FORTY-SECOND SUPPLEMENTAL INDENTURE

EXHIBIT 4.36

 

 

FORTY-SECOND SUPPLEMENTAL

INDENTURE

DATED AS OF DECEMBER 1, 2007

TO

INDENTURE OF MORTGAGE

DATED AS OF JANUARY 1, 1941

AQUA PENNSYLVANIA, INC.

TO

THE BANK OF NEW YORK TRUST COMPANY, N. A.

THIS FORTY-SECOND SUPPLEMENTAL INDENTURE dated as of December 1, 2007, by and between AQUA PENNSYLVANIA, INC. (f/k/a Pennsylvania Suburban Water Company), a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (the “Company”) as successor by merger to the Philadelphia Suburban Water Company (the “Original Company”), party of the first part, and THE BANK OF NEW YORK TRUST COMPANY, N. A., a national banking association (the “Trustee”), party of the second part.

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

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

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

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

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

WHEREAS , the Company and its predecessor have issued under the Original Indenture, as supplemented at the respective dates of issue, fifty series of First Mortgage Bonds designated, respectively, as set forth in the following table, the Original or Supplemental Indenture creating each series and the principal amount of bonds thereof issued being indicated opposite the designation of such series:

Designation		Indenture				Amount
3 1 / 4 % Series due 1971		Original				$	16,375,000
9 5/8% Series due 1975		Thirteenth Supplemental					10,000,000
9.15% Series due 1977		Fourteenth Supplemental					10,000,000
3% Series due 1978		First Supplemental					2,000,000
3 3/8% Series due 1982		Second Supplemental					4,000,000
3.90% Series due 1983		Third Supplemental					5,000,000
3 1 / 2 % Series due 1986		Fourth Supplemental					6,000,000
4 1 / 2 % Series due 1987		Fifth Supplemental					4,000,000
4 1/8% Series due 1988		Sixth Supplemental					4,000,000
5% Series due 1989		Seventh Supplemental					4,000,000
4 5/8% Series due 1991		Eighth Supplemental					3,000,000
4.70% Series due 1992		Ninth Supplemental					3,000,000
6 7/8% Series due 1993		Twelfth Supplemental					4,500,000
4.55% Series due 1994		Tenth Supplemental					4,000,000
10 1/8% Series due 1995		Sixteenth Supplemental					10,000,000
5 1 / 2 % Series due 1996		Eleventh Supplemental					4,000,000
7 7/8% Series due 1997		Fifteenth Supplemental					5,000,000
8.44% Series due 1997		Twenty-Third Supplemental					12,000,000
9.20% Series due 2001		Seventeenth Supplemental					7,000,000
8.40% Series due 2002		Eighteenth Supplemental					10,000,000
5.95% Series due 2002		Twenty-Seventh Supplemental					4,000,000
12.45% Series due 2003		Twentieth Supplemental					10,000,000
13% Series due 2005		Twenty-First Supplemental					8,000,000
10.65% Series due 2006		Twenty-Second Supplemental					10,000,000
9.89% Series due 2008		Twenty-Fourth Supplemental					5,000,000
7.15% Series due 2008		Twenty-Eighth Supplemental					22,000,000
9.12% Series due 2010		Twenty-Fifth Supplemental					20,000,000
8 7/8% Series due 2010		Nineteenth Supplemental					8,000,000
6.50% Series due 2010		Twenty-Seventh Supplemental					3,200,000
9.17% Series due 2011		Twenty-Sixth Supplemental					5,000,000
9.93% Series due 2013		Twenty-Fourth Supplemental					5,000,000
9.97% Series due 2018		Twenty-Fourth Supplemental					5,000,000
9.17% Series due 2021		Twenty-Sixth Supplemental					8,000,000
9.29% Series due 2026		Twenty-Sixth Supplemental					12,000,000
1995 Medium Term Note Series		Twenty-Ninth Supplemental					77,000,000
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

