. Parties Interested Herein. Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Company, the Trustee, and the Bondholders, any right, remedy, or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Company shall be for the sole and exclusive benefit of the Company, the Trustee and the Bondholders. Section 1205. Severability. If any provision of this Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or Sections in this Indenture shall not affect the remaining portions of this Indenture, or any part thereof. Section 1206. Notices. All notices, certificates, payments or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or overnight express mail addressed as follows: if to the Municipality, at the City-County Building, Indianapolis, Indiana, 46204, Attention of its Controller; if to the Company or to the Guarantor, at 1220 Waterway Boulevard, Indianapolis, Indiana, 46202, Attention of its Treasurer; if to the Trustee, at 101 West Washington Street, Indianapolis, Indiana, 46255, Attention of the Corporate Trust Department; if to the First Mortgage Indenture Trustee, at Fidelity Bank, National Association, Corporate Trust Department, 1700 Market Street, Philadelphia, Pennsylvania, 19103; or to such other addresses as may hereafter be furnished by notice. Section 1207. Trustee as Paying Agent and Registrar. The Trustee is hereby designated and agrees to act as principal paying agent and Bond Registrar for the Bonds. Section 1208. Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original. Section 1209. Applicable Law. This Indenture shall be governed by and construed in accordance with the applicable laws of the State of Indiana. Section 1210. Holidays. If any date for the payment of principal of or premium or interest on the Bonds is not a Business Day, then such payment shall be due on the first Business Day thereafter and payment on such day shall be considered timely hereunder. Section 1211. Captions and Table of Contents. The captions herein and the Table of Contents are inserted only as a matter of convenience and do not in any way define, limit, construe or describe the scope or intent of this Indenture or any section thereof or in any other way affect this Indenture. IN WITNESS WHEREOF, INDIANAPOLIS WATER COMPANY, has caused these presents to be signed in its name and behalf and attested by its duly authorized officers and the City of Indianapolis, Indiana, has caused these presents to be signed in its name and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its Clerk and, to evidence its acceptance of the Trusts hereby created, National City Bank, Indiana of Indianapolis, Indiana, has caused these presents to be signed in its name and behalf by a duly authorized Vice President and Trust Officer, its official seal to be hereunto affixed, and the same to be attested by one of its duly authorized officers, all as of the day and year first above written. INDIANAPOLIS WATER COMPANY By _________________ ______ J. A. Rosenfeld Senior Vice President and Treasurer ______________________________ Joseph W. Jordan, Secretary THE CITY OF INDIANAPOLIS By _________________ ______ (SEAL) Stephen Goldsmith, Mayor ATTEST: ______________________________ Beverly S. Rippy, Clerk NATIONAL CITY BANK, INDIANA (SEAL) By _________________ __________ Faith Berning, Vice President ATTEST: ______________________________ T. Scott Fesler, Trust Officer STATE OF INDIANA ) ) SS: COUNTY OF MARION ) Before me, the undersigned, a Notary Public in and for the State of Indiana, personally appeared J. A. Rosenfeld and Joseph W. Jordan personally known to me to be the Treasurer and Secretary of Indianapolis Water Company, who, after being first duly sworn, acknowledged that they as such officers, being authorized to do so, executed the foregoing Indenture of Trust for and on behalf of said Corporation. WITNESS MY HAND and Notarial Seal this _____ day of _______________, 1993. ____________________ _____ Notary Public ____________________ __________ I am a resident of (Printed Name) ____________ County, Indiana My Commission Expires: ______________________ STATE OF INDIANA ) ) SS: COUNTY OF MARION ) Before me, the undersigned, a Notary Public in and for the State of Indiana, personally appeared Stephen Goldsmith and Beverly S. Rippy personally known to me to be the Mayor and Clerk of the City of Indianapolis, who, after being first duly sworn, acknowledged that they as such officers, being authorized to do so, executed the foregoing Indenture of Trust for and on behalf of said City. WITNESS MY HAND and Notarial Seal this _____ day of _______________, 1993. ____________________ _____ Notary Public ____________________ __________ I am a resident of (Printed Name) ____________ County, Indiana My Commission Expires: ______________________ STATE OF INDIANA ) ) SS: COUNTY OF MARION ) Before me, the undersigned, a Notary Public in and for the State of Indiana, personally appeared Faith Berning and T. Scott Fesler, personally known to me to be the Vice President and Trust Officer of National City Bank, Indiana, who, after being first duly sworn, acknowledged that as such officers, being authorized to do so, executed the foregoing Indenture of Trust for and on behalf of said Company. WITNESS MY HAND and Notarial Seal this _____ day of _______________, 1993. ____________________ _____ Notary Public ____________________ __________ I am a resident of (Printed Name) ____________ County, Indiana My Commission Expires: ______________________ This instrument was prepared by Theodore J. Esping, Baker & Daniels, 300 North Meridian Street, Suite 2700, Indianapolis, Indiana 46204. EX-4.15 4 22ND SUP INDENTURE; IWC TO FIDELITY BANK INDIANAPOLIS WATER COMPANY TO FIDELITY BANK, NATIONAL ASSOCIATION TWENTY-SECOND SUPPLEMENTAL INDENTURE DATED AS OF APRIL 1, 1993 $11,600,000 FIRST MORTGAGE BONDS, ECONOMIC DEVELOPMENT SERIES E THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE, made as of the 1st day of April, 1993, between INDIANAPOLIS WATER COMPANY, a corporation duly organized and existing under the laws of the State of Indiana ("Company"), and FIDELITY BANK, NATIONAL ASSOCIATION, a national banking association, duly organized and existing under the laws of the United States of America ("Trustee"), WITNESSETH that: WHEREAS, the Company has heretofore duly executed, acknowledged and delivered to Fidelity-Philadelphia Trust Company (a Pennsylvania corporation, later known as The Fidelity Bank and as Fidelity Bank, National Association, to which the Trustee above named is the successor by merger), as trustee, a First Mortgage (hereinafter, as amended to the date hereof, called the "Principal Indenture"), dated July 1, 1936, and duly recorded on July 23, 1936, in the office of the Recorder of Marion County, Indiana, in Mortgage Record 1154, at page 232 and following, and in the office of the Recorder of Hamilton County, Indiana, in Mortgage Record 90, at page 11 and following, and in the office of the Recorder of Hancock County, Indiana, in Mortgage Record 71, at page 74 and following, and on July 1, 1968, in the office of the Recorder of Hendricks County, Indiana, in Mortgage Record 182, at page 7 and following, and on January 22, 1987, in the office of the Recorder of Boone County, Indiana, in Mortgage Record 232, at page 798 and following, and has also duly executed, acknowledged and delivered 21 supplemental indentures thereto dated and recorded or to be recorded as follows: Supplemental Indenture and Recording Recorder's Mortgage Record Date Date Office or Instrument No. First 11/14/45 Marion County Mtg. Rec. 1363, p. 548 (Nov. 1, 1945) " Hamilton County Mtg. Rec. 98, p. 485 " Hancock County Mtg. Rec. 79, p. 579 07/11/68 Hendricks County Mtg. Rec. 182, p. 301 Second 05/24/46 Marion County Mtg. Rec. 1377, p. 479 (May 1, 1946) " Hamilton County Mtg. Rec. 99, p. 340 " Hancock County Mtg. Rec. 80, p. 459 07/11/68 Hendricks County Mtg. Rec. 182, p. 317 Third 05/04/55 Marion County Mtg. Rec. 1785, p. 167 (May 1, 1955) " Hamilton County Mtg. Rec. 116, p. 48 " Hancock County Mtg. Rec. 94, p. 88 07/01/68 Hendricks County Mtg. Rec. 182, p. 85 Fourth 10/01/57 Marion County Mtg. Rec. 1909, p. 462 (Sept. 1, 1957) " Hamilton County Mtg. Rec. 131, p. 1 " Hancock County Mtg. Rec. 98, p. 414 07/01/68 Hendricks County Mtg. Rec. 182, p. 103 09/22/87 Boone County Mtg. Rec. 233, p. 1 Fifth 06/17/59 Marion County Mtg. Rec. 1990, p. 340 (June 15, 1959) " Hamilton County Mtg. Rec. 139, p. 489 " Hancock County Mtg. Rec. 102, p. 169 07/01/68 Hendricks County Mtg. Rec. 182, p. 136 01/22/87 Boone County Mtg. Rec. 233, p. 68 Sixth 12/27/60 Marion County Mtg. Rec. 2072, p. 465 (Dec. 15, 1960) " Hamilton County Mtg. Rec. 147, p. 489 " Hancock County Mtg. Rec. 105, p. 220 07/01/68 Hendricks County Mtg. Rec. 182, p. 156 01/22/87 Boone County Mtg. Rec. 233, p. 109 Seventh 01/10/62 Marion County Mtg. Rec. 2127, p. 213 (Dec. 15, 1961) " Hamilton County Mtg. Rec. 153, p. 28 " Hancock County Mtg. Rec. 107, p. 409 07/01/68 Hendricks County Mtg. Rec. 182, p. 183 01/22/87 Boone County Mtg. Rec. 233, p. 166 Eighth 06/30/65 Marion County Instrument No. 65-30648 (June 25, 1965) " Hamilton County Mtg. Rec. 184, p. 283 " Hancock County Mtg. Rec. 117, p. 345 07/01/68 Hendricks County Mtg. Rec. 182, p. 202 01/22/87 Boone County Mtg. Rec. 233, p. 203A Ninth 08/10/67 Marion County Instrument No. 67-37106 (Aug. 1, 1967) " Hamilton County Mtg. Rec. 207, p. 41 " Hancock County Mtg. Rec. 125, p. 249 07/01/68 Hendricks County Mtg. Rec. 182, p. 211 01/22/87 Boone County Mtg. Rec. 233, p. 221 Tenth 08/20/71 Marion County Instrument No. 71-43913 (Aug. 1, 1971) " Hamilton County Mtg. Rec. 254, p. 203 " Hancock County Instrument No. 71-3128 " Hendricks County Mtg. Rec. 196, p. 258 Eleventh 12/08/71 Marion County Instrument No. 71-68031 (Dec. 1, 1971) " Hamilton County Mtg. Rec. 260, p. 109 12/09/71 Hancock County Instrument No. 71-4768 12/08/71 Hendricks County Mtg. Rec. 198, p. 275 01/22/87 Boone County Mtg. Rec. 233, p. 258 Twelfth 10/09/73 Marion County Instrument No. 73-65209 (Sept. 1, 1973) " Hamilton County Mtg. Rec. 290, p. 467 " Hancock County Instrument No. 73-5232 " Hendricks County Mtg. Rec. 212, p. 1 01/22/87 Boone County Mtg. Rec. 233, p. 295 Thirteenth 04/19/74 Marion County Instrument No. 74-22568 (May 1, 1974) " Hamilton County Mtg. Rec. 296, p. 364 " Hancock County Instrument No. 74-1599 " Hendricks County Mtg. Rec. 215, p. 327 01/22/87 Boone County Mtg. Rec. 233, p. 355 Fourteenth 01/19/76 Marion County Instrument No. 76-3100 (Jan. 15, 1976) 01/20/76 Hamilton County Mtg. Rec. 318, p. 397 " Hancock County Instrument No. 76-0234 " Hendricks County Mtg. Rec. 230, p. 245 01/22/87 Boone County Mtg. Rec. 233, p. 355 Fifteenth 12/26/84 Marion County Instrument No. 84-100402 (Dec. 15, 1984) " Hamilton County Mtg. Rec. 469, p. 847 " Hancock County Instrument No. 845685 " Hendricks County Mtg. Rec. 336, p. 177 01/22/87 Boone County Mtg. Rec. 233, p. 507 Sixteenth 12/06/85 Marion County Instrument No. 85-107269 (Nov. 1, 1985) " Hamilton County Instrument No. 85-18775 " Hancock County Instrument No. 856010 " Hendricks County Mtg. Rec. 351, p. 4804 01/22/87 Boone County Mtg. Rec. 233, p. 532 Seventeenth 03/27/89 Marion County Instrument No. 89-26632 (March 1, 1989) " Hamilton County Instrument No. 89-5728 " Hancock County Instrument No. 89-1589 " Hendricks County Mtg. Rec. 417, p. 794 " Boone County Mtg. Rec. 252, p. 404 Eighteenth 03/27/89 Marion County Instrument No. 89-26631 (March 1, 1989) " Hamilton County Instrument No. 89-5729 " Hancock County Instrument No. 89-1590 " Hendricks County Mtg. Rec. 417, p. 817 " Boone County Mtg. Rec. 252, p. 427 Nineteenth 06/14/89 Marion County Instrument No. 89-0056055 (June 1, 1989) " Hamilton County Instrument No. 89-12284 " Hancock County Instrument No. 89-3454 " Hendricks County Mtg. Rec. 422, p. 9749 " Boone County Mtg. Rec. 254, p. 202 Twentieth 12/07/92 Marion Instrument No. 92-162138 (Dec. 1, 1992) Hamilton Instrument No. 92-48373 Hancock Instrument No. 92-12116 Hendricks Mtg. Rec. 524, p. 313 Boone Mtg. Rec. 296, p. 28 Twentieth-First 12/11/92 Marion County Instrument No. 92-164510 (Dec. 1, 1992) 12/07/92 Hamilton County Instrument No. 92-48374 12/07/92 Hancock County Instrument No. 92-12117 12/07/92 Hendricks County Mtg. Rec. 524, p. 337 12/11/92 Boone County Mtg. Rec. 296, p. 366
and WHEREAS, there are outstanding bonds of the Company on the date hereof issued under the Ninth, Eleventh, Thirteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth and Twenty-First Supplemental Indentures, as follows: Principal Supplemental Amount Indenture Series Outstanding Ninth 5 7/8% Series due 1997$ 6,775,000 Eleventh 8% Series due 20013,000,000 Thirteenth Economic Development Series A11,600,000 Sixteenth 12 7/8% Series due 20025,200,000 Seventeenth Economic Development Series B10,000,000 Eighteenth Economic Development Series C30,000,000 Nineteenth 9.83% Series due 2019 5,000,000 Twentieth 8.19% Series due 202210,000,000 Twenty-First Economic Development Series D 5,000,000 Total . . . . $ 86,575,000 and WHEREAS, this Twenty-Second Supplemental Indenture (hereinafter sometimes referred to as "this Supplemental Indenture") is intended to be made a part of the Principal Indenture as so supplemented as fully as if therein recited at length; and WHEREAS, by Section 1 of Article II of the Principal Indenture it is provided that: "Bonds may be issued hereunder from time to time in one or more series without limitation as to the aggregate principal amount of any or all series (but subject to the restrictions and provisions contained in this Indenture and any supplemental indenture), and may be executed, authenticated and delivered originally either as coupon bonds or as registered bonds without coupons, as the Board of Directors of the Company shall determine." and WHEREAS, by Section 4 of Article II it is provided that: "The coupon bonds and coupons of series other than the first series, and the Trustee's certificate thereon, shall be substantially in the forms hereinbefore recited, with such modifications, omissions, or additions permitted by or not inconsistent with the provisions of this Indenture as may be determined by 'resolution' and embodied in an indenture or indentures supplemental hereto. The bonds of each series shall be distinguished from the bonds of each other series in such manner as may be determined by such resolution. All bonds of the same series shall be identical in tenor except as to the denominations thereof and except variations appropriate for bonds in registered form without coupons. "The Bonds of each series other than the first shall be dated and mature on such dates, shall bear interest at such rate or rates, payable in such installments and on such dates, shall be payable as to principal and interest at such place or places, and in such coin or currency (constituting legal tender) of the United States, shall be of such denominations, shall have such provisions for record dates for the payment of interest, and shall have such tax free and tax refund provisions, sinking, improvement, amortization or other analogous fund requirements, redemption provisions, conversion privileges, provisions for exchange, registry and transfer, limitations upon the maximum amount issuable, and/or such other terms and provisions permitted by or not inconsistent with this Indenture, all as may be determined by 'resolution' and expressed in the bonds and/or in an indenture or indentures supplemental hereto. "The bonds and coupons of series other than the first may have inscribed thereon such descriptive words, numbers, marks of identification, designations, legends and endorsements as may be required to comply with the rules of any exchange or to conform to usage in respect thereof, or as consistently with the provisions hereof, may be determined by 'resolution.' "Before any bonds of any series other than the first, shall be authenticated and delivered by the Trustee under this Indenture, the Company and the Trustee shall execute and deliver and the Company shall cause to be recorded an indenture supplemental hereto, authorized by 'resolution,' creating or authorizing such series." and WHEREAS, it is provided in Section 2 of Article IV of the Principal Indenture that: "From time to time the Trustee shall authenticate and deliver to or upon the order of the Company, additional bonds of the first series or any other duly authorized series issuable hereunder to a principal amount not in excess of 75% of the 'net amount of permanent additions' made after July 1, 1936 to property owned by the company." and WHEREAS, it is provided in Section 1 of Article IV of the Ninth Supplemental Indenture, Eleventh Supplemental Indenture and the Sixteenth through Twentieth Supplemental Indentures that, so long as any bonds of the respective series therein defined are outstanding, the Company ". . . will not avail itself of any of the rights granted to it under the Principal Indenture to use permanent additions as a basis for the authentication and delivery of bonds or for the discharge of any sinking or improvement fund obligations of the Company or for the withdrawal of cash from any such fund to an extent in excess of seventy per cent (70%) of the amount of such permanent additions instead and in lieu of the seventy-five per cent (75%) provided and authorized under the terms of the Principal Indenture." and WHEREAS, by Section 1 of Article XII of the Principal Indenture it is provided, among other things, that: "The Company, when authorized by 'resolution,' and the Trustee without any action or consent by the holder of any of the bonds from time to time and at any time, may enter into an indenture or indentures supplemental hereto and which thereafter shall form a part hereof the same as if its or their terms were incorporated herein, for any one or more of the following purposes: * * * "(b) To define the covenants and provisions (permitted under or not inconsistent with this Indenture) of or applicable to any bonds of any series issued hereunder, other than the first series, as determined from time to time by 'resolution'; "(c) To add to the limitations on the authorized amount, date of maturity, method, conditions and purposes of issue of any bonds issued or to be issued hereunder, or of any series of bonds hereunder, further limitations to be thereafter observed"; * * * "(f) To make such provision in regard to matters or questions arising under this Indenture as may be necessary or desirable and not inconsistent with this Indenture and/or to cure, correct or supplement any defective provision contained herein or in any supplemental indenture; and . . ." and WHEREAS, the Company, subsequent to July 1, 1936, has made net permanent additions to the property owned by it and is entitled under the provisions of Section 2 of Article IV of the Principal Indenture to require the Trustee to authenticate and deliver to it additional bonds of the First Series or any other duly authorized series issuable under the Principal Indenture and secured by the lien thereof, all in accordance with the terms and provisions of the Principal Indenture; and WHEREAS, the Company has by proper corporate action, and in compliance with the provisions of Section 1 of Article XII of the Principal Indenture, authorized the execution of this Supplemental Indenture and determined to create an additional series of bonds to be issued under and secured by said Principal Indenture as supplemented, said series of bonds to be known and designated as "Indianapolis Water Company First Mortgage Bonds, Economic Development Series E," sometimes hereinafter referred to as the "bonds of this Series," in the principal amount of $11,600,000, to bear interest at 5.20% per year, to be fully registered bonds without coupons and dated in accordance with the provisions of Section 5 of Article II of the Principal Indenture, and has determined by proper corporate action, as provided for by Section 2 of Article IV of the Principal Indenture, to request the authentication and delivery to it by the Trustee of Eleven Million Six Hundred Thousand Dollars ($11,600,000) principal amount of bonds of this Series on the basis of net permanent additions made by the Company subsequent to July 1, 1936, and the Company desires to provide by this Supplemental Indenture for the creation of the bonds of this Series and for issue of said Eleven Million Six Hundred Thousand Dollars ($11,600,000) of bonds of this Series; and WHEREAS, the Company has by proper corporate action and in the exercise of its corporate powers under the laws of the State of Indiana duly authorized the issue of said Eleven Million Six Hundred Thousand Dollars ($11,600,000) principal amount of bonds of this Series to be issued in accordance with the terms and provisions of the Principal Indenture and of this Supplemental Indenture, and to be secured by a first lien on substantially all of its properties (other than securities) as provided in the Principal Indenture and indentures supplemental thereto, including this Supplemental Indenture, and has further duly authorized the execution, delivery and recording of this Supplemental Indenture to provide for the issue of the bonds of this Series, and to prescribe the terms and provisions thereof, insofar as said terms and provisions are not prescribed by the Principal Indenture; and WHEREAS, the form, terms and provisions of the bonds of this Series and of the certificate of authentication of the Trustee to be thereon endorsed shall be substantially in the forms following, respectively (except that any portion of the text of any such bond may appear on the reverse side thereof, with an appropriate reference thereto on the face of such bond): [FORM OF BOND] No. ____ Matures: May 1, 2001 $__________ INDIANAPOLIS WATER COMPANY First Mortgage Bond, Economic Development Series E Indianapolis Water Company, a corporation of the State of Indiana ("Company"), for value received, hereby promises to pay to National City Bank, Indiana, as trustee under an Indenture of Trust dated as of April 1, 1993 ("City Indenture"), executed and delivered by the City of Indianapolis, Indiana ("City") and the Company to said National City Bank, Indiana, as Trustee ("City Trustee"), or registered assigns, on the 1st day of May, 2001 the sum of _________________________ Dollars ($_______________), in immediately available funds and to pay interest thereon in like manner from the date of this bond until the principal hereof shall become due and payable, at the rate of five and two- tenths percent (5.20%) per year, computed on the basis of a 360-day year (consisting of 12 months of 30 days each), payable semiannually in like funds on the first day of May and November in each year, commencing November 1, 1993. Except as otherwise provided in the next sentence, the principal of and premium, if any, and interest on this Bond will be payable, in such coin or currency of the United States as at the time of payment is legal tender for the payment of public and private debts, at the corporate trust office of the Trustee (hereinafter defined). So long as there is no existing default in the payment of interest on any bond of this series, payments of interest on and partial prepayments of principal of this Bond prior to its maturity will be made to the person or entity ("Person") in whose name this Bond is registered at the close of business on the last day of the calendar month next preceding the date on which such payment is due by check mailed to such Person's address as it appears on the Company's books for registration and registration of transfer, unless otherwise agreed upon in writing by the Company and the registered holder hereof. This Bond is one of a duly authorized issue of first mortgage bonds issuable in series, all issued and to be issued under and equally secured by a first mortgage (hereinafter, as amended, called the "Principal Indenture"), dated July 1, 1936, duly executed and delivered by the Company to Fidelity- Philadelphia Trust Company (now Fidelity Bank, National Association), as Trustee ("Trustee"), and twenty-two indentures supplemental thereto, to which Principal Indenture and supplemental indentures reference is hereby made for a description of the property mortgaged and pledged ("mortgaged property"), the nature and extent of the security, the rights of the holders and registered owners of said bonds and of the Trustee in respect of such security, and the terms and conditions under which said bonds are secured. The Principal Indenture and any indenture supplemental thereto may be modified with the assent of the Company and of the holders and registered owners of at least seventy-five percent (75%) in principal amount of the bonds then outstanding and not owned or controlled directly or indirectly by the Company or by anyone directly or indirectly controlling the Company, subject to the restrictions and provisions with respect thereto set forth in the Principal Indenture and supplemental indentures. The Principal Indenture also may be modified without the consent of any bondholder when necessary to effect or maintain qualification of the Principal Indenture under the Trust Indenture Act of 1939 and for other purposes specified in the Principal Indenture. Said bonds may be for various principal sums and may be issued from time to time in one or more series without limitation as to the aggregate principal amount of any or all series, which series may mature on different dates, may bear interest at different rates and may otherwise vary, as in the Principal Indenture provided. The bonds of this series, of which this is one, are known as "Indianapolis Water Company First Mortgage Bonds, Economic Development Series E," and hereinafter referred to as "bonds of this Series." The bonds of this Series are issued under the twenty- second supplemental indenture to the Principal Indenture ("Twenty-Second Supplemental Indenture") in order to evidence and secure a loan made by the City of Indianapolis, Indiana ("City"), to the Company pursuant to a Loan Agreement dated as of April 1, 1993. In order to fund such loan, the proceeds of which will be used by the Company to redeem bonds of its Economic Development Series A, the City has issued in the principal amount of $11,600,000, its Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project) ("City Bonds") under and pursuant to the City Indenture. The City Bonds are payable from payments made, or caused to be made, by the Company of principal of, premium, if any, and interest on the bonds of this Series. The Company's Economic Development Series A bonds were issued to secure $12,000,000 in principal amount of bonds issued by the City in 1974. The proceeds of that City bond issue were lent to the Company to enable it to construct its Eagle Creek Purification and Pumping Station and related facilities (now the Company's "Thomas W. Moses Treatment Plant"). That plant and related facilities ("Project") were completed in 1976 and are now in service. In the event that all or a substantial portion of either the Project ("Project Taking") or the mortgaged property ("Total Taking") shall be purchased by any governmental body or agency, or shall be taken by the exercise of the power of eminent domain or of a right to purchase or otherwise acquire the same vested in any governmental body or agency, the bonds of this Series in the case of a Project Taking may be redeemed by the Company in whole within one year after the receipt of the proceeds received therefor and in the case of a Total Taking shall be redeemed to the extent of the proceeds received therefor ratably applicable to the bonds of this Series within six months after the receipt of such funds. In the event of a Total Taking, the bonds of this Series are also redeemable at any time within one year after such purchase or taking, in whole but not in part, at the option of the Company. All redemptions described in this paragraph shall be made on not less than thirty (30) days' notice, at their principal amount, together with accrued interest in each case to the date of redemption, all as more particularly set forth in the Twenty- Second Supplemental Indenture. In certain other adverse circumstances referred to in Section 3 of Article III of the Twenty-Second Supplemental Indenture, the bonds of this Series are redeemable in whole, but not in part, at the option of the Company, in each case within one year of the event authorizing the redemption and at 100% of their principal amount, together with accrued interest to the date of redemption. In the event that the Trustee and the Company are notified that (a) an Event of Default under Section 801 of the City Indenture has occurred and is continuing, (b) the City Trustee has declared the principal of all City Bonds then outstanding immediately due and payable under Section 802 of the City Indenture, and (c) the City Trustee has not waived such Event of Default or rescinded such declaration, then the Company shall immediately redeem all of the bonds of this Series then outstanding at a price equal to one hundred percent (100%) of the principal amount thereof, together with accrued interest thereon to the redemption date. The bonds of this Series are also subject to mandatory redemption in whole (or in part as described below) in the event of a Determination of Taxability (as defined in the City Indenture) with respect to the City Bonds. If there has been a Determination of Taxability but fewer than all of the City Bonds are required to be redeemed under Section 501 of the City Indenture, then the bonds of this Series shall be subject to mandatory redemption only to the extent necessary to provide a sum sufficient to pay the principal and interest on the principal of the City Bonds that are required to be redeemed. Any such redemption of the bonds of this Series shall be on a date selected by the Trustee and within one hundred eighty (180) days of the Determination of Taxability (but in no event later than the date selected by the City Trustee for redemption of the City Bonds), and shall be redeemed at a price equal to one hundred percent (100%) of the principal amount thereof, together with accrued interest thereon to the redemption date. The principal hereof may also be declared or become due on the conditions, in the manner and with the effect set forth in the Principal Indenture upon the happening of an "Event of Default," unless waived or cured, as in the Principal Indenture provided. This bond is nontransferable except to the City Trustee and successor trustees thereto. To the extent that it is transferable, it is transferable by the registered owner hereof in person or by attorney duly authorized in writing, on books of the Company to be kept for that purpose at the principal office of the Trustee, in the City of Philadelphia, Pennsylvania, and at the Company's principal office in the City of Indianapolis, Indiana, upon surrender hereof for cancellation at either of said offices and upon presentation of a written instrument of transfer duly executed. Thereupon the Company shall issue in the name of the transferee, and the Trustee shall authenticate and deliver, a new registered bond or bonds without coupons of this Series, in authorized denominations, of equal aggregate principal amount. Any such transfer shall be subject to the terms and conditions specified in the Principal Indenture and the Twenty-Second Supplemental Indenture. The Company and the Trustee and any paying or transfer agent may deem and treat the registered owner of this bond as the absolute owner hereof for the purpose of receiving payment of or an account of the principal hereof and the interest hereon, and for all other purposes, and shall not be affected by any notice to the contrary. This bond shall not be valid or become obligatory for any purpose unless it shall have been authenticated by the certificate of the Trustee under the Principal Indenture endorsed hereon. IN WITNESS WHEREOF, Indianapolis Water Company has caused this bond to be signed by its President or a Vice President and by its Secretary or an Assistant Secretary, and that bond to be dated. Dated: INDIANAPOLIS WATER COMPANY By_________________________________ President _________________________ Secretary [FORM OF TRUSTEE'S CERTIFICATE] This bond is one of the bonds of the series designated therein, referred to in the within-mentioned Twenty-Second Supplemental Indenture to the First Mortgage of Indianapolis Water Company. FIDELITY BANK, NATIONAL ASSOCIATION By_________________________________ Authorized Officer Date_______________________________ [FORM OF PREPAYMENT RECORD] PREPAYMENT RECORD Principal Amount of Bond $_______________ Date of Maturity: May 1, 2001 Prepayments on Principal Balance Signature of Authorized Amount Date Outstanding Officer and Title and WHEREAS, all acts and things necessary to make said Eleven Million Six Hundred Thousand Dollars ($11,600,000) principal amount of bonds of this Series, when executed by the Company and authenticated by the Trustee and issued by the Company as hereinafter and in the Principal Indenture provided, valid, binding and legal obligations of the Company, and this Supplemental Indenture a valid, binding and enforceable supplement to the Principal Indenture, have been duly performed, and the execution and delivery of this Supplemental Indenture and the execution, delivery and issuance of said principal amount of bonds of this Series have been in all respects duly and lawfully authorized: Now, Therefore, This Supplemental Indenture Witnesseth: That Indianapolis Water Company, in order to secure the payment of the principal of and premium, if any, and interest on all bonds issued under the Principal Indenture and all indentures supplemental thereto, according to their tenor and effect, and according to the terms of the Principal Indenture and of any indenture supplemental thereto, and to secure the performance of the covenants and obligations in said bonds and in the Principal Indenture and any indenture supplemental thereto respectively contained, and for the proper conveying and confirming unto the Trustee, its successors in said trust and its and their assigns forever, upon the trusts and for the purposes expressed in the Principal Indenture and any indenture supplemental thereto, all and singular the estates, property and franchises of the Company, thereby mortgaged or intended so to be, the Company, for and in consideration of the premises and of the sum of One Dollar ($1.00) in hand paid by the Trustee to the Company upon the execution and delivery of this Supplemental Indenture, receipt whereof is hereby acknowledged, and of other good and valuable considerations, has granted, bargained, sold, conveyed, released, confirmed, pledged, assigned, transferred, mortgaged, warranted and set over and by these presents does grant, bargain, sell, convey, release, confirm, pledge, assign, transfer, mortgage, warrant and set over unto Fidelity Bank, National Association, as Trustee, and to its successors in said trust and its and their assigns forever in trust in accordance with the provisions of the Principal Indenture and indentures supplemental thereto: All and singular the premises, property, assets, rights and franchises of the Company, whether now or hereafter owned, constructed or acquired, of whatever character and wherever situated made subject to the lien of the Principal Indenture and any indenture supplemental thereto, including, without limiting the generality of the foregoing, all real and personal property of every kind and nature whatsoever, including franchises and all rights of any kind (not expressly excluded or excepted from the lien of the Principal Indenture and indentures supplemental thereto), now owned by the Company and acquired by the Company since the execution of the Twenty-First Supplemental Indenture; And This Supplemental Indenture Further Witnesseth That: In order to provide for the authentication and delivery by the Trustee to the Company of said $11,600,000 principal amount of Indianapolis Water Company First Mortgage Bonds, Economic Development Series E, in order to define the covenants and provision of or applicable to the bonds of this Series, as determined in compliance with the provisions of the Principal Indenture, it is hereby covenanted and agreed by and between the Company and the Trustee, as follows: ARTICLE I Definitions The terms defined in this Article I shall, for all purposes of this Supplemental Indenture, have the following meanings unless the context otherwise requires: The term "City Bonds" means the $11,600,000 City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project) of the City of Indianapolis, Indiana, authenticated and delivered under and pursuant to the City Indenture. The term "City Indenture" means the Indenture of Trust, dated as of April 1, 1993, by and between the Company, the City of Indianapolis, Indiana, and National City Bank, Indiana, as Trustee, and any indenture supplemental thereto or amendatory thereof, pursuant to which the City Bonds are issued and secured. The term "City Trustee" means the person, corporation or banking association acting as trustee from time to time under the City Indenture. The term "Loan Agreement" means the Loan Agreement, dated as of April 1, 1993, between the City of Indianapolis, Indiana, a municipal corporation and political subdivision duly organized and existing under the laws of the State of Indiana, and the Company, and any and all modifications, alterations, amendments and supplements thereto. The term "Project" means the water facilities described in Exhibit A to the Loan Agreement. The term "Trustee" means the Trustee for the time being whether the original or a successor, under the Principal Indenture. ARTICLE II Description of Bonds of This Series Bonds of this Series shall be designated "Indianapolis Water Company First Mortgage Bonds, Economic Development Series E." Said bonds shall be dated the date of their authentication and shall bear interest from that date until the principal thereof shall become due and payable, at a rate of five and two-tenths (5.20%) per year, computed on the basis of a 360-day year (consisting of 12 months of 30 days each), payable semiannually on May 1 and November 1 of each year commencing November 1, 1993. Principal and interest will be payable to the registered owner of the bonds, and at the address thereof, appearing on the Company's books for registration and registration of transfer, in immediately available funds. Except as otherwise provided in the next sentence, the principal of and premium, if any, and interest on the bonds will be payable, in such coin or currency of the United States as of this Series at the time of payment is legal tender for the payment of public and private debts, at the corporate trust office of the Trustee. So long as there is no existing default in the payment of interest on any bond of this Series, payments of interest on and partial prepayments of principal of any bond of this Series prior to its maturity will be made to the person or entity ("Person") in whose name said bond (or a bond or bonds in exchange for which said bond was issued) is registered at the close of business on the last day of the calendar month next preceding the date on which such payment is due by check mailed to such Person's address as it appears on the Company's books for registration and registration of transfer, unless otherwise agreed upon in writing by the Company and the registered holder of the bond. The bonds of this Series will mature on May 1, 2001. The bonds of this Series shall be fully registered bonds without coupons in the denominations of Five Thousand Dollars ($5,000) each or any whole multiple thereof, to be lettered "R" and bearing such numbers as the Company may reasonably require to comply with the usual practice prevailing in such cases. Said bonds will be nontransferable except to the City Trustee and successors thereto, if any. Each bond of this Series authenticated and delivered upon any transfer, or in substitution for the whole or any part of any bond or bonds of such series, shall carry all the rights to interest accrued and unpaid and to accrue, which were carried by the whole or such part of such bond or bonds. In accordance with the provisions of Section 8 of Article II of the Principal Indenture, the Company hereby designates its principal office in the City of Indianapolis, Indiana, as an office, in addition to that of the Trustee, where books for the registration and registration of transfer of bonds of this Series will be kept. The aggregate principal amount of all bonds of this Series which may at any time be certified, issued and outstanding shall be limited to Eleven Million Six Hundred Thousand Dollars ($11,600,000), and bonds of said series may be executed, authenticated, delivered and issued hereunder from time to time subject to the restrictions and provisions contained in this Supplemental Indenture and in the Principal Indenture. ARTICLE III Redemption of the Bonds SECTION 1. In the event that all or a substantial portion of either the Project ("Project Taking") or the mortgaged property ("Total Taking") shall be purchased by any governmental body or agency, or shall be taken by the exercise of the power of eminent domain or of a right to purchase or otherwise acquire the same vested in any governmental body or agency, bonds of this Series may or shall, as the case may be, be redeemed as hereinafter set forth. In the case of a Project Taking, bonds of this Series may be redeemed by the Company in whole within one year after receipt of the proceeds received therefor. In the case of a Total Taking, that portion of the award or consideration for property so acquired by a governmental authority which shall consist solely of cash ratably applicable to bonds then outstanding of this Series shall within six (6) months after the receipt thereof be used for the redemption of bonds of this Series. In the event that the consideration or award to the Company for property so acquired by a governmental authority in the case of a Total Taking includes property other than cash, that portion of such property which is ratably applicable to bonds of this Series shall within sixty (60) days after receipt thereof be sold for cash and the proceeds of such sale or sales shall within six (6) months after the receipt thereof be used for redemption of bonds of this Series. In the event of a Total Taking, bonds of this Series shall also be redeemable in whole, but not in part, at the option of the Company, to be exercised within one year after such purchase or taking, in each case at one hundred percent (100%) of their principal amount, together with accrued interest to the date of redemption. SECTION 2. Upon the occurrence of any of the events described in subparts (a) or (b) of Section 502 of the City Indenture, the bonds of this Series shall be redeemable in whole, but not in part, at the option of the Company at any time within one year following the occurrence of any such event or events at one hundred percent (100%) of their principal amount, together with accrued interest to the date of redemption. SECTION 3. In the event that the Company and the Trustee are notified by the City Trustee that (a) an Event of Default has occurred and is continuing under Section 801 of the City Indenture, (b) the City Trustee has declared the principal of all City Bonds then outstanding immediately due and payable pursuant to Section 802 of the City Indenture, and (c) such Event of Default or declaration of acceleration of maturity and principal of and interest on, the bonds of this Series has not been waived or rescinded by the City Trustee, as provided in Section 810 of the City Indenture, the Company shall immediately redeem all of the bonds of this Series then outstanding, at a price equal to 100% of the principal amount thereof, together with accrued interest thereon to the redemption date. SECTION 4. In the event that the Company is notified by the City Trustee that there has occurred a Determination of Taxability with respect to the City Bonds and, as a result thereof, all the City Bonds are being redeemed as provided in Section 501 of the City Indenture, the Company shall call for redemption on a redemption date selected by it (but in no event later than the date selected by the City Trustee for redemption of the City Bonds) all of the bonds of this Series then outstanding. If there has been a Determination of Taxability but fewer than all of the City Bonds are required to be redeemed under Section 501 of the City Indenture, then the bonds of this Series shall be subject to mandatory redemption, in accordance with the preceding sentence, only to the extent necessary to provide a sum sufficient to pay the principal and interest on the principal of the City Bonds that are required to be redeemed. Any such redemption shall be at a price equal to one hundred percent (100%) of the principal amount thereof, together with interest thereon to the redemption date. SECTION 5. In the event that the Company shall desire to exercise its right, or is required by the provisions of this Article III, to redeem and pay all or any part of the bonds of this Series, payments in redemption of bonds of this Series shall be made directly by the Company to the registered owners of the bonds of this Series entitled thereto. Any such redemption may be made without complying with the provisions, terms and conditions of Article V of the Principal Indenture, and without the giving of any prior notices except for the notices required to be given by Article V of the Loan Agreement. SECTION 6. Bonds of this Series may be redeemed in part, but the portion of any such bond so redeemed in part shall be Five Thousand Dollars ($5,000) or an integral multiple thereof. In case any bond of this Series shall be redeemed in part only, payment of the redemption price of such portion of the bond shall be made by the Company (or Trustee, as the case may be) to the registered holder thereof, at its address appearing on the books for registration and registration of transfer of bonds of this Series without presentation or surrender thereof, provided that there is on file with the Company and Trustee (and not theretofore rescinded by written notice from such registered holder to the Company and Trustee) a written commitment from such registered holder to the effect that (1) payments will be so made, and (2) such registered holder will make notations on such bond or a paper attached thereto of the portion thereof so redeemed. Prior to any transfer by the registered holder of any bond of this Series, the same shall have been surrendered to the Company or Trustee for appropriate notation thereon of, or in exchange for a new bond or bonds for, the unredeemed balance of the principal amount thereof. The Trustee shall not be under any duty to determine that any of the notations mentioned herein have been made or be liable in any manner with respect thereto. ARTICLE IV Particular Covenants of the Company SECTION 1. So long as any bond of this Series remains outstanding, the Company covenants that it will not exercise or take advantage of any of the rights granted to it under Section 5 or Section 8, Article VIII of the Principal Indenture to request that the Trustee pay over cash to it to the extent that such payment would be in conflict with the specific directions hereinafter set forth. The Company covenants that the application of any moneys deposited with or received by the Trustee pursuant to the provisions of Section 8, Article VIII, of the Principal Indenture shall be subject to the provisions of Section 1, Article III, of this Supplemental Indenture in the event of a Project Taking or Total Taking of the Company's property. Nothing in this Section shall be construed to limit the right of the Company to request the Trustee to apply cash in accordance with the authority granted under Section 5, Article VIII, of the Principal Indenture, other than with respect to cash received in the case of a Project Taking and that portion of cash held by the Trustee which is ratably applicable to bonds of this Series then outstanding in the case of a Total Taking. SECTION 2. The Company covenants and agrees that it will duly and punctually pay to the holder of any bond of this Series issued under and secured by the Principal Indenture and this Supplemental Indenture the principal of, premium, if any, and interest on said bond at the dates and places and in the manner mentioned in such bond. SECTION 3. The Trustee shall not incur any liability by reason of any default, failure or delay on the part of the Company to observe or perform its covenants contained in this Article IV. ARTICLE V Amendment of Principal Indenture Article I, Section 13, of the Principal Indenture is amended to read: "Section 13. A demand, request, notice, certificate, appointment, approval, consent, waiver, designation, direction, nomination or other similar act of the Company, under any of the provisions hereof, shall mean an instrument in writing signed by the President or a Vice President of the Company, attested by its Secretary or an Assistant Secretary, and delivered to the Trustee, except as otherwise provided herein." Article IV, Section 7, of the Principal Indenture is amended by changing subparagraph (3) of the second paragraph thereof to read: "(3) Upon written or oral request by the President, a Vice President, Treasurer, Assistant Treasurer or Secretary of the Company, the Trustee shall invest such cash, or any part thereof, in obligations of the United States of America, any state of the United States or any political subdivision thereof or an interest bearing account made up of government securities and/or securities of governmental agencies; provided, however, that the Trustee may require that any such oral request of the Company be followed up by a written confirmation, signed by any of said officers. Any investments so made may, at the option of the Company, be sold and the proceeds applied in any manner provided in this Section." Article VII, Section 3, of the Principal Indenture is amended by deleting the third paragraph thereof. Article VII, Section 9, of the Principal Indenture is amended by changing the fourth paragraph thereof to read: "That it will furnish to the Trustee annually a statement of the President, a Vice President, the Treasurer or Secretary of the Company, or a certificate or certificates of insurance, executed by the insurance company or companies providing the insurance, identifying the amount and character of the insurance in force and the companies issuing policies of insurance on said property, setting forth the character and amount of each policy. In the case where an insurance reserve fund has been established, such statement shall set forth the amount of insurance for which the same is substituted, and the amount of such fund with a detailed statement of the case on deposit and investments held therein. All resolutions authorizing the establishment and maintenance of such insurance reserve fund shall be furnished the Trustee. The Trustee shall be under no duty with reference to such statements other than to retain the same in its file for inspection only by bondholders or their duly authorized representatives." ARTICLE VI Principal Indenture Applicable The bonds of this Series shall be issued under, subject to and in compliance with the terms and provisions of the Principal Indenture, as amended and supplemented, which are applicable according to the true intent and meaning thereof to all bonds of whatsoever series issued under the terms of said Principal Indenture, except as expressly modified by the terms of this Supplemental Indenture. ARTICLE VII Concerning the Trustee The Trustee, for itself and its successors, accepts the trusts of this Supplemental Indenture and agrees to execute them, but only upon the following additional terms and conditions to which the Company and the holders of all the bonds issued under this Supplemental Indenture agree: (a) The Trustee shall be under no obligation to see to the recording, registry or filing of this Supplemental Indenture. (b) The recitals of facts and the covenants and agreement contained in this Supplemental Indenture and in said bonds of this Series shall be taken as made by the Company alone and shall not be construed as made by or as imposing any obligation or liability upon the Trustee. (c) The Trustee shall not be responsible for the execution or validity hereof, or of the bonds of this Series (except in respect of the certificates of authentication of the Trustee endorsed on the bonds of this Series), or for the sufficiency of the security as provided herein, or in said Principal Indenture. (d) All the terms and provisions of the Principal Indenture defining and limiting the liability and responsibility of the Trustee in the discharge of the trusts thereof shall, in like manner, define and limit its liability and responsibility in the performance of the trusts under this Supplemental Indenture as if expressly stated in this instrument. ARTICLE VIII Miscellaneous SECTION 1. All the covenants, stipulations, promises and agreements in this Supplemental Indenture contained by or on behalf of the Company shall bind and benefit its successors and assigns, whether so expressed or not. SECTION 2. For every purpose of this Supplemental Indenture, including the execution, issue and use of any and all of the bonds of this Series, the term "Company" includes and means not only the party of the first part hereto, but also any successor corporation. SECTION 3. A bond of this Series shall no longer be deemed to be "outstanding" hereunder for any purpose, except for the purpose of entitling the holder thereof to receive payment of the redemption price and accrued interest to the date fixed for redemption, if the Company shall have completed giving the required notice of redemption of such bond, or shall have irrevocably authorized the Trustee to cause notice to be given, and shall have segregated in its possession, or shall have deposited with the Trustee, in trust, an amount in cash sufficient to redeem all bonds of this Series called for redemption, together with accrued interest to the date fixed for redemption. SECTION 4. Any moneys coming into the hands of the Trustee hereunder, the application of which is not otherwise specifically provided for by the terms and provisions of this Supplemental Indenture, shall be applied by the Trustee in accordance with the terms and provisions of the Principal Indenture. SECTION 5. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be taken to be an original and all collectively but one instrument. SECTION 6. The headings of the Articles of this Supplemental Indenture are inserted for convenience of reference only, and are not to be taken to be any part of this Supplemental Indenture or to control or affect the meaning of the same. SECTION 7. In the event that an interest payment or maturity date or a date fixed for redemption of any bond of this Series shall be a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City of Indianapolis, Indiana (or Philadelphia, Pennsylvania, if payment is being made by the Trustee), are authorized by law to close, then payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding business day not a Saturday, Sunday or a legal holiday or a day upon which banking institutions in the City of Indianapolis, Indiana (or Philadelphia, Pennsylvania, if payment is being made by the Trustee), are authorized by law to close, with the same force and effect as if made on the date of maturity, interest date, or the date fixed for redemption, and no interest shall accrue for the period after such date. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be executed by their Presidents or Vice Presidents, under and by the authority vested in them, have hereto affixed their signatures, and their Secretaries or Assistant Secretaries have duly attested the execution hereof, as of the 1st day of April, 1993. INDIANAPOLIS WATER COMPANY By_________________________________ J. A. Rosenfeld Senior Vice President and Treasurer ____________________________ Secretary FIDELITY BANK, NATIONAL ASSOCIATION By_________________________________ _______________, Assistant Vice President ATTEST: ____________________________ Assistant Secretary STATE OF INDIANA ) ) SS: COUNTY OF MARION ) BE IT REMEMBERED that on this ___ day of ____________, 1993, before me the undersigned, a Notary Public in and for the County and State aforesaid, duly commissioned and qualified, personally appeared J. A. Rosenfeld and Joseph W. Jordan, of Indianapolis Water Company, to me well known and personally known to me to be, respectively, Senior Vice President and Treasurer and Secretary of Indianapolis Water Company and to be persons who executed the foregoing instrument for and on behalf of said Indianapolis Water Company, and acknowledged the execution of said instrument, and acknowledged that they executed said instrument voluntarily as such officers of the Company, respectively, as the act and deed of said Indianapolis Water Company, for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and affixed by Notarial Seal the day and year aforesaid. ___________________________________ Notary Public ___________________________________ Printed Name Residing in ____________ County, Indiana My Commission Expires: _________________________ [SEAL] COMMONWEALTH OF PENNSYLVANIA ) ) SS: COUNTY OF PHILADELPHIA ) BE IT REMEMBERED that on this ___ day of ____________, 1993, before me the undersigned, a Notary Public in and for the County and State aforesaid, duly commissioned and qualified, personally appeared _________________________, Assistant Vice President, and ________________________, Assistant Secretary of Fidelity Bank, National Association, to me well known and personally known to me to be, respectively, Assistant Vice President and Assistant Secretary of said Bank and to be persons who executed the foregoing instrument for and on behalf of said Bank, and acknowledged the execution of said instrument, and acknowledged that they executed said instrument voluntarily as such Assistant Vice President and Assistant Secretary of said Bank, respectively, as the act and deed of said Bank, for the uses and purposes therein set forth. I certify that I am not a Director or Officer of Fidelity Bank, National Association. IN WITNESS WHEREOF, I have hereunto set my hand and affixed by Notarial Seal the day and year aforesaid. ___________________________________ Notary Public ___________________________________ Printed Name Residing in ____________ County, Pennsylvania My Commission Expires: _________________________ [SEAL] This instrument was prepared by Fred E. Schlegel, an attorney, 300 North Meridian Street, Suite 2700, Indianapolis, Indiana 46204-1782. RECORDING DATA Received on ____________________, for recording at the office of the Recorder of Marion County, Indiana, and recorded in said office as Instrument No. ____________________. Received on ____________________, for recording at the office of the Recorder of Hamilton County, Indiana, and recorded in said office as Instrument No. ____________________. Received on ____________________, for recording at the office of the Recorder of Hancock County, Indiana, and recorded in said office as Instrument No. ____________________. Received on ____________________, for recording at the office of the Recorder of Hendricks County, Indiana, and recorded in Hendricks County Mortgage Record ___, page ___. Received on ____________________, for recording at the office of the Recorder of Boone County, Indiana, and recorded in Boone County Mortgage Record ___, page ___. This page is for recordkeeping only. It was not a part of the Twenty-Second Supplemental Indenture as executed or recorded. EX-10.13 5 IWCR NOTE AGREEMENT; DATED 3/1/94 Conformed Copy IWC RESOURCES CORPORATION NOTE AGREEMENT Dated as of March 1, 1994 $14,000,000 6.31% Senior Notes Due March 1, 2001 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS; INTERPRETATION . . . . . . . . . . . 1 1.1. Definitions . . . . . . . . . . . . . . . . . . . 1 SECTION 2. DESCRIPTION OF NOTES AND COMMITMENT . . . . . . . 12 2.1. Description of Notes . . . . . . . . . . . . . . . 12 2.2. Commitment, Closing Date . . . . . . . . . . . . . 12 SECTION 3. PREPAYMENT OF NOTES . . . . . . . . . . . . . . . 13 3.1. Optional Prepayments . . . . . . . . . . . . . . . 13 3.2. Prepayment Upon Occurrence of Prepayment Event . . 13 3.3. Notice of Prepayments . . . . . . . . . . . . . . 14 3.4. Direct Payment . . . . . . . . . . . . . . . . . . 14 SECTION 4. REPRESENTATIONS . . . . . . . . . . . . . . . . . 14 4.1. Representations of the Company . . . . . . . . . . 14 4.2. Representations of the Purchaser . . . . . . . . . 15 SECTION 5. CLOSING CONDITIONS . . . . . . . . . . . . . . . 17 5.1. Closing Certificate . . . . . . . . . . . . . . . 17 5.2. Legal Opinions . . . . . . . . . . . . . . . . . . 17 5.3. Company's Existence and Authority . . . . . . . . 17 5.4. Legality of Investment . . . . . . . . . . . . . . 17 5.5. Private Placement Number Application . . . . . . . 17 5.6. Satisfactory Proceedings . . . . . . . . . . . . . 17 5.7. Waiver of Conditions . . . . . . . . . . . . . . . 18 SECTION 6. COMPANY COVENANTS . . . . . . . . . . . . . . . . 18 6.1. Corporate Existence, Etc. . . . . . . . . . . . . 18 6.2. Insurance . . . . . . . . . . . . . . . . . . . . 18 6.3. Taxes, Claims for Labor and Materials; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 18 6.4. Maintenance, Etc. . . . . . . . . . . . . . . . . 19 6.5. Nature of Business . . . . . . . . . . . . . . . . 19 6.6. Fixed Charge Coverage. . . . . . . . . . . . . . . 19 6.7. Mergers and Consolidations . . . . . . . . . . . . 19 6.8. Sale of Assets . . . . . . . . . . . . . . . . . . 20 6.9. Adjusted Consolidated Net Worth. . . . . . . . . . 21 6.10. Repurchase of Notes. . . . . . . . . . . . . . . 21 6.11. Transactions with Affiliates . . . . . . . . . . 21 6.12. Reports and Rights of Inspection . . . . . . . . 21 6.13. Cost of this Financing. . . . . . . . . . . . . . 24 6.14. Rule 144A Information. . . . . . . . . . . . . . 25 SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR . . . . . 25 7.1. Events of Default . . . . . . . . . . . . . . . . 25 7.2. Notice to Holders . . . . . . . . . . . . . . . . 26 7.3. Acceleration of Maturities . . . . . . . . . . . . 27 7.4. Rescission of Acceleration . . . . . . . . . . . . 27 SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . 28 8.1. Consent Required . . . . . . . . . . . . . . . . . 28 8.2. Solicitation of Noteholders . . . . . . . . . . . 28 8.3. Effect of Amendment or Waiver . . . . . . . . . . 29 SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 29 9.1. Note Register . . . . . . . . . . . . . . . . . . 29 9.2. Exchange of Notes . . . . . . . . . . . . . . . . 29 9.3. Loss, Theft, Etc. of Notes . . . . . . . . . . . . 29 9.4. Powers and Rights Not Waived; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 30 9.5. Notices . . . . . . . . . . . . . . . . . . . . . 30 9.6. Successors and Assigns . . . . . . . . . . . . . . 31 9.7. Survival of Covenants and Representations . . . . 31 9.8. Copies To Regulatory Bodies . . . . . . . . . . . 31 9.9. Severability . . . . . . . . . . . . . . . . . . . 31 9.10. Substitution . . . . . . . . . . . . . . . . . . 31 9.11. Governing Law . . . . . . . . . . . . . . . . . . 32 9.12. Captions . . . . . . . . . . . . . . . . . . . . 32 9.13. Verification . . . . . . . . . . . . . . . . . . 32 Schedule 1 (Purchaser Information) Exhibit A (Form of Note) Exhibit B (Company Closing Certificate) Exhibit C-1 (Form of Opinion of Special Counsel to Purchaser) Exhibit C-2 (Form of Opinion of Special Indiana Counsel to the Purchaser) Exhibit D (Form of Opinion of Counsel to the Company) NOTE AGREEMENT $14,000,000 6.31% Senior Notes Due March 1, 2001 Dated as of March 1, 1994 To the Purchaser named in Schedule I hereto which is a signatory to this Agreement Gentlemen: The undersigned, IWC Resources Corporation, an Indiana corporation (the "Company"), agrees with you as follows: SECTION 1. DEFINITIONS; INTERPRETATION. 1.1. Definitions. Unless the context otherwise requires, the terms set forth below shall have the meanings assigned thereto, and the following definitions shall apply to both the singular and plural forms of the defined terms: "Adjusted Consolidated Net Worth" shall mean, as of the date of any determination thereof, shareholders' equity, as shown on a consolidated balance sheet of the Company, less Restricted Investments that exceed ten percent (10%) of such amount of shareholders' equity. "Affiliate" shall mean any Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (b) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Company or (c) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in [Indianapolis, Indiana] are authorized to close. "Capitalized Lease" shall mean any lease, the obligation for Rentals with respect to which is required to be capitalized on a balance sheet of the lessee in accordance with generally accepted accounting principles. "Capitalized Rentals" shall mean as of the date of any determination the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which the Company or any Restricted Subsidiary is a lessee would be reflected as a liability on a consolidated balance sheet of the Company and its Restricted Subsidiaries. "Consolidated Current Assets" and "Consolidated Current Liabilities" shall mean such assets and liabilities of the Company and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with generally accepted accounting principles to constitute current assets and current liabilities, respectively. "Consolidated Net Income" for any period shall mean the gross revenues of the Company and its Restricted Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied and after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses on the sale or other disposition of Investments or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any corporation (other than a Restricted Subsidiary), substantially all the assets of which have been acquired in any manner, realized by such other corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Restricted Subsidiary) with which the Company or a Restricted Subsidiary shall have consolidated or which shall have merged into or with the Company or a Restricted Subsidiary prior to the date of such consolidation or merger; (f) net earnings of any business entity (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest; (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Restricted Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period. "Consolidated Working Capital" shall mean the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Current Debt" of any Person shall mean as of the date of any determination thereof (1) all Indebtedness for money borrowed other than Funded Debt of such Person and (ii) Guaranties by such Person of Current Debt of others. "Default" shall mean any event or condition, the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default as defined in Section 7.1. "Environmental Legal Requirement" shall mean any applicable law, statute or ordinance relating to public health, safety or the environment, including, without limitation, any such applicable law, statute or ordinance relating to releases, discharges or emissions to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use and handling of polychlorinated biphenyls or asbestos, to the disposal, treatment, storage or management of solid or hazardous wastes or Hazardous Substances or crude oil, fractious petroleum, petroleum derivatives or by-products or to exposure to toxic or hazardous materials, to the handling, transportation, discharge or release of gaseous or liquid Hazardous Substances and any regulation, order, notice or demand issued pursuant to such law, statute or ordinance, in each case applicable to the property of the Company and its Subsidiaries or the operation, construction or modification of any thereof, including without limitation the following: the Clean Air Act, the Federal Water Pollution Control Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Comprehensive Environmental Response Compensation and Liability Act as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Dis- posal Act, the Resource Conservation and Recovery Act as amended by the Solid and Hazardous Waste Amendments of 1984, the Occupational Safety and Health Act, the Emergency Planning and Community Right-to-Know Act of 1986, the Solid Waste Disposal Act, and any state statutes addressing similar matters, and any state statute providing for financial responsibility for cleanup or other actions with respect to the release or threatened release of Hazardous Substances or crude oil, fractious petroleum, petroleum derivatives or by-products and the rules or regulations promulgated thereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer any successor sections. "ERISA Affiliate" shall mean any corporation, trade or business that is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Internal Revenue Code of 1986, as amended, or Section 4001 of the ERISA. "Event of Default" shall have the meaning set forth in Section 7.1 hereof. "Fixed Charges" for any period shall mean on a consolidated basis the sum of (a) all Rentals (including all Rentals on Capitalized Leases) payable during such period by the Company and its Restricted Subsidiaries, and (b) all Interest Charges on all Indebtedness (other than Capitalized Rentals) of the Company and its Restricted Subsidiaries. "Funded Debt" of any Person shall mean (a) all Indebtedness for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not included in Consolidated Current Liabilities, (b) all Capitalized Rentals, and (c) all Guaranties of Funded Debt of others. "Guaranties" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (b) to advance or supply funds (1) for the purchase or payment of such Indebtedness or obligation, (2) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, or (c) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (d) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Hazardous Substance" shall mean any hazardous or toxic material, substance or waste, pollutant or contaminant which is regulated under any statute, law, ordinance, rule or regulation of any local, state, regional or Federal authority having jurisdiction over the property of the Company and its Subsidiaries or its use, including but not limited to any material, substance or waste which is: (a) defined as a hazardous substance under Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Secs. 1317) as amended; (b) regulated as a hazardous waste under Section 1004 of the Federal Resource Conservation and Recovery Act (42 U.S.C. Secs. 6901 et seq.) as amended; (c) defined as a hazardous substance under Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Secs. 9601 et seq.) as amended; or (d) defined or regulated as a hazardous substance or hazardous waste under any rules or regulations promulgated under any of the foregoing statutes. "Indebtedness" of any Person shall mean and include all obligations of such Person which in accordance with generally accepted accounting principles shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (a) obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of property or assets, (b) obligations secured by any lien or other charge upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (c) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the Event of Default are limited to repossession or sale of property, (d) Capitalized Rentals, and (e) Guaranties of obligations of others of the character referred to in this definition; provided, however, that Guaranties which are otherwise classified as liabilities on a balance sheet of a Person shall not be included in Indebtedness if such inclusion would result in such Guaranties being counted twice. "Interest Charges" for any period shall mean all interest and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. Computations of Interest Charges on a pro forma basis for Indebtedness having a variable interest rate shall be calculated at the rate in effect on the date of any determination. "Investments" shall mean all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; provided, however, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business. "Long-Term Lease" shall mean any lease of real or personal property (other than a Capitalized Lease) having an original term, including any period for which the lease may be renewed or extended at the option of the lessor, of more than three years. "Make Whole Amount" shall mean, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 3.1 or 3.2 or that has become or is declared to be immediately due and payable pursuant to Section 7.3, as the context require. "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note, 0.5% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between reported yields. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) which will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 3.1, 3.2 or 7.3 "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 3.1 or 3.2 or which has become or is declared to be immediately due and payable pursuant to Section 7.3, as the context requires. "Minority Interests" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Company and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Multiemployer Plan" shall have the same meaning as in ERISA. "Net Income Available for Fixed Charges" for any period shall mean the sum of (a) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (b) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period, and (e) Fixed Charges during such period. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "Plan" means a "pension plan," as such term in defined in ERISA, established or maintained by the Company or any ERISA Affiliate or as to which the Company or any ERISA Affiliate contributed or is a member or otherwise may have any liability. "Prepayment Event" shall mean and include (i) any Acquisition by any Person or any Persons acting together which would constitute a "group" for purposes of Section 13(d) of the Exchange Act (a "Group") of 20% or more of the total Voting Stock of the Company, (ii) the acquisition by the Company for cash, property or securities, in one transaction or a series of related transactions within a 12-month period, of more than 30% of the Voting Stock of the Company outstanding immediately prior to the commencement of such acquisition, (iii) the payment of a dividend or other distribution by the Company to its shareholders, in one transaction or a series of related transactions within a 12-month period, of cash, property or securities having an aggregate fair market value at the time of distribution that is 30% or more of the fair market value of the Voting Stock of the Company outstanding immediately prior to such distribution, or (iv) any Acquisition by any Person or Group of the power to elect, appoint or cause the election or appointment of at least a majority of the members of the Board of Directors of the Company, through beneficial ownership of the Voting Stock or otherwise. For the purposes of this definition, "Acquisition" of the power or properties and assets stated in the preceding sentence means the earlier of (a) the actual possession thereof and (b) the consummation of any transaction or series of related transactions which, with the passage of time and if successful, would give such Person or Persons actual possession thereof. "Pro Forma Fixed Charges" for any period shall mean, as of the date of any determination thereof, the maximum aggregate amount of Fixed Charges which would have become payable by the Company and its Restricted Subsidiaries in such period determined on a pro forma basis giving effect as of the beginning of such period to the Incurrence of any Funded Debt (including Capitalized Rentals) and the concurrent retirement of outstanding Funded Debt or Current Debt or termination of any Capitalized Leases. "Purchasers" shall have the meaning set forth in Section 2.1 hereof. "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Rentals" shall mean and include as of the date of any determination thereof all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Reportable Event" shall have the same meaning as in ERISA. "Restricted Investments" shall mean all Investments, other than Investments described in the following clauses (a) through (g): (a) Investments by the Company and its Restricted Subsidiaries in and to Wholly-owned Restricted Subsidiaries, including any Investment in a corporation which, after giving effect to such Investment, will become a Restricted Subsidiary; provided that Wholly-owned Restricted Subsidiary (or corporation which will become a Wholly-owned Restricted Subsidiary) has a primary line of business similar to one of the Company's principal lines of business on the date of the Agreement. (b) Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or any Restricted Subsidiary, is accorded the highest rating by Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized credit rating agency of similar standing; (c) Investments in direct obligations of the United States of America, or any agency or instrumentality of the United States of America, the payment or guaranty of which constitutes a full faith and credit obligation of the United States of America, in either case maturing in twelve months or less from the date of acquisition thereof; (d) Investments in certificates of deposit maturing within one year from the date of origin, issued by a bank or trust company organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit are, at the time of acquisition thereof by the Company or a Restricted Subsidiary, rated in one of the two highest rating categories by Standard & Poor's Corporation or by Moody's Investors Service, Inc. or another nationally recognized rating agency; (e) loans or advances in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Company or any Restricted Subsidiary; (f) receivables arising from the sale of goods and services in the ordinary course of business of the Company and its Restricted Subsidiaries; and (g) Investments in direct obligations of any state of the United States, any subdivision or agency thereof or any municipality therein which are rated by a nationally recognized rating agency in one of the highest two rating classifications and maturing within three years of the date of acquisition thereof. "Restricted Subsidiary" shall mean any Subsidiary (a) which is organized under the laws of the United States or any state thereof; (b) which conducts substantially all of its business and has substantially all of its assets within the United States; and (c) of which more than 80% (by number of votes) of the Voting Stock is owned by the Company and/or one or more Restricted Subsidiaries. "Securities Act" shall mean the Securities Act of 1933, as amended. "Security" shall have the same meaning as in Section 2(1) of the Securities Act. The term "subsidiary" shall mean, as to any particular parent corporation, any corporation of which more than 50% (by number of votes) of the Voting Stock shall be owned by such parent corporation and/or one or more corporations which are themselves Restricted Subsidiaries of such parent corporation. The term "Subsidiary" shall mean a subsidiary of the Company. "Total Assets" shall mean as of the date of any deter- mination thereof the total amount of all assets of the Company and its Restricted Subsidiaries (less depreciation, depletion and other properly deductible valuation reserves), determined in accordance with generally accepted accounting principles. "Unrestricted Subsidiary" shall mean any Subsidiary which is not a Restricted Subsidiary. "Voting Stock" shall mean Securities of any class or classes the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). "Wholly-owned" when used in connection with any Subsid- iary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) and all Funded Debt or Current Debt shall be owned by the Company and/or one or more of its Wholly-owned Restricted Subsidiaries. 