<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999
Commission File Number 1-6659
PHILADELPHIA SUBURBAN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1702594
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010-3489
------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
---------------------------------------------------
(610)-527-8000
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 1999
40,962,206
- ----------------
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-----------------------------------
Assets (Unaudited) (Audited)
<S> <C> <C>
Property, plant and equipment, at cost $ 1,315,220 $ 1,248,621
Less accumulated depreciation 252,468 232,427
-----------------------------------
Net property, plant and equipment 1,062,752 1,016,194
-----------------------------------
Current assets:
Cash and cash equivalents 6,454 8,247
Accounts receivable and unbilled revenues, net 41,903 40,768
Inventory, materials and supplies 4,368 3,857
Prepayments and other current assets 2,800 7,026
-----------------------------------
Total current assets 55,525 59,898
-----------------------------------
Regulatory assets 57,525 57,697
Deferred charges and other assets, net 26,199 22,944
-----------------------------------
$ 1,202,001 $ 1,156,733
===================================
Liabilities and Stockholders' Equity
Stockholders' equity:
6.05% Series B cumulative preferred stock $ 1,760 $ 3,220
Common stock at $.50 par value, authorized 100,000,000 shares,
outstanding 40,962,206 and 40,702,311 in 1999 and 1998 20,780 20,617
Capital in excess of par value 249,890 244,457
Retained earnings 99,324 91,683
Minority interest 2,609 2,589
Treasury stock, 596,766 and 533,292 shares in 1999 and 1998 (10,891) (9,478)
Accumulated other comprehensive income 1,068 -
-----------------------------------
Total stockholders' equity 364,540 353,088
-----------------------------------
Long-term debt, excluding current portion 411,514 413,309
Commitments - -
Current liabilities:
Current portion of long-term debt 33,437 2,981
Loans payable 39,280 24,615
Accounts payable 10,292 25,248
Accrued interest 7,847 8,406
Accrued taxes 12,086 14,382
Other accrued liabilities 18,752 20,462
-----------------------------------
Total current liabilities 121,694 96,094
-----------------------------------
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits 132,919 126,809
Customers' advances for construction 56,866 57,781
Other 9,322 8,735
-----------------------------------
Total deferred credits and other liabilities 199,107 193,325
-----------------------------------
Contributions in aid of construction 105,146 100,917
-----------------------------------
$ 1,202,001 $ 1,156,733
===================================
</TABLE>
See notes to consolidated financial statements on page 6 of this report.
2
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
Operating revenues $ 194,091 $ 188,664
Costs and expenses:
Operations and maintenance 71,573 72,825
Depreciation 22,792 20,341
Amortization 989 1,737
Taxes other than income taxes 16,803 16,941
Restructuring costs 3,787 -
---------------------------
115,944 111,844
---------------------------
Operating income 78,147 76,820
Other expense (income):
Interest expense, net 24,968 23,728
Dividends on preferred stock of subsidiary and
minority interest 76 114
Allowance for funds used during construction (1,369) (861)
Merger transaction costs 6,334 -
Gains on sales of properties (198) (6,680)
---------------------------
Income before income taxes 48,336 60,519
Provision for income taxes 21,551 24,157
---------------------------
Net income 26,785 36,362
Dividends on preferred stock 104 146
---------------------------
Net income available to common stock $ 26,681 $ 36,216
===========================
Net income $ 26,785 $ 36,362
Other comprehensive income:
Unrealized gains on securities 1,643 -
Provision for income taxes on other comprehensive income (575) -
---------------------------
Comprehensive income $27,853 $36,362
===========================
Net income per common share:
Basic $ 0.65 $ 0.90
===========================
Diluted $ 0.65 $ 0.89
===========================
Average common shares outstanding
during the period:
Basic 40,823 40,263
===========================
Diluted 41,281 40,741
===========================
</TABLE>
See notes to consolidated financial statements on page 6 of this report.
3
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
Operating revenues $69,337 $68,991
Costs and expenses:
Operations and maintenance 24,645 25,216
Depreciation 7,765 6,932
Amortization 277 601
Taxes other than income taxes 5,591 5,871
---------------------------
38,278 38,620
---------------------------
Operating income 31,059 30,371
Other expense (income):
Interest expense, net 8,347 7,671
Dividends on preferred stock of subsidiary and
minority interest 34 45
Allowance for funds used during construction (512) (309)
Gains on sales of properties (190) -
---------------------------
Income before income taxes 23,380 22,964
Provision for income taxes 9,013 9,129
---------------------------
Net income 14,367 13,835
Dividends on preferred stock 35 48
---------------------------
Net income available to common stock $14,332 $13,787
===========================
Net income $14,367 $13,835
Other comprehensive income:
Unrealized gains on securities 1,643 -
Provision for income taxes on other comprehensive income (575) -
---------------------------
Comprehensive income $15,435 $13,835
===========================
Net income per common share:
Basic $ 0.35 $ 0.34
===========================
Diluted $ 0.35 $ 0.34
===========================
Average common shares outstanding
during the period:
Basic 40,898 40,563
===========================
Diluted 41,333 41,077
===========================
</TABLE>
See notes to consolidated financial statements on page 6 of this report.
4
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of dollars)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1999 1998
------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 26,785 $ 36,362
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 23,781 22,078
Deferred income taxes 5,576 7,637
Gains on sales of properties (198) (6,680)
Net decrease (increase) in receivables, inventory
and prepayments 2,645 (2,366)
Net decrease in payables, accrued interest, accrued taxes
and other accrued liabilities (14,753) (4,819)
Net cash flows from discontinued operations 383 1,361
Other 2,533 (1,363)
------------------------------
Net cash flows from operating activities 46,752 52,210
------------------------------
Cash flows from investing activities:
Property, plant and equipment additions, including allowance
for funds used during construction of $1,369 and $861 (67,723) (57,867)
Acquisitions of water systems (199) (23,911)
Proceeds from dispositions of properties 237 33,728
Other (6,280) 362
------------------------------
Net cash flows used in investing activities (73,965) (47,688)
------------------------------
Cash flows from financing activities:
Customers' advances and contributions in aid of construction 3,604 3,434
Repayments of customers' advances (2,125) (1,876)
Net proceeds (repayments) of short-term debt 14,665 (9,500)
Proceeds from long-term debt 34,664 29,120
Repayments of long-term debt (6,154) (23,519)
Redemption of preferred stock (1,460) -
Redemption of preferred stock of subsidiary - (4,214)
Proceeds from issuing common stock 5,939 31,281
Repurchase of common stock (1,756) (3,334)
Dividends paid on preferred stock (90) (146)
Dividends paid on common stock (21,832) (21,898)
Other (35) (47)
------------------------------
Net cash flows from (used in) financing activities 25,420 (699)
------------------------------
Net increase (decrease) in cash and cash equivalents (1,793) 3,823
Cash and cash equivalents at beginning of year 8,247 3,374
------------------------------
Cash and cash equivalents at end of period $ 6,454 $ 7,197
==============================
</TABLE>
See Merger with Consumers Water Company footnote for description of
non-cash investing and financing activities.
See notes to consolidated financial statements on page 6 of this report.
5
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-----------------------------------
(Unaudited) (Audited)
Stockholders' equity:
<S> <C> <C>
6.05% Series B cumulative preferred stock $ 1,760 $ 3,220
Common stock, $.50 par value 20,780 20,617
Capital in excess of par value 249,890 244,457
Retained earnings 99,324 91,683
Minority interest 2,609 2,589
Treasury stock (10,891) (9,478)
Accumulated other comprehensive income 1,068 -
-----------------------------------
Total stockholders' equity 364,540 353,088
-----------------------------------
Long-term debt:
First Mortgage Bonds secured by utility plant:
Interest Rate Range
0.00% to 1.99% 903 949
2.00% to 4.99% 824 -
5.00% to 5.49% 2,200 -
5.50% to 5.99% 31,545 21,945
6.00% to 6.49% 102,210 87,210
6.50% to 6.99% 55,200 55,200
7.00% to 7.49% 38,000 40,001
7.50% to 7.99% 23,000 23,000
8.00% to 8.49% 16,500 16,500
8.50% to 8.99% 9,005 9,011
9.00% to 9.49% 53,776 53,776
9.50% to 9.99% 51,220 51,820
10.00% to 10.55% 6,000 6,000
-----------------------------------
Total First Mortgage Bonds 390,383 365,412
Note payable to bank under revolving credit agreement, due January 2000 43,425 38,935
Notes payable to banks under revolving credit agreements, due June 2000 9,600 10,400
Installment note payable, 9%, due in equal annual payments through 2013 1,543 1,543
-----------------------------------
444,951 416,290
Current portion of long-term debt 33,437 2,981
-----------------------------------
Long-term debt, excluding current portion 411,514 413,309
-----------------------------------
Total capitalization $ 776,054 $ 766,397
===================================
</TABLE>
See notes to consolidated financial statements on page 6 of this report.
6
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)
(UNAUDITED)
Note 1 Basis of Presentation
On March 10, 1999, Philadelphia Suburban Corporation (the "Company" or
"PSC") completed a merger with Consumers Water Company ("CWC"). See
Note 2 - Merger with Consumers Water Company. The merger has been
accounted for as a pooling-of-interests under Accounting Principles
Board Opinion No. 16. Accordingly, the Company's consolidated financial
statements have been restated to include the accounts and results of
CWC as if the merger had been completed as of the beginning of the
earliest period presented. Certain reclassifications were made to the
historical financial statements of the two companies to conform
presentations.
The accompanying consolidated balance sheet and statement of
capitalization of PSC at September 30, 1999, the consolidated
statements of income and comprehensive income for the nine months and
quarter ended September 30, 1999 and 1998, and the consolidated
statements of cash flow for the nine months ended September 30, 1999
and 1998 are unaudited, but reflect all adjustments, consisting of only
normal recurring accruals, which are, in the opinion of management,
necessary to present fairly the consolidated financial position, the
consolidated results of operations, and the consolidated cash flow for
the periods presented. Because they cover interim periods, the
statements and related notes to the financial statements do not include
all disclosures and notes normally provided in annual financial
statements, and therefore, should be read in conjunction with the PSC
Annual Report on Form 10-K for the year ended December 31, 1998, Form
8-K filed on May 24, 1999 containing the Company's audited Supplemental
Consolidated Financial Statements as of December 31, 1998 and 1997 and
for each of the years in the three-year period ended December 31, 1998
and the Quarterly Report on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999.
Note 2 Merger with Consumers Water Company
On March 10, 1999, the Company completed a merger ("the Merger") with
CWC. Pursuant to the merger agreement, the Company issued 13,014,015
shares of common stock in exchange for all of the outstanding stock of
CWC. CWC common shareholders received 1.432 shares of the Company's
Common Stock for each CWC common share and CWC preferred shareholders
received 5.649 shares of the Company's Common Stock for each CWC
preferred share. As a result of the Merger, CWC became a wholly-owned
subsidiary of the Company. CWC serves approximately 230,000 customers
in service territories covering parts of Pennsylvania, Ohio, Illinois,
New Jersey and Maine.
During the first quarter of 1999, the Company recorded a charge of
$6,334 ($6,134, after tax benefits of $200) for merger transaction
costs consisting primarily of fees for investment bankers, attorneys,
accountants, and other administrative charges. In addition, the Company
recorded in the first quarter of 1999 restructuring costs of $3,787
($2,462, after tax benefits of $1,325) that includes severance and
other costs associated with the closing of CWC's corporate office. As
of March 31, 1999, $1,647
7
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)(continued)
(UNAUDITED)
of restructuring costs were accrued and during the second and third
quarters of 1999, $1,300 of these restructuring costs were paid with
the balance anticipated to be paid over time. The merger transaction
costs have been reported in Other expense and the restructuring costs
have been reported as Costs and expenses in the Consolidated Statements
of Income and Comprehensive Income.
8
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)(continued)
(UNAUDITED)
Note 3 Acquisitions
In January 1999, the Pennsylvania Public Utility Commission ("PAPUC")
approved the franchise application of the Company's largest subsidiary,
Philadelphia Suburban Water Company ("PSW") to expand PSW's service
territory in Cumru Township, Berks County. It is anticipated that new
customers will result as the territory is developed over time.
In March 1999, one of CWC's Pennsylvania subsidiaries purchased the
water system assets that the New Wilmington Municipal Authority and the
Wilmington Borough owned jointly, for $55 in cash. The service
territory covers 33 square miles and is located in Wilmington Borough,
Mercer County and Wilmington Borough, Lawrence County. The annual
revenues of this system approximate $165.
In March 1999, PSW's wastewater subsidiary acquired the assets of a
wastewater system from a real estate developer and a township for $162
in cash, payable in installments over four years. The service territory
covers approximately a one-half square mile area in East Bradford
Township, Chester County. The annual revenues of this system
approximate $40.
In July 1999, PSW entered into an agreement to purchase the water
system assets of the East Marlborough Township water system for $500 in
cash. Located in Chester County, the system is contiguous to PSW's and
has annual operating revenues of approximately $70. In October 1999,
the PAPUC approved the transaction and closing is anticipated to occur
by the end of 1999.
In August 1999, CWC's Ohio subsidiary acquired the water system assets
of two apartment complexes in Jackson Township, Ohio for $95 in cash.
The annual revenues of this system, once fully developed, are projected
to approximate $100.
In August 1999, PSW entered into an agreement to purchase the water
utility assets of Bensalem Township for approximately $36,500. In
October 1999, the PAPUC approved the transaction. Closing on the
acquisition is anticipated to occur in December 1999. The Bensalem
Township system covers a 20 square-mile service area in Bucks County,
Pennsylvania. The increase in annual revenues resulting from this
acquisition approximate $4,100.
In August 1999, CWC's Illinois subsidiary entered into an agreement to
purchase the water utility assets of the Village of Bradley in Kankakee
County for $975 in cash. The annual operating revenues of this system
is $190. This transaction is anticipated to close by the end of 1999.
The Company continues to actively explore other opportunities to expand
its utility operations through acquisitions and otherwise.
9
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)(continued)
(UNAUDITED)
Note 4 Water Rates
PSW filed an application with the PAPUC on October 29, 1999 requesting
a $28 million or 15.5% increase in annual revenues. The application is
currently pending before the PAPUC and a final determination is
anticipated by July 2000. In May 1999, a rate application was filed by
CWC's Illinois subsidiary for one of its divisions. The amount of
increased annual revenue requested is $558 and a decision is
anticipated during the first quarter of 2000. During the first quarter
of 1999, CWC's operating subsidiaries settled one rate case and
implemented received a rate increase granted under the terms of a prior
year rate settlement in two CWC divisions resulting in an aggregate
annual revenue increase of $390.
Water utilities in Pennsylvania are permitted by the PAPUC to add a
Distribution System Improvement Charge ("DSIC") to their water bills
reflecting the capital costs and depreciation related to certain
distribution system improvement projects completed and placed into
service between base rate filings. PAPUC rules require a utility to
suspend the use of the DSIC in the quarter subsequent to a twelve-month
period that the utility's adjusted return on equity exceeds a benchmark
established by the PAPUC. The benchmark is established quarterly by the
PAPUC staff based on recent economic data. Based on the adjusted return
on equity for 1998 and the applicable benchmark, PSW's DSIC resumed in
the second quarter of 1999 after having been suspended in the first
quarter of 1999. PSW's DSIC in the second and third quarters of 1999
was 3.05% and 3.62% of base water rates, respectively. The amount of
PSW's DSIC in the fourth quarter of 1999 has been set at 5.00% of base
water rates, the maximum DSIC allowed. During the third and fourth
quarters, two of CWC's Pennsylvania subsidiaries also reflect a DSIC on
their water bills at rates less than 1%. The amount of the DSIC in the
first quarter of 2000 is dependent on the adjusted return on equity of
the individual Pennsylvania subsidiaries and the benchmark established
by the PAPUC and therefore is not determinable at this time.
In addition to its base rates and DSIC, PSW has utilized a surcharge on
its bills to reflect certain changes in Pennsylvania State taxes until
such time as the tax changes are incorporated into base rates. From May
1998 until February 1999, PSW was required to provide a revenue credit
of 0.11% ($110 on an annual basis) of base water rates in order to
provide its customers with the savings associated with a decrease in
the Pennsylvania Capital Stock Tax rate. In February 1999, PSW added a
1.04% surcharge ($1,384 on an annual basis) as a result of increases in
the Pennsylvania Public Utility Realty Tax, resulting in a combined
surcharge of 0.93%. Effective April 1, 1999, the combined surcharge was
adjusted to 0.96% due to a change in the revenue credit from 0.11% to
0.08%. Effective May 29, 1999, the combined surcharge was adjusted to
0.80% ($1,153 on an annual basis) due to a decrease in the Pennsylvania
Capital Stock Tax rate. CWC's Pennsylvania subsidiaries have also begun
to utilize a surcharge at various rates (providing approximately $250
of revenues on an annual basis) on their bills to reflect the changes
in Pennsylvania State Taxes.
10
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)(continued)
(UNAUDITED)
Note 5 Long-term Debt and Loans Payable
In January 1999, PSW issued a First Mortgage Bond of $10,000 5.85%
Series due 2004 and in April 1999, PSW issued a First Mortgage Bond of
$15,000 6.00% Series due 2004 through the medium-term note program.
Proceeds from these issues were used to reduce the balance of PSW's
revolving credit facility. In June 1999, CWC's Maine subsidiary issued
a First Mortgage Bond of $2,200 5.05% Series due 2024. In August 1999,
CWC's Maine subsidiary issued a First Mortgage Bond of $824 2.68%
Series due 2019. Proceeds from these issues were used to reduce the
balance of its short-term debt.
In June 1999, two of the three CWC revolving credit agreements were due
and terminated as planned. The two expired revolving credit facilities
had represented aggregate borrowing facilities of $20,000 and amounts
borrowed under these facilities have been repaid. In August 1999, the
remaining CWC revolving credit agreement was amended to increase the
facility from $15,000 to $20,000.
In October 1999, PSW issued $25,000 in First Mortgage Bonds 6.00%
Series due 2029 as security for an equal amount of Bonds issued by the
Delaware County Industrial Development Authority. The proceeds from
these bonds are restricted to funding the costs of certain capital
projects. As of closing, project costs of $22,562 were already incurred
and accordingly the Trustee transferred such amounts to PSW. As a
result, $22,562 of the balance on PSW's revolving credit agreement has
been classified as long-term debt as of September 30, 1999. The
remainder of the proceeds are being held by the Trustee pending
completion of the remainder of the projects financed with this issue.
It is expected that these projects will be completed in 2000, however,
funds will be drawn from the trust during the interim as expenditures
are made on these projects.
Note 6 Net Income per Common Share
Basic net income per common share is based on the weighted average
number of common shares outstanding. Diluted net income per common
share is based on the weighted average number of common shares
outstanding and potentially dilutive shares. The dilutive effect of
employee stock options is included in the computation of Diluted net
income per common share. The following table summarizes the shares, in
thousands, used in computing Basic and Diluted net income per common
share:
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1999 1998 1999 1998
------ ------ ------ ------
Average common shares outstanding
during the period for Basic
computation....................... 40,823 40,263 40,898 40,563
Dilutive effect of employee stock
options........................... 458 478 435 514
------ ------ ------ ------
Average common shares outstanding
during the period for Diluted
computation....................... 41,281 40,741 41,333 41,077
====== ====== ====== ======
11
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)
Forward-looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements address, among other things, the Company's: use of cash;
projected capital expenditures; liquidity; Year 2000 disclosure, including
statements regarding readiness, remediation, costs, risks and contingency plans;
as well as information contained elsewhere in this Report where statements are
preceded by, followed by or include the words "believes", "expects",
"anticipates", "plans", "projects" or similar expressions. These statements are
based on a number of assumptions concerning future events, and are subject to a
number of uncertainties and other factors, many of which are outside the
Company's control. Actual results may differ materially from such statements for
a number of reasons, including the effects of regulation, abnormal weather,
changes in capital requirements and funding, acquisitions and the Year 2000
readiness of third parties with whom the Company deals. The Company undertakes
no obligation to update or revise forward-looking statements, whether as a
result of new information, future events or otherwise.
General Information
Philadelphia Suburban Corporation ("PSC" or "the Company"), a Pennsylvania
corporation, is the holding Company of Philadelphia Suburban Water Company
("PSW") and Consumers Water Company ("CWC"). PSW, a regulated water utility,
provides water to approximately 303,000 customers within its 482 square-mile
service territory. PSW's service territory is located north and west of the City
of Philadelphia. In addition, water service is provided to approximately 6,800
customers through an operating and maintenance contract with a municipal
authority contiguous to its service territory.
CWC owns 100% of the voting stock of four water companies and at least 96% of
the voting stock of three water companies, collectively CWC's operating
subsidiaries. These water companies are regulated water utilities providing
water and wastewater service in 27 operating divisions to approximately 230,000
customers in Pennsylvania, Ohio, Illinois, New Jersey and Maine.
Financial Condition
During the first nine months of 1999, the Company had $67,723 of capital
expenditures, redeemed $1,460 of preferred stock, and repaid $2,125 of customer
advances for construction. Of the total capital expenditures, $12,100 was
related to the construction of the Shenango water treatment plant in Sharon,
Pennsylvania, $24,200 for infrastructure improvements and the balance for
routine capital improvements. Construction of the Shenango plant commenced in
December 1997 and is expected to cost $35,000 with completion anticipated in the
first quarter of 2000. To date, $27,400 has been expended on the Shenango plant
construction.
12
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
During the first nine months of 1999, the proceeds from the issuance of
long-term debt, proceeds from the issuance of common stock, internally generated
funds, available working capital and funds available under the revolving credit
agreements were used to fund the cash requirements discussed above and to pay
dividends. In connection with the merger of CWC on March 10, 1999, the Company
issued 13,014,015 shares of common stock in exchange for all of the outstanding
stock of CWC. In January 1999, PSW issued a First Mortgage Bond of $10,000 5.85%
Series due 2004 through the medium-term note program. In April 1999, PSW issued
a First Mortgage Bond of $15,000 6.00% Series due 2004. Proceeds from these
issues were used to reduce the balance of PSW's revolving credit facility. In
June 1999, CWC's Maine subsidiary issued a First Mortgage Bond of $2,200 5.05%
Series due 2024. In August 1999, CWC's Maine subsidiary issued a First Mortgage
Bond of $824 2.68% Series due 2019. Proceeds from these issues were used to
reduce the balance of its short-term debt. Effective with the September 1, 1999
payment, the Company has increased the quarterly dividend on common stock from
$.17 per share to $.18 per share.
At September 30, 1999, the Company, PSW and CWC had short-term lines of credit
of $24,000, $1,000 and $87,800, respectively. At September 30, 1999, the
Company, PSW and CWC had $12,000, $1,000 and $60,520 available, respectively
under short-term lines of credit. In June 1999, two of the three CWC revolving
credit agreements became due and were terminated as planned. The two expired
revolving credit facilities had represented aggregate borrowing facilities of
$20,000 and amounts borrowed under these facilities have been repaid. In August
1999, the remaining CWC revolving credit agreement was amended to increase the
facility from $15,000 to $20,000. At September 30, 1999, PSW's revolving credit
agreement remained as a $50,000 facility. At September 30, 1999, PSW and CWC had
$6,575 and $10,400 available, respectively, under their revolving credit
agreements. In October 1999, PSW issued $25,000 in First Mortgage Bonds 6.00%
Series due 2029 as security for an equal amount of Bonds issued by the Delaware
County Industrial Development Authority. As of November 12, 1999, the Trustee
for this issue held $2,438 in an interest bearing account pending completion of
the remainder of the projects financed with this issue. Accordingly, $22,562 of
borrowings under the PSW revolving credit agreement were repaid with the
proceeds from this issuance of First Mortgage Bonds and this portion of the
revolving credit balance is classified as long-term debt as of September 30,
1999. The remainder of the revolving credit agreements balances have been
classified as current portion of long-term debt. PSW intends to renew this
facility and continue to periodically refinance portions of the borrowings under
this facility through the issuance of First Mortgage Bonds.
In the fourth quarter of 1999, PSW intends to establish a $300,000 medium-term
note program to replace a similar program that expired in July 1999. The program
will provide for the issuance of long-term debt with maturities ranging between
one and 35 years at fixed rates of interest, as determined at the time of
issuance. The proceeds from debt issuances under this program will be used for
general corporate purposes, to fund PSW's ongoing construction programs and to
partially fund the acquisition of the water utility assets of Bensalem Township
and other acquisitions.
13
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
Results of Operations
Analysis of First Nine Months of 1999 Compared to First Nine Months of 1998
Operating revenues increased $5,427 or 2.9% primarily due to additional revenues
from acquisitions, rate increases, including an additional $2,260 from the
Distribution System Improvement Charge and $1,040 of additional revenues from a
state tax adjustment surcharge that were added to customers bills in
Pennsylvania, offset in part by $1,623 of revenues associated with CWC's New
Hampshire operations which was sold in April 1998. In addition, water
consumption for the first nine months increased despite drought declarations in
Pennsylvania and New Jersey that affected revenues in the third quarter of 1999.
Six rate increases were granted or became effective in various CWC divisions
since the first quarter of 1998 which contributed an additional $1,540 of
revenues in the first nine months of 1999.
Operations and maintenance expenses decreased by $1,252 or 1.7% due to $592 of
operations and maintenance expenses associated with CWC's New Hampshire
operations which was sold in April 1998, savings from reduced electric costs as
a result of electric deregulation in Pennsylvania and a reduction in general
corporate expenses due to the closing of CWC's corporate office. The decreased
operating costs were offset in part by increased wages and higher maintenance
expenses at PSW resulting from an increased number of main breaks.
Depreciation expense increased $2,451 or 12.0% reflecting the utility plant
placed in service since the third quarter of 1998, including the assets acquired
through system acquisitions.
Amortization decreased $748 primarily due to the completion of the amortization
in 1998 of the costs associated with PSW's 1997 rate filing.
Taxes other than income taxes decreased by $138 or 0.8% due to a decrease in the
Pennsylvania Public Utility Realty Tax ("PURTA"), the other taxes of CWC's New
Hampshire operations, sold in April 1998, and a reduction in state regulatory
taxes. The reduction in the PURTA tax is due to an additional 1998 charge for
PURTA tax resulting from an additional assessment.
Restructuring costs of $3,787 were recorded in the first quarter of 1999, as
described in Note 2 - Merger with Consumers Water Company, which includes
severance of $2,940 and other costs associated with the closing of CWC's
corporate office.
Net interest expense increased by $1,240 or 5.2% due to increased borrowings to
finance on-going capital projects and acquisitions, offset partially by a
reduction in debt associated with CWC's New Hampshire operations and lower
interest rates on borrowings.
Allowance for funds used during construction increased by $508 primarily due to
an increase in the average balance of utility plant construction work in
progress resulting from the construction of the $35,000 Shenango water treatment
plant. Construction commenced on this facility in December 1997 and is expected
to be completed in the first quarter of 2000.
