FORM 10-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-K

 

 

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File number 1-6659

 

 

AQUA AMERICA, INC.

(a Pennsylvania corporation)

 

 

762 W. Lancaster Avenue

Bryn Mawr, Pennsylvania 19010-3489

(610) 527-8000

I.R.S. Employer Identification Number 23-1702594

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Common stock, par value $.50 per share   New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None.

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 12 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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    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 any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12(b)-2 of the Exchange Act.:

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (do not check if smaller reporting company)    Small reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2012: $3,453,548,692

For purposes of determining this amount only, registrant has defined affiliates as including (a) the executive officers named in Part I of this 10-K report, (b) all directors of registrant, and (c) each shareholder that has informed registrant by June 30, 2012, that it has sole or shared voting power of 5% or more of the outstanding common stock of registrant.

The number of shares outstanding of the registrant’s common stock as of February 14, 2013: 140,347,743

DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of registrant’s 2012 Annual Report to Shareholders have been incorporated by reference into Parts I and II of this Form 10-K.

(2) Portions of the definitive Proxy Statement, relative to the May 8, 2013 annual meeting of shareholders of registrant, to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, have been incorporated by reference into Part III of this Form 10-K.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

    
         Page  
Part I   

Item 1.

 

Business

     4   

Item 1A.

 

Risk Factors

     14   

Item 1B.

 

Unresolved Staff Comments

     22   

Item 2.

 

Properties

     23   

Item 3.

 

Legal Proceedings

     23   

Item 4.

 

Mine Safety Disclosures

     25   
Part II   

Item 5.

 

Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

     25   

Item 6.

 

Selected Financial Data

     26   

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     26   

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

     27   

Item 8.

 

Financial Statements and Supplementary Data

     27   

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     27   

Item 9A.

 

Controls and Procedures

     27   

Item 9B.

 

Other Information

     28   
Part III   

Item 10.

 

Directors, Executive Officers and Corporate Governance

     28   

Item 11.

 

Executive Compensation

     30   

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     30   

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

     31   

Item 14.

 

Principal Accountant Fees and Services

     31   
Part IV   

Item 15.

 

Exhibits and Financial Statement Schedules

     32   
 

Signatures

     33   
 

Exhibit Index

     35   


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K (“10-K”), or incorporated by reference into this 10-K, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are made based upon, among other things, our current assumptions, expectations, plans, and beliefs concerning future events and their potential effect on us. These forward-looking statements involve risks, uncertainties and other factors, many of which are outside our control that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In some cases you can identify forward-looking statements where statements are preceded by, followed by or include the words “believes,” “expects,” “anticipates,” “plans,” “future,” “potential,” “probably,” “predictions,” “continue” or the negative of such terms or similar expressions. Forward-looking statements in this 10-K, or incorporated by reference into this 10-K, include, but are not limited to, statements regarding:

 

   

recovery of capital expenditures and expense in rates;

 

   

projected capital expenditures and related funding requirements;

 

   

the availability and cost of capital financing;

 

   

developments, trends and consolidation in the water and wastewater utility industries;

 

   

dividend payment projections;

 

   

opportunities for future acquisitions, the success of pending acquisitions and the impact of future acquisitions;

 

   

the capacity of our water supplies, water facilities and wastewater facilities;

 

   

the impact of geographic diversity on our exposure to unusual weather;

 

   

the impact of conservation awareness of customers and more efficient plumbing fixtures and appliances on water usage per customer;

 

   

our capability to pursue timely rate increase requests;

 

   

our authority to carry on our business without unduly burdensome restrictions;

 

   

our ability to obtain fair market value for condemned assets;

 

   

the impact of fines and penalties;

 

   

the impact of changes in and compliance with governmental laws, regulations and policies, including those dealing with taxation, the environment, health and water quality, and public utility regulation;

 

   

the impact of decisions of governmental and regulatory bodies, including decisions to raise or lower rates;

 

   

the development of new services and technologies by us or our competitors;

 

   

the availability of qualified personnel;

 

   

the condition of our assets;

 

   

the impact of legal proceedings;

 

   

general economic conditions;

 

   

acquisition-related costs and synergies;

 

   

the sale of water and wastewater divisions;

 

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the impact of federal and/or state tax policies and the regulatory treatment of the effects of those policies;

 

   

the amount of repair tax deductions and the Internal Revenue Service’s ultimate acceptance of the deduction methodology; and

 

   

the forward-looking statements contained under the heading “Forward-Looking Statements” in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” from the portion of our 2012 Annual Report to Shareholders incorporated by reference herein and made a part hereof.

Because forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to:

 

   

changes in general economic, business, credit and financial market conditions;

 

   

changes in governmental laws, regulations and policies, including those dealing with taxation, the environment, health and water quality, and public utility regulation;

 

   

our determination of what qualifies for a repair expense tax deduction;

 

   

changes in environmental conditions, including those that result in water use restrictions;

 

   

abnormal weather conditions, including the effects of climate change;

 

   

changes in, or unanticipated, capital requirements;

 

   

changes in our credit rating or the market price of our common stock;

 

   

our ability to integrate businesses, technologies or services which we may acquire;

 

   

our ability to manage the expansion of our business;

 

   

our ability to supply water or collect and treat wastewater;

 

   

the extent to which we are able to develop and market new and improved services;

 

   

the effect of the loss of major customers;

 

   

our ability to retain the services of key personnel and to hire qualified personnel as we expand;

 

   

labor disputes;

 

   

increasing difficulties in obtaining insurance and increased cost of insurance;

 

   

cost overruns relating to improvements or the expansion of our operations;

 

   

increases in the costs of goods and services;

 

   

civil disturbance or terroristic threats or acts;

 

   

the continuous and reliable operation of our information technology systems;

 

   

changes in accounting pronouncements; and

 

   

litigations and claims.

Given these risks and uncertainties, you should not place undue reliance on any forward-looking statements. You should read this 10-K and the documents that we incorporate by reference into this 10-K completely and with the understanding that our actual future results, performance and achievements may be materially different from what we expect. These forward-looking statements represent assumptions, expectations, plans, and beliefs only as of the date of this 10-K. Except for our ongoing obligations to disclose certain information under the federal securities laws, we are not obligated, and assume no obligation, to update these forward-looking statements, even though our situation may change in the future. For further information or other factors which could affect our financial results and such forward-looking statements, see “Risk Factors.” We qualify all of our forward-looking statements by these cautionary statements.

 

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Table of Contents

PART I

 

Item 1. Business

The Company

Aqua America, Inc. (referred to as “Aqua America”, the “Company”, “we”, or “us”) is the holding company for regulated utilities providing water or wastewater services to what we estimate to be almost 3 million people in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Florida, Indiana, Virginia, and Georgia. Our largest operating subsidiary, Aqua Pennsylvania, Inc. (“Aqua Pennsylvania”), accounted for approximately 55% of our operating revenues and a larger percentage of our net income for 2012, and as of December 31, 2012, provided water or wastewater services to approximately one-half of the total number of people we serve, and is located in the suburban areas in counties north and west of the City of Philadelphia and in 25 other counties in Pennsylvania. Our other subsidiaries provide similar services in nine other states. In addition, we provide water and wastewater services through operating and maintenance contracts with municipal authorities and other parties in the states we operate in as well as sludge hauling, septage and grease services, backflow prevention services, certain other non-regulated water and wastewater services, and non-utility raw water supply services for firms in the natural gas and oil drilling industry.

In January 2012, we sold our regulated water operations in Maine, which served approximately 16,000 customers, to Connecticut Water Services, Inc. In May 2012, we acquired all of American Water Works Company, Inc.’s regulated water and wastewater operations in Ohio, which served approximately 59,000 customers, and simultaneously sold our regulated water operations in New York, which served approximately 51,000 customers. These transactions concluded our regulated operations in Maine and New York. In September 2012, we began to market for sale our regulated water and wastewater operations in Florida, which serve approximately 38,000 customers, and our operation in Georgia which consists of a wastewater treatment facility. In December 2012, the Company entered into a definitive agreement to sell 80 of its regulated water and wastewater systems in Florida to the Florida Governmental Utility Authority. These 80 water and wastewater systems represent approximately 56% of our total customers served in Florida. This transaction is expected to close in the first half of 2013. In addition, we are holding discussions with interested parties for the sale of the remainder of our Florida regulated water and wastewater operations. The operating results, cash flows, and financial position of the Company’s Maine, New York, Florida, and Georgia subsidiaries have been presented in the Company’s consolidated financial statements as discontinued operations. During the second quarter of 2011, we acquired all of American Water Works Company, Inc.’s regulated water and wastewater operations in Texas, which served approximately 5,300 customers, and sold our regulated water and wastewater operations in Missouri, which served approximately 3,900 customers and concluded our regulated utility operations in Missouri.

Aqua America, which prior to its name change in 2004 was known as Philadelphia Suburban Corporation, was formed in 1968 as a holding company for its primary subsidiary, Aqua Pennsylvania, formerly known as Philadelphia Suburban Water Company. In the early 1990s we embarked on a growth through acquisition strategy focused on water and wastewater operations. Our most significant transactions to date have been the merger with Consumers Water Company in 1999, the acquisition of the regulated water and wastewater operations of AquaSource, Inc. in 2003, the acquisition of Heater Utilities, Inc. in 2004, and the acquisition of American Water Works Company, Inc.’s regulated water and wastewater operations in Ohio in 2012. Since the early 1990s, our business strategy has been primarily directed toward the regulated water and wastewater utility industry and has extended our regulated operations from southeastern Pennsylvania to include our current operations in nine other states. In 2009, we began operations in Georgia through the acquisition of a wastewater utility business that is currently not subject to economic regulation by the Georgia Public Service Commission. Prior to classification as a discontinued operation, our Georgia operation was included within our Regulated segment as it provided services similar to our regulated utility subsidiaries.

 

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Beginning in 2010, and continuing into 2013, we pursued a portfolio rationalization strategy to focus our operations in areas where we have critical mass and economic growth potential and to divest operations where limited customer growth opportunities exist or where we are unable to achieve favorable operating results or a return on equity that we consider acceptable. In 2012, we sold our utility operations in Maine and in New York, in 2011 we sold our utility operations in Missouri, and in 2010 we sold our utility operation in South Carolina to a local municipality. In connection with the sale of our New York and Missouri utility operations, we acquired additional utility systems (and customers) in Ohio and Texas, two of the larger states in our portfolio. Initiated in 2012, and concluding in 2013, we began to market for sale our Florida utility operations and our wastewater treatment facility in Georgia, and these sales should conclude in 2013.

In 2011, one of our subsidiaries entered into a joint venture with a firm that operates natural gas pipelines and processing plants for the construction and operation of a private pipeline system to supply raw water to certain natural gas well drilling operations in Pennsylvania. The operation of the private pipeline system commenced in the second quarter of 2012 and marks an expansion of our growth venture serving the raw water needs of firms in the natural gas and oil drilling industry.

The following table reports our operating revenues from continuing operations by principal state for the Regulated segment and Other for the year ended December 31, 2012:

 

     Operating
Revenues
(000’s)
     Operating
Revenues
(%)
 

Pennsylvania

   $ 419,965        55.4

Ohio

     78,464        10.4

Texas

     65,976        8.7

Illinois

     49,329        6.5

North Carolina

     46,026        6.1

Other states (a)

     80,124        10.6
  

 

 

    

 

 

 

Regulated segment total

     739,884        97.7

Other

     17,876        2.3
  

 

 

    

 

 

 

Consolidated

   $ 757,760        100.0
  

 

 

    

 

 

 

 

(a) Includes our operating subsidiaries in the following states: New Jersey, Indiana, and Virginia.

Information concerning revenues, net income, identifiable assets and related financial information of the Regulated segment and Other for 2012, 2011, and 2010 is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 17 – Segment Information in the “Notes to Consolidated Financial Statements” from the portions of our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K. The information from these sections of our 2012 Annual Report to Shareholders is incorporated by reference herein.

 

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The following table summarizes our operating revenues from continuing operations, by utility customer class, for the Regulated segment and Other for the year ended December 31, 2012:

 

     Operating
Revenues
(000’s)
     Operating
Revenues
(%)
 

Residential water

   $ 447,338        59.0

Commercial water

     117,992        15.6

Fire protection

     27,529        3.6

Industrial water

     25,015        3.3

Other water

     43,246        5.7
  

 

 

    

 

 

 

Water

     661,120        87.2

Wastewater

     68,225        9.0

Other utility

     10,539        1.5
  

 

 

    

 

 

 

Regulated segment total

     739,884        97.7

Other

     17,876        2.3
  

 

 

    

 

 

 

Consolidated

   $ 757,760        100.0
  

 

 

    

 

 

 

Our utility customer base is diversified among residential water, commercial water, fire protection, industrial water, other water, wastewater customers and other utility customers (consisting of certain operating contracts that are closely associated with the utility operations). Residential customers make up the largest component of our utility customer base, with these customers representing approximately 70% of our water and wastewater revenues. Substantially all of our water customers are metered, which allows us to measure and bill for our customers’ water consumption. Water consumption per customer is affected by local weather conditions during the year, especially during the late spring and summer in our northern U.S. service territories. In general, during these seasons, an extended period of dry weather increases consumption, while above average rainfall decreases consumption. Also, an increase in the average temperature generally causes an increase in water consumption. On occasion, abnormally dry weather in our service areas can result in governmental authorities declaring drought warnings and water use restrictions in the affected areas, which could reduce water consumption. See “Water Supplies, Water Facilities and Wastewater Facilities” for a discussion of water use restrictions that may impact water consumption during abnormally dry weather. The geographic diversity of our utility customer base reduces the effect of our exposure to extreme or unusual weather conditions in any one area of our service territory. Water usage is also affected by changing consumption patterns by our customers, resulting from such causes as increased water conservation and the installation of water saving devices and appliances that can result in decreased water usage. It is estimated that in the event we experience a 0.50% decrease in water consumption it would result in a decrease in annual residential water revenue of approximately $2,000,000, and would likely be partially offset by a reduction in incremental water production expenses such as chemicals and power.

Our growth in revenues over the past five years is primarily a result of increases in water and wastewater rates and our growth through acquisition strategy. See “Economic Regulation” for a discussion of water and wastewater rates. The majority of the increase in our utility customer base has been due to customers added through acquisitions. In 2012, 2011, 2010, 2009, and 2008, the utility customer growth rate due to acquisitions and other growth ventures (excluding dispositions) was 7.2%, 1.0%, 1.0%, 1.0%, and 2.0%, respectively. In 2012, our customer count, excluding dispositions, increased by 69,858 customers, primarily due to the acquisition of American Water Works Company, Inc.’s Ohio operations and natural growth. Overall, for the five-year period of 2008 through 2012, our utility customer base increased at an annual compound rate of 0.4%. If the number of customers associated with utility system dispositions during the past five years was excluded from the January 1, 2008 utility customer base, the annual compound growth rate would have been 2.3% for that same period.

 

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Acquisitions and Water Sale Agreements

According to the U.S. Environmental Protection Agency (“EPA”), approximately 85% of the U.S. population obtains its water from community water systems, and 15% of the U.S. population obtains its water from private wells. With approximately 53,000 community water systems in the U.S. (83% of which serve less than 3,300 customers), the water industry is the most fragmented of the major utility industries (telephone, natural gas, electric, water and wastewater). The majority of these community water systems are government-owned, and the balance of the systems are privately-owned (or investor-owned). The nation’s water systems range in size from large government-owned systems, such as the New York City water system which serves approximately 8 million people, to small systems, where a few customers share a common well. In the states where we operate, we believe there are approximately 19,000 community water systems of widely-varying size, with the majority of the population being served by government-owned water systems.

Although not as fragmented as the water industry, the wastewater industry in the U.S. also presents opportunities for consolidation. According to the EPA’s most recent survey of wastewater treatment facilities (which includes both government-owned and privately-owned facilities) in 2008, there are approximately 15,000 such facilities in the nation serving approximately 74% of the U.S. population. The remaining population represents individual homeowners with their own treatment facilities; for example, community on-lot disposal systems and septic tank systems. The vast majority of wastewater facilities are government-owned rather than privately-owned. The EPA’s survey also indicated that there are approximately 7,400 wastewater facilities in operation or planned in the 10 states where we operate.

Because of the fragmented nature of the water and wastewater utility industries, we believe that there are many potential water and wastewater system acquisition candidates throughout the U.S. We believe the factors driving consolidation of these systems are:

 

 

the benefits of economies of scale;

 

 

the increasing cost and complexity of environmental regulations;

 

 

the need for substantial capital investment;

 

 

the need for technological and managerial expertise;

 

 

limited access to cost-effective financing; and

 

 

the monetizing of public assets to support the financial condition of municipalities.

We are actively exploring opportunities to expand our utility operations through acquisitions or other growth ventures. During the five-year period ended December 31, 2012, we completed 78 acquisitions or other growth ventures.

We believe that acquisitions will continue to be an important source of customer growth for us. We intend to continue to pursue acquisitions of government-owned and privately-owned water and wastewater systems that provide services in areas near our existing service territories or in new service areas. We engage in continuing activities with respect to potential acquisitions, including calling on prospective sellers, performing analyses and investigations of acquisition candidates, making preliminary acquisition proposals and negotiating the terms of potential acquisitions. Further, we are also seeking other potential business opportunities, including growth opportunities provided by the natural gas and oil drilling industry with a current focus on the raw water needs of drillers.

Water Utility Supplies and Facilities and Wastewater Utility Facilities

Our water utility operations obtain their water supplies from surface water sources, underground aquifers, and water purchased from other water suppliers. Our water supplies are primarily self supplied and processed at twenty surface water treatment plants located in four states, and numerous well stations located in all of the states in which we conduct business. Approximately 9% of our water supplies are supplied by water purchased from other water suppliers. It is our policy to obtain and maintain the permits necessary to obtain the water we distribute.

 

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We believe that the capacities of our sources of supply, and our water treatment, pumping and distribution facilities, are generally sufficient to meet the present requirements of our customers under normal conditions. We plan system improvements and additions to capacity in response to normal replacement and renewal needs, changing regulatory standards, changing patterns of consumption, and increased demand from customer growth. The various state regulatory commissions have generally recognized the operating and capital costs associated with these improvements in setting water rates.

On occasion, drought warnings and water use restrictions are issued by governmental authorities for portions of our service territories in response to extended periods of dry weather conditions. The timing and duration of the warnings and restrictions can have an impact on our water revenues and net income. In general, water consumption in the summer months is more affected by drought warnings and restrictions because discretionary and recreational use of water is at its highest during the summer months. At other times of the year, warnings and restrictions generally have less of an effect on water consumption.

We believe that our wastewater treatment facilities are generally adequate to meet the present requirements of our customers under normal conditions. In addition, we own several sewer collection systems where the wastewater is treated at a municipally-owned facility. Changes in regulatory requirements can be reflected in revised permit limits and conditions when National Pollution Discharge Elimination System (“NPDES”) permits are renewed, typically on a five-year cycle, or when treatment capacity is expanded. Capital improvements are planned and budgeted to meet normal replacement and renewal needs, anticipated changes in regulations, needs for increased capacity related to projected growth, and to reduce inflow and infiltration to collection systems. The various state regulatory commissions have generally recognized the operating and capital costs associated with these improvements in setting wastewater rates for current customers and capacity charges for new customers.

Economic Regulation

Most of our water and wastewater utility operations are subject to regulation by their respective state regulatory commissions, which have broad administrative power and authority to regulate rates and charges, determine franchise areas and conditions of service, approve acquisitions and authorize the issuance of securities. The regulatory commissions also establish uniform systems of accounts and approve the terms of contracts with affiliates and customers, business combinations with other utility systems, loans and other financings, and the franchise areas that we serve. A small number of our operations are subject to rate regulation by county or city governments. The profitability of our utility operations is influenced to a great extent by the timeliness and adequacy of rate allowances we are granted by the respective regulatory commissions or authorities in the various states in which we operate.

 

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Accordingly, we maintain a rate case management capability, the objective of which is to provide that the tariffs of our utility operations reflect, to the extent practicable, the timely recovery of increases in costs of operations, capital, taxes, energy, materials, and compliance with environmental regulations. We file rate increase requests to recover and earn a return on the capital investments that we make in improving or replacing our facilities and to recover expenses. In the states in which we operate, we are primarily subject to economic regulation by the following state regulatory commissions:

 

State

  

Regulatory Commission

Pennsylvania    Pennsylvania Public Utility Commission
Ohio    The Public Utilities Commission of Ohio
North Carolina    North Carolina Utilities Commission
Illinois    Illinois Commerce Commission
Texas    Texas Commission on Environmental Quality
New Jersey    New Jersey Board of Public Utilities
Florida    Florida Public Service Commission
Indiana    Indiana Utility Regulatory Commission
Virginia    Virginia State Corporation Commission

Our water and wastewater operations are comprised of 66 rate divisions, each of which requires a separate rate filing for the evaluation of the cost of service, including the recovery of investments, in connection with the establishment of tariff rates for that rate division. When feasible and beneficial to our utility customers, we will seek approval from the applicable state regulatory commission to consolidate rate divisions to achieve a more even distribution of costs over a larger customer base. Eight of the states in which we operate permit us to file a revenue requirement for some form of consolidated rates for the rate divisions in that state.

In some regulatory jurisdictions, we may seek authorization to bill our utility customers in accordance with a rate filing that is pending before the respective regulatory commission. Furthermore, some regulatory commissions authorize the use of expense deferrals and amortization in order to provide for an impact on our operating income by an amount that approximates the requested amount in a rate request. The additional revenue billed and collected prior to the final regulatory commission ruling is subject to refund based on the outcome of the ruling. The revenue recognized and the expenses deferred by us reflect an estimate as to the final outcome of the ruling. If the request is denied completely or in part, we could be required to refund some or all of the revenue billed to date, and write-off some or all of the deferred expenses.

Five states in which we operate water utilities, and three states in which we operate wastewater utilities, permit us to add a surcharge to water or wastewater bills to offset the additional depreciation and capital costs associated with certain capital expenditures related to replacing and rehabilitating infrastructure systems. Without a surcharge mechanism, a water and wastewater utility absorbs all of the depreciation and capital costs of these projects between base rate increases without the benefit of additional revenues. The gap between the time that a capital project is completed and the recovery of its costs in rates is known as regulatory lag. The infrastructure rehabilitation surcharge mechanism is intended to substantially reduce regulatory lag, which often acted as a disincentive to water and wastewater utilities to rehabilitate their infrastructure. In addition, our subsidiaries in certain states use a surcharge or credit on their bills to reflect changes in certain costs, such as changes in state tax rates, other taxes and purchased water costs, until such time as the costs are incorporated into base rates.

Currently, Pennsylvania, Illinois, Ohio, and Indiana, allow for the use of infrastructure rehabilitation surcharges, and in 2012 New Jersey regulators approved a rulemaking to implement an infrastructure rehabilitation surcharge for regulated water utilities; as a result, the Company’s operating subsidiary in New Jersey is in the process of implementing an infrastructure rehabilitation surcharge for 2013. These mechanisms typically adjust periodically based on additional qualified capital expenditures completed or anticipated in a future period. The infrastructure rehabilitation surcharge is capped at a percentage of base rates, generally at 5% to 12.75% of base rates, and is reset to zero when new base rates that reflect the costs of those additions become effective or when a utility’s earnings exceed a regulatory benchmark. Infrastructure rehabilitation surcharges provided revenues of $15,911,000 in 2012, $15,938,000 in 2011, and $14,044,000 in 2010.

 

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In 2012, Aqua Pennsylvania adopted the repair tax accounting change on Aqua America’s 2012 federal income tax return to be filed in September 2013. This tax accounting change allows a tax deduction for certain qualifying utility asset improvements that were formerly capitalized for tax purposes. The tax accounting change was implemented in response to a June 2012 rate order issued by the Pennsylvania Public Utility Commission to our subsidiary, which provides for flow-through accounting treatment of certain income tax benefits resulting from the accounting change. As a result of implementing this accounting change, the infrastructure rehabilitation surcharge will be suspended for 2013 for Aqua Pennsylvania’s water customers. This tax accounting change and its treatment under the Pennsylvania rate order will financially offset the impact of the 2013 infrastructure rehabilitation surcharge suspension.

In general, we believe that Aqua America, Inc. and its subsidiaries have valid authority, free from unduly burdensome restrictions, to enable us to carry on our business as presently conducted in the franchised or contracted areas we now serve. The rights to provide water or wastewater service to a particular franchised service territory are generally non-exclusive, although the applicable regulatory commissions usually allow only one regulated utility to provide service to a given area. In some instances, another water utility provides service to a separate area within the same political subdivision served by one of our subsidiaries. Therefore, as a regulated utility, there is little or no competition for the daily water and wastewater service we provide to our customers. Water and wastewater utilities may compete for new customers in new service territories. Competition for new territory generally comes from nearby utilities, either investor-owned or municipal-owned. There is also often competition for the acquisition of other utilities. Competition for the acquisition of other water or wastewater utilities may come from other investor-owned utilities, nearby municipally-owned utilities and sometimes from strategic or financial purchasers seeking to enter or expand in the water and wastewater industry. We compete for new service territories and the acquisition of other utilities on the following bases: economic value, economies of scale, our ability to provide quality water and wastewater service, our existing infrastructure network, our ability to perform infrastructure improvements, our ability to comply with environmental, health, and safety regulations, our technical, regulatory, and operational expertise, our ability to access capital markets, and our cost of capital. The addition of new service territories and the acquisition of other utilities by regulated utilities such as us are generally subject to review and approval by the applicable state regulatory commissions.

In a limited number of instances, in one of our southern states, where there are municipally-owned water or wastewater systems near our operating divisions, the municipally-owned system may either have water distribution or wastewater collection mains that are located adjacent to our division’s mains or may construct new mains that parallel our mains. In these circumstances, on occasion, the municipally-owned system may attempt to take over the customers who are connected to our mains, resulting in our mains becoming surplus or underutilized without compensation.

In the states where our subsidiaries operate, it is possible that portions of our subsidiaries’ operations could be acquired by municipal governments by one or more of the following methods:

 

 

eminent domain;

 

 

the right of purchase given or reserved by a municipality or political subdivision when the original franchise was granted; and

 

 

the right of purchase given or reserved under the law of the state in which the subsidiary was incorporated or from which it received its permit.

 

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The price to be paid upon such an acquisition by the municipal government is usually determined in accordance with applicable law governing the taking of lands and other property under eminent domain. In other instances, the price may be negotiated, fixed by appraisers selected by the parties or computed in accordance with a formula prescribed in the law of the state or in the particular franchise or charter. We believe that our operating subsidiaries will be entitled to fair market value for any assets that are condemned, and we believe the fair market value will be in excess of the book value for such assets. The City of Fort Wayne, Indiana (the “City”) has authorized the acquisition by eminent domain of the northern portion of the utility system of one of the operating subsidiaries that we acquired in connection with the AquaSource acquisition in 2003. In addition, the City seeks to acquire certain of the Company’s utility system assets located in the southwest section of the City. Refer to Item 3. Legal Proceedings of this Annual Report on Form 10-K for additional information regarding this proceeding.

Despite the condemnation referred to above, and the sales of certain systems, our primary strategy continues to be to acquire additional water and wastewater systems, to maintain our existing systems where there is a business or a strategic benefit, and to actively oppose unilateral efforts by municipal governments to acquire any of our operations, particularly for less than the fair market value of our operations or where the municipal government seeks to acquire more than it is entitled to under the applicable law or agreement. On occasion, we may voluntarily agree to sell systems or portions of systems in order to help focus our efforts in areas where we have more critical mass and economies of scale or for other strategic reasons.

Environmental, Health and Safety Regulation

Provision of water and wastewater services is subject to regulation under the federal Safe Drinking Water Act, the Clean Water Act and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. In addition, we are subject to federal and state laws and other regulations relating to solid waste disposal, dam safety and other aspects of our operations. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.

From time to time, Aqua America has acquired, and may acquire, systems that have environmental compliance issues. Environmental compliance issues also arise in the course of normal operations or as a result of regulatory changes. Aqua America attempts to align capital budgeting and expenditures to address these issues in a timely manner. We believe that the capital expenditures required to address outstanding compliance issues have been budgeted in our capital program and represent less than 5% of our expected total capital expenditures over the next five years. We are parties to agreements with regulatory agencies in Pennsylvania, Texas, Florida, Indiana, and Virginia under which we have committed to make certain improvements for environmental compliance. These agreements are intended to provide the regulators with assurance that problems covered by these agreements will be addressed, and the agreements generally provide protection from fines, penalties and other actions while corrective measures are being implemented. We are actively working directly with state environmental officials to implement or amend these agreements as necessary.

Safe Drinking Water Act - The Safe Drinking Water Act establishes criteria and procedures for the EPA to develop national quality standards for drinking water. Regulations issued pursuant to the Safe Drinking Water Act and its amendments set standards regarding the amount of certain microbial and chemical contaminants and radionuclides in drinking water. Current requirements under the Safe Drinking Water Act are not expected to have a material impact on our business, financial condition, or results of operations as we have made and are making investments to meet existing water quality standards. We may, in the future, be required to change our method of treating drinking water at certain sources of supply and make additional capital investments if additional regulations become effective.

 

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In order to remove or inactivate microbial organisms, rules were issued by the EPA to improve disinfection and filtration of potable water and to reduce consumers’ exposure to disinfectants and by-products of the disinfection process. We filter all of our surface water sources. New compliance monitoring requirements under the Stage 2 Disinfection By-Product Rule will go into effect beginning in 2013 at our largest surface water treatment plants, and in 2014 at several other facilities. Two capital projects are planned for 2013 at two systems acquired in 2012 in Ohio to maintain compliance under the new Stage 2 Rule monitoring requirements. Three smaller facilities experienced exceedances of the current Stage 1 Disinfection By-Product maximum contaminant levels (MCL) in 2012, but we do not believe these caused any unusual health risks and the exceedances did not result in any fines. These exceedances were addressed, or are being addressed, with operational changes or small capital investments. In aggregate, the costs of compliance with the requirements of the Stage 1 and Stage 2 Disinfection By-Product Rules in all of our state operations are estimated at less than 1% of our planned capital program over the next five years.

The federal Groundwater Rule became effective December 1, 2009. This rule requires additional testing of water from well sources, and under certain circumstances requires demonstration and maintenance of effective disinfection. States throughout the country are taking a variety of approaches to implementation of the Groundwater Rule. Pennsylvania has taken a position that all wells will be required to demonstrate and maintain effective disinfection, and work is underway in our Pennsylvania operations to achieve compliance. The federal rule is also expected to require modifications to a few wells or well stations in several other states. In North Carolina, the rule is being coupled with an existing requirement for visitation of well stations or installation of monitoring equipment. In aggregate, the costs of compliance with the requirements of the Groundwater Rule in all of our state operations is estimated at less than 1% of our planned capital program over the next five years.

A rule lowering the limit on arsenic was promulgated in 2001 by the EPA and became effective in January 2006, with a provision for further time extensions for small water systems. One system in Texas was equipped with treatment in 2009. Construction was completed in 2010 for treatment of one well in Pennsylvania acquired in 2008. Two wells acquired in 2011 in Texas have arsenic levels requiring treatment or replacement of the source. One well was taken out of service, and one remains in service. We are working under an EPA administrative order to correct these problems by May 2014, and we expect to have improvements to address the issue at these two Texas facilities completed in 2013 at a total estimated cost of less than $500,000.

The Safe Drinking Water Act provides for the regulation of radionuclides other than radon, such as radium and uranium. Revisions to the Radionuclides Rule that became effective in 2003 changed the monitoring protocols and added a maximum contaminant level for uranium. Under the revised rule, some of our groundwater facilities exceeded one or more of the radionuclide standards and required treatment. Treatment has been installed at all wells that remain in service and that had been identified as needing treatment in the initial round of testing. Ongoing testing continues on quarterly, annual, 3-year or 9-year cycles, as required by applicable regulations, and occasionally test results for an individual well will trigger requirements for public notification and/or treatment. We acquired one well system in Texas in 2011 with uranium levels just over the MCL. A replacement well has been designed and will be drilled in 2013. The future capital cost of compliance with radionuclide requirements over the next five years is expected to be less than 1% of our planned capital budget over that time.

Clean Water Act - The Clean Water Act regulates discharges from drinking water and wastewater treatment facilities into lakes, rivers, streams, and groundwater. It is our policy to obtain and maintain all required permits and approvals for the discharges from our water and wastewater facilities, and to comply with all conditions of those permits and other regulatory requirements. A program is in place to monitor facilities for compliance with permitting, monitoring and reporting for wastewater discharges. From time to time, discharge violations may occur which may result in fines. These fines and penalties, if any, are not expected to have a material impact on our business, financial condition, or results of operations. We are also parties to compliance agreements with regulatory agencies in several states where we operate while improvements are being made to address wastewater discharge compliance issues. The required costs to comply with these compliance agreements are included in our capital program and are expected to be approximately 1% of our planned five-year capital budget.

 

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Solid Waste Disposal - The handling and disposal of residuals and solid waste generated from water and wastewater treatment facilities is governed by federal and state laws and regulations. A program is in place to monitor our facilities for compliance with regulatory requirements, and we are not aware of any significant environmental remediation costs necessary from our handling and disposal of waste material from our water and wastewater operations. Capital expenditures of less than $3,000,000, or less than 1% of our planned five-year capital budget, have been included in our five-year capital budget related to the expansion and/or replacement of some of our current waste disposal facilities in Pennsylvania and Ohio for our large surface water treatment facilities in these states. Three capital projects to reduce waste volume and extend the life of our disposal facilities were completed in the past two years in Pennsylvania. Two more projects are budgeted to be completed in 2013, one in Pennsylvania and one in Ohio.

