Document:

Exhibit 10.42

Exhibit 10.42

AQUA AMERICA, INC.

2009 OMNIBUS EQUITY COMPENSATION PLAN

As Amended as of February 25, 2011

 

 

 

AQUA AMERICA, INC.

2009 OMNIBUS EQUITY COMPENSATION PLAN

The purpose of the Aqua America, Inc. 2009 Omnibus Equity Compensation Plan (the
“Plan”) is to provide (i) designated employees of Aqua America, Inc. (the
“Company”) and its subsidiaries, (ii) certain consultants and advisors who perform services
for the Company or its subsidiaries, and (iii) non-employee members of the Board of Directors of
the Company with the opportunity to receive grants of incentive stock options, nonqualified stock
options, stock appreciation rights, stock awards, stock units and other stock-based awards. The
Company believes that the Plan will encourage the participants to contribute to the success of the
Company, align the economic interests of the participants with those of the shareholders, and
provide a means through which the Company can attract and retain officers, other key employees,
non-employee directors and key consultants of significant talent and abilities for the benefit of
our shareholders and customers. The Plan shall be effective as of May 8, 2009, subject to approval
by the shareholders of the Company. The Plan was amended as of February 25, 2011.

Section 1. Definitions

The following terms shall have the meanings set forth below for purposes of the Plan:

(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

(b) A Person shall be deemed a “Beneficial Owner” of any securities:

(i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly,
has the right to acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or
upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the “Beneficial Owner” of securities
tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s
Affiliates or Associates until such tendered securities are accepted for payment, purchase or
exchange;

(ii) that such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including
without limitation pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of any
security under this clause (ii) as a result of an oral or written agreement, arrangement or
understanding to vote such security if such agreement, arrangement or understanding (A) arises
solely from a revocable proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

 

 

 

(iii) that are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or
Associates) has any agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the
proviso to clause (ii) above) or disposing of any voting securities of the Company; provided,
however, that nothing in this subsection (b) shall cause a Person engaged in business as an
underwriter of securities to be the “Beneficial Owner” of any securities acquired through
such Person’s participation in good faith in a firm commitment underwriting until the expiration of
forty days after the date of such acquisition.

(c) “Board” shall mean the Board of Directors of the Company.

(d) “Cause” shall mean, except to the extent specified otherwise by the Committee, a
finding by the Committee that the Grantee (i) has breached his or her employment or service
contract with the Employer, (ii) has engaged in disloyalty to the Employer, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty, (iii) has
disclosed trade secrets or confidential information of the Employer to persons not entitled to
receive such information, (iv) has breached any written non-competition, non-solicitation or
confidentiality agreement between the Grantee and the Employer or (v) has engaged in such other
behavior detrimental to the interests of the Employer as the Committee determines.

(e) “Change in Control” shall be deemed to have occurred if:

(i) any Person, together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the Company Stock then outstanding;

(ii) during any twenty-four month period, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election by the Company’s shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by a vote of at least
seventy-five percent of the directors in office at the time of such election or nomination who were
directors at the beginning of such period; or

(iii) there occurs a sale of 50% or more of the aggregate assets or earning power of the
Company and its subsidiaries, or its liquidation is approved by a majority of its shareholders or
the Company is merged into or is merged with an unrelated entity such that following the merger,
the shareholders of the Company no longer own more than 50% of the resultant entity.

 

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Notwithstanding anything in this subsection (e) to the contrary, a Change in Control shall not be
deemed to have taken place under clause (e)(i) above if (A) such Person becomes the Beneficial
Owner in the aggregate of 20% or more of the Company Stock then outstanding as a result, in the
determination of a majority of those members of the Board in office prior to the acquisition,
of an inadvertent acquisition by such Person if such Person, as soon as practicable, divests itself
of a sufficient amount of its Company Stock so that it no longer owns 20% or more of the Company
Stock then outstanding, or (B) such Person becomes the Beneficial Owner in the aggregate of 20% or
more of the Company Stock outstanding as a result of an acquisition of Company Stock by the Company
which, by reducing the number of Company Stock outstanding, increases the proportionate number of
shares of Company Stock beneficially owned by such Person to 20% or more of the shares of Company
Stock then outstanding; provided, however that if a Person shall become the Beneficial Owner of 20%
or more of the shares of Company Stock then outstanding by reason of Company Stock purchased by the
Company and shall, after such share purchases by the Company become the Beneficial Owner of any
additional shares of Company Stock, then the exemption set forth in this clause shall be
inapplicable.

(f) “Code” shall mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.

(g) “Committee” shall mean the committee, consisting of members of the Board,
designated by the Board to administer the Plan.

(h) “Company” shall mean Aqua America, Inc. and shall include its successors.

(i) “Company Stock” shall mean common stock of the Company.

(j) “Disability” or “Disabled” shall mean a Grantee’s becoming disabled within
the meaning of section 22(e)(3) of the Code, within the meaning of the Employer’s long-term
disability plan applicable to the Grantee or as otherwise determined by the Committee.

(k) “Dividend” shall mean a dividend paid on shares of Company Stock. If interest is
credited on accumulated dividends, the term “Dividend” shall include the accrued interest.

(l) “Dividend Equivalent” shall mean a dividend payable on a hypothetical share of
Company Stock.

(m) “Dividend Equivalent Amount” shall mean an amount determined by multiplying the
number of Dividend Equivalents subject to a Grant by the per-share cash Dividend paid by the
Company on its outstanding Company Stock, or the per-share fair market value (as determined by the
Committee) of any Dividend paid by the Company on its outstanding Company Stock in consideration
other than cash, with respect to each record date for the payment of a dividend during the
Accumulation Period described in Section 11(a)(i). If interest is credited on accumulated Dividend
Equivalents, the term “Dividend Equivalent Amount” shall include the accrued interest.

(n) “Early Retirement” shall mean, except as otherwise provided in the Grant
Instrument, termination of a Grantee’s employment that occurs on or after the date that the Grantee
becomes eligible for early retirement pursuant to the terms of the Pension Plan; provided, however,
that if a Grantee is not an active participant in the Pension Plan immediately prior to terminating employment, “Early Retirement” shall mean, except as otherwise
provided in the Grant Instrument, termination of a Grantee’s employment that occurs on or after
the date that a Grantee is first eligible for Social Security retirement benefits and has completed
at least 10 years of service as would be determined for vesting purposes under the Pension Plan.

 

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(o) “Employee” shall mean an employee of the Company or a subsidiary of the Company.

(p) “Employed by, or providing service to, the Employer” shall mean employment or
service as an Employee, Key Advisor or member of the Board (so that, for purposes of exercising
Options and SARs and satisfying conditions with respect to Stock Awards and Performance Units, a
Grantee shall not be considered to have terminated employment or service until the Grantee ceases
to be an Employee, Key Advisor and member of the Board).

(q) “Employer” shall mean the Company and each of its subsidiaries.

(r) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(s) “Exercise Price” shall mean the per share price at which shares of Company Stock
may be purchased under an Option, as designated by the Committee.

(t) “Fair Market Value” of Company Stock means, unless the Committee determines
otherwise with respect to a particular Grant, (i) if the principal trading market for the Company
Stock is a national securities exchange, the last reported sale price of Company Stock on the
relevant date or (if there were no trades on that date) the latest preceding date upon which a sale
was reported, (ii) if the Company Stock is not principally traded on such exchange, the mean
between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as
reported on the OTC Bulletin Board, or (iii) if the Company Stock is not publicly traded or, if
publicly traded, is not subject to reported transactions as set forth above, the Fair Market Value
per share shall be as determined by the Committee through any reasonable valuation method
authorized under the Code.

(u) “Grant” shall mean a grant of Options, SARs, Stock Awards, Stock Units or Other
Stock-Based Awards under the Plan.

(v) “Grant Instrument” shall mean the agreement that sets forth the terms and
conditions of a Grant, including all amendments thereto.

(w) “Grantee” shall mean an Employee, Key Advisor or Non-Employee Director who
receives a Grant under the Plan.

(x) “Incentive Stock Option” shall mean an option to purchase Company Stock that is
intended to meet the requirements of section 422 of the Code.

(y) “Key Advisor” shall mean a consultant or advisor of an Employer.