The merger transaction costs in the first quarter of 1999 of $6,334 represents
the fees for investment bankers, attorneys, accountants, and other
administrative charges associated with the merger of Consumers Water Company
consummated on March 10, 1999. See Note 2 - Merger with Consumers Water Company.
14
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
Gains on sales of properties decreased by $6,482 primarily due to the gain on
the sale of CWC's New Hampshire operations of $6,680 recorded in the second
quarter of 1998, offset in part by gains on sales of properties in 1999.
The Company's effective income tax rate was 44.6% in the first nine months of
1999 and 39.9% in 1998. The effective tax rate increased due to the estimated
non-deductible portion of the $6,334 of merger transaction costs recorded in the
first quarter of 1999. Exclusive of the merger transaction costs and related tax
benefits of $200, the 1999 effective income tax rate was 39.8%.
Dividends on preferred stock decreased $42 or 28.8% due to the redemption in
January 1999 of 14,600 shares of preferred stock. The preferred shares were
redeemed at the liquidation value of $100 per share.
Net income available to common stock for the first nine months of 1999 decreased
by $9,535, of which $8,596, net of tax, was related to the merger costs recorded
in the first quarter of 1999, $3,903, net of tax, was related to the gain on
sale of CWC's New Hampshire operations in April 1998 and the other factors
described above. Excluding these non-recurring items, net income available to
common stock increased $2,964 or 9.2%. On a diluted per share basis, earnings
decreased $.24 reflecting the change in net income and a 1.3% increase in the
average number of common shares outstanding. The increase in the number of
shares outstanding is primarily a result of the additional shares sold or
otherwise issued through the Dividend Reinvestment Plan and the employee stock
and incentive plan.
Analysis of Third Quarter of 1999 Compared to Third Quarter of 1998
Operating revenues for the quarter increased $346 or 0.5% primarily due to rate
increases, including an additional $1,100 from the Distribution System
Improvement Charge and $420 of additional revenues from a state tax adjustment
surcharge that were added to customers' bills in Pennsylvania, offset in part by
a decrease in customer consumption of water in Pennsylvania and New Jersey. The
Pennsylvania and New Jersey service territories were affected by drought
declarations during the third quarter of 1999 in which the Governors of each
state imposed mandatory bans on nonessential water usage. These restrictions
were lifted at the end of September and in early October. While these
restrictions were in effect, water consumption in these areas declined to levels
below those experienced in 1998. Three rate increases were granted or became
effective in various CWC divisions since the third quarter of 1998, providing
for an additional $124 of revenues in the quarter.
Operations and maintenance expenses decreased by $571 or 2.3% due to a reduction
in general corporate expenses related to the closing of CWC's corporate office
in March 1999, reduced production costs attributable to reduced production and
savings from reduced electric costs, offset partially by increased wages and
maintenance expenses. The reduced electric costs result from the electric
deregulation in Pennsylvania. The increased maintenance expenses result from an
increase in water main repairs.
15
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
Depreciation expense increased $833 or 12.0% reflecting the utility plant placed
in service since the third quarter of 1998.
Amortization decreased $324 primarily due to the completion of the amortization
in 1998 of the costs associated with PSWs 1997 rate filing.
Taxes other than income taxes decreased by $280 or 4.8% as a result of an
additional 1998 charge for PURTA tax due to an additional tax assessment that
had been necessary to offset a state-wide deficit in the collection of this tax.
The decreased PURTA tax is offset partially by an increase in local real estate
taxes due to additional capital expenditures.
Net interest expense increased by $676 or 8.8% due to increased borrowings to
finance on-going capital projects offset partially by lower interest rates on
borrowings.
Allowance for funds used during construction increased by $203 primarily due to
an increase in the average balance of utility plant construction work in
progress resulting from the construction of the $35,000 Shenango water treatment
plant. Construction commenced on this facility in December 1997 and is expected
to be completed in the first quarter of 2000.
Gains on sales of properties increased by $190 due to the gain on the sale of
various land parcels in CWC's Illinois subsidiary.
The Company's effective income tax rate was 38.6% in the third quarter of 1999
and 39.8% in 1998. The effective tax rate decreased due to differences between
tax deductible expenses and book expenses, offset in part by an increase in the
statutory Federal income tax rate from 34% to 35% in the CWC operating
subsidiaries.
Dividends on preferred stock decreased $13 or 27.1% due to the redemption in
January 1999 of 14,600 shares of preferred stock. The preferred shares were
redeemed at the liquidation value of $100 per share.
Net income available to common stock for the quarter increased by $545 primarily
as a result of factors described above. On a diluted per share basis, earnings
increased $.01 or 2.9% reflecting the change in net income and a 0.6% increase
in the average number of common shares outstanding. The increase in the number
of shares outstanding is primarily a result of the additional shares sold or
otherwise issued through the Dividend Reinvestment Plan and the employee stock
and incentive plan.
Recent Events
The Company's water customers are located in five states and as of December 31,
1998, 65% were located in Pennsylvania. On June 10, 1999, the Pennsylvania
Department of Environmental Protection declared a drought warning for most of
the counties in Pennsylvania, including the counties served by PSW and CWC's
Pennsylvania subsidiaries. A drought warning calls for voluntary restrictions on
water use, particularly non-essential uses of water. On July 20, 1999, the
Governor of Pennsylvania issued a drought emergency order for the counties that
were previously under the
16
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
drought warning. The drought emergency imposes a mandatory ban on all
nonessential water usage. On September 30, 1999, the drought emergency order was
lifted for nearly all Pennsylvania counties, including those served by PSC's
water companies. While portions of Pennsylvania, particularly those dependent on
ground water, experienced water shortages, the Company's water supplies remained
adequate. As a result of these actions, water consumption and water revenues in
these areas declined to levels below those experienced in 1998. As a result of
the drought emergency order being lifted, water revenues are expected to return
to normal levels.
Year 2000
Overview
The Company has actively pursued a Year 2000 Program (the "Program"). The
objective of the Program is to provide reasonable assurance that the Company's
critical systems and processes that impact the Company's ability to deliver
water to its customers will not experience significant interruptions that would
interfere with such water service or result in a material business impairment
that would have an adverse impact to the Company's operations, liquidity or
financial condition as a result of the Year 2000 issue. For purposes of the
Program, the Year 2000 issue is defined as whether information technology
accurately processes date and time data from, into and between the twentieth and
twenty-first centuries, and the years 1999 and 2000 and leap year calculations.
The Company's systems and processes that were reviewed include: (i) internal
systems and processes, consisting of software, databases, information technology
hardware and imbedded microprocessors; and (ii) relationships with third
parties. The Program involves a systematic approach to the Year 2000 issue
consisting of the following steps: (i) inventorying the component elements of
the Company's systems and processes; (ii) assessing whether there are Year 2000
issues with such systems and processes; (iii) remediation of systems and
processes that are identified as having Year 2000 issues; (iv) testing the
remediation measures that are implemented; and (v) developing contingency plans.
The Company's State of Readiness
Internal Systems and Processes The Company has evaluated its systems and
processes based on a prioritization of the risks they pose to the overall
objectives of the Program. An inventory of all critical systems and processes
and an assessment of Year 2000 issues for the Company's critical systems has
been completed. As a result of the assessment, it was determined that the
internal systems and processes directly related to the treatment and
distribution of water to its customers would not be significantly affected by
the Year 2000 issue. Some financial and office systems may have been affected
and the remediation or replacement and testing of these systems is under way. It
is anticipated that remediation or replacement and testing of the last of these
office systems is anticipated to be completed in November 1999.
Relationships with Third Parties - The Company's relationships with third
parties that may be affected by the Year 2000 issue may be classified into three
categories: customers; suppliers; and third party software vendors. The majority
of the Company's revenues are from residential customers and commercial
customers (consisting primarily of apartments, colleges, hospitals, small
businesses and municipalities), and from fire protection services. It is not
anticipated that
17
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
water use by customers in these categories will be significantly affected by the
Year 2000 issue. No single customer accounted for more than one percent of the
Company's 1998 revenues.
The Company has contacted its key suppliers to determine their Year 2000
compliance status and the responses received to date indicate that such
suppliers are or intend to be Year 2000 compliant. Because of the substantial
electric power requirements of the Company's water treatment and distribution
systems, electric power supply may be the most critical supplier relationship.
To date, the Company's electric suppliers have indicated that they do not
anticipate service disruptions from the Y2K problem. Third party vendors of
critical software systems have been contacted regarding the compliance status of
their software and either the vendors have represented that their software
packages are compliant or the software is being remedied as part of the
Company's Year 2000 Program.
The Costs to Address the Company's Year 2000 Issues
The Company estimates its total cost for its Year 2000 Program to be
approximately $8,000 which includes the costs to develop a new customer billing
system that the Company is implementing to provide added capacity and
capabilities. Substantially all of these costs have been incurred to date in
bringing its critical systems into compliance.
The Risks of the Company's Year 2000 Issues
A material Year 2000 noncompliance could result in an interruption in, or
failure of, certain normal business activities or operations. Such noncompliance
could materially and adversely affect the Company's water service and results of
operations, liquidity and financial condition. Because of the uncertainty
inherent in the Year 2000 issue, due primarily from the uncertainty of the Year
2000 readiness of third party suppliers, the Company is unable to determine at
this time whether the consequences of Year 2000 noncompliances will have a
material impact on the Company. The Company's Year 2000 Program is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
issue and, in particular, about the Year 2000 compliance and readiness of its
key vendors and suppliers. The Company believes that, with the completion of its
Program, the possibility of significant interruptions of normal operations
should be reduced.
The Company's Contingency Plans
The Company had developed contingency plans for critical systems or processes or
vendor relationships that cannot be verified as Year 2000 compliant. Contingency
plans have also been developed for certain other critical systems,
notwithstanding a determination of their Year 2000 compliance, where such
systems would have a significant effect on the Company's ability to deliver
water to its customers.
Forward-looking Statements
The statements in the Company's Year 2000 disclosure contain forward-looking
statements and should be read in conjunction with the Company's disclosure under
the "Forward-looking Statements" section in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
18
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)(continued)
Impact of Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". The Company's adoption of this
statement on January 1, 1999 did not have a material impact on the Company's
results from operations or financial condition.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities". The Company's adoption of this statement on January 1, 1999 did not
have a material impact on the Company's results from operations or financial
condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and in June 1999 amended this standard by
issuing SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement No. 133". SFAS No.
133 establishes accounting and reporting standards for derivative instruments
and for hedging activities. SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 137 changed the
timing of the implementation of SFAS No. 133. The Company plans to adopt these
statements in 2001 as required. As of September 30, 1999, the Company had no
derivative instruments or hedging activities.
19
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
There are no pending legal proceedings to which the Registrant or any
of its subsidiaries is a party or to which any of their properties is
the subject that present a reasonable likelihood of a material adverse
impact on the Registrant. Reference is made to Item 3 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, which
is included by a reference herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
4.26 Thirty-second Supplemental Indenture, dated as of
October 1, 1999
10.37 Bond Purchase Agreement among the Delaware County
Industrial Development Authority, Philadelphia
Suburban Water Company and Commerce Capital
Markets dated September 29, 1999
10.38 Construction and Financing Agreement between the
Delaware County Industrial Development Authority
and Philadelphia Suburban Water Company dated as
of October 1, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K
None
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be executed on its behalf by the
undersigned thereunto duly authorized.
November 12, 1999
PHILADELPHIA SUBURBAN CORPORATION
Registrant
/s/ Nicholas DeBenedictis
---------------------------------
Nicholas DeBenedictis
Chairman and President
/s/ David P. Smeltzer
---------------------------------
David P. Smeltzer
Vice President - Finance
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
4.26 Thirty-second Supplemental Indenture, dated
as of October 1, 1999 23
10.37 Bond Purchase Agreement among the 58
Delaware County Industrial Development Authority,
Philadelphia Suburban Water Company and
Commerce Capital Markets dated September 29, 1999
10.38 Construction and Financing Agreement between 82
the Delaware County Industrial Development
Authority and Philadelphia Suburban Water Company
dated as of October 1, 1999
27 Financial Data Schedule 121
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 4.26
THIRTY-SECOND SUPPLEMENTAL
INDENTURE
DATED AS OF OCTOBER 1, 1999
TO
INDENTURE OF MORTGAGE
DATED AS OF JANUARY 1, 1941
PHILADELPHIA SUBURBAN WATER COMPANY
TO
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
-------------------
$25,000,000 FIRST MORTGAGE BONDS, 6.00% Series due 2029
<PAGE>
THIRTY-SECOND SUPPLEMENTAL INDENTURE
THIRTY-SECOND SUPPLEMENTAL INDENTURE dated as of the 1st day of
October, 1999, by and between PHILADELPHIA SUBURBAN WATER COMPANY, a corporation
duly organized and existing under the laws of the Commonwealth of Pennsylvania
(the "Company"), party of the first part, and CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, a national banking association (the "Trustee"), party of
the second part.
WHEREAS, the Company heretofore duly executed and delivered to
The Pennsylvania Company for Insurances on Lives and Granting Annuities, as
trustee, an Indenture of Mortgage dated as of January 1, 1941 (the "Original
Indenture"), which by reference is hereby made a part hereof, and in and by the
Original Indenture the Company conveyed and mortgaged to the Trustee certain
property therein described, to secure the payment of its bonds to be generally
known as its "First Mortgage Bonds" and to be issued under the Original
Indenture in one or more series as therein provided; and
WHEREAS, on March 29, 1947, concurrently with a merger of
Germantown Trust Company into The Pennsylvania Company for Insurances on Lives
and Granting Annuities, the name of the surviving corporation was changed to The
Pennsylvania Company for Banking and Trusts; on September 30, 1955, concurrently
with a merger of The First National Bank of Philadelphia into The Pennsylvania
Company for Banking and Trusts, the name of the surviving corporation was
changed to The First Pennsylvania Banking and Trust Company; on June 3, 1974, by
amendment to its Articles of Association, The First Pennsylvania Banking and
Trust Company was changed and converted into a national bank and concurrently
therewith changed its name to First Pennsylvania Bank N.A.; on October 1, 1991,
First Pennsylvania Bank N.A. merged with and into The Philadelphia National
Bank, which changed its name to CoreStates Bank, N.A.; on October 10, 1995,
Mellon Bank, N.A. succeeded Corestates Bank N.A. as trustee; and on November 24,
1997, Chase Manhattan Trust Company, National Association, succeeded Mellon
Bank, N.A. as trustee, such mergers and changes of name not involving any change
in the title, powers, rights or duties of the Trustee, as trustee under the
Original Indenture as supplemented at the respective dates thereof; and
WHEREAS, the Company duly executed and delivered to the
Trustee a First Supplemental Indenture dated as of July 1, 1948, a Second
Supplemental Indenture dated as of July 1, 1952, a Third Supplemental Indenture
dated as of November 1, 1953, a Fourth Supplemental Indenture dated as of
January 1, 1956, a Fifth Supplemental Indenture dated as of March 1, 1957, a
Sixth Supplemental Indenture dated as of May 1, 1958, a Seventh Supplemental
Indenture dated as of September 1, 1959, an Eighth Supplemental Indenture dated
as of May 1, 1961, a Ninth Supplemental Indenture dated as of April 1, 1962, a
Tenth Supplemental Indenture dated as of March 1, 1964, an Eleventh Supplemental
Indenture dated as of November 1, 1966, a Twelfth Supplemental Indenture dated
as of January 1, 1968, a Thirteenth Supplemental Indenture dated as of June 15,
1
<PAGE>
1970, a Fourteenth Supplemental Indenture dated as of November 1, 1970, a
Fifteenth Supplemental Indenture dated as of December 1, 1972, a Sixteenth
Supplemental Indenture dated as of May 15, 1975, a Seventeenth Supplemental
Indenture dated as of December 15, 1976, an Eighteenth Supplemental Indenture
dated as of May 1, 1977, a Nineteenth Supplemental Indenture dated as of June 1,
1980, a Twentieth Supplemental Indenture dated as of August 1, 1983, a
Twenty-First Supplemental Indenture dated as of August 1, 1985, a Twenty-Second
Supplemental Indenture dated as of April 1, 1986, a Twenty-Third Supplemental
Indenture dated as of April 1, 1987, a Twenty-Fourth Supplemental Indenture
dated as of June 1, 1988, a Twenty-Fifth Supplemental Indenture dated as of
January 1, 1990, a Twenty-Sixth Supplemental Indenture dated as of November 1,
1991, a Twenty-Seventh Supplemental Indenture dated as of June 1, 1992, a
Twenty-Eighth Supplemental Indenture dated as of April 1, 1993, a Twenty-Ninth
Supplemental Indenture dated as of March 1, 1995, a Thirtieth Supplemental
Indenture dated as of August 15, 1995 and a Thirty-First Supplemental Indenture
dated as of July 1, 1997, to subject certain additional property to the lien of
the Original Indenture and to provide for the creation of additional series of
bonds; and
WHEREAS, the Company has issued under the Original Indenture,
as supplemented at the respective dates of issue, thirty-seven series of First
Mortgage Bonds designated, respectively, as set forth in the following table,
the Indenture creating each series and the principal amount of bonds thereof
issued being indicated opposite the designation of such series:
<TABLE>
<CAPTION>
Designation Indenture Amount
----------- --------- ------
<S> <C> <C>
3 1/4% Series due 1971 Original $16,375,000
9 5/8% Series due 1975 Thirteenth Supplemental 10,000,000
9.15% Series due 1977 Fourteenth Supplemental 10,000,000
3% Series due 1978 First Supplemental 2,000,000
3 3/8% Series due 1982 Second Supplemental 4,000,000
3.90% Series due 1983 Third Supplemental 5,000,000
3 1/2% Series due 1986 Fourth Supplemental 6,000,000
4 1/2% Series due 1987 Fifth Supplemental 4,000,000
4 1/8% Series due 1988 Sixth Supplemental 4,000,000
5% Series due 1989 Seventh Supplemental 4,000,000
4 5/8% Series due 1991 Eighth Supplemental 3,000,000
4.70% Series due 1992 Ninth Supplemental 3,000,000
6 7/8% Series due 1993 Twelfth Supplemental 4,500,000
4.55% Series due 1994 Tenth Supplemental 4,000,000
10 1/8% Series due 1995 Sixteenth Supplemental 10,000,000
5 1/2% Series due 1996 Eleventh Supplemental 4,000,000
7 7/8% Series due 1997 Fifteenth Supplemental 5,000,000
8.44% Series due 1997 Twenty-Third Supplemental 12,000,000
9.20% Series due 2001 Seventeenth Supplemental 7,000,000
8.40% Series due 2002 Eighteenth Supplemental 10,000,000
5.95% Series due 2002 Twenty-Seventh Supplemental 4,000,000
12.45% Series due 2003 Twentieth Supplemental 10,000,000
13% Series due 2005 Twenty-First Supplemental 8,000,000
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.65% Series due 2006 Twenty-Second Supplemental 10,000,000
9.89% Series due 2008 Twenty-Fourth Supplemental 5,000,000
7.15% Series due 2008 Twenty-Eighth Supplemental 22,000,000
9.12% Series due 2010 Twenty-Fifth Supplemental 20,000,000
8 7/8% Series due 2010 Nineteenth Supplemental 8,000,000
6.50% Series due 2010 Twenty-Seventh Supplemental 3,200,000
9.17% Series due 2011 Twenty-Sixth Supplemental 5,000,000
9.93% Series due 2013 Twenty-Fourth Supplemental 5,000,000
9.97% Series due 2018 Twenty-Fourth Supplemental 5,000,000
9.17% Series due 2021 Twenty-Sixth Supplemental 8,000,000
9.29% Series due 2026 Twenty-Sixth Supplemental 12,000,000
1995 Medium Term Note
Series Twenty-Ninth Supplemental 77,000,000
7.72% Subseries A due 2025 15,000,000
6.82% Subseries B due 2005 10,000,000
6.89% Subseries C due 2015 12,000,000
6.99% Subseries D due 2006 10,000,000
7.47% Subseries E due 2003 10,000,000
6.83% Subseries F due 2003 10,000,000
7.06% Subseries G due 2004 10,000,000
6.35% Series due 2025 Thirtieth Supplemental 22,000,000
1997 Medium Term Note
Series Thirty-First Supplemental 65,000,000
6.75% Subseries A due 2007 10,000,000
6.30% Subseries B due 2002 10,000,000
6.14% Subseries C due 2008 10,000,000
5.80% Subseries D due 2003 10,000,000
5.85% Subseries E due 2004 10,000,000
6.00% Subseries F due 2004 15,000,000
and
</TABLE>
WHEREAS, the Original Indenture and said Supplemental
Indentures were duly recorded in the Commonwealth of Pennsylvania on the dates
and in the office for the Recording of Deeds for the following counties in the
Mortgage Books and at the pages indicated in the following table:
[Continued on Next Page]
3
<PAGE>
<TABLE>
<CAPTION>
COUNTY
====================================================================================================================================
Bucks Chester Delaware Montgomery
- ------------------------------------------------------------------------------------------------------------------------------------
Date of
Indenture Recording Book Page Book Page Book Page Book Page
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Original 2/20/41 496 1 H-13.Vol.307 20 1034 1 1625 1
- ------------------------------------------------------------------------------------------------------------------------------------
First Supplemental 8/26/48 632 1 F-16.Vol.380 200 1668 169 2031 257
- ------------------------------------------------------------------------------------------------------------------------------------
Second Supplemental 7/1/52 768 438 18.Vol.425 186 1962 376 2360 517
- ------------------------------------------------------------------------------------------------------------------------------------
Third Supplemental 11/25/53 895 1 18.Vol.442 325 2052 1 2493 1
- ------------------------------------------------------------------------------------------------------------------------------------
Fourth Supplemental 1/9/56 1089 155 Z-20.Vol.499 1 2199 1 2722 425
- ------------------------------------------------------------------------------------------------------------------------------------
Fifth Supplemental 3/20/57 1181 316 B-22.Vol.536 601 2294 50 2850 335
- ------------------------------------------------------------------------------------------------------------------------------------
Sixth Supplemental 5/9/58 1254 1 G-23 201 2380 039 2952 289
- ------------------------------------------------------------------------------------------------------------------------------------
Seventh Supplemental 9/25/59 1332 509 B-25 109 2442 1 3090 249
- ------------------------------------------------------------------------------------------------------------------------------------
Eighth Supplemental 5/9/61 - - Z-26 17 2526 312 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Eighth Supplemental 5/10/61 1409 225 - - - - 3249 289
- ------------------------------------------------------------------------------------------------------------------------------------
Ninth Supplemental 4/10/62 1458 372 G-28 126 2581 463 3307 169
- ------------------------------------------------------------------------------------------------------------------------------------
Tenth Supplemental 3/19/64 1568 1 M-30 967 2976 1043 3310 237
- ------------------------------------------------------------------------------------------------------------------------------------
Eleventh Supplemental 11/4/66 1655 695 Q-32 6682 762 223 3549 129
- ------------------------------------------------------------------------------------------------------------------------------------
Twelfth Supplemental 1/23/68 1691 531 N-33 219 2792 708 3542 315
- ------------------------------------------------------------------------------------------------------------------------------------
Thirteenth Supplemental 7/2/70 1763 1167 D-35 80 2850 301 3687 23
- ------------------------------------------------------------------------------------------------------------------------------------
Fourteenth Supplemental 11/5/70 1774 331 K-35 713 2858 3113 700 548
- ------------------------------------------------------------------------------------------------------------------------------------
Fifteenth Supplemental 12/11/72 1869 196 O-37 998 2926 550 3786 96
- ------------------------------------------------------------------------------------------------------------------------------------
Sixteenth Supplemental 5/28/75 1979 14 E-44 77 3005 511 4010 307
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Bucks Chester Delaware Montgomery
- ------------------------------------------------------------------------------------------------------------------------------------
Date of
Indenture Recording Book Page Book Page Book Page Book Page
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Seventeenth Supplemental 12/18/77 2072 683 L-51 1 3072 43 5002 436
- ------------------------------------------------------------------------------------------------------------------------------------
Eighteenth Supplemental 4/29/77 2082 567 B-52 344 3078 728 5003 291
- ------------------------------------------------------------------------------------------------------------------------------------
Nineteenth Supplemental 6/23/80 2303 714 J-62 92 3261 293 5030 502
- ------------------------------------------------------------------------------------------------------------------------------------
Twentieth Supplemental 8/2/83 2487 370 D-72 1 96 810 5662 1045
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-First Supplemental 8/27/85 2690 806 54 550 - - 5864 1347
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-First Supplemental 8/28/85 - - - - 264 159 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Second Supplemental 4/22/86 2774 160 263 275 326 592 5944 360
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Third Supplemental 4/1/87 2960 693 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Third Supplemental 4/2/87 - - 680 337 447 1807 6115 602
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Fourth Supplemental 7/25/88 3199 1095 1224 389 0593 0585 6324 143
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Fifth Supplemental 1/12/90 0136 0250 1848 205 731 1571 6538 376
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Sixth Supplemental 11/8/91 369 2190 2660 205 894 2241 6780 891
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Seventh Supplemental 6/29/92 0487 1829 3055 182 0969 2023 6918 302
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Eighth Supplemental 4/22/93 0652 1335 3542 1542 1081 0852 7112 0539
- ------------------------------------------------------------------------------------------------------------------------------------
Twenty-Ninth 3/30/95 1045 1872 3875 1368 1349 0829 7561 1155
Supplemental
- ------------------------------------------------------------------------------------------------------------------------------------
Thirtieth Supplemental 8/30/95 1111 0798 3932 0471 1393 2255 7631 0689
- ------------------------------------------------------------------------------------------------------------------------------------
Thirty-First Supplemental 7/11/97 1421 2196 4201 2133 1607 138 7968 779
====================================================================================================================================
</TABLE>
and
5
<PAGE>
WHEREAS, the original Indenture was recorded in Berks County on August
16, 1999 in Book 3113, page 707; and
WHEREAS, all of the bonds of each of said series are presently
outstanding other than the bonds listed on Exhibit A attached hereto and made a
part hereof; and
WHEREAS, the lien of the Original Indenture, as supplemented, has been
perfected as a security interest under the Pennsylvania Uniform Commercial Code
by filing a financing statement in the office of the Secretary of the
Commonwealth; and
WHEREAS, the Company proposes to create under the Original Indenture,
as supplemented by this Thirty-Second Supplemental Indenture, a new series of
bonds to be designated "First Mortgage Bonds, 1999 Series due 2029" (herein
referred to as the "Bonds") to be limited in aggregate principal amount to
$25,000,000, to be issued only as registered bonds without coupons, to be dated
as of October 1, 1999, to bear interest at the rate of 6% per annum, and to
mature on June 1, 2029; and
WHEREAS, in order to finance the cost of acquiring, constructing,
installing and equipping facilities for the furnishing of water, in the counties
of Bucks, Chester, Delaware and Montgomery, which are to be financed under a
Construction and Financing Agreement dated as of October 1, 1999 (the "Financing
Agreement") between the Company and the Delaware County Industrial Development
Authority, a Pennsylvania body politic and corporate (the "Authority"), and
which are described in Exhibit A thereto, less any deletions therefor and
together with any additions, improvements and modifications thereto and
substitutions therefor made in accordance with the provisions of the Financing
Agreement (the "Facilities"), the Company has requested the Authority to issue a
new series of bonds to be known as the Authority's Water Facilities Revenue
Bonds (Philadelphia Suburban Water Company Project), Series of 1999 in the
aggregate principal amount of $25,000,000 (the "Authority Bonds"); and
WHEREAS, the Authority Bonds are to be issued under a Trust Indenture,
dated as of October 1, 1999 (the "Authority Indenture"), between the Authority
and Chase Manhattan Trust Company, National Association, as trustee (the
"Authority Trustee"); and
WHEREAS, the Bonds are to be issued by the Company to secure the
obligation of the Company to pay to or for the account of the Authority an
amount equal to the principal of, redemption premium, if any, and interest on
the Authority Bonds pursuant to the Financing Agreement; and
WHEREAS, the right, title and interest of the Authority in and to the
Financing Agreement and the payments thereunder and the security for such
payments are to be assigned by the Authority to the Authority Trustee, and the
Bonds are to be delivered by the Company on behalf of the Authority directly to
the Authority Trustee, as assignee, as security for the payment of the principal
of, redemption premium, if any, and interest on, the Authority Bonds; and
6
<PAGE>
WHEREAS, Article XVIII of the Original Indenture provides that the
Company, when authorized by resolution of its Board of Directors, may with the
Trustee enter into an indenture supplemental to the Original Indenture, which
thereafter shall form a part of the Original Indenture, for the purposes, inter
alia, of subjecting to the lien of the Original Indenture additional property,
of defining the covenants and provisions applicable to any bonds of any series
other than the 3 1/4% Series due 1971, of adding to the covenants and agreements
of the Company contained in the Original Indenture other covenants and
agreements thereafter to be observed by the Company, of surrendering any right
or power in the Original Indenture reserved to or conferred upon the Company,
and of making such provisions in regard to matters or questions arising under
the Original Indenture as may be necessary or desirable and not inconsistent
therewith; and
WHEREAS, in addition to the property described in the Original
Indenture and the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth,
Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth,
Seventeenth, Eighteenth, Nineteenth, Twentieth, Twenty-First, Twenty-Second,
Twenty-Third, Twenty-Fourth, Twenty-Fifth, Twenty-Sixth, Twenty-Seventh,
Twenty-Eighth, Twenty-Ninth, Thirtieth, and Thirty-First Supplemental
Indentures, the Company has acquired certain other property and desires to
confirm the lien of the Original Indenture thereon; and
WHEREAS, the Company, by proper corporate action, has duly authorized
the creation of said new series of Bonds (to be issued in accordance with the
terms and provisions of the Original Indenture and indentures supplemental
thereto, including this Thirty-Second Supplemental Indenture, and to be secured
by said Original Indenture and indentures supplemental thereto, including this
Thirty-Second Supplemental Indenture) and has further duly authorized the
execution, delivery and recording of this Thirty-Second Supplemental Indenture
setting forth the terms and provisions of the Bonds insofar as said terms and
provisions are not set forth in said Original Indenture; and
WHEREAS, the Bonds and the Trustee's certificate upon said Bonds are to
be substantially in the following form - the proper amount, names of registered
owners and numbers to be inserted therein, and such appropriate insertions,
omissions and changes to be made therein as may be required or permitted by this
Indenture to conform to any pertinent law or usage:
7
<PAGE>
No. R-1 $25,000,000
PHILADELPHIA SUBURBAN WATER
COMPANY
(Incorporated under the Laws of the Commonwealth
of Pennsylvania)
First Mortgage Bond, 6% Series Due 2029
Philadelphia Suburban Water Company, a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania (hereinafter called
the "Company", which term shall include any successor corporation as defined in
the Indenture hereinafter referred to), for value received, hereby promises to
pay to The Delaware County Industrial Development Authority or its registered
assigns, on the 1st day of June, 2029, at the designated office of Chase
Manhattan Trust Company, National Association in the City of Philadelphia,
Pennsylvania, the sum of Twenty-five million dollars in such coin or currency of
the United States of America as at the time of payment is legal tender for the
payment of public and private debts and to pay interest thereon at said office
to the registered owner hereof by draft or check of the Trustee mailed to such
registered owner from the interest payment date next preceding the date of the
authentication of this Bond (or if this Bond is authenticated after a Record
Date as defined below and on or before the succeeding interest payment date,
from such succeeding interest payment date, or if this Bond is authenticated
prior to June 1, 2000 , from the date hereof) until the principal hereof shall
become due and payable, at the rate of six percent (6%) per annum, payable
semiannually in like coin or currency on the first day of June and the first day
of December in each year, commencing June 1, 2000 and to pay interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and, to the extent legally enforceable, on any overdue
installment of interest at a rate of 6% per annum after maturity whether by
acceleration or otherwise until paid.