Designation		Indenture				Amount
6.00% Subseries F due 2004			15,000,000
6.00% Series due 2029		Thirty-Second Supplemental					25,000,000
1999 Medium Term Note Series		Thirty-Third Supplemental					222,334,480
7.40% Subseries A due 2005			15,000,000
7.40% Subseries B due 2005			11,000,000
6.21% Subseries C due 2011			15,000,000
9.53% Subseries D due 2019			4,000,000
6.375% Subseries E due 2023			14,000,000
8.26% Subseries F due 2022			1,500,000
9.50% Subseries G due 2006			1,440,000
9.22% Subseries H due 2019			2,534,480
8.32% Subseries I due 2022			3,500,000
8.14% Subseries J due 2025			4,000,000
6.00% Subseries K due 2030			18,360,000
5.93% Subseries L due 2012			25,000,000
2.65% Subseries M due 2006			5,000,000
3.461% Subseries N due 2007			12,000,000
5.08% Subseries O due 2015			20,000,000
5.17% Subseries P due 2017			7,000,000
5.751% Subseries Q due 2019			15,000,000
5.751% Subseries R due 2019			5,000,000
6.06% Subseries S due 2027			15,000,000
6.06% Subseries T due 2027			5,000,000
5.98% Subseries U due 2028			3,000,000
5.35% Series due 2031		Thirty-Fourth Supplemental					30,000,000
5.55% Series due 2032		Thirty-Sixth Supplemental					25,000,000
3.75% Series due 2010		Thirty-Seventh Supplemental					3,200,000
5.15% Series due 2032		Thirty Seventh Supplemental					25,000,000
5.05% Series due 2039		Thirty-Eighth Supplemental					14,000,000
5.00% Series due 2036		Thirty-Ninth Supplemental					21,770,000
5.00% Series due 2037		Thirty-Ninth Supplemental					24,165,000
5.00% Series due 2038		Thirty-Ninth Supplemental					25,375,000
5.00% Series due 2035		Fortieth Supplemental					24,675,000
5.00% Series due 2040		Forty-first Supplemental					23,915,000
5.00% Series due 2041		Forty-first Supplemental					23,915,000

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

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

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

WHEREAS , the Company proposes to create under the Original Indenture, as supplemented by this Forty-second Supplemental Indenture, two series of bonds to be designated “First Mortgage Bonds, 5.25% Series due 2042” (herein referred to as the “5.25% Series due 2042”) to be limited in aggregate principal amount to $24,830,000, to bear interest at the rate of 5.25% per annum, and to mature on July 1, 2042, and “First Mortgage Bonds, 5.25% Series due 2043” (herein referred to as the “5.25% Series due 2043”) to be limited in aggregate principal amount to $24,830,000, to bear interest at the rate of 5.25% per annum, and to mature on July 1, 2043, each series to be issued only as registered bonds without coupons and to be dated the date of delivery thereof; and

WHEREAS , in order to finance the costs of numerous acquisitions, constructions, modifications, expansions, installations and replacements of the Company’s water distribution, treatment and related operating systems located in the Counties of Chester, Delaware and Montgomery in Pennsylvania and that are part of the Company’s system for the distribution of water to its customers and related financing costs, which are to be financed under a Financing Agreement dated as of December 1, 2007 (the “Financing Agreement”) between the Company and the Montgomery County Industrial Development Authority, a Pennsylvania body politic and corporate (the “Authority”), and which are described in Exhibit A thereto (which facilities, less any deletions therefrom and together with any additions, improvements and modifications thereto and substitutions therefore made in accordance with the provisions of the Financing Agreement are referred to as 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 (Aqua Pennsylvania, Inc. Project), Series A of 2007 the aggregate principal amount of $49,660,000 (the “Authority Bonds”); and

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

WHEREAS , the Authority Bonds are to be issued under a Trust Indenture, dated as of December 1, 2007 (the “Authority Indenture”), between the Authority and U.S. Bank National Association, as trustee (the “Authority Trustee”); and

