Exhibit 10.1
AGREEMENT
THIS Agreement made as of the 30th day of March, 2007 by and between, Aqua
America, Inc., a Pennsylvania corporation (“Aqua America”), and Karl M. Kyriss
(the “Executive”).
WHEREAS, the Executive is presently employed as an executive of the Aqua America
or one of its Subsidiaries; and
WHEREAS, Aqua America considers it essential to foster the employment of
well-qualified, key management personnel, and, in this regard, the board of
directors of Aqua America recognize that, as is the case with many publicly-held
corporations such as Aqua America, the possibility of a change of control of
Aqua America may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of key management personnel to the detriment of Aqua America;
WHEREAS, the board of directors of Aqua America have determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of key members of management of Aqua America and its Subsidiaries to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of Aqua
America, although no such change is now contemplated; and
WHEREAS, in order to induce the Executive to remain in the employ of Aqua
America or its Subsidiaries, for which the Executive provides key executive
services, Aqua America is entering into this Agreement to provide that the
Executive with certain compensation in the event Executive’s employment is
terminated subsequent to a “Change of Control” (as defined in Section 1 hereof)
of Aqua America as a cushion against the financial and career impact on the
Executive of any such Change of Control; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms shall
have the meanings specified in this Section unless the context clearly otherwise
requires:
(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

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(b) “Base Compensation” shall mean the average of the total of cash base salary
and annual bonus paid to, and dividend equivalents under the Equity Compensation
Plan accrued for, the Executive in each calendar year in all capacities with
Aqua America, and its Subsidiaries or Affiliates, as would be reported for
Federal income tax purposes on Form W-2 if currently subject to tax, together
with (i) any amounts the payment of which has been deferred by the Executive
under any deferred compensation plan of Aqua America, and its Subsidiaries or
Affiliates, or otherwise, (ii) any and all salary reduction authorized amounts
under any of the benefit plans or programs of Aqua America, and its Subsidiaries
or Affiliates, (iii) the value, calculated on the same basis as the value of
stock option grants shown in Aqua America’s Proxy, for each calendar year in
which a grant was made, of the stock option grants made to the Executive under
the Equity Compensation Plan, but excluding any amounts attributable to the
exercise of stock options, and (iv) the value, based on the average value of
shares vesting in each year, of any grants of Restricted Stock made to the
Executive under the Equity Compensation Plan, for the three calendar years (or
such number of actual full calendar years of employment, if less than three)
immediately preceding the calendar year in which occurs a Change of Control or
the Executive’s Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the “Beneficial Owner” of any securities: (i) that
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the “Beneficial Owner” of
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such Person’s Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange; (ii) that such Person or any of
such Person’s Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has “beneficial ownership” of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the “Beneficial Owner” of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of

 

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the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person’s Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to clause (ii) above) or disposing of any voting
securities of Aqua America; provided, however, that nothing in this Section 1(c)
shall cause a Person engaged in business as an underwriter of securities to be
the “Beneficial Owner” of any securities acquired through such Person’s
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) “Board” shall mean the board of directors of Aqua America.
(e) “Change of Control” shall mean:
(i) any Person (including any individual, firm, corporation, partnership or
other entity except Aqua America or any employee benefit plan of Aqua America or
of any Affiliate or Associate, any Person or entity organized, appointed or
established by Aqua America for or pursuant to the terms of any such employee
benefit plan), together with all Affiliates and Associates of such Person, shall
become the Beneficial Owner in the aggregate of 20% or more of the Common Stock
of Aqua America then outstanding;
(ii) during any twenty-four month period, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute a majority
thereof, unless the election, or the nomination for election by Aqua America’s
shareholders, of at least seventy-five percent of the directors who were not
directors at the beginning of such period was approved by a vote of at least
seventy-five percent of the directors in office at the time of such election or
nomination who were directors at the beginning of such period; or
(iii) there occurs a sale of substantially all of the assets of Aqua America or
its liquidation is approved by a majority of its shareholders or Aqua America is
merged into or is merged with an unrelated entity such that following the merger
the shareholders of Aqua America no longer own more than 51% of the resultant
entity.