The interest so payable will (except as otherwise provided in the
Thirty-Second Supplemental Indenture referred to herein) be calculated on the
basis of a 360-day year of twelve 30-day months and be paid to the person in
whose name this Bond (or a Bond or Bonds in exchange for which this Bond was
issued) is registered at the close of business on the fifteenth day of the
calendar month next preceding the month in which the interest payment date
occurs or, if such day is not a business day, on the next preceding business day
(a "record date") and principal, premium, if any, and interest on this Bond
shall be paid in accordance with written payment instructions of the registered
owner delivered to the Trustee (defined below) on or before such record date.
8
<PAGE>
The provisions of the Bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as if fully set
forth at this place.
IN WITNESS WHEREOF, Philadelphia Suburban Water Company has caused this
Bond to be signed by its President or a Vice President and its corporate seal to
be hereto affixed and attested by its Secretary or an Assistant Secretary, and
this Bond to be dated October 1, 1999.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
_________________________________ By:___________________________
(Assistant) Secretary Vice President and Treasurer
(Form of Reverse of Bond)
This Bond is one of a duly authorized issue of bonds of the Company
known as its First Mortgage Bonds, issued and to be issued without limitation as
to aggregate principal amount except as set forth in the Indenture hereinafter
mentioned in one or more series and equally secured (except insofar as a sinking
fund or other similar fund established in accordance with the provisions of the
Indenture may afford additional security for the bonds of any specific series)
by an Indenture of Mortgage (herein called the "Indenture") dated as of January
1, 1941, executed by the Company to The Pennsylvania Company for Insurances on
Lives and Granting Annuities (succeeded by Chase Manhattan Trust Company,
National Association), as Trustee (hereinafter called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the property mortgaged and pledged, the nature and extent of the
security, the rights of the holders and registered owners of the bonds and of
the Trustee in respect of such security, and the terms and conditions under
which the bonds are and are to be secured and may be issued under the Indenture;
but neither the foregoing reference to the Indenture nor any provision of this
Bond or of the Indenture or of any indenture supplemental thereto shall affect
or impair the obligation of the Company, which is absolute and unconditional, to
pay at the stated or accelerated maturity herein and in the Indenture provided,
the principal of and premium, if any, and interest on this Bond as herein
provided. As provided in the Indenture, the bonds may be issued in series for
various principal amounts, may bear different dates and mature at different
times, may bear interest at different rates and may otherwise vary as in the
Indenture provided or permitted. This Bond is one of the Bonds described in an
indenture supplemental to said Indenture known as the "Thirty-Second
Supplemental Indenture" dated as of October 1, 1999, and designated therein as
"First Mortgage Bonds, 6% Series due 2029" (the "Bonds").
To the extent permitted by and as provided in the Indenture,
modifications or alterations of the Indenture, or of any indenture supplemental
9
<PAGE>
thereto, and of the rights and obligations of the Company and of the holders and
registered owners of bonds issued and to be issued thereunder may be made with
the consent of the Company by an affirmative vote of the holders and registered
owners of not less than 75% in principal amount of bonds then outstanding under
the Indenture and entitled to vote, at a meeting of the bondholders called and
held as provided in the Indenture, and, in case one or more but less than all of
the series of bonds then outstanding under the Indenture are so affected, by an
affirmative vote of the holders and registered owners of not less than 75% in
principal amount of bonds of any series then outstanding under the Indenture and
entitled to vote on and affected by such modification or alteration, or by the
written consent of the holders and registered owners of such percentages of
bonds; provided, however, that no such modification or alteration shall be made
which shall reduce the percentage of bonds the consent of the holders or
registered owners of which is required for any such modification or alteration
or which shall affect the terms of payment of the principal of or interest on
the bonds, or permit the creation by the Company of any lien prior to or on a
parity with the lien of the Indenture with respect to any property subject to
the lien of the Indenture as a first mortgage lien thereon, or which shall
affect the rights of the holders or registered owners of less than all of the
bonds of any series affected thereby.
The Bonds have been issued by the Company to secure the obligation of
the Company to pay to or for the account of the Authority (defined below) an
amount equal to the principal, premium, if any, of, and interest on, the
Authority Bonds (defined below) pursuant to the Construction and Financing
Agreement (the "Financing Agreement") dated as of October 1, 1999, between the
Delaware County Industrial Development Authority, a Pennsylvania body politic
and corporate (the "Authority"), and the Company, which Authority Bonds are
being issued to finance the cost of acquiring, constructing, installing and
equipping facilities for the furnishing of water, in the counties of Bucks,
Chester, Delaware and Montgomery, which are to be financed under the Financing
Agreement and which are described in Exhibit A thereto, less any deletions
therefor and together with any additions, improvements and modifications thereto
and substitutions therefor made in accordance with the provisions of the
Financing Agreement (the "Facilities"). The Facilities are to be financed
through the sale of the Authority's Water Facilities Revenue Bonds (Philadelphia
Suburban Water Company Project), Series of 1999, in the aggregate principal
amount of $25,000,000 due June 1, 2029 (the "Authority Bonds") and bearing
interest at 6% per annum.
The Authority Bonds are to be issued under a Trust Indenture, dated as
of October 1, 1999 (the "Authority Indenture"), between the Authority and Chase
Manhattan Trust Company, National Association, as trustee (the "Authority
Trustee"). The right, title and interest of the Authority in and to the
Financing Agreement and the payments thereunder and the security for such
payments have been assigned by the Authority to the Authority Trustee, and the
Bonds have been delivered by the Company on behalf of the Authority directly to
the Authority Trustee, as assignee, as security for the payment of the principal
of, and premium, if any, and interest on, the Authority Bonds. The Authority
Trustee may not sell, assign or otherwise transfer the Bonds except for a
transfer of the entire outstanding principal amount thereof to its successor as
Trustee under the Authority Indenture, which successor and each subsequent
successor shall hold such Bonds subject to the same restriction on transfer.
10
<PAGE>
In the event any Authority Bonds shall be purchased by the Company and
cancelled pursuant to the Authority Indenture, Bonds corresponding in principal
amount to the Authority Bonds so purchased and cancelled shall be deemed to be
paid in full, and in the event and to the extent the principal of, and premium,
if any, or interest on, any Authority Bonds is paid out of funds held by the
Authority Trustee other than payments on Bonds, the corresponding payment of the
principal of and premium, if any, or interest on, an aggregate principal amount
of such Authority Bonds shall be deemed to have been satisfied.
In the event this Bond shall be deemed to have been paid in full, this
Bond shall be surrendered to the Trustee for cancellation. In the event this
Bond shall be deemed to have been paid in part, this Bond shall be presented to
the Trustee for notation hereon of the payment of the portion of the principal
hereof so deemed to have been paid.
The Bonds are redeemable only as follows:
(a) The Bonds are subject to redemption prior to maturity on or after
June 1, 2006 by the Authority, at the option of the Company, out of moneys
deposited with or held by the Trustee for such purpose, as a whole or in part,
at any time in the manner described below, at the redemption prices (stated as a
percentage of the principal amount), as set forth below, of the Bonds to be
redeemed, plus interest accrued thereon to the date fixed for redemption:
Optional Redemption Periods (inclusive) Redemption Prices
- --------------------------------------- -----------------
June 1, 2009 through May 31, 2010 101%
June 1, 2010 and thereafter 100%
(b) The Bonds are subject to mandatory redemption as a whole at any
time prior to maturity should the Company be required to accelerate the payments
of the Authority Bonds pursuant to the provisions of Section 7.02 (a) of the
Financing Agreement and 7.01(b) and (c) of the Authority Indenture, if the
Trustee shall receive a written notice from the Authority or the Authority
Trustee that the Authority Bonds are subject to mandatory redemption in
accordance with any of such provisions.
(c) The Bonds are also subject to mandatory redemption by the Company
in whole if the Trustee shall receive a written demand from the Authority
Trustee for redemption of all such Bonds held by the Authority Trustee stating
that an "Event of Default" as defined in Section 9.01(a) of the Authority
Indenture has occurred and is continuing and that payment of the principal of
the Authority Bonds has been accelerated pursuant to Section 9.01(b) of the
Authority Indenture, provided that at the time of notice of such redemption as
provided in Section 2 of Article V of the Original Indenture (i) said written
demand shall not have been withdrawn by the Authority Trustee, and (ii) no event
of default under Section 1 of Article XI of the Original Indenture shall have
occurred and be continuing.
11
<PAGE>
If this Bond or any portion hereof is called for redemption and payment
thereof is duly provided for as specified in the Indenture, interest shall cease
to accrue hereon or on such portion, as the case may be, from and after the date
fixed for redemption.
The principal hereof may be declared or may become due prior to its
maturity date on the conditions, in the manner and with the effect set forth in
the Indenture upon the happening of an event of default, as in the Indenture
provided; subject, however, to the right, under certain circumstances, of the
registered owners of a majority in principal amount of Bonds outstanding to
annul such declaration.
This Bond is transferable by the registered owner hereof in person or
by attorney duly authorized in writing, on books of the Company to be kept for
that purpose at the designated office of the Trustee in the City of
Philadelphia, Pennsylvania, upon surrender hereof for cancellation at such
office and upon presentation of a written instrument of transfer duly executed,
and thereupon the Company shall issue in the name of the transferee or
transferees, and the Trustee shall authenticate and deliver, a new Bond or Bonds
in authorized denominations, of equal aggregate unpaid principal amount. Any
such transfer or exchange shall be subject to the terms and conditions and to
the payment of the charges specified in the Indenture.
The Company and the Trustee may deem and treat the registered owner of
this Bond as the absolute owner hereof for the purpose of receiving payment of
or on account of the principal hereof and the interest hereon, and for all other
purposes, and shall not be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or
interest on this Bond or for any claim based hereon or otherwise in respect
hereof or of the Indenture or of any indenture supplemental thereto against any
incorporator or any past, present or future stockholder, officer or director of
the Company or of any predecessor or successor corporation, as such, either
directly or through the Company or through any such predecessor or successor
corporation or through any receiver or trustee in bankruptcy, by virtue of any
constitutional provision, statute or rule of law or equity, or by the
enforcement of any assessment or penalty or otherwise; all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released by every holder or registered owner hereof, as
more fully provided in the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or
any indenture supplemental thereto, or become valid or obligatory for any
purpose, until Chase Manhattan Trust Company, National Association, as Trustee
under the Indenture, or a successor trustee thereunder, shall have signed the
certificate of authentication endorsed hereon.
(Form of Trustee's Certificate)
This Bond is one of the Bonds, of the series designated therein,
referred to in the within-mentioned Thirty-Second Supplemental Indenture.
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
By:__________________________
Authorized Signer
12
<PAGE>
and;
WHEREAS, all acts and things necessary to make the Bonds, when executed
by the Company and authenticated and delivered by the Trustee as in this
Thirty-Second Supplemental Indenture provided and issued by the Company, valid,
binding and legal obligations of the Company, and this Thirty-Second
Supplemental Indenture a valid and enforceable supplement to said Original
Indenture, have been done, performed and fulfilled, and the execution of this
Thirty-Second Supplemental Indenture has been in all respects duly authorized:
NOW, THEREFORE, THIS THIRTY-SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
That, in order to secure the payment of the principal and interest of all bonds
issued under the Original Indenture and all indentures supplemental thereto,
according to their tenor and effect, and according to the terms of the Original
Indenture and of any indenture supplemental thereto, and to secure the
performance of the covenants and obligations in said bonds and in the Original
Indenture and any indenture supplemental thereto respectively contained, and to
provide for the proper issuing, conveying and confirming unto the Trustee, its
successors in said trust and its and their assigns forever, upon the trusts and
for the purposes expressed in the Original Indenture and in any indenture
supplemental thereto, all and singular the estates, property and franchises of
the Company thereby mortgaged or intended so to be, the Company, for and in
consideration of the premises and of the sum of One Dollar ($1.00) in hand paid
by the Trustee to the Company upon the execution and delivery of this
Thirty-Second Supplemental Indenture, receipt whereof is hereby acknowledged,
and of other good and valuable consideration, and intending to be legally bound,
has granted, bargained, sold, aliened, enfeoffed, released and confirmed and by
these presents does grant, bargain, sell, alien, enfeoff, release and confirm
unto Chase Manhattan Trust Company, National Association, as Trustee, and to its
successors in said trust and its and their assigns forever:
All and singular the premises, property, assets, rights and franchises
of the Company, whether now or hereafter owned, constructed or acquired, of
whatever character and wherever situated (except as herein expressly excepted),
including among other things the following, but reference to or enumeration of
any particular kinds, classes, or items of property shall not be deemed to
exclude from the operation and effect of the Original Indenture or any indenture
supplemental thereto any kind, class or item not so referred to or enumerated:
I.
REAL ESTATE AND WATER RIGHTS.
The real estate described in the deeds from the grantors named in
Exhibit B hereto, dated and recorded as therein set forth, and any other real
estate and water rights acquired since the date of the Thirty-First Supplemental
Indenture.
13
<PAGE>
II.
BUILDINGS AND EQUIPMENT.
All mains, pipes, pipe lines, service pipes, buildings, improvements,
standpipes, reservoirs, wells, flumes, sluices, canals, basins, cribs,
machinery, conduits, hydrants, water works, plants and systems, tanks, shops,
structures, purification systems, pumping stations, fixtures, engines, boilers,
pumps, meters and equipment which are now owned or may hereafter be acquired by
the Company (except as herein expressly excepted), including all improvements,
additions and extensions appurtenant to any real or fixed property now or
hereafter subject to the lien of the Original Indenture or any indenture
supplemental thereto which are used or useful in connection with the business of
the Company as a water company or as a water utility, whether any of the
foregoing property is now owned or may hereafter be acquired by the Company.
It is hereby declared by the Company that all property of the kinds
described in the next preceding paragraph, whether now owned or hereafter
acquired, has been or is or will be owned or acquired with the intention of
using the same in carrying on the business or branches of the business of the
Company, and it is hereby declared that it is the intention of the Company that
all thereof (except property hereinafter specifically excepted) shall be subject
to the lien of the Original Indenture.
It is agreed by the Company that so far as may be permitted by law
tangible personal property now owned or hereafter acquired by the Company,
except such as is hereafter expressly excepted from the lien hereof, shall be
deemed to be and construed as fixtures and appurtenances to the real property of
the Company.
III.
FRANCHISES AND RIGHTS OF WAY.
All the corporate and other franchises of the Company, all water and
flowage rights, riparian rights, easements and rights of way, and all permits,
licenses, rights, grants, privileges and immunities, and all renewals,
extensions, additions or modifications of any of the foregoing, whether the same
or any thereof, or any renewals, extensions, additions or modifications thereof,
are now owned or may hereafter be acquired, owned, held, or enjoyed by the
Company.
IV.
AFTER ACQUIRED PROPERTY.
All real and fixed property and all other property of the character
hereinabove described which the Company may hereafter acquire.
14
<PAGE>
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in any way appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents, revenues, issues, income, product and profits thereof, and all the
estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid premises, property, rights and franchises and every part and parcel
thereof.
EXCEPTING AND RESERVING, HOWEVER, certain premises, not used or useful
in the supplying of water by the Company, expressly excepted and reserved from
the lien of the Original Indenture and not subject to the terms thereof.
AND ALSO SAVING AND EXCEPTING from the property hereby mortgaged and
pledged, all of the following property (whether now owned by the Company or
hereafter acquired by it): All bills, notes and accounts receivable, cash on
hand and in banks, contracts, choses in action and leases to others (as distinct
from the property leased and without limiting any rights of the Trustee with
respect thereto under any of the provisions of the Original Indenture or of any
indenture supplemental thereto), all bonds, obligations, evidences of
indebtedness, shares of stock and other securities, and certificates or
evidences of interest therein, all automobiles, motor trucks, and other like
automobile equipment and all furniture, and all equipment, materials, goods,
merchandise and supplies acquired for the purpose of sale in the ordinary course
of business or for consumption in the operation of any properties of the Company
other than any of the foregoing which may be specifically transferred or
assigned to or pledged or deposited with the Trustee hereunder or required by
the provisions of the Original Indenture or any indenture supplemental thereto
so to be; provided, however, that if, upon the happening of a completed default,
as specified in Section 1 of Article XI of the Original Indenture, the Trustee
or any receiver appointed hereunder shall enter upon and take possession of the
mortgaged property, the Trustee or any such receiver may, to the extent
permitted by law, at the same time likewise take possession of any and all of
the property described in this paragraph then on hand and any and all other
property of the Company then on hand, not described or referred to in the
foregoing granting clauses, which is used or useful in connection with the
business of the Company as a water company or as a water utility, and use and
administer the same to the same extent as if such property were part of the
mortgaged property, unless and until such completed default shall be remedied or
waived and possession of the mortgaged property restored to the Company, its
successors or assigns.
SUBJECT, HOWEVER, to the exceptions, reservations and matters
hereinabove and in the Original Indenture recited, to releases executed since
the date of the Original Indenture in accordance with the provisions thereof, to
existing leases, to easements and rights of way for pole lines and electric
transmission lines and other similar encumbrances and restrictions which the
Company hereby certifies, in its judgment, do not impair the use of said
property by the Company in its business, to liens existing on or claims against,
and rights in and relating to, real estate acquired for right-of-way purposes,
to taxes and assessments not delinquent, to alleys, streets and highways that
may run across or encroach upon said lands, to liens, if any, incidental to
construction, and to Permitted Liens, as defined in the Original Indenture; and,
with respect to any property which the Company may hereafter acquire, to all
terms, conditions, agreements, covenants, exceptions and reservations expressed
or provided in such deeds and other instruments, respectively, under and by
virtue of which the Company shall hereafter acquire the same and to any and all
liens existing thereon at the time of such acquisition.
15
<PAGE>
TO HAVE AND TO HOLD, all and singular the property, rights, privileges
and franchises hereby conveyed, transferred or pledged or intended so to be unto
the Trustee and its successors in the trust heretofore and hereby created, and
its and their assigns forever.
IN TRUST NEVERTHELESS, for the equal pro rata benefit and security of
each and every person or corporation who may be or become the holders of bonds
and coupons secured by the Original Indenture or by any indenture supplemental
thereto, or both, without preference, priority or distinction as to lien or
otherwise of any bond or coupon over or from any other bond or coupon, so that
each and every of said bonds and coupons issued or to be issued, of whatsoever
series, shall have the same right, lien and privilege under the Original
Indenture and all indentures supplemental thereto and shall be equally secured
hereby and thereby, with the same effect as if said bonds and coupons had all
been made, issued and negotiated simultaneously on the date thereof; subject,
however, to the provisions with reference to extended, transferred or pledged
coupons and claims for interest contained in the Original Indenture and subject
to any sinking or improvement fund or maintenance deposit provisions, or both,
for the benefit of any particular series of bonds.
IT IS HEREBY COVENANTED, DECLARED AND AGREED, by and between the
parties hereto, that all such bonds and coupons are to be authenticated,
delivered and issued, and that all property subject or to become subject hereto
is to be held subject to the further covenants, conditions, uses and trusts
hereinafter set forth, and the Company, for itself and its successors and
assigns, does hereby covenant and agree to and with the Trustee and its
successor or successors in said trust, for the benefit of those who shall hold
said bonds and coupons, or any of them, issued under this Indenture or any
indenture supplemental hereto, or both, as follows:
ARTICLE I.
Form, Authentication and Delivery of the Bonds;
Redemption Provisions
SECTION 1. There shall be a thirty-eighth series of bonds, limited in
aggregate principal amount to $25,000,000 designated as "Philadelphia Suburban
Water Company, First Mortgage Bonds, 6% Series due 2029".
Interest on the Bonds shall be payable semiannually on June 1 and
December 1 of each year (each an "interest payment date"), commencing June 1,
2000. Each Bond shall be dated the date of its authentication and shall bear
interest from the interest payment date next preceding its date of
authentication, unless authenticated after a record date and on or before the
succeeding interest payment date, in which case it shall bear interest from such
succeeding interest payment date, or, unless authenticated on or prior to the
record date for the first interest payment date for the Bonds, in which case it
shall bear interest from October 1, 1999; provided, however, that, if at the
time of authentication of any Bond, interest on the predecessor Bond of such
Bond is in default, such Bond shall bear interest from the date to which
interest has been paid, or, if no interest has been paid, from October 1, 1999.
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The Bonds shall be stated to mature (subject to the right of earlier redemption
at the prices and dates and upon the terms and conditions hereinafter set forth)
on June 1, 2029 and shall bear interest at the rate of 6%.
The Bonds shall be issuable only as registered bonds without coupons,
shall be in the form hereinabove recited, in the denomination of Five Thousand
Dollars ($5,000) or any integral multiple thereof, shall be lettered "R", and
shall bear such numbers as the Company may reasonably require.
The principal of, and interest on the Bonds shall be payable at the
designated office of the trustee in the City of Philadelphia, Pennsylvania, in
such coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts; provided, however,
that each installment of interest may be paid by check to the order of the
person entitled thereto, mailed to such person's address as the same appears on
the books maintained for such purpose by or on behalf of the Company, or by bank
wire transfer of immediately available funds pursuant to instructions and
conditions incorporated in an agreement between such person and the Trustee or
the Company.
The person in whose name any Bond is registered at the close of
business on any record date (as hereinafter defined) with respect to any
interest payment date shall be entitled to receive the interest payable on such
interest payment date notwithstanding the cancellation of such Bond upon any
transfer or exchange subsequent to the record date and prior to such interest
payment date; provided, however, that if and to the extent the Company shall
default in the payment of the interest due on such interest payment date, such
defaulted interest shall be paid to the persons in whose names outstanding Bonds
are registered at the close of business on a subsequent record date established
by notice given by mail by or on behalf of the Company to the holders of Bonds
not less than fifteen days preceding such subsequent record date, such record
date to be not less than ten days preceding the date of payment of such
defaulted interest. The term "record date" with respect to any regular interest
payment date shall mean the fifteenth day of the calendar month next preceding
the month in which such interest payment date occurs.
The Bonds are being issued by the Company to secure the obligation of
the Company to pay to or for the account of the Authority an amount equal to the
principal of, and interest on, the Authority Bonds pursuant to the Financing
Agreement. The Authority Bonds are being sold to finance the cost of the
acquiring, constructing, installing and equipping of the Facilities.