Dam Safety - Our subsidiaries own fifteen major dams that are subject to the requirements of the federal and state regulations related to dam safety. During 2011, we dismantled two of our major dams, and one of our major dams was reclassified by the Department of Environmental Protection in Pennsylvania to a lower hazard category. All major dams undergo an annual engineering inspection. We believe that all fifteen dams are structurally sound and well-maintained.

We performed studies of our dams that identified two dams in Pennsylvania and two dams in Ohio requiring capital improvements resulting from the adoption by state regulatory agencies of revised formulas for calculating the magnitude of a possible maximum flood event. The most significant capital improvement remaining to be performed is on one dam in Pennsylvania at an estimated cost of $15,000,000. Design and construction for this dam is planned during the six-year period from 2013 to 2018. Expenditures in the aggregate for all four dams during the five-year period from 2013 to 2017 are expected to be approximately 1% of our planned capital program. We continue to study alternatives for these remaining dams which might change the cost estimates and timetables for these capital improvements.

Safety Standards - Our facilities and operations may be subject to inspections by representatives of the Occupational Safety and Health Administration from time to time. We maintain safety policies and procedures to comply with the Occupational Safety and Health Administration’s rules and regulations, but violations may occur from time to time, which may result in fines and penalties, which are not expected to be material. We endeavor to correct such violations promptly when they come to our attention.

Security

We maintain security measures at our facilities, and collaborate with federal, state and local authorities and industry trade associations regarding information on possible threats and security measures for water and wastewater utility operations. In the event of an increase in the cost of security, including capital expenditures, the costs incurred are expected to be recoverable in water rates and are not expected to have a material impact on our business, financial condition, or results of operations.

Employee Relations

As of December 31, 2012, we employed a total of 1,619 full-time employees. Our subsidiaries are parties to 14 labor agreements with labor unions covering 548 employees. The labor agreements expire at various times between May 2013 and May 2016.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. You may also obtain our SEC filings from the SEC’s Web site at www.sec.gov.

Our Internet Web site address is www.aquaamerica.com. We make available free of charge through our Web site’s “Investor Relations” page all of our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information. These reports and information are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

 

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In addition, you may request a copy of the foregoing filings, at no cost by writing or telephoning us at the following address or telephone number:

Investor Relations Department

Aqua America, Inc.

762 W. Lancaster Avenue

Bryn Mawr, PA 19010-3489

Telephone: 610-527-8000

Our Board of Directors has various committees including an audit committee, an executive compensation committee and a corporate governance committee. Each of these committees has a formal charter. We also have Corporate Governance Guidelines and a Code of Ethical Business Conduct. Copies of these charters, guidelines, and codes can be obtained free of charge from our Web site, www.aquaamerica.com. In the event we change or waive any portion of the Code of Ethical Business Conduct that applies to any of our directors, executive officers, or senior financial officers, we will post that information on our Web site.

The references to our Web site and the SEC’s Web site are intended to be inactive textual references only, and the contents of those Web sites are not incorporated by reference herein and should not be considered part of this or any other report that we file with or furnish to the SEC.

 

Item 1A. Risk Factors

In addition to the other information included or incorporated by reference in this 10-K, the following factors should be considered in evaluating our business and future prospects. Any of the following risks, either alone or taken together, could materially and adversely affect our business, financial condition, and results of operations. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we projected.

The rates we charge our customers are subject to regulation. If we are unable to obtain government approval of our requests for rate increases, or if approved rate increases are untimely or inadequate to recover and earn a return on our capital investments, to recover expenses or taxes, or to take into account changes in water usage, our profitability may suffer.

The rates we charge our customers are subject to approval by regulatory commissions or similar regulatory bodies in the states in which we operate. We file rate increase requests, from time to time, to recover our investments in utility plant and expenses. Our ability to maintain and meet our financial objectives is dependent upon the recovery of, and return on, our capital investments and expenses through the rates we charge our customers. Once a rate increase petition is filed with a regulatory commission, the ensuing administrative and hearing process may be lengthy and costly, and the cost to the Company may not always be fully recoverable. The timing of our rate increase requests are therefore partially dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase to the extent approved. In addition, the amount or frequency of rate increases may be decreased or lengthened as a result of changes in income tax laws regarding tax-basis depreciation as it applies to our capital expenditures or qualifying repair tax deductible expenditures. We can provide no assurances that any future rate increase request will be approved by the appropriate state regulatory commission; and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments, expenses, and return for which we initially sought the rate increase.

 

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In some jurisdictions, we may seek authorization to bill our utility customers in accordance with a rate filing that is pending before the respective regulatory commission. Furthermore, some regulatory commissions authorize the use of expense deferrals and amortization in order to provide for an impact on our operating income by an amount that approximates the requested amount in a rate request. The additional revenue billed and collected prior to the final ruling is subject to refund based on the outcome of the ruling. The revenue recognized and the expenses deferred by us reflect an estimate as to the final outcome of the ruling. If the request is denied completely or in part, we could be required to refund some or all of the revenue billed to date, and write-off some or all of the deferred expenses.

The final determination of our income tax liability may be materially different from our income tax provision.

Significant judgment is required in determining our provision for income taxes. Our calculation of the provision for income taxes is subject to our interpretation of applicable business tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service and other taxing authorities. In December 2012, Aqua Pennsylvania changed its tax method of accounting to permit the expensing of certain utility asset improvement costs that were previously being capitalized and depreciated for tax purposes. Our determination of what qualifies as a capital cost versus a repair expense tax deduction is subject to subsequent adjustment and may impact the income tax benefits that have been recognized. Although we believe our income tax estimates are appropriate, there is no assurance that the final determination of our income tax liability will not be materially different; either higher or lower, from what is reflected in our income tax provision. In the event we are assessed additional income taxes, our business, financial condition, and results of operations could be adversely affected.

Our business requires significant capital expenditures that are dependent on our ability to secure appropriate funding. Disruptions in the capital and credit markets may limit our access to capital. If we are unable to obtain sufficient capital, or if the cost of borrowing increases, it may materially and adversely affect our business, financial condition, results of operations, and our ability to pay dividends.

Our business is capital intensive. In addition to the capital required to fund our growth through acquisition strategy, on an annual basis, we spend significant sums for additions to or replacement of property, plant and equipment. We obtain funds for our capital expenditures from operations, contributions and advances by developers and others, equity issuances and debt issuances. We have paid common dividends consecutively for 68 years and our Board of Directors recognizes the value that our common shareholders place on both our historical payment record and on our future common dividend payments. Our ability to maintain and meet our financial objectives is dependent upon the availability of adequate capital, and we may not be able to access the debt and equity markets on favorable terms or at all. The U.S. credit and liquidity crisis of 2008 and 2009 caused substantial volatility in capital markets, including credit markets and the banking industry, generally reduced the availability of credit from financing sources, and could re-occur in the future. If in the future, our credit facilities are not renewed or our short-term borrowings are called for repayment, we would have to seek alternative financing sources; however, there can be no assurance that these alternative financing sources would be available on terms acceptable to us. In the event we are unable to obtain sufficient capital, we may need to take steps to conserve cash by reducing our capital expenditures or dividend payments and our ability to pursue acquisitions that we may rely on for future growth could be impaired. The reduction in capital expenditures may result in reduced potential earnings growth, affect our ability to meet environmental laws and regulations, and limit our ability to improve or expand our utility systems to the level we believe appropriate. There is no guarantee that we will be able to obtain sufficient capital in the future on reasonable terms and conditions for expansion, construction and maintenance. In addition, delays in completing major capital projects could delay the recovery of the capital expenditures associated with such projects through rates. If the cost of borrowing increases, we might not be able to recover increases in our cost of capital through rates. The inability to recover higher borrowing costs through rates, or the regulatory lag associated with the time that it takes to begin recovery, may adversely affect our business, financial condition, and results of operations.

 

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Our inability to comply with debt covenants under our credit facilities could result in prepayment obligations.

We are obligated to comply with debt covenants under some of our loan and debt agreements. Failure to comply with covenants under our credit facilities could result in an event of default, which if not cured or waived, could result in us being required to repay or finance these borrowings before their due date, limit future borrowings, cause cross default issues, and increase borrowing costs. If we are forced to repay or refinance (on less favorable terms) these borrowings our business, financial condition, and results of operations could be adversely affected by increased costs and rates.

General economic conditions may affect our financial condition and results of operations.

A general economic downturn may lead to a number of impacts on our business that may affect our financial condition and results of operations. Such impacts may include: a reduction in discretionary and recreational water use by our residential water customers, particularly during the summer months when such discretionary usage is normally at its highest; a decline in usage by industrial and commercial customers as a result of decreased business activity; an increased incidence of customers’ inability to pay or delays in paying their utility bills, or an increase in customer bankruptcies, which may lead to higher bad debt expense and reduced cash flow; a lower natural customer growth rate due to a decline in new housing starts; and a decline in the number of active customers due to housing vacancies or abandonments. General economic turmoil may also lead to an investment market downturn, which may result in our pension plans’ asset market values suffering a decline and significant volatility. A decline in our pension plans’ asset market values could increase our required cash contributions to these plans and pension expense in subsequent years.

Federal and state environmental laws and regulations impose substantial compliance requirements on our operations. Our operating costs could be significantly increased in order to comply with new or stricter regulatory standards imposed by federal and state environmental agencies.

Our water and wastewater services are governed by various federal and state environmental protection and health and safety laws and regulations, including the federal Safe Drinking Water Act, the Clean Water Act and similar state laws, and federal and state regulations issued under these laws by the EPA and state environmental regulatory agencies. These laws and regulations establish, among other things, criteria and standards for drinking water and for discharges into the waters of the U.S. and states. Pursuant to these laws, we are required to obtain various environmental permits from environmental regulatory agencies for our operations. We cannot assure you that we will be at all times in total compliance with these laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators and/or such violations or noncompliance could result in civil suits. Environmental laws and regulations are complex and change frequently. These laws, and the enforcement thereof, have tended to become more stringent over time. While we have budgeted for future capital and operating expenditures to comply with these laws and our permits, it is possible that new or stricter standards could be imposed that will require additional capital expenditures or raise our operating costs. Although these expenditures and costs may be recovered in the form of higher rates, there can be no assurance that the various state regulatory commissions or similar regulatory bodies that govern our business would approve rate increases to enable us to recover such expenditures and costs. In summary, we cannot assure you that our costs of complying with, or discharging liability under, current and future environmental and health and safety laws will not adversely affect our business, financial condition, or results of operations.

 

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Federal and state environmental laws, regulatory initiatives relating to hydraulic fracturing, and volatility in natural gas and crude oil prices, could result in reduced demand for raw water utilized in hydraulic fracturing and adversely affect our joint venture business, financial condition, or results of operations.

We have invested in a joint venture for the construction and operation of a private pipeline system to supply raw water to certain natural gas drilling operations for hydraulic fracturing. Hydraulic fracturing involves the injection under pressure of water, along with other materials such as sand, into prospective rock formations to stimulate natural gas production. In general, the environmental community has taken an interest in monitoring and understanding the potential environmental impact of hydraulic fracturing. In the event the use of hydraulic fracturing is limited through regulation, our investment in the raw water pipeline may be adversely impacted in the event that demand for raw water is reduced.

Historically, natural gas and crude oil prices have been volatile, and are likely to continue to be volatile. A decrease in demand for natural gas, due to price volatility, could result in reduced demand for raw water utilized in hydraulic fracturing. In the event hydraulic fracturing is limited, due to a reduction in demand for natural gas, our investment in the raw water pipeline may be adversely impacted in the event that demand for raw water is reduced.

Our business is impacted by weather conditions and is subject to seasonal fluctuations, which could adversely affect demand for our water service and our revenues and earnings.

Demand for our water during the warmer months is generally greater than during cooler months due primarily to additional requirements for water in connection with irrigation systems, swimming pools, cooling systems and other outside water use. Throughout the year, and particularly during typically warmer months, demand will vary with temperature, rainfall levels and rainfall frequency. In the event that temperatures during the typically warmer months are cooler than normal, if there is more rainfall than normal, or rainfall is more frequent than normal, the demand for our water may decrease and adversely affect our business, financial condition, and results of operations.

Decreased residential customer water consumption as a result of water conservation efforts may adversely affect demand for our water service and may reduce our revenues and earnings.

We believe there have been general declines in water usage per residential customer as a result of an increase in conservation awareness, and the structural impact of an increased use of more efficient plumbing fixtures and appliances. These gradual, long-term changes are normally taken into account by the regulatory commissions in setting rates, whereas short-term changes in water usage, if significant, may not be fully reflected in the rates we charge. We are dependent upon the revenue generated from rates charged to our residential customers for the volume of water used. If we are unable to obtain future rate increases to offset decreased residential customer water consumption to cover our investments, expenses, and return for which we initially sought the rate increase, our business, financial condition, and results of operations may be adversely affected.

Drought conditions and government imposed water use restrictions may impact our ability to serve our current and future customers, and may impact our customers’ use of our water, which may adversely affect our business, financial condition, and results of operations.

We depend on an adequate water supply to meet the present and future demands of our customers. Drought conditions could interfere with our sources of water supply and could adversely affect our ability to supply water in sufficient quantities to our existing and future customers. An interruption in our water supply could have a material adverse effect on our business, financial condition, and results of operations. Moreover, governmental restrictions on water usage during drought conditions may result in a decreased demand for our water, even if our water supplies are sufficient to serve our customers during these drought conditions, which may adversely affect our business, financial condition, and results of operations.

 

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An important element of our growth strategy is the acquisition of water and wastewater systems. Any future acquisitions we decide to undertake may involve risks. Further, competition for acquisition opportunities from other regulated utilities, governmental entities, and strategic and financial buyers may hinder our ability to grow our business.

An important element of our growth strategy is the acquisition and integration of water and wastewater systems in order to broaden our current, and move into new, service areas. We will not be able to acquire other businesses if we cannot identify suitable acquisition opportunities or reach mutually agreeable terms with acquisition candidates. It is our intent, when practical, to integrate any businesses we acquire with our existing operations. The negotiation of potential acquisitions as well as the integration of acquired businesses could require us to incur significant costs and cause diversion of our management’s time and resources. Future acquisitions by us could result in:

 

   

dilutive issuances of our equity securities;

 

   

incurrence of debt, contingent liabilities, and environmental liabilities;

 

   

unknown capital expenditures;

 

   

failure to maintain effective internal control over financial reporting;

 

   

recording goodwill and other intangible assets for which we may never realize their full value and may result in an asset impairment that may negatively affect our results of operations;

 

   

fluctuations in quarterly results;

 

   

other acquisition-related expenses; and

 

   

exposure to unknown or unexpected risks and liabilities.

Some or all of these items could have a material adverse effect on our business and our ability to finance our business and to comply with regulatory requirements. The businesses we acquire in the future may not achieve sales and profitability that would justify our investment, and any difficulties we encounter in the integration process, including in the integration of processes necessary for internal control and financial reporting, could interfere with our operations, reduce our operating margins and adversely affect our internal controls. We compete with governmental entities, other regulated utilities, and strategic and financial buyers, for acquisition opportunities. As consolidation becomes more prevalent in the water and wastewater industries and competition for acquisitions increases, the prices for suitable acquisition candidates may increase to unacceptable levels and limit our ability to grow through acquisitions. In addition, our competitors may impede our growth by purchasing water utilities near our existing operations, thereby preventing us from acquiring them. Competing governmental entities, utilities, environmental or social activist groups, and strategic and financial buyers have challenged, and may in the future challenge, our efforts to acquire new companies and/or service territories. Our growth could be hindered if we are not able to compete effectively for new companies and/or service territories with other companies or strategic and financial buyers that have lower costs of operations or that can submit more attractive bids. In addition, as consolidation becomes more prevalent in the water and wastewater industries and competition for acquisitions increases, the prices for suitable acquisition candidates may increase to unacceptable levels and limit our ability to grow through acquisitions. Any of these risks may adversely affect our business, financial condition, and results of operations.

 

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We employ a portfolio rationalization strategy to focus our operations in areas where we have critical mass and economic growth potential and to divest operations where limited customer growth opportunities exist or where we are unable to achieve favorable operating results or a return on equity that we consider acceptable. Dispositions we decide to undertake may involve risks which could adversely affect our business, operating results and financial condition.

In the event we determine a division, utility system or business should be sold, we may be unable to reach terms that are agreeable to us or be able to find a suitable buyer. If the business is part of our regulated operations, we may face additional challenges in obtaining regulatory approval for the disposition, and the regulatory approval obtained may include restrictive conditions. We may be required to continue to hold or assume certain residual liabilities with respect to the business sold. The negotiation of potential dispositions as well as the efforts to divest the acquired business could require us to incur significant costs and cause diversion of our management’s time and resources. Any of these risks may adversely affect our business, financial condition, and results of operations.

Our water and wastewater systems may be subject to condemnations or other methods of taking by governmental entities.

In the states where our subsidiaries operate, it is possible that portions of our subsidiaries’ operations could be acquired by municipal governments by one or more of the following methods:

 

   

eminent domain;

 

   

the right of purchase given or reserved by a municipality or political subdivision when the original franchise was granted; and

 

   

the right of purchase given or reserved under the law of the state in which the subsidiary was incorporated or from which it received its permit given or reserved by a municipality or political subdivision when the original franchise was granted.

The price to be paid upon such an acquisition by the municipal government is usually determined in accordance with applicable law governing the taking of lands and other property under eminent domain. In other instances, the price may be negotiated, fixed by appraisers selected by the parties or computed in accordance with a formula prescribed in the law of the state or in the particular franchise or charter. We believe that our operating subsidiaries will be entitled to receive fair market value for any assets that are condemned. However, there is no assurance that the fair market value received for assets condemned will be in excess of book value.

In a limited number of instances, in one of our southern states where there are municipally-owned water or wastewater systems near our operating divisions, the municipally-owned system may either have water distribution or wastewater collection mains that are located adjacent to our division’s mains or may construct new mains that parallel our mains. In these circumstances, on occasion, the municipally-owned system may attempt to take over the customers who are connected to our mains, resulting in our mains becoming surplus or underutilized without compensation.

Contamination of our water supply may result in disruption in our services and litigation which could adversely affect our business, operating results and financial condition.

Our water supplies are subject to possible contamination, including: contamination from naturally-occurring compounds; chemicals in groundwater systems; pollution resulting from man-made sources, such as man-made organic chemicals; pharmaceuticals and personal care products; and possible deliberate or terrorist attacks. In the event that a water supply is contaminated, we may have to interrupt the use of that water supply until we are able to substitute, where feasible, the flow of water from an uncontaminated water source. In addition, we may incur significant costs in order to treat the contaminated source through expansion of our current treatment facilities, or development of new treatment methods. If we are unable to substitute water supply from an uncontaminated water source, or to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our business, financial condition, and results of operations. The costs we incur to decontaminate a water source or an underground water system could be significant and could adversely affect our business, financial condition, and results of operations, and may not be recoverable in rates. We could also be held liable for consequences arising out of human exposure to contamination and/or hazardous substances in our water supplies or other environmental damage. We may incur costs to defend our position even if we are not liable for consequences arising out of human exposure to contamination and/or hazardous substances in our water supplies or other environmental damage. Our insurance policies may not be sufficient to cover the costs of these claims.

 

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In addition to the potential pollution of our water supply as described above, we maintain security measures at our facilities and have heightened employee awareness of potential threats to our water systems. We have and will continue to bear increases in costs for security precautions to protect our facilities, operations, and supplies, most of which have been recoverable under state regulatory policies. While the costs of increases in security, including capital expenditures, may be significant, we expect these costs to continue to be recoverable in water and wastewater rates. Despite our security measures, we may not be in a position to control the outcome of terrorist events, or other attacks on our water systems should they occur.

Wastewater operations entail significant risks and may impose significant costs.

Wastewater collection and treatment and septage pumping and sludge hauling involve various unique risks. If collection or treatment systems fail or do not operate properly, or if there is a spill, untreated or partially treated wastewater could discharge onto property or into nearby streams and rivers, causing various damages and injuries, including environmental damage. These risks are most acute during periods of substantial rainfall or flooding, which are the main causes of sewer overflow and system failure. Liabilities resulting from such damages and injuries could materially and adversely affect our business, financial condition, and results of operations.

The failure of, or the requirement to repair, upgrade or dismantle, any of our dams or reservoirs may adversely affect our business, financial condition, and results of operations.

Several of our water systems include impounding dams and reservoirs of various sizes. Although we believe our dams are structurally sound and well-maintained, the failure of a dam could result in significant downstream property damage or injuries for which we may be liable. We periodically inspect our dams and purchase liability insurance to cover such risks, but depending on the nature of the downstream damage and cause of the failure, the policy limits of insurance coverage may not be sufficient. A dam failure could also result in damage to, or disruption of, our water treatment and pumping facilities that are often located downstream from our dams and reservoirs. Significant damage to these facilities could affect our ability to provide water to our customers and, consequently, our results of operations until the facilities and a sufficient raw water impoundment can be restored. The estimated costs to maintain our dams are included in our capital budget projections and, although such costs to date have been recoverable in rates, there can be no assurance that rate increases will be granted in a timely or sufficient manner to recover such costs in the future, if at all.

Any failure of our water and wastewater treatment plants, network of water and wastewater pipes, or water reservoirs could result in losses and damages that may affect our reputation and our business, financial condition, and results of operations.

Our operating subsidiaries treat water and wastewater, distribute water and collect wastewater through an extensive network of pipes, and store water in reservoirs. A failure of a major treatment plant, pipe, or reservoir could result in injuries and property damage for which we may be liable. The failure of a major treatment plant, pipe, or reservoir may also result in the need to shut down some facilities or parts of our network in order to conduct repairs. Such failures and shutdowns may limit our ability to supply water in sufficient quality and quantities to our customers or collect and treat wastewater in accordance with standards prescribed by governmental regulators, including state regulatory commissions, with jurisdiction over our operations, and may adversely affect our reputation and our business, financial condition, and results of operations. Any business interruption or other losses might not be covered by insurance policies or be recoverable in rates, and such losses may make it difficult for us to secure insurance in the future at acceptable rates.

 

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Work stoppages and other labor relations matters could adversely affect our operating results.

Approximately 34% of our workforce is unionized under 14 labor contracts with labor unions, which expire over several years. In light of rising costs for healthcare and retirement benefits, contract negotiations in the future may be difficult. We are subject to a risk of work stoppages and other labor actions as we negotiate with the unions to address these issues, which could affect our business, financial condition, and results of operations. We cannot assure you that issues with our labor forces will be resolved favorably to us in the future or that we will not experience work stoppages.

Significant or prolonged disruptions in the supply of important goods or services from third parties could adversely affect our business, financial condition, and results of operations.

We are dependent on a continuing flow of important goods and services from suppliers for our water and wastewater businesses. A disruption or prolonged delays in obtaining important supplies or services, such as maintenance services, purchased water, chemicals, electricity, or other materials, could adversely affect our water or wastewater services and our ability to operate in compliance with all regulatory requirements, which could have a significant effect on our business, financial condition, and results of operations. In certain circumstances, we rely on third parties to provide certain important services (such as certain customer bill print and mail activities or utility service operations in some of our divisions) and a disruption in these services could materially and adversely affect our business, financial condition, and results of operations. Some possible reasons for a delay or disruption in the supply of important goods and services include:

 

   

our suppliers may not provide materials that meet our specifications in sufficient quantities;

 

   

our suppliers may provide us with water that does not meet applicable quality standards or is contaminated;

 

   

our suppliers may face production delays due to natural disasters, strikes, lock-outs, or other such actions;

 

   

one or more suppliers could make strategic changes in the lines of products and services they offer; and

 

   

some of our suppliers, such as small companies, may be more likely to experience financial and operational difficulties than larger, well-established companies, because of their limited financial and other resources.

As a result of any of these factors, we may be required to find alternative suppliers for the materials and services on which we rely. Accordingly, we may experience delays in obtaining appropriate materials and services on a timely basis and in sufficient quantities from such alternative suppliers at a reasonable price, which could interrupt services to our customers and adversely affect our business, financial condition, and results of operations.

We are increasingly dependent on the continuous and reliable operation of our information technology systems, and a disruption of these systems could adversely affect our business.

We rely on our information technology systems in connection with the operation of our business, especially with respect to customer service and billing, accounting and, in some cases, the monitoring and operation of our treatment, storage and pumping facilities. In addition, we rely on our systems to track our utility assets and to manage maintenance and construction projects, materials and supplies, and our human resource functions. A loss of these systems, or major problems with the operation of these systems, could adversely affect our operations and have a material adverse effect on our business, financial condition, and results of operations. Although we do not believe that our systems are at a materially greater risk of cyber security incidents than other similar organizations, our information technology systems may be vulnerable to damage or interruption from:

 

   

power loss, computer systems failures, and internet, telecommunications or data network failures;

 

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operator negligence or improper operation by, or supervision of, employees;

 

   

physical and electronic loss of data;

 

   

computer viruses;

 

   

intentional security breaches, hacking, denial of service actions, misappropriation of data and similar events; and

 

   

hurricanes, fires, floods, earthquakes and other natural disasters.

Such cyber security incidents may result in the loss or compromise of customer, financial or operational data, disruption of billing, collections or normal field service activities, disruption of electronic monitoring and control of operational systems and delays in financial reporting and other normal management functions. Possible impacts associated with a cyber security incident may include remediation costs related to lost, stolen, or compromised data, repairs to data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and environmental laws and regulation, including standards for drinking water, litigation and reputational damage.

We depend significantly on the services of the members of our management team, and the departure of any of those persons could cause our operating results to suffer.

Our success depends significantly on the continued individual and collective contributions of our management team. The loss of the services of any member of our management team or the inability to hire and retain experienced management personnel could harm our business, financial condition, and results of operations.

Climate change laws and regulations may be adopted that could require compliance with greenhouse gas emissions standards and other climate change initiatives. Additional capital expenditures could be required and our operating costs could be increased in order to comply with new regulatory standards imposed by federal and state environmental agencies.

Climate change is receiving ever increasing attention worldwide. Many scientists, legislators, and others attribute global warming to increased levels of greenhouse gases (GHG), including carbon dioxide. Climate change legislation has been introduced from time to time in Congress, and if enacted, would limit GHG emissions from covered entities through a “cap and trade” system to reduce the quantity of national GHG emissions in accordance with established goals and timelines. Possible new climate change laws and regulations, if enacted, may require us to monitor and/or change our utility operations. GHG emissions occur at several points across our utility operations, notably our use of service vehicles and energy. It is possible that new standards could be imposed that will require additional capital expenditures or raise our operating costs. Because it is uncertain what laws will be enacted, we cannot predict the potential impact of such laws on our business, financial condition, or results of operations. Although these expenditures and costs may be recovered in the form of higher rates, there can be no assurance that the various state regulatory commissions or similar regulatory bodies that govern our business would approve rate increases to enable us to recover such expenditures and costs. We cannot assure you that our costs of complying with new standards or laws will not adversely affect our business, financial condition, and results of operations.

 

Item 1B. Unresolved Staff Comments.

None.

 

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Item 2. Properties.

Our properties consist of transmission and distribution mains and conduits, water and wastewater treatment plants, pumping facilities, wells, tanks, meters, pipes, dams, reservoirs, buildings, vehicles, land, easements, rights and other facilities and equipment used for the operation of our systems, including the collection, treatment, storage, and distribution of water and the collection and treatment of wastewater. Substantially all of our treatment, storage, and distribution properties are owned by our subsidiaries, and a substantial portion of our property is subject to liens of mortgage or indentures. These liens secure bonds, notes and other evidences of long-term indebtedness of our subsidiaries. For certain properties that we acquired through the exercise of the power of eminent domain and certain other properties we purchased, we hold title for water supply purposes only. We own, operate and maintain over ten thousand miles of transmission and distribution mains, surface water treatment plants, and many well treatment stations and wastewater treatment plants. A minority of the properties are leased under long-term leases.

The following table indicates for our continuing operations our net property, plant and equipment, in thousands of dollars, as of December 31, 2012 in the principal states where we operate:

 

     Net Property,
Plant and
Equipment
        

Pennsylvania

   $ 2,474,269        62.9

Ohio

     349,211        8.9

North Carolina

     263,253        6.7

Illinois

     258,588        6.6

Texas

     227,893        5.8

Other (a)

     362,949        9.1
  

 

 

    

 

 

 

Consolidated

   $ 3,936,163        100.0
  

 

 

    

 

 

 

 

(a) Includes our operating subsidiaries in the following states: New Jersey, Indiana, and Virginia.

We believe that our properties are generally maintained in good condition and in accordance with current standards of good water and wastewater industry practice. We believe that our facilities are adequate and suitable for the conduct of our business and to meet customer requirements under normal circumstances.

Our corporate offices are leased from our subsidiary, Aqua Pennsylvania, and are located in Bryn Mawr, Pennsylvania.

 

Item 3. Legal Proceedings

There are various legal proceedings in which we are involved. Although the results of legal proceedings cannot be predicted with certainty, there are no pending legal proceedings, other than as set forth below, to which we or any of our subsidiaries is a party or to which any of our properties is the subject that we believe are material or are expected to have a material adverse effect on our financial position, results of operations or cash flows.

For legal proceedings which were concluded during the first nine months of 2012, refer to our respective 2012 10-Q filings for disclosure of the conclusion of these legal proceedings.

 

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The City of Fort Wayne, Indiana (the “City”) authorized the acquisition by eminent domain of the northern portion of the utility system of one of the Company’s operating subsidiaries in Indiana. In January 2008, we reached a settlement with the City to transition this portion of the system in February 2008 upon receipt of the City’s initial valuation payment of $16,910,500. The settlement agreement specifically stated that the final valuation of the system will be determined through a continuation of the legal proceedings that were filed challenging the City’s valuation. On February 12, 2008, we turned over the northern portion of the system to the City upon receipt of the initial valuation payment. The proceeds received by the Company are in excess of the book value of the assets relinquished. No gain has been recognized due to the contingency over the final valuation of the assets. The net book value of the assets relinquished has been removed from the consolidated balance sheet and the difference between the net book value and the initial payment received has been deferred and is recorded in other accrued liabilities on the Company’s consolidated balance sheet. Once the contingency is resolved and the asset valuation is finalized, through the finalization of the litigation between the Company and the City of Fort Wayne, the amounts deferred will be recognized in the Company’s consolidated income statement. On March 16, 2009, oral argument was held before the Allen County Circuit Court on certain procedural aspects with respect to the valuation evidence that may be presented and whether we are entitled to a jury trial. On October 12, 2010, the Wells County Indiana Circuit Court ruled that the Company is not entitled to a jury trial, and that the Wells County judge should review the City of Fort Wayne Board of Public Works’ assessment based upon a “capricious, arbitrary or an abuse of discretion” standard. The Company appealed the Wells County Indiana Circuit Court’s decision to the Indiana Court of Appeals. On January 13, 2012, the Indiana Court of Appeals reached a decision upholding the Wells County Indiana Circuit Court decision. On February 10, 2012, the Company filed a petition for transfer requesting that the Indiana Supreme Court review the matter. The Supreme Court of Indiana accepted transfer and the matter is pending the Court’s decision. The Company continues to evaluate its legal options with respect to this decision. Depending upon the outcome of all of the legal proceedings we may be required to refund a portion of the initial valuation payment, or may receive additional proceeds. The northern portion of the system relinquished represented approximately 0.40% of Aqua America’s total assets. In addition, in December 2012, the Fort Wayne City Council considered an ordinance that sought to declare it a “public convenience and necessity” to acquire certain of Company’s utility system assets located in the southwest section of the City and, if negotiations with Fort Wayne officials were to fail, to condemn certain of the Company’s utility system assets. The first public hearing on the ordinance was held on January 22, 2013 and a subsequent hearing scheduled for February 5, 2013 was not held due to ongoing settlement discussions between the parties. The Company will participate in the City Council proceedings and will evaluate its legal options.

An appeal of a jury verdict for one of the Company’s subsidiaries, Aqua Utilities Florida, Inc., by a husband and wife who lived in a house abutting a percolation pond at a wastewater treatment plant owned by the Company’s subsidiary in Pasco County, Florida has been voluntarily dismissed by the plaintiffs. The lawsuit was originally filed in August 2006 in the circuit court for the Sixth Judicial Circuit in and for Pasco County, Florida and has been amended several times by the plaintiffs. The lawsuit alleged our subsidiary was negligent in the design, operation and maintenance of the plant, resulting in bodily injury to the plaintiffs and various damages to their property. Subsequent amendments to the complaint included additional counts alleging trespass, nuisance, and strict liability. A trial of this matter during January 2011 resulted in a judicial dismissal of the count for strict liability and jury verdicts in favor of the Company on the remaining counts. On June 16, 2011, the plaintiffs agreed to dismiss their appeals and to release all claims against our subsidiary and the Company, which resulted in the conclusion of the original plaintiffs’ litigation against our subsidiary. In the third quarter of 2008, approximately thirty-five additional plaintiffs, associated with approximately eight other homes in the area, filed a second lawsuit with the same court and represented by the same attorneys making similar allegations against our subsidiary with respect to the operation of the facility. The court has severed the litigation so that the plaintiffs will be grouped by the houses in which they lived and a separate trial will be held for each of the households. Some of these plaintiffs testified in the trial of the original lawsuit in which all allegations were resolved in the Company’s favor. The claims from the first of these households is expected to go to trial in May 2013. The lawsuit has been submitted to our insurance carriers, who have reserved their rights with respect to various portions of the plaintiffs’ claims. Based on the ultimate outcome of the litigation, we may or may not have insurance coverage for parts or all of the claim. The Company continues to assess this matter and any potential loss. At this time, the Company believes that the estimated amount of any potential loss would not be material to the Company’s consolidated results of operations or consolidated financial condition.