1.2. Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with generally accepted accounting principles, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 1.3. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or action which a Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. SECTION 2. DESCRIPTION OF NOTES AND COMMITMENT. 2.1. Description of Notes. The Company will authorize the issue and sale of $14,000,000 aggregate principal amount of its 6.31% Senior Notes due March 1, 2001 (the "Notes") to be dated the date of issue, to bear interest from such date at the rate of 6.31% per annum, payable semiannually on the first day of each March and September in each year (commencing September 1, 1994) and at maturity and to bear interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the rate of 7.31% per annum after maturity, whether by acceleration or otherwise, until paid, to be expressed to mature on March 1, 2001, and to be substantially in the form attached hereto as Exhibit A. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in Section 3 of this Agreement. The term "Notes" as used herein shall include each Note delivered pursuant to this Agreement and the separate agreements with the purchasers named in Schedule I hereto. You and the other purchasers named in Schedule I hereto are hereinafter sometimes referred to as the "Purchasers." The terms which are capitalized herein shall have the meanings set forth in Section 1.1 hereof unless the context shall otherwise require. 2.2. Commitment, Closing Date. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to you, and you agree to purchase from the Company, the Notes of the Company at a price of 100% of the principal amount thereof set forth opposite your name in Schedule 1. Delivery of the Notes will be made at the offices of Bank One Indianapolis, 111 Monument Circle, 16th Floor, Indianapolis, Indiana 46277, Attention: Trust Cage, against payment therefor in Federal or other funds current and immediately available to the Company's account at National City Bank, Indianapolis, Indiana, for the account of IWC Resources Corporation, Account No. 6090519, in the amount of the purchase price at 10:00 A.M., Indianapolis time, on March 10, 1994 or such later date (not later than May 1, 1994) as the Company shall specify by not less than five Business Days' prior written notice to you (the "Closing Date"). The Notes delivered to you on the Closing Date will be delivered to you in the form of seven registered Notes, each in the amount of Two Million Dollars ($2,000,000), registered in your name or in the name of such nominee as you may specify and in substantially the form attached hereto as Exhibit A, all as you may specify at any time prior to the date fixed for delivery. SECTION 3. PREPAYMENT OF NOTES. No prepayment of the Notes may be made except to the extent and in the manner expressly provided in this Agreement. 3.1. Optional Prepayments. Upon compliance with Section 3.3 and subject to the following limitations, the Company shall have the right to prepay the outstanding Notes, in whole but not in part, on any Optional Prepayment Date (defined in the next sentence) by payment of the principal amount of the Notes and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make Whole Amount, determined three Business Days prior to the date of such prepayment. "Optional Prepayment Date" means each March 1 and September 1, commencing March 1, 1997 and ending September 1, 2000. 3.2. Prepayment Upon Occurrence of Prepayment Event. In the event that any Prepayment Event shall occur or the Company shall have knowledge of any proposed Prepayment Event, the Company will give written notice (the "Company Notice") in the manner provided in Section 9.5 of this Agreement of such fact to the holders of the Notes. The Company Notice shall be delivered promptly upon receipt of such knowledge by the Company and in any event no later than three Business Days following the occurrence of any Prepayment Event. The Company Notice shall (a) describe the facts and circumstances of such Prepayment Event in reasonable detail, (b) make reference to this Section 3.2 and the right of the holders of the Notes to require payment on the terms and conditions provided for in this Section 3.2, and (c) offer in writing to prepay the outstanding Notes, together with accrued interest to the date of prepayment and a premium equal to the Make Whole Amount. Each holder of the Notes shall have the right to accept such offer and require prepayment of the Notes held by such holder by written notice to the Company (the "Noteholder Notice") given in the manner provided in Section 9.5 of this Agreement within 30 days following receipt of the Company Notice specifying a date for payment (the "Prepayment Date") which Prepayment Date shall be not later than three Business Days after the date of the Noteholder Notice. The Company shall, on each Prepayment Date, make prepayments with accrued interest and a premium equal to Make Whole Amount on all Notes held by holders who have accepted such offer of prepayment. Without limiting the foregoing, notwithstanding any failure on the part of the Company to give the Company Notice herein required as a result of the occurrence of a Prepayment Event, each holder of the Notes shall have the right to require the Company to prepay such holder's Notes in full, together with accrued interest thereon to the date of prepayment and a premium equal to the Make Whole Amount at any time within ninety days after such holder has actual knowledge of any such Prepayment Event. The Company agrees to make such prepayment on the date designated in the Noteholder's Notice delivered by such holder. 3.3. Notice of Prepayments. The Company will give notice of any prepayment of the Notes to be made pursuant to Section 3.1 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (a) such date, (b) the principal amount of the holder's Notes to be prepaid on such date, and (c) the estimated premium (including the calculation in respect thereof), if any, and accrued interest applicable to the prepayment. Such notice of prepayment shall also certify all facts which are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with the premium, if any, and accrued interest thereon shall become due and payable on the prepayment date. The Company will also give written notice to each holder of the Notes, by telecopy or other same day written communication, setting forth the computation and amount of any premium payable in connection with such prepayment at least two Business Days prior to the date of such prepayment. 3.4. Direct Payment. Notwithstanding anything to the contrary in this Agreement or the Notes, in the case of any Note owned by a Purchaser or its nominee or owned by any other institutional holder who has given written notice to the Company requesting that the provisions of this Section shall apply, the Company will promptly and punctually pay when due the principal thereof and premium, if any, and interest thereon, without any presentment thereof directly to such Purchaser or such subsequent institutional holder at the address of such Purchaser set forth in Schedule I or at such other address as such Purchaser or such subsequent institutional holder may from time to time designate in writing to the Company or, if a bank account is designated for the Purchaser on Schedule I hereto or in any written notice to the Company from a Purchaser or any such subsequent institutional holder, the Company will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account of such Purchaser or such institutional holder in any bank in the United States as such Purchaser or any such subsequent institutional holder may from time to time direct in writing. SECTION 4. REPRESENTATIONS. 4.1. Representations of the Company. The Company represents and warrants that all representations set forth in the form of certificate attached hereto as Exhibit B are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. 4.2. Representations of the Purchaser. (a) You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution (as such term is used in Section 2(ii) of the Securities Act) thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act, and that the Company is not required to register the Notes. Without limiting the foregoing, you agree that for a period of three years commencing on the date of original issuance of the Notes you will reoffer or resell the Notes purchased under this Agreement (i) only (A) to the Company, (B) pursuant to a transaction under and meeting the requirements of Rule 144A, as amended from time to time, promulgated under the Securities Act, (C) in an offshore transaction (as defined in Rule 902 of Regulation S under the Securities Act) to persons to whom offers and sales of the Notes may be made without registration under the Securities Act in reliance upon Regulation S thereunder, or (D) in accordance with another available exemption from the requirements of Section 5 of the Securities Act, and (ii) in the case of resales pursuant to subclauses (B), (C) or (D) of clause (i) above, after delivering to the Company a completed and signed Assignment Form attached to the Note. In the event of a resale described in subclause (B) of the foregoing clause (i), you agree that you and any person acting on your behalf will take reasonable steps to ensure that any purchaser of any Note from you is aware that you may be relying upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. (b) You represent that at least one of the following statements is an accurate representation as to each source of funds to be used by you to pay the purchase price of the Notes purchased by you hereunder: (1) if you are an insurance company, no part of such funds constitutes assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest; or (2) if you are an insurance company, to the extent that any part of such funds constitutes assets allocated to any separate account maintained by you, (i) such separate account is a "pooled separate account" within the meaning of Prohibited Transaction Class Exemption 90-1, in which case you have disclosed to the Company the names of each employee benefit plan whose assets in such separate account exceed 10% of the total assets or are expected to exceed 10% of the total assets of such account as of the date of such purchase (and for the purposes of this subdivision (2), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan), or (ii) such separate account contains only the assets of a specific employee benefit plan, complete and accurate information as to the identity of which you have delivered to the Company; or (3) either (x) all of such funds constitute assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets which are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(g) of the QPAM Exemption are satisfied and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company, or (y) all of such funds constitute assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), the conditions of Part I(g) of the QPAM Exemption are satisfied and (i) the names of each employee benefit plan whose assets are included in such investment fund, (ii) the names of each employee benefit plan whose assets are included in such investment fund and whose assets, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM and (iii) the identity of such QPAM have each been disclosed to the Company; or (4) if you are other than an insurance company, all or a portion of such funds consists of funds which do not constitute assets of any employee benefit plan (other than a governmental plan exempt from the coverage of ERISA) and the remaining portion, if any, of such funds consists of funds which may be deemed to constitute assets of one or more specific employee benefit plans, complete and accurate information as to the identity of each of which you have delivered to the Company. As used in this Section 4.2, the terms "employee benefit plan," "governmental plan," "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 5. CLOSING CONDITIONS. Your obligation to purchase the Notes on the Closing Date shall be subject to the performance by the Company of its agreements hereunder which by the terms hereof are to be performed at or prior to the time of delivery of the Notes and to the following further conditions precedent: 5.1. Closing Certificate. Concurrently with the delivery of Notes to you on the Closing Date, you shall have received a certificate dated the Closing Date, signed by the President or a Vice President of the Company substantially in the form attached hereto as Exhibit B, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you. 5.2. Legal Opinions. Concurrently with the delivery of Notes to you on the Closing Date, you shall have received legal opinions from: (i) Sidley & Austin, who are acting as your special counsel in this transaction, (ii) Baker & Daniels, who are acting as your special Indiana counsel in this transaction, and (iii) John Davis, Esq., Vice President and General Counsel of the Company, each such opinion dated the Closing Date, each in form and substance satisfactory to you, and each covering the matters set forth in Exhibits C-1, C-2 and D, respectively, hereto. 5.3. Company's Existence and Authority. On or prior to the Closing Date, you shall have received, in form and substance reasonably satisfactory to you and your special counsel, such documents and evidence with respect to the Company as you may reasonably request in order to establish the existence and good standing of the Company and the authorization of the transactions contemplated by this Agreement. 5.4. Legality of Investment. The Notes to be pur- chased by you shall be a legal investment for you under the laws of each jurisdiction to which you may be subject. 5.5. Private Placement Number Application. An application for issuance of a private placement number for the Notes shall have been made to Standard & Poor's Corporation. 5.6. Satisfactory Proceedings. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to you, and you shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. 5.7. Waiver of Conditions. If on the Closing Date the Company fails to tender to you the Notes to be issued to you on such date or if the conditions specified in this Section 5 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Without limiting the foregoing, if the conditions specified in this Section 5 have not been fulfilled, you may waive compliance by the Company with any such condition to such extent as you may in your sole discretion determine. Nothing in this Section 5.7 shall operate to relieve the Company of any of its obligations hereunder or to waive any of your rights against the Company. SECTION 6. COMPANY COVENANTS. From and after the Closing Date and continuing so long as any amount remains unpaid on any Note: 6.1. Corporate Existence, Etc. The Company will preserve and keep in force and effect, and will cause each Restricted Subsidiary to preserve and keep in force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business, provided that the foregoing shall not prevent any transaction permitted by Section 6.7. 6.2. Insurance. The Company will maintain, and will cause each Restricted Subsidiary to maintain, to the extent commercially available, insurance coverage by financially sound and reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties. 6.3. Taxes, Claims for Labor and Materials; Compliance with Laws. (a) The Company will promptly pay and discharge, and will cause each Restricted Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Restricted Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company or such Restricted Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials; provided the Company or such Restricted Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (1) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Restricted Subsidiary or any material interference with the use thereof by the Company or such Restricted Subsidiary, and (2) the Company or such Restricted Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto. (b) The Company will promptly comply and will cause each Restricted Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject, including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and all Environmental Legal Requirements, in each case where the failure to so comply could have a material adverse effect on the operations or financial condition of the Company or its Restricted Subsidiaries. 6.4. Maintenance, Etc. The Company will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. 6.5. Nature of Business. Neither the Company nor any Restricted Subsidiary will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Restricted Subsidiaries would be substantially changed from the general nature of the business engaged in by the Company and its Restricted Subsidiaries on the date of this Agreement. 6.6. Fixed Charge Coverage. The Company shall maintain, as of the last date of each fiscal quarter of the Company, a ratio of Net Income Available for Fixed Charges for the four consecutive fiscal quarters ending on such date to Pro Forma Fixed Charges for the four consecutive fiscal quarters ending on such date of 2.0 to 1.0. 6.7. Mergers and Consolidations. The Company will not, and will not permit any Restricted Subsidiary to, consolidate with or be a party to a merger with any other corporation or sell all of substantially all of its assets, provided, however, that the Company may consolidate or merge with any other corporation if (A) the surviving or continuing corporation shall be a corporation organized under the laws of the United States, any state thereof or the District of Columbia and having substantially all of its assets in the United States, (B) the surviving or continuing corporation, if not the Company, shall assume, in an instrument executed and delivered to all the holders of Notes in form and substance satisfactory to the holder or holders of not less than 66-2/3% of the aggregate principal amount of the Notes at the time outstanding (exclusive of any Notes held by the Company, its Subsidiaries and their Affiliates), the due and punctual payment of the principal, Make Whole Amount, if any, and interest on, the Notes and the due observance and performance of each of the covenants and other terms of this Agreement to be observed or performed by the Company, and the Notes, following such assumption, rank at least pari passu with all other outstanding senior indebtedness of the surviving or continuing corporation, (C) if the Company is not the continuing or surviving corporation, the Company shall have delivered to the holders of the Notes then outstanding an opinion of counsel, reasonably satisfactory in form and substance to the holders of at least 66-2/3% of the principal amount of the Notes then outstanding (exclusive of any Notes held by the Company, its Subsidiaries and their Affiliates), that any such merger complies with the terms hereof and the assumption is an enforceable obligation of the surviving or continuing corporation, and (D) at the time of such consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing. 6.8. Sale of Assets. (a) The Company will not, and will not permit any Restricted Subsidiary to sell, lease, transfer or otherwise dispose of (collectively, a "Disposition") any asset, other than in the ordinary course of business, in one or a series of transactions to any Person, other than to the Company or any Restricted Subsidiary, unless (i) during any fiscal year, after giving effect to such Disposition, the aggregate book value of all such assets sold, leased, transferred or otherwise disposed of during such fiscal year shall not exceed 10% of the Total Assets of the Company and its Restricted Subsidiaries as shown on the most recently available audited annual financial statements of the Company and its Restricted Subsidiaries, and (ii) after giving effect to such Disposition, no Default or Event of Default shall exist. (b) Notwithstanding the provisions of Section 6.8(a), the Company and its Restricted Subsidiaries may sell, transfer or otherwise dispose of assets if (i) the proceeds from the Disposition are used to reduce Funded Debt of the Company or a Restricted Subsidiary or are used to acquire other assets for the Company or a Restricted Subsidiary and such other assets are to be used in the operations of the Company or the Restricted Subsidiary for which they are acquired, and (ii) the period between the Disposition and the use of proceeds permitted by this Section does not exceed 180 days. For purposes of the foregoing, proceeds of a Disposition may be used for more than one purpose permitted by this Section and all such uses shall be considered in the aggregate. For purposes of subclause (ii), the Company shall not be required to "trace" the receipt and application of particular funds; however, unless Disposition proceeds are segregated pending application for a permitted use, the Company shall not be entitled to the benefit of the foregoing subclause (ii) unless it maintains Consolidated Working Capital, at all times between the date of Disposition and the date of the permitted use of proceeds, of not less than the sum of (A) the amount cash proceeds from the Disposition and (B) 50% of the Company's Consolidated Working Capital at the month-end next preceding the Disposition. 6.9. Adjusted Consolidated Net Worth. The Company will at all times keep and maintain Adjusted Consolidated Net Worth at an amount not less than $65,000,000. In valuing any Investments for the purpose of applying the limitations set forth in this Section 6.9, such Investments shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this Section 6.9, at any time when a corporation becomes a Restricted Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. 6.10. Repurchase of Notes. Neither the Company nor any Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless the offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same terms. In case the Company repurchases or otherwise acquires any Notes, such Notes shall immediately thereafter be cancelled and no Notes shall be issued in substitution therefor. Without limiting the foregoing, upon the purchase or other acquisition of any Notes by the Company, any Restricted Subsidiary or any Affiliate, such Notes shall no longer be outstanding for purposes of any section of this Agreement relating to the taking by the holders of the Notes of any actions with respect hereto, including, without limitation, Section 7.3, Section 7.4 and Section 8.1. 6.11. Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 6.12. Reports and Rights of Inspection. The Company will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Company or such Restricted Subsidiary, in accordance with generally accepted accounting principles consistently maintained (except for changes disclosed in the financial statements furnished to you pursuant to this Section 6.19 and concurred in by the independent public accountants referred to in Section 6.19(b) hereof), and will furnish to you so long as you are the holder of any Note and to each other institutional holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) Quarterly Statements. As soon as available and in any event within 60 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (1) consolidated balance sheets of the Company and its Restricted Subsidiaries as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, (2) consolidated statements of income and retained earnings of the Company and its Restricted Subsidiaries for such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, and (3) consolidated statements of cashflows of the Company and its Restricted Subsidiaries for the portion of the fiscal year ending with such quarter, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct, by an authorized financial officer of the Company; (b) Annual Statements. As soon as available and in any event within 120 days after the close of each fiscal year of the Company, copies of: (1) consolidated balance sheets of the Company and its Restricted Subsidiaries as of the close of such fiscal year, and (2) consolidated statements of income and retained earnings and cash flows of the Company and its Restricted Subsidiaries for such fiscal year, in each case setting forth in comparative form the consoli- dated figures for the preceding fiscal year, all in reason- able detail and accompanied by a report thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements have been prepared in accordance with generally accepted accounting principles and present fairly, in all material respects, the consolidated financial position of the Company and its Restricted Subsidiaries as of the end of the fiscal year being reported on and the consolidated results of the operations and cash flows for said year in conformity with generally accepted accounting principles and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards; (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary; (d) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities ex- change or the Securities and Exchange Commission or any successor agency, and copies of any orders in any proceed- ings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Company or any of its Subsidiaries; (e) Officer's Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and setting forth, to the best of such officer's knowledge: (1) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of Section 6.6 and Section 6.9, inclusive (and, if applicable, Section 6.8(b)), at the end of the period covered by the financial statements then being furnished, and (2) whether there existed as of the date of such financial statements and whether there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto; and (f) Requested Information. With reasonable promptness, such other data and information as you or any such institutional holder may reasonably request. Without limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each institutional holder of the then outstanding Notes (or such Persons as either you or such holder may designate), to visit and inspect, under the Company's guidance, any of the properties of the Company or any Restricted Subsidiary, to examine all their books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Company authorizes said accountants to discuss with you the finances and affairs of the Company and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Company shall not be required to pay or reimburse you or any such holder for expenses which you or any such holder may incur in connection with any such visitation or inspection. 6.13. Cost of this Financing. Whether or not the transactions contemplated by this Agreement shall be consummated: (a) Payment of Fees and Expenses. The Company will pay all costs and expenses of the Purchaser in connection with this Agreement and the consummation of all transactions contemplated hereby, and all costs and expenses of the Purchaser and each other Noteholder relating to any future amendment or supplement to this Agreement or any of the Notes (or any proposal for such amendment or supplement) whether or not consummated, or any waiver or consent with respect thereto (or any proposal for such waiver or consent) whether or not consummated, including but not limited to reasonable out-of-pocket expenses, the cost of obtaining a private placement number for the Notes, the cost of all accounting services required hereby, all reasonable attorneys' fees (not to exceed $15,000 for legal services through the Closing Date), all stenographic or reproduction expenses relating to such transactions, and the cost of transmitting the Notes to the home office of the Purchaser or to such other address as may be requested by the Purchaser, and will pay the fees, expenses and disbursements of all counsel referred to in Section 5.2 for their services in connection therewith. The Company will not be required to pay the costs and expenses of any prospective transferee incurred in connection with such transferee's acquisition of any Notes, other than the cost of registering such Notes on the books of the Company and the cost of transmitting such Notes to such transferee. (b) Reimbursement. The Company will reimburse all costs and expenses described in clause (a) of this Section which shall have been paid by the Purchaser or any Noteholder. (c) Indemnification for Fees, etc. The Company will pay and indemnify the Purchaser and every other Noteholder against all liability and loss with respect to (i) all claims for fees or commissions of brokers or finders with respect to any transaction contemplated by this Agreement, and (ii) all taxes, fees and other public charges payable in connection with the issuance of any of the Notes, or the execution, delivery and enforcement of this Agreement or any of the Notes, or any amendment or supplement to this Agreement. The obligations of the Company under this Section shall survive the payment or transfer of the Notes. 6.14. Rule 144A Information. If the Company ceases to be a reporting company under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Company will furnish to each holder of Notes and any prospective purchaser designated by any such holder all information described in Rule 144A under the Securities Act, including such financial or other information as any holder of Notes or any Person designated by such holder may reasonably determine is required to permit such holder to comply with the requirements of Rule 144A in connection with the resale of Notes, in any such case promptly after the same is requested. SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR. 7.1. Events of Default. Any one or more of the following shall constitute an "Event of Default" as the term is used herein: (a) Default shall occur in the payment of interest on any Note for more than ten days after the same shall have become due; or (b) Default shall occur for more than ten days in the making of any payment of the principal of any Note or the premium, if any, thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment; or (c) Default shall be made in the payment of the principal of or interest on any Funded Debt or Current Debt (other than the Notes) of the Company or any Restricted Subsidiary having an aggregate principal amount in excess of $1,000,000 and such default shall continue beyond the period of grace, if any, allowed with respect thereto; or (d) Default shall occur in the observance or per- formance of any covenant or agreement contained in this Agreement which is not remedied within 30 days after the earlier of (1) the date on which the Company first obtains knowledge of such Default and (2) the date on which written notice thereof is given to the Company by the holder of any Note; provided, however, that if a default occurs with respect to a covenant or agreement other than a covenant contained in Sections 6.6 through 6.9, no Event of Default shall occur at the end of the aforesaid 30-day period if the Company is diligently pursuing a remedy and (A) the default cannot reasonably be expected to have a material adverse effect on the operations or financial condition of the Company and its Restricted Subsidiaries, considered as a whole, and (B) the remedy is not within the control of the Company (if the remedy is within the control of the Company, the aforesaid 30-day period shall be deemed to be a 90-day period, assuming the other requirements of this proviso are met); or (e) Any representation or warranty made by the Company herein, or made by the Company in any statement or certificate furnished by the Company in connection with the consummation of the issuance and delivery of the Notes or furnished by the Company pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or (f) Final judgment or judgments for the payment of money aggregating in excess of $1,000,000 is or are out- standing against the Company or any Restricted Subsidiary or against any property or assets of either and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of 30 days from the date of its entry; or (g) The Company or any Restricted Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or the Company or any Restricted Subsidiary applies for or consents to the appointment of a custodian, trustee, liquidator, or receiver for the Company or such Restricted Subsidiary or for the major part of the property of either; or (h) A custodian, trustee, liquidator, or receiver is appointed for the Company or any Restricted Subsidiary or for the major part of the property of either and is not discharged within 30 days after such appointment; or (i) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are, instituted by or against the Company or any Restricted Subsidiary and, if instituted against the Company or any Restricted Subsidiary, are consented to or are not dismissed within 30 days after such institution. 7.2. Notice to Holders. When any Event of Default described in the foregoing Section 7.1 has occurred, or if the holder of any Note or of any other evidence of Funded Debt or Current Debt of the Company gives any notice or takes any other action with respect to a claimed default, the Company agrees to give notice within three Business Days of such event to all holders of the Notes then outstanding. 7.3. Acceleration of Maturities. When any Event of Default described in paragraph (a) or (b) of Section 7.1 has happened and is continuing, any holder of any Note may, and when any Event of Default described in paragraphs (c) through (f), inclusive, of said Section 7.1 has happened and is continuing, the holder or holders of 25% or more of the principal amount of Notes at the time outstanding may, by notice to the Company, declare the entire principal and all interest accrued on all Notes to be, and all Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in paragraph (g), (h) or (i) of Section 7.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Company will forthwith pay to the holders of the Notes the entire principal and interest accrued on the Notes and, to the extent permitted by law, an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the Make Whole Amount, determined as of the date on which the Notes shall so become due and payable. No course of dealing on the part of any Noteholder nor any delay or failure on the part of any Noteholder to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Notes upon any default hereunder or thereon, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. 7.4. Rescission of Acceleration. The provisions of Section 7.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (f), inclusive, of Section 7.1, the holders of 66-2/3% in aggregate principal amount of the Notes then outstanding may, by written instrument filed with the Company, rescind and annual such declaration and the consequences thereof, provided that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 7.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to Section 8.1; and provided further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS. 8.1. Consent Required. Any term, covenant, agreement or condition of this Agreement may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the holders of at least 66-2/3% in aggregate principal amount of outstanding Notes; provided that without the written consent of the holders of all of the Notes then outstanding, no such waiver, modification, alteration or amendment shall be effective (a) which will change the time of payment of the principal of or the interest on any Note or reduce the principal amount thereof or change the rate of interest thereon, or (b) which will change any of the provisions with respect to optional prepayments, or (c) which will change the percentage of holders of the Notes required to consent to any such amendment, modification or waiver of any of the provisions of this Section 8 or Section 7. 8.2. Solicitation of Noteholders. The Company will not solicit, request or negotiate for or with respect to any proposed amendment, modification or waiver of any of the provisions of this Agreement or the Notes unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver effected pursuant to the provisions of this Section 8.2 shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by the holder or holders of the requisite percentage of outstanding Notes. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of the Notes as consideration for or as an Inducement to the entering into by any holder of the Notes of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all of the Notes then outstanding. 8.3. Effect of Amendment or Waiver. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. SECTION 9. MISCELLANEOUS. 9.1. Note Register. The Company shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "Note Register"), and the Company will register or transfer or cause to be registered or transferred, as hereinafter provided and under such reasonable regulations as it may prescribe, any Note issued pursuant to this Agreement. At any time, and from time to time, the holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the holder of such Note or its attorney duly authorized in writing. The Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any Note shall be made to or upon the written order of such holder. 9.2. Exchange of Notes. At any time and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office, the Company will deliver in exchange therefor, without expense to the holder, except as set forth below, Notes for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, in the denomination of $100,000 or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, registered in the name of such Person or Persons as may be designated by such holder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond or indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will make and deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser or any subsequent institutional holder is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. 9.4. Powers and Rights Not Waived; Remedies Cumulative. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to and are not exclusive of any rights or remedies any such holder would otherwise have, and no waiver or consent, given or extended pursuant to Section 8 hereof, shall extend to or affect any obligation or right not expressly waived or consented to. 9.5. Notices. All communications provided for here- under shall be in writing and, if to you, delivered or mailed by prepaid overnight air courier, or by facsimile communication, in each case addressed to you at your address appearing on Schedule I to this Agreement or such other address as you or the subsequent holder of any Note initially issued to you may designate to the Company in writing, and if to the Company, delivered or mailed by prepaid overnight air courier, or by facsimile communication, in each case to the Company at IWC Resources Corporation; 1220 Waterway Boulevard, Indianapolis, Indiana 46202, (telephone 317-263-6468, telecopier 317-263-6448), Attention: Executive Vice President, with a copy to the attention of the General Counsel, or to such other address as the Company may in writing designate to you or to a subsequent holder of the Note initially issued to you, or by facsimile communication; provided, however, that a notice sent by overnight air courier shall only be effective if delivered at a street address designated for such purpose in Schedule I in the case of a Purchaser and as herein set forth in the case of the Company and a notice sent by facsimile communication shall only be effective if made by confirmed transmission at a telephone number designated for such purpose in Schedule I in the case of a Purchaser and as herein set forth in the case of the Company or, in either case, as you or a subsequent holder of any Notes initially issued to you may designate to the Company in writing or at a telephone number herein set forth in the case of the Company. 9.6. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to your benefit and to the benefit of your successors and assigns, including each successive holder or holders of any Notes. 9.7. Survival of Covenants and Representations. All covenants, representations and warranties made by the Company herein and in any certificates delivered pursuant hereto, whether or not in connection with the Closing Date, shall survive the closing and the delivery of this Agreement and the Notes. 9.8. Copies To Regulatory Bodies. Each Noteholder may, if such Noteholder, in its sole discretion exercised in good faith, determines that it is appropriate or necessary, furnish copies of any financial statements and other certificates, reports or documents delivered to it pursuant to this Agreement to any regulatory body (including, without limitation, the National Association of Insurance Commissioners) or commission to whose jurisdiction such Noteholder may be subject. 9.9. Severability. Should any part of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid or unenforceable portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid or unenforceable. 9.10. Substitution. The Purchaser shall have the right to substitute any of its wholly-owned subsidiaries as Purchaser hereunder, by notice delivered to the Company, which notice shall be signed by both the Purchaser and such wholly-owned subsidiary, shall contain such wholly-owned subsidiary's agreement to be bound by this Agreement and shall contain confirmation by such wholly-owned subsidiary of the accuracy with respect to it of the representations set forth in Section 4.2 (subject to any exception necessary to reflect the intention, if any, of such wholly-owned subsidiary to transfer to the Purchaser at a subsequent date all or any of the Notes to be acquired by such wholly-owned subsidiary). The Company agrees that upon receipt of such notice, all references to the Purchaser hereunder (other than in this Section 9.10) shall be deemed to refer to such wholly-owned subsidiary and that such wholly-owned subsidiary shall have the right to transfer the Notes acquired by it hereunder to the Purchaser subsequent to such purchase. In the event that a wholly-owned subsidiary of the Purchaser is substituted for the Purchaser in accordance with this Section 9.10 and thereafter transfers its Notes or any portion thereof to the Purchaser, upon receipt by the Company of notice of such transfer, whenever the word Purchaser is used in this Agreement (other than in this Section 9.10) such word shall be deemed to refer to such wholly-owned subsidiary only if it retains any portion of the Notes, and shall be deemed to refer to the Purchaser to the extent the Purchaser owns all or any portion of the Notes, and the Purchaser and such wholly-owned subsidiary (if it retains any Notes) shall each have all the rights which the original purchaser of Notes has under this Agreement. 9.11. Governing Law. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with Indiana law. 9.12. Captions. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 9.13. Verification. The Purchaser and each other Noteholder shall be entitled to make such independent examinations as such person may deem reasonable, and to receive copies of all such instruments, certificates, opinions and other evidence as it may reasonably request, with respect to the transactions contemplated by this Agreement and the taking of all corporate proceedings in connection therewith and for the purpose of verifying the accuracy of any certification which is made or required to be made pursuant to this Agreement. The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. IWC Resources Corporation By /s/ James T. Morris Chairman of the Board, President and Chief Executive Officer Accepted and agreed to as of March 1, 1994. AMERICAN UNITED LIFE INSURANCE COMPANY By /s/ Kent R. Adams Vice President Amount of Names and Addresses of Purchasers; Notes to be Payment Instructions Purchased American United Life $14,000,000 Insurance Company (Seven (7) One American Square Notes, each P.O. Box 368 issued in the Indianapolis, Indiana 46206-0368 amount of Telephone 317-263-1877 $2,000,000) Tax I.D. Number: 35-0145825 1. In the case of payments on the Notes: By wire transfer of Federal or other immediately available funds (identifying each payment as to issuer, security and principal or interest) to: Bank One Indianapolis for the account of American United Life Insurance Company ABA #0740-0001-00 Account #32032-50 Trust Cage, 16th Floor 111 Monument Circle Indianapolis, Indiana 46277 Attn: Securities Accounting 2. In the case of all communications: Attention: Securities Department American United Life Insurance Company (Address and telephone above) Telecopier: (317) 263-1225 SCHEDULE 1 (to Note Agreement) IWC RESOURCES CORPORATION 6.31% Senior Note Due March 1, 2001 No. R- $ IWC Resources Corporation, an Indiana corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on March 1, 2001 the principal amount of DOLLARS ($ ) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 6.31% per annum from the date hereof until maturity, payable semiannually on the first day of each March and September in each year commencing September 1, 1994, and at maturity. The Company agrees to pay interest on overdue principal (including any overdue prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 7.31% per annum after maturity, whether by acceleration or otherwise, until paid. The amounts described in the preceding sentence shall be payable semi-annually, as aforesaid (or at the option of the registered holder hereof on demand). The principal interest and premium, if any, in respect of this Note are payable at the principal office of the Company in Indianapolis, Indiana, or at such other place as the Company may designate by written notice to the holder of this Note as provided in the Note Agreement referred to below. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the next preceding Business Day. "Business Day" means any day other than a Saturday, Sunday, statutory holiday or other day on which banks in Indianapolis, Indiana are required by law to close or are customarily closed. This Note is one of the 6.31% Senior Notes due March 1, 2001 of the Company in the aggregate principal amount of $14,000,000 issued or to be issued under and pursuant to the terms and provisions of the Note Agreement, dated as of March 1, 1994 (the "Note Agreement"), entered into by the Company with the original purchaser therein referred to and this Note and the EXHIBIT A (to Note Agreement) holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreement to all the benefits and security provided for thereby or referred to therein, to which Note Agreement reference is hereby made for the statement thereof. This Note and the other Notes outstanding under the Note Agreement are subject to prepayment at the option of the Company prior to their expressed maturity dates on March 1 and September 1 of each year, commencing March 1, 1997, on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreement. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. If an Event of Default, as defined in the Note Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price and with the effect provided in the Note Agreement. This Note and said Note Agreement is governed by and construed in accordance with the laws of Indiana. IWC RESOURCES CORPORATION By ASSIGNMENT FORM To assign this Note fill in the form below: The undersigned holder assigns and transfers this Note to (INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX I.D. NUMBER) (Print or type assignee's name, address and zip code) and irrevocably appoints agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. In connection with any transfer of the Note occurring prior to the date that is three years after the date of original issuance of the Notes, the undersigned holder confirms that this Note is being transferred: CHECK ONE BOX BELOW (1) [ ] to the Company or a Subsidiary of the Company; or (2) [ ] to a "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act), which person has been advised that the Note has been sold or transferred to it in reliance upon Rule 144A; or (3) [ ] in an "Offshore Transaction" (as defined in Regulation S) to a transferee that is not, or that the undersigned reasonably believes not to be, a "U.S. Person" (as defined in Regulation S) pursuant to and in accordance with the exemption from registration provided by Regulation S thereunder; or (4) [ ] to an institutional investor and an "accredited investor" (as defined in Regulation D under the Securities Act of 1933, as amended (the "Securities Act")) that is acquiring the Note for investment purposes and not for distribution; it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Notes, and it and any accounts for which it is acting are each able to bear the economic risk of its investment; it is acquiring the Note purchased by it for its own account or for one or more accounts as to each of which it exercises sole investment discretion. [If this box is checked, the Company may request, and if so requested the undersigned will furnish, such certificates and other information as may reasonably be required to confirm that any such transfer is exempt from the registration requirements of the Securities Act]; or (5) [ ] pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended, as described in the letter attached hereto and addressed to the Company. [If this box is checked, the Company may request, and if so requested the undersigned will furnish, such certificates and other information as may reasonably be required to confirm that any such transfer is exempt from the registration requirements of the Securities Act.] Unless one of the boxes is checked, if the proposed transfer is to occur within three years of the date of the original issuance of the Notes, the Company may refuse to register the Note in the name of any person other than the registered Holder thereof; Name of transferring holder:_____________________________________ (exactly as it appears on front of this Note) By:_____________________ Printed Name:_________________ (Signature) Title:_________________ Date:______________ IWC RESOURCES CORPORATION CLOSING CERTIFICATE American United Life Insurance Company One American Square P.O. Box 368 Indianapolis, Indiana 46206 Gentlemen: This certificate is delivered to you in compliance with the requirements of the Note Agreement, dated as of March 1, 1994 (the "Agreement"), entered into by the undersigned, IWC Resources Corporation, an Indiana corporation (the "Company"), with you, and as an inducement to and as part of the consideration for your purchase on this date aggregating $14,000,000 principal amount of the 6.31% Senior Notes due March 1, 2001 (the "Notes") of the Company pursuant to the Agreement. The terms which are capitalized herein shall have the same meanings as in the Agreement. The Company represents and warrants to you as follows: 1. Subsidiaries. Annex 1 attached hereto states the name of each of the Company's Subsidiaries (including Restricted Subsidiaries), the jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and each other Subsidiary. The Company, and each Subsidiary, has good and marketable title to all of the shares it purports to own of the stock of each Subsidiary, free and clear in each case of any lien. All such shares have been duly issued and are fully paid and non-assessable. 2. Corporate Organization and Authority. The Company, and each Subsidiary, (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry-on its business as now conducted and as presently proposed to be conducted; and EXHIBIT B (to Note Agreement) (c) is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction wherein the nature of the business transacted by it or the nature of the property owned or leased by it makes such licensing or qualification necessary. 3. Business and Property. You have heretofore been furnished with a copy of the Private Placement Memorandum dated February 9, 1994 (the "Memorandum") prepared by Banc One Capital Corporation which generally sets forth the business conducted and proposed to be conducted by the Company and its Subsidiaries and the principal properties of the Company and its Subsidiaries. 4. Financial Statements. (a) The consolidated balance sheets of the Company and its Subsidiaries as of December 31 in each of the years 1987 to 1992, both inclusive, and the statements of income and retained earnings and changes in financial position or cash flows for the fiscal years ended on said dates, each accompanied by a report thereon containing an opinion unqualified as to scope limitations imposed by the Company and otherwise without qualification except as therein noted, by KPMG Peat Marwick, have been prepared in accordance with generally accepted accounting principles consistently applied except as therein noted, are correct and complete and present fairly the financial position of the Company and its Subsidiaries as of such dates and the results of their operations and cash flows for such periods. The unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 1993 and the unaudited statements of income and retained earnings and cash flows for the three-month and nine-month periods ended on said date prepared by the Company have been prepared in accordance with generally accepted accounting principles consistently applied, are correct and complete and present fairly the financial position of the Company and its Subsidiaries as of said date and the results of their operations and changes in their financial position or cash flows for such period subject to year-end audit and adjustments. (b) Since September 30, 1993, there has been no material adverse change in the condition, financial or otherwise, of the Company and its Subsidiaries as shown on the consolidated balance sheet as of such date, nor has there been a material adverse change in the condition, financial or otherwise, of Indianapolis Water Company as of such dates, except in each case changes in the ordinary course of business. 5. Full Disclosure. The financial statements referred to in paragraph 4 do not, nor does the Memorandum or any other written statement furnished by the Company to you in connection with the negotiation of the sale of the Notes, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading. There is no fact peculiar to the Company or its Subsidiaries which the Company has not disclosed to you in writing which materially affects adversely nor, so far as the Company can now foresee, will materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries. 6. Pending Litigation. There are no proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary in any court or before any governmental authority or arbitration board or tribunal which involve the possibility of materially and adversely affecting the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries. 7. Title to Properties. The Company, and each Restricted Subsidiary, has good and marketable title in fee simple (or its equivalent under applicable law) to all the real property and has good title to all the other property it purports to own, including that reflected in the most recent balance sheet referred to in paragraph 4 except as sold or otherwise disposed of in the ordinary course of business. 8. Patents and Trademarks. The Company, and each Subsidiary, owns or possesses all the patents, trademarks, trade names, service marks, copyrights, licenses and rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any known conflict with the rights of others. 9. Sale is Legal and Authorized. The sale of the Notes and compliance by the Company with all of the provisions of the Agreement and the Notes-- (a) are within the corporate powers of the Company; (b) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under the Certificate of Incorporation or By-laws of the Company or any indenture or other agreement or instrument to which the Company is a party or by which it may be bound or result in the imposition of any liens or encumbrances on any property of the Company; and (c) have been duly authorized by proper corporate action on the part of the Company (no action by the stockholders of the Company being required by law, by the Certificate of Incorporation or By-laws of the Company or otherwise), executed and delivered by the Company and the Agreement; and the Notes constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms. 10. No Defaults. No Default or Event of Default as defined in the Agreement has occurred and is continuing. The Company is not in default in the payment of any Funded Debt or Current Debt and is not in default under any instrument or instruments or agreements under and subject to which any Funded Debt or Current Debt has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder. 11. Governmental Consent. No approval, consent or withholding of objection on the part of any regulatory body, state, Federal or local, is necessary in connection with the execution and delivery by the Company of the Agreement or the Notes or compliance by the Company with any of the provisions of the Agreement or the Notes. 12. Taxes. All tax returns required to be filed by the Company or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and other governmental charges upon the Company or any Subsidiary or upon any of their respective properties, income or franchises, which are shown to be due and payable in such returns have been paid. The Company does not know of any proposed additional tax assessment against it for which adequate provision has not been made in its accounts, and no material controversy in respect of additional Federal or state income taxes is pending or to the knowledge to the Company threatened. The provisions for taxes on the books of the Company and each Subsidiary are adequate for all open years, and for its current fiscal period. 13. Use of Proceeds. The net proceeds from the sale of the Notes will be used to repay existing debt and other corporate purposes. None of the transactions contemplated in the Agreements (including, without limitation thereof, the use of proceeds from the issuance of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns or intends to carry or purchase any "margin stock" within the meaning of said Regulation G. None of the proceeds from the sale of the Notes will be used to purchase, or refinance any borrowing, the proceeds of which were used to purchase any "security" within the meaning of the Securities Exchange Act of 1934, as amended. 14. Solvency. The Company is not entering into any of the transactions contemplated hereby, nor does the Company intend to make any transfer or incur any obligations hereunder, with actual intent to hinder, delay or defraud either present or future creditors. On the Closing Date, after giving effect to the consummation of the transactions contemplated hereby and the use of the proceeds of the issuance and sale of the Notes for the purposes described herein, (i) the Company expects the cash available to the Company and the Subsidiaries on a consolidated basis, after taking into account all other anticipated uses of the cash of the Company, will be sufficient to satisfy all final judgments for money damages which have been docketed against the Company and the Subsidiaries or which may be rendered against the Company and the Subsidiaries in any action in which the Company is a defendant (taking into account the reasonably anticipated maximum amount of any such judgment and the earliest time at which such judgment might be entered); (ii) the sum of the present fair saleable value of the assets of the Company and the Subsidiaries on a consolidated basis will exceed the probable liability of the Company and the Subsidiaries on their debts; (iii) the Company and the Subsidiaries on a consolidated basis will not have incurred or intended to incur, or believed that they will have incurred, debts beyond their ability to pay such debts as such debts mature (taking into account the timing and amounts of cash to be received by the Company from any source, and of amounts to be payable on or in respect of debts of the Company and the Subsidiaries); and (iv) the Company and the Subsidiaries on a consolidated basis will have sufficient capital with which to conduct their present and proposed businesses and the property of the Company and the Subsidiaries does not constitute unreasonably small capital with which to conduct their present or proposed businesses. For purposes of paragraph 15, "debt" means any liability on a claim, and "claim" means (1) any right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed (other than those being disputed in good faith), undisputed, legal, equitable, secured or unsecured, or (2) any right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. 15. Private Offering. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security or has solicited or will solicit an offer to acquire the Notes or any similar Security from or has otherwise approached or negotiated or will approach or negotiate in respect of the Notes or any similar Security with any Person other than the Purchaser and not more than 16 other institutional investors, each of whom was offered a portion of the Notes at private sale for investment. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security or has solicited or will solicit an offer to acquire the Notes or any similar Security from any Person so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act of 1933, as amended. 16. ERISA. The consummation of the transactions provided for in the Agreements and compliance by the Company with the provisions thereof and the Notes issued thereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended. Each Plan complies in all material respects with all applicable statutes and governmental rules and regulations, and (a) no Reportable Event has occurred and is continuing with respect to any Plan, (b) neither the Company nor any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or instituted steps to do so, and (c) no steps have been instituted to terminate any Plan. No condition exists or event or transaction has occurred in connection with any Plan which could result in the occurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty. No Plan maintained by the Company or any ERISA Affiliate, nor any trust created thereunder, has incurred any "accumulated funding deficiency" as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits by an amount greater than $5,000,000 in the aggregate. Neither the Company nor any ERISA Affiliate has any contingent liability with respect to any post-retirement "welfare benefit plan" (as such term is defined in ERISA) except as has been disclosed to the Purchasers. 17. Compliance with Law. (a) Except as provided in subsection (b) below, neither the Company nor any Restricted Subsidiary (i) is in violation of any law, ordinance, franchise, governmental rule or regulation, including without limitation any Environmental Legal Requirement to which it is subject; or (ii) has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its business, which violation or failure to obtain could, in the case of clause (i) or (ii), have a material adverse effect on the operations or financial condition of the Company and its Restricted Subsidiaries, taken as a whole, or impair the ability of the Company to perform its obligations contained in the Agreements or the Notes. Neither the Company nor any Restricted Subsidiary is in default with respect to any order of any court or governmental authority or arbitration board or tribunal. (b) The NPDES Permit issued to Indianapolis Water Company has expired but Indianapolis Water Company is continuing to conduct its operations in accordance with the expired NPDES Permit and such circumstances are known to and permitted by the Indiana Department of Environmental Management (IDEM) having jurisdiction over the affected activities. Dated: IWC RESOURCES CORPORATION By Its SUBSIDIARIES OF THE COMPANY 1. RESTRICTED SUBSIDIARIES: Percentage of Voting Stock Name of Jurisdiction of Owned by Company and Subsidiary Incorporation each other Subsidiary Indianapolis Water Company Indiana 100% Harbour Water Corporation Indiana 100% Zionsville Water Company Indiana 100% Utility Data Corporation Indiana 100% IWC Services, Inc. Indiana 100% Waterway Holdings, Inc. Indiana 100%
2. SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES): None ANNEX 1 (to Closing Certificate) DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION The closing opinion of Sidley & Austin, special counsel to the Purchaser, called for by Section 5.2 of the Note Agreement, shall be dated the Closing Date and addressed to the Purchaser, shall be satisfactory in form and substance to the Purchaser and shall be to the effect that: (1) The Company is a corporation, duly incorporated, legally existing and in good standing under the laws of the State of Indiana, has corporate power to execute and deliver the Note Agreement and the Notes; and (2) The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreement is an exempt transaction under the Securities Act of 1933, as amended, and does not under existing law require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture in respect thereof under the Trust Indenture Act of 1939. The opinion of Sidley & Austin shall also cover such other matters relating to the sale of the Notes as the Purchaser may reasonably request. In rendering the opinion set forth in paragraph (1) above, Sidley & Austin may rely solely on the Certificate of Incorporation of the Company certified by the Secretary of the State of Indiana and the good standing certificate for the Company in the State of Indiana. With respect to matters of fact upon which such opinion is based, Sidley & Austin may rely on appropriate certificates of public officials and officers of the Company. Exhibit C-1 (to Note Agreement) DESCRIPTION OF SPECIAL INDIANA COUNSEL'S CLOSING OPINION The closing opinion of Baker & Daniels, special Indiana counsel to the Purchaser, called for by Section 5.2 of the Note Agreement, shall be dated the Closing Date and addressed to the Purchaser, shall be satisfactory in form and substance to the Purchaser and shall be to the effect that: (1) The Company is a corporation, duly incorporated, legally existing and in good standing under the laws of the State of Indiana, has corporate power to execute and deliver the Note Agreement and the Notes; and (2) The Note Agreement and the Notes have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their respective terms, except as enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors' rights generally, and (ii) equitable principles of general applicability (regardless of whether such enforceability is considered in a proceeding in equity or at law). The opinion of Baker & Daniels shall cover such other matters relating to Indiana law as the Purchaser may reasonably request. With respect to matters of fact upon which such opinion is based, Baker & Daniels may rely on appropriate certificates of public officials and officers of the Company. Exhibit C-2 (to Note Agreement) DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY The closing opinion of John Davis, Esq., Vice President and General Counsel of the Company, which is called for by Section 5.2 of the Note Agreement, shall be dated the Closing Date and addressed to the Purchaser, shall be satisfactory in scope and form to the Purchaser and shall be to the effect that: (1) The Company is a corporation, duly incorporated, legally existing and in good standing under the laws of the State of Indiana, has corporate power and authority and is duly authorized to enter into and perform the Note Agreement and to issue the Notes and incur the Indebtedness to be evidenced thereby; (2) The Company has full power and authority and is duly authorized to conduct the activities in which it is now engaged and is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary; (3) Each Subsidiary is a corporation duly organized, legally existing and in good standing under the laws of its jurisdiction of incorporation and is duly licensed or qualified and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary, and all of the issued and outstanding shares of capital stock of each such Subsidiary have been duly issued, are fully paid and nonassessable and are owned by the Company or by one or more Restricted Subsidiaries, or by the Company and one or more Restricted Subsidiaries; (4) The Note Agreement and the Notes have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their respective terms, except as enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors' rights generally, and (ii) equitable principles of general applicability (regardless of whether such enforceability is considered in a proceeding in equity or at law); Exhibit D (to Note Agreement) (5) No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal, state or local, is necessary in connection with the lawful execution, delivery and performance of the Note Agreements or the Notes; (6) The issuance and sale of the Notes and the execution, delivery and performance by the Company of the Note Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any lien or encumbrance upon any of the property of the Company pursuant to the provisions of the Certificate of Incorporation or By-laws of the Company or any agreement or other instrument known to such counsel to which the Company is a party or by which the Company may be bound; (7) The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreement is an exempt transaction under the Securities Act of 1933, as amended, and does not under existing law require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture in respect thereof under the Trust Indenture Act of 1939; (8) There is no action, suit or proceeding pending against or, to our knowledge, after due inquiry, threatened against or affecting the Company or any Subsidiary or any of the business, assets or rights of the Company or any Subsidiary by or before any court, governmental or regulatory authority or arbitrator, which if adversely determined (i) might question, either individually or collectively, the validity of the Agreement or the Notes, or any of the transactions contemplated thereby, (ii) might result, either individually or collectively, in any material and adverse change in the business, assets, operations or condition, financial or otherwise, of the Company or any Subsidiary, or (iii) might, individually or collectively, impair the ability of the Company or any Subsidiary to perform their respective obligations under the Agreement or the Notes. (9) The purchase and sale of the Notes, the application of the proceeds of the sale of the Notes and the consummation of the transactions contemplated by the Agreement do not result in any violation of Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations G, T, U or X of the Board of Governors of the Federal Reserve System (12 CFR Parts 207, 220, 221 and 224, respectively). (10) The interest rate provided for in the Notes is not in excess of the maximum rate of interest which is permitted by the usury laws of the state of Indiana. The opinion of John Davis, Esq. shall cover such other matters relating to the sale of the Notes as the Purchaser may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company. EX-10.14 6 LOAN AGREEMENT; IWC AND CITY; DATED 4/1/93 LOAN AGREEMENT INDIANAPOLIS WATER COMPANY AND CITY OF INDIANAPOLIS, INDIANA DATED AS OF APRIL 1, 1993 The rights of the City of Indianapolis, Indiana, under this Agreement (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and rights relating to any amendments to this Agreement) have been assigned to National City Bank, Indiana, as Trustee under an Indenture of Trust dated as of the date of this Agreement, among Indianapolis Water Company, the City and the Trustee. Table of Contents RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . 1 AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE I Definitions and Exhibits . . . . . . . . . . 2 Section 1.1. Terms Defined . . . . . . . . . . . . . 2 Section 1.2. Rules of Interpretation. . . . . . . . . 4 Section 1.3. Exhibits. . . . . . . . . . . . . . . . 4 ARTICLE II The Loan and The Project . . . . . . . . . 5 Section 2.1. Municipality's Representations, Warranties and Covenants. . . . . . . . 5 Section 2.2. Company's Representations, Warranties and Covenants. . . . . . . . . . . . . . . 5 ARTICLE III The Bonds, Use of Proceeds, The First Mortgage Bonds . . . . . . . . . . . . . . 7 Section 3.1. Agreement to Issue Bonds. . . . . . . . 7 Section 3.2. Disbursements from Redemption Fund. . . 7 Section 3.3. Investment of Construction Fund and Bond Fund Moneys. . . . . . . . . . . . . . 7 Section 3.4. Covenants with Respect to Arbitrage. . . 8 Section 3.5. Loan Payments and Other Amounts Payable. 8 Section 3.6. Obligation of Company Unconditional. . . 10 ARTICLE IV Particular Covenants of the Company . . . . 10 Section 4.1. Consent to Assignment to Trustee. . . . 10 Section 4.2. Payment of Expenses of Issuance of Bonds. 11 Section 4.3. Company to Maintain its Existence; Conditions Under Which Exceptions Permitted. . . . . . . . . . . . . . . 11 Section 4.4. Further Assurances and Corrective Instruments. . . . . . . . . . . . . . 11 Section 4.5. Covenants of Company with Respect to Use of Bond Proceeds. . . . . . . . . . . . 11 Section 4.6. Indemnification of Municipality and Trustee. . . . . . . . . . . . . . . . 12 ARTICLE V Prepayment of First Mortgage Bonds . . . . . . . 12 Section 5.1. Mandatory Prepayment of First Mortgage Bonds in Event of Determination of Taxability. . . . . . . . . . . . . . . 12 Section 5.2. Extraordinary Event Prepayment of First Mortgage Bonds. . . . . . . . . . . . . 12 Section 5.3. Notice of Prepayment. . . . . . . . . . 13 ARTICLE VI Events of Default and Remedies . . . . . . 14 Section 6.1. Events of Default. . . . . . . . . . . . 14 Section 6.2. Remedies on Default. . . . . . . . . . . 15 Section 6.3. Application of Moneys. . . . . . . . . . 15 Section 6.4. Remedies Cumulative. . . . . . . . . . . 15 Section 6.5. Delay or Omission Not a Waiver. . . . . 15 Section 6.6. Remedies Subject to Provisions of Law. . 15 ARTICLE VII Amendments to this Agreement . . . . . . . 16 Section 7.1. Amendments to this Agreement. . . . . . 16 ARTICLE VIII Miscellaneous . . . . . . . . . . . . . . . 16 Section 8.1. Binding Effect. . . . . . . . . . . . . 16 Section 8.2. Severability. . . . . . . . . . . . . . 16 Section 8.3. Amounts Remaining in Bond Fund. . . . . 16 Section 8.4. Amendments, Changes and Modifications. 16 Section 8.5. Execution in Counterparts. . . . . . . 16 Section 8.6. Notices. . . . . . . . . . . . . . . . 16 Section 8.7. References to Bonds Ineffective After Bonds are Paid. . . . . . . . . . . . 17 Section 8.8. Agreement for Benefit of Parties Hereto. 17 Section 8.9. Waiver. . . . . . . . . . . . . . . . . 17 Section 8.10. Captions and Table of Contents. . . . . 17 Section 8.11. Survival of Covenants, Representations and Warranties. . . . . . . . . . . . 17 Section 8.12. Applicable Law. . . . . . . . . . . . . 17 Section 8.13. Holidays. . . . . . . . . . . . . . . . 17 LOAN AGREEMENT This LOAN AGREEMENT has been executed as of April 1, 1993, by and between INDIANAPOLIS WATER COMPANY, an Indiana corporation (the "Company"), and the CITY OF INDIANAPOLIS, INDIANA (the "Municipality"). RECITALS 1. Definitions of certain of the terms used in these Recitals are set out in Article I hereof and Article I of the Indenture. 2. In 1974, the Company initiated a program of expansion of its Indianapolis water distribution facilities. A portion of those facilities, now known as the Thomas W. Moses Treatment Plant and described in detail on Exhibit A attached hereto (the "Project"), were financed through the City of Indianapolis, Indiana 6-1/4% Economic Development Water Facilities Revenue Bonds, 1974 Series (Indianapolis Water Company Project) (the "1974 Bonds"). 3. To finance a portion of the costs of the Project, the Company borrowed from the Municipality funds derived from the sale of the 1974 Bonds, and the Company, as evidence of its obligation to repay the funds, issued and delivered to the Municipality its First Mortgage Bonds, Economic Development Series A. 4. The Company has determined that the 1974 Bonds can be refinanced at a net savings to the Company and has further determined that such refinancing will result in other benefits to the Company. 5. Pursuant to IC 5-1-5, IC 36-7-11.9 and IC 36-7- 12, the Municipality is authorized and empowered to issue revenue bonds to refund and refinance revenue bonds previously issued by it. The Municipality is obtaining funds to loan to the Company to assist with the refunding and refinancing of the 1974 Bonds through the sale of $11,600,000 aggregate principal amount of City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project). 6. Pursuant to an Indenture of Trust dated as of the date of this Agreement, among the Company, the Municipality and National City Bank, Indiana of Indianapolis, Indiana, as Trustee, the Municipality will issue the Bonds and, as security for the payment of the Bonds and the performance of the obligations of the Municipality and the Company under the Indenture and the First Mortgage Bonds, the Municipality will assign the First Mortgage Bonds and its rights under this Agreement (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and rights relating to any amendments to this Agreement) to the Trustee. In addition, the principal of, premium, if any, and interest on the Bonds will be guaranteed by IWC Resources Corporation, an Indiana Corporation, pursuant to a Guaranty Agreement dated as of April 1, 1993. The Bonds will be payable solely out of the revenues and other amounts derived from the First Mortgage Bonds and under this Agreement and shall not in any respect be a general obligation of, an indebtedness of, or constitute a charge against the general credit of the Municipality, the State of Indiana, or any political subdivision thereof. AGREEMENT In consideration of the premises and the mutual covenants contained herein, the Company and the Municipality agree as follows: ARTICLE I Definitions and Exhibits Section 1.1. Terms Defined. As used in this Agreement, the following terms shall have the following meanings unless the context otherwise requires: "Act" means IC 36-7-11.9 and IC 36-7-12, as from time to time amended. "Agreement" means this Loan Agreement and any amendment and supplement hereto. "Agreement Term" means the period commencing on the date of this Agreement and, subject to the provisions of this Agreement, ending on such date as the Bonds have been fully paid and retired or provision for such payment made as provided in the Indenture. "Authorized Company Representative" means a person designated to act on behalf of the Company by written certificate furnished to the Municipality and the Trustee containing the specimen signature of the person and signed on behalf of the Company by its President, any of its Vice- Presidents, its Chief Financial Officer, its Secretary or any of its Assistant Secretaries. The certificate may designate an alternate or alternates. The Authorized Company Representative may be an employee of the Company. "Bonds" means the $11,600,000 aggregate principal amount of the City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project). "Bond Fund" means the fund created in Section 402 of the Indenture. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Indianapolis Economic Development Commission, a development commission created by the Municipality pursuant to the Act. "Company" means Indianapolis Water Company, an Indiana corporation, and its successors and assigns. "Counsel" means an attorney-at-law admitted to practice in the highest court of any state (who may be counsel to the Trustee, the Municipality or the Company). "First Mortgage Bonds" means the First Mortgage Bonds issued under the Twenty-Second Supplemental Indenture to the Company's First Mortgage Indenture and designated Indianapolis Water Company First Mortgage Bonds, Economic Development Series E. "First Mortgage Indenture" means the First Mortgage Indenture dated as of July 1, 1936 between the Company and Fidelity Bank, National Association (formerly the Fidelity- Philadelphia Trust Company), Philadelphia, Pennsylvania, as trustee, as heretofore amended and supplemented by twenty-one supplemental indentures and as to be amended and as to be supplemented by the Twenty-Second Supplemental Indenture. "Guarantor" means IWC Resources Corporation, an Indiana corporation. "Guaranty" means the Guaranty Agreement dated as of April 1, 1993 executed by the Guarantor under which the Guarantor guarantees the principal of, premium, if any and interest on the Bonds. "Indenture" means the Indenture of Trust, dated as of the date of this Agreement, among the Company, the Municipality and National City Bank, Indiana, Indianapolis, Indiana, as Trustee, relating to the Bonds, and any indenture supplemental thereto. "Loan" means the loan by the Municipality to the Company of the proceeds from the sale of the Bonds. "Majority" means, when used with reference to the Owners or Holders of Bonds outstanding, in excess of (50%) fifty percent of the principal amount of Bonds outstanding. "Municipality" means the City of Indianapolis, Indiana, and any successor. "1974 Bonds" means the 6-1/4% City of Indianapolis, Indiana Economic Development Water Facilities Revenue Bonds, 1974 Series (Indianapolis Water Company Project). "Project" means the facilities described in Exhibit A hereto. "Purchaser" means Smith Barney, Harris Upham & Co. Incorporated. "Redemption Fund" means the Fund created and established under Section 302 of the Indenture. "Trustee" means the trustee at the time serving under the Indenture. "Twenty-Second Supplemental Indenture" means the Supplemental Indenture dated as of April 1, 1993, between the Company and the First Mortgage Indenture Trustee, under which the First Mortgage Bonds are to be issued. Section 1.2. Rules of Interpretation. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) "This Agreement" means this instrument as originally executed and as it may from time to time be supplemented or amended. (b) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. (c) The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. (d) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles. (e) Any terms not defined herein but defined in the Indenture shall have the same meaning herein. (f) The terms defined elsewhere in this Agreement shall have the meanings therein prescribed for them. Section 1.3. Exhibits. The following Exhibits are a part of this Agreement: Exhibit A: Description of the Project. Exhibit B: Form of Twenty-Second Supplemental Indenture. ARTICLE II The Loan and The Project Section 2.1. Municipality's Representations, Warranties and Covenants. (a) The Municipality represents and warrants that: (i) The Municipality is a duly organized and existing municipal corporation and political subdivision of the State of Indiana, with full power and authority under the Act to enter into the transactions contemplated by this Agreement and to carry out its obligations hereunder. (ii) The Municipality has duly authorized the issuance, execution and delivery of the Bonds and the execution and delivery of this Agreement and the Indenture. (b) The Municipality covenants that: (i) The Municipality shall not take any action to interfere with any obligation it may have with respect to the Bonds, the proceedings authorizing the Bonds or this Agreement. (ii) The Municipality shall provide funds from the proceeds from the sale of the Bonds for the refinancing of the entire outstanding principal amount of the 1974 Bonds, and shall secure the payment of the Bonds by assigning this Agreement (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and rights relating to any amendment of this Agreement) and the First Mortgage Bonds to the Trustee pursuant to the Indenture. Section 2.2. Company's Representations, Warranties and Covenants. The Company makes the following representations and warranties (all as of the date on which this Agreement has been executed) and in addition, makes the following covenants: (a) It is a duly organized and existing corporation under the laws of the State of Indiana, has the power and authority to own its properties and assets and to carry on its business as now being conducted and as now contemplated, and has full power and authority to issue the First Mortgage Bonds and to execute and deliver this Agreement and the Indenture; all actions necessary for the execution and delivery of the First Mortgage Bonds, this Agreement and the Indenture have been taken; and the First Mortgage Bonds will be a valid and binding obligation of the Company. (b) The execution, delivery and performance of this Agreement, the Twenty-Second Supplemental Indenture, the First Mortgage Bonds and the Indenture will not conflict with or result in a breach of, or a default under, the Company's Articles of Incorporation, By-Laws, or any material agreement or instrument to which the Company is a party or by which it is bound (excepting, however such agreements or instruments with respect to which the Company has been required to and has obtained waivers or consents) or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company, except for the lien of the Indenture and the First Mortgage Indenture. (c) Each item of property that is a part of the Project constitutes a component of a system whose purpose is the collection, treatment, and distribution of water to the general public for residential, commercial, agricultural and industrial purposes and for fire protection. (d) The "average maturity" of the Bonds (taking into account their issue prices) does not exceed 120% of the "average reasonably expected economic life" of the facilities financed with the proceeds of the Bonds (taking into account the respective cost of such facilities), all as determined in accordance with the provisions of Section 147(b) of the Code. (e) Neither the Project nor any component thereof constitutes a facility the primary purpose of which is retail food and beverage service, automobile sales or services, or the provision of recreation or entertainment, any private or commercial golf course, country club, massage parlor, tennis club, skating facility (including roller skating, skateboard and ice skating), racquet sports facility (including any handball or racquetball court), hot tub facility, suntan facility, racetrack, airplane, sky box or other private luxury box, health club facility, facility used for gambling, or facility used for the sale of alcoholic beverages. (f) The Bonds are not and shall not be "federally guaranteed" as defined in Section 149(b) of the Code. (g) The Company is and will be the lawful owner of the Project and has and will have good and marketable title to the Project, subject to the lien of the First Mortgage Indenture. (h) The execution, delivery and performance by the Company of this Loan Agreement, the Twenty-Second Supplemental Indenture and the First Mortgage Bonds do not require the consent or approval of, the giving of notice of, the registration with, or the taking of any other action in respect of, any federal, state or other governmental authority or agency, not previously obtained or performed. (i) No litigation, arbitration proceedings or governmental proceedings are pending or threatened against the Company which would, if adversely determined, materially and adversely affect the financial condition or continued operations or properties of the Company and which the Company believes, after consulting with its counsel, are reasonably likely to be adversely determined. (j) The Company believes that the interest on the 1974 Bonds is excludable from gross income for purposes of federal income taxation and has received no information to the contrary from the City, the Trustee, the holder of any 1974 Bond or the Internal Revenue Service. (k) The Company will take no action (including specifically but without limitation, any action described in any agreement or certificate relating to tax matters and delivered in connection with the Bonds) which would (and will omit no action (including specifically but without limitation, any action described in any agreement or certificate relating to tax matters and delivered in connection with the Bonds) reasonably within its power, the omission of which would) cause the interest on the Bonds to become includable for Federal income tax purposes in the gross income of any Bondholder, other than a Bondholder who is a "substantial user" of the Project or a "related person" within the meaning and for the purpose of Section 147 of the Code. ARTICLE III The Bonds, Use of Proceeds, The First Mortgage Bonds Section 3.1. Agreement to Issue Bonds. In order to provide funds to make the Loan, the Municipality shall issue the Bonds and sell them to the Purchaser and deposit the proceeds with the Trustee into the Redemption Fund. Section 3.2. Disbursements from Redemption Fund. The Indenture authorizes the Trustee to make payments from the Redemption Fund to the Trustee in its capacity as trustee with respect to the 1974 Bonds and solely for the purpose of discharging, redeeming and retiring the 1974 Bonds, provided, however, that any moneys remaining in the Redemption Fund after such discharge, retirement, redemption and termination shall be promptly released and distributed to the Company. Payment as aforesaid shall be made upon receipt by the Trustee of all materials and documents necessary to evidence to the satisfaction of the Trustee that the funds being disbursed hereunder are sufficient to discharge fully all obligations of the Company created and existing in connection with the 1974 Bonds, together with all instruments and documents necessary to evidence to the satisfaction of the Trustee the discharge of all liens and encumbrances arising and existing by reason of the 1974 Bonds. Section 3.3. Investment of Redemption Fund and Bond Fund Moneys. Any moneys held as part of the Bond Fund or the Redemption Fund shall be invested by the Trustee at the written direction of the Company in direct obligations of the United States of America or in other obligations backed by the full faith and credit of the United States of America. Section 3.4. Covenants with Respect to Arbitrage. The Company and the Municipality covenant to each other and to and for the benefit of the holders of the Bonds that no use will be made of the proceeds from the issue and sale of the Bonds which, if such use could have been reasonably expected on the date of issue of the Bonds, would have caused the Bonds to be classified as arbitrage bonds within the meaning of Section 103(b)(2) and Section 148 of the Code. As long as any Bonds are outstanding, the Municipality and the Company shall not violate the requirements of the Code relating to arbitrage bonds, and any regulations thereunder including the requirement of Section 148 of the Code relating to the rebate of certain amounts to the United States government. The Company will provide to the Trustee instructions relating to the permissible investment of Bond proceeds and instructions and computations (using investment information provided by the Trustee) relating to the amount required to be rebated to the United States, all in conformity with Section 148 of the Code. Subject to Section 3.3 hereof, the Company reserves the right, however, to make any investment of proceeds permitted under the laws of the State of Indiana, if the sections of the Code relating to arbitrage bonds or the regulations thereunder are repealed or relaxed or are held void by final judgment of a court of competent jurisdiction, so long as the investment would not result in making the interest on the Bonds includable in the gross income of the holders thereof for purposes of Federal income taxation. In making investments, the Company may rely on an opinion of counsel of recognized competence in such matters. The Trustee may make any and all such investments through its own bond department. Section 3.5 Loan Payments and Other Amounts Payable. The Company agrees to repay the loan from the Municipality as follows: (a) Concurrently with the sale of the Bonds, the Company shall execute and deliver the First Mortgage Bonds to the Municipality, pursuant to which the Company shall make payments sufficient to pay when due (whether at maturity, upon call for redemption, by acceleration or otherwise) the principal of and premium, if any, and interest on the Bonds. The First Mortgage Bonds shall be issued as fully registered bonds registered in the name of the Trustee substantially in the form set forth in the Twenty-Second Supplemental Indenture that is attached hereto as Exhibit B. The First Mortgage Bonds shall not to any extent be transferable or assignable except as is required to effect the assignment to the Trustee or to effect the assignment or pledge of the Trust Estate to any successor trustee. (b) The Company shall also pay promptly upon demand when due (i) the reasonable and necessary fees and expenses of the Trustee (including attorney's fees and any reasonable and necessary fees and expenses in its capacity as Registrar) and any paying agent for services in connection with the Bonds as specified in Section 903 of the Indenture and (ii) the reasonable and necessary fees and expenses of the Municipality, including reasonable attorneys' fees, in connection with any default of the Company under this Agreement, the First Mortgage Bonds or the Indenture. (c) If the Company fails to make any of the payments required in this Section 3.5 or in the First Mortgage Bonds all unpaid items or installments shall continue as an obligation of the Company until fully paid. (d) All payments under this Section 3.5 shall be made by the Company directly to the Trustee in immediately available funds and the Trustee shall deposit all such payments into the Bond Fund, provided that payments under Section 3.5(b) shall be made by the Company directly to the person entitled thereto. The amount of any money in the Bond Fund which is either proceeds from the sale of any Bonds or earnings on investments made pursuant to the provisions of the Indenture which has been set aside by the Trustee, at the request of the Company, for payments of principal, whether at maturity or upon redemption, of the Bonds shall be credited against the obligation of the Company to pay the principal of the First Mortgage Bonds. The amount of any money in the Bond Fund which is either proceeds from the sale of any Bonds or earnings on investments made pursuant to the provisions of the Indenture which has been set aside by the Trustee for payments of interest on the Bonds shall be credited against the obligation of the Company to pay interest on the First Mortgage Bonds. The principal amount of any Bonds purchased by the Company and delivered to the Trustee, or purchased by the Trustee and cancelled, shall be credited against the obligation of the Company to pay the principal of the First Mortgage Bonds. (e) If on any principal or interest payment date for the Bonds, whether by maturity, redemption, acceleration or otherwise, the balance in the Bond Fund is insufficient to make the required payments of principal of and premium, if any, and interest on the Bonds on that date, the Company upon notice shall pay forthwith any deficiency to the Trustee. (f) The Company shall not be obligated to make any further payments under this Section 3.5, and the Company's liability to make payments under this Section 3.5 shall cease, at any time that the entire principal of and premium, if any, and interest on the Bonds shall have been fully paid in accordance with their terms and the provisions of Section 1201 of the Indenture (including, without limitation, principal, interest to maturity or earliest redemption date, as the case may be, expenses of redemption, redemption premiums, and fees and expenses of the Municipality, the Trustee and any paying agent and any other costs and fees required to be paid by the Company pursuant to this Agreement), or at any time that there shall be in the Bond Fund an amount sufficient to pay or redeem the Bonds in accordance with the provisions of Section 1201 of the Indenture (including, without limitation, principal, interest to maturity or earliest redemption date, as the case may be, expenses of redemption and redemption premiums, and fees and expenses of the Municipality, the Trustee and any paying agent and any other costs and fees required to be paid by the Company pursuant to this Agreement) and all other requirements of Section 1201 of the Indenture have been satisfied in full. Section 3.6. Obligation of Company Unconditional. The obligation of the Company to make the payments and to perform and observe its other agreements pursuant to this Agreement and the First Mortgage Bonds shall be absolute and unconditional and shall not be subject to reduction or delay by set-off, counterclaim, abatement or otherwise. Until such time as the principal of and premium, if any, and interest on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with Section 1201 of the Indenture (including, without limitation, principal, interest to maturity or earliest redemption date, as the case may be, expenses of redemption, redemption premiums, and fees and expenses of the Municipality, the Trustee and any paying agent and any other costs and fees required to be paid by the Company pursuant to this Agreement), and all other requirements of Section 1201 of the Indenture have been satisfied in full, the Company (a) shall not suspend or discontinue any payments pursuant to this Agreement or the First Mortgage Bonds, (b) shall perform and observe all its other agreements contained in this Agreement and the First Mortgage Bonds, and (c) except as provided in Article V hereof, shall not terminate this Agreement or the First Mortgage Bonds for any cause. Nothing contained in this Agreement shall be construed to release the Municipality from the performance of any of its obligations; and in the event the Municipality shall fail to perform any such agreement on its part, the Company or the Trustee may institute such action against the Municipality as the Company may deem necessary to compel performance, provided that no such action shall (i) violate the agreements on the part of the Company contained in the first sentence of this Section 3.6 or (ii) diminish the amounts required to be paid by the Company pursuant to Section 3.5 hereof. ARTICLE IV Particular Covenants of the Company Section 4.1. Consent to Assignment to Trustee. The Company acknowledges and consents to the assignment of the First Mortgage Bonds and of the Municipality's rights hereunder (except the right to receive payment for its expenses, the right to receive indemnities, the right to receive notices and rights relating to any amendments to this Agreement) to the Trustee pursuant to the Indenture. Except as otherwise provided herein, the Company shall pay to the Trustee all amounts payable under this Agreement and the First Mortgage Bonds, and the Company acknowledges that the Trustee may enforce the rights, remedies and privileges granted to the Municipality hereunder. Section 4.2. Payment of Expenses of Issuance of Bonds. In addition to its payment obligations under Section 3.5 of this Agreement, the Company shall pay for all the reasonable costs and shall be liable and pay for any recording expenses, legal fees, printing expenses and other fees and expenses reasonably incurred or to be incurred by or on behalf of the Commission, the Municipality and the Trustee in connection with or as an incident to the issuance and sale of the Bonds or any amendment or supplement to this Agreement or the Indenture. Section 4.3. Company to Maintain its Existence; Conditions Under Which Exceptions Permitted. The Company shall during the term of this Agreement maintain its corporate existence and will be duly qualified to transact business in the State of Indiana and shall not voluntarily take, or omit to take, any action that would cause the Company to be dissolved, nor shall the Company sell, lease transfer or otherwise dispose of all or substantially all of its assets or consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it; except that the Company may consolidate with or merge into another corporation incorporated and existing under the laws of the United States of America or one of the states of the United States of America or permit one or more other corporations to consolidate with or merge into it or sell or otherwise transfer to another such other corporation all or substantially all of its assets as an entirety and may thereafter dissolve, provided, that immediately after such action there is no default under the First Mortgage Indenture, this Agreement or the Indenture, and further provided that if the Company is not the surviving, resulting or transferee corporation (the "Survivor"), the Survivor is (a) qualified to do business in the State of Indiana and (b) shall expressly assume and agree to perform all of the Company's obligations under this Agreement, the First Mortgage Bonds and the Indenture. Section 4.4. Further Assurances and Corrective Instruments. The Municipality and the Company shall execute and deliver, or cause to be executed and delivered, such supplements hereto and further instruments as may reasonably be required for carrying out the intention of or facilitating the performance of this Agreement. Section 4.5. Covenants of Company with Respect to Use of Bond Proceeds. The Municipality is issuing the Bonds pursuant to an exemption contained in the Code. It is the intention of the parties that the interest on the Bonds remain excludable from gross income for purposes of federal income taxation and to that end the Company covenants with the Municipality and with the Trustee for the benefit of the future Holders of the Bonds, that it will never, insofar as it is able, permit Bond proceeds to be expended or utilized in such a manner as to cause the loss of the exclusion from gross income for federal income tax purposes under Section 103 of the Code. Section 4.6. Indemnification of Municipality and Trustee. The Company shall indemnify and hold the Municipality and the Trustee harmless against any claim, loss, liability or expense incurred without gross negligence or bad faith or willful misconduct on the part of the Municipality or the Trustee arising out of or in connection with this Agreement, the First Mortgage Indenture, the Indenture or the Project, including reasonable attorneys' fees and the costs and expense of defense against any such claim or liability. ARTICLE V Prepayment of First Mortgage Bonds Section 5.1. Mandatory Prepayment of First Mortgage Bonds in Event of Determination of Taxability. The Company shall prepay the amounts due under this Agreement and the First Mortgage Bonds in whole (or in part as provided below) prior to the expiration of this Agreement and prior to the full payment (or provision for full payment) of the Bonds on the earliest practicable date (selected by the Trustee) within one hundred and eighty (180) days following a Determination of Taxability (as defined in the Indenture). If there has been a Determination of Taxability but fewer than all of the Bonds are required to be redeemed under Section 501 of the Indenture, then the Company shall prepay the amounts due under this Agreement and First Mortgage Bonds only to the extent necessary to provide a sum sufficient to pay the principal and interest on the principal of the Bonds that are required to be redeemed. In the event of an obligation to prepay under this Section 5.1, the Company shall pay to the Trustee a sum sufficient, together with other funds deposited into the Bond Fund and available for the purpose, to pay the principal and interest on the principal of the Bonds to be redeemed and all reasonable and necessary fees and expenses of the Trustee and any paying agent accrued and to accrue through the redemption date. Section 5.2. Extraordinary Event Prepayment of First Mortgage Bonds. The Company may, at its option, prepay the First Mortgage Bonds in whole but not in part, without redemption premium, within one year following the occurrence of any of the events specified in Section 502(a) or (b) of the Indenture by paying the Trustee a sum sufficient, together with other funds in the Bond Fund and available for that purpose, to pay (a) the principal of and interest upon all of the Bonds then outstanding, and (b) all reasonable and necessary fees and expenses of the Trustee and the paying agent accrued and to accrue through the redemption date. In the case of a Project Taking (as defined in the Twenty-Second Supplemental Indenture), the First Mortgage Bonds may be redeemed in whole by the Company within one year after receipt of the proceeds received therefor. In the case of a Total Taking (as defined in the Twenty-Second Supplemental Indenture), that portion of the award or consideration which consists solely of cash shall be used to redeem first mortgage bonds, including the First Mortgage Bonds, within six months after the receipt thereof. In the event that the consideration or award to the Company for property so acquired by a governmental authority in the case of a Total Taking includes property other than cash, that portion of such property which is ratably applicable to the First Mortgage Bonds shall within sixty days after receipt thereof be sold for cash and the proceeds of such sale shall within six months after such Total Taking be used for redemption of the First Mortgage Bonds. In the event of a Total Taking, the First Mortgage Bonds may also be redeemed in whole, but not in part, at the option of the Company, to be exercised within one year after such purchase or taking, at one hundred percent (100%) of the principal amount thereof, together with accrued interest to the date of redemption. In the event that less than all of the Bonds are to be redeemed, the particular Bonds or portions thereof to be redeemed shall be selected by lot or by such other random means as the Trustee shall determine in its discretion. Section 5.3. Notice of Prepayment. To exercise prepayment under Section 5.2, the Company shall give written notice to the Trustee at least 60 days but not more than 90 days prior to a specified date of the prepayment. To prepay under Section 5.1, to the extent the Company is required to give notice, the Company shall give written notice to the Trustee within 30 days after the event requiring the prepayment specifying the date of the prepayment, which shall in no event be later than the date set by the Trustee for redemption of the Bonds in the Trustee's notice to the Holders of the Bonds given under Section 503 of the Indenture. If the Company fails to give timely notice of a prepayment with respect to a prepayment under Section 5.2, the Trustee shall give written notice to the Company specifying a date of prepayment not less than 15 days nor more than 60 days from the date that notice is mailed. ARTICLE VI Events of Default and Remedies Section 6.1. Events of Default. The occurrence and continuance of any of the following events shall constitute an "Event of Default" hereunder: (a) Default in the due and punctual payment of any installment of principal of or redemption premium, if any, on the First Mortgage Bonds whether at stated maturity, upon required prepayment, acceleration or otherwise; (b) Default in the due and punctual payment and for a period of five (5) days thereafter of any interest on the First Mortgage Bonds; (c) The dissolution or liquidation of the Company unless such dissolution or liquidation is permitted by this Agreement; (d) Failure by the Company to observe and perform any covenant, condition or agreement in this Agreement on its part to be observed or performed other than those referred to in Section 6.1(a), (b) or (c) for a period of sixty days after written notice, specifying the failure and requesting that it be remedied, given to the Company by the Trustee, unless the Trustee agrees in writing to an extension of the time prior to its expiration; provided, however, that with respect to this clause (d), if such failure of performance shall be such that it cannot be corrected within such period, it shall not constitute an Event of Default if: (i) such failure of performance, in the reasonable opinion of the Trustee, is correctable without material adverse effect on the Bonds; (ii) corrective action is instituted by or on behalf of the Company within such period and diligently pursued until such failure of performance is corrected; and (iii) in the reasonable opinion of the Trustee, correction of such failure of performance has not taken an unreasonable amount of time. The Trustee may request (and may rely upon) from the Company a certificate to the effect that the Company has instituted corrective action and will diligently pursue such action and believes that its failure of performance can be corrected through such action. (e) A decree or order shall have been entered by a court of competent jurisdiction constituting an order for relief under the Bankruptcy Code or adjudging the Company insolvent or approving as properly filed a petition seeking reorganization of the Company under the Bankruptcy Code or any other federal or state law relating to bankruptcy or insolvency or appointing a receiver or decreeing or ordering the winding up or liquidation of the affairs of the Company or the sequestration of a substantial part of the property of the Company, and any such decree or order shall remain in force undischarged and unstayed for period of ninety days. (f) The Company shall file a petition seeking relief under the Bankruptcy Code or shall suffer the imposition of an order thereunder or shall institute or consent to the institution of bankruptcy or insolvency proceedings against it or shall file a petition or answer or consent seeking reorganization or relief (other than as a creditor) under the Bankruptcy Code or any other federal or state law relating to bankruptcy or insolvency or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due or shall fail to pay its debts generally as they become due, or action shall be taken by the Company in furtherance of any of the aforesaid purposes. (g) An Event of Default as defined in Section 801 of the Indenture shall have occurred. (h) An Event of Default as defined in Section 4.1 of the Guaranty shall have occurred. Section 6.2. Remedies on Default. Whenever any Event of Default referred to in Section 6.1 shall have happened and be continuing, the Trustee may, and upon the written request of the owners of not less than 25% of the aggregate principal amount of the Bonds then outstanding shall, declare the First Mortgage Bonds and all amounts payable thereunder, whether by acceleration of maturity or otherwise, to be immediately due and payable. Section 6.3. Application of Moneys. All moneys collected by the Trustee under Section 6.2 shall be applied as specified in the Indenture. Section 6.4. Remedies Cumulative. No remedy granted by this Agreement is intended to be exclusive of any other remedy. All available remedies shall be cumulative. Section 6.5. Delay or Omission Not a Waiver. No delay or omission of the Trustee to exercise any right or power accruing upon any Event of Default shall impair the right or power, or shall be construed to be a waiver of the Event of Default or an acquiescence therein. Every power and remedy may be exercised as often as the Trustee deems expedient. Section 6.6. Remedies Subject to Provisions of Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that their exercise does not violate any applicable provision of law. All the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable under the provisions of any applicable law. ARTICLE VII Amendments to this Agreement Section 7.1. Amendments to this Agreement. This Agreement may be amended in accordance with Article XI of the Indenture. ARTICLE VIII Miscellaneous Section 8.1. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Municipality, the Company and their respective successors and assigns, subject to the limitations in Sections 4.3 and 8.4. Section 8.2. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, that holding shall not invalidate or render unenforceable any other provisions hereof. Section 8.3. Amounts Remaining in Bond Fund. Any amounts remaining in the Bond Fund upon expiration or termination of this Agreement in accordance with the Indenture shall belong to and be paid to the Company by the Trustee. Section 8.4. Amendments, Changes and Modifications. After the Bonds are issued and before they are paid in full (or provision for payment in full is made), this Agreement may not be amended, assigned or terminated without the written consent of the Trustee. Section 8.5. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original. Section 8.6. Notices. All notices, certificates, payments or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or overnight express mail addressed as follows: if to the Municipality, at the City-County Building, Indianapolis, Indiana, 46204, Attention of its Controller; if the Company or to the Guarantor, at 1220 Waterway Boulevard, Indianapolis, Indiana, 46202, Attention of its Treasurer; and if to the Trustee, at 101 West Washington Street, Suite 655, Indianapolis, Indiana 46255, Attention of the Corporate Trust Department; or to such other addresses as may hereafter be furnished by notice. Section 8.7. References to Bonds Ineffective After Bonds are Paid. Upon payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) and payment of all fees and charges of the Municipality, Trustee and any paying agent, all references in this Agreement to the Bonds and the Trustee shall be ineffective and neither the Trustee nor the holders of the Bonds shall thereafter have any rights hereunder, except those that shall have theretofore vested. Section 8.8. Agreement for Benefit of Parties Hereto. Nothing in this Agreement, express or implied, is intended to give to any person other than the parties hereto and the holder of the First Mortgage Bonds, any right, remedy or claim under or by reason of this Agreement. Section 8.9. Waiver. No waiver of any of the provisions of this Agreement shall be effective and binding unless set forth in a written notice and no waiver of one provision shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver or a waiver of such provision in any other instance. Section 8.10. Captions and Table of Contents. The captions herein and the Table of Contents are inserted only as a matter of convenience and do not in any way define, limit, construe or describe the scope or intent of this Agreement or any section thereof or in any other way affect this Agreement. Section 8.11. Survival of Covenants, Representations and Warranties. All covenants, representations and warranties made by the Company and the Municipality contained herein or in any other document, certificate or instrument delivered in connection with the sale of any of the Bonds shall be continuing and shall survive delivery of the Bonds and the other transactions contemplated by this Agreement and the Indenture. Section 8.12. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. Section 8.13. Holidays. Where a date of payment on the First Mortgage Bonds is not a Business Day, then payment may be made on the first Business Day thereafter. IN WITNESS WHEREOF, the Municipality and the Company have caused this Agreement to be executed all as of the date first above written. CITY OF INDIANAPOLIS, INDIANA (SEAL) By:____________________________________ Stephen Goldsmith, Mayor ____________________________________ Beverly S. Rippy, Clerk INDIANAPOLIS WATER COMPANY By:__________________________________ J. A. Rosenfeld Senior Vice President and Treasurer ___________________________________ Joseph W. Jordan, Secretary EX-10.15 7 GUARANTY AGREE; IWCR AND NAT'L CITY BANK GUARANTY AGREEMENT BETWEEN IWC RESOURCES CORPORATION AND NATIONAL CITY BANK, INDIANA AS TRUSTEE DATED AS OF APRIL 1, 1993 THIS GUARANTY AGREEMENT is entered into as of April 1, 1993 (the "Guaranty" or "Agreement"), by IWC Resources Corporation, an Indiana corporation (the "Guarantor") in favor of National City Bank, Indiana (the "Trustee"), as trustee under the Indenture of Trust dated as of April 1, 1993, by and among the City of Indianapolis, Indiana (the "Municipality"), the Indianapolis Water Company (the "Company") and the Trustee (the "Indenture"). RECITALS 1. The Municipality intends to issue its City of Indianapolis, Indiana Economic Development Water Facilities Refunding Revenue Bonds, Series 1993 (Indianapolis Water Company Project) in an aggregate principal amount of $11,600,000 (the "Bonds") pursuant to IC 5-1-5, IC 36-7-11.9 and IC 36-7-12 and under the Indenture. 2. The Bonds are being issued to assist the Company, a subsidiary of the Guarantor, with the retirement, discharge and termination of its obligations and liabilities under and in connection with the 6-1/4% City of Indianapolis, Indiana Economic Development Water Facilities Revenue Bonds, 1974 Series (Indianapolis Water Company Project). The Guarantor desires that the Municipality enter into the Loan Agreement dated as of April 1, 1993 (the "Loan Agreement"), between the Municipality and the Company pursuant to which the proceeds from the sale of the Bonds will be loaned to the Company for the purposes described herein. The Guarantor is willing to enter into and deliver this Guaranty in order to induce the Municipality to issue the Bonds and as an inducement to purchasers of the Bonds to purchase the Bonds. 3. Capitalized terms not specifically defined herein but defined in the Indenture or in the Loan Agreement shall, for purposes of this Agreement, have the meanings ascribed to them in the Indenture or the Loan Agreement. AGREEMENT In consideration of the premises and mutual covenants contained herein, the Guarantor agrees with the Trustee as follows: ARTICLE I Section 1.1. Representations of the Guarantor. The Guarantor represents and warrants to the Trustee for the benefit of the holders of the Bonds that: (a) The Guarantor is a corporation duly organized and validly existing under the laws of the State of Indiana. (b) The Guarantor is licensed or qualified to do business in each state in which the ownership of property or the transaction of business by the Guarantor requires that the Guarantor be licensed or qualified. (c) The Guarantor has full right, power and authority to enter into, execute and deliver this Agreement and to perform its obligations hereunder. (d) No authorization, approval, consent or license of any governmental body or authority, not already obtained, is required for the valid and lawful execution and delivery by the Guarantor of this Agreement and the performance of the obligations of the Guarantor hereunder. (e) The execution and delivery by the Guarantor of this Agreement and the performance by the Guarantor hereunder will not conflict with or constitute a breach of or default under the Guarantor's Articles of Incorporation or Bylaws, or any material indenture, agreement or other instrument to which the Guarantor or any of its subsidiaries is a party or by which any of them or their properties are bound or are subject. (f) No event has occurred which, with the lapse of time or the giving of notice or both, would give any creditor of the Guarantor the right to accelerate the maturity of any of the Guarantor's outstanding indebtedness for money borrowed. (g) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or, to the knowledge of the Guarantor, threatened against the Guarantor (or, to the knowledge of the Guarantor, any meritorious basis therefor) wherein the Guarantor believes that an unfavorable decision is reasonably likely, which would have a material adverse effect on the financial condition of the Guarantor and its consolidated subsidiaries taken as a whole, the operation by the Guarantor of its properties, or the corporate existence or powers of the Guarantor. (h) The Guarantor is in compliance in all material respects with all applicable Federal, state and local laws, rules, regulations, orders and decrees relating to the conduct of its business as currently conducted, and no order, decree, judgment, fine or penalty has been issued, assessed or threatened based upon any violation or alleged violation of any of the foregoing that the Guarantor believes could have a material adverse effect on the financial condition of the Guarantor and its consolidated subsidiaries taken as a whole and Guarantor is not aware of any meritorious basis for any such order,decree, judgment, fine or penalty. (i) Neither the Guarantor nor, to the knowledge of the Guarantor, any other party thereto is in default in any material respect under any lease, contract or agreement to which the Guarantor or any of its consolidated subsidiaries is a party and which default materially and adversely affects the business, properties or financial condition of the Guarantor and its consolidated subsidiaries taken as a whole; and no event has occurred which, with the passage of time or the giving of notice or both, would constitute a material default by the Guarantor thereunder. (j) Guarantor and its consolidated subsidiaries have good and marketable title to all real and personal property described in the financial statements of Guarantor included or incorporated by reference in the Official Statement as being owned by them, in each case free and clear of all liens, encumbrances and defects except for the lien of the First Mortgage Indenture dated as of July 1, 1936 between the Company and Fidelity Bank, National Association on property of the Company, and the liens and encumbrances permitted thereby, and except such other liens and encumbrances on such property owned by the Guarantor and its consolidated subsidiaries as do not materially adversely affect the value of such property and do not materially interfere with the use made and proposed to be made of such property; and the real properties held under lease by the Guarantor or its consolidated subsidiaries are held under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the conduct of the business of the Guarantor and its consolidated subsidiaries. (k) To the best knowledge of the Guarantor, the Guarantor and its consolidated subsidiaries own or possess or are licensed under all the patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and rights necessary for the present and planned future conduct of their business. (l) To the best knowledge of the Guarantor, KPMG Peat Marwick are independent public accountants as required by the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder. (m) The financial statements included or incorporated by reference in the Official Statement have been prepared in accordance with generally accepted accounting principles applied on a consistent basis except for the changes in accounting principles noted therein, if any, and fairly present the consolidated financial position of the Guarantor and its consolidated subsidiaries, the consolidated results of its operations and its cash flows at the dates and for the periods indicated. (n) Except as set forth or contemplated in the Official Statement, since December 31, 1992 (i) neither the Guarantor nor any of its consolidated subsidiaries has sustained any loss or interference with its business from fire, explosion, flood or any labor dispute or court or governmental action, order or decree and (ii) there has been no change in the capital stock or increase in short-term debt or long-term debt, of the Guarantor and its consolidated subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the general affairs, management, properties, financial position, preferred or common stockholders' equity or results of operations of the Guarantor and its consolidated subsidiaries taken as a whole, which in any such case described in clause (i) or (ii) is material to the Guarantor and its consolidated subsidiaries taken as a whole. (o) The Guarantor acknowledges that the execution and delivery by it of this Guaranty Agreement is an essential inducement to the Municipality to issue and sell the Bonds and to the purchasers of the Bonds to purchase the Bonds and that the issuance and sale of the Bonds and the loan of the proceeds thereof to the Company will result in a material financial benefit to the Guarantor. (p) Guarantor has filed or caused to be filed all federal, state and local tax returns for such periods that returns have been required and has paid when due or reserved for in such financial statements all such taxes, excepting only those as are being contested in good faith. (q) The Official Statement does not, as of its date, contain any untrue statement of material fact or omit to include any statement of material fact necessary in order to make the statements therein not misleading. (r) This Guaranty Agreement is the legal, valid and binding agreement of the Guarantor enforceable in accordance with its terms, subject to all laws relating to bankruptcy, moratorium, receivership and creditors' rights generally and further to general principles of equity. ARTICLE II Covenants and Agreements Section 2.1. Guaranty of Payment. The Guarantor unconditionally guarantees to the Trustee for the benefit of the holders of the Bonds: (a) the full and prompt payment of the principal of and premium, if any, on each Bond when and as the payment shall become due, whether at maturity, by acceleration, call for redemption or otherwise; (b) the full and prompt payment of interest on each Bond when and as the payment shall become due; and (c) the full and prompt payment upon demand of any charges and expenses of the Trustee and the Municipality required to be paid under the Loan Agreement and the Indenture. All amounts collected by the Trustee under this Agreement shall be deposited into the Bond Fund created under the Indenture. Section 2.2. Obligations Absolute. The obligations of the Guarantor shall be absolute and unconditional and shall remain in full force and effect until the entire principal of and premium, if any, and interest on the Bonds, and all charges and expenses of the Trustee and the Municipality covered by this Guaranty have been paid or provided for. The obligations of the Guarantor shall not be affected by the happening of any event, including without limitation any of the following, whether or not with notice to, or the consent of, the Guarantor: (a) the compromise, settlement, release or termination of any or all of the obligations of the Company, the Municipality or the Trustee under this Guaranty, the Loan Agreement, the First Mortgage Indenture or the Indenture; (b) the failure to give notice to the Guarantor of the occurrence of an event of default under this Guaranty, the Loan Agreement, the First Mortgage Indenture or the Indenture; (c) the assignment of any interest of the Municipality in the Loan Agreement; (d) the waiver of the performance or the performance by the Municipality, the Trustee, the Company or the Guarantor of any of the obligations of any of them under the Loan Agreement, the Indenture, the First Mortgage Indenture or this Guaranty; (e) the extension of the time for payment of any principal of or premium, if any, or interest on any Bond or under this Guaranty or of the time for performance of any other obligations under the Indenture, the Loan Agreement, the First Mortgage Indenture or this Guaranty; (f) the modification of any provision of the Loan Agreement, the First Mortgage Indenture or the Indenture; (g) the taking or the omission of any of the actions referred to in the Loan Agreement, the First Mortgage Indenture, the Indenture or in this Guaranty; (h) any failure or delay on the part of the Municipality or the Trustee to exercise any right of the Municipality or the Trustee under this Guaranty, the Loan Agreement, the First Mortgage Indenture, or the Indenture, or any other act by the Municipality, the Trustee or any of the holders of the Bonds; (i) the liquidation, dissolution, sale or other disposition of all or substantially all the assets of the Company or the Guarantor, or, receivership, insolvency, bankruptcy or other similar proceedings affecting the Company, the Guarantor or the Municipality, or any contest of the validity of this Guaranty, the Loan Agreement, the First Mortgage Indenture, or the Indenture in any such proceeding or the Guarantor's ownership of the Company; (j) the failure of the Guarantor fully to perform any of its obligations under this Guaranty. Section 2.3. No Setoff, Etc.. No setoff, counterclaim or reduction of an obligation, or any defense of any kind which the Guarantor or the Company may have against the Municipality or the Trustee shall be available to the Guarantor against the Trustee or any holder of any Bond in any action to enforce this Guaranty. Section 2.4. Notice of Acceptance; Costs of Enforcement. The Guarantor waives notice from the Trustee or the holders of any of the Bonds of their acceptance and reliance on this Guaranty. The Guarantor agrees to pay all costs, expenses and fees, including all reasonable attorneys' fees, which may be incurred by the Trustee in enforcing or attempting to enforce this Guaranty following any default on the part of the Guarantor, whether the enforcement is by suit or otherwise. Section 2.5. Guaranty for Benefit of Bondholders. This Guaranty is entered into by the Guarantor for the benefit of the Trustee and the holders of the Bonds and any successor trustee or trustees under the Indenture, all of whom shall be entitled to enforce performance of this Guaranty to the same extent as if they were parties to it. ARTICLE III Particular Covenants of the Guarantor Section 3.1. Guarantor to Maintain its Existence; Conditions Under Which Exceptions Permitted. The Guarantor shall, during the term of this Agreement, maintain its corporate existence and be and remain duly qualified to transact business in the State of Indiana and shall not voluntarily take, or omit to take, any action that would cause the Guarantor to be dissolved, nor shall the Guarantor sell, lease, transfer or otherwise dispose of all or substantially all of its assets or consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it; except that the Guarantor may consolidate with or merge into another corporation incorporated and existing under the laws of the United States of America or one of the states of the United States of America or permit one or more other such corporations to consolidate with or merge into it or sell or otherwise transfer to another such other corporation all or substantially all of its assets as an entirety and may thereafter dissolve, provided, that immediately after such action there is no default under this Agreement and further provided that if the Guarantor is not the surviving, resulting or transferee corporation (the "Survivor"), the Survivor (a) is qualified to do business in the State of Indiana and (b) shall concurrently with the consummation thereof expressly assume in writing and agree to perform all of the Guarantor's obligations under this Agreement and deliver a copy of such written assumption and agreement to the Trustee. Section 3.2. Further Assurances and Corrective Instruments. The Guarantor shall execute and deliver, or cause to be executed and delivered, such supplements hereto and further instruments as may reasonably be required for carrying out the intention of or facilitating the performance of this Agreement. Section 3.3. Reports, Certificates and Other Information. The Guarantor shall furnish to the Trustee and the Purchaser (except for the materials referred to in subsection (c)), during the term of this Agreement: (a) Annual Statements. As soon as available and in any event within one hundred twenty days after the close of each fiscal year of the Guarantor ending after the date of this Agreement, copies of the consolidated balance sheet of the Guarantor, and consolidated statements of income and retained earnings and statements of consolidated cash flows of the Guarantor for such fiscal year, each of which shall be audited by the Guarantor's independent public accountants and shall set forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and shall be accompanied by a report thereon of such accountants that such financial statements present fairly the consolidated financial position, results of operations and cash flows of the Guarantor and its subsidiaries as of the date of such statements. (b) Quarterly Statements. As soon as available, and in any event within sixty days after the close of each calendar quarter ending after the date of this Agreement (except the last quarter of each fiscal year), copies of the consolidated balance sheet of the Guarantor as of the end of such quarter, and consolidated statements of income and retained earnings and statements of consolidated cash flows of the Guarantor for the portion of the fiscal year ended as of the end of such quarter. All such statements may be prepared internally and shall be accompanied by a certificate of an appropriate officer of the Guarantor that such financial statements have been prepared in material conformity with generally accepted accounting principles consistently applied (except for changes in which the independent accountants for the Guarantor concur), and present fairly the financial position of the Guarantor and its subsidiaries as of the dates of such statements. (c) No Default Certificate. Concurrently with providing such financial statements, a certificate of the President, a Vice President or the Treasurer of the Guarantor that after reasonable investigation he has no knowledge of the occurrence of any Event of Default under this Agreement (or of any event that with the lapse of time or the giving of notice would constitute an Event of Default), or if such officer shall have obtained knowledge of any such Event of Default or default, he shall disclose the same in such certificate and the nature thereof. (d) Proxy Statements, etc.. Concurrently with the mailing of its proxy statement to its shareholders and any Current Report on Form 8-K to the Securities and Exchange Commission, a copy of such documents. ARTICLE IV Events of Default and Remedies Therefor Section 4.1. Events of Default. The occurrence and continuance of any of the following events shall constitute an "Event of Default" under this Guaranty: (a) Default shall be made in the due and prompt payment of the principal of, or premium on, the Bonds when and as the payment shall become due and payable, whether at maturity, by acceleration, call for redemption or otherwise; (b) Default shall be made in the due and punctual payment of any installment of interest on the Bonds, when and as payment shall become due and payable and such default shall continue for a period of five (5) days thereafter; (c) Default shall be made in the performance or observance of any other of the covenants, agreements, or conditions contained in this Guaranty and the default shall continue for a period of sixty (60) days after written notice thereof to the Guarantor by the Trustee, provided, however, that with respect to this clause (c), if such failure of performance or observance shall be such that it cannot be corrected within such period, it shall not constitute an Event of Default if: (i) in the reasonable opinion of the Trustee, such failure of performance or observance is correctable without material adverse effect on the Bonds, (ii) corrective action is instituted by or on behalf of the Guarantor within such period and is diligently pursued until such failure of performance or observance is corrected, and (iii) in the reasonable opinion of the Trustee, correction of such failure of performance has not taken an unreasonable amount of time. The Trustee may request (and may rely upon) from the Guarantor a certificate to the effect that the Guarantor has instituted corrective action and will diligently pursue such action and believes that its failure of performance or observance can be corrected through such action; (d) A decree or order shall have been entered by a court of competent jurisdiction constituting an order for relief under the Bankruptcy Code or adjudging the Guarantor insolvent or approving as properly filed a petition seeking reorganization of the Guarantor under the Bankruptcy Code or any other federal or state law relating to bankruptcy or insolvency or appointing a receiver or decreeing or ordering the winding up or liquidation of the affairs of the Guarantor or the sequestration of a substantial part of the property of the Guarantor, and any such decree or order shall remain in force undischarged and unstayed for a period of ninety days; (e) The Guarantor shall file a petition seeking relief under the Bankruptcy Code or shall suffer the imposition of an order thereunder or shall institute or consent to the institution of bankruptcy or insolvency proceedings against it or shall file a petition or answer or consent seeking reorganization or relief (other than as a creditor) under the Bankruptcy Code or any other federal or state law relating to bankruptcy or insolvency or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due or shall fail to pay its debts generally as they become due, or action shall be taken by the Guarantor in furtherance of any of the aforesaid purposes. Section 4.2. Suits for Enforcement. In case any one or more of the events of default specified in Section 4.1 shall happen and be continuing, the Trustee may proceed to protect and enforce its rights on behalf of holders of the Bonds either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, condition or agreement contained in this Guaranty or in aid of the exercise of any power granted in this Guaranty or to enforce any other legal or equitable right of the holders of the Bonds. Each default in payment shall give rise to a separate cause of action, and separate suits may be brought as each cause of action arises. ARTICLE V Miscellaneous Section 5.1. Obligations Arise. The obligations of the Guarantor under this Guaranty shall arise absolutely and unconditionally when the Bonds shall have been issued, sold and delivered by the Municipality and the proceeds paid to the Trustee. This Guaranty shall bind the successors, assigns and legal representatives of the Guarantor. Section 5.2. Remedies Not Exclusive. No remedy given to the Trustee in this Guaranty is intended to be exclusive of any other available remedy or remedies. Every available remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any right or power or shall be construed to be a waiver thereof, but any right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy, it shall not be necessary to give any notice, other than a notice expressly required. In the event any provision in this Guaranty should be breached by the Guarantor and thereafter waived by the Trustee, the waiver shall be limited to the particular breach and shall not be deemed to waive any other breach. Section 5.3. Amendments. No waiver, amendment, release or modification of this Guaranty shall be established by conduct, custom or course of dealing, but solely by an instrument in writing executed by the Trustee. The Trustee shall not consent to any amendment of this Guaranty, other than an amendment necessary to cure for the benefit of the holders of the Bonds any ambiguity, formal defect or omission, without notice and the written approval or consent of the holders of not less than a majority in aggregate principal amount of the Bonds at the time outstanding given. Section 5.4. Entire Agreement. This Guaranty constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and may be executed simultaneously in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Section 5.5. Notices. All notices, certificates, payments or other communications shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or by express mail addressed as follows: if to the Trustee at National City Bank, Indiana, Indianapolis, Indiana, and if to the Guarantor at 1220 Waterway Boulevard, Indianapolis, Indiana 46202, attention of its Treasurer. Section 5.6. Invalidity. The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections in this Guaranty, or the invalidity or unenforceability of the Loan Agreement, Bonds, First Mortgage Indenture, First Mortgage Bonds, or the Indenture, shall not affect the validity or enforceability of the remaining portions of this Guaranty, or any part thereof. Section 5.7. Applicable Law. This Guaranty shall be governed by and construed in accordance with the laws of the State of Indiana. IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of April 1, 1993. IWC RESOURCES CORPORATION By:___________________________ J. A. Rosenfeld Senior Vice President and Treasurer ______________________________ Joseph W. Jordan, Secretary Accepted as of this 1st day of April, 1993 by National City Bank, Indiana, as Trustee. By:___________________________ Faith Berning, Vice President (SEAL) ATTEST: By:___________________________ EX-10.16 8 AGREE 4 OPER/MAINT OF CITY WASTEWATER FAC AGREEMENT FOR THE OPERATION AND MAINTENANCE OF THE CITY OF INDIANAPOLIS, INDIANA ADVANCED WASTEWATER TREATMENT FACILITIES TABLE OF CONTENTS Article Page ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . 2 Section 1.01. Agreement Year . . . . . . . . . . . . . . 2 Section 1.02. Annual Fee . . . . . . . . . . . . . . . . 2 Section 1.03. AWT Facilities . . . . . . . . . . . . . . 2 Section 1.04. Beginning Inventory . . . . . . . . . . . 2 Section 1.05. Capital Expenditures . . . . . . . . . . . 2 Section 1.06. Capital Improvements . . . . . . . . . . . 2 Section 1.07. Contractor's Proposal . . . . . . . . . . 2 Section 1.08. Contract Compliance Officer ("CCO") . . . 2 Section 1.09. Effective Date . . . . . . . . . . . . . . 3 Section 1.10. Equipment . . . . . . . . . . . . . . . . 3 Section 1.11. Event of Default . . . . . . . . . . . . . 3 Section 1.12. Extraordinary Event of Default . . . . . . 3 Section 1.13. For Cause . . . . . . . . . . . . . . . . 3 Section 1.14. NPDES Permit . . . . . . . . . . . . . . . 3 Section 1.15. Operation and Maintenance Costs . . . . . 4 Section 1.16. Partnership Agreement . . . . . . . . . . 4 Section 1.17. Permits . . . . . . . . . . . . . . . . . 4 Section 1.18. Repair and Replacement Fund . . . . . . . 4 Section 1.19. Termination Date . . . . . . . . . . . . . 4 Section 1.20. Unforeseen Circumstances . . . . . . . . . 4 Section 1.21. Vehicles . . . . . . . . . . . . . . . . . 5 ARTICLE II. EMPLOYMENT OF CONTRACTOR . . . . . . . . . . . 5 ARTICLE III. TERM OF AGREEMENT . . . . . . . . . . . . . . . 5 Section 3.01. Term . . . . . . . . . . . . . . . . . . . 5 Section 3.02. Termination by the City . . . . . . . . . 5 Section 3.03. Termination by the Contractor . . . . . . 6 Section 3.04. Termination for Failure of Funding . . . . 6 ARTICLE IV. REPRESENTATIONS OF CONTRACTOR, PARTNERS AND PARENT COMPANIES . . . . . . . . . . . . . . . 6 Section 4.01. Partnership; Authorization; etc. . . . . . 6 Section 4.02. Litigation . . . . . . . . . . . . . . . . 7 Section 4.03. No Default . . . . . . . . . . . . . . . . 8 Section 4.04. Inspection and Review of AWT Facilities. . .8 Section 4.05. Accuracy of Contractor Representations . . 8 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF CITY . . . . 9 Section 5.01. Organization; Authorization; etc. . . . . 9 Section 5.02. Litigation. . . . . . . . . . . . . . . . 9 Section 5.03. No Default. . . . . . . . . . . . . . . 10 Section 5.04. Compliance with Law. . . . . . . . . . . 10 Section 5.05. Accuracy of City Representations. . . . 10 Section 5.06. AWT Facilities. . . . . . . . . . . . . 11 ARTICLE VI. COVENANTS OF THE CONTRACTOR; CITY CONSENTS AND COOPERATION . . . . . . . . . . . . . . . . . 11 Section 6.01. Control of Partnership . . . . . . . . . 11 Section 6.02. Assignment of Partnership Interests . . 11 Section 6.03. No Amendments to Partnership Agreement . 11 Section 6.04. Restrictions on Subcontracting . . . . . 11 Section 6.05. Compliance with Law . . . . . . . . . . 12 Section 6.06. Environmental Compliance . . . . . . . . 12 Section 6.07. Delivery of Reports; Cooperation with City . . . . . . . . . . . . . . . . . . 13 Section 6.08. Meetings with CCO . . . . . . . . . . . 13 Section 6.09. Transition . . . . . . . . . . . . . . . 13 Section 6.10. Adequate Staffing . . . . . . . . . . . 13 Section 6.11. Odor Control . . . . . . . . . . . . . . 14 Section 6.12. Predictive, Preventive, Corrective and Routine Maintenance . . . . . . . . . . 14 Section 6.13. Training of AWT Employees . . . . . . . 14 Section 6.14. Safety and Protection . . . . . . . . . 15 Section 6.15. Community Relations and Training Center 15 Section 6.16. Process and Operational Changes . . . . 15 Section 6.17. Minority and Women-Owned Business Participation . . . . . . . . . . . . . 16 Section 6.18. Dechlorination . . . . . . . . . . . . . 16 Section 6.19. Partners to Pursue Wastewater Privatization Opportunities . . . . . . 16 Section 6.20. Wet Weather Operating Plan . . . . . . . 16 ARTICLE VII. MAINTENANCE AND OPERATIONS . . . . . . . . . 16 Section 7.01. Operation of the AWT Facilities . . . . 17 Section 7.02. Maintenance of the AWT Facilities . . . 21 Section 7.03. Repair and Replacement Fund . . . . . . 22 Section 7.04. Capital Expenditures . . . . . . . . . . 24 Section 7.05. Inventory . . . . . . . . . . . . . . . 24 Section 7.06. Vehicles . . . . . . . . . . . . . . . . 25 Section 7.07. Reporting Requirements . . . . . . . . . 25 ARTICLE VIII. COMPENSATION . . . . . . . . . . . . . . . . 25 Section 8.01. Annual Fee . . . . . . . . . . . . . . . 25 Section 8.02. Utility Savings . . . . . . . . . . . . 26 Section 8.03. Adjustment for Hydraulic and Organic Loadings . . . . . . . . . . . . . . . . 26 Section 8.04. Accounting System and Financial Data . . 26 Section 8.05. Capital Improvement Plan . . . . . . . . 26 Section 8.06. Regulatory Adjustments . . . . . . . . . 27 Section 8.07. Additional Services . . . . . . . . . . 27 ARTICLE IX. PERSONNEL . . . . . . . . . . . . . . . . . . 28 Section 9.01. Contractor to Interview AWT Employees . 28 Section 9.02. Comparable Employment . . . . . . . . . 28 Section 9.03. Personnel Changes by Contractor . . . . 28 Section 9.04. Worker Assistance Program . . . . . . . 29 Section 9.05. Nondiscrimination in Employment . . . . 29 Section 9.06. No Restriction on Employment . . . . . . 29 Section 9.07. City not Employer . . . . . . . . . . . 29 ARTICLE X. DEFAULTS AND REMEDIES . . . . . . . . . . . . 30 Section 10.01. Event of Default . . . . . . . . . . . . 30 Section 10.02. Notice and Cure . . . . . . . . . . . . 30 Section 10.03. Remedies . . . . . . . . . . . . . . . . 31 Section 10.04. Extraordinary Event of Default . . . . . 31 ARTICLE XI. LIMITATIONS . . . . . . . . . . . . . . . . . 32 Section 11.01. Possession of AWT Facilities . . . . . . 32 Section 11.02. Access to the AWT Facilities . . . . . . 32 Section 11.03. Control . . . . . . . . . . . . . . . . 32 ARTICLE XII. DISPUTE RESOLUTION . . . . . . . . . . . . . 32 ARTICLE XIII. EXPANSION AND MODIFICATION . . . . . . . . . 33 Section 13.01. Purpose . . . . . . . . . . . . . . . . 33 Section 13.02. Notice and Negotiation . . . . . . . . . 33 Section 13.03. Absence of Agreement . . . . . . . . . . 33 ARTICLE XIV. INSURANCE . . . . . . . . . . . . . . . . . . 33 Section 14.01. Contractor to Provide Insurance . . . . 33 Section 14.02. Special Conditions . . . . . . . . . . . 34 ARTICLE XV. INDEMNIFICATION . . . . . . . . . . . . . . . 34 Section 15.01. Contractor to Indemnify City . . . . . . 34 Section 15.02. City to Indemnify Contractor . . . . . . 35 Section 15.03. Fines and Penalties . . . . . . . . . . 35 Section 15.04. Co-Negligence . . . . . . . . . . . . . 35 Section 15.05. Demand for Indemnification . . . . . . . 35 Section 15.06. Survival of Obligations . . . . . . . . 36 ARTICLE XVI. MISCELLANEOUS . . . . . . . . . . . . . . . . 36 Section 16.01. Entire Agreement and Amendment . . . . . 36 Section 16.02. Waiver . . . . . . . . . . . . . . . . . 37 Section 16.03. City's Ability to Waive Certain Provisions . . . . . . . . . . . . . . . 37 Section 16.04. Remedies . . . . . . . . . . . . . . . . 37 Section 16.05. Controlling Law . . . . . . . . . . . . 37 Section 16.06. Notices . . . . . . . . . . . . . . . . 37 Section 16.07. Binding Nature of Agreement; No Assignment . . . . . . . . . . . . . . . 39 Section 16.08. Nature of Relationship . . . . . . . . . 40 Section 16.09. Execution in Counterparts . . . . . . . 40 Section 16.10. Provisions Separable . . . . . . . . . . 40 Section 16.11. Section and Paragraph Headings . . . . . 40 Section 16.12. Gender . . . . . . . . . . . . . . . . . 40 Section 16.13. Sections . . . . . . . . . . . . . . . . 40 Section 16.14. Number of Days . . . . . . . . . . . . . 40 Section 16.15. Consents . . . . . . . . . . . . . . . . 