The Authority Bonds are to be issued under the Authority Indenture and
the right, title and interest of the Authority in and to the Financing Agreement
and the payments thereunder and the security for such payments have been
assigned by the Authority to the Authority Trustee, and the Bonds are to be
delivered by the Company on behalf of the Authority directly to the Authority
Trustee, as assignee, as security for the payment of the principal of, and
premium, if any, and interest on, the Authority Bonds. The Authority Trustee may
not sell, assign or otherwise transfer the Bonds except for a transfer of the
entire outstanding principal amount thereof to its successor as Trustee under
the Authority Indenture, which successor and each subsequent successor shall
hold the Bonds subject to the same restriction on transfer.
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The text of the Bonds and of the certificate of the Trustee upon such
Bonds shall be, respectively, substantially of the tenor and effect hereinbefore
recited.
Exchange of any Bonds shall be effected in accordance with the
applicable provisions of Sections 7, 8 and 9 of Article II of the Original
Indenture.
SECTION 2. The Bonds are redeemable only as follows:
(a) The Bonds are subject to redemption prior to maturity on or after
June 1, 2009 by the Authority, at the option of the Company, out of moneys
deposited with or held by the Trustee for such purpose, as a whole or in part,
at any time in the manner described below, at the redemption prices (stated as a
percentage of the principal amount), as set forth below, of the Bonds to be
redeemed, plus interest accrued thereon to the date fixed for redemption:
Optional Redemption Periods (inclusive) Redemption Prices
- --------------------------------------- -----------------
June 1, 2009 through May 31, 2010 101%
June 1, 2010 and thereafter 100%
(b) The Bonds are subject to mandatory redemption as a whole or in part
at any time prior to maturity should the Company be required to accelerate the
payments of the Authority Bonds pursuant to the provisions of Article VII of the
Financing Agreement, if the Trustee shall receive a notice from the Authority or
the Authority Trustee that the Bonds are subject to mandatory redemption in
accordance with any of such provisions.
(c) (reserved)
(d) The Bonds are also subject to mandatory redemption by the Company
in whole if the Trustee shall receive a written demand from the Authority
Trustee for redemption of all such Bonds held by the Authority Trustee stating
that an "Event of Default" as defined in Section 9.01(a) of the Authority
Indenture has occurred and is continuing and that payment of the principal of
the Authority Bonds has been accelerated pursuant to Section 9.01(b) of the
Authority Indenture, provided that at the time of notice of such redemption as
provided in Section 2 of Article V of the Original Indenture (i) said written
demand shall not have been withdrawn by the Authority Trustee, and (ii) no event
of default under Section 1 of Article XI of the Original Indenture shall have
occurred and be continuing.
SECTION 3. Any redemption of the Bonds shall be effected in accordance
with the provisions of Article V of the Original Indenture.
SECTION 4. In the event any Authority Bonds shall be purchased by the
Company, surrendered by the Company to the Authority Trustee for cancellation
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and cancelled by the Authority Trustee, Bonds corresponding in principal amount
to the Authority Bonds so purchased, surrendered and cancelled shall be deemed
to have been paid in full.
SECTION 5. In the event and to the extent the principal of and premium,
if any, or interest on, any Authority Bonds is paid out of funds held by the
Authority Trustee other than payments of Bonds, the corresponding payment of the
principal of, and premium, if any, or interest on, an aggregate principal amount
of Bonds equal to the aggregate principal amount of such Authority Bonds shall
be deemed to have been satisfied.
SECTION 6. All Bonds deemed to have been paid in full as provided in
Section 4 and 5 of this Article I of this Thirty-Second Supplemental Indenture
shall be surrendered to the Trustee for cancellation, and the Trustee shall
forthwith cancel the same and, on the written request of the Company, deliver
the same to the Company. In case part of an outstanding Bond shall be deemed to
have been partially paid as provided in said Section 4 or Section 5, upon
presentation of such Bond at the designated office of the Trustee, the Trustee
shall make a notation thereon of the payment of the portion of the principal
amount of such Bond so deemed to have been paid unless the registered owner
shall elect to surrender such Bond to the Trustee, in which case the Company
shall execute and the Trustee shall authenticate and deliver, without charge to
the registered owner, Bonds in such authorized denominations as shall be
specified by the registered owner for the unpaid balance of the principal amount
of such outstanding Bond.
SECTION 7. Bonds in the aggregate principal amount of $25,000,000 may
be issued under the provisions of Article IV of the Original Indenture and may
forthwith be executed by the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered to or upon the order of the Company,
upon receipt by the Trustee of the resolutions, certificates, opinions or other
instruments or all of the foregoing required to be delivered upon the issue of
bonds pursuant to the provisions of the Original Indenture.
ARTICLE II.
Maintenance or Improvement Deposit.
SECTION 1. The Company covenants that it will deposit with the Trustee
on or before the March 1 next occurring after the bonds of the 9.89% Series due
2008 cease to be outstanding, or on or before the March 1 next occurring after
the bonds of the 9.93% Series due 2013 cease to be outstanding, or on or before
the next March 1 next occurring after the bonds of the 9.97% Series due 2018
cease to be outstanding, or on or before the March 1 next occurring after the
bonds of the 9.12% Series due 2010 cease to be outstanding, or on or before the
March 1 next occurring after the bonds of the 9.29% Series due 2026 cease to be
outstanding, or on or before the March 1 next occurring after the bonds of the
9.17% Series due 2021 cease to be outstanding, or on or before the next March 1
next occurring after the bonds of the 9.17% Series due 2011 cease to be
outstanding, or on or before the March 1 next occurring after the bonds of the
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6.50% Series due 2010 cease to be outstanding, or on or before the next March 1
next occurring after the bonds of the 5.95% Series due 2002 cease to be
outstanding, or on or before the March 1 next occurring after the bonds of the
7.15% Series due 2008 cease to be outstanding, or on or before the March 1 next
occurring after the bonds of any of the Subseries of the 1995 Medium Term Note
Series issued under the Twenty-Ninth Supplemental Indenture (consisting of the
7.72% Subseries A due 2025, the 6.82% Subseries B due 2005, the 6.89% Subseries
C due 2015, the 6.99% Subseries D due 2006, the 7.47% Subseries E due 2003, the
6.83% Subseries F due 2003, and the 7.06% Subseries G due 2004) shall cease to
be outstanding, or on or before the March 1 next occurring after bonds of the
6.35% Series due 2025 shall cease to be outstanding, on or before the March 1
next occurring after the bonds of any of the Subseries of the 1997 Medium Term
Note Series issued under the Thirty-First Supplemental Indenture (consisting of
the 6.75% Subseries A due 2007, the 6.30% Subseries B due 2002, the 6.14%
Subseries C due 2008, the 5.80% Subseries D due 2003, the 5.85% Subseries E due
2004 and the 6.00% Subseries F due 2004) whichever is latest, and on or before
March 1 in each year thereafter if and so long as any of the Bonds are
outstanding, an amount in cash (the "Maintenance or Improvement Deposit") equal
to 9% of the Gross Operating Revenues of the Company during the preceding
calendar year less, to the extent that the Company desires to take such credits,
the following:
(a) the amount actually expended for maintenance during such
calendar year; and
(b) the Cost or Fair Value, whichever is less, of Permanent
Additions acquired during such calendar year which at the time of
taking such credit constitute Available Permanent Additions; and
(c) the unapplied balance, or any part thereof, of the Cost or
Fair Value, whichever is less, of Available Permanent Additions
acquired by the Company during the five calendar years preceding such
calendar year and specified in the Officers' Certificates delivered to
the Trustee pursuant to Section 2 of this Article, but only to the
extent that the Permanent Additions with respect to which such Cost or
Fair Value was determined shall at the time of taking such credit
constitute Available Permanent Additions.
SECTION 2. The Company covenants that it will on or before March 1 in
each year, beginning with the first deposit made with the Trustee under the
provisions of Section 1 of this Article, as long as any of the Bonds are
outstanding, deliver to the Trustee the following:
(A) An Officers' Certificate, which shall state:
(i) The amount of the Gross Operating Revenues for the preceding
calendar year;
(ii) 9% of such Gross Operating Revenues;
(iii) The amount actually expended by the Company for maintenance
during such calendar year;
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(iv) The amount set forth in subparagraph (xii) of each Officers'
Certificate delivered to the Trustee pursuant to the provisions of this
Section during the preceding five calendar years (specifying each such
Officers' Certificate), after deducting from each such amount the
aggregate of (a) the Cost or Fair Value, whichever is less, of all
Permanent Additions represented by such amount which have ceased to be
Available Permanent Additions; and (b) any part of such amount for
which the Company has previously taken credit against any Maintenance
or Improvement Deposit (specifying the Officers' Certificate in which
such credit was taken); and (c) any part of such amount for which the
Company then desires to take credit against the Maintenance or
Improvement Deposit;
(v) An amount which shall be the aggregate of all amounts set forth
pursuant to the provisions of clause (c) of the foregoing subparagraph
(iv);
(vi) The Cost or Fair Value, whichever is less, of Available
Permanent Additions acquired by the Company during the preceding
calendar year;
(vii) That part of the amount set forth in subparagraph (vi) which
the Company desires to use as a credit against the Maintenance or
Improvement Deposit;
(viii) The amount of cash payable to the Trustee under the
provisions of Section 1 of this Article, which shall be the amount by
which the amount set forth in subparagraph (ii) hereof exceeds the sum
of the amounts set forth in subparagraphs (iii), (v) and (vii) hereof;
(ix) The sum of all amounts charged on the books of the Company
against any reserve for retirement or depreciation during the preceding
calendar year representing the aggregate of the Cost when acquired of
any part of the Company's plants and property of the character
described in the granting clauses hereof which has been permanently
retired or abandoned;
(x) The aggregate of the amounts set forth in subparagraphs (v) and
(vii) hereof;
(xi) The amount by which the amount set forth in subparagraph (x)
exceeds the amount set forth in subparagraph (ix), being the amount
required to be deducted from the Cost or Fair Value of Available
Permanent Additions in order to determine a Net Amount of Available
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Permanent Additions pursuant to the provisions of Section 9 of Article
I of the Original Indenture;
(xii) The amount set forth in subparagraph (vi) after deducting the
amount, if any, set forth in subparagraph (vii); and
(xiii) That all conditions precedent to the taking of the credit or
credits so requested by the Company have been complied with.
(B) In the event that the Officers' Certificate delivered to the
Trustee pursuant to the provisions of paragraph (A) of this Section shall state,
pursuant to the requirements of subparagraph (vi), the Cost or Fair Value of
Available Permanent Additions acquired by the Company during the preceding
calendar year, the documents specified in paragraphs 2, 3, 5, 6 and 7 of
subdivision (B) of Section 3 of Article IV of the Original Indenture.
(C) An amount in cash equal to the sum set forth in subparagraph (viii)
of the Officers' Certificate provided for in paragraph (A) hereof.
SECTION 3. All cash deposited with the Trustee as part of any
Maintenance or Improvement Deposit provided for in Section 1 of this Article,
may, at the option of the Company, be applied to the purchase of bonds under the
provisions of Section 2 of Article X of the Original Indenture or to the
redemption of bonds under the provisions of Section 3 of Article X of the
Original Indenture or may be withdrawn by the Company at any time to reimburse
the Company for the cost of a Net Amount of Available Permanent Additions
(excluding, however, from any such Available Permanent Additions all Permanent
Additions included in any certificate delivered to the Trustee for the purpose
of obtaining a credit against any Maintenance or Improvement Deposit provided
for in Section 1 of this Article to the extent that such Permanent Additions
have been used for any such credit). The Trustee shall pay to or upon the
written order of the Company all or any part of such cash upon the receipt by
the Trustee of:
(a) A Resolution requesting such payment; and
(b) The documents specified in paragraphs 2, 5, 6 and 7 of
subdivision (B) of Section 3 of Article IV of the Original Indenture,
with such modifications, additions and omissions as may be appropriate
in the light of the purposes for which they are used.
ARTICLE III.
Covenants of the Company.
SECTION 1. The Company hereby covenants and agrees with the Trustee,
for the benefit of the Trustee and all the present and future holders of the
Bonds, that the Company will pay the principal of, and premium, if any, and
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interest on, all bonds issued or to be issued as aforesaid under and secured by
the Original Indenture as hereby supplemented, as well as all bonds which may be
hereafter issued in exchange or substitution therefor, and will perform and
fulfill all of the terms, covenants and conditions of the Original Indenture and
of this Thirty-Second Supplemental Indenture with respect to the additional
bonds to be issued under the Original Indenture as hereby supplemented.
SECTION 2. The Company covenants and agrees that so long as any of the
Bonds are outstanding (a) the Company will not make any Stock Payment if, after
giving effect thereto, its retained earnings, computed in accordance with
generally accepted accounting principles consistently applied, will be less than
the sum of (i) Excluded Earnings, if any, since December 31, 1998, and (ii)
$20,000,000; (b) Stock Payments made more than 40 days after the commencement,
and prior to the expiration, of any Restricted Period shall not exceed 65% of
the Company's Net Income during such Restricted Period; and (c) the Company will
not authorize a Stock Payment if there has occurred and is continuing an event
of default under subsections (a) and (b) of Section 1 of Article XI of the
Original Indenture.
For the purposes of this Section 2 the following terms shall have the
following meanings:
"Capitalization" shall mean the sum of (i) the aggregate principal
amount of all Debt at the time outstanding, (ii) the aggregate par or stated
value of all capital stock of the Company of all classes at the time
outstanding, (iii) premium on capital stock, (iv) capital surplus, and (v)
retained earnings.
"Debt" means (i) all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, for the repayment of money borrowed, (ii)
all deferred indebtedness for the payment of the purchase price of property or
assets purchased (but Debt shall not be deemed to include Customer Advances for
construction or any bonds issued under the Indenture which are not Outstanding
Bonds), (iii) leases which have been or, in accordance with generally accepted
accounting principles, should be recorded as capital leases and (iv) guarantees
of the obligations of another of the nature described in clauses (i), (ii) or
(iii) which have been or, in accordance with generally accepted accounting
principles, should be recorded as debt.
"Determination Date" shall mean the last day of each calendar quarter.
Any calculation with respect to any Determination Date shall be based on the
Company's balance sheet as of such date.
"Excluded Earnings" shall mean 35% of the Company's Net Income during
any Restricted Period.
"Net Income" for any particular Restricted Period shall mean the amount
of net income properly attributable to the conduct of the business of the
Company for such period, as determined in accordance with generally accepted
accounting principles consistently applied, after payment of or provision for
taxes on income for such period.
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"Outstanding Bonds" shall mean bonds which are outstanding within the
meaning indicated in Section 20 of Article I of the Original Indenture except
that, in addition to the bonds referred to in clauses (a), (b) and (c) of said
Section 20, said term shall not include bonds for the retirement of which
sufficient funds have been deposited with the Trustee with irrevocable
instructions to apply such funds to the retirement of such bonds at a specified
time, which may be either the maturity thereof or a specified redemption date,
whether or not notice of redemption shall have been given.
"Restricted Period" shall mean a period commencing on any Determination
Date on which the total Debt of the Company is, or as the result of any Stock
Payment then declared or set aside and to be made thereafter will be, more than
70% of Capitalization, and continuing until the third consecutive Determination
Date on which the total Debt of the Company does not exceed 70% of
Capitalization.
"Stock Payment" shall mean any payment in cash or property (other than
stock of the Company) to any holder of shares of any class of capital stock of
the Company as such holder, whether by dividend or upon the purchase,
redemption, conversion or other acquisition of such shares, or otherwise.
SECTION 3. The Company covenants and agrees that so long as any of the
Bonds are outstanding, neither the Company nor any subsidiary of the Company
will, directly or indirectly, lend or in any manner extend its credit to, or
indemnify, or make any donation or capital contribution to, or purchase any
security of, any corporation which directly or indirectly controls the Company,
or any subsidiary or affiliate (other than an affiliate which is a subsidiary of
the Company) of any such corporation.
ARTICLE IV.
The Trustee.
SECTION 1. The Trustee hereby accepts the trust hereby declared and
provided, and agrees to perform the same upon the terms and conditions in the
Original Indenture, as supplemented by this Thirty-Second Supplemental
Indenture.
SECTION 2. Subject to the provisions of Article XIII of the Original
Indenture, the Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through and consult with attorneys, agents,
officers or employees selected by the Trustee in its sole discretion. The
Trustee shall be entitled to advice of counsel concerning all matters of trusts
hereof and the duties hereunder and may in all cases pay such reasonable
compensation to all such attorneys, agents, officers and employees as may
reasonably be employed in connection with the trusts hereof. The Trustee may act
or refrain from acting and rely upon and be free from all liability for so
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relying upon the opinion or advice of any attorney (who may be the attorney or
attorneys for the Company). The Trustee may act and rely on written opinions of
experts employed by the Trustee and such advice shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by the Trustee hereunder in good faith and in reliance thereon. The Trustee
shall not be responsible for any loss or damage resulting from any action or
non-action in good faith taken in reliance upon such opinion or advice. The
Trustee shall not be bound to confirm, verify or make any investigation into the
facts or matters stated in any financial or other statements, resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order or other paper or document furnished pursuant to the terms
hereof.
SECTION 3. Before the Trustee shall be required to foreclose on, or to
take control or possession of, the real property or leasehold interest (the
"Premises") which may be the subject of any mortgage or mortgages for which the
Trustee is mortgagee in connection with the issuance of the Bonds, the Trustee
shall be indemnified and held harmless by the holders and/or beneficial owners
of the Bonds from and against any and all expense, loss, or liability that may
be suffered by the Trustee in connection with any spill, leak or release which
may have occurred on or invaded the Premises or any contamination by an
Hazardous Substance (hereinafter defined), whether caused by the Company or any
other person or entity, including, but not limited to, (1) any and all
reasonable expenses that the Trustee may incur in complying with any of the
Environmental Statutes (hereinafter defined), (2) any and all reasonable costs
that the Trustee may incur in studying or remedying any spill, leak or release
which may have occurred on or invaded the Premises or any contamination, (3) any
and all fines or penalties assessed upon the Trustee by reason of such
contamination, (4) any and all loss of value of the Premises or the improvements
thereon by reason of such contamination, and (5) any and all legal fees and
costs reasonably incurred by the Trustee in connection with any of the
foregoing. As used in this Section, contamination by any Hazardous Substance
shall include contamination, arising from the presence, creation, production,
collection, treatment, disposal, discharge, release, storage, transport or
transfer of any Hazardous Substance at or from the Premises or any improvements
thereon. As used in this Section, the term "Hazardous Substance" shall mean
petroleum hydrocarbons or any substance which (a) constitutes a hazardous waste
or substance under any applicable federal, state or local law, rule, order or
regulation now or hereafter adopted; (b) constitutes a "hazardous substance" as
such term is defined under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended (42 U.S.C. ss.9601 et seq.) and the
regulations issued thereunder and any comparable state or local law or
regulation; (c) constitutes a "hazardous waste" under the Resource Conservation
and Recovery Act, (42 U.S.C. ss.6991) and the regulations issued thereunder and
any comparable state or local law or regulation; (d) constitutes a pollutant,
contaminant, chemical or industrial, toxic or hazardous substance or waste as
such terms are defined under Federal Clean Water Act, as amended (33 U.S.C.
ss.1251 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C.
ss.2601 et seq.), or any comparable state or local laws or regulations; (e)
exhibits any of the characteristics enumerated in 40 C.F.R. Sections 261.20 -
261.24, inclusive; (f) those extremely hazardous substances listed in Section
302 of the Superfund Amendments and Reauthorization Act of 1986 (Public Law
99-499, 100 Stat. 1613) which are present in threshold planning or reportable
quantities as defined under such act; (g) toxic or hazardous chemical substances
which are present in quantities which exceed exposure standards as those terms
are defined under Sections 6 and 8 of the Occupational Safety and Health Act, as
amended (29 U.S.C. ss.ss.655 and 657 and 29 C.F.R. Part 1910, subpart 2); and
(h) any asbestos, petroleum-based products or any Hazardous Substance contained
within or release from any underground or aboveground storage tanks. As used in
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this Section, the term "Environmental Statutes" shall mean the statutes, laws,
rules, orders and regulations referred to in (a) through (h) inclusive in the
preceding sentence.
ARTICLE V.
Miscellaneous.
SECTION 1. This instrument is executed and shall be construed as an
indenture supplemental to the Original Indenture, and shall form a part thereof,
and except as hereby supplemented, the Original Indenture and the First, Second,
Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth,
Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth,
Nineteenth, Twentieth, Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth,
Twenty-Fifth, Twenty-Sixth, Twenty-Seventh, Twenty-Eighth, Twenty-Ninth,
Thirtieth and Thirty-First Supplemental Indentures are hereby confirmed. All
references in this Thirty-Second Supplemental Indenture to the Original
Indenture shall be deemed to refer to the Original Indenture as heretofore
amended and supplemented, and all terms used herein shall be taken to have the
same meaning as in the Original Indenture, as so amended, except in the cases
where the context clearly indicates otherwise.
SECTION 2. Any notices to the Trustee under this Thirty-Second
Supplemental Indenture shall be delivered to the Trustee by registered or
certified mail, hand delivery or other courier or express delivery service (with
receipt confirmed) or by telecopy (with receipt confirmed) at the following
address:
Chase Manhattan Trust Company, National Association
Capital Markets Fiduciary Services
1650 Market Street, Suite 520
Philadelphia, PA 19103
Attention: Philadelphia Suburban Water
Administrator
Telecopy: (215) 972-1685
Any change in such address or telecopy number may be made by notice to the
Company delivered in the manner set forth above.
SECTION 3. All recitals in this Thirty-Second Supplemental Indenture
are made by the Company only and not by the Trustee; and all of the provisions
contained in the Original Indenture in respect of the rights, privileges,
immunities, powers and duties of the Trustee shall be applicable in respect
hereof as fully and with like effect as if set forth herein in full.
SECTION 4. Although this Thirty-Second Supplemental Indenture is dated
as of October 1, 1999 for convenience and for the purpose of reference, the
actual date or dates of execution hereof by the Company and the Trustee are as
indicated by their respective acknowledgments annexed hereto.
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SECTION 5. In order to facilitate the recording or filing of this
Thirty-Second Supplemental Indenture, the same may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original and such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF the parties hereto have caused their corporate seals
to be hereunto affixed and their authorized officers have hereto affixed their
signatures, and their authorized officers have duly attested the execution
hereof, as of the 1st day of October, 1999.
[CORPORATE SEAL] PHILADELPHIA SUBURBAN WATER
COMPANY
Attest: /s/ Suzanne Falcone By: Kathy L. Pape
-------------------------- ---------------------------
Asst. Secretary Vice President and Treasurer
[CORPORATE SEAL] CHASE MANHATTAN TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
Attest: By:
--------------------------- ----------------------------
Authorized Officer Authorized Officer
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EXHIBIT A
BONDS REDEEMED OR PAID AT MATURITY
Principal Amount
Paid or Redeemed
(If less than al Date
Series Bonds of Series) Paid Maturity
- ------ ---------------- -------- ------------
3.25% Series Due 1971 12/31/70 Redemption
9.63% Series Due 1975 6/15/75 Maturity
9.15% Series Due 1977 1/1/77 Maturity
3.00% Series Due 1978 7/1/78 Maturity
3.38% Series Due 1982 7/1/82 Maturity
3.90% Series Due 1983 7/1/83 Maturity
3.50% Series Due 1986 1/1/86 Maturity
4.50% Series Due 1987 1/1/87 Maturity
4.13% Series Due 1988 5/1/88 Maturity
5.00% Series Due 1989 9/1/89 Maturity
4.63% Series Due 1991 5/1/91 Maturity
4.70% Series Due 1992 4/1/92 Maturity
6.88% Series Due 1993 1/1/93 Maturity
4.55% Series Due 1994 3/1/94 Maturity
10.13% Series Due 1995 $ 6,300,000 -- Sinking Fund
10.13% Series Due 1995 $ 3,700,000 5/17/93 Redemption
9.20% Series Due 2001 $ 3,850,000 -- Sinking Fund
9.20% Series Due 2001 $ 3,150,000 5/1/93 Redemption
8.40% Series Due 2002 $ 5,850,000 -- Sinking Fund
8.40% Series Due 2002 $ 4,150,000 1/2/96 Redemption
5.95% Series Due 2002 $ 2,400,000 -- Sinking Fund
12.45% Series Due 2003 $ 1,000,000 8/1/93 Sinking Fund
12.45% Series Due 2003 $ 9,000,000 8/2/93 Redemption
8.88% Series Due 2010 $ 800,000 -- Sinking Fund
8.88% Series Due 2010 $ 7,200,000 6/30/92 Redemption
13.00% Series Due 2005 8/2/95 Redemption
7.88% Series Due 1997 1/2/96 Redemption
10.65% Series Due 2006 4/2/96 Redemption
5.50% Series Due 1996 11/1/96 Maturity
8.44% Series Due 1997 4/1/97 Maturity
7.15% Series Due 2008 $ 4,000,000 -- Sinking Fund
29
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PROPERTIES ACQUIRED FROM 6/4/97 TO 9/30/99
- -------------------------------------------------------------------------------------------------------------------------
NAME GRANTOR COUNTY TAX PARCEL NO. INDEX NO. DEED DATE BOOK PAGE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PEDDLERS VIEW
WELL SITE #1 DELUCA ENTERPRISES, INC BUCKS 41-48-05 -- 8/6/97 1461 217
- -------------------------------------------------------------------------------------------------------------------------
PEDDLERS VIEW
WELL SITE #2 DELUCA ENTERPRISES, INC BUCKS 41-47-142 -- 8/6/97 1461 213
- -------------------------------------------------------------------------------------------------------------------------
FERNHILL PLANT WEST CHESTER AREA
& RESERVOIR MUNICIPAL AUTHORITY CHESTER 52-3-106 VI-A-11 1/21/98 4292 396
- -------------------------------------------------------------------------------------------------------------------------
FERNHILL TANK WEST CHESTER AREA
& OFFICE MUNICIPAL AUTHORITY CHESTER 52-3-174 VI-A-59 1/21/98 4292 384
- -------------------------------------------------------------------------------------------------------------------------
WEST CHESTER AREA
HOOPES PARK TANK MUNICIPAL AUTHORITY CHESTER 51-5-53.1 VI-A-62 1/21/98 4292 402
- -------------------------------------------------------------------------------------------------------------------------
WEST CHESTER AREA
NEW & GAY STREET TANK MUNICIPAL AUTHORITY CHESTER 1-8-405 VI-A-63 1/21/98 4292 408
- -------------------------------------------------------------------------------------------------------------------------
INGRAMS MILL WEST CHESTER AREA
FILTRATION PLANT MUNICIPAL AUTHORITY CHESTER 51-4-44 VI-D-8 1/21/98 4292 390
- -------------------------------------------------------------------------------------------------------------------------
WEST CHESTER AREA
WHITE WELL STATION MUNICIPAL AUTHORITY CHESTER 51-5-38.2 VI-E-66 1/21/98 4292 415
- -------------------------------------------------------------------------------------------------------------------------
WEST CHESTER AREA
WHITE WELLS 4 & 5 MUNICIPAL AUTHORITY CHESTER 51-5-18 VI-E-67 1/21/98 4292 421
- -------------------------------------------------------------------------------------------------------------------------
VALLEY HILL TANK D.P.I. CAPITAL FUND II LP. CHESTER 33-5H-7 VI-B-44 6/19/98 4369 838
- -------------------------------------------------------------------------------------------------------------------------
9 ELLIOT AVENUE WALTER T. BROWN MONTGOMERY 40-00-17076-00-2 VII-A-15 7/1/98 5234 1164
- -------------------------------------------------------------------------------------------------------------------------
970 RADCLIFFE STREET BRISTOL BOROUGH BUCKS 4-21-78 VI-D-9 12/10/98 1752 1863
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
Chase Manhattan Trust Company National Association, Mortgagee and
Trustee named in the foregoing Thirty-Second Supplemental Indenture, hereby
certifies that its precise name and the post office address of its Global Trust
Services Group in Philadelphia, Pennsylvania are as follows:
Chase Manhattan Trust Company, National Association
Capital Markets Fiduciary Services
1650 Market Street, Suite 520
Philadelphia, PA 19103
Attention: Philadelphia Suburban Water
Administrator
Telecopy: (215) 972-1685
CHASE MANHATTAN TRUST COMPANY
NATIONAL ASSOCIATION
By: ________________________
Authorized Officer
31
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF MONTGOMERY
On the 5th day of October, 1999, before me, the Subscriber, a
Notary Public for the Commonwealth of Pennsylvania, personally appeared Kathy
L.Pape, who acknowledged herself to be the Vice President and Treasurer of
Philadelphia Suburban Water Company, a corporation, and that she as such Vice
President and Treasurer, being authorized to do so, executed the foregoing
Thirty-Second Supplemental Indenture as and for the act and deed of said
corporation and for the uses and purposes therein mentioned, by signing the name
of the corporation by herself as such officer.