 

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One of the Company’s subsidiaries, South Haven Sewer Works, acquired in 2008 has been operating under a Consent Decree with the EPA and the United States Department of Justice entered into in 2003. The Consent Decree addresses the elimination of sanitary sewer overflows from the subsidiary’s sewer system. Although substantial improvements to the system have been made to significantly reduce the number of sanitary sewer overflows at the sewer system since the Company’s acquisition of the subsidiary, the EPA and Department of Justice proposed on May 11, 2010, a revised Consent Decree, including new dates for completing work to address sanitary sewer overflows in the system and a proposed civil penalty, which is currently estimated to be approximately $254,000 for purported sanitary sewer overflow violations since the date of the original Consent Decree, which was entered into by the original owner. The Company’s subsidiary had contested the appropriateness of earlier calculations of the proposed penalty based on sanitary sewer violations occurring prior to the acquisition of the subsidiary and the amount of the proposed penalty. The Company continues to negotiate a proposed modification with the EPA and Department of Justice to resolve the matter. The Company had withheld payment of a certain amount of shares payable to the sellers as a contingent indemnification offset related to the proceedings. Pursuant to further agreement with the sellers, the Company has retained a portion of those shares in an amount anticipated to cover penalty amounts and attendant costs, continued to withhold a designated amount of shares to cover contingent increases, and released a certain number of shares to the sellers.

 

Item 4. Mine Safety Disclosures

Not applicable.

PART II

 

Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange under the ticker symbol WTR. As of February 14, 2013, there were approximately 26,126 holders of record of our common stock.

The following table shows the high and low intraday sales prices for our common stock as reported on the New York Stock Exchange composite transactions reporting system and the cash dividends paid per share for the periods indicated:

 

     First
Quarter
     Second
Quarter
     Third
Quarter
     Fourth
Quarter
     Year  

2012

                                  

Dividend paid per common share

   $ 0.165      $ 0.165      $ 0.165      $ 0.175      $ 0.670  

Dividend declared per common share

     0.165        0.165        0.340        —           0.670  

Price range of common stock

              

- high

     22.75         25.17         26.93         25.94         26.93  

- low

     21.06         21.52         24.06         24.15         21.06  

2011

                                  

Dividend paid per common share

   $ 0.155      $ 0.155      $ 0.155      $ 0.165      $ 0.630  

Dividend declared per common share

     0.155        0.155        0.320        —           0.630  

Price range of common stock

              

- high

     23.79         23.28         22.74         22.52         23.79  

- low

     21.56         21.03         19.28         20.16         19.28  

We have paid common dividends consecutively for 68 years. Effective August 2, 2012, our Board of Directors authorized an increase of 6.1% in the December 1, 2012 quarterly dividend over the dividend Aqua America, Inc. paid in the previous quarter. As a result of this authorization, beginning with the dividend payment in December 2012, the annualized dividend rate increased to $0.70 per share. This is the 22nd dividend increase in the past 21 years and the fourteenth consecutive year that we have increased our dividend in excess of five percent. We presently intend to pay quarterly cash dividends in the future, on March 1, June 1, September 1, and December 1, subject to our earnings and financial condition, restrictions set forth in our debt instruments, regulatory requirements and such other factors as our Board of Directors may deem relevant. During the past five years, our common dividends paid have averaged 60.8% of net income attributable to common shareholders.

 

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The following table summarizes the Company’s purchases of its common stock for the quarter ending December 31, 2012:

Issuer Purchases of Equity Securities

 

Period

   Total
Number
of Shares
Purchased (1)
     Average
Price Paid
per Share
     Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
     Maximum
Number of
Shares
that May
Yet Be
Purchased
Under the
Plan or
Programs (2)
 

October 1-31, 2012

     —         $ —           —           548,278  

November 1-30, 2012

     —         $ —           —           548,278  

December 1-31, 2012

     14,358      $ 24.69        —           548,278  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     14,358      $ 24.69        —           548,278  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Represents shares withheld and placed in treasury shares by the Company in conjunction with a prior acquisition of a wastewater company in accordance with the purchase agreement.
(2) On August 5, 1997, our Board of Directors authorized a common stock repurchase program that was publicly announced on August 7, 1997, for up to 1,007,351 shares. No repurchases have been made under this program since 2000. The program has no fixed expiration date. The number of shares authorized for purchase was adjusted as a result of the stock splits effected in the form of stock distributions since the authorization date.

 

Item 6. Selected Financial Data

The information appearing in the section captioned “Summary of Selected Financial Data” from the portions of our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K is incorporated by reference herein.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information appearing in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” from the portions of our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K is incorporated by reference herein.

 

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risks in the normal course of business, including changes in interest rates and equity prices. The exposure to changes in interest rates is a result of financings through the issuance of fixed rate, long-term debt. Such exposure is typically related to financings between utility rate increases, since generally our rate increases include a revenue level to allow recovery of our current cost of capital. Interest rate risk is managed through the use of a combination of long-term debt, which is at fixed interest rates and short-term debt, which is at floating interest rates. As of December 31, 2012, the debt maturities by period, in thousands of dollars, and the weighted average interest rate for long-term debt are as follows:

 

     2013     2014     2015     2016     2017     Thereafter     Total     Fair
Value
 

Long-term debt:

                

Fixed rate

   $ 45,038     $ 86,419     $ 58,487     $ 35,607     $ 42,769     $ 1,220,672     $ 1,488,992     $ 1,602,997  

Variable rate

     —          —          —          —          100,000       —          100,000       100,000  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 45,038     $ 86,419     $ 58,487     $ 35,607     $ 142,769     $ 1,220,672     $ 1,588,992     $ 1,702,997  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average interest rate*

     5.37     5.17     5.21     4.85     2.33     5.08     4.81  

 

* Weighted average interest rate of 2017 long-term debt maturity is as follows: fixed rate debt of 5.08% and variable rate debt of 1.15%.

From time to time, we make investments in marketable equity securities. As a result, we are exposed to the risk of changes in equity prices for the “available-for-sale” marketable equity securities. As of December 31, 2012, the carrying value of certain investments, which reflects market value, in thousands of dollars, was $494.

 

Item 8. Financial Statements and Supplementary Data

Information appearing under the captions “Consolidated Statements of Net Income,” “Consolidated Statements of Comprehensive Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Capitalization,” “Consolidated Statements of Equity” and “Notes to Consolidated Financial Statements” from the portions of our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K is incorporated by reference herein. Also, the information appearing in the sections captioned “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” from the portions of our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K is incorporated by reference herein.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures - Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

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(b) Management’s Report on Internal Control Over Financial Reporting - The information appearing in the section captioned “Management’s Report on Internal Control Over Financial Reporting” from the portions of our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K is incorporated by reference herein.

(c) Attestation Report of the Registered Public Accounting Firm - The Attestation Report of our Independent Registered Public Accounting Firm as to our internal control over financial reporting, contained in our 2012 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K, is incorporated by reference herein. With the exception of the aforementioned information and the information incorporated by reference in Items 6, 7, and 8, the 2012 Annual Report to Shareholders is not to be deemed filed as part of the Annual Report on Form 10-K.

(d) Changes in Internal Control Over Financial Reporting - No change in our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

None.

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

We make available free of charge within the Corporate Governance portion of the Investor Relations section of our web site, at www.aquaamerica.com, our Corporate Governance Guidelines, the Charters of each Committee of our Board of Directors, and our Code of Ethical Business Conduct (the “Code”). Amendments to the Code, and any grant of a waiver from a provision of the Code requiring disclosure under applicable SEC rules, will be disclosed on our Web site. The reference to our Web site is intended to be an inactive textual reference only, and the contents of such Web site are not incorporated by reference herein and should not be considered part of this or any other report that we file with or furnish to the SEC.

Directors of the Registrant, Audit Committee, Audit Committee Financial Expert and Filings under Section 16(a)

The information appearing in the sections captioned “Information Regarding Nominees and Directors,” “Corporate Governance - Code of Ethics”, - “Board and Board Committees”, and - “Audit Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the definitive Proxy Statement relating to our May 8, 2013, annual meeting of shareholders, to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, is incorporated by reference herein.

 

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Our Executive Officers

The following table and the notes thereto set forth information with respect to our executive officers, including their names, ages, positions with Aqua America, Inc. and business experience during the last five years:

 

Name

  

Age

  

Position with Aqua America, Inc. (1)

Nicholas DeBenedictis    67    Chairman, President and Chief Executive Officer (May 1993 to present); President and Chief Executive Officer (July 1992 to May 1993); Chairman and Chief Executive Officer, Aqua Pennsylvania (July 1992 to present); President, Philadelphia Suburban Water Company (February 1995 to January 1999) (2)
David P. Smeltzer    54    Executive Vice President and Chief Financial Officer (January 2012 to present); Chief Financial Officer (February 2007 to January 2012); Senior Vice President - Finance and Chief Financial Officer (December 1999 to February 2007); Vice President - Finance and Chief Financial Officer (May 1999 to December 1999); Vice President - Rates and Regulatory Relations, Philadelphia Suburban Water Company (March 1991 to May 1999) (3)
Christopher H. Franklin    48    Executive Vice President and President and Chief Operating Officer, Regulated Operations (January 2012 to Present); Regional President - Midwest and Southern Operations and Senior Vice President, Corporate and Public Affairs (January 2010 to January 2012); Regional President, Aqua America - Southern Operations and Senior Vice President, Public Affairs and Customer Operations (January 2007 to January 2010); Vice President, Public Affairs and Customer Operations (July 2002 to January 2007) (4)
Karl M. Kyriss    62    Executive Vice President and President, Aqua Capital Ventures (January 2012 to present); Regional President - Northeastern Operations (January 2010 to January 2012); Regional President, Aqua Mid-Atlantic Operations (February 2007 to January 2010); President - Aqua Pennsylvania (March 2003 to present) and President, Mid-Atlantic Operations (May 2005 to February 2007) (5)
Christopher P. Luning    45    Senior Vice President, General Counsel, and Secretary (April 2012 to present); Vice President Corporate Development and Corporate Counsel (June 2008 to April 2012); Vice President and Deputy General Counsel (May 2005 to June 2008); Assistant General Counsel (March 2003 to May 2005)
William C. Ross    67    Senior Vice President, Engineering and Environmental Affairs (January 2012 to present); Vice President, Engineering and Environmental Affairs (February 2001 to January 2012); Senior Manager Planning and Engineering Philadelphia Suburban Water Company (February 1998 to February 2001)
Robert A. Rubin    50    Senior Vice President, Controller and Chief Accounting Officer (January 2012 to present); Vice President, Controller and Chief Accounting Officer (May 2005 to January 2012); Controller and Chief Accounting Officer (March 2004 to May 2005); Controller (March 1999 to March 2004) (6)

Prior to January 16, 2004, Aqua Pennsylvania was known as Philadelphia Suburban Water Company.

 

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(1) In addition to the capacities indicated, the individuals named in the above table hold other offices or directorships with subsidiaries of the Company. Officers serve at the discretion of the Board of Directors.
(2) Mr. DeBenedictis was Secretary of the Pennsylvania Department of Environmental Resources from 1983 to 1986. From December 1986 to April 1989, he was President of the Greater Philadelphia Chamber of Commerce. Mr. DeBenedictis was Senior Vice President for Corporate and Public Affairs of Philadelphia Electric Company from April 1989 to June 1992.
(3) Mr. Smeltzer was Vice President - Controller of Philadelphia Suburban Water Company from March, 1986 to March 1991.
(4) Mr. Franklin was Director of Public Affairs from January 1993 to February 1997.
(5) Mr. Kyriss was Vice President - Northeast Region of American Water Works Services Company from 1997 to 2003.
(6) Mr. Rubin was Accounting Manager with Aqua America, Inc. from June 1989 to June 1994. He then served from June 1994 to March 1999 as Assistant Controller of Philadelphia Suburban Water Company.

 

Item 11. Executive Compensation

The information appearing in the sections captioned “Executive Compensation” and “Director Compensation” of the definitive Proxy Statement relating to our May 8, 2013, annual meeting of shareholders, to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, is incorporated by reference herein.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Ownership of Common Stock - The information appearing in the section captioned “Ownership of Common Stock” of the Proxy Statement relating to our May 8, 2013, annual meeting of shareholders, to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, is incorporated by reference herein.

 

30


Table of Contents

Securities Authorized for Issuance under Equity Compensation Plans - The following table provides information for our equity compensation plans as of December 31, 2012:

Equity Compensation Plan Information

 

Plan Category

  Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
    Weighted-average exercise
price of outstanding
options, warrants and
rights
(b)
    Number of  securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a)
(c)
 

Equity compensation plans approved by security holders

    2,896,975  (1)    $ 20.81  (2)      3,861,837  

Equity compensation plans not approved by security holders

    0        0        0   
 

 

 

   

 

 

   

 

 

 

Total

    2,896,975     $ 20.81        3,861,837  
 

 

 

   

 

 

   

 

 

 

 

(1) Consists of 2,497,282 shares issuable upon exercise of outstanding options, 331,225 shares issuable upon conversion of outstanding performance share units, and 68,468 shares issuable upon conversion of outstanding restricted share units.
(2) Calculated based upon outstanding options of 2,497,282 shares of our common stock.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information appearing in the sections captioned “Corporate Governance - Director Independence” and “ - Policies and Procedures For Approval of Related Person Transactions” of the definitive Proxy Statement relating to our May 8, 2013, annual meeting of shareholders, to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, is incorporated by reference herein.

 

Item 14. Principal Accountant Fees and Services

The information appearing in the section captioned “Proposal No. 2 - Services and Fees” of the definitive Proxy Statement relating to our May 8, 2013, annual meeting of shareholders, to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, is incorporated by reference herein.

 

31


Table of Contents

PART IV

 

Item 15. Exhibits and Financial Statement Schedules

Financial Statements. The following is a list of our consolidated financial statements and supplementary data incorporated by reference in Item 8 hereof:

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets - December 31, 2012 and 2011

Consolidated Statements of Net Income - 2012, 2011, and 2010

Consolidated Statements of Comprehensive Income - 2012, 2011, and 2010

Consolidated Statements of Cash Flows - 2012, 2011, and 2010

Consolidated Statements of Capitalization - December 31, 2012 and 2011

Consolidated Statements of Equity - 2012, 2011, and 2010

Notes to Consolidated Financial Statements

Financial Statement Schedules. All schedules to our consolidated financial statements are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.

Exhibits, Including Those Incorporated by Reference. A list of exhibits filed as part of this Form 10-K is set forth in the Exhibit Index hereto which is incorporated by reference herein. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated in parentheses.

 

32


Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AQUA AMERICA, INC.
By  

Nicholas DeBenedictis

  Nicholas DeBenedictis
  Chairman, President and Chief Executive Officer

Date: February 28, 2013

 

33


Table of Contents

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Nicholas DeBenedictis

   

David P. Smeltzer

Nicholas DeBenedictis     David P. Smeltzer
Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)     Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Robert A. Rubin

   

Mary C. Carroll

Robert A. Rubin     Mary C. Carroll
Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)     Director

Richard H. Glanton

   

Lon R. Greenberg

Richard H. Glanton     Lon R. Greenberg
Director     Director

William P. Hankowsky

   

Wendell F. Holland

William P. Hankowsky     Wendell F. Holland
Director     Director

Mario Mele

   

Ellen T. Ruff

Mario Mele     Ellen T. Ruff
Director     Director
   

Andrew J. Sordoni III

    Andrew J. Sordoni III
    Director

 

34


Table of Contents

EXHIBIT INDEX

 

Exhibit No.

  

Description

    2.1

   Stock Purchase Agreement, dated as of July 26, 2011, by and between Aqua America, Inc. and Connecticut Water Service, Inc. (32) (Exhibit 2.1)

    2.2

   Stock Purchase Agreement, dated as of July 8, 2011, by and among American Water Works Company, Inc., Ohio-American Water Company and Aqua Ohio, Inc. (32) (Exhibit 2.2)

    2.3

   Stock Purchase Agreement, dated as of July 8, 2011, by and among Aqua Utilities, Inc., Aqua New York, Inc. and American Water Works Company, Inc. (32) (Exhibit 2.3)

    2.4

   Utility System Asset Acquisition Agreement as of December 28, 2012 by and among Florida Governmental Utility Authority, as buyer and Aqua Utilities Florida, Inc., and Crystal River Utilities, Inc., as sellers

    3.1

   Restated Articles of Incorporation as of December 9, 2004 (15) (Exhibit 3.1)

    3.2

   Bylaws, as amended effective as of October 5, 2010 (29) (Exhibit 3.2)

    3.3

   Amended and Restated Articles of Incorporate of Aqua America, Inc. as of May 10, 2012 (36) (Exhibit 3.1)

    3.4

   Bylaws, as amended effective as of May 10, 2012 (36) (Exhibit 3.2)

    4.1

   Indenture of Mortgage dated as of January 1, 1941 between Philadelphia Suburban Water Company and The Pennsylvania Company for Insurance on Lives and Granting Annuities (now First Pennsylvania Bank, N.A.), as Trustee, with supplements thereto through the Twentieth Supplemental Indenture dated as of August 1, 1983 (2) (Exhibits 4.1 through 4.16)

    4.2

   Agreement to furnish copies of other long-term debt instruments (1) (Exhibit 4.7)

    4.3

   Twenty-fourth Supplemental Indenture dated as of June 1,1988 (3) (Exhibit 4.5)

    4.4

   Twenty-fifth Supplemental Indenture dated as of January 1, 1990 (4) (Exhibit 4.6)

    4.5

   Twenty-sixth Supplemental Indenture dated as of November 1, 1991 (5) (Exhibit 4.12)

    4.6

   Twenty-ninth Supplemental Indenture dated as of March 30,1995 (6) (Exhibit 4.17)

    4.7

   Thirty-third Supplemental Indenture, dated as of November 15, 1999 (9) (Exhibit 4.27)

    4.8

   Thirty-fourth Supplemental Indenture, dated as of October 15, 2001 (11) (Exhibit 4.21)

    4.9

   Thirty-fifth Supplemental Indenture, dated as of January 1, 2002 (11) (Exhibit 4.22)

    4.10

   Thirty-sixth Supplemental Indenture, dated as of June 1, 2002 (12) (Exhibit 4.23)

    4.11

   Thirty-seventh Supplemental Indenture, dated as of December 15, 2002 (13) (Exhibit 4.23)

    4.12

   Note Purchase Agreement among the note purchasers and Philadelphia Suburban Corporation, dated July 31, 2003 (14) (Exhibit 4.27)

    4.13

   Thirty-eighth Supplemental Indenture, dated as of November 15, 2004 (20) (Exhibit 4.28)

    4.14

   Thirty-ninth Supplemental Indenture, dated as of May 1, 2005 (19) (Exhibit 4.29)

    4.15

   Fortieth Supplemental Indenture, dated as of December 15, 2005 (11) (Exhibit 4.31)

    4.16

   Forty-first Supplemental Indenture, dated as of January 1, 2007 (22) (Exhibit 4.1)

    4.17

   Forty-second Supplemental Indenture, dated as of December 1, 2007 (22) (Exhibit 4.36)

    4.18

   Forty-third Supplemental Indenture, dated as of December 1, 2008 (24) (Exhibit 4.37)

    4.19

   Forty-fourth Supplemental Indenture, dated as of July 1, 2009 (25) (Exhibit 4.38)

    4.20

   Forty-fifth Supplemental Indenture, dated as of October 15, 2009 (28) (Exhibit 4.39)

 

35


Table of Contents

EXHIBIT INDEX

 

Exhibit No.

  

Description

    4.21

   Forty-sixth Supplemental Indenture, dated as of October 15, 2010 (30) (Exhibit 4.35)

    4.22

   1994 Equity Compensation Plan, as amended by Amendment effective August 5, 2003* (16) (Exhibit 10.5)

    4.23

   Placement Agency Agreement between Philadelphia Suburban Water Company and PaineWebber Incorporated dated as of March 30, 1995 (6) (Exhibit 10.12)

    4.24

   Forty-seventh Supplement Indenture, dated as of October 15, 2012

  10.1

   Philadelphia Suburban Corporation Deferred Compensation Plan Master Trust Agreement with PNC Bank, National Association, dated as of December 31, 1996* (7) (Exhibit 10.24)

  10.2

   Bond Purchase Agreement among the Delaware County Industrial Development Authority, Philadelphia Suburban Water Company and Commerce Capital Markets dated September 29, 1999 (8) (Exhibit 10.37)

  10.3

   Construction and Financing Agreement between the Delaware County Industrial Development Authority and Philadelphia Suburban Water Company dated as of October 1, 1999(8) (Exhibit 10.38)

  10.4

   Placement Agency Agreement between Philadelphia Suburban Water Company and Merrill Lynch & Co., PaineWebber Incorporated, A.G. Edwards & Sons, Inc., First Union Securities, Inc., PNC Capital Markets, Inc. and Janney Montgomery Scott, Inc., dated as of November 15, 1999 (9) (Exhibit 10.41)

  10.5

   Bond Purchase Agreement among the Delaware County Industrial Development Authority, Philadelphia Suburban Water Company and The GMS Group, L.L.C., dated October 23, 2001 (11) (Exhibit 10.35)

  10.6

   Construction and Financing Agreement between the Delaware County Industrial Development Authority and Philadelphia Suburban Water Company dated as of October 15, 2001 (10) (Exhibit 10.36)

  10.7

   Bond Purchase Agreement among the Bucks County Industrial Development Authority, Pennsylvania Suburban Water Company and Janney Montgomery Scott LLC, dated May 21, 2002 (13) (Exhibit 10.42)

  10.8

   Construction and Financing Agreement between the Bucks County Industrial Development Authority and Pennsylvania Suburban Water Company dated as of June 1, 2002 (13) (Exhibit 10.43)

  10.9

   Bond Purchase Agreement among the Delaware County Industrial Development Authority, Pennsylvania Suburban Water Company, and The GMS Group, L.L.C., dated December 19, 2002 (13) (Exhibit 10.44)

  10.10

   Construction and Financing Agreement between the Delaware County Industrial Development Authority and Pennsylvania Suburban Water Company dated as of December 15, 2002 (13) (Exhibit 10.45)

  10.11

   Aqua America, Inc. 2004 Equity Compensation Plan as amended by Amendment effective February 22, 2007* (22) (Exhibit 10.29)

  10.12

   2010 Annual Cash Incentive Compensation Plan* (30) (Exhibit 10.24)

  10.13

   Bond Purchase Agreement among the Northumberland County Industrial Development Authority, Aqua Pennsylvania, Inc., and Sovereign Securities Corporation, LLC, dated November 16, 2004 (21) (Exhibit 10.31)

  10.14

   Aqua America, Inc. 2004 Equity Compensation Plan* (17) (Appendix C)

  10.15

   Bond Purchase Agreement among the Montgomery County Industrial Development Authority, Aqua Pennsylvania, Inc. and Sovereign Securities Corporation, LLC, dated December 12, 2007 (22) (Exhibit 10.34)

 

36


Table of Contents

EXHIBIT INDEX

 

Exhibit No.

  

Description

  10.16

   Bond Purchase Agreement among the Delaware County Industrial Development Authority, Aqua Pennsylvania, Inc. and Sovereign Securities Corporation, LLC, dated May 10, 2005 (19) (Exhibit 10.36)

  10.17

   Bond Purchase Agreement among the Delaware County Industrial Development Authority, Aqua Pennsylvania, Inc. and Sovereign Securities Corporation, LLC, dated December 21, 2005 (11) (Exhibit 10.37)

  10.18

   Aqua America, Inc. Dividend Reinvestment and Direct Stock Purchase Plan* (18)

  10.19

   Non-Employee Directors’ Compensation for 2012* (33) (Exhibit 10.21)

  10.20

   Non-Employee Directors’ Compensation for 2013*

  10.21

   Bond Purchase Agreement among the Chester County Industrial Development Authority, Aqua Pennsylvania, Inc. and Sovereign Securities Corporation, LLC, dated December 21, 2006 (21) (Exhibit 10.2)

  10.22

   Bond Purchase Agreement among the Pennsylvania Economic Development Financing Authority, Aqua Pennsylvania, Inc. and Sovereign Securities Corporation, LLC, dated December 4, 2008 (24) (Exhibit 10.35)

  10.23

   Aqua America, Inc. 2004 Equity Compensation Plan (amended and restated as of January 1, 2009)* (24) (Exhibit 10.36)

  10.24

   Amendment to Incentive Stock Option and Dividend Equivalent Grant Agreements between Aqua America, Inc. and Nicholas DeBenedictis* (24) (Exhibit 10.37)

  10.25

   Amendment to Incentive Stock Option and Dividend Equivalent Grant Agreements between Aqua America, Inc. and Roy H. Stahl* (24) (Exhibit 10.38)

  10.26

   Amendment to Incentive Stock Option and Dividend Equivalent Grant Agreements between Aqua America, Inc. and David P. Smeltzer* (24) (Exhibit 10.39)

  10.27

   Amendment to Incentive Stock Option and Dividend Equivalent Grant Agreements between Aqua America, Inc. and Karl M. Kyriss* (24) (Exhibit 10.40)

  10.28

   Amendment to Incentive Stock Option and Dividend Equivalent Grant Agreements between Aqua America, Inc. and Christopher H. Franklin* (24) (Exhibit 10.41)

  10.29

   Change in Control and Severance Agreement between Aqua America, Inc. and Nicholas DeBenedictis* (24) (Exhibit 10.42)

  10.30

   Change in Control Agreement between Aqua America, Inc. and Roy H. Stahl* (24) (Exhibit 10.43)

  10.31

   Change in Control Agreement between Aqua America, Inc. and David P. Smeltzer* (24) (Exhibit 10.44)

  10.32

   Change in Control Agreement between Aqua America, Inc. and Karl M. Kyriss* (24) (Exhibit 10.45)

  10.33

   Change in Control Agreement between Aqua America, Inc. and Christopher H. Franklin* (24) (Exhibit 10.46)

  10.34

   Change in Control Agreement between Aqua America, Inc. and Christopher P. Luning*

  10.35

   Aqua America, Inc. Supplemental Pension Benefit Plan for Salaried Employees (as amended and restated effective January 1, 2008)* (24) (Exhibit 10.47)

  10.36

   Aqua America, Inc. Supplemental Executive Retirement Plan for Nicholas DeBenedictis (as amended and restated effective January 1, 2008)* (24) (Exhibit 10.48)

 

37


Table of Contents

EXHIBIT INDEX

 

Exhibit No.

  

Description

  10.37

   Amendment 2008-1 to the Aqua America, Inc. Deferred Compensation Plan Master Trust Agreement dated as of December 15, 2008* (24) (Exhibit 10.50)

  10.38

   Aqua America, Inc. 2009 Executive Deferral Plan, As Amended and Restated Effective January 1, 2009* (23) (Exhibit 4.1)

  10.39

   Aqua America, Inc. 2009 Omnibus Equity Compensation Plan* (26) (Exhibit 99.1)

  10.40

   Aqua America, Inc. 2009 Omnibus Equity Compensation Plan, As Amended Effective February 25, 2011 * (30) (Exhibit 10.42)

  10.41

   Employment agreement dated January 31, 2010, between Aqua America, Inc. and Nicholas DeBenedictis * (27) (Exhibit 10.1)

  10.42

   First amendment to Aqua America, Inc. Supplemental Pension Benefit Plan for Salaried Employees (as amended and restated effective January 1, 2008)* (28) (Exhibit 10.54)

  10.43

   Second amendment to Aqua America, Inc. Supplemental Pension Benefit Plan for Salaried Employees (as amended and restated effective January 1, 2008)* (27) (Exhibit 10.3)

  10.44

   First amendment to Aqua America, Inc. Supplemental Executive Retirement Plan for Nicholas DeBenedictis (as amended and restated effective January 1, 2008)* (28) (Exhibit 10.56)

  10.45

   Second amendment to Aqua America, Inc. Supplemental Executive Retirement Plan for Nicholas DeBenedictis (as amended and restated effective January 1, 2008)* (27) (Exhibit 10.4)

  10.46

   Bond Purchase Agreement among the Pennsylvania Economic Development Financing Authority, Aqua Pennsylvania, Inc., Jeffries and Company, Inc., and Janney Montgomery Scott LLC, dated June 30, 2009 (25) (Exhibit 10.52)

  10.47

   Bond Purchase Agreement among the Pennsylvania Economic Development Financing Authority, Aqua Pennsylvania, Inc., Jeffries and Company, Inc., Janney Montgomery Scott LLC, and PNC Capital Markets LLC, dated October 20, 2009 (28) (Exhibit 10.59)

  10.48

   Restricted Stock Grant Agreement made by Aqua America, Inc. to Nicholas DeBenedictis dated January 31, 2010* (27) (Exhibit 10.2)

  10.49

   Bond Purchase Agreement among the Pennsylvania Economic Development Financing Authority, Aqua Pennsylvania, Inc., Jeffries and Company, Inc., PNC Capital Markets LLC, and TD Securities (USA) LLC, dated October 27, 2010 (30) (Exhibit 10.51)

  10.50

   Revolving Credit Agreement between Aqua Pennsylvania, Inc. and PNC Bank, National Association, TD Bank, N.A., and Citizens Bank of Pennsylvania, dated as of November 30, 2010 (30) (Exhibit 4.34)

  10.51

   Revolving Credit Agreement between Aqua Pennsylvania, Inc. and PNC Bank, National Association, TD Bank, N.A., Citizens Bank of Pennsylvania, and Huntington National Bank, dated as of November 28, 2011 (33) (Exhibit 4.25)

  10.52

   Revolving Credit Agreement between Aqua America, Inc. and PNC Bank, National Association, CoBank, ACB, and Huntington National Bank, dated as of March 23, 2012 (35) (Exhibit 10.60)

  10.53

   Revolving Credit Agreement between Aqua Pennsylvania, Inc. and PNC Bank, National Association, TD Bank, N.A., Citizens Bank of Pennsylvania, and Huntington National Bank, dated as of November 26, 2012

  10.54

   Bond Purchase Agreement among Aqua Pennsylvania, Inc., Teachers Insurance and Annuity Association, John Hancock Life Insurance Company, John Hancock Life Insurance Company of New York, John Hancock Life & Health Insurance Company, The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York, New York Life Insurance Company, New York Life Insurance and Annuity Corporation, Minnesota Life Insurance Company, United Health Care Insurance Company, American Republic Insurance Company, Western Fraternal Life Association, dated November 8, 2012

  10.55

   2012 Annual Cash Incentive Compensation Plan* (33) (Exhibit 10.51)

 

38


Table of Contents

EXHIBIT INDEX

 

Exhibit No.

  

Description

  10.56

   2013 Annual Cash Incentive Compensation Plan*

  10.57

   Form of Performance Share Unit Grant Agreement for Chief Executive Officer* (31) (Exhibit 10.53)

  10.58

   Form of Performance Share Unit Grant Agreement for other Executive Officers* (31) (Exhibit 10.54)

  10.59

   Form of Restricted Stock Unit Grant Agreement for Chief Executive Officer* (31) (Exhibit 10.55)

  10.60

   Form of Restricted Stock Unit Grant Agreement for other Executive Officers* (31) (Exhibit 10.56)

  10.61

   Amendment to employment agreement effective as of December 6, 2011, between Aqua America, Inc. and Nicholas DeBenedictis * (33) (Exhibit 10.56)

  10.62

   Restricted Stock Grant Agreement made by Aqua America, Inc. to Nicholas DeBenedictis dated December 6, 2011* (33) (Exhibit 10.57)

  10.63

   Aqua America, Inc. Supplemental Pension Benefit Plan for Salaried Employees (as amended and restated effective January 1, 2011)* (33) (Exhibit 10.58)

  10.64

   Aqua America, Inc. Supplemental Executive Retirement Plan for Nicholas Debenedictis (as amended and restated effective January 1, 2011)* (33) (Exhibit 10.59)

  10.65

   Aqua America, Inc. Amended and Restated Employee Stock Purchase Plan* (34) (Appendix C)

  13.1

   Selected portions of Annual Report to Shareholders for the year ended December 31, 2012 incorporated by reference in Annual Report on Form 10-K for the year ended December 31, 2012.

  21.1

   Subsidiaries of Aqua America, Inc.

  23.1

   Consent of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP

  31.1

   Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934

  31.2

   Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934

  32.1

   Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350

  32.2

   Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350

101.INS

   XBRL Instance Document

101.SCH

   XBRL Taxonomy Extension Schema Document

101.CAL

   XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

   XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

   XBRL Taxonomy Extension Label Linkbase Document

101.PRES

   XBRL Taxonomy Extension Presentation Linkbase Document

In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the Company or its subsidiaries are not filed herewith. Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.

 

* Indicates management contract or compensatory plan or arrangement.

