EXHIBIT 10.34
BOND PURCHASE AGREEMENT
$49,660,000
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
Water Facilities Revenue Bonds
(Aqua Pennsylvania, Inc. Project)
Series A of 2007
Bond Purchase Agreement dated December 12, 2007, among the MONTGOMERY COUNTY
INDUSTRIAL DEVELOPMENT AUTHORITY (the “Authority”), AQUA PENNSYLVANIA, INC., a
Pennsylvania corporation (the “Company”), and SOVEREIGN SECURITIES CORPORATION,
LLC, a Pennsylvania limited liability company (the “Underwriter”).
Section 1. Background.
(a) The Authority proposes to enter into a Financing Agreement (the “Financing
Agreement”) dated as of December 1, 2007 with the Company, under which the
Authority will agree to loan to the Company funds to (i) finance certain capital
costs of the construction, acquisition and installation of modifications,
expansions and replacements of water distribution, treatment and related
operating systems located in the counties of Chester, Delaware and Montgomery in
Pennsylvania (the “Facilities”) that are part of the Company’s system (the
“System”) for the distribution of water to its customers, and (ii) pay related
financing costs (collectively, the “Project”). To finance the loan under the
Financing Agreement, the Authority proposes to issue and sell $49,660,000
aggregate principal amount of Montgomery County Industrial Development Authority
Water Facilities Revenue Bonds (Aqua Pennsylvania, Inc. Project), Series A of
2007 (the “Bonds”) to the Underwriter, who will in turn reoffer the Bonds for
sale to the public.
(b) The Bonds will be issued pursuant to the Pennsylvania Economic Development
Financing Law, Act of August 23, 1967, P.L. 251, as amended and supplemented
(the “Act”), a resolution adopted by the Authority on November 8, 2007 (the
“Authority Resolution”) and under a Trust Indenture dated as of December 1, 2007
(the “Trust Indenture”), between the Authority and U.S. Bank National
Association, as trustee (the “Trustee”). The Bonds will have such terms as are
set forth in Schedule I attached hereto.
The Bonds will be payable out of payments by the Company under the Financing
Agreement, including payments under its First Mortgage Bond, 5.25% Series due
2042 in the principal amount of $24,830,000 (the “2042 First Mortgage Bond”),
and its First Mortgage Bond, 5.25% Series due 2043 in the principal amount of
$24,830,000 (the “2043 First Mortgage Bond” and, along with the 2042 First
Mortgage Bond, the “First Mortgage Bonds”) issued with respect to the Bonds. The
First Mortgage Bonds will be issued under and secured by the Company’s Indenture
of Mortgage dated as of January 1, 1941 (the “Indenture of Mortgage”), from the
Company to The Bank of New York Trust Company, N.A., trustee (successor to The
Pennsylvania Company for Insurance on Lives and Granting Annuities,

 

 

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The Pennsylvania Company for Banking and Trusts, The First Pennsylvania Banking
and Trust Company, First Pennsylvania Bank, N.A., CoreStates Bank, N.A., Mellon
Bank, N.A., Chase Manhattan Trust Company, National Association and J.P. Morgan
Trust Company, National Association) (the “Mortgage Trustee”), as presently
amended and supplemented and as to be further supplemented by a Forty-second
Supplemental Indenture of Mortgage to be dated as of December 1, 2007 (the
“Forty-second Supplemental Mortgage,” which together with the Indenture of
Mortgage, as amended and supplemented, is referred to hereinafter as the
“Mortgage”). Each First Mortgage Bond will be issued in the same aggregate
principal amount and will mature on the same date and bear interest at the same
rate as the same maturity of Bonds that it secures. All of the Authority’s
rights under the Financing Agreement to receive and enforce repayment of its
loan to the Company and to enforce payment of the Bonds, including all of the
Authority’s rights to the First Mortgage Bonds, and all of the Authority’s
rights to moneys and securities in the Project Funds, the Revenue Funds and the
Debt Service Funds (and the accounts within all such Funds applicable to the
Bonds) established by the Trust Indenture, except for the Authority’s rights to
certain fees and reimbursements for expenses, indemnification and notice
thereunder and rights relating to amendments of and notices under the Financing
Agreement, will be assigned to the Trustee as security for the Bonds pursuant to
the Trust Indenture.
(c) The Project will finance the acquisition, construction, installation and
equipping of facilities for the furnishing of water for purposes of
Section 142(a)(4) of the Internal Revenue Code of 1986, as amended (the “Code”),
so that the interest on the Bonds will not be includable in gross income for
federal income tax purposes under the Code and the Underwriter may offer the
Bonds for sale without registration under the Securities Act of 1933, as amended
(the “1933 Act”) or qualification of the Trust Indenture under the Trust
Indenture Act of 1939, as amended (the “1939 Act”).
(d) A Preliminary Official Statement dated December 3, 2007, including the
Appendices thereto and all documents incorporated therein by reference (the
“Preliminary Official Statement”), has been supplied to the parties hereto, and
a final Official Statement to be dated the date hereof, including the Appendices
thereto and all documents incorporated therein by reference, prepared for use in
such offerings will be supplied to the parties hereto as soon as it is
available, subject to Section 10 hereof (such final Official Statement, as it
may be amended or supplemented with the consent of the Authority, the
Underwriter and the Company, is hereinafter referred to as the “Official
Statement”).
Section 2. Purchase, Sale and Closing. On the terms and conditions herein set
forth, the Underwriter will buy from the Authority, and the Authority will sell
to the Underwriter, all (but not less than all) of the Bonds at a purchase price
equal to $49,253,532.90, which is equal to the $49,660,000.00, aggregate
principal amount of the Bonds, plus original issue premium of $338,432.90, less
the underwriting discount of $744,900.00. Payment for the Bonds shall be made in
immediately available funds to the Trustee for the account of the Authority.
Closing (the “Closing”) will be at the offices of Ballard Spahr Andrews &
Ingersoll, LLP, Philadelphia, Pennsylvania (“Bond Counsel”), at 10:00 a.m.,
Eastern Standard Time, on December 20, 2007 or at such other date, time or place
or in such other manner as may be agreed on by the parties hereto. The Bonds
will be delivered as fully registered bonds in the aggregate principal amount of
$49,660,000 in the name of Cede & Co., as nominee for The Depository Trust
Company (“DTC”), with CUSIP numbers printed thereon, and shall conform in all
respects to DTC’s Book-Entry Only System. Delivery of the Bonds to DTC will be
made by delivering the Bonds to the Trustee utilizing the DTC FAST system. If
the Underwriter so requests, the Bonds shall be made available to the
Underwriter (prior to their delivery to DTC) in Philadelphia, Pennsylvania at
least three full business days before the Closing for purposes of inspection.

 

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The Underwriter agrees to make a bona fide public offering of the Bonds at the
initial offering prices or yields set forth in the Official Statement; provided,
however, that the Underwriter reserves the right (and the Authority and the
Company hereby expressly acknowledge such right): to make concessions to
dealers; to effect transactions that stabilize or maintain the market price of
the Bonds above that which might otherwise prevail in the open market and to
discontinue at any time such stabilizing transactions; and to change such
initial offering prices, all as the Underwriter shall deem necessary in
connection with the marketing of the Bonds.
Section 3. Authority’s Representations. The Authority makes the following
representations on and as of the date hereof, all of which shall survive
Closing:
(a) The Authority is a body politic and corporate, duly created and existing
under the Constitution and laws of the Commonwealth of Pennsylvania (the
“Commonwealth”), and has, and at the date of Closing will have, full legal
right, power and authority to: enter into this Bond Purchase Agreement; execute
and deliver the Bonds, the Trust Indenture, the Financing Agreement, this Bond
Purchase Agreement and the Authority’s tax certificate and the other various
certificates executed by the Authority in connection therewith (collectively,
with the Authority Resolution, the “Authority Financing Documents”); issue, sell
and deliver the Bonds to the Underwriter as provided herein; and carry out and
consummate the transactions contemplated by the Authority Financing Documents
and the Official Statement to be carried out and/or consummated by it.
(b) The Authority Resolution was duly adopted at a public meeting of the
Authority at which a quorum was present and acted throughout; and the Authority
Resolution is in full force and effect and has not been amended, repealed or
superseded in any way.
(c) The sections entitled “INTRODUCTORY STATEMENT” (insofar as it relates to the
Authority), “THE AUTHORITY” and “ABSENCE OF MATERIAL LITIGATION” (solely insofar
as the information set forth therein relates to the Authority) contained in the
Preliminary Official Statement as of its date did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements contained therein,
in the light of the circumstances under which they were made, not misleading.
(d) The sections entitled “INTRODUCTORY STATEMENT” (insofar as it relates to the
Authority), “THE AUTHORITY” and “ABSENCE OF MATERIAL LITIGATION” (solely insofar
as the information set forth therein relates to the Authority) contained in the
Official Statement as of its date does not or will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.

 

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(e) The Authority has complied, and will at the Closing be in compliance, in all
material respects with the provisions of the Act.
(f) The Authority has duly authorized and approved the Preliminary Official
Statement and the Official Statement; and has duly authorized and approved the
execution and delivery of, and the performance by the Authority of the
obligations on its part contained in, the Authority Financing Documents.
(g) To the best of the knowledge of the Authority after due inquiry, the
Authority is not in material breach of or in default under any applicable law or
administrative regulation of the Commonwealth or the United States; and the
execution and delivery of the Authority Financing Documents, and compliance with
the provisions of each thereof, do not and will not conflict with or constitute
a breach of or default under any existing law, administrative regulation,
judgment, decree, loan agreement, note, resolution, agreement or other
instrument to which the Authority is a party or is otherwise subject.
(h) All approvals, consents and orders of any governmental authority, board,
agency or commission having jurisdiction that would constitute a condition
precedent to the Authority’s legal ability to issue the Bonds or to the
Authority’s performance of its obligations hereunder and under the Authority
Financing Documents have been obtained or will be obtained prior to the Closing.
(i) The Bonds, when issued, authenticated and delivered in accordance with the
Trust Indenture and sold to the Underwriter as provided herein, will be validly
issued and will be valid and binding limited obligations of the Authority
enforceable against the Authority in accordance with their terms (except as
enforcement may be affected by bankruptcy, insolvency, reorganization,
moratorium or other laws or legal or equitable principles affecting the
enforcement of creditors’ rights (“Creditors’ Rights Limitations”).
(j) The terms and provisions of the Authority Financing Documents when executed
and delivered by the respective parties thereto will constitute the valid, legal
and binding obligations of the Authority enforceable against the Authority in
accordance with their respective terms (except as enforcement of remedies may be
limited by Creditors’ Rights Limitations).
(k) There is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, or public board or body, pending or, to the
knowledge of the Authority after due inquiry, threatened against the Authority,
affecting the existence of the Authority or the titles of its officers to their
respective offices or seeking to prohibit, restrain or enjoin the sale, issuance
or delivery of the Bonds or of the revenues or assets of the Authority pledged
or to be pledged to pay the principal of and interest on the Bonds, or the
pledge thereof, or in any way contesting or affecting the validity or
enforceability of the Authority Financing Documents or contesting in any way the
completeness or accuracy of the Preliminary Official Statement or the Official
Statement, or contesting the power or authority of the Authority with respect to
the issuance of the Bonds or the execution, delivery or performance of any of
the Authority Financing Documents, wherein an unfavorable decision, ruling or
fording would affect in any way the validity or enforceability of any of the
Authority Financing Documents.

