table - pennsylvania · permit no. paii32203 issued by padep to the city with respect to the ms4...

TABLE OF CONTENTS

Page

Article I. DEFINITIONS ..................2

Article II. TERMS OF PURCHASE AND ASSUMPTION OF LIABILITIES..........................17

Arficle III. PURCHASE PRICE ........................24

Section 2.01.Section 2.02.Section 2.03.Section 2.04.Section 2.05.Section 2.06.Section 2.07.

Section 3.01.Section 3.02.Section 3.03.Section 3.04.

Section 4.01.Section 4.02.Section 4.03.Section 4.04.Section 4.05.Section 4.06.Section 4.07.Section 4.08.Section 4.09.Section 4.10.Section 4.1l.Section 4.12.Section 4.13.Section 4.14.Section 4.15.Section 4.16.Section 4.17.Section 4.18.Section 4.19.Section 4.20.Section 4.21.Section 4.22.

Purchase and Sale of Acquired Assets........ ..........17Excluded Assets........ .......19Conveyance of Title... ......20Assumption of Liabilities................. .....................20Subsequent Documentation; Further Acts .......... ....................21Certain Transfers; Assignment of Contracts............... ............2IWithdrawal Liability.. ........................23

Purchase Price.......... ......24Purchase Price Adjustment .................25Allocation of the Purchase Price.......... .................28Transfer Taxes; Bulk Sales ................28

Existence and Power. ........................29AuthorizationandValidityofAgreement.............. ................29No Conflict or Vio1ation................ ......................30Consents and Approvals............. .......30Financial Statements .......30Absence of Certain Changes or Events... ..............31Tax Mafters................ ........................32Real Property ..................33Equipment and Machinery............. .......................34Supplies..... ......................34Intellectual Property Assets ...............34Employee Benefit P1ans......... ............35Personnel; Labor Relations ................36Environmental Compliance......... .......37Consent Decree Matters...... ...............38Licenses and Permits ........39Insurance: Bonds........ .......................40Contracts and Commitments....... ........40Compliance with Law ........................41Litigation.. .......................42Title to the Acquired Assets; Sufficiency .............42Broker's and Finder's Fees .................42

Article IV. REPRESENTATIONS AND WARRANTIES OF THE SELLER............................29

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Article V. REPRESENTATIONS AND WARRANTIES OF BTIYER .....................43

Article VI. COVENANTS REGARDING REAL PROPERTY AND EASEMENTS ................45

Section 5.01.Section 5.02.Section 5.03.Section 5.04.Section 5.05.Section 5.06.Section 5.07.Section 5.08.Section 5.09.Section 5.10.


Section 7.01.Section 7.02.Section 7.03.Section 7.04.Section 7.05.Section 7.06.Section 7.07.Section 7.08.Section 7.09.Section 7.10.Section 7.1l.Section 7.12.Section 7.13.

Section 8.01.Section 8.02.Section 8.03.Section 8.04.Section 8.05.Section 8.06.

Title Examination; Missing Easements ................45Objections to Title; Conveyance by the City........... ...............46UCC Search; Releases ........................48Consents... .......................48

Taxes........ ........................48Cooperation on Tax Matters ..............49Files and Records..... ........49Personnel Matters...... .......50Restrictions on Sale or Lease of System; Right of First Refusal...... .........52Consent Decree ...............55Current and Future Rates......... ...........56Operation and Maintenance of the MS4 System .....................59Additional Agreements................ ......60Exclusivity ......................63Outstanding Indebtedness ............... ......................63PaPUC Approval... ..........64lnsurance.. .......................65

Survival..... .......................65Indemnification by the Seller... ..........66Indemnification by Buyer ..................66Indemnification Procedure............... .....................67Limitations on Indemnification Obligations .........69Insurance Policv........ ........................71

Article VII. OTHER AGREEMENTS........ .......48

Article VIII. INDEMNIFICATION........... .......65

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Article IX. PRE-CLOSING COVENANTS OF THE SELLER............. ...................72

Article X. PRE-CLOSING COVENANTS OF BUYER.... .....................75



Section I 1.01.

Section 11.02.Section I 1.03.Section 11.04.Section I 1.05.

Section 12.01.Section 12.02.Section 12.03.Section 12.04.Section 12.05.Section 12.06.Section 12.07.Section 12.08.

Section 13.01.Section 13.02.Section 13.03.

Section 14.01.Section 14.02.

Section 15.01.Section 15.02.

Consents and Approvals ............. ......77Representations and Warranties of Buyer.... ........78No Injunctions............. .......................78Performance of the Obligations of Buyer .............78Deliveries by Buyer ........78

Consents and Approvals............. .......78Representations and Warranties of Seller.... .........79No Injunctions............. ........................79No Material Adverse Effect........ .......80Deliveries by Seller.... ......80Performance of the Obligations of Seller..... .........80R&W Insurance Policy .....................80Assignment of Easements................ ....................80

Closing Date........... .........80Deliveries by the Se11er......... .............80Deliveries bv Buver .........82

Article XI. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER...................77

Article XII. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIJYER ........78

Article XIII. CLOSING........... ........80

Article XIV. TERMINATION.. ......82

Article XV. MISCELLANEOUS................ .......84

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Section 15.03.Section 15.04.Section 15.05.Section 15.06.Section 15.07.Section 15.08.Section 15.09.Section 15.10.Section l5.l l.Section 15.I2.Section 15.13.Section 15.14.Section 15.15.Section 15.16.Section 15.17.Section 15.18.

ExhibitsExhibit AExhibit BExhibit CExhibit DExhibit EExhibit F

Form of Bill of SaleForm of Assignment and Assumption AgreementForm of Escrow AgreementAuthority Board Authorizing ResolutionBuyer Authorizing ResolutionsForm of Abstractor Search Result Chart

Certain Permitted LiensAssigned ContractsIntaneible AssetsExcluded Intellectual PropertyAdditional Excluded AssetsRetained Equipment and MachineryMS4 System Real PropertvEssential System AssetsCompliance ScheduleVariance Adjustment CalculationConsents

Certain Schedules

Schedule 1.01

Schedule 2.01(c)Schedule 2.01ft)Schedule 2.02(d)Schedule 2.02(h)Schedule 2.02(i)Schedule 2.02(o)Schedule 6.01

Schedule 7.06Schedule 7.07(d)Schedule 12.01(a)

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT ("Aqreement"), dated as of March 29,2016(the "Effective Date"), is made and entered into by and between THE SEWER AUTHORITY OFTHE CITY OF SCRANTON (the "Seller"), and PENNSYLVANIA-AMERICAN WATERCOMPANY ("Buyer").

WITNESSETH:

WHEREAS, the Seller, acting by and through the Authority Board, owns and operates awastewater collection and treatment system (the "System"); and

WHEREAS, Buyer owns and operates a public utility water system operating in or nearthe Seller's wastewater service area (the "Water Svstem") which includes the City of Scranton(the "City") and the Borough of Dunmore (the "&@") (the City and the Borough, together,the "Service Area"); and

WHEREAS, the Seller issued on March 3, 2015 a Request for Proposals ("RFP")regarding the management and/or sale of the System, as it explored ways to achieve operatingeff,rciencies, to improve customer wastewater service, to keep future customer rates as low as

possible and to raise capital to fund important infrastructure needs; and

WHEREAS, Buyer, among other parties, responded to the RFP and, subsequently, toSeller's request for Best and Final Offers ("BAFO"), and engaged in extensive discussions withthe Seller including the Seller's response to Buyer's questions related to the RFP, the Seller'srequests for clarification related to the BAFO, and Buyer's and the Seller's responses to suchcorrespondence (collectively, the "Clarifuinq Correspondence"), which resulted in the Seller andBuyer entering into a Memorandum of Understanding, dated December 15, 2015, as modified onMarch 14,2016 (the "MOU"), for the sale and transfer of the System; and

WHEREAS, Buyer, in reliance upon the representations, warranties and covenants of theSeller herein, desires to purchase and acquire from the Seller, and the Seller, in reliance upon therepresentations, warranties and covenants of Buyer herein, desires to sell, transfer, assign,convey and deliver to Buyer all of the assets of the System (other than the Excluded Assets), andin connection therewith, Buyer has agreed to assume certain ongoing obligations and liabilitiesof the Seller related to the operation of the System (including the Seller's obligations under theConsent Decree subject to the limitations contained herein), all on the terms and subject to theconditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutualrepresentations, warranties, covenants, and agreements herein contained, the receipt andsufficiency of which hereby are acknowledged, intending to be legally bound, the Parties heretoagree as follows:

ARTICLE I.

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the followingterms, as used in this Agreement shall have the meanings set forth in this Article I:

"Abstract Completion Date" has the meaning specified in Section 6.01(a).

"Abstractor" has the meaning specified in Section 6.01(a).

"Abstractor Search Result Chart" has the meaning specified in Section 6.01(a).

"Accrued PTO" has the meaning specified in Section 7.04(c).

"Accrued Sick Bank" means the portion of the Accrued PTO comprising the totalamount of accrued but unused paid sick days with respect to all Union Personnel as of theClosing Date.

"Acquired Assets" has the meaning specified in Section 2.01.

"Acquired Authorizations" has the meaning specified in Section 2.01(i).

"Affiliate" means, with respect to any Person, any other Person that directly or indirectly,through one or more intermediaries, controls, is controlled by, or is under common control with,such Person. The term "control" (including the terms "controlled by" and "under commoncontrol with") means the possession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of a Person, whether through the ownership of votingsecurities, by contract or otherwise.

"Agreement" has the meaning specified in the Preamble of this Agreement.

"Allocation Schedule" has the meaning specifred in Section 3.03.

"Amended CBA" has the meaning specified in Section 7.04(f).

"Amended Consent Decree" has the meaning specified in Section 7.06(d).

"Approved Revised CSO Control Measures Plan" means any Revised CSO ControlMeasures Plan approved in accordance with Subsection XIX of the Consent Decree, orestablished through Dispute Resolution pursuant to Section XII of the Consent Decree.

"Assignable Outstanding Indebtedness" has the meaning specified in Section 7.Il(a).

"Assigned Contracts" has the meaning specified in Section 2.01(c).

"Assignment and Assumption Agreement" has the meaning specified in Section13.02(b).

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"Assumed Liabilities" has the meaning specihed in Section 2.04(a).

"Authority Board" has the meaning set forth in the Municipality Authorities Act of 1945and the bylaws of the Seller.

"Average System Rates" means the "Rates for Rate Zone l" contained in Buyer'sSupplement No. 2 to Tariff Wastewater PA P.U.C. No. 15, lst Revised Page No. 4 through lstRevised Page No. 4.1 on file with the PaPUC, as amended.

"Base Amount" has the meaning specified in Section 3.01.

"Borough" has the meaning specified in the recitals to this Agreement.

"Business Day" means any day other than Saturday, Sunday, and any day on whichcommercial banks in Pennsylvania are authorized by Law to be closed.

"Buyer" has the meaning specified in the Preamble of this Agreement.

"Buyer Fundamental Representations" has the meaning specifred in Section 8.01.

"Buyer Indemnified Persons" has the meaning specified in Section 8.02.

"Buyer Parent" means American Water Works Company, Inc.

"Buyer Post-Signing Event" has the meaning specified in Section 10.04.

"Buyer Schedule Supplement" has the meaning specified in Section 10.04.

"CAGR" has the meaning specified in Section 7.07(d).

"CERCLA" means the Comprehensive Environmental Response Compensation andLiability Act of 1980,42 U.S.C. $9601 et seq., as amended.

"City" has the meaning specified in the recitals to this Agreement.

"City NPDES Permit" means the National Pollutant Discharge Elimination SystemPermit No. PAII32203 issued by PaDEP to the City with respect to the MS4 System whichbecame effective on November l, 2014 and expires on October 31,2019, including any revisionor modification thereto.

"City-Owned Real Property" has the meaning specif,red in Section 6.02(d).

"Clarifying Correspondence" has the meaning specified in the recitals to thisAgreement.

"Closing" means the consummation of the sale and purchase of the Acquired Assets andassumption of the Assumed Liabilities and the other transactions contemplated hereby, all inaccordance with the terms and conditions of this Agreement.

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"Closing Cash Balance" means the sum of (a) the aggregate amount of cash and cashequivalents in the bank accounts included in the Acquired Assets as of the Closing EffectiveTime plus (b) the lesser of (i) the aggregate amount paid by the Seller to cash-out the AccruedSick Bank in accordance with Section 7.04(c), and (ii) $450,000.