WHEREAS , the proceeds of the Authority Bonds are to be loaned to the Company pursuant to the terms of the Financing Agreement and 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 of the Authority, as security for the payment of the principal of, redemption premium, if any, and interest on, the Authority Bonds; and

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

WHEREAS , the Company, by proper corporate action, has duly authorized the creation of the 5.25% Series due 2042 and the 5.25% Series due 2043 (to be issued in accordance with the terms and provisions of the Original Indenture and indentures supplemental thereto, including this Forty-second Supplemental Indenture, and to be secured by said Original Indenture and indentures supplemental thereto, including this Forty-second Supplemental Indenture) and has further duly authorized the execution, delivery and recording of this Forty-second Supplemental Indenture setting forth the terms and provisions of the 5.25% Series due 2042 and the 5.25% Series due 2043 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:

[Form of 5.25% Series due 2042]

No. R-1		$24,830,000

AQUA PENNSYLVANIA, INC.

(Incorporated under the Laws of the Commonwealth of Pennsylvania)

First Mortgage Bond, 5.25% Series due 2042

Aqua Pennsylvania, Inc. (f/k/a known as Pennsylvania Suburban Water Company, successor by merger to Philadelphia Suburban Water Company), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (hereinafter called the “Company”, which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to Montgomery County

Industrial Development Authority or its registered assigns, on the 1st day of July 2042, at the designated office of The Bank of New York Trust Company, N. A. (hereinafter called the “Trustee”) in Philadelphia, Pennsylvania, the sum of Twenty-four Million Eight Hundred Thirty Thousand Dollars in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts and to pay interest thereon to the registered owner hereof by 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 on or prior to July 1, 2008, from the date hereof) until the principal hereof shall become due and payable, at the rate of 5.25% per annum, payable semiannually in like coin or currency on the first day of January and the first day of July in each year, commencing July 1, 2008 and to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and, to the extent legally enforceable, on any overdue installment of interest at a rate of 5.25% per annum after maturity whether by acceleration or otherwise until paid.

The interest so payable will (except as otherwise provided in the Forty-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 whether or not such day is a business day (a “Record Date”) and principal, premium, if any, and interest on this Bond shall be paid in accordance with written payment instructions of the registered owner delivered to the Trustee on or before such record date.

This Bond is one of a duly authorized issue of bonds of the Company known as its First Mortgage Bonds, issued and to be issued without limitation as to aggregate principal amount except as set forth in the Indenture hereinafter mentioned in one or more series and equally secured (except insofar as a sinking fund or other similar fund established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by an Indenture of Mortgage (herein called the “Indenture”) dated as of January 1, 1941, executed by the Philadelphia Suburban Water Company (now Aqua Pennsylvania, Inc., f/k/a Pennsylvania Suburban Water Company, as successor by merger) to The Pennsylvania Company for Insurances on Lives and Granting Annuities (succeeded as trustee by The Bank of New York Trust Company, N. A.), as Trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders and registered owners of the bonds and of the Trustee in respect of such security, and the terms and conditions under which the bonds are and are to be secured and may be issued under the Indenture; but neither the foregoing reference to the Indenture nor any provision of this Bond or of the Indenture or of any indenture supplemental thereto shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay at the stated or accelerated maturity herein and in the Indenture provided, the principal of and premium, if any, and interest on this Bond as herein provided. As provided in the Indenture, the bonds may be issued in series for various principal amounts, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided or permitted. This Bond is one of the Bonds described in an indenture supplemental to said Indenture known as the “Forty-second Supplemental Indenture” dated as of December 1, 2007, and designated therein as “First Mortgage Bonds, 5.25% Series due 2042” (the “Bonds”).

Concurrently herewith the Company is issuing is “First Mortgage Bonds, 5.25% Series due 2043” in the aggregate principal amount of $24,830,000 (the “5.25% Series due 2043”) and, together with the 5.25% Series due 2042, the “2007 Bonds”).