 

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(l) The net proceeds received from the Bonds and applied in accordance with the
Trust Indenture and the Financing Agreement shall be used in accordance with the
Act as described in the Official Statement.
(m) Any certificate signed by any of the authorized officers of the Authority
and delivered to the Underwriter shall be deemed a representation and warranty
by the Authority to the Underwriter as to the statements made therein.
Section 4. Company’s Representations and Warranties. The Company makes the
following representations and warranties on and as of the date hereof and as of
the date of Closing, all of which will survive the Closing:
(a) The Company has not sustained since December 31, 2006 any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; and since the respective dates as of which
information is given in the Official Statement, there have not been any material
changes in the outstanding capital stock or the long-term debt of the Company or
any material adverse change, or a development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholder’s equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Official Statement.
(b) The Company was organized, is in good standing and subsists as a corporation
under the laws of the Commonwealth, with power (corporate and other) to own its
properties and conduct its business as described in the Official Statement.
(c) The First Mortgage Bonds have been duly authorized; and, when issued and
delivered as contemplated by this Bond Purchase Agreement, will have been duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company enforceable in accordance with their
terms (except as may be affected by Creditors’ Rights Limitations) entitled to
the benefits provided by the Mortgage.
(d) The Indenture of Mortgage has been duly authorized, executed and delivered
by the Company, and the Forty-second Supplemental Mortgage has been duly
authorized by the Company. When the Forty-second Supplemental Mortgage, in
substantially the form approved by the Underwriter and Bond Counsel, has been
executed and delivered by the Company and assuming due authorization and
execution by the Mortgage Trustee, and recorded as required by law, the Mortgage
will constitute a valid and legally binding instrument enforceable against the
Company in accordance with its terms except as enforceability may be affected by
Creditors’ Rights Limitations; will constitute a direct, valid and enforceable
first mortgage lien (except as enforceability of such lien may be affected by
Creditors’ Rights Limitations) upon all of the properties and assets of the
Company (not heretofore released as provided for in the Mortgage) specifically
or generally described or referred to in the Mortgage as being subject to the
lien thereof, excepting permitted liens under the Mortgage and excepting
property and assets that the Mortgage expressly excludes from the lien thereof;
and will create a mortgage upon all properties and assets acquired by the
Company after the execution and delivery of the Forty-second Supplemental
Mortgage and required to be subjected to the lien of the Mortgage pursuant
thereto when so acquired, except for permitted liens under the Mortgage. The
Indenture of Mortgage has been and the Forty-second Supplemental Mortgage will
be duly filed, recorded or registered in each place in the Commonwealth in which
such filing, recording or registration was or is required to protect and
preserve the lien of the Mortgage; and all necessary approvals of regulatory
authorities, commissions and other governmental bodies having jurisdiction over
the Company required to subject the mortgaged properties and assets or trust
estate (as defined in the Mortgage) to the lien of the Mortgage have been duly
obtained.

 

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(e) With only such exceptions as are not material and do not interfere with the
conduct of the business of the Company, the Company has good and marketable
title to all of its real property currently held in fee simple, and all of its
other interests in real property (other than certain rights of way, easements,
occupancy rights, riparian and flowage rights, licenses, leaseholds and real
property interests of a similar nature). In each case such title is free and
clear of all liens, encumbrances and defects except such as may be described in
the Official Statement, the lien of the Mortgage, permitted liens under the
Mortgage or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company. Any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
(f) With only such exceptions as are not material and do not interfere with the
conduct of the business of the Company, the Company has all licenses,
franchises, permits, authorizations, rights, approvals, consents and orders of
all governmental authorities or agencies necessary for the ownership or lease of
the properties owned or leased by it and for the operation of the business
carried on by it as described in the Official Statement, and all water rights,
riparian rights, easements, rights of way and other similar interests and rights
described or referred to in the Mortgage necessary for the operation of the
business carried on by it as described in the Official Statement. Except as
otherwise set forth in the Official Statement, all such licenses, franchises,
permits, orders, authorizations, rights, approvals and consents are in full
force and effect and contain no unduly burdensome provisions. Except as
otherwise set forth in the Official Statement, there are no legal or
governmental proceedings pending or, to the knowledge of the Company after due
inquiry, threatened that would result in a material modification, suspension or
revocation thereof. The Company has the legal power to exercise the rights of
eminent domain for the purposes of conducting its water utility operations.
(g) The issue and sale of the Bonds, the issue and delivery of the First
Mortgage Bonds and the compliance by the Company with all of the applicable
provisions of the First Mortgage Bonds and the Mortgage and the execution,
delivery and performance by the Company of the Forty-second Supplemental
Mortgage, the Financing Agreement, this Bond Purchase Agreement and the
Continuing Disclosure Agreement will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance (other than the
lien of the Mortgage) upon any of the property or assets of the Company pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company are subject,
nor will such action result in a violation of the provisions of the Articles of
Incorporation, as amended, or the Bylaws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its property. No consent, approval,
authorization, order, registration or qualification of or with any court or any
such regulatory authority or other governmental body (other than those already
obtained) is required to be obtained by the Company for the issue and sale of
the Bonds, the issue and delivery of the First Mortgage Bonds, the execution,
delivery and performance by the Company of this Bond Purchase Agreement, the
Financing Agreement, the Forty-second Supplemental Mortgage, the First Mortgage
Bonds and the Continuing Disclosure Agreement, or the consummation by the
Company of the other transactions contemplated by this Bond Purchase Agreement
or the Mortgage, except for the issuance and registration by the Commonwealth
Public Utility Commission of a Securities Certificate authorizing the incurring
of the debt evidenced by the First Mortgage Bonds.

 

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(h) The Company has applied to the Pennsylvania Public Utility Commission for an
order to authorize the issuance and delivery of the First Mortgage Bonds on
terms not inconsistent with this Bond Purchase Agreement.
(i) The Company is not a holding company, a registered holding company or an
affiliate of a registered holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(j) There are no legal or governmental proceedings pending to which the Company
is a party or to which any property of the Company is subject, other than as set
forth in the Official Statement, wherein an unfavorable ruling, decision or
finding would have a material adverse effect on the financial position,
stockholder’s equity or results of operations of the Company; and, to the best
of the Company’s knowledge after due diligence, no such proceedings are
threatened by governmental authorities or threatened by others.
(k) The Project consists of either land or property of a character subject to
depreciation for federal income tax purposes and will be used to furnish water
that is or will be made available to members of the general public (including
electric utility, industrial, agricultural, or commercial users); the rates for
the furnishing or sale of the water have been established or approved by a state
or political subdivision thereof, by an agency or instrumentality of the United
States, or by a public service or public utility commission or other similar
body of any state or political subdivision thereof; and all other information
supplied by the Company to the Underwriter with respect to the exclusion from
gross income pursuant to Section 103 of the Code of the interest on the Bonds is
correct and complete.
(l) The Company has not, within the immediately preceding ten (10) years,
defaulted in the payment of principal or interest on any of its bonds, notes or
other securities, or any legally authorized obligation issued by it.
(m) The information with respect to the Company and the Project and the
descriptions of the First Mortgage Bonds and the Mortgage contained in the
Preliminary Official Statement and the Official Statement (including appendices
A and B thereto) do not contain any untrue statement of a material fact or omit
to state any material fact necessary to be stated therein in order to make such
information and descriptions, in the light of the circumstances under which they
were made, not misleading.

 

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Section 5. Authority’s Covenants. The Authority will:
(a) Furnish such information, execute such instruments and take such other
action in cooperation with the Underwriter as the Underwriter may reasonably
request to qualify the Bonds for offer and sale under the Blue Sky or other
securities laws and regulations of such states and other jurisdictions in the
United States of America as the Underwriter may designate and will assist, if
necessary therefor, in the continuance of such qualifications in effect so long
as required for distribution of the Bonds; provided, however, that the Authority
shall in no event be required to file a general consent to suit or service of
process or to qualify as a foreign corporation or as a dealer in securities in
any such state or other jurisdiction.
(b) Not, on its part, amend or supplement the Official Statement without prior
notice to and the consent of the Underwriter and the Company and will advise the
Underwriter and the Company promptly of the institution of any proceedings by
any governmental agency or otherwise affecting the use of the Official Statement
in connection with the offer and sale of the Bonds.
(c) Refrain from knowingly taking any action (and permitting any action with
regard to which the Authority may exercise control) that would result in the
loss of the exclusion from gross income for federal income tax purposes of
interest on the Bonds.
Section 6. Company’s Covenants. The Company agrees that it will:
(a) Refrain from knowingly taking any actions (and from permitting any action
with regard to which the Company may exercise control) that would result in the
loss of the exclusion from gross income for federal tax purposes of interest on
the Bonds.
(b) Indemnify and hold harmless the Authority, its members, directors, officers,
agents, attorneys, and employees and the Underwriter, its officers, directors,
officials, agents, attorneys, employees, and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the Securities Exchange Act of 1934, as amended (the “1934 Act”), from and
against all losses, claims, damages, liabilities and expenses, joint or several,
to which the Authority and the Underwriter, or either of them, or any of their
respective members, directors, officers, agents, attorneys, and employees and
each person, if any, who controls the Underwriter within the meaning of the 1933
Act or 1934 Act as aforedescribed may become subject, under federal laws or
regulations, or otherwise, insofar as such losses, claims, damages, liabilities
and expenses (or actions in respect thereof) arise out of or are based upon:
(i) a breach of the Company’s representations included in this Agreement;
(ii) any untrue statement or alleged untrue statement of any material fact
pertaining to the Project or the Company set forth in the Official Statement,
the Preliminary Official Statement or any amendment to either; (iii) the willful
or negligent omission of (or the alleged omission to state) a material fact in
the Official Statement, the Preliminary Official Statement, or any amendment or
supplement to either, as such fact is required to be stated therein or necessary
to make the statements therein that pertain to the Company or the Project not
misleading in the light of the circumstances under which they were made; (iv) or
arising by virtue of the failure to register the Bonds under the 1933 Act or the
failure to qualify the Indenture under the 1939 Act; or (v) arising by virtue of
any audit or investigation conducted by a state or federal agency, department or
entity questioning, among other things, the tax-exempt status of the Bonds.