 

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(z) “Non-Employee Director” shall mean a member of the Board who is not an Employee.

(aa) “Nonqualified Stock Option” shall mean an option to purchase Company Stock that
is not intended to meet the requirements of section 422 of the Code.

(bb) “Normal Retirement” shall mean, except as otherwise provided in the Grant
Instrument, termination of a Grantee’s employment on or after the date a Grantee first satisfies
the conditions for normal retirement benefits under the terms of the Pension Plan, whether or not
the Grantee is covered by the Pension Plan.

(cc) “Option” shall mean an Incentive Stock Option or a Nonqualified Stock Option
granted under the Plan.

(dd) “Other Stock-Based Award” shall mean any Grant based on, measured by or payable
in Company Stock, as described in Section 10.

(ee) “Pension Plan” shall mean the Retirement Income Plan for Aqua America, Inc. and
Subsidiaries, as in effect from time to time.

(ff) “Person” shall mean any individual, firm, corporation, partnership or other
entity except the Company, any subsidiary of the Company, any employee benefit plan of the Company
or of any subsidiary, or any Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such employee benefit plan.

(gg) “SAR” shall mean a stock appreciation right with respect to a share of Company
Stock.

(hh) “Stock Award” shall mean an award of Company Stock, with or without restrictions.

(ii) “Stock Unit” shall mean an award of a phantom unit that represents a hypothetical
share of Company Stock.

Section 2. Administration

(a) Committee. The Plan shall be administered and interpreted by the Board or by a
Committee appointed by the Board. The Committee, if applicable, should consist of two or more
persons who are “outside directors” as defined under section 162(m) of the Code, and related
Treasury regulations, and “non-employee directors” as defined under Rule 16b-3 under the Exchange
Act. The Board shall approve and administer all grants made to Non-Employee Directors. The
Committee may delegate authority to one or more subcommittees, as it deems appropriate. To the
extent that the Board or a subcommittee administers the Plan, references in the Plan to the
“Committee” shall be deemed to refer to the Board or such subcommittee. In the absence of
a specific designation by the Board to the contrary, the Plan shall be administered by the
Committee of the Board or any successor Board committee performing substantially the same
functions.

 

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(b) Committee Authority. The Committee shall have the sole authority to (i) determine
the individuals to whom grants shall be made under the Plan, (ii) determine the type, size, terms
and conditions of the grants to be made to each such individual, (iii) determine the time when the
grants will be made and the duration of any applicable exercise or restriction period, including
the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms and
conditions of any previously issued grant, subject to the provisions of Section 17 below, and (v)
deal with any other matters arising under the Plan.

(c) Committee Determinations. The Committee shall have full power and express
discretionary authority to administer and interpret the Plan, to make factual determinations and to
adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and
for the conduct of its business as it deems necessary or advisable, in its sole discretion. The
Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to
the powers vested in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the Committee shall be
executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly situated
individuals.

Section 3. Grants

Awards under the Plan may consist of grants of Options as described in Section 6, Stock Awards
as described in Section 7, Stock Units as described in Section 8, SARs as described in Section 9
and Other Stock-Based Awards as described in Section 10. All Grants shall be subject to the terms
and conditions set forth herein and to such other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by the Committee to the individual
in the Grant Instrument. All Grants shall be made conditional upon the Grantee’s acknowledgement,
in writing or by acceptance of the Grant, that all decisions and determinations of the Committee
shall be final and binding on the Grantee, his or her beneficiaries and any other person having or
claiming an interest under such Grant. Grants under a particular Section of the Plan need not be
uniform as among the Grantees.

Section 4. Shares Subject to the Plan

(a) Shares Authorized. Subject to adjustment as described in subsection (d) below,
the aggregate number of shares of Company Stock that may be issued or transferred under the Plan is
5,000,000 shares. Shares issued or transferred under the Plan may be authorized but unissued
shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent Options or SARs granted
under the Plan terminate, expire or are canceled, forfeited, exchanged or surrendered without
having been exercised or if any Stock Awards, Stock Units or Other Stock-Based Awards are
forfeited, terminated or otherwise not paid in full, the shares subject to such Grants shall again
be available for purposes of the Plan. Shares of Company Stock surrendered in payment of the
Exercise Price of an Option or withheld for purposes of satisfying the Company’s minimum tax
withholding obligations with respect to Grants under the Plan shall again be available for issuance
or transfer under the Plan.

 

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(b) Limit on Stock Awards, Stock Units and Other Stock-Based Awards. Within the
aggregate limit described in subsection (a), the maximum number of shares of Company Stock that may
be issued under the Plan pursuant to Stock Awards, Stock Units and Other Stock-Based Awards during
the term of the Plan is 2,500,000 shares (i.e., fifty percent (50%) of the aggregate limit
described in subsection (a) above), subject to adjustment as described in subsection (d) below.

(c) Individual Limits. All Grants under the Plan shall be expressed in shares of
Company Stock. The maximum aggregate number of shares of Company Stock with respect to which all
Grants may be made under the Plan to any individual during any calendar year shall be 200,000
shares, subject to adjustment as described in subsection (d) below. The foregoing limit of this
subsection (c) shall apply without regard to whether the Grants are to be paid in Company Stock or
cash. All cash payments with respect to Grants (other than with respect to Dividend Equivalents or
Dividends) shall equal the Fair Market Value of the shares of Company Stock to which the cash
payments relate. A Participant may not accrue Dividend Equivalents and Dividends on
performance-based Grants described in Section 12 during any calendar year in excess of $600,000.

(d) Adjustments. If there is any change in the number or kind of shares of Company
Stock outstanding by reason of (i) a stock dividend, spinoff, recapitalization, stock split, or
combination or exchange of shares, (ii) a merger, reorganization or consolidation, (iii) a
reclassification or change in par value, or (iv) any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company’s receipt of consideration, or if the
value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or
the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares of
Company Stock available for issuance under the Plan, the maximum number of shares of Company Stock
for which any individual may receive Grants in any year, the kind and number of shares covered by
outstanding Grants, the kind and number of shares issued and to be issued under the Plan, and the
price per share or the applicable market value of such Grants shall be equitably adjusted by the
Committee, in such manner as the Committee deems appropriate, to reflect any increase or decrease
in the number of, or change in the kind or value of, the issued shares of Company Stock to
preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the
Plan and such outstanding Grants; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. In the event of a Change in Control of the Company, the provisions
of Section 15 of the Plan shall apply. Any adjustments to outstanding Grants shall be consistent
with section 409A or 422 of the Code, to the extent applicable. Any adjustments determined by the
Committee shall be final, binding and conclusive.

Section 5. Eligibility for Participation

(a) Eligible Persons. All Employees (including, for all purposes of the Plan, an
Employee who is a member of the Board) and Non-Employee Directors shall be eligible to participate
in the Plan. Key Advisors shall be eligible to participate in the Plan if the Key Advisors render
bona fide services to the Employer, the services are not in connection with the
offer and sale of securities in a capital-raising transaction and the Key Advisors do not
directly or indirectly promote or maintain a market for the Company’s securities.

 

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(b) Selection of Grantees. The Committee shall select the Employees, Key Advisors and
Non-Employee Directors to receive Grants and shall determine the number of shares of Company Stock
subject to a particular Grant in such manner as the Committee determines.

Section 6. Options

The Committee may grant Options to an Employee, Key Advisor or Non-Employee Director upon such
terms as the Committee deems appropriate. The following provisions are applicable to Options:

(a) Number of Shares. The Committee shall determine the number of shares of Company
Stock that will be subject to each Grant of Options to Employees, Key Advisors and Non-Employee
Directors.

(b) Type of Option and Price.

(i) The Committee may grant Incentive Stock Options or Nonqualified Stock Options or any
combination of the two, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to employees of the Company or its parent or subsidiary
corporations, as defined in section 424 of the Code. Nonqualified Stock Options may be granted to
Employees and Non-Employee Directors.

(ii) The Exercise Price of Company Stock subject to an Option shall be determined by the
Committee and shall be equal to or greater than the Fair Market Value of a share of Company Stock
on the date the Option is granted. However, an Incentive Stock Option may not be granted to an
Employee who, at the time of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary corporation of the
Company, as defined in section 424 of the Code, unless the Exercise Price per share is not less
than 110% of the Fair Market Value of a share of Company Stock on the date of grant.