"Closing Cash Statement" has the meaning specified in Section 3.02(b).

"Closing Date" has the meaning specified in Section 13.01.

"Closing Effective Time" has the meaning specified in Section 13.01.

"Closing Outstanding Indebtedness Amount" has the meaning specified in Section3.01(a).

"COBRA" means Title X of the Consolidated Omnibus Budget Reconciliation Act of1985, as amended, including Sections 220I through2208 of the Public Health Service Act andPart 6 of Subtitle B of the Employee Retirement Income Security Act of 1974, as amended.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collective Bargaining Agreement" means the Agreement between the Seller and theUnion dated as of April I, 2013 for the period April l, 2013 to March 31, 2017, as may beamended from time to time.

"Combined Sewer Overflow" or "CSO" means any discharge from the Seller'sCombined Sewer System at a CSO Outfall designated in the currently applicable Seller NPDESPermit.

"Combined Sewer System" means the portion of the Seller's System designed to conveymunicipal sewage, wastewaters (domestic, commercial, and industrial) and stormwater runoff inthe same system of pipes to the Wastewater Treatment Plant.

"Combined Sewer System Assets" means the assets of the System designed andconstructed to collect and convey municipal sewage (i.e., domestic, commercial and industrial)and stormwater through a single pipe-system to the Wastewater Treatment Plant or CombinedSewer Overflow structures, including (i) wastewater collection pipes, pumping stations and otherassets used for wastewater collection, (ii) stormwater drains, pipes, collection basins, pumpingstations and all other stormwater drainage assets used for stormwater collection, and (iii) catchbasins, inlets, pipes and all other stormwater lateral facilities, in each case that connectwastewater and surface stormwater drains to the combined sewer mains that discharge to theWastewater Treatment Plant or combined sewer overflow structures, but excluding theMunicipal Separate Storm Sewer System. The term "Combined Sewer System Assets" alsoincludes facilities constructed in accordance with Exhibit A of the Consent Decree.

"Compliance Schedule" has the meaning specified in Section 7.06(a).

"Consent Decree" means the order of the United States District Court for the MiddleDistrict of Pennsylvania dated January 31, 2013, among the EPA, PaDEP and the Seller,

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including, among other requirements, the Long-Term Control Plan and Nine Minimum ControlsPlan (as defined in the Consent Decree), as modified by the Notice of Non-Material Modificationof Consent Decree filed December 18, 2015, and as may be further modified in accordance withthe terms of this Agreement and approved in accordance with the terms of the Consent Decree.

"Consent Decree Required Information" has the meaning specified in Section 7.03(b).

"Contract" means any contract, agreement, purchase order, lease, sublease, license,sublicense, plan, indenfure, loan agreement, security agreement, instrument or other document,commitment, arrangement, undertaking, practice or authorization that is binding on any Personor its property under applicable Law.

"CSO Control Measures" means the construction, control measures, actions and otheractivities set forth in Appendix A of the Consent Decree, including the Seller's Long-TermControl Plan, as approved by Federal and State regulatory authorities and as may be amendedfrom time to time in accordance with the terms of the Consent Decree.

"CSO Outfall" means an outfall in the Combined Sewer System from which combinedsewage and stormwater are discharged and so designated in the currently applicable SellerNPDES Permit.

"Cured" has the meaning specified in Section 6.02(a).

"Damages" means any and all losses, liabilities, obligations, damages, penalties, interest,Taxes, claims, actions, demands, causes of action, judgments, reasonable attorneys', consultants'and other professional fees, and all other reasonable costs and expenses sustained or incurred ininvestigating, preparing or defending or otherwise incident to any such claim, action, demand,cause of action or judgment or the enforcement of a Party's rights under Article YIII; provided,however, that "Damages" shall not include punitive damages, except in the case of fraud or tothe extent actually awarded to a Governmental Authority or other third party in respect of a ThirdParty Claim.

"Easements" means all easements, rights of way, licenses, use agreements, occupancyagreements, leases and other agreements and appurtenances for and over the real property ofthird parties.

"Effective Date" has the meaning specified in the Preamble.

"Eligible Easement" means any Easement that is either:

(a) a Held Easement which is not subject to any Objection Notice or, if same was subjectto an Objection Notice, the applicable Title Objection Items have been Cured pursuant to Section6.02(a); or

(b) an Easement with respect to which the Seller has instituted condemnation proceedingsin order to obtain the necessary right and title to such Easement, the period for makingpreliminary objections thereto has expired without any preliminary objections being made or, ifpreliminary objections were made, all such preliminary objections have been resolved and, in

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any case, the only remaining issue is the fair value that will be paid to the landowner for thetaking of such Easement.

"Environment" means any surface water, ground water, soil or subsurface strata,sediments or ambient air.

"Environmental Claims" means all notices of investigations, warnings, notice letters,notices of violations, Liens, orders, claims, demands, suits or administrative or judicial actionsfor any injunctive relief, fines, penalties, third party claims, or other claims asserting violationsof Environmental Requirements or responsibility for Environmental Liabilities.

"Environmental Conditions" means the Release of Hazardous Materials or the presence

of Hazardous Materials on, in, under or within any property (including the presence in theEnvironment), other than the presence of Hazardous Materials .in locations and at concentrationsthat are naturally occurring.

"Environmental Liabilities" means .any legal obligation or liability arising underEnvironmental Requirements or related to or arising out of any Environmental Condition,including those consisting of or relating to any (a) duty imposed by, breach of or noncompliancewith any Environmental Requirements; (b) environmental, health or safety matters or conditions(including on-site or off-site contamination, occupational safety and health and regulation ofHazardous Materials); (c) Remedial Action undertaken by any Person; (d) bodily injury(including illness, disability and death, and regardless of when any such bodily injury occurred,was incurred or manifested itself;, property damage (including trespass, nuisance, wrongfuleviction and deprivation of the use of real or personal property), or other losses or damagesincurred by any other Person (including any employee or former employee of such Person); (e)any injury to, destruction of, or loss of natural resources, or costs of any natural resource damageassessments; (f) exposure of any Person to any Hazardous Materials; and (g) the presence orRelease of any Hazardous Materials.

"Environmental Requirements" mean all present Laws (including common law),regulations, legally binding or otherwise enforceable requirements and Licenses and Permitsrelating to human health, pollution, or protection of the Environment (including ambient air,surface water, ground water, land surface or surface strata), including (i) those relating toemissions, discharges, Releases, or threatened Releases of Hazardous Materials, and (ii) thoserelating to the identification, generation, manufacture, processing, dishibution, use, treatment,storage, disposal, release, recovery, transport or other handling of Hazardous Materials. Withoutlimiting the foregoing, the term "Environmental Requirements" includes (l) CERCLA; theSuperfund Amendments and Reauthorization Act, Public Law 99-499, 100 Stat. 1613; theEmergencyPlanningandCommunityRighttoKnow Act,42 U.S.C. Sections 11001-11050;theResource Conservation and Recovery Act, 42 U.S.C. Sections 6901-6992k ("RCRA"); the SafeDrinking Water Act, 42 U.S.C. Sections 300f to 300j-26; the Toxic Substances Control Act, l5U.S.C. Sections 2601-2692; the Hazardous Materials Transportation Act, 49 U.S.C. Sections510l-5127; the Federal Water Pollution Control Act, 33 U.S.C. Sections 125l-1387; the OilPollution Act of 1990,33 U.S.C. Sections 2701--2761; the Clean Air Act, 42 U.S.C. Sections7401-7671q; the Atomic Energy Act of 1954, as amended, 42 U.S.C. Sections 201I et seq.; theLow Level Radioactive Waste Policy Act, as amended, 42 U.S.C. Section 2021b et seq.; the

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Occupational Safety and Health Act, 29 U.S.C. Sections 651-678, and the regulationspromulgated pursuant to the above-listed federal statutes, and (2) counterpart Laws andregulations promulgated or issued by any state or local Governmental Authority.

rrEPAfr means the United States Environmental Protection Agency, or a successorGovernmental Authority with substantially similar power and authority thereto.

"Equipment and Machinery" means (i) all equipment, tangible personal property,machinery, office furniture and equipment, hxtures, tooling, spare maintenance or replacementparts, environmental testing equipment, and vehicles, (ii) any rights to warranties applicable tothe foregoing, and licenses received from manufacturers of any such item, and (iii) any relatedclaims, credits, and rights of recovery with respect thereto.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Escrow Account" has the meaning specified in Section 3.01(b).

"Escrow Agent" means Delaware Trust Company.

"Escrow Agreement" means the Escrow Agreement, in substantially the form attachedhereto as Exhibit C, dated as of the Closing Date, among Buyer, the Seller and the EscrowAgent.

"Escrow Amount" has the meaning specified in Section 3.01(b).

"Escrow Fund" means, at any given time, the portion of the Escrow Amount (togetherwith any interest or other earnings thereon) then remaining in the Escrow Account.

"Escrow Release Date" means the date that is eighteen (18) months following theClosing Date.

"Essential Easement" means any Easement that is necessary for or used in connectionwith the use and operation of any Essential System Asset or to provide continuous andunimpeded rights of way for the Essential System Assets (including access thereto).

"Essential System Assets" means (a) the Waste Water Treatment Plant, (b) all pumpingstations, outfalls and other "above ground" Combined Sewer System Assets and allappurtenances relating thereto, and (c) easements for all Combined Sewer System Assets whichin any way relate to railroad properties and rights-of-way, and collection system mains andlaterals and other lines comprising the System, wherever located, which have a diameter oftwelve (12) inches or more, including those Essential System Assets at the locations identified onSchedule 6.01.

"Estimated Closing Cash Balance" has the meaning specified in Section 3.02(a).

"Estimated Closing Cash Increase" has the meaning specified in Section 3.02(a).

"Estimated Closing Cash Reduction" has the meaning specifred in Section 3.02(a).

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"Estimated Closing Cash Statement" has the meaning specif,red in Section 3.02(a).

"Estimated Withdrawal Liability Amount" has the meaning specified in Section2.07(b\.

"Excess Offsets and Credits" has the meaning specified in Section 7.06(e).

"Excluded Accounts Receivable" has the meaning specified in Section 2.02(l).

"Excluded Assets" has the meaning specified in Section 2.02.

"Excluded Liability" or "Excluded Liabilities" means any and all liabilities, debts orobligations of any nature, whether known or unknown, absolute, accrued, contingent, liquidated,unliquidated, due or to become due or otherwise and whether or not required to be reflected on abalance sheet prepared in accordance with GASB, in each case which are not AssumedLiabilities.

"Executive Officers" of the Seller are the Executive Director, the Director ofCompliance, the Director of Engineering and the Chief Financial Officer.

"Files and Records" means all files and records of or relating to the Seller or the System,whether in hard copy or magnetic or other format including customer and supplier records,customer lists (both current and prospective), records of sales calls, manuals, books, files,records, engineering data, procedures, systems, instructions, drawings, blueprints, plans, designs,specifications, equipment lists, parts lists, equipment maintenance records, equipment warrantyinformation, plant plans, specifications and drawings, sales and advertising material, computersoftware, and records relating to Transferred Personnel, and whether stored on-site or off-site.

"Final Order" means a Governmental Approval by a Governmental Authority as towhich (a) no request for stay of the action is pending, no such stay is in effect and if any timeperiod is permitted by statute or regulation for hling any request for such stay, such time periodhas passed, (b) no petition for rehearing of the action is pending and the time for filing any suchpetition or application has passed, (c) such Governmental Authority does not have the actionunder reconsideration on its own motion and (d) no appeal to a court or administrative tribunal ora request for stay by a court or administrative tribunal of the Governmental Authority's action ispending or in effect and the deadline for filing any such appeal or request for stay has passed.

"Financial Statements" has the meaning specified in Section 4.05.

"GASB" means the Government Accounting Standards Board.

"Governmental Approval" means any consent, approval, authorization, order,adjudication, award, decision, judgment, writ, decree, ruling, or verdict entered, issued, made, orrendered by any court, administrative agency, or other Governmental Authority of competentjurisdiction.

"Governmental AuthoriQr" means any goverrlment, court, department, commission,board, bureau, municipality, agency or instrumentality of the United States, or of any state,

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county, city or political subdivision thereof, or any foreign govemmental body, including thePaPUC, the EPA, PaDEP and the Authority Board.