 

39


Table of Contents

Notes -

Documents Incorporated by Reference

 

(1) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1992.
(2) Indenture of Mortgage dated as of January 1, 1941 with supplements thereto through the Twentieth Supplemental Indenture dated as of August 1, 1983 were filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1983.
(3) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1988.
(4) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1989.
(5) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1991.
(6) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
(7) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1996.
(8) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
(9) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1999.
(10) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2001.
(11) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2005.
(12) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
(13) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2002.
(14) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
(15) Filed as an Exhibit to Form 8-K filed December 9, 2004.
(16) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2003.
(17) Filed as Appendix C to definitive Proxy Statement dated April 2, 2004.
(18) Filed as a Registration Statement on Form S-3 on February 19, 2005.
(19) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
(20) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2004.
(21) Filed an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.
(22) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2007.
(23) Filed as a Registration Statement on Form S-8 on December 10, 2008.
(24) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2008.
(25) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
(26) Filed as a Registration Statement on Form S-8 on June 11, 2009.
(27) Filed as an Exhibit to Form 8-K filed on February 4, 2010.
(28) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2009.
(29) Filed as an Exhibit to Form 8-K filed on October 7, 2010.
(30) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2010.
(31) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.
(32) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.
(33) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2011.
(34) Filed as Appendix C to Proxy Statement on Schedule 14A on March 30, 2012.
(35) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.
(36) Filed as an Exhibit to Form 8-K filed on May 11, 2012.

 

40

EX-2.4

Exhibit 2.4

UTILITY SYSTEM

ASSET ACQUISITION AGREEMENT

By and Among

FLORIDA GOVERNMENTAL UTILITY AUTHORITY,

AS BUYER

and

AQUA UTILITIES FLORIDA, INC.,

AND

CRYSTAL RIVER UTILITIES, INC.,

AS SELLERS

Dated

December 28, 2012


TABLE OF CONTENTS

 

         PAGE  

ARTICLE I: DEFINITIONS AND CONSTRUCTION

     2   
 

SECTION 1.01.

  

DEFINITIONS

     2   
 

SECTION 1.02.

  

CONSTRUCTION AND INTERPRETATION

     7   
 

SECTION 1.03.

  

INCORPORATION

     8   
 

SECTION 1.04.

  

SECTION HEADINGS

     8   
 

SECTION 1.05.

  

REPRESENTATION BY COUNSEL; CONSTRUCTION

     8   

ARTICLE II: REPRESENTATIONS

     8   
 

SECTION 2.01.

  

REPRESENTATIONS OF THE FGUA

     8   
 

SECTION 2.02.

  

REPRESENTATIONS OF AQUA

     11   

ARTICLE III: PURCHASE AND SALE OF ASSETS

     16   
 

SECTION 3.01.

  

PURCHASE AND SALE COVENANT

     16   
 

SECTION 3.02.

  

PURCHASED ASSETS

     16   
 

SECTION 3.03.

  

PURCHASE PRICE

     20   

ARTICLE IV: CONDITIONS PRECEDENT TO CLOSING

     20   
 

SECTION 4.01.

  

PROVISION OF INFORMATION BY AQUA

     20   
 

SECTION 4.02.

  

FINANCIAL DUE DILIGENCE

     21   
 

SECTION 4.03.

  

ISSUANCE OF BONDS

     21   
 

SECTION 4.04.

  

INTEREST RATE ADJUSTMENT

     22   
 

SECTION 4.05.

  

ENVIRONMENTAL ASSESSMENT

     24   
 

SECTION 4.06.

  

SURVEY

     25   
 

SECTION 4.07.

  

TITLE VERIFICATION

     26   
 

SECTION 4.08.

  

REGULATORY RATE COMPLIANCE

     28   
 

SECTION 4.09.

  

TRANSFER OF PERMITS

     28   
 

SECTION 4.10.

  

DEADLINE TO CLOSE AND DISBURSE

     29   
 

SECTION 4.11.

  

ACKNOWLEDGEMENT OF TRANSFER

     29   
 

SECTION 4.12.

  

TRANSACTION WITH SARASOTA COUNTY

     29   

ARTICLE V: CLOSING PROCEDURES

     30   
 

SECTION 5.01.

  

CLOSING DATE AND PLACE

     30   
 

SECTION 5.02.

  

DOCUMENTS FOR THE CLOSING

     30   
 

SECTION 5.03.

  

PROPERTY TAXES

     31   
 

SECTION 5.04.

  

ACCOUNTS RECEIVABLE; CUSTOMER DEPOSITS

     32   
 

SECTION 5.05.

  

CONNECTION CHARGES

     32   
 

SECTION 5.06.

  

PROFESSIONAL FEES; COSTS

     33   
 

SECTION 5.07.

  

RISK OF LOSS

     33   
 

SECTION 5.08.

  

PROCEEDS OF SALE; CLOSING PROCEDURE

     33   

 

Asset Acquisition Agreement    Page | i


ARTICLE VI: GENERAL PROVISIONS

     35   
 

SECTION 6.01.

  

RIGHT TO ENTER

     35   
 

SECTION 6.02.

  

CONDUCT BETWEEN EXECUTION AND CLOSING

     36   
 

SECTION 6.03.

  

AQUA EMPLOYEES

     37   
 

SECTION 6.04.

  

APPLICABLE LAW; JURISDICTION AND VENUE

     37   
 

SECTION 6.05.

  

NOTICE

     38   
 

SECTION 6.06.

  

ASSIGNMENT AND JOINDER

     39   
 

SECTION 6.07.

  

INDIVIDUAL LIABILITY

     39   
 

SECTION 6.08.

  

FGUA LIABILITIES

     40   
 

SECTION 6.09.

  

AQUA LIABILITIES

     40   
 

SECTION 6.10.

  

AMENDMENTS AND WAIVERS

     41   
 

SECTION 6.11.

  

ENTIRE AGREEMENT

     42   
 

SECTION 6.12.

  

EFFECT OF TERMINATION

     42   
 

SECTION 6.13.

  

PUBLICITY; ANNOUNCEMENTS

     42   
 

SECTION 6.14.

  

CONFIDENTIALITY

     43   
 

SECTION 6.15

  

RADON GAS

     43   
 

SECTION 6.16.

  

TRANSITION SERVICES

     43   

APPENDICES

 

APPENDIX A

  

Schedule of Real Property

     A-1   

APPENDIX B

  

Schedule of Easements

     B-1   

APPENDIX C

  

Schedule of Assets Comprising the Utility System

     C-1   

APPENDIX D

  

Schedule of Third Party Warranties Related to Completed or In Progress Construction

     D-1   

APPENDIX E

  

Schedule of Permits

     E-1   

APPENDIX F

  

Schedule of Litigation and Regulatory Non-Compliance

     F-1   

APPENDIX G

  

Schedule of Inventory

     G-1   

APPENDIX H

  

Schedule of Operating and Vendor Contracts

     H-1   

APPENDIX I

  

Schedule of Reuse and Effluent Disposal Agreements

     I-1   

APPENDIX J

  

Schedule of Purchased Water and Wastewater Service Agreements

     J-1   

APPENDIX K

  

Schedule of Executory Agreements (Developer Agreements)

     K-1   

APPENDIX L

  

Schedule of Executory Agreements (Other Than Developer Agreements)

     L-1   

APPENDIX M

  

Schedule of Rates, Fees and Charges

     M-1   

APPENDIX N

  

Schedule of Environmental Compliance Exceptions

     N-1   

APPENDIX O

  

Schedule of Excluded Assets

     O-1   

APPENDIX P

  

Schedule of Permitted Exceptions

     P-1   

APPENDIX Q

  

Form of Document Escrow Agreement

     Q-1   

APPENDIX R

  

Form of Documents for Closing

     R-1   

APPENDIX S

  

Purchase Price Calculation

     S-1   

 

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UTILITY SYSTEM

ASSET ACQUISITION AGREEMENT

THIS AGREEMENT, is made and entered into as of this 28th day of December, 2012, by and among the Florida Governmental Utility Authority, a legal entity and public body created by interlocal agreement pursuant to section 163.01(7), Florida Statutes (the “FGUA”), and Aqua Utilities Florida, Inc. and Crystal River Utilities, Inc. (each hereinafter individually referred to as a “Seller” and collectively referred to as “Aqua”).

W I T N E S S E T H:

WHEREAS, Aqua owns potable water supply, treatment, and distribution systems and wastewater collection, transmission, treatment, disposal and reuse systems that are the subject of this Agreement in Alachua County, Citrus County, Hardee County, Lake County, Lee County, Marion County, Orange County, Pasco County, Polk County, Putnam County, Seminole County, and Volusia County, Florida; and

WHEREAS, the FGUA, pursuant to section 163.01, Florida Statutes, the Florida Interlocal Cooperation Act of 1969, and that certain interlocal agreement initially entered into and adopted by Brevard County, Lee County, Polk County and Sarasota County, as subsequently amended and restated (the “Interlocal Agreement”), has the power and authority to provide potable water and wastewater infrastructure and service throughout the State of Florida, and more specifically within the Aqua Counties (as herein defined); and

WHEREAS, the FGUA held a public hearing on December 28, 2012 concerning the proposed purchase and sale of the water and wastewater utility assets owned by Aqua in Florida that are the subject of this Agreement, and made a determination that such a purchase and sale of such assets is in the public interest; and

 

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WHEREAS, the FGUA, in determining if such a purchase and sale is in the public interest, considered, at a minimum, all of the factors required by law; and

WHEREAS, in accordance with the requirements of section 163.01(7)(g), Florida Statutes, either (i) the FGUA has obtained consent from each local government in the Aqua Counties, or (ii) a local government has taken no action following notice thereby authorizing the FGUA to execute this Agreement and to consummate the transactions contemplated by this Agreement;

NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and agreements contained herein, the parties to this Agreement do undertake, promise and agree for themselves, their permitted successors and assigns as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

SECTION 1.01. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings as defined herein unless the context requires otherwise:

“Agreement” means this Utility System Asset Acquisition Agreement, including any amendments and supplements hereto executed and delivered in accordance with the terms hereof.

“Appendices” means Appendices A through R attached to and made a parte of this Agreement.

 

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“Aqua” means, collectively, Aqua Utilities Florida, Inc. and Crystal River Utilities, Inc., each of which is a Florida corporation, and their successors and assigns.

“Aqua Counties” means counties in which Aqua owns and operates the Utility System including Alachua, Citrus, Hardee, Lake, Lee, Marion, Orange, Pasco, Polk, Putnam, Seminole, and Volusia Counties, Florida.

“Board” means the governing body of the FGUA.

“Bonds” has the meaning set forth in Section 4.03(A) of this Agreement.

“Closing” has the meaning set forth in Section 5.01 of this Agreement.

“Closing Date” has the meaning set forth in Section 5.01 of this Agreement.

“Connection Charges” has the meaning set forth in Section 5.05(A) of this Agreement.

“Contractor” has the meaning set forth in Section 6.03(A) of this Agreement.

“Deductible” has the meaning set forth in Section 6.09 of this Agreement.

“Effective Time” means 12:01 a.m. (Eastern) on the Closing Date.

“Easements” means all rights, privileges, easements, licenses, prescriptive rights, rights-of-ways, and rights to use public and private roads, highways, streets, railroads and other areas owned or used by Aqua in connection with the construction, reconstruction, installation, expansion, maintenance and operation of the Utility System or the Purchased Assets.

“Environmental Law” includes all federal, state and local environmental laws and regulations, including, without limitation: (1) the United States Clean Water Act (also known as the United States Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq.; (2) the United States Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; (3) the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq.; (4) the United States Superfund Amendment and Reauthorization Act of 1986, Public Law 99-499, 100 Stat., 1613; (5) the United States Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; (6) the United States Safe Drinking Water Act, 42 U.S.C. § 300j-8; (7) Chapter 403 Florida Statutes; and (8) regulations related thereto. Any reference to legislative act or regulation shall be deemed to include all amendments thereto and all regulations, orders, decrees, judgments or notices issued thereunder.

 

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“Environmental Site Assessment” or “ESA” has the meaning set forth in Section 4.05(A) of this Agreement.

“Escrow Closing” has the meaning set forth in Section 5.08(A) of this Agreement.

“Excluded Assets” means those assets, properties and rights, both tangible and intangible, real and personal, of Aqua described in Section 3.02(C) and Appendix O hereto which shall not be sold, conveyed, or transferred to the FGUA pursuant to this Agreement.

“FGUA” means the Florida Governmental Utility Authority created by the Interlocal Agreement initially entered into by and among Brevard County, Lee County, Polk County, and Sarasota County, Florida and whose membership currently consists of Polk County, Lee County, Citrus County, Pasco County, Hendry County and DeSoto County, Florida.

“FPSC” means the Florida Public Service Commission.

“Individual System” means a single water or wastewater system within an Operating System. For example, the Pasco System consists of the Palm Terrace, Zephyr Shores and Jasmine Lakes water and wastewater Individual Systems.

“Initial Interest Rate” has the meaning set forth in Section 4.04 of this Agreement.

“Interlocal Agreement” has the meaning set forth in the Recitals to this Agreement.

“Knowledge” means, with respect to an individual who is a natural being, the actual knowledge or awareness of a particular fact or other matter, or facts or matters a prudent person could be expected to discover or otherwise be aware thereof in the ordinary course of conducting his business.

 

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“Lake System” means that portion of the Utility System and Purchased Assets located in Lake County, Florida.

“Lake System Bonds” has the meaning set forth in Section 4.03(A) of this Agreement.

“Material” or “Materiality” means a level of significance that would have affected any decision of a reasonable person in that person’s position regarding whether to enter into this Agreement or would affect any decision of a reasonable person in that person’s position regarding whether to consummate the transaction contemplated by this Agreement.

“Operating System” means the Unified System, Lake System, or the Pasco System, each comprising an individual Operating System.

“Other Bonds” has the meaning set forth in Section 4.03(A) of this Agreement.

“Pasco System” means that portion of the Utility System and Purchased Assets located in Pasco County, Florida.

“Pasco System Bonds” has the meaning set forth in Section 4.03(A) of this Agreement.

“Permitted Exceptions” means those title exceptions described in Appendix P hereto.

“Purchase Price” has the meaning set forth in Section 3.03 of this Agreement.

“Purchased Assets” has the meaning set forth in Section 3.02(A) of this Agreement.

“Real Estate Warranty Period” has the meaning set forth in Section 2.02 of this Agreement.

“Seller” has the meaning set forth in the introductory paragraph of this Agreement.

 

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“Tax” means any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereof imposed, assessed or collected by or under the authority of any governmental body or payable under any tax-sharing agreement or any other contract.

“TIC” or “True Interest Cost” means the rate assuming semi-annual interest payments and a 30/360 day count convention, necessary to discount the amounts payable on the respective principal and interest payments, assuming the bonds are not redeemed prior to maturity, to the purchase price received for the bonds. The purchase price shall be calculated as par amount of the bonds at Closing minus any original issue discount and plus any original issue premium.

“Title Agent” means the law firm of Nabors, Giblin & Nickerson, P.A. as agent for Old Republic National Title Insurance Company or another entity acceptable to the FGUA.

“Title Policy” has the meaning set forth in Section 4.07(A) of this Agreement.

“Transaction Cost” means the engineering fees, system operator fees, attorney fees, and other costs, fees and expenses incurred by the FGUA in connection with the negotiations and due diligence leading up to the FGUA’s acquisition of the Purchased Assets and the documentation and closing on the acquisition, issuance of bonds, including, but not limited to, (A) rating agency and other financing fees; (B) the fees and disbursements of bond counsel; (C) the discount taken by the underwriter; (D) the fees and disbursements of the FGUA’s financial advisor; (E) the fees and disbursements of the FGUA’s consulting engineers; (F) the fees and disbursements of the FGUA’s water and wastewater counsel and consultants; (G) the costs of preparing or printing the Bonds and the documentation supporting issuance of the Bonds; (H) the fees payable in respect of any municipal bond insurance policy; and (I) any other costs of a similar nature incurred in connection with issuance of the Bonds.

 

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Unified System” means those portions of the Utility System and Purchased Assets located in Alachua, Citrus, Hardee, Lee, Marion, Orange, Polk, Putnam, Seminole, and Volusia Counties, Florida.

Unified System Bonds” has the meaning set forth in Section 4.03(A) of this Agreement.

“Utility System” means all potable water supply, treatment, storage, and distribution systems and wastewater collection, transmission, treatment, disposal and reuse systems owned by Aqua, which provide services in the Aqua Counties.

SECTION 1.02. CONSTRUCTION AND INTERPRETATION.

(A) Words that indicate a singular number shall include the plural in each case and vice versa, and words that import a person shall include legal entities, firms and corporations.

(B) The terms “herein,” “hereunder,” “hereby,” “hereof,” and any similar terms, shall refer to this Agreement; the term “heretofore” shall mean before the date of execution of this Agreement; and the term “hereafter” shall mean on or after the initial date of execution of this Agreement.

(C) Words that reference only one gender shall include all genders.

(D) This Agreement shall be construed as resulting from joint negotiation and authorship. No part of this Agreement shall be construed as the product of any one of the parties hereto.

 

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SECTION 1.03. INCORPORATION. The Appendices hereto and each of the documents referred to therein are incorporated and made a part hereof in their entirety by reference.

SECTION 1.04. SECTION HEADINGS. Any headings preceding the texts of the several Articles, Sections, or Appendices in this Agreement and any table of contents or marginal notes appended to copies hereof, shall be solely for the convenience of reference and shall neither constitute a part of this Agreement nor affect its meaning, construction or effect.

SECTION 1.05. REPRESENTATION BY COUNSEL; CONSTRUCTION. Each party acknowledges and represents to the other that it has been represented by legal counsel in connection with the preparation and execution of this Agreement and related documents, and each party, therefore, acknowledges and agrees that any rule of construction or interpretation of language against the drafting party shall not be applicable to this Agreement or any related document.

ARTICLE II

REPRESENTATIONS

SECTION 2.01. REPRESENTATIONS OF THE FGUA. The FGUA makes the following representations, which representations shall survive the Closing for a period of twelve (12) months.

(A) The FGUA is duly organized and validly existing as an intergovernmental utility authority created by the Interlocal Agreement pursuant to section 163.01(7), Florida Statutes.

 

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(B) The FGUA has full power and authority to enter into the transactions contemplated by this Agreement.

(C) Whether or not applicable, the FGUA has fulfilled and complied with the provisions of section 125.3401, section 180.301 and section 189.423, Florida Statutes, relative to the purchase of the Utility System by a governmental agency.

(D) The FGUA is not in default under any provisions of the laws of the State of Florida material to the performance of its obligations under this Agreement. The execution, delivery and performance of this Agreement and the consummation by the FGUA of the transactions contemplated by this Agreement have been duly authorized by all necessary action on the part of the FGUA. Assuming the due authorization, execution and delivery by the other parties hereto, this Agreement constitutes a valid and legally binding obligation of the FGUA, enforceable against the FGUA in accordance with its terms, except to the extent that the enforceability thereof may be limited by any applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally, or by the exercise of judicial discretion of a court of competent jurisdiction in accordance with general principles of equity.

(E) The authorization, execution, performance and delivery of this Agreement and the consummation by the FGUA of the transactions contemplated by this Agreement will not conflict with, violate or constitute a material breach of, or default under, any existing law, court or administrative regulation, decree, order, or any provision of the Constitution or the laws of the State of Florida relating to the FGUA or its affairs, or any ordinance, resolution, agreement, lease or other instrument to which the FGUA is subject or by which it is bound.

 

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(F) There is no action, suit, investigation or proceeding pending or, to the FGUA’s knowledge, threatened against or affecting the FGUA, at law or in equity or before any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, wherein any decision, ruling or finding would adversely affect the transactions contemplated by this Agreement or which in any way would adversely affect the validity of this Agreement or any other agreement or instrument to which the FGUA is a party and which is used or contemplated for use in the consummation of the transactions contemplated by this Agreement.

(G) The FGUA has not dealt with any broker, salesman or finder in connection with the transactions contemplated by this Agreement and no sales commissions or finder’s fees are due or payable as a result hereof.

(H) At the FGUA’s sole cost and expense, the FGUA has provided notice to, and received all required consents from, all host governments in the Aqua Counties of the proposed purchase by the FGUA of the Utility System, or the applicable host government took no action within the statutory time period. No other host government consents in the Aqua Counties are required for the FGUA to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement.

(I) Subject to the provisions in Section 4.03 of this Agreement, the FGUA will have a source of immediately available funds to pay the Purchase Price and to consummate the transactions contemplated by this Agreement at the Closing.

 

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(J) The FGUA has conducted its own independent investigation, review and analysis of the Utility System and the Purchased Assets, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of Aqua for such purpose. The FGUA acknowledges and agrees that: (i) in making its decision to enter into this Agreement and to consummate the transactions contemplated by this Agreement, the FGUA has relied upon its own investigation and the express representations of warranties of Aqua set forth in Section 2.02 of this Agreement (including the related portions of the Appendices hereto); and (ii) neither Aqua nor any other person has made any representation or warranty as to Aqua, the Operating System or the Purchased Assets, except as expressly set forth in Section 2.02 of this Agreement (including the related portions of the Appendices hereto).

SECTION 2.02. REPRESENTATIONS OF AQUA. Each Seller, severally and jointly, makes the following representations and warranties, which representations and warranties shall survive the Closing for a period of twelve (12) months, except for those set forth in Sections 2.02(E)(1) and (2) which shall survive for a period of twenty four (24) months (“Real Estate Warranty Period”).

(A) Each Seller is duly organized, validly existing and in good standing in the State of Florida and authorized to do business in such jurisdiction, and has all requisite corporate power and authority to enter into the transactions contemplated by this Agreement.

(B) The execution, delivery and performance of this Agreement and the consummation by each Seller of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of such Seller. Assuming the due authorization, execution and delivery by the FGUA, this Agreement will be valid and enforceable against such Seller in accordance with its terms, except to the extent that the enforceability thereof may be limited by any applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally, or by the exercise of judicial discretion of a court of competent jurisdiction in accordance with the general principles of equity.

 

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(C) Except as disclosed in Appendix F, there are no current actions, suits or proceedings at law or in equity pending or, to each Seller’s knowledge, threatened against such Seller before any federal, state, municipal or other court, administrative or governmental agency or instrumentality, domestic or foreign, which affect its respective Utility System or any of its respective Purchased Assets or such Seller’s right and ability to make and perform this Agreement; nor is Aqua aware of any facts which to its knowledge are likely to result in any such action, suit or proceeding. Aqua is not materially in default with respect to any permit, order or decree of any court or of any administrative or governmental agency or instrumentality affecting its respective Utility System or any of its respective Purchased Assets. Each Seller agrees and covenants that it shall have a continuing duty to disclose to the FGUA up to and including the Closing the existence and nature of all pending judicial or administrative suits, actions, proceedings and orders which in any way relate to the construction, operation or maintenance of its respective Utility System.

(D) Each Seller has not dealt with any broker, salesman or finder in connection with the transactions contemplated by this Agreement and no sales commissions or finder’s fees are due or payable as a result hereof.

(E) Each Seller has prepared, completed and delivered to the FGUA, or, within ten (10) days following execution of this Agreement, each Seller shall prepare, complete and deliver to the FGUA, the following Appendices, subject to any qualifications stated in the Appendices. Within ten (10) days of the FGUA’s receipt of the Appendices, the FGUA shall provide Aqua with written notice of objection to any Appendix, or part thereof. In the event of a timely objection, the parties shall have five (5) days to resolve the objection or the FGUA may elect to terminate the Agreement. Upon such termination the parties shall have no liability and no further obligation to each other under this Agreement. In the event that no timely objection is received, the Appendices shall be deemed accepted by the parties as the Appendices to this Agreement.

(1) Appendix A is a schedule providing a complete legal description or recording references, which each Seller has in its possession, for all real property owned by such Seller, to its knowledge upon due inquiry, which real property such Seller acquired either from Florida Water Services Corporation; AquaSource, Inc.; or another third party, respectively.

 

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(2) Appendix B is a schedule for each Seller identifying in reasonable detail all Easements with respect to its Utility System or Purchased Assets, to Seller’s knowledge at the time of execution of this Agreement; provided that, the Appendix shall not include public rights-of-ways, platted easements and general rights to use public roads, highways, and streets.

(3) Appendix C contains a list of the material water and wastewater assets of each Seller comprising its respective Utility System together with the locations of such assets and identifying the places at which plans and specifications can be examined which substantially describe its respective Purchased Assets.

(4) Appendix D is a schedule for each Seller of its material construction work in progress and third party warranties currently in effect that relate to completed or in-progress construction, including manufacturer’s warranties.

(5) Appendix E is a schedule for each Seller of all current or active federal and Florida Department of Environmental Protection and Water Management District permits, applications or other documents, together with effective dates and any expiration dates, which authorize the operation of its respective Utility System by all such applicable governmental authorities.

 

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(6) Appendix F is a schedule of litigation and material regulatory non-compliance issues known to each Seller which may include notices of violation, inspection or enforcement actions and specifically identifying the Individual System and the non-compliance issues identified by the regulatory authority.

(7) Appendix G is an inventory of the material equipment, vehicles (indicating leased rolling stock), tools, parts, laboratory equipment, computer equipment, meters, meter reading equipment and related software and other personal property, other than the Excluded Assets, used by each Seller in connection with the operation of its respective Utility System.

(8) Appendix H is a schedule for each Seller of all operating and vendor contracts affecting its respective Utility System, to be assumed by the FGUA.

(9) Appendix I is a schedule of all reuse or effluent disposal agreements entered into by each Seller for sale or reuse of effluent delivered through its respective Utility System.

(10) Appendix J is a schedule of all executory purchased water and purchased wastewater service agreements entered into by each Seller in connection with its respective Utility System.

(11) Appendix K is a schedule which sets forth all executory developer or service agreements under which each Seller, as owner of its respective Utility System, has any continuing or outstanding water or wastewater service obligations relating to its respective Utility System as of September 30, 2012, and the total number of (a) contractual connections; (b) contractual connections paid for and not yet connected; (c) contractual connections not yet paid for and not yet connected; and (d) any contractual connections for which such Seller has or expects to begin collecting a periodic minimum or base charge prior to the Closing.

 

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(12) Appendix L is a schedule of all other agreements entered into between each Seller and third parties which would reasonably be considered to be an encumbrance upon its respective Purchased Assets, including, without limitation, any leasehold agreements or oral agreements, if any. Any such agreements that have not been reduced to writing are identified on said schedule with a narrative of the terms thereof included therein.

(13) Appendix M is a schedule of all current tariffs collectively setting forth the most current schedule of rates, fees and charges that each Seller is authorized to impose.

(F) Each Seller shall, prior to the Closing, secure all required consents from third parties necessary to comply with the terms of any of the agreements to be assumed by the FGUA or that are necessary for the FGUA’s ownership, operation and use of the Purchased Assets.

(G) To its knowledge, each Seller is not in violation of any governmental law, rule, regulation, permitting condition, or other governmental requirement of any type or nature which violation would have a material adverse effect on its respective Individual Systems or on its applicable Operating Systems.

(H) To the knowledge of each Seller, (1) there are no hazardous substances (as that term is defined in the Environmental Laws), located upon or beneath the real estate to be conveyed to the FGUA at concentrations that could reasonably be expected to result in the owner or operator of such real estate being required to remediate such hazardous substances under Environmental Laws, and (2) except as set forth in Appendix N, such Seller is in material compliance with all applicable Environmental Laws. Except as set forth in Appendix N, each Seller has not received any written notice from any governmental authority finding material non-compliance with applicable Environmental Laws since January 1, 2007.

(I) The management, officers and directors of each Seller have no knowledge of material facts adversely affecting the physical condition of its respective Utility System or its respective Purchased Assets which are not readily observable or which have not been disclosed or provided by such Seller to the FGUA in connection with this transaction or otherwise.

 

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ARTICLE III

PURCHASE AND SALE OF ASSETS

SECTION 3.01. PURCHASE AND SALE COVENANT. At the Closing, the FGUA shall purchase and Aqua shall sell and convey the Purchased Assets to the FGUA upon the terms and subject to the conditions set forth in this Agreement. At the Closing, the FGUA shall assume responsibility for the performance and satisfaction of Aqua’s obligations in accordance with Assignment and Assumption Agreements and other documents substantially in the form attached hereto as Appendix R.

SECTION 3.02. PURCHASED ASSETS.

(A) The assets of Aqua to be purchased by the FGUA hereunder (the “Purchased Assets”) shall consist of those assets, business properties, and rights (both tangible and intangible) that Aqua owns or possesses at the Closing, including the following:

(1) All fee simple real property as described in Appendix A hereof;

 

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(2) All Easements described in Appendix B and any others that Aqua owns or possesses that are necessary for the use of the Purchased Assets;

(3) All water and wastewater treatment plants, including reuse and reclaimed water wells, water supplies, wells, collection, transmission, and distribution system piping, pumping, and effluent and disposal facilities of every kind and description whatsoever including, without limitation, all trade fixtures, leasehold improvements, lift stations, pumps, generators, controls, tanks, distribution, collection or transmission pipes or facilities, valves, meters, meter reading devices and associated software, service connections, and all other physical facilities, appurtenances and property installations used in the operation of the Utility System described in Appendix C, together with an assignment of all existing and assignable third party warranties and ownership documents that relate to completed or in progress construction as more particularly described in Appendix D;

(4) All equipment and other personal property as more particularly described in Appendix G to this Agreement.

(5) All as-built surveys and water and wastewater plans, plats, engineering and other drawings, designs, blueprints, plans and specifications, maintenance and operating manuals, engineering reports, calculations, computer studies, non-corporate accounting, and non-corporate business records and all other non-corporate information, in each case, controlled by or in the possession of Aqua that relate to the description and operation of the Utility System, inclusive of all pertinent computer records;

(6) To the extent that they may be transferred, all necessary regulatory approvals subject to all conditions, limitations or restrictions contained therein; all existing permits and other governmental authorizations and approvals of any kind necessary to construct, operate, expand, and maintain the Utility System according to all governmental requirements, as more specifically described in Appendix E to this Agreement;

 

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(7) The following records: (i) all information required to be maintained related to the Purchased Assets; (ii) all information provided through the due diligence process; (iii) engineering project files; (iv) electronic map files; (v) plans for engineering projects; (vi) environmental files; (vii) developer files; (viii) daily operations logs; (ix) operations files; (x) any consents or administrative orders; (xi) service and warranty records; (xii) equipment logs, operating guides, and manuals located at each plant; (xiii) database of customer accounts; (xiv) updated fixed asset list; and (xv) copies of general ledger by plant;

(8) All claims of Aqua against third parties, whether choate or inchoate, known or unknown, contingent or non-contingent, relating to (a) the Purchased Assets and (b) a tacking of time periods for any prescriptive easement or adverse possession claim; and

(9) The rolling stock listed in Appendix G to this Agreement; provided that, at or prior to Closing, Aqua may sell certain components of this rolling stock to third parties in which case the sale price for such components (net of any lease payments Aqua is required to make in order to convey such components free and clear of any lease encumbrance), shall be a reduction to the Purchase Price payable at Closing. Notwithstanding the foregoing, if the lease payments which Aqua is required to make in order to convey free and clear title for such vehicles is greater than the purchase price paid to Aqua for such vehicles, then Aqua shall have the right to include such vehicles in the definition of “Excluded Assets”.

(B) The Purchased Assets shall be conveyed by Aqua to the FGUA free and clear of all liens or encumbrances, subject to the Permitted Exceptions.

 

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(C) The Purchased Assets do not and shall not include the Excluded Assets as set forth in Appendix O to this Agreement.

(D) Within sixty (60) days after the Closing, Aqua shall remove all Excluded Assets from the real property portion of the Utility System. Such removal shall be done in such manner as to avoid (1) any damage to the Utility System and other properties to be occupied by the FGUA, and (2) any disruption to the operation of the Utility System after the Closing. Any damage to the Utility System resulting from such removal shall be paid, as soon as reasonably practicable, by Aqua. Should Aqua fail to remove the Excluded Assets within such sixty (60) day period, the FGUA shall have the right, but not the obligation, (1) to remove the Excluded Assets at Aqua’s sole cost and expense; (2) to store the Excluded Assets and to charge Aqua all storage costs associated therewith; or (3) to exercise any other right or remedy conferred by this Agreement. Aqua shall, as soon as reasonably practicable, reimburse the FGUA for all costs and expenses incurred by the FGUA in connection with any Excluded Assets not removed from the Utility System by Aqua within the timeframe provided above.

(E) The FGUA does not assume any debts, liabilities, obligations, or other financial or service obligations of Aqua, except as may be expressly provided hereunder or as may be otherwise provided in writing. The FGUA does not assume and shall not be liable for any expense, assessment, exposure, fine, penalty, liability, act or omission of any kind whatsoever imposed or required by any third party, whether known or unknown, contingent, liquidated or not liquidated, arising or accruing under contract, tort, or pursuant to statute, rule, ordinance, law, regulation or otherwise, arising or accruing before the Closing Date, regardless of when the claim is made. Aqua shall remain liable for and shall pay, perform or discharge all such liabilities and obligations; provided Aqua is not hereby limited in its right to contest in good faith any such liabilities or obligations. The FGUA does not assume, and is not liable for, any litigation pending at Closing involving Aqua or the Purchased Assets.

 

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SECTION 3.03. PURCHASE PRICE. The aggregate purchase price shall be Forty Nine Million Two Hundred Thousand Dollars ($49,200,000.00) (“Purchase Price”), subject to the terms, adjustments and prorations provided herein. The Purchase Price for each of the Operating Systems shall be payable by the FGUA to the respective Seller in immediately available funds at the Closing by wire transfer pursuant to wire instructions to be provided by Sellers to the FGUA prior to the Closing. The Purchase Price for each of the Operating Systems is as follows:

 

(1)   

Pasco System

   $ 16,419,315   
(2)   

Lake System

   $ 14,627,847   
(3)   

Unified System

   $ 18,152,838   

ARTICLE IV

CONDITIONS PRECEDENT TO CLOSING

SECTION 4.01. PROVISION OF INFORMATION BY AQUA.