(c) Option Term. The Committee shall determine the term of each Option. The term of
any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option
that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company, or any parent or subsidiary
corporation of the Company, as defined in section 424 of the Code, may not have a term that exceeds
five years from the date of grant.

(d) Exercisability of Options.

(i) Options shall become exercisable in accordance with such terms and conditions, consistent
with the Plan, as may be determined by the Committee and specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason. Without limiting the foregoing, unless the
Committee determines otherwise, if a Grantee ceases to be employed by, or provide service to, the
Employer on account of the Grantee’s death or Disability, all outstanding Options held by the
Grantee as of the date the Grantee ceases to be employed by, or provide service to, the Employer
shall become fully exercisable on the date of such termination of employment or service.

 

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(ii) The Committee may provide in a Grant Instrument that the Participant may elect to
exercise part or all of an Option before it otherwise has become exercisable. Any shares so
purchased shall be restricted shares and shall be subject to a repurchase right in favor of the
Company during the same period as would be required to vest in the underlying Option, with the
repurchase price equal to the lesser of (A) the Exercise Price or (B) the Fair Market Value of such
shares at the time of repurchase, or such other restrictions as the Committee deems appropriate.

(e) Grants to Non-Exempt Employees. Notwithstanding the foregoing, Options granted to
persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may
not be exercisable for at least six months after the date of grant (except that such Options may
become exercisable, as determined by the Committee, upon the Grantee’s death, Disability or
retirement, or upon a Change in Control or other circumstances permitted by applicable
regulations).

(f) Termination of Employment, Retirement, Disability or Death.

(i) Except as provided below, an Option may only be exercised while the Grantee is employed
by, or providing service to, the Employer as an Employee, Key Advisor or member of the Board.

(ii) In the event the Grantee ceases to be employed by, or provide service to, the Company on
account of a termination for Cause by the Employer or a termination for any reason other than
death, Disability, Early Retirement or Normal Retirement, any Option held by the Grantee shall
terminate as of the date the Grantee ceases to be employed by, or provide service to, the Employer.
Except as otherwise provided by the Committee, any of the Grantee’s Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide
service to, the Employer shall terminate as of such date. In addition, notwithstanding any other
provisions of this Section 6, if the Committee determines that the Grantee has engaged in conduct
that constitutes Cause at any time while the Grantee is employed by, or providing service to, the
Employer or after the Grantee’s termination of employment or service, any Option held by the
Grantee shall immediately terminate and the Grantee shall automatically forfeit all shares
underlying any exercised portion of an Option for which the Company has not yet delivered the share
certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares.
Upon any exercise of an Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.

(iii) In the event the Grantee ceases to be employed by, or provide service to, the Employer
because the Grantee is Disabled, any Option which is otherwise exercisable by the Grantee,
including Options becoming exercisable pursuant to Section 6(d)(i) above, shall terminate unless exercised within thirty-eight (38) months after the date on
which the Grantee ceases to be employed by, or provide service to, the Employer (or within such
other period of time as may be specified by the Committee), but in any event no later than the date
of expiration of the Option term.

 

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(iv) In the event the Grantee ceases to be employed by, or provide service to, the Employer on
account of Early Retirement or Normal Retirement, any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within thirty-eight (38) months after the date on which
the Grantee ceases to be employed by, or provide service to, the Employer (or within such other
period of time as may be specified by the Committee), but in any event no later than the date of
expiration of the Option term. Unless the Committee determines otherwise, no Option shall
accelerate and become exercisable as a result of a Grantee’s Early Retirement or Normal Retirement.

(v) If the Grantee dies while employed by, or providing service to, the Employer, any Option
that is otherwise exercisable by the Grantee, including Options becoming exercisable pursuant to
Section 6(d)(i) above, shall terminate unless exercised within twelve (12) months after the date on
which the Grantee ceases to be employed by, or provide service to, the Employer (or within such
other period of time as may be specified by the Committee), but in any event no later than the date
of expiration of the Option term.

(g) Exercise of Options. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the Company. The Grantee
shall pay the Exercise Price for an Option as specified by the Committee (i) in cash, (ii) unless
the Committee determines otherwise, by delivering shares of Company Stock owned by the Grantee and
having a Fair Market Value on the date of exercise at least equal to the Exercise Price or by
attestation (on a form prescribed by the Committee) to ownership of shares of Company Stock having
a Fair Market Value on the date of exercise at least equal to the Exercise Price, (iii) by payment
through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve
Board, or (iv) by such other method as the Committee may approve. Shares of Company Stock used to
exercise an Option shall have been held by the Grantee for the requisite period of time necessary
to avoid adverse accounting consequences to the Company with respect to the Option. Payment for
the shares to be issued or transferred pursuant to the Option, and any required withholding taxes,
must be received by the Company by the time specified by the Company depending on the type of
payment being made, but in all cases prior to the issuance or transfer of such shares.

(h) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide
that, if the aggregate Fair Market Value of the Company Stock on the date of the grant with respect
to which Incentive Stock Options are exercisable for the first time by a Grantee during any
calendar year, under the Plan or any other stock option plan of the Company or a parent or
subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee
of the Company or a parent or subsidiary corporation (within the meaning of section 424(f) of the
Code) of the Company.

 

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(i) Restrictive Covenants Agreement. All unexercised Options following the date a
Grantee ceases to be employed by, or provide service to, the Employer on account of Early
Retirement or Normal Retirement shall be forfeited if, during the thirty-eight (38)-month period
following such termination of employment or service, the Grantee violates the terms of any written
invention assignment, non-competition, non-solicitation or confidentiality agreement between the
Grantee and the Employer, except as otherwise provided in the Grant Instrument.

Section 7. Stock Awards

The Committee may issue or transfer shares of Company Stock to an Employee, Key Advisor or
Non-Employee Director under a Stock Award, upon such terms as the Committee deems appropriate. The
following provisions are applicable to Stock Awards:

(a) General Requirements. Shares of Company Stock issued or transferred pursuant to
Stock Awards may be issued or transferred for consideration or for no consideration, and subject to
restrictions or no restrictions, as determined by the Committee. The Committee may, but shall not
be required to, establish conditions under which restrictions on Stock Awards shall lapse over a
period of time, at a particular date or according to such other criteria as the Committee deems
appropriate, including, without limitation, restrictions based upon the achievement of specific
performance goals. The period of time during which the Stock Awards will remain subject to
restrictions will be designated in the Grant Instrument as the “Restriction Period.”

(b) Number of Shares. The Committee shall determine the number of shares of Company
Stock to be issued or transferred pursuant to a Stock Award and the restrictions applicable to such
shares.

(c) Requirement of Employment or Service. If the Grantee ceases to be employed by, or
provide service to, the Employer during a period designated in the Grant Instrument as the
Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate
as to all shares covered by the Grant as to which the restrictions have not lapsed, and those
shares of Company Stock must be immediately returned to the Company. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems appropriate. Without
limiting the foregoing, unless the Committee determines otherwise:

(i) If a Grantee ceases to be employed by, or provide service to, the Employer on account of
Early Retirement, a pro-rata portion of the Stock Award, based on the period in which the Grantee
was employed by, or providing service to, the Employer during the Restriction Period, shall not
terminate and shall continue to be subject to the restrictions, if any, to which such Stock Award
was subject at the time of the Grant and the remaining balance of such Stock Award shall terminate.
The shares of Company Stock subject to the pro-rata portion of the Stock Award that does not
terminate on account of Early Retirement shall continue to be subject to any performance goals
established by the Committee with respect to the Stock Award.

(ii) If a Grantee ceases to be employed by, or provide service to, the Employer on account of
Normal Retirement, the Stock Award shall not terminate as a result of the Grantee’s Normal
Retirement. The shares of Company Stock subject to the Stock Award
shall continue to be subject to any performance goals established by the Committee with
respect to the Stock Award.

 

-11-

 

(d) Restrictions on Transfer and Legend on Stock Certificate. During the Restriction
Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of a
Stock Award except under Section 14(a) below. Unless otherwise determined by the Committee, the
Company will retain possession of certificates for shares of Stock Awards until all restrictions on
such shares have lapsed. Each certificate for a Stock Award, unless held by the Company, shall
contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be
entitled to have the legend removed from the stock certificate covering the shares subject to
restrictions when all restrictions on such shares have lapsed. The Committee may determine that
the Company will not issue certificates for Stock Awards until all restrictions on such shares have
lapsed.