"Hazardous Materials" means: (a) any substance that is a "hazatdous substance,""hazardous waste," "solid waste," "municipal waste," "industrial waste," "flammable material, ""radioactive materialr" "hazardous material," "pollutant," or "contaminant" or words of similarmeaning and regulatory effect under any applicable Environmental Requirements, (b) petroleumor petroleum product (including crude oil and any fraction thereof) or waste oil, (c) any naturalor synthetic gas (whether in liquid or gaseous state), (d) any asbestos or polychlorinatedbyphenyls, (e) Mold, and (f) any mixture or solution of the foregoing, and all derivatives orsynthetic substitutes of the foregoing.

"Held Easement" means, as of any particular date, each Easement that has been obtainedby the Seller prior such date.

"Indemnified Party" means any Buyer Indemnified Person or Seller IndemnifiedPerson, as applicable, entitled to indemnification pursuant to Article VIIL

"Indemnifying Party" means a Party which is obligated to indemnify an IndemnifiedParty pursuant to Article VIII.

"Independent Third Party" has the meaning specified in Section 7.05(b).

"Industrial Pretreatment Program" means the program for regulation and managementof discharges to the System from Industrial Users as defined in 40 C.F.R. $403.3 which issufficient to satisfy the requirements of the Amended Consent Decree (including the revisedNine Minimum Controls Plan) and the Seller NPDES Permit as transferred to Buyer, includingany amendments or revisions thereto.

"Intellectual Property" means any and all of the following in any jurisdictionthroughout the world: (a) trademarks and service marks, including all applications andregistrations and the goodwill connected with the use of and symbolized by the foregoing;(b) copyrights, including all applications and registrations, and works of authorship, whether ornot copyrightable; (c) trade secrets and confidential know-how; (d) patents and patentapplications; (e) websites and internet domain name registrations; and (f) all other intellectualproperty and industrial property rights and assets, and all rights, interests and protections that areassociated with, similar to, or required for the exercise of, any of the foregoing.

"Intellectual Property Assets" has the meaning specified in Section 2.01(g).

"Knowledge", "to the Knowledge ofl, and phrases of similar import, means the actualknowledge, after reasonable inquiry, of (A) with respect to Seller, the Executive Officers, or (B),with respect to Buyer, Kathy L. Pape.

"Law" means any law, statute, regulation, ordinance, rule, order, judicial, administrativeor regulatory decree, judgment, adjudication, consent decree, settlement agreement,governmental requirement or common law doctrine enacted, promulgated, entered into, agreed orimposed by any Governmental Authority.

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"Leased Real ProperQ/" means any parcel of land, building, fixtures or other realproperty leased, subleased, licensed or occupied pursuant to any leasehold or other real propertyright or interest.

"Liability Cap" has the meaning specified in Section 8.05(c).

"Licenses and Permits" mean all licenses, permits, franchises, authorizations,certif,rcates, registrations, consents, orders, adjudications, variances, waivers, privileges,approvals or other Governmental Approvals issued, granted, approved or allowed by or obtainedfrom, or required to be obtained from, any Governmental Authority, including environmentalpermits, operating permits and approvals.

"Lien" means any lien, pledge, mortgage, deed of trust, security interest, charge, claim,option, warrant, lease, sublease, right to possession, hypothecation, easement, right-of-way,encroachment, or other encumbrance, right or restriction which affects, by way of a conflictingownership interest or otherwise, the right, title or interest in or to any property.

"Long Term Control Plan" means the plan submitted and approved by EPA and PaDEPunder Section V.B. of the Consent Decree.

"Material Adverse Effect" means any event, occurrence, fact, condition or change that,individually or in the aggregate, is materially adverse to (a) the business, condition (financial orotherwise), assets, liabilities or results of operations of the System, taken as a whole, or (b) theabilify of the Seller to consummate the transactions contemplated hereby; provided, however,that for purposes of the foregoing clause (a), a "Material Adverse Effect" shall not include anyevent, occunence, fact, condition or change arising out of or attributable to: (i) generaleconomic or political conditions; (ii) conditions generally affecting the sewer system industry(including sewer system owners, operators and service providers); (iii) any changes in financial,banking or securities markets in general, including any disruption thereof and any decline in theprice of any security or any market index or any change in prevailing interest rates; (iv) acts ofwar (whether or not declared), armed hostilities or terrorism, or the escalation or worseningthereof; (v) any action by the Seller required or permitted by this Agreement or any action taken(or omitted to be taken) by the Seller with the written consent of or at the written request ofBuyer; (vi) any changes in applicable Laws or accounting rules or the enforcement,implementation or interpretation thereof; (vii) any natural or man-made disaster or acts of God;or (viii) any failure, in and of itself, by the Seller to meet any internal or published projections,forecasts or revenue or earnings predictions with respect to the System Qtrovided that theunderlying causes of such failure shall not (subject to the other provisions of this definition) beexcluded from the determination of a Material Adverse Effect), except, in the case of theforegoing clauses (i), (ii), (iii), (iv), (vi) and (vii), to the extent such event, occurrence, fact,condition or change has a materially disproportionate effect on the Seller as compared to othersimilar situated'Persons engaged in the industry in which the Seller operates.

"Material Change" has the meaning specified in Section 7.05(h).

"Material Contracts" has the meaning specihed in Section 4.18.

"Material Terms" has the meaning specified in Section 7.05(b).

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"Maximum Liability Cap" has the meaning specified in Section 8.05(c).

"Missing Easements" means, as of any particular date, each Easement that is appurtenantto any Combined Sewer System Asset or necessary for access to any Combined Sewer SystemAsset or for the operation of any Combined Sewer System Asset (including Easements forutilities and power to any Combined Sewer System Asset) or otherwise is necessary for or usedin connection with the operation of the System or to provide continuous and unimpeded rights ofway for the Combined Sewer System Assets (including access thereto) that either (a) has notbeen obtained by the Seller prior such date or (b) if such Easement has been obtained by theSeller prior such date, such Easement is unrecorded or such Easement is not sufficient to operatethe System as currently conducted.

"Mold" means any mold, fungus, bacteria, viral, or microbial matter or pathogenicorganisms of a type or quantity that (a) results in or could reasonably result in a significant riskto human health or the Environment or obligations under Environmental Requirements toundertake Remedial Actions, or (b) would materially and negatively impact the value of any ofthe Acquired Assets.

"MOU" has the meaning specified in the recitals to this Agreement.

"Multiemployer Plan" has the meaning specified in Section a.l2(c).

"Municipal Separate Storm Sewer System" or "MS4 System" means the current and

any future assets and facilities, built, operated or maintained, or real property ("MS4 SystemReal Property") and Stormwater System Assets owned by the City, the Borough or the Seller,and used for the purpose of capturing, conveying and discharging stormwater separate from anysewage or wastewaters.

"Nine Minimum Controls Plan" means the plan set forth in Appendix A of the ConsentDecree as may be revised and updated in accordance with the Nine Minimum Controlsrequirements referenced in Section V.A of the Consent Decree.

"Non-Union Personnel" means Personnel who are not members of the Union.

"Nonassignable Assets" has the meaning specif,red in Section 2.06(a).

"Noticed Proposal" has the meaning specifred in Section 7.05(g).

"Noticed Proposal Period" has the meaning specified in Section 7.05(g).

"Objection Notice" has the meaning specified in Section 6.02(a).

"Off-Site Location" means a location other than property on which the System islocated.

"Outside Date" means October 15, 2016, as may be extended pursuant to Sectionr4.01(0.

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"Outstanding Indebtedness" means the aggregate amount of outstanding indebtednessand other obligations of the Seller (including all principal and accrued but unpaid interest, fees,indemnities, compensation, expenses and other amounts payable, and including any terminationfees, prepayment penalties, redemption premium, "breakage" costs or similar paymentsassociated with the payment, prepayment or redemption of such amounts of OutstandingIndebtedness), as of the Closing Effective Time, and all arbitrage rebate amounts and trustee orpaying agent fees and expenses payable under or with respect to the following bonds, notes andother debt instruments (including any and all indentures, debentures, mortgages or otherContracts relating to any of the following): (i) Sewer Revenue Bonds, Series of 2011,{,(ii) Sewer Revenue Bonds, Series of 201I B, (iii) Sewer Revenue Bonds, Series of 2014,(iv) Sewer Revenue Bonds, Series of 2015, (v) PENNVEST Promissory Note #71192,(vi) PENNVEST Promissory Note #71162, (vii) PENNVEST Promissory Note #71281,(viii) PENNVEST Promissory Note #27682, (ix) PENNVEST Promissory Note #79906,(x) PENNVEST Promissory Note #71375, , (xi) PENNVEST Promissory Note #27881, (xii)$4,000,000 line of credit from First National Commonwealth Bank and (xiii) $2,000,000 line ofcredit from First National Commonwealth Bank.

"Owned Real PropertSr" means all land owned in fee simple, together with all buildings,structures, improvements and fixtures located thereon, and all easements, rights of way, licenses,privileges, air rights and other rights and interests appurtenant thereto.

"PaDEP" means the Pennsylvania Department of Environmental Protection.

"PaPUC" means the Pennsylvania Public Utility Commission.

"ParQ/" means Buyer or the Seller, and the term "Parties" means collectively Buyer andthe Seller.

"PCB Equipment" means PCB equipment as defined in 40 C.F.R.Part76l.

"Permitted Liens" means (a) Liens securing the Outstanding Indebtedness which (i) willbe will be repaid and fully and unconditionally released, satisfred and discharged of record at theClosing or (ii) secure only that portion of the Outstanding Indebtedness that is assumed by Buyerat Closing, if any, pursuant to and in accordance with Section 3.01 and Section 7.1 l; (b) statutoryLiens for Taxes not yet due and payable or which are being contested in good faith byappropriate procedures and for which appropriate reserves have been recorded in the InterimFinancial Statements; (c) Liens in the nature of zoning restrictions, easements, rights-of-way orother restrictions of record on the use of the Real Property that, in the reasonable judgment ofBuyer will not materially impair the continued use of the Real Property, the System and theAcquired Assets including the easements and rights-of-way for all wastewater lines and otherfacilities comprising the System, as the System and other Acquired Assets are currently being'and have historically been used; (d) the Liens set forth on Schedule 1.01; and (e) mechanic's,materialman's, carrier's, repairer's and other similar Liens arising or incurred in the ordinarycourse of business under applicable Law or that are not yet due and payable or are beingcontested in good faith and by appropriate proceedings, in any case (i) for which reserves havebeen established on the Interim Financial Statements and (ii) that do not, and would notreasonably be expected to, individually or in the aggregate, materially and adversely affect the

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value, or materially impair the continued use, of such Acquired Assets in the same or similarmanner as currently being used; provided, however, that nothing contained in herein shall beconstrued as relieving the Seller of its obligation hereunder to deliver the Acquired Assets toBuyer on the Closing Date in the condition required under Article XIII of this Agreement.

"Person" means any individual, corporation, partnership, joint venfure, association,limited liability company, joint-stock company, trust, or unincorporated organization, or anyGovernmental Authority or other entity.

"Personnel" means the employees of the Seller, and includes Union Personnel and Non-Union Personnel.

"Policies" and "Policy" have the meanings specified in Section aJ7@).

"Post-Closing Withdrawal Liability Payoff Amount" has the meaning specified inSection 2.07(d).

"Proposal" means any written agreement, offer or proposal (including a letter of intent,term sheet, form of definitive agreement or definitive agreement) for a Sale Transaction.

"Proposal Notice" has the meaning specified in Section 7.05(b).

"Purchase Price" has the meaning specified in Section 3.01.

"R&W Insurance Policy" has the meaning specified in Section 10.01.

"R&W Premium" has the meaning specified in Section 10.01.

"Rate Increase(s)" has the meaning specified in Section 7.07(a).

rrRcRr{rrmeans the Resource Conservation and Recovery Acq as amended.

"Real Property" has the meaning specified in Section a.08(a).

"Real Property Lease" has the meaning specified in Section 4.08(b).

"Regulated Asbestos Containing Material" means regulated asbestos containingmaterial as defined by 40 C.F.R. $ 61.141.

"Related Agreements" means all agreements, instruments, ordinances and otherdocuments contemplated by or executed and delivered by Buyer or Seller pursuant to thisAgreement or in connection with the transactions contemplated hereby.

"Release" means any actual or threatened spilling, leaking, pumping, pouring, injecting,emptying, discharging, emitting, escaping, leaching, dumping, disposal, or release or migrationof Hazardous Materials into the Environment, including the abandonment or discarding ofbarrels, containers and other receptacles containing any Hazardous Materials.