In Witness Whereof I hereunto set my hand and official seal.
[NOTARIAL SEAL]
s/s/Linda M. Freeman
---------------------
32
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
On the 5th day of October, 1999 before me, the Subscriber, a Notary
Public for the Commonwealth of Pennsylvania, personally appeared Catherine
Lenhardt, who acknowledged herself to be an Assistant Vice President of Chase
Manhattan Trust Company National Association, Trustee, a national banking
association, and that she as such Assistant Vice President, being authorized to
do so, executed the foregoing Thirty-Second Supplemental Indenture as and for
the act and deed of said national banking association and for the uses and
purposes therein mentioned by signing the name of said national banking
association by herself as such officer.
In Witness Whereof I hereunto set my hand and official seal.
[NOTARIAL SEAL]
/s/ Caroline N. Hunter
----------------------
33
<PAGE>
This Thirty-Second Supplemental Indenture was recorded on October 1,
1999 in the Office for the Recording of Deeds for each of the five counties
tabulated below in the Mortgage Book and at the page indicated:
Mortgage
County Book Page
-------- ----
Berks . . . . . . . . . . . . ____ ____
Bucks . . . . . . . . . . . . ____ ____
Chester. . . . . . . . . . . . ____ ____
Delaware . . . . . . . . . . . ____ ____
Montgomery . . . . . . . . . . ____ ____
For the recording information with respect to the Original Indenture
and the first Thirty-One supplemental indentures, see pages 4 and 5 of this
Thirty-Second Supplemental Indenture.
<PAGE>
Exhibit 10.37
BOND PURCHASE AGREEMENT
$25,000,000
DELAWARE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
6.00% Water Facilities Revenue Bonds
due June 1, 2029
(Philadelphia Suburban Water Company Project)
Series of 1999
Bond Purchase Agreement dated September 29, 1999 among the DELAWARE COUNTY
INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"); PHILADELPHIA SUBURBAN WATER
COMPANY, a Pennsylvania corporation (the "Company"), and COMMERCE CAPITAL
MARKETS, INC. (the "Underwriter").
1. Background.
(a) The Issuer proposes to enter into a Construction and Financing
Agreement (the "Financing Agreement") dated as of October 1, 1999 with the
Company, under which the Issuer will agree to loan to the Company funds to
provide financing of the costs of certain capital projects consisting of
improvements and additions to the Company's water facilities (the "Capital
Projects") located within municipalities in Delaware, Chester, Bucks and
Montgomery Counties, Pennsylvania. To finance the loan under the Financing
Agreement, the Issuer proposes to issue and sell $25,000,000 aggregate principal
amount of the bonds identified above (the "Bonds") to the Underwriter, who will
in turn reoffer the Bonds for sale to the public;
(b) The Bonds will be issued pursuant to the Pennsylvania Economic
Development Financing Law, Act of August 23, 1967, P.L. 251, as amended and
supplemented (the "Act"), a resolution adopted by the Issuer on May 11, 1998, as
supplemented by a resolution adopted by the Issuer on May 19, 1999 (together,
the "Resolution") and under a Trust Indenture dated as of October 1, 1999 (the
"Indenture") between the Issuer and Chase Manhattan Trust Company, National
Association, as trustee (the "Trustee"). The Bonds will have such terms as are
set forth in Schedule I attached hereto. The Bonds will be payable out of
payments by the Company under the Financing Agreement, including payments under
its First Mortgage Bond, in the principal amount of $25,000,000 (the "First
Mortgage Bond") to be issued concurrently with the Bonds pursuant to the
Company's Indenture of Mortgage (the "Original Indenture") dated as of January
1, 1941 to Chase Manhattan Trust Company, National Association, as successor
trustee (the "Mortgage Trustee"), as heretofore amended and supplemented and as
to be further supplemented by a Thirty-Second Supplemental Indenture (the
"Thirty-Second Supplemental Indenture") dated as of October 1, 1999 (the
Original Indenture as so supplemented and amended is hereinafter referred to as
the "First Mortgage Indenture"). All of the Issuer'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 Issuer's rights to the First
Mortgage Bond, and all of the Issuer's rights to moneys and securities in the
Construction Fund, the Debt Service Fund and the Revenue Fund established by the
Indenture, except for the Issuer's rights to certain fees and reimbursement 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 Indenture;
<PAGE>
(c) The Capital Projects are intended to constitute facilities for the
furnishing of water for purposes of Section 142(a)(4) of the Internal Revenue
Code of 1986, as amended (the "Code"), so that the interest on the Bonds will
not be includable in gross income for federal income tax purposes under the Code
and the Underwriter may offer the Bonds for sale without registration under the
Securities Act of 1933, as amended (the "1933 Act") or qualification of the
Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act");
and
(d) A Preliminary Official Statement dated September 21, 1999,
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 as of the date
hereof, including the Appendices thereto and all documents incorporated therein
by reference (the "Final Official Statement"), prepared for use in such offering
will be supplied to the parties hereto as soon as it is available subject to
Section 10 hereof. The Final Official Statement, as it may be amended or
supplemented with the consent of the Issuer, the Underwriter and the Company, is
hereinafter referred to as the "Official Statement."
2. Purchase, Sale and Closing. On the terms and conditions herein set
forth, the Underwriter will buy from the Issuer, and the Issuer will sell to the
Underwriter, all (but not less than all) of the Bonds at a purchase price equal
to 98.30% of the principal amount thereof, plus interest accrued in the amount
of $25,000.00 to the Closing date. Payment shall be made in immediately
available funds to the Trustee for the account of the Issuer. Closing (the
"Closing") will be at the offices of Blank Rome Comisky & McCauley LLP,
Philadelphia, Pennsylvania, at 10:00 a.m., Eastern Daylight Time, on October 7,
1999, or at such other date, time or place as may be agreed on by the parties
hereto. The Bonds will be delivered in New York, New York in the form of one
typewritten bond maturing June 1, 2029, registered in the name of Cede & Co., as
nominee for The Depository Trust Company.
The Underwriter agrees to make a bona fide public offering of the Bonds at
the initial offering prices or yields set forth in the Official Statement;
provided, however, the Underwriter reserves the right (and the Issuer and the
Company hereby expressly acknowledge such right): (i) to make concessions to
dealers; (ii) 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 (iii) to change such
initial offering prices, all as the Underwriter shall deem necessary in
connection with the marketing of the Bonds.
3. Issuer's Representations. The Issuer makes the following
representations, all of which shall survive Closing, that:
(a) The Issuer is a body politic and corporate, duly created and
existing under the Constitution and laws of the Commonwealth of Pennsylvania
(the "Commonwealth"), and has, and at the date of Closing will have, full legal
right, power and authority to: (i) enter into this Bond Purchase Agreement; (ii)
execute and deliver the Indenture, the Financing Agreement, this Bond Purchase
Agreement and the Authority?s tax certificate (collectively, the "Issuer
Financing Documents") and the other various certificates executed by the Issuer
in connection therewith; (iii) issue, sell and deliver the Bonds to the
Underwriter as provided herein; and (iv) carry out and to consummate the
transactions contemplated by the Issuer Financing Documents and the Official
Statement to be carried out and/or consummated by it;
2
<PAGE>
(b) The section entitled "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;
(c) The section entitled "THE AUTHORITY" contained in the Official
Statement as of its date does not or will not, with respect to the Issuer,
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 Issuer has complied, and will at the Closing be in compliance
in all material respects, with the provisions of the Act;
(e) To the extent required by law, the Issuer 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 Issuer of the obligations on its part contained in the Issuer Financing
Documents;
(f) To the best of the knowledge of the officer of the Issuer
executing this Bond Purchase Agreement, the Issuer 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 Issuer
Financing Documents, and compliance with the provisions of each thereof, will
not conflict with or constitute a breach of or default under any law,
administrative regulation, judgment, decree, loan agreement, note, resolution,
agreement or other instrument to which the Issuer is a party or is otherwise
subject;
(g) All approvals, consents and orders of any governmental authority,
board, agency or commission having jurisdiction which would constitute a
condition precedent to the Issuer's legal ability to issue the Bonds or to the
performance by the Issuer of its obligations hereunder and under the Issuer
Financing Documents have been obtained or will be obtained prior to the Closing;
(h) The Bonds, when issued, authenticated and delivered in accordance
with the Indenture and sold to the Underwriter as provided herein, will be
validly issued, and will be valid and binding limited obligations of the Issuer
enforceable in accordance with their terms (except as an enforcement of remedies
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws or legal or equitable principles affecting the enforcement of creditors'
rights ("Creditors' Rights Limitations"));
(i) The terms and provisions of the Issuer Financing Documents when
executed and delivered by the respective parties thereto, will constitute the
valid, legal and binding obligations of the Issuer enforceable in accordance
with their respective terms (except as enforcement of remedies may be limited by
Creditors' Rights Limitations);
3
<PAGE>
(j) There is no action, suit, proceeding, inquiry or investigation, at
law or in equity, before or by any court, public board or body, pending or, to
the knowledge of the Issuer, threatened against the Issuer, affecting the
existence of the Issuer 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 the revenues or assets of the Issuer 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 Issuer 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 Issuer with respect to the issuance of
the Bonds or the execution and delivery of the Issuer Financing Documents,
wherein an unfavorable decision, ruling or finding would affect in any way the
validity or enforceability of the Issuer Financing Documents; and
(k) The net proceeds received from the Bonds and applied in accordance
with the Indenture shall be used in accordance with the Act as described in the
Official Statement.
4. Company's Representations. The Company makes the following
representations, all of which will survive the Closing:
(a) The Company has not sustained since June 30, 1999 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 capital stock or 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, stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Official Statement;
(b) The Company was organized 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 Bond has 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 a valid
and legally binding obligation of the Company entitled to the benefits provided
by the First Mortgage Indenture;
4
<PAGE>
(d) The Original Indenture has been duly authorized, executed and
delivered by the Company and the Mortgage Trustee, and the Thirty-Second
Supplemental Indenture has been duly authorized. When the Thirty-Second
Supplemental Indenture, in substantially the form approved by the Company, has
been executed and delivered by the Company and the Mortgage Trustee and recorded
as required by law, the First Mortgage Indenture (i) will constitute a valid and
legally binding instrument enforceable in accordance with its terms except as
enforceability may be limited by Creditors' Rights Limitations, and (ii) will
constitute a direct, valid and enforceable first mortgage lien (except as
enforceability of such lien may be limited by Creditors' Rights Limitations),
upon all of the properties and assets of the Company (not heretofore released as
provided for in the First Mortgage Indenture) specifically or generally
described or referred to in the First Mortgage Indenture as being subject to the
lien thereof (which properties and assets constitute substantially all of the
Company's properties and assets other than securities), except for permitted
liens under the First Mortgage Indenture, and will create a similar lien upon
all properties and assets acquired by the Company after the execution and
delivery of the Thirty-Second Supplemental Indenture and required to be
subjected to the lien of the First Mortgage Indenture pursuant thereto when so
acquired (which properties and assets will constitute substantially all of the
Company's properties and assets subsequently acquired other than securities),
except for permitted liens under the First Mortgage Indenture; the Original
Indenture has been, and the Thirty-Second Supplemental Indenture 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 First Mortgage Indenture; and all necessary approvals of regulatory
authorities, commissions and other governmental bodies having jurisdiction over
the Company required to subject to the lien of the First Mortgage Indenture, the
mortgaged property or trust estate (as defined in the First Mortgage Indenture)
have been duly obtained;
(e) In each of the following cases with such exceptions as are not
material and do not interfere with the conduct of the business of the Company,
the Company has good and marketable title to all of its real property currently
held in fee simple; good and marketable title to all of its other interests in
real property (other than certain rights of way, easements, occupancy rights,
riparian and flowage rights and real property interests of a similar nature);
and good and marketable title to all personal property owned by it, in each case
free and clear of all liens, encumbrances and defects except such as are
described in the Official Statement, the lien of the First Mortgage Indenture,
permitted liens under the First Mortgage Indenture or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company; and any real property and
buildings held under lease by the Company are held by it under valid, subsisting
and enforceable leases with such exceptions which are not material and do not
interfere with the use made and proposed to be made of such property and
buildings of the Company;
(f) In each of the following cases except for such exceptions which
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 First
Mortgage Indenture 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
threatened that would result in a material modification, suspension or
revocation thereof; and the Company has the legal power to exercise the rights
of eminent domain for the purposes of conducting its water utility operations;
5
<PAGE>
(g) The issue and sale of the Bonds; the issue and delivery of the
First Mortgage Bond and the compliance by the Company with all of the provisions
of the First Mortgage Bond and the First Mortgage Indenture; the execution,
delivery and performance by the Company of the Thirty-Second Supplemental
Indenture, 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 First Mortgage Indenture) upon any of the property or assets of the
Company pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject, nor will such action result in a violation of the provisions
of the Articles of Incorporation, as amended, or the Bylaws of the Company or
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its property; and 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 for the issue and sale of the
Bonds; the issue and delivery of the First Mortgage Bond; the execution,
delivery and performance by the Company of this Bond Purchase Agreement, the
Financing Agreement, the Thirty-Second Supplemental Indenture, the First
Mortgage Bond and the Continuing Disclosure Agreement; or the consummation by
the Company of the other transactions contemplated by this Bond Purchase
Agreement or the First Mortgage Indenture;
(h) The Pennsylvania Public Utility Commission by order has duly
authorized the issuance and delivery of the First Mortgage Bond on terms not
inconsistent with this Bond Purchase Agreement;
(i) The Company is not a holding company, a registered holding company
or an affiliate of a registered holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended;
(j) There are no legal or governmental proceedings pending to which
the Company is a party or of which any property of the Company is subject, other
than as set forth in the Official Statement and other than litigation incident
to the kind of business conducted by the Company wherein an unfavorable ruling,
decision or finding is likely that would have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company; and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
(k) (i) The Capital Projects consist 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); (ii) 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 (iii) all other information supplied by the Company 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 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 Capital
Projects and the descriptions of the Bonds, the Indenture, the Financing
Agreement, the First Mortgage Bond, the First Mortgage Indenture and the
Continuing Disclosure Agreement contained in the Preliminary Official Statement
and the Official Statement (including Appendix A and the information
incorporated therein by reference) do not contain an untrue statement of a
material fact or omit to state a material fact necessary to make such
information and descriptions, in the light of the circumstances under which they
were made, not misleading; and
6
<PAGE>
(n) The Company will undertake, pursuant to the Continuing Disclosure
Agreement dated as of October 1, 1999 to be entered into between the Company and
the Trustee (the "Continuing Disclosure Agreement"), to provide annual reports
and notices of certain material events in accordance with Rule 15c2-12 under the
Securities Exchange Act of 1934, as amended ("Rule 15c2-12"). A description of
this undertaking and the Continuing Disclosure Agreement is set forth in the
Preliminary Official Statement and will also be set forth in the Final Official
Statement.
5. Issuer's Covenants. The Issuer will:
(a) cooperate in qualifying the Bonds for offer and sale under the
Blue Sky laws of states designated by the Underwriter, provided that the Issuer
shall not be required to qualify to do business or consent to service of process
in any state or jurisdiction other than the Commonwealth and the Issuer's
out-of-pocket costs in respect thereof are paid by the Company or are otherwise
provided for; and
(b) refrain from knowingly taking any action with regard to which the
Issuer 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 referred
to under the caption "TAX MATTERS" in the Official Statement.
6. Company's Covenants. The Company agrees that it will:
(a) refrain from taking any action, or from permitting any action,
with regard to which the Company may exercise control, to be taken, that would
result in the loss of the exclusion from gross income for federal tax purposes
of interest on the Bonds;
(b) indemnify the Issuer, its members, directors, officers and
employees and the Underwriter, its officers, directors, officials, employees and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the 1933 Act (collectively, "Indemnified Parties") against claims asserted
against them in connection with the offering and sale of the Bonds (i) on the
ground that the Preliminary Official Statement or the Official Statement (except
for the information relating to the Issuer under the caption "THE AUTHORITY")
contains an alleged untrue statement of material fact or an alleged omission to
state any material fact necessary to make the statements therein not misleading
in the light of the circumstances under which they were made, or (ii) arising by
virtue of the failure to register the Bonds under the 1933 Act, or to qualify
the Indenture under the 1939 Act;
(c) indemnity and hold harmless the Issuer and its counsel and each
person if any who controls (within the meaning of Section 20 of the Securities
Exchange Act of 1934 or Section 15 of the Securities Act of 1933, as amended)
the Issuer from and against all losses, claims, damages, liabilities and
expenses, joint or several, to which the authority, such officer, agent,
employee or controlling person may become subject, under federal laws or
regulations, or otherwise, insofar as such losses, claims, damages, 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
Capital Projects or the Company set forth in the Official Statement, or any
amendment or supplement thereto, or the Preliminary Official Statement , or
(iii) the willful or negligent omission or alleged omission to state in the
Official Statement or the Preliminary Official Statement a material fact
required to be stated therein or necessary to make the statements therein
pertaining to the Company or the Capital Projects not misleading.
(d) refrain from knowingly taking 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 income tax purposes of interest on the Bonds referred
to under the caption "TAX MATTERS" in the Official Statement.
7
<PAGE>
7. Underwriter's Covenants.
(a) By acceptance hereof the Underwriter agrees to indemnify and hold
harmless the Indemnified Parties against claims, losses, damages, liabilities
and expenses asserted against them, or any of them, in connection with (i) the
offering and sale of the Bonds on the grounds that the information under the
caption "UNDERWRITING" contains an untrue statement of a material fact or 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, or (ii)
failure on the part of the Underwriter to deliver an Official Statement to any
purchaser; and will reimburse any legal or other expenses reasonably incurred by
an Indemnified Party in connection with investigating or defending any such
loss, claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which the Underwriter may otherwise have. The
Underwriter shall not be liable for any settlement of any such action effected
without its consent.
(b) The Underwriter will indemnity and hold harmless the Issuer and
each director, officer and employee of the Issuer against any losses, claims,
damages, liabilities or expenses, joint or several, to which the Issuer or each
member, officer or employees of the Issuer may become subject, under federal
laws or regulations or otherwise: (i) insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in the
Official Statement under the caption "UNDERWRITING," any amendment or supplement
thereto, or the Preliminary official Statement or arise out of or are based upon
the omission or the alleged omission to state therein a material fact necessary
to make the statements under "UNDERWRITING" not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made to the Preliminary Official
Statement or Official Statement in reliance upon and in conformity with written
information furnished by the Underwriters specifically for use therein (it being
understood that the Underwriters furnished only the information under
"UNDERWRITING"); or (ii) failure on the part of the Underwriters to deliver an
Official Statement to any purchasers; and will reimburse any legal or other
expenses reasonably incurred by the Authority or each member, officer, or
employee of the Issuer in connection with investigating or defending of any such
loss, claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which the Underwriter may otherwise have. The
Underwriter shall not be liable for any settlement of any such action effected
without its consent.
8. Notice of Indemnification; Settlement. Promptly after receipt by an
Indemnified Party of notice of the commencement of any action against an
Indemnified Party hereunder in respect of which indemnity is to be sought
against the Company or the Underwriter, as the case may be (the "Indemnifying
Party"), such Indemnified Party 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 omission so
to notify the Indemnifying Party will not relieve the Indemnifying Party from
any liability which it may have to any Indemnified Party 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 any Indemnified
Party from and against any loss or liability by reason of such settlement or
judgment. The indemnity agreements contained in this Bond Purchase Agreement
shall include reimbursement for expenses reasonably incurred by an Indemnified
Party in investigating the claim and in defending it if the Indemnifying Party
declines to assume the defense and shall survive delivery of the Bonds.
8
<PAGE>
9. Equitable Contribution. If the indemnification provided for in Section
6(b) is unavailable to the Underwriter (or any controlling person thereof) in
respect of any losses, claims, damages or liabilities referred to therein, then
the Company shall, in lieu of indemnifying the Underwriter, contribute to the
amount paid or payable by the Underwriter as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Underwriter, respectively,
from the offering of the Bonds. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then the
Company shall contribute to such amount paid or payable by the Underwriter in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Underwriter, respectively, in
connection with the statements or omission which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefit received by the Company or the Underwriter
shall be deemed to be in the same proportion as the total proceeds from the
offering (before deducting issuance costs and expenses other than underwriting
fees and commissions) received by the Company, on the one hand, bear to the
total underwriting fees and commissions received by the Underwriter, on the
other hand. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriter agree that it would not
be just and equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 9. The
amount paid or payable by the Underwriter as a result of the losses, claims,
damages or liabilities referred to above in this Section 9 shall be deemed to
include any legal or other expenses reasonably incurred by the Underwriter in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, the Underwriter shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Bonds underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which the Underwriter
has otherwise been required to pay by reason of such untrue or allegedly untrue
statement or omission or alleged omission.
10. Official Statement; Public Offering.
(a) In order to enable the Underwriter to comply with Rule 15c2-12 (i)
the Company has prepared or caused the preparation of the Preliminary Official
Statement, which the Company and the Issuer (but only with respect to the
information therein with respect to the Issuer under the headings "THE
AUTHORITY" and "INTRODUCTORY STATEMENT") deem final and complete as of its date;
(ii) the Company shall provide to the Underwriter sufficient copies of the
Official Statement in sufficient time to accompany any confirmation that
requires payment from any customer and in any event within seven business days
after the date of this Bond Purchase Agreement; and (iii) the Company agrees to
notify the Underwriter of any developments that would render the Official
Statement misleading in any material respect during the period that the Official
Statement is required to be delivered in connection with the sale of the Bonds
and for a period of 25 days thereafter. The Issuer and the Company hereby
authorize the use of the Preliminary Official Statement and the Official
Statement by the Underwriter in connection with the offering of the Bonds.
9
<PAGE>
(b) After the Closing, and until the Underwriter has informed the
Issuer and the Company that the Underwriter has sold all the Bonds, the Issuer
and the Company will not adopt or distribute any amendment of or supplement to
the Official Statement, except with the prior written consent of the
Underwriter; and if any event relating to or affecting the Issuer, the Company
or the Bonds shall occur, the result of which shall make it necessary, in the
reasonable opinion of the Underwriter, to amend or supplement the Official
Statement in order to make it not misleading in the light of the circumstances
existing at that time, the Company shall forthwith prepare, and the Company
shall approve for distribution, a reasonable number of copies of an amendment of
or supplement to the Official Statement, in form and substance satisfactory to
the Underwriter, so that the Official Statement then will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances existing at that time,
not misleading. The Issuer shall cooperate with the Company in the issuance and
distribution of any such amendment or supplement.
(c) The Underwriter agrees to promptly provide upon closing a
nationally recognized municipal securities information repository and the
Municipal Securities Rulemaking Board ("MSRB") with a copy of the Official
Statement for filing in accordance with Rule 15c2-12 and to inform the Issuer in
writing as to (i) the date and place of such filing and (ii) the date of the end
of the underwriting period.