 

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(c) Undertake, pursuant to the Continuing Disclosure Agreement dated as of
December 1, 2007 to be entered into between the Company and the Trustee (the
“Continuing Disclosure Agreement”), to provide annual reports and notices of
certain material events in accordance with Rule 15c2-12 under the 1934 Act, as
amended (“Rule 15c2-12”).
(d) Not amend or supplement the Official Statement without prior notice to, and
the consent of, the Underwriter, and will advise the Underwriter and the
Authority promptly of the institution of any proceedings by any governmental
agency or otherwise affecting the use of the Official Statement in connection
with the offer and the sale of the Bonds.
(e) Take all actions reasonably necessary to maintain in effect and to comply
with the order of the Commonwealth Public Utility Commission dated November 29,
2007, registering the Securities Certificate for the issuance of the First
Mortgage Bonds in support of the Bonds.
Section 7. Underwriter’s Covenant and Compensation.
(a) By acceptance hereof the Underwriter agrees to indemnify and hold harmless
the Authority, its members, directors, officers, agents, attorneys, and
employees and the Company, its officers, directors, agents, attorneys, and
employees and each person if any, who controls the Company within the meaning of
Section 15 of the 1933 Act against all or several claims, losses, damages,
liabilities and expenses asserted against them, or any of them, at law or in
equity, in connection with the offering and sale of the Bonds on the grounds
that the information under the caption “UNDERWRITING” in the Preliminary
Official Statement or the Official Statement (or any supplement or amendment to
said information) contains an untrue or allegedly untrue statement of a material
fact or omits or allegedly omits to state any material fact necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made (it being understood that the Underwriter furnished only
the information under such “UNDERWRITING” heading), or failure on the part of
the Underwriter to deliver an Official Statement to any purchaser. The
Underwriter will reimburse any legal or other expenses reasonably incurred by a
party, person or entity indemnifiable under this Section 7 in connection with
investigating or defending any such loss, claim, damage, liability or action.
This indemnity agreement will be in addition to any liability that the
Underwriter may otherwise have. The Underwriter shall not be liable for any
settlement of, any such action effected without its consent.
(b) The Underwriter will be paid an underwriting discount of $744,900.00 with
respect to the Bonds.
(c) The Underwriter acknowledges that the Authority is relying upon the accuracy
of the certification in clause (b) above on the date hereof as a condition
precedent to lending the proceeds of the Bonds to the Company.

 

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Section 8. Notice of Indemnification; Settlement. Promptly after a party, person
or entity indemnifiable under Section 6 or 7 of this Bond Purchase Agreement (an
“Indemnitee”) receives notice of the commencement of any audit, investigation or
action against such Indemnitee in respect of which indemnity is to be sought by
the Indemnitee against the Company or an Underwriter, as the case may be (the
“Indemnifying Party”), the Indemnitee will notify the Indemnifying Party in
writing of such action, and the Indemnifying Party may assume the defense
thereof, including the employment of counsel and the payment of all expenses;
but the failure so to notify the Indemnifying Party will not relieve the
Indemnifying Party from any liability that it may have to the Indemnitee
otherwise than hereunder. The Indemnifying Party shall not be liable for any
settlement of any such action effected without its consent, but if settled with
the consent of the Indemnifying Party or if there is a final judgment for the
plaintiff in any such action, the Indemnifying Party will indemnify and hold
harmless the Indemnitee from and against any loss or liability by reason of such
settlement or judgment. The indemnity agreements contained in this Bond Purchase
Agreement shall include reimbursement for expenses reasonably incurred by an
Indemnitee in investigating the claim and in defending it if the Indemnifying
Party declines to assume the defense and shall survive delivery of the Bonds.
Notwithstanding the foregoing, in the event of an investigation or audit by the
Internal Revenue Service or the Securities and Exchange Commission or any other
state or federal agency, department, or entity with respect to the Bonds, the
Authority shall have the right and duty to undertake its own defense, including
the employment of counsel, with full power to litigate, compromise or settle the
same on its own behalf, and the Company agrees that it will indemnify and hold
the Authority harness for all costs and expenses, including, but not limited to,
attorney fees and expenses and costs, of any such settlement.
Section 9. Equitable Contribution. If the indemnification provided for in
Section 6(b) of this Bond Purchase Agreement is unavailable to the Underwriter
(or any controlling person thereof) in respect of any losses, claims, damages or
liabilities referred to therein, then the Company shall, in lieu of indemnifying
the Underwriter, contribute to the amount paid or payable by the Underwriter as
a result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Underwriter, respectively, from the offering of the Bonds. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then the Company shall contribute to such amount paid or payable
by the Underwriter in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the
Underwriter, respectively, in connection with the statements or omission which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefit received by the Company
or the Underwriter shall be deemed to be in the same proportion as the total
proceeds from the offering (before deducting issuance costs and expenses other
than underwriting fees and commissions) received by the Company, on the one
hand, bear to the total underwriting fees and commissions received by the
Underwriter, on the other hand. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
related to information supplied by the Company or the Underwriter and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriter
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to above in this Section 9. The amount paid or payable by the Underwriter as a
result of the losses, claims, damages or liabilities referred to above in this
Section 9 shall be deemed to include any reasonable legal or other expenses
reasonably incurred by the Underwriter in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 9, the Underwriter shall not be required to contribute any amount in
excess of the amount of the discount allowed to the Underwriter as set forth in
Section 7(b) hereof.

 

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Section 10. Official Statement; Public Offering.
(a) In order to enable the Underwriter to comply with Rule 15c2-12: the Company
has prepared (or caused to be prepared) the Preliminary Official Statement,
which the Company and the Authority (in the case of the Authority, only with
respect to the information therein under the headings “THE AUTHORITY” and,
insofar as they relate to the Authority, “INTRODUCTORY STATEMENT” and “ABSENCE
OF MATERIAL LITIGATION”) deem final and complete as of its date except for
certain permitted omissions as described in Rule 15c2-12. The Company shall
provide to the Underwriter sufficient copies of the Official Statement in
sufficient time to accompany any confirmation that requires payment from any
customer and in any event within seven business days after the date of this Bond
Purchase Agreement. If the Company, during the period described in Section 10(b)
below, has or gains knowledge of a fact or circumstance that would render the
Official Statement misleading in any material respect, then the Company shall
promptly give the Underwriter written notice thereof. The Authority and the
Company hereby authorize the use of the Preliminary Official Statement and the
Official Statement by the Underwriter in connection with the offering of the
Bonds.
(b) The Authority and the Company will not adopt or distribute any amendment of
or supplement to the Official Statement, except with the prior written consent
of the Underwriter. If from the date hereof until the earlier of (i) ninety
(90) days after the end of the underwriting period (as defined in Rule 15c-2-12)
or (ii) the time when the Official Statement is available to any person from the
Repository with which it has been deposited, but in no case less than
twenty-five (25) days following the end of the underwriting period, any event
relating to or affecting the Authority, the Company or the Bonds shall occur,
the result of which shall make it necessary, in the opinion of the Underwriter,
to amend or supplement the Official Statement in order to make it not misleading
in the light of the circumstances existing at that time, the Company shall
forthwith prepare, and the Company and the Authority shall approve for
distribution, a reasonable number of copies of an amendment of or supplement to
the Official Statement, in form and substance reasonably satisfactory to the
Underwriter, so that the Official Statement then will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances existing at that time,
not misleading. The Authority shall cooperate with the Company in the issuance
and distribution of any such amendment or supplement.
(c) Upon Closing, the Underwriter shall promptly provide a Nationally Recognized
Municipal Securities Information Repository and the Municipal Securities
Rulemaking Board with a copy of the Official Statement for filing in accordance
with Rule 15c2-12, and inform the Authority and the Company in writing as to the
date and place of such filing and the date of the end of the underwriting
period.

 

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Section 11. Conditions of Underwriter’s and Authority’s Obligations. The
Underwriter’s obligations to purchase and pay for the Bonds and the Authority’s
obligation to issue and deliver the Bonds are subject to fulfillment of the
following conditions at or before Closing:
(a) The representations of the Authority and the Company herein, as applicable,
shall be true in all material respects on and as of the date of the Closing and
shall be confirmed by appropriate certificates at Closing.
(b) Neither the Authority nor the Company, as applicable, shall be in default in
the performance of any of their respective covenants herein.
(c) The Underwriter shall have received:
(i) An opinion of Ballard Spahr Andrews & Ingersoll, LLP, Bond Counsel, dated
the date of Closing, substantially in the form attached as Exhibit A hereto,
addressed to (or with reliance letters delivered in respect of) the Authority,
the Trustee, the Company and the Underwriter.
(ii) An opinion of Ballard Spahr Andrews & Ingersoll, LLP, Bond Counsel, dated
the date of Closing, substantially in the form attached as Exhibit B hereto,
addressed to the Underwriter.
(iii) An opinion of McGrory Wentz, LLP, counsel for the Authority, dated the
date of Closing, substantially in the form attached as Exhibit C hereto,
addressed to the Underwriter, the Trustee, the Authority and Bond Counsel.
(iv) Opinions of Dilworth Paxson LLP, counsel to the Company, and the Company’s
Senior Vice President-Law and Administration, dated the date of Closing,
substantially in the forms attached as Exhibit D hereto, addressed to the
Underwriter, the Authority and Bond Counsel.
(v) An agreed upon procedures letter dated the date of the Official Statement
and addressed to the Company and the Underwriter from the Company’s auditor with
respect to financial information set forth in Appendix A and Appendix B to the
Official Statement, in form and substance reasonably satisfactory to the
Company’s auditor and the Underwriter.
(vi) A certificate dated the date of Closing executed by the Chairman and the
Executive Director of the Authority and addressed to the Underwriter to the
effect that, to the best of their respective knowledge:
(A) the representations and warranties of the Authority contained herein are
true and correct in all material respects as of the date of Closing; and
(B) the Authority has complied in all material respects with all agreements
executed by the Authority in connection with issuance of the Bonds and satisfied
in all material respects the Authority’s covenants contained in Section 5 herein
and all of the conditions on its part to be performed or satisfied at or prior
to the Closing.