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"Remedial Action" means any and all actions to (a) investigate, clean up, remediate,remove, treat, contain or in any other way address any Hazardous Materials in the Environment,(b) prevent the Release or threat of Release or minimize the fuither Release of any HazardousMaterials so it does not migrate or endanger public health or welfare or the indoor or outdoorEnvironment, and (c) perform pre-remedial studies and investigations and post-remedialmonitoring, maintenance and care. The term "Remedial Action" includes any action whichconstitutes (i) a "removal", 'oremedial action" or "response" as defined by Section 101 ofCERCLA, 42 U.S.C. $$ 9601(23), (24), and (25); (ii) a "corrective action" as defined in RCRA,42 U.S.C. $ 6901 et seq.; or (iii) a "response" or "interim response" as defined in thePennsylvania Hazardous Sites Cleanup Act, 35 P.S. $6020.103.

"Representative" means, with respect to any Person, any director, officer, agent,

employee, general partner, member, shareholder, advisor or other authorized representative ofsuch Person.

"Retained Equipment and Machinery" has the meaning specified in Section 2.02(i).

"Review Period" has the meaning specified in Section 3.02(c).

"Revised CSO Control Measures Plan" means any revisions, amendments or changes

to the CSO Control Measures Plan that is submitted and approved by EPA and PaDEP inaccordance with the Consent Decree.

"RtrrP'r has the meaning specified in the recitals to this Agreement.

"ROFR Sale Transaction" has the meaning specified in Section 7.05(d).

"ROFR Sale Transaction Negotiation Period" has the meaning specified in Section7.os(d).

"Sale Proposal Review Period" has the meaning specified in Section 7.05(b).

"Sale Transaction" means any proposed sale, lease, liquidation or transfer of all orsubstantially all of the System or the Acquired Assets by Buyer, and including any other assets

of Buyer or its Affiliates included in such proposed transaction; provided, that the term "SaleTransaction" excludes any sale or transfer of the equity interests, or all or substantially all theassets, of Buyer, Buyer Parent or any of their respective Affiliates.

"Schedules" means the disclosure schedules delivered by the Seller and Buyerrespectively, concurrently with the execution and delivery of this Agreement, and as may be

updated by a Seller Schedule Supplement or a Buyer Schedule Supplement, respectively.

"Seller" has the meaning specified in the Preamble of this Agreement.

"Seller Indemnified Persons" has the meaning specified in Section 8.03.

"Seller NPDES Permit" means the National Pollutant Discharge Elimination SystemPermit No. PA0026492 issued by PaDEP to the Seller with respect to the System.

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"Seller Post-Signing Event" has the meaning specified in Section 9.03.

"Seller Proposal Notice" has the meaning specified in Section 7.05(c).

"Seller Schedule Supplement" has the meaning specified in Section 9.03.

"Seller Successor" has the meaning specified in Section 15.13(c).

"Sellerfs Benefit Obligations" have the meaning specihed in Section 4.12.

"Seller's Plans" have the meaning specified in Section 4.12.

"Service Area" has the meaning specified in the recitals to this Agreement.

"Stormwater System Assets" means all assets owned by the Seller, the City or theBorough and used exclusively in the operation or maintenance of the MS4 System, including(i) drains, pipes and collection basins and all other stormwater drainage assets used exclusivelyfor stormwater collection, conveyance and discharge; (ii) catch basins, inlets, pipes and all otherstormwater lateral facilities (the "Stormwater Lateral Facilities") that connect surfacestormwater drains to storm conveyances which discharge to surface waters, and (iii) the CityNPDES Permit. Stormwater System Assets shall not include the Combined Sewer SystemAssets or any other property that is jointly used for (a) the collection, transportation andtreatment of stormwater or otherwise in the operation of the stormwater system and (b) theoperation of the System, including the Stormwater Lateral Facilities that connect surfacestormwater drains to Combined Sewer System Assets mains.

"Straddle Period" has the meaning specified in Section 7.01.

"Substantially Comparable Compensation and Benefits" means wages,healtlr/welfare, including holidays, vacation time, sick time, bereavement benefits and anypersonal days, as applicable, and retirement benefits that are, on an actuarial basis, substantiallycomparable to the aggregate value of Seller's then current wages, health/welfare plans andretirement benefit plans for current employees as of the Closing Date; provided however that anychanges to Seller's wages, health/welfare and retirement benefits shall only be as allowed for bySection 9.01.

"Supplies" means all lubricants, spare parts, fuel, chemicals, raw materials, and othersupplies and inventory, and all rights to warranties received from suppliers with respect to theforegoing, and related claims, credits, and rights of recovery with respect thereto.

"System" has the meaning specified in the recitals to this Agreement.

"Target Cash" means $38,340,626.

"Tax" or "Taxes" means all federal, state, local, foreign and other income, gross receipts,sales, use, production, ad valorem, transfer, franchise, regisfration, profits, license, lease, service,service use, withholding, payroll, employment, unemployment, estimated, excise, severance,environmental, stamp, occupation, premium, property (real or personal), real property gains,

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windfall profits, customs, duties or other taxes, fees, assessments or charges of any kindwhatsoever, together with any interest, additions or penalties with respect thereto and anyinterest in respect of such additions or penalties.

"Tax Return" means any return, declaration, form, report, claim, informational return(including all Forms 1099), election, disclosure, estimate or statement required to be filed withany Governmental Authority with respect to Taxes, including any schedule or attachment theretoor amendment thereof.

"Taxing Authority" means, with respect to any Tax or Tax Return, the GovernmentalAuthority that imposes such Tax or requires a Person to file such Tax Retum and the agency (ifany) charged with the collection of such Tax or the administration of such Tax Return, in eachcase, for such Governmental Authority.

"Threshold Amount" has the meaning specified in Section 8.05(a).

"Title Commitment" has the meaning specifred in Section 6.02(a).

"Title Company" has the meaning specified in Section 6.02(a).

"Title Objection ltems" has the meaning specihed in Section 6.02(a).

"Title Policy" has the meaning specified in Section 2.03.

"Transaction Expense Amount" means the sum of (a) the R&W Premium, plus (b) theaggregate amount of Transfer Taxes for which the Seller is responsible pursuant to Section 3.04being paid by Buyer at the Closing, if any.

"Transfer Taxes" has the meaning specified in Section 3.04.

"Transferred Personnel" has the meaning specified in Section 7.0a@).

"Transition Plan" has the meaning specified in Section 7.06(d).

"Trustees" has the meaning specified in Section 2.07(a).

"UCC Search" has the meaning specified in Section 6.03.

"flnion" means Teamsters Union Local229.

"Union Personnel" means Personnel who are members of the Union.

"Variance Adjustment" has the meaning specified in Section 7.07(d).

"WARII Act" has the meaning specified in Section 4.13(dxi).

"Wastewater Treatment Plant" means the wastewater treatment plant owned andoperated by the Seller located at Cedar Avenue and Breck Street, Scranton, PA, with a permitted

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average flow capacity of 20 million gallons per day, as authorized by PaDEP Water QualityManagement Part II Permit No. 3510401.

"Water System" has the meaning specihed in the Preamble of this Agreement.

"Withdrawal Liability" has the meaning specified in Section 2.07(a).

"Withdrawal Liability Escrow Account" has the meaning specified in Section 3.01(c).

"Withdrawal Liability Escrow Amount" has the meaning specified in Section 2.07(b).

"Withdrawal Liability Escrow Release Date" has the meaning specified in Section2.07(c).

"Withdrawal Liability Payoff Amount" has the meaning specified in Section 2.07(a).

ARTICLE II.

TERMS OF PURCHASE AND ASSUMPTION OF LIABILITIES

Section2.0l. Purchase and Sale of Acquired Assets. Subject to the terms andconditions set forth in this Agreement, at the Closing, Buyer shall purchase from the Seller andthe Seller shall sell, transfer, assign, convey and deliver to Buyer, free and clear of all Liensother than Permitted Liens, all of the Seller's right, title and interest in and to all assets,properties, business, goodwill and rights of the Seller of every kind and description, whethertangible or intangible, real, personal or mixed, wherever situated, in each case used in, held foruse in, or acquired or developed for use in, the System, or otherwise related to, or arising out of,the operation or conduct of the System (whether or not any such assets have any value foraccounting purposes or are carried or reflected on the books or financial statements of the Seller),but in all cases other than the Excluded Assets (the foregoing, collectively, the "AcquiredAssets"), including:

Other Defined Terms Defined in Section:

Act 11 Section 7.09(aXx)

Accounting Referee Section 3.02(c)(iii)

Disputed Amounts Section 3.O2(c)(iii)

DOJ Section 7.06(c)

Excluded Intellectual Property Section 2.02(d)

Interim Financial Statements Section 4.05

Post-Closing Adjustment Section 3.02(bxii)

Resolution Period Section 3.02(c)(ii)

Statement of Objections Section 3.02(c)(ii)

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(a) all real property and appurtenant interests, Easements, rights of way, propertyrights and privileges owned, licensed or leased by the Seller including the Real Property, leases

or licenses or other arrangements by or between the Seller and third Persons of the Real Propertyor other Acquired Assets (and any guaranties or other credit enhancement in connectiontherewith), and fixtures;

(b) all cash and cash equivalents, including accounts receivable;

(c) subject to Section 2.06, all rights in, to and under the Contracts listed on Schedule2.01(c) (including any Contracts which may be added to Schedule 2.01(c) by the Seller followingthe date hereof and prior to the Closing at the written request or with the prior written consent ofBuyer in accordance with Section 2.06(c)) (collectively, the "Assisned Contracts");

(d) all Supplies;

(e) all personal property and fixed assets, including all Equipment and Machineryowned, leased or licensed or otherwise used or usable by the Seller, and all system pipes,auxiliary equipment and plant equipment, other than the Retained Equipment and Machinery;

(0 all prepaid expenses and security deposits (including letters of credit and othernoncash deposits);

(g) all lntellectual Property owned, licensed or otherwise used by the Seller, otherthan the Excluded Intellectual Property (the "Intellectual Propertv Assets");

(h) all other intangible assets, including, the benefit of third party representations,warranties and guarantees, correspondence and the computer software and programs (whetherproprietary or not), including the intangible assets listed on Schedule 2.01(h);

(i) subject to Section 2.02G,), all Files and Records;

() subject to Section 2.06, all Licenses and Permits of or held by the Seller (to theextent transferrable to Buyer under applicable Law) (the "Acquired Authorizations"), includingall Licenses and Permits which are environmental permits, the Seller NPDES Permit, otheroperating permits and those items listed or described on Schedule 4.16 hereto;

(k) all rights to any action, suit, claim or proceeding of any nature available to orbeing pursued by the Seller in respect of the System or any other Acquired Asset, whetherarising by way of claim, counterclaim, right of recoupment or otherwise;

(l) the Combined Sewer System Assets; and

(-) all goodwill of the System.

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SELLER MAKES NOEXPRESS OR IMPLIED REPRESENTATTON OR WARRANTY OF ANY KINDWHATSOEVER, INCLUDING ANY REPRESENTATION AS TO THE PHYSICALCONDITION OR VALUE OF ANY OF THE ACQUIRED ASSETS OR THE SYSTEM, OR

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THE FUTURE PROFITABILITY OR FUTURE EARNINGS PEMORMANCE OF THEACQUIRED ASSETS OR THE SYSTEM OR ANY FUTURE RATEMAKING THAT MAYBE ALLOWED BY THE PAPUC FOR ANY OF THE ACQUIRED ASSETS. ALL IMPLIEDWARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSEARE EXPRESSLY EXCLUDED.