(A) Aqua has gathered, and delivered to the FGUA, the information described and to be encompassed by Appendices A through N hereof, which are more particularly described in Sections 2.02(E)(1) through (13) and 2.02(H) hereof, and the corporate guarantee described in Section 6.09(A).

(B) Aqua shall make any plans or specifications for the Utility System available to the FGUA, or its representatives, for inspection during normal business hours and upon reasonable advance notice from the FGUA.

 

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SECTION 4.02. FINANCIAL DUE DILIGENCE. The FGUA has had the opportunity to examine the billing analysis and to cause to be prepared at its expense a due diligence investigation of the revenues of the Utility System by a FGUA rate consultant or fiscal agent selected by it. The FGUA has relied upon its own financial due diligence investigation in entering into this Agreement.

SECTION 4.03. ISSUANCE OF BONDS.

(A) The purchase of the Utility System by the FGUA is subject to its ability to successfully finance it in accordance with the provisions of this Section 4.03. At a minimum, it will be necessary for the FGUA to issue several series of its bonds in a par amount adequate to pay (1) the Purchase Price for each Operating System, (2) all Transaction Costs, and (3) the cost of capital improvements as determined by the FGUA’s engineers. Currently the FGUA anticipates issuing: (1) at least $19,199,239 aggregate principal amount of bonds to acquire the Pasco System (the “Pasco System Bonds”); (2) at least $17,277,033 aggregate principal amount of bonds to acquire the Lake System (the “Lake System Bonds”); and (3) at least $22,415,977 aggregate principal amount of bonds to acquire the Unified System (the “Unified System Bonds”). One or more of the aforedescribed bond issues could be divided into multiple bond issues (the “Other Bonds”). The Pasco System Bonds, the Lake System Bonds, the Unified System Bonds, and the Other Bonds are referred to herein as the “Bonds.”

(B) Each series of the Bonds shall have the following characteristics: (1) the term of such series shall be for at least thirty (30) years; (2) a true interest cost of not greater than 4.5%; (3) ratings from any two of the following rating agencies: (a) a rating by Moody’s Investors Service of no less than “A3”, (b) a rating by Standard & Poor’s Ratings Service of no less than “A-”, and (c) a rating by Fitch Ratings of no less than “A-” (“Ratings”); (4) standard redemption provisions with an optional redemption price of no greater than par; and (5) with a debt service reserve account in an amount equal to the maximum debt service to be paid on such series any year, subject in each case to the review and approval of the FGUA’s financial advisor that each such parameter has been met. The Bonds shall be delivered on or before the Closing Date.

 

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SECTION 4.04. INTEREST RATE ADJUSTMENT.

(A) The Purchase Price provided for herein was arrived at based on a bondable cash flow pro-forma. That pro-forma assumes a TIC of 4.5% (“Initial Interest Rate”) based upon a municipal tax-free revenue bond issue with 30-year maturity schedule of level principal and interest payments, a debt service coverage of 140%, achievement of the Ratings, and with the Bond insured if, in the judgment of the FGUA, that results in a lower cost of funds. For purposes of this Section 4.04, each Operating System acquisition will be financed through a separate Bond. The parties agree that the Purchase Price shall be adjusted at Closing to reflect the actual TIC achieved for each Operating System Bond. The FGUA shall direct the underwriters for the Bonds in the “Bond Purchase Agreement” to use all reasonable efforts to attain the lowest possible TIC on the Bonds.

(B) In the event that the TIC for a particular Operating System Bond is lower than the Initial Interest Rate, then the Purchase Price for that Operating System shall be adjusted upward by the additional net Bond proceeds resulting from the difference between the Initial Interest Rate and the greater of the actual TIC or 4.25%.

 

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(C) In the event that the actual TIC for a particular Operating System Bond is greater than the Initial Interest Rate, then the Purchase Price for that Operating System shall be adjusted downward to reflect the lower net Bond proceeds resulting from the difference between the Initial Interest Rate and the actual TIC.

(D) In the event that the actual TIC is higher than 4.65% for a particular Operating System Bond, then both Aqua and the FGUA shall have the option of terminating this Agreement for all Operating Systems by providing written notice to the other party of such termination, and, if terminated, thereupon the FGUA and Aqua shall have no liabilities and no further obligations to each other under this Agreement.

(E) The parties acknowledge and agree that a fair and accurate example of the variation in the TIC and the effect on the Purchase Price is set forth in Appendix S, and that the principals and assumptions applied in Appendix S shall likewise be applied in the determination of the Purchase Price at such time as the actual TIC has been determined. Following the FGUA’s pricing of the Bonds, Aqua agrees to execute the Purchase Price certification in the form set forth in Appendix S, prior to the FGUA entering into a Bond Purchase Agreement.

 

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SECTION 4.05. ENVIRONMENTAL ASSESSMENT.

(A) Aqua and the FGUA agree that the FGUA may direct and authorize, at the FGUA’s cost, a “Phase I” Environmental Site Assessment of any or all of the real property to be conveyed hereunder. The Environmental Site Assessment shall be in general accordance with the scope and limitations of the American Society for Testing and Materials Designation: E 1527-97 (Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment (“ESA”) Process). Prior to conducting any environmental assessment other than a Phase I ESA, the FGUA shall notify Aqua of its desire to conduct additional environmental assessments or testing. Only if the FGUA receives prior written approval from Aqua shall it be permitted to conduct any additional testing or assessment other than a Phase I ESA. Prior to performing any Phase II or additional ESA, the FGUA shall provide a scope of work to Aqua, and Aqua shall have the right to review and approve such scope of work, prior to any intrusive sampling. In the event the Phase II or additional ESA performed for the FGUA identifies the presence of hazardous substances (as that term is defined in the Environmental Laws) in the soil or groundwater at levels required to be remediated under applicable Environmental Laws, the FGUA shall provide the ESA report to Aqua. Aqua shall obtain the opinion of a qualified expert regarding an estimated cost to remediate such hazardous substances identified in the soil or groundwater as required by applicable Environmental Laws. Aqua shall be responsible for such remediation, at its expense; provided that, if the cost estimated for any remediation as set forth in this Section 4.05 exceeds $500,000, either party shall have the option of: (1) waiving this condition precedent to the Closing, (2) terminating this Agreement as to the Individual System affected, whereupon the FGUA and Aqua shall have no liability and no obligation to each other under this Agreement for such Individual System, or (3) terminating this Agreement, thereupon the FGUA and Aqua shall have no liability and no further obligations to each other under this Agreement. The provisions in this Section 4.05(A) shall not be subject to the Deductible or the Cap set forth in Section 6.09(A).

(B) All ESAs are expected to be completed and delivered to the FGUA and Aqua not less than thirty (30) days prior to the Closing.

 

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SECTION 4.06. SURVEY. Aqua shall provide the FGUA with all existing surveys of the real property to be conveyed to the FGUA within ten (10) days of Aqua signing this Agreement. The FGUA shall have the option to order a new or updated survey of any or all real property being insured by the title insurance policies hereunder. Such new surveys shall be at the FGUA’s expense. Any such surveys shall (A) be received not less than thirty (30) days prior to the Closing and updated thereafter as required by the title insurer; (B) be satisfactory and sufficient for the title insurer to delete the standard exceptions of title insurance coverage concerning encroachments, overlays, boundary line disputes or any other adverse matter which would be disclosed by an accurate survey; (C) be certified as of the current date to the FGUA, Aqua, the title insurer or any other parties requested by the FGUA; and (D) show the location of all improvements and easements. Material adverse matters (i.e., matters that materially interfere with the present use of the real property) disclosed by such surveys and disclosed to Aqua may be resolved by Aqua in its sole and absolute discretion so that such matters may be removed as an exclusion to coverage on the title insurance commitment, at Aqua’s expense, prior to the issuance of any policy after the Closing. Nothing shall obligate Aqua to expend any monies to resolve such survey matters. If Aqua is unable or unwilling to resolve such material adverse matters prior to the Closing, the FGUA shall have the option of: (1) waiving this condition precedent to the Closing, (2) terminating this Agreement as to the Individual System affected, whereupon the FGUA and Aqua shall have no liability and no obligation to each other under this Agreement for such Individual System, or (3) terminating this Agreement, thereupon the FGUA and Aqua shall have no liability and no further obligations to each other under this Agreement.

 

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SECTION 4.07. TITLE VERIFICATION.

(A) The FGUA shall obtain, and deliver copies to Aqua of, title insurance commitments for the real property to be conveyed hereunder as set forth in Appendix A for an ALTA form owner’s title insurance policy from the Title Agent (the “Title Policy”). Subject to subsection (D) of this Section 4.07, any encumbrances or defects in title must be removed from any title insurance commitment prior to the Closing and the subsequent Title Policy issued free and clear of encumbrances, title defects, materialman’s liens or other adverse matters, created or potentially created by Aqua, with the exception of: (1) taxes for the current year which are not yet due and payable, (2) the Permitted Exceptions, and (3) any encumbrance of or created by the FGUA, including any instruments evidencing debt executed by the FGUA at the Closing.

(B) The estate or interests to be insured by the Title Insurance Policy shall consist of all real property identified in Appendix A.

(C) At the Closing, or upon issuance of any Title Insurance Policy after the Closing, the owner’s title insurance policy shall show marketable title to the insured estate or interests vested in the FGUA. All charges and costs for the issuance of the owner’s title insurance commitments and policy(ies) shall be paid by the FGUA.

 

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(D) Marketable title shall be determined according to applicable Title Standards adopted by authority of The Florida Bar and in accordance with law. If the title commitment reflects title exceptions other than the Permitted Exceptions, the FGUA shall thereafter within ten (10) days, notify Aqua in writing specifying the defects. Aqua shall have no more than thirty (30) days from receipt of notice within which (1) to remove the defects, (2) to provide notice that it intends to remove the defects, or (3) to provide notice that it disputes the defects. Aqua shall have one hundred eighty (180) days after receipt of the FGUA’s notice, to eliminate the defects, which timeframe may extend beyond Closing. Aqua may, at its option, eliminate such defects in a variety of ways including, without limitation: (1) purchasing all or a portion of the property interest in question; (2) providing an alternate property reasonably acceptable to the FGUA; (3) commencing an eminent domain proceeding or other legal proceeding to acquire or clear title; or, (4) if the FGUA agrees, reimbursing the FGUA for its expenses in acquiring title to the property in an eminent domain proceeding. If Aqua or the FGUA commences a legal proceeding to acquire or clear title, the time period to cure defects shall extend until a final determination is made in such proceeding or appeal thereof; provided Aqua shall use its commercially reasonable efforts to prosecute diligently to completion any such proceeding. In the event Aqua fails to cure any title defect as provided herein, the FGUA may require substitute property, or payment by Aqua of an amount equal to the fair market value of the property, or portion thereof, taking into account any planned closure of existing utility plants or related facilities located thereon.

(E) At its election, the FGUA may search the Official Records of the Aqua Counties and the records of the Secretary of State for uniform commercial code financing statements evidencing a secured interest in the Purchased Assets other than the real property. Such search shall be at the FGUA’s expense. Any secured interests in the Purchased Assets other than Permitted Exceptions and those relating to real property must be identified by the FGUA to Aqua not less than thirty (30) days prior to the Closing and must be paid off, released or terminated at Aqua’s expense provided that, the FGUA’s failure to identify shall not relieve Aqua of its obligation hereunder to convey the Purchased Assets free and clear of all liens or encumbrances, subject to the Permitted Exceptions.

 

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SECTION 4.08. REGULATORY RATE COMPLIANCE. To the extent that Aqua has any regulatory rate relief proceedings pending at the time of the Closing before the FPSC, other county regulatory authority, or before an appellate court in the State of Florida, Aqua shall terminate such proceedings upon the Closing and all financial responsibility or liability for any rate relief, refund or other obligations relating to such proceedings shall remain with Aqua after the Closing, and shall expressly not be assumed by the FGUA. Notwithstanding the foregoing sentence, Aqua shall not be prohibited from filing or pursuing any such regulatory rate relief proceedings during the period commencing on the date of this Agreement and ending on the Closing Date. The parties further acknowledge that Aqua has pending a FPSC rate indexing. Aqua shall complete and fully implement the indexed rates prior to the FGUA’s obligation to consummate the transactions contemplated by this Agreement.

SECTION 4.09. TRANSFER OF PERMITS. Within thirty (30) days after the FGUA executes this Agreement, Aqua shall commence all requisite action to notify, apply for and seek the transfer of the permits and governmental approvals described in Appendix E hereof, including, but not limited to, the procedures referenced in Rule 62-4.120, Florida Administrative Code (1990), 40 C.F.R. § 122.63(d) (1998) and 47 C.F.R. § 73 (1998) and shall use all reasonable efforts to obtain the transfer of such permits. The FGUA shall timely cooperate and provide all reasonably necessary assistance in this endeavor, including, but not limited to, execution at the Closing of the permit transfer applications prepared by Aqua. Upon the Closing, the FGUA shall assume all obligations under the permits and governmental approvals necessary for the continued operation of the Utility System. The FGUA and Aqua acknowledge that the transfer of permits cannot be effectuated until after the Closing of the transactions contemplated by this Agreement, and as such shall constitute a post-Closing obligation of the parties until completed. All charges and costs for the transfer of permits shall be shared equally by Aqua and the FGUA.

 

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SECTION 4.10. DEADLINE TO CLOSE AND DISBURSE. Notwithstanding any other provision in this Agreement, if the Closing and disbursement to Aqua of the Purchase Price, subject to the terms, adjustments and prorations provided herein, do not occur on or before June 30, 2013, then Aqua or the FGUA shall have the option of: (1) waiving this deadline or (2) terminating this Agreement, thereupon the FGUA and Aqua shall have no liability and no further obligations to each other under this Agreement.

SECTION 4.11. ACKNOWLEDGEMENT OF TRANSFER. The obligations of the parties to consummate the transactions contemplated hereby are subject to (1) Aqua Utilities Florida, Inc. filing a notice with the FPSC to acknowledge transfer of its respective Purchased Assets to the FGUA, and (2) Crystal River Utilities, Inc. filing a notice with Citrus County to acknowledge transfer of its respective Purchased Assets to the FGUA.

SECTION 4.12. TRANSACTION WITH SARASOTA COUNTY. The obligations of Aqua to consummate the transactions contemplated hereby are subject to: (1) Dolomite Utilities Corp. (as affiliate of Aqua) executing an agreement with Sarasota County not less than twenty (20) days prior to the Closing Date, pursuant to which Sarasota County agrees to purchase from Dolomite Utilities Corp. the water and wastewater systems owned by Dolomite Utilities Corp. in Sarasota County for a purchase price of not less than $36,800,000; and (2) the FGUA entering into an Interlocal Agreement with Sarasota County to provide for mutual cooperation and assistance to achieve a successful closing on the Aqua transactions. In the event these conditions are not met, either party shall have the option of: (1) waiving this condition or (2) terminating this Agreement, thereupon the FGUA and Aqua shall have no liability and no further obligations to each other under this Agreement.

 

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ARTICLE V

CLOSING PROCEDURES

SECTION 5.01. CLOSING DATE AND PLACE. The asset and bond closings (collectively, the “Closing”) shall be held at the law firm of Nabors, Giblin & Nickerson, P.A., in Tampa, on or before February 28, 2013, or at such later date as mutually agreed among the parties (the “Closing Date”); provided that the Closing Date shall be automatically extended for a period of up to thirty (30) days to complete the financing as provided in Section 4.03 of this Agreement.

SECTION 5.02. DOCUMENTS FOR THE CLOSING.

(A) At the Closing, each Seller shall furnish a certificate reaffirming such Seller’s representations and warranties as set forth in this Agreement up to the Closing Date, and a release of documents from the Escrow Closing.

(B) At the Closing, the FGUA shall furnish the closing statement, a certificate reaffirming the FGUA’s representations and warranties as set forth in this Agreement up to the Closing Date, and a release of documents from the Escrow Closing.

 

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(C) From time to time after the Closing, each party hereto shall, upon request of the other, execute, acknowledge and deliver, or shall cause to be executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers or other documentation for (1) confirming or correcting title in the name of the FGUA or perfecting possession by the FGUA of any or all of the Purchased Assets in existence or use at the time of the Closing, including the establishment of Easements of record, without resort to litigation, expenditure of monies or other extraordinary means, provided that Aqua’s obligations pursuant to this Section 5.02(C) shall be subject to Section 6.09(B), or (2) otherwise fulfilling the obligations of the parties hereunder.

SECTION 5.03. PROPERTY TAXES. Aqua shall be required to escrow through the Title Agent for payment to the Tax Collector of the Aqua Counties an amount equal to the current ad valorem taxes and assessments due (real and personal), prorated through the Closing Date in accordance with section 196.295, Florida Statutes. The FGUA shall cooperate with Aqua in its effort to recover any taxes paid in excess of that due through the Closing Date. However, in no event shall the FGUA be responsible for any ad valorem taxes or assessments (real or personal) for the current year, which are not cancelled after the Closing Date.

 

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SECTION 5.04. ACCOUNTS RECEIVABLE; CUSTOMER DEPOSITS. Each Seller hereby agrees to cooperate with the FGUA to ensure an orderly transition of all of its customers with respect to billing and customer service activities including, but not limited to, working with the FGUA on a compatible format for transfer of customer data. The parties agree that the FGUA will be entitled to all customer billings with respect to water and wastewater collection and treatment services for the period on or after the Closing Date, and each Seller will be entitled to all such billings prior to the Closing Date, such billings being considered an Excluded Asset under this Agreement. After the Closing, any payments received by the FGUA or the Sellers with respect to utility services provided utilizing the Purchased Assets shall belong to the FGUA or such Seller as provided above. If such payment or the documentation relating thereto does not indicate whether such payment is for the period prior to or after Closing, the FGUA and such Seller shall jointly determine whether the payment belongs to the FGUA or such Seller. If either the FGUA or such Seller receives a payment which under the terms of this Agreement properly belongs to the other, the party in receipt of such payment shall hold such payment in trust for the other party and shall turn the payment over to the other party upon receipt thereof without any right of setoff. At Closing, the FGUA shall assume the liability for customer deposits and each Seller shall, by electronic funds transfer, transfer all customer deposits and accrued interest thereon through Closing to the FGUA. Each Seller shall provide, by customer account, a reconciliation of accrued interest up to the Closing Date.

SECTION 5.05. CONNECTION CHARGES.

(A) Sums collected by Aqua in the ordinary course of business for connection charges, including capacity, deferred standby fees or service availability charges of any type (collectively referred to herein as “Connection Charges”) up to the Closing Date shall remain Aqua’s sole and separate property with no claim of the FGUA therefore to the extent that such connections are physically connected to the Utility System prior to the Closing. To the extent such connections are not physically connected to the Utility System prior to the Closing, then Aqua shall transfer the Connection Charges for such connections to the FGUA at the Closing.

(B) All sums collected from and after the Closing Date relative to the use of, or connection to, the Utility System shall be paid to the FGUA, with no claim of Aqua therefor.

 

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SECTION 5.06. PROFESSIONAL FEES; COSTS. Each party shall be responsible for securing its own counsel for representation in connection with the negotiation of this Agreement, and all other matters associated with performance, termination or the Closing hereunder; unless otherwise specified herein, and each party shall be responsible for the payment of the fees of its own attorneys, bankers, engineers, accountants, and other professional advisors or consultants in connection therewith.

SECTION 5.07. RISK OF LOSS. At all times prior to and through the Effective Time, Aqua shall maintain adequate fire and extended insurance coverage for the cost of any repairs to the Purchased Assets that may be required by casualty damage. The risk of loss during the said period of time shall fall upon Aqua. The risk of loss shall pass to the FGUA at the Effective Time.

SECTION 5.08. PROCEEDS OF SALE; CLOSING PROCEDURE.

(A) Prior to the FGUA closing the issuance of the Bonds to pay the Purchase Price, Aqua and the FGUA shall execute and place in escrow all documents necessary to close the transactions contemplated by this Agreement (the “Escrow Closing”). At the Escrow Closing, the parties shall execute and enter into an Escrow Closing Agreement in substantially the form attached as Appendix Q to this Agreement; and Aqua shall furnish the documents listed in Section 5.08(C), all in substantially the form attached as Appendix R to this Agreement. Aqua shall also furnish at the Escrow Closing any necessary assignments, estoppel letters, releases, satisfactions, terminations and any corrective instruments.

 

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(B) In order to secure title insurance coverage against the existence of material adverse matters recorded during the period of time between the effective date of the title insurance commitment and the date of recording of the documents creating the estate to be insured, Aqua and the FGUA agree that the escrow agent for the Escrow Closing may also be the Title Agent.

(C) Aqua shall pay all Taxes and fees necessary for transfer, filing or recording of, and shall deliver to the FGUA, the following documents affecting the transfer of the Purchased Assets to the FGUA; these documents shall be in final form, together with any exhibits or appendices thereto in the form attached as Appendix R to the Agreement:

(1) Special warranty deed for the conveyance of all real property set forth in Appendix A;

(2) Assignment of Easements for the easements set forth in Appendix B;

(3) Transfer, Assignment and Assumption Agreement covering all contracts, agreements, permits and approvals and other interests in the Purchased Assets as set forth in Appendices C, D, E, F, G, H, I, J, K and L;

(4) Bill of Sale or other documents of assignment and transfer, with full warranties of title, to all Purchased Assets, other than the property set forth in Appendix A;

(5) Non-foreign affidavit, no-lien affidavit, “gap” affidavit, waiver and release of lien or such other forms as are customarily required for issuance of the title insurance policy referenced herein; and

(6) Any affidavits, certificates, estoppel certificates, corrective instruments, releases, satisfactions or terminations necessary to close, including, but not limited to, those instruments identified by the title insurer insuring the real property set forth in Appendix A.

 

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(D) Aqua acknowledges that the FGUA will issue Bonds to generate proceeds to pay the Purchase Price as described in Section 3.03 hereof. Therefore, all closing procedures shall be subject to the customary and reasonable requirements of the underwriter selected by the FGUA and the purchasers of the revenue bonds. The disbursement of proceeds shall be at the direction of the Title Agent in order to secure coverage against material adverse matters or defects in title which are recorded during the period of time between the effective date of the title insurance commitment and the date of recording of the document creating the estate or interest to be insured.

ARTICLE VI

GENERAL PROVISIONS

SECTION 6.01. RIGHT TO ENTER. Prior to the Closing, the FGUA shall have the right, at any reasonable time during normal business hours with twenty four (24) hours prior notice to Aqua, to enter upon Aqua’s property to inspect the Utility System and the Purchased Assets, to familiarize itself with day-to-day operations, to review the operational practices of Aqua, and to ensure compliance with any and all federal and state regulatory requirements; provided, however, that such access shall not be had or done in any such manner so as to unreasonably interfere with the normal conduct of the Utility System and Purchased Assets.

 

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SECTION 6.02. CONDUCT BETWEEN EXECUTION AND CLOSING. After the date of execution of this Agreement until the Closing, Aqua shall:

(A) Continue to provide water and wastewater treatment to its current customers in the ordinary and usual manner;

(B) Comply with all legal requirements, contractual obligations and maintain the Utility System in the ordinary course of business, consistent with prior practice;

(C) Not, except in the ordinary course of business or as required by law, dispose of any Purchased Assets or enter into or modify any effluent reuse or disposal agreements, developer, water or wastewater service agreement, or construction or third party vendor agreement affecting the Utility System, without the prior written consent of the FGUA, which consent shall not be unreasonably withheld and which shall be acted upon promptly by the FGUA;

(D) Confer with the FGUA prior to implementing operational decisions of a material nature which are not in the ordinary course of business or which may constitute an obligation or liability of the FGUA following Closing;

(E) Maintain all books and records relating to the Utility System in the ordinary course of business; and

(F) Make a good faith effort to provide to the FGUA copies of all Easements of Aqua.

Notwithstanding the foregoing, Aqua shall have the right until the Closing, and in its sole and absolute discretion, to (i) settle any or all disputes provided such settlement does not modify Utility System rates, fees, charges or revenue or materially modify the Purchased Assets, and (ii) file and pursue any and all rate proceedings, in each case without obtaining the prior written consent of the FGUA.

 

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SECTION 6.03. AQUA EMPLOYEES.

(A) Each Seller shall, within five (5) days of Aqua signing this Agreement, provide the FGUA and its contractor, U.S. Water/Wade Trim, LLC (“Contractor”), with a list of all of such Seller’s non-executive employees and other pertinent information with respect to such employees relating to the Aqua Counties as reasonably requested by the FGUA or Contractor.

(B) The FGUA covenants, and shall cause Contractor, to offer employment to all such non-executive employees relating to the Aqua Counties as of the Closing Date with comparable pay and benefits as such non-executive employees presently enjoy as of the date of this Agreement, subject to passing Contractor’s standard background check and drug screening. Each Seller shall be responsible for payment of all wages, salaries and benefits accrued and payable to individuals employed by such Seller through the Effective Time, and the FGUA shall have no liability therefor. The FGUA shall be responsible for payment of all wages, salaries and benefits, under the Contractor’s benefit plans, relating to all non-executive employees hired by the FGUA for the period commencing on and from the Effective Time for a minimum period of twelve (12) months, subject to the FGUA or Contractor’s ordinary employment retention and termination standards.

SECTION 6.04. APPLICABLE LAW; JURISDICTION AND VENUE.

(A) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida.

(B) The parties to this Agreement expressly consent to the jurisdiction of and agree to suit in any court of general jurisdiction in the State of Florida, whether state, local or federal, and further agree that venue shall lie in Leon County.

 

Asset Acquisition Agreement    Page | 37


SECTION 6.05. NOTICE.

(A) All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when hand delivered or mailed by registered or certified mail, postage prepaid, or by courier service, charges prepaid, to the parties at the following addresses:

 

To the FGUA:    System Manager
   Government Services Group, Inc.
   1500 Mahan Drive, Suite 250
   Tallahassee, Florida 32308
   Attention: Robert Sheets
   Email: Rsheets@govserv.com

with a copy to:

   Nabors, Giblin & Nickerson, P.A.
   1500 Mahan Drive, Suite 200
   Tallahassee, Florida 32308
   Attention: Brian P. Armstrong
   Email: Barmstrong@ngnlaw.com
To Aqua:    Aqua Utilities Florida, Inc.
   Crystal River Utilities, Inc.
   762 West Lancaster Avenue
   Bryn Mawr, Pennsylvania 19010
   Attention: Christopher P. Luning, Esquire
   Email: Cpluning@aquaamerica.com

with a copy to:

   Fox Rothschild LLP
   2000 Market Street, 20th Floor
   Philadelphia, Pennsylvania 19103
   Attention: Peter J. Tucci, Esquire
   Email: ptucci@foxrothschild.com

(B) Any written notice given to one person in subsection (A) of this Section 6.05 shall also be copied and provided to all other persons identified in subsection (A) of this Section 6.05.

(C) The parties may, by notice in writing given to the others, designate any future or different addresses to which the subsequent notices, certificates or other communications shall be sent. Any notice shall be deemed given on the date such notice is delivered by hand, by electronic correspondence or by facsimile transmission or five (5) days after the date mailed.

 

Asset Acquisition Agreement    Page | 38


SECTION 6.06. ASSIGNMENT AND JOINDER. Neither Aqua nor the FGUA shall have the power or authority to assign this Agreement or any of their rights, duties or obligations hereunder to a third party, without the prior written consent of the other party. This Agreement shall be construed as solely for the benefit of the FGUA and Aqua, and their successors by law, and no claim or cause of action shall accrue to or for the benefit of any other third party by reason hereof.

SECTION 6.07. INDIVIDUAL LIABILITY. Notwithstanding anything to the contrary contained herein or in any other instrument or document executed by or on behalf of the FGUA in connection herewith, no stipulation, covenant, agreement or obligation contained herein or therein shall be deemed or construed to be a stipulation, covenant, agreement, or obligation of any present or future member, officer, employee, contractor or agent of the FGUA, or of any incorporator, member, director, trustee, officer, employee or agent of any successor to the FGUA, in any such Person’s individual capacity, and no such Person, in an individual capacity, shall be liable personally for any breach or non-observance of or for any failure to perform, fulfill or comply with any such stipulations, covenants, agreements or obligations, nor shall any recourse be had for the payment of the Purchase Price or for any claim based hereon or on any such stipulation, covenant, agreement, or obligation, against any such person, in an individual capacity, either directly or through the FGUA or any successor to the FGUA, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such Person, in an individual capacity, is hereby expressly waived and released. All references to the FGUA in this Section 6.07 shall be deemed to include the FGUA, its government members, Board members, officers, attorneys, employees, contractors and agents. The provisions of this Section shall survive the termination of this Agreement.

 

Asset Acquisition Agreement    Page | 39


SECTION 6.08. FGUA LIABILITIES. The FGUA shall not be obligated to pay any liability arising out of or in any connection whatsoever with this Agreement from any funds except from the net revenues realized by the FGUA after the Closing from its ownership and operation of the respective Operating System. It is further agreed between the FGUA and Aqua that this Agreement and any obligations arising in connection therewith, whether for payment of the Purchase Price, or for any claim of liability, remedy for breach or otherwise, shall not constitute a lien on the Utility System or any other property owned or operated by the FGUA, or any governmental member of the FGUA.

SECTION 6.09. AQUA LIABILITIES.

(A) Aqua shall not be liable to the FGUA for any liabilities, obligations, damages, losses, actions, audits, deficiencies, claims, fines, costs and expenses resulting from, relating to or arising out of any misrepresentation, breach of warranty or non-fulfillment of any agreement or covenant on the part of Aqua under this Agreement, or from any misrepresentation in, or omission from, any Appendix or information furnished by Aqua pursuant to this Agreement, unless and until the FGUA shall have sustained cumulative losses as a result of one or more claims of Two Hundred Fifty Thousand Dollars ($250,000.00) (the “Deductible”) in which event Aqua shall be responsible only for losses exceeding the Deductible. Once the aggregate of losses exceeds the Deductible, the maximum liability for which Aqua shall reimburse the FGUA shall not exceed the amount of Five Million Five Hundred Thousand Dollars ($5,500,000.00) (the “Cap”). At Closing, Aqua shall provide a corporate guarantee by Aqua Utilities, Inc., in a form reasonably satisfactory to the FGUA’s counsel, that shall guarantee and ensure payment and performance of any and all Aqua liabilities arising under this Section 6.09.

 

Asset Acquisition Agreement    Page | 40


(B) Notwithstanding the foregoing, during the Real Estate Warranty Period, Aqua agrees to undertake the following, and to be liable for the full cost thereof including reasonable attorney’s fees and costs: (i) conveyance to the FGUA, free and clear of any liens or encumbrances (subject to the Permitted Exceptions), of any real property interests discovered post-Closing that should have been included in Appendices A or B based on ownership or possession of Aqua on the Closing Date; and (ii) acquisition and conveyance to the FGUA, free and clear of any liens or encumbrances, of any interest in real property within which Purchased Assets are located, and which should have been included in Appendices A or B based on ownership or possession of that portion of the Purchased Assets by Aqua on the Closing Date; provided, however, that Aqua’s liabilities pursuant to this Section 6.09(B) shall not be subject to the Deductible, but shall be subject to the Cap. Discovery and correction of the real estate issues identified in the subsection shall not constitute a misrepresentation or breach of warranty actionable under Section 6.09(A) of this Agreement.

SECTION 6.10. AMENDMENTS AND WAIVERS. No amendment, supplement, modification or waiver of this Agreement shall be binding upon any party hereto unless executed in writing by such party. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision of this Agreement, whether or not similar, unless otherwise expressly provided.

 

Asset Acquisition Agreement    Page | 41


SECTION 6.11. ENTIRE AGREEMENT. This Agreement is the entire agreement between the parties and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions of the agreements, understandings, negotiations and discussions of the parties, whether oral or written, pertaining to the subject matter hereof, and there are not warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein.

SECTION 6.12. EFFECT OF TERMINATION. In the event of the termination of this Agreement in accordance with its terms, this Agreement shall then become void and have no effect, with no liability on the part of any of the parties to this Agreement or their affiliates, except that nothing shall relieve a party from liability for any breach of this Agreement.

SECTION 6.13. PUBLICITY; ANNOUNCEMENTS. The parties agree to issue an initial press release announcing the consummation of the transactions contemplated by this Agreement to be issued promptly following the date hereof and in a form which is prepared by Aqua and reasonably satisfactory to the FGUA. The parties acknowledge that notices have been provided to the Aqua Counties in which the FGUA must provide notice, and that the FGUA has held public hearings and issued other public statements concerning the negotiation, execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement to local government representatives, customer groups and others as appropriate in furtherance of the objectives of this Agreement. To the extent practicable, the FGUA will coordinate with Aqua regarding the timing and content of notices and public statements regarding the transactions contemplated by this Agreement.

 

Asset Acquisition Agreement    Page | 42


SECTION 6.14 CONFIDENTIALITY. Notwithstanding any other term of this Agreement, each of the FGUA and Aqua acknowledges that it is no longer bound by the terms of that certain Non-Disclosure Agreement, dated April 3, 2012, entered into by and between the FGUA and Aqua Utilities Florida, Inc.