(e) Right to Vote and to Receive Dividends. Unless the Committee determines
otherwise, during the Restriction Period, the Grantee shall have the right to vote shares of Stock
Awards and to receive any Dividends or other distributions paid on such shares, subject to any
restrictions deemed appropriate by the Committee, including, without limitation, the achievement of
specific performance goals.

(f) Lapse of Restrictions. All restrictions imposed on Stock Awards shall lapse upon
the expiration of the applicable Restriction Period and the satisfaction of all conditions, if any,
imposed by the Committee. The Committee may determine, as to any or all Stock Awards, that the
restrictions shall lapse without regard to any Restriction Period. Without limiting the foregoing,
unless the Committee determines otherwise, if a Grantee ceases to be employed by, or provide
service to, the Employer on account of the Grantee’s death or Disability, the restrictions and
conditions on all outstanding Stock Awards held by the Grantee as of the date the Grantee ceases to
be employed by, or provide service to, the Employer shall immediately lapse.

(g) Restrictive Covenants Agreement. All Stock Awards with respect to which the
applicable restrictions have not lapsed following the date a Grantee ceases to be employed by, or
provide service to, the Employer on account of Early Retirement or Normal Retirement shall be
forfeited if, during the Restriction Period, the Grantee violates the terms of any written
invention assignment, non-competition, non-solicitation or confidentiality agreement between the
Grantee and the Employer, except as otherwise provided in the Grant Instrument.

Section 8. Stock Units

The Committee may grant Stock Units, each of which shall represent one hypothetical share of
Company Stock, to an Employee, Key Advisor or Non-Employee Director, upon such terms and conditions
as the Committee deems appropriate. The following provisions are applicable to Stock Units:

(a) Crediting of Units. Each Stock Unit shall represent the right of the Grantee to
receive a share of Company Stock or an amount of cash based on the value of a share
of Company Stock, if and when specified conditions are met. All Stock Units shall be credited
to bookkeeping accounts established on the Company’s records for purposes of the Plan.

 

-12-

 

(b) Terms of Stock Units. The Committee may grant Stock Units that are payable if
specified performance goals or other conditions are met, or under other circumstances. Stock Units
may be paid at the end of a specified performance period or other period, or payment may be
deferred to a date authorized by the Committee. The Committee shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock Units. Without limiting the
foregoing, unless the Committee determines otherwise, if a Grantee ceases to be employed by, or
provide service to, the Employer on account of the Grantee’s death or Disability, all outstanding
Stock Units held by the Grantee as of the date the Grantee ceases to be employed by, or provide
service to, the Employer shall become fully vested on the date of such termination of employment or
service.

(c) Requirement of Employment or Service. If the Grantee ceases to be employed by, or
provide service to, the Employer prior to the vesting of Stock Units, or if other conditions
established by the Committee are not met, the Grantee’s Stock Units shall be forfeited. The
Committee may, however, provide for complete or partial exceptions to this requirement as it deems
appropriate. Without limiting the foregoing, unless the Committee determines otherwise:

(i) If a Grantee ceases to be employed by, or provide service to, the Employer on account of
Early Retirement, a pro-rata share of the Stock Units, based on the period in which the Grantee was
employed by, or providing service to, the Employer during the period of time during which the Stock
Units remain subject to restrictions, shall not be forfeited as a result of such termination of
employment or service. The pro-rata share of the Stock Units that is not forfeited as a result of
the Grantee’s Early Retirement shall continue to be subject to any performance goals established by
the Committee with respect to the Stock Units.

(ii) If a Grantee ceases to be employed by, or provide service to, the Employer on account of
Normal Retirement, the Stock Units shall not be forfeited as a result of such termination of
employment or service. The Stock Units shall continue to be subject to any performance goals
established by the Committee with respect to the Stock Units.

(d) Payment With Respect to Stock Units. Payments with respect to Stock Units shall
be made in cash, Company Stock or any combination of the foregoing, as the Committee shall
determine.

(e) Restrictive Covenants Agreement. All Stock Units with respect to which the
applicable restrictions have not lapsed or which have not yet been paid following the date a
Grantee ceases to be employed by, or provide service to, the Employer on account of Early
Retirement or Normal Retirement shall be forfeited if, during the period of time during which the
Stock Units remain subject to restrictions, the Grantee violates the terms of any written invention
assignment, non-competition, non-solicitation or confidentiality agreement between the Grantee and
the Employer, except as otherwise provided in the Grant Instrument.

 

-13-

 

Section 9. Stock Appreciation Rights

The Committee may grant SARs to an Employee, Key Advisor or Non-Employee Director separately
or in tandem with any Option. The following provisions are applicable to SARs:

(a) General Requirements. The Committee may grant SARs to an Employee, Key Advisor or
Non-Employee Director separately or in tandem with any Option (for all or a portion of the
applicable Option). Tandem SARs may be granted either at the time the Option is granted or at any
time thereafter while the Option remains outstanding; provided, however, that, in the case of an
Incentive Stock Option, SARs may be granted only at the time of the Grant of the Incentive Stock
Option. The Committee shall establish the base amount of the SAR at the time the SAR is granted.
The base amount of each SAR shall be equal to the per share Exercise Price of the related Option
or, if there is no related Option, an amount equal to or greater than the Fair Market Value of a
share of Company Stock as of the date of Grant of the SAR.

(b) Tandem SARs. In the case of tandem SARs, the number of SARs granted to a Grantee
that shall be exercisable during a specified period shall not exceed the number of shares of
Company Stock that the Grantee may purchase upon the exercise of the related Option during such
period. Upon the exercise of an Option, the SARs relating to the Company Stock covered by such
Option shall terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.

(c) Exercisability. An SAR shall be exercisable during the period specified by the
Committee in the Grant Instrument and shall be subject to such vesting and other restrictions as
may be specified in the Grant Instrument. The Committee may accelerate the exercisability of any
or all outstanding SARs at any time for any reason. Without limiting the foregoing, unless the
Committee determines otherwise, if a Grantee ceases to be employed by, or provide service to, the
Employer on account of the Grantee’s death or Disability, all outstanding SARs held by the Grantee
as of the date the Grantee ceases to be employed by, or provide service to, the Employer shall
become fully exercisable on the date of such termination of employment or service. SARs may only
be exercised while the Grantee is employed by, or providing service to, the Employer or during the
applicable period after termination of employment or service as described in Section 6(f) above. A
tandem SAR shall be exercisable only during the period when the Option to which it is related is
also exercisable.

(d) Grants to Non-Exempt Employees. Notwithstanding the foregoing, SARs granted to
persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may
not be exercisable for at least six months after the date of grant (except that such SARs may
become exercisable, as determined by the Committee, upon the Grantee’s death, Disability or
retirement, or upon a Change in Control or other circumstances permitted by applicable
regulations).

(e) Value of SARs. When a Grantee exercises SARs, the Grantee shall receive in
settlement of such SARs an amount equal to the value of the stock appreciation for the number of
SARs exercised. The stock appreciation for an SAR is the amount by which the Fair
Market Value of the underlying Company Stock on the date of exercise of the SAR exceeds the
base amount of the SAR as described in subsection (a).

 

-14-

 

(f) Form of Payment. The appreciation in an SAR shall be paid in shares of Company
Stock, cash or any combination of the foregoing, as the Committee shall determine. For purposes of
calculating the number of shares of Company Stock to be received, shares of Company Stock shall be
valued at their Fair Market Value on the date of exercise of the SAR.

(g) Restrictive Covenants Agreement. All unexercised SARs following the date a
Grantee ceases to be employed by, or provide service to, the Employer on account of Early
Retirement or Normal Retirement shall be forfeited if, during the thirty-eight (38)-month period
following such termination of employment or service, the Grantee violates the terms of any written
invention assignment, non-competition, non-solicitation or confidentiality agreement between the
Grantee and the Employer, except as otherwise provided in the Grant Instrument.