41 THIS AGREEMENT FOR THE OPERATION AND MAINTENANCE OF THE CITY OF INDIANAPOLIS, INDIANA, ADVANCED WASTEWATER TREATMENT FACILITIES ("Agreement"), dated as of December 20, 1993, and executed by (i) the City of Indianapolis ("City"), acting by and through the Department of Public Works of the City of Indianapolis ("Department"), (ii) White River Environmental Partnership, an Indiana general partnership having its principal place of business in Indianapolis, Indiana ("Contractor"), (iii) LAH White River Corporation, JMM White River Corporation and IWC Services, Inc. (collectively, "Partners"), and (iv) IWC Resources Corporation, GWC Operational Services, Inc., JMM Operational Services, Inc., Lyonnaise American Holdings, Inc., Lyonnaise des Eaux-Dumez, GWC Corporation ("GWC") and Montgomery Watson Americas, Inc. (collectively, "Parent Companies"), WITNESSETH PREAMBLE WHEREAS, the City owns and is responsible for the operation and maintenance of the Belmont and Southport Advanced Wastewater Treatment Facilities (collectively, "AWT Facilities," as described in Appendix "A" hereto); and WHEREAS, the City desires to have the AWT Facilities maintained and operated in the most efficient manner possible, while complying with all Federal, State and local laws, rules and regulations; and WHEREAS, the efficient operation and maintenance of the AWT Facilities require unique and specialized professional skills together with experience in new technologies and engineering expertise; and WHEREAS, the City desires to maintain ownership of the AWT Facilities and to contract for operation and maintenance of the AWT Facilities with a private contracting firm which has the specialized professional skills and experience to operate the AWT Facilities in the most efficient manner possible; and WHEREAS, the Contractor responded to the Request for Proposal issued by the City for operation and maintenance of the AWT Facilities; and WHEREAS, the Contractor has available to it experienced professionals in the business of supplying operation, maintenance and management services for facilities such as the AWT Facilities; and WHEREAS, the City and the Contractor wish to enter into this Agreement setting forth their respective rights, duties, privileges and responsibilities, NOW, THEREFORE, in consideration of the mutual promises and commitments hereinafter described, the City and the Contractor AGREE as follows: ARTICLE I. DEFINITIONS Section 1.01. Agreement Year. The period commencing with the Effective Date and ending at 12:00 midnight on the anniversary date of the Effective Date and, for each successive Agreement Year thereafter, the period commencing on 12:00 midnight on the anniversary date of the Effective Date and ending on 12:00 midnight of the next succeeding anniversary date of the Effective Date. Section 1.02. Annual Fee. The fee as described in Article VIII of this Agreement. Section 1.03. AWT Facilities. The City of Indianapolis Advanced Wastewater Treatment Facilities, consisting of the Belmont Plant and the Southport Plant, and any additions to and interconnection between the two plants or replacements thereof (including Capital Improvements), owned by the City and operated and maintained by the Contractor, all as further described in Appendix A to this Agreement. Section 1.04. Beginning Inventory. The spare parts, tools, materials and supplies at the AWT Facilities on the Effective Date, which are intended to be used by the Contractor and are identified in Appendix C to this Agreement. Section 1.05. Capital Expenditures. The cost of new Capital Improvements and major repairs and replacements, including material and contract labor, for the AWT Facilities, the individual cost of which exceeds $25,000. Section 1.06. Capital Improvements. The improvements to the AWT Facilities made pursuant to the City's Capital Improvement Plan, including all Equipment and components thereof, and major repairs and replacements to the AWT Facilities resulting from Capital Expenditures. Section 1.07. Contractor's Proposal. The Proposal for Contract Operations and Maintenance of the Advanced Wastewater Treatment Facilities submitted by the Contractor to the City, August 26, 1993, as supplemented and amended by letters from the Contractor to Joseph E. DeGroff, on the City's behalf, dated November 5 and November 9, 1993. Section 1.08. Contract Compliance Officer ("CCO"). The person selected by the City to act as the liaison between the City and the Contractor for purposes of this Agreement. Section 1.09. Effective Date. The date on which the Contractor takes responsibility for the day-to-day operation and maintenance of the AWT Facilities, which date shall be January 30, 1994, unless mutually agreed otherwise by the City and the Contractor. Section 1.10. Equipment. All Vehicles, machinery, structures, components, parts, and materials contained within the AWT Facilities which are utilized in the operation and maintenance of the AWT Facilities. Section 1.11. Event of Default. The occurrences described in Article X hereof which constitute an Event of Default under this Agreement. Section 1.12. Extraordinary Event of Default. The operation and maintenance, or lack thereof, of the AWT Facilities by the Contractor in such a manner as to create a situation which poses a potential for a real and serious threat to the health and public welfare of the City and its citizens, or which would seriously jeopardize the operational capacity or integrity of the AWT Facilities. Section 1.13. For Cause. An act by the Contractor, not caused by Unforeseen Circumstances, giving the City the right to terminate the Agreement pursuant to Section 3.02, including (i) an uncured Event of Default by the Contractor; (ii) an uncured violation by the Contractor of any Permits, law, rule or regulation in connection with the operation of the AWT Facilities or uncured failure to comply with an order of any court or administrative agency; or (iii) any willful act or omission which would constitute a crime under applicable law. Section 1.14. NPDES Permit. Any permit issued to the City of Indianapolis, in accordance with Section 402 and related provisions of the Clean Water Act, as amended by Pub.L. 92-500, Pub.L. 95-217, Pub.L. 95-576, Pub.L. 96-483 and Pub.L. 97-117 (33 U.S.C. 1251 et seq.), and Public Law 100, Acts of 1972, as amended (Indiana Code 13-7, et seq.), and implementing regulations, to authorize the discharges from the AWT Facilities, which is in effect at any time during the term of this Agreement, including any revision or modification to such a permit or any superseding permit which is issued and becomes effective during the term of this Agreement. As of the Effective Date, "NPDES Permit" means, with respect to the Belmont plant, NPDES Permit No. IN 0023183, issued by the Indiana Department of Environmental Management (IDEM) to the City on or about September 30, 1985, and, with respect to the Southport plant, NPDES Permit No. IN 0031950, issued by the IDEM to the City on or about September 30, 1985. Section 1.15. Operation and Maintenance Costs. All direct costs and expenses of operation and maintenance of the AWT Facilities, including, but not limited to, utility costs, energy costs, chemicals, direct labor, salaries and wages, employee benefits, direct overhead, repair and maintenance of Equipment, parts, materials and supplies, grounds, roads, gates, fences, laboratory operation and related expenses, taxes (excluding federal income and state tax of the Contractor), invoice and collection expenses, legal, accounting and other professional fees, insurance and bonding, licenses and permits, costs of processing, transportation and disposal of all sludge within the Belmont Plant and all other costs not described above associated with the operation and maintenance of the AWT Facilities. Section 1.16. Partnership Agreement. The Partnership Agreement, dated as of August 20, 1993, by and among LAH White River Corporation, an Indiana corporation, JMM White River Corporation, an Indiana corporation, and IWC Services, Inc., an Indiana corporation. Section 1.17. Permits. All regulatory permits and licenses to which the AWT Facilities and their operation are subject, as listed in Appendix D hereto, including, without limitation, the City's NPDES Permits. Section 1.18. Repair and Replacement Fund. The funds established by the City pursuant to this Agreement to provide for the costs of major repairs and maintenance, exclusive of Capital Expenditures, and other non-repetitive, non-routine activities required for the operational continuity of the AWT Facilities, continued compliance with local, state and federal ordinances, laws and regulations, and safety or continued performance generally due to failure, or to avert the failure, of the AWT Facilities or some component or integral part thereof. The Repair and Replacement Fund shall not include those activities set forth in the schedule referenced in Section 6.12 and shall not be used to cover any direct or indirect labor costs of the Contractor, except as agreed upon in advance by the City and Contractor. Section 1.19. Termination Date. The date on which this Agreement terminates and is no longer in force or effect, which date shall be five years from the Effective Date unless earlier terminated as provided herein. Section 1.20. Unforeseen Circumstances. Any event or condition which has an effect on the rights or obligations of the parties under this Agreement, or upon the AWT Facilities, including their operation and maintenance, which is beyond the reasonable control of the party relying thereon as justification for a delay in, or non-performance of, action required under this Agreement, including but not limited to (i) an act of God, landslide, lightning, earthquake, tornado, fire, explosion, flood (beyond the limits set forth in the NPDES Permit), acts of a public enemy, war, blockade, sabotage, insurrection, riot or civil disturbance; (ii) preliminary or final order of any local, state or federal court, administrative agency or governmental body of competent jurisdiction; (iii) any change in law, regulation, rule, requirement, interpretation or statute adopted, promulgated, issued or otherwise specifically modified or changed by any local, state or federal governmental body; (iv) labor disputes, strikes, work slowdowns or work stoppages provided that the Contractor undertakes its best efforts to resolve such matters through any lawful means; (v) an increase in the hydraulic and/or organic loading to be treated beyond the capacity of the AWT Facilities as such capacity is described in Appendix B; and (vi) loss of, or inability to obtain, service from a utility necessary to the operation and maintenance of the AWT Facilities. Section 1.21. Vehicles. All cars, trucks, vans or other modes of transportation used in connection with operation of the AWT Facilities for transporting people or things or used for other necessary functions in the operation or maintenance of the AWT Facilities. ARTICLE II. EMPLOYMENT OF CONTRACTOR The City hereby contracts with the Contractor for the professional services and for the compensation hereinafter described, which services the Contractor hereby agrees to render in accordance with the terms of this Agreement, including the attached appendices. ARTICLE III. TERM OF AGREEMENT Section 3.01. Term. The term of this Agreement ("Term") shall commence on the Effective Date and expire on the fifth anniversary of the Effective Date, unless extended or sooner terminated in accordance with the provisions hereof. Section 3.02. Termination by the City. The City shall have the option, exercisable at any time, to terminate this Agreement For Cause, by giving written notice ninety (90) days prior to the date of said termination to the Contractor. In addition, any time following the third anniversary of the Effective Date, the City shall have the option to terminate this Agreement without cause by giving notice ninety (90) days prior to the date of said termination to the Contractor. Notwithstanding this Section 3.02, the City shall have at all times the right to terminate this Agreement as a result of an Extraordinary Event of Default pursuant to Section 10.04 hereof. Section 3.03. Termination by the Contractor. The Contractor shall have the right to terminate this Agreement only after an Event of Default by the City, pursuant to Article X hereof, which remains uncured. In the event of an uncured Event of Default by the City, the Contractor, subject to the provisions of Article XII, may terminate this Agreement by giving notice to the City of its election at least one hundred and eighty (180) days prior to the date of termination. Section 3.04. Termination for Failure of Funding. If sufficient funds for the City's performance of this Agreement are not appropriated, the City will have the right to terminate this Agreement by giving written notice documenting the lack of funding, in which case, unless otherwise agreed to by the parties, this Agreement will terminate and become null and void effective the date of such notice. The City agrees that it will make its best efforts to obtain sufficient funds for performance of this Agreement, including, but not limited to, including in its budget for each fiscal period during the term hereof a request for sufficient funds to meet its obligations hereunder in full. In the event that the City terminates this Agreement as provided in this Section, the Contractor shall be reimbursed by the City for its costs or liabilities incurred in connection with its performance of this Agreement prior to its receipt of said notice. The Contractor shall also be reimbursed by the City for its direct costs in transitioning the AWT Facilities back to the City upon proper documentation of the same to the City. The remedies provided for in this paragraph are not intended to be exclusive and shall not be in lieu of any other remedy available to the Contractor, the Partners or the Parent Companies. ARTICLE IV. REPRESENTATIONS OF CONTRACTOR, PARTNERS AND PARENT COMPANIES The Contractor, Partners and Parent Companies each represent to the City as follows as respects their own situation: Section 4.01. Partnership; Authorization; etc. (a) The Contractor is a general partnership duly formed and existing under the laws of the State of Indiana, is duly authorized to conduct its business in the State of Indiana and all other states where its activities require such authorization, and has the power to enter into this Agreement and any other related documents to which the Contractor is a party. (b) The execution and delivery of this Agreement was duly authorized by all necessary partnership or corporate action of the Contractor, the Partners and the Parent Companies. The Contractor, the Partners and the Parent Companies each has full power and authority to execute and deliver this Agreement and to perform its respective obligations under this Agreement. This Agreement is a legal, valid and binding obligation of the Contractor, the Partners and the Parent Companies, enforceable against the Contractor, the Partners and the Parent Companies in accordance with its terms. (c) The execution and delivery of this Agreement and other related documents to which the Contractor, the Partners and the Parent Companies are a party, the consummation of the transactions contemplated thereby, and the fulfillment of the terms and conditions thereof do not and will not conflict with or result in a breach of any of the terms or conditions of the Partnership Agreement, articles of incorporation, by-laws, any restriction or any agreement or instrument to which the Contractor, the Partners and the Parent Companies are now a party or by which they are bound or to which any property of the Contractor, the Partners and the Parent Companies are subject, and do not and will not constitute a default under any of the foregoing, or, to the best of the knowledge of the Contractor, the Partners and the Parent Companies, cause any of them to be in violation of any order, decree, statute, rule or regulation of any court or any state or federal regulatory body having jurisdiction over the Contractor, the partners and the Parent Companies or their properties, and do not and will not result in the creation or imposition of any lien, charge or encumbrance of any nature upon any of the property or assets of the Contractor, the Partners and the Parent Companies contrary to the terms of any instrument or agreement to which any of them are a party or by which they are bound. Section 4.02. Litigation. (a) Except for actions, suits, claims, investigations and proceedings identified in Schedule 4.02 attached to this Agreement, (i) there are no actions, suits, claims, investigations or proceedings pending or threatened against the Contractor, the Partners or the Parent Companies in any court or before any governmental, regulatory or administrative agency, instrumentality or authority, arbitration board or tribunal that relate to their operation and maintenance of wastewater treatment facilities in North America or would materially affect their entry into, or performance of, this Agreement and (ii) the Contractor, the Partners and the Parent Companies are not charged by any governmental agency, instrumentality or authority with a material violation of, or threatened by any governmental agency, instrumentality or authority with a charge of a violation of, any federal, state, county or municipal law or regulation in a manner that relates to their operation and maintenance of wastewater treatment facilities in North America or would materially affect their entry into, or performance of, this Agreement. (b) The Contractor, the Partners and the Parent Companies are not subject to any judgment, order, injunction or other judicial or administrative mandate of any court, arbitrator or governmental, regulatory or administrative agency, instrumentality or authority that would materially affect their entry into, or performance of, this Agreement. Section 4.03. No Default. Except as otherwise disclosed in Schedule 4.03 attached to this Agreement, the Contractor, the Partners or the Parent Companies is not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, (i) any mortgage, loan agreement, lease, lease purchase, indenture or evidence of indebtedness for borrowed money to which the Contractor, the Partners or the Parent Companies is a party or by which any material amount of the assets of the Contractor, the Partners or the Parent Companies is bound that would materially affect their entry into, or performance of, this Agreement or (ii) any judgment, order, injunction, or other judicial or administrative mandate of any court, arbitrator or governmental agency or instrumentality, which default or potential default could reasonably be expected to have a material adverse effect on the Contractor, the Partners or the Parent Companies . The Contractor, Partners and Parent Companies jointly and severally represent that: Section 4.04. Inspection and Review of the AWT Facilities. The Contractor has had the opportunity to review and inspect the AWT Facilities, to review and inspect Permits and permit applications regarding the AWT Facilities, to review and inspect other documentation regarding the operation and maintenance of the AWT Facilities, and has been afforded the opportunity to meet with and ask questions of and receive answers from representatives of the City connected with the AWT Facilities. The Contractor's Proposal was based upon those reviews and inspections and the City's information so provided. Section 4.05. Accuracy of Contractor Representations. The representations made by the Contractor in its Statement of Qualifications ("SOQ"), its Proposal and in all other information and documentation submitted to the City were true and accurate as of the date they were made and are true and accurate as of the date of this Agreement. The representations made by the Contractor in its SOQ and its Proposal did not contain any material misrepresentations or omissions of any material facts as of the date they were made and the representations made therein and the representations made herein do not contain any material misrepresentations or omissions of any material facts as of the date of this Agreement. ARTICLE V. REPRESENTATIONS AND WARRANTIES OF CITY The City represents and warrants to the Contractor, Partners and Parent Companies that: Section 5.01. Organization; Authorization; etc. (a) The City is a municipal corporation duly organized and existing under the laws of the State of Indiana and is duly authorized and empowered to enter into and perform this Agreement and to execute all documents related thereto. (b) The execution and delivery of this Agreement was duly authorized by all necessary governmental action, none of which action has been rescinded or otherwise modified. This Agreement is a legal, valid and binding obligation of the City, enforceable against the City in accordance with its terms. (c) The execution and delivery of this Agreement and any other related document to which the City is a party, the consummation of the transactions contemplated herein, and the fulfillment of the terms and conditions hereof do not and will not (i) conflict with or result in a breach of any of the terms or conditions of any restriction, agreement or instrument to which the City is a party or by which it is bound, or (ii) constitute a default under any of the foregoing, or, to the best of the knowledge of the City, cause it to be in violation of any order, decree, statute, rule or regulation of any court or state or federal regulatory body having jurisdiction over the City or its properties. Section 5.02. Litigation. (a) Except for actions, suits, claims, investigations and proceedings disclosed in Schedule 5.02 attached to this Agreement, (i) there are no actions, suits, claims, investigations or proceedings pending or threatened against the City in any court or before any governmental, regulatory or administrative agency, instrumentality or authority, arbitration board or other tribunal that would materially affect the City's entering into, or performance of, this Agreement and (ii) the City is not charged by any governmental agency, instrumentality or authority with a material violation of, or threatened by any governmental agency, instrumentality or authority with a charge of a violation of, any federal, state, county or municipal law or regulation that would materially affect the City's entering into, or performance of, this Agreement. (b) The City is not subject to any judgment, order, injunction or other judicial or administrative mandate of any court, arbitrator or governmental, regulatory or administrative agency, instrumentality or authority that would materially affect the City's entering into, or performance of, this Agreement. Section 5.03. No Default. Except as otherwise disclosed in Schedule 5.03 attached to this Agreement, the City is not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, (i) any mortgage, loan agreement, lease, lease purchase, indenture or evidence of indebtedness for borrowed money to which the City is a party or by which any material amount of the assets of the City is bound that would materially affect the City's entering into, or performance of, this Agreement, or (ii) any judgment, order, injunction, rule, regulation or other judicial or administrative mandate of any court, arbitrator or governmental agency or instrumentality, which default or potential default could reasonably be expected to have a material adverse effect on the City's entering into, or performance of, this Agreement. Section 5.04. Compliance with Law. Except as otherwise disclosed in Schedule 5.04 attached to this Agreement, the City is, to its knowledge, now, and at the Effective Date shall be, in compliance with the terms of all applicable laws, regulations, Permits, orders, judgments, administrative orders, regulations and guidelines adopted or entered by governmental authority having jurisdiction to do so in connection with its operation and maintenance of the AWT Facilities. The City has properly prepared and timely filed prior to the Effective Date, all permit applications required by any applicable law, rule or regulation. Except as otherwise disclosed in a schedule attached to this Agreement, there are no outstanding complaints, orders, citations, notices or orders of violation or non-compliance issued to the City relating to the operation, maintenance, or condition of the AWT Facilities. The City shall be responsible for any fines, penalties or other costs connected with a violation of any such law, regulation, guideline, permit, judgment or order in effect or in existence on the Effective Date. Section 5.05. Accuracy of City Representations. The facts and representations stated and made by the City in its Request for Proposal and in the information and data provided by the City in connection with that Request for Proposal and all other information and documentation submitted to the Contractor by the City were true and accurate as of the date they were made or submitted and are true and accurate as of the date of this Agreement. In the event that the performance of any service under this Agreement by the Contractor shall require the Contractor to use, consider, or evaluate any designs, specifications, contract documents, reports, studies or other services provided to the City or Contractor by another architect, engineer or consultant, the Contractor shall take reasonable steps to verify the technical accuracy of such documents. The representations made by the City did not contain any material misrepresentations or omissions of any material facts as of the date they were made, and the representations made therein and the representations made herein do not contain any material misrepresentations or omissions of any material fact as of the date of this Agreement. Section 5.06. AWT Facilities. Except as identified in Schedule 5.06 attached to this Agreement, the AWT Facilities are now, and at the Effective Date will be, in good working order and condition. Prior to the Effective Date, the City shall use its best efforts to maintain the AWT Facilities in good repair and operating condition, including, but not by way of limitation, making any necessary or advisable major repairs or Capital Improvements to said Facilities. ARTICLE VI. COVENANTS OF THE CONTRACTOR; CITY CONSENTS AND COOPERATION The following covenants and conditions shall apply during the Term: Section 6.01. Control of Partnership. As of the Effective Date, IWC Services, Inc. is a general partner of the partnership with an initial percentage share of partnership capital of 52%. IWC Services, Inc. shall remain a general partner of the partnership and maintain a percentage share of partnership capital in accordance with the Partnership Agreement. In addition, IWC Services, Inc. shall be the Managing Partner of the Contractor. Section 6.02. Assignment of Partnership Interests. The Contractor shall not admit new partners, nor shall the Partners assign any of their interest in the partnership to another entity without the prior written consent of the City. Section 6.03. No Amendments to Partnership Agreement. The Contractor has provided a copy of the Partnership Agreement to the City. The Partners shall not amend, modify, rescind, revoke, or otherwise alter their Partnership Agreement without the written consent of the City. Section 6.04. Restrictions on Subcontracting. The Contractor shall not subcontract any of its management responsibilities with regard to operation and maintenance of the AWT Facilities without the prior written consent of the City. The City's consent to any subcontract arrangement shall not act as a release or waiver of (i) the Contractor's, Partner's or Parent Companies' liabilities under this Agreement, or (ii) the provisions of Section 6.02 hereof. Section 6.05. Compliance with Law. The Contractor shall comply with all laws, regulations, guidelines, orders, judgments, decrees or other executive, legislative, judicial or administrative mandates adopted or entered by governmental authority having jurisdiction to do so in connection with the operation and maintenance of the AWT Facilities. The City shall cooperate with, and assist, the Contractor in gathering all reports, forms, statements and other documentation required by local, state and federal authorities. Such information shall be provided to the Contractor in a timely manner so as to allow the Contractor adequate time to prepare and submit any necessary documentation within required deadlines. Section 6.06. Environmental Compliance. (a) In addition to the general compliance with laws as set forth in Section 6.05, the Contractor shall comply with the terms of all applicable environmental laws, regulations, Permits, orders, judgments, administrative orders and regulations in connection with the operation and maintenance of the AWT Facilities. (b) The Contractor shall be responsible for the preparation, on behalf of the City, of any and all permit applications related to Process Changes, as defined in Section 6.16. Such applications shall be forwarded to the CCO for review and filing by the City. Other permit applications, such as those for routine permit renewal, shall be prepared and filed by the City. The Contractor, however, shall advise the City on the need for such other applications and shall assist the City in the preparation of such applications as necessary to assure that information to be submitted is representative of, and accurately describes, the operations of the AWT Facilities. As an "Additional Service," the City may request consultation with the Contractor for its professional opinions and assistance in evaluating other technical issues relating to a permit application. (c) The Contractor shall implement appropriate operating processes, environmental and monitoring reports, and shall file such reports with the CCO. The Contractor shall maintain the current laboratory analysis program and present sampling program in accordance with the Standard Methods for Water and Wastewater Analysis Procedures or in accordance with the other testing requirements of the water quality and NPDES waste discharge permit in effect at the Effective Date. The Contractor shall familiarize itself with the monitoring reports required to be made by the City as specified in the City's NPDES permits and furnish to the CCO copies of all completed reports filed in accord with that permit. The Contractor shall in a timely manner prepare and file any wastewater treatment plant monitoring reports that are required by any governmental agency having jurisdiction, and shall provide copies to the City. (d) Notwithstanding any other provisions of this Agreement, the City shall have the sole responsibility for enforcement of its ordinances, including, among others, its ordinances for industrial pretreatment. Section 6.07. Delivery of Reports; Cooperation with City. The Contractor shall deliver to the CCO at its cost reports required to be delivered pursuant to this Agreement, together with additional reports reasonably requested by the CCO. In addition, the Contractor shall cooperate and assist the City in gathering of the information and documentation necessary to complete reports, forms, statements, and other documentation required by local, State and federal authorities. Such information shall be provided to the City in a timely manner to allow the City adequate time to prepare and submit any necessary documentation within required deadlines. Section 6.08. Meetings with CCO. The City shall designate one or more persons to act as the CCO for purposes of this Agreement. The Contractor shall meet on a regular basis with, and upon the reasonable request of, the CCO. Section 6.09. Transition. The Contractor and the City shall take all necessary steps to ensure a smooth transition on the Effective Date. At least thirty (30) days prior to the Effective Date, the Contractor shall provide the City with a written transition plan. The transition plan should include such elements as (i) an orientation process for employees, (ii) career planning workshops for employees, (iii) interviewing prospective employees, and (iv) collective bargaining with the current union. Upon receipt of notice of termination from the City, the Contractor shall also provide, in good faith, all transition services reasonably necessary to transfer operation and maintenance responsibility back to the City or to a third party. Section 6.10. Adequate Staffing. The Contractor shall employ and retain an adequate staff in order to operate and maintain the AWT Facilities within design specifications and with performance levels at a level at or above the performance levels achieved on a continuous basis when the AWT Facilities were operated and maintained by the City. Section 6.11. Odor Control. The Contractor shall use its best efforts to contain and control odors emitted from the AWT Facilities. The City acknowledges, however, that its efforts to date to control odors have been, and are currently, concentrating on off-site effects and that commencing on the Effective Date there is a need to increase attention to the problem of on-site odor control. The City agrees that Capital Expenditure will be required to address this problem, and the Contractor and the City mutually commit to address odor control as soon as possible. Section 6.12. Predictive, Preventive, Corrective and Routine Maintenance. The Contractor shall implement its Maintenance Management Program (as defined in the Contractor's Proposal which is incorporated herein by reference) covering predictive, preventive, corrective and routine maintenance. Predictive maintenance tasks shall include vibration analyses, transfer oil and equipment lubrication testing, motor winding testing and thermographic profiles. The preventive maintenance program shall use manufacturer's recommendations as provided by the City and/or the experience of the Contractor's maintenance staff with similar equipment to schedule necessary care. The Contractor's routine maintenance program shall include landscaping, groundskeeping, painting, building maintenance, road upkeep and other such routine maintenance activities at the AWT Facilities. Within one hundred eighty (180) days of the Effective Date, the Contractor shall submit to the City for its agreement a proposed schedule of predictive, preventive, corrective and routine maintenance, which schedule shall thereafter be updated from time to time as agreed upon by the City and the Contractor. The City shall maintain all existing warranties, guarantees, contracts, easements and licenses ("operating documents") that have been granted to the City as the owner or lessor of the AWT Facilities and Equipment and supply to the Contractor all other existing operating documents. The City shall make available to the Contractor such operating documents, as well as treatment facility, collection system drawings, calculations, maintenance manuals, operational records, logs, reports, submittals, effluent test records, repair records, cost records, audits and general correspondence which may be in the City's possession or that of its agents, related to the design, condition or operation of the AWT Facilities. The Contractor shall take no action which would invalidate or void the operating documents. Section 6.13. Training of AWT Employees. The Contractor shall implement a training program for the employees of the AWT Facilities. A written outline of such training program shall be provided to the CCO after the Contractor has completed its individual employee career program and within one hundred and eighty (180) days after the Effective Date. Section 6.14. Safety and Protection. The Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the operation and maintenance of the AWT Facilities. The Contractor shall take reasonable and prudent precautions for the safety of, and to prevent injury, or loss, to all employees of the Contractor and other persons at the AWT Facilities. The Contractor's safety program shall comply with all applicable local, state and federal guidelines, rules, regulations and laws. The Contractor shall designate a responsible representative on site at the AWT Facilities whose duty shall be the prevention of accidents. Section 6.15. Community Relations and Training Center. The Contractor shall take an active role in the community of Indianapolis and institute programs for the education of the citizens thereof with respect to the operation of the AWT Facilities. As a part of this commitment, the Contractor shall create and locate a National Training Center in Indianapolis and shall cause LAH to commit One Million Dollars ($1,000,000) to be invested during the Term for cooperative studies on advanced wastewater and environmental topics. The Contractor shall contribute at least five percent (5%) of its pre-tax profits on an annual basis to civic or other community organizations to further support economic development initiatives, such initiatives to be mutually agreed upon by the City and Contractor. Section 6.16. Process and Operational Changes. Process and operational changes may be made during the course of this Agreement. "Process Changes" are adjustments to major components of the AWT Facilities, such as land application of sludge and use of chlorination. No Process Change will be made without the prior written consent of the City. "Operational Changes" are adjustments in routine operating procedures. Operational Changes will be made as a matter of routine practice by the Contractor and will not require the prior approval of the City. However, the Contractor will inform the City of such Operational Changes in its monthly reports to the CCO. The Contractor shall be responsible for all risks associated with any Process Change proposed and implemented by it and/or any Operational Changes implemented as a part of the operation and maintenance of the AWT Facilities, including, without limitation, the risk of obtaining and complying with all applicable Permits. As a part of any proposal effecting a Process Change, other than a change identified in the Contractor's Proposal, the Contractor shall propose a prospective reduction in the Annual Fee (in the form of a sum certain agreed to by the City), in order to permit the City to share a portion of any anticipated cost savings associated with the proposed change. The Contractor agrees to use its best efforts to propose and implement as soon as reasonably possible a beneficial sludge reuse or other land application program ("Sludge Program"). The City shall be entitled to all cost savings resulting from the Sludge Program. Section 6.17. Minority and Women-Owned Business Participation. The Contractor shall use its best efforts to utilize Indianapolis-based minority-owned and women-owned businesses in connection with the operation and maintenance services to be provided under this Agreement in an amount equal to at least twelve percent (12%) (10% MBE, 2% WBE) of the purchases/contracts available for placement on an annual basis, with an overall goal of eighteen percent (18%) (15% MBE, 3% WBE). Section 6.18. Dechlorination. Without limiting the applicability of Section 8.06(b), if at any time, any local, state or federal administrative agency, court, or any governmental body of competent jurisdiction, by any order, decree, judgment, ruling, permit or ordinance, requires dechlorination with respect to the AWT Facilities, the Contractor shall be solely responsible for all costs and expenses necessary to take the required action. Section 6.19. Partners to Pursue Wastewater Privatization Opportunities. Consistent with the terms of the Partnership Agreement, the Partners and Parent Companies shall use their best efforts to pursue, in their discretion, other major projects related to operation and maintenance privatization that may arise in the states of Indiana, Ohio, Kentucky, Illinois and Michigan. As part of these efforts, the Partners and the Parent Companies shall pursue such opportunities through the Contractor or an affiliate thereof. The headquarters of the Contractor shall be established and remain in Marion County, Indiana, during the Term. Section 6.20. Wet Weather Operating Plan. Within one hundred eighty (180) days after the Effective Date, the Contractor will develop a Wet Weather Operating Plan ("WWOP") and submit it to the City for approval. The WWOP will be designed to eliminate or greatly reduce the bypass of raw sewage except for conditions exceeding plant hydraulic capacity. The WWOP shall include monitoring the by-pass structure level and installation of additional flow metering devices within the AWT Facilities. ARTICLE VII. MAINTENANCE AND OPERATIONS Except as otherwise provided in this Agreement, the Contractor shall perform all services necessary for the proper and effective operation and maintenance of the AWT Facilities in a manner at least as effective as the manner in which the AWT Facilities were being operated and maintained by the City on a consistent basis prior to the Effective Date, including, but not limited to, those services set forth in Sections 7.01 and 7.02. The Contractor shall operate and maintain the AWT Facilities in a cost-effective and professional manner in accordance with generally accepted practices for wastewater treatment, such that, except where prevented from doing so because of Unforeseen Circumstances, wastewater effluent discharged from the AWT Facilities and other operational characteristics meet the existing and present requirements of governmental regulatory agencies, including those specified in the NPDES Permit and within the limits of the operating capability of the AWT Facilities; provided that (i) at all times, the AWT Facilities influent shall not contain levels of biologically toxic substances that cause process interference or pass through, thereby preventing such requirements from being met, (ii) the AWT Facilities shall not be rendered inoperable for any reason beyond the reasonable control of the Contractor, and (iii) the design capacity of the AWT Facilities, as described in Appendix A, are not exceeded. At such times as the capabilities and limits of the AWT Facilities are exceeded, the Contractor shall take reasonable steps to either prevent effluent violations or keep the number and duration of violations to a minimum. Section 7.01. Operation of the AWT Facilities. During the Term, the Contractor shall operate the AWT Facilities on a continuous 24-hours per day, 7 days per week basis, in compliance with all Permits and all Federal, State and local laws, rules and regulations. Any Process Change and/or Operational Change implemented by the Contractor as an intended cost-saving measure shall be done at the Contractor's own risk. Operation of the AWT Facilities shall include, but not be limited to, the following: (a) The Contractor shall provide or obtain (i) all personnel and associated wages, salaries, and benefits, (ii) all chemicals and fuel, (iii) all necessary inventory to operate and maintain properly the AWT Facilities at the level required by this Agreement, (iv) all necessary utilities, and (v) any other services necessary to operate the AWT Facilities in accordance with all Permits and applicable laws, regulations and statutes. The Contractor shall be responsible for the payment of any fines or penalties arising from the negligent acts or omissions or willful misconduct of the Contractor or its agents. (b) The Contractor shall provide all personnel, materials, and services necessary to support the operation and maintenance of the AWT Facilities in the manner required by this Agreement including, but not limited to, the following functions: operations, engineering, laboratory testing, training, computer control system operation and maintenance, administration, public relations (in consultation with the City), purchasing, regulatory compliance and reporting, transportation, janitorial, security, residuals management, and general building and grounds maintenance at the AWT Facilities. (c) On the Effective Date, the Contractor shall commence implementation of the City's existing Industrial Pretreatment Program ("IPP"), in compliance with the NPDES Permit and applicable law. Any additions or modifications to the IPP required by federal or state law and/or recommended by the Contractor, to be approved in writing by the City, shall be incorporated into this Agreement by reference. The IPP shall include, without limitation, the following: (i) Industrial Survey and Classification to identify and categorize all commercial and industrial users of the collection system, (ii) a review of the City's Industrial Discharge Ordinance to provide recommended changes and assist the City in implementing the changes, (iii) implementation of an Industrial Inspection Program pursuant to which all existing, significant industrial users shall be inspected at least once per year and all pertinent information shall be maintained on record, (iv) the establishment of an ongoing Industrial Discharge Sample Collection and Flow Monitoring Program pursuant to which all industrial users shall be sampled at least once a year, significant industrial users at least twice per year, and federal categorical users at least four times per year, (v) laboratory sample analysis pursuant to which all industrial users shall be sampled and analyzed at least once per year to establish uncontrollable source contributions of metals and the removal efficiencies of the AWT Facilities, (vi) implementation of a Small Quantity Generator Program pursuant to which all potential threats of discharge to the sewer shall be addressed in writing, (vii) program administration whereby the Contractor shall perform, on behalf of the City, all permitting activities in connection with the Program and modify the City's computer software program to support the Program activities, (viii) implement the City's existing Enforcement Response Plan pursuant to which a detailed plan outlining responsible parties, enforcement options and/or actions and time frames for administering those actions shall be prepared in accordance with the federal EPA guidelines (the City shall retain all responsibility and authority to initiate and to prosecute any enforcement action), and (ix) continue liaison activities to ensure open lines of communication between all parties through periodic meetings and to act as the liaison between the City, regulatory agencies, industrial users and the public. (d) The Contractor shall transport and handle, in accordance with applicable law, sludge, grit, screenings, and other wastes and residues generated by the AWT Facilities. In reliance upon an IDEM waste classification dated February 22, 1993 and the IDEM Special Waste Disposal Approval dated February 10, 1993, the City warrants that the incinerator ash and sludge from the AWT Facilities is not a "hazardous waste," "hazardous substance," or "hazardous material," as such terms are defined in or pursuant to the federal Resources Conservation Recovery Act (RCRA), 42 U.S.C. 6901 et seq. and Indiana Code 13-7-8.5 or other applicable law, it being understood that the parties do not anticipate such wastes and residues ever becoming so classified under the scope of this Agreement. (e) The Contractor recognizes the concern of the City regarding the appearance of the grounds, buildings and structures and agrees to maintain the cleanliness and appearance of the AWT Facilities in a professional manner. The Contractor shall be responsible for maintenance of the lawn, tree and plant trimming and miscellaneous maintenance work at the AWT Facilities. (f) The Contractor shall actively pursue improvements in effectiveness, efficiency, and the cost of operations and maintenance of the AWT Facilities and at least annually or upon written request by the CCO, evaluate all Equipment and notify the CCO of specific Capital Expenditure needs. (g) The Contractor shall maintain a professional, positive and responsive working relationship with the CCO and other representatives of the City, regulatory authorities, suppliers of materials, utilities, and services, and the public. (h) The Contractor shall review and update, where appropriate, the City's Emergency Preparedness Plan for interaction and coordination with the appropriate agencies of the City. The Contractor shall use its best efforts to deal with emergencies and to maintain or restore normal operations. In the event of an emergency, the Contractor shall make every reasonable effort to contact the CCO to authorize any needed emergency major repairs or Capital Expenditures. Should the CCO not be available to authorize such needed emergency expenditures, the Contractor may proceed without the City's authorization. The Contractor shall provide the CCO a written report detailing those actions within twenty-four (24) hours of such occurrence. The City shall be liable for the cost of all such emergency measures, provided such situation was not due to the fault or negligence of the Contractor. (i) The Contractor shall prepare, in a timely manner, NPDES discharge monitoring reports and any other oral or written report(s) required pursuant to all Permits and submit them to the CCO for transmittal to the appropriate agencies. (j) The Contractor shall provide twenty-four (24) hour per day security of the Southport treatment plant, and the Contractor and the City shall agree prior to the Effective Date about responsibility for security at the Belmont treatment plant. The CCO shall have twenty-four (24) hour per day access to the AWT Facilities. Visits may be made at any reasonable time by any of the City's representatives as designated by the CCO. All such visitors, however, shall comply with the Contractor's operating and safety procedures. The CCO shall not have the right to direct or control the activities of the Contractor or its employees. (k) At least two (2) days prior to the Effective Date, the Contractor, accompanied by the CCO, shall conduct and complete a comprehensive inspection of the AWT Facilities for the purpose of documenting operational and maintenance requirements of the AWT Facilities. The inspection shall include a color video tape record of all areas to be operated and maintained by the Contractor. The video tape shall include an audio commentary by the Contractor and the CCO made during the taping. Two complete copies of the video tape shall be supplied to the CCO. The Contractor shall also prepare a written inspection report which shall set forth the condition of all buildings and Equipment which comprise the AWT Facilities. The inspection report shall be provided to the CCO for its review and comment prior to the Effective Date. Additionally, during the first ninety (90) days of the Term, the Contractor will conduct a predictive maintenance survey of all equipment, which survey will be used to supplement and/or modify the initial inspection report. (l) The Contractor shall pay all Operation and Maintenance Costs at its expense in a timely manner except for those which it is disputing. (m) The Contractor shall implement improvements to the Environmental Monitoring and Process Support Laboratory (EMPSL) including without limitation (i) reorganization of the EMPSL to increase the efficiency and productivity, (ii) increase process control laboratory output through a quality assurance/quality control program, (iii) minimize manual data handling, and (iv) improve the laboratory budgeting process. (n) The Contractor shall identify and recommend for City approval revenue enhancement projects during the term of this Agreement, including any IPP initiatives pursuant to 7.01(c), which efforts the City shall support and encourage. As a part of such recommendation, the Contractor shall propose what portion of the additional revenues that the Contractor will receive as an economic incentive (which shall be within the guidelines of the Rev. Proc. 93-19) for the Contractor to propose and capture such additional revenues for the City. The City shall respond promptly to all such proposals. In no event shall any such additional payments to the Contractor during any Agreement Year exceed the amount of the Annual Fee for that year. Section 7.02. Maintenance of the AWT Facilities. During the Term, the Contractor shall have full responsibility for the maintenance of the AWT Facilities, except as provided otherwise herein. The Contractor shall be responsible for performing routine maintenance, predictive maintenance, preventive maintenance and corrective maintenance (except as specifically provided herein) of the AWT Facilities, all in a manner at least as effective as the manner in which the AWT Facilities were maintained by the City on a consistent basis prior to the Effective Date. Such maintenance shall include, but not be limited to, the following: (a) The Contractor shall provide all personnel, materials, and services necessary to maintain the AWT Facilities' structures, Vehicles, Equipment, mechanical, electrical, HVAC, instrumentation, communication and computer systems adequately to insure efficiency, long-term reliability and conservation of capital investment. The Contractor shall implement its maintenance management program in order to provide prudent maintenance in accordance with industry standards, equipment manufacturers' instructions, and existing operating and maintenance manuals (taking into account the specific maintenance requirements of each piece of Equipment) so that at the Termination Date the AWT Facilities are returned to the City in the same or better condition than at the Effective Date, normal wear and tear excepted. The City and Contractor, as the case may be, shall make provisions for enforcing existing Equipment warranties and guarantees, and for maintaining all warranties on new Equipment purchased after the Effective Date. The Contractor shall employ routine, predictive, preventive and corrective maintenance programs. Within ninety (90) days of the Effective Date, the Contractor shall complete a full review of the AWT Facilities' maintenance management program and make appropriate recommendations to the CCO regarding the adequacy of such system. Changes and/or enhancements to the existing maintenance management program may include corrective and/or Capital Improvements, as mutually agreed by City and Contractor. (b) The Contractor shall maintain detailed records and reports of maintenance work performed and shall make such reports available to the CCO. The reports shall identify all maintenance activities and orders pending or completed since the most recent report. (c) The Contractor shall prepare and submit to the City for review and approval an annual budget of Capital Expenditures and items that should be paid out of the Repair and Replacement Fund, not later than sixty (60) days prior to each anniversary of the Effective Date. (d) The Contractor shall continuously and, as appropriate, (i) review and inspect the AWT Facilities to determine the necessity of any major repair and maintenance activities that should be payable from the Repair and Replacement Fund and prepare written recommendations to the City related to all such activities, and (ii) comply with the provisions of Sections 7.03 and 7.04. (e) The Contractor shall maintain any portion of the AWT Facilities that are on stand-by mode in a manner consistent with the preservation of the assets and shall protect the City from any grant repayment obligations which may arise if any part of the AWT Facilities are not properly placed and maintained in the stand-by mode by the Contractor. Section 7.03. Repair and Replacement Fund. The City shall provide a Repair and Replacement Fund to provide for the necessary funding for major repair and maintenance and other non-repetitive and non-routine maintenance activities required for the continued operation of the AWT Facilities. The Repair and Replacement Fund shall not cover regular and routine preventive and predictive maintenance items (including oils and lubricants, light bulbs, and other such items) that are to be undertaken by the Contractor at its expense. The Repair and Replacement Fund for each Agreement Year shall be in the amount of One Million Five Hundred Thousand Dollars ($1,500,000). No funds shall be disbursed from the Repair and Replacement Fund without the prior written consent of the City. At no time will the City threaten the successful operation and maintenance of the AWT Facilities by withholding funds for projects which may endanger the AWT Facilities effluent or the safety of equipment and/or employees. The Contractor on a monthly basis shall submit to the City a report on expenses which should be reimbursed out of the Repair and Replacement Fund and, at its option, may request the City to pay such expenses directly from the Repair and Replacement Fund. The Contractor shall notify the CCO when actual expenditures from the Repair and Replacement Fund are equal to eighty percent (80%) of the Repair and Replacement Fund for any Agreement Year. To the extent that the Contractor determines that it is necessary to make Repair and Replacement expenditures in excess of amounts in the Repair and Replacement Fund for any Agreement Year, the Contractor shall submit a written proposal to the CCO, which proposal shall be approved by the City and the Contractor prior to making such expenditure. Any Repair and Replacement Fund moneys which remain unspent as of the end of any Agreement Year shall be retained by the City. Any Repair and Replacement costs incurred by the Contractor for an Agreement Year exceeding the amounts in the Repair and Replacement Fund and not earlier reimbursed by the City shall be paid by the City to the Contractor no later than sixty (60) days after the end of that Agreement Year, with interest from the date of payment by the Contractor until payment by the City, computed at an annual rate equal to the Prime Rate of National City Bank, Indiana in effect at the time such expenditures were made ("Prime Rate"). During the Term, the Contractor shall recommend and perform activities to be paid for from the Repair and Replacement Fund as follows: (a) As provided in Section 7.02 above, the Contractor shall determine the necessity for performing any major repair or maintenance activities payable from the Repair and Replacement Fund. (b) The Contractor shall prepare written recommendations for all major repair and maintenance activities to be paid from the Repair and Replacement Fund that the Contractor determines may be required to keep the AWT Facilities in a state of good operating and repair and order, which recommendations shall include the approximate cost of completing such activities. (c) The City, within fifteen (15) days of the receipt of such written recommendations, shall either approve or deny the Contractor's recommendation in writing; provided, that if the City fails to notify the Contractor, in writing, within such fifteen (15) day period of its decision, such recommendation shall be deemed approved. (d) In the event that the City shall approve the Contractor's recommendation, and in the event the cost of the major repair or maintenance activity, plus the total aggregate cost of all such activities previously incurred during any Agreement Year, does not exceed the total amount in the Repair and Replacement Fund, the Contractor shall proceed with the recommended work, and it shall be paid for from such Fund. (e) In the event the City shall approve the Contractor's recommendation, but the cost of the major repair or maintenance activity, plus the total aggregate cost of all such activities previously made during the current Agreement Year, exceeds the total amount then in the Repair and Replacement Fund, the Contractor shall proceed with the work; provided, that expenses incurred shall be treated as a service provided by the Contractor, at the direction of the City, which shall be deemed to be Additional Services pursuant to Section 8.07 and shall be reimbursed by the City, plus interest from the date of payment by the Contractor to the date of payment by the City at an annual rate equal to the Prime Rate. (f) In the event that the City does not approve a major repair or maintenance item recommended by the Contractor, the City shall indemnify and hold the Contractor harmless from any damages or liability suffered by the Contractor as a result of the City's denial. Section 7.04. Capital Expenditures. In accordance with Section 7.02(c) hereof, the Contractor shall submit a budget and justification for each Capital Expenditure it believes should be performed for a given Agreement Year. The City, in its discretion, shall determine whether to accept the Contractor's proposal for the Capital Expenditure. At the City's option, the City may add any such Capital Expenditures proposed by the Contractor to the list of Capital Improvements pursuant to the Construction Management Agreement. If the City does not approve a Capital Expenditure recommended by the Contractor, the City shall indemnify and hold the Contractor harmless from any damages or liability suffered by the Contractor as a result of the City's denial. Section 7.05. Inventory. On or prior to the Effective Date, the Contractor shall complete a schedule of Beginning Inventory (which shall be valued at cost) which it intends to use, said schedule to Appendix C hereto. All other inventory may be disposed of by the City at its option. During the Term, the Contractor shall utilize the Beginning Inventory in the operation and maintenance of the AWT Facilities, and the City shall be entitled to a credit towards the Annual Fee equal to the inventory used by the Contractor at the value set forth in the Beginning Inventory or as otherwise agreed upon by the City and the Contractor. On the Termination Date, the Contractor shall turn over to the City any remaining Beginning Inventory. Section 7.06. Vehicles. The City shall provide the Contractor with the Vehicles needed by the Contractor for its services under this Agreement. A list of Vehicles will be attached in Appendix E. The Contractor guarantees that proper maintenance of the Vehicles shall be conducted as specified by Vehicle maintenance documentation or as otherwise agreed upon by the City and the Contractor. New Vehicle purchases will be mutually agreed upon by the City and Contractor annually. Section 7.07. Reporting Requirements. In connection with its operation and maintenance responsibilities and activities: (a) The Contractor shall provide to the City monthly reports of plant operating parameters, laboratory analysis, maintenance plans and activities, treatment results, Equipment and parts inventories, manpower utilization and other relevant information. These reports shall be in a form developed jointly by the CCO and the Contractor. (b) The Contractor shall meet with the CCO at least monthly to review such operations and reports. The Contractor shall also conduct an annual inspection with the CCO and any other representatives of the City to evaluate the condition of the AWT Facilities. (c) The Contractor shall also provide the CCO with quarterly reports on the status of minority and women-owned business participation. ARTICLE VIII. COMPENSATION Section 8.01. Annual Fee. For the aforedescribed services, the City shall pay the Contractor an Annual Fee during the Term as follows: Agreement Years Annual Fee Year 1 $15,155,400 Year 2 $14,650,000 Year 3 $14,600,000 Year 4 $14,000,000 Year 5 $13,831,075 The Annual Fee for each Agreement Year after Year 1 shall be adjusted based upon the Consumer Price Index, all Urban Consumers, U.S. City Annual Index, published by the U.S. Department of Labor, Bureau of Labor Statistics or some other agreeable index if the C.P.I. is discontinued ("Index"), as follows: For each Agreement Year, the Index for the fourth (4th) month preceding the commencement of such Agreement Year shall be divided by the Index for the same month most recently preceding the Effective Date. The Annual Fee for such Agreement Year set out above will be multiplied by the resulting quotient, and the resulting product shall then be the adjusted Annual Fee for such Agreement Year. One twelfth (1/12) of the Annual Fee for each Agreement Year shall be due and payable on or before the fifth (5th) day of each month of the Agreement Year in which services are provided. Section 8.02. Utility Savings. The City and the Contractor shall use the first Agreement Year to establish a "Utility Baseline" for the consumption and cost of utilities in the operation and maintenance of the AWT Facilities. Should the Contractor reduce utility costs below the Utility Baseline, the City shall have the right to request a prospective reduction in the Annual Fee (in the form of a sum certain) in an amount equal to at least one-half of the projected reduction in utility costs. Section 8.03. Adjustment for Hydraulic and Organic Loadings. The City and the Contractor will establish prior to the Effective Date a base line for hydraulic and organic loadings of influent at the AWT Facilities, based on historic data ("Average Loading Baseline"). At the end of each Agreement Year, the City and the Contractor shall determine the actual level of hydraulic and organic loadings ("Actual Loading") for that Agreement Year. If such Actual Loading for the Agreement Year is either greater than or less than the Average Loading Baseline by more than ten percent (10%), the City and the Contractor shall use their best efforts to agree upon a prospective adjustment of the Annual Fee. Section 8.04. Accounting System and Financial Data. The Contractor agrees to maintain its accounting system and financial data so as to allow the inspection thereof by the CCO and other City representatives during normal business hours. Section 8.05. Capital Improvement Plan. The Contractor shall participate in the development and implementation of the City's Capital Improvement Plan with respect to the AWT Facilities and shall act in the capacity of program manager for such Capital Improvements, pursuant to the terms of the program management agreement to be executed by the Contractor and the City on or about the Effective Date. For the first year of this Agreement, the Contractor shall act as program manager for those Capital Improvements set forth in the program management agreement. For subsequent years, any further Capital Improvements shall be jointly identified by the City and the Contractor as a part of the budget for Capital Expenditures established pursuant to Section 7.04 hereof, and will be governed by the program management agreement. For each Agreement Year, compensation to the Contractor for acting as program manager shall be in an amount equal to three percent (3%) of the applicable construction costs of AWT projects for the first Two Million Dollars ($2,000,000) of Capital Improvements, and six percent (6%) of the applicable construction costs of such projects thereafter. Any contractors, engineers or architects shall be selected or approved by the City. Section 8.06. Regulatory Adjustments. The Annual Fee may also be adjusted as a result of changes in federal or state legislation or regulations, pursuant to this section. (a) Should the Operation and Maintenance Costs increase solely as a direct result of legislative or regulatory changes (including revisions in the requirements or limitations of the NPDES Permit) which occur and become effective during the Term, the Annual Fee shall be increased by an amount equal to the actual costs necessary to comply appropriately with such legislative or regulatory changes, as determined by agreement of the parties hereto. (b) Notwithstanding (a) above, should (i) the Contractor alter the method of operation pursuant to this Agreement or otherwise with the agreement of the City and (ii) the Operation and Maintenance Costs increase as a direct result of legislative or regulatory changes which occur and become effective during the Term, the Annual Fee shall be increased only by an amount equal to the increase in the Operation and Maintenance Costs which would have been incurred by the City had the method of operation of the AWT Facilities not been altered. Section 8.07. Additional Services. The Contractor may perform Additional Services at the AWT Facilities which are not within the original scope of this Agreement, as agreed upon, in writing, by the Contractor and the City ("Additional Services"). The City may also request that the Contractor perform other Additional Services. Such Additional Services, if agreed to by the Contractor, shall be described in an additional services form (ASA), invoiced by the Contractor and paid for by the City on a monthly basis. Such payments shall be in addition to the regular monthly compensation amount of the Annual Fee paid to the Contractor. In the event of an Unforeseen Circumstance described in Section 1.20(i), the Contractor and the City recognize that such a circumstance may call for services beyond the scope of the Contractor's anticipated services under this Agreement. In such a circumstance, the parties shall cooperate with each other and, with the City's consent, address the situation, and the costs incurred by the Contractor arising from the event shall be paid by the City as payment for Additional Services provided. Should payment for the Additional Services require approval by the Board of Public Works, the City shall promptly seek such approval. ARTICLE IX. PERSONNEL Section 9.01. Contractor to Interview AWT Employees. On or before the Effective Date, the Contractor shall complete its interviewing of all employees of the AWT Facilities who are interested in and apply for a position with the Contractor. The Contractor shall use its best efforts to employ all interested and qualified employees of the AWT Facilities as its employees at the AWT Facilities, consistent with its intent to have an initial staffing level of 206 employees. In addition to the employees hired by the Contractor to work at the AWT Facilities, the Contractor shall offer employment to existing AWT employees in order to fill thirty (30) positions with entities owned by the Partners or affiliated companies. The Contractor shall have the right to require substance abuse tests of all persons to whom it offers a position of employment and the right to reject for employment any person not passing or declining to take such a test. Section 9.02. Comparable Employment. The Contractor shall provide current City AWT Facilities employees with a total package of compensation and benefits equivalent to or better than compensation and benefits provided by the City. The Contractor acknowledges that it has agreed to bargain with the employees' collective bargaining representatives to determine the specific terms and conditions of employment to which bargaining unit employees will be subject. The Contractor shall provide the City with wages and benefits specifics at least ten (10) days prior to the Effective Date of this Agreement, subject to ratification of the collective bargaining agreement with the union. All employees shall receive year for year credit for years employed by the City for purposes of eligibility and vesting in the Contractor's benefit programs. All pre-existing conditions of employees and dependents currently covered by the City's health insurance program shall be covered on and after the Effective Date under the Contractor's health insurance program. Section 9.03. Personnel Changes by Contractor. If at any time subsequent to the Effective Date of this Agreement the Contractor makes a determination to reduce the number of employees at the AWT Facilities, the Contractor shall use its best efforts to place displaced employees in comparable capacities at other facilities operated by the Contractor, the Partners or the Parent Companies. The City will attempt to place any employees displaced by the Contractor in other employment opportunities with the City for a period of one year following the employee's displacement. Section 9.04. Worker Assistance Program. The Contractor shall pay Three Hundred Thousand Dollars ($300,000) to support a displaced worker assistance program ("Worker Assistance Program") which will be designed and administered by the Contractor to assist displaced workers with the process of employment change ("Fund"). The Fund will be used to support a number of initiatives including, without limitation, specialized training programs, assistance with job search skills, an outplacement allowance and career and outplacement counseling programs, consistent with the terms of the Schedule of Outplacement Services, which is attached hereto and incorporated by reference as Appendix F. The Contractor shall report at least monthly to the City on the operation of the Worker Assistance Plan and the use of the Fund. Any moneys remaining in the Fund at the end of the first Agreement Year shall be credited to the Annual Fee for the second Agreement Year. Section 9.05. Nondiscrimination in Employment. The Contractor and any subcontractor shall not discriminate against any employee or applicant for employment to be employed in the performance of this Agreement, with respect to hire, tenure, terms, conditions or privileges of employment, or any other matter directly or indirectly related to employment, because of race, religion, color, age, sex, handicap, national origin, ancestry, disabled veteran status or Vietnam-era veteran status. Breach of this provision may be regarded as a material breach of the Agreement. Section 9.06. No Restriction on Employment. At or prior to the Termination Date, the Contractor shall not place any restriction upon the ability of the employees at the AWT Facilities to become employees of the City, or employees of any contractor which may in the future operate and maintain the AWT Facilities. Section 9.07. City not Employer. Nothing in this Article shall be construed to place the City in the relationship of the Employer of, or to grant the City the rights to direct or control either employees of the Contractor or displaced employees. The City shall, however, make appropriate payment, at its expense, of all accrued but unused City employee vacation time, personal leave, and perfect attendance time. In addition, the City shall pay all non- exempt AWT City employees for accrued but unused compensatory time as of the Effective Date. The Contractor agrees to pay AWT City employees for accrued but unused sick leave up to one hundred forty-four (144) hours per employee and to pay exempt City AWT employees for accrued but unused compensatory time, and the City agrees to reimburse the Contractor for these amounts actually paid upon receipt of documentation verifying such payments. ARTICLE X. DEFAULTS AND REMEDIES Section 10.01. Event of Default. The occurrence of any of the following shall constitute an "Event of Default" for purposes of this Agreement: (a) The institution against the Contractor of bankruptcy, insolvency, reorganization, arrangement, debt adjustment, liquidation or receivership proceedings in which it is alleged that the Contractor is insolvent or unable to meet its debts as they mature; (b) The failure by the City to pay any fee, charge or other monetary payment to the Contractor within forty-five (45) days of the day upon which such fee, charge or monetary payment becomes payable; (c) The failure by the Contractor (i) to perform the operation and maintenance of the AWT Facilities in the manner set forth by this Agreement, except in the event of Unforeseen Circumstances, or (ii) to maintain adequate and experienced personnel necessary to ensure that the operation and maintenance standards set forth in this Agreement are satisfied; (d) The failure by the Contractor to allow representatives of the City onto the premises of the AWT Facilities or to inspect the records of the Contractor as they relate to the AWT Facilities; or (e) The breach of any other representation, covenant, warranty or obligation by a party to this Agreement, except in the event of Unforeseen Circumstances. Section 10.02. Notice and Cure. The non-defaulting party shall give written notice to the party in default of any Event of Default. With respect to an Event of Default under Section 10.01(b), the City shall have ten (10) days from the date of receipt of such notice to take action to cure the default. For Events of Default under Sections 10.01(a), (c), (d) and (e), the party in default shall have thirty (30) days from the date of receipt of such notice to take action to cure the default ("First Cure Period"). If such default is not cured at the expiration of such cure periods, and the defaulting party is diligently pursuing a cure the cure period shall be extended for an additional sixty (60) day period ("Second Cure Period"). If such default has not been cured at the expiration of the Second Cure Period or if the defaulting party is not diligently pursuing a cure at the end of the First Cure Period, the party not in default may exercise any of the remedies set forth in Section 10.03 of this Agreement. Provided, however, that any cure period will be extended in the event that the Event of Default is related to the need for regulatory action (which has not been obtained) and the proper documentation requesting such action has been filed with the appropriate regulatory agencies. Section 10.03. Remedies. Subject to the provisions of Section 10.04, the following remedies against a party in default which does not cure its default as set forth in Section 10.02 of this Agreement shall be available to the non-defaulting party: (a) If the party in default is the Contractor, the City may (i) withhold payment of the compensation payable to Contractor pursuant to Article VIII, without such non-payment constituting an Event of Default, until such time as the default is cured; or (ii) terminate this Agreement. (b) If the party in default is the City, the Contractor may terminate this Agreement. (c) The party in default shall reimburse the non-defaulting party and be responsible for all the expenses incurred as a result of the default, including consequential and incidental damages and expenses and reasonable charges of attorneys, engineers, architects and other professionals. The foregoing remedies shall be in addition to, and not in lieu or limitation of, all remedies available at law or in equity to the non-defaulting Party. Section 10.04. Extraordinary Event of Default. If the Contractor commits an Extraordinary Event of Default, the City shall have the right, upon written notice to the Contractor as to the specific circumstances of the asserted Extraordinary Event of Default, to enter upon the premises of the AWT Facilities, terminate the Agreement and assume responsibility for the maintenance and operation of the AWT Facilities. The City shall have the right to utilize such personnel of the Contractor as is necessary for the continued operation and maintenance of the AWT Facilities and shall reimburse the Contractor for the reasonable cost thereof. In the event of an Extraordinary Event of Default, the Contractor shall refund to the City any unearned compensation that may have been paid by the City. In addition, the Contractor shall pay any and all costs and expenses, including reasonable attorneys' fees and any other professional fees, incurred by the City resulting from the Contractor's Extraordinary Event of Default. The foregoing remedies shall be in addition to, and not in limitation of, all remedies available at law or in equity to the City. ARTICLE XI. LIMITATIONS Section 11.01. Possession of AWT Facilities. The Contractor shall be entitled to possession of the AWT Facilities during the term of this Agreement. Section 11.02. Access to the AWT Facilities. The Contractor shall allow the City access to all of the AWT Facilities at all times. The City shall have the right to conduct a performance audit and evaluation of the Contractor at such times as the City deems necessary and at the City's expense. The Contractor agrees to cooperate with any such audit. The City may employ consultants, at its expense, to assist the City in the Audit. Section 11.03. Control. The City shall have no right to control or direct the Contractor or its employees in its operation of the AWT Facilities, so long as an Event of Default has not occurred. ARTICLE XII. DISPUTE RESOLUTION The parties will attempt in good faith to resolve any and all controversies or claims arising out of or relating to this Agreement promptly by negotiation. The disputing party shall give the other party written notice of the dispute. Within twenty days after receipt of said notice, the receiving party shall submit to the other a written response. The notice and response shall include (a) a statement of each party's position and a summary of the evidence and arguments supporting its position, and (b) the name and title of the executive who will represent that party. The executives shall meet at a mutually acceptable time and place within thirty (30) days of the date of the disputing party's notice and thereafter as often as they reasonably deem necessary to exchange relevant information and to attempt to resolve the dispute. If the matter has not been resolved within sixty (60) days of the disputing party's notice, or if the party receiving said notice will not meet within thirty (30) days, either party may initiate mediation of the controversy or claim in accordance with Rule 2 of the Indiana Rules of Alternative Dispute Resolution, as adopted by the Supreme Court of the State of Indiana. Notwithstanding the provisions of this Article , a party may seek a preliminary injunction or other preliminary judicial relief if in its good faith judgment such action is necessary to avoid irreparable harm. Further, the enforcement of the provisions of Article X, Section 10.04 of this Agreement shall not be subject to the dispute resolution requirements of this Article XII. ARTICLE XIII. EXPANSION AND MODIFICATION Section 13.01. Purpose. Inasmuch as increased sewage treatment capacity may become necessary during the life of this Agreement or changes in technology and/or revised environmental, ecological or sanitary legislation or regulations may require modification of the AWT Facilities or its manner of operation, it is the intention of the parties hereto to provide a mechanism, if permitted by law, whereby such needs may be accomplished under the terms of this Agreement. Section 13.02. Notice and Negotiation. The parties hereto agree to keep each other informed as to circumstances and information indicating a need for expansion or modification of the AWT Facilities. Either party may give notice at any time that it desires to commence negotiations for amendment of this Agreement to provide for expansion or modification of the AWT Facilities and for the payment of additional compensation in consideration of the increased duties of the Contractor. Upon receipt of the notice, the parties will attempt to resolve all such matters in good faith. If the City is not in a position, either financially or legally, to agree to any proposed amendment of this Agreement, a disclosure of such inability shall be a good faith response on the part of the City. Section 13.03. Absence of Agreement. In the event the parties cannot agree upon an amendment to this Agreement, the Contractor and the City shall continue to comply with their respective duties pursuant to this Agreement unless terminated. ARTICLE XIV. INSURANCE Section 14.01. Contractor to Provide Insurance. The Contractor shall maintain, at its expense, during the Term, the following insurance to the extent that such insurance is commercially available: (a) Comprehensive General Liability with limits of $1,000,000 Per Occurrence and $3,000,000 Annual Aggregate covering the following: (i) Blanket contractual insurance to cover indemnification clauses contained in this Agreement. (ii) Property Damage. (iii) Personal Injury. (iv) Independent Contractor and Contractors Protective. (v) Collapse, Explosion or Underground. (b) Commercial Automobile Insurance covering all Vehicles. (c) Excess Liability Insurance with a minimum $10,000,000 limit. Section 14.02. Special Conditions. The following conditions shall apply to all insurance obtained by the Contractor: (a) The City shall be named as an additional insured on all policies. (b) The City shall be provided with a certificate or, at its request, a certified copy of all policies referred to in this Article XIV within thirty (30) days of the inception date of each such policy. (c) The City shall be given sixty (60) days prior notice of cancellation or non-renewal. (d) All insurance companies and coverages must be acceptable and approved in writing by the City. ARTICLE XV. INDEMNIFICATION Section 15.01. Contractor to Indemnify City. The Contractor, the Partners and the Parent Companies shall jointly and severally defend, protect, indemnify and hold harmless, the City from all liability, including for attorney's fees, subject to Section 15.04 hereof, for all claims, actions, charges, costs, investigations and damages of any nature whatsoever ("claims"), which arise from the negligent acts or omissions or willful misconduct of the Contractor or its agents in connection with the performance of this Agreement (and severally as respects a party's execution of this Agreement), including but not limited to claims relating to (a) personal injury or damage to or loss of use or loss of any personal or real property caused by or arising out of the negligent act of the Contractor, its employees, or agents; (b) the Contractor's failure to provide the standard of care, skill and diligence required under this Agreement in the performance of its duties under this Agreement; (c) any breach of representation, covenant or warranty of the Contractor, Partners or Parent Companies as the case may be, set forth in this Agreement; and (d) any violation by the Contractor or its agents of any federal, state or local law, ordinance, rule, regulation, or Permit. Section 15.02. City to Indemnify Contractor. To the fullest extent permitted by law, the City agrees to defend, protect, indemnify and hold harmless the Contractor, the Partners, the Parent Companies and their respective employees and agents from all claims, actions, charges or demands for any damages, liabilities, losses, costs and expenses as may arise from or are due to the negligent acts or omissions of the City, its agents or employees. Section 15.03. Fines and Penalties. The Contractor shall be liable for fines and/or civil or criminal penalties imposed by any local, state or federal regulatory agency for violation of any Permits, or any law or statute, which fines or civil penalties are a result of the Contractor's negligence or willful failure to operate and maintain the AWT Facilities in accordance with the terms of this Agreement. The City hereby agrees to assist the Contractor, to the extent warranted, in defending or contesting any such fines or civil or criminal penalties in any administrative or court proceeding prior to the payment of such fine or civil or criminal penalty by the Contractor. The Contractor shall be responsible for the cost of contesting such fine or civil or criminal penalty. Section 15.04. Co-Negligence. In the event that both the Contractor and the City are negligent, and the negligence of both is the proximate cause of such claim for damage for personal injury or property damage, then in that event each party will be responsible for the portion of the liability or damages resulting in consequence equal to such party's comparative share of the total negligence. The indemnity required by this Article shall not be limited by reason of the enumeration of any insurance coverage required herein. Section 15.05. Demand for Indemnification. If any action is brought against a party to this Agreement entitled to indemnification pursuant to this Article XV (an "indemnified party") in respect of which indemnity may be sought against the party granting indemnification (an "indemnifying party") pursuant to this Article XV, such indemnified party shall promptly notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party of any such action shall not release the indemnifying party from any liability it may have to such indemnified party, unless the indemnifying party is prejudiced thereby, in which case the latter is released to the extent of the prejudice. In case any such action is brought against an indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party against which a claim is to be made will be entitled to participate therein at its own expense and, to the extent that it may wish, to assume at its own expense the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided however, that (i) if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded, based upon advice of counsel, that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party shall have the right to select separate counsel to assume such legal defenses and otherwise to participate in the defense of such action on behalf of such indemnified party or parties; and (ii) in any event, the indemnified party shall be entitled to have counsel chosen by such indemnified party participate in, but not conduct, the defense. Upon receipt of notice from the indemnifying party to such indemnified party of its election to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Article XV for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (x) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with proviso (i) to the next preceding sentence (it being understood, however that the indemnifying party shall not be liable for the expenses of more than one separate counsel); (y) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action; or (z) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. An indemnifying party shall not be liable for any settlement of any action or proceeding effected without its written consent. Section 15.06. Survival of Obligations. The obligations set forth under this Article XV shall survive the expiration or termination of this Agreement. ARTICLE XVI. MISCELLANEOUS Section 16.01. Entire Agreement and Amendment. This Agreement (and the Appendices hereto) contain the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements and conditions, expressed or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. This Agreement (and the Appendices hereto) may not be modified or amended other than by an agreement in writing signed by all of the parties hereto, except that amendment of the provisions of Article VIII shall require the consent of only the Contractor and the City. Any such amendment, however, shall not affect the liability of the Partners and Parent Companies hereunder. Section 16.02. Waiver. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. Section 16.03. City's Ability to Waive Certain Provisions. If, based upon the advice of nationally recognized bond counsel, the City reasonably concludes that any provision of this Agreement has the potential for causing the AWT Facilities to be treated as used in a private business use under Section 141(b) of the Internal Revenue Code of 1986, as amended, and other applicable authority (including IRS Rev. Proc. 93-13), the City may, at its option , either (i) waive such provision(s) and the Agreement shall be deemed to have been amended to delete such provision or (ii) request the Contractor to negotiate in good faith to amend such provision(s) to reduce or eliminate such risk while preserving the original intent of the parties to the extent practical. If such waiver changes the scope of the services to be provided under this Agreement, the City and the Contractor shall agree to make an adjustment to the Annual Fee. Section 16.04. Remedies. In the event of breach of any provisions of this Agreement, the non-breaching party shall be entitled to reasonable attorneys' fees incurred for the enforcement of said provisions, in addition to damages for the breach thereof the remedies provided in this Agreement shall be cumulative and no one shall be construed as exclusive of any other or of any remedy provided by law and failure of any party to exercise any remedy at any time shall not operate as a waiver of the right of such party to exercise any remedy for the same or subsequent default at any time thereafter. Section 16.05. Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement shall be governed by the laws and decisions of the courts of the State of Indiana, notwithstanding any Indiana or other conflict-of-law provision or court decision to the contrary. Section 16.06. Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been received when delivered or on the third business day following the mailing, by registered or certified mail, postage prepaid, return receipt requested, thereof addressed as set forth below: TO THE CITY: Michael B. Stayton, Director Department of Public Works City of Indianapolis Suite 2460, City-County Building 200 East Washington Street Indianapolis, Indiana 46204 With copies to: AWT Contract Compliance Officer City of Indianapolis Department of Public Works 2700 South Belmont Avenue Indianapolis, Indiana 46221; and Sue A. Beesley Corporation Counsel 200 East Washington Street City-County Building Suite 1601 Indianapolis, IN 46204 TO THE CONTRACTOR: Mr. James T. Morris Managing Partner White River Environmental Partnership P.O. Box 1220 Indianapolis, Indiana 46202 Mr. David Sherman Project Manager White River Environmental Partnership 2700 South Belmont Avenue Indianapolis, Indiana 46221 With copies to: Ron Ballard, President JMM Operational Services, Inc. Suite 1100 1700 Broadway Denver, Colorado 80209 Patrick R. Cairo, Vice President Lyonnaise American Holding, Inc. 2004 Renaissance Blvd. King of Prussia, PA. 19406 Any notices pertaining to Article X shall also be sent to : Ron Dungan, Executive Vice President GWC Corp. 2004 Renaissance Blvd. King of Prussia, PA 19406 Murli Tolaney, President Montgomery Watson 300 North Lake Ave Suite 1200 Pasadena, CA 91101 Jacques Petry, President International Water Div. Lyonnaise des Eaux-Dumez 72, Avenue de la Liberte 92022 NANTERRE CEDEX France Any Party hereto may change the address to which notices are to be sent by giving notice of such change of address in conformity with this Section. Section 16.07. Binding Nature of Agreement; No Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their successors and assigns, except that no Party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other Party hereto. The parties acknowledge that it is contemplated that after the execution of this Agreement, GWC will be merged into United Water Resources ("UWR") and, upon consummation of that merger, UWR will assume GWC's responsibilities hereunder. Section 16.08. Nature of Relationship. The relationship which the parties intend to create under this Agreement is that of principal and independent contractor. Nothing herein is intended to, or shall be construed to, create the relationship of partners, of joint venturers or of employment between the City and the Contractor. The City shall not have the right to direct or control the activities or practices of the Contractor except as expressly provided in this Agreement. Section 16.09. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any Party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts thereof, individually or taken together, shall bear the signatures of all of the Parties reflected hereon as the signatories. Section 16.10. Provisions Separable. The provisions of this Agreement and of each section or other subdivision hereof are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part unless the Agreement is rendered totally unenforceable thereby. Section 16.11. Section and Paragraph Headings. The section and paragraph headings in this Agreement are for convenience of reference only; they form no part of this Agreement and shall not affect its interpretation. Section 16.12. Gender. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, whether masculine, feminine or neuter, which the context may require. Section 16.13. Sections. This Agreement is divided into sections, numbered in whole arabic numbers, each of which is subdivided into subdivision numbered with the whole arabic designation of the section in which it is located, followed by a decimal point and an arabic numeral designating the subdivision. Both the sections and the subdivisions are referred to as "Sections." In construing this Agreement, the word Section should be given the meaning which its context suggests and doubts should be resolved in favor of the broader designation. Section 16.14. Number of Days. Except as expressly stated to the contrary elsewhere herein, in computing the number of days, for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and legal holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or legal holiday. Section 16.15. Consents. Unless otherwise specified, the Director of the Department of Public Works or his or her designee in writing (who may be the CCO) shall have full power and authority to agree, consent and approve on the City's behalf for all purposes of this Agreement, subject to any required approvals by the Board of Public Works. Whenever the consent or approval of a party is required by this Agreement, it shall not be unreasonably withheld. [The remainder of the page is intentionally left blank] IN WITNESS WHEREOF, the Parties have executed this Agreement on this ____ day of December, 1993. BOARD OF PUBLIC WORKS APPROVED WHITE RIVER ENVIRONMENTAL AND AUTHORIZED DIRECTOR TO PARTNERSHIP EXECUTE AGREEMENT. CITY OF INDIANAPOLIS By:___________________________ DEPARTMENT OF PUBLIC WORKS Managing Partner By: _________________________ Michael B. Stayton Director of Public Works Department ATTEST: ______________________________ Board Secretary APPROVED AS TO LEGAL FORM: SUE A. BEESLEY, CORPORATION COUNSEL ______________________________ APPROVED: ______________________________ James H. Steele, Jr. Controller The following Parties are executing this Agreement only to the extent of their representations, covenants and entitlements contained herein. "THE PARTNERS" IWC SERVICES, INC. JMM WHITE RIVER CORPORATION By: _________________________ By: _________________________ President President LAH WHITE RIVER CORPORATION By: _________________________ President "THE PARENT COMPANIES" IWC RESOURCES CORPORATION LYONNAISE AMERICAN HOLDINGS, INC. By: _________________________ By: _________________________ President President LYONNAISE DES EAUX DUMEZ GWC CORPORATION By: _________________________ By: _________________________ President President JMM OPERATIONAL SERVICES, INC. GWC OPERATIONAL SERVICES, INC. By: _________________________ By: _________________________ President President MONTGOMERY WATSON AMERICAS, INC. By: _________________________ President APPENDIX A DESCRIPTION OF AWT FACILITIES The Belmont Advanced Wastewater Treatment Facility (the "Belmont Facility") is located at 2700 South Belmont Avenue. The property and facilities to be operated and maintained are as shown in the diagram shown on the previous page. The Belmont Facility is bounded on the north by West Raymond Street, on the east by Harding Street down to the White River, on the east and south by the White River, and on the west by Eagle Creek. The Contractor will maintain all roadways including those atop the levee. The following areas are completely excluded from any responsibility of the Contractor: 1. Resource Recovery Facilities (#18) 2. Two Indianapolis Fire Department Storage Buildings (#13 and #19) 3. Animal Control Center (#15) 4. Abandoned Cars Building (#16) and associated fenced storage area 5. CEMD Maintenance Garage, both the old and new buildings and associated fenced storage areas and the gas and car wash facility (#13 and #25) 6. Sludge Lagoons ("II") 7. Ash Lagoons ("JJ") 8. The area west of Belmont Avenue south of Raymond Street up to the perimeter fence (the private business area and the citizen's transfer station area The following areas will be utilized exclusively by City of Indianapolis work forces: 1. Air Pollution Control Division Offices (#2) 2. Construction Engineering Offices (#3) 3. Inspection Division Offices (#4) 4. Training Center (#6) 5. Flood Control Building (Solid Waste Offices) (#8) 6. Solids Waste Division Garage (#14) The following areas will have shared occupancy between the Contractor and the City of Indianapolis work forces: 1. Administrative and Laboratory Building (#1) The Southport Advanced Wastewater Treatment Facilities (the "Southport Facility") is located at 3800 West Southport Road. The Southport Facility to be operated and maintained by the Contractor is displayed on the diagram above. The Southport Facility is bounded on all four sides by fencing as shown on the diagram. Additionally, the green space outside the fence on the south and up to Southport Road and all roadways shall be maintained up to a distance of approximately one mile from the White River eastward to the east fence line. Two areas are excluded from the Contractor's responsibility for maintenance. The six sludge lagoons designated by the letters "BB" are to remain for rehabilitation and use by the City of Indianapolis and will be maintained by the City. The area east of the gravel road which runs north and south located just east of the levee which protects the east side of the Southport Facility north and east of the area designated as a "Parking Lot" to the north fence, the east fence and the south fence will be utilized and/or maintained by the City of Indianapolis or its designee. All roadways will be maintained by the Contractor. APPENDIX B AWT FACILITIES CAPACITY BELMONT DESIGN CRITERIA Hydraulic and Organic Loading 1. Hydraulic Loading a. Primary Peak Design Flow 300 MGD b. Primary Average Design Flow 150 MGD c. Secondary Average Design Flow 125 MGD d. Tertiary Average Design Flow 125 MGD 2. Oganic Loading a. BOD Average 255,200 lb/day b. NH3-N Average 15,900 lb/day SOUTHPORT DESIGN CRITERIA Hydraulic and Organic Loading 1. Hydraulic Loading a. Peak Flow 150 MGD b. Average Design Flow 125 MGD 2. Organic Loading a. BOD Average 207,500 lb/day b. NH3-N Average 18,200 lb/day APPENDIX C BEGINNING INVENTORY APPENDIX D PERMIT LISTING APPENDIX E LIST OF VEHICLES APPENDIX F SCHEDULE OF OUTPLACEMENT SERVICES The Outplacement Services Program (the "Program") applies to City employees who are employed by the Wastewater Treatment Division of the Department of Public Works who are separated from employment with the City of Indianapolis because they: 1. Did not receive an employment offer from the Contractor, and 2. Were not placed in another comparable City position. The description of benefits for eligible employees for the Program is as follows: Outplacement Allowance. The outplacement company will distribute the outplacement allowance on a weekly basis to eligible individuals, beginning the week following the Effective Date. The allowance is based upon the individual's current hourly rate of pay and length of service with the City as of the Effective Date. LENGTH OF SERVICE: OUTPLACEMENT ALLOWANCE 0-5 Years 160 hours pay 6 Years 200 hours pay 7 Years 240 hours pay 8 Years 280 hours pay 9 Years 320 hours pay 10 Years 360 hours pay 11 Years 400 hours pay 12 Years 440 hours pay 13 Years 480 hours pay 14 Years 520 hours pay 15 Years 560 hours pay 16+ Years 640 hours pay Education Credit. Eligible individuals will receive a tuition credit, up to a maximum of $2,000. The credit may be used at any accredited college, university or vocational institution. The credit will be paid directly to the institution or reimbursement to the individual upon proof of successful passing of course. Subsequent credit draw down depends on proof of successful completion of prior course(s). The education credit is available through July, 1996. Outplacement Workshops. These workshops are designed to equip participants with the knowledge and skills necessary to evaluate their career goals and to effectively identify and pursue appropriate job opportunities. Individual Counseling. Experienced counselors will help participants deal with the emotional aspects of job loss and career transition and will offer individual coaching and advice in such topics as resume preparation, job leads and interviewing style. Interests and Aptitude Testing. Testing will be provided to assist participants in determining career goals. Job Lead Assistance. Counselors will be available to support tailoring an individual's skills and abilities to available positions. Clerical Services. Assistance will be provided in typing resumes and letters. Information Resource Materials. The outplacement service will make information available such as computerized job network, newspapers, periodicals and directories, as well as information on unemployment compensation, COBRA, PERF, job training programs, and other public resources. IN WITNESS WHEREOF, the Parties have executed this Agreement on this 20th day of December, 1993. BOARD OF PUBLIC WORKS APPROVED WHITE RIVER ENVIRONMENTAL AND AUTHORIZED DIRECTOR TO PARTNERSHIP EXECUTE AGREEMENT. CITY OF INDIANAPOLIS By: /s/ James T. Morris DEPARTMENT OF PUBLIC WORKS Managing Partner By: /s/ Michael B. Stayton Michael B. Stayton Director of Public Works Department ATTEST: /s/ Lisa Hansen Board Secretary APPROVED AS TO LEGAL FORM: SUE A. BEESLEY, CORPORATION COUNSEL /s/ Sue A. Beesley APPROVED: /s/ James H. Steele, Jr. James H. Steele, Jr. Controller The following Parties are executing this Agreement only to the extent of their representations, covenants and entitlements contained herein. "THE PARTNERS" IWC SERVICES, INC. JMM WHITE RIVER CORPORATION By: /s/ Alan R. Kimbell By: /s/ Ronald J. Ballard President President LAH WHITE RIVER CORPORATION By: /s/ Patrick R. Cairo Vice President "THE PARENT COMPANIES" IWC RESOURCES CORPORATION LYONNAISE AMERICAN HOLDINGS, INC. By: /s/ James T. Morris By: /s/ G. De Panafieu President Vice President LYONNAISE DES EAUX DUMEZ GWC CORPORATION By: /s/ G. De Panafieu By: /s/ Ronald S. Dungan Vice Chairman Executive Vice President JMM OPERATIONAL SERVICES, INC. GWC OPERATIONAL SERVICES, INC. By: /s/ Ronald J. Ballard By: /s/ Ronald S. Dungan President President MONTGOMERY WATSON AMERICAS, INC. By: /s/ Murli Tolaney President EXHIBITS TO THE AGREEMENT FOR THE OPERATION AND MAINTENANCE OF THE CITY OF INDIANAPOLIS ADVANCED WASTEWATER TREATMENT PLANTS APPENDIX A . . . . . . . DESCRIPTION OF THE AWT FACILITIES APPENDIX B . . . . . . . CAPACITY OF THE AWT FACILITIES APPENDIX C* . . . . . . . BEGINNING INVENTORY APPENDIX D* . . . . . . . LIST OF PERMITS APPENDIX E* . . . . . . . LIST OF VEHICLES APPENDIX F . . . . . . . SCHEDULE OF OUTPLACEMENT SERVICES CONTRACTOR SCHEDULES Schedule 4.02* . . . . . Litigation Schedule 4.03* . . . . . No Default CITY SCHEDULES Schedule 5.02 . . . . . . Litigation Schedule 5.03 . . . . . . No Default Schedule 5.04 . . . . . . Compliance with Laws Schedule 5.06 . . . . . . Components of AWT Facilities not in good working order ______________________________ *To be delivered to and accepted by the respective parties prior to the Effective Date. SCHEDULE 4.02 While the consent degree hereinafter described does not directly involve the Contractor or any Partner or Parent Company, Jacksonville Suburban Utilities Corporation ("JSUC"), a subsidiary of General Waterworks Corporation, which, in turn, is a subsidiary of GWC Corporation, a Parent Company, is an operating utility engaged in rendering water utility and wastewater treatment services in Jacksonville, Florida, and is subject to a consent decree, dated November 10, 1992, issued by the United States District Court for the Middle District of Florida. This consent decree was the result of a citizen's lawsuit initiated by the National Resources Defense Council ("NRDC"). EPA elected not to participate in this action, and no penalties were assessed by the consent decree. However, pursuant to the consent decree, JSUC agreed to undertake a focused treatability study to determine the cause of occasional toxicity in the effluent of its wastewater treatment facility and in a one-year monitoring period ending July 1, 1994, JSUC is subject to penalties in stipulated amounts in the event of discharges above or below limitations contained in its NPDES permit. JSUC is also required to distribute two pamphlets to its customers to educate them on the impact on the operation of the sewage treatment plant of the disposal of household toxics and hazardous wastes. As part of the consent decree, JSUC agreed to pay NRDC's legal fees in the amount of $10,000 and $4,000 to the Stewards of the St. John's River, an environmental interest group. SCHEDULE 4.03 (NONE) SCHEDULE 5.02 Actions, suits, claims, investigations and proceedings required to be disclosed pursuant to Section 5.02 of the Agreement: 1. On December 17, 1993, the American Federation of State, County, and Municipal Employees, AFL-CIO, Indiana Council 62 and the American Federation of State, County, and Municipal Employees Local 725 (collectively, the "Union") filed a Verified Complaint for Preliminary and Permanent Injunction in the Marion Superior Court Civil Division, Room 5 seeking (i) that a preliminary and permanent injunction be issued enjoining the City from awarding and entering into the Agreement with the Contractor or any other private contractor unless and until the City complies with Article X of the collective bargaining agreement by providing the Union with the proper notice, training and opportunity to bid on the work, or alternatively, until the City and the Union exhaust their contractual arbitration procedure; (ii) that a preliminary and permanent injunction be issued requiring the City to rescind the award of the Agreement to the Contractor and to reopen the bidding for the purpose of permitting the Union the notice, training and opportunity to bid on the work in accordance with Article X of the collective bargaining agreement; and (iii) that a preliminary and permanent injunction be issued enjoining the City from taking any adverse action against the employees as a result of the drug testing being conducted by the Contractor. Other than as described above, there are no actions, suits, claims, investigations or proceedings pending or threatened against the City in any court or before any governmental, regulatory or administrative agency, instrumentality or authority, arbitration board or other tribunal that would materially affect the City's entering into, or performance of the Agreement. 2. The City is not charged by any governmental agency, instrumentality or authority with a material violation of, or threatened by any governmental agency, instrumentality or authority with a charge of a violation of, any federal, state, county or municipal law or regulation that would materially affect the City's entering into, or performance of, the Agreement. SCHEDULE 5.03 Defaults required to be disclosed pursuant to Section 5.03 of the Agreement: 1. The City is not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under any mortgage, loan agreement, lease, lease purchase, indenture or evidence of indebtedness for borrowed money to which the City is a party or by which any material amount of the assets of the City is bound that would materially affect the City's entering into, or performance of, the Agreement. 2. The City in not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under any judgment, order, injunction, rule, regulation or other judicial or administrative mandate of any court, arbitrator or governmental agency or instrumentality, which default or potential default could reasonably be expected to have a material adverse effect on the City's entering into, or performance of, the Agreement. SCHEDULE 5.04 Pursuant to Section 5.04 of the Agreement, the following are instances where the City is not in full compliance with the terms of all applicable laws, regulations, Permits, orders, judgments, administrative orders, regulations and guidelines adopted or entered by governmental authorities having jurisdiction to do so in connection with the operation and maintenance of the AWT Facilities: 1. OSHA Process Safety Management. The City has not yet begun a hazards analysis and no program is currently in place. 2. RCRA Contingency Plans. Our current plans do not yet sufficiently cover the items as required in 40 CFR Part 265 Subparts C and D. 3. Emergency Action Plan for Highly Hazardous Chemicals. 29 CFR 1910.119 requires an emergency action plan which is not yet completed. 4. Spill Prevention Control and Countermeasures Plan. 40 CFR Part 112 requires facilities that store oil in a single container with a capacity of less than 660 gallons to have such a plan. The City does not currently have a complete plan. 5. Hazard Communication Plan. Needs to be updated. 6. Hazard Communication Training. Needs to be conducted. 7. Lock-out Tag Training. Needs to be updated. 8. Formal Respirator Program. Program and training are needed. 9. We are in compliance with IDEM's Solid Waste Rule, but have asked for administrative relief based on applicability of NPDES Permit, NPDES Storm Permit, Air Permit and 503 Permit. 10. Confined Space Entry Permit Program. Has not been fully implemented. Note: AWT has never in the past been responsible for developing and conducting compliance or training programs which dealt with OSHA and RCRA regulations. In the last two to three months, AWT has decided to move forward to develop these programs. Items 1,2,3,4,5, and 8 listed above are all started and are near completion. Pursuant to Section 5.04, the City also discloses the following information with regard to current environmental liabilities and/or complaints: 1. The City has received a Notice of Violation for alleged air violations. This may result in a fine and VOC limits in the new permit. 2. There is evidence of groundwater contamination due to leaking underground storage tanks. The tanks were removed in the mid 1980's. The groundwater is contaminated with BTEX and other organics. The tanks were located north of the existing maintenance/incinerator. 3. NPDES Permit Excursions. The AWT has had the following minor excursions in the past two years: a. March 1992--Belmont-NH3N b. April 1992--Belmont-NH3N c. April 1992--Southport-fecals d. May 1992--Southport-fecals e. July 1992--Southport-raw wet weather bypass f. September 1992--Belmont-PE bypass g. November 1992--Southport-wet weather bypass and suspended solids h. March 1993--Belmont-amenable cyanide i. June 1993--Belmont-fecals j. July 1993--Belmont-fecals k. August 1993--Belmont-chlorine residual l. September 1993--Southport-no record of DO (probe malfunction) 4. The AWT Facilities have received the following number of complaints regarding odor over the past two years: a. 1992 Belmont--0 complaints b. 1992 Southport--0 complaints c. 1993 Belmont--1 complaints d. 1993 Southport--0 complaints There may have been additional calls received by the Plants. The console logs were not reviewed. SCHEDULE 5.06 Pursuant to Section 5.06 of the Agreement, the following components of the AWT Facilities would not be considered to be in good working order and condition: BELMONT FACILITY 1. Oxygen Nitrification System. a. Waste Pumps 3 - Not functional and no plans to repair. b. Mixer, Train #1 Stage #8 - Needs new bearing. Projected to be repaired by January 1, 1994. 2. Dissolved Air Flotation. Tank Numbers 5,6,7,8,9 and 10 - Waiting for new annual contract to purchase parts. 3. Belt Filter Presses. a. Presses Number 1,2,3 in the South Building. b. Presses Number 6 and 7 in the North Building. Number 6 should be repaired by end of 1993 and the parts are on order for Number 7. c. Three Moyno Pumps. 4. Incineration. Incinerator Number 8. 5. Odor Control Systems. All systems in Solids Processing Area--need new chemical feed pumps and piping. 6. Bio Roughing. a. LEL's and Controllers - waiting on repair parts. b. Traveling Water Screen Number 1 - probably will be abandoned or will become a capital improvement project under the Agreement. SOUTHPORT FACILITY 1. Bio Roughing. a. Traveling Water Screens will be abandoned or replaced as a capital improvement project. 2. Oxygen Nitrification System. a. Intermediate Pump Station is operable, but out of service. EX-10.17 9 WHITE RIVER PARTNERSHIP AGREEMENT WHITE RIVER ENVIRONMENTAL PARTNERSHIP PARTNERSHIP AGREEMENT This Agreement, made and entered into as of August 20, 1993, by and among LAH White River Corporation, an Indiana corporation ("LAH"), JMM White River Corporation, an Indiana corporation ("JMM") and IWC Services, Inc., an Indiana corporation ("IWCS") (hereafter sometimes individually referred to as a "Partner" and sometimes collectively referred to as "Partners"). WITNESSETH: WHEREAS, the Partners hereto desire to form a general partnership (hereinafter referred to as the "Partnership"), under the laws of the State of Indiana upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, and intending to be legally bound hereby, it is agreed by and among the Partners as follows: Article I BASIC STRUCTURE Sec. 1.1 Formation The parties hereby form a general partnership pursuant to the laws of the State of Indiana. Sec. 1.2 Name The business of the Partnership shall be conducted under the name of White River Environmental Partnership. Sec. 1.3 Place of Business The principal office and place of business of the Partnership shall be located at 1220 Waterway Boulevard, Indianapolis, Indiana 46202, or such other place as the Managing Partner may from time to time designate. Sec. 1.4 Term The Partnership shall commence on August 20, 1993, and shall terminate on December 31, 2023, unless sooner terminated in one of the following manners: (a) By unanimous agreement of the Partners, or (b) By the completion of the purpose intended (as evidenced by action of the Management Committee under Sec. 3.6 hereof), or (c) Pursuant to this agreement, or (d) By applicable Indiana law, or (e) By bankruptcy, withdrawal, reorganization, or expulsion of all of the then Partners. Sec. 1.5 Purpose (a) The primary purpose of the Partnership shall be to submit a proposal (the "Proposal") and to carry out a service contract (the "Service Contract") with the City of Indianapolis (the "City") for the operations of wastewater treatment facilities. (b) A secondary purpose of the Partnership shall be to conduct and carry out any and all other lawful business authorized by the Management Committee under Sec. 3.6 or Sec. 3.7 hereof. Sec. 1.6 Investment Representative of Partners Each Partner represents and warrants that he is acquiring his interest in the Partnership for his own account, for investment, and not with a view to the sale or distribution thereof in violation of the Securities Act of 1933, as amended, Indiana securities regulation law or other applicable law. Article II FINANCIAL ARRANGEMENTS Sec. 2.1 Definition of Capital For purposes of this document "capital" shall be defined as property owned by the Partnership other than property of a kind which may be includable in the inventory of the Partnership or which is held for sale to customers of the Partnership in its ordinary course of business. Sec. 2.2 Capital Accounts Notwithstanding anything herein to the contrary, the Partnership intends to maintain capital accounts in accordance with the regulations under Internal Revenue Code Section 704(b). An individual capital account shall be maintained by each partner. Contributions to the capital of the Partnership by a Partner shall be credited to its individual capital account. In the event a Partner's capital account contains capital (as defined above), the gain on such property and the losses, deductions, amortization depreciation associated with such property shall be added to or subtracted from the Partner's capital account (using the initial capital account as a base). Sec. 2.3 Allocation of Profits and Losses All profits of the Partnership shall be deemed to be income of the Partners according to their respective Percentage Share of Capital. All losses of the Partnership shall be deducted from the Partners' capital accounts according to their respective Percentage Share of Capital. Undistributed profits shall be added to the relevant Partners' capital accounts. Amounts distributed in excess of current profits shall be deducted from the relevant Partners' capital accounts. Upon dissolution, any Partner having a negative capital account balance shall be required to make up such balance. Sec. 2.4 Capital; Pre-formation Qualified Expenses The amount of the basic capital of the Partnership shall be fixed from time to time by the Management Committee under Sec. 3.6 hereof. The Partnership, as authorized by the Management Committee under Sec. 3.7 hereof, shall select the legal, financial and technical advisers/consultants deemed necessary to assist in the preparation of the Proposal. The relevant out-of-pocket fees and costs of such advisors ("external expenses") will be borne in proportion to their Percentage Share of Capital. The non-out-of-pocket expenses directly incurred by a Partner for preparation of the Proposal and for negotiation of the Service Contract ("internal expenses") will be recorded by such party. As soon as possible, a budget will be agreed by the Partners for external and internal expenses. If the Partnership is awarded the Service Contract, all such external and internal expenses (including such expenses incurred prior to the formation of the Partnership) will be considered as part of the contributions of the Partners to their respective capital accounts of the Partnership. In the event the Partnership is not awarded the Service Contract, all mutually agreed expenses incurred by each Partner shall be totaled and, as promptly as practical, proportionate reimbursement shall be made so that each Partner's share of the aggregate is the same as such Partner's Percentage Share of Capital. Expenses incurred by a Partner in connection with the negotiation of this Partnership Agreement or the O&M Agreement will not qualify for reimbursement or as an equity contribution as provided above. Sec. 2.5 Additional Capital Contributions Following the fixing of the basic capital of the Partnership, initially and upon each increase, each Partner shall contribute to the capital of this Partnership an amount according to his then Percentage Share of Capital when due, as specified by the Management Committee under Sec. 3.6 hereof, or otherwise as called for by the Managing Partner by not less than seven days' prior written notice. Sec. 2.6 Rights of the Partners Upon Default of a Partner Any Partner refusing for more than 30 days following notice under Sec. 2.5 to contribute according to his then Percentage Share of Capital the amounts called for by the Managing Partner under Sec. 2.5 hereof or in accordance with the due date specified by the Management Committee under Sec. 3.6 hereof, as the case may be, shall lose a share of its Percentage Share of Capital of the Partnership equal to 150% of the ratable percent of the contribution called for as such amount shall then represent the percentage of the total capital of the Partnership, following the contributions made in response to such call by the other Partners. The calculation of the Partnership's and Partner's capital shall be based upon the initial capital contributions of the Partners adjusted for any Partner's additional capital contribution or withdrawal at the value of such contribution or withdrawal when made as well as cumulative credited earnings and losses. Sec. 2.7 Percentage Share of Capital The Percentage Share of Capital of each Partner shall be (unless otherwise modified by the terms of this agreement) as follows: INITIAL PERCENTAGE NAMES SHARE OF CAPITAL IWCS 52 JMM 43 LAH 5 Sec. 2.8 Partners' Share of the Profits and Losses Subject to the Regulations under Internal Revenue Code sections 704(b) and (c), the Partners shall share in the profits and losses of the Partnership according to their then Percentage Share of Capital. Sec. 2.9 Allocation Upon Buy-Out or Shift in Interest Nothing in this agreement to the contrary withstanding, upon a sale of a Partner's interest or upon the withdrawal of a Partner from this Partnership or upon a shift in Partnership interests by inter-Partner transfers the operating profits and losses of this Partnership for the fiscal year to date shall be allocated as follows: Said Partner's then Percentage Share of Capital shall be multiplied times the actual total amount of each item of Partnership gain or loss, as defined in Section 702 of the Internal Revenue Code (as amended or supplemented), at the closing of the books on the date of sale or withdrawal. Sec. 2.10 Adjustments Nothing herein set forth to the contrary, (a) each Partner's capital account shall be increased by: (i) the amount of money contributed by the Partner to the Partnership, (ii) the fair market value of property contributed by the Partner to the Partnership (net of liabilities secured by such contributed property that the Partnership is considered to assume or take subject to), and (iii) allocation to the Partner of Partnership income and gain (or items thereof), including income and gain exempt from tax and income and income and gain, but excluding income and gain described in paragraph (b) below; and (b) shall be decreased by: (i) the amount of money distributed to the Partner by the Partnership, (ii) the fair market value of property distributed to the Partner by the Partnership (net of liabilities secured by such distributed property that such Partner is considered to assume or take subject to under Internal Revenue Code Section 752), (iii) allocations to the Partner of expenditures of the Partnership described in Internal Revenue Code Section 705(a)(2)(B), and (iv) allocations of Partnership loss and deduction (or item thereof), excluding items described in (iii) above and loss or deduction described in paragraphs (c)(i) or (ii) below; and is otherwise adjusted in accordance with the additional rules set forth in this paragraph. (c)(i) Allocations to reflect reevaluations. If Partnership property is properly reflected in the capital accounts of the Partners and on the books of the Partnership at a book value that differs from the adjusted tax basis of such property, then the capital accounts of the Partners shall be adjusted solely for allocations of the book items to such Partners and the Partners' shares of the corresponding tax items shall not be independently reflected by further adjustments to the Partners' capital accounts. (ii) Credits. Allocations of tax credits and tax credit recapture shall not be reflected by adjustments to the Partners' capital accounts (except to the extent that adjustments to the adjusted tax basis of Partnership Internal Revenue Code Section 38 property in respect of tax credits and tax credit recapture give rise to capital account adjustments). Sec. 2.11 Interest No interest shall be paid on any capital account or contribution to the capital of the Partnership. Sec. 2.12 Return of Capital Contributions No Partner shall have the right to demand the return of his capital contributions except as herein provided. Sec. 2.13 Rights of Priority Except as herein provided, the individual Partners shall have no right to any priority over each other as to the return of capital contributions except as herein provided. Sec. 2.14 Distributions Distributions to the Partners of net operating profits of the Partnership, as hereinafter defined, shall be made at such times as the Management Committee shall decide under Sec. 3.6 hereof. Such distributions shall be made to all Partners simultaneously. For the purpose of this Section, net operating profit for any accounting period shall mean the gross receipts of the Partnership for such period, less the sum of all cash expenses of operation of the Partnership, and such sums as may be necessary to establish a reserve for operating expenses. In the event the Management Committee shall determine under Sec. 3.6 hereof that the capital of the Partnership previously contributed by the Partners is no longer all required by the Partnership, a distribution in return of capital may be authorized by the Management Committee under Sec. 3.6 hereof. Sec. 2.15 O&M Agreement Immediately prior to the presentation of the Proposal, the Partnership will enter into an Operations and Maintenance Agreement ("O&M Agreement") with JMM and JMM White River O&M Partnership (the "O&M Partnership"). Under the O&M Agreement the O&M Partnership will agree to carry out the terms of the Service Contract with the City. Under the O&M Agreement, the O&M Partnership will provide all employees to perform the Service Contract, contract for power, chemicals and other necessary materials and supplies and other expert consulting services as needed, and make other necessary purchases from third parties to perform the Service Contract, all of which costs shall be reimbursed by the Partnership under the terms of the O&M Agreement. A management fee will be paid to JMM under the O&M Agreement in order to remunerate it for its operations/ maintenance and technology know-how, management expertise and corporate image. The management fee will be 10% of annual GAAP pre-tax earnings of the Partnership (before deducting the management fee) as set forth in the Partnership's annual financial statements, as more specifically defined in the O&M Agreement. Sec. 2.16 Annual Budget and Financial Plan An annual budget and financial plan for each financial year of the partnership (and any change thereto) shall be prepared by the General Manager and be presented to the Management Committee for approval under Sec. 3.7 hereof. In the event an annual budget and financial plan is approved under Sec. 3.7 but not unanimously, such annual budget and financial plan together with any modifications proposed thereto by any director shall be resubmitted for discussion and reapproval at the next meeting of the Management Committee. If the annual budget and financial plan, as previously approved or as modified, is approved at such subsequent meeting of the Management Committee under Sec. 3.7 hereof without the favorable vote of all the members, then the approved budget and financial plan shall nevertheless be binding on all parties hereto. Article III MANAGEMENT Sec. 3.1 Managing Partner The Managing Partner shall be IWCS. Sec. 3.2 Management of the Partnership The Managing Partner, acting through the Senior Manager, shall manage the day-to-day operations of the Partnership, all pursuant to the powers allocated to the Managing Partner herein and subject to the Management Committee of the Partnership. Sec. 3.3 Restrictions on Rights and Powers of Partners No Partner without the consent of all the other Partners shall: (a) Do any act in contravention of this agreement. (b) Do any act which would make it impossible to carry on the ordinary business of the Partnership. (c) Confess judgement against the Partnership. (d) Possess Partnership property, or assign his interest or rights in specific Partnership property, for other than a Partnership purpose. Sec. 3.4 Management Committee The business and affairs of the Partnership shall be managed by a six-member Management Committee. Each general partner shall be entitled to nominate and elect members of the Management Committee as follows: IWCS - 3 Members JMM - 2 Members LAH - 1 Members In the event of a tie vote by the full Management Committee the Senior Manager shall be entitled at his election to break the tie by casting an additional vote (the "casting vote"), provided that the casting vote shall not be available for the matters described in Sec. 3.6 and 3.7 hereof. Sec. 3.5 Managers The Management Committee shall elect managers to carry on the day-to-day business of the Partnership. The managers will include the following: (a) The Senior Manager shall be a member of the Management Committee of the Partnership as nominated by IWCS. (b) The General Manager shall be selected from persons nominated by JMM. (c) The Chief Financial Officer (in charge of treasury, accounting and audit functions for the Partnership) shall be a person selected by majority vote of the Management Committee. (d) Such other managers as may be appropriate in the discretion of the Management Committee. Sec. 3.6 Actions which require Super Majority Vote The following actions must receive an affirmative vote from at least one member of the Management Committee who has been nominated by each of the three Partners (a "super majority vote"): (a) Amend this agreement. (b) Approve pricing of the proposal. (c) Approve form and structure of the Proposal. (d) Fix amount of basic capital of the Partnership, and any changes thereof. (e) Authorize signature by the Partnership of the Service Contract, and any amendments thereto. (f) Approval of the O&M Agreement. (g) Admission of a new Partner. (h) Liquidation of the Partnership. (i) Distributions to the Partners. (j) Settling of claims against the Partnership of $100,000 or more. Sec. 3.7 Actions which require Two-thirds Vote The following actions must receive an affirmative vote from at least two-thirds (four members) of the full Management Committee: (a) Approval of the annual budget and financial plan of the Partnership, including overrun tolerances. (b) Approval of the annual budget of the O&M Partnership under the O&M Agreement. (c) Election and compensation of the managers of the Partnership, including incentive compensation and plans to provide benefits to employees, if any, of the Partnership. (d) Selection of auditors for the Partnership. (e) Selection of legal counsel for the Partnership for matters involving the Partnership, the Proposal, the Service Contract or the O&M Agreement. (f) Financing transactions, including borrowings of funds and pledging of Partnership assets, aggregating $500,000 or more. (g) Settling of claims between $25,000 and $100,000. (h) Establishment of authorization levels for expenditures. Sec. 3.8 Other Actions of the Management Committee All actions of the Management Committee not specified in Sec. 3.6 or Sec. 3.7 hereof shall be taken by a majority vote of the members acting on the matter, provided that at least four members shall be required for a quorum. Sec. 3.9 Actions by the Managing Partner The Managing Partner, acting through the Senior Manager, shall have the authority to take the following actions: (a) Making calls for capital authorized under Sec. 3.6(d) hereof. (b) Short-term borrowing of funds for working capital purposes and other routine treasury functions to carry out day-to-day operations of the Partnership. (c) Approval for overruns and other amendments to the budget and financial plan for the Partnership and the budget of the O&M Partnership under the O&M Agreement, subject to maximum tolerance levels fixed by the Management Committee under Sec. 3.7 hereof. (d) Distribution of incentive compensation to managers of the Partnership in accordance with plans, if any, approved by the Management Committee under Sec. 3.7 hereof. (e) Designation of tax matters partner to sign tax returns and handle tax audits, if required. (f) Generally to do any act or thing and execute all instruments necessary, incidental or convenient to the proper administration of the Partnership, other than actions described in Sec. 3.6 and Sec. 3.7 hereof. Sec. 3.10 Meetings of the Management Committee Regular meetings of the Management Committee shall be held on the schedule as fixed from time to time by the Management Committee. Special meetings of the Management Committee may be called by the Senior Manager, the General Manager or any member on not less than three days' notice, which notice shall specify the purpose of the special meeting. Meetings of the Management Committee may be held by conference telephone or by teleconferencing. The Management Committee may amplify and amend the provisions of this Sec. 3.10 by action taken under Sec. 3.6 hereof. Sec. 3.11 Liability Each Partner shall be liable for his or her professional mistakes and errors in judgement to the extent that liability is finally imposed against this Partnership or any of its Partners by any court of competent jurisdiction or pursuant to a binding arbitration process which the Partnership either is or becomes subject to, in favor of a third party provided that such liability shall only be imposed when such Partner was not acting: (i) in accordance with clear professional standards; and (ii) in accordance with the standards of this Partnership. Sec. 3.12 Indemnification of Partnership Managers The managers of the Partnership, when acting in their respective capacities as such, shall be entitled to indemnity from the Partnership for any act performed by them within the scope of the authority conferred on them by this agreement, except for acts of malfeasance or negligence or for damages arising from any misrepresentations. Article IV RIGHT TO ASSIGN PARTNERSHIP INTEREST Sec. 4.1 Partner's Right of Assignment Except as herein provided, a Partnership interest shall not be assigned. Sec. 4.2 Transfers Except as herein specifically provided, the Partners shall not sell, assign, pledge or otherwise shift, transfer or encumber in any manner or by any means whatever, all or any part of the interests of the Partnership now owned or hereafter acquired by them without having first obtained the consent of and offered it to the other Partner(s) and to the Partnership in accordance with the terms and conditions of this agreement. Except as herein specifically provided, consent to transfer may be refused for cause or for no cause, in the discretion of the Partnership and of each Partner. Sec. 4.3 Right of First Refusal In the event that any Partner is in receipt of a bona fide offer (from an offeror as to which consent required under Sec. 4.2 hereof has not been refused) to purchase his interest, and shall desire in good faith to sell, assign, transfer or otherwise dispose of his interest in accordance with the terms of such offer, he shall serve notice to such effect upon the other Partners and Partnership by registered or certified mail, return receipt requested, and said notice shall indicate the name and address of the person offering to purchase the same and the price and terms of payment upon which said sale is proposed. Said notice shall also consist of an offer to sell such interest to the other Partners and to the Partnership upon the same payment terms as the proposed sale. In such event the Partnership shall have the first right to purchase such interest on the same terms and conditions as set forth in the offer and, in the event the Partnership itself does not desire to make such purchase, then the other Partners shall have the next right to purchase such interest. If more than one Partner desires to purchase such interest it shall be allocated among such Partners on the basis of their respective Percentage Shares of Capital. If the Partnership or one or more Partners desire to make such purchase, the selling Partner must sell its interest to such purchaser or purchasers. If neither the Partnership nor another Partner notifies the selling Partner of its desire to purchase such interest within 60 days following receipt of notice of the selling Partner's desire to sell such interest, then the selling Partner following such 60-day period shall have the right to sell its interest to the person making such offer on the terms of such offer within the following 60 days, after which the provisions of this Article shall again prohibit any sale or assignment of a Partnership interest. Sec. 4.4 Buy/Sell Agreement For purposes of this Sec. 4.4, JMM and LAH shall be considered one Partner. Under the circumstances described in Sec. 7.12, one Partner may give notice in writing to the other Partner, fixing a price per unit of Partnership interest and giving the other Partner the option either to buy all, but not less than all, of the units of interest of the offeror at such price or to sell all, but not less than all, of its respective units of interest to the offeror at such price. The notice may be provided only in accordance with Sec. 7.12. The Partner receiving such notice shall reply thereto in writing within thirty (30) days, shall state its election either to buy or sell and shall fix the closing date for such purchase and sale which shall be not less than thirty (30) days nor more than sixty (60) days after the date of such reply. If a Partner fails to reply within such thirty (30) day period, then the original offeror may, within fifteen (15) days after the expiration of such thirty (30) day period, give notice in writing to the other party selecting which course of action he elects to follow, i.e., to buy at the specified price or to sell at the specified price, and fixing the closing date for the purchase and sale which shall be not less than thirty (30) days nor more than sixty (60) days after the date of such notice. For purposes of this Sec. 4.4, a unit equals one (1) percent of the Percentage Share of Capital in the Partnership. Sec. 4.5 Substitution of Additional Partners Notwithstanding anything herein to the contrary the assignee (including, but without limitation, any transferee or purchaser) of the whole or any part of the Partnership interest shall not be substituted as a Partner without prior written consent of the Management Committee under Sec. 3.6 hereof. In no event shall such consent be given unless assignee, as a condition precedent to such consent, has: (a) Accepted and assumed in a form satisfactory to the Managing Partner all terms and provisions of this agreement; (b) And if the assignee is a corporation, provided a certified copy of a resolution of its Management Committee in form satisfactory to the Managing Partner as to the matters described in (a) above; (c) Executed such other documents or instruments as may be required in order to effectuate its admission as a Partner; provided an opinion of counsel in form and substance satisfactory to counsel for the Partnership, that neither the offering nor the assignment of the Partnership interest violates any provision of any federal or state securities law; and executed a statement that he is acquiring his interest in the Partnership for his own account for investment, and not with a view to sale or distribution thereof; (d) Executed such other documents or instruments as the Managing Partner may reasonably require to order to effectuate the admission of such assignee as a Partner. Sec. 4.6 Dissolution, Withdrawal, etc. of a Partner The dissolution, withdrawal, assignment for the benefit of creditors, adjudication of bankruptcy or legal incapacity of a Partner shall not dissolve or terminate the Partnership. Furthermore, any Partnership interest assigned for the benefit of creditors or upon or due to the bankruptcy of a Partner shall automatically become a non-voting interest and as soon as practical shall be mandatorily converted into a non-voting limited partnership interest, and in such event each Partner hereby authorizes the Partnership and its managers to make such filings and take such other actions as may be necessary to convert the Partnership into a limited partnership under Indiana law for such purpose. Sec. 4.7 Inter-group Transfers Notwithstanding the restrictions set forth in Sec. 4.2 hereof, the Partners shall be permitted to transfer part or all of their Partnership interests to affiliated companies such as, IWC Resources Corporation, Lyonnaise des Eaux--Dumez, GWC Corporation and Montgomery Watson Americas, Inc. and their wholly-owned subsidiaries, following 30 days' notice to the Partnership, and provided that there shall not result from any such inter-group transfer an impairment of a financial commitment of another Partner then in place in respect of the Partnership. Article V LIQUIDATION OF PARTNERSHIP AND OF PARTNER'S INTEREST Sec. 5.1 Dissolution In the event that the Partnership shall hereafter be dissolved for any reason whatsoever, a full and general account of its assets, liabilities and transactions shall at once be taken. Such assets may be sold and turned into cash as soon as possible and all debts paid and any amounts due the Partnership collected. Any assets distributed in kind shall be valued at their fair market value. The proceeds thereof shall thereupon be applied as follows: (a) To discharge the debts and liabilities of the Partnership and the expenses of liquidation. (b) To pay each Partner its proportionate share of any remaining positive capital account to the extent of such capital account. (c) To divide the surplus, if any, among the Partners in proportion to each Partner's then Percentage Share of Capital. Article VI MISCELLANEOUS--SUBSTANTIVE PROVISIONS Sec. 6.1 Year, Books, Statements The Partnership's fiscal year shall commence on January 1st of each year and shall end on December 31st of each year. Full and accurate books of account shall be kept at such place as the Managing Partner may from time to time designate showing the condition of the business and finances of the Partnership; and each Partner shall have access to such books of account and shall be entitled to examine them at any time during ordinary business hours. At the end of each year, the Managing Partner shall cause the Partnership's accountants to prepare a balance sheet setting forth the financial position of the Partnership as of the end of that year and a statement of operations (income and expenses) for that year. A copy of the balance sheet and statement of operations shall be delivered to each Partner as soon as is available. The Managing Partner shall also cause a monthly statement of income, cash flow, source and use of funds, and summary balance sheet to be submitted to the Partners promptly after the end of each month. The Partnership books shall be kept on the basis and in accordance with generally accepted accounting principles ("GAAP"). Sec. 6.2 Partnership's Agents Pursuant to the Partnership's day to day activity, and subject to Sec. 3.7(d) and (e) hereof, the Managing Partner shall have the power to employ investment counsel, brokers, accountants, attorneys and any other agents to act in the Partnership's behalf, generally to do any act or thing and execute all instruments necessary, incidental or convenient to the proper administration of the Partnership property; otherwise said employment shall only be made if agreed to by all the Partners. Sec. 6.3 Checks All checks or demands for money and notes of the Partnership shall be signed by the Managing Partner or such other person or persons as the Managing Partner may from time to time designate. Sec. 6.4 Conflicts of Interest; Confidential Information; Exclusivity Partners may engage in or possess interest in other business ventures of every kind and description for their own accounts. Neither the Partnership nor any of the Partners shall have any rights by virtue of this agreement in such independent business ventures or to the income or profits derived therefrom. However, each Partner hereto agrees that any proprietary or non-public information received by it from another Partner in connection with the preparation and submittal of the Proposal, the carrying out of the Service Contract or in regard to the Partnership will be treated as confidential. No Partner shall disclose, without the prior written consent of the other Parties, any information provided to it as set forth above, in any manner whatsoever, in whole or in part, to any third party or use such information in any manner whatsoever other than for the purpose of pursuing such Service Contract on behalf of the Partnership. Any information provided by JMM with regard to the operation of a Service Contract or to the technical aspect of providing sewage services under such a contract shall be solely for the use of the Partnership with regard to the Service Contract and may not be used for the purpose of preparing a proposal for any similar service contract without the written permission of JMM. The Partners agree to act and coordinate their efforts with each other on an exclusive basis with respect to the possible submittal of the Proposal. Therefore, during the term of the Partnership neither JMM, IWCS nor LAH nor any representative thereof will hold discussions regarding the Proposal or the Service Contract with third parties. Sec. 6.5 Use of Name The name of White River Environmental Partnership shall belong to and may be used by the Partnership and shall not be sold or disposed of so long as the Partnership shall continue in existence. In the event of the withdrawal of any of the Partners during the term of the Partnership, the withdrawing Partner shall have no interest in the firm name and shall have no right to receive any payment therefor. Upon dissolution of the Partnership or the termination thereof, the Partnership name shall become the property of IWCS. Article VII MISCELLANEOUS Sec. 7.1 Execution in Counterpart This Partnership Agreement may be executed in any number of counterparts, each of which shall be taken to be an original. Valid execution shall be deemed to have occurred when a Partnership signature page is executed by the Partner in question and countersigned by the Managing Partner. Sec. 7.2 Notices All notices to be given as set forth herein shall be in writing and sent by telefacsimile or delivered to the ether Party at its address specified below or at such other address designated by such Party in the future. To IWCS: IWC Services, Inc. 1220 Waterway Boulevard P.O. Box 1220 Indianapolis, IN 46206 Attention: Alan Kimbell (317) 236-8680 (317) 163-6448 (Fax) To JMM: JMM White River Corporation c/o JMM Operational Services, Inc. 1700 Broadway, Suite 1100 Denver, CO 80290 Attention: Ronald J. Ballard (303) 860-0810 (303) 860-7096 (Fax) To LAH: LAH White River Corporation c/o Lyonnaise American Holding, Inc. 72, Avenue de la Liberte 92022 Nanterre, France Attention: Jacques F. Petry 33.1.46.95.51.54 33.1.46.95.51.80 (Fax) Sec. 7.3 Modifications No modification of this agreement shall be valid unless such modification is in writing, approved under Sec. 3.6 and signed by the parties hereto. Sec. 7.4 Titles and Subtitles Titles of the paragraphs and subparagraphs are placed herein for convenient reference only and shall not to any extent have the effect of modifying, amending or changing the express terms and provisions of this Partnership agreement. Sec. 7.5 Words and Gender or Number As used herein, unless the context clearly indicates the contrary, the singular number shall include the plural, the plural the singular and the use of any gender shall be applicable to all genders. Sec. 7.6 Severability In the event any parts of this agreement are found to be void, the remaining provisions of this agreement shall nevertheless be binding with the same effect as though the void parts were deleted. Sec. 7.7 Effective Date This agreement shall be effective only upon execution by all of the proposed Partners. Sec. 7.8 Execution This agreement may be executed by each of the Partners on a separate signature page. Sec. 7.9 Waiver No waiver of any provision of this agreement shall be valid unless in writing and signed by the person or party against whom charged. Sec. 7.10 Applicable Law This agreement shall be subject to and governed by the laws of the State of Indiana. Sec. 7.11 Agreement Binding This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors, administrators, successors and assigns. Sec. 7.12 Dispute Resolution Any dispute among the Partners shall initially be subject to good faith consultation and negotiation in an attempt to resolve the matter by mutual agreement. If the dispute remains unresolved, the parties shall have the ultimate recourse of the buy/sell agreement provided in Sec. 4.4 hereof on a two-party basis, with IWCS being considered one party and JMM and LAH being collectively considered the other party. Prior to initiating the provisions of Sec. 4.4 hereof, alternative dispute resolution measures may be initiated at the election of any party to the dispute. SIGNATURE PAGE In witness whereof the undersigned, a Partner of the White River Environmental Partnership, does hereby, as of the day and year below written, execute said agreement by executing this signature page. Witnesses Partner /s/ David Sherman IWC Services, Inc. Date Signed: 8/20/93 By: /s/ Alan R. Kimbell Title: President Witnesses Partner /s/ David Sherman JMM White River Corporation Date Signed: 8/20/93 By: /s/ Ronald J. Ballard Title: President Witnesses Partner /s/ David Sherman LAH White River Corporation Date Signed: 8/20/93 By: /s/ Patrick R. Cairo Title: Director EX-10.18 10 PLAN AND AGREEMENT OF MERGER PLAN AND AGREEMENT OF MERGER Among IWC RESOURCES CORPORATION RESOURCES ACQUISITION CORP. S. M. & P. CONDUIT CO., INC. and its shareholders June 14, 1993 TABLE OF CONTENTS PAGE ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . 1 1.1 The Merger . . . . . . . . . . . . . . . . . . . . 1 1.2 Effective Time of the Merger . . . . . . . . . . . 2 1.3 Articles of Incorporation, By-Laws, Directors and Officers . . . . . . . . . . . . . . . . . . . . . 2 1.4 Conversion of Shares . . . . . . . . . . . . . . . 3 1.5 Non-Compete Agreements . . . . . . . . . . . . . . 3 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS . . . . 3 2.1 Corporate Existence of Company, Etc . . . . . . . 3 2.2 Capitalization . . . . . . . . . . . . . . . . . 4 2.3 Title to Shares . . . . . . . . . . . . . . . . . 4 2.4 Capacity of the Shareholders . . . . . . . . . . 5 2.5 Consents and Approvals . . . . . . . . . . . . . 5 2.6 No Conflicts . . . . . . . . . . . . . . . . . . 5 2.7 Subsidiaries . . . . . . . . . . . . . . . . . . 5 2.8 Financial Statements . . . . . . . . . . . . . . 5 2.9 Liabilities . . . . . . . . . . . . . . . . . . . 6 2.10 Absence of Certain Changes or Events . . . . . . 6 2.11 Title to Properties . . . . . . . . . . . . . . . 7 2.12 Trademarks, Etc . . . . . . . . . . . . . . . . . 7 2.13 Insurance . . . . . . . . . . . . . . . . . . . . 8 2.14 Company Contracts . . . . . . . . . . . . . . . . 8 2.15 Litigation . . . . . . . . . . . . . . . . . . . 11 2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . 11 2.17 Compliance with Laws . . . . . . . . . . . . . . 12 2.18 Employee Benefits and Agreements . . . . . . . . 12 2.19 [omitted] . . . . . . . . . . . . . . . . . . . . 13 2.20 Licenses and Permits . . . . . . . . . . . . . . 14 2.21 Business Relations . . . . . . . . . . . . . . . 14 2.22 Interest in Competitors, Suppliers, Customers, Etc . . . . . . . . . . . . . . . . . . . . . . . 14 2.23 Accounts Receivable . . . . . . . . . . . . . . . 14 2.24 Employee Relations . . . . . . . . . . . . . . . 15 2.25 Environmental Matters . . . . . . . . . . . . . . 15 2.26 No Brokers . . . . . . . . . . . . . . . . . . . 16 2.27 Vehicles . . . . . . . . . . . . . . . . . . . . 16 2.28 Non-Disposition of Resources Shares . . . . . . . 16 2.29 Non-Redemption of Company Stock . . . . . . . . . 16 2.30 No Spin-Off . . . . . . . . . . . . . . . . . . . 16 2.31 [omitted] . . . . . . . . . . . . . . . . . . . . 17 2.32 Distributions by the Company . . . . . . . . . . 17 2.33 Liabilities of the Company . . . . . . . . . . . 17 2.34 Bankruptcy . . . . . . . . . . . . . . . . . . . 17 2.35 Insolvency . . . . . . . . . . . . . . . . . . . 17 2.36 Company's Assets . . . . . . . . . . . . . . . . 17 2.37 S Election . . . . . . . . . . . . . . . . . . . 17 ARTICLE III REPRESENTATIONS AND WARRANTIES OF RESOURCES . . . . . . 18 3.1 Organization . . . . . . . . . . . . . . . . . . . 18 3.2 Corporate Power and Authority, Etc . . . . . . . . 18 3.3 No Conflicts . . . . . . . . . . . . . . . . . . . 18 3.4 Consents . . . . . . . . . . . . . . . . . . . . . 18 3.5 Resources' SEC Reports . . . . . . . . . . . . . . 18 3.6 No Brokers . . . . . . . . . . . . . . . . . . . . 19 3.7 Articles of Incorporation and By-Laws . . . . . . 19 ARTICLE IV COVENANTS OF THE COMPANY AND THE SHAREHOLDERS . . . . . 19 4.1 Conduct of Business . . . . . . . . . . . . . . . 19 4.2 Undertakings . . . . . . . . . . . . . . . . . . 21 4.3 Access . . . . . . . . . . . . . . . . . . . . . 21 4.4 Confidentiality . . . . . . . . . . . . . . . . . 21 4.5 Exclusivity . . . . . . . . . . . . . . . . . . . 22 4.6 Shareholder Debt . . . . . . . . . . . . . . . . 22 4.7 Investment Covenants . . . . . . . . . . . . . . 22 4.8 Legend on Resources Shares . . . . . . . . . . . 23 4.9 Shareholder Approval of Merger . . . . . . . . . 23 4.10 Non-Compete Agreements . . . . . . . . . . . . . 23 4.11 Final "S Corporation" Income Tax Returns . . . . 23 ARTICLE V COVENANTS OF RESOURCES . . . . . . . . . . . . . . . . 23 5.1 Undertakings . . . . . . . . . . . . . . . . . . . 23 5.2 Confidentiality . . . . . . . . . . . . . . . . . 24 5.3 Tax Covenants . . . . . . . . . . . . . . . . . . 24 5.4 Non-Compete Agreement . . . . . . . . . . . . . . 25 5.5 Repayment of Shareholder Debt . . . . . . . . . . 25 5.6 Rule 144 . . . . . . . . . . . . . . . . . . . . . 25 5.7 Access to Records . . . . . . . . . . . . . . . . 26 5.8 Release of Claims . . . . . . . . . . . . . . . . 26 5.9 Personal Guarantees . . . . . . . . . . . . . . . 26 5.10 Amendment Creating Preferred Stock . . . . . . . 26 5.11 Certain Post-Closing Matters . . . . . . . . . . 27 ARTICLE VI CONDITIONS TO RESOURCES' AND NEWCO'S OBLIGATIONS . . . 27 6.1 Representations, Warranties, and Covenants of Shareholders and Company . . . . . . . . . . . . . 27 6.2 Further Action . . . . . . . . . . . . . . . . . . 28 6.3 No Governmental or Other Proceeding . . . . . . . 28 6.4 Opinion of Shareholders' Counsel . . . . . . . . . 28 6.5 Employment Agreement . . . . . . . . . . . . . . . 28 6.6 Non-Compete Agreements . . . . . . . . . . . . . . 28 6.7 No Material Adverse Change . . . . . . . . . . . . 28 6.8 Escrow . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE VII CONDITIONS TO SHAREHOLDERS' OBLIGATIONS . . . . . . . . 29 7.1 Representations, Warranties, and Covenants of Resources . . . . . . . . . . . . . . . . . . . . 29 7.2 Further Action . . . . . . . . . . . . . . . . . . 29 7.3 No Governmental or Other Proceeding . . . . . . . 29 7.4 Opinion of Resources' Counsel . . . . . . . . . . 29 ARTICLE VIII SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . 30 8.1 Survival . . . . . . . . . . . . . . . . . . . . . 30 8.2 Indemnification . . . . . . . . . . . . . . . . . 30 8.3 Certain Tax Matters . . . . . . . . . . . . . . . 30 8.4 Notice of Claims . . . . . . . . . . . . . . . . . 31 8.5 Defense . . . . . . . . . . . . . . . . . . . . . 31 8.6 Limitations on Indemnity Obligations . . . . . . . 31 ARTICLE IX TERMINATION PRIOR TO CLOSING . . . . . . . . . . . . . 32 9.1 Termination of Agreement . . . . . . . . . . . . . 32 9.2 Termination of Obligations . . . . . . . . . . . . 32 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 32 10.1 Entire Agreement . . . . . . . . . . . . . . . . 32 10.2 Successor and Assigns . . . . . . . . . . . . . 33 10.3 Counterparts . . . . . . . . . . . . . . . . . . 33 10.4 Headings . . . . . . . . . . . . . . . . . . . . 33 10.5 No Waiver . . . . . . . . . . . . . . . . . . . 33 10.6 Expenses . . . . . . . . . . . . . . . . . . . . 33 10.7 Notices . . . . . . . . . . . . . . . . . . . . 33 10.8 Further Assurances . . . . . . . . . . . . . . . 35 10.9 Governing Law . . . . . . . . . . . . . . . . . 35 10.10 Consent to Jurisdiction . . . . . . . . . . . . 35 10.11 Specific Performance . . . . . . . . . . . . . . 35 LIST OF EXHIBITS AND SCHEDULES EXHIBIT I Merger Agreement EXHIBIT II Non-Compete Agreement EXHIBIT III Opinion of Counsel for Shareholders EXHIBIT IV Baker Employment Agreement EXHIBIT V Escrow Agreement EXHIBIT VI Opinion of Counsel for Resources EXHIBIT VII Series B Convertible Redeemable Preferred Stock SCHEDULE 2.1 Corporate Existence of Company, Etc. SCHEDULE 2.2 Capitalization SCHEDULE 2.5 Consents and Approvals SCHEDULE 2.6 No Conflicts SCHEDULE 2.7 Subsidiaries SCHEDULE 2.9 Liabilities SCHEDULE 2.10 Absence of Certain Changes or Events SCHEDULE 2.11 Title to Properties SCHEDULE 2.12 Trademarks, Etc. SCHEDULE 2.13 Insurance SCHEDULE 2.14 Company Contracts SCHEDULE 2.15 Litigation SCHEDULE 2.16 Taxes SCHEDULE 2.17 Compliance with Laws SCHEDULE 2.18 Employee Benefits and Agreements SCHEDULE 2.20 Licenses and Permits SCHEDULE 2.21 Business Relations SCHEDULE 2.22 Interest in Competitors, Suppliers, Customers, Etc. SCHEDULE 2.24 Employee Relations SCHEDULE 2.25 Environmental Matters SCHEDULE 2.27 Vehicles SCHEDULE 3.4 Consents PLAN AND AGREEMENT OF MERGER THIS PLAN AND AGREEMENT OF MERGER (this "Agreement"), made and entered into as of this ____ day of June, 1993, by and among IWC Resources Corporation, an Indiana corporation ("Resources"), Resources Acquisition Corp., an Indiana corporation and a wholly owned subsidiary of Resources ("NewCo"), S. M. & P. Conduit Co., Inc., an Indiana corporation (the "Company"), and Diana L. Sosbey, Patrick J. Baker and Daniel S. Baker (individually a "Shareholder" and collectively the "Shareholders"); WITNESSETH: WHEREAS, the Boards of Directors of Resources and the Company deem it advisable and in the best interests of their respective corporations that the Company be acquired by Resources pursuant to the merger of the Company with and into NewCo (the "Merger"); and WHEREAS, the Boards of Directors of Resources, NewCo and the Company, by resolutions duly adopted, have approved this Agreement providing for the Merger, and the Boards of Directors of the Company and NewCo have recommended the Merger Agreement (as defined herein) and the Merger for approval by their respective shareholders in accordance with the terms of this Agreement and Indiana law; and WHEREAS, Resources, NewCo, the Company and the Shareholders of the Company desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated by this Agreement and to prescribe various conditions precedent to such transactions; NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements herein set forth, the parties to this Agreement have agreed, and hereby agree subject to the terms and conditions hereinafter set forth, as follows: ARTICLE I THE MERGER 1.1 The Merger. (a) At the Effective Time of the Merger (as defined in Section 1.2) in accordance with the provisions of Indiana law and the terms of this Agreement, the Company shall be merged with and into NewCo, with NewCo surviving such Merger as the surviving corporation, all as more fully provided for in the Merger Agreement which is attached hereto as Exhibit I and incorporated herein by reference. NewCo, subsequent to the Effective Time of the Merger, is sometimes referred to herein as the "Surviving Corporation." (b) The occurrence of the transactions contemplated by Section 1.1(a) is herein called the "Closing," and the date thereof is herein sometimes called the "Closing Date." 1.2 Effective Time of the Merger. The Merger shall not become effective until, and, subject to the terms and conditions of this Agreement, shall become effective when, the following actions shall have in all respects been completed: (a) the Merger Agreement shall have been approved by the shareholders of each of the Company and NewCo in accordance with the requirements of Indiana law; and (b) appropriate articles of merger shall have been filed and become effective in accordance with the requirements of Indiana law. The date and time when the Merger shall become effective as aforesaid is herein referred to as the "Effective Time of the Merger." 1.3 Articles of Incorporation, By-Laws, Directors and Officers. (a) The Articles of Incorporation of NewCo, as in effect immediately prior to the Effective Time of the Merger, but as amended to change the name of NewCo to "S M & P Conduit Co., Inc.," shall be the Articles of Incorporation of the Surviving Corporation from and after the Effective Time of the Merger until amended in accordance with Indiana law. (b) The By-Laws of NewCo, as in effect immediately prior to the Effective Time of the Merger, but as amended to reflect the change of name of NewCo shall be the By-Laws of the Surviving Corporation from and after the Effective Time of the Merger until amended or repealed in accordance with Indiana law. (c) Following the Effective Time of the Merger, the officers of NewCo shall be restructured to consist of James T. Morris, Chairman of the Board, Daniel S. Baker, President, J. A. Rosenfeld, Executive Vice President and Treasurer, and John Davis, Secretary, each to hold office in accordance with the Articles of Incorporation and By-Laws of the Surviving Corporation. (d) Following the Effective Time of the Merger, the Board of Directors of NewCo shall be restructured to consist of James T. Morris, Kenneth N. Griffin, Alan R. Kimbell, Joseph R. Broyles, J. A. Rosenfeld, and Daniel S. Baker, and each shall hold such office until his successor shall have been duly elected and qualified in accordance with the By-Laws and Articles of Incorporation of the Surviving Corporation. 1.4 Conversion of Shares. At the Effective Time of the Merger, the Shares (as defined in Section 2.2) shall be converted on the basis and in the manner specified in the Merger Agreement. 1.5 Non-Compete Agreements. At the Closing, the Shareholders shall each enter into Non-Compete Agreements with Resources in the form attached as Exhibit II. As consideration for his or her Non-Compete Agreement, Resources shall pay each Shareholder the following amount in cash at Closing: Shareholder Amount Diana L. Sosby $1,000,000 Patrick J. Baker $1,000,000 Daniel S. Baker $1,000,000 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS The Shareholders, jointly and severally, hereby represent and warrant to Resources and NewCo as follows: 2.1 Corporate Existence of Company, Etc. (a) The Company is a corporation duly organized and validly existing under the laws of the State of Indiana, and has all requisite power and authority to own or lease and operate its properties and to carry on its business as presently conducted. The Company is duly qualified as a foreign corporation, and is in good standing, in the jurisdictions set forth on Schedule 2.1, and in each other jurisdiction where the conduct of its business or the character of its properties owned or held under lease require it to be so qualified. (b) The Company has all requisite corporate power and authority to enter into and perform all of its obligations under this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject only, with respect to the Merger, to the approval of the holders of the Shares. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company subject to the effects of bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights and remedies of creditors generally and the effects of general principles of equity, whether applied by a court of law or equity (the "Limitations"). 