 

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Notwithstanding anything in this subsection 1(e) to the contrary, a Change of
Control shall not be deemed to have taken place under clause (e)(i) above if
(i) such Person becomes the beneficial owner in the aggregate of 20% or more of
the Common Stock of Aqua America then outstanding as a result, in the
determination of a majority of those members of the Board of Directors of Aqua
America in office prior to the acquisition, of an inadvertent acquisition by
such Person if such Person, as soon as practicable, divests itself of a
sufficient amount of its Common Stock so that it no longer owns 20% or more of
the Common Stock then outstanding, or (ii) such Person becomes the beneficial
owner in the aggregate of 20% or more of the Common Stock of Aqua America
outstanding as a result of an acquisition of common stock by Aqua America which,
by reducing the number of common stock outstanding, increases the proportionate
number of shares of common stock beneficially owned by such Person to 20% or
more of the shares of common stock then outstanding; provided, however that if a
Person shall become the beneficial owner of 20% or more of the shares of common
stock then outstanding by reason of common stock purchased by Aqua America and
shall, after such share purchases by Aqua America become the beneficial owner of
any additional shares of common stock, then the exemption set forth in this
clause shall be inapplicable.
(f) “Cause” shall mean 1) misappropriation of funds, 2) habitual insobriety or
substance abuse, 3) conviction of a crime involving moral turpitude, or 4) gross
negligence in the performance of duties, which gross negligence has had a
material adverse effect on the business, operations, assets, properties or
financial condition of Aqua America or its Subsidiaries and Affiliates.
(g) “Equity Compensation Plan” shall mean Aqua America’s 1994 and 2004 Equity
Compensation Plan, and its predecessors and successors.
(h) “Good Reason Termination” shall mean a Termination of Employment initiated
by the Executive upon one or more of the following occurrences:
(i) any failure of Aqua America or its successor(s) to comply with and satisfy
any of the terms of this the Agreement;
(ii) any significant involuntary reduction of the authority, duties,
responsibilities or reporting relationships held by the Executive immediately
prior to the Change of Control;
(iii) any involuntary removal of the Executive from the employment grade,
compensation level or officer positions which the Executive holds with Aqua
America or, if the Executive is employed by a Subsidiary, with a Subsidiary,
immediately prior to the Change of Control, except in connection with promotions
to higher office;
(iv) any involuntary reduction in the Executive’s target level of annual and
long-term compensation as in effect immediately prior to the Change of Control;

 

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(v) any transfer of the Executive, without Executive’s express written consent,
to a location which is outside the Bryn Mawr, Pennsylvania area by more than 50
miles, other than on a temporary basis (less than 6 months); or
(vi) the Executive being required to undertake business travel to an extent
substantially greater than the Executive’s business travel obligations
immediately prior to the Change of Control.
(i) “Normal Retirement Date” shall mean the first day of the calendar month
coincident with or next following the Executive’s 65th birthday.
(j) “Subsidiary” shall mean any corporation in which Aqua America, directly or
indirectly, owns at least a 50% interest or an unincorporated entity of which
Aqua America, directly or indirectly, owns at least 50% of the profits or
capital interests.
(k) “Termination Date” shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(l) “Termination of Employment” shall mean the termination of the Executive’s
actual employment relationship with Aqua America and any of it Subsidiaries that
actually employs the Executive.
2. Notice of Termination. Any Termination of Employment following a Change of
Control shall be communicated by a Notice of Termination to the other party
hereto given in accordance with Section 14 hereof. For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates
the specific provision in this Agreement relied upon, (ii) briefly summarizes
the facts and circumstances deemed to provide a basis for the Executive’s
Termination of Employment under the provision so indicated, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in the event of the
Executive’s involuntary Termination of Employment for any reason other than
Cause or in the event of a Good Reason Termination, in either event within two
years after a Change of Control, Aqua America shall pay to the Executive, upon
the execution of a release in the form required by Aqua America of its
terminating executives prior to the Change of Control, within 15 days after the
Termination Date (or as soon as possible thereafter in the event that the
procedures set forth in Section 11(b) hereof cannot be completed within
15 days), an amount in cash equal to two (2) times the Executive’s Base
Compensation, subject to required employment taxes and deductions.