Section 10. Other Stock-Based Awards

The Committee may grant Other Stock-Based Awards, which are awards (other than those described
in Sections 6, 7, 8 and 9 of the Plan) that are based on or measured by Company Stock, to any
Employee, Key Advisor or Non-Employee Director, on such terms and conditions as the Committee shall
determine. Other Stock-Based Awards may be awarded subject to the achievement of performance goals
or other conditions and may be payable in cash, Company Stock or any combination of the foregoing,
as the Committee shall determine.

Section 11. Dividend Equivalents

The Committee may grant Dividend Equivalents alone or in connection with Stock Units or Other
Stock-Based Awards, to an Employee, Key Advisor or Non-Employee Director, upon such terms and
conditions as the Committee deems appropriate. The Committee may grant Dividend Equivalents on the
terms described in subsections (a) through (e) below or on such other terms as the Committee deems
appropriate. Except as otherwise provided in the Grant Instrument, the following provisions may be
applicable to Dividend Equivalents:

(a) Amount of Dividend Equivalent Credited. The Company shall credit to an account
for each Grantee maintained by the Company in its books and records on each record date the
Dividend Equivalent Amount for each Grantee attributable to each record date, from the date of
grant until the earliest of the date of:

(i) the end of the applicable accumulation period designated by the Committee at the time of
grant (the “Accumulation Period”),

(ii) the date the Grantee ceases to be employed by, or provide service to, the Employer for
any reason other than death, Disability, Early Retirement, or Normal Retirement, or as otherwise
determined by the Committee, in its sole discretion, at the time of the Grantee’s termination of
employment or service, or

(iii) the end of a period of four years from the date of grant.

 

-15-

 

The Company shall maintain in its books and records separate accounts which identify the Dividend
Equivalent Amounts for each Grantee, reduced by all amounts paid pursuant to subsection (b) below.
No interest shall be credited to any such account. The amount of Dividend Equivalents credited
pursuant to this subsection (a) shall be deemed a separate payment for purposes of section 409A of
the Code.

(b) Payment of Credited Dividend Equivalents. Any Dividend Equivalent Amounts accrued
in an account between the date of grant to March 1 of the following year shall be distributed to
the Grantee no later than March 15 of the year following the date of grant, subject to subsection
(c) below, and any Dividend Equivalent Amounts accrued in an account from March 2 of the year
following the date of grant (or any anniversary thereof) through March 1 of the following year
shall be distributed to the Grantee no later than March 15 of such following year, subject to
subsection (c) below. Notwithstanding the foregoing, if a Change in Control occurs while the
Grantee is employed by, or providing service to, the Employer, any Dividend Equivalent Amounts or
portion thereof, which have not, prior to such date, been paid to the Grantee or forfeited shall be
paid to the Grantee within sixty (60) days following the consummation of the Change in Control.

(c) Forfeiture of Dividend Equivalents. Except as otherwise determined by the
Committee, payment of Dividend Equivalent Amounts for any accrual period ending on March 1 as
described in subsection (b) above shall be forfeited by the Grantee if the Grantee ceases to be
employed by, or provide service to, the Employer on March 1 of such accrual period; provided,
however, that the Grantee shall not forfeit any payments if the Grantee ceases to be employed by,
or provide service to, the Employer on account of death, Disability, Early Retirement, or Normal
Retirement, subject to subsection (e) below.

(d) Form of Payment. All Dividend Equivalent Amounts shall be paid solely in cash.

(e) Restrictive Covenants Agreement. All unpaid Dividend Equivalent Amounts following
the date a Grantee ceases to be employed by, or provide service to, the Employer on account of
Early Retirement or Normal Retirement shall be forfeited if, during the applicable Accumulation
Period, the Grantee violates the terms of any written invention assignment, non-competition,
non-solicitation or confidentiality agreement between the Grantee and the Employer, except as
otherwise provided in the Grant Instrument.

Section 12. Qualified Performance-Based Compensation

The Committee may determine that Stock Awards, Stock Units, Other Stock-Based Awards and
Dividend Equivalents granted to an Employee shall be considered “qualified performance-based
compensation” under section 162(m) of the Code. The following provisions shall apply to Grants of
Stock Awards, Stock Units, Other Stock-Based Awards and Dividend Equivalents that are to be
considered “qualified performance-based compensation” under section 162(m) of the Code:

(a) Performance Goals.

(i) When Stock Awards, Stock Units, Other Stock-Based Awards or Dividend Equivalents that are
to be considered “qualified performance-based compensation” are granted, the Committee shall
establish in writing (A) the objective performance goals that must be met, (B) the performance
period during which the performance will be measured, (C) the threshold, target and maximum amounts
that may be paid if the performance goals are met, and (D) any other conditions that the Committee
deems appropriate and consistent with the Plan and section 162(m) of the Code.

 

-16-

 

(ii) The business criteria may relate to the Grantee’s business unit or the performance of the
Company and its parents and subsidiaries as a whole, or any combination of the foregoing. The
Committee shall use objectively determinable performance goals based on one or more of the
following criteria: total return to shareholders; dividends; earnings per share; customer growth;
cost reduction goals; the achievement of specified operational goals, including water quality and
the reliability of water supply; measures of customer satisfaction; net income (before or after
taxes) or operating income; earnings before interest, taxes, depreciation and amortization or
operating income before depreciation and amortization; revenue targets; return on assets, capital
or investment; cash flow; budget comparisons; implementation or completion of projects or processes
strategic or critical to the Company’s business operations; and any combination of, or a specified
increase in, any of the foregoing.

(b) Establishment of Goals. The Committee shall establish the performance goals in
writing either before the beginning of the performance period or during a period ending no later
than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on
which 25% of the performance period has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code. The performance goals
shall satisfy the requirements for “qualified performance-based compensation,” including the
requirement that the achievement of the goals be substantially uncertain at the time they are
established and that the goals be established in such a way that a third party with knowledge of
the relevant facts could determine whether and to what extent the performance goals have been met.
The Committee shall not have discretion to increase the amount of compensation that is payable upon
achievement of the designated performance goals.

(c) Announcement of Grants. The Committee shall certify and announce the results for
each performance period to all Grantees after the announcement of the Company’s financial results
for the performance period. If and to the extent that the Committee does not certify that the
performance goals have been met, the grants of Stock Awards, Stock Units, Other Stock-Based Awards
and Dividend Equivalents for the performance period shall be forfeited or shall not be made, as
applicable.

(d) Death, Disability or Other Circumstances. The Committee may provide that Stock
Awards, Stock Units, Other Stock-Based Awards and Dividend Equivalents shall be payable or
restrictions on such Grants shall lapse, in whole or in part, in the event of the
Grantee’s death or Disability during the performance period, or under other circumstances
consistent with the Treasury regulations and rulings under section 162(m) of the Code.

 

-17-

 

Section 13. Withholding of Taxes

(a) Required Withholding. All Grants under the Plan shall be subject to applicable
federal (including FICA), state and local tax withholding requirements. The Employer may require
that the Grantee or other person receiving or exercising Grants pay to the Employer the amount of
any federal, state or local taxes that the Employer is required to withhold with respect to such
Grants, or the Employer may deduct from other wages and compensation paid by the Employer the
amount of any withholding taxes due with respect to such Grants.

(b) Election to Withhold Shares. If the Company so permits, a Grantee may elect to
satisfy the Employer’s tax withholding obligation with respect to Grants paid in Company Stock by
having shares withheld up to an amount that does not exceed the Grantee’s minimum applicable
withholding tax rate for federal (including FICA), state and local tax liabilities. The election
must be in a form and manner prescribed by the Company and may be subject to the prior approval of
the Company.

Section 14. Transferability of Grants

(a) Nontransferability of Grants. Except as provided below, only the Grantee may
exercise rights under a Grant during the Grantee’s lifetime. A Grantee may not transfer those
rights except (i) by will or by the laws of descent and distribution or (ii) with respect to Grants
other than Incentive Stock Options, pursuant to a domestic relations order. When a Grantee dies,
the personal representative or other person entitled to succeed to the rights of the Grantee may
exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or
her right to receive the Grant under the Grantee’s will or under the applicable laws of descent and
distribution.

(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, the
Committee may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock
Options to family members, or one or more trusts or other entities for the benefit of or owned by
family members, consistent with the applicable securities laws, according to such terms as the
Committee may determine; provided that the Grantee receives no consideration for the transfer of an
Option and the transferred Option shall continue to be subject to the same terms and conditions as
were applicable to the Option immediately before the transfer.