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

The 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 Financing Agreement (the “Financing Agreement”) dated as of December 1, 2007 between the Montgomery County Industrial Development Authority, a Pennsylvania body politic and corporate (the “Authority”), and the Company, which Authority Bonds are being issued to finance the costs of numerous constructions, modifications, expansions, installations and replacements of the Company’s water distribution, treatment and related operating systems located in the Counties of Chester, Delaware and Montgomery in Pennsylvania and that are part of the Company’s system for the distribution of water to its customers and related financing costs which are to be financed under the Financing Agreement and which are described in Exhibit A thereto (which facilities, less any deletions therefrom and together with any additions, improvements and modifications thereto and substitutions therefor made in accordance with the provisions of the Financing Agreement are referred to as the “Facilities”). The Facilities are to be financed through the sale of the Authority’s Water Facilities Revenue Bonds (Aqua Pennsylvania, Inc. Project), Series A of 2007, in the aggregate principal amount of $49,660,000 (the “Authority Bonds”).

The Authority Bonds are to be issued under a Trust Indenture, dated as of December 1, 2007 (the “Authority Indenture”) between the Authority and U.S. Bank 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 Authority Bonds subject to the same restriction on transfer.

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 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, at the option of the Company, on or after July 1, 2018, in whole or in part, at a redemption price of 100% of the principal amount of the Bonds to be redeemed, plus interest accrued thereon to the date fixed for redemption.

(b) The Bonds are also subject to redemption at the direction of the Company, in whole, at any time prior to maturity, at a redemption price of 100% of the principal amount of the bonds to be redeemed, plus interest accrued thereon to the date fixed for redemption, at any time the Authority Bonds are subject to extraordinary optional redemption pursuant to Section 7.01(a)(ii) of the Authority Indenture.

(c) The Bonds are also subject to special mandatory redemption at the direction of the Company, in part, prior to maturity, at a redemption price of 100% of the principal amount of the bonds to be redeemed, plus interest accrued thereon to the date fixed for redemption, at such time and in such amount as the Authority Bonds are subject to special mandatory redemption pursuant to Section 7.01(a)(iii) of the Authority Indenture.

(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.

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 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 The Bank of New York Trust Company, N. A., as Trustee under the Indenture, or a successor trustee thereunder, shall have signed the certificate of authentication endorsed hereon.

IN WITNESS WHEREOF, Aqua Pennsylvania, Inc. has caused this Bond to be signed by its President or a Vice President and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant Secretary, and this Bond to be dated December 20, 2007.

Attest:		AQUA PENNSYLVANIA, INC.
		By:
(Assistant) Secretary				Vice President

(Form of Trustee’s Certificate)

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

[Form of 5.25% Series due 2043]

No. R-1		$24,830,000

AQUA PENNSYLVANIA, INC.

(Incorporated under the Laws of the Commonwealth

of Pennsylvania)

First Mortgage Bond, 5.25% Series due 2043

Aqua Pennsylvania, Inc. (f/k/a known as Pennsylvania Suburban Water Company, successor by merger to Philadelphia Suburban Water Company), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (hereinafter called the “Company”, which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to Montgomery County Industrial Development Authority or its registered assigns, on the 1st day of July 2043, at the designated office of The Bank of New York Trust Company, N. A. (hereinafter called the “Trustee”) in Philadelphia, Pennsylvania, the sum of Twenty-four Million Eight Hundred Thirty Thousand Dollars in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts and to pay interest thereon to the registered owner hereof by 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 on or prior to July 1, 2008, from the date hereof) until the principal hereof shall become due and payable, at the rate of 5.25% per annum, payable semiannually in like coin or currency on the first day of January and the first day of July in each year, commencing July 1, 2008 and to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and, to the extent legally enforceable, on any overdue installment of interest at a rate of 5.25% per annum after maturity whether by acceleration or otherwise until paid.

The interest so payable will (except as otherwise provided in the Forty-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 whether or not such day is a business day (a “Record Date”) and principal, premium, if any, and interest on this Bond shall be paid in accordance with written payment instructions of the registered owner delivered to the Trustee on or before such record date.