SECTION 6.15 RADON GAS. RADON IS NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT HAS ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA. ADDITIONAL INFORMATION REGARDING RADON TESTING MAY BE OBTAINED FROM THE COUNTY PUBLIC HEALTH UNIT.

SECTION 6.16. TRANSITION SERVICES.

(A) The parties acknowledge and agree that the FGUA and its Contractor will require a minimum period of sixty (60) days to prepare for an orderly and efficient transition of operations, customer service and billing activities to the FGUA and, as such, the parties acknowledge and agree that beginning January 1, 2013, the FGUA, its Contractor and Aqua will take all steps necessary and exert their respective best efforts, to include information sharing, test programming, document sharing and such other activities, so as to create a seamless transition of such activities on or around the Closing Date. In the event such activities are accomplished in this timely fashion, the need for Aqua post-closing transition services will be mitigated or eliminated.

 

Asset Acquisition Agreement    Page | 43


(B) On or before the Closing Date, at either party’s option, the parties will enter into a transition services agreement (the “Transition Services Agreement”), pursuant to which the parties will agree upon a list of reasonable transition services to be provided by either party, or its affiliates, to the other party, or its affiliates. Such services shall be provided at reasonable rates (which rates shall not exceed 100% of the cost of either party, or its affiliates, providing such services prior to the Closing) as allocated in accordance with the methodologies used for such allocations by such party and its affiliates in accordance with past practice, and in accordance with the terms and conditions set forth in the Transition Services Agreement. The parties shall cooperate in good faith during the period between the date hereof and the Closing Date in order to minimize, to the extent possible, the period of time following the Closing Date that either party will require services to be provided under the Transition Services Agreement.

[remainder of page left intentionally blank; signature page follows]

 

Asset Acquisition Agreement    Page | 44


IN WITNESS WHEREOF, the FGUA and Aqua have caused this Agreement to be duly executed and entered into on the date first above written.

 

    FLORIDA GOVERNMENTAL UTILITY AUTHORITY
    By:  

Lea Ann Thomas

    Its:  

Chair

Attest:      

Robert Sheets

     
    AQUA UTILITIES FLORIDA, INC.
    By:  

Nicholas DeBenedictis

    Its:  

Chairman

Attest:      

Christopher P Luning

     
    CRYSTAL RIVER UTILITIES, INC.
    By:  

Nicholas DeBenedictis

    Its:  

Chairman

Attest:      

Christopher P Luning

     

 

Asset Acquisition Agreement    Page | 45


APPENDIX A

SCHEDULE OF REAL PROPERTY

 

A-1


APPENDIX B

SCHEDULE OF EASEMENTS

 

B-1


APPENDIX C

SCHEDULE OF ASSETS COMPRISING THE UTILITY SYSTEM

 

C-1


APPENDIX D

SCHEDULE OF THIRD PARTY WARRANTIES RELATED TO

COMPLETED OR IN PROGRESS CONSTRUCTION

 

D-1


APPENDIX E

SCHEDULE OF PERMITS

 

E-1


APPENDIX F

SCHEDULE OF LITIGATION AND REGULATORY NON-COMPLIANCE

 

F-1


APPENDIX G

SCHEDULE OF INVENTORY

 

G-1


APPENDIX H

SCHEDULE OF OPERATING AND VENDOR CONTRACTS

 

H-1


APPENDIX I

SCHEDULE OF REUSE AND EFFLUENT DISPOSAL AGREEMENTS

 

I-1


APPENDIX J

SCHEDULE OF PURCHASED

WATER AND WASTEWATER SERVICE AGREEMENTS

 

J-1


APPENDIX K

SCHEDULE OF EXECUTORY AGREEMENTS

(DEVELOPER AGREEMENTS)

 

K-1


APPENDIX L

SCHEDULE OF EXECUTORY AGREEMENTS

(OTHER THAN DEVELOPER AGREEMENTS)

 

L-1


APPENDIX M

SCHEDULE OF RATES, FEES AND CHARGES

 

M-1


APPENDIX N

SCHEDULE OF ENVIRONMENTAL COMPLIANCE EXCEPTIONS

 

N-1


APPENDIX O

SCHEDULE OF EXCLUDED ASSETS

 

(1) all cash, cash equivalents and short-term investments; all payments received by Aqua prior to the Closing;

 

(2) all minute books, stock records and corporate seals;

 

(3) any shares of capital stock of Aqua;

 

(4) all insurance policies and rights thereunder;

 

(5) the following agreements:

(a)

(b)

(c)

 

(6) records that Aqua is required by law to retain in its possession;

 

(7) all claims, existing as of the Closing Date, for refunds of Taxes and other governmental charges of whatever nature;

 

(8) all rights and obligations in connection with and assets of any employee benefit plans;

 

(9) the following property and assets:

(a)

(b)

(c)

 

(10) the following rolling stock:

(a)

(b)

(c)

 

(11) All rights of Aqua under this Agreement and all ancillary documents hereto.

 

O-1


APPENDIX P

SCHEDULE OF PERMITTED EXCEPTIONS

 

P-1


APPENDIX Q

FORM OF DOCUMENT ESCROW AGREEMENT

 

Q-1


APPENDIX R

FORM OF DOCUMENTS FOR CLOSING

 

R-1


APPENDIX S

PURCHASE PRICE CALCULATION

BASED ON TRUE INTEREST COST

 

S-1

EX-4.24

Exhibit 4.24

Prepared by and Return to:

Mary T. Tomich, Esq.

Dilworth Paxson LLP

1500 Market Street

Suite 3500E

Philadelphia, PA 19102

215-575-7000

 

 

FORTY-SEVENTH SUPPLEMENTAL

INDENTURE

DATED AS OF OCTOBER 15, 2012

TO

INDENTURE OF MORTGAGE

DATED AS OF JANUARY 1, 1941

AQUA PENNSYLVANIA, INC.

TO

THE BANK OF NEW YORK MELLON TRUST COMPANY, N. A., as Trustee

 

 


FORTY-SEVENTH SUPPLEMENTAL INDENTURE dated as of October 15, 2012, by and between AQUA PENNSYLVANIA, INC. (f/k/a Pennsylvania Suburban Water Company), a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (the “Company”) as successor by merger to the Philadelphia Suburban Water Company (the “Original Company”), party of the first part, and THE BANK OF NEW YORK MELLON TRUST COMPANY, N. A., a national banking association (the “Trustee”), party of the second part.

WHEREAS, the Original Company heretofore duly executed and delivered to The Pennsylvania Company for Insurances on Lives and Granting Annuities, as trustee, an Indenture of Mortgage dated as of January 1, 1941 (the “Original Indenture”), which by reference is hereby made a part hereof, and in and by the Original Indenture the Original Company conveyed and mortgaged to such trustee certain property therein described, to secure the payment of its bonds to be generally known as its “First Mortgage Bonds” and to be issued under the Original Indenture in one or more series as therein provided; and

WHEREAS, through a series of mergers, changes of names and successions, The Bank of New York Mellon Trust Company, N. A. became the successor trustee; such mergers, changes of name and successions not involving any change in the title, powers, rights or duties of the trustee, as trustee under the Original Indenture as supplemented at the respective dates thereof; and

WHEREAS, the Original Company duly executed and delivered to the Trustee thirty-four supplemental indentures supplemental to the Original Indenture, and the Company duly executed and delivered to the Trustee twelve supplemental indentures to the Original Indenture so as to subject certain additional property to the lien of the Original Indenture and to provide for the creation of additional series of bonds; and

WHEREAS, pursuant to an Agreement and Plan of Merger and Reorganization dated December 20, 2001, and effective on January 1, 2002, the Original Company agreed to merge, in conjunction with its affiliated corporations, Consumers Pennsylvania Water Company – Shenango Valley Division, Consumers Pennsylvania Water Company – Roaring Creek Division, Consumers Pennsylvania Water Company – Susquehanna Division, Waymart Water Company, Fawn Lake Forrest Water Company, Western Utilities, Inc., and Northeastern Utilities, Inc. (such affiliates referred to hereinafter as the “Merging Entities”) with and into the Company; and

WHEREAS, pursuant to the Thirty-Fifth Supplemental Indenture dated as of January 1, 2002 (the “Thirty-Fifth Supplemental Indenture”), the Company agreed to assume the obligations of the Original Company under the Original Indenture and all supplements thereto; and

 

2


WHEREAS, the Company has issued under the Original Indenture, as supplemented at the respective dates of issue, sixty-one series of First Mortgage Bonds designated, respectively, as set forth in the following table, the Indenture creating each series and the principal amount of bonds thereof issued being indicated opposite the designation of such series:

 

Designation

  

Indenture

   Amount  

3 1/4% Series due 1971

   Original    $ 16,375,000   

9 5/8% Series due 1975

   Thirteenth Supplemental      10,000,000   

9.15% Series due 1977

   Fourteenth Supplemental      10,000,000   

3% Series due 1978

   First Supplemental      2,000,000   

3 3/8% Series due 1982

   Second Supplemental      4,000,000   

3.90% Series due 1983

   Third Supplemental      5,000,000   

3 1/2% Series due 1986

   Fourth Supplemental      6,000,000   

4 1/2% Series due 1987

   Fifth Supplemental      4,000,000   

4 1/8% Series due 1988

   Sixth Supplemental      4,000,000   

5% Series due 1989

   Seventh Supplemental      4,000,000   

4 5/8% Series due 1991

   Eighth Supplemental      3,000,000   

4.70% Series due 1992

   Ninth Supplemental      3,000,000   

6 7/8% Series due 1993

   Twelfth Supplemental      4,500,000   

4.55% Series due 1994

   Tenth Supplemental      4,000,000   

10 1/8% Series due 1995

   Sixteenth Supplemental      10,000,000   

5 1/2% Series due 1996

   Eleventh Supplemental      4,000,000   

7 7/8% Series due 1997

   Fifteenth Supplemental      5,000,000   

8.44% Series due 1997

   Twenty-Third Supplemental      12,000,000   

9.20% Series due 2001

   Seventeenth Supplemental      7,000,000   

8.40% Series due 2002

   Eighteenth Supplemental      10,000,000   

5.95% Series due 2002

   Twenty-Seventh Supplemental      4,000,000   

12.45% Series due 2003

   Twentieth Supplemental      10,000,000   

13% Series due 2005

   Twenty-First Supplemental      8,000,000   

10.65% Series due 2006

   Twenty-Second Supplemental      10,000,000   

9.89% Series due 2008

   Twenty-Fourth Supplemental      5,000,000   

7.15% Series due 2008

   Twenty-Eighth Supplemental      22,000,000   

9.12% Series due 2010

   Twenty-Fifth Supplemental      20,000,000   

8 7/8% Series due 2010

   Nineteenth Supplemental      8,000,000   

6.50% Series due 2010

   Twenty-Seventh Supplemental      3,200,000   

9.17% Series due 2011

   Twenty-Sixth Supplemental      5,000,000   

9.93% Series due 2013

   Twenty-Fourth Supplemental      5,000,000   

9.97% Series due 2018

   Twenty-Fourth Supplemental      5,000,000   

9.17% Series due 2021

   Twenty-Sixth Supplemental      8,000,000   

6.35% Series due 2025

   Thirtieth Supplemental      22,000,000   

9.29% Series due 2026

   Twenty-Sixth Supplemental      12,000,000   

1995 Medium Term Note Series

   Twenty-Ninth Supplemental      77,000,000   

7.72% Subseries A due 2025

   15,000,000   

6.82% Subseries B due 2005

   10,000,000   

6.89% Subseries C due 2015

   12,000,000   

6.99% Subseries D due 2006

   10,000,000   

7.47% Subseries E due 2003

   10,000,000   

6.83% Subseries F due 2003

   10,000,000   

7.06% Subseries G due 2004

   10,000,000   

 

3


1997 Medium Term Note Series

   Thirty-First Supplemental      65,000,000   

6.75% Subseries A due 2007

   10,000,000   

6.30% Subseries B due 2002

   10,000,000   

6.14% Subseries C due 2008

   10,000,000   

5.80% Subseries D due 2003

   10,000,000   

5.85% Subseries E due 2004

   10,000,000   

6.00% Subseries F due 2004

   15,000,000   

6.00% Series due 2029

   Thirty-Second Supplemental      25,000,000   

1999 Medium Term Note Series

   Thirty-Third Supplemental      222,334,480   

7.40% Subseries A due 2005

   15,000,000   

7.40% Subseries B due 2005

   11,000,000   

6.21% Subseries C due 2011

   15,000,000   

9.53% Subseries D due 2019

   4,000,000   

6.375% Subseries E due 2023

   14,000,000   

8.26% Subseries F due 2022

   1,500,000   

9.50% Subseries G due 2006

   1,440,000   

9.22% Subseries H due 2019

   2,534,480   

8.32% Subseries I due 2022

   3,500,000   

8.14% Subseries J due 2025

   4,000,000   

6.00% Subseries K due 2030

   18,360,000   

5.93% Subseries L due 2012

   25,000,000   

2.65% Subseries M due 2006

   5,000,000   

3.461% Subseries N due 2007

   12,000,000   

5.08% Subseries O due 2015

   20,000,000   

5.17% Subseries P due 2017

   7,000,000   

5.751% Subseries Q due 2019

   15,000,000   

5.751% Subseries R due 2019

   5,000,000   

6.06% Subseries S due 2027

   15,000,000   

6.06% Subseries T due 2027

   5,000,000   

5.98% Subseries U due 2028

   3,000,000   

5.35% Series due 2031

   Thirty-Fourth Supplemental      30,000,000   

5.55% Series due 2032

   Thirty-Sixth Supplemental      25,000,000   

3.75% Series due 2010

   Thirty-Seventh Supplemental      3,200,000   

5.15% Series due 2032

   Thirty Seventh Supplemental      25,000,000   

5.05% Series due 2039

   Thirty-Eighth Supplemental      14,000,000   

5.00% Series due 2036

5.00% Series due 2037

5.00% Series due 2038

  

Thirty-Ninth Supplemental

Thirty-Ninth Supplemental

Thirty-Ninth Supplemental

    

 

 

21,770,000

24,165,000

25,375,000

  

  

  

5.00% Series due 2035

   Fortieth Supplemental      24,675,000   

5.00% Series due 2040

   Forty-first Supplemental      23,915,000   

5.00% Series due 2041

   Forty-first Supplemental      23,915,000   

5.25% Series due 2042

   Forty-second Supplemental      24,830,000   

5.25% Series due 2043

   Forty-second Supplemental      24,830,000   

6.25% Series due 2017

   Forty-third Supplemental      9,000,000   

6.75% Series due 2018

   Forty-third Supplemental      13,000,000   

5.00% Series due 2039

   Forty-fourth Supplemental      58,000,000   

5.00% Series due 2040

   Forty-fifth Supplemental      62,165,000   

4.75% Series due 2040

   Forty-fifth Supplemental      12,520,000   

5.00% Series due 2033

   Forty-sixth Supplemental      25,910,000   

5.00% Series due 2034

   Forty-sixth Supplemental      19,270,000   

4.50% Series due 2042

   Forty-sixth Supplemental      15,000,000   

5.00% Series due 2043

   Forty-sixth Supplemental      81,205,000   

 

4


and

WHEREAS, the bonds of each of said series that are outstanding as of September 30, 2012 are listed on Exhibit A attached hereto and made a part hereof; and

WHEREAS, in order to secure the lien of the Original Indenture on the properties of the Original Company and the Company, the Original Indenture and the first forty-six supplemental indentures supplemental to the Original Indenture were duly recorded in the Commonwealth of Pennsylvania on the dates and in the office for the Recording of Deeds for the counties and in the Mortgage Books at the pages indicated in Exhibit B hereto; and

WHEREAS, the lien of the Original Indenture, as supplemented, has been perfected as a security interest under the Pennsylvania Uniform Commercial Code by filing a financing statement in the office of the Secretary of the Commonwealth; and

WHEREAS, the Delaware County Industrial Development Authority previously issued its Water Facilities Revenue Bonds (Philadelphia Suburban Water Company Project), Series of 2001 in the aggregate principal amount of $30,000,000, all of which are currently outstanding (the “2001 Bonds”) to finance the acquisition, construction, installation and equipping of facilities for the furnishing of water at various sites throughout the Company’s water supply and distribution system; and

WHEREAS, the Bucks County Industrial Development Authority previously issued its Water Facilities Revenue Bonds (Pennsylvania Suburban Water Company Project), Series of 2002 in the aggregate principal amount of $25,000,000, all of which are currently outstanding (the “2002 Bonds”) finance the acquisition, construction, installation and equipping of facilities for the furnishing of water at various sites throughout the Company’s water supply and distribution system; and

WHEREAS, the Company previously issued its $1,500,000 principal amount 8.26% Series due 2022 (the “8.26% Series”), all of which are currently outstanding, and its $3,500,000 principal amount 8.32% Series due 2022 (the “8.32% Series”), all of which are currently outstanding; and

WHEREAS, the Company proposes to create under the Original Indenture, as supplemented by this Forty-seventh Supplemental Indenture, three series of bonds to be designated (i) “First Mortgage Bond, 3.79% Series due 2041” (herein referred to as the “3.79% Series due 2041”) to be limited in aggregate principal amount to $40,000,000, to bear interest at the rate of 3.79% per annum, and to mature on December 1, 2041, (ii) “First Mortgage Bond, 3.80% Series due 2042” (herein referred to as the “3.80% Series due 2042”) to be limited in aggregate principal amount to $20,000,000, to bear interest at the rate of 3.80% per annum, and to mature on December 1, 2042, and (iii) “First Mortgage Bond, 3.85% Series due 2047 (herein referred to as the “3.85% Series due 2047”) to be limited in aggregate principal amount to $20,000,000, to bear interest at the rate of 3.85% per annum, and to mature on December 1, 2047 (the 3.79% Series due 2041, the 3.80% Series due 2042 and the 3.85% Series due 2047 are collectively referred to as the “Bonds”), each such series to be issued only as registered bonds without coupons and to be dated the date of delivery thereof; and

 

5


WHEREAS, the Company proposes to issue the Bonds under the provisions of Article IV of the Original Indenture, as supplemented by the indentures supplemental thereto, including this Forty-seventh Supplemental Indenture, and will comply with the provisions thereof as well as with other provisions of the Original Indenture and indentures supplemental thereto in connection with the issuance of additional bonds so that it will be entitled to procure the authentication and delivery of the Bonds; and

WHEREAS, Article XVIII of the Original Indenture provides that the Company, when authorized by resolution of its Board of Directors, may with the Trustee enter into an indenture supplemental to the Original Indenture, which thereafter shall form a part of the Original Indenture, for the purposes, inter alia, of subjecting to the lien of the Original Indenture additional property, of defining the covenants and provisions applicable to any bonds of any series other than the 3 1/4% Series due 1971, of adding to the covenants and agreements of the Company contained in the Original Indenture other covenants and agreements thereafter to be observed by the Company, of surrendering any right or power in the Original Indenture reserved to or conferred upon the Company, and of making such provisions in regard to matters or questions arising under the Original Indenture as may be necessary or desirable and not inconsistent therewith; and

WHEREAS, the Company, by proper corporate action, has duly authorized the creation of the 3.79% Series due 2041, the 3.80% Series due 2042 and the 3.85% Series due 2047 (to be issued in accordance with the terms and provisions of the Original Indenture and indentures supplemental thereto, including this Forty-seventh Supplemental Indenture, and to be secured by said Original Indenture and indentures supplemental thereto, including this Forty-seventh Supplemental Indenture), and has further duly authorized the execution, delivery and recording of this Forty-seventh Supplemental Indenture setting forth the terms and provisions of the 3.79% Series due 2041, the 3.80% Series due 2042 and the 3.85% Series due 2047 insofar as said terms and provisions are not set forth in said Original Indenture; and

WHEREAS, the Bonds and the Trustee’s certificate upon said Bonds are to be substantially in the following form - the proper amount, names of registered owners and numbers to be inserted therein, and such appropriate insertions, omissions and changes to be made therein as may be required or permitted by this Forty-seventh Supplemental Indenture to conform to any pertinent law or usage:

THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND SALES OR OTHER TRANSFERS HEREOF MAY BE MADE ONLY TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A UNDER THE ACT (“QUALIFIED INSTITUTIONAL BUYERS”), IN TRANSACTIONS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE ACT.

 

[continued on next page]

 

6


BY ITS ACCEPTANCE OF THIS BOND, THE HOLDER REPRESENTS AND AGREES THAT IT IS A QUALIFIED INSTITUTIONAL BUYER AND THAT THIS BOND IS BEING ACQUIRED FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF IN ANY TRANSACTION THAT WOULD BE IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS, AND THAT ANY RESALE OR OTHER TRANSFER HEREOF OR ANY INTEREST HEREIN PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF (A) ITS DATE OF ISSUE OR (B) THE LAST DATE ON WHICH THE COMPANY OR ANY OF ITS AFFILIATES WAS THE BENEFICIAL OWNER HEREOF WILL BE MADE ONLY (1) TO A PLACEMENT AGENT OR THE COMPANY, (2) THROUGH ANY PLACEMENT AGENT OR BY ANY PLACEMENT AGENT ACTING AS PRINCIPAL TO A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE APPROVED BY SUCH PLACEMENT AGENT, (3) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER APPROVED BY THE COMPANY IN A TRANSACTION APPROVED BY THE COMPANY, (4) THROUGH A DEALER OTHER THAN A PLACEMENT AGENT TO A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE IN A TRANSACTION APPROVED BY THE COMPANY, OR (5) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A UNDER THE ACT, SUBJECT TO IN EACH CASE THE DISPOSITION OF THE PURCHASER’S PROPERTY BEING AT ALL TIMES WITHIN ITS CONTROL. IN THE CASE OF CERTIFICATED BONDS, ANY TRANSFER DESCRIBED IN CLAUSE (3), (4) OR (5) ABOVE REQUIRES THE SUBMISSION TO THE TRUSTEE (AS DEFINED HEREIN) OR ANY DULY AUTHORIZED PAYING AGENT OF THE CERTIFICATE OF TRANSFER ATTACHED HERETO DULY COMPLETED OR A DULY COMPLETED TRANSFER INSTRUMENT SUBSTANTIALLY IN THE FORM OF THE CERTIFICATE OF TRANSFER. THE COMPANY SHALL NOT RECOGNIZE ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER, OF THIS BOND NOT MADE IN COMPLIANCE WITH THE FOREGOING PROVISIONS. THIS BOND AND RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON THE PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS BOND TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR PROVIDE ALTERNATIVE PROCEDURES IN COMPLIANCE WITH APPLICABLE LAW AND PRACTICES RELATING TO THE RESALE OR OTHER TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS BOND SHALL BE DEEMED, BY THE ACCEPTANCE OF THIS BOND, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

 

7


No. R-    [PPN]
$   

AQUA PENNSYLVANIA, INC.

(Incorporated under the Laws of the Commonwealth

of Pennsylvania)

First Mortgage Bond, 3.79% Series due 2041

Aqua Pennsylvania, Inc. (f/k/a known as Pennsylvania Suburban Water Company, successor by merger to Philadelphia Suburban Water Company), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (hereinafter called the “Company”, which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to              or its registered assigns, on the 1st day of December, 2041 (the “Maturity Date”), at the address designated by the registered owner pursuant to Section 11.1 of the Bond Purchase Agreement dated as of November 8, 2012, between the Company and the Purchasers listed therein (the “Bond Purchase Agreement”), the sum of          Million Dollars in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts and to pay interest thereon to the registered owner hereof by wire transfer of immediately available funds in accordance with Section 11.1 of the Bond Purchase Agreement to such registered owner from the interest payment date next preceding the date of the authentication of this bond (or if this bond is authenticated after a Record Date as defined below and on or before the succeeding interest payment date, from such succeeding interest payment date, or if this bond is authenticated on or prior to June 1, 2013 from the date hereof) until the principal hereof shall become due and payable, at the rate of 3.79% per annum, payable semiannually in like coin or currency on the 1st day of June and the 1st day of December in each year, commencing June 1, 2013 and to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and, to the extent legally enforceable, on any overdue installment of interest at a rate of 5.79% per annum after maturity whether by acceleration or otherwise until paid.

The interest so payable will (except as otherwise provided in the Forty-seventh Supplemental Indenture referred to herein) be calculated on the basis of a 360-day year of twelve 30-day months and be paid to the person in whose name this bond (or a bond or bonds in exchange for which this bond was issued) is registered at the close of business on the 15th day of the calendar month preceding the month in which the interest payment date occurs whether or not such day is a business day (a “Record Date”) and principal, premium, if any, and interest on this bond shall be paid by the Company in accordance with written payment instructions of the registered owner delivered to the Company on or before such record date.

 

8


This bond is one of a duly authorized issue of bonds of the Company known as its First Mortgage Bonds, issued and to be issued without limitation as to aggregate principal amount except as set forth in the Indenture hereinafter mentioned in one or more series and equally secured (except insofar as a sinking fund or other similar fund established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by an Indenture of Mortgage (herein called the “Indenture”) dated as of January 1, 1941, executed by the Philadelphia Suburban Water Company (now Aqua Pennsylvania, Inc., f/k/a Pennsylvania Suburban Water Company, as successor by merger) to The Pennsylvania Company for Insurances on Lives and Granting Annuities (succeeded as trustee by The Bank of New York Mellon Trust Company, N.A.), as Trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders and registered owners of the bonds and of the Trustee in respect of such security, and the terms and conditions under which the bonds are and are to be secured and may be issued under the Indenture; but neither the foregoing reference to the Indenture nor any provision of this bond or of the Indenture or of any indenture supplemental thereto shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay at the stated or accelerated maturity herein and in the Indenture provided, the principal of and premium, if any, and interest on this bond as herein provided. As provided in the Indenture, the bonds may be issued in series for various principal amounts, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided or permitted. This bond is one of the bonds described in the Forty-seventh Supplemental Indenture (the “Forty-seventh Supplemental Indenture”) dated as of October 15, 2012, and designated therein as “First Mortgage Bond, 3.79% Series due 2041” (the “Bonds”).

Concurrently herewith the Company is issuing its “First Mortgage Bond, 3.80% Series due 2042” in the aggregate principal amount of $20,000,000 and its “First Mortgage Bond, 3.85% Series due 2047” in the aggregate principal amount of $20,000,000.

To the extent permitted by and as provided in the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders and registered owners of bonds issued and to be issued thereunder may be made with the consent of the Company by an affirmative vote of the holders and registered owners of not less than 75% in principal amount of bonds then outstanding under the Indenture and entitled to vote, at a meeting of the bondholders called and held as provided in the Indenture, and, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, by an affirmative vote of the holders and registered owners of not less than 75% in principal amount of bonds of any series then outstanding under the Indenture and entitled to vote on and affected by such modification or alteration, or by the written consent of the holders and registered owners of such percentages of bonds; provided, however, that no such modification or alteration shall be made which shall reduce the percentage of bonds the consent of the holders or registered owners of which is required for any such modification or alteration or which shall affect the terms of payment of the principal of or interest on the bonds, or permit the creation by the Company of any lien prior to or on a parity with the lien of the Indenture with respect to any property subject to the lien of the Indenture as a first mortgage lien thereon, or which shall affect the rights of the holders or registered owners of less than all of the bonds of any series affected thereby.

The Company may, at its option, upon notice as provided below, redeem at any time all, or from time to time any part of, the Bonds, in an amount not less than 10% of the aggregate principal amount of the Bonds then outstanding in the case of a partial redemption, at 100% of the principal amount so redeemed, together with interest accrued thereon to the date of such redemption, plus the Make-Whole Amount (as defined in the Forty-seventh Supplemental Indenture) determined for the redemption date with respect to such principal amount of each bond then outstanding.

 

9


Any redemption shall be effected by notice mailed to the registered owners thereof, as provided in the Indenture, at least thirty (30) days and not more than forty-five (45) days before the redemption date, all on the conditions and in the manner provided in the Indenture. Each such notice shall specify such date (which shall be a Business Day (as defined in the Forty-seventh Supplemental Indenture)), the aggregate principal amount of the Bonds to be redeemed on such date, the principal amount of each bond held by such holder to be redeemed (determined in accordance with Article I, Section 3 of the Forty-seventh Supplemental Indenture), and the interest to be paid on the redemption date with respect to such principal amount being redeemed, and shall be accompanied by a certificate of the chief financial officer, principal accounting officer, treasurer or comptroller (each, for purposes of this bond, a “Senior Financial Officer”) of the Company as to the estimated Make-Whole Amount due in connection with such redemption (calculated as if the date of such notice were the date of the redemption), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Bonds a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified redemption date.

If this bond or any portion hereof is called for redemption and payment thereof is duly provided for as specified in the Indenture, interest shall cease to accrue hereon or on such portion, as the case may be, from and after the redemption date. In the event of redemption of this bond in part only, a new bond for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof.

The principal hereof may be declared or may become due prior to its Maturity Date on the conditions, in the manner and with the effect set forth in the Indenture upon the happening of an event of default, as in the Indenture provided; subject, however, to the right, under certain circumstances, of the registered owners of a majority in principal amount of bonds then outstanding, including the Bonds, to annul such declaration.

The Company, the Trustee and any Paying Agent may deem and treat the registered owner of this bond as the absolute owner hereof for the purpose of receiving payment of or on 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 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 designated office of the Trustee in Philadelphia, Pennsylvania upon surrender hereof for cancellation at such office and upon presentation of a written instrument of transfer duly executed, and thereupon the Company shall issue in the name of the transferee or transferees, and the Trustee shall authenticate and deliver, a new bond or bonds in authorized denominations, of equal aggregate unpaid principal amount. Any such transfer or exchange shall be subject to the terms and conditions and to the payment of the charges specified in the Indenture.

No recourse shall be had for the payment of the principal of or interest on this bond or for any claim based hereon or otherwise in respect hereof or of the Indenture or of any indenture supplemental thereto against any incorporator or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company, or through any such predecessor or successor corporation or through any receiver or trustee in bankruptcy, by virtue of any constitutional provision, statute or rule of law or equity, or by the enforcement of any assessment or penalty or otherwise; all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released by every holder or registered owner hereof, as more fully provided in the Indenture.

 

10


This bond shall not be entitled to any benefit under the Indenture or any indenture supplemental thereto, or become valid or obligatory for any purpose, until The Bank of New York Mellon Trust Company, N. A., as Trustee under the Indenture, or a successor trustee thereunder, shall have signed the certificate of authentication endorsed hereon.

This bond shall be deemed to be a contract and shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania (excluding laws governing conflicts of law).

IN WITNESS WHEREOF, Aqua Pennsylvania, Inc. has caused this bond to be signed by its President or a Vice President and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant Secretary, and this bond to be dated                 .

 

      AQUA PENNSYLVANIA, INC.
Attest:        

 

      By  

 

Assistant Secretary       (Vice) President

[Form of Trustee’s Certificate]

This bond is one of the Bonds, of the series designated therein, referred to in the within-mentioned Forty-seventh Supplemental Indenture.

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N. A., TRUSTEE
By:  

 

  Authorized Officer

 

11


[Form of Certificate of Transfer]

(To be delivered with a Certificated Bond to the Trustee)

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

(please print or typewrite name and address including postal zip code of assignee and insert Taxpayer Identification No.)

this bond and all rights hereunder, hereby irrevocably constituting and appointment attorney to transfer this bond the books of the Company with full power of substitution in the premises.

CERTIFICATE OF TRANSFER

(The following is not required for sales or other transfers of this bond to or through the Company or a placement agent).

In connection with any transfer of this bond occurring prior to the date which is two years after the later of (a) the date of original issue of this bond, or (b) the last date the Company or any of its affiliates was the beneficial owner of this bond, the undersigned confirms that:

 

¨ This bond is being transferred by the undersigned to a transferee that is, or that the undersigned reasonably believes to be, a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended) pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder.

If the foregoing box is not checked, then, so long as the accompanying bond shall bear a legend on its face restricting resales and other transfers thereof (except in the case of a resale or other transfer made (i) to a placement agent referred to in such legend or to the Company or (ii) through a placement agent or by a placement agent acting as principal to a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, in a transaction approved by a placement agent) the Trustee shall not be obligated to register this bond in the name of any person other than the registered owner hereof.

Dated:

NOTICE: The signature of the beneficial owner to this assignment must correspond with the name as written on the face of this bond in every particular, without alteration or enlargement or any change whatsoever.

TO BE COMPLETED BY PURCHASER IF THE BOX ABOVE IS CHECKED:

The undersigned represents and warrants that it is a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the registered owner is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:

NOTICE: To be executed by an officer.

 

12


THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND SALES OR OTHER TRANSFERS HEREOF MAY BE MADE ONLY TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A UNDER THE ACT (“QUALIFIED INSTITUTIONAL BUYERS”) IN TRANSACTIONS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE ACT.