Section 15. Consequences of a Change in Control

(a) Notice and Acceleration. Unless the Committee determines otherwise, effective
upon the date of the Change in Control, (i) all outstanding Options and SARs shall automatically
accelerate and become fully exercisable, (ii) the restrictions and conditions on all outstanding
Stock Awards shall immediately lapse, and (iii) all Stock Units, Other Stock-Based Awards and
unpaid Dividend Equivalent Amounts shall become fully vested and shall be paid at their target
values, or in such greater amounts as the Committee may determine.

 

-18-

 

(b) Other Alternatives. Notwithstanding the foregoing, in the event of a Change in
Control, the Committee may take one or more of the following actions with respect to any or all
outstanding Grants: the Committee may (i) require that Grantees surrender their outstanding Options
and SARs in exchange for one or more payments by the Company, in cash or Company Stock as
determined by the Committee, in an amount equal to the amount by which the then Fair Market Value
of the shares of Company Stock subject to the Grantee’s unexercised Options and SARs exceeds the
Exercise Price of the Options or the base amount of the SARs, as applicable, (ii) after giving
Grantees an opportunity to exercise their outstanding Options and SARs, terminate any or all
unexercised Options and SARs at such time as the Committee deems appropriate, or (iii) determine
that outstanding Options and SARs that are not exercised shall be assumed by, or replaced with
comparable options or rights by, the surviving corporation, (or a parent or subsidiary of the
surviving corporation), and other outstanding Grants that remain in effect after the Change in
Control shall be converted to similar grants of the surviving corporation (or a parent or
subsidiary of the surviving corporation). Such surrender or termination shall take place as of the
date of the Change in Control or such other date as the Committee may specify.

(c) Committee. The Committee making the determinations under this Section 15
following a Change in Control must be comprised of the same members as those on the Committee
immediately before the Change in Control.

Section 16. Requirements for Issuance or Transfer of Shares

No Company Stock shall be issued or transferred in connection with any Grant hereunder unless
and until all legal requirements applicable to the issuance or transfer of such Company Stock have
been complied with to the satisfaction of the Committee. The Committee shall have the right to
condition any Grant on the Grantee’s undertaking in writing to comply with such restrictions on his
or her subsequent disposition of the shares of Company Stock as the Committee shall deem necessary
or advisable, and certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or transferred under the
Plan may be subject to such stop-transfer orders and other restrictions as the Company deems
appropriate to comply with applicable laws, regulations and interpretations, including any
requirement that a legend be placed thereon.

Section 17. Amendment and Termination of the Plan

(a) Amendment. The Board may amend or terminate the Plan at any time; provided,
however, that the Board shall not amend the Plan without shareholder approval if such approval is
required in order to comply with the Code or other applicable law, or to comply with applicable
stock exchange requirements.

(b) No Repricing Without Shareholder Approval. Notwithstanding anything in the Plan
to the contrary, the Committee may not reprice Options, nor may the Board amend the Plan to permit
repricing of Options, unless the shareholders of the Company provide prior approval for such
repricing. The term “repricing” shall have the meaning given that term in Section 303A(8) of the
New York Stock Exchange Listed Company Manual, as in effect from time to time.

 

-19-

 

(c) Shareholder Re-Approval Requirement. If Stock Awards, Stock Units, Other
Stock-Based Awards or Dividend Equivalents are granted as “qualified performance-based
compensation” under Section 12 above, the Plan must be reapproved by the shareholders no later than
the first shareholders meeting that occurs in the fifth year following the year in which the
shareholders previously approved the provisions of Section 12, if required by section 162(m) of the
Code or the regulations thereunder.

(d) Termination of Plan. The Plan shall terminate on the day immediately preceding
the tenth anniversary of its effective date, unless the Plan is terminated earlier by the Board or
is extended by the Board with the approval of the shareholders.

(e) Termination and Amendment of Outstanding Grants. A termination or amendment of
the Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee
unless the Grantee consents or unless the Committee acts under Section 18(f) below. The
termination of the Plan shall not impair the power and authority of the Committee with respect to
an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 18(f) below or may be amended by agreement of the Company and
the Grantee consistent with the Plan.

(f) Effective Date of the Plan. The Plan shall be effective as of the date on which
the shareholders approve the Plan.

Section 18. Miscellaneous

(a) Grants in Connection with Corporate Transactions and Otherwise. Nothing contained
in the Plan shall be construed to (i) limit the right of the Committee to make Grants under the
Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of
the business or assets of any corporation, firm or association, including Grants to employees
thereof who become Employees, or (ii) limit the right of the Company to grant stock options or make
other awards outside of the Plan. The Committee may make a Grant to an employee of another
corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of
stock or property, reorganization or liquidation involving the Company, in substitution for a stock
option or stock awards grant made by such corporation. Notwithstanding anything in the Plan to the
contrary, the Committee may establish such terms and conditions of the new Grants as it deems
appropriate, including setting the Exercise Price of Options or the base price of SARs at a price
necessary to retain for the Grantee the same economic value as the prior options or rights.

(b) Governing Document. The Plan shall be the controlling document. No other
statements, representations, explanatory materials or examples, oral or written, may amend the Plan
in any manner. The Plan shall be binding upon and enforceable against the Company and its
successors and assigns.

(c) Funding of the Plan. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other segregation of assets to
assure the payment of any Grants under the Plan.

 

-20-

 

(d) Rights of Grantees. Nothing in the Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be granted a Grant under the Plan.
Neither the Plan nor any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Employer or any other employment rights.

(e) No Fractional Shares. No fractional shares of Company Stock shall be issued or
delivered pursuant to the Plan or any Grant. Except as otherwise provided under the Plan, the
Committee shall determine whether cash, other awards or other property shall be issued or paid in
lieu of such fractional shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.

(f) Compliance with Law. The Plan, the exercise of Options and SARs and the
obligations of the Company to issue or transfer shares of Company Stock under Grants shall be
subject to all applicable laws and regulations, and to approvals by any governmental or regulatory
agency as may be required. With respect to persons subject to section 16 of the Exchange Act, it
is the intent of the Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is
the intent of the Company that Incentive Stock Options comply with the applicable provisions of
section 422 of the Code, that Grants of “qualified performance-based compensation” comply with the
applicable provisions of section 162(m) of the Code and that, to the extent applicable, Grants
comply with the requirements of section 409A of the Code. To the extent that any legal requirement
of section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code as set forth in the
Plan ceases to be required under section 16 of the Exchange Act or section 422, 162(m) or 409A of
the Code, that Plan provision shall cease to apply. The Committee may revoke any Grant if it is
contrary to law or modify a Grant to bring it into compliance with any valid and mandatory
government regulation.

(g) Employees Subject to Taxation Outside the United States. With respect to Grantees
who are believed by the Committee to be subject to taxation in countries other than the United
States, the Committee may make Grants on such terms and conditions, consistent with the Plan, as
the Committee deems appropriate to comply with the laws of the applicable countries, and the
Committee may create such procedures, addenda and subplans and make such modifications as may be
necessary or advisable to comply with such laws.

(h) Governing Law. The validity, construction, interpretation and effect of the Plan
and Grant Instruments issued under the Plan shall be governed and construed by and determined in
accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to the conflict
of laws provisions thereof.

 

-21-Exhibit 10.51

Exhibit 10.51

BOND PURCHASE AGREEMENT

$141,385,000

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

	 	 	 
	$45,180,000

Water Facilities Revenue Refunding Bonds

(Aqua Pennsylvania, Inc. Project) 

Series A of 2010
	 	$96,205,000

Water Facilities Revenue Bonds

(Aqua Pennsylvania, Inc. Project)

Series B of 2010

Bond Purchase Agreement dated October 27, 2010 (this “Bond Purchase Agreement”) among the
PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY (the “Authority”), AQUA PENNSYLVANIA, INC., a
Pennsylvania corporation (the “Company”), and JEFFERIES & COMPANY, INC., a Delaware Corporation
(the “Representative”), on behalf of itself and as representative of the underwriters identified on
Schedule I attached hereto (collectively, the “Underwriters”).

Section 1. Background.