 

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(vii) A certificate dated the date of Closing executed by the chief financial
officer of the Company and addressed to the Underwriter to the effect that, to
the best of his knowledge:
(A) the representations and warranties of the Company in this Bond Purchase
Agreement are true and correct in all material respects as of the date of
Closing;
(B) the Preliminary Official Statement and the Official Statement, as of their
respective dates, insofar as they relate to the Company, do not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, under the
circumstances in which they were made, not misleading in any respect; and
(C) no event affecting the Company has occurred since the date of this Bond
Purchase Agreement that is required to be disclosed in the Official Statement or
necessary in order to make the statements and information therein not misleading
in any material respect.
(viii) Two executed copies of the Trust Indenture, the Financing Agreement, the
Bond Purchase Agreement, the Forty-second Supplemental Mortgage and the
Continuing Disclosure Agreement and specimen copies of the First Mortgage Bonds.
(ix) Two copies of the Articles of Incorporation and Bylaws of the Company, as
amended to the date of Closing, and of the resolutions of the Board of Directors
of the Company authorizing and approving the execution and delivery of this Bond
Purchase Agreement, the Financing Agreement, the First Mortgage Bonds, the
Forty-second Supplemental Mortgage, the Continuing Disclosure Agreement and the
incurrence of indebtedness with respect thereto and all transactions described
in the Official Statement and contemplated by this Bond Purchase Agreement, all
certified by its Secretary or Assistant Secretary.
(x) Two copies of the Authority Resolution.
(xi) One or more letters from the Company’s auditor, dated the date of the
Preliminary Official Statement and the Official Statement and addressed to the
Company and the Underwriter, consenting to the use of the financial statements
reported upon by such firm and all references to such firm contained in the
Preliminary Official Statement and the Official Statement.
(xii) Evidence satisfactory to the Underwriter of a rating of “AA-” assigned by
Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, and
that such rating is in full force and effect as of the date of Closing.
(xiii) Evidence satisfactory to Bond Counsel and the Underwriter of the receipt
by the Authority of a Preliminary Allocation relating to the Bonds and approval
of the Project from the Pennsylvania Department of Community and Economic
Development and of the registration of a Securities Certificate relating to the
First Mortgage Bonds and the Bonds with the Pennsylvania Public Utility
Commission.

 

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(xiv) Such additional documentation, including, without limitation, legal
opinions, as the Underwriter or its counsel or Bond Counsel may reasonably
request to evidence compliance with applicable law and the validity of the
Bonds, the Financing Agreement, the Trust Indenture, this Bond Purchase
Agreement, the Forty-second Supplemental Mortgage, the First Mortgage Bonds and
the Continuing Disclosure Agreement, and to evidence that the interest on the
Bonds is not includable in gross income under the Code and the status of the
offering under the 1933 Act and the 1939 Act.
(d) At Closing there shall not have been any material adverse change in the
financial condition of the Company or any adverse development concerning the
business or assets of the Company that would result in a material adverse change
in the prospective financial condition or results of operations of the Company
from that described in the Official Statement, which, in the judgment of the
Underwriter, makes it inadvisable to proceed with the sale of the Bonds; and the
Underwriter shall have received certificates of the Company certifying that no
such material adverse change has occurred or, if such a change has occurred,
full information with respect thereto.
(e) The Underwriter shall deliver at Closing a certificate in form acceptable to
Bond Counsel to the effect that the Underwriter has sold to the public
(excluding bond houses and brokers) a substantial amount of the Bonds at initial
offering prices no higher than, or yields no lower than, those shown on the
cover page of the Official Statement and that such certificate may be relied
upon for purposes of determining compliance with Section 148 of the Code.
Section 12. Events Permitting the Underwriter to Terminate. The Underwriter may
terminate its obligation to purchase the Bonds at any time before Closing if any
of the following occurs:
(a) A legislative, executive or regulatory action or proposed action, or a court
decision, which in the reasonable judgment of the Underwriter casts sufficient
doubt on the legality of, or the exclusion from gross income for federal income
tax purposes of interest on, obligations such as the Bonds so as to materially
impair the marketability or materially lower the market price of the Bonds.
(b) Any action by the Securities and Exchange Commission or a court that would
require registration of the Bonds or the First Mortgage Bonds under the 1933 Act
or qualification of the Indenture under the 1939 Act.
(c) Any general suspension of trading in securities on the New York Stock
Exchange or the establishment, by the New York Stock Exchange, by the Securities
and Exchange Commission, by any federal or state agency, or by the decision of
any court, of any limitation on prices for such trading, or any outbreak of new
hostilities or other national or international calamity or crisis, or any
material escalation in any such hostilities, calamity or crisis, the effect of
which on the financial markets of the United States of America shall be such as
to materially impair the marketability or materially lower the market price of
the Bonds.

 

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(d) Any event or condition occurring or arising after the date hereof, which in
the reasonable judgment of the Underwriter renders untrue or incorrect, in any
material respect as of the time to which the same purports to relate, the
information contained in the Official Statement, or which requires that
information not reflected in the Official Statement or Appendices thereto should
be reflected therein in order to make the statements and information contained
therein not misleading in any material respect as of such time; provided that
the Authority, the Company and the Underwriter will use their best efforts to
amend or supplement the Official Statement to reflect, to the reasonable
satisfaction of the Underwriter, such changes in or additions to the information
contained in the Official Statement.
(e) Pending or threatened litigation affecting or arising out of the ownership
of the Facilities or any other facilities of the Company or the issuance of the
Bonds, which, in the reasonable judgment of the Underwriter, would materially
impair the marketability or materially lower the market price of the Bonds.
(f) Quantities of the Official Statement are not delivered to the Underwriter in
a timely manner as required by Section 10 hereof.
(g) The Pennsylvania Public Utility Commission fails to issue and register a
Securities Certificate with respect to the First Mortgage Bonds.
If the Underwriter terminates its obligation to purchase the Bonds because any
of the conditions specified in Section 11 hereof or this Section 12 shall not
have been fulfilled at or before the Closing, such termination shall not result
in any liability on the part of the Authority, the Underwriter or the Company,
except for the obligations of the Company under Sections 6(b), 8, 9 and 14 which
shall remain in full force and effect.
Section 13. Event Permitting the Company to Terminate. The Company may terminate
its obligations hereunder (except for its obligations under Sections 6(b), 8, 9
and 14) in the event prior to Closing, notwithstanding its exercise of diligent
efforts it is unable to obtain from the Commonwealth Public Utility Commission
the issuance and registration of a Securities Certificate with respect to the
First Mortgage Bonds.
Section 14. Expenses. All expenses and costs of the authorization, issuance,
sale and delivery of the Bonds including, without limitation, accrued interest,
the preparation of and furnishing to the Underwriter of the Preliminary Official
Statement and the Official Statement, the preparation and execution of the
Bonds, the Financing Agreement, the Trust Indenture, the First Mortgage Bonds,
the Forty-second Supplemental Mortgage, the Continuing Disclosure Agreement and
this Bond Purchase Agreement, the Insurance Policy premium, rating agency fees,
the issuance and closing fees of the Authority, the fees and disbursements of
counsel to the Authority, the fees and disbursements of Bond Counsel, the fees
and disbursements of counsel to the Underwriter and the expenses incurred in
connection with qualifying the Bonds for sale under the securities laws of
various jurisdictions and preparing a Blue Sky memorandum, if any, shall be paid
by the Company from funds contributed by the Company and from proceeds of the
Bonds. The Authority shall bear no out-of-pocket expense in connection with the
transactions contemplated by this Bond Purchase Agreement. The Underwriter will
pay all other expenses of the Underwriter in connection with the public offering
of the Bonds.

 

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Section 15. Execution in Counterparts. This Bond Purchase Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Bond Purchase Agreement by signing any such counterpart.
Section 16. Notices and Other Actions. All notices, requests, demands and formal
actions hereunder will be in writing mailed, faxed (with confirmation of
receipt) or delivered by nationally recognized, next-day delivery service to:
The Underwriter:
Sovereign Securities Corporation, LLC
Mail Code: 20-210-CPC LLC
1500 Market Street
Centre Square-Concourse
Philadelphia, Pennsylvania 19102
Attention: George C. Werner, III Managing Director
Fax #: (267) 675-0643
Email: gwerner@sovereignbank.com
The Company:
Aqua Pennsylvania, Inc.
762 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010
Attention: Stephen F. Anzaldo, Treasurer
Fax #: (610) 519-0989
Email: sfanzaldo@aquaamerica.com
The Authority:
Montgomery County Industrial Development Authority
Human Services Center
1430 DeKalb Street, 5th Floor
P.O. Box 311
Norristown, PA 19404-0311
Attention: Gerald J. Birkelbach, Executive Director
Fax: (610) 278-5944
Email: gbirkelb@montcopa.org
Section 17. Governing Law. This Bond Purchase Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
excluding those relating to choice of laws or conflict of laws, and may not be
assigned by the Authority, the Company or the Underwriter.

 

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Section 18. Successors. This Bond Purchase Agreement will inure to the benefit
of and be binding upon the parties and their respective successors and, as to
Sections 6, 7, 8 and 9 hereof, the Indemnitees, and will not confer any rights
upon any other person. The term “successor” shall not include any holder of any
Bonds merely by virtue of such holding.
Section 19. Limitations on Liability. No personal recourse shall be had for any
claim based on this Bond Purchase Agreement or the Bonds against any board
member, officer, agent, employee, or attorney past, present or future, of the
Authority or any successor body as such, either directly or through the
Authority or any successor body, under any constitutional provision, statute, or
rule of law or by enforcement of any assessment or penalty or otherwise.
Notwithstanding any provision or obligation to the contrary in this Bond
Purchase Agreement, the liability of the Authority for payments of any kind,
nature or description provided for herein or in any other document executed
pursuant hereto shall be limited to the revenues derived by the Authority from
the Financing Agreement.
(Signatures on next page)

 

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IN WITNESS WHEREOF, the Authority, the Company and the Underwriter have caused
their duly authorized officers to execute and deliver this Bond Purchase
Agreement as of the date first written above.

            MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
      By:   /s/ Sherry Horowitz         SHERRY HOROWITZ, Chairperson           
 

            AQUA PENNSYLVANIA, INC.
      By:   /s/ Stephen F. Anzaldo         STEPHEN F. ANZALDO, Treasurer       
     

            SOVEREIGN SECURITIES CORPORATION, LLC
      By:   /s/ George C. Werner III         GEORGE C. WERNER, III       
Managing Director     

 

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SCHEDULE I
Terms of Bonds
Dated Date: December 20, 2007

                              Principal       Price     Series   Maturity Date  
Amount   Rate of Interest   (to Call Date)   Yield   2007A   July 1, 2042  
$24,830,000   5.25%   100.722   5.16% 2007A   July 1, 2043   $24,830,000   5.25%
  100.641   5.17%

Interest Payment Dates: January 1 and July 1, commencing July 1, 2008
Redemption Provisions: The Bonds are subject to redemption as follows:
Optional Redemption. The Bonds are subject to optional redemption prior to
maturity by the Authority, at the direction of the Company, on and after July 1,
2018, as a whole at any time or in part from time to time, at a redemption price
equal to one hundred percent (100%) of the principal amount thereof, plus
interest accrued to the date fixed for redemption.
Extraordinary Optional Redemption. The Bonds are subject to redemption, at any
time prior to maturity, at the option of the Authority, upon the direction of
the Company, in whole, at a Redemption Price of 100% of the principal amount of
the Bonds to be redeemed, plus interest accrued thereon to the date fixed for
redemption, if any of the following events shall have occurred:
(a) The damage or destruction of all or substantially all of the Facilities to
such extent, that, in the reasonable opinion of the Company, the repair and
restoration thereof would not be economical; or
(b) the taking by condemnation, or the threat thereof, of all or substantially
all of the Facilities or the taking by condemnation of any part, use or control
of the Facilities so as to render them unsatisfactory to the Company for their
intended use; or
(c) in the Company’s reasonable opinion, (1) unreasonable burdens or excessive
liabilities shall have been Imposed upon the Company with respect to the
Facilities or the operation thereof, including, but not limited to, federal,
state or other ad valorem, property, income or other taxes not being imposed on
the date of the Agreement other than ad valorem property taxes presently levied
upon privately owned property used for the same general purposes as the
Facilities, or (2) the continued operation of the Facilities is impractical,
uneconomical or undesirable for any reason.
Any such redemption shall be on any date within 180 days following the
occurrence of one of the events listed above permitting the exercise of the
option.
Special Mandatory Redemption. The Bonds are subject to mandatory redemption, in
part, on the first interest payment date for which notice can be given in
accordance with the Trust Indenture after the Project has been completed and the
certificate of the Company with respect thereto required by the Financing
Agreement has been filed with the Authority and the Trustee, to the extent of
any amounts transferred from the Project Fund to the Debt Service Fund pursuant
to the Trust Indenture, at a Redemption Price of 100% of the principal amount of
the Bonds to be redeemed, plus accrued interest thereon to the date fixed for
redemption.
Selection shall be made and notice given in accordance with the Indenture.

 

 

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EXHIBIT “A”
FORM OF APPROVING OPINION OF
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
Upon delivery of the Bonds, Ballard Spahr Andrews & Ingersoll, LLP,
Philadelphia, Pennsylvania,
Bond Counsel, will issue its approving opinion in substantially the following
form
December 20, 2007

  Re:   
$49,660,000 aggregate principal amount of Montgomery County Industrial
Development Authority Water Facilities Revenue Bonds
(Aqua Pennsylvania, Inc. Project) Series A of 2007

Ladies and Gentlemen:
We have acted as Bond Counsel to the Montgomery County Industrial Development
Authority (the “Authority”) in connection with the issuance and sale of its
$49,660,000 aggregate principal amount of Montgomery County Industrial
Development Authority Water Facilities Revenue Bonds (Aqua Pennsylvania, Inc.
Project) Series A of 2007 (the “Bonds”). The Bonds are being issued by the
Authority at the request of Aqua Pennsylvania, Inc., as successor to
Philadelphia Suburban Water Company (the “Company”), to finance facilities
located in the Pennsylvania Counties of Chester, Delaware and Montgomery (the
“Project Facilities”) for the furnishing of water which is made available on
reasonable demand to members of the general public in portions of the
Pennsylvania Counties of Chester, Delaware and Montgomery.
The Bonds are issuable in fully registered form, and are being issued under the
Trust Indenture dated as of December 1, 2007 (the “Indenture”) between the
Authority and U.S. Bank National Association, as trustee (the “Trustee”). The
Authority and the Company are entering into a Financing Agreement dated as of
December 1, 2007 (the “Financing Agreement”), pursuant to which the Authority
will lend the proceeds of the Bonds to the Company to finance the Project
Facilities.
In satisfaction of its obligation under the Financing Agreement with respect to
the Bonds, the Company, concurrently with the issuance of the Bonds, is
delivering to the Trustee its First Mortgage Bond 5.25% Due 2042 (the “2042
First Mortgage Bond”) and its First Mortgage Bond 5.25% Due 2043 (the “2043
First Mortgage Bond” and, together with the 2042 First Mortgage Bond, the “First
Mortgage Bonds”) in the aggregate principal amount equal to the aggregate
principal amount of the Bonds. The Authority has assigned its interests under
the Financing Agreement with respect to the Bonds, including its right to
receive the First Mortgage Bonds and the payments thereunder, to the Trustee for
the benefit of the holders of the Bonds.
Sections 103 and 141-150 of the Internal Revenue Code of 1986, as amended (the
"Code"), provide generally that interest on certain issues of bonds, the
proceeds of which are to be used to provide facilities for the furnishing of
water within the meaning of Section 142(a) of the Code, will be excludable from
the gross income of the holder thereof. The Code imposes various requirements
pertaining to the use and investment of the proceeds of such bonds, the maturity
of and security for such bonds, the procedure for issuance of such bonds, the
rebate of arbitrage profits to the Internal Revenue Service and filings with the
Internal Revenue Service. We have concluded that the Bonds meet the requirements
of the Code in reliance on representations of the Authority and the Company with
respect to the application of the proceeds of the Bonds, the nature of the
Project Facilities and other matters solely within the knowledge of the
Authority and the Company which we have not independently verified, and have
assumed continuing compliance with the covenants in the Indenture, the Financing
Agreement and the certificates of the Company with respect to the Project
Facilities delivered at closing pertaining to the requirements of those sections
of the Code which affect the exclusion from gross income of interest on the
Bonds for federal income tax purposes. In the event that such representations
are determined to be inaccurate or incomplete or the Authority or the Company
fails to comply with the aforementioned covenants, interest on the Bonds could
become includable in gross income from the date of issuance, regardless of the
date on which the event causing such inclusion occurs.

 

A-1

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In our capacity as Bond Counsel, we have examined such documents, records of the
Authority and other instruments as we deemed necessary to enable us to express
the opinions set forth below, including original counterparts or certified
copies of the Indenture, the Financing Agreement, the First Mortgage Bonds, the
other documents listed in the closing memorandum filed with the Trustee and an
executed Water Facilities Revenue Bond (Aqua Pennsylvania, Inc. Project)
Series A of 2007 as authenticated by the Trustee.
Based on the foregoing, it is our opinion that:
1. The Authority is a public instrumentality of the Commonwealth of Pennsylvania
and a body corporate and politic, organized and existing under Pennsylvania law,
with full power and authority to execute and deliver the Financing Agreement and
the Indenture, and to issue and sell the Bonds.
2. The Financing Agreement and the Indenture have been duly authorized, executed
and delivered by the Authority and constitute legal, valid and binding
obligations of the Authority enforceable against the Authority in accordance
with their respective terms, subject to state and federal laws and equitable
principles affecting the enforcement of creditors’ rights.
3. All right, title and interest of the Authority under the Financing Agreement
as they relate to the Bonds, including the right to receive the First Mortgage
Bonds and the payments thereunder (except for certain rights to indemnification
and to payments in respect of administrative expenses of the Authority), have
been effectively assigned to the Trustee by the Indenture.
4. The issuance and sale of the Bonds have been duly authorized by the
Authority; the Bonds have been duly executed and delivered by the Authority;
and, on the assumption that all Bonds have been authenticated by the Trustee,
the Bonds are legal, valid and binding obligations of the Authority enforceable
against the Authority in accordance with their terms, subject to state and
federal laws and equitable principles affecting the enforcement of creditors’
rights, and are entitled to the benefit and security of the Indenture.
5. Under existing laws as enacted and construed on the date of initial delivery
of the Bonds, interest on the Bonds is excludable from gross income for purposes
of federal income tax, assuming the accuracy of the certifications of the
Authority and the Company and continuing compliance by the Authority and the
Company with the requirements of the Code, except that interest on a Bond is not
excludable while the Bond is held by a substantial user of the Project
Facilities or a related person as provided in the Code. Interest on the Bonds is
a tax preference item that is subject to individual and corporate federal
alternative minimum tax. Interest on Bonds held by foreign corporations may be
subject to the branch profits tax imposed by the Code.

 

A-2

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The Bonds are offered at a premium (“original issue premium”) over their
respective principal amounts. For federal income tax purposes, original issue
premium is amortizable periodically over the term of the Bond through reductions
in the holder’s tax basis for the Bond for determining taxable gain or loss from
the sale or from redemption prior to maturity. Amortizable premium is accounted
for as reducing the tax-exempt interest on the Bond rather than creating a
deductible expense or loss.
Ownership of the Bonds may result in other federal income tax consequences to
certain taxpayers, including, without limitation, financial institutions,
property and casualty insurance companies, individual recipients of social
security or railroad retirement benefits, certain S corporations and taxpayers
who may be deemed to have incurred or continued debt to purchase or carry the
Bonds. We express no opinion as to these matters.
6. Under the existing laws of the Commonwealth of Pennsylvania as enacted and
construed on the date of initial delivery of the Bonds, interest on the Bonds is
exempt from Pennsylvania personal income tax and Pennsylvania corporate net
income tax, and the Bonds are exempt from personal property taxes in
Pennsylvania.
We do not express any opinion herein as to the adequacy or accuracy of the
Official Statement of the Authority pertaining to the offering of the Bonds.
We call your attention to the fact that the Authority’s obligation to make
payments in respect of the Bonds is limited to moneys received from payments to
be made by the Company pursuant to the First Mortgage Bonds and as provided in
the Indenture and that the Bonds do not pledge the credit or taxing power of the
County of Montgomery or the Commonwealth of Pennsylvania or any political
subdivision thereof. The Authority has no taxing power.
Very truly yours,

 

A-3

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EXHIBIT B
FORM OF SUPPLEMENTAL OPINION OF
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
December 20, 2007

  Re:   
$49,660,000 aggregate principal amount of Montgomery County Industrial
Development Authority Water Facilities Revenue Bonds,
(Aqua Pennsylvania, Inc. Project) Series A of 2007