11. Conditions of Underwriter's Obligations. The Underwriter's obligations
to purchase and pay for the Bonds and the Issuer'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 Issuer and the Company herein 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 Issuer nor the Company shall be in default in the
performance of any of their respective covenants herein;
(c) The Underwriter shall have received:
(i) Opinions of Blank Rome Comisky & McCauley LLP, Bond Counsel,
dated the date of Closing, in the forms attached as Exhibits A and B hereto,
addressed to (or reliance letters delivered in respect of) the Issuer, the
holders of the Bonds and the Underwriter;
(ii) An opinion Blank Rome Comisky & McCauley LLP, counsel for
the Issuer, dated the date of Closing with respect to the matters set forth in
Exhibit C hereto, addressed to the Underwriter;
(iii) Opinions of Dilworth Paxson LLP ("Company Counsel") and the
Company?s internal General Counsel, dated the date of Closing, in the forms
attached as Exhibit D hereto, addressed to the Underwriter and the Issuer and,
in the case of the opinion of Company Counsel, to Bond Counsel;
(iv) An opinion of Ballard Spahr Andrews & Ingersoll, LLP,
counsel for the Underwriter, in form and substance satisfactory to the
Underwriter;
10
<PAGE>
(v) An opinion of counsel to Financial Guaranty Insurance Company
(the "Bond Insurer") in form and substance satisfactory to the Underwriter,
relating to the enforceability of the Municipal Bond New Issue Insurance Policy
(the "Insurance Policy") and the information concerning the Bond Insurer in the
Official Statement;
(vi) An agreed upon procedures letter dated the date of Closing,
from KPMG Peat Marwick LLP, the Company's independent certified public
accountants, with respect to the Official Statement, in form satisfactory to the
Underwriter;
(vii) A certificate dated the date of Closing executed by the
Chairman of the Issuer to the effect that:
(A) the representations, warranties and covenants of the
Issuer contained herein, to the best of the knowledge of such Chairman, are true
and correct in all material respects as of the date of Closing; and
(B) to the best of the knowledge of such Chairman, the
Issuer has complied in all material respects with all agreements and satisfied
in all material respects all of the conditions on its part to be performed or
satisfied at or prior to the Closing;
(viii) A certificate dated the date of Closing executed by the
chief financial officer of the Company to the effect that:
(A) the representations and warranties of the Company in
this Bond Purchase Agreement are true and correct in all material respects as of
the date of Closing;
(B) the Preliminary Official Statement and the Official
Statement, as of their respective dates, insofar as they relate to the Company,
do not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and
(C) no event affecting the Company occurred since the date
of the Bond Purchase Agreement which is required to be disclosed in the Official
Statement in order to make the statements and information therein not misleading
in any material respect;
(ix) Two executed copies of the Indenture, the Financing
Agreement, the Bond Purchase Agreement, the Thirty-Second Supplemental Indenture
and the Continuing Disclosure Agreement;
(x) Two copies of the Articles of Incorporation and By-laws 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 Bond, the Thirty-Second Supplemental Indenture, 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;
(xi) Two copies of the Resolution;
11
<PAGE>
(xii) A letter from KPMG Peat Marwick LLP dated the date of
Closing and addressed to the Underwriter consenting to the use of the financial
statements prepared by such firm and all references to such firm contained in
the Preliminary Official Statement and the Official Statement;
(xiii) Evidence of the issuance of the Insurance Policy by the
Bond Insurer which unconditionally and irrevocably guarantees the payment when
due of the principal of and interest on the Bonds;
(xiv) Evidence satisfactory to the Underwriter of a rating of
"AAA" assigned by Standard & Poor's Ratings Services, and that such rating is in
full force and effect as of the date of Closing;
(xv) Evidence satisfactory to Bond Counsel and the Underwriter of
the receipt of a Preliminary Allocation Request relating to the Bonds from the
Pennsylvania Department of Community and Economic Development and a Securities
Certificate relating to the Bonds from the Pennsylvania Public Utility
Commission; and
(xvi) Such additional documentation as the Underwriter or its
counsel or Bond Counsel may reasonably request to evidence compliance with
applicable law and the validity of the Bonds, the Financing Agreement, the
Indenture, this Bond Purchase Agreement, the First Mortgage Indenture, the First
Mortgage Bond and the Continuing Disclosure Agreement, and to evidence that the
interest on the Bonds is not includable in gross income under the Code and the
status of the offering under the 1933 Act and the 1939 Act.
(d) At Closing there shall not have been any material adverse change
in the financial condition of the Company or any adverse development concerning
the business or assets of the Company which 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 reasonable
judgment of the Underwriter, makes it inadvisable to proceed with the sale of
the Bonds; and the Underwriter shall have received certificates of the Company
certifying that no such material adverse change has occurred or, if such a
change has occurred, full information with respect thereto; and
(e) The Underwriter shall deliver at Closing a certificate in form
acceptable to Bond Counsel to the effect that the Underwriter has sold to the
public (excluding bond houses and brokers) a substantial amount of the Bonds at
initial offering prices no higher than, or yields no lower than, those shown on
the cover page of the Official Statement and that such certificate may be relied
upon for purposes of determining compliance with Section 148 of the Code.
12. Events Permitting the Underwriter to Terminate. The Underwriter may
terminate its obligation to purchase the Bonds at any time before Closing if any
of the following occurs:
(a) A legislative, executive or regulatory action or proposed action
or a court decision which, in the judgment of the Underwriter, casts sufficient
doubt on the legality of, or the exclusion from gross income for federal income
tax purposes of interest on obligations such as the Bonds so as to materially
impair the marketability or materially lower the market price thereof; or
12
<PAGE>
(b) Any action by the Securities and Exchange Commission or a court
which would require registration of the Bonds or the First Mortgage Bond under
the 1933 Act or qualification of the Indenture under the 1939 Act; or
(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 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 shall be such as
to materially impair the marketability or materially lower the market price of
the Bonds; or
(d) Any event or condition occurs or arises after the date hereof
which, in the reasonable judgment of the Underwriter, renders untrue or
incorrect, in any material respect as of the time to which the same purports to
relate, the information contained in the Official Statement, or which requires
that information not reflected in the Official Statement or Appendices thereto
should be reflected therein in order to make the statements and information
contained therein not misleading in any material respect as of such time;
provided that the Issuer, the Company and the Underwriter will use their best
efforts to amend or supplement the Official Statement to reflect, to the
satisfaction of the Underwriter, such changes in or additions to the information
contained in the Official Statement; or
(e) pending or threatened litigation affecting or arising out of the
ownership of the Capital Projects or any other facilities of the Company or the
issuance of the Bonds which in the reasonable judgment of the Underwriter would
materially impair the marketability or materially lower the market price of the
Bonds; or
(f) Sufficient quantities of the Official Statement are not delivered
to the Underwriter in a timely manner as required by Section 10 hereof.
If the Underwriter terminates its obligation to purchase the Bonds because
any of the conditions specified in Section 11 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 Issuer, the Underwriter, or, except for the
payment of such costs of issuance described in Section 13 hereof which are due
and payable, the Company.
13 Expenses. All expenses and costs of the authorization, issuance, sale
and delivery of the Bonds including, without limitation, the preparation of and
furnishing to the Underwriter of the Preliminary Official Statement and the
Official Statement, the preparation and execution of the Bonds, the Financing
Agreement, the Indenture, the First Mortgage Bond, the Thirty-Second
Supplemental Indenture and this Bond Purchase Agreement, the Insurance Policy
premium, rating agency fees, the issuance and closing fees of the Issuer, the
fees and disbursements of counsel to the Issuer, the fees and disbursements of
Bond Counsel, the fees and disbursements of counsel to the Underwriter and the
expenses incurred in connection with qualifying the Bonds for sale under the
securities laws of various jurisdictions and preparing Blue Sky and legal
investment memoranda shall be paid by the Company as provided in this Bond
Purchase Agreement. The Issuer shall bear no out-of-pocket expense in connection
with the transactions contemplated by this Bond Purchase Agreement. The
Underwriter will pay all other expenses of the Underwriter in connection with
the public offering of the Bonds.
13
<PAGE>
14 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.
15 Notices and Other Actions. All notices, requests, demands and formal
actions hereunder will be in writing mailed, telegraphed or delivered to:
The Underwriter:
Commerce Capital Markets, Inc.
One Commerce Square
2005 Market Street, Suite 200
Philadelphia, Pennsylvania 19103
Attention: George C. Werner, III
Managing Director
The Company:
Philadelphia Suburban Water Company
762 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010
Attention: Kathy Pape
Vice President and Treasurer
The Issuer:
Delaware County Industrial Development
Authority
200 East State Street, Suite 205
Media, Pennsylvania 19063
Attention: J. Patrick Killian
Executive Director
16 Governing Law. This Bond Purchase Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania and
may not be assigned by the Issuer, the Company or the Underwriter.
17 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 and 7 above, the directors, officers, employees and agents of the
Issuer, 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.
14
<PAGE>
18. Limitations on Liability. No personal recourse shall be had for any
claim based on this Bond Purchase Agreement or the Bonds against any member,
officer, agent to employee, past, present or future, of the Issuer or any
successor body as such, either directly or through the Issuer 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 Issuer 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 Issuer from the Financing Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Company and the Underwriter have caused
their duly authorized representatives to execute and deliver this Bond Purchase
Agreement as of the date first written above.
DELAWARE COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
By: /s/ Marvin E. Berger
-------------------------------------
(Vice) Chairman
PHILADELPHIA SUBURBAN WATER COMPANY
By: /s/ Kathy L. Pape
-------------------------------------
Kathy Pape
Vice President and Treasurer
COMMERCE CAPITAL MARKETS, INC.
By: /s/ George C. Werner
-------------------------------------
George C. Werner
Managing Director
<PAGE>
Schedule I
Terms of Bonds
Principal Amount: $25,000,000
Dated Date: October 1, 1999
Maturity Date: June 1, 2029
Interest Payment Dates: June 1 and December 1, commencing June 1, 2000
Rate of Interest: 6.00%
Underwriter's Discount: $425,000
Redemption provisions:
The Bonds are subject to redemption as follows:
Optional Redemption. The Bonds are subject to redemption prior to maturity
at the option of the Issuer, upon direction of the Company, on or after June 1,
2009, as a whole or in part at any time, at the redemption prices (stated as a
percentage of the principal amount) set forth below, plus interest accrued to
the date fixed for redemption.
Optional Redemption Periods (inclusive) Redemption Prices
--------------------------------------- -----------------
June 1, 2009 through May 31, 2010 101%
June 1, 2010 and thereafter 100
Extraordinary Optional Redemption. The Bonds are subject to redemption at
the option of the Company as a whole at any time prior to maturity at a
redemption price of 100% of the principal amount thereof plus accrued interest
to the redemption date upon the occurrence of the following events:
(a) the Capital Projects are partially or totally damaged or destroyed
by fire or other casualty and the Company determines within sixty (60) days
after such damage or destruction that satisfactory restoration of the Capital
Projects may not be made; or
(b) all or substantially all of the Capital Projects are taken or
condemned as a whole by a public body in the exercise of its power of eminent
domain, or any portion of the Capital Projects are so taken or condemned and the
Company determines that the remaining portion of the Capital Projects is
unsuitable for the Company's business; or
(c) if changes in the economic availability or raw materials,
operating supplies, labor or facilities necessary for the operation of the
Capital Projects or the water supply and distribution system of which they are
part as an efficient facility or technological or other changes shall have
occurred which, in the Company's opinion, render the Facilities or such system
uneconomical for their intended purposes.
Schedule I-1
<PAGE>
Excess Funds Redemption. The Bonds are subject to redemption as a whole or
in part at any time prior to maturity at a redemption price of 100% of the
principal amount thereof plus accrued interest to the redemption date to the
extent that excess funds on deposit in the Construction Fund not needed to pay
Project Costs are transferred by the Trustee to the Revenue Fund.
Schedule I-2
<PAGE>
EXHIBIT A
FORM OF OPINION OF BLANK ROME COMISKY & MCCAULEY LLP
A-1
<PAGE>
EXHIBIT B
Points to be covered in Supplemental Opinion of Bond Counsel
(Terms defined in Bond Purchase Agreement
are used here with same meanings)
1 The Bonds are not subject to the registration requirements of the 1933
Act and the Indenture is not required to be qualified under the 1939 Act.
2 The Bond Purchase Agreement has been duly authorized, executed and
delivered by the Issuer and constitutes the valid and binding obligation of the
Issuer enforceable in accordance with its terms, subject only to applicable
bankruptcy, insolvency, moratorium, reorganization or other laws affecting
creditors' rights heretofore or hereafter enacted and to general equity
principles.
3 The execution and delivery of the Official Statement has been authorized
by the Issuer.
4 The information and statements contained in the Official Statement under
the sections captioned "THE BONDS", "SECURITY FOR THE BONDS" and in APPENDIX C
thereto (insofar as Appendix C purports to summarize provisions of the Bonds,
the Indenture and the Financing Agreement) are reasonable summaries of the
provisions of the Bonds and the documents purported to be summarized therein,
and matters set forth in the section captioned "TAX EXEMPTION" and APPENDIX D
thereto accurately reflects our opinion as to such matters and the tax exempt
nature of the interest on the Bonds.
5 We have not verified and are not passing upon and do not assume any
responsibility for the accuracy, completeness or reasonableness of the
statements contained in the Official Statement, except for the determinations
with respect to the sections referred to in numbered paragraph 4 above, and
without having undertaken to determine independently the accuracy or
completeness of the statements contained in the Official Statement, nothing has
come to the attention of Bond Counsel which would lead it to believe that the
Official Statement (except for financial, tabular, demographic or statistical
data therein and the information contained under the headings "THE
BONDS?Book-Entry Only System," "BOND INSURANCE," "ESTIMATED SOURCES AND USES OF
FUNDS," "BONDHOLDERS' RISKS," and "ABSENCE OF MATERIAL LITIGATION" and in
APPENDIX A, APPENDIX B and APPENDIX E of the Official Statement, as to which
bond counsel need not express a view) as of its date and as of the date of
Closing, contains any untrue statement of a material fact or omits to state any
material fact that is required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
B-1
<PAGE>
EXHIBIT C
Points to be covered in Opinion of Blank Rome Comisky & McCauley LLP
Counsel for the Issuer
(Terms defined in Bond Purchase Agreement
are used here with same meanings)
1 The Issuer is a body corporate and politic constituting an
instrumentality of the Commonwealth and is duly created and existing pursuant to
the Act.
2 The Issuer has by proper action duly authorized the execution and
issuance of the Bonds and the execution and delivery of the Issuer Financing
Documents. The Bonds have been duly and validly issued by the Issuer and the
Issuer Financing Documents have each been duly and validly executed and
delivered by the Issuer and the Bonds and each of such documents are valid and
binding agreements of the Issuer, enforceable against the Issuer in accordance
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws or legal or equitable
principles affecting the enforcement of creditor's rights.
3 To the knowledge of such counsel, the execution and the issuance by the
Issuer of the Bonds, the execution and delivery by the Issuer of the Issuer
Financing Documents and performance by the Issuer of the Issuer's obligations
under the Bonds and the Issuer's Financing Documents, do not conflict with or
constitute on a part of the Issuer a violation of, breach of or default under
any existing constitutional provision or statute of the Commonwealth, or, to our
knowledge without having undertaken any independent investigation, any
indenture, mortgage, deed of trust, resolution, note agreement or other
agreement or instrument to which the Issuer is a party or by which the Issuer is
bound, or, to our knowledge, any order, rule or regulation of any court,
governmental agency or body of the Commonwealth having jurisdiction over the
Issuer or any of its activities or property.
4 To the knowledge of such counsel, there is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public
board or body, pending or threatened against the Issuer, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the
transactions contemplated by the Bonds.
5 The Issuer has approved the distribution of the Preliminary Official
Statement and the Official Statement by the Underwriter in connection with the
sale of the Bonds.
6 The information contained in the Preliminary Official Statement and the
Official Statement under the heading "THE AUTHORITY" has been reviewed by us and
nothing has come to our attention which would lead us to believe that such
information contains any untrue statement of a material fact or omits to state a
material fact which is required to be stated therein or which is necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading in any material respect.
C-1
<PAGE>
EXHIBIT D
Points to be covered in Opinions of
Dilworth Paxson LLP
and Company Counsel
(Terms defined in Bond Purchase Agreement
are used here with same meanings)
1 The Company was organized and subsists 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.
2 The Company has the corporate power and authority to enter into and
perform the Bond Purchase Agreement, the Financing Agreement and the Continuing
Disclosure Agreement. The execution, delivery and performance by the Company of
the Financing Agreement, the Bond Purchase Agreement and the Continuing
Disclosure Agreement have been duly authorized by all requisite corporate
action.
3 The Bond Purchase Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company.
The Financing Agreement and the Continuing Disclosure Agreement, when executed
and delivered by the Company, will constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general.
4 The execution and delivery of the Bond Purchase Agreement, the Financing
Agreement and the Continuing Disclosure Agreement and the performance by the
Company of its obligations thereunder will not violate, conflict with or result
in a breach of or constitute a default under the Articles of Incorporation or
Bylaws of the Company or any agreement, instrument, order, writ, judgment or
decree to which the Company is a party or to which it or any of its property is
subject.
5 The Company has obtained all approvals required in connection with the
execution and delivery of, and performance by the Company of its obligations
under, the Bond Purchase Agreement, the Financing Agreement and the Continuing
Disclosure Agreement.
6 The First Mortgage Bond have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the First
Mortgage Indenture.
7 The First Mortgage Bonds are not subject to the registration requirements
of the 1933 Act.
D-1
<PAGE>
8 The Original Indenture has been duly authorized, executed and delivered
by the Company and the Trustee and the Thirty-Second Supplemental Indenture has
been duly authorized, executed and delivered by the Company and the Trustee and
recorded as required by law. The First Mortgage Indenture (i) constitutes a
valid and legally binding instrument enforceable in accordance with its terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws relating to or affecting the enforcement of
creditors' rights, and (ii) constitutes a direct, valid and enforceable first
mortgage lien (except as enforceability of such lien may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights) upon all of the properties and assets of the Company (not
heretofore released as provided for in the First Mortgage Indenture)
specifically or generally described or referred to in the First Mortgage
Indenture as being subject to the lien thereof (which properties and assets
constitute substantially all of the Company's properties and assets other than
securities), except for permitted liens under the First Mortgage Indenture, and
will create a similar lien upon all properties and assets acquired by the
Company after the execution and delivery of the Thirty-Second Supplemental
Indenture and required to be subjected to the lien of the First Mortgage
Indenture pursuant thereto when so acquired (which properties and assets will
constitute substantially all of the Company's properties and assets subsequently
acquired other than securities), except for permitted liens under the First
Mortgage Indenture; the First Mortgage Indenture has been 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 First
Mortgage Indenture; and all necessary approvals of regulatory authorities,
commissions and other governmental bodies having jurisdiction over the Company
required to subject to the lien of the First Mortgage Indenture the mortgaged
property or trust estate (as defined in the First Mortgage Indenture) have been
duly obtained.
9 In each of the following cases with such exceptions as are not material
and do not interfere with the conduct of the business of the Company, the
Company has good and marketable title in fee simple to all of its real property;
good and marketable title to all of its other interests in real property (other
than to certain rights of way, easements, occupancy rights, riparian and flowage
rights and real property interest of a similar nature); and good and marketable
title to all personal property owned by it, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Official
Statement, the lien of the First Mortgage Indenture, permitted liens under the
First Mortgage Indenture or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company.
D-2
<PAGE>
10 In each of the following cases with 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, indeterminate permits, other permits,
authorizations, rights, approvals, consents and order of all governmental
authorities or agencies necessary for the ownership or lease of the properties
owned or leased by it and for the operation of the business carried on by it as
described in the Official Statement, and all water rights, riparian rights,
easements, rights of way and other similar interests and rights described or
referred to in the First Mortgage Indenture 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,
indeterminate permits, other permits, orders, authorizations, rights, approvals
and consents are in full force and effect and contain no unduly burdensome
provisions; to the best of such counsel's knowledge, except as otherwise set
forth in the Official Statement, there are no legal or governmental proceedings
pending or threatened that would result in a material modification, suspension
or revocation thereof; and the Company has the legal power to exercise the
rights of eminent domain for the purposes of conducting its water utility
operations.
11 The issue and sale of the Bonds; the issue and delivery of the First
Mortgage Bond and the compliance by the Company with all of the provisions of
the First Mortgage Bond and the First Mortgage Indenture; the execution,
delivery and performance by the Company of the Thirty-Second Supplemental
Indenture, 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 First Mortgage Indenture) upon any of the property or assets of the
Company pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject, nor will such action result in a violation of the provisions
of the Articles of Incorporation, as amended, or the Bylaws of the Company or
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its property; and no
consent, approval, authorization, order, registration or qualification of or
with any court or any such regulatory authority or other governmental body not
already obtained is required for the issue and sale of the Bonds; the issue and
delivery of the First Mortgage Bond; the execution, delivery and performance of
this Bond Purchase Agreement, the Financing Agreement, the Thirty-Second
Supplemental Indenture, the First Mortgage Bond and the Continuing Disclosure
Agreement; or the consummation of the other transactions contemplated by this
Bond Purchase Financing Agreement or the First Mortgage Indenture.
12 The Company is not a holding company, a registered holding company or an
affiliate of a registered holding company within the meaning of the Public
Utility Company Holding Act of 1935, as amended.
13 There are no legal or governmental proceedings pending to which the
Company is a party or of which any property of the Company is the subject, other
than as set forth in the Official Statement and other than litigation incident
to the kind of business conducted by the Company which, if determined adversely
to the Company, would not have a material adverse effect on the financial
position, stockholders' equity or results of operations of the Company.
14 Such counsel shall also state that it has no reason to believe that the
information with respect to the Company and the Capital Projects and the
descriptions of the First Mortgage Bond and the First Mortgage Indenture
contained in the Official Statement (including Appendix A and the information
incorporated therein by reference) contain any untrue statement of a material
fact or omit to state a material fact which is required to be stated therein or
which is necessary to make such information and descriptions, in the light of
the circumstances under which they were made, not misleading in any material
respect.
D-3
<PAGE>
Exhibit 10.38
================================================================================
CONSTRUCTION AND FINANCING
AGREEMENT
between
DELAWARE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and
PHILADELPHIA SUBURBAN WATER COMPANY
-------------------------
Dated as of October 1, 1999
-------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions........................................................................................3
ARTICLE II
REPRESENTATIONS AND FINDINGS
SECTION 2.01. Representations and Warranties of the Authority....................................................7
SECTION 2.02. Representation and Warranties of the Company.......................................................7
SECTION 2.03. Findings of the Authority..........................................................................8
ARTICLE III
COMPLETION OF THE FACILITIES; ISSUANCE OF THE BONDS
SECTION 3.01. Portions of Project Completed......................................................................9
SECTION 3.02. Acquisition, Etc., of the Facilities; Completion...................................................9
SECTION 3.03. Issuance of Bonds..................................................................................9
SECTION 3.04. Payments From Construction Fund....................................................................9
SECTION 3.05. Requisitions......................................................................................10
SECTION 3.06. Plans and Specifications..........................................................................10
SECTION 3.07. Completion of Facilities..........................................................................10
SECTION 3.08. Company to Pay Additional Amounts If Required.....................................................10
SECTION 3.09. Contractor Defaults; Company Proceedings. ......................................................11
SECTION 3.10. Investment of Amounts in the Construction Fund....................................................11
ARTICLE IV
LOAN AND OTHER AMOUNTS
SECTION 4.01. Loan by Authority to Company.....................................................................12
SECTION 4.02. Repayment of Loan and Other Amounts..............................................................12
SECTION 4.03. Security For Payment.............................................................................13
SECTION 4.04. Assignment to Trustee............................................................................13
SECTION 4.05. Operation and Maintenance........................................................................14
SECTION 4.06. Insurance........................................................................................14
SECTION 4.07. Liens............................................................................................14
SECTION 4.08. Facilities Used For Purpose of the Act...........................................................15
SECTION 4.09. Payment of Certain Costs.........................................................................15
SECTION 4.10. Obligation to Make Payments Absolute.............................................................15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
SPECIAL COVENANTS
<S> <C> <C>
SECTION 5.01. No Warranty.......................................................................................16
SECTION 5.02. Company to Maintain Corporate Existence, Etc......................................................16
SECTION 5.03. Operation of Facilities; Maintenance of Licenses
and Permits....................................................................................16
SECTION 5.04. Additional Permits................................................................................16
SECTION 5.05. Authority to Maintain Corporate Existence, Etc....................................................17
SECTION 5.06. Compliance With Continuing Disclosure Agreement...................................................17
SECTION 5.07. Certain Tax Covenants.............................................................................17
ARTICLE VI
ASSIGNMENT, LEASING AND SALES
SECTION 6.01. Assignment, Lease and Sale of Facilities.........................................................19
SECTION 6.02. Assignment of Rights Under Agreement.............................................................20
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. Events of Default.................................................................................21
SECTION 7.02. Remedies..........................................................................................22
SECTION 7.03. Remedies Not Exclusive............................................................................23
SECTION 7.04. Reimbursement of Fees and Expenses................................................................23
SECTION 7.05. Waivers of Breaches...............................................................................23
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Termination.......................................................................................25
SECTION 8.02. Notices...........................................................................................25
SECTION 8.03. Benefit of Agreement. ...........................................................................26
SECTION 8.04. Amendments........................................................................................26
SECTION 8.05. Counterparts......................................................................................26
SECTION 8.06. Invalidity of Certain Clauses.....................................................................26
SECTION 8.07. Governing Law.....................................................................................27
SECTION 8.08. Indemnification...................................................................................27
SECTION 8.09. Limitation of Rights Against Authority............................................................29
SECTION 8.10. Limitation of Recourse Against Authority..........................................................30
EXHIBIT A Description of the Facilities........................................................................33
</TABLE>
<PAGE>
CONSTRUCTION AND FINANCING AGREEMENT
THIS CONSTRUCTION AND FINANCING AGREEMENT, dated as of October 1, 1999,
by and between the DELAWARE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY, a body
corporate and politic organized and existing under and by virtue of the laws of
the Commonwealth of Pennsylvania ("Authority"), and PHILADELPHIA SUBURBAN WATER
COMPANY, a corporation organized and existing under the laws of the Commonwealth
of Pennsylvania ("Company").
WITNESSETH:
WHEREAS, the Authority was organized pursuant to the Economic
Development Financing Law of the Commonwealth of Pennsylvania, Act of August 23,
1967, P.L. 251, as amended ("Act"), which Act declares it to be the policy of
the Commonwealth of Pennsylvania ("Commonwealth") to promote the health, safety,
morals, employment, business opportunities and general welfare of the people
thereof by providing for the creation of industrial and commercial development
authorities which shall exist and operate as public instrumentalities of the
Commonwealth for the public purpose of alleviating unemployment, maintaining
employment at a high level, eliminating and preventing blight and eliminating or
reducing air and water pollution, and creating and developing business
opportunities by the construction, improvement, rehabilitation, revitalization
and financing of industrial, commercial, manufacturing and research and
development enterprises; and
WHEREAS, the Act declares that every authority incorporated under it
shall be for the purpose of acquiring, holding, constructing, improving,
maintaining, owning, financing and leasing, as lessor or as lessee, among other
things, facilities for the furnishing of water; and
WHEREAS, the Company is engaged primarily in the activity, under the
regulatory control of the Pennsylvania Public Utility Commission, of furnishing
water available on reasonable demand to members of the general public; and
WHEREAS, the Authority adopted resolutions on May 11, 1998 and May 19,
1999 providing for the issuance and sale by the Authority of its revenue bonds
to provide funds for the costs of (i) the acquisition, construction,
installation and equipping of the Facilities (hereinafter defined) and (ii) the
costs of issuance relating thereto (collectively "Project"): and
<PAGE>
WHEREAS, in connection with the issuance by the Authority of its
revenue bonds to provide funds for the cost of the Facilities, the Company is to
enter into this Construction and Financing Agreement ("Agreement") under which
the Authority agrees to loan funds to the Company for the construction and
installation of the Facilities and the Company agrees to pay to the Authority,
in repayment of the loan, amounts sufficient to amortize such revenue bonds; and
WHEREAS, the Company has commenced the acquisition, construction,
installation and equipping of certain of the Facilities; and
WHEREAS, the Company now desires the Authority to proceed with the
issuance and sale of its revenue bonds to provide the funds to pay the cost of
the Facilities; and
WHEREAS, the Authority, by due corporate action, has authorized the
issuance and sale of up to $25,000,000 aggregate principal amount of its Water
Facilities Revenue Bonds (Philadelphia Suburban Water Company Project), Series
of 1999 ("1999 Bonds" or "Bonds"), the proceeds of which shall be applied to pay
and to reimburse the Company for its payment of the costs of acquiring,
constructing, installing and equipping the Facilities; and
WHEREAS, the 1999 Bonds are to be issued under and secured by a Trust
Indenture ("Indenture"), dated as of October 1, 1999, between the Authority and
Chase Manhattan Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America and having a corporate trust office and place of business in
Philadelphia, Pennsylvania, as successor trustee ("Trustee"); and
WHEREAS, the proceedings to be undertaken by the Authority in respect
of the acquisition, construction, installation and equipping of the Facilities
and the financing thereof have been approved by the Secretary of the Department
of Community and Economic Development of the Commonwealth of Pennsylvania,
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby and in consideration of the mutual covenant hereinafter contained, DO
HEREBY AGREE as follows:
-2-
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Terms defined in the Preambles hereof shall
have the meanings ascribed thereto in such Preambles. Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Indenture.