2.2 Capitalization. The authorized capital stock of the Company consists of 1,000 shares of common stock ("Common Stock"), of which 100 shares are issued and outstanding. All of the outstanding shares of Common Stock (referred to collectively herein as the "Shares") are owned of record and beneficially by the Shareholders in the amounts set forth on Schedule 2.2. All outstanding Shares have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive rights. Except as set forth below, there is outstanding no security, option, warrant, right, call, subscription, agreement, commitment or understanding of any nature whatsoever, real or contingent, that directly or indirectly (i) calls for the issuance, sale, pledge or other disposition of any Common Stock or of any other capital stock of the Company or any securities convertible into, or other rights to acquire, any such Common Stock or other capital stock of the Company or (ii) obligates the Company or the Shareholders to grant, offer or enter into any of the foregoing or (iii) relates to the voting or control of such Common Stock, capital stock, securities or rights. The Company may be a party to one or more subscription agreements relating to the Shares now held by the Shareholders, but none of such agreements could obligate the Company to issue additional Common Stock in the future. The Company's Articles of Incorporation and Bylaws contain provisions defining the voting rights of the Common Stock. No person has any right to require the Company to register any of its securities under the Securities Act of 1933, as amended (the "Securities Act"). 2.3 Title to Shares. Each of the Shareholders has legal and valid title to that number of the Shares set forth opposite his name in Schedule 2.2, free and clear of all liens, security interests, adverse claims or other encumbrances of any character whatsoever ("Encumbrances"). 2.4 Capacity of the Shareholders. Each Shareholder has full legal capacity and authority to enter into this Agreement; and this Agreement has been duly executed and delivered on behalf of each Shareholder and constitutes the valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms except for the Limitations. 2.5 Consents and Approvals. Except as set forth on Schedule 2.5, no consent, approval or authorization of, exemption by, or filing with, any governmental or regulatory authority, or any third party, is required in connection with the execution, delivery and performance by the Company and the Shareholders of this Agreement and the consummation by the Company and the Shareholders of the transactions contemplated hereby, excluding, however, consents, approvals, authorizations, exemptions and filings, if any, which Resources or NewCo are required to obtain or make. 2.6 No Conflicts. Except as set forth on Schedule 2.6, the execution, delivery and performance of this Agreement by the Company and the Shareholders and the consummation by the Company and the Shareholders of the transactions contemplated hereby will not conflict with, or constitute or result in a breach, default or violation of (with or without the giving of notice or the passage of time) any of the terms, provisions or conditions of, (i) the Articles of Incorporation or By-Laws of the Company; (ii) any law, ordinance, regulation or rule applicable to any Shareholder or the Company; (iii) any order, judgment, injunction, or other decree by which any Shareholder or the Company, or any of their respective assets or properties is bound; or (iv) any written or oral contract, agreement, or commitment to which any Shareholder or the Company is a party or by which they or any of their respective assets or properties is bound; nor will such execution, delivery and performance result in the creation of any Encumbrance upon any properties, assets or rights of the Company. 2.7 Subsidiaries. Except as set forth on Schedule 2.7, the Company does not own any equity ownership interest, directly or indirectly, in any person, corporation or other entity. There are no entities in which the Company owns at least 50% of the outstanding common stock. 2.8 Financial Statements. (a) A copy of the balance sheets of the Company as of December 31, 1991 and December 31, 1992, and the statements of income and retained earnings and cash flows of the Company for the two years ended December 31, 1992, including the notes thereto (collectively the "Financial Statements"), have been supplied to Resources. The balance sheet of the Company as at December 31, 1992 fairly presents the financial position of the Company as at such date and has been prepared in accordance with generally accepted accounting principles consistently applied. Except as may be noted therein, the statements of income and retained earnings and cash flows for the years ended December 31, 1991 and 1992 fairly present the results of operations, shareholders' equity and cash flows of the Company in all material respects for the periods then ended and have been prepared on a basis consistent with each other. The shareholders' equity of the Company as at December 31, 1992, and determined in accordance with generally accepted accounting principles, was not less than $2,915,889. (b) The Company has delivered to Resources copies of its monthly financial statements for the months of January, February, March and April of 1993 (the "Monthly Financial Statements"). The Monthly Financial Statements were prepared by the Company in a manner consistent with the monthly financial statements for the same months of the prior year, except for salary accruals to the Shareholders as noted in Section 2.10(g)(ii) below. 2.9 Liabilities. Except as set forth on Schedule 2.9, as of December 31, 1992, and except for liabilities, if any, under service contracts or similar agreements not material to the Company, the Company had no debts, obligations or liabilities of whatever kind or nature, either direct or indirect, absolute or contingent, matured or unmatured, and regardless of whether they are of a type required by generally accepted accounting principles to be included in the Financial Statements, except debts, obligations and liabilities that are fully reflected in, or reserved against on, the 1992 Financial Statements. Since December 31, 1992, except as set forth on Schedule 2.9, the Company has incurred no liabilities except in the ordinary course of business. 2.10 Absence of Certain Changes or Events. Except as set forth on Schedule 2.10 or except as otherwise specifically contemplated by this Agreement, since December 31, 1992, there has not been (a) any damage, destruction or casualty loss to the physical properties of the Company (whether covered by insurance or not) in excess of $50,000 in the aggregate; (b) any material adverse change in the business, operations or financial condition of the Company; (c) any entry into any transaction, commitment or agreement (including without limitation any borrowing or capital expenditure) other than in the ordinary course of business; (d) any redemption or other acquisition by the Company of the Company's capital stock or any declaration, setting aside or payment of any dividend or other distribution in cash, stock or property with respect to the Company's capital stock; (e) any material increase in the rate or terms of compensation payable or to become payable by the Company to its directors, officers or employees or any increase in the rate or terms of any bonus, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any such directors, officers or employees; (f) any acceleration of sales (i.e., the issuance of services billings at an accelerated rate outside of the ordinary course of business), or reduction of aggregate administrative, marketing, advertising and promotional expenses other than in the ordinary course of business; (g) any sale, transfer or other disposition of any asset of the Company to any party, including any Shareholder, except for (i) payment of third-party obligations incurred in the ordinary course of business in accordance with the Company's regular payment practices, (ii) compensation to employees and officers and directors in the ordinary course of business, provided, however, that the rate of compensation paid to the Shareholders since December 31, 1992 has not exceeded an aggregate for all Shareholders of $550,000 on an annualized basis, (iii) sales or transfers for a fair consideration, and (iv) abandonment or disposal of assets deemed of little or no value; (h) any termination or waiver of any material rights of value to the business of the Company; or (i) any failure by the Company to pay their accounts payable or other obligations in the ordinary course of business consistent with past practice, other than items disputed by the Company in good faith. The compensation paid to Shareholders of the Company from January 1, 1990 to the present is as set forth in the letter to Resources of even date herewith. 2.11 Title to Properties. Except as set forth on Schedule 2.11, the Company has good and marketable title to all of the assets and properties which it purports to own and which are reflected on the 1992 Financial Statements, free and clear of all Encumbrances, except for (a) liens for current taxes not yet due and payable or for taxes the validity of which is being contested in good faith by appropriate proceedings, (b) Encumbrances and defects which individually or in the aggregate do not materially affect the business, operations or financial condition of the Company, and (c) assets and properties disposed of in the ordinary course of business since December 31, 1992. 2.12 Trademarks, Etc. Except as set forth on Schedule 2.12, and except for the right to use the name SM&P Conduit Co., Inc., there are no trademarks, trade names, service marks, copyrights, or applications therefor which are material to the conduct of the business, operations or financial condition of the Company. The Shareholders are aware of no person that has challenged the Company's use of the name SM&P Conduit Co., Inc. or that uses or claims the right to use such name or any confusingly similar name. The Shareholders and/or the Company have previously caused to be incorporated one or more corporations having a name similar to S. M. & P. Conduit Co., Inc. (the "New Corporations"). Schedule 2.12 sets forth a complete listing of the New Corporations and a copy of the Articles of Incorporation and all other charter or organizational documents related to the New Corporations. None of the New Corporations has completed its organization, issued any shares of its capital stock, conducted any business, or incurred any liabilities. As soon as practicable after the Closing, the Shareholders shall cause each of the New Corporations to dissolve or to change their names to a name not confusingly similar to S. M. & P. Conduit Co., Inc., to assign to the Surviving Corporation all rights to use of the name S. M. & P. Conduit Co., Inc., and all derivations thereof, and to take such further actions as to the New Corporations as Resources may reasonably request to secure for the Surviving Corporation the benefits intended by this Agreement. Except for conflicts, if any, related to the Company's use of the name S. M. & P. Conduit Co., Inc. (it being understood that the Shareholders currently have no knowledge of any such conflicts), the conduct of the business of the Company as now conducted does not conflict with any valid patents, trademarks, trade names, service marks or copyrights of others. 2.13 Insurance. Schedule 2.13 lists all insurance policies with respect to the properties, assets, operations and business of the Company with respect to which the Company has paid a premium within the last 13 months. The insurance policies listed on Schedule 2.13 and all other insurance policies with respect to the properties, assets, operations and business of the Company are hereinafter referred to as the "Insurance Policies". All Insurance Policies listed on Schedule 2.13 (except as otherwise noted on Schedule 2.13) are in full force and effect. Except as set forth on Schedule 2.13, there are no pending claims against the insurers under the Insurance Policies by the Company. There are no unsettled claims as to which the insurers have denied liability and with respect to which there is a reasonable likelihood of a settlement or determination adverse to the Company. There are no circumstances existing which would enable the insurers to avoid liability under the Insurance Policies in accordance with their terms. Except as set forth on Schedule 2.13, (i) to the knowledge of the Shareholders there exist no material claims under the Insurance Policies that have not been properly filed by the Company, and (ii) no insurance company has refused to renew any material insurance policy of the Company during the past 18 months. 2.14 Company Contracts. Schedule 2.14 lists the following (to the extent any of the following exist and excluding any item that has been fully performed or otherwise is no longer binding upon the Company) (such agreements, commitments, and written summaries of oral agreements being sometimes collectively referred to herein as the "Company Contracts") all of which have been made available to Resources for its review: (a) All leases of real property to which the Company is a party (whether as lessor or lessee); (b) All leases of vehicles, machinery or equipment to which the Company is a party (whether as lessor or lessee), with the annual rental, the termination date, and the conditions of assignment and renewal being given with respect to each lease; (c) All rights and all licenses, leases, and other agreements relating to rights in other tangible personal property to which the Company is a party, involving the payment by or to it of more than $25,000 in the aggregate with respect to any one agreement. (d) All policies of insurance and fidelity or surety bonds in force with respect to the directors, officers, properties, assets, liabilities, or operations of the Company in each case with a notation as to the status of premiums paid thereon; (e) All agreements of the Company for the borrowing or lending of money; (f) All agreements granting any person a lien, security interest, or mortgage on any property or asset of the Company, including any factoring agreement or agreement for the assignment of receivables or inventory; (g) All agreements of the Company guaranteeing, indemnifying, or otherwise becoming liable for the obligations or liabilities of another other than the endorsement of negotiable instruments in the ordinary course of business; (h) All agreements of the Company with any manufacturer or supplier, including agreements with respect to discounts or allowances or extended payment terms; (i) All agreements of the Company with any distributor, dealer, sales agent, or representative; (j) All agreements which restrict the Company from doing any kind of business or from doing business in any jurisdiction or from competing with any person; (k) All agreements of the Company for the purchase of goods, materials, supplies, machinery, capital assets or services in excess of $25,000; (l) All collective bargaining agreements and employee pension, health and welfare and retirement benefit plans of the Company which are currently in effect; (m) All bonus, deferred compensation, profit sharing, pension, retirement, stock option, stock purchase, hospitalization, insurance, medical, dental, or other plans, arrangements, or practices of the Company providing employee or executive benefits; (n) All shareholders' agreements, proxies, voting trusts, or powers of attorney to act on behalf of the Company or in connection with its properties or business affairs other than such powers to so act as normally pertain to corporate officers; (o) All agreements relating to the sale of assets of the Company not yet fully performed; (p) All joint venture or partnership agreements of the Company with any other person; (q) All agreements of the Company for the construction or modification of any building or structure or for the incurrence of any other capital expenditure; (r) All advertising agreements of the Company; (s) All agreements of the Company giving any party the right to renegotiate or require a reduction in price or the repayment of any amount previously paid; (t) All agreements with utilities for the location of underground lines or conduits; (u) All other agreements and commitments (including employment and consulting agreements) to which the Company is a party, by which it is or may be bound, or from which it does or may derive benefit, and a description of the terms thereof, with the termination date and conditions of assignment and renewal being given in each case, except any contract or commitment (A) involving the payment by or to the Company of less than $25,000 in the aggregate as to such contract or commitment, or, (B) terminable by the Company without liability or expense on 60 days' notice or less, or (C) for the purchase or sale of merchandise or services entered into in the ordinary course of business, which will be performed by the Company in less than three months and which will not have any material adverse effect on the properties and business of the Company, or (D) covered by any other paragraph of this Section 2.14; (v) The name and current rate of compensation of (A) each director and officer of the Company and (B) each other employee of or consultant to the Company is as set forth in the letter to Resources of even date herewith; (w) The name of each retired employee, officer, or director, if any, of the Company who is receiving or is entitled to receive any payments not covered by any employee benefit plan and his or her age, sex and current benefits; and (x) The name of each bank in which the Company has an account or safe deposit box and the names of all persons authorized to draw thereon or to have access thereto. Except as set forth on Schedule 2.14, each of the Company Contracts is valid, binding, and enforceable in accordance with its terms for the periods (if any) stated therein, except for the effect of the Limitations; the Company has fulfilled or has taken all actions necessary to enable it to fulfill when due all of its material obligations under the Company Contracts which are material, and there is not, under any of the foregoing, any existing default or event of default or any event which, with or without the giving of notice or the passage of time, would constitute a material default under any of the Company Contracts which are material. Notwithstanding the foregoing, the Shareholders make no representation or warranty as to the absence of any limitation on enforceability, or any default or potential default that may arise as a result of any violation by the Company of any representation or commitment by it relating to the ownership of the Company. To the knowledge of the Shareholders, there are no laws, regulations, rules or decrees currently in effect or currently proposed to be in effect which adversely affect or might adversely affect the Company's rights under any of the Company Contracts in a material manner. 2.15 Litigation. Except as set forth on Schedule 2.15, there is not now pending any action, proceeding or investigation in any court or before any governmental or regulatory authority of which the Shareholders have knowledge nor, to the knowledge of the Shareholders, is any such action, proceeding or investigation threatened in writing or orally (a) against the Company or against any Shareholder, in connection with the conduct of the businesses of the Company, (b) which seeks to enjoin or obtain damages in respect of the consummation of the transactions contemplated hereby, or (c) would render Resources or NewCo unable to exercise control over the assets of the Company. The actions or proceedings described in clauses (a), (b), and (c) are collectively referred to as "Litigation." Except as set forth on Schedule 2.15, the Company is not subject to any outstanding order, writ, judgment or decree. Schedule 2.15 contains a list that includes all Litigation. 2.16 Taxes. Except as set forth on Schedule 2.16, (a) all federal, state, local and foreign income, franchise, excise, payroll, sales, use and property tax ("Taxes") returns required to be filed with respect to the Company and any employee benefit plan listed on Schedule 2.18 have been filed in a timely manner (taking into account all extensions of due dates); (b) such returns reflect accurately all liability for Taxes of the Company for the periods covered thereby; (c) all Taxes payable by or due from the Company relating to all periods ending on or before December 31, 1992 have been paid or accrued on the Financial Statements; (d) no election under Section 341(f) or Section 338(g) of the Internal Revenue Code of 1986 (the "Code") has been, or prior to the Closing Date will be, filed by or on behalf of the Company; (e) the Company has not executed any presently effective waiver or extension of any statute of limitations against assessment and collection of Taxes with respect to the Company; and (f) the proper amounts have been withheld by the Company from employees with respect to all cash compensation paid to employees for all periods in compliance in all material respects with the tax and other withholding provisions of all applicable laws. Except as set forth on Schedule 2.16, or as reflected in the Financial Statements, no deficiencies for any Taxes have been asserted in writing or assessed against the Company which remain unpaid. 2.17 Compliance with Laws. Except as set forth on Schedule 2.17, the Company has complied in all material respects with all laws, statutes, rules, regulations, judgments, decrees and orders applicable to its business, and which are material. 2.18 Employee Benefits and Agreements. (a) Schedule 2.18 contains a list of (i) all employment contracts between the Company and each officer or employee thereof (excluding any contract that has been fully performed and oral agreements of employment terminable at will without payment of severance or other benefits except as are available to employees generally), (ii) all collective bargaining agreements between the Company and employee representatives, and (iii) all bonus, incentive, stock option, stock purchase, phantom stock, stock appreciation rights, performance shares, and similar plans either currently maintained by the Company or, if terminated, under which employees or former employees have rights that are outstanding, and all awards and agreements under any of such plans pursuant to which any employees or former employees hold outstanding rights. (b) Schedule 2.18 contains a list of each employee pension benefit plan (within the meaning of section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of section 401 of the Code which the Company currently maintains or to which the Company contributes or is required to contribute on behalf of its employees or has any other obligation. The Company does not maintain or contribute to or have any other obligation under any defined benefit plan. With respect to each of such plans, the most recent summary plan descriptions, the most recently filed Form 5500 for each of such plans have been provided to Resources. None of such plans is a multiemployer plan as defined in section 414(f) of the Code, or section 4001(a)(3) of ERISA, nor is any such plan a plan with respect to which more than one employer makes contributions within the meaning of sections 4063 and 4064 of ERISA. With respect to each plan described above in this Section 2.18(b), except as set forth on Schedule 2.18: (i) the plan is qualified under section 401 of the Code and the trust maintained pursuant thereto is exempt from federal income taxation under section 501 of the Code, and nothing has occurred to cause the loss of such qualification or exemption, (ii) all contributions required by the Code to be made to the plan for the plan year most recently ended and for all prior plan years have been made timely in accordance with the Code and ERISA, and the Company does not have a minimum funding waiver outstanding with respect to such plan, (iii) the administrators or sponsors of the plan have complied in all material respects with applicable ERISA and Code requirements, including requirements as to the filing of reports, returns, documents, and notices with the Secretary of Labor and the Secretary of the Treasury, or the furnishing of such documents to participants or beneficiaries of such plan, and (iv) the Company has in all material respects discharged all duties it has to the plan under sections 404 and 405 of ERISA, and to the knowledge of Shareholders, no party whom the Company is obligated to indemnify for a breach of those provisions has committed any such breach. (c) Schedule 2.18 contains a list of each of the following that is currently maintained by the Company or pursuant to which it has any obligation: any unfunded deferred compensation, supplemental death, disability, medical reimbursement, employee welfare benefit plan (within the meaning of section 3(1) of ERISA) and, to the extent not included in Section 2.18(b) above, each employee pension benefit plan maintained by the Company. With respect to each such plan that is funded or required by its express terms to be funded through insurance, all premiums due and payable with respect to such insurance have been paid. With respect to each of such plans, the most recent summary plan descriptions, the most recently filed Form 5500 for each of such plans have been provided to Resources. (d) Schedule 2.18 lists (i) all governmental or court required plans, including, but not limited to, affirmative action plans, with respect to the Company, and (ii) all governmental or court ordered audits for compliance with applicable law that would require the continuation of any such plan or the implementation of any such plan that has not been put into effect on the date of this Agreement. 2.19 [omitted] 2.20 Licenses and Permits. The Company has all material governmental licenses and permits and other governmental authorizations and approvals required for the conduct of its businesses as presently conducted ("Material Permits"). Schedule 2.20 is a list of all Material Permits. 2.21 Business Relations. Except as set forth on Schedule 2.21, the Company is not required to provide any bonding or other financial security arrangements in connection with any transactions with any of its customers or suppliers. Except as set forth on Schedule 2.21, neither the Shareholders, nor to the Shareholder's knowledge (without making any inquiry) any employee of the Company, has received any information suggesting that any customer or supplier of the Company has any present intention of ceasing to do business with the Company after the consummation of the transactions contemplated hereby. For purposes of this Section 2.21, it shall be presumed that the Shareholders had no knowledge of a customer's or supplier's intent to cease business with the Company if such customer or supplier remains a customer or supplier of the Company at substantially the same level as the relationship existing prior to Closing for a period of two (2) years after Closing. The fact that any customer or supplier shall cease to do business with the Company within two (2) years after the Closing shall not create any presumption that the Shareholders had any knowledge of such customer's or supplier's intent to cease doing business with the Company. 2.22 Interest in Competitors, Suppliers, Customers, Etc. Except as set forth on Schedule 2.22, neither any of the Shareholders nor any officer or director of the Company or any affiliate of any such officer or director has any ownership interest in (i) any competitor, supplier or customer of the Company accounting for one percent (1%) or more of the Company's purchases or sales in the most recently ended fiscal year or (ii) any property used in the operation of the business of the Company, excluding however in the case of (i) or (ii) ownership of less than 1% of any publicly held corporation. 2.23 Accounts Receivable. All accounts receivable (including those reduced to promissory notes) reflected on the Financial Statements represent sales actually made or services actually rendered in the ordinary course of business; all accounts receivable (including those reduced to promissory notes) of the Company as of the Closing Date will represent sales actually made or services actually rendered or funds advanced in the ordinary course of business on or prior to the Closing Date. All accounts receivable shown on the December 31, 1992 balance sheet of the Company included in the Financial Statements not collected in full at the Closing Date will be collected in full within 30 days thereafter. The amount, if any, of such accounts receivable remaining uncollected upon the expiration of such 30-day period (the "Bad Debts") shall not be subject to a claim by Resources or the Surviving Corporation under Article VIII, but shall instead be applied as a deduction to the payment referred to in Section 5.11(b) hereof in the manner set forth in such Section 5.11(b). 2.24 Employee Relations. No union organizational campaign with respect to the Company is in process or, to the knowledge of the Shareholders, threatened. The Company has not incurred any general work stoppages, general labor disputes, or union strikes in the past three (3) years, nor have any been threatened. Schedule 2.24 sets forth a summary of all material grievances asserted in writing that are (i) currently pending or (ii) settled since June 1, 1992. 2.25 Environmental Matters. (a) Except as set forth on Schedule 2.25, the Company has obtained all material permits, licenses, and other authorizations which are required with respect to the operation of the businesses of the Company under federal, state, and local laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic, or hazardous substances or wastes into the environment or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial toxic or hazardous substances or wastes ("Environmental Laws"). (b) Except as set forth on Schedule 2.25, the Company is in compliance in all material respects with the terms and conditions of the required permits, licenses, and authorizations and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables contained in the Environmental Laws or contained in any regulation, or code, or any judgment, decree, order or injunction, promulgated, issued, or entered by or against the Company or with respect to any of its properties thereunder and the Company has not received any notice or demand letter with respect thereto. (c) Except as set forth on Schedule 2.25, there is not pending any action, suit, investigation, or other proceeding or, to the knowledge of Shareholders, threatened against the Company relating to the Environmental Laws or any regulation, code, plan, judgment, decree, order, injunction, notice, or demand letter promulgated, issued, or entered by or against the Company thereunder. (d) Except as set forth on Schedule 2.25, no event, condition, activity, practice, ownership or lease of real property or other action or inaction of the Company has or is reasonably likely to: (i) prevent compliance by the Company with the Environmental Laws or with any regulation, code, judgment, decree, order or injunction promulgated, issued, or entered by or against the Company thereunder in any manner which could have a material adverse effect on the business, assets, financial condition, or results of operations of the Company; (ii) give rise to any material liability of the Company, including without limitation, liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorizations Act of 1986, or similar state or local laws; or (iii) result in any material claim, action, proceeding, or notice of violation based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release, or threatened release into the environment of any pollutant, contaminant, chemical, or industrial, toxic, or hazardous substance or waste. 2.26 No Brokers. Neither the Company nor any Shareholder has engaged or employed any broker or finder in connection with the transactions contemplated by this Agreement. 2.27 Vehicles. Schedule 2.27 sets forth a list of all vehicles currently owned or leased by the Company. 2.28 Non-Disposition of Resources Shares. There is no plan or intention by the Shareholders to sell, exchange, or otherwise dispose of (except testamentary transfer) any of the common or preferred stock of Resources received in the Merger (the "Resources Shares"); the Shareholders are acquiring the Resources Shares for investment and not with a view toward distribution; and the Shareholders will not sell, exchange or otherwise dispose of (except testamentary transfer) any of the Resources Shares, whether received in the Merger or by testamentary transfer from another Shareholder, for at least a two-year period following the Merger, except with the prior written consent of Resources. 2.29 Non-Redemption of Company Stock. There has been no redemption by the Company of Common Stock prior to and in contemplation of the Merger. 2.30 No Spin-Off. There has been no spin-off of any portion of the Company's business or any sale, exchange or other disposition of any of the Company's assets in contemplation of the Merger. 2.31 [omitted]. 2.32 Distributions by the Company. There have been no distributions by the Company to any of the Shareholders in contemplation of the Merger other than normal and ordinary dividend distributions, if any. 2.33 Liabilities of the Company. The liabilities of the Company to be assumed by NewCo (including the Shareholder Debt, as defined in Section 4.6 hereof) and the liabilities to which Company assets are subject are valid debts of the Company. 2.34 Bankruptcy. The Company is not under the jurisdiction of a court in a Chapter 11 Bankruptcy Proceeding or similar case. 2.35 Insolvency. The fair market value of the assets of the Company to be transferred to NewCo exceeds the sum of all of the liabilities of the Company to be assumed by NewCo plus the amount of all liabilities to which the transferred assets are subject as of the effective date of the Merger. 2.36 Company's Assets. NewCo will acquire at least 90 percent of the fair market value of the net assets and at least 70 percent of the fair market value of the gross assets held by the Company immediately before the Merger. For this purpose, Company assets used to pay expenses incurred by the Company, if any, in connection with the transactions contemplated by this Agreement are included as assets held by the Company immediately before the Merger and not acquired by NewCo. No redemptions or dividend distributions to Shareholders have been made by the Company in contemplation of the Merger. 2.37 S Election. The Company is and will be an "S Corporation" within the meaning of section 1361(a) of the Code for the period from January 1, 1993, through the day immediately preceding the Closing Date (the "Short Year"). ARTICLE III REPRESENTATIONS AND WARRANTIES OF RESOURCES Resources hereby represents and warrants to the Shareholders as follows: 3.1 Organization. Resources and NewCo are each corporations duly organized and validly existing under the laws of the State of Indiana, and each has all requisite corporate power and authority to carry on its business as it is now being conducted and to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. 3.2 Corporate Power and Authority, Etc. The execution, delivery and performance by Resources and NewCo of this Agreement and the consummation by them of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Resources and NewCo. This Agreement has been duly and validly executed and delivered by Resources and NewCo and constitutes the valid and binding obligation of each. The Resources Shares to be delivered to the Shareholders at the Closing will be duly authorized, validly issued and fully paid and nonassessable, and free and clear of all Encumbrances except for (i) those created by the Shareholders, (ii) those created pursuant to this Agreement and the agreements contemplated hereby and (iii) those imposed by securities or similar laws. 3.3 No Conflicts. The execution, delivery and performance by Resources and NewCo of this Agreement and the consummation by Resources and NewCo of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule or regulation applicable to Resources or NewCo, (ii) violate any order, judgment injunction or decree by which Resources or NewCo or any of their respective assets or properties is bound or (iii) conflict with, or result in a breach or default under, any term or condition of the respective Articles of Incorporation or By-Laws of Resources or NewCo or any agreement, contract or commitment or other instrument to which Resources or NewCo or any of its subsidiaries is a party or by which any of them may be bound; except for violations, conflicts, breaches or defaults which in the aggregate would not materially hinder or impede the consummation of the transactions contemplated hereby. 3.4 Consents. Except as set forth on Schedule 3.4, no consent, approval or authorization of, exemption by, or filing with, any governmental or regulatory authority, or any third party, is required in connection with the execution, delivery and performance by Resources or NewCo of this Agreement or the consummation by Resources or NewCo of the transactions contemplated hereby, excluding, however, consents, approvals, authorizations, exemptions and filings, if any, which the Company or the Shareholders are required to obtain or make. 3.5 Resources' SEC Reports. Resources has delivered to the Shareholders (i) Resources' Annual Report on Form 10-K for the year ended December 31, 1992, and (ii) Resources' Quarterly Report on Form 10-Q for the period ended March 31, 1993, each in the form (including exhibits) filed with the Securities and Exchange Commission (collectively, "Resources' SEC Reports"). As of their respective dates, except as otherwise heretofore disclosed to the Shareholders in writing, Resources' SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. Each of the consolidated balance sheets included in or incorporated by reference into Resources' SEC Reports (including the related notes and schedules) fairly presented the consolidated financial position of Resources and its subsidiaries as of its date and each of the consolidated statements of income, of shareholders' equity and of cash flows included in or incorporated by reference into Resources' SEC Reports (including any related notes and schedules) fairly presented the results of operations, shareholders' equity and cash flows, of Resources and its subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments) in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein. Resources has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months and has been subject to such filing requirements for the past ninety (90) days. 3.6 No Brokers. Neither Resources nor NewCo has engaged or employed any broker or finder in connection with the transactions contemplated by this Agreement. 3.7 Articles of Incorporation and By-Laws. Resources has previously furnished the Shareholders with true and complete copies of Resources Restated Articles of Incorporation and By-Laws as in effect on the date hereof. ARTICLE IV COVENANTS OF THE COMPANY AND THE SHAREHOLDERS The Shareholders, jointly and severally, and the Company hereby covenant to and agree with Resources as follows: 4.1 Conduct of Business. Except as may be otherwise specifically contemplated by this Agreement or except as Resources may otherwise consent to in writing between the date hereof and the Closing Date: (a) The Shareholders will cause the Company to and the Company will (i) operate its businesses only in the ordinary course; (ii) use its best efforts to preserve its business organization intact; (iii) maintain its properties, machinery and equipment in as good a state of operating condition and repair as they were in on the date of this Agreement, except for maintenance required by reason of fire, flood or other acts of God (except that any insurance proceeds paid by reason of any such casualty after the date hereof shall be applied towards such maintenance); (iv) continue all of the Insurance Policies (or comparable insurance) in full force and effect; (v) use its best efforts to keep available until the Closing Date the services of its present officers and key employees; (vi) pay its accounts payable and all other obligations in the ordinary course of business; and (vii) use its best efforts to preserve its relationships with its lenders, suppliers, customers, licensors and licensees and others having material business dealings with it such that the business will not be impaired; and (b) The Shareholders will cause the Company not to and the Company will not (i) make any change in its Articles of Incorporation or By-Laws; (ii) make any change in its issued or outstanding capital stock, or issue any warrant, option or other right to purchase shares of its capital stock or any security convertible into shares of its capital stock, or redeem, purchase or otherwise acquire any shares of its capital stock, or declare any dividends or make any other distribution in respect of its capital stock; (iii) voluntarily incur or assume, whether directly or by way of guarantee or otherwise, any material obligation or liability, except obligations and liabilities incurred in the ordinary course of business; (iv) mortgage, pledge or encumber any material part of its properties or assets, tangible or intangible; (v) sell or transfer any material part of its assets, property or rights, or cancel any material claims against others; (vi) amend or terminate any Company Contract or any Material Permit to which it is a party, except in the ordinary course of business pursuant to the terms of such agreement; (vii) make any material change in any plan set forth on Schedule 2.18, except as required by law and except for changes made in the ordinary course of business in accordance with the Company's customary practices (including normal increases in compensation and benefits to persons other than the Shareholders consistent with past practice after normal periodic performance reviews); (viii) make any changes in the accounting methods, principles or practices employed by it, except as required by generally accepted accounting principles; (ix) make any capital expenditure or enter into any commitment therefor; (x) incur any debt or make any borrowings, or enter into any commitment therefor; or (xi) enter into any other agreement, course of action or transaction material to the Company except in the ordinary course of business. 4.2 Undertakings. The Shareholders and the Company will use their reasonable efforts, and will cooperate with Resources to secure any necessary consents, approvals, authorizations and exemptions from governmental agencies and other third parties, and to obtain the satisfaction of the conditions specified in Articles VI and VII, as shall be required in order to enable the parties to effect the transactions contemplated hereby in accordance with the terms and conditions hereof. 4.3 Access. The Shareholders and the Company shall (i) provide Resources with such information as Resources may from time to time reasonably request with respect to the Company and the transactions contemplated by this Agreement, (ii) provide Resources and its officers, accountants, counsel and other authorized representatives reasonable access during regular business hours and upon reasonable notice to the properties, books, and records of the Company, or as Resources may otherwise from time to time reasonably request, and (iii) permit Resources to make such inspections thereof as Resources may reasonably request. 4.4 Confidentiality. (a) Unless and until the Closing is consummated, the Shareholders and the Company, as the case may be (the "Recipient"), will keep confidential any information which has been furnished to it by or on behalf of Resources (the "Provider"), in connection with the transactions contemplated by this Agreement ("Confidential Information"), and shall use the Confidential Information solely in connection with the transactions contemplated by this Agreement. If this Agreement is terminated, the Recipient will return all Confidential Information to the Provider and either destroy any writings prepared by or on behalf of the Recipient based on Confidential Information or deliver such writings to the Provider. Confidential Information does not include information which (i) is or becomes (but only when it becomes) generally available to the public other than as a result of disclosure in violation of this Section 4.4, or (ii) is or becomes (but only when it becomes) available to the Recipient on a non-confidential basis from a source other than the Provider, or any of its agents or advisors or employees, provided that such source is not bound by a confidentiality agreement with the Provider in respect thereof. (b) The Recipient may disclose Confidential Information to any of its directors, officers, employees, agents, and advisors. In any event, the Recipient will be responsible for damages incurred by the Provider arising from any breach of this Section 4.4 by any person or entity to whom Confidential Information shall have been furnished. The Recipient may disclose Confidential Information if required by legal process or by operation of applicable law (but only to the extent so required and only after reasonable written notice to Provider, unless the giving of such notice would violate applicable law). 4.5 Exclusivity. Resources shall have the exclusive right through the close of business on July 31, 1993 (or such later date as the term of this Agreement may be extended by the parties hereto in writing), to consummate the transactions contemplated herein, and during such exclusive period, neither the Shareholders, the Company nor any of their authorized representatives will solicit or accept any other offer to purchase any of the capital stock or all or any significant part of the assets of the Company or any similar transaction nor hold discussions or negotiations with, or provide any information to, any other individual or corporation, partnership or other entity concerning such purchase (other than such discussions which are in furtherance of the transactions contemplated herein). 4.6 Shareholder Debt. Immediately after the Effective Time of the Merger, the Surviving Corporation shall repay certain indebtedness of the Company to the Shareholders up to an amount, which when combined with all other indebtedness of the Company paid to the Shareholders since December 31, 1992, does not exceed the aggregate sum of $1,304,766 plus unpaid interest (the "Shareholder Debt"). All other indebtedness of the Company to the Shareholders in excess thereof, if any (including any represented by notes payable to Shareholders), will be deemed to have been a contribution to the capital of the Company immediately prior to the Effective Time of the Merger. On the Closing Date, all indebtedness of the Shareholders to the Company will be paid in full, either by delivery to NewCo of a check therefor or by offset against any payments due Shareholders at Closing. 4.7 Investment Covenants. Each Shareholder acknowledges and agrees that the Resources Shares being acquired have not been registered under the Securities Act or any state securities laws; such Resources Shares are being acquired for investment and not with a view to any distribution; such Resources Shares may be sold only upon compliance with the registration requirements of the Securities Act and applicable state securities laws or, in the case of Resources' Common Shares, after satisfying a two-year holding period, in compliance with the limitations of Rule 144 promulgated under the Securities Act; and such Shareholder has been provided with or has had access to such information regarding Resources as such Shareholder deemed necessary or appropriate to make an informed investment decision regarding the Resources Shares. 4.8 Legend on Resources Shares. The Shareholders acknowledge and agree that each certificate representing the Resources Shares shall be stamped or otherwise imprinted on its face with a legend in the following form: "The Shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. The Shares have been acquired for investment and may not be sold, transferred or otherwise disposed of except in compliance with such Act." 4.9 Shareholder Approval of Merger. The Shareholders shall cause the Company promptly to call a meeting of the Shareholders to approve the Merger Agreement and the Merger contemplated by this Agreement and the Shareholders agree to vote in favor of such Merger Agreement and Merger and not to exercise any dissenters' rights in connection with the Merger. 4.10 Non-Compete Agreements. At the Closing, each of the Shareholders shall execute and deliver to Resources a Non- Compete Agreement in the form attached as Exhibit II. 4.11 Final "S Corporation" Income Tax Returns. The Shareholders shall cause to be prepared and shall file in a timely manner (taking into account any extensions of due dates) the Company's federal and state income tax returns for the Short Year and shall promptly thereafter furnish to Resources a copy of each Shareholder's related Form K-1 Shareholder's Share of Income, Credits, Deductions, Etc. (each, a "Form K-1"). ARTICLE V COVENANTS OF RESOURCES Resources hereby covenants and agrees with the Company and the Shareholders as follows: 5.1 Undertakings. Resources will use its reasonable efforts and will cooperate with the Company and the Shareholders to secure any necessary consents, approvals, authorizations and exemptions from governmental agencies and other third parties and to obtain the satisfaction of the conditions specified in Articles VI and VII, as shall be required in order to enable the parties to effect the transactions contemplated hereby in accordance with the terms and conditions hereof. 5.2 Confidentiality. (a) Unless and until the Closing is consummated, Resources (the "Recipient"), will keep confidential any information which has been furnished to it by or on behalf of the Shareholders or the Company, as the case may be (the "Provider"), in connection with the transactions contemplated by this Agreement ("Confidential Information"), and shall use the Confidential Information solely in connection with the transactions contemplated by this Agreement. If this Agreement is terminated, the Recipient will return all Confidential Information to the Provider and either destroy any writings prepared by or on behalf of the Recipient based on Confidential Information or deliver such writings to the Provider. Confidential Information does not include information which (i) is or becomes (but only when it becomes) generally available to the public other than as a result of disclosure in violation of this Section 5.2, or (ii) is or becomes (but only when it becomes) available to the Recipient on a non-confidential basis from a source other than the Provider, or any of its agents or advisors or employees, provided that such source is not bound by a confidentiality agreement with the Provider in respect thereof. (b) The Recipient may disclose Confidential Information to any of its directors, officers, employees, agents, and advisors. In any event, the Recipient will be responsible for damages incurred by the Provider arising from any breach of this Section 5.2 by any person or entity to whom Confidential Information shall have been furnished. The Recipient may disclose Confidential Information if required by legal process or by operation of applicable law (but only to the extent so required and only after reasonable written notice to the Provider, unless the giving of such notice would violate applicable law). 5.3 Tax Covenants. (a) Prior to the Merger, Resources shall own all of the outstanding capital stock of NewCo. (b) NewCo has no plan or intention to issue additional shares of its stock following the Merger that would result in Resources owning (i) less than eighty percent (80%) of the total combined voting power of all classes of NewCo stock entitled to vote or (ii) less than eighty percent (80%) of the total number of shares of all other classes of NewCo stock. (c) Resources has no plan or intention to redeem or otherwise reacquire any of its voting common stock to be issued in the Merger. (d) Resources has no plan or intention to redeem or otherwise reacquire any of its preferred stock to be issued in the Merger prior to July 13, 1998. (e) Resources has no plan or intention to liquidate NewCo, to merge NewCo with and into another corporation, to sell or otherwise dispose of its NewCo stock, or to cause NewCo to sell or otherwise dispose of any assets of the Company acquired in the Merger, except for dispositions made in the ordinary course of business or a transfer by NewCo of part or all of the assets acquired in the Merger to a corporation controlled by NewCo. For this purpose, NewCo would be in control of another corporation if NewCo owns stock possessing at least eighty percent (80%) of the total combined voting power of all classes of stock entitled to vote and at least eighty percent (80%) of the total number of shares of all other classes of stock of that corporation. (f) Following the Merger, Resources presently intends that NewCo will continue the historic business of the Company or use a significant portion of the Company's historic assets in a business. (g) There is no intercorporate debt existing between Resources and the Company or between NewCo and the Company that was issued, acquired, settled or will be settled at a discount. (h) Neither Resources nor NewCo are investment companies within the meaning of Sec. 368(a)(2)(F)(iii) and (iv) of the Code. 5.4 Non-Compete Agreement. At the Closing, Resources shall execute and deliver the Non-Compete Agreements in the form attached as Exhibit II and pay to the Shareholders the consideration provided for in Section 1.5 above. 5.5 Repayment of Shareholder Debt. At the Closing, NewCo shall have sufficient funds to permit the Surviving Corporation to repay the Shareholder Debt. 5.6 Rule 144. Resource agrees that for a period of five (5) years following the Closing (or for such shorter period as the Shareholders hold any Resources Shares acquired in the Merger) that it will use its reasonable efforts to timely file any reports and other filings required to be filed by it under the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations adopted by the Securities and Exchange Commission (the "SEC") thereunder (or if Resources is not required to file such reports and filings, it will upon the request of any Shareholder make publicly available other information so long as it is necessary to permit sales under Rule 144 under the Securities Act) and it will take such further actions as a Shareholder may reasonably request, all to the extent required from time to time to enable a Shareholder to sell within the limitations of the exemptions provided by (i) Rule 144 under Securities Act as such rule may be amended from time to time, or (ii) any similar rule or regulation thereafter adopted by the SEC. Resources shall have no liability for breach of this Section 5.6 provided that the Shareholders are not denied the practical benefits of Rule 144 (or any similar rule) for a period in excess of six (6) consecutive months and that, during such period, Resources is using its reasonable efforts to comply with this Section 5.6. 5.7 Access to Records. Following the Closing, Resources shall permit the Shareholders reasonable access to such records of the Company relating to the operations of the Company prior to the Closing as the Shareholders may reasonably request for purposes of responding to tax audits, litigation or similar situations where the Shareholders have a reasonable need for access to such records. The Shareholders will take reasonable steps to protect the confidentiality of records of the Company made available to them. 5.8 Release of Claims. At the Closing, Resources shall cause the Surviving Corporation to release the Shareholders from any liability they may have to the Surviving Corporation on account of any acts or omissions of the Shareholders prior to the Closing; provided, however, that such release shall not release the Shareholders from any liability they may have for breach of this Agreement or any agreement contemplated hereby, or from any obligation they may have to indemnify Resources or the Surviving Corporation pursuant to the terms of this Agreement or any agreement contemplated hereby. 5.9 Personal Guarantees. Resources shall use its reasonable efforts to cause the Shareholders to be released from any obligations they may have pursuant to personal guarantees of indebtedness of the Company, and shall indemnify and hold harmless the Shareholders from and against any liability pursuant to such personal guarantees, provided that such indebtedness is fully reflected in the Financial Statements or otherwise disclosed in writing to Resources prior to the Closing Date. 5.10 Amendment Creating Preferred Stock. Prior to the Closing Date, Resources shall amend its Restated Articles of Incorporation to create the Series B Convertible Redeemable Preferred Stock containing terms substantially identical to those attached as Exhibit VII. 5.11 Certain Post-Closing Matters. Resources agrees that: (a) Promptly after the expiration of the 30-day period referred to in Section 2.23 hereof, it shall cause the Surviving Corporation to assign to the Shareholders all of the Surviving Corporation's rights in and to the Bad Debts, if any, and shall cease all collection efforts with respect thereto. (b) Within 10 business days after the Shareholders shall have delivered to Resources copies of the Forms K- 1 pursuant to Section 4.11 hereof, it shall cause the Surviving Corporation to pay to each Shareholder an amount equal to (i) five percent (5%) of the excess of the items of income over the items of loss and deduction reflected on that Shareholder's Form K-1 for the Company's Short Year, minus (ii) one-third (1/3) the aggregate amount of the Bad Debts, if any (net of one- third (1/3) of any amount of the Bad Debts collected by the Surviving Corporation without any efforts on its part after the date of the assignment referred to in (a) above and prior to the date of the payment provided for herein). ARTICLE VI CONDITIONS TO RESOURCES' AND NEWCO'S OBLIGATIONS The obligations of Resources and NewCo to consummate the transactions contemplated hereby shall be subject to the satisfaction on or prior to the Closing Date of all of the following conditions, except such conditions as Resources and NewCo may waive: 6.1 Representations, Warranties, and Covenants of Shareholders and Company. The Shareholders and the Company shall have complied in all material respects with all of their agreements and covenants contained herein required to be complied with at or prior to the Closing Date, and all the representations and warranties of the Shareholders contained herein shall be true on and as of the Closing Date with the same effect as though made on and as of the Closing Date. Resources shall have received a certificate executed by each of the Shareholders, and dated as of the Closing Date, certifying as to the fulfillment of the conditions set forth in this Section 6.1, if such be the case or specifying which conditions have not been satisfied. 6.2 Further Action. All action (including notifications and filings) that shall be required to be taken by the Shareholders or the Company in order to consummate the transactions contemplated hereby shall have been taken and all consents, approvals, authorizations and exemptions from third parties that shall be required by the Shareholders or the Company in order to enable the Shareholders and the Company to consummate the transactions contemplated hereby shall have been duly obtained, and, as of the Closing Date, the transactions contemplated hereby shall not violate any applicable law or governmental regulation which is material. 6.3 No Governmental or Other Proceeding. No order of any court or governmental or regulatory authority or body which restrains or prohibits the transactions contemplated hereby shall be in effect on the Closing Date and no suit or investigation by any government agency to enjoin the transactions contemplated hereby or seek damages or other relief as a result thereof shall be pending or threatened as of the Closing Date. 6.4 Opinion of Shareholders' Counsel. Resources shall have received an opinion of the Shareholders' counsel, dated the Closing Date, in substantially the form attached as Exhibit III. 6.5 Employment Agreement. Daniel S. Baker shall have executed an Employment Agreement in the form attached hereto as Exhibit IV. 6.6 Non-Compete Agreements. Each of the Shareholders shall have executed a Non-Compete Agreement in the form attached hereto as Exhibit II. 6.7 No Material Adverse Change. Since December 31, 1992, there shall have been no material adverse change in the business, prospects, properties, assets, or financial condition of the Company, other than those specifically permitted or contemplated by this Agreement or disclosed in this Agreement or the Schedules hereto. 6.8 Escrow. The Shareholders, Resources and National City Bank, Indiana, as escrow agent (the "Escrow Agent") shall have entered into an Escrow Agreement in the form of Exhibit V attached hereto, pursuant to which each of the Shareholders shall deposit with the Escrow Agent 59,498 of the Common Shares and 5,018 of the Preferred Stock of Resources issued to such Shareholder in the Merger, to secure the indemnification obligations of the Shareholders under Article VIII of this Agreement and the obligations of the Shareholders under the Non-Compete Agreements referred to in Section 6.6. ARTICLE VII CONDITIONS TO SHAREHOLDERS' OBLIGATIONS The obligations of the Company and the Shareholders to consummate the transactions contemplated hereby shall be subject to the satisfaction on or prior to the Closing Date of all of the following conditions, except such conditions as the Company and the Shareholders may waive: 7.1 Representations, Warranties, and Covenants of Resources. Resources shall have complied in all material respects with all of its agreements and covenants contained herein required to be complied with at or prior to the Closing Date, and all of the representations and warranties of Resources contained herein shall be true in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date. The Shareholders shall have received a certificate of Resources, dated as of the Closing Date and signed by the chief financial officer of Resources, certifying as to the fulfillment of the conditions set forth in this Section 7.1, if such be the case, or specifying which conditions have not been satisfied. 7.2 Further Action. All action (including notifications and filings) that shall be required to be taken by Resources in order to consummate the transactions contemplated hereby shall have been taken and all consents, approvals, authorizations and exemptions from third parties that shall be requested in order to enable Resources to consummate the transactions contemplated hereby shall have been duly obtained, and, as of the Closing Date, the transactions contemplated hereby shall not violate any applicable law or governmental regulation. 7.3 No Governmental or Other Proceeding. No order of any court or governmental or regulatory authority or body which restrains or prohibits the transactions contemplated hereby shall be in effect on the Closing Date and no suit or investigation by any government agency to enjoin the transactions contemplated hereby or seek damages or other relief as a result thereof shall be pending or threatened in writing as of the Closing Date. 7.4 Opinion of Resources' Counsel. The Shareholders shall have received an opinion of counsel to Resources, dated the Closing Date, substantially in the form attached as Exhibit VI. ARTICLE VIII SURVIVAL AND INDEMNIFICATION 8.1 Survival. The representations, warranties and covenants contained herein, or in any instrument or certificate delivered pursuant hereto, shall survive Closing for a period of thirty-six (36) months, except that (a) the covenant of Resources contained in Section 5.6 shall survive for a period of five (5) years and (b) all representations, warranties and covenants contained herein, or in any instrument or certificate delivered pursuant hereto with respect to Taxes and those contained in Sections 2.3, 2.25 and 3.2 shall survive for the applicable statute of limitations period. A claim for indemnification by a party against the other under Section 8.2, or any other claim of any nature under or pursuant to any other provision of this Agreement, or in any instrument or certificate delivered pursuant hereto, must be asserted in writing and in accordance with Section 8.4 prior to the expiration of the applicable time period referenced above. If written notice of a claim is given in accordance with Section 8.4 prior to the expiration of the applicable time period referenced above, then the representation, warranty or covenant applicable to such claim shall survive until, but only for purposes of, resolution of such claim, provided that no suit or action connected with or relating to this Agreement or the transactions contemplated herein, and no defense, counterclaim or set-off based upon any alleged breach of this Agreement, may be first instituted or made more than six (6) months after expiration of the applicable time period referenced above. 8.2 Indemnification. Subject to the provisions of Section 8.1, from and after the Closing, the Shareholders, jointly and severally, on the one hand, and Resources and the Surviving Corporation, on the other hand, shall indemnify and hold harmless the other (the party seeking indemnification or asserting a claim being referred to as the "Indemnified Party") from and against any and all claims, losses, liabilities and damages, including, without limitation, amounts paid in settlement, interest, penalties, reasonable costs of investigation and reasonable fees and disbursements of counsel, accountants and experts, arising out of or resulting from the inaccuracy of any representation or warranty, or the breach of any covenant or agreement, contained herein or in any instrument or certificate delivered pursuant hereto, by the party against whom indemnification or relief is sought (the "Indemnifying Party"). 8.3 Certain Tax Matters. In the event of any claim for indemnification relating to Taxes attributable to the period January 1, 1993 to the Closing Date, the Shareholders' obligation to indemnify Resources shall be limited to any interest, penalty, cost of investigation or defense or similar expense, and shall not extend to the amount that the Company would have paid had the tax been paid when due. 8.4 Notice of Claims. The Indemnified Party shall notify the Indemnifying Party in writing of any claim, specifying in reasonable detail the basis of such claim, the facts pertaining thereto and, if known, the amount, or an estimate of the amount, of the liability arising therefrom. No party shall have any liability hereunder and the other party may not assert as a defense, counterclaim or set-off any claim unless the notice required by this Section is given within six (6) months after discovery of the grounds for the claim. The Indemnified Party shall provide to the Indemnifying Party as promptly as practicable thereafter all information and documentation necessary to support and verify the claim asserted and the Indemnifying Party shall be given reasonable access to all books and records in the possession or control of the Indemnified Party or any of its affiliates which the Indemnifying Party reasonably determines to be related to such claim. 8.5 Defense. If the facts giving rise to a right to indemnification arise out of the claim of any third party, or if there is any claim against a third party, the Indemnifying Party may assume the defense or the prosecution thereof, including the employment of counsel, at its cost and expense. The Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate therein, but the fees and expenses of such counsel employed by the Indemnified Party shall be at its expense. The Indemnifying Party shall not be liable for any settlement of any such claim effected without its prior written consent which consent shall not be unreasonably withheld. Whether or not the Indemnifying Party does choose to so defend or prosecute such claim, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend at such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. The Indemnifying Party shall be subrogated to all rights and remedies of the Indemnified Party to the extent of any indemnifications provided hereunder. 8.6 Limitations on Indemnity Obligations. Except for indemnification or claims relating to Taxes, the Shareholders shall have no obligation to indemnify Resources pursuant to Section 8.2 for any claims for indemnification or to respond in damages for any other claim under or pursuant to any provision of this Agreement or any instrument or certificate delivered pursuant hereto, however denominated, except to the extent that the aggregate dollar amount of all unpaid claims exceeds $100,000, it being understood that the Shareholders shall not be liable for the first $100,000 of claims. 8.7 Special Agreement Regarding Schedules. The parties to this Agreement have reviewed the Schedules hereto and the effect that disclosures in the Schedules would otherwise have upon the representations and warranties contained in Article II and the indemnification obligations of the Shareholders pursuant to Article VIII. Subject to the limitations of Sections 8.1, 8.4, 8.5 and 8.6, the parties have agreed that the risk of loss associated with certain potential liabilities or other adverse consequences identified on the Schedules ("Potential Liabilities") should be borne by the Shareholders, and the disclosure of such Potential Liabilities in the Schedules should not serve to limit the representations and warranties of the Shareholders or their indemnification obligations to Resources (it being understood that Sections 8.1, 8.4, 8.5 and 8.6 would nonetheless apply to any claim for indemnification on account of any Potential Liabilities). Accordingly, notwithstanding any other provision of this Agreement to the contrary, the parties agree that for purposes of the representations and warranties contained in Article II and the indemnification obligations of the Shareholders contained in Article VIII, the following shall apply: (a) The representation and warranty contained in Section 2.1 shall be applied as if Schedule 2.1 did not identify the fact that the Company is not yet qualified to do business in the states of Kansas and Oklahoma. (b) The representations and warranties contained in Sections 2.9, 2.15, 2.16, 2.17, and 2.25 shall be applied as if the corresponding Schedules disclosed nothing, except that in the case of Schedules 2.9, 2.15 and 2.17, Resources shall not be entitled to indemnification against any loss arising from the matters listed on such Schedule to the extent that (and only to the extent that) such loss is covered by insurance. (c) The representation and warranty contained in Section 2.13 shall apply as if Schedule 2.13 disclosed nothing other than the identity of the insurance policies maintained by the Company and item 10. (d) The representation and warranty contained in Section 2.14 shall apply as if Schedule 2.14 identified nothing other than the existence of contracts or agreements of the Company and the items referred to in Schedule 2.5. (e) The representation and warranty contained in Section 2.18 shall apply as if Schedule 2.18 did not disclose the failure to file outstanding tax returns. (f) The representation and warranty contained in Section 2.24 shall apply as if Schedule 2.24 disclosed nothing except (i) union attempts to organize, and (ii) that for purposes of Section 2.24 a "grievance" shall mean a complaint filed by employees pursuant to federal and/or state law, including EEOC charges, unemployment compensation claims, workers compensation claims, claims of unfair labor practices and similar matters. The disclosure of any matter on any Schedule shall relate solely to the representation and warranty to which the Schedule relates, and shall not qualify or otherwise affect any other representation or warranty (it is understood, however, that any Schedule may refer to or incorporate information by reference from another Schedule, in which case the appropriate information from the cross-referenced Schedule shall be deemed to be a part of the first Schedule). ARTICLE IX TERMINATION PRIOR TO CLOSING 9.1 Termination of Agreement. This Agreement may be terminated at any time prior to the Closing: (a) By the mutual written consent of Resources and the Shareholders; (b) By Resources or the Shareholders in writing if the Closing shall not have occurred on or before July 31, 1993, or such other date to which the Agreement has been extended by agreement of the parties; or (c) By either the Shareholders or Resources, against the other, if the other shall (i) fail to perform in any material respect its agreements contained herein required to be performed prior to the Closing Date, or (ii) materially breach any of its representations, warranties, covenants or agreements contained herein, which failure or breach is not cured within five (5) days after the party seeking to terminate has notified the other party in writing of its intent to terminate this Agreement pursuant to this clause. 9.2 Termination of Obligations. Termination of this Agreement pursuant to this Article IX shall terminate all obligations of the parties hereunder, except for the obligations under Sections 4.4, 5.2 and 10.6; provided, however, that termination pursuant to clause (b) or (c) of Section 9.1 shall not relieve the defaulting or breaching party from any liability to the other party hereto resulting from its willful breach of this Agreement. ARTICLE X MISCELLANEOUS 10.1 Entire Agreement. This Agreement (including the Schedules and Exhibits hereto) constitutes the sole understanding of the parties with respect to the subject matter hereof. This agreement supersedes and replaces any and all prior agreements, understandings and representations, written and oral, if any, including without limitation the contents of that certain "Confidential Business Memorandum" for Company. No amendment, modification or alteration of the terms or provisions of this Agreement shall be binding unless the same shall be in writing and duly executed by the parties hereto. 10.2 Successor and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and he binding upon the respective successor of the parties hereto; provided, however, that this Agreement may not be assigned by any party without the prior written consent of the other party hereto. If this Agreement is assigned with such consent, the terms and conditions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective assigns; provided, however, that no assignment of this Agreement or any of the rights or obligations hereof shall relieve any party of its obligations under this Agreement. 10.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument. 10.4 Headings. The headings of the Sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof. 10.5 No Waiver. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party hereto, will be deemed to constitute a waiver by the party taking any action of compliance with any representation, warranty or agreement contained herein. The waiver by any party hereto of any condition or of a breach of any other provision of this Agreement will not operate or be construed as a waiver of any other condition or subsequent breach. The waiver by any party of any of the conditions precedent to its obligations under the Agreement will not preclude it from seeking redress for breach of this Agreement other than with respect to the condition so waived. 10.6 Expenses. The Shareholders and Resources shall each pay all costs and expenses incurred by them or it or on their or its behalf in connection with this Agreement and the transactions contemplated hereby, including, without limiting the generality of the foregoing, fees and expenses of its own financial consultants, accountants and counsel. All expenses incurred by the Company shall be reimbursed by the Shareholders. 10.7 Notices. Any notice, request, instruction or other document (each, a "notice") to be given hereunder by any party hereto to any other party hereto shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid: If to Company to: S. M. & P. Conduit Co., Inc. 518 Herriman Ct. Noblesville, Indiana 46060 If to the Shareholders to: Diana L. Sosbey 8596 Twin Point Circle Indianapolis, Indiana 46236 Patrick J. Baker 1913 West 116th Street Carmel, Indiana 46032 Daniel S. Baker 7285 Waterview Pt. Noblesville, Indiana 46060 with a copy to: Curtis Miller, C.P.A. Katz, Sapper & Miller Suite 800 11711 North Meridian Street Carmel, Indiana 46032 and with a copy to: Marvin Mitchell, Esq. Mitchell, Hurst, Jacobs & Dick 152 East Washington Street Indianapolis, Indiana 46204-3615 If to Resources to: IWC Resources Corporation 1200 Waterway Boulevard Indianapolis, Indiana 46202 Attention: J.A. Rosenfeld with a copy to: Baker & Daniels 300 North Meridian Street Suite 2700 Indianapolis, Indiana 46204 Attention: Randy D. Loser, Esq. 10.8 Further Assurances. From and after the Closing Date, each party, at the request of the other party and at the requesting party's expense, will each take all such action and deliver all such documents as shall be reasonably necessary or appropriate to consummate the transactions contemplated by this Agreement and to permit the parties to enjoy the benefits contemplated by this Agreement. 10.9 Governing Law. The validity, performance and enforcement of this Agreement and any agreement entered into pursuant hereto, unless expressly provided to the contrary, will be governed by the laws of Indiana, without giving effect to the principles of conflicts of law thereof. 10.10 Consent to Jurisdiction. Each of Resources and the Shareholders consents and submits to jurisdiction and venue in any court setting in Marion County, Indiana, for all purposes of this Agreement and any ancillary document to which it is a party, including, without limitation, any action or proceeding instituted for the enforcement of any right, remedy, obligation or liability arising under or by reason hereof and thereof. 