Ladies and Gentlemen:
Reference is made to our opinion as bond counsel identified as Closing Item No.
[E-3(a)] delivered to you concurrently herewith and relating to the
above-referenced Bonds (the “Bonds”). At your request we have undertaken a
review of certain other matters pertaining to the Bonds. All terms are used but
not defined herein shall have the same meanings ascribed to them in the Official
Statement dated December 12, 2007 (the “Official Statement”) prepared in
connection with the public offering of the Bonds.
Based on the review described in our approving opinion of even date herewith, it
is our opinion that:
1. The Bond Purchase Agreement dated December 12, 2007 (the “Bond Purchase
Agreement”), among you, the Company and the Authority relating to the Bonds has
been duly authorized, executed and delivered by the Authority and constitutes
the legal, valid and binding obligation of the Authority enforceable against the
Authority in accordance with its terms, except as enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally and general principles of equity.
2. It is not necessary in connection with the offering and sale of the Bonds to
register the Bonds under the Securities Act of 1933, as amended, or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended.
3. The information in the Official Statement under the captions “INTRODUCTORY
STATEMENT - Description of the Bonds” and “- Security for the Bonds,” “THE
BONDS” (other than the information under the sub-caption “Book-Entry Only
System,” as to which we express no view) and “SECURITY FOR THE BONDS” (other
than the information under the sub-captions “The Mortgage” and “Additional
Parity Indebtedness” as to which we express no view) and the information set
forth in Appendix C to the Official Statement (other than information under the
heading “THE FIRST MORTGAGE BONDS AND THE MORTGAGE” as to which we express no
view), insofar as such information purports to summarize provisions of the
Bonds, the Indenture and the Agreement, fairly and accurately summarize such
information in all material respects. The information in the Official Statement
under the caption “TAX MATTERS” and the related information set forth on the
outside front cover of the Official Statement accurately reflect our firm’s
opinion with respect to the matters discussed therein in all material respects.

 

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This letter is furnished by us solely for your benefit in connection with the
provisions of the Bond Purchase Agreement and may not be relied upon by any
other persons for any purpose without our express written permission.
Very truly yours,

 

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EXHIBIT C
FORM OF OPINION OF COUNSEL FOR THE AUTHORITY
December 20, 2007

     
Montgomery County Industrial Development Authority
  U.S. Bank National Association, as Trustee
1430 DeKalb Street, 5th Floor
  2 Liberty Place, Suite 2000
P.O. Box 311
  50 So. 16th Street
Norristown, PA 19404-0311
  Philadelphia, Pennsylvania 19102
 
   
Sovereign Securities Corporation, LLC
  Ballard Spahr Andrews & Ingersoll, LLP
1500 Market Street
  Mellon Bank Center
Centre Square — Concourse
  1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19102
  Philadelphia, PA 19103

  Re:   
$49,660,000 aggregate principal amount of Montgomery County Industrial
Development Authority Water Facilities Revenue Bonds,
(Aqua Pennsylvania, Inc. Project) Series A of 2007

Ladies and Gentlemen:
I have acted as counsel to the Montgomery County Industrial Development
Authority (“Authority”) in connection with the authorization, execution and
issuance by the Authority of the captioned Bonds (“Bonds”). This opinion is
being rendered pursuant to Section 11(c)(iii) of the Bond Purchase Agreement,
dated December 12, 2007 (the “Bond Purchase Agreement”) by and among Sovereign
Securities Corporation, LLC (“Underwriter”), Aqua Pennsylvania, Inc.
(“Borrower”) and the Authority. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Bond Purchase Agreement.
As the basis for this opinion, I have examined the Pennsylvania Economic
Development Financing Law, 73 P.S. §§ 371 et seq., as amended (“Act”); the
Resolution of the Authority relating to the Bonds adopted on October 11, 2007 (
the “Resolution”), and such other documents, certificates and records of the
Authority and other instruments and matters of law as I have deemed necessary to
enable me to express the opinion set forth below, including, without limitation,
original counterparts or certified copies of the Trust Indenture, dated as of
December 1, 2007 (“Indenture”), between the Authority and U.S. Bank National
Association, as trustee (“Trustee”), the Financing Agreement, dated as of
December 1, 2007 (“Financing Agreement”), between the Authority and the
Borrower) and the Bond Purchase Agreement. The Indenture, the Financing
Agreement and the Bond Purchase Agreement are collectively referred to herein as
the “Authority Documents”.
I have assumed and relied upon the truth, completeness, authority and accuracy
of all documents, certificates and instruments examined and the authenticity of
all signatures thereon other than those of the Authority.

 

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I have also assumed that each of the documents referred to herein are, where
appropriate, duly authorized and executed by and valid and legally binding
obligations of, and enforceable in accordance with their terms against all
parties thereto other than the Authority and that the actions required to be
taken or consents required to be obtained by such parties have been taken and
obtained. In rendering this opinion, I have also assumed that such parties have
acted in full compliance with the terms of all applicable laws, regulations and
orders.
As to questions of fact material to this opinion, I have relied upon
certificates and representations of officers and representatives of the
Authority or of other public officials, without independent investigation.
I have not made any independent investigation in rendering this opinion other
than the examination described above. My opinion is therefore qualified in all
respects by the scope of that examination.
My opinions are specifically limited to the present internal laws of the
Commonwealth of Pennsylvania (“Commonwealth”) and present federal law and no
opinion is expressed as to the effect the laws of any other jurisdiction may
have upon the subject matter of the opinions expressed herein under conflict of
laws principles or otherwise.
Based upon the foregoing, and subject to the limitations, assumptions,
qualifications and exceptions set forth herein, I am of the opinion that:
1. The Authority is a body corporate and politic constituting an instrumentality
of the Commonwealth and is duly created and presently existing pursuant to the
Act.
2. The Authority has duly authorized the execution and issuance of the Bonds and
the execution and delivery of the Authority Documents. The Bonds have been duly
and validly executed and delivered by the Authority and the Authority Documents
have each been duly and validly executed and delivered by the Authority and the
Bonds and each of the Authority Documents are valid and binding agreements of
the Authority, enforceable against the Authority in accordance with their
respective terms.
3. The execution and the issuance by the Authority of the Bonds, the execution
and delivery by the Authority of the Authority Documents and performance by the
Authority of the Authority’s obligations under the Bonds and the Authority
Documents, do not conflict with or constitute on the part of the Authority a
violation of, breach of or default under any existing constitutional provision
or statute of the Commonwealth applicable to the Authority, or, to my knowledge
without having undertaken any independent investigation, any indenture,
mortgage, deed of trust, resolution, note agreement or other agreement or
instrument to which the Authority is a party or by which the Authority is bound
and which is known to me, or, to my knowledge, without having undertaken any
independent investigation, any order, rule or regulation of any court,
governmental agency or body of the Commonwealth having jurisdiction over the
Authority or any of its activities or property.
4. To my knowledge, without having undertaken any independent investigation,
there is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board or body, pending or threatened
against the Authority, wherein an unfavorable decision, ruling or order would
materially and adversely affect the obligations of the Authority under the
Bonds.

 

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5. The Resolution has been duly adopted by the Authority in compliance with the
Pennsylvania Sunshine Act of October 15, 1998, P.L. 729, No. 93 (65 P.S. § 701
et seq.). The Authority has obtained the approval of the Commonwealth Department
of Community and Economic Development for the issuance of the Bonds, and to my
actual knowledge, such approval is in full force and effect.
6. The Authority has approved the distribution of the Preliminary Official
Statement dated December 3, 2007 and the Official Statement dated December 12,
2007 (“Official Statement”) by the Underwriter in connection with the offering
of the Bonds.
7. The information contained in the Official Statement under the headings
“INTRODUCTORY STATEMENT — The Authority,” “THE AUTHORITY” and “ABSENCE OF
MATERIAL LITIGATION” (solely insofar as the information set forth therein
relates to the Authority) has been reviewed by me and nothing has come to my
attention which would lead me to believe that such information contains any
untrue statement of a material fact or omits to state a material fact which is
required to be stated therein or which is necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading in any material respect.
The opinions expressed herein are subject in all respects to the following
qualifications: (a) no opinion is rendered as to the availability of equitable
remedies including, but not limited to, specific performance and injunctive
relief, whether enforceability is considered in a proceeding in equity or at
law; (b) no opinion is rendered as to the effect of bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium and other similar laws or legal
principles affecting creditors’ rights or remedies; (c) no opinion is rendered
as to the creation, perfection or priority of any lien or security interest;
(d) no opinion is rendered with respect to any “blue sky” or other securities
laws of the Commonwealth or of other jurisdictions; and (e) no opinion is
rendered with regard to any federal income tax law or regulation or any state
tax law or regulation of the Commonwealth or of other jurisdictions.
No opinion is expressed as to the validity or enforceability of any provisions
of the Authority Documents: (a) allowing any person or entity to institute
judicial or non judicial proceedings or to exercise any other rights, without
notice to the person or entity against whom enforcement is sought; (b) waiving
any right or defense of any person or entity; (c) providing or implying the
availability of self-help in any particular event or circumstances; (d) relating
to court costs or legal fees which may be properly chargeable or recoverable in
any judicial proceedings; and (e) relating to indemnification.
i call your attention to the fact that the Bonds are special and limited
obligations of the Authority, payable solely from the payments derived by the
Authority under the Financing Agreement. The Bonds are not obligations or
liabilities of the Commonwealth or the County of Montgomery, Pennsylvania or any
other political subdivision thereof nor do the Bonds pledge the credit of the
Commonwealth or the County of Montgomery, Pennsylvania or any other political
subdivision thereof nor do the Bonds pledge the credit of the Authority (other
than to the limited extent described above). The Authority has no taxing power.

 

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This opinion is given as of the date hereof. No opinion is expressed as to any
matter not set forth in the numbered paragraphs herein. I make no undertaking to
supplement this opinion if facts or circumstances hereafter come to my attention
or changes in law occur after the date hereof. This opinion is rendered solely
in connection with the original delivery and payment for the Bonds on the date
hereof, and may not be relied upon for any other purpose. This opinion may not
be relied upon by any other person, including any purchaser of the Bonds from
the Underwriter or otherwise or for any other purpose, nor may this opinion be
distributed, quoted or disclosed to any person, firm or entity without my prior
written consent in each instance.