(a) The Authority proposes to enter into a Financing Agreement (the “Financing Agreement”)
dated as of October 15, 2010 with the Company, under which the Authority will agree to loan to the
Company funds: (i) to currently refund on November 18, 2010 (the “Refunding Project”) the
outstanding $25,000,000 Delaware County Industrial Development Authority Water Facilities Revenue
Bonds (Philadelphia Suburban Water Company Project), Series of 1999 (the “1999 Bonds”), which were
issued to finance the costs of the facilities located at various sites throughout the Company’s
existing water supply and distribution system, and to pay a portion of the costs of issuance of
such bonds (the “1999 Project Facilities”); and the outstanding $18,360,000 Mercer County
Industrial Development Authority Water Facilities Revenue Bonds, Series of 2000 (Consumers
Pennsylvania Water Company – Shenango Valley Division Project) (the “2000 Bonds”, and together with
the 1999 Bonds, the “Prior Bonds”), which were used to finance a portion of the cost of
acquisition, construction, installation and equipping of its water treatment and filtration
facilities located in Sharon, Pennsylvania, and pay a portion of the costs of issuance of such
bonds (the “2000 Project Facilities”, and together with the 1999 Project Facilities, the “Refunding
Project Facilities”), and related refunding financing costs; (ii) to 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 Bucks,
Chester, Delaware, Mercer, Montgomery and Warren Counties in Pennsylvania (the “Project Facilities”
and together with the Refunding Project Facilities the “Facilities”) that are part of the Company’s
System (the “Construction Project”, and together with the “Refunding Project”, the “Project”); and
(iii) the related financing costs.

 

 

 

To finance the loan under the Financing Agreement, the Authority proposes to issue and sell
$45,180,000 aggregate principal amount of its Water Facilities Revenue Refunding Bonds (Aqua
Pennsylvania, Inc. Project), Series A of 2010 (the “2010A Bonds”), and $96,205,000 aggregate
principal amount of its Water Facilities Revenue Bonds (Aqua Pennsylvania, Inc. Project), Series B
of 2010 (the “2010B Bonds”, and together with the 2010A Bonds, the “Bonds”) to the Underwriters,
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 September 15, 2010 (the “Authority Resolution”) and a Trust Indenture, dated as of
October 15, 2010 (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 II attached
hereto.

The Bonds will be payable out of payments by the Company under the Financing Agreement,
including payments under its First Mortgage Bond, 5.00% Series due December 1, 2033 in the
principal amount of $25,910,000; its First Mortgage Bond, 5.00% Series due December 1, 2034, in the
principal amount of $19,270,000; its First Mortgage Bond, 4.50% Series due December 1, 2042, in the
principal amount of $15,000,000; and its First Mortgage Bond, 5.00% Series due December 1, 2043, in
the principal amount of $81,205,000 (together, 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 Mellon Trust Company, N.A., as trustee (successor to The Pennsylvania Company for
Insurance on Lives and Granting Annuities, 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-sixth Supplemental Indenture of Mortgage to be dated as of
October 15, 2010 (the “Forty-sixth Supplemental Mortgage”, which together with the Indenture of
Mortgage, as amended and supplemented, is referred to hereinafter as the “Mortgage”). Each of the
First Mortgage Bonds 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 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 proceeds of the 2010A Bonds and 2010B Bonds will be used to refinance and finance,
respectively, 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 Underwriters 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”).

 

2

 

(d) A Preliminary Official Statement dated October 15, 2010, 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 Representative 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
Underwriters will buy from the Authority, and the Authority will sell to the Underwriters, all (but
not less than all) of the Bonds at a purchase price equal to $141,764,215.45, which is equal to the
$141,385,000.00 aggregate principal amount of the Bonds, plus net original issue premium of
$1,838,245.45, less the underwriting discount of $1,459,030.00. 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 LLP, Philadelphia, Pennsylvania (“Bond
Counsel”), at 10:00 a.m., Eastern Standard Time, on November 17, 2010 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 $141,385,000 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
Representative so requests, the Bonds shall be made available to the Underwriters (prior to their
delivery to DTC) in Philadelphia, Pennsylvania at least three full business days before the Closing
for purposes of inspection.

The Underwriters agree 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
Underwriters reserve 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 Underwriters 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”), including the
“Act”, 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 Underwriters 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.

 

3

 

(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” (solely 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” (solely 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.

(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.

 

4

 

(i) The Bonds, when issued, authenticated and delivered in accordance with the Trust Indenture
and sold to the Underwriters 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 finding would affect in any way the validity
or enforceability of any of the Authority Financing Documents.

(1) 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 Representative shall be deemed a representation and warranty by the Authority to the
Underwriters 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, 2009, 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.

 

5

 

(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-sixth Supplemental Mortgage has been duly authorized by the Company. When the
Forty-sixth Supplemental Mortgage, in substantially the form approved by the Representative 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-sixth 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-sixth 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.

(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.

 

6

 

(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-sixth
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-sixth 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.

(h) The Company has obtained from the Pennsylvania Public Utility Commission an order duly
authorizing the issuance and delivery of the First Mortgage Bonds by the Company and the incurring
of the debt evidenced thereby, on terms not inconsistent with this Bond Purchase Agreement.

 

7

 

(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 Representative 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.

Section 5. Authority’s Covenants. The Authority will:

(a) Furnish such information, execute such instruments and take such other action in
cooperation with the Representative as the Representative 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 Representative 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 Representative and the Company and will advise the Representative 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.

 

8

 

(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 Underwriters, their respective officers, directors, officials,
agents, attorneys, employees, and each person, if any, who controls each of the Underwriters
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 Underwriters, or either of them, or any
of their respective members, directors, officers, agents, attorneys, and employees and each person,
if any, who controls the Underwriters 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 Trust 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.

(c) Undertake, pursuant to the Continuing Disclosure Agreement dated as of November 17, 2010
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 l5c2-l2 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 Representative, and will advise the Representative 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.

 

9

 

(e) Take all actions reasonably necessary to maintain in effect and to comply with the order
of the Pennsylvania Public Utility Commission dated October 21, 2010, registering the Securities
Certificate for the issuance of the First Mortgage Bonds in support of the Bonds.

Section 7. Underwriters’ Covenant and Compensation.

(a) By acceptance hereof, each of the Underwriters, on a several (according to their
respective percentages on Schedule I) but not joint basis, 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 Underwriters furnished only the information under such “UNDERWRITING”
heading), or failure on the part of the Underwriters to deliver an Official Statement to any
purchaser. The Underwriters 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 Underwriters may otherwise have. The Underwriters shall not be
liable for any settlement of, any such action effected without its consent.

(b) The Underwriters will be paid an underwriting discount of $1,459,030.00 with respect to
the Bonds.

(c) The Underwriters acknowledge 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.

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 any of the respective
Underwriters, 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

 

10

 

 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 any of the respective Underwriters (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 each or any of the respective
Underwriters, contribute to the amount paid or payable by each or any of the Underwriters 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 Underwriters, 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 Underwriters in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and each or any of the Underwriters,
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 Underwriters 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 Underwriters, 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 each of the Underwriters and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters 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 each of the Underwriters 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 such Underwriter in
connection with investigating or defending any such action or claim. Notwithstanding the provisions
of this Section 9, no Underwriter shall be required to contribute any amount in excess of the
amount of the discount allowed to each Underwriter as set forth in Section 7(b) hereof.

Section 10. Official Statement; Public Offering.

 

11

 

(a) In order to enable the Underwriters to comply with Rule l5c2-l2, 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 l5c2-l2. The Company shall provide to the Representative 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 (7) business days after the date of this Bond Purchase
Agreement. If the Company, during the period described in Section l0(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 Representative written notice thereof.
The Authority and the Company hereby authorize the use of the Preliminary Official Statement and
the Official Statement by the Underwriters 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 Representative. If from the
date hereof until the earlier of (i) ninety (90) days after the end of the underwriting period (as
defined in Rule l5c2-12) 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 Representative, 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 Underwriters, 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 Representative shall promptly provide the Municipal Securities
Rulemaking Board with a copy of the Official Statement for filing in accordance with Rule 15c2-l2,
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.

Section 11. Conditions of Underwriters’ and Authority’s Obligations. The Underwriters’
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.