10.11 Specific Performance. Resources on the one hand, and the Shareholders and the Company, on the other hand, acknowledge that the other will be irreparably harmed and that there will be no adequate remedy at law in the event of a violation by it of any of its covenants or agreements which are contained in this Agreement. It is accordingly agreed that, in addition to any other remedies which may be available upon the breach of such covenants and agreements, the Shareholders or Resources, as the case may be, shall have the right to obtain injunctive relief to restrain any breach or threatened breach of, or otherwise to obtain specific performance of, the other's covenants or agreements contained in this Agreement. IN WITNESS WHEREOF each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first above written. S. M. & P. CONDUIT CO., INC. By /s/Diana L. Sosbey Name: Diana L. Sosbey Title: President IWC RESOURCES CORPORATION By /s/J.A. Rosenfeld Name: J.A. Rosenfeld Title: Senior Vice President RESOURCES ACQUISITION CORP. By /s/J.A. Rosenfeld Name: J.A. Rosenfeld Title: President DIANA L. SOSBEY /s/Diana L. Sosbey PATRICK J. BAKER /s/Patrick J. Baker DANIEL S. BAKER /s/Daniel S. Baker EXHIBIT I MERGER AGREEMENT THIS MERGER AGREEMENT (this "Merger Agreement") is made as of June __, 1993 by and among IWC Resources Corporation, an Indiana corporation ("Resources"), Resources Acquisition Corp., an Indiana corporation and wholly owned subsidiary of Resources ("NewCo"), and S. M. & P. Conduit Co., Inc., an Indiana corporation (the "Company"). WHEREAS, Resources, NewCo, the Company and the common shareholders of the Company have entered into a Plan and Agreement of Merger (the "Agreement") relating to the merger of the Company with and into NewCo (the "Merger"); and WHEREAS, Resources, NewCo and the Company desire to set forth the terms and conditions of the Merger; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I 1.01 Constituent Corporations and Surviving Corporation. NewCo and the Company shall be the constituent corporations to the Merger. At the Effective Time of the Merger (as hereinafter defined), the Company shall be merged with and into NewCo, which shall be the surviving corporation of the Merger (the "Surviving Corporation"). At the Effective Time of the Merger, the identity and separate existence of the Company shall cease and all of the rights, privileges, powers, franchises, properties and assets of the Company shall be vested in NewCo in accordance with the provisions of the Indiana Business Corporation Law. At the Effective Time of the Merger, the name of the Surviving Corporation shall be changed to S M & P Conduit Co., Inc. 1.02 Effective Time. The date and time when the Merger becomes effective are herein referred to as the "Effective Time of the Merger." The Effective Time of the Merger shall be at the time stated in the Articles of Merger to be filed with the Secretary of State of Indiana with respect to the Merger. ARTICLE II 2.01 Articles of Incorporation. The Articles of Incorporation of NewCo as in effect immediately prior to the Effective Time of the Merger, but as amended in the manner set forth in Section 4.01 below, shall thereafter be the Articles of Incorporation of the Surviving Corporation until amended in accordance with Indiana law. 2.02 By-Laws. The By-Laws of NewCo, as in effect immediately prior to the Effective Time of the Merger, but as amended to reflect the change of name of NewCo, shall be the By-Laws of the Surviving Corporation, until amended or repealed. 2.03 Officers. The officers of NewCo at the Effective Time of the Merger shall be the officers of the Surviving Corporation from and after the Effective Time of the Merger, each to hold office in accordance with the Articles of Incorporation and By-Laws of the Surviving Corporation. 2.04 Directors. The directors of NewCo at the Effective Time of the Merger shall be the directors of the Surviving Corporation from and after the Effective Time of the Merger, each to serve until his successor shall have been duly elected and qualified in accordance with the Articles of Incorporation and By-Laws of the Surviving Corporation. ARTICLE III 3.01 Conversion of Company Common Stock. At the Effective Time of the Merger, each of the issued and outstanding whole shares of common stock of the Company (the "Company Common Stock"), by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be converted into and become the right to receive from the Surviving Corporation (a) 3,569.90 Common Shares of Resources (the "Resources Common Stock"), (b) 516.12 shares of Series B Convertible Redeemable Preferred Stock of Resources (the "Resources Preferred Stock") and (c) Ninety-Five Thousand Dollars ($95,000) in cash. No fractional shares of Resources Common Stock or Resources Preferred Stock shall be issued, and the number of shares of Resources Common Stock and Resources Preferred Stock issued to each former holder of Company Common Stock shall be rounded to the nearest whole share. Any fractional shares of Company Common Stock outstanding shall be converted into the right to receive a proportionate portion of the consideration provided above for a whole share, such calculation to be made to the nearest ten-thousandths (.0000) of a share of Company Common Stock. 3.02 Shares Held in Company Treasury. At the Effective Time of the Merger, all shares of common and preferred stock of the Company held in the treasury of the Company, if any, shall be cancelled, without any payment or other distribution in respect thereof. 3.03 No Conversion of NewCo Stock. None of the issued and outstanding shares of NewCo's capital stock shall be converted or otherwise affected by the Merger and at and after the Effective Time of the Merger, all of such shares shall remain issued and outstanding shares of capital stock of the Surviving Corporation. ARTICLE IV 4.01 Amendment to Articles of Incorporation of Surviving Corporation. At the Effective Time of the Merger, the Articles of Incorporation of the Surviving Corporation shall be amended by amending Article I to read in its entirety as follows: "ARTICLE I Name The name of the Corporation is S M & P Conduit Co., Inc." ARTICLE V 5.01 Counterparts. This Merger Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one agreement. 5.02 Governing Law. This Merger Agreement shall be governed in all respects, including, but not limited to, validity, interpretation, effect and performance, by the internal laws of the State of Indiana without regard to the principles of conflicts of law thereof. 5.03 Section Headings. The section headings in this Merger Agreement have been inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, the undersigned parties have duly executed this Merger Agreement, as of the date first written above. IWC RESOURCES CORPORATION By ________________________________ Printed:_________________________ Title:___________________________ RESOURCES ACQUISITION CORP. By ________________________________ Printed:_________________________ Title:___________________________ S. M. & P. CONDUIT CO., INC. By ________________________________ Printed:_________________________ Title:___________________________ EXHIBIT II NON-COMPETE AGREEMENT THIS NON-COMPETE AGREEMENT ("Agreement") is made as of the ____ day of June, 1993, by and between ______________________ ("Shareholder") and IWC Resources Corporation, an Indiana corporation ("Resources"). Recitals A. Shareholder is now a shareholder of S. M. & P. Conduit Co., Inc., an Indiana corporation (the "Company"). B. Resources has agreed to acquire the Company pursuant to the terms of a Plan and Agreement of Merger among Resources, Resources Acquisition Corp., the Company and the shareholders of the Company, including the Shareholder (the "Agreement"). C. Shareholder possesses valuable information regarding the business of the Company, and could threaten the value of Resources' investment in the Company if Shareholder were to disclose such information or to compete with the Company. In order to induce Resources to enter into and perform the Agreement, and in consideration of Resources' obligations under the Agreement, Shareholder desires to agree not to compete with Company. Agreement In consideration of the matters stated in the Recitals and the covenants contained in this Agreement, the parties agree as follows: 1. Restrictive Covenants. Shareholder hereby agrees as follows: (a) Shareholder will not, for five (5) years from the date hereof, directly or indirectly: (i) engage, whether as an individual or sole proprietor or as owner, partner, shareholder (except of one percent (1%) or less of any class of outstanding securities listed on any national securities exchange or actively traded in an over-the-counter market), officer, director, manager, agent, consultant, formal or informal advisor, or by or through the lending of any form of assistance, in the underground facility locating business within the States of Illinois, Indiana, Missouri, Ohio, Texas, Wisconsin, Arkansas, Kentucky, Kansas, Oklahoma and Michigan (the "Restricted Territory"); or (ii) solicit, take away or endeavor to take away from the Company any sales of underground facility locating services to any customer of the Company within the Restricted Territory; or (iii) solicit, take away, hire, employ or endeavor to employ any person who is then or was at any time during the prior six (6) months an employee of Company; or (iv) lend money, guarantee loans, make gifts of money or other property, or otherwise lend financial or other assistance in any form to any person, firm, association, partnership, venture, corporation or other business entity who is engaged or will within the period prescribed above engage in any of the activities prohibited by the foregoing paragraphs (i), (ii) and (iii) of this paragraph 1(a). (b) All data and information which Resources reasonably regards as confidential that Shareholder has obtained regarding the business conducted by the Company, including customer lists, information relating to the requirements of customers and all other information regarding the affairs of the Company (in each case only to the extent Resources reasonably regards the same as confidential), shall be held in confidence by Shareholder and, without Resources' prior written consent (which shall not unreasonably be withheld), Shareholder shall not divulge any of such information to anyone except the Company or its representatives or as required by law. (c) Shareholder acknowledges that any violation by him of any provision of this paragraph 1 will cause irreparable harm to Resources, that damages for such harm will be incapable of precise measurement and that, as a result, Resources will not have an adequate remedy at law to redress the harm caused by such violations. Therefore, in the event of Shareholder's violation of any provisions of this paragraph 1, Shareholder agrees that, in addition to its other remedies, Resources shall be entitled to injunctive relief, including but not limited to temporary restraining orders and/or preliminary or permanent injunctions to restrain or enjoin any violation of this paragraph 1 by Shareholder. Shareholder agrees to and hereby does submit to jurisdiction before any state or federal court of record in Marion County, Indiana, or in the state and county in which such violation may occur, at Resources' election, for that purpose, and Shareholder hereby waives any right to raise the questions of jurisdiction and venue in any action that Resources may bring in any such court against Shareholder. (d) In addition to any other relief to which it shall be entitled, Resources shall be entitled to recover from Shareholder the costs and reasonable attorney's fees incurred by Resources in (i) the successful enforcement of this paragraph 1 and (ii) obtaining relief from Shareholder's violation of any restriction contained in this paragraph 1. (e) In addition to its other remedies, Resources shall be entitled to satisfy any amounts due it as a result of breach of this Agreement pursuant to the terms of the Escrow Agreement dated the date hereof by and among Resources, Shareholder, National City Bank, Indiana as escrow agent and certain other parties. 2. Severability. Should any clause, portion or paragraph of this Agreement be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of this Agreement. Should any particular covenant or restriction, including but not limited to the covenants and restrictions of paragraph 1, be held to be unreasonable or unenforceable for any reason, including without limitation the time period, geographical area and scope of activity covered by such covenant, then such covenant or restriction shall be given effect and enforced to whatever extent would be reasonable and enforceable. 3. Binding on Successors and Assigns. The terms and conditions hereof shall inure to the benefit of and be binding upon the successors and assigns of Resources and the heirs, executors and personal representatives of Shareholder. 4. Governing Law. This Agreement and the performance by the parties under this Agreement shall be construed in accordance with the internal laws of Indiana, and any action or proceeding that may be brought, arising out of, in connection with or by reason of this Agreement shall be governed by the internal laws of Indiana to the exclusion of the law of any other forum, and regardless of the jurisdiction in which the action or proceeding may be instituted or pending. 5. Entire Agreement, Modifications. The foregoing terms and conditions of this Agreement constitute the entire agreement by and between Resources and Shareholder relating to the subject matter hereof. No amendment to or modification of this Agreement shall be effective unless the amendment or modification is in writing and signed by Shareholder and Resources. 6. Notices. Any notice required or permitted under this Agreement shall be delivered by hand or mailed by registered or certified mail, postage prepaid, addressed: If to Resources: IWC Resources Corporation 1220 Waterway Boulevard Indianapolis, Indiana 46202 Attention: J.A. Rosenfeld If to Shareholder: ______________________________ ______________________________ ______________________________ 7. Captions. The captions herein are for convenience and identification purposes only, are not integral parts of this Agreement and are not to be considered in the interpretation of any part of this Agreement. 8. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [The following paragraph shall be included in the Non- Compete Agreement of Daniel S. Baker: 9. Employment Acknowledged. Resources acknowledges that Shareholder will be an employee of the Surviving Corporation (as defined in the Agreement) as provided in that certain Employment Agreement between the Surviving Corporation and Shareholder of even date herewith. Resources agrees that Shareholder's activities in the proper discharge of his duties as an employee of the Surviving Corporation shall not constitute a breach of the Agreement.] IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Shareholder" ___________________________________ IWC RESOURCES CORPORATION By ________________________________ Name: Title: EXHIBIT III [Form of Opinion of Counsel for Shareholders] _________ __, 1993 IWC Resources Corporation Resources Acquisition Corp. 1220 Waterway Boulevard Indianapolis, Indiana 46222 Gentlemen: We have acted as counsel to S. M. & P. Conduit Co., Inc., an Indiana corporation (the "Company"), and its shareholders, Diana L. Sosbey, Patrick J. Baker and Daniel S. Baker (the "Shareholders"), in connection with the preparation of the Plan and Agreement of Merger (the "Agreement"), dated _________ __, 1993 by and among IWC Resources Corporation ("Resources"), Resources Acquisition Corp. ("NewCo"), the Company and the Shareholders, including the Merger Agreement attached thereto pursuant to which the Company will be merged with and into NewCo (the "Merger"), the Non-Compete Agreements dated the date hereof by and between Resources and each of the Shareholders, the Employment Agreement dated the date hereof by and between the Company and Daniel S. Baker, and the Escrow Agreement dated the date hereof by and among _________________ as escrow agent, Resources and the Shareholders. The Agreement, the Merger Agreement, the Employment Agreement and the Escrow Agreement are referred to herein collectively as the "Transaction Documents." This Opinion Letter is being given pursuant to Section 6.4 of the Agreement and, except as otherwise indicated, capitalized terms used herein are defined as set forth in the Agreement. In connection with this Opinion Letter, we have examined signed copies of the Transaction Documents, a certified copy of certain resolutions adopted by the Board of Directors and Shareholders of the Company dated ________ __, 1993, and a certified copy of the Company's Articles of Incorporation and By-Laws, as amended. We have considered such matters of law and fact, and have relied upon such certificates and other information furnished to us and upon the representations of the Shareholders contained in the Agreement as we have deemed appropriate as a basis for our opinions set forth below. This Opinion Letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord, and this Opinion Letter should be read in conjunction therewith. The law covered by the opinions expressed herein is limited to the Federal law of the United States and the law of the State of Indiana. [Incorporation of the Opinion Accord is optional.] Based upon the foregoing, and subject to the qualifications and exceptions set forth below, we are of the opinion that: 1. The Company is incorporated and existing under the laws of the State of Indiana and has all requisite power and authority to own or lease and operate its properties and to carry on its business as presently conducted. 2. The Company has the requisite corporate power and authority to enter into the Transaction Documents to which it is a party and to perform its respective obligations under such Transaction Documents. 3. Each of the Transaction Documents to which the Company is a party has been approved by all necessary action on the part of the Board of Directors of the Company and the Shareholders, has been duly executed and delivered to Resources and is enforceable against the Company and/or the Shareholders as the case may be, except that no opinion is expressed herein as to the enforceability of Sections 6 or 10 of the Employment Agreement. 4. The execution and delivery by the Company and the Shareholders of, and the performance of their respective obligations under, the Transaction Documents do not violate the Articles of Incorporation or By-Laws of the Company. 5. The authorized capital stock of the Company consists of 1,000 shares of common stock ("Common Stock") of which 100 shares are issued and outstanding. All of the outstanding shares of Common Stock (referred to collectively herein as the "Shares") are owned of record and beneficially by the Shareholders in the amounts set forth on Schedule 2.2 to the Agreement. All outstanding Shares have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive rights. To the best of our knowledge after due inquiry [the scope of which may be expressed in this opinion], there is outstanding no security, option, warrant, right, call, subscription, agreement, commitment or understanding of any nature whatsoever, real or contingent, that directly or indirectly (i) calls for the issuance, sale, pledge or other disposition of any Shares or of any other capital stock of the Company or any securities convertible into, or other rights to acquire, any such Shares or other capital stock of the Company or (ii) obligates the Company or the Shareholders to grant, offer or enter into any of the foregoing or (iii) relates to the voting or control of such shares, capital stock, securities or rights. No person has any right to require the Company to register any of its securities under the Securities Act of 1933, as amended. The General Qualifications (as defined in the Accord) apply to each of the opinions set forth herein. Based and relying upon a review of our litigation files and certificates of the Shareholders and an officer of the Company, we hereby confirm to you that there is no action, proceeding or investigation in any court or before any governmental or regulatory authority pending or threatened in writing or orally (i) against the Company or against any Shareholder, in connection with the conduct of the businesses of the Company, except as set forth on Schedule 2.15 of the Agreement, (ii) which seeks to enjoin or obtain damages in respect of the consummation of the transactions contemplated by the Transaction Documents, or (iii) would render Resources or NewCo unable to exercise control over the assets of the Company. This Opinion Letter may be relied upon by you only in connection with the transactions contemplated by the Transaction Documents, including the Merger, and may not be used or relied upon by any other person for any purpose whatsoever, without in each instance our prior written consent. Very truly yours, EXHIBIT IV EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of the ____day of ________, 1993, by and between S M & P Conduit Co., Inc., an Indiana corporation ("Corporation") and wholly owned subsidiary of IWC Resources Corporation, and Daniel S. Baker, a resident of Indiana ("Employee"). Recitals A. Employee has extensive business experience valuable to the Corporation, and desires to provide services to the Corporation upon the terms and conditions set forth in this Agreement. B. The Corporation wishes to employ Employee upon the terms and conditions set forth in this Agreement; and C. The Corporation currently engages in, or has plans to engage in, businesses providing underground facility locating services and related businesses, with respect to which the Corporation has developed and expects to develop certain Confidential Information (as defined herein) which the Corporation desires and intends to protect. NOW, THEREFORE, in consideration of the premises, the mutual promises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Agreement 1. President and Chief Operating Officer. The Corporation hereby employs Employee as President and Chief Operating Officer for the Corporation, and Employee hereby agrees to serve the Corporation in such capacities, upon the terms and conditions hereinafter set forth. 2. Term. The term of Employee's employment under this Agreement shall be for an initial term of approximately five and one-half years commencing as of the date of this Agreement and ending on December 31, 1998 (the "Initial Term"). This Agreement shall automatically renew for successive one (1) year periods after the Initial Term, but may be terminated at the end of the Initial Term or any renewal term by either the Corporation or Employee with prior written notice by the terminating party delivered to the other at least ninety (90) days before the end of the Initial Term or any renewal term as the case may be. 3. Compensation. Employee shall be compensated on an annual salary plus annual bonus basis. (a) The salary for the first year of the Initial Term shall be $200,000 and shall be paid in equal installments for the same periods and on the same dates that the Corporation uses for its other employees. (b) For the second and each succeeding year of the Initial Term and of any renewal term (and for the partial year at the end of the Initial Term), Employee's annual salary will be determined by the Board of Directors, but shall not be less than an annual rate of $200,000. (c) Employee shall be entitled to receive an annual bonus beginning with the calendar year 1993 based upon the EBIT (as defined below) of the Corporation for such year in accordance with the following Schedule: EBIT Bonus up to $4,000,000 none next 2,000,000 5.0% of EBIT in excess of $4,000,000 next 1,000,000 7.5% of EBIT in excess of $6,000,000 next 500,000 10.0% of EBIT in excess of $7,000,000 next 500,000 15.0% of EBIT in excess of $7,500,000 over 8,000,000 at the discretion of the Board (d) For purposes of this Agreement, the term "EBIT" shall mean the earnings of the Corporation before (i) interest and taxes, (ii) amortization of amounts paid pursuant to the non-compete agreements with Diana L. Sosbey, Patrick J. Baker and Daniel S. Baker and (iii) payment of premiums on insurance on the life of Employee for each fiscal year, all as determined by the Corporation in accordance with its usual accounting procedures. Each annual bonus shall be payable within thirty (30) days following completion of year-end financial statements for the Corporation. (e) After the termination of this Agreement, the Corporation shall not be liable to Employee for any further salary hereunder; provided, that Employee shall be paid (i) any amounts earned hereunder through the date of termination, and (ii) a pro rata portion of the bonus, if any, payable pursuant to subparagraph (c) based upon the number of full months Employee is employed by the Corporation during the fiscal year in which termination occurs. (f) In the event of any merger, consolidation, reorganization, spin-off or similar transaction involving the Corporation, the Corporation and Employee shall negotiate in good faith to determine what adjustments, if any, are appropriate in the method of calculating the annual bonus. In the event the Corporation and Employee are unable to agree upon the appropriate adjustment, the question shall be submitted to arbitration in accordance with the commercial rules of the American Arbitration Association and judgment upon the award may be entered by any court of competent jurisdiction. 4. Benefits. (a) Employee shall be entitled to participate in all life, health or hospitalization insurance programs, or any other benefit plan or program, upon the terms and conditions of such programs, which the Corporation may from time to time provide or make available to other executives of the Corporation generally. Employee shall also be eligible to participate in the IWC Resources Corporation Restricted Stock Plan. (b) Employee shall be reimbursed for any reasonable out-of-pocket expenses and travel expenses incurred by him in connection with the performance of the Corporation's business, in accordance with reasonable policies that may be established by the Board of Directors from time to time applicable to reimbursement of expenses. The Corporation shall provide Employee with the use of a suitable automobile for business purposes. (c) Employee shall be entitled to an annual vacation of up to six (6) weeks per year. Vacation may be taken at such time or times as Employee shall select, subject to the condition that it shall be taken at a time when his absence will not impair the Corporation's normal business functions. In no event shall Employee take more than two weeks vacation in any 30- day period without the prior consent of the Corporation. Unused vacation shall lapse at the end of each anniversary year, unless Employee is unable to use such vacation time because of requirements of the Corporation, in which event the Corporation shall permit the vacation to accumulate and to be taken in a succeeding year or years or shall reimburse Employee for such unused vacation days at his then applicable salary. (d) The right of Employee to indemnification for liability incurred as a result of his service as an officer or director of the Corporation pursuant to the Articles of Incorporation or By-Laws of the Corporation shall not be materially less than the indemnification rights available to officers and directors of IWC Resources Corporation pursuant to its Articles of Incorporation and By-Laws. (e) Corporation shall provide Employee with office space and secretarial or similar support reasonably satisfactory to Employee. 5. Title, Services and Duties. (a) Employee is hereby employed to perform the services of President and Chief Operating Officer and discharge the duties necessary and appropriate thereto. The Corporation shall cause Employee to be appointed President and Chief Operating Officer and a Director. (b) E m p l o y e e ' s responsibilities shall include those matters typically performed by a chief operating officer, including responsibility for the day-to-day operations of the Corporation, and such other executive level duties as may be assigned to him from time to time by the Board of Directors. (c) Employee accepts the employment specified above and, during such employment, shall devote his full business time, attention, energy and skill to the business of the Corporation. This shall not preclude Employee from serving as a Director of any other corporation which does not compete with the Corporation or from investing his assets in such form or manner as will not require his services in the operation of the affairs of the companies in which such investments are made or from devoting reasonable time to the affairs of charitable or civic organizations. (d) Employee shall not be required to relocate outside of the Indianapolis and Noblesville metropolitan areas without his consent. 6. Covenant Not To Compete And Not To Disclose Confidential Information. Employee hereby acknowledges that by virtue of his position as President and Chief Operating Officer, and his employment hereunder, he will have advantageous familiarity with and knowledge about the Corporation's Confidential Information (as defined below). Therefore, Employee agrees as follows: (a) During Employee's employment by the Corporation and for a period of two (2) years thereafter, regardless of the reason or method of termination, Employee will not (i) engage (either directly or indirectly, as shareholder, partner, officer, director, consultant, employee or otherwise) in a business competitive with that of the Corporation within any geographical territory within which the Corporation has done business during the last twelve (12) months of his employment; (ii) solicit, take away, hire, employ or endeavor to employ any of the employees of the Corporation or any persons who were employees of the Corporation within the six (6) months prior to termination of Employee's employment; or (iii) lend money, guarantee loans, make gifts of money or other property, or otherwise lend financial or other assistance in any form to any person, firm, association, partnership, venture, corporation or other business entity who is engaged or will within the above period engage in any of the activities prohibited by the foregoing paragraphs (i) and (ii) of this paragraph. For purposes of this Agreement, a "business competitive with that of the Corporation" shall mean any business related to underground facility locating services and any other business engaged in by the Corporation within the twelve (12) months immediately preceding termination of Employee's employment. (b) Employee agrees that information obtained by him regarding the sources of supply, processes, and "know-how," merchandising methods, trade information, trade secrets, inventions, customer lists, confidential information relating to customers and customer requirements and all other confidential information regarding the affairs of the Corporation which comes to his attention by reason of his employment, including records of the foregoing ("Confidential Information") will be received by him in confidence, and agrees not to divulge any of such information to anyone except in the performance of his duties to the Corporation or as required by law. Employee agrees that all such records and copies of records shall be the property of the Corporation and agrees to keep such documents subject to the Corporation's custody and control, and to surrender to the Corporation such of those documents as are still in his possession at the termination of his employment. Employee further agrees to return to the Corporation at the Corporation's main office any and all sales catalogs, brochures, samples, sample cases, machinery, equipment and other sales aids, promptly upon termination of his employment. (c) Employee acknowledges that any violation of any provision of this paragraph 6 by him will cause irreparable damage to the Corporation, that such damages will be incapable of precise measurement and that, as a result, the Corporation will not have an adequate remedy at law to redress the harm which such violations will cause. Therefore, in the event of any violation of any provision of this paragraph 6 by Employee, Employee agrees that the Corporation shall be entitled to injunctive relief including, but not limited to, temporary and/or permanent restraining orders to restrain any violation of this paragraph 6 by Employee. Employee agrees to and hereby does submit to jurisdiction before any state or federal court of record in Marion County, Indiana, and Employee hereby waives any right to raise the questions of jurisdiction and venue in any action that may be brought in any such court by the Corporation against Employee alleging a violation of this paragraph 6. (d) The obligations of Employee under this paragraph 6 shall be in addition to and not in lieu of the obligations of Employee under that certain Non-Compete Agreement between Employee and IWC Resources Corporation of even date herewith. 7. Key-Man Insurance. The Corporation shall be entitled, at its option and for its benefit, to carry insurance on the life of Employee under such policies, with such insurers, and in such amounts as the Corporation may determine. The Corporation shall own the policy and shall have the sole right to designate the beneficiary thereof, including naming itself. Employee shall cooperate with the Corporation in all reasonable respects necessary to cause the issuance of such policy, including without limitation, submission to such physical examinations and accurate completion of applications as the insurer selected by the Corporation may require. If Employee so requests, upon termination of Employee's employment with the Corporation, the Corporation will cooperate with Employee to permit transfer to Employee at Employee's sole cost of any policies of insurance on the life of Employee owned by the Corporation. 8. Termination. In addition to the provisions of paragraph 2, the Corporation may terminate this Agreement as follows: (a) Immediately for fraud, dishonesty, gross misconduct or similar conduct; (b) Upon 60 days written notice for cause, provided that such notice specifies in reasonable detail the failure(s) of Employee, and Employee does not correct such failures to the reasonable satisfaction of the Board of Directors of the Corporation within such 60 days period. For purposes of this Agreement, "cause" shall exist if Employee shall fail to perform in any material respect his obligations under this Agreement; (b) Upon ten (10) days' notice following Employee's being disabled in such a manner that materially affects Employee's ability to perform hereunder for a period of ninety (90) out of any one hundred (100) consecutive days; (c) Immediately upon Employee's death; (d) Upon mutual agreement by the Corporation and Employee; (e) Immediately for material breach by Employee of the covenants in paragraph 6 hereof; and (f) In accordance with the provisions of paragraph 2. 9. Severance Benefits. Upon termination, except as provided in paragraph 3(e) or as may be required by applicable law or regulations then in effect, the Corporation shall have no obligation to pay Employee any salary or benefits under this Agreement. 10. Severability. In case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect (including, without limitation, the geographical and temporal restrictions contained in paragraph 6 hereof), such provisions shall be modified or deleted in such a manner so as to make this Agreement as modified legal and enforceable to the fullest extent permitted under applicable law. 11. Parties Bound. All provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, personal representatives, successors and assigns. 12. Effect and Modification. This Agreement comprises the entire agreement between the parties with respect to the subject matter hereof and supersedes all earlier agreements relating to the subject matter hereof. No statement or promise, except as herein set forth, has been made with respect to the subject matter of this Agreement. The headings of the individual paragraphs herein are for convenience only and shall not be deemed to be a substantive part of this Agreement. No modification or amendment hereof shall be effective unless in writing and signed by Employee and an officer of the Corporation (other than Employee). 13. Non-Waiver. The Corporation's or Employee's failure or refusal to enforce all or any part of, or the Corporation's or Employee's waiver of any breach of this Agreement, shall not be a waiver of the Corporation's or Employee's continuing or subsequent rights under this Agreement, nor shall such failure or refusal or waiver have any effect upon the subsequent enforceability of this Agreement. 14. Assignability. This Agreement may be assigned by the Corporation to any of its affiliates without the consent of Employee. This Agreement may not be assigned by Employee, whether by operation of law or otherwise, in whole or in part, without the prior written consent of the Corporation. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same Agreement. 16. Governing Law. This Agreement shall be governed by the internal laws of the State of Indiana. 17. Notice. Any notice, request, instruction or other document to be given hereunder to any party shall be in writing and delivered by hand, telegram, registered or certified United States mail, return receipt requested, or other form of receipted delivery, with all expenses of delivery prepaid, as follows: If to Employee: Daniel S. Baker 549 Lion's Creek Drive Noblesville, Indiana 46060 With a copy to: Marvin Mitchell, Esq. Mitchell, Hurst Jacobs & Dick 152 East Washington Street Indianapolis, Indiana 46204 If to the Corporation: S M & P Conduit Co., Inc. 1220 Waterway Boulevard Indianapolis, Indiana 46202 Attention: Chairman With a copy to: Randy D. Loser, Esq. Baker & Daniels Suite 2700 300 North Meridian Street Indianapolis, Indiana 46204 and to such other addresses or to such other parties as either the Corporation or Employee may designate by giving notice to the other. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. "Employee" _________________________________ Daniel S. Baker "Corporation" S M & P CONDUIT CO., INC. B y ______________________________ Name: Title: EXHIBIT V ESCROW AGREEMENT THIS ESCROW AGREEMENT ("Escrow Agreement") is entered into as of the ____ day of June, 1993, by and among IWC Resources Corporation, an Indiana corporation ("Resources"), Diana L. Sosbey, Patrick J. Baker and Daniel S. Baker (individually a "Shareholder" and collectively the "Shareholders") and National City Bank, Indiana, a national banking association with offices in Indianapolis, Indiana (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, Resources, Resources Acquisition Corp. ("NewCo") and the Shareholders are parties to a certain Plan and Agreement of Merger dated as of the date hereof ("Agreement"), pursuant to which S. M. & P. Conduit Co., Inc., an Indiana corporation, all of the capital stock of which is owned by the Shareholders, is being merged with and into NewCo (the "Merger"); and WHEREAS, pursuant to the Agreement, the Shareholders have agreed to place certain of the Common Shares ("Common Shares") and of the Series B Convertible Redeemable Preferred Stock ("Preferred Stock") of Resources to be received by them in the Merger in escrow to provide Resources with recourse in the event of any claims by Resources for indemnification under the Agreement or for breach of any of the Non-Compete Agreements to be entered into between Resources and the Shareholders (the "Non-Compete Agreements"); and WHEREAS, the Escrow Agent has agreed to act as the escrowee of such arrangement. NOW THEREFORE, IT IS AGREED AS FOLLOWS: 1. Resources and the Shareholders do hereby appoint and designate Escrow Agent as the escrow agent for the purposes herein set forth and the Escrow Agent hereby accepts such appointment and designation. 2. Each Shareholder hereby delivers to Escrow Agent a certificate or certificates representing that number of shares of Common Shares and a certificate or certificates representing that number of shares of Preferred Stock set forth on Schedule 1 attached hereto, accompanied by a stock power or powers duly executed in blank, in proper form for transfer (such shares of Common Shares and Preferred Stock being herein referred to collectively as the "Escrowed Stock"). The Escrow Agent hereby acknowledges receipt of the Escrowed Stock and agrees to hold the Escrowed Stock in accordance with the terms of this Escrow Agreement for the benefit of Resources and the Shareholders. 3. Resources and each of the Shareholders hereby authorize the Escrow Agent to hold the Escrowed Stock in its possession and distribute from time to time the Escrowed Stock only as follows: (a) For purposes of this Escrow Agreement, the "Fair Market Value" of each share of Escrowed Stock shall be deemed to be $23.25; provided, that in the event that Resources shall at any time declare or pay any dividend on its Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the Fair Market Value of each share of Escrowed Stock shall be adjusted by multiplying $23.25 by a fraction, the numerator of which is the number of shares of Common Shares that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Shares that are outstanding immediately after such event. (b) In the event Resources from time to time makes a claim for indemnification under the Agreement or for breach of the Non-Compete Agreements, Resources shall notify the Shareholders in writing of the aggregate dollar amount of such claim and Resources shall have the right to have delivered to it all or such portion of the Escrowed Stock having a Fair Market Value equal to the aggregate dollar amount of such claim (rounded to the nearest whole share). Such notice shall be sent registered or certified mail, return receipt requested, with a copy sent to the Escrow Agent, and shall specify a date not earlier than ten business days from the date of such notice when the Escrow Agent shall distribute shares of Escrowed Stock to Resources (or, in the case of shares of Escrowed Stock that are Common Shares, to the transfer agent for the Common Shares for transfer to Resources), unless the Escrow Agent receives prior to such date a written notice from any one of the Shareholders stating that Resources is not entitled to such distribution. To the extent a claim relates to breach of the Non-Compete Agreement of a particular Shareholder, only the Escrowed Stock deposited by that Shareholder shall be delivered and only that Shareholder may give a written notice that Resources is not entitled to a distribution. In all other cases, the shares of the Escrowed Stock to be delivered to Resources shall be selected pro rata from the Escrowed Stock deposited by all Shareholders, based upon the relative proportions of the Escrowed Stock set forth on Schedule 1 hereto. In the event all shares owned by a particular Shareholder have been delivered to Resources, shares of Escrowed Stock shall be selected thereafter in proportion to the remaining stock deposited by the other Shareholders, it being understood that the indemnification obligations of the Shareholders are joint and several. (c) Any Escrowed Stock not claimed by Resources shall be delivered to the Shareholders on June __, 1996, unless prior to such date Resources has notified the Escrow Agent of a claim for indemnification or breach of a Non-Compete Agreement and such claim has not yet been settled. In the event the unsettled claim is for an amount less than the Fair Market Value of the Escrowed Stock remaining, the Escrow Agent shall retain an amount of Escrowed Stock having a Fair Market Value equal to the amount of the unsettled claim and shall deliver the remaining Escrowed Stock, if any, to the Shareholders. (d) If the Escrow Agent shall have received actual notice from Resources or the Shareholders to withhold the delivery of any Escrowed Stock, then the Escrow Agent shall not make any delivery until either (i) Resources and the Shareholders shall have notified the Escrow Agent in writing that the controversy with respect thereto has been settled by an agreement between Resources and the Shareholders or (ii) the Escrow Agent shall have received a copy of a final determination of a court of appropriate jurisdiction as to the disposition of the Escrowed Stock. (e) The Shareholders shall be entitled to receive dividends on and to exercise all voting rights with respect to the shares of Escrowed Stock during the time they are subject to this Agreement, to exercise rights of conversion with respect to the Preferred Stock (in which case the Common Shares received upon conversion shall be held in escrow pursuant to this Agreement) and to exercise all other ownership rights with respect to the Escrowed Stock, provided, however, that the Shareholders shall have no right to sell, transfer, pledge or otherwise encumber the Escrowed Stock, or take any other action with respect to the Escrowed Stock that would deny Resources the practical benefits of this Agreement. (f) The Shareholders shall be entitled to substitute for all or part of the Escrowed Stock cash in the amount of the Fair Market Value per share of Escrowed Stock, in which case such cash shall be held in escrow pursuant to this Agreement and the appropriate number of shares of Escrowed Stock released to the Shareholders. The Escrow Agent shall invest such cash in certificates of deposit, government securities, money market accounts or similar investments as directed by the Shareholders, who shall also be entitled to determine the length of maturity thereof which shall not exceed three (3) years. In the event Resources is entitled to any distribution, and unless Resources directs otherwise, the Escrow Agent shall immediately liquidate such investments as are necessary to provide funds to make such distribution, and neither the Escrow Agent nor Resources shall have any liability to the Shareholders for any early withdrawal penalty or other loss incurred as a result of liquidating such investments. The Shareholders shall be entitled to payment quarterly of all investment earnings. 4. Upon delivery of all of the Escrowed Stock (and all cash substituted therefor) in accordance with the provisions of Section 3 of this Escrow Agreement the escrow hereby created shall be terminated. Prior to such delivery, the escrow may be terminated by delivery to the Escrow Agent of written instructions to such effect (including instructions as to delivery of the Escrowed Stock) executed by Resources and the Shareholders. 5. The Escrow Agent shall be entitled to its usual and customary fees for acting as such and to reimbursement for its reasonable expenses and disbursements in connection therewith, including reasonable attorneys' fees, all of which shall be paid one-half by Resources and one-half by the Shareholders, jointly and severally; provided, that any additional fees and expenses of the Escrow Agent incurred as a result of a Shareholder's investment directions pursuant to Section 3(f) above shall be charged separately to, and paid by, such Shareholder. 6. The Escrow Agent shall be entitled to rely upon, and shall incur no liability for acting, or omitting to take action, in accordance with, any written instructions provided for in this Escrow Agreement or any other written instructions executed by both Resources and the Shareholders delivered to the Escrow Agent, and shall have no obligation to satisfy itself as to the truth of any matter asserted therein. The Escrow Agent may treat as authorized any instrument or other writing believed by it in good faith to be genuine and to be signed or presented by the proper person. The Escrow Agent shall have no liability for the performance of its duties hereunder, except in the event of its own gross negligence or willful misconduct. The Escrow Agent may choose and consult with legal counsel with respect to any matter relating to the carrying out of this Escrow Agreement. The Shareholders and Resources agree to jointly indemnify the Escrow Agent for any cost and expense it may incur in the proper performance of its duties under this Escrow Agreement. 7. The Escrow Agent or any successor to it hereafter appointed may at any time resign by giving notice in writing to Resources and the Shareholders and shall be discharged of its duties hereunder upon the appointment (and the acceptance thereof) of the successor Escrow Agent as hereinafter provided. In the event of any such resignation, Resources may appoint a successor Escrow Agent which shall be a bank or trust company organized under the laws of the United States of America, or the State of Indiana with unimpaired capital and surplus in excess of Fifty Million Dollars ($50,000,000) and with an office located in Indianapolis, Indiana. Any such successor Escrow Agent shall deliver to Resources and the Shareholders a written instrument accepting such appointment hereunder and thereupon it shall succeed to all rights and duties of the Escrow Agent hereunder, and shall be entitled to receive the Escrowed Stock (and any cash substituted therefor). A successor Escrow Agent may, with the approval of Resources and the Shareholders, accept the account rendered and the property delivered to it by a predecessor Escrow Agent as a full and complete discharge to the predecessor Escrow Agent without incurring any liability or responsibility for so doing. 8. A l l n o t i c e s , certificates, consents, requests, demands and other communications required or permitted under this Escrow Agreement shall be in writing and shall be deemed to have been properly given if delivered by hand, sent by express mail or other overnight courier service, or mailed, certified or registered mail with postage prepaid: If to Shareholders to: Diana L. Sosbey 8596 Twin Point Circle Indianapolis, Indiana 46236 Patrick J. Baker 1913 West 116th Street Carmel, Indiana 46032 Daniel S. Baker 549 Lion's Creek Drive Noblesville, Indiana 46060 with a copy to: Marvin Mitchell, Esq. Mitchell, Hurst Jacobs & Dick 152 East Washington Street Indianapolis, Indiana 46204 If to Resources to: IWC Resources Corporation 1220 Waterway Boulevard Indianapolis, Indiana 46202 Attention: J.A. Rosenfeld with a copy to: Baker & Daniels 300 North Meridian Street Suite 2700 Indianapolis, Indiana 46204 Attention: Randy D. Loser, Esq. If to Escrow Agent to: National City Bank, Indiana 101 West Washington Street Indianapolis, Indiana 46255 Attention: Peggy Pfau or to such other person or address as the party to whom the communication is to be given shall have notified the other party in accordance with this Section 8. Any express mail or other overnight courier service communication shall be deemed to have been given on the first "business day" (such term excluding, for purposes of this Escrow Agreement, Saturdays, Sundays and legal holidays) after the day of sending. Any mailed communication (other than express mail) shall be deemed to have been given on the third business day after mailing. 9. This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. 10. This Escrow Agreement may be executed in several counterparts, each of which shall be deemed an original and which together shall constitute one and the same instrument. 11. This Escrow Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and assigns. 12. This Escrow Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings. No amendment, supplement, modification or waiver of the terms of this Escrow Agreement shall be binding unless expressed in writing and executed on behalf of the party to be charged therewith. IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow Agreement as of the date first above written. IWC RESOURCES CORPORATION B y ________________________________ J. A. Rosenfeld Senior Vice President and Treasurer ___________________________________ Diana L. Sosbey ___________________________________ Patrick J. Baker ___________________________________ Daniel S. Baker NATIONAL CITY BANK, INDIANA B y ________________________________ Name: Title: EXHIBIT VI [Form of Opinion of Counsel of Resources] _________ __, 1993 Diana L. Sosbey Patrick J. Baker Daniel S. Baker Re: Merger of S. M. & P. Conduit Co., Inc. With and Into Resources Acquisition Corp. Lady and Gentlemen: We have acted as counsel to IWC Resources Corporation, an Indiana corporation ("Resources"), in connection with the preparation of the Plan and Agreement of Merger (the "Agreement"), dated as of June 14, 1993 by and among Resources, Resources Acquisition Corp. ("NewCo"), S. M. & P. Conduit Co., Inc. (the "Company") and you as the shareholders of the Company (the "Shareholders"), including the Merger Agreement attached thereto pursuant to which the Company will be merged with and into NewCo (the "Merger"), the Non-Compete Agreements dated the date hereof by and between Resources and each of the Shareholders, the Employment Agreement dated the date hereof by and between Resources and Daniel S. Baker, and the Escrow Agreement dated the date hereof by and among National City Bank, Indiana, as escrow agent, Resources and the Shareholders. The Agreement, the Merger Agreement, the Non-Compete Agreements, the Employment Agreement and the Escrow Agreement are referred to herein collectively as the "Transaction Documents." This Opinion Letter is being given pursuant to Section 7.4 of the Agreement. In connection with this Opinion Letter, we have examined signed copies of the Transaction Documents, certified copies of certain resolutions adopted by the Boards of Directors of Resources and NewCo and by the sole shareholder of NewCo, and a certified copy of the Articles of Incorporation and By-Laws, each as amended, of Resources and NewCo. We have considered such matters of law and fact, and have relied upon such certificates and other information furnished to us and upon the representations of Resources contained in the Agreement as we have deemed appropriate as a basis for our opinions set forth below. This Opinion Letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord, and this Opinion Letter should be read in conjunction therewith. The law covered by the opinions expressed herein is limited to the Federal law of the United States and the law of the State of Indiana. Based upon the foregoing, and subject to the qualifications and exceptions set forth below, we are of the opinion that: 1. Each of Resources and NewCo is incorporated and existing under the laws of the State of Indiana. 2. Each of Resources and NewCo has the requisite corporate power and authority to enter into each Transaction Document to which it is a party and to perform its obligations under each such Transaction Document. 3. Each Transaction Document to which Resources or NewCo, as the case may be, is a party has been approved by all necessary action on the part of the Board of Directors of Resources or by the Board of Directors and shareholders of NewCo, as the case may be, and is enforceable against Resources or NewCo, as the case may be. 4. The Resources Common Shares and the shares of Series B Convertible Redeemable Preferred Stock to be issued pursuant to the Merger Agreement have been duly authorized and, when issued and delivered to the Shareholders pursuant to the Merger Agreement, will be validly issued, fully paid and nonassessable. 5. The execution and delivery by Resources or NewCo, as the case may be, of each Transaction Document to which it is a party, and the performance by Resources or NewCo, as the case may be, of its obligations under each such Transaction Document, do not violate the Articles of Incorporation or By-Laws, each as amended, of Resources or NewCo, as the case may be. The General Qualifications (as defined in the Accord) apply to each of the opinions set forth herein. This Opinion Letter may be relied upon by you only in connection with the transactions contemplated by the Transaction Documents, including the Merger, and may not be used or relied upon by any other person for any purpose whatsoever, without in each instance our prior written consent. Very truly yours, EXHIBIT VII FORM OF AMENDMENT TO ARTICLES OF INCORPORATION CREATING SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK OF IWC RESOURCES CORPORATION The Articles of Incorporation of IWC Resources Corporation are hereby amended by the addition of a new Section 5 to Article VI of the Articles of Incorporation, said Section 5 to read in its entirety as follows: "Section 5. Terms of Series B Convertible Redeemable Preferred Stock. I. Designation and Amount The Corporation shall have a series of Special Shares which shall be designated as "Series B Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of shares constituting the Series B Preferred Stock shall be 60,000. Such number of shares may be increased or decreased by amendment to these Articles of Incorporation without shareholder approval; provided, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock. II. Dividends and Distributions (A) Subject to the rights of the holders of any shares of any series of Special Shares (or any similar stock) ranking prior and superior to the Series B Preferred Stock and the Common Shares with respect to dividends, the holders of shares of Series B Preferred Stock shall be entitled to participate with the holders of the Common Shares in the receipt of dividends and distributions and to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, dividends equal to the per share amount of each cash dividend, and the per share amount (payable in kind) of each non-cash dividend or other distribution, other than a dividend payable in shares of Common Shares or a subdivision of the outstanding shares of Common Shares (by reclassification or otherwise), declared on the Common Shares. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in shares of Common Shares). The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. III. Voting Rights The holders of shares of Series B Preferred Stock shall have the following voting rights: (A) Each share of Series B Preferred Stock shall entitle the holder thereof to one (1) vote on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, by the provisions creating any other series of Special Shares or any similar stock, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Shares and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no voting rights. IV. Conversion (A) General. Any holder of outstanding Series B Preferred Stock may, at any time, convert all but not less than all of said shares owned by said holder into Common Shares, at the Conversion Rate (as such term is defined below) as then in effect. (B) Conversion Rate and Adjustments. The initial Conversion Rate shall be one (1) Common Share for each share of Series B Preferred Stock (the "Conversion Rate"). In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. V. Redemption (A) Mandatory Redemption. On _________________ (the "Redemption Date") the Corporation shall redeem all of the shares of Series B Preferred Stock then outstanding out of funds legally available therefor at a redemption price equal to $23.25 per share, subject to adjustment as set forth below (as adjusted, the "Redemption Price"), together with an amount equal to unpaid dividends thereon to the date of redemption. In the event of any change in the Series B Preferred Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, exchanges of shares or the like, the Redemption Price shall be appropriately adjusted. (B) Notice of Redemption. At least thirty (30) days prior to the Redemption Date, the Corporation shall notify the holders of the Series B Preferred Stock of the procedures to be followed in connection with the redemption; provided, however, that the failure to give such notice (the "Redemption Notice") shall not affect any of the Corporation's rights hereunder or the validity of such redemption. The Redemption Notice shall be sent to the holders of the Series B Preferred Stock at their addresses as they appear on the records of the Corporation. The holders of the Series B Preferred Stock may continue to exercise the right of conversion provided in Article IV hereof until the Redemption Date notwithstanding the Corporation's giving of the Redemption Notice. (C) Procedures for Redemption. If, on or prior to the Redemption Date, all funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust with a bank or trust company for the account of the holders of the shares so to be redeemed (so as to be and continue to be available therefor), then on and after the Redemption Date, notwithstanding that any certificate for shares of the Series B Preferred Stock so called for redemption shall not have been surrendered for cancellation, all shares of the Series B Preferred Stock shall be deemed to be no longer outstanding, and all rights with respect to such shares of the Series B Preferred Stock shall forthwith cease and terminate, except the right of the holders thereof to receive out of the funds so set aside in trust the amount payable on redemption thereof without interest thereon. In case the holders of shares of the Series B Preferred Stock which shall have been redeemed shall not within one year (or any longer period if required by law) after the Redemption Date claim any amount so deposited in trust for the redemption of such shares, such bank or trust company shall, upon demand and if permitted by applicable law, pay over to the Corporation any such unclaimed amount so deposited with it, and shall thereupon be relieved of all responsibility in respect thereof, and thereafter the holders of such shares shall, subject to applicable escheat laws, look only to the Corporation for payment of the Redemption Price thereof without interest thereon. (D) Status After Redemption. Shares of Series B Preferred Stock redeemed, purchased or otherwise acquired for value by the Corporation shall, after such acquisition, have the status of authorized and unissued shares of Special Shares of the Corporation and may be reissued by the Corporation at any time as shares of any class or series of Special Shares other than as shares of Series B Preferred Stock. VI. Liquidation, Dissolution or Winding Up Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to the aggregate amount to be distributed per share to holders of shares of Common Shares. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the aggregate amount of which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. VII. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Shares is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Shares payable in shares of Common Shares, or effect a subdivision or combination or consolidation of the outstanding shares of Common Shares (by reclassification or otherwise than by payment of a dividend in shares of Common Shares) into a greater or lesser number of shares of Common Shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event. VIII. Rank The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Special Shares. IX. Amendment The Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preference or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Series B Preferred Stock, voting together as a single series." EX-10.19 11 EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT by and between IWC Resources Corporation , an Indiana corporation (the "Company"), and James T. Morris (the "Executive"), dated as of the 31st day of December , 19 93 . The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined in Section 2) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of such date; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions, as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 20% or more of the Outstanding Company Common Stock and Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, in accordance with the terms and provisions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles, and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office which is the headquarters of the Company and is less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not hereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid in equal installments on a monthly basis, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the average annualized (for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonus paid or payable, including by reason of any deferral, to the Executive by the Company and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs (the "Recent Average Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable employment expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date, or if more favorable to the Executive, as in effect generally at any time therafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a material breach by the Executive of the Executive's obligations under Section 4(a) (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach or (ii) the conviction of the Executive of a felony involving moral turpitude. (c) Good Reason; Window Period. The Executive's employment may be terminated (i) during the Employment Period by the Executive for Good Reason or (ii) during the Window Period by the Executive without any reason. For purposes of this Agreement, the "Window Period" shall mean the 30-day period immediately following the first anniversary of the Effective Date. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirement), authority, duties or responsibilities as contemplated by Section 4(a) or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, unsubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section (4)b, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B); (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c), provided that such successor has received at least ten days' prior written notice from the Company or the Executive of the requirements of Section 11(c). For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive without any reason during the Window Period or for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b). For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive during the Window Period or for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company Upon Termination. (a) Good Reason or during the Window Period; Other than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment either for Good Reason or without any reason during the Widow Period: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Highest Annual Bonus and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount (such amount shall be hereinafter referred to as the "Severance Amount") equal to the product of (1) two and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus [2(x+y)]; provided that such amount shall be reduced by the present value (determined as provided in Section 280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code")) of any other amount of severance relating to salary or bonus continuation to be received by the Executive upon termination of employment of the Executive under any severance plan, policy or arrangement of the Company; and C. a separate lump-sum supplemental retirement benefit (the amount of such benefit shall be hereinafter referred to as the "Supplemental Retirement Amount") equal to the difference between (1) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to the Company's Retirement Plan (or any other successor plan thereto) (the "Retirement Plan") during the 90-day period immediately preceding the Effective Date) of the benefit payable under the Retirement Plan and any supplemental and/or excess retirement plan of the Company and its affiliated companies providing benefits for the Executive (the "SERP") which the Executive would receive if the Executive's employment continued at the compensation level provided for in Sections 4(b)(i) and 4(b)(ii) for the remainder of the Employment Period, assuming for this purpose that all accrued benefits are fully vested and that benefit accrual formulas are no less advantageous to the Executive than those in effect during the 90-day period immediately preceding the Effective Date, and (2) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to the Retirement Plan during the 90-day period immediately preceding the Effective Date) of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP; and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives of the Company and its affiliated companies and their families (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of Accrued Obligations (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Death Benefits (as defined below)) and (ii) payment to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the greater of (A) the sum of the Severance Amount and the Supplemental Retirement Amount and (B) the present value (determined as provided in Section 280G(d)(4) of the Code) any cash amount to be received by the Executive or the Executive's family as a death benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of life insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (B) shall be hereinafter referred to as the "Death Benefits"). (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for (i) payment of Accrued Obligations (which shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination) and the timely payment of provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Disability Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the greater of (A) the sum of the Severance Amount and the Supplemental Retirement Amount and (b) the present value (determined as provided in Section 280G(d)(4) of the Code) of any cash amount to be received by the Executive as a disability benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of disability insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit) (the benefits included in this clause (B) shall be hereinafter referred to as the "Disability Benefits"). (d) Cause; Other Than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period, excluding a termination either for Good Reason or without any reason during the Widow Period, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment for provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Except as provided in Sections 6(a)(ii), 6(b) and 6(c), nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice of program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. (b) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(a) as though such termination were by the Company without Cause, or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amount pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9)(a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: 8191 N. Pennsylvania St. Indianapolis, IN 46240 If to the Company: 1220 Waterway Blvd. Indianapolis, IN 46202 Attention: Corporate Secretary and General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive's employment with the Company terminates, then the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. [Executive] [Company] By EX-13 12 ANNUAL REPORT Document Summary: Document: ~WRD0005 Author: Addressee: Operator: Creation Date: 03/27/1994 Modification Date: 03/29/1994 Identification key words: Comments: Dear Shareholder: Numerous positive developments in 1993 enhanced continued growth of IWC Resources Corporation (Company). In June, the Company acquired SM&P Conduit Co., Inc. (SM&P), an underground utility locating company headquartered in Noblesville, Indiana. SM&P's steady growth has expanded to 14 district offices, with over 500 employees in eight states, predominantly in the Midwest and Southwest. SM&P made a significant contribution to the Company's consolidated earnings in 1993. We are confident SM&P's continued performance will add incremental earnings to the Company in the future. In May, Indianapolis Water Company (IWC) requested the approval of the Indiana Utility Regulatory Commission for an $8.9 million (14%) increase in its water utility rates, based in part on increased expenses connected with new accounting rules regarding postretirement benefits other than pensions and increases in other operating expenses, such as, property taxes and costs imposed by government. IWC also requested approval to merge Zionsville Water Corporation into IWC. This merger would recognize the fact that the two utilities now operate as one. We anticipate a decision sometime this spring. In January, Utility Data Corporation (UDC) finalized a new augmented agreement with the city of Indianapolis to provide sewer billing and collection services for its Department of Public Works. Besides creating an efficient customer billing service by combining water and sewer charges, it saves Indianapolis taxpayers in excess of $2.1 million annually. A revenue enhancement provision of the contract also provided the Company incremental operating earnings of just under $400,000 during 1993. UDC also negotiated an agreement with the American Water Works Association to market water utility recordkeeping software systems. In December, Harbour Water Corporation (Harbour) executed a 10-year contract to sell water to the town of Westfield, Indiana, north of Indianapolis. Westfield continues operating its own water utility through a cost-efficient supply from Harbour. Also in December, the Company, through IWC Services, Inc., gained international recognition as the majority partner of the White River Environmental Partnership (Partnership). The Partnership contracted with the city of Indianapolis to operate and manage its two Advanced Wastewater Treatment plants. Our two partners in this endeavor are recognized worldwide as two of the prominent players in water and wastewater services. The Partnership also expects to pursue similar operations in the region surrounding Indiana. These efforts contributed to the Indianapolis Business Journal recognizing the Company as the recipient of its 1993 Corporate Enterprise Award. IWC, our primary subsidiary, experienced a second consecutive year of uneven weather patterns. Customer demands during the summer once again were reduced by high precipitation levels, thus holding down both revenues and earnings. A total of 58 miles of water main extensions were completed during the year. Plans were initiated to restore 1.2 billion gallons of water supply storage in Geist Reservoir through a sediment removal project. Construction began on an addition to our General Office to enhance much-needed customer service areas, as well as office and training space for employees. The addition will be completed this spring. The Company added prominent key individuals to its management team during the year. They included: Daniel S. Baker as president of SM&P Conduit Co., Inc.; IWC welcomed John M. Davis as vice president, general counsel and secretary. IWC promotions included Martha L. Wharton, a 28-year employee, vice president of customer relations; and Jane Ryan, a 16-year employee, assistant secretary. Goals and objectives of the comprehensive strategic planning effort of 1992 gained momentum in 1993, and we plan to aggressively continue that program in 1994. The dedicated service of the Company's employees continues prioritizing our customers, shareholders, and community as their primary constituencies. We honored their dedication with the second annual "Crystal Awards" banquet at the Indiana Roof Ballroom. "The Best of the Best" theme recognized five outstanding individuals in various categories, including "Employee of the Year" Sharon Ronan, a 32-year employee. You have our commitment to continue to work hard and efficiently for the growth of the Company's "expanding world." Sincerely, James T. Morris, Chairman February 1994 The Company's Business The term "Company" in this report, unless otherwise indicated, refers to the consolidated operations of IWC Resources Corporation and its subsidiaries. IWC Resources Corporation (Resources) is a holding company. Resources owns and operates seven subsidiaries, including three waterworks systems, which supply water for residential, commercial, and industrial uses, and fire protection service in Indianapolis, Indiana, and surrounding areas. The territory served by the three utilities covers an area of approximately 185 square miles, which includes areas in Marion, Hancock, Hamilton, Hendricks, and Boone counties. At year's end, Resources' three water utilities were providing service to 224,142 customers. In addition to the three water utilities, Resources has four other wholly owned subsidiaries: IWC Services, Inc., Utility Data Corporation (UDC), Waterway Holdings, Inc., and SM&P Conduit Co., Inc. (SM&P). IWC Services, Inc. provides laboratory water testing services, principally for water utilities. UDC provides billing, payment processing, and other data processing services for various water and sewer utilities. The Company, principally through Waterway Holdings, Inc., owns approximately 360 acres of real estate, primarily in the Geist Reservoir area, that it expects to sell or develop in the future. SM&P performs underground utility locating and marketing services in Indiana and seven other states. The White River Environmental Partnership (Partnership), of which the Company through IWC Services, Inc. is the majority partner (52%), was formed during 1993. It subsequently was awarded a five-year contract to operate and maintain the two Advanced Wastewater Treatment facilities for the city of Indianapolis. In addition to saving Indianapolis taxpayers approximately $12 million in 1994, and $65 million over the contract's five years, this endeavor will serve as an international wastewater management model. L&K Noe Pin-Point Boring, Inc. had been a 52% owned subsidiary until July 1993, at which time it was liquidated into Resources and its operations terminated. Resources continues to seek expansion and diversification of its operations through the acquisition of other water utilities and other related businesses. It is expected, however, that the water utilities will continue as one of the principal sources of revenues for the Company in the foreseeable future. The utility subsidiaries of the Company are subject to regulation by the Indiana Utility Regulatory Commission (Commission), which has jurisdiction over rates, standards of service, accounting procedures, issuance of securities, and related matters. Rates charged by the Company's utilities for water service are approved by the Commission. Utility operations also are subject to pollution control and water quality control regulations, including those issued by the Environmental Protection Agency, the Indiana Department of Environmental Management, the Indiana Water Pollution Control Board, and the Indiana Department of Natural Resources. There are no significant competitors operating within the Company's utility service area, and it does not anticipate any significant competition will develop within such area. Comparative Highlights 1993 1992 (in thousands*) We recorded revenues from our customers $ 82,321 $ 63,452 We incurred operating expenses 56,543 40,269 Leaving a balance as earnings from operations 25,778 23,183 We had other expense 7,074 5,873 Earnings before income taxes 18,704 17,310 We accrued income taxes 9,328 9,197 That left earnings for our shareholders 9,376 8,113 Cash dividends declared to our common and convertible preferred shareholders 9,290 8,894 Leaving retained in the business $ 86 $ (781) Average number of common and common equivalent shares outstanding during year 6,658 6,379 Dividends declared per common share $ 1.40 $ 1.395 Net earnings per common and common equivalent share 1.41 1.27 Book value per common and common equivalent share 11.20 10.49 *All dollar amounts, except per share data, and average shares outstanding in thousands. INDIANAPOLIS WATER COMPANY Indianapolis Water Company (IWC) is the principal subsidiary of Resources. Indianapolis is a growing city, and IWC's service area continues to accommodate that expansion. There were 58 miles of new water mains completed, and 5,047 new customers added in 1993. A petition was filed with the Indiana Utility Regulatory Commission requesting a 14% increase in rates to meet the increased costs of conducting business. Hearings on that petition are complete. A decision is expected by this spring. HARBOUR WATER CORPORATION Harbour Water Corporation, which serves an area north of Indianapolis, continued its strong growth record. The utility now serves 2,309 customers, an 8% increase over last year. In addition, an agreement was reached with nearby Westfield, Indiana, for sale of water to the town's water system. A new booster station will be built and placed in service to meet this growth. ZIONSVILLE WATER CORPORATION This utility also continues to grow and now serves 2,233 customers compared to 2,157 in 1992. This system and that of Indianapolis have, indeed, grown together. The Company has petitioned the Indiana Utility Regulatory Commission to approve a merger of Zionsville Water into IWC. SM&P CONDUIT CO., INC. SM&P Conduit Co., Inc. (SM&P) provides underground facility locating services for utility companies. Its service encompasses electric, telephone, gas, cable television, water and sewer utilities. SM&P utilizes the latest equipment to ensure accuracy in locating and to reduce damage to buried utility lines. SM&P currently has 14 offices in eight states. WATERWAY HOLDINGS, INC. This subsidiary was formed to hold, lease, develop and dispose of real estate. Land owned by Waterway Holdings, Inc. is located generally north and west of Geist Reservoir in Hamilton County. Waterway Holdings, Inc. continues to explore the possible sale or development of the remaining land. UTILITY DATA CORPORATION This subsidiary provides customer billing, customer relations, and data processing services for the Company's water utilities, and the city of Indianapolis sewer operations, and similar services for several other municipal and private utilities in Indiana. Starting in 1993, the IWC water and the city of Indianapolis sewer billings were combined on a single monthly billing statement, with Utility Data Corporation (UDC) assuming the responsibility for all aspects of billing, collections, and customer contact. During 1993, UDC produced over 2,800,000 utility customer bills and processed over 2,530,000 utility customer payments. IWC SERVICES, INC. IWC Services, Inc. offers water-related services to contractors and other water and wastewater utilities, using capacities within several sections of the core business of the Company. The White River laboratory tests water samples submitted from water providers all over Indiana. The Company's leak detection equipment and vacuum excavator are used by contractors and utilities in central Indiana. WHITE RIVER ENVIRONMENTAL PARTNERSHIP Through IWC Services, Inc., the Company serves as the majority partner of the White River Environmental Partnership (Partnership). The Partnership was awarded a five-year contract in 1993 to operate and manage the city of Indianapolis' two Advanced Wastewater Treatment plants, commencing January 30, 1994. The Company's partners in this venture are considered world leaders in water and wastewater treatment. ENGINEERING AND TECHNICAL SERVICES The Company completed the conversion of its Marion County distribution system maps from manual drafting to a computer-drafted Geographical Information System through its participation in the Indianapolis Mapping and Geographic Infrastructure System (IMAGIS). Completion of the IMAGIS-IWC Distribution Map System has also allowed the Company to initiate automated drafting of new customer main extensions. Design, Construction and Planning Construction of an addition to the General Office commenced last fall, with completion scheduled in spring 1994. After relocation of 44 employees to this facility, the existing office building will be renovated, with the lobby converted to a modern customer service facility. These projects will provide enhanced customer service, and will alleviate crowding experienced in the General Office. The Harding Station groundwater facility in Perry Township was expanded with an additional filter in 1993. The addition of another filter and second ground storage tank are scheduled for 1994 as part of a two-year plan to expand the plant capacity to six million gallons-a-day to serve the Company's southside service area. Plans also are being developed for the installation of a transmission main in or along Southport Road and west across White River, to enable the Harding facility to provide additional water and emergency backup to the southern part of the Ben Davis District and the airport area. The final phase of the East Side feeder main to Edmondson Station will be completed this year. Other reinforcing mains will be installed to alleviate low pressure in the Bunker Hill area in southeast Marion County. Over 70 miles of main extension design were completed. Company savings in excess of $300,000 were successfully negotiated with the city and state on street reconstruction projects. These entities altered their design or construction instead of the Company relocating distribution facilities at its expense. Engineering and operating personnel meet routinely to identify the needs to better serve the system's customer demands. Planning capability will be greatly enhanced by the recent acquisition of a PC-based software system -- Watermax -- which will allow the Company to model the system as a whole and run "what if" scenarios. Land and Resource Management The Aquifer Protection Plan for the south well field in southwest Marion County was completed. This plan will guide the Company's development of its newest major source-of-supply (40 to 50 million gallons-per- day), and result in a land use plan to protect the aquifer system from potential contamination sources. In October, a permit application was filed with the U.S. Army Corps of Engineers to conduct a sediment removal project in Geist Reservoir. Upon receipt of the permit, the Company may proceed to regain 1.2 billion gallons of water supply storage lost to sedimentation during the past 50 years. OPERATIONS Pumpage increased in 1993 compared to 1992. Daily pumpage averaged 117,500,000 gallons compared to 115,500,000 gallons last year. The maximum daily pumpage during 1993 occurred on July 9 when 153,520,000 gallons were distributed. Rainfall was more than adequate in 1993, and our sources of supply reflected that fact. Geist and Morse reservoirs remained full throughout the year. In July, and again in November, the streams were in flood stage. Eagle Creek Reservoir reached a record high point on November 15 -- nearly five feet above normal pool. No operating problems resulted from these floods, and stream quality for the year was generally good. Distribution system repairs increased by a proportion one would expect given the growth of that system. The Company began using PVC pipe in 1993. This material is less costly and provides several advantages, the most significant of which is its immunity to corrosion. Regulatory requirements demand increasing attention to alternative treatment methods and laboratory testing. Work has begun on a pilot plant which will allow economic evaluation of alternative unit processes in advance of their required use on plant scale. The Company's laboratory continues to upgrade its equipment and skills to provide assurance of product quality and compliance with reporting requirements. Customer Service Much creativity, energy, and just plain hard work by many dedicated employees achieved successful implementation of the contract to provide customer services for the Indianapolis Department of Public Works (DPW). Utility Data Corporation (UDC) entered into an agreement with the DPW on November 20, 1992, with a start date of January 4, 1993. The Customer Relations Division of the Customer Service Department was transferred to UDC and seven new employees were hired. The division was restructured into three sections: customer contact, customer accounts, and collections. Extended hours and combined water/sewer billing have received overwhelming customer approval. Additional customer services, such as budget billing and direct check debiting, are being studied and may be instituted during 1994. The Company added a net total of 5,292 customers to its system in 1993, suggesting a continuing strong economy in the housing market throughout its service area. There were 5,047 accounts added to the Indianapolis system, 169 to Harbour Water, and 76 to Zionsville Water, raising the net total of system customers to 224,142 at year's end. Considerable effort has gone into reducing the number of longtime estimated bills. Customer meters are normally read every other month; however, readers often find no one at home, overgrown yards and shrubbery, businesses locked up, and keys that no longer work. At year's end, 39 customer meters had 10 or more consecutive estimates. In order to improve the reliability and convenience of obtaining readings in flooded vaults, some of these meters are being replaced with newer technology that allows them to be read without entering the vault. Additionally, service employees now use gas detectors to check meter vaults for harmful atmospheric conditions. A new procedure to improve communication between the office dispatcher and field employees is in place. As a result, field service personnel are able to respond more quickly to customer requests. The procedure has also helped to lower overtime costs through higher productivity. Utility Plant and Distribution of Customers, Mains, and Fire Hydrants