Section 2.02. Excluded Assets. Notrvithstanding anything herein to the contrary, theAcquired Assets shall not include the following assets, properties and rights of Seller (the

"MsdAsge!g"):

(a) the Stormwater System Assets;

(b) the Seller's telephone numbers and fax numbers;

(c) all Contracts other than the Assigned Contracts;

(d) all Intellectual Property set forth on Schedule 2.02(d) (the "Excluded IntellecProperty");

(e) the corporate seals, organizational documents, minute books, Tax Returns, booksof account or other records having to do with the organization of Seller, all employee-related oremployee benefit-related files or records, other than personnel files of Transferred Personnel, andany other books and records which Seller is prohibited from disclosing or transferring to Buyerunder applicable Law and is required by applicable Law to retain;

(f) all insurance policies of Seller and rights to applicable claims and proceedsthereunder, except as otherwise provided in Section 7.13 and Section 15.04;

(g) all Seller's Plans and trusts or other assets attributable thereto;

(h) the assets, properties and rights specifically set forth on Schedule 2.02(h);

(i) the Equipment and Machinery specifically set forth on Schedule 2.02(i) (the"Retained Equipment and Machinery");

0) the City NPDES Permit;

(k) any unamortized debt expenses;

(l) the accounts receivable set forth on Schedule 2.02(l) (the "Excluded AcgountsReceivable"), which Schedule shall be delivered by Buyer to the Seller not less than three (3)Business Days prior to the Closing Date, and which Excluded Accounts Receivable shall bewritten off by the Seller concurrently with the Closing, and all Liens related thereto;

(-) all Liens held by the Seller with respect to accounts of customers of the Systemwhich are not transferrable to Buyer under applicable Law, other than Liens relating to theExcluded Accounts Receivable:

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(n) the rights which accrue or will accrue to the Seller under this Agreement and theRelated Agreements;

(o) the MS4 System Real Property, including the MS4 System Real Property listed onSchedule 2.02(o); and

(p) all privileged materials, documents and records of the Seller related solely to thesale of the System, including all such privileged materials, documents and records related solelyto the negotiation, execution, delivery, or performance of this Agreement,

Section 2.03. Convevance of Title. At the Closing, the Seller shall (i) sell, transfer,assign, convey and deliver to Buyer good and valid title to the Acquired Assets (other thanOwned Real Property, Leased Real Property and Easements), (ii) grant, bargain, sell, transfer,assign and convey to Buyer all of the Seller's right, title and interest in and to a valid fee simpleestate in the Owned Real Property included in the Acquired Assets, (iii) assign, transfer andconvey to Buyer all of the Seller's right, title and interest in and to a valid leasehold estate in theLeased Real Property included in the Acquired Assets, and (iv) assign, transfer and convey toBuyer all of the Seller's right, title and interest in and to any and all Easements included in theAcquired Assets, including all Easements that are necessary for or used in connection with theoperation of the System or to provide continuous and unimpeded rights of way for the CombinedSewer System Assets (including access thereto), in each case free and clear of all Liens, otherthan Permitted Liens. The Acquired Assets shall be conveyed by special warranty deeds, bills ofsale, assignments and other instruments of transfer or conveyance reasonably satisfactory toBuyer and the Title Company. Title to the Real Property shall be insurable by the TitleCompany, at regular rates, as a good and marketable title, free and clear of all Liens andexceptions to coverage, except for Permitted Liens and otherwise as provided for in Section6.02(a) below, pursuant to an owner's policy of title insurance on the American Land TitleAssociation's ("ALTA") Owner's Form 2006 (the "Title Policv").

Section 2.04. Assumption of Liabilities.

(a) On the terms and subject to the conditions set forth in this Agreement andexcluding the Excluded Liabilities, Buyer shall assume and agrees to pay, perform and dischargewhen due, only the following liabilities and obligations of the Seller and no others (the

"45sumed._@ilities."): (l) liabilities and obligations arising under the Consent Decree (whetherarising from, related to, or based on events or circumstances occurring prior to, on or after theClosing Date, and including the Seller's obligations and covenants set forth in the ConsentDecree regarding implementation of the CSO Control Measures to be performed on or after theClosing) but excluding any Environmental Liabilities arising from the non-compliance eventsand conditions described in Schedule 4.14, (2) in the event that Buyer and the Union have agreedprior to the Closing to enter into the Amended CBA effective as of immediately following theClosing, liabilities and obligations under the Amended CBA Qtrovided, that for the avoidance ofdoubt, in no event shall the Assumed Liabilities include any liabilities or obligations with respectto the Accrued PTO, which shall be cashed-out and paid in full to the applicable UnionPersonnel by the Seller in accordance with Section 7.04(c) (and in any event shall constitute an

Excluded Liability)), (3) all liabilities and obligations related to the System or the AcquiredAssets to the extent arising from, related to, or based on events or circumstances occurring after

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the Closing , (4) all liabilities and obligations of the Seller arising under or to be performed underthe executory portions of the Assigned Contracts after the Closing; provided, however, thatBuyer will not assume or be responsible for any liabilities or obligations that arise from theSeller's breach of or default under any Assigned Contracts on or prior to the Closing Date, all ofwhich liabilities and obligations constitute Excluded Liabilities, and (5) in the event that Buyerelects to assume any portion of the Outstanding Indebtedness at the Closing pursuant to Section3.01, the Seller's obligations relating to such portion of the Outstanding Indebtedness so

assumed by Buyer (but only to the extent of the Outstanding Indebtedness actually assumed byBuyer).

(b) Buyer shall not assume or be liable to pay any liabilities or obligations relating tothe Excluded Liabilities or any other liabilities or obligations that are not Assumed Liabilities.

Section 2.05. Subsequent Documentation: Further Acts. At any time and from timeto time after the Closing Date, the Seller shall, upon the request of Buyer, and Buyer shall, uponthe request of the Seller, at the cost of requesting Party, promptly execute, acknowledge anddeliver, or cause to be executed, acknowledged and delivered, such other instruments ofconveyance and transfer and other documents, and perform or cause to be performed such fuitheracts, as may be reasonably required to evidence or effectuate, or more fully evidence oreffectuate, (a) the sale, transfer, assignment, conveyance and delivery hereunder of the AcquiredAssets to Buyer, (b) the assumption by Buyer of any of the Assumed Liabilities, and (c) thevesting in Buyer of all right, title and interest in the Acquired Assets and the System as providedherein.

Section 2.06. Certain Transfers: Assisnment of Contracts.

(a) Notwithstanding anything to the contrary in this Agreement, and subject to theprovisions of this Section 2.06(a) and Section 2.06(b), to the extent that the sale, transfer,assignment, conveyance and delivery, or attempted sale, transfer, assignment, conveyance and

delivery, to Buyer of any Assigned Contract or other Acquired Asset would result in a violationof applicable Law, or would require the consent, authorization, approval or waiver of any Person(other than the Parties hereto), including any Governmental Authority, and such consent,authorization, approval or waiver shall not have been obtained prior to the Closing, thisAgreement shall not constitute a sale, transfer, assignment, conveyance and delivery, or an

attempted sale, transfer, assignment, conveyance and delivery, thereof (any such Acquired Asset,a''@'').Foraperiodofsix(6)monthsfollowingtheClosing,theSe1lerandBuyer shall use commercially reasonable efforts (at the Seller's cost and expense), and shallcooperate with each other, to obtain any such required consent, authorization, approval orwaiver, or any release, substitution, novation or amendment required to sell, transfer, assign,

convey and deliver any such Nonassignable Asset to Buyer; provided, however, that in no eventshall Buyer be required to pay any consideration therefor. Once such consent, authorization,approval, waiver, release, substitution or amendment is obtained, the Seller shall sell, transfer,assign, convey and deliver to Buyer the relevant Nonassignable Asset to which such consent,authorization, approval, waiver, release, substitution or amendment relates for no additionalconsideration, and such Nonassignable Asset shall thereafter constitute and be deemed an

"Acquired Asset" for all purposes hereunder . Any applicable sales, transfer and other similar

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Taxes in connection with such sale, transfer, assignment, conveyance and delivery shall be paidby Buyer and Seller pursuant to the provisions of Section 3.04(a).

(b) Until such time as a Nonassignable Asset is transferred to Buyer pursuant to thisSection 2.06, Buyer and the Seller shall cooperate in any commercially reasonable andeconomically feasible arrangements (such as subleasing, sublicensing or subcontracting) toprovide to the Parties the economic and, to the extent permitted under applicable Law,operational equivalent of the transfer of such Nonassignable Asset to Buyer at the Closing andthe performance by Buyer of its obligations with respect thereto, and to the extent that the Sellertransfers and turns over the economic and beneficial rights with respect to each suchNonassignable Asset, Buyer shall, to such extent and to the extent permitted under applicableLaw and the terms of any applicable Contract that constitutes a Nonassignable Asset, as agent orsubcontractor for the Seller, pay, perform and discharge the liabilities and obligations of theSeller thereunder from and after the Closing Date, but only to the extent that such liabilities andobligations would constitute Assumed Liabilities if the applicable consent or approval had beenobtained on or prior to the Closing Date and such Nonassignable Asset had been assigned toBuyer at Closing. To the extent permitted under applicable Law, the Seller shall, at Buyer'sexpense, hold in trust for and pay to Buyer promptly upon receipt thereof, such NonassignableAsset and all income, proceeds and other monies received by the Seller with respect to suchNonassignable Asset in connection with the arrangements under this Section 2.06.

(c) If, following the date hereof and prior to the Closing, Buyer identifies anyContract to which the Seller is a party which is not set forth on Schedule 2.01(c) as of the datehereof and Buyer desires for such Contract to be included in the Acquired Assets as an AssignedContract, and Buyer reasonably determines that such Contract is used in, held for use in, oracquired or developed for use in, the System, or otherwise related to, or arising out of, theoperation or conduct of the System, Buyer shall give notice of such determination to the Sellerand, unless the Seller disagrees in good faith with Buyer's determination that such Contract isused in, held for use in, or acquired or developed for use in, the System, or otherwise related to,or arising out of, the operation or conduct of the System (in which case the Seller shall giveBuyer notice of such disagreement and the Parties shall work together in good faith to resolvesuch dispute), the Seller shall, promptly following receipt of such notice, deliver to Buyer anupdated Schedule 2.01(c) reflecting the addition of such Contract, and such Contract shallthereafter constitute and be deemed an "Assigned Contract" for all purposes hereunder(including, for the avoidance of doubt, the provisions of Section 2.06(a) and Section 2.06(b) tothe extent applicable to such Contract from and after the Closing).

(d) In the event that, during the twelve (12) month period following the Closing,Buyer identifies any Contract to which the Seller was a party as of the Closing and which wasnot set forth on Schedule 2.01(c) (as may be updated pursuant to Section 2.06(c)) and (i) Buyerdesires for such Contract to be assigned to Buyer and deemed an Assigned Contract as providedin this Section 2.06(d), and (ii) Buyer reasonably determines such Contract was, prior to theClosing, used in, held for use in, or acquired or developed for use in, the System, or otherwiserelated to, or arising out of, the operation or conduct of the System, unless the Seller disagrees ingood faith with Buyer's determination that such Contract was not, as of or prior to the Closing,used in, held for use in, or acquired or developed for use in, the System, or otherwise related to,or arising out of, the operation or conduct of the System (in which case the Seller shall give

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Buyer notice of such disagreement and the Parties shall work together in good faith to resolvesuch dispute) and Seller has not otherwise terminated such Contract on or after Closing, theSeller shall, promptly following Buyer's written request therefor, execute, acknowledge anddeliver, or cause to be executed, acknowledged and delivered, such other instruments ofconveyance and transfer and other documents, and perform or cause to be performed such furtheracts, as may be reasonably required to evidence or effectuate, or more fully evidence oreffectuate the assignment of such Contract to Buyer for no additional consideration, and uponsuch assignment, such Contract shall be deemed an "Assigned Conffact" for all purposeshereunder. From the time that Buyer delivers written notice to the Seller in accordance with thisSection 2.06(d) requesting that the Seller assign or cause the assignment of such Contract toBuyer until such Contract is assigned to Buyer, the provisions of Section 2.06(a) and Section2.06(b) shall apply to such Contract as a Nonassignable Asset.

(e) For the avoidance of doubt, nothing contained in this Section 2.06 shall beapplicable to the Easements or other matters with respect to the Real Property as of andfollowing the Closing (including the transfer thereof following the Closing), which shall begoverned exclusively by the terms of Article VI.

Section 2.07. Withdrawal Liabilitv.

(a) Following the date hereof, and except as otherwise provided in Section 2.07(9)below, the Seller shall, and Buyer shall reasonably cooperate with the Seller to, request from thetrustees of the Multiemployer Plan (the "Trustees") consent and agreement of the Trustees to thepayment of an amount at Closing in full and final satisfaction of the withdrawal liability thatwould be assessed against the Seller for withdrawal from the Multiemployer Plan as of theClosing (the "Withdrawal Liabilitv"). In the event that the Seller obtains the written consent ofthe Trustees, on terms reasonably acceptable to Buyer, to the payment at the Closing of anaggregate amount in full and final satisfaction of the Withdrawal Liability and the Seller'sobligations with respect to the Multiemployer Plan (the "WitMrawal Liabilily P "),(i) the Seller shall deliver written evidence of such consent to Buyer prior to the Closing Date,which written evidence include instructions for the payment by Buyer at the Closing on behalf ofthe Seller, and shall otherwise be in form and substance reasonably acceptable to Buyer, and, (ii)subject to the foregoing clause (i), Buyer shall pay the Withdrawal Liability Payoff Amount onbehalf of the Seller out of the proceeds of the sale at the Closing pursuant to Section 3.01(c).