BY ITS ACCEPTANCE OF THIS BOND, THE HOLDER REPRESENTS AND AGREES THAT IT IS A QUALIFIED INSTITUTIONAL BUYER AND THAT THIS BOND IS BEING ACQUIRED FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF IN ANY TRANSACTION THAT WOULD BE IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS, AND THAT ANY RESALE OR OTHER TRANSFER HEREOF OR ANY INTEREST HEREIN PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF (A) ITS DATE OF ISSUE OR (B) THE LAST DATE ON WHICH THE COMPANY OR ANY OF ITS AFFILIATES WAS THE BENEFICIAL OWNER HEREOF WILL BE MADE ONLY (1) TO A PLACEMENT AGENT OR THE COMPANY, (2) THROUGH ANY PLACEMENT AGENT OR BY ANY PLACEMENT AGENT ACTING AS PRINCIPAL TO A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE APPROVED BY SUCH PLACEMENT AGENT, (3) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER APPROVED BY THE COMPANY IN A TRANSACTION APPROVED BY THE COMPANY, (4) THROUGH A DEALER OTHER THAN A PLACEMENT AGENT TO A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE IN A TRANSACTION APPROVED BY THE COMPANY, OR (5) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A UNDER THE ACT, SUBJECT TO IN EACH CASE THE DISPOSITION OF THE PURCHASER’S PROPERTY BEING AT ALL TIMES WITHIN ITS CONTROL. IN THE CASE OF CERTIFICATED BONDS, ANY TRANSFER DESCRIBED IN CLAUSE (3), (4) OR (5) ABOVE REQUIRES THE SUBMISSION TO THE TRUSTEE (AS DEFINED HEREIN) OR ANY DULY AUTHORIZED PAYING AGENT OF THE CERTIFICATE OF TRANSFER ATTACHED HERETO DULY COMPLETED OR A DULY COMPLETED TRANSFER INSTRUMENT SUBSTANTIALLY IN THE FORM OF THE CERTIFICATE OF TRANSFER. THE COMPANY SHALL NOT RECOGNIZE ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER, OF THIS BOND NOT MADE IN COMPLIANCE WITH THE FOREGOING PROVISIONS. THIS BOND AND RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON THE PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS BOND TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR PROVIDE ALTERNATIVE PROCEDURES IN COMPLIANCE WITH APPLICABLE LAW AND PRACTICES RELATING TO THE RESALE OR OTHER TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS BOND SHALL BE DEEMED, BY THE ACCEPTANCE OF THIS BOND, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

 

13


No. R-    [PPN]
$   

AQUA PENNSYLVANIA, INC.

(Incorporated under the Laws of the Commonwealth

of Pennsylvania)

First Mortgage Bond, 3.80% Series due 2042

Aqua Pennsylvania, Inc. (f/k/a known as Pennsylvania Suburban Water Company, successor by merger to Philadelphia Suburban Water Company), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (hereinafter called the “Company”, which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to              or its registered assigns, on the 1st day of December, 2042 (the “Maturity Date”), at the address designated by the registered owner pursuant to Section 11.1 of the Bond Purchase Agreement dated as of November 8, 2012, between the Company and the Purchasers listed therein (the “Bond Purchase Agreement”), the sum of          Million Dollars in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts and to pay interest thereon to the registered owner hereof by wire transfer of immediately available funds in accordance with Section 11.1 of the Bond Purchase Agreement to such registered owner from the interest payment date next preceding the date of the authentication of this bond (or if this bond is authenticated after a Record Date as defined below and on or before the succeeding interest payment date, from such succeeding interest payment date, or if this bond is authenticated on or prior to June 1, 2013 from the date hereof) until the principal hereof shall become due and payable, at the rate of 3.80% per annum, payable semiannually in like coin or currency on the 1st day of June and the 1st day of December in each year, commencing June 1, 2013 and to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and, to the extent legally enforceable, on any overdue installment of interest at a rate of 5.80% per annum after maturity whether by acceleration or otherwise until paid.

The interest so payable will (except as otherwise provided in the Forty-seventh Supplemental Indenture referred to herein) be calculated on the basis of a 360-day year of twelve 30-day months and be paid to the person in whose name this bond (or a bond or bonds in exchange for which this bond was issued) is registered at the close of business on the 15th day of the calendar month preceding the month in which the interest payment date occurs whether or not such day is a business day (a “Record Date”) and principal, premium, if any, and interest on this bond shall be paid by the Company in accordance with written payment instructions of the registered owner delivered to the Company on or before such record date.

 

14


This bond is one of a duly authorized issue of bonds of the Company known as its First Mortgage Bonds, issued and to be issued without limitation as to aggregate principal amount except as set forth in the Indenture hereinafter mentioned in one or more series and equally secured (except insofar as a sinking fund or other similar fund established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by an Indenture of Mortgage (herein called the “Indenture”) dated as of January 1, 1941, executed by the Philadelphia Suburban Water Company (now Aqua Pennsylvania, Inc., f/k/a Pennsylvania Suburban Water Company, as successor by merger) to The Pennsylvania Company for Insurances on Lives and Granting Annuities (succeeded as trustee by The Bank of New York Mellon Trust Company, N.A.), as Trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders and registered owners of the bonds and of the Trustee in respect of such security, and the terms and conditions under which the bonds are and are to be secured and may be issued under the Indenture; but neither the foregoing reference to the Indenture nor any provision of this bond or of the Indenture or of any indenture supplemental thereto shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay at the stated or accelerated maturity herein and in the Indenture provided, the principal of and premium, if any, and interest on this bond as herein provided. As provided in the Indenture, the bonds may be issued in series for various principal amounts, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided or permitted. This bond is one of the bonds described in the Forty-seventh Supplemental Indenture (the “Forty-seventh Supplemental Indenture”) dated as of October 15, 2012, and designated therein as “First Mortgage Bond, 3.80% Series due 2042” (the “Bonds”).

Concurrently herewith the Company is issuing its “First Mortgage Bond, 3.79% Series due 2041” in the aggregate principal amount of $40,000,000 and its “First Mortgage Bond, 3.85% Series due 2047” in the aggregate principal amount of $20,000,000.

To the extent permitted by and as provided in the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders and registered owners of bonds issued and to be issued thereunder may be made with the consent of the Company by an affirmative vote of the holders and registered owners of not less than 75% in principal amount of bonds then outstanding under the Indenture and entitled to vote, at a meeting of the bondholders called and held as provided in the Indenture, and, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, by an affirmative vote of the holders and registered owners of not less than 75% in principal amount of bonds of any series then outstanding under the Indenture and entitled to vote on and affected by such modification or alteration, or by the written consent of the holders and registered owners of such percentages of bonds; provided, however, that no such modification or alteration shall be made which shall reduce the percentage of bonds the consent of the holders or registered owners of which is required for any such modification or alteration or which shall affect the terms of payment of the principal of or interest on the bonds, or permit the creation by the Company of any lien prior to or on a parity with the lien of the Indenture with respect to any property subject to the lien of the Indenture as a first mortgage lien thereon, or which shall affect the rights of the holders or registered owners of less than all of the bonds of any series affected thereby.

The Company may, at its option, upon notice as provided below, redeem at any time all, or from time to time any part of, the Bonds, in an amount not less than 10% of the aggregate principal amount of the Bonds then outstanding in the case of a partial redemption, at 100% of the principal amount so redeemed, together with interest accrued thereon to the date of such redemption, plus the Make-Whole Amount (as defined in the Forty-seventh Supplemental Indenture) determined for the redemption date with respect to such principal amount of each bond then outstanding.

 

15


Any redemption shall be effected by notice mailed to the registered owners thereof, as provided in the Indenture, at least thirty (30) days and not more than forty-five (45) days before the redemption date, all on the conditions and in the manner provided in the Indenture. Each such notice shall specify such date (which shall be a Business Day (as defined in the Forty-seventh Supplemental Indenture)), the aggregate principal amount of the Bonds to be redeemed on such date, the principal amount of each bond held by such holder to be redeemed (determined in accordance with Article I, Section 3 of the Forty-seventh Supplemental Indenture), and the interest to be paid on the redemption date with respect to such principal amount being redeemed, and shall be accompanied by a certificate of the chief financial officer, principal accounting officer, treasurer or comptroller (each, for purposes of this bond, a “Senior Financial Officer”) of the Company as to the estimated Make-Whole Amount due in connection with such redemption (calculated as if the date of such notice were the date of the redemption), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Bonds a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified redemption date.

If this bond or any portion hereof is called for redemption and payment thereof is duly provided for as specified in the Indenture, interest shall cease to accrue hereon or on such portion, as the case may be, from and after the redemption date. In the event of redemption of this bond in part only, a new bond for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof.

The principal hereof may be declared or may become due prior to its Maturity Date on the conditions, in the manner and with the effect set forth in the Indenture upon the happening of an event of default, as in the Indenture provided; subject, however, to the right, under certain circumstances, of the registered owners of a majority in principal amount of bonds then outstanding, including the Bonds, to annul such declaration.

The Company, the Trustee and any Paying Agent may deem and treat the registered owner of this bond as the absolute owner hereof for the purpose of receiving payment of or on 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 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 designated office of the Trustee in Philadelphia, Pennsylvania upon surrender hereof for cancellation at such office and upon presentation of a written instrument of transfer duly executed, and thereupon the Company shall issue in the name of the transferee or transferees, and the Trustee shall authenticate and deliver, a new bond or bonds in authorized denominations, of equal aggregate unpaid principal amount. Any such transfer or exchange shall be subject to the terms and conditions and to the payment of the charges specified in the Indenture.

No recourse shall be had for the payment of the principal of or interest on this bond or for any claim based hereon or otherwise in respect hereof or of the Indenture or of any indenture supplemental thereto against any incorporator or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company, or through any such predecessor or successor corporation or through any receiver or trustee in bankruptcy, by virtue of any constitutional provision, statute or rule of law or equity, or by the enforcement of any assessment or penalty or otherwise; all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released by every holder or registered owner hereof, as more fully provided in the Indenture.

 

16


This bond shall not be entitled to any benefit under the Indenture or any indenture supplemental thereto, or become valid or obligatory for any purpose, until The Bank of New York Mellon Trust Company, N. A., as Trustee under the Indenture, or a successor trustee thereunder, shall have signed the certificate of authentication endorsed hereon.

This bond shall be deemed to be a contract and shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania (excluding laws governing conflicts of law).

IN WITNESS WHEREOF, Aqua Pennsylvania, Inc. has caused this bond to be signed by its President or a Vice President and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant Secretary, and this bond to be dated                 .

 

      AQUA PENNSYLVANIA, INC.
Attest:        

 

      By  

 

Assistant Secretary       (Vice) President

[Form of Trustee’s Certificate]

This bond is one of the bonds, of the series designated therein, referred to in the within-mentioned Forty-seventh Supplemental Indenture.

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N. A., TRUSTEE
By:  

 

  Authorized Officer

 

17


[Form of Certificate of Transfer]

(To be delivered with a Certificated Bond to the Trustee)

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

(please print or typewrite name and address including postal zip code of assignee and insert Taxpayer Identification No.)

this bond and all rights hereunder, hereby irrevocably constituting and appointment attorney to transfer this bond the books of the Company with full power of substitution in the premises.

CERTIFICATE OF TRANSFER

(The following is not required for sales or other transfers of this bond to or through the Company or a placement agent).

In connection with any transfer of this bond occurring prior to the date which is two years after the later of (a) the date of original issue of this bond, or (b) the last date the Company or any of its affiliates was the beneficial owner of this bond, the undersigned confirms that:

 

¨ This bond is being transferred by the undersigned to a transferee that is, or that the undersigned reasonably believes to be, a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended) pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder.

If the foregoing box is not checked, then, so long as the accompanying bond shall bear a legend on its face restricting resales and other transfers thereof (except in the case of a resale or other transfer made (i) to a placement agent referred to in such legend or to the Company or (ii) through a placement agent or by a placement agent acting as principal to a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, in a transaction approved by a placement agent) the Trustee shall not be obligated to register this bond in the name of any person other than the registered owner hereof.

Dated:

NOTICE: The signature of the beneficial owner to this assignment must correspond with the name as written on the face of this bond in every particular, without alteration or enlargement or any change whatsoever.

TO BE COMPLETED BY PURCHASER IF THE BOX ABOVE IS CHECKED:

The undersigned represents and warrants that it is a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the registered owner is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:

NOTICE: To be executed by an officer.

 

18


THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND SALES OR OTHER TRANSFERS HEREOF MAY BE MADE ONLY TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A UNDER THE ACT (“QUALIFIED INSTITUTIONAL BUYERS”) IN TRANSACTIONS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE ACT.

BY ITS ACCEPTANCE OF THIS BOND, THE HOLDER REPRESENTS AND AGREES THAT IT IS A QUALIFIED INSTITUTIONAL BUYER AND THAT THIS BOND IS BEING ACQUIRED FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF IN ANY TRANSACTION THAT WOULD BE IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS, AND THAT ANY RESALE OR OTHER TRANSFER HEREOF OR ANY INTEREST HEREIN PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF (A) ITS DATE OF ISSUE OR (B) THE LAST DATE ON WHICH THE COMPANY OR ANY OF ITS AFFILIATES WAS THE BENEFICIAL OWNER HEREOF WILL BE MADE ONLY (1) TO A PLACEMENT AGENT OR THE COMPANY, (2) THROUGH ANY PLACEMENT AGENT OR BY ANY PLACEMENT AGENT ACTING AS PRINCIPAL TO A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE APPROVED BY SUCH PLACEMENT AGENT, (3) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER APPROVED BY THE COMPANY IN A TRANSACTION APPROVED BY THE COMPANY, (4) THROUGH A DEALER OTHER THAN A PLACEMENT AGENT TO A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE IN A TRANSACTION APPROVED BY THE COMPANY, OR (5) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A UNDER THE ACT, SUBJECT TO IN EACH CASE THE DISPOSITION OF THE PURCHASER’S PROPERTY BEING AT ALL TIMES WITHIN ITS CONTROL. IN THE CASE OF CERTIFICATED BONDS, ANY TRANSFER DESCRIBED IN CLAUSE (3), (4) OR (5) ABOVE REQUIRES THE SUBMISSION TO THE TRUSTEE (AS DEFINED HEREIN) OR ANY DULY AUTHORIZED PAYING AGENT OF THE CERTIFICATE OF TRANSFER ATTACHED HERETO DULY COMPLETED OR A DULY COMPLETED TRANSFER INSTRUMENT SUBSTANTIALLY IN THE FORM OF THE CERTIFICATE OF TRANSFER. THE COMPANY SHALL NOT RECOGNIZE ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER, OF THIS BOND NOT MADE IN COMPLIANCE WITH THE FOREGOING PROVISIONS. THIS BOND AND RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON THE PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS BOND TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR PROVIDE ALTERNATIVE PROCEDURES IN COMPLIANCE WITH APPLICABLE LAW AND PRACTICES RELATING TO THE RESALE OR OTHER TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS BOND SHALL BE DEEMED, BY THE ACCEPTANCE OF THIS BOND, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

 

19


No. R-   [PPN]
$  

AQUA PENNSYLVANIA, INC.

(Incorporated under the Laws of the Commonwealth

of Pennsylvania)

First Mortgage Bond, 3.85% Series due 2047

Aqua Pennsylvania, Inc. (f/k/a known as Pennsylvania Suburban Water Company, successor by merger to Philadelphia Suburban Water Company), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (hereinafter called the “Company”, which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to              or its registered assigns, on the 1st day of December, 2047 (the “Maturity Date”), at the address designated by the registered owner pursuant to Section 11.1 of the Bond Purchase Agreement dated as of November 8, 2012, between the Company and the Purchasers listed therein (the “Bond Purchase Agreement”), the sum of          Million Dollars in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts and to pay interest thereon to the registered owner hereof by wire transfer of immediately available funds in accordance with Section 11.1 of the Bond Purchase Agreement to such registered owner from the interest payment date next preceding the date of the authentication of this bond (or if this bond is authenticated after a Record Date as defined below and on or before the succeeding interest payment date, from such succeeding interest payment date, or if this bond is authenticated on or prior to June 1, 2013 from the date hereof) until the principal hereof shall become due and payable, at the rate of 3.85% per annum, payable semiannually in like coin or currency on the 1st day of June and the 1st day of December in each year, commencing June 1, 2013 and to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and, to the extent legally enforceable, on any overdue installment of interest at a rate of 5.85% per annum after maturity whether by acceleration or otherwise until paid.

The interest so payable will (except as otherwise provided in the Forty-seventh Supplemental Indenture referred to herein) be calculated on the basis of a 360-day year of twelve 30-day months and be paid to the person in whose name this bond (or a bond or bonds in exchange for which this bond was issued) is registered at the close of business on the 15th day of the calendar month preceding the month in which the interest payment date occurs whether or not such day is a business day (a “Record Date”) and principal, premium, if any, and interest on this bond shall be paid by the Company in accordance with written payment instructions of the registered owner delivered to the Company on or before such record date.

 

20


This bond is one of a duly authorized issue of bonds of the Company known as its First Mortgage Bonds, issued and to be issued without limitation as to aggregate principal amount except as set forth in the Indenture hereinafter mentioned in one or more series and equally secured (except insofar as a sinking fund or other similar fund established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by an Indenture of Mortgage (herein called the “Indenture”) dated as of January 1, 1941, executed by the Philadelphia Suburban Water Company (now Aqua Pennsylvania, Inc., f/k/a Pennsylvania Suburban Water Company, as successor by merger) to The Pennsylvania Company for Insurances on Lives and Granting Annuities (succeeded as trustee by The Bank of New York Mellon Trust Company, N.A.), as Trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders and registered owners of the bonds and of the Trustee in respect of such security, and the terms and conditions under which the bonds are and are to be secured and may be issued under the Indenture; but neither the foregoing reference to the Indenture nor any provision of this bond or of the Indenture or of any indenture supplemental thereto shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay at the stated or accelerated maturity herein and in the Indenture provided, the principal of and premium, if any, and interest on this bond as herein provided. As provided in the Indenture, the bonds may be issued in series for various principal amounts, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided or permitted. This bond is one of the bonds described in the Forty-seventh Supplemental Indenture (the “Forty-seventh Supplemental Indenture”) dated as of October 15, 2012, and designated therein as “First Mortgage Bond, 3.85% Series due 2047” (the “Bonds”).

Concurrently herewith the Company is issuing its “First Mortgage Bond, 3.79% Series due 2041” in the aggregate principal amount of $40,000,000 and its “First Mortgage Bond, 3.80% Series due 2042” in the aggregate principal amount of $20,000,000.

To the extent permitted by and as provided in the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders and registered owners of bonds issued and to be issued thereunder may be made with the consent of the Company by an affirmative vote of the holders and registered owners of not less than 75% in principal amount of bonds then outstanding under the Indenture and entitled to vote, at a meeting of the bondholders called and held as provided in the Indenture, and, in case one or more but less than all of the series of bonds then outstanding under the Indenture are so affected, by an affirmative vote of the holders and registered owners of not less than 75% in principal amount of bonds of any series then outstanding under the Indenture and entitled to vote on and affected by such modification or alteration, or by the written consent of the holders and registered owners of such percentages of bonds; provided, however, that no such modification or alteration shall be made which shall reduce the percentage of bonds the consent of the holders or registered owners of which is required for any such modification or alteration or which shall affect the terms of payment of the principal of or interest on the bonds, or permit the creation by the Company of any lien prior to or on a parity with the lien of the Indenture with respect to any property subject to the lien of the Indenture as a first mortgage lien thereon, or which shall affect the rights of the holders or registered owners of less than all of the bonds of any series affected thereby.

The Company may, at its option, upon notice as provided below, redeem at any time all, or from time to time any part of, the Bonds, in an amount not less than 10% of the aggregate principal amount of the Bonds then outstanding in the case of a partial redemption, at 100% of the principal amount so redeemed, together with interest accrued thereon to the date of such redemption, plus the Make-Whole Amount (as defined in the Forty-seventh Supplemental Indenture) determined for the redemption date with respect to such principal amount of each bond then outstanding.

 

21


Any redemption shall be effected by notice mailed to the registered owners thereof, as provided in the Indenture, at least thirty (30) days and not more than forty-five (45) days before the redemption date, all on the conditions and in the manner provided in the Indenture. Each such notice shall specify such date (which shall be a Business Day (as defined in the Forty-seventh Supplemental Indenture)), the aggregate principal amount of the Bonds to be redeemed on such date, the principal amount of each bond held by such holder to be redeemed (determined in accordance with Article I, Section 3 of the Forty-seventh Supplemental Indenture), and the interest to be paid on the redemption date with respect to such principal amount being redeemed, and shall be accompanied by a certificate of the chief financial officer, principal accounting officer, treasurer or comptroller (each, for purposes of this bond, a “Senior Financial Officer”) of the Company as to the estimated Make-Whole Amount due in connection with such redemption (calculated as if the date of such notice were the date of the redemption), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Bonds a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified redemption date.

If this bond or any portion hereof is called for redemption and payment thereof is duly provided for as specified in the Indenture, interest shall cease to accrue hereon or on such portion, as the case may be, from and after the redemption date. In the event of redemption of this bond in part only, a new bond for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof.

The principal hereof may be declared or may become due prior to its Maturity Date on the conditions, in the manner and with the effect set forth in the Indenture upon the happening of an event of default, as in the Indenture provided; subject, however, to the right, under certain circumstances, of the registered owners of a majority in principal amount of bonds then outstanding, including the Bonds, to annul such declaration.

The Company, the Trustee and any Paying Agent may deem and treat the registered owner of this bond as the absolute owner hereof for the purpose of receiving payment of or on 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 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 designated office of the Trustee in Philadelphia, Pennsylvania upon surrender hereof for cancellation at such office and upon presentation of a written instrument of transfer duly executed, and thereupon the Company shall issue in the name of the transferee or transferees, and the Trustee shall authenticate and deliver, a new bond or bonds in authorized denominations, of equal aggregate unpaid principal amount. Any such transfer or exchange shall be subject to the terms and conditions and to the payment of the charges specified in the Indenture.

No recourse shall be had for the payment of the principal of or interest on this bond or for any claim based hereon or otherwise in respect hereof or of the Indenture or of any indenture supplemental thereto against any incorporator or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company, or through any such predecessor or successor corporation or through any receiver or trustee in bankruptcy, by virtue of any constitutional provision, statute or rule of law or equity, or by the enforcement of any assessment or penalty or otherwise; all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released by every holder or registered owner hereof, as more fully provided in the Indenture.

 

22


This bond shall not be entitled to any benefit under the Indenture or any indenture supplemental thereto, or become valid or obligatory for any purpose, until The Bank of New York Mellon Trust Company, N. A., as Trustee under the Indenture, or a successor trustee thereunder, shall have signed the certificate of authentication endorsed hereon.

This bond shall be deemed to be a contract and shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania (excluding laws governing conflicts of law).

IN WITNESS WHEREOF, Aqua Pennsylvania, Inc. has caused this bond to be signed by its President or a Vice President and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant Secretary, and this bond to be dated                 .

 

    AQUA PENNSYLVANIA, INC.
Attest:      

 

    By  

 

Assistant Secretary     (Vice) President

[Form of Trustee’s Certificate]

This bond is one of the bonds, of the series designated therein, referred to in the within-mentioned Forty-seventh Supplemental Indenture.

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N. A., TRUSTEE
By:  

 

  Authorized Officer

 

23


[Form of Certificate of Transfer]

(To be delivered with a Certificated Bond to the Trustee)

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

(please print or typewrite name and address including postal zip code of assignee and insert Taxpayer Identification No.)

this bond and all rights hereunder, hereby irrevocably constituting and appointment attorney to transfer this bond the books of the Company with full power of substitution in the premises.

CERTIFICATE OF TRANSFER

(The following is not required for sales or other transfers of this bond to or through the Company or a placement agent).

In connection with any transfer of this bond occurring prior to the date which is two years after the later of (a) the date of original issue of this bond, or (b) the last date the Company or any of its affiliates was the beneficial owner of this bond, the undersigned confirms that:

 

¨ This bond is being transferred by the undersigned to a transferee that is, or that the undersigned reasonably believes to be, a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended) pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder.

If the foregoing box is not checked, then, so long as the accompanying bond shall bear a legend on its face restricting resales and other transfers thereof (except in the case of a resale or other transfer made (i) to a placement agent referred to in such legend or to the Company or (ii) through a placement agent or by a placement agent acting as principal to a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, in a transaction approved by a placement agent) the Trustee shall not be obligated to register this bond in the name of any person other than the registered owner hereof.

Dated:

NOTICE: The signature of the beneficial owner to this assignment must correspond with the name as written on the face of this bond in every particular, without alteration or enlargement or any change whatsoever.

TO BE COMPLETED BY PURCHASER IF THE BOX ABOVE IS CHECKED:

The undersigned represents and warrants that it is a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the registered owner is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:

NOTICE: To be executed by an officer.

 

24


and;

WHEREAS, all acts and things necessary to make the bonds, when executed by the Company and authenticated and delivered by the Trustee as in this Forty-seventh Supplemental Indenture provided and issued by the Company, valid, binding and legal obligations of the Company, and this Forty-seventh Supplemental Indenture a valid and enforceable supplement to said Original Indenture, have been done, performed and fulfilled, and the execution of this Forty-seventh Supplemental Indenture has been in all respects duly authorized:

NOW, THEREFORE, THIS FORTY-SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH: That, in order to secure the payment of the principal and interest of all bonds issued under the Original Indenture and all indentures supplemental thereto, according to their tenor and effect, and according to the terms of the Original Indenture and of any indenture supplemental thereto, and to secure the performance of the covenants and obligations in said bonds and in the Original Indenture and any indenture supplemental thereto respectively contained, and to provide for the proper issuing, 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 Original Indenture and in 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 Forty-seventh Supplemental Indenture, receipt whereof is hereby acknowledged, and of other good and valuable consideration, has granted, bargained, sold, aliened, enfeoffed, released and confirmed and by these presents does grant, bargain, sell, alien, enfeoff, release and confirm unto The Bank of New York Mellon Trust Company, N. A. as Trustee, and to its successors in said trust and its and their assigns forever:

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 (except as herein expressly excepted), including among other things the following, but reference to or enumeration of any particular kinds, classes, or items of property shall not be deemed to exclude from the operation and effect of the Original Indenture or any indenture supplemental thereto any kind, class or item not so referred to or enumerated:

I.

REAL ESTATE AND WATER RIGHTS.

The real estate described in the deeds from the grantors named in Exhibit B hereto, dated and recorded as therein set forth, and any other real estate and water rights acquired since the date of the Forty-sixth Supplemental Indenture.

 

25


II.

BUILDINGS AND EQUIPMENT.

All mains, pipes, pipe lines, service pipes, buildings, improvements, standpipes, reservoirs, wells, flumes, sluices, canals, basins, cribs, machinery, conduits, hydrants, water works, plants and systems, tanks, shops, structures, purification systems, pumping stations, fixtures, engines, boilers, pumps, meters and equipment which are now owned or may hereafter be acquired by the Company (except as herein expressly excepted), including all improvements, additions and extensions appurtenant to any real or fixed property now or hereafter subject to the lien of the Original Indenture or any indenture supplemental thereto which are used or useful in connection with the business of the Company as a water company or as a water utility, whether any of the foregoing property is now owned or may hereafter be acquired by the Company.

It is hereby declared by the Company that all property of the kinds described in the next preceding paragraph, whether now owned or hereafter acquired, has been or is or will be owned or acquired with the intention of using the same in carrying on the business or branches of the business of the Company, and it is hereby declared that it is the intention of the Company that all thereof (except property hereinafter specifically excepted) shall be subject to the lien of the Original Indenture.

It is agreed by the Company that so far as may be permitted by law tangible personal property now owned or hereafter acquired by the Company, except such as is hereafter expressly excepted from the lien hereof, shall be deemed to be and construed as fixtures and appurtenances to the real property of the Company.

III.

FRANCHISES AND RIGHTS OF WAY.

All the corporate and other franchises of the Company, all water and flowage rights, riparian rights, easements and rights of way, and all permits, licenses, rights, grants, privileges and immunities, and all renewals, extensions, additions or modifications of any of the foregoing, whether the same or any thereof, or any renewals, extensions, additions or modifications thereof, are now owned or may hereafter be acquired, owned, held, or enjoyed by the Company.

 

26


IV.

AFTER ACQUIRED PROPERTY.

All real and fixed property and all other property of the character hereinabove described which the Company may hereafter acquire.

TOGETHER WITH all and singular the tenements, hereditaments and appurtenances belonging or in any way appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders, tolls, rents, revenues, issues, income, product and profits thereof, and all the estate, right, title, interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid premises, property, rights and franchises and every part and parcel thereof.

EXCEPTING AND RESERVING, HOWEVER, certain premises, not used or useful in the supplying of water by the Company, expressly excepted and reserved from the lien of the Original Indenture and not subject to the terms thereof.

AND ALSO SAVING AND EXCEPTING from the property hereby mortgaged and pledged, all of the following property (whether now owned by the Company or hereafter acquired by it): all bills, notes and accounts receivable, cash on hand and in banks, contracts, choses in action and leases to others (as distinct from the property leased and without limiting any rights of the Trustee with respect thereto under any of the provisions of the Original Indenture or of any indenture supplemental thereto), all bonds, obligations, evidences of indebtedness, shares of stock and other securities, and certificates or evidences of interest therein, all automobiles, motor trucks, and other like automobile equipment and all furniture, and all equipment, materials, goods, merchandise and supplies acquired for the purpose of sale in the ordinary course of business or for consumption in the operation of any properties of the Company other than any of the foregoing expected property which may be specifically transferred or assigned to or pledged or deposited with the Trustee hereunder or required by the provisions of the Original Indenture or any indenture supplemental thereto so to be; provided, however, that if, upon the happening of a completed default, as specified in Section I of Article XI of the Original Indenture, the Trustee or any receiver appointed hereunder shall enter upon and take possession of the mortgaged property, the Trustee or any such receiver may, to the extent permitted by law, at the same time likewise take possession of any and all of the property described in this paragraph then on hand and any and all other property of the Company then on hand, not described or referred to in the foregoing granting clauses, which is used or useful in connection with the business of the Company as a water company or as a water utility, and use and administer the same to the same extent as if such property were part of the mortgaged property, unless and until such completed default shall be remedied or waived and possession of the mortgaged property restored to the Company, its successors or assigns.

SUBJECT, HOWEVER, to the exceptions, reservations and matters hereinabove and in the Original Indenture recited, to releases executed since the date of the Original Indenture in accordance with the provisions thereof, to existing leases, to easements and rights of way for pole lines and electric transmission lines and other similar encumbrances and restrictions which the Company hereby certifies, in its judgment, do not impair the use of said property by the Company in its business, to liens existing on or claims against, and rights in and relating to, real estate acquired for right-of-way purposes, to taxes and assessments not delinquent, to alleys, streets and highways that may run across or encroach upon said lands, to liens, if any, incidental to construction, and to Permitted Liens, as defined in the Original Indenture; and, with respect to any property which the Company may hereafter acquire, to all terms, conditions, agreements, covenants, exceptions and reservations expressed or provided in such deeds and other instruments, respectively, under and by virtue of which the Company shall hereafter acquire the same and to any and all liens existing thereon at the time of such acquisition.

 

27


TO HAVE AND TO HOLD, all and singular the property, rights, privileges and franchises hereby conveyed, transferred or pledged or intended so to be unto the Trustee and its successors in the trust heretofore and hereby created, and its and their assigns forever.

IN TRUST NEVERTHELESS, for the equal pro rata benefit and security of each and every entity who may be or become the holders of bonds and coupons secured by the Original Indenture or by any indenture supplemental thereto, or both, without preference, priority or distinction as to lien or otherwise of any bond or coupon over or from any other bond or coupon, so that each and every of said bonds and coupons issued or to be issued, of whatsoever series, shall have the same right, lien and privilege under the Original Indenture and all indentures supplemental thereto and shall be equally secured hereby and thereby, with the same effect as if said bonds and coupons had all been made, issued and negotiated simultaneously on the date thereof; subject, however, to the provisions with reference to extended, transferred or pledged coupons and claims for interest contained in the Original Indenture and subject to any sinking or improvement fund or maintenance deposit provisions, or both, for the benefit of any particular series of bonds.

IT IS HEREBY COVENANTED, DECLARED AND AGREED, by and between the parties hereto, that all such bonds and coupons are to be authenticated, delivered and issued, and that all property subject or to become subject hereto is to be held subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustee and its successor or successors in said trust, for the benefit of those who shall hold said bonds and coupons, or any of them, issued under this Indenture or any indenture supplemental hereto, or both, as follows:

ARTICLE I.

Form, Authentication and Delivery of the Bonds; Redemption Provisions

SECTION 1. There shall be a sixty-second series limited in aggregate principal amount of $40,000,000 designated as “Aqua Pennsylvania, Inc., First Mortgage Bond, 3.79% Series due 2041”, a sixty-third series of bonds limited in aggregate principal amount to $20,000,000 designated as “Aqua Pennsylvania, Inc., First Mortgage Bond, 3.80% Series due 2042” and a sixty-fourth series of bonds limited in aggregate principal amount to $20,000,000 designated as “Aqua Pennsylvania, Inc., First Mortgage Bond, 3.85% Series due 2047”.

Interest on each Series of the Bonds shall be payable semiannually on June 1 and December 1 (each an “Interest Payment Date”) in each year commencing June 1, 2013. Each Bond shall be dated the date of its authentication and shall bear interest from the interest payment date next preceding the date of the authentication of such Bond (or if such Bond is authenticated after a Record Date as defined below and on or before the succeeding interest payment date, from such succeeding interest payment date, or if such Bond is authenticated on or prior to the record date for the first interest payment date for the Bonds, in which case it shall bear interest from the date of original issuance of the Bonds); provided, however, that, if at the time of authentication of any Bond, interest on the predecessor Bond of such Bond is in default, such Bond shall bear interest from the date to which interest has been paid, or, if no interest has been paid, from the date of original issuance thereof. The 3.79% Series due 2041 shall be stated to mature (subject to the right of earlier redemption at the prices and dates and upon the terms and conditions hereinafter set forth) on December 1, 2041 and shall bear interest at the rate of 3.79% per annum. The 3.80% Series due 2042 shall be stated to mature (subject to the right of earlier redemption at the prices and dates and upon the terms and conditions hereinafter set forth) on December 1, 2042 and shall bear interest at the rate of 3.80% per annum. The 3.85% Series due 2047 shall be stated to mature (subject to the right of earlier redemption at the prices and dates and upon the terms and conditions hereinafter set forth) on December 1, 2047 and shall bear interest at the rate of 3.85% per annum. Any payment of principal of or interest on any Bond that is due on a date other than a Business Day (as defined below) shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; provided that if the maturity date of any Bond is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day. As used herein, “Business Day” means any day other than a Saturday or Sunday, on which the Trustee, any paying agent or banks in New York, New York are not required or authorized by law or executive order to close.