For all purposes of this Agreement, the terms defined in this Article I
shall have the meanings herein specified, unless the context clearly otherwise
requires:
"Agreement" or "Financing Agreement" shall mean this Construction and
Financing Agreement dated as of October 1, 1999, between the Authority and the
Company, and any and all modifications, alterations, amendments and supplements
thereto.
"Authorized Company Representative" shall mean any Person or Persons at
the time designated to act as such on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing the specimen
signature of such Person and signed on behalf of the Company by its President,
any Vice President, Secretary or Assistant Secretary, or Treasurer or Assistant
Treasurer. An Authorized Company Representative may be an employee of the
Company.
"Completion Date" shall mean the date of completion of acquisition,
construction, installation and equipping of the Facilities, as that date shall
be certified pursuant to Section 3.07 hereof.
"Construction Fund" shall mean the fund so entitled created under
Section 4.01 of the Indenture.
"Construction Period" shall mean the period between the beginning of
the construction of the Facilities or the date on which the 1999 Bonds are first
delivered to the initial purchasers thereof, whichever is earlier, and the
Completion Date.
"Continuing Disclosure Agreement" shall mean that certain Continuing
Disclosure Agreement between the Company and the Trustee dated the date of
issuance of the Bonds, as it may be amended from time to time in accordance with
the terms thereof.
-3-
<PAGE>
"Cost of Construction" in respect of the Facilities shall mean and be
deemed to include all items within the definition of "cost" contained in the Act
including but not limited to
(a) obligations of the Authority and the Company incurred for
labor, materials and other expenses and to contractors, builders and material
men in connection with the acquisition, construction, installation and equipping
of the Facilities;
(b) the cost of contract bonds and of insurance of all kinds
that may be deemed by the Company to be desirable or necessary during the course
of acquisition, construction, installation and equipping of the Facilities which
is not paid by the contractor or contractors or otherwise provided for;
(c) the expenses of the Company not otherwise provided for,
for engineering, including test borings, surveys, estimates, plans and
specifications and preliminary investigations therefor, and for supervising
construction, as well as for the performance of all other duties required or
reasonably necessary for the proper completion of the Facilities;
(d) legal, accounting, financial, advertising, recording and
printing expenses, the service fee of the Authority, compensation and expenses
of the Trustee, and all other fees and expenses incurred in connection with the
issuance of the 1999 Bonds;
(e) interest, not otherwise provide for, accruing upon the
1999 Bonds until completion of the Facility;
(f) all other costs which the Authority and the Company shall
be required to pay under the terms of any contract or contracts for the
acquisition, construction, installation and equipping of the Facilities;
(g) all other costs, to the extent not enumerated above,
within the definition of "Cost" under the Act; and
(h) any sums required to reimburse the Authority and the
Company for advances made by them for any of the above items, or for any other
costs incurred and for work done by them which are properly chargeable to the
Facilities.
-4-
<PAGE>
"Counsel" shall mean an attorney or firm of attorneys at law (who may
be employed by or counsel to the Authority or the Company) not unsatisfactory to
the Trustee.
"Debt Service Fund" shall mean the fund created under Section 5.03 of
the Indenture.
"Facilities" shall mean the facilities for the furnishing of water in
the counties of Bucks, Chester, Delaware and Montgomery which are to be
acquired, constructed, installed and equipped and to be financed under this
Agreement, less any deletions therefrom and together with any additions,
improvements and modification thereto and substitutions therefor made in
accordance with the provisions of this Agreement, as more fully described in
Exhibit A hereto.
"Final Determination or Taxability" shall mean, with respect to the
Bonds under consideration, a determination, in a final administrative proceeding
before the Internal Revenue Service (including, without limiting the generality
of the foregoing, an examination of the federal income tax return of any
Bondholder) or a court of competent jurisdiction that has made a determination,
decision, judgment or decree, or has taken any other official action, to the
effect that interest on the Bonds has become includable in the gross income of
Bondholders for federal income tax purposes, and such action is no longer
subject to appeal or other contest before the Internal Revenue Service or the
same or another court of competent jurisdiction; for this purpose, an action
shall be considered no longer subject to appeal or other contest when there has
been filed with the Trustee a Certified Resolution of the Company that the
Company will not appeal or otherwise contest such action or when the Trustee has
determined that such action is not being appealed or otherwise contested in good
faith; provided that no Bondholder shall have any duty or obligation to appeal
or otherwise contest any determination that interest on such Bonds has become
includable in the gross income of such Bondholder for Federal income tax
purposes.
"First Mortgage Bond" shall mean the bonds designated "First Mortgage
Bond, 6% Series due 2029", due June 1, 2029, in the principal amount of
$25,000,000, issued by the Company and outstanding under the Mortgage Indenture.
"Loan" shall mean the financing provided by the Authority to the
Company pursuant to Section 4.01 hereof to provide funds for and toward the
Costs of Construction of the Facilities.
-5-
<PAGE>
"Loan Repayments" shall mean the payments to be made by the Company to
the Authority pursuant to Section 4.02(a) hereof.
"Mortgage Indenture" shall mean the Indenture of Mortgage dated as of
January 1, 1941 from the Company to The Pennsylvania Company for Insurances on
Lives and Granting Annuities (now Chase Manhattan Trust Company, National
Association), as successor mortgage trustee, as heretofore and hereafter
supplemented and amended.
"Plans and Specifications" shall mean the plans and specifications
prepared for the Facilities, duly certified by an Authorized Company
Representative and on file at the principal office of the Company in Bryn Mawr,
Pennsylvania, as the same may be revised from time to time prior to the
Completion Date in accordance with Section 3.06 of this Agreement.
"Redemption Price" shall mean the principal amount of the Bonds subject
to redemption plus any premium applicable thereto.
"Tax Compliance Agreement" shall have the meaning set forth in the
Indenture.
-6-
<PAGE>
ARTICLE II
REPRESENTATIONS AND FINDINGS
SECTION 2.01. Representations and Warranties of the Authority. The
Authority makes the following representations as the basis for the undertakings
on the part of the Company herein contained:
(a) The Authority is a public instrumentality of the
Commonwealth and a public body corporate and politic organized and existing
under and pursuant to the Act;
(b) The Authority has power to enter into this Agreement and
to perform and observe the agreements and covenants on its part contained
herein; and by proper corporate action has duly authorized the execution and
delivery hereof; and the execution and delivery of this Agreement by the
Authority and its performance of its obligations hereunder, to the best of its
knowledge, do not and will not violate or constitute a default under the
Authority's Articles of Incorporation or bylaws or any agreement, indenture,
mortgage, lease, note or other obligation or instrument or order or regulation
of any court or administrative agency binding upon the Authority;
(c) Under existing statutes and decisions no taxes on income
or profits are imposed on the Authority; and
(d) As required by the Act, the Department of Community and
Economic Development has approved as of July 14, 1999, the proceedings to be
undertaken in respect of the issuance and sale of the 1999 Bonds and the
construction of the Facilities.
SECTION 2.02. Representation and Warranties of the Company. The Company
makes the following representations as the basis for the undertakings on the
part of the Authority herein contained:
-7-
<PAGE>
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth, and has all
required corporate power to enter into this Agreement and to perform and observe
the agreements and covenants on its part contained herein; the Company by proper
corporate action has duly authorized the execution and delivery of this
Agreement; and the execution and delivery of this Agreement by the Company and
its performance of its obligations hereunder do not and will not violate or
constitute a default under the Corporation's Articles of Incorporation or bylaws
or any agreement, indenture, mortgage, lease, note or other obligation or
instrument or any order of any court or administrative agency binding upon the
Company;
(b) The cost of the Facilities, as defined in the Act, is
estimated by the Company as of the date hereof to be not less than $25,000,000;
and
(c) The Facilities are to be located in the Counties of
Delaware, Chester, Montgomery and Bucks, in the Commonwealth, and within the
authorized service area of the Company.
SECTION 2.03. Findings of the Authority. The Authority hereby confirms
its findings that:
(a) The Company is of a nature and size and is engaged in
activities which require substantial capital, is financially responsible to
assume all obligations prescribed by the Authority and the Act and is qualified
to be an "occupant" for purposes of the Act; and
(b) The Project to be undertaken by the Authority hereunder
will promote the purposes of the Act by protecting the health, safety and
general welfare of the people of the Commonwealth and encouraging economic
development within the Commonwealth through the provision of basic services and
facilities, thereby alleviating unemployment, maintaining employment at a high
level and creating and developing business opportunities.
-8-
<PAGE>
ARTICLE III
COMPLETION OF THE FACILITIES; ISSUANCE OF THE BONDS
SECTION 3.01. Portions of Project Completed. Work on certain of the
Facilities has been commenced and/or has been completed.
SECTION 3.02. Acquisition, Etc., of the Facilities; Completion. The
Company will cause the acquisition, construction, installation and equipping of
the Facilities to be completed with all reasonable dispatch for and at the
expense of the Authority, as herein provided, substantially in accordance with
the Plans and Specifications. In order to effectuate the purposes of this
Agreement, the Company will make, execute, acknowledge and deliver, or cause to
be made, executed, acknowledged and delivered, all such contracts, orders,
receipts, writings and instructions, in the name of the Company or otherwise,
with or to other persons, firms or corporations, and in general do or cause to
be done all such other things as may be requisite or proper for acquiring,
constructing, installing and equipping the Facilities and fulfilling the
obligations of the Company under this Agreement.
The Company will maintain such records in connection with the
acquisition, construction, installation and equipping of the Facilities as to
permit ready identification of the Facilities, and the Cost of Construction
thereof.
SECTION 3.03. Issuance of Bonds. In order to provide funds for payment
of the Cost of Construction of the Facilities the Authority will sell, issue and
deliver to the initial purchasers thereof, the 1999 Bonds and deliver the
proceeds thereof to the Trustee. A sum equal to the accrued interest, if any,
paid by the initial purchasers of the 1999 Bonds shall be deposited in the Debt
Service Fund and the balance of the proceeds received from said sale, after
payment of the costs of issuance of the 1999 Bonds, and certain other funds of
the Company available for the purpose, shall be deposited in the Construction
Fund.
SECTION 3.04. Payments From Construction Fund. In the Indenture, the
Authority has authorized and directed the Trustee to make payments from the
Construction Fund to pay the Cost of Construction of the Facilities upon receipt
of Requisitions (as defined therein) signed by an Authorized Company
Representative, setting forth the matters required pursuant to Exhibit "B" to
the Indenture.
-9-
<PAGE>
SECTION 3.05. Requisitions. The Company will cause such Requisitions to
be submitted to the Trustee as may be necessary to effect payments out of the
Construction Fund in accordance with the provisions of the Indenture; provided,
however, that the Company will not submit any Requisition for payment of any
item not properly included in the cost of the Facilities as defined in the Act
or which, if paid, would result in less than 95% of the proceeds from the 1999
Bonds being used to acquire, construct, install and equip the Facilities.
SECTION 3.06. Plans and Specifications. The Company may revise the
Plans and Specifications, including revisions to add structures, equipment,
fixtures and machinery not described in Exhibit A hereto, and modifications or
deletions of structures, equipment, fixtures and machinery described therein, at
any time and from time to time prior to the Completion Date, provided that in
the case of a material change, (a) an Authorized Company Representative shall
certify to the Trustee that the Facilities provided for by the revised Plans and
Specifications will constitute facilities for the furnishing of water meeting
the requirements of Section 142(a)(4) of the Code; and (b) the Trustee shall be
furnished with a Favorable Opinion of Recognized Bond Counsel that the revision
of the Plans and Specifications and the expenditure of moneys from the
Construction Fund to pay the Cost of Construction of the Facilities in
accordance with the revised Plans and Specifications will not adversely affect
the exclusion of interest on the 1999 Bonds from gross proceeds of the holders
thereof for federal income purposes.
SECTION 3.07. Completion of Facilities. When the Facilities have been
completed, the Company shall so notify the Authority and the Trustee by a
certificate of an Authorized Company Representative. Such certificate shall
establish the Completion Date and shall state that, except for amounts retained
by the Trustee at the Company's direction for any Cost of Construction of the
Facilities not then due and payable or the liability for payment of which is
being contested or disputed by the Company: (a) acquisition, construction,
installation and equipping of the Facilities have been completed substantially
in accordance with the Plans and Specifications, and all labor, services,
materials and supplies used therefor have been paid for; and (b) all other
facilities necessary in connection with the Facilities have been constructed,
installed and equipped in accordance with the Plans and Specifications, and all
costs and expenses incurred in connection therewith have been paid.
Notwithstanding the foregoing, such certificate may state that it is given
without prejudice to any rights against third parties which exist at the date
thereof or which may subsequently come into being.
-10-
<PAGE>
SECTION 3.08. Company to Pay Additional Amounts If Required. If the
moneys in the Construction Fund shall not be sufficient to pay the Cost of
Construction of the Facilities in full, the Company will complete the Facilities
and pay all that portion of the Cost of Construction thereof in excess of the
moneys available therefor in the Construction Fund. The Authority does not make
any warranty, either express or implied, that the moneys which will be paid into
the Construction Fund will be sufficient to pay the Cost of Construction of the
Facilities. If the Company shall pay any portion of the Cost of Construction of
the Facilities pursuant to the provisions of this Section, it shall not be
entitled to any reimbursement therefor from the Authority, the Trustee or the
holders of any of the 1999 Bonds, nor shall it be entitled to any diminution in
or postponement of the Loan Repayments required in Section 4.02 hereof to be
paid by the Company.
SECTION 3.09. Contractor Defaults; Company Proceedings. In the event of
default of any contractor or subcontractor under any contract made by it in
connection with the Facilities or in the event of a breach of warranty with
respect to any materials, workmanship or performance guaranty, the Company may
proceed, either separately or in conjunction with others, to pursue such
remedies against the contractor or subcontractor so in default and against each
surety for the performance of such contract as it may deem advisable. The
Company will advise the Authority of the steps it intends to take in connection
with any such default.
If the Company shall so notify the Authority, the Company may,
in its own name or in the name of the Authority, prosecute any action or
proceeding or take any other action involving any such contractor, subcontractor
or surety which the Company deems reasonably necessary, and in such event the
Authority will cooperate fully with the Company. Any amounts recovered by way of
damages, refunds, adjustments or otherwise in connection with the foregoing
prior to the Completion Date shall be paid into the Construction Fund, and any
amounts so recovered after the Completion Date shall be retained by or paid to
the Company.
SECTION 3.10. Investment of Amounts in the Construction Fund. Any
moneys held in the Construction Fund shall be invested or reinvested as provided
in Article VI of the Indenture. The Company shall not request any investment of
such moneys which would be in violation of the covenant of the Authority
contained in the final paragraph of Section 6.03 of the Indenture.
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ARTICLE IV
LOAN AND OTHER AMOUNTS
SECTION 4.01. Loan by Authority to Company. The Authority on this date
is lending to the Company the sum of $25,000,000 ("Loan"), being the
proceeds of the issuance of the 1999 Bonds.
SECTION 4.02. Repayment of Loan and Other Amounts. (a) Loan Repayments.
The Company shall pay to the Authority, as and for the repayment of the loan,
(i) on the second Business Day prior to each Interest Payment Date, maturity
date or date established for the redemption of the 1999 Bonds, as the case may
be, an amount which, together with other moneys available for the purpose in the
Debt Service Fund under the Indenture, will equal the sum of (x) the interest
which will become due on such date on the 1999 Bonds; plus (y) the principal
amount of the 1999 Bonds, if any, maturing on such date; plus (z) the principal
amount of and premium, if any, on the 1999 Bonds, if any, to be redeemed on such
date; and (ii) on any date on which the 1999 Bonds shall be declared to be and
shall become due and payable prior to their stated maturity pursuant to the
provisions of the Indenture, an aggregate amount equal to the sum of the
principal or redemption price of and interest so becoming due and payable on the
1999 Bonds (all of the foregoing are collectively "Loan Repayments").
Nothing herein contained shall be construed as imposing on the
Authority or on the Trustee any duty or responsibility of giving any prior
notice to the Company of the due date of any Loan Repayment hereunder, or of the
amount on deposit in the Debt Service Fund, or of the amount of any credits
available to the Company against any Loan Repayment and failure by the Company
to receive any such prior notice, even if customarily given by the Authority or
the Trustee, shall not relieve the Company of its obligation to make any Loan
Repayment when it is due and payable.
All such payments shall be made in funds which will be immediately
available funds at the place of payment on the payment date in question. The
Company shall have the option to make prepayment, from time to time, in whole or
in part of any amount due as aforesaid on account of the Loan, together with
interest accrued and to accrue with respect to such prepayment. The Authority
shall direct the Trustee in writing to apply such prepayments to the purchase or
redemption of Bonds in such manner, consistent with the provisions of the
Indenture, as may be directed by the Company.
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In the event the Company shall fail to make any of the payments
required in this Section, the item or payment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully
paid, and the Company will pay the same with interest thereon from the due date
until paid at the highest rate per annum borne by the Bonds.
The obligation of the Company to make Loan Repayments hereunder is
subject to acceleration as set forth in Section 7.02 hereof.
(b) Other Amounts. So long as any Bonds are outstanding, the Company
shall pay to the Authority on each of the Loan Repayment dates referred to in
Section 4.02(a) of this Agreement the amount of Administration Expenses not
theretofore provided for which have then accrued and become payable.
In furtherance of the foregoing, the parties agree that the Company
shall pay to the Authority the reasonable fees and expenses of the Authority in
connection with this Agreement and the Bonds and any and all other expenses
incurred in connection with the authorization, issuance, sale and delivery of
the Bonds or incurred by the Authority in connection with any litigation which
may at any time be instituted involving this Agreement, the Bonds, or any of the
other documents contemplated thereby, or incurred in connection with the
administration of this Agreement, or otherwise in connection with this
Agreement, or any of the other documents, instruments or agreements in
connection therewith. Such fees shall include, but not be limited to, the
Authority's regular annual administration fees and termination fees.
SECTION 4.03. Security For Payment. To further secure the obligation of
the Company to make Loan Repayments, the Company will execute and deliver its
First Mortgage Bond under the Mortgage Indenture in one or more series, in such
principal amounts and with such interest rates, interest payment and maturity
dates and redemption provisions as may correspond to such provisions of the 1999
Bonds issued and sold by the Authority. Contemporaneously with the execution and
delivery of this Agreement the Company is executing and delivering, as security
for its obligation to make Loan Repayments, its First Mortgage Bond which
contains provisions with respect to interest rate, interest payment and maturity
dates, redemption and acceleration of maturity corresponding to such provisions
of the 1999 Bonds.
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SECTION 4.04. Assignment to Trustee. It is understood and agreed that
the obligations of the Company to make the payments due under this Agreement and
the First Mortgage Bond securing those obligations are to be assigned and
pledged by the Authority to the Trustee. The Company assents to such assignment
and pledge and agrees that, as to the Trustee, its obligation to make such
payments and the payments required under the First Mortgage Bond shall be
absolute and unconditional and shall not be subject to any defense other than
payment or to any right of set off, counterclaim or recoupment arising out of
any breach by the Authority of any obligation to the Company, whether hereunder
or otherwise, or out of any indebtedness or liability at any time owing to the
Company by the Authority.
The Authority hereby directs the Company and the Company agrees to pay
to the Trustee at its designated office in Philadelphia, Pennsylvania, all
payments pursuant to this Agreement and the payments required under the First
Mortgage Bond.
SECTION 4.05. Operation and Maintenance. The Company shall maintain,
preserve, and keep the Facilities or cause the Facilities to be maintained,
preserved and kept, with the appurtenances and every part and parcel thereof, in
good repair, working order and condition and, from time to time, will make or
cause to be made all such repairs, replacements and renewals as it deems
necessary. The Authority shall not operate the Facilities or have any obligation
to maintain them.
The Company shall have the privilege of remodeling the Facilities or
making substitutions, modifications and improvements to the Facilities from time
to time as it, in its discretion, may deem to be desirable for its uses and
purposes, the cost of which remodeling, substitutions, modifications and
improvements shall be paid by the Company and the same shall be the property of
the Company and be included under the terms of this Agreement as part of the
Facilities.
SECTION 4.06. Insurance. At all times during the term of this Agreement
the Company will keep the Facilities continuously insured in accordance with the
requirements of the Mortgage Indenture.
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SECTION 4.07. Liens. The Company will pay or cause to be discharged or
make adequate provision to satisfy and discharge, within sixty (60) days after
the same shall accrue, any lien or charge (other than Permitted Encumbrances)
upon any Loan Repayments hereunder or upon any First Mortgage Bond pledged as
security for the payment thereof and all lawful claims or demands which, if
unpaid, might be or become a lien upon any Loan Repayments hereunder or upon any
First Mortgage Bond pledged as security for the payment thereof. Notwithstanding
the foregoing, if the Company shall first notify the Authority and Trustee of
its intention so to do, the Company may in good faith contest any such lien or
charge or claim or demand in appropriate legal proceedings, and in such event
may permit the items so contested to remain undischarged and unsatisfied during
the period of such contest and any appeal therefrom, unless the Authority or the
Trustee shall notify the Company in writing that, in the opinion of Counsel, by
nonpayment of any such items the lien of the Indenture as to the Loan Repayments
payable pursuant to this Agreement or as to any First Mortgage Bond pledged as
security for the payment thereof shall be materially endangered, in which event
the Company shall promptly pay and cause to be satisfied and discharged all such
unpaid items. The Authority will cooperate fully with the Company in any such
contest.
SECTION 4.08. Facilities Used For Purpose of the Act. So long as the
Company operates the Facilities, they will be used for purposes permitted by the
Act and as facilities for the furnishing of water.
SECTION 4.09. Payment of Certain Costs. The Company shall pay, or cause
to be paid in addition to the payments provided for in Section 4.02, Section
4.04 and Section 4.07 hereof, all of the expenses of operation of the
Facilities, including, without limitation, the cost of all necessary and proper
repairs, replacements and renewals made pursuant to Section 4.05 hereof.
SECTION 4.10. Obligation to Make Payments Absolute. It is understood
and agreed that the payments under Section 4.02 hereof and other charges payable
hereunder shall continue to be payable at the time and in the amounts herein
specified, whether or not the Facilities, or any portion thereof, shall have
been destroyed by fire or other casualty, or title thereto, or the use thereof,
shall have been taken by the exercise of the power of eminent domain, and that
there shall be no abatement of any such payments and other charges by reason
thereof.
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ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. No Warranty. The Authority makes no warranty, either
express or implied, as to the actual or designed capacity of the Facilities, as
to the suitability of the Facilities for the purposes specified in this
Agreement, or that the Facilities will be suitable for the Company's purposes or
needs.
SECTION 5.02. Company to Maintain Corporate Existence, Etc. The Company
shall maintain its corporate existence and its qualification to do business in
the Commonwealth, will not dissolve or otherwise dispose of all or substantially
all its assets and will not consolidate with or merge into another corporation
except as provided in this Section 5.02; provided, however, that the Company may
consolidate with or merge into another corporation, or sell or otherwise
transfer to another Company all or substantially all its assets as an entirety
and thereafter dissolve, if (a) the successor corporation assumes in writing all
the obligations of the Company herein and in the First Mortgage Bond, and (b) if
the successor corporation is not a Pennsylvania corporation, said successor
shall either qualify to do business in the Commonwealth or file with the Trustee
a consent to service of process in the Commonwealth in form satisfactory to the
Trustee.
If consolidation, merger or sale or other transfer is made as permitted
by this Section, the provisions of this Section shall continue in full force and
effect and no further consolidation, merger or sale or other transfer shall be
made except in compliance with the provisions of this Section.
SECTION 5.03. Operation of Facilities; Maintenance of Licenses and
Permits. The Company shall operate the Facilities as part of its system for the
furnishing of water to the general public at rates approved by the Public
Utility Commission of the Commonwealth , and to that end will maintain in force
and effect the requisite franchises, operating rights, certificates of public
convenience and necessity, tariffs, licenses and permits.
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SECTION 5.04. Additional Permits. In the event it may be necessary for
the proper performance of this Agreement on the part of the Authority or the
Company that any application or applications for any permit or license to do or
to perform certain things be made to any governmental or other agency by the
Company or the Authority, the Company and the Authority shall execute upon the
request of the other such application or applications.
SECTION 5.05. Authority to Maintain Corporate Existence, Etc. The
Authority will maintain its corporate existence and duly will procure any
necessary renewals and extensions thereof; will use its best efforts to
maintain, preserve and renew all its rights, powers, privileges and franchises;
and will comply with all valid acts, rules, regulations, orders and directions
of any legislative, executive, administrative or judicial body applicable to the
Facilities. The Authority further covenants that it will not voluntarily or
knowingly take or fail to take any action that would result in the loss of any
exemption from taxes which it presently enjoys or to which it may subsequently
become entitled.
SECTION 5.06. Compliance With Continuing Disclosure Agreement. The
Company hereby covenants and agrees that it will comply with and carry out all
of the provisions of the Continuing Disclosure Agreement. Notwithstanding any
other provision of this Agreement, failure of the Company to comply with the
Continuing Disclosure Agreement shall not be considered an Event of Default
hereunder or under the Indenture; however, the Trustee may (and, at the request
of any Participating Underwriter (as defined in the Continuing Disclosure
Agreement) or the holders of at least 25% aggregate principal amount in
Outstanding 1999 Bonds and provision of indemnity satisfactory to the Trustee in
its sole discretion, shall) or any Bondholder may, take such actions as may be
necessary and appropriate, including seeking specific performance by court
order, to cause the Company to comply with its obligations under this Section
5.06.
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SECTION 5.07. Certain Tax Covenants. The Company will comply with all
provisions of the Tax Compliance Agreement to be complied by it. The Company
will not take any action or fail to take any action (including the requirement
to make rebate payments to the United States as required under Section 148(f) of
the Code and the Tax Compliance Agreement and the obligations described in 5.05
of the Indenture) which would cause the Bonds to be "arbitrage bonds" within the
meaning of Sections 103(b) and 148(a) of the Code or would otherwise cause
interest on the 1999 Bonds to be includible in the gross income of the holders
thereof for federal income tax purposes (except with respect to the interest on
the 1999 Bonds during any period when such Bonds are held by a "substantial
user" of the Facilities financed by the 1999 Bonds or a "related person" within
the meaning of Section 147(a) of the Code); provided, however, that if the
Trustee receives an opinion of Recognized Bond Counsel that any action or
failure to take action will cause the interest on the 1999 Bonds to be included
in the gross income of Bondholders for Federal income tax purposes, no Event of
Default shall be deemed to have occurred unless and until there is a Final
Determination of Taxability.