This Bond is one of a duly authorized issue of bonds of the Company known as its First Mortgage Bonds, issued and to be issued without limitation as to aggregate principal amount except as set forth in the Indenture hereinafter mentioned in one or more series and equally secured (except insofar as a sinking fund or other similar fund established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by an Indenture of Mortgage (herein called the “Indenture”) dated as of January 1, 1941, executed by the Philadelphia Suburban Water Company (now Aqua Pennsylvania, Inc., f/k/a Pennsylvania Suburban Water Company, as successor by merger) to The Pennsylvania Company for Insurances on Lives and Granting Annuities (succeeded as trustee by The Bank of New York Trust Company, N. A.), as Trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders and registered owners of the bonds and of the Trustee in respect of such security, and the terms and conditions under which the bonds are and are to be secured and may be issued under the Indenture; but neither the foregoing reference to the Indenture nor any provision of this Bond or of the Indenture or of any indenture supplemental thereto shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay at the stated or accelerated maturity herein and in the Indenture provided, the principal of and premium, if any, and interest on this Bond as herein provided. As provided in the Indenture, the bonds may be issued in series for various principal amounts, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided or permitted. This Bond is one of the Bonds described in an indenture supplemental to said Indenture known as the “Forty-second Supplemental Indenture” dated as of December 1, 2007, and designated therein as “First Mortgage Bonds, 5.25% Series due 2043” (the “Bonds”).

Concurrently herewith the Company is issuing is “First Mortgage Bonds, 5.25% Series due 2043” in the aggregate principal amount of $24,830,000 (the “5.25% Series due 2043”) and, together with the 5.25% Series due 2042, the “2007 Bonds”).

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

The 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 Financing Agreement (the “Financing Agreement”) dated as of December 1, 2007 between the Montgomery County Industrial Development Authority, a Pennsylvania body politic and corporate (the “Authority”), and the Company, which Authority Bonds are being issued to finance the costs of numerous constructions, modifications, expansions, installations and replacements of the Company’s water distribution, treatment and related operating systems located in the Counties of Chester, Delaware and Montgomery in Pennsylvania and that are part of the Company’s system for the distribution of water to its customers and related financing costs which are to be financed under the Financing Agreement and which are described in Exhibit A thereto (which facilities, less any deletions therefrom and together with any additions, improvements and modifications thereto and substitutions therefor made in accordance with the provisions of the Financing Agreement are referred to as the “Facilities”). The Facilities are to be financed through the sale of the Authority’s Water Facilities Revenue Bonds (Aqua Pennsylvania, Inc. Project), Series A of 2007, in the aggregate principal amount of $49,660,000 (the “Authority Bonds”).

The Authority Bonds are to be issued under a Trust Indenture, dated as of December 1, 2007 (the “Authority Indenture”) between the Authority and U.S. Bank 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 Authority Bonds subject to the same restriction on transfer.

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 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:

(e) The Bonds are subject to redemption prior to maturity, at the option of the Company, on or after July 1, 2018, in whole or in part, at a redemption price of 100% of the principal amount of the Bonds to be redeemed, plus interest accrued thereon to the date fixed for redemption.

(f) The Bonds are also subject to redemption at the direction of the Company, in whole, at any time prior to maturity, at a redemption price of 100% of the principal amount of the bonds to be redeemed, plus interest accrued thereon to the date fixed for redemption, at any time the Authority Bonds are subject to extraordinary optional redemption pursuant to Section 7.01(a)(ii) of the Authority Indenture.

(g) The Bonds are also subject to special mandatory redemption at the direction of the Company, in part, prior to maturity, at a redemption price of 100% of the principal amount of the bonds to be redeemed, plus interest accrued thereon to the date fixed for redemption, at such time and in such amount as the Authority Bonds are subject to special mandatory redemption pursuant to Section 7.01(a)(iii) of the Authority Indenture.

(h) 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 Indent