 

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The Bonds shall be issuable only as registered bonds without coupons, shall be in the form hereinabove recited, in the minimum denomination of $100,000 or any integral multiple of $1,000 in excess thereof, shall be lettered “R”, and shall bear such numbers as the Company may reasonably require.

The principal of, and interest on the Bonds shall be payable as provided in the form of Bond, and shall be payable, along with interest on the Bonds, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; each installment of interest shall be paid by bank wire transfer of immediately available funds pursuant to instructions and conditions incorporated in an agreement between such person and the Trustee or the Company.

The person in whose name any Bond is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date notwithstanding the cancellation of such Bond upon any transfer or exchange subsequent to the Record Date and prior to such Interest Payment Date; provided, however, that if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the persons in whose names outstanding Bonds are registered at the close of business on a subsequent Record Date established by notice given by mail by or on behalf of the Company to the holders of Bonds not less than fifteen (15) days preceding such subsequent Record Date, such Record Date to be not less than ten (10) days preceding the date of payment of such defaulted interest. The term “Record Date” as used in this Section 1 with respect to any regular Interest Payment Date shall mean the fifteenth (15th) day of the calendar month preceding such Interest Payment Date.

Exchange of any Bonds shall be effected in accordance with the applicable provisions of Sections 7, 8 and 9 of Article II of the Original Indenture.

 

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The text of the Bonds and of the certificate of the Trustee upon such Bonds shall be, respectively, substantially of the tenor and effect hereinbefore recited.

SECTION 2. The Company may redeem the Bonds prior to maturity only as provided in this Section and upon payment of the redemption price specified in this Section. The Company may, at its option, upon notice as provided below, redeem at any time all, or from time to time any part of, the Bonds, in an amount not less than 10% of the aggregate principal amount of the Bonds then outstanding in the case of a partial redemption, at 100% of the principal amount so redeemed, together with interest accrued thereon to the date of such redemption, plus the Make-Whole Amount (as defined below) determined for the redemption date with respect to such principal amount of each Bond then outstanding. The Company will give each holder of Bonds and the Trustee written notice of each optional redemption under this Section 2 not less than 30 days and not more than 45 days prior to the date fixed for such prepayment. Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of the Bonds to be redeemed on such date, the principal amount of each Bond held by such holder to be redeemed (determined in accordance with Section 3 below), and the interest to be paid on the redemption date with respect to such principal amount being redeemed, and shall be accompanied by a certificate of the chief financial officer, principal accounting officer, treasurer or comptroller (each, for purposes of this Article I, a “Senior Financial Officer”) of the Company as to the estimated Make-Whole Amount due in connection with such redemption (calculated as if the date of such notice were the date of the redemption), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Bonds and the Trustee a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified redemption date.

The term “Make-Whole Amount” means, with respect to any Bond, 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 Bond 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 Bond, the principal of such Bond that is to be prepaid pursuant to this Section 2.

“Discounted Value” means, with respect to the Called Principal of any Bond, 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 such Bond is payable) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Bond, 0.50% 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 PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on the run 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 (including by way of interpolation), 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 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.

 

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In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding paragraph, 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 (1) the applicable U.S. Treasury security with the maturity closest to and greater than such Remaining Average Life and (2) the applicable U.S. Treasury security with the maturity closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Bond.

“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) that 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 Bond, 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 such Bond, 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 this Section 2.

“Settlement Date” means, with respect to the Called Principal of any Bond, the date on which such Called Principal is to be redeemed pursuant to this Section 2.

SECTION 3. In the case of each partial redemption of the Bonds, the principal amount of the Bonds to be redeemed shall be allocated among all of the Bonds at the time outstanding in proportion, as nearly as practicable, to their respective unpaid principal amounts thereof.

SECTION 4. Any redemption of the Bonds shall be effected in accordance with the provisions of Article V of the Original Indenture.

SECTION 5. All Bonds deemed to have been paid in full as provided in Section 2 and 3 of this Article I of this Forty-seventh Supplemental Indenture shall be surrendered to the Trustee for cancellation, and the Trustee shall forthwith cancel the same and, in accordance with applicable laws and regulations and the Trustee’s policies and procedures, and on the written request of the Company, deliver the same to the Company. Any Bond paid in full, whether at maturity or earlier redemption, shall be surrendered to the Company and cancelled and shall not be reissued, and no Bond shall be issued in lieu of the principal amount of such Bond paid at maturity or redemption. In case part of an outstanding Bond shall be deemed to have been partially paid as provided in said Section 2 or Section 3, upon presentation of such Bond at the designated office of the Trustee, the Trustee shall make a notation thereon of the payment of the portion of the principal amount of such Bond so deemed to have been paid unless the registered owner shall elect to surrender such Bond to the Trustee, in which case the Company shall execute and the Trustee shall authenticate and deliver, without charge to the registered owner, Bonds in such authorized denominations as shall be specified by the registered owner for the unpaid balance of the principal amount of such outstanding Bond. The holder of a Bond that has been partially paid, shall not be required to surrender such Bond to the Trustee or the Company; provided, however, prior to any sale or other disposition of any Bond by a holder thereof, such holder will either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Bond to the Company in exchange for a new Bond or Bonds pursuant to Article II of the Original Indenture.

 

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SECTION 6. The 3.79% Series due 2041 in the aggregate principal amount of $40,000,000, the 3.80% Series due 2042 in the aggregate principal amount of $20,000,000 and the 3.85% Series due 2047 in the aggregate principal amount of $20,000,000 may be issued under the provisions of Article IV of the Original Indenture and may forthwith be executed by the Company and delivered to the Trustee and shall be authenticated by the Trustee and delivered to or upon the order of the Company, upon receipt by the Trustee of the resolutions, certificates, opinions or other instruments or all of the foregoing required to be delivered upon the issue of bonds pursuant to the provisions of the Original Indenture

ARTICLE II.

Maintenance or Improvement Deposit.

SECTION 1. The Company covenants that it will deposit with the Trustee on or before the March 1 next occurring after the bonds of the bonds of the 9.93% Series due 2013 cease to be outstanding, or on or before the next March 1 next occurring after the bonds of the 9.97% Series due 2018 cease to be outstanding, or on or before the March 1 next occurring after the bonds of the 9.29% Series due 2026 cease to be outstanding, or on or before the March 1 next occurring after the bonds of the 9.17% Series due 2021 cease to be outstanding, or on or before the March 1 next occurring after the bonds of any of the Subseries of the 1995 Medium Term Note Series issued under the Twenty-Ninth Supplemental Indenture (consisting of the 7.72% Subseries A due 2025 and the 6.89% Subseries C due 2015) shall cease to be outstanding, or on or before March 1 next occurring after the bonds of any of the Subseries of the 1999 Medium Term Note Series issued under the Thirty-Third Supplemental Indenture (consisting of the 8.26% Subseries F due 2022, the 8.32% Subseries I due 2022, the 8.14% Subseries J due 2025, the 5.08% Subseries O due 2015, the 5.17% Subseries P due 2017, the 5.751% Subseries Q due 2019, the 5.751% Subseries R due 2019, the 6.06% Subseries S due 2027, the 6.06% Subseries T due 2027 and the 5.98% Subseries U due 2028) cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.35% Series due 2031 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.55% Series due 2032 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.15% Series due 2032 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.05% Series due 2039 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2036 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2037 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2038 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2035 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2040 cease to be outstanding or on or before March 1 next occurring after the bonds of the 5.00% Series due 2041 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.25% Series due 2042 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.25% Series due 2043 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 6.25% Series due 2017 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 6.75% Series due 2018 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2033 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2034 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2039 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2040 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 4.75% Series due 2040 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 4.50% Series due 2042 cease to be outstanding, or on or before March 1 next occurring after the bonds of the 5.00% Series due 2043 cease to be outstanding, whichever is latest, and on or before March 1 in each year thereafter if and so long as any of the Bonds are outstanding, an amount in cash (the “Maintenance or Improvement Deposit”) equal to 9% of the Gross Operating Revenues of the Company during the preceding calendar year less, to the extent that the Company desires to take such credits, the following:

(a) the amount actually expended for maintenance during such calendar year; and

 

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(b) the Cost or Fair Value, whichever is less, of Permanent Additions acquired during such calendar year which at the time of taking such credit constitute Available Permanent Additions; and

(c) the unapplied balance, or any part thereof, of the Cost or Fair Value, whichever is less, of Available Permanent Additions acquired by the Company during the five calendar years preceding such calendar year and specified in the Officers’ Certificates delivered to the Trustee pursuant to Section 2 of this Article, but only to the extent that the Permanent Additions with respect to which such Cost or Fair Value was determined shall at the time of taking such credit constitute Available Permanent Additions.

SECTION 2. The Company covenants that it will on or before March 1 in each year, beginning with the first deposit made with the Trustee under the provisions of Section 1 of this Article, as long as any of the Bonds are outstanding, deliver to the Trustee the following:

(A) An Officers’ Certificate, which shall state:

(i) The amount of the Gross Operating Revenues for the preceding calendar year;

 

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(ii) 9% of such Gross Operating Revenues;

(iii) The amount actually expended by the Company for maintenance during such calendar year;

(iv) The amount set forth in subparagraph (xii) of each Officers’ Certificate delivered to the Trustee pursuant to the provisions of this Section during the preceding five calendar years (specifying each such Officers’ Certificate), after deducting from each such amount the aggregate of (a) the Cost or Fair Value, whichever is less, of all Permanent Additions represented by such amount which have ceased to be Available Permanent Additions; and (b) any part of such amount for which the Company has previously taken credit against any Maintenance or Improvement Deposit (specifying the Officers’ Certificate in which such credit was taken); and (c) any part of such amount for which the Company then desires to take credit against the Maintenance or Improvement Deposit;

(v) An amount which shall be the aggregate of all amounts set forth pursuant to the provisions of clause (c) of the foregoing subparagraph (iv);

(vi) The Cost or Fair Value, whichever is less, of Available Permanent Additions acquired by the Company during the preceding calendar year;

(vii) That part of the amount set forth in subparagraph (vi) which the Company desires to use as a credit against the Maintenance or Improvement Deposit;

(viii) The amount of cash payable to the Trustee under the provisions of Section 1 of this Article, which shall be the amount by which the amount set forth in subparagraph (ii) hereof exceeds the sum of the amounts set forth in subparagraphs (iii), (v) and (vii) hereof;

(ix) The sum of all amounts charged on the books of the Company against any reserve for retirement or depreciation during the preceding calendar year representing the aggregate of the Cost when acquired of any part of the Company’s plants and property of the character described in the granting clauses hereof which has been permanently retired or abandoned;

(x) The aggregate of the amounts set forth in subparagraphs (v) and (vii) hereof;

(xi) The amount by which the amount set forth in subparagraph (x) exceeds the amount set forth in subparagraph (ix), being the amount required to be deducted from the Cost or Fair Value of Available Permanent Additions in order to determine a Net Amount of Available Permanent Additions pursuant to the provisions of Section 9 of Article I of the Original Indenture;

 

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(xii) The amount set forth in subparagraph (vi) after deducting the amount, if any, set forth in subparagraph (vii); and

(xiii) That all conditions precedent to the taking of the credit or credits so requested by the Company have been complied with.

(B) In the event that the Officers’ Certificate delivered to the Trustee pursuant to the provisions of paragraph (A) of this Section shall state, pursuant to the requirements of subparagraph (vi), the Cost or Fair Value of Available Permanent Additions acquired by the Company during the preceding calendar year, the documents specified in paragraphs 2, 3, 5, 6 and 7 of subdivision (B) of Section 3 of Article IV of the Original Indenture.

(C) An amount in cash equal to the sum set forth in subparagraph (viii) of the Officers’ Certificate provided for in paragraph (A) hereof.

SECTION 3. All cash deposited with the Trustee as part of any Maintenance or Improvement Deposit provided for in Section 1 of this Article, may, at the option of the Company, be applied to the purchase of bonds under the provisions of Section 2 of Article X of the Original Indenture or to the redemption of bonds under the provisions of Section 3 of Article X of the Original Indenture or may be withdrawn by the Company at any time to reimburse the Company for the cost of a Net Amount of Available Permanent Additions (excluding, however, from any such Available Permanent Additions all Permanent Additions included in any certificate delivered to the Trustee for the purpose of obtaining a credit against any Maintenance or Improvement Deposit provided for in Section 1 of this Article to the extent that such Permanent Additions have been used for any such credit). The Trustee shall pay to or upon the written order of the Company all or any part of such cash upon the receipt by the Trustee of:

(a) A Resolution requesting such payment; and

(b) The documents specified in paragraphs 2, 5, 6 and 7 of subdivision (B) of Section 3 of Article IV of the Original Indenture, with such modifications, additions and omissions as may be appropriate in the light of the purposes for which they are used.

ARTICLE III.

Covenants of the Company.

SECTION 1. The Company hereby covenants and agrees with the Trustee, for the benefit of the Trustee and all the present and future holders of the Bonds, that the Company will pay the principal of and premium, if any, of and interest on all bonds issued or to be issued as aforesaid under and secured by the Original Indenture as hereby supplemented, as well as all bonds which may be hereafter issued in exchange or substitution therefor, and will perform and fulfill all of the terms, covenants and conditions of the Original Indenture and of this Forty-seventh Supplemental Indenture with respect to the additional bonds to be issued under the Original Indenture as hereby supplemented.

 

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SECTION 2. The Company covenants and agrees that so long as any of the Bonds are outstanding (a) the Company will not make any Stock Payment if, after giving effect thereto, its retained earnings, computed in accordance with generally accepted accounting principles consistently applied, will be less than the sum of (i) Excluded Earnings, if any, since December 31, 1998, and (ii) $20,000,000; (b) Stock Payments made more than forty (40) days after the commencement, and prior to the expiration, of any Restricted Period shall not exceed 65% of the Company’s Net Income during such Restricted Period; and (c) the Company will not authorize a Stock Payment if there has occurred and is continuing an event of default under subsections (a) or (b) of Section 1 of Article XI of the Original Indenture.

For the purposes of this Section 2 the following terms shall have the following meanings:

“Capitalization” shall mean the sum of (i) the aggregate principal amount of all Debt at the time outstanding, (ii) the aggregate par or stated value of all capital stock of the Company of all classes at the time outstanding, (iii) premium on capital stock, (iv) capital surplus, and (v) retained earnings.

“Debt” means (i) all indebtedness, whether or not represented by bonds, debentures, notes or other securities, for the repayment of money borrowed, (ii) all deferred indebtedness for the payment of the purchase price of property or assets purchased (but Debt shall not be deemed to include customer advances for construction or any bonds issued under the Indenture which are not Outstanding Bonds), (iii) leases which have been or, in accordance with generally accepted accounting principles, should be recorded as capital leases and (iv) guarantees of the obligations of another of the nature described in clauses (i), (ii) or (iii) which have been or, in accordance with generally accepted accounting principles, should be recorded as debt.

“Determination Date” shall mean the last day of each calendar quarter. Any calculation with respect to any Determination Date shall be based on the Company’s balance sheet as of such date.

“Excluded Earnings” shall mean 35% of the Company’s Net Income during any Restricted Period.

“Net Income” for any particular Restricted Period shall mean the amount of net income properly attributable to the conduct of the business of the Company for such period, as determined in accordance with generally accepted accounting principles consistently applied, after payment of or provision for taxes on income for such period.

“Outstanding Bonds” shall mean bonds which are outstanding within the meaning indicated in Section 20 of Article I of the Original Indenture except that, in addition to the bonds referred to in clauses (a), (b) and (c) of said Section 20, said term shall not include bonds for the retirement of which sufficient funds have been deposited with the Trustee with irrevocable instructions to apply such funds to the retirement of such bonds at a specified time, which may be either the maturity thereof or a specified redemption date, whether or not notice of redemption shall have been given.

 

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“Restricted Period” shall mean a period commencing on any Determination Date on which the total Debt of the Company is, or as the result of any Stock Payment then declared or set aside and to be made thereafter will be, more than 70% of Capitalization, and continuing until the third consecutive Determination Date on which the total Debt of the Company does not exceed 70% of Capitalization.

“Stock Payment” shall mean any payment in cash or property (other than stock of the Company) to any holder of shares of any class of capital stock of the Company as such holder, whether by dividend or upon the purchase, redemption, conversion or other acquisition of such shares, or otherwise.

SECTION 3. The Company covenants and agrees that so long as any of the Bonds are outstanding neither the Company nor any subsidiary of the Company will, directly or indirectly, lend or in any manner extend its credit to, or indemnify, or make any donation or capital contribution to, or purchase any security of, any corporation which directly or indirectly controls the Company, or any subsidiary or affiliate (other than an affiliate which is a subsidiary of the Company) of any such corporation.

ARTICLE IV.

The Trustee.

SECTION 1. The Trustee hereby accepts the trust hereby declared and provided, and agrees to perform the same upon the terms and conditions in the Original Indenture, as supplemented by this Forty-seventh Supplemental Indenture.

SECTION 2. Subject to the provisions of Article XIII of the Original Indenture, the Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through and consult with attorneys, agents, officers or employees selected by the Trustee in its sole discretion. The Trustee shall be entitled to advice of counsel concerning all matters of trusts hereof and the duties hereunder and may in all cases pay such reasonable compensation to all such attorneys, agents, officers and employees as may reasonably be employed in connection with the trusts hereof. The Trustee may act or refrain from acting and rely upon and be free from all liability for so relying upon the opinion or advice of any attorney (who may be the attorney or attorneys for the Company) and shall be free from all liability for any action taken or not taken in reliance on such opinion or advice. The Trustee may act and rely on written opinions of experts employed by the Trustee and such advice shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Trustee hereunder in good faith and in reliance thereon. The Trustee shall not be responsible for any loss or damage resulting from any action or non-action in good faith taken in reliance upon such opinion or advice. The Trustee shall not be bound to confirm, verify or make any investigation into the facts or matters stated in any financial or other statements, resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document furnished pursuant to the terms hereof.

 

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SECTION 3. Before the Trustee shall be required to foreclose on, or to take control or possession of, the real property or leasehold interest (the “Premises”) which may be the subject of any mortgage or mortgages for which the Trustee is mortgagee in connection with the issuance of the Bonds, the Trustee shall be indemnified and held harmless by the holders and/or beneficial owners of the Bonds from and against any and all expense, loss, or liability that may be suffered by the Trustee in connection with any spill, leak or release which may have occurred on or invaded the Premises or any contamination by any Hazardous Substance (as such terms are hereinafter defined), whether caused by the Company or any other person or entity, including, but not limited to, (1) any and all reasonable expenses that the Trustee may incur in complying with any of the Environmental Statutes (hereinafter defined), (2) any and all reasonable costs that the Trustee may incur in studying or remedying any spill, leak or release which may have occurred on or invaded the Premises or any contamination, (3) any and all fines or penalties assessed upon the Trustee by reason of such contamination, (4) any and all loss of value of the Premises or the improvements thereon by reason of such contamination, and (5) any and all legal fees and costs reasonably incurred by the Trustee in connection with any of the foregoing. As used in this Section, contamination by any Hazardous Substance shall include contamination arising from the presence, creation, production, collection, treatment, disposal, discharge, release, storage, transport, or transfer of any Hazardous Substance at or from the Premises or any improvements thereon. As used in this Section, the term “Hazardous Substance” shall mean petroleum hydrocarbons or any substance which (a) constitutes a hazardous waste or substance under any applicable federal, state or local law, rule, order or regulation now or hereafter adopted; (b) constitutes a “hazardous substance” as such term is defined under the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. §9601 et seq.) and the regulations issued thereunder and any comparable state or local law or regulation; (c) constitutes a “hazardous waste” under the Resource Conservation and Recovery Act, (42 U.S.C. §6991) and the regulations issued thereunder and any comparable state or local law or regulation; (d) constitutes a pollutant, contaminant, chemical or industrial, toxic or hazardous substance or waste as such terms are defined under the Federal Clean Water Act, as amended (33 U.S.C. §1251 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. § 2601 et seq.), or any comparable state or local laws or regulations; (e) exhibits any of the characteristics enumerated in 40 C.F.R. Sections 261.20-261.24, inclusive; (f) those extremely hazardous substances listed in Section 302 of the Superfund Amendments and Reauthorization Act of 1986 (Public Law 99-499, 100 Stat. 1613) which are present in threshold planning or reportable quantities as defined under such act; (g) toxic or hazardous chemical substances which are present in quantities which exceed exposure standards as those terms are defined under Sections 6 and 8 of the Occupational Safety and Health Act, as amended (29 U.S.C. §§655 and 657 and 29 C.F.R. Part 1910, subpart 2); and (h) any asbestos, petroleum-based products, or any substance contained within or released from any underground or aboveground storage tanks. As used in this Section, the term “Environmental Statutes” shall mean the statutes, laws, rules, orders and regulations referred to in (a) through (g) inclusive in the preceding.

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ARTICLE V.

Miscellaneous.

SECTION 1. This instrument is executed and shall be construed as an indenture supplemental to the Original Indenture, and shall form a part thereof, and except as hereby supplemented, the Original Indenture and the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth, Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth, Twenty-Fifth, Twenty-Sixth, Twenty-Seventh, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First, Thirty-Second, Thirty-Third, Thirty-Fourth, Thirty-Fifth, Thirty-Sixth, Thirty-Seventh, Thirty-Eighth, Thirty-Ninth, Fortieth, Forty-first, Forty-second, Forty-third, Forty-fourth, Forty-fifth and Forty-sixth Supplemental Indentures are hereby confirmed. All references in this Forty-seventh Supplemental Indenture to the Original Indenture shall be deemed to refer to the Original Indenture as heretofore amended and supplemented, and all terms used herein and not specifically defined herein shall be taken to have the same meaning as in the Original Indenture, as so amended, except in the cases where the context clearly indicates otherwise.

SECTION 2. Any notices to the Trustee under this Forty-seventh Supplemental Indenture shall be delivered to the Trustee by registered or certified mail, hand delivery or other courier or express delivery service (with receipt confirmed) or by telecopy (with receipt confirmed) at the following address:

The Bank of New York Mellon Trust Company, N. A.

Global Corporate Trust

1735 Market Street, 6th Floor

AIM No: 193-0650

Philadelphia, PA 19103

Attention: Judy Wisniewski

Telephone: 215-553-6941

Fax: 215-553-6915

Any change in such address or telecopy number may be made by notice to the Company delivered in the manner set forth above.

SECTION 3. All recitals in this Forty-seventh Supplemental Indenture are made by the Company only and not by the Trustee; and all of the provisions contained in the Original Indenture in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect hereof as fully and with like effect as if set forth herein in full.

SECTION 4. Although this Forty-seventh Supplemental Indenture is dated for convenience and for the purpose of reference as of October 15, 2012, the actual date or dates of execution hereof by the Company and the Trustee are as indicated by their respective acknowledgments annexed hereto.

 

39


SECTION 5. In order to facilitate the recording or filing of this Forty-seventh Supplemental Indenture, the same may be simultaneously executed in several counterparts, each of which shall be deemed to be an original and such counterparts shall together constitute but one and the same instrument.

[Remainder of page intentionally left blank]

 

40


IN WITNESS WHEREOF the parties hereto have caused their corporate seals to be hereunto affixed and their authorized officers have hereto affixed their signatures, and their authorized officers have duly attested the execution hereof, as of the day first above written.

 

[CORPORATE SEAL]    

AQUA PENNSYLVANIA, INC.,

as successor by merger to

Philadelphia Suburban Water Company

Attest:  

Maria Gordiany

    By:  

Diana MoyKelly

[CORPORATE SEAL]    

THE BANK OF NEW YORK

MELLON TRUST COMPANY, N. A.,

as Trustee

Attest:  

M. Callahan

    By:  

Lawrence M. Kusch

  Authorized Officer     Name:   Lawrence M. Kusch
      Title:   Authorized Signer

 

41


The Bank of New York Mellon Trust Company, N.A., Mortgagee and Trustee named in the foregoing Forty-seventh Supplemental Indenture, hereby certifies that its precise name and the post office address are as follows:

The Bank of New York Mellon Trust Company, N. A.

Global Corporate Trust

1735 Market Street, 6th Floor

AIM No: 193-0650

Philadelphia, PA 19103

Attention: Judy Wisniewski

Telephone: 215-553-6941

Fax: 215-553-6915

 

THE BANK OF NEW YORK

MELLON TRUST COMPANY, N. A.,

as Trustee

By:  

Lawrence M. Kusch

Name:   Lawrence M. Kusch
Title:   Authorized Signer

 

42


COMMONWEALTH OF PENNSYLVANIA:

COUNTY OF MONTGOMERY:

On the 26th day of October, 2012 before me, the Subscriber, a Notary Public for the Commonwealth of Pennsylvania, personally appeared Diana MoyKelly, who acknowledged himself/herself to be the Treasurer of Aqua Pennsylvania, Inc., a corporation, and that she as such Treasurer, being authorized to do so, executed the foregoing Forty-seventh Supplemental Indenture as and for the act and deed of said corporation and for the uses and purposes therein mentioned, by signing the name of the corporation by himself as such officer.

In Witness Whereof I hereunto set my hand and official seal.

[NOTARIAL SEAL]

 

Jacqueline Peyreferry

 

43


STATE OF ILLINOIS

COUNTY OF COOK

On the 26th day of October, 2012 before me, the Subscriber, a Notary Public for the State of Illinois, personally appeared Lawrence M. Kusch, who acknowledged himself to be an Authorized Signer of The Bank of New York Mellon Trust Company, N.A., a national banking association, and that he as such Authorized Signer, being authorized to do so, executed the foregoing Forty-seventh Supplemental Indenture as and for the act and deed of said national banking association and for the uses and purposes therein mentioned by signing the name of said national banking association by himself as such officer.

In Witness Whereof I hereunto set my hand and official seal.

[NOTARIAL SEAL]

 

T. Mosterd

 

44


EXHIBIT A

OUTSTANDING FIRST MORTGAGE BONDS

 

Division

   Structure    Interest
Rate
    Issue Date      Maturity
Date
     Original
Amount
     Balance (incl. CP)
@ 09/30/12
 

Aqua Pa

   Tax Exempt      5.35     11/01/01         10/01/31         30,000,000         30,000,000   

Aqua Pa

   Tax Exempt      5.55     06/01/02         09/01/32         25,000,000         25,000,000   

Roaring Creek

   Tax Exempt      5.05     11/30/04         10/01/39         14,000,000         14,000,000   

Aqua Pa

   Tax Exempt      5.15     06/26/02         09/01/32         25,000,000         25,000,000   

Aqua Pa

   Tax Exempt      5.00     05/19/05         11/01/36         21,770,000         21,770,000   

Aqua Pa

   Tax Exempt      5.00     05/19/05         11/01/37         24,165,000         24,165,000   

Aqua Pa

   Tax Exempt      5.00     05/19/05         11/01/38         25,375,000         25,375,000   

Aqua Pa

   Tax Exempt      5.00     12/28/05         02/01/35         24,675,000         24,675,000   

Aqua Pa

   Tax Exempt      5.00     01/16/07         02/01/40         23,915,000         23,915,000   

Aqua Pa

   Tax Exempt      5.00     01/16/07         02/01/41         23,915,000         23,915,000   

Aqua Pa

   Tax Exempt      5.25     12/20/07         07/01/42         24,830,000         24,830,000   

Aqua Pa

   Tax Exempt      5.25     12/20/07         07/01/43         24,830,000         24,830,000   

Aqua Pa

   Tax Exempt      6.25     12/18/08         10/01/17         9,000,000         9,000,000   

Aqua Pa

   Tax Exempt      6.75     12/18/08         10/01/18         13,000,000         13,000,000   

Aqua Pa

   Tax-Exempt      5.00     07/18/09         10/01/39         58,000,000         58,000,000   

Aqua Pa

   Tax-Exempt      5.00     11/17/09         11/15/40         62,165,000         62,165,000   

Aqua Pa

   Tax-Exempt      4.75     11/17/09         11/15/40         12,520,000         12,520,000   

Aqua Pa

   Tax-Exempt      5.00     11/17/10         12/01/33         25,910,000         25,910,000   

Aqua Pa

   Tax-Exempt      5.00     11/17/10         12/01/34         19,270,000         19,270,000   

Aqua Pa

   Tax-Exempt      4.50     11/17/10         12/01/42         15,000,000         15,000,000   

Aqua Pa

   Tax-Exempt      5.00     11/17/10         12/01/43         81,205,000         81,205,000   
             

 

 

    

 

 

 
                   583,545,000   
             

 

 

    

 

 

 

Aqua Pa

   Taxable      6.89     12/19/95         12/15/15         12,000,000         12,000,000   

Aqua Pa

   Taxable      7.72     05/19/95         05/15/25         15,000,000         15,000,000   

Shenango

   Taxable      8.14     11/01/95         11/01/25         4,000,000         4,000,000   

Susquehanna

   Taxable      8.26     11/01/92         11/01/22         1,500,000         1,500,000   

Shenango

   Taxable      8.32     11/01/92         11/01/22         3,500,000         3,500,000   

Aqua Pa

   Taxable      9.17     11/01/91         09/15/21         8,000,000         3,600,000   

Aqua Pa

   Taxable      9.29     11/01/91         09/15/26         12,000,000         12,000,000   

Aqua Pa

   Taxable      9.93     06/01/88         06/01/13         5,000,000         5,000,000   

Aqua Pa

   Taxable      9.97     06/01/88         06/01/18         5,000,000         5,000,000   

Aqua Pa

   Taxable      5.08     05/10/04         05/15/15         20,000,000         20,000,000   

Aqua Pa

   Taxable      5.17     05/10/04         05/10/17         7,000,000         7,000,000   

Aqua Pa

   Taxable      5.751     05/10/04         05/15/19         15,000,000         15,000,000   

Aqua Pa

   Taxable      5.751     05/10/04         05/15/19         5,000,000         5,000,000   

Aqua Pa

   Taxable      6.06     05/10/04         05/10/27         15,000,000         15,000,000   

Aqua Pa

   Taxable      6.06     05/10/04         05/15/27         5,000,000         5,000,000   

Aqua Pa

   Taxable      5.98     05/10/04         05/15/28         3,000,000         3,000,000   
             

 

 

    

 

 

 
                   131,600,000   
             

 

 

    

 

 

 

TOTAL FIRST MORTGAGE BONDS

                719,545,000         715,145,000   
             

 

 

    

 

 

 

 

A-1


EXHIBIT B

RECORDING INFORMATION

BUCKS, CHESTER, DELAWARE AND MONTGOMERY COUNTIES

 

          Bucks    Chester    Delaware    Montgomery

Indenture

   Date of
Recording
   Book    Page    Book    Page    Book    Page    Book    Page

Original

   2/20/41    496    1    H-13.Vol.307    20    1034    1    1625    1

First Supplemental

   8/26/48    632    1    F-16.Vol.380    200    1668    169    2031    257

Second Supplemental

   7/1/52    768    438    18.Vol.425    186    1962    376    2360    517

Third Supplemental

   11/25/53    895    1    18.Vol.442    325    2052    1    2493    1

Fourth Supplemental

   1/9/56    1089    155    Z-20.Vol.499    1    2199    1    2722    425

Fifth Supplemental

   3/20/57    1181    316    B-22.Vol.536    601    2294    50    2850    335

Sixth Supplemental

   5/9/58    1254    1    G-23    201    2380    039    2952    289

Seventh Supplemental

   9/25/59    1332    509    B-25    109    2442    1    3090    249

Eighth Supplemental

   5/9/61    —      —      Z-26    17    2526    312    —      —  

Eighth Supplemental

   5/10/61    1409    225    —      —      —      —      3249    289

Ninth Supplemental

   4/10/62    1458    372    G-28    126    2581    463    3307    169

Tenth Supplemental

   3/19/64    1568    1    M-30    967    2976    1043    3310    237

Eleventh Supplemental

   11/4/66    1655    695    Q-32    6682    762    223    3549    129

Twelfth Supplemental

   1/23/68    1691    531    N-33    219    2792    708    3542    315

Thirteenth Supplemental

   7/2/70    1763    1167    D-35    80    2850    301    3687    23

Fourteenth Supplemental

   11/5/70    1774    331    K-35    713    2858    3113    700    548

Fifteenth Supplemental

   12/11/72    1869    196    O-37    998    2926    550    3786    96

Sixteenth Supplemental

   5/28/75    1979    14    E-44    77    3005    511    4010    307

Seventeenth Supplemental

   12/18/77    2072    683    L-51    1    3072    43    5002    436

Eighteenth Supplemental

   4/29/77    2082    567    B-52    344    3078    728    5003    291

Nineteenth Supplemental

   6/23/80    2303    714    J-62    92    3261    293    5030    502

Twentieth Supplemental

   8/2/83    2487    370    D-72    1    96