     
 
  Very truly yours,
 
   
 
  FREDERIC M. WENTZ

 

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EXHIBIT D
FORM OF OPINIONS OF THE COMPANY’S LEGAL COUNSEL AND THE
COMPANY’S SENIOR VICE PRESIDENT — LAW AND ADMINISTRATION
December 20, 2007
Montgomery County Industrial Development Authority
1430 DeKalb Street, 5th Floor
P.O. Box 311
Norristown, PA 19404-0311
Sovereign Securities Corporation, LLC
1500 Market Street
Philadelphia, PA 19102
Ballard Spahr Andrews & Ingersoll
Mellon Bank Center, 32nd Floor
1735 Market Street
Philadelphia, PA 19103

  Re:   
$49,660,000 aggregate principal amount of Montgomery County Industrial
Development Authority Water Facilities Revenue Bonds
(Aqua Pennsylvania. Inc. Project) Series A of 2007

Ladies and Gentlemen:
We have acted as counsel to Aqua Pennsylvania, Inc. (the “Company”) in
connection with (i) the issuance by Montgomery County Industrial Development
Authority (the “Authority”), and the sale to Sovereign Securities Corporation,
LLC pursuant to that certain Bond Purchase Agreement dated December 12, 2007
(the “Purchase Agreement”), of $49,660,000 aggregate principal amount of
Montgomery County Industrial Development Authority Water Facilities Revenue
Bonds (Aqua Pennsylvania, Inc.), Series A of 2007 (the “Authority Bonds”), and
(ii) the issuance and delivery of the Company’s First Mortgage Bond, 5.25%
Series due 2042 in the principal amount of $24,830,000 (the “2042 First Mortgage
Bond”); and its First Mortgage Bond, 5.25% Series due 2043 in the principal
amount of $24,830,000 (the “2043 First Mortgage Bond” and along with the 2042
First Mortgage Bond collectively, the “First Mortgage Bonds”), issued under an
Indenture of Mortgage (the “Original Mortgage”) dated as of January 1, 1941, as
amended and supplemented by supplemental indentures thereto, including the
Forty-second Supplemental Indenture dated as of December 1, 2007 (the
“Forty-second Supplemental Indenture”) under which The Bank of New York Trust
Company, N.A. is successor trustee (the “Mortgage Trustee”). The original
Mortgage as amended and supplemented is hereinafter called the “Mortgage”.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Purchase Agreement.

 

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We have examined and reviewed, among other things:
(a) a copy of the Articles of Incorporation of the Company, as amended and
restated and now in effect;
(b) a copy of the bylaws of the Company as now in effect;
(c) resolutions of the Board of Directors of the Company authorizing the
execution and delivery of the Purchase Agreement, the Financing Agreement, the
Forty-second Supplemental Indenture, the First Mortgage Bonds, the Continuing
Disclosure Agreement and the Official Statement;
(d) the Purchase Agreement;
(e) the Financing Agreement dated as of December 1, 2007 (the “Financing
Agreement”) between the Authority and the Company;
(f) the Continuing Disclosure Agreement dated as of December 1, 2007 (the
“Continuing Disclosure Agreement”) between the Company and U.S. Bank National
Association, as trustee for the Authority Bonds (the “Trustee”);
(g) the Official Statement relating to the Authority Bonds dated December 12,
2007 (the “Official Statement”);
(h) the Securities Certificate relating to the issue and sale of the First
Mortgage Bonds, filed by the Company with the Pennsylvania Public Utility
Commission pursuant to the provisions of Chapter 19 of the Pennsylvania Public
Utility Code, and a copy of the Order of the Public Utility Commission
registering such Securities Certificate, certified by the Secretary of the
Pennsylvania Public Utility Commission;
(i) a Subsistence Certificate from the Secretary of the Commonwealth with
respect to the Company;
(j) executed counterparts of the Original Mortgage and of the Forty-second
Supplemental Indenture supplemental thereto and evidence satisfactory to us of
the due recordation thereof in the Counties of Adams, Berks, Bradford, Bucks,
Carbon, Chester, Columbia, Crawford. Cumberland, Delaware, Forest, Juniata,
Lackawanna, Lawrence, Lehigh, Luzerne, Mercer, Monroe, Montgomery, Northampton,
Northumberland, Pike, Schuylkill, Snyder, Susquehanna, Wayne and Wyoming,
Pennsylvania;
(k) the documents delivered to the Mortgage Trustee in connection with the
authentication of the First Mortgage Bonds pursuant to the provisions of
Sections 2(B} and 3 of Article TV of the Original Mortgage;
(l) the First Mortgage Bonds delivered to the Trustee at the Closing held today;
(m) the certificates of the Company and other documents delivered to the
Mortgage Trustee at the Closing;

 

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(n) a certificate of the Company and various bringdown title searches of various
title companies in the Counties of Adams, Berks, Bradford, Bucks, Carbon,
Chester, Columbia, Crawford, Cumberland, Delaware, Forest, Juniata, Lackawanna,
Lawrence, Lehigh, Luzerne, Mercer, Monroe, Montgomery, Northampton,
Northumberland, Pike, Schuylkill, Snyder, Susquehanna, Wayne and Wyoming,
Pennsylvania, each dated as of a recent date (collectively, “Title Searches”),
as to matters relating to title to real estate and the lien of the Mortgage
thereon, on which certificate and searches we are relying for the purposes of
this opinion; and
(o) various certificates of officers of the Company relating to title to real
property and the priority of any lien thereon.
In rendering this opinion, we have assumed that all signatures on documents and
instruments examined by us are genuine (except signatures of the Company on the
Purchase Agreement, the Forty-second Supplemental Indenture, the Financing
Agreement, the First Mortgage Bonds and the Continuing Disclosure Agreement
(collectively, the “Company Documents”) and the Official Statement), the
authenticity of all documents submitted to us as originals and the conformity
with the original documents of all documents submitted to us as copies. We have
also assumed, with your permission, that none of the signatories of the
documents and instruments referred to above is an affiliate of the Company
within the meaning of 66 Pa.C.S. §2101 (1989).
As to questions of fact material to the opinions hereinafter expressed, we have
relied solely and without investigation upon certificates of public officials,
certificates of officers of the Company and the representations of the Company
contained in the Company Documents (including the exhibits and schedules to such
documents) and the certificates and other documents delivered pursuant thereto.
To the extent that the opinions contained herein are given to our knowledge,
such knowledge means the actual knowledge of those attorneys within our firm who
have provided substantive representation to the Company in connection with this
financing, without investigation and inquiry, and does not include matters of
which such attorneys could be deemed to have constructive knowledge.
In rendering this opinion, we have also assumed that each of the Company
Documents has been duly authorized, executed and delivered by each party thereto
(other than the Company) and that each of the Company Documents is binding and
enforceable against each such party in accordance with its respective terms.
Further, as to matters relating to title to real estate and the lien of the
Mortgage, we have relied exclusively upon various certificates of officers of
the Company and the Title Searches and we have not made, nor undertaken to make,
any investigation or inquiry with respect to title to real property or the
priority of any lien thereon.
We are generally familiar with the Company’s operations as a public utility
within the Commonwealth of Pennsylvania (the “Commonwealth”).
Based upon the foregoing and such other examination of fact and law as we have
deemed necessary for purposes of this opinion, we are of the opinion that:
1. The Company was organized and subsists under the laws of the Commonwealth,
with the corporate power to own its properties and conduct its business as
described in the Official Statement.

 

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2. The Company has the corporate power and authority to enter into and perform
the Purchase Agreement, the Financing Agreement, the First Mortgage Bonds, the
Forty-second Supplemental Indenture and the Continuing Disclosure Agreement. The
execution, delivery and performance by the Company of the Financing Agreement,
the Bond Purchase Agreement, the First Mortgage Bonds, the Forty-second
Supplemental Indenture and the Continuing Disclosure Agreement have been duly
authorized by all requisite corporate action.
3. The Purchase Agreement, the Financing Agreement and the Continuing Disclosure
Agreement constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
4. The First Mortgage Bonds have been duly authorized, executed, authenticated,
issued and delivered and each constitutes a valid and legally binding obligation
of the Company entitled to the benefits provided by the Mortgage.
5. The First Mortgage Bonds are not subject to the registration requirements of
the 1933 Act.
6. The Mortgage constitutes a direct, valid and enforceable mortgage lien
(except as enforceability of such lien may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors’ rights)
upon all of the properties and assets of the Company (not heretofore released as
provided for in the Mortgage) specifically or generally described or referred to
in the Mortgage as being subject to the lien thereof, [except for permitted
liens under the Mortgage]; the Original Mortgage, either separately or as an
exhibit to (a) the Thirty-Fifth Supplemental Indenture dated as of January 1,
2002, (b) the Thirty-Eighth Supplemental Indenture dated as of November 15,
2004, or (c) the Forty-first Supplemental Indenture dated as of January 1, 2007,
and the Forty-second Supplemental Indenture dated as of December 1, 2007, has
been properly recorded in the Counties of Adams, Berks, Bradford, Bucks, Carbon,
Chester, Columbia, Crawford, Cumberland, Delaware, Forest, Juniata, Lackawanna,
Lawrence, Lehigh, Luzerne, Mercer, Monroe, Montgomery, Northampton,
Northumberland, Pike, Schuylkill, Snyder, Susquehanna, Wayne and Wyoming in the
Commonwealth and such recordations are the only recordations necessary in order
to establish, preserve, protect and perfect the lien of the Mortgage on all real
estate and fixed property of the Company (excluding easement and other similar
nights) described in the Mortgage as subject to the lien thereof.
7. With such exceptions as are not material and do not interfere with the
conduct of the business of the Company, the Company has good and marketable
title to all of its real property currently held in fee simple; good and
marketable title to all of its other interests in real property (other than to
certain rights of way, easements, occupancy rights, riparian and flowage rights,
licenses, leaseholds, and real property interests of a similar nature); and good
and marketable title to all personal property owned by it; in each case free and
clear of all liens, encumbrances and defects except such as may be described in
the Official Statement, the lien of the Mortgage, permitted liens under the
Mortgage or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
8. The Company is not a holding company, a registered holding company or an
affiliate of a registered holding company within the meaning of the Public
Utility Company Holding Act of 1935, as amended.