(b) In the event that the Seller is unable to obtain the consent of the Trustees to thepayment at Closing of the amount required to fully pay, satisfr and discharge the entire amountof the Withdrawal Liability as described in Section2.07(a), then (i) the Seller and Buyer shall,each acting reasonably and in good faith (and taking into account the most recent estimateobtained by the Trustees of the amount required to fully and finally satisfy the WithdrawalLiability and the Seller's obligations with respect to the Multiemployer Plan as of a datereasonably proximate to the Closing Date), agree in writing prior to the Closing Date, on anestimate of the amount required to fully pay, satisfy and discharge the entire amount of theWithdrawal Liability (such amount, the "Estimated Withdrawal L "), and (ii)Buyer shall, at the Closing, deliver to the Escrow Agent an amount equal to one hundred and tenpercent (110%) of the Estimated Withdrawal Liability Amount (the "Withdrawal Liabilit)'Escrow Amount") pursuant to Section 3.01(c).

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(c) The Escrow Agent shall hold the Withdrawal Liability Escrow Amount in theWithdrawal Liability Escrow Account until the date on which Buyer and the Seller, after havingobtained the written consent of the Trustees to the payment of an aggregate amount in full andfinal satisfaction of the Withdrawal Liability and the Seller's obligations with respect to theMultiemployer Plan, on terms reasonably acceptable to Buyer, jointly instruct the Escrow Agentin writing to disburse the Withdrawal Liability Escrow Amount as provided herein (such date,the "Withdrawal Liability Escrow Release Date").

(d) On the Withdrawal Liability Escrow Release Date, the Seller and Buyer shalljointly instruct the Escrow Agent in writing to make payment by wire transfer of immediatelyavailable funds from the Withdrawal Liability Escrow Account directly to the account oraccounts specified in the written consent of the Trustees, in the amount (such amount, the "Bqst:Closine Withdrawal Liabilitv Payoff Amount") equal to the amount set forth in the writtenconsent of the Trustees as described in Section 2.07(c).

(e) If the Post-Closing Withdrawal Liability Payoff Amount is an amount thatexceeds the aggregate amount of funds in the Withdrawal Liability Escrow Account on theWithdrawal Liability Escrow Release Date, the Seller shall, concurrently with the disbursementby the Escrow Agent of the entire balance of the Withdrawal Liability Escrow Account, pay (bywire transfer of immediately available funds) to the account or accounts speciflred in the writtenconsent of the Trustees, the amount of such excess.

(f) If the Post-Closing Withdrawal Liability Payoff Amount is an amount that is less

than the aggregate amount of funds in the Withdrawal Liability Escrow Account on theWithdrawal Liability Escrow Release Date, the Seller and Buyer shall jointly instruct the EscrowAgent in writing to make payment, by wire transfer of immediately available funds from theWithdrawal Liability Escrow Account to the Seller in an amount, if any, of the balance of anyfunds remaining in the Withdrawal Liability Escrow Account immediately following thepayment of the Post-Closing Withdrawal Liability Payoff Amount.

(g) Notwithstanding the foregoing provisions of this Section 2.07, following theEffective Date, it is agreed that the Seller and Buyer shall enter into good faith discussionssurrounding the possible application of the asset sale exception pursuant to Section 4204 ofEzuSA as an alternative to the payment of the Withdrawal Liability as provided in the foregoingprovisions of this Section 2.07, provided that the Parties acknowledge and agree that unless and

only in the event that the Seller and Buyer agree in writing prior to the Closing Date to mutuallysatisfactory terms regarding the implementation of the asset sale exception pursuant toSection 4204 of ERISA in connection with the transactions contemplated by this Agreement, theforegoing provisions of this Section 2.07 shall be applicable.

ARTICLE III.

PURCHASE PRICE

Section 3.01. Purchase Price. The purchase price for the sale, transfer, assignment,conveyance and delivery hereunder of the Acquired Assets to Buyer hereunder shall be OneHundred Ninety Five Million Dollars ($195,000,000) (the "Base Amount"), which, subject to

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any adjustment pursuant to Section 3.02 (the "Purchase Price") shall be paid as follows at

Closing:

(a) Buyer shall (i) pay in full (in the case of Outstanding Indebtedness then subject toprepayment or redemption) or make provision for the payment in fuIl so as to effect a legaldefeasance of (in the case of Outstanding Indebtedness not then subject to prepayment orredemption), on behalf of the Seller, the total amount of Outstanding Indebtedness as of theClosing Effective Time (the "Closins Outstanding Indebtedness Amount"), less any amount ofthe Outstanding Indebtedness actually assumed by Buyer pursuant to clause (ii) of this Section3.01(a), and (ii) subject to Section 7.ll and at Buyer's sole and absolute discretion, assume suchportion of the Outstanding Indebtedness (if any) as Buyer, in its sole and absolute discretion,elects to assume and which may be lawfully assigned to and assumed by Buyer pursuant toapplicable Law and the terms of the Contracts governing the Outstanding Indebtedness, subjectto obtaining the written release of the Seller and the City from all obligations thereunder in suchform and terms reasonably acceptable to the Seller.

(b) Buyer shall pay to the Escrow Agent an amount equal to Five Million Dollars($5,000,000) (the "Escrow Amount"), to be held by the Escrow Agent pursuant to the terms ofthe Escrow Agreement in a segregated account (the "Escrow Account") for a period of up to theEscrow Release Date, to be utilized to fund any payments required to be made in connectionwith any claim made pursuant to Article VIII;

(c) subject to Section 2.07,Buyer shall pay (i) to the account or accounts specified inthe written consent of the Trustees as described in Section 2.07, on behalf of the Seller, theWithdrawal Liability Payoff Amount, or (ii) to the Escrow Agent, an amount equal to theWithdrawal Liability Escrow Amount, to be held by the Escrow Agent pursuant to the terms ofthe Escrow Agreement in a segregated account (the "Withdrawal Liabili ") fora period of up to the Withdrawal Liability Escrow Release Date, to be utilized as provided inSection 2.07; and

(d) Buyer shall pay to the Seller by wire transfer of immediately available funds anamount equal to the Base Amount (1) plus the Estimated Closing Cash Increase (if any) or minusthe Estimated Closing Cash Reduction (if any), (ii) minus the Closing Outstanding IndebtednessAmount, (iii) minus the Escrow Amount, (iv) minus (x) the Withdrawal Liability Payoff Amountor (y) the Withdrawal Liability Escrow Amount, as the case may be, and (v) minus theTransaction Expense Amount, to one or more accounts that the Seller designates in writing andprovides to Buyer at least three (3) Business Days prior to the Closing Date.

Section 3.02. Purchase Price Adiustment.

(a) Estimated Closine Cash. No less than three (3) Business Days prior to theClosing Date, the Seller shall prepare a statement (the "Estimated Closins Cash Statement")setting forth the estimated aggregate amount of the Closing Cash Balance, as determined in goodfaith by the Seller (the "Estimated Closing Cash Balance") and prepared and calculatedaccordance with the manner of determination and calculation (as applicable), using the same lineitems, accounting principles, practices, procedures, policies and methods (with consistentclassifications, judgments, elections, inclusions, exclusions and valuation and estimation

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methodologies) used and applied in preparing the Interim Financial Statements, and whichEstimated Closing Cash Statement shall set forth the actual amount paid by the Seller prior to theClosing to cash-out the Accrued PTO in accordance with Section7.04(c), and the portion thereofattributable to the cash-out of the Accrued Sick Bank. In the event that the Estimated ClosingCash Balance exceeds the Target Cash, then the Purchase Price will be increased by the amountof such difference and such increase shall be paid to the Seller at Closing in the manner providedin Section 3.01 above (the amount of any such increase, the "Estimated Closinq C ").In the event that the Target Cash exceeds the Estimated Closing Cash Balance, then the Purchase

Price (and the amount payable by Buyer at Closing) will be reduced by the amount of suchdifference (the amount of any such reduction, the "Estimated Closins "). ThePurchase Price, as adjusted pursuant to this Section 3.02(a), shall be subject to further adjustmentfollowing the Closing as provided in Section 3.02(b).

(b) Post-Closine Adjustments.

(i) Within ninety (90) days after the Closing Date, Buyer shall prepare and

deliver to the Seller a statement (the "Closine Cash Statement") setting forth Buyer'sgood faith calculation of the Closing Cash Balance, prepared and calculated accordancewith the manner of determination and calculation (as applicable), using the same lineitems, accounting principles, practices, procedures, policies and methods (with consistentclassifications, judgments, elections, inclusions, exclusions and valuation and estimationmethodologies) used and applied in preparing the Interim Financial Statements.

(ii) The "Post-Closing Adjustment" shall be an amount equal to the EstimatedClosing Cash Balance minus the Closing Cash Balance, as frnally determined pursuant toSection 3.02(c). If the Post-Closing Adjustment is a positive number, Buyer shall pay tothe Seller an amount equal to the Post-Closing Adjustment in accordance with Section3.02(c)(vi) below. If the Post-Closing Adjustrnent is a negative number, the Seller shallpay to Buyer an amount equal to the Post-Closing Adjustment (expressed as a positivenumber) in accordance with Section 3.02(cXvi) below.

(c) Examination and Review.

(D After receipt of the Closing Cash Statement, the Seller shall have forty-five (45) days (the "Miew Period,") to review the Closing Cash Statement. During theReview Period, the Seller and the Seller's Representatives shall have reasonable access

(during normal business hours upon reasonable advance notice) to, including by beingfurnished copies of, such frnancial information (to the extent in Buyer's or itsRepresentatives' possession) and documents to the extent used in or directly relating tothe preparation of the Closing Cash Statement as the Seller may reasonably request forthe purpose of reviewing the Closing Cash Statement and to prepare a Statement ofObjections.

(ii) The Seller may object to the Closing Cash Statement by delivering toBuyer, no later than the last day of the Review Period, a written statement setting forththe Seller's objections in reasonable detail, indicating each disputed item or amount andthe basis for the Seller's disagreement therewith (the "Statement of Objections");

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provided that the Seller's grounds for any such objections shall be limited to fixingmanifest effors and omissions, including mathematical errors or omissions, in Buyer'scalculations and claims that the items in dispute were not calculated and determined inaccordance with the accounting principles and procedures set forth in this Agreement. Ifthe Seller fails to deliver the Statement of Objections before the expiration of the ReviewPeriod, the Closing Cash Statement (as prepared by Buyer) and the Post-ClosingAdjustment reflected in the Closing Cash Statement shall be deemed to have beenaccepted by the Seller and shall be deemed final and binding on the Parties for allpurposes hereunder. If the Seller delivers the Statement of Objections before theexpiration of the Review Period, Buyer and the Seller shall negotiate in good faith toresolve such objections within thirty (30) days after the delivery of the Statement ofObjections (the "Resolution Period"), and, if each disputed item properly included in theStatement of Objections is resolved in writing within the Resolution Period, the Post-Closing Adjustment and the Closing Cash Statement, with such changes as are agreed inwriting by Buyer and the Seller during the Resolution Period, shall be frnal and bindingupon the Parties for all purposes hereunder.

(iii) If the Seller and Buyer fail to reach an agreement with respect to all of thematters set forth in the Statement of Objections before expiration of the ResolutionPeriod, then any amounts remaining in dispute ("Disputed Amounts") shall be submittedfor resolution to RSM US LLP or such other regionally recognized firm of independentcertified public accountants mutually agreed upon by the Parties other than theaccountants of Buyer or the Seller or their Affiliates (the "Accounting Referee") who,acting as experts and not arbitrators, shall resolve the Disputed Amounts only and makeany adjustments to the Closing Cash Statement and the Post-Closing Adjustment toreflect the resolution of such Disputed Amounts. The Accounting Referee shall onlydecide the specific Disputed Amount, and the scope of the disputes to be resolved bysuch Accounting Referee shall be limited to fixing mathematical errors and determiningwhether the items in dispute were calculated and determined in accordance with theaccounting principles and procedures set forth in this Agreement, and the AccountingReferee's decision for each Disputed Amount must be within the range of valuesassigned to each such item in the Closing Cash Statement and the Statement ofObjections, respectively.