 

12

 

(c) The Representative shall have received:

(i) An opinion of Ballard Spahr LLP, Bond Counsel, dated the date of Closing, substantially in
the form attached as Appendix E to the Preliminary Official Statement, addressed to (or with
reliance letters delivered in respect of) the Authority, the Trustee, the Company and the
Representative.

(ii) An opinion of Ballard Spahr LLP, Bond Counsel, dated the date of Closing, substantially
in the form attached as Exhibit A hereto, addressed to the Representative.

(iii) An opinion of the Office of Chief Counsel of the Pennsylvania Department of Community
and Economic Development, as counsel for the Authority, dated the date of Closing, in form and
substance satisfactory to the Representative, addressed to the Representative, the Trustee, the
Company and Bond Counsel.

(iv) An opinion of Dilworth Paxson LLP, counsel to the Company, dated the date of Closing,
substantially in the form attached as Exhibit B hereto, addressed to the Representative, 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 Representative 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 Representative.

(vi) A certificate dated the date of Closing executed by the Executive Director of the
Authority and addressed to the Representative to the effect that, to the best of his or her
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.

(vii) A certificate dated the date of Closing executed by the chief financial officer of the
Company and addressed to the Representative 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;

 

13

 

(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-sixth 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-sixth 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 Representative,
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 Representative of a long-term credit rating of “AA-” and a
recovery rating of “1+” assigned by Standard & Poor’s Ratings Services, a Division of The
McGraw-Hill Companies, and that such ratings are in full force and effect as of the date of
Closing.

(xiii) Evidence satisfactory to Bond Counsel and the Representative of the receipt by the
Authority of a Preliminary Allocation relating to the Bonds and of the registration of a Securities
Certificate relating to the First Mortgage Bonds and the Bonds with the Pennsylvania Public Utility
Commission.

(xiv) Such additional documentation, including, without limitation, legal opinions, as the
Representative 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-sixth 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.

 

14

 

(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 Representative, makes it inadvisable to proceed with the sale of the Bonds; and the
Representative 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 Representative shall deliver at Closing a certificate in form acceptable to Bond
Counsel to the effect that the Underwriters have 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 Underwriters to Terminate. The Underwriters may terminate
their 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 Representative 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
Trust 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.

(d) Any event or condition occurring or arising after the date hereof, which in the reasonable
judgment of the Representative 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 Representative will use their best efforts to amend or supplement
the Official Statement to reflect, to the reasonable satisfaction of the Representative, such
changes in or additions to the information contained in the Official Statement.

 

15

 

(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 Representative, 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 Underwriters in a timely
manner as required by Section 10 hereof.

If the Underwriters terminate their 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 Underwriters 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. [Intentionally Omitted]

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 Underwriters 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-sixth Supplemental Mortgage, the Continuing Disclosure Agreement and this
Bond Purchase Agreement, 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 Underwriters 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. Each of the respective Underwriters
will pay all other expenses it may incur in connection with the public offering of the Bonds.

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.

 

16

 

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 Underwriters:

	 	Jefferies & Company, Inc.,
	 	 

	 	as Representative of the Underwriters
	 	 

	 	1650 Market Street
	 	 

	 	36th Floor
	 	 

	 	Philadelphia, PA 19103
	 	 

	 	Attention: George C. Werner, III, Managing Director
	 	 

	 	Fax #: (610) 514-9852
	 	 

	 	Email: gwerner@Jefferies.com
	 	 
	 	 
	 	The Company:

	 	Aqua Pennsylvania, Inc.
	 	 

	 	762 Lancaster Avenue
	 	 

	 	Bryn Mawr, PA 19010
	 	 

	 	Attention: Diana Moy Kelly, Treasurer
	 	 

	 	Fax #: (610) 519-0989
	 	 

	 	Email: dmoykelly@aquaamerica.com
	 	 
	 	 
	 	The Authority:

	 	Pennsylvania Economic Development Financing Authority
	 	 

	 	Center for Private Financing
	 	 

	 	400 North Street, 4th Floor
	 	 

	 	Harrisburg, PA 17120-0225
	 	 

	 	Attention: Stephen Drizos, Executive Director
	 	 

	 	Fax #: (717) 787-0879
	 	 

	 	Email: sdrizos@state.pa.us

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
Underwriters.

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.

 

17

 

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)

 

18

 

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

	 	 	 	 	 
	 	PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING

AUTHORITY

 	 
	 	By:  	Stephen M. Drizos
 	 
	 	 	STEPHEN M. DRIZOS 	 
	 	 	Executive Director 	 
	 
	 	AQUA PENNSYLVANIA, INC.

 	 
	 	By:  	Diana MoyKelly
 	 
	 	 	DIANA MOY KELLY 	 
	 	 	Treasurer 	 
	 
	 	JEFFERIES & COMPANY, INC., on its own behalf

and as Representative of the Underwriters

 	 
	 	By:  	George C. Werner, III
 	 
	 	 	GEORGE C. WERNER, III 	 
	 	 	Managing Director 	 

 

19

 

SCHEDULE I

Underwriters

	 	 	 	 	 
	Jefferies & Company, Inc.
	 	 	72.50	%
	PNC Capital Markets, LLC
	 	 	20.00	%
	TD Securities (USA) LLC
	 	 	7.50	%

 

20

 

SCHEDULE II

$141,385,000

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

	 	 	 
	 
	 	 
	$45,180,000
	 	$96,205,000
	Water Facilities Revenue Refunding Bonds
	 	Water Facilities Revenue Bonds
	(Aqua Pennsylvania, Inc. Project)
	 	(Aqua Pennsylvania, Inc. Project)
	Series A of 2010
	 	Series B of 2010

2010A Bonds

	 	 	 	 	 	 	 	 	 	 	 
	$25,910,000
	 	5.00%
	 	Term Bond Due
	 	December 1, 2033
	 	Yield: 5.00%
	 	Price:100.000
	$19,270,000
	 	5.00%
	 	Term Bond Due
	 	December 1, 2034
	 	Yield: 5.05%
	 	Price: 99.306

2010B Bonds

	 	 	 	 	 	 	 	 	 	 	 
	$15,000,000
	 	4.50%
	 	Term Bond Due
	 	December 1, 2042
	 	Yield: 4.75%
	 	Price: 95.904
	$81,205,000
	 	5.00%
	 	Term Bond Due
	 	December 1, 2043
	 	Yield: 4.60%
	 	Price: 103.185*

	 	 	 
	*	 	Price shown to first optional redemption date of December 1, 2020.

Interest Payment Dates: June 1 and December 1, commencing June 1, 2011.

Redemption Provisions: The Bonds are subject to redemption as follows:

Optional Redemption

The 2010A Bonds are subject to optional redemption prior to maturity by the Authority, at the
direction of the Company, on and after December 1, 2020, as a whole or in part at any time, at a
redemption price equal to 100% of the principal amount thereof, plus interest accrued thereon to
the date fixed for redemption.

The 2010B Bonds are subject to optional redemption prior to maturity by the Authority, at the
direction of the Company, on and after December 1, 2020, as a whole or in part at any time, at a
redemption price equal to 100% of the principal amount thereof, plus interest accrued thereon to
the date fixed for redemption.

Extraordinary Optional Redemption- 2010A Bonds. The 2010A 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:

 

21

 

(a) the damage or destruction of all or substantially all of the Refunding Project 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 Refunding Project
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 Refunding Project 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 Financing Agreement other than ad
valorem property taxes presently levied upon privately owned property used for the same general
purposes as the Refunding Project Facilities, or (2) the continued operation of the Refunding
Project 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.

Extraordinary Optional Redemption- 2010B Bonds. The 2010B 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 2010B 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 Project 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
Project Facilities or the taking by condemnation of any part, use or control of the Project
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 Project 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 Financing Agreement other than ad valorem property
taxes presently levied upon privately owned property used for the same general purposes as the
Project Facilities, or (2) the continued operation of the Project 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.

 

22

 

Special Mandatory Redemption of the 2010B Bonds. The 2010B 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 Construction 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 2010B Project
Fund to the 2010B Debt Service Fund pursuant to the Trust Indenture, at a Redemption Price of 100%
of the principal amount of the 2010B 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 Trust Indenture.

 

23

 

EXHIBIT A

 

 

 

EXHIBIT B

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