Utility Plant Customers (miles) Hydrants 1993 1992 1993 1992 1993 1992 1993 1992 (in thousands) IWC $ 254,225 $ 247,573 219,600 214,553 2,748 2,694 24,114 23,647 Harbour 3,868 3,604 2,309 2,140 38 34 321 280 Zionsville 2,570 2,609 2,233 2,157 31 31 295 288 $ 260,663 $ 253,786 224,142 218,850 2,817 2,759 24,730 24,215
FINANCIAL REVIEW Consolidated net earnings were $9,376,000 for 1993 compared with $8,113,000 for 1992 based upon operating revenues of $82,321,000 in 1993 and $63,452,000 in 1992. Earnings available for common and common equivalent shareholders were $1.41 per share for 1993 compared with $1.27 per share for 1992. During 1993, the average number of common and common equivalent shares outstanding increased 279,000 shares over 1992 due primarily to the shares issued to acquire SM&P in June 1993. Cash dividends declared on these shares totaled $1.40 per share in 1993 compared with $1.395 in 1992. Details and a discussion of financial and operating results follow: Operating Revenues 1993 1992 (in thousands) Water Utilities: Residential $ 41,513 $ 40,633 Commercial and Industrial 18,032 16,696 Public Fire Protection 945 2,157 Other 3,849 3,966 Total Water Utilities 64,339 63,452 Utility-Related Services 17,982 - $ 82,321 $ 63,452 Utility Customers 1993 1992 Residential 204,867 200,926 Commercial and Industrial 16,262 14,990 Metered Public 196 173 Private Fire Lines 2,809 2,734 Flat Rate Public 8 27 224,142 218,850 Operating Expenses 1993 1992 (in thousands) Operation and Administration: Water utilities $ 31,633 $ 29,774 Utility-related services 12,453 - Depreciation 6,556 5,316 Taxes other than Income Taxes 5,901 5,179 $ 56,543 $ 40,269 Results of Operations In 1993, the Company began presenting the results of operations according to its major segments: (1) water utilities and (2) utility-related services. Accordingly, the results of operations of certain utility-related services subsidiaries are presented in revenues and operating expenses in 1993, whereas they were reported as earnings from non-utility subsidiaries in 1992. The primary component of the utility-related services segment is SM&P which was acquired in June 1993. The following discussion is applicable to the water utilities segment operations only. Operating revenues for the water utilities segment increased $887,000, representing a 1.4% increase from 1992, primarily due to a slight increase in total water consumption in 1993. Operation and administration expenses for the water utilities segment increased $1,859,000 representing a 6.2% increase over 1992. Labor expense increased $841,000 (6.3%) mainly due to a general wage increase, effective January 1, 1993. Chemical costs increased $66,000 (9.6%) due to increased usage and higher chemical costs. The cost of outside services increased $575,000 (19.1%) primarily due to an increase in consulting and other services. Costs of the Company's pension and other benefit plans increased $92,000 (6.1%) primarily due to the higher costs of benefits provided. Depreciation increased $1,240,000 (23.3%) of which $799,000 is applicable to the utility- related segment. The increase in water utility depreciation of $441,000 represents an 8.3% increase over 1992, and is primarily due to additional plant placed in service and an increase in the composite depreciation rate from 1.76% to 1.9% effective June 10, 1992. Human Resources At its May meeting, the Executive Committee of the Indianapolis Water Company (IWC) announced the promotion of Martha L. Wharton to vice president of customer relations. John M. Davis joined the Company June 30 as vice president, general counsel and secretary. At year's end, there were 904 full-time IWC Resources Corporation employees compared with 395 in 1992. The acquisition of SM&P Conduit Co., Inc. added 499, including President Daniel S. Baker. Two employees were honored in 1993 for completing 40 years service to IWC. Ronald L. Sponsel, a maintenance supervisor in the Distribution Department, was recognized on June 1, and Marvin R. Tucker Jr., supervisor of Meter Reading, was honored November 24. The John N. Hurty Service Award, representing 25 years service in the water utility field, was presented by the Indiana Department of Environmental Management to 14 employees. This brought the total number of employees who have been so honored to 330. The Company is extremely grateful for its employees' continued loyalty and dedication. The Thomas W. Moses Memorial Scholarship Program, which was initiated in 1986, has now provided financial assistance to 61 children of employees seeking a college education. It is noteworthy to report that 29 employees were reimbursed for educational classes taken during 1993. The second annual Crystal Awards, recognizing and rewarding employees who provide superior service both inside and outside the Company, were presented on October 15 at a festive dinner, titled "Best of the Best," at the Indiana Roof Ballroom. From over 200 nominations made by fellow employees, the following individuals were selected: Sharon Ronan, Crystal Award (for extraordinary service, recognized as "Employee of the Year"); Danny Hammer, Sapphire Award (for superior service in direct contact with customers); Linda Morgason, Ruby Award (for outstanding service to fellow employees); Valerie Harley-Edwards, Emerald Award (for superior service in a solitary work atmosphere); Anthony Pippens, Amethyst Award (for outstanding volunteer service to the community). The Company is an equal opportunity employer. All applicants and employees will receive equal opportunities for hire, promotion, and other job opportunities without regard to race, color, religion, national origin, sex, handicap, age, or status as a disabled or Vietnam-era veteran. In addition, the Company complies with all affirmative action requirements applicable to it and maintains affirmative action programs for minorities, women, handicapped persons, and disabled and Vietnam-era veterans. IWC RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992 ASSETS 1993 1992 (in thousands) Current assets: Cash and cash equivalents $ 1,813 $ 605 Accounts receivable, less allowance for doubtful accounts of $190 9,515 7,235 Materials and supplies, at average cost 1,722 1,297 Other current assets 871 1,559 Total current assets 13,921 10,696 Utility plant: Utility plant in service 323,313 312,678 Less accumulated depreciation 70,406 65,213 Net plant in service 252,907 247,465 Construction work in progress 7,756 6,321 Utility plant, net 260,663 253,786 Construction funds held by Trustee 2,010 1,958 Other property 6,825 1,996 Goodwill, net of accumulated amortization 17,479 1,419 Deferred charges and other assets 11,545 5,257 $ 312,443 $ 275,112 LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1992 (in thousands) Current liabilities: Notes payable to banks $ 21,779 $ 5,071 Current portion of long-term debt 1,200 1,400 Accounts payable and accrued expenses 14,380 11,287 Federal income taxes 392 - Customer deposits 1,027 944 Total current liabilities 38,778 18,702 Long-term obligations: Long-term debt, less current portion 85,375 86,275 Customer advances for construction 43,597 41,108 Total long-term obligations 128,972 127,383 Deferred income taxes 23,795 21,723 Unamortized investment tax credits 5,029 5,146 Contributions in aid of construction 28,081 26,991 Other credits 5,069 3,457 Preferred stock of subsidiary and redeemable preferred stock 5,705 4,505 Total liabilities and other credits 235,429 207,907 Shareholders' equity: Common stock 59,301 49,728 Retained earnings 17,912 17,826 77,213 67,554 Less unearned compensation 199 349 Total shareholders' equity 77,014 67,205 Commitments and contingencies $ 312,443 $ 275,112 The accompanying notes are an integral part of the consolidated financial statements. IWC RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years ended December 31, 1993, 1992, and 1991
Total Common Stock Retained Unearned Shareholders' Shares Amount Earnings Compensation Equity (in thousands, except share data) Balance at December 31, 1990 5,277,329 $ 31,348 $ 16,898 $ - $ 48,246 Net earnings 9,017 9,017 Dividends - $1.38 per common share (7,308) (7,308) Common stock issued: Dividend Reinvestment Plan 49,804 853 853 Public offering 1,000,000 15,887 15,887 Balance at December 31, 1991 6,327,133 48,088 18,607 66,695 Net earnings 8,113 8,113 Dividends - $1.395 per common share (8,894) (8,894) Common stock issued: Dividend Reinvestment Plan 53,967 1,116 1,116 Restricted Stock Plan 26,491 524 (524) - Compensation expense 175 175 Balance at December 31, 1992 6,407,591 49,728 17,826 (349) 67,205 Net earnings 9,376 9,376 Dividends - $1.40 per share: Common stock (9,254) (9,254) Redeemable preferred stock (36) (36) Common stock issued: Acquisition of subsidiary 356,991 8,300 8,300 Dividend Reinvestment Plan 55,646 1,236 1,236 Restricted Stock Plan 1,725 37 (37) - Compensation expense 187 187 Balance at December 31, 1993 6,821,953 $ 59,301 $ 17,912 $ (199) $ 77,014
The accompanying notes are an integral part of the consolidated financial statements. IWC RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Years ended December 31, 1993, 1992 and 1991
1993 1992 1991 (in thousands, except per share data) Operating revenues: Water utilities $ 64,339 $ 63,452 $ 59,930 Utility-related services 17,982 - - 82,321 63,452 59,930 Operating expenses: Operation and administration: Water utilities 31,633 29,774 29,504 Utility-related services 12,453 - - Depreciation 6,556 5,316 4,424 Taxes other than income taxes 5,901 5,179 4,956 Total operating expenses 56,543 40,269 38,884 Operating earnings 25,778 23,183 21,046 Other income (expense): Interest expense, net (7,295) (6,937) (6,849) Interest income 208 337 390 Dividends on preferred stock of subsidiary (203) (203) (203) Other, net 216 930 1,258 (7,074) (5,873) (5,404) Earnings before income taxes and cumulative effect of accounting change 18,704 17,310 15,642 Income taxes 9,328 9,197 7,905 Earnings before cumulative effect of accounting change 9,376 8,113 7,737 Cumulative effect of accounting change, net of income taxes - - 1,280 Net earnings $ 9,376 $ 8,113 $ 9,017 Per common and common equivalent share: Earnings before cumulative effect of accounting change $ 1.41 $ 1.27 $ 1.45 Cumulative effect of accounting change - - .24 Net earnings $ 1.41 $ 1.27 $ 1.69 Average number of common and common equivalent shares outstanding 6,658 6,379 5,335
The accompanying notes are an integral part of the consolidated financial statements. IWC RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1993, 1992 and 1991
1993 1992 1991 (in thousands) Cash flows from operating activities: Net earnings $ 9,376 $ 8,113 $ 9,017 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 7,808 5,877 4,835 Deferred income taxes and investment tax credits 1,241 1,832 2,245 Gain on sales of other property (1,052) (855) (720) Provision for bad debts 335 314 334 Dividends on preferred stock of subsidiary 203 203 203 Other, net 137 (380) (76) Changes in operating assets and liabilities: Accounts receivable 353 (591) (3,141) Materials and supplies (425) 52 (67) Other current assets 1,741 (585) 238 Accounts payable and accrued expenses 279 1,038 (97) Federal income taxes 232 (836) 122 Customer deposits 83 20 55 Net cash provided by operating activities 20,311 14,202 12,948 Cash flows from investing activities: Acquisition of SM&P Conduit Co., Inc., net of cash acquired (12,482) - - Additions to utility plant and other property (13,967) (15,751) (14,416) Proceeds from sales of other property 1,517 1,078 806 Customer advances for construction 5,748 6,503 5,230 Refunds of customer advances for construction (2,242) (2,360) (2,896) Other investing activities, net (963) (287) (184) Net cash used by investing activities (22,389) (10,817) (11,460) Cash flows from financing activities: Proceeds from notes payable to banks 49,087 29,584 25,283 Payments of notes payable (36,312) (41,131) (18,623) Proceeds from long-term debt 11,600 14,836 - Payments of long-term debt (12,780) (15,953) (4,300) Decrease (increase) in construction funds held by Trustee (52) 335 3,410 Cash dividends (9,493) (9,097) (7,511) Proceeds from issuance of common stock 1,236 1,116 16,740 Net cash provided (used) by financing activities 3,286 (20,310) 14,999 Increase (decrease) in cash and cash equivalents 1,208 (16,925) 16,487 Cash and cash equivalents at beginning of year 605 17,530 1,043 Cash and cash equivalents at end of year $ 1,813 $ 605 $ 17,530 Supplemental disclosure of cash flow information- Cash paid for: Interest on long-term debt and notes payable to banks, net of capitalized interest $ 7,104 $ 6,766 $ 6,673 Income taxes $ 7,488 $ 8,072 $ 6,355
The accompanying notes are an integral part of the consolidated financial statements. IWC RESOURCES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 1993, 1992 and 1991 Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of IWC Resources Corporation (Resources), and its wholly owned subsidiaries. The term "Company" refers to the consolidated operations of Resources and its subsidiaries. Through its water utility subsidiaries, the Company owns and operates waterworks systems supplying water for residential, commercial and industrial uses, and for fire protection in Indianapolis, Indiana, and the surrounding area. These subsidiaries are regulated by the Indiana Utility Regulatory Commission (Commission), and their accounting policies, which are substantially consistent with generally accepted accounting principles, are governed by the Commission. The Company also owns and operates businesses which are involved in utility line locating, data processing and other utility- related services, and real estate sales and development. In November 1993, a subsidiary of the Company became majority partner in White River Environmental Partnership (Partnership). In December 1993, the Partnership was awarded a five-year contract by the city of Indianapolis to manage and operate its two Advanced Wastewater Treatment plants commencing January 30, 1994. At December 31, 1993, this Partnership was still in the development stage and had no significant assets. The Company's majority-owned subsidiary, which provided directional boring services, was liquidated in 1993. The assets, liabilities and operations of this subsidiary were not significant to the Company's consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. Utility Plant Utility plant is stated at cost which includes the cost of land, outside contract work, labor and materials, interest and certain indirect costs incurred during the construction period. Such indirect costs consist of administration, general overhead, and other costs applicable to construction projects. When utility plant in service is retired, except for land and land rights, the accumulated cost of the retired property plus cost of removal and less salvage value is charged against accumulated depreciation. If land or land rights are sold, the net gain or loss is included in earnings. Property not currently used in utility operations is included in other property. Depreciation of utility plant for financial statement purposes is computed at a composite annual rate of 1.9% (1.76% prior to June 10, 1992) as approved by the Commission. Generally, maintenance and repairs and the cost of replacements of minor items of property are charged to operation expense accounts as incurred. Other Property Other property is stated at cost less accumulated depreciation and includes property not currently used in utility operations, real estate held for development or resale, and property and equipment used in non-utility businesses. Accumulated depreciation at December 31, 1993 and 1992 was $1,209,000 and $609,000, respectively. Goodwill The Company recognizes the excess of cost over fair value of tangible and other identifiable assets acquired in business acquisitions as goodwill which is amortized by the straight-line method over 20 to 40 years. Amortization expense was $319,000 in 1993 and $101,000 in 1992 and 1991. Accumulated amortization at December 31, 1993 and 1992 was $886,000 and $567,000, respectively. Income Taxes For financial statement purposes, investment tax credits are deferred and amortized ratably over the lives of the applicable assets as prescribed by the Commission. For income tax purposes, the credits are deducted in the year in which the constructed or acquired property is placed in service. In February 1992, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS No. 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement amounts for assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates which apply to taxable income in the years in which those temporary differences are expected to reverse. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period the change is enacted. Effective January 1, 1993, the Company adopted SFAS No. 109. The effect of this change in accounting for income taxes is not material to the Company's financial condition or results of operations. Accordingly, no cumulative effect of accounting change has been presented. Customer Advances and Contributions in Aid of Construction In certain cases, customers advance funds for water main extensions. These advances are included in customer advances for construction and are generally refundable to the customer over a period of ten years. Advances not refunded within ten years are permanently transferred to contributions in aid of construction. Revenues Utility revenues are recognized based on water usage at rates approved by the Commission. Service revenues are recognized as services are provided. Pension Plans and Other Retirement Benefits The Company has a noncontributory defined benefit pension plan which covers the majority of its utility employees and certain other employees. Benefits are based on, among other factors, an employee's services rendered to date and average monthly earnings for the 36 consecutive calendar months that produce the highest average. The Company's funding policy is to contribute annually at least the minimum contribution required to comply with ERISA regulations. The Company has an unfunded executive supplemental benefit plan which provides additional retirement benefits to certain officers. Benefits are based on, among other factors, an employee's age, services rendered to date, and benefits received from the Company's noncontributory defined benefit pension plan. The Company also sponsors a defined contribution plan covering substantially all non-bargaining unit employees and an employee stock ownership plan covering substantially all of its utility employees. The Company provides postretirement life insurance and healthcare benefits to certain of its employees. Prior to 1993, the Company accounted for such benefits on a cash basis. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106) which requires it to accrue currently, during the period of employment, the present value of the estimated cost of such benefits. The effects of this change, which are not material to the Company's financial condition or results of operations, are discussed in the note entitled, Pension Plans and Other Retirement Benefits. Reclassifications Certain amounts for 1992 and 1991 have been reclassified to conform with the 1993 presentation. 1991 Change in Accounting Method In 1991, the Company's water subsidiaries changed their method of accounting to accrue unbilled revenues. The cumulative effect of this change as of January 1, 1991, is separately reported in the consolidated statements of earnings. Acquisition of SM&P Conduit Co., Inc. On June 14, 1993, the Company acquired SM&P Conduit Co., Inc. (SM&P) in a transaction accounted for as purchase. SM&P is engaged in the business of providing a single source facility locating service for all utilities including: gas, electric, telephone, cable television, water and sewer. The Company also entered into not to compete agreements with SM&P shareholders at a cost of $3,000,000. The cost of the acquisition and agreements not to compete was paid by cash of $12,503,000 and the issuance of 356,991 shares of the Company's common stock and 51,612 shares of the Company's Series B Redeemable Preferred Stock. Goodwill of $16,379,000 is being amortized over 40 years, and the cost of agreements not to compete is being amortized over their five-year lives. A summary of the SM&P assets acquired and liabilities assumed follows: (in thousands) Property and equipment $ 5,021 Accounts receivable 2,968 Other current assets 1,456 Short-term notes payable (3,933) Accounts payable and accrued expenses (2,524) Federal income taxes payable (364) Net assets acquired $ 2,624 The consolidated financial statements include the results of SM&P's operations beginning June 14, 1993. As this acquisition is not material to the consolidated financial statements, pro forma operating results are not presented. Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amount. The carrying amounts of cash equivalents, construction funds held by Trustee and notes payable to banks approximate fair value because of the short maturity of those instruments. The fair value of long-term debt at December 31, 1993, is estimated to be $96,929,000. The fair value was determined by discounting future payments at current interest rates for similar issues. Utility Plant in Service A summary of utility plant in service at December 31 follows: 1993 1992 (in thousands) Land and land rights $ 9,818 $ 9,922 Structures and improvements 46,302 45,610 Pumping station equipment 14,562 14,079 Purification system 25,290 24,850 Transmission and distribution system 218,361 209,408 Other 8,980 8,809 $ 323,313 $ 312,678 Accounts Payable and Accrued Expenses A summary of accounts payable and accrued expenses at December 31 follows: 1993 1992 (in thousands) Accounts payable $ 2,132 $ 1,695 Accrued property taxes 4,629 4,181 Accrued interest on long-term debt 1,547 1,515 Accrued vacations 1,526 1,338 Other accrued expenses 4,546 2,558 $ 14,380 $ 11,287 Notes Payable to Banks and Long-term Debt At December 31, 1993, the Company had lines of credit with banks aggregating $22,200,000 which require a compensating cash balance of $100,000. At December 31, 1993, unused lines of credit aggregated $14,672,000. Interest on borrowings under the lines of credit is variable (an average of 3.37% at December 31, 1993). The Company also has short-term loans with banks amounting to $13,700,000 which were used solely for the acquisition of SM&P. Interest on these loans is variable (3.89% at December 31, 1993). The Company expects to refinance these loans under a long-term agreement in March 1994. The Company has a Controlled Disbursement Agreement with a bank which authorizes the bank to transfer funds daily between the Company's checking and note payable accounts. Outstanding checks drawn on this checking account are reported as a component of notes payable to banks. At December 31, 1993 and 1992, such outstanding checks amounted to $551,000 and $396,000, respectively. A summary of First Mortgage Bonds (secured by utility plant) outstanding at December 31 follows: 1993 1992 (in thousands) 5-7/8% Series due 1997 $ 6,775 $ 6,775 5.20% Series due 2001 11,600 - 8% Series due 2001 3,000 3,000 12-7/8% Series due 2002 5,200 6,300 6-1/4% Series due 2004 - 11,600 7-7/8% Series due 2019 40,000 40,000 9.83% Series due 2019 5,000 5,000 6.10% Series due 2022 5,000 5,000 8.19% Series due 2022 10,000 10,000 86,575 87,675 Less current portion 1,200 1,400 $ 85,375 $ 86,275 Provisions of trust indentures related to the 5-7/8% Series Bonds and the 8% Series Bonds require annual sinking or improvement fund payments amounting to 1/2% of the maximum aggregate amount outstanding. As permitted, this requirement has been satisfied by substituting a portion of permanent additions to utility plant. These bonds are redeemable at the option of the Company at varying premium amounts at different periods prior to the respective dates of maturity. The 5.20% Series Bonds are due and payable in full May 1, 2001. In the event the bonds lose their tax-exempt status, mandatory redemption of the bonds is required. The 12-7/8% Series Bonds mature at the rate of $2,000,000 on November 15 of each of the years 1998 through 2002. Subject to certain restrictions, these bonds are redeemable at the option of the Company at varying premium amounts at different periods prior to the respective dates of maturity. In January 1992 and January 1993, the Company prepaid $3,700,000 and $1,100,000, respectively, in principal amount of these bonds, due $960,000 in each of the years 1998 through 2002 at a premium of $378,000. In January 1994, the Company prepaid $1,200,000 in principal amount of these bonds, due $240,000 in each of the years 1998 through 2002 at a premium of $77,000. The 6-1/4% Series Bonds required varying annual redemptions through maturity. In March 1993, the Company gave required notice and in April 1993 prepaid the remaining $11,600,000 principal balance from the proceeds of the newly issued 5.20% Series Bonds. The 7-7/8% Series Bonds include issues of $10,000,000 and $30,000,000, both of which are due and payable in full March 1, 2019. In the event the bonds lose their tax exempt status, mandatory redemption of the bonds is required. Optional redemptions by the Company are allowed on or after March 1, 1998, and are generally subject to a premium. The 9.83% Series Bonds are redeemable at the option of the Company, on or after June 15, 2014, with final redemption by June 15, 2019. Early redemptions are subject to a premium. The 6.10% Series Bonds are due and payable in full December 1, 2022. In the event the bonds lose their tax exempt status, mandatory redemption of the bonds is required. Optional redemptions by the Company are allowed on or after December 1, 1999, and are generally subject to a premium. The 8.19% Series Bonds are due and payable in full December 1, 2022. Optional redemptions by the Company are allowed at any time at the greater of par or the present value of the bonds discounted at 1/2% over the applicable Treasury rate. Required principal payments on long-term debt for the five years following December 31, 1993, exclusive of obligations which may be satisfied by permanent additions to utility plant, amount to $6,775,000 in 1997 and $800,000 in 1998. Interest expense is net of an allowance for funds used during construction (AFUDC) which is an amount capitalized for construction projects as authorized by the Commission. AFUDC amounts capitalized were $160,000, $122,000 and $2,126,000 during 1993, 1992 and 1991, respectively. Preferred Stock of Subsidiary The preferred stock of subsidiary represents 45,049 shares of Indianapolis Water Company (IWC) cumulative preferred stock of $100 par value per share. The preferred stock is redeemable at the option of the subsidiary upon proper notice at prices ranging from $100 to $105 per share plus accrued dividends (an aggregate redemption value of $4,658,000). Dividends on the preferred stock are payable at rates ranging from 4% to 5% per annum. Redeemable Preferred Stock At December 31, 1993, 60,000 special shares of Series B Convertible Redeemable Preferred Stock, no par value, have been authorized, of which 51,612 shares have been issued and are outstanding. The preferred stock was issued in connection with the acquisition of SM&P and is convertible by the holder at any time, in whole, into shares of common stock at a conversion rate of one common share for each share of preferred stock. Mandatory redemption of the preferred stock is required on July 14, 1998, at $23.25 per share plus accrued dividends (an aggregate redemption value of $1,200,000). Holders of preferred stock are entitled to the same voting and dividend rights as common shareholders and such shares are considered common share equivalents in the calculation of earnings per share. Common Stock The Company's authorized capital stock consists of 10,000,000 common shares and 2,000,000 special shares with no par value. No special shares have been issued other than the 60,000 shares designated as Series B Convertible Redeemable Preferred Stock. The Company has a Dividend Reinvestment and Stock Purchase Plan which allows common shareholders the option of receiving their dividends in cash or common stock and permits optional cash purchases of shares at current market values to a maximum of $5,000 per quarter. At December 31, 1993, 36,406 shares of common stock were reserved for issuance under the plan. In April 1992, the Company adopted a Restricted Stock Plan under which 200,000 common shares have been reserved and may be awarded to officers and key employees. Restricted stock plan participants are entitled to cash dividends and voting rights on their awarded shares. Restrictions generally limit the sale, transfer or pledge of shares during a three-year measurement period following issuance of such shares. The number of shares awarded under the plan may be adjusted at the end of the measurement period as determined by provisions of the plan. Participants may vest in certain restricted shares upon death, disability or retirement as described in the plan. In the event of a change in control of the Company, all restrictions expire and participants may receive additional shares as determined by provisions of the plan. During 1992, the Company awarded 26,491 restricted shares with a market value at date of award of $19.75 per share. Unearned compensation of $524,000 was recorded as of January 1, 1992, the effective date of the award, based on the market value of the shares, and is being amortized to expense over the three-year measurement period. During 1993, the Company awarded an additional 1,725 restricted shares with a market value at date of award of $21.66 per share. Unearned compensation of $37,000 was recorded as of July 1, 1993, the effective date of the award, based on the market value of the shares, and is being amortized to expense over the remainder of the three-year measurement period. At December 31, 1993, 171,784 shares were reserved for future awards under the plan. In January 1988, the Company's board of directors adopted a Shareholder Rights Plan pursuant to which a dividend distribution of one preferred share purchase right for each outstanding share of common stock was made to shareholders of record on February 18, 1988. Under the plan, each right will initially entitle shareholders to purchase one one-hundredth of a share of a new series of preferred stock of the Company at an exercise price of $45. The rights become exercisable when a person or group acquires 20% or more of the Company's common stock or commences a tender offer for 30% or more of the Company's common stock. Upon the happenings of certain events, each right not owned by a 20% shareholder or shareholder group will entitle its holder to purchase, at the right's then current exercise price, shares of the Company's common stock having a value of twice that price. The rights expire in February 1998. Taxes Components of taxes other than income taxes follow: 1993 1992 1991 (in thousands) Property taxes $ 4,086 $ 4,076 $ 3,926 Other 1,815 1,103 1,030 $ 5,901 $ 5,179 $ 4,956 Components of income taxes follow: 1993 1992 1991 (in thousands) Federal: Currently payable $ 5,864 $ 5,349 $ 4,588 Deferred 1,236 1,723 1,667 Investment tax credits, net (117) (112) (98) $ 6,983 $ 6,960 $ 6,157 State: Currently payable $ 2,223 $ 2,016 $ 1,614 Deferred 122 221 134 2,345 2,237 1,748 $ 9,328 $ 9,197 $ 7,905 The differences between actual income taxes and expected federal income taxes using statutory rates follow: 1993 1992 1991 (in thousands) Expected federal income taxes $ 6,546 $ 5,885 $ 5,318 Taxable customer advances for construction 1,309 1,487 1,241 State income taxes, net of federal income tax benefit 1,524 1,477 1,154 Other, net (51) 348 192 $ 9,328 $ 9,197 $ 7,905 The tax effects of temporary differences follow: 1993 1992 1991 (in thousands) Depreciation $ 1,098 $ 1,217 $ 1,102 Customer advances for construction 46 21 (263) Pension expense 110 (70) 151 Increase in deferred state income taxes 122 221 134 Unbilled utility revenues - - 561 Bond redemption premium (12) 467 - Other, net (6) 88 116 $ 1,358 $ 1,944 $ 1,801 The tax effects of significant temporary differences represented by deferred tax assets and deferred tax liabilities at December 31 follow: 1993 1992 (in thousands) Deferred tax assets: Customer advances for construction $ 2,393 $ 2,409 Accrued pension costs 1,013 871 Accrued vacations 574 495 Other 603 461 Total deferred tax assets 4,583 4,236 Deferred tax liabilities: Utility plant, principally due to differences in depreciation and capitalized costs 27,363 24,832 Debt redemption premiums deducted for tax 508 507 Other property bases greater for tax 271 321 Other 236 299 Total deferred tax liabilities 28,378 25,959 Net deferred tax liabilities $ 23,795 $ 21,723 The Company has established a regulatory asset of $714,000 to offset the effects of the 1993 increase in Federal Corporate tax rates on its water utilities' net deferred tax liabilities. Customer advances for construction received after 1986 are includible in taxable income when received and are deductible if subsequently refunded to customers. Such advances continue to be excluded from financial statement income. Effective September 8, 1993, the Commission granted IWC permission to surcharge developers for income taxes on advances and reduce its water rates by a corresponding amount. The surcharge for taxes on advances will be reported as a component of operating revenues. Investment tax credits amounted to $9,000, $9,000, and $23,000 for 1993, 1992 and 1991, respectively, and were recorded as additions to unamortized investment tax credits. Pension Plans and Other Retirement Benefits The Company has two pension plans: (1) a noncontributory defined benefit pension plan which covers the majority of its utility employees and certain other employees, and (2) an executive supplemental benefit plan which provides additional retirement benefits to certain officers. The following tables set forth the plans' funded status and accrued pension cost amounts recognized in the Company's consolidated financial statements at December 31:
Majority Plan Supplemental Plan 1993 1992 1993 1992 (in thousands) (in thousands) Accumulated benefit obligation $ 7,221 $ 5,195 $ 1,845 $ 1,651 Vested benefit obligation $ 6,545 $ 4,678 $ 1,782 $ 1,624 Projected benefit obligation $ 13,215 $ 11,076 $ 2,298 $ 1,915 Plan assets at fair value, primarily listed stocks and bank fixed income funds 10,818 10,110 - - Projected benefit obligation in excess of plan assets 2,397 966 2,298 1,915 Unrecognized net asset (obligation) at transition 1,045 1,173 (67) (79) Unrecognized loss (2,216) (1,099) (786) (519) Additional minimum liability - - 400 334 Accrued pension cost $ 1,226 $ 1,040 $ 1,845 $ 1,651
Net periodic pension costs for the years ended December 31 include the following components:
Majority Plan Supplemental Plan 1993 1992 1991 1993 1992 1991 (in thousands) (in thousands) Service cost - benefits earned during year $ 769 $ 720 $ 685 $ 86 $ 96 $ 93 Interest cost on projected benefit obligation 902 776 707 149 145 140 Return on plan assets (562) (603) (1,409) - - - Net amortization and deferrals (393) (259) 750 45 43 85 Net periodic pension cost $ 716 $ 634 $ 733 $ 280 $ 284 $ 318
The weighted-average discount rate and rate of increase in future compensation levels used in determining the projected benefit obligation were 7-1/4% and 4-1/2%, respectively, for 1993, and 8% and 5%, respectively, for 1992 and 1991. The expected long-term rate of return on assets was 8% for 1993 and 8-1/2% for 1992 and 1991. Contributions to the Company's defined contributions plan and its employee stock ownership plan amounted to $352,000, and $274,000 in 1993, $255,000 and $250,000 in 1992, and $226,000 and $149,000 in 1991, respectively. The Company provides postretirement life insurance and healthcare benefits (OPRBs) to certain employees. The following table sets forth the Company's accumulated postretirement benefit obligation at December 31, 1993: (in thousands) Accumulated post-retirement benefit obligation: Active employees $ 11,623 Retired employees 6,012 17,635 Unrecognized transition obligation (15,694) Unrecognized gain 81 Accrued postretirement benefit cost $ 2,022 The following table sets forth the Company's net periodic postretirement benefit cost for the year ended December 31, 1993: (in thousands) Service cost-benefits earned during year $ 462 Interest cost on accumulated postretirement benefit obligation 1,322 Amortization of transition obligation 826 Net periodic postretirement benefit cost $ 2,610 The weighted-average discount rate used to measure the accumulated postretirement benefit obligation was 7-1/4%. The Company used premium growth rates to compute assumed healthcare cost trend rates. These rates ranged from 13% in 1993 to 5-1/4% in 2000 and thereafter. Had these healthcare cost trends rates been higher by 1%, the net periodic postretirement benefit cost would have been higher by $311,000 and the accumulated postretirement benefit obligation would have been higher by $2,616,000. The Company does not fund these postretirement benefits. The Company is amortizing the cumulative obligation for employee services rendered prior to adoption of SFAS No. 106 (the transition obligation) on a delayed basis over a 20-year period. The adoption of SFAS No. 106 has increased the Company's cost of OPRBs for financial statement purposes from approximately $590,000 to approximately $2,610,000 annually. In December 1992, the Commission authorized all Indiana utilities, including the utility subsidiaries of the Company, to record as a regulatory asset the excess of accrual basis costs over the cash basis costs which were used to establish current rates. The Commission declared that the reasonable and necessary level of such costs, including amortization of the transition obligation, would be recoverable in future utility rates as determined through each utility's next general rate case. The Company is in process of a general rate case at December 31, 1993, and expects a decision in spring 1994. During 1993, the Company recognized OPRB costs in excess of cash basis amounts of $2,022,000 of which $2,016,000 has been offset by a regulatory asset which is included in deferred charges and other assets. Segment Information The Company's operations include two business segments: regulated water utilities and unregulated utility-related services. The water utilities segment includes the operations of the Company's three water utility subsidiaries. The utility-related services segment provides utility line locating services, data processing and billing and payment processing, and other utility-related services to both unaffiliated utilities and to the Company's water utilities. Intersegment activity represents water sales to an affiliate and certain operating cost allocations between affiliates. Identifiable assets are those assets used exclusively in the operations of each business segment. Corporate assets are principally comprised of cash and certain property held for sale. The following table shows operating revenues, operating earnings and other summary financial information by segment as of and for the year ended December 31, 1993. For the years ended December 31, 1992 and 1991, the Company's operations were primarily related to water utilities and, accordingly, information by segment is not presented. Utility- Water Related Corporation Utilities Services and Other Consolidated (in thousands) Operating revenues: Unaffiliated $ 64,339 $ 17,982 $ - $ 82,321 Affiliated 242 4,025 (4,267) - Total 64,581 22,007 (4,267) 82,321 Operating earnings 21,841 3,937 - 25,778 Depreciation 5,757 799 - 6,556 Identifiable assets 280,823 28,923 2,697 312,443 Capital expenditures 13,049 778 140 13,967 Commitments and Contingencies Pursuant to the 1986 Amendments of the Safe Drinking Water Act, the United States Environmental Protection Agency (EPA) continues to propose new drinking water standards and requirements which, if promulgated, could be costly and require substantial changes in current operations of the Company. The outcome of EPA's proposals are uncertain at this time. Additionally, the Indiana Department of Environmental Management issues permits for discharges from the Company's treatment stations, the terms and limitations of which can, and may well be, onerous and expensive. On May 17, 1993, Indianapolis Water Company and Zionsville Water Corporation, both wholly owned subsidiaries of the Company, filed a petition with the Commission for approval of a merger of the two companies and a new schedule of rates and charges applicable to their interconnected systems. The increase in combined revenues sought by the companies is approximately $8.9 million, or 14%. This request for new rates includes the increased costs associated with adoption of accrual accounting for postretirement benefits other than pensions. On November 10, 1993, the Utility Consumer Counselor (UCC), representing ratepayers, prefiled its testimony and exhibits in the case, the effect of which, if adopted by the Commission, would result in a decrease in current rates of approximately $4.6 million, or 7.2%. On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law. One of the provisions of the Act was to increase the federal corporate income tax rate from 34% to 35% retroactive to January 1, 1993. On October 6, 1993, Indianapolis Water Company and Zionsville Water Corporation, as part of their rate case, asked the Commission for approval to defer approximately $968,000 of increased federal income tax obligations as a regulatory asset and to amortize and recover such asset over a 20-year period, commencing with the approval of new rates. Hearings before the Commission were concluded in December 1993, and the Company anticipates a final order in the second quarter of 1994. In January 1994, the Company entered into agreement with four key executives. The agreements provide that in the event of change of control of the Company, each executive vests in a three-year employment contract at their then existing level of compensation. Quarterly Financial Data (Unaudited) Quarters First Second Third Fourth (in thousands, except per share data) 1993 Operating revenues (a) $ 15,680 $ 18,501 $ 25,916 $ 22,224 Operating earnings (a) 4,208 6,473 8,878 6,219 Net earnings $ 954 $ 2,461 $ 3,427 $ 2,534 Net earnings per common and common equivalent share: $ .15 $ .38 $ .51 $ .37 1992 Operating revenues $ 14,839 $ 16,338 $ 16,879 $ 15,396 Operating earnings 4,953 6,098 6,483 5,649 Net earnings $ 1,589 $ 2,059 $ 2,323 $ 2,142 Net earnings per common and common equivalent share $ .25 $ .32 $ .37 $ .33 (a) Certain reclassifications have been made to conform with classifications adopted for reporting of segment information beginning December 31, 1993. These reclassifications did not have a material effect on the quarterly results as originally reported. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders IWC Resources Corporation: We have audited the accompanying consolidated balance sheets of IWC Resources Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of IWC Resources Corporation and subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in the Notes to Consolidated Financial Statements, the Company changed its method of revenue recognition in 1991 and, effective January 1, 1993, changed its method of accounting for income taxes and postretirement benefits other than pensions. KPMG Peat Marwick Indianapolis, Indiana January 26, 1994 Selected Financial Data The selected consolidated financial data presented below have been derived from and should be read in conjunction with the Company's Consolidated Financial Statements and related Notes thereto included elsewhere in this report. Summary of Operations Data:
Year Ended December 31, 1993 1992 1991 1990 1989 (in thousands, except per share data) Operating revenues $ 82,321 $ 63,452 $ 59,930 $ 53,630 $ 50,215 Operating earnings 25,778 23,183 21,046 19,529 17,502 Cumulative effect of accounting change - - 1,280 - - Net earnings 9,376 8,113 9,017 5,833 5,365 Per common and common equivalent share: Earnings before cumulative effect of accounting change 1.41 1.27 1.45 1.11 1.03 Cumulative effect of accounting change - - .24 - - Net earnings $ 1.41 $ 1.27 $ 1.69 $ 1.11 $ 1.03 Cash dividends per common share $ 1.40 $ 1.395 $ 1.38 $ 1.38 $ 1.38 Average number of common and common equivalent shares outstanding 6,658 6,379 5,335 5,251 5,204
Summary of Balance Sheet Data:
December 31, 1993 1992 1991 1990 1989 (in thousands) Utility plant, net $ 260,663 $ 253,786 $ 243,573 $ 234,213 $ 206,633 Construction funds held by Trustee 2,010 1,958 2,293 5,703 25,277 Total assets 312,443 275,112 279,608 253,942 249,844 Capitalization: Long-term debt (excluding current portion) $ 85,375 $ 86,275 $ 72,675 $ 91,675 $ 91,875 Preferred stock of subsidiary and redeemable preferred stock 5,705 4,505 4,505 4,505 4,505 Common shareholders' equity 77,014 67,205 66,695 48,246 48,656 Total capitalization $ 168,094 $ 157,985 $ 143,875 $ 144,426 $ 145,036
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The most significant changes in the consolidated financial condition and results of operations of IWC Resources Corporation and subsidiaries (Company) are attributable to the combined operations of its two segments: (1) water utilities and (2) utility-related services. These segments are discussed more fully in Notes to Consolidated Financial Statements, Segment Information. The Company acquired SM&P Conduit Co., Inc., (SM&P) in June 1993, and beginning in 1993, has grouped the Company's operations according to major segment. As a result of this acquisition, many of the differences between results of operations for 1993 and 1992 are due primarily to SM&P operations, which are included in the utility-related services segment. The following discussion and analysis will concentrate primarily on differences due to the results of operations of the water utilities segment. 1993 Compared to 1992 Operating revenues increased $18,869,000 (29.7%) of which $17,982,000 is applicable to the utility-related services segment. The increase in water utilities segment revenues of $887,000 represents a 1.4% increase over 1992, and is primarily due to a slight increase in total water consumption, reflecting wet weather conditions experienced during the summer months of 1993 and a change in the mix of customers. Water consumption is affected by the frequency and pattern of rainfall, temperatures, the level of economic activity, and conservation efforts. For 1993, residential revenues increased $880,000 (2.2%), commercial and industrial revenues increased $1,336,000 (8.0%), and public fire protection and other revenues decreased $1,329,000 (21.7%). The fluctuation in residential revenues and public fire protection and other revenues is primarily due to billing metered customers rather than municipalities for certain public fire protection charges after June 30, 1993. Operation and administration expenses increased $14,312,000 (48.1%) of which $12,453,000 is applicable to the utility-related services segment. The increase in water utilities segment expenses of $1,859,000 which is discussed below represents a 6.2% increase over 1992 and is primarily due to the effects of inflation on the Company's costs. Labor costs increased $841,000 (6.3%) mainly due to a general wage increase, effective January 1, 1993. Chemical costs increased $66,000 (9.6%) primarily due to increased usage and higher chemical costs. The cost of outside services increased $575,000 (19.1%) chiefly due to an increase in consulting and other services. Costs of the Company's pension and other benefit plans increased $92,000 (6.1%) primarily due to the higher costs of benefits provided. Depreciation increased $1,240,000 (23.3%) of which $799,000 is applicable to the utility-related services segment. The increase in water utilities segment depreciation of $441,000 represents a 8.3% increase over 1992, and is primarily due to additional plant placed in service and an increase in the composite depreciation rate from 1.76% to 1.9% effective June 10, 1992. Taxes other than income taxes increased $722,000 (13.9%) which is net of a $72,000 (1.4%) decrease in such expenses for the water utilities segment. The decrease is primarily due to a reduction in property taxes following an appeal. The increase in interest expense, net, of $358,000 (5.2%) is largely due to the effects of an increase in short-term debt of $13,700,000 in connection with the SM&P acquisition. Other, net, decreased $714,000 (76.8%) primarily due to including earnings from certain non-utility subsidiaries in operating earnings during 1993. 1992 Compared to 1991 Operating revenues increased $3,522,000 (5.9%), primarily due to the net effects of an increase in Indianapolis Water Company's (IWC's) water rates, effective November 6, 1991, an increase in IWC's rates to cover an approved increase in its composite annual depreciation rate from 1.76% to 1.9%, effective June 10, 1992, and a 6.7% decrease in total water consumption, reflecting much wetter and cooler weather conditions experienced during the summer months of 1992, compared with the very hot and dry summer months of 1991. Operation and administration and maintenance expenses increased $270,000 (.9%) primarily due to the effects of inflation on the Company's costs. Labor expense increased $691,000 (5.5%) mainly due to a general wage increase, effective January 1, 1992. Power costs decreased $215,000 (7.7%) largely due to decreased pumpage in the summer months. Chemical costs decreased $247,000 (26.4%) primarily due to decreased usage. The cost of outside services increased $211,000 (7.5%) chiefly due to an increase in consulting and other services. Regulatory expenses increased $124,000 (38.0%) principally due to increased rate case expenses. Costs of the Company's pension and other benefit plans increased $150,000 (11.0%) primarily due to the higher costs of benefits provided. Depreciation increased $892,000 (20.2%) primarily due to additional plant placed in service and an increase in the composite depreciation rate from 1.76% to 1.9% effective June 10, 1992. Taxes other than income taxes increased $223,000 (4.5%) largely due to an increase in property taxes resulting from additional assessed property, including the Company's White River North Station, and higher property tax rates. Income taxes increased $1,292,000 (16.3%) mainly due to higher pretax earnings and an increase in taxable customer advances for construction. The increase in interest expense, net, of $78,000 (1.1%) is primarily due to the net effects of an increase in average short-term debt outstanding, a reduction in average long-term debt outstanding and a reduction in capitalized interest due to the completion of the Company's White River North Station in 1991. Earnings from non-utility subsidiaries decreased $563,000 (42.8%), chiefly due to reduced gains from land sales. Liquidity and Capital Resources At the present time, the majority of the Company's business activities are conducted through its water utilities. In June 1993, the Company acquired SM&P which diversified the Company's operations. The Company may, in the future, become involved in other water utilities and utility-related activities through the acquisition or formation of additional subsidiaries. The source of capital to finance these subsidiaries will be determined at the time they are established or acquired. However, the Company does not intend to enter into any business that would impair the Company's primary commitment to maintain and develop its water utilities to meet the current and future needs of their customers. Cash Flows from Operating Activities Cash flows from operating activities result primarily from net earnings adjusted for non-cash items such as depreciation and deferred taxes and changes in operating assets and liabilities. The seasonal nature of the Company's business typically results in higher operating revenues in the second and third quarters of the year than in the first and fourth quarters. Fluctuations in accounts payable and accrued expenses result primarily from property taxes and timing of payments, whereas federal income taxes vary with pretax earnings and the level of taxable customer advances for construction received by the Company. Cash Flows from Investing Activities Cash flows from investing activities fluctuate primarily as a result of additions to utility plant and other property and the level of customer advances for construction, net of refunds. In June 1993, the Company used the proceeds from additional short-term borrowings of $13,700,000 to acquire the net assets of SM&P. The Company continues to experience significant growth in its distribution system. Approximately 58 miles of new mains were placed in service in 1993 compared with approximately 86 miles during 1992. The Company received over $5,700,000 in new customer advances for construction of new mains in 1993 and over $6,500,000 in 1992. Such advances are subject to refund over a ten-year period based on the addition of new customers to the constructed mains. The Company refunded approximately $2,200,000 and $2,400,000 during 1993 and 1992, respectively. The Company also added $18,988,000 (including $5,021,000 from the acquisition of SM&P) to utility plant and other property during 1993 compared to $15,751,000 during 1992. Cash Flows from Financing Activities Cash flows from financing activities consist primarily of the Company's borrowings, dividend payments and sales of common stock. The Company utilizes borrowings against its lines of credit with local banks for its short-term cash needs. In January 1992, the Company used net proceeds from the Company's stock offering in December 1991 to prepay $3,700,000 in principal amount of its 12-7/8% Series Bonds, plus applicable redemption premiums of $298,000. In January 1993, the Company prepaid an additional $1,100,000 in principal amount of these bonds at a premium of $80,000. In December 1993, the Company gave required notice to prepay in January 1994 an additional $1,200,000 in principal amount of these bonds at a premium of $77,000. Funds used to prepay the amounts in 1993 and 1994 were derived from proceeds of the sale of common shares through the Company's Dividend Reinvestment and Stock Purchase Plan. In April 1993, the Company issued $11,600,000 of First Mortgage Bonds to secure a like amount of Economic Development Bonds issued by the city of Indianapolis. Proceeds from this issue were used to prepay the remaining $11,600,000 of 6-1/4% Series Bonds, including the mandatory redemption of $300,000 due May 1, 1993. The Company expects to refinance $13,700,000 of short-term notes payable to banks under a long-term agreement in March 1994. Approximately 99%, 110%, and 81% of net earnings applicable to common and common equivalent shares were declared payable in cash dividends during 1993, 1992, and 1991, respectively. Long-term debt, as a percentage of total capital and long-term debt, decreased to 52.6% at December 31, 1993, compared to 56.2% at December 31, 1992, and 52.1% at December 31, 1991. The decrease in 1993 in the "debt ratio" was primarily due to the combined effects of a payment of $12,700,000 in long-term debt and issuance of new long-term debt of $11,600,000, issuance of $8,300,000 in common stock for the acquisition of SM&P, issuance of common stock through the Company's dividend reinvestment and restricted stock plans of $1,273,000 and an increase in retained earnings of $86,000. During 1993, the Company increased its line of credit for working capital purposes to $22,200,000; borrowings under the lines were $7,528,000 at December 31, 1993. The Company increased its short-term bank debt by $13,700,000 to acquire SM&P and assumed $3,933,000 of SM&P's short-term debt. Capital Expenditures Capital expenditures for 1994 are budgeted at approximately $23,000,000 and will be financed primarily from internally generated cash, customer advances for construction, short-term bank borrowings and draws from construction funds held by the trustee. Capital expenditures for the five-year period 1994 through 1998 are budgeted at approximately $125,000,000 with the major portion for new mains and distribution and plant facilities. The Company anticipates that it will be necessary during the five-year period 1994 through 1998 to secure additional outside financing from both short-and long-term debt, in order to finance planned capital expenditures and long-term debt maturities. Projected capital expenditures do not include any construction projects that IWC could be required to undertake to comply with legislative or regulatory environmental or water quality requirements that may be imposed in the future. If IWC is required to adopt new methods of water treatment, the costs involved will be substantial. Capital costs are presently estimated at $37,000,000 for ozonation and $90,000,000 for granular activated carbon (GAC). Additionally, IWC is subject to regulatory requirements regarding discharges from its treatment plants. The Company estimates that the cost to comply with possible changes to existing regulatory requirements for discharges could aggregate $30,000,000 for additional facilities and $1,000,000 in increased operating costs. Such costs and expenses should be recoverable through water rates, but only after appropriate regulatory action. Environmental Matters The Company's utility operations are subject to pollution control and water quality control regulations, including those issued by the Environmental Protection Agency (EPA), the Indiana Department of Environmental Management (IDEM), the Indiana Water Pollution Control Board and the Indiana Department of Natural Resources. Under the Federal Clean Water Act and Indiana's regulations, the Company must obtain National Pollutant Discharge Elimination System (NPDES) permits for discharges from its White River, Fall Creek, and the Thomas W. Moses treatment stations. The Company's current NPDES permits were to expire June 30, 1989, for White River and Fall Creek stations and December 31, 1990, for Thomas W. Moses treatment station. Applications for renewal of the permits have been filed with, but have not been acted upon, by IDEM (these permits continue in effect pending review of the applications). The Company received an NPDES permit for its White River North Station on April 1, 1991, and it has complied with the reporting requirements for the initial 12-month period of the permit. IDEM has authority to reopen this permit and it could propose in some or all of these permits additional limitations that could be difficult and expensive. Accordingly, the full impact of such restrictions cannot be assessed with certainty at this time. The Company anticipates, however, that the capital costs and expense of compliance with any such permits are likely to be significant. Under the federal Safe Drinking Water Act (SDWA), the Company is subject to regulation by EPA of the quality of water it sells and treatment techniques it uses to make the water potable. EPA promulgates nationally applicable maximum containment levels (MCLs) for "contaminants" found in drinking water. Management believes that the Company is currently in compliance with all MCLs promulgated to date. EPA has continuing authority, however, to issue additional regulations under the SDWA, and Congress amended the SDWA in July 1986 to require EPA, within a three-year period, to promulgate MCLs for over 80 chemicals not then regulated. EPA has been unable to meet the three-year deadline, but has promulgated MCLs for many of these chemicals and has proposed additional MCLs. Management of the Company believes that it will be able to comply with the promulgated MCLs and those now proposed without any change in treatment technique, but anticipates that in the future, because of EPA regulations, the Company may have to change its method of treating drinking water to include ozonation and/or GAC. In either case, the capital costs could be significant (currently estimated at $37,000,000 for ozonation and $90,000,000 for GAC), as would be the Company's increase in annual operating costs (currently estimated at $1,600,000 for ozonation and $4,300,000 for GAC). Actual costs could exceed these estimates. The Company would expect to recover such costs through its water rates; however, such recovery may not necessarily be timely. Under a 1991 law enacted by the Indiana Legislature, a water utility, including the utility subsidiaries of the Company, may petition the Indiana Utility Regulatory Commission (Commission) for prior approval of its plans and estimated expenditures required to comply with provisions of, and regulations under, the Federal Clean Water Act and SDWA. Upon obtaining such approval, the utility may include, to the extent of its estimated costs as approved by the Commission, such costs in its rate base for ratemaking purposes and recover its costs of developing and implementing the approved plans if statutory standards are met. The capital costs for such new systems, equipment or facilities or modifications of existing facilities may be included in the utility's rate base upon completion of construction of the project or any part thereof. While use of this statute is voluntary on the part of a utility, if utilized it should allow utilities a greater degree of confidence in recovering major costs incurred to comply with environmentally related laws on a timely basis. Rate Case On May 17, 1993, Indianapolis Water Company and Zionsville Water Corporation, both wholly owned subsidiaries of the Company, filed a petition with the Commission for approval of a merger of the two companies and a new schedule of rates and charges applicable to their interconnected systems. The increase in combined revenues sought by the companies is approximately $8.9 million, or 14%. This request for new rates includes the increased costs associated with adoption of accrual accounting for postretirement benefits other than pensions. On November 10, 1993, the Utility Consumer Counselor, representing ratepayers, prefiled its testimony and exhibits in the case, the effect of which, if adopted by the Commission, would result in a decrease in current rates of approximately $4.6 million, or 7.2%. Trends, Inflation and Changing Prices Under normal conditions and particularly during periods of inflation, water utility revenues from increased water consumption will not keep pace with the increase in operating costs. Therefore, periodic water rate and service charge adjustments are necessary, with the frequency of such increases being partially determined by the amount of inflation. Results for any interim period are not indicative of results to be expected for the year. Typically, the seasonal nature of the Company's business results in a higher proportion of operating revenues being realized in the second and third quarters of the year than the first and fourth quarters of the year. SHAREHOLDER INFORMATION Annual Meeting The annual meeting of shareholders will be held at IWC Resources Corporation's General Office, 1220 Waterway Boulevard, Indianapolis, Indiana, at 11:00 a.m. (EST) on Thursday, April 21, 1994. Notice of the meeting, a proxy statement and a form of proxy were mailed on or about March 11, 1994, to all shareholders of record March 7, 1994. Form 10-K and Financial Information A copy of the Company's annual report on Form 10-K (including financial statements, but without exhibits) filed with the Securities and Exchange Commission is available without charge upon request. Requests should be addressed to the Shareholder Relations Department, IWC Resources Corporation, P. O. Box 1220, Indianapolis, Indiana 46206. Dividend Reinvestment and Stock Purchase Plan The Company offers its registered shareholders a convenient and economical way to reinvest their dividends and make optional cash purchases of the Company's common stock. There are no brokerage commissions or service fees charged on purchase made through the Plan. A prospectus describing the Plan is available upon request by writing or calling the Shareholder Relations Department, (317) 639-1501. Shareholder Inquiries Shareholders with questions concerning their accounts, dividend checks, or stock certificates should contact the Company's stock transfer and dividend disbursing agent as follows: BANK ONE, INDIANAPOLIS, NA BANK ONE CENTER/TOWER 111 Monument Circle, Suite 1611 Indianapolis, Indiana 46204 (800) 753-7107 or (317) 321-8110 Stock Statistics The common stock of the Company is traded over-the-counter under the NASDAQ National Market System symbol of IWCR. The following table sets forth, on a per-share basis, the high and low sale prices of the Company's common stock and dividends paid per share the last two years. Common Stock Dividends Declared High Low Per Share (Cent) 1993 Fourth Quarter $ 24 $ 20-3/4 35 Third Quarter 24 21-1/2 35 Second Quarter 23-1/4 21 35 First Quarter 23-3/4 20-3/4 35 1992 Fourth Quarter 23 20-1/2 35 Third Quarter 23 20 35 Second Quarter 20-1/4 18 35 First Quarter 20-1/2 18-1/2 34-1/2 Distribution of Shareholders December 31, 1993, of Record Other Indiana States Total & Foreign Countries Holders 3,531 1,381 4,912 72% 28% Shares 2,908,792 3,913,161 6,821,953 43% 57% IWC RESOURCES CORPORATION BOARD OF DIRECTORS Joseph D. Barnette, Jr., Chairman and Chief Executive Officer Banc One Indiana Corporation Thomas W. Binford, Chairman Binford, Miles, Rodgers and Associates Indianapolis Joseph R. Broyles*, President and Chief Operating Officer Indianapolis Water Company Murvin S. Enders, Plant Manager Toledo Machining Plant, Chrysler Corporation Otto N. Frenzel III*, Chairman of the Board National City Bank, Indiana Indianapolis Elizabeth Grube, Personal Investments, Indianapolis John G. Johnson*, Retired President Butler University, Indianapolis (Retired effective December 31, 1993) J. B. King, Vice President and General Counsel Eli Lilly and Company, Indianapolis Robert B. McConnell*, Chairman of the Executive Committees IWC Resources Corporation and Indianapolis Water Company J. George Mikelsons, Chairman of the Board and Chief Executive Officer Amtran, Inc., Indianapolis Thomas M. Miller*, Chairman of the Board and Chief Executive Officer NBD Indiana, Inc. and NBD Bank, N.A., Indianapolis James T. Morris*, Chairman of the Board and Chief Executive Officer IWC Resources Corporation and Indianapolis Water Company Jack E. Reich*, Chairman of the Board Emeritus American United Life Insurance Company, Indianapolis Fred E. Schlegel, Partner Baker & Daniels, Attorneys, Indianapolis *Member of Executive Committee IWC RESOURCES CORPORATION OFFICERS James T. Morris, Chairman of the Board, Chief Executive Officer and President J. A. Rosenfeld, Executive Vice President (Effective February 25, 1994) Kenneth N. Giffin, Senior Vice President - Governmental Relations and Real Estate John M. Davis, Vice President, General Counsel and Secretary Alan R. Kimbell, Vice President - Marketing (Effective January 21, 1994) James P. Lathrop, Controller Jane G. Ryan, Assistant Secretary INDIANAPOLIS WATER COMPANY OFFICERS James T. Morris, Chairman of the Board and Chief Executive Officer Joseph R. Broyles, President and Chief Operating Officer Paul J. Doane, Executive Vice President J. A. Rosenfeld, Executive Vice President (Effective February 25, 1994) Kenneth N. Giffin, Senior Vice President - Governmental Relations John M. Davis, Vice President, General Counsel and Secretary Robert F. Miller, Vice President - Engineering (Effective January 21, 1994) David S. Probst, Vice President - Business Development Tim K. Bumgardner, Vice President - Operations Ronald H. Carrell, Vice President - Customer Service Martha L. Wharton, Vice President - Customer Relations L. M. Williams, Vice President - Human Resources James P. Lathrop, Assistant Treasurer Jane G. Ryan, Assistant Secretary EX-21 13 SUBSIDIARIES Document Summary: Document: 0805-21 Author: Addressee: Operator: Creation Date: 03/30/1994 Modification Date: 03/30/1994 Identification key words: Comments: Exhibit 21 SUBSIDIARIES IWC Resources Corporation has seven wholly owned subsidiaries, each of which is incorporated under the laws of the State of Indiana. These corporations are Indianapolis Water Company, Harbour Water Corporation, Zionsville Water Corporation, Utility Data Corporation, IWC Services, Inc., SM&P Conduit Co., Inc. and Waterway Holdings, Inc. EX-23 14 CONSENT Document Summary: Document: 0805-23 Author: Addressee: Operator: Creation Date: 03/30/1994 Modification Date: 03/30/1994 Identification key words: Comments: Exhibit 23 Consent of Independent Certified Public Accountants The Board of Directors IWC Resources Corporation: We consent to incorporation by reference in the Registration Statement No. 33-30221 on Form S-8 and Registration Statement No. 33-6406 on Form S-3 (originally on Form S-16) of IWC Resources Corporation of our reports dated January 26, 1994, relating to the consolidated balance sheets of IWC Resources Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993, which reports appear herein or in the 1993 Annual Report to Shareholders and have been incorporated by reference in the December 31, 1993 annual report on Form 10-K of IWC Resources Corporation. Our reports refer to a change in method of revenue recognition in 1991 and, effective January 1, 1993, a change in accounting for income taxes and postretirement benefits other than pensions. KPMG PEAT MARWICK Indianapolis, Indiana March 23, 1994 -----END PRIVACY-ENHANCED MESSAGE-----