(iv) All fees and costs of the Accounting Referee will be borne pro rata byBuyer and the Seller in proportion to the difference between the Accounting Referee's

determination of Post-Closing Adjustment and the Seller's and Buyer's determination ofsuch Post-Closing Adjustment. For example, if the Seller's determination differs by$20,000 from the Accounting Referee's determination, but Buyer's determination onlydiffers by $5,000, the Seller will bear 20125 (or 80%) of such fees and costs and Buyerwill bear 5125 (or 20%) of such fees and costs.

(v) The Accounting Referee shall make a determination as soon as practicablewithin thirty (30) days (or such other time as the Parties shall agree in writing) after theirengagement, and their resolution of the Disputed Amounts and their adjustments to theClosing Cash Statement and the Post-Closing Adjustment shall be conclusive and bindingupon the Parties.

",1

(vi) Payment of the Post-Closing Adjustment shall (A) be due (x) within five(5) Business Days following the expiration of the Review Period (if the Seller does nottimely deliver a Statement of Objections) or (y) if the Seller timely delivers a Statementof Objections, then within five (5) Business Days following the earlier to occur of (1)written agreement of the Parties with respect to the resolution of all items in dispute, or(2) final resolution by the Accounting Referee; and (B) be paid by wire transfer ofimmediately available funds to such accounts as are directed in writing by Buyer or theSeller, as the case may be.

(d) Any payments made pursuant to this Section 3.02 shall be treated as an

adjustment to the Purchase Price by the Parties for Tax purposes, unless otherwise required byapplicable Law.

(e) Any payment or distribution to customers of the Variance Adjustment madepursuant to Section 7.07 shall be treated as an adjustment to the Purchase Price by the Parties forTax purposes and any other purposes under applicable Law, unless otherwise required byapplicable Law.

Section 3.03. Allocation of the Purchase Price. Buyer and the Seller agree that thePurchase Price (which for purposes of this Section 3.03 shall include any liabilities required to betreated as part of the Purchase Price for U.S. federal income Tax purposes), as may be adjustedpursuant to Section 3.02, shall be allocated among the Acquired Assets in accordance with theallocation reflected in a schedule prepared by Buyer in accordance with this Section 3.03 (the"Allocation Schedule") as required by the Code. Within sixty (60) days following the finaldetermination of the Purchase Price pursuant to Section 3.02, Buyer shall deliver to the Seller adraft of the Allocation Schedule setting forth Buyer's proposed allocation for the Seller's review.The Seller shall have the right to review and reasonably comment upon Buyer's proposedAllocation Schedule, provided, that (a) such proposed Allocation Schedule shall be deemed

approved by the Seller and shall be final and binding upon the Parties unless the Seller provideswritten notice of the Seller's comments to one or more items reflected in the proposed AllocationSchedule within twenty (20) Business Days after delivery of the proposed Allocation Schedule tothe Seller, and (b) upon receipt of any such written comments from the Seller with respect to theproposed Allocation Schedule, Buyer may make such adjustments or revisions to the proposedAllocation Schedule based on the Seller's comments as Buyer determines in good faith to benecessary and appropiate, provided further, that Buyer shall have no obligation to make anysuch adjustments or revisions absent manifest error. The Parties shall adhere to the AllocationSchedule (as finally determined pursuant to this Section 3.03) for all purposes relevant to thecalculation of federal or state Taxes, and will report the transactions contemplated herein in a

manner consistent with such Allocation Schedule. Except as required by applicable Law, Buyerand the Seller shall not take any position on their respective Tax Returns that is inconsistent withthe Allocation Schedule.

Section 3.04. Transfer Taxes: Bulk Sales.

(a) Any and all deed stamps or transfer Taxes which may be due the Commonwealthof Pennsylvania or any political subdivision in connection with the sale, transfer, assignment,conveyance and delivery hereunder of the Acquired Assets to Buyer (collectively, "Trangfer

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Taxes"), shall, except as otherwise provided below, be borne seventy five percent (75%) byBuyer and twenty frve percent (25%) by the Seller, and in the event that Buyer pays the fullamount of any such Transfer Taxes following the Closing, the Seller shall promptly, and in anyevent within five (5) Business Days, following Buyer's request therefor, pay to Buyer an amountequal to twenty five percent (25%) of any such Transfer Taxes so paid by Buyer, p rovided, that,the Seller's obligation to pay such Transfer Taxes hereunder is limited to an aggregate amount of$100,562.28 and in no event shall the Seller be required to pay any Transfer Taxes in excess ofsuch amount. Without limiting the foregoing, in the event that Buyer is required underapplicable Law, or elects in its sole discretion, to pay any Transfer Taxes at the Closing, thenBuyer shall give written notice to the Seller prior to the Closing Date of such payment, whichnotice shall include the aggregate amount of such Transfer Taxes being paid at Closing and theportion for which the Seller is responsible (which, for the avoidance of doubt, shall be the lesser

of (x) twenty five percent (25o/o) of such Transfer Taxes being paid at the Closing or (y)$100,562.28), and upon Buyer's delivery of such notice, the Seller's portion of such TransferTaxes shall be included in the Transaction Expense Amount for purposes of Section 3.01(d).The terms hereof shall survive Closing.

(b) The Parties hereby waive compliance with the provisions of any bulk sales, bulktransfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to thesale of any or all of the Acquired Assets to Buyer.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller makes only the representations and warranties which are set forth in thisArticle IV. Any matter, information or item disclosed on any particular Schedule delivered bythe Seller which is numbered to correspond to the representations and warranties contained inthis Article IV shall be deemed to have been disclosed in response to such other representationsor warranties in this Article IV in respect of which such disclosure is reasonably apparent on itsface notwithstanding the omission of an appropriate cross-reference.

As a material inducement to Buyer to enter into this Agreement and to consummate thetransactions contemplated hereby, the Seller represents and warrants to Buyer, as of the date

hereof and as of the Closing Date, as follows:

Section4.0l. Existence and Power. The Seller is a municipal authority under theMunicipality Authorities Act, as enacted by the Commonwealth of Pennsylvania, as amended,and in good standing under the Laws of the Commonwealth of Pennsylvania. The Seller has allrequisite power and authority to own, lease and operate the Acquired Assets and the System, tosell and transfer in the manner described herein the Acquired Assets to Buyer and to enter into,execute and deliver this Agreement and the Related Agreements and perform its obligationshereunder and thereunder.

Section 4.02. Authorization and Validitv of Aereement. The execution and deliveryof this Agreement and the Related Agreements by the Seller and the consummation by the Sellerof the transactions contemplated by this Agreement and the Related Agreements have been duly

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and validly authorized by all necessary action on the part of the Seller, and no other proceedingson the part of the Seller are necessary to authorize the execution, delivery and performance ofthis Agreement or any applicable Related Agreement. This Agreement has been duly executedand delivered by the Seller and constitutes, and the Related Agreements, when executed anddelivered, will constitute legal, valid and binding obligations of the Seller, enforceable againstthe Seller in accordance with their respective terms and conditions, except to the extent thatenforceability may be limited by applicable bankruptcy, insolvency, reorganization or otherLaws affecting the enforcement of creditors'rights generally. A true, correct and complete copyof the authorizing resolutions duly adopted by the Authority Board is attached hereto as

Exhibit D, which resolutions have not been, and as of the Closing will not have been, revoked,rescinded or amended.

Section 4.03. No Conflict or Violation. Except as set forth on Schedule 4.03, theexecution, delivery and performance of this Agreement and the Related Agreements by the Sellerdo not and shall not: (a) violate or conflict with, or result in a breach or constitute a defaultunder, any provision of the charter, bylaws or other similar organizational or governingdocuments of the Seller, (b) violate, conflict with, result in a breach or constitute a default underany provision of, or require any Governmental Approval or any notice, filing, consent,authorization or approval under, any Licenses and Permits held by the Seller or any applicableLaw of any Governmental Authority having jurisdiction over the Seller, the System or any of theAcquired Assets, or the City, the Borough, or their respective assets or properties, (c) violate,conflict with, or result in a breach of or constitute (with due notice or lapse of time or both) adefault under any provision of, or require any notice, filing, consent, authorization or approvalunder, or give rise to any rights of termination, amendment, modification, acceleration orcancellation of or loss of any benefit under, or result in the creation of any Lien on any of theAcquired Assets or any other material assets or properties of Seller (other than Permitted Liens)pursuant to, any Contract to which the Seller is a party, or by which any of the Acquired Assetsor any other material assets and properties of the Seller are bound or subject, or (d) result in theimposition of any Liens or other restrictions on the System or any of the Acquired Assets, otherthan Permiffed Liens, except, in the case of the foregoing clauses (b), (c) and (d), where suchviolation, conflict, breach, default, requirement, or resulting Lien or other restriction would notreasonably be expected to have a material and adverse effect on the System or any of theAcquired Assets (or Buyer's ownership or operation thereof following the Closing) or materiallyimpair the Seller's ability to timely consummate the transactions contemplated hereby or performits obligations hereunder.

Section 4.04. Consents and Approvals. Schedule 4.04 sets forth a list of each consent,waiver, authorization or approval of any Governmental Authority, or of any other Person, andeach declaration or notice to or filing or registration with any Govemmental Authority requiredto be obtained, given or made by the Seller in connection with the execution and delivery of thisAgreement and each Related Agreement by the Seller and the performance by the Seller of itsobligations hereunder and thereunder.

Section 4.05. Financial Statements.

(a) Schedule 4.05 sets forth the following financial statements of the Seller(collectively, the "Financial Statements"): (i) the audited financial statements of the Seller for

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the fiscal years ended March 31,2015, March 31,2014 and March 31,2013, which consist of thestatements of net position and statements of revenues, expenses and changes in net position forthe fiscal years then ended (the "Audited Financial Statements"), and (ii) the unaudited balancesheet as of January 31,2016 and the related unaudited income statement for the ten-month periodthen ended (the "Interim Financial Statements"). Except as set forth on Schedule 4.05, theFinancial Statements have been prepared and presented in accordance with the applicablestandards for financial reporting of the GASB, consistently applied, and fairly present, in allmaterial respects, the frnancial condition and results of operations of the Seller as of therespective dates of, and for the periods referred to in, the Financial Statements, subject in thecase of the Interim Financial Statements, to the absence of foofirote disclosures and normal year-end adjustments which, if presented, would not be material in amount or differ materially fromthose presented in the Audited Financial Statements.

(b) The Seller has established and maintains, adheres to and enforces a system ofintemal accounting controls which are, in all material respects, effective in providing assuranceregarding the reliability of financial reporting and the preparation of financial statements(including the Financial Statements) in accordance with GASB, including policies andprocedures that (i) require the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Seller and the System, (ii)provide assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with GASB, and that receipts and expenditures of the Seller and theSystem are being made only in accordance with appropriate authorizations of management and(iii) provide assurance regarding prevention or timely detection of unauthorized acquisition, useor disposition of the assets of the Seller and the System.

(c) There are no liabilities, obligations, indebtedness, debts, or commitments of anynature whatsoever, whether asserted or unasserted, known or unknown, absolute or contingent,accrued or unaccrued, matured or unmatured or otherwise, of the Seller or the System, other thanliabilities (i) adequately reflected in or reserved against in the Interim Financial Statements,(ii) incuned in the ordinary course of business since the date of the Interim Financial Statementsconsistent with past practice and which are not, individually or in the aggregate material (inamount or otherwise), (iii) incurred under Contracts to which the Seller is a party on theEffective Date with respect to the performance by the Seller of its obligations thereunder in theordinary course of business (other than any liabilities or obligations that arise from the Seller'sbreach of, or default under, any such Contracts), (iv) related to undrawn amounts underOutstanding Indebtedness or (v) disclosed in Schedule 4.05(c).