SECTION 5.08. Financial Statements. For so long as the Bond Insurance
Policy is outstanding and in effect, the Company shall provide the Bond Insurer
within 120 days after the end of the Company's fiscal year copies of the
Company's audited financial statements and such additional information as the
Bond Insurer may reasonably request from time to time.
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ARTICLE VI
ASSIGNMENT, LEASING AND SALE OF FACILITIES
SECTION 6.01. Assignment, Lease and Sale of Facilities. The Company
shall not sell, lease or otherwise dispose of or encumber the Facilities except
as provided in Section 5.02 and this Section 6.01. This Agreement may be
assigned in whole or in part and the Facilities may be sold or leased as a whole
or in part by the Company, subject, however, to the following conditions:
(a) The Company may sell or otherwise dispose of any
machinery, fixtures, apparatus, tools, instruments or other movable property
constituting part of the Facilities (collectively, "Moveable Property") which
the Company deems no longer to be needed or useful in its operation of the
Facilities; provided, that if the original cost of acquisition of such
machinery, fixtures, apparatus, tools, instruments or other movable property was
more than $100,000, the Company shall, in writing, certify to the Authority that
such items are no longer needed or useful in its operation of the Facilities.
Any proceeds thereof shall be paid to the Trustee for deposit in the
Construction Fund or used to purchase replacements for the Moveable Property
sold or disposed of pursuant to this Section 6.01(a);
(b) No sale, assignment or leasing (other than pursuant to
Section 5.02 hereof) shall relieve the Company from primary liability for any of
its obligations hereunder, and in the event of any such sale, assignment or
leasing the Company shall continue to remain primarily liable for the payments
specified in Sections 4.02, 4.04 and 4.07 hereof and for performance and
observance of the other agreements on its part herein provided;
(c) The purchaser, assignee or lessee from the Company shall
assume the obligations of the Company hereunder to the extent of the interest
assigned or leased;
(d) The Company shall, at least fifteen (15) days prior to the
delivery thereof, furnish or cause to be furnished to the Authority, for its
information only, a true and complete copy of each such proposed sale agreement,
assignment or lease, as the case may be, and shall furnish to the Authority and
the Trustee an executed copy thereof following execution;
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(e) The Company shall pay the Authority's and the Trustee's
reasonable costs and expenses incurred, and the reasonable fees charged thereby,
in connection with such sale, assignment or lease; and
(f) The Company shall furnish to the Trustee a Favorable
Opinion to the effect that the proposed sale, assignment or lease, as the case
may be, will not adversely affect the exclusion of interest on the 1999 Bonds
from gross income of the holders thereof from federal income tax purposes.
SECTION 6.02. Assignment of Rights Under Agreement. The Authority shall
assign its rights under and interest in this Agreement (except for its rights to
receive certain fees and expenses, to receive certain notices, and any and all
rights to indemnification), and will pledge and assign all Loan Repayments and
security therefor, including the First Mortgage Bond of the Company pledged as
security therefor, and receipts and revenues receivable under or pursuant to
this Agreement, and income earned by the investment of funds held under the
Indenture, to the Trustee pursuant to the Indenture as security for payment of
the principal of, premium, if any, and interest on the Bonds, but such
assignment or pledge shall be subject to this Agreement.
Except as provided in Section 6.01(b) and Section 6.02 hereof, the
Authority will not otherwise sell, assign, transfer, convey or dispose of the
revenues from the Facilities or the First Mortgage Bond during the term of this
Agreement, nor will it take any action which may reasonably be construed as
tending to cause or induce the levy of special assessments against the
Facilities or such revenues or the First Mortgage Bond, nor will it create or
suffer to be created any lien or charge upon the Facilities or such revenues or
the First Mortgage Bond except Permitted Encumbrances.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. Events of Default. (a) Subject to the provisions set
forth in Section 7.01(c) hereof, each of the following shall be an "Event of
Default" under this Agreement, and the terms "Event of Default" or "Default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
(i) Failure by the Company to pay when due any Loan
Repayments; or
(ii) Failure by the Company to pay when due any
payment required to be made under this Agreement other than Loan Repayments,
which failure shall continue for a period of sixty (60) days after written
notice, specifying such failure and requesting that it be remedied, is given to
the Company by the Authority or the Trustee, unless the Company is contesting in
good faith its obligation to make the payment or the Authority and the Trustee
shall agree in writing to an extension of such time prior to its expiration; or
(iii) Failure by the Company to observe and perform
any covenant, condition or agreement on its part to be observed or
performed, other than as referred to in subsections (a) and (b) of this Section,
which failure shall continue for a period of sixty (60) days after written
notice, specifying such failure and requesting that it be remedied, is given to
the Company by the Authority or the Trustee, unless the Authority and the
Trustee shall agree in writing to an extension of such time prior to its
expiration; or
(iv) The dissolution or liquidation of the Company or
the filing by the Company of a voluntary petition under the laws of the
United States relating to bankruptcy or failure by the Company promptly to
procure the dismissal of an involuntary petition in bankruptcy filed against it,
or an assignment by the Company for the benefit of its creditors, or the entry
by the Company into an agreement of composition with its creditors, or the
appointment by a court of competent jurisdiction of a receiver for the Company.
The term "dissolution or liquidation of the Company" as used in this subsection,
shall not be construed to include the cessation of the corporate existence of
the Company resulting either from a merger or consolidation of the Company into
or with another Company or a dissolution or liquidation of the Company following
a transfer of all or substantially all its assets as an entirety under the
conditions permitting such actions contained in Section 5.02 hereof.
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(b) A failure by the Authority to observe or perform any
covenant or agreement herein contained on its part to be observed or performed
shall not constitute an event of default hereunder, but the Company shall be
entitled to enforce the observance and performance by the Authority of any of
its covenants or agreements herein contained by such remedies at law or in
equity as it deems desirable, subject to the limitation of liability set forth
in Section 8.03 hereof.
(c) The foregoing provisions of this Section are subject to
the following limitations: if by reason of acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders of any kind of the
government of the United States or of the Commonwealth or any department,
agency, political subdivision or official of either of them, or any civil or
military authority; insurrections; riots; epidemics; landslides; lightning;
earthquakes; fires; hurricanes; storms; floods; washouts; droughts; arrests;
restraint of government and people; civil disturbances; explosions; breakage or
accident to machinery; partial or entire failure of utilities; or any cause or
event not reasonably within the control of the Company, the Company is unable in
whole or in part to carry out its agreements herein contained, other than the
obligations on the part of the Company contained in Sections 4.02 hereof, the
Company shall not be deemed in default during the continuance of such inability.
The Company agrees to use its best efforts to remedy with all
reasonable dispatch the cause or causes preventing it from carrying out its
agreements; provided, however, that the settlement of strikes, lockouts and
other industrial disturbances shall be entirely within the discretion of the
Company, and the Company shall not be required to make settlement of strikes,
lockouts and other industrial disturbances by acceding to the demands of the
opposing party or parties when such course, in the judgment of the Company , is
unfavorable to the Company.
Any failure of the Company to perform its obligations under
Section 4.02 hereof shall constitute an Event of Default regardless of the
reason for such failure to perform.
SECTION 7.02. Remedies. Whenever any Event of Default referred to in
Section 7.01 hereof shall have happened and be subsisting, any one or more of
the
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following remedial steps may be taken, provided such Default has not theretofore
been cured:
(a) The Authority, at its option, may declare the unpaid
principal balance of the Loan to be immediately due and payable, whereupon the
same shall become immediately due and payable; and
(b) The Authority may take any action at law or in equity to
collect the payments then due and thereafter to become due or to enforce
performance and observance of any obligation, agreement or covenant of the
Company under this Agreement and under the First Mortgage Bond. All amounts
collected pursuant to action taken under this Section shall be applied in
accordance with the Indenture.
SECTION 7.03. Remedies Not Exclusive. No remedy conferred upon or
reserved to the Authority by this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Authority to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice
other than such notice as may be herein expressly required.
SECTION 7.04. Reimbursement of Fees and Expenses. If the Company shall
default under any of the provisions of this Agreement and the Authority shall
employ attorneys or incur other expenses for the collection of Loan Repayments
or for the enforcement of performance or observance of any obligation or
agreement on the part of the Company contained in this Agreement or in the First
Mortgage Bond, the Company, on demand therefor, will reimburse the Authority for
reasonable fees and expenses of such attorneys and such other reasonable
expenses so incurred.
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SECTION 7.05. Waivers of Breaches. In the event any agreement contained
in this Agreement shall be breached by either party and such breach shall
thereafter be waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. In view of the assignment of the Authority's rights in and under this
Agreement to the Trustee under the Indenture, the Authority shall have no power
to exercise any right hereunder or waive any default hereunder by the Company
without the written consent of the Trustee to such exercise or waiver, or, if
the maturity of the Outstanding 1999 Bonds shall have been accelerated at the
request of the holders of the 1999 Bonds, the consent of the holders of a
majority in principal amount of the 1999 Bonds then Outstanding. In the event
any default by the Company hereunder shall have been waived as a default under
the Indenture by the holders of the requisite majority in principal amount of
the 1999 Bonds, no consent of the Trustee shall be required, and the Authority
shall be obligated to waive the Company's default hereunder.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Termination. This Agreement shall terminate upon (i)
payment in full of the 1999 Bonds (including interest and premium, if any,
thereon), or the making of provision for payment thereof in accordance with the
provisions of the Indenture; (ii) payment of all other reasonable and necessary
obligations incurred by the Authority to pay the Cost of Construction of the
Facilities, including interest, Premium and other charges, if any, thereon; and
(iii) payment of all unpaid Administration Expenses.
Any amounts, other than amounts being held for payment of the
1999 Bonds or other payments referred to in the preceding sentence, then
remaining in the Debt Service Fund and other Funds established under the
Indenture shall belong to and be paid to the Company by the Trustee.
SECTION 8.02. Notices. All notices, certificates, requests or other
communications hereunder shall be sufficiently given and shall be deemed given
when mailed by registered mail, postage prepaid, addressed as follows:
if to the Authority:
200 E. State Street
Suite 205
Media, Pennsylvania 19063
if to the Company:
762 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010
Attention: Vice President and Treasurer
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if to the Trustee:
Chase Manhattan Trust Company, National Association
One Liberty Place
Suite 5210
1650 Market Street
Philadelphia, PA 19103
Attention: Corporate Trust Department
A duplicate copy of each notice, certificate, request or other communication
given hereunder to the Authority, the Company or the Trustee shall also be given
to the others. The Company, the Authority and the Trustee, by giving notice as
above provided, may designate any further or different addresses to which
subsequent notices, certificates, requests or other communications shall be
sent.
SECTION 8.03. Benefit of Agreement. This Agreement shall inure to the
benefit of and shall be binding upon the Authority, the Company and their
respective successors and assigns, subject to the limitation that any obligation
or liability of the Authority created by or arising out of this Agreement shall
not be a general debt or liability of the Authority, but shall be payable solely
out of the proceeds derived from this Agreement, the First Mortgage Bond, or the
sale of the 1999 Bonds or income earned on invested funds as provided herein and
in the Indenture.
SECTION 8.04. Amendments. This Agreement may be amended in any respect
but only by written agreement of the parties hereto, subject to the limitations
upon such amendments set forth in the Indenture.
SECTION 8.05. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when so executed and delivered shall be
an original; but such counterparts shall together constitute but one and the
same Agreement.
SECTION 8.06. Invalidity of Certain Clauses. If any clause, provision
or section of this Agreement be held illegal or invalid by any court, the
invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Agreement shall be
construed and enforced as if such illegal or invalid clause, provision or
section had not been contained herein. In case any agreement or obligation
contained in this Agreement be held to be in violation of law, then such
agreement or obligation shall be deemed to be the agreement or obligation of the
Authority or the Company, as the case may be, only to the extent permitted by
law.
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SECTION 8.07. Governing Law. The laws of the Commonwealth shall govern
the construction and interpretation of this Agreement.
SECTION 8.08. Indemnification.
(a) The Company agrees that at all times it will protect and
hold the Authority and its officers, members, employees and agents (including,
but not limited to, the Authority's legal counsel), past, present and future,
harmless and indemnified from and against all claims for losses, damages or
injuries to the Trustee or others, including death, personal injury and property
damage or loss, arising during the term hereof or during any other period when
the Authority has, had or shall have any interest in the Facilities or arising
out of the use thereof or any activity conducted thereon or in any other manner
connected therewith, directly or indirectly, including but not limited to claims
arising out of the acquisition, construction, installation, equipping and
operation of the Facilities; and the Authority, and its officers, members,
employees and agents, past, present and future, shall not be liable for any
loss, damage or injury to the Person or property of the Company or its agents,
servants or employees or any other Person who or that may be upon the Facilities
or damaged or injured as a result of any condition existing or activity
occurring upon the Facilities or any other matter connected directly or
indirectly therewith due to any act or negligence of any Person, excepting only
willful misconduct or gross negligence of the Authority, and its officers,
agents, members or employees, past, present and future.
(b) The Company hereby covenants and agrees that it will
indemnify and hold the Trustee and its directors, officers, agents and employees
(collectively, the "Indemnitees") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses, including
out-of-pocket, incidental expenses, legal fees and expenses, the allocated costs
and expenses of in-house counsel and legal staff and the costs and expenses of
defending or preparing to defend against any claim (collectively "Losses") that
may be imposed on, incurred by, or asserted against, the Indemnitees or any of
them for following any instruction or other direction upon which the Trustee is
authorized to rely pursuant to the terms of this Agreement and the Indenture. In
addition to and not in limitation of the immediately preceding sentence, the
Company also covenants and agrees to indemnify and hold the Indemnitees and each
of them harmless from and against any and all Losses that may be imposed on,
incurred by, or asserted against the Indemnitees or any of them in connection
with or arising out of the Trustee's performance under this Agreement and the
Indenture, provided the Trustee has not acted with negligence or engaged in
willful misconduct. The provisions of this Section 8.08(b) shall survive the
termination of this Agreement and the Indenture, the defeasance of the 1999
bonds and the resignation or removal of the Trustee for any reason.
-27-
<PAGE>
(c) The Company shall indemnify, hold harmless and defend the
Authority and the Trustee and the respective officers, members, directors,
employees and agents (including, but not limited to, the Authority's and the
Trustee's legal counsel) each of them, past, present and future, against all
loss, costs, damages, expenses, suits, judgments, actions and liabilities of
whatever nature, including, specifically, (i) any liability under any state or
federal securities laws (including, but not limited to attorneys fees,
litigation and court costs, amounts paid in settlement and amounts paid to
discharge judgments) and (ii) any and all costs and expense arising out of, or
from, any state or federal environmental laws (including, without limitation,
costs of remediation, attorney's fees and expenses, litigation and court costs,
amounts paid in settlement and amounts paid to discharge judgments) directly or
indirectly resulting from or arising out of or related to: (A) the design,
construction, installation, operation, use, occupancy, maintenance or ownership
of the Facilities (including compliance with laws, ordinances and rules and
regulations of public authorities relating thereto); or (B) any statements or
representations with respect to Company, the Project, this Agreement, the 1999
Bonds, the Indenture or any other document or instrument delivered in connection
with the issuance of the 1999 Bonds (including any statements or representations
made in connection with the offer or sale thereof) made or given to the
Authority, the Trustee or any underwriters or purchasers of any of the bonds, by
the Company or any of its directors, officers, agents or employees, including
but not limited to, statements or representations of facts, financial
information or corporate affairs.
The Company also will pay and discharge and indemnify and hold harmless
the Authority and the Trustee from (i) any lien or charge upon payments by the
Company to the Authority and the Trustee under this Agreement, and (ii) any
taxes (including, without limitation, any ad valorem taxes and sales taxes,
assessments, impositions and other charges) in respect of any portion of the
Facilities.
If any such claim is asserted, or any such lien or charge upon
payments, or any such taxes, assessments, impositions or other charges are
sought to be imposed, the Authority or the Trustee will give prompt notice to te
Company, and the Company shall have the sole right and duty to assume, and will
assume, the defense thereof, with full power to litigate, compromise or settle
the same in its sole discretion.
-28-
<PAGE>
(d) The Company releases the Authority and the Trustee from,
agrees that the Authority and the Trustee shall not be liable for, and agrees to
indemnify and hold the Authority and the Trustee and their agents, employees and
servants, harmless from, any liability arising out of the construction of the
Facilities or the Loan. If any such claim is asserted, the Authority or the
Trustee will give prompt notice to the Company and the Company will assume the
defense thereof, with full power to litigate, compromise or settle the claim in
its sole discretion. The Company will reimburse the Authority or the Trustee, as
the case may be, for all direct costs, including reasonable attorney's fees and
expenses properly incurred in connection therewith.
(e) If the indemnification provided herein is for any reason
determined to be unavailable to the Authority or the Trustee, then, with respect
to any such loss, claim, demand or liability, including expenses in connection
therewith, the Authority and the Trustee, as appropriate, shall be entitled as a
matter of right to contribution by the Company. The amount of each contribution
shall be in such proportion as is appropriate to reflect relative culpability of
the parties.
(f) The Company shall not make any claim against the
Authority, nor shall the Authority be liable for any damage or injury to any
property of the Company or any other person on the Facilities or to any part of
the Facilities due to any cause whatsoever, nor will the Company resist the
Authority's claim to indemnification on the ground that the right to such claim
is not set forth herein with sufficient particularity.
SECTION 8.09. Limitation of Rights Against Authority.
(a) The Company hereby expressly acknowledges that the
Authority is a conduit issuer and that all of the right, title and interest of
the Authority in and to this Agreement are to be assigned to the Trustee (except
for the right of the Authority to receive its reasonable fees and expenses and
to indemnification), naming the Trustee its true and lawful attorney for and in
its name to enforce the terms and conditions of this Agreement. Notwithstanding
any other provision contained herein, the Company hereby expressly agrees,
acknowledges and covenants that to the extent practicable it shall duly and
punctually perform or cause to be performed each and every duty and obligation
of the Authority hereunder and under the Indenture.
(b) The Company shall neither sue the Authority, or any of its
members, officers, agents or employees, past, present or future, for any costs,
damages, expenses, suits, judgments, liabilities, claims, losses, demands,
actions or nonactions based upon this financing or sustained in connection with
or as a result of this financing nor ever raise as a defense in any proceedings
whatsoever that the Authority is a true party in interest.
-29-
<PAGE>
Notwithstanding any other provisions of this Agreement, the Company
shall be entitled to (i) bring an action of specific performance against the
Authority to compel any action required to be taken by the Authority hereunder
or an action to enjoin the Authority from performing any action prohibited by
this instrument, but no such action shall in any way impose pecuniary liability
against the Authority or any of its members, officers, agents or employees,
past, present and future, (ii) join the Authority in any litigation if such
joinder is necessary to pursue any of the Company's rights, provided that prior
to such joinder, the Company shall post such security as the Authority may
require to further protect the Authority from loss and (iii) pecuniary
remuneration from the Authority for damage or loss suffered by Company by reason
of the willful misconduct of the Authority or any of its members, officers,
agents or employees, past, present or future.
SECTION 8.10. Limitation of Recourse Against Authority.
(a) In the event of any default by the Authority hereunder,
and notwithstanding any provision or obligation to the contrary herein before or
hereinafter set forth, the liability of the Authority, its incorporator,
officers, members, agents and employees, past, present or future, shall be
limited to its interest in the Facilities, the improvements thereon, the rents,
issues and profits therefrom, the Trust Estate and the lien of any judgment
shall be restricted thereto. The Authority, its incorporator, officers, members,
agents and employees, past, present or future, do not assume general liability
nor specific liability for the repayment of any mortgage or other loan, or for
the costs, fees, penalties, taxes, interest, commissions, charges, insurance or
any other payments therein recited or therein set forth, or incurred in any way
in connection therewith. Other than as set forth hereinabove in this Section
8.10, there shall be no other recourse for damages of any kind or nature by the
Company or any other entity against the Authority, its incorporator, officers,
members, agents and employees, past, present or future, or any of the property
or other assets nor or hereafter owned by it or them, either directly or
indirectly; and all such recourse or liability is hereby expressly waived and
released as a condition of and in consideration of execution and delivery of
this Agreement by the Authority.
-30-
<PAGE>
(b) No recourse under or upon any obligation, covenant or
agreement contained herein or in any 1999 Bond shall be had against the
Authority or any member, officer, employee or agent, past, present or future, of
the Authority or of any successor of the Authority under this Agreement, any
other agreement, any rule of law, statute or constitutional provision, or by
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, its expressly being agreed and understood that the obligations of the
Authority hereunder, and under the 1999 Bonds and elsewhere, are solely
corporate obligations of the Authority to the extent specifically limited in the
Act and that no personal liability whatsoever shall attach to or shall be
incurred by the Authority or such members, officers, employees or agents, past,
present or future, of the Authority or of any successor of the Authority, or any
of them, because of such indebtedness or by reason of any obligation, covenant
or agreement contained herein, in the 1999 Bonds on implied therefrom.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Construction
and Financing Agreement to be duly executed as of the day and year first above
written.
DELAWARE COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
By:____________________________________
Chairman
(Seal)
Attest:____________________________
Secretary
PHILADELPHIA SUBURBAN WATER
COMPANY
By:____________________________________
Vice President
(Seal)
Attest:____________________________
Asst. Secretary
-32-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA:
Series.:
COUNTY OF DELAWARE :
On this the 7th day of October 1999, before me the undersigned notary
public personally appeared Marvin E. Berger who acknowledged himself to be the
Chairman of the Delaware County Industrial Development Authority, a public body
corporate and politic organized and existing under the laws of the Commonwealth
of Pennsylvania, and that he as such officer, being authorized to do so,
executed the foregoing Construction and Financing Agreement for the purposes
therein contained by signing the name of Delaware County Industrial Development
Authority by himself as its Chairman.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[SEAL]
/s/ Dawn M. Raymond
-------------------
Notary Public
My Commission Expires:
-33-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA:
Series.:
COUNTY OF DELAWARE :
On this the 5th day of October 1999, before me the undersigned notary
public personally appeared Kathy L. Pape who acknowledged him/herself to be a
[Vice President] of the Philadelphia Suburban Water Company, a Pennsylvania
corporation, and that he/she as such officer, being authorized to do so,
executed the foregoing Construction and Financing Agreement for the purposes
therein contained by signing the name of the Philadelphia Suburban Water Company
by him/herself as its Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[SEAL]
/s/ Linda M. Freeman
--------------------
Notary Public
My Commission Expires:
-34-
<PAGE>
EXHIBIT A TO
CONSTRUCTION AND FINANCING
AGREEMENT DATED AS OF OCTOBER 1, 1999 BY AND
BETWEEN THE DELAWARE COUNTY INDUSTRIAL DEVELOPMENT
AUTHORITY AND PHILADELPHIA SUBURBAN WATER COMPANY
DESCRIPTION OF THE FACILITIES
The following projects comprise the Facilities and will be financed
with the proceeds of the 1999 Bonds and will be owned by the Company (dollar
amounts are maximum Bond proceeds allocable to each category):
Bucks County Project: $4,014,029
Replacement of 3,530 feet of 8" water main ("B-1") ; Tie-in 31,700 feet
of 12" water main ("B-2"); Installation of two new filters to increase
capacity at the Neshaminy plant, Middletown Township ("B-3").
Chester County Project: $10,121,902
Replacement of 9,594 feet of 12" water main ("C-1"); Tie in 13,770 feet
of 12" water main ("C-2"); Tie in 7,770 feet of 12" water main ("C-3");
Installation of 33,000 feet of 20" water main ("C-4"); Installation of
7,200 feet of 12" water main ("C-5"); Installation of 5,775 feet of 12"
water main ("C-6"); Construction and installation of a booster facility
("C-7"); Completion of all phases of construction and startup costs of
Fern Hill plant ("C-8"); Tie in 20,440 feet of 12" water main ("C-9").
Delaware County Project: $6,178,368
Replacement of 2,426 feet of 8" water main ("D-1"); Replacement of
2,835 feet of 12" main ("D-2"); Replacement of 4,330 feet of 8" water
main ("D-3"); Replacement of 2,410 feet of 8" water main ("D-4");
Replacement of 3,283 feet of 8" water main ("D-5"); Replacement of
1,060 feet of 8" water main ("D-6"); Replacement of 4,860 feet of 8"
water main ("D-7"); Replacement of 3,430 feet of 8" water main ("D-8");
Replacement of 3,112 feet of 12" water main ("D-9"); Designing,
constructing, equipping and startup of a 16,300 square feet meter
operation and storage building ("D-10").
A-1
<PAGE>
Montgomery County Project: $6,902,148
Replacement of 4,288 feet of 12" water main ("M-1"); Replacement of
5,096 feet of 10" water main with 16" water main ("M-2"); Replacement
of 2,745 feet of 8" water main ("M-3"); Replacement of 4,400 feet of 8"
water main ("M-4"); Replacement of 2,243 feet of 4" water main ("M-5");
Replacement of 8,447 feet of 12" water main ("M-6"); Replacement of
2,830 feet of 8" water main ("M-7"); Replacement of 599 feet of 8"
water main ("M-8"); Replacement of 5,209 feet of 12" water main
("M-9"); Replacement of 6,700 feet of 12" water main ("M-10").
A-2
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and the statements of capitalization at September
30, 1999, and the consolidated statements of income and comprehensive income and
the consolidated statements of cash flow for the nine months ended September 30,
1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,061,989
<OTHER-PROPERTY-AND-INVEST> 763
<TOTAL-CURRENT-ASSETS> 55,525
<TOTAL-DEFERRED-CHARGES> 26,199
<OTHER-ASSETS> 57,525
<TOTAL-ASSETS> 1,202,001
<COMMON> 9,889
<CAPITAL-SURPLUS-PAID-IN> 250,958
<RETAINED-EARNINGS> 99,324
<TOTAL-COMMON-STOCKHOLDERS-EQ> 360,171
0
1,760
<LONG-TERM-DEBT-NET> 411,514
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 39,280
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 33,437
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 355,839
<TOT-CAPITALIZATION-AND-LIAB> 1,202,001
<GROSS-OPERATING-REVENUE> 194,091
<INCOME-TAX-EXPENSE> 21,551
<OTHER-OPERATING-EXPENSES> 115,944
<TOTAL-OPERATING-EXPENSES> 137,495
<OPERATING-INCOME-LOSS> 56,596
<OTHER-INCOME-NET> (6,212)
<INCOME-BEFORE-INTEREST-EXPEN> 50,384
<TOTAL-INTEREST-EXPENSE> 23,599
<NET-INCOME> 26,785
104
<EARNINGS-AVAILABLE-FOR-COMM> 26,681
<COMMON-STOCK-DIVIDENDS> 21,832
<TOTAL-INTEREST-ON-BONDS> 29,293
<CASH-FLOW-OPERATIONS> 46,752
<EPS-BASIC> 0.65
<EPS-DILUTED> 0.65
</TABLE>