 

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(b) In the event the Executive’s Normal Retirement Date would occur prior to
24 months after the Termination Date, the aggregate cash amount determined as
set forth in (a) above shall be reduced by multiplying it by a fraction, the
numerator of which shall be the number of days from the Termination Date to the
Executive’s Normal Retirement Date and the denominator of which shall be
730 days. In the event the Termination Date occurs after the Executive’s Normal
Retirement Date, no payments shall be made under this Section 3.
4. Other Payments and Benefits. The payment due under Section 3 hereof shall be
in addition to and not in lieu of any payments or benefits due to the Executive
under any other plan, policy or program of Aqua America, and its Subsidiaries or
Affiliates. In addition, the Executive shall be entitled to (i) a continuation
of health, dental, life and welfare benefits, excluding disability benefits,
otherwise provided to senior level executives or employees generally, as the
same may be amended for all such individuals from time to time, for the period
of two years, (ii) continued use of the automobile furnished to the Executive
for the lesser of (1) two years after the Termination Date or (2) the balance of
the applicable lease term, if any, in either case to the same extent as was
provided to the Executive, if any, in the calendar year immediately preceding
the Change of Control and the ability to purchase such automobile at its book
value at the completion of such period and (iii) fully-paid executive level
outplacement services from the provider or the Executive’s choice for six
(6) months following the Termination Date.
5. Trust Fund. Aqua America sponsors an irrevocable trust fund pursuant to a
trust agreement to hold assets to satisfy its obligations to the Executive under
this Agreement. Funding of such trust fund shall be subject to the discretion of
Aqua America’s President, as set forth in the agreement pursuant to which the
fund has been established.
6. Enforcement.
(a) In the event that Aqua America shall fail or refuse to make payment of any
amounts due the Executive under Sections 3 and 4 hereof within the respective
time periods provided therein, Aqua America shall pay to the Executive, in
addition to the payment of any other sums provided in this Agreement, interest,
compounded daily, on any amount remaining unpaid from the date payment is
required under Section 3 or 4, as appropriate, until paid to the Executive, at
the rate from time to time announced by PNC Bank as its “prime rate” plus 1%,
each change in such rate to take effect on the effective date of the change in
such prime rate.

 

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(b) It is the intent of the parties that the Executive not be required to incur
any expenses associated with the enforcement of his rights under this Agreement
by arbitration, litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, Aqua America shall pay the Executive on
demand the amount necessary to reimburse the Executive in full for all
reasonable expenses (including all attorneys’ fees and legal expenses) incurred
by the Executive in enforcing any of the obligations of Aqua America under this
Agreement.
7. No Mitigation. The Executive shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive’s continuing or future participation in or rights under any
benefit, bonus, incentive or other plan or program provided by Aqua America, or
any of its Subsidiaries or Affiliates, and for which the Executive may qualify.
9. No Set-Off. Aqua America’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which Aqua America, or any of
its Subsidiaries or Affiliates may have against the Executive or others.
10. Taxes. Any payment required under this Agreement shall be subject to all
requirements of the law with regard to the withholding of taxes, filing, making
of reports and the like, and Aqua America shall use its best efforts to satisfy
promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event
that it shall be determined that any payment or distribution by Aqua America to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
“Payment”), would constitute an “excess parachute payment” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the
aggregate present value of amounts payable or distributable to or for the
benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are

 

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hereinafter referred to as “Agreement Payments”) shall be reduced (but not below
zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed
in present value, which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be subject to the loss of deduction
under Section 280G of the Code. For purposes of this Section 11, present value
shall be determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made by Aqua
America’s independent public accountant immediately prior to the Change of
Control (the “Accounting Firm”), which firm shall provide its determinations and
any supporting calculations both to Aqua America and the Executive within
10 days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon Aqua America and the Executive. The Executive shall then
have the right to determine which of the Agreement Payments shall be eliminated
or reduced in order to produce the Reduced Amount in accordance with the
requirements of this Section. Within five days after this determination, Aqua
America shall pay (or cause to be paid) or distribute (or cause to be
distributed) to or for the benefit of the Executive such amounts as are then due
to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Agreement Payments, as the case may be, will have been made
by Aqua America which should not have been made (“Overpayment”) or that
additional Agreement Payments which have not been made by Aqua America could
have been made (“Underpayment”), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph and Aqua America shall cooperate and provide
all information necessary for such review. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to Aqua America together with interest from the date of payment under this
Agreement at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the “Federal Rate”); provided, however, that no amount shall be
payable by the Executive to Aqua America if and to the extent such payment would
not reduce the limit on the amount that is deductible under Section 280G of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by Aqua America to or for
the benefit of the Executive together with interest from the date of payment
under this Agreement at the Federal Rate.