 

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9. The Mortgage and the First Mortgage Bonds conform in all material respects as
to legal matters to the descriptions thereof in the Official Statement.
Without having undertaken to determine independently the accuracy, completeness
and fairness of the statements contained in the Official Statement, nothing has
come to our attention in connection with our representation of the Company in
respect of the issuance of the First Mortgage Bonds which leads us to believe
that the information with respect to the Company contained in the Official
Statement (including Appendix A and the information incorporated therein by
reference) contains any untrue statement of a material fact or omits to state a
material fact which is required to be stated therein or which is necessary to
make such information and descriptions, in the light of the circumstances under
which they were made, not misleading in any material respect.
The foregoing opinions are subject to the following qualifications:
(i) The opinions expressed in paragraphs 3 and 4 are subject to the
qualifications that the enforceability of the First Mortgage Bonds are subject
to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other
similar laws of general application relating to or affecting creditors’ rights,
(ii) certain provisions of Pennsylvania law affecting the availability of
certain remedies, and (iii) the further qualification that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to the discretion of the court before which any proceeding therefor maybe
brought.
(ii) Our opinions are subject to limitations imposed by general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is considered in proceedings at law
or in equity).
(iii) We express no opinion as to the enforceability with respect to any
provisions purporting to waive the effect of applicable laws and remedies and
any provisions releasing any party from, or requiring indemnification for,
liability for gross negligence, recklessness or willful misconduct.
(iv) Any requirements in any of the documents specifying that provisions of a
document may only be waived in writing may not be enforced to the extent that an
oral agreement or an implied agreement by trade practice or course of conduct
has been created modifying any provision of such document.
(v) We express no opinion as to the applicability to the transactions
contemplated by the Company Documents of Section 548 of the Bankruptcy Code or
any applicable state law relating to fraudulent transfers and obligations.
(vi) Other applicable local, state and federal laws, regulations and ordinances,
court decisions and constitutional requirements may limit or render
unenforceable certain of the rights or remedies contained in the Company
Documents, but in our opinion, none of the same would materially impair the
practical realization of the benefits intended to be provided by the Company
pursuant to the Company Documents.
(vii) Our opinion is limited in all respects to the laws of the Commonwealth in
effect as of the date hereof and we express no opinion as to the laws of any
other jurisdiction.

 

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(viii) This opinion is limited to the matters set forth herein, no opinion may
be inferred or implied beyond the matters expressly stated herein, and our
statements contained in the opinion portion of this letter must be read in
conjunction with the assumptions, limitations, exceptions and qualifications set
forth in this letter.
(ix) The opinions herein are expressed as of the date hereof only and not as of
some future date. We undertake no responsibility to advise you of any change in
law or new laws, regulations or judicial decisions in the future. Nor do we
assume any obligation to update or supplement this opinion to reflect any facts
or circumstances which may hereafter come to our attention. References to
“laws,” “regulations” and “judicial decisions” herein shall include only
officially published laws and regulations of the Commonwealth of Pennsylvania.
This opinion is solely for the benefit of each of you and the benefit of any
subsequent holder of the First Mortgage Bonds or the Authority Bonds and may not
be relied upon by any other person or for any other purpose.
Very truly yours,

 

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[Letterhead of Aqua Pennsylvania]
December 20, 2007
Montgomery County Industrial Development Authority
1430 DeKalb Street, 5th Floor
P.O. Box 311
Norristown, PA 19404-0311
Sovereign Securities Corporation, LLC
1500 Market Street
Philadelphia, PA 19102
Ballard Spahr Andrews & Ingersoll
Mellon Bank Center, 32nd Floor
1735 Market Street
Philadelphia, PA 19103

  Re:   
$49,660,000 aggregate principal amount of
Montgomery County Industrial Development Authority Water Facilities Revenue
Bonds
(Aqua Pennsylvania, Inc. Project) Series A of 2007

Ladies and Gentlemen:
I am Senior Vice President-Law and Administration for Aqua Pennsylvania, Inc.
(the “Company”).
Pursuant to Section 11(c)(iv) of the Bond Purchase Agreement dated December 12,
2007 (the “Purchase Agreement”) among the Authority, the Underwriter and the
Company (fka Pennsylvania Suburban Water Company, as successor by merger to
Philadelphia Suburban Water Company) relating to the Authority Bonds, I have
been asked to render an opinion to you regarding certain matters involving the
Company. Capitalized terms used herein and not otherwise defined shall have the
definitions ascribed to such terms in the Purchase Agreement.
In rendering this opinion, I have assumed the following:
(i) the genuineness of all signatures (other than the signatures of the Company
on the Forty-second Supplemental Mortgage, as hereinafter defined);
(ii) the authenticity and completeness of all documents submitted to me as
originals;
(iii) the conformity to original documents of all documents submitted to me as
copies, and the authenticity of the originals of such copies;
(iv) the entity executing the Mortgage as trustee is duly organized and validly
existing, in good standing under the laws of the jurisdiction of its
organization, is properly qualified to do business in all jurisdictions in which
the business conducted by it makes such qualification necessary and has all
necessary legal and corporate power and authority to enter into and perform its
obligations under the Mortgage;

 

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(v) the due authorization, execution and delivery of the Mortgage by or on
behalf of the party thereto other than the Company;
(vi) the enforceability against each party thereto (other than the Company) of
the Mortgage in accordance with its respective terms; and
(vii) that the execution, delivery and performance of the Mortgage by the entity
other than the Company which is party thereto does not and will not conflict
with, result in any breach of, or constitute a default under any order, writ,
injunction or decree of any court or governmental authority, or any agreement,
indenture or other instrument, to which any such party is a party or by which it
or its properties are bound, and that all necessary approvals, consents,
permits, registrations, filings or other notices to or grants of authority from
any federal or local governmental body necessary for the execution, delivery and
performance of the Mortgage by each party thereto (other than the Company) have
been duly received or made, with all appeal periods expired and no appeals
taken.
I am making each of the foregoing assumptions with your permission and with the
disclaimer that we make no representation as to the accuracy of such
assumptions, although I have no knowledge that any such assumption is untrue.
In my opinion:
1. With such exceptions as are not material and do not materially interfere with
the conduct of the business of the Company: (a) the Company has all licenses,
franchises, permits, authorizations, rights, approvals, consents and order of
all governmental authorities or agencies necessary for the ownership or lease of
the properties owned or leased by it and for the operation of the business
carried on by it as described in the Official Statement, and ail water rights,
riparian rights, easements, rights of way and other similar interests and rights
described or referred to in the Mortgage necessary for the operation of the
business carried on by it as described in the Official Statement; (b) except as
otherwise set forth in the Official Statement, all such licenses, franchises,
permits, orders, authorizations, rights, approvals and consents are in full
force and effect; (c) to the best of my knowledge, except as otherwise set forth
in the Official Statement, there are no legal or governmental proceedings
pending or, to my knowledge, threatened that would result in a material
modification, suspension or revocation thereof; and (d) the Company has the
legal power to exercise the rights of eminent domain for the purposes of
conducting its water utility operations.
2. The issue and sale of the Bonds; the issue and delivery of the First Mortgage
Bonds and the compliance by the Company with all of the applicable provisions of
the First Mortgage Bonds and the Mortgage; and the execution, delivery and
performance by the Company of the Forty-second Supplemental Mortgage, the
Financing Agreement, the Purchase Agreement and the Continuing Disclosure
Agreement will not materially conflict with or result in a material breach of
any of the terms or provisions of, or constitute a material default under, or
result in the creation or imposition of any material lien, charge or encumbrance
(other than the lien of the Mortgage) upon any of the property or assets of the
Company pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject, nor will such action result in a violation of the provisions
of the Articles of Incorporation, as amended, or the Bylaws of the Company or
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its property. No consent,
approval, authorization, order, registration or qualification of or with any
court or any such regulatory authority or other governmental body not already
obtained is required for the issue and delivery of the First Mortgage Bonds, the
execution, delivery and performance of the Purchase Agreement, the Financing
Agreement, the Forty-second Supplemental Mortgage, the First Mortgage Bonds, and
the Continuing Disclosure Agreement, or the consummation of the other
transactions contemplated by the Purchase Agreement or the Mortgage.

 

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3. There are no legal or governmental proceedings pending to which the Company
is a party or of which any property of the Company is the subject, other than as
set forth in the Official Statement and other than litigation incident to the
kind of business conducted by the Company, wherein an unfavorable ruling,
decision or finding is likely that would have a material adverse effect on the
financial position, stockholders’ equity or results of operations of the
Company.
4. Each of the Indenture of Mortgage dated as of January 1, 1941 (the “Original
Mortgage”), between the Company and The Philadelphia Company for Insurance on
Lives and Exacting Annuities (now The Bank of New York Trust Company, N.A., as
successor in interest), as trustee (the “Trustee”) and the forty-one indentures
supplemental thereto, including the Forty-second Supplemental Indenture dated as
of December 1, 2007 between the Company and the Trustee (the Original Mortgage
as so supplemented and amended, the “Mortgage”) was duly authorized, executed
and delivered by the Company and the Mortgage constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws relating to
creditors’ rights generally from time to time in effect, and subject, as to
enforceability, to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law).
The foregoing opinions are subject to the following qualifications:
(i) The enforceability of the Mortgage, including, without limitation, any non
judicial and self-help remedies and waivers contained therein, may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the rights of creditors generally and are subject
to limitations imposed by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is considered in proceedings at law or in equity), public policy and
applicable law which may limit the availability of the remedies provided for
therein,
(ii) I express no opinion as to the adequacy of any notice with respect to the
disposition of any collateral. I also express no opinion as to the effectiveness
or enforceability of provisions relating to waivers of notice or waivers of
other rights, severability, prepayment fees or penalties, choice of law, or any
provisions which release or limit the Company’s liability or relate to
cumulative remedies or, to the extent they purport to or would have the effect
of compensating the Company in amounts in excess of any actual loss suffered by
the Company, provisions relating to the payment of a default rate of interest.
(iii) I express no opinion as to enforceability with respect to any provisions
in the Mortgage executed by the Company purporting to waive the effect of
applicable laws and remedies and any provisions releasing any party from, or
requiring indemnification for, liability for gross negligence, recklessness or
willful misconduct.

 

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(iv) Requirements in the Mortgage specifying that provisions of the Mortgage may
only be waived in writing may not be enforced to the extent that an oral
agreement or an implied agreement by trade practice or course of conduct has
been created modifying any provision of such Mortgage.
(v) My opinion is limited in all respects to laws of the Commonwealth of
Pennsylvania in effect as of the date hereof and we express no opinion as to the
laws of any other jurisdiction.
(vi) This opinion is limited to the matters set forth herein, no opinion may be
inferred or implied beyond the matters expressly stated herein, and our
statements contained in the opinion portion of this letter must be read in
conjunction with the assumptions, limitations, exceptions and qualifications set
forth in this letter.
(vii) The opinions herein are expressed as of the date hereof only and not as of
some future date. I undertake no responsibility to advise you of any change in
law or new laws, regulations or judicial decisions in the future nor do I assume
any obligation to update or supplement this opinion to reflect any facts or
circumstances which may hereafter come to our attention. References to “laws,”
“regulations” and “judicial decisions” herein shall include only officially
published laws and regulations of the Commonwealth of Pennsylvania.
This opinion is solely for your benefit and may not be relied upon by any other
person or for any other purpose.

     
 
  Very truly yours,
 
   
 
  Roy H. Stahl

 

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