 

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(d) All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in subsections (b) and (c) above shall be borne
solely by Aqua America. Aqua America agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall be indefinite until Aqua
America notifies the Executive in writing that this Agreement will not be
renewed at least sixty days prior to the proposed termination; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Executive with
Aqua America and its Subsidiaries, as the case may be, shall terminate for any
reason; provided, however, that if a Change of Control occurs within 18 months
after (a) the Executive’s termination incurred for any reason other than a
voluntary resignation or retirement (a Good Reason Termination shall not be
deemed voluntary) or termination for Cause or (b) the termination of this
Agreement, the Executive shall be entitled to all of the terms and conditions of
this Agreement as if the Executive’s termination had occurred on the date of the
Change of Control.
13. Successor Company. Aqua America shall require any successor or successors
(whether direct or indirect, by purchase, merger or otherwise) to all or
substantially all of the business and/or assets of Aqua America, by agreement in
form and substance satisfactory to the Executive, to acknowledge expressly that
this Agreement is binding upon and enforceable against the successor or
successors, in accordance with the terms hereof, and to become jointly and
severally obligated with Aqua America to perform this Agreement in the same
manner and to the same extent that Aqua America would be required to perform if
no such succession or successions had taken place. Failure of Aqua America to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor’s assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
Aqua America Aqua America and any successor or successors to its business and/or
assets, jointly and severally.

 

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14. Notice. All notices and other communications required or permitted hereunder
or necessary or convenient in connection herewith shall be in writing and shall
be delivered personally or mailed by registered or certified mail, return
receipt requested, or by overnight express courier service, as follows:
If to Aqua America or, to:

              Aqua America, Inc.     762 W. Lancaster Avenue     Bryn Mawr, PA
19010-3489
 
  Attention:   Chairman, Executive Compensation
 
      and Employee Benefits Committee

If to the Executive, to:
Karl M. Kyriss
or to such other names or addresses as Aqua America or the Executive, as the
case may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
Aqua America following a Change of Control, notice at the last address of Aqua
America or to any successor pursuant to Section 13 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
15 Governing Law. This Agreement shall be governed by and interpreted under the
laws of the Commonwealth of Pennsylvania without giving effect to any conflict
of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This Agreement supersedes
all prior agreements, sets forth the entire understanding between the parties
hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment executed by the
Executive and Aqua America. The provisions of this Agreement may require a
variance from the terms and conditions of certain compensation or bonus plans
under circumstances where such plans would not provide for payment thereof in
order to obtain the maximum benefits for the Executive. It is the specific
intention of the parties that the provisions of this Agreement shall supersede
any provisions to the contrary in such plans, and such plans shall be deemed to
have been amended to correspond with this Agreement without further action by
Aqua America.

 

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17. No Right to Continued Employment. Nothing in this Agreement shall be
construed as giving the Executive any right to be retained in the employ of Aqua
America or any of its Subsidiaries.
18. Successors and Assigns. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Aqua America hereunder shall not
be assignable in whole or in part.
19. Severability. If any provision of this Agreement or application thereof to
anyone or under any circumstances shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred upon the Executive by
this Agreement is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and shall be in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. No delay or omission by the Executive in exercising any right,
remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof.
21. Miscellaneous. All section headings are for convenience only. This Agreement
may be executed in several counterparts, each of which is an original. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
22. Arbitration. In the event of any dispute under the provisions of this
Agreement other than a dispute in which the sole relief sought is an equitable
remedy such as an injunction, the parties shall be required to have the dispute,
controversy or claim settled by arbitration in Bryn Mawr, Pennsylvania, in
accordance with the National Rules for the Settlement of Employment Disputes of
the American Arbitration Association, before one arbitrator who shall be an
executive officer or former executive officer of a publicly traded corporation,
selected by the parties. Any award entered by the arbitrator shall be final,
binding and nonappealable and judgment may be entered thereon by either party in
accordance with applicable law in any court of competent jurisdiction. This
arbitration provision shall be specifically enforceable. The arbitrator shall
have no authority to modify any provision of this Agreement or to award a remedy
for a dispute involving this Agreement other than a benefit specifically
provided under or by virtue of the Agreement. Aqua America shall be responsible
for all of the fees of the American Arbitration Association and the arbitrator
and any expenses relating to the conduct of the arbitration (including
reasonable attorneys’ fees and expenses).

 

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.

          ATTEST:   AQUA AMERICA, INC.
 
       
/s/ Roy H. Stahl
  By   /s/ Nicholas DeBenedictis
 
       
Secretary
       
 
            EXECUTIVE
 
        /s/ Joy Ellen Ambrogio   /s/ Karl M. Kyriss
     
Witness
       

 

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