Section 4.06. Absence of Certain Changes or Events. Except as reflected in theFinancial Statements, or as set forth on Schedule 4.06, since March 31, 2015, (x) the Seller hasoperated the System in the ordinary course of business consistent with past practice, and (y) therehas not been any:

(a) change, event or condition (whether or not covered by insurance) that has had, orwould reasonably be expected to have, a Material Adverse Effect;

(b) (i) increase in the compensation payable or to become payable to any Personnel,except for normal periodic increases in the ordinary course of business consistent with past

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practice or obligations of the Seller pursuant to the terms of the Collective BargainingAgreement, (ii) bonus, incentive compensation, service award or other like benefit granted, madeor accrued, contingently or otherwise, for or to the credit of any Personnel, (iii) employeewelfare, pension, retirement, profit sharing, or similar payment or arrangement made or agreed toby the Seller for any Personnel, or (iv) entry by the Seller into any employment agreement orsimilar Contract with any Personnel;

(c) establishment of, addition or amendment to or modification of any employeebenefit plan, arrangement, or practice described in Schedules 4.12(b), (c), or (d);

(d) sale, assignment or transfer of any assets or properties of the Seller used in, ornecessary or important to, the operation of the System, except for the disposal of obsolete assets

in the ordinary course of business;

(e) failure to repay or discharge any material obligation or liability of the Seller;

(0 failure to operate the System in the ordinary course or to preserve the Systemintact;

(g) material damage, destruction or loss involving or affecting the Acquired Assets orthe System, or any material intemrption in use of any Acquired Assets, in either case whether ornot covered by insurance;

(h) action to incur, increase or modify any indebtedness, obligations or liabilities withrespect to the System or the Acquired Assets (including any Assumed Liabilities) or that subjectany Acquired Assets to any Liens, other than Permitted Liens;

(i) agreements, waivers, permits, fees, charges, or other burdens of any natureimposed on the System by the Seller, the City or the Borough for the benefit of the Seller, theCity or the Borough;

0) action taken, or failure to take any action, by or on the part of the Seller, the Cityor the Borough which, had such action been taken or such failure occurred after the date of thisAgreement, would have violated the covenants in Section 9.01; or

(k) agreement by the Seller, the City or the Borough to do any of the foregoing.

Section 4.07. Tax Matters. Except as set forth in Schedule 4.07, (i) the Seller has

timely paid all Taxes that may have been or may be due and payable by the Seller arising fromthe ownership or operation of the Acquired Assets or the System; (ii) all Tax Returns required tobe filed by the Seller or with respect to the System have been timely (within any applicableextension periods) filed, and all such Tax Returns are true, complete and correct in all materialrespects; (iii) the Seller has established reserves or accruals on the Financial Statements that are

adequate for the payment of Taxes, if any, for all periods through the Closing Date; (iv) noTaxing Authority has asserted any claim against the Seller for the assessment of any additionalTax liability or initiated any action or proceeding which could result in such an assertion; and (v)the Seller has made all withholding of Taxes required to be made under all applicable Laws and

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regulations, including withholding with respect to compensation paid to employees, and theamounts withheld have been properly paid over to the appropriate Taxing Authorities.

Section 4.08. Real ProperW.

(a) Schedule 4.08 contains a description of (i) each Owned Real Property included inthe Acquired Assets and (ii) each Leased Real Property included in the Acquired Assets. SuchOwned Real Property and such Leased Real Property, together with the Held Easements arecollectively referred to herein as the "Rsg!&pg4v". As of the Effective Date, there are nopending condemnation proceedings relating to any of the Owned Real Property included in theAcquired Assets or any of the Leased Real Property included in the Acquired Assets, nor writtenthreats of any condemnation proceedings with respect to such Owned Real Property or LeasedReal Property. As of the Closing, there are no pending condemnation proceedings relating toany of the Real Property nor written threats of any condemnation proceedings with respect to theReal Property. To the Knowledge of the Seller, (1) as of the Effective Date, the Seller is not inviolation of any Law, the Seller has not received any written notice from any GovernmentalAuthority that it is in violation of an applicable Law with respect to any of the Owned RealProperty included in the Acquired Assets or any of the Leased Real Property included in theAcquired Assets, or its interests thereunder, except for such violation that has been cured in allmaterial respects by the Seller and for which the Seller has received confirmation of cure fromthe Governmental Authority, and (2) as of the Closing, the Seller is not in violation of any Law,the Seller has not received any written notice from any Governmental Authority that it is inviolation of an applicable Law with respect to the Real Property or its interests thereunder,except for such violation that has been cured in all material respects by the Seller and for whichthe Seller has received confirmation of cure from the Governmental Authority.

(b) The Seller has valid and subsisting leasehold estate in and to each Leased RealProperty included in the Acquired Assets, free and clear of all liens, other than Permitted Liens.Schedule 4.08 contains a description of each real property lease or sublease or other similarContract under which the Seller has a leasehold or subleasehold estate or otherwise uses oroccupies or has the right to use or occupy the Leased Real Property included in the AcquiredAssets (each such lease, sublease or other Contract including all amendments thereto, a "RealPropertv Lease"). True and correct copies of each Real Property Lease has been provided by theSeller to Buyer. Neither the Seller nor, to the Knowledge of Seller, the landlord under any RealProperty Lease is in default or breach of any obligations under any Real Property Lease, nor isthere any condition which, with the passage of time, the giving of notice, or both, wouldreasonably be expected to result in a default or breach by the Seller or, to the Knowledge ofSeller, the landlord of any obligations thereunder.

(c) With respect to each Held Easement, as of the Closing: (i) each such HeldEasement is in appropriate form, has been duly recorded, and is sufficient for the right of wayand other interests necessary for the operation of the System, or access thereto, at the locations towhich it relates, (ii) each such Held Easement is free and clear of any Liens, except for anyPermitted Liens, and is assignable by Seller to Buyer without consent of the owner of the land towhich the Easement relates or that any such consent has been obtained, (iii) the Seller is not inbreach of or in default under such Easement, (iv) no party to such Easement has given the Sellerwritten notice of or made a claim with respect to any breach or default thereunder, and (v) to the

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Knowledge of Seller, no condition currently exists and there is no condition which, with thepassage of time, the giving of notice, or both, could result in a default or breach by any party(including the Seller) under or with respect to such Easement. True and correct copies of eachHeld Easement will be provided by Seller to Buyer prior to the Closing.

Section 4.09. Equipment and Machinerv.

(a) All Equipment and Machinery included in the Acquired Assets that is material tothe operation of the System as currently and historically operated and conducted is set forth andotherwise described on Schedule 4.09(a). Except as set forth in Schedule 4.09(a), the Seller (i)has good and marketable title, free and clear of all Liens (other than the Permitted Liens andLiens which will be fully and unconditionally released at or prior to Closing) to the Equipmentand Machinery owned by the Seller, and (ii) holds good and transferable leasehold interests in ora valid license to use, all Equipment and Machinery leased or licensed by it or otherwise used byit in the operation of the System, in each case under valid and enforceable leases or otherContracts. Except as set forth on Schedule 4.09(a), the Seller is not required to obtain theapproval or consent of the lessor or any other Person in connection with the assignment to Buyerof the Equipment and Machinery leased or licensed by the Seller, and such assignment will notresult in any change in terms of the applicable Contract or any increased costs or tax recapture.For the avoidance of doubt, this Section a.09(a) does not apply to any Retained Equipment andMachinery.

(b) Except for Equipment and Machinery which is obsolete and except as otherwiseset forth on Schedule 4.09(a), the Equipment and Machinery and all other tangible assets andproperties that are included in the Acquired Assets are in good operating condition and repair(except for ordinary wear and tear) and are usable in the ordinary course of the business and are

being operated in conformity in all material respects with all applicable Laws and the terms ofany Contracts to which the Seller is a party or by which such Equipment and Machinery issubject or bound.

Section4.l0. Supplies. All Supplies included in the Acquired Assets consist of aquality and quantity usable in the ordinary course of business, consistent with past practice. Asof the Closing, the levels of Supplies included in the Acquired Assets will be consistent with thelevels of Supplies historically maintained by the Seller and will be sufficient for the continuedconduct and operation of the System by Buyer immediately following the Closing insubstantially the same manner as currently and historically conducted and operated by the Seller.

Section 4.1 l. Intellectual Propertv Assets. Schedule 4.1 I sets a complete and accuratelist of all Intellectual Property Assets (whether owned by the Seller or licensed to the Seller byany third party) that are material to the operation of the System as currently and historicallyoperated and conducted. All Intellectual Property Assets are owned by or licensed to the Sellerfree and clear of all Liens, except for Permitted Liens and Liens which will be fully andunconditionally released at or prior to Closing, and are valid, issued and enforceable, have notbeen canceled, and, to the Knowledge of Seller, are not the subject of any legal challenge. Tothe Knowledge of Seller, no facts exist that would invalidate or render unenforceable anyIntellectual Property Assets. Except as disclosed on Schedule 4.1 1, (a) there are no licenses nowoutstanding or other rights granted to third parties under any Intellectual Property Assets, and (b)

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the Seller is not a party to any Contract or other agreement or understanding with respect to anyIntellectual Property Assets. There are no unresolved claims made, and no Person orGovernmental Authority has communicated to the Seller, the threat of any such claim, that anyof the Intellectual Property Assets or activities of the Seller in connection with the IntellectualProperty Assets constitutes unfair competition or is in violation or infringement of any patent,trademark, trade name, service mark, trade dress, right of publicity, copyright or registrationtherefor, of any other Person. To the Knowledge of Seller, (x) the Intellectual Property Assetsdo not infringe the patent, trademark, copyright, trade secret or other proprietary right of anythird party and (y) no lntellectual Property Asset is being infringed or misappropriated by anythird party. All filings or recordations necessary or appropriate to protect the interests of theSeller in any Intellectual Property Assets have been duly made and are in full force and effect.

Section 4.12. Emplovee Benefit Plans.

(a)below:

As used in this Agreement, the following terms have the meanings set forth

''@''meanSallmaterialobligations'affangements,orpractices,whether or not legally enforceable, to provide benefits, other than salary or wages to present orformer directors, employees or agents, (other than obligations, arrangements and practices thatare Seller's Plans), that are owed, adopted or followed by the Seller. Seller's Benefit Obligationsalso include consulting agreements under which the compensation paid does not depend upon theamount of service rendered, sabbatical policies, severance payment policies and fringe benefitswithin the meaning of Code $132.

"&!Lff.b" means each voluntary employees' beneficiary association underSection 501(c)(9) of the Code whose members include any Personnel and any employee benefitplans or any other retirement, profit sharing, stock option, stock bonus, deferred compensation(including any "nonqualified deferred compensation plan" within the meaning of Section 409,4.

of the Code), severance, sick leave or other material plan or alrangement providing benefits tocurrent or former Personnel, in each case, if either currently in effect or terminated within the lastsix (6) years, to which the Seller is a plan sponsor or to which the Seller otherwise contributes orhas contributed within the last six (6) years, or in which the Seller otherwise participates or hasparticipated within the last six (6) years.

(b) Schedule 4.12(b) contains a true and complete list of all Seller's Plans and theSeller's Benefit Obligations. All such Seller's Plans and Seller's Benefit Obligations are in fullforce and effect and are in material compliance both as to form and operation, with applicableprovisions of the Code, ERISA and any other applicable Laws, and with any applicablecollective bargaining agreement. To Seller's Knowledge, no event has occurred which hasresulted or could reasonably be expected to result in the imposition of any liability on the Sellerunder the Code or other applicable Law with respect to any Seller's Plans or Seller's BenefitObligations.

(c) Except as set forth in Schedule 4.12(c), the Seller does not sponsor, maintain,contribute to, nor is it required to contribute to, any "multiemployer plan" within the meaning ofSection 414(fxl) of the Code, and has no liability of any nature, whether known or unknown,

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fixed or contingent, with respect to any such multiemployer plan (the multiemployer plan setforth in Schedule 4.12(c), the "Multiemployer Plan"). Schedule 4.I2(c) sets forth an estimateobtained by the trustee of the Multiemployer Plan, based on the most recent valuation of theMultiemployer Plan, of the withdrawal liability that would be assessed against the Seller forwithdrawal from the Multiemployer Plan.

(d) Except as set forth on Schedule 4.12(d), the Seller does not sponsor, maintain,contribute to, nor is it required to contribute to, any medical, health, life or other welfare plan orbenefits for present or future terminated or retired Personnel or their spouses or dependents,other than as required by COBRA, or any comparable state Law, and has no liability of anynature, whether known or unknown, fixed or contingent, with respect to any suchpost-termination welfare benefits.

(e) The Seller is and has been in compliance in all material respect with therequirements of COBRA and is not subject to any excise Tax under Code Section 4980B for thecurrent or any prior taxable year.

(f) Except as set forth in Schedule 4.12(fl, the Seller has not entered into anyseverance or similar arrangement with respect to any present or former Personnel that will resultin any obligation (absolute or contingent) of Buyer to make any payment to any present orformer Personnel following termination of employment, including the termination ofemployment effected by the transactions contemplated by this Agreement. The consummationof the transactions contemplated by this Agreement will not trigger any severance or otherobligation of the Seller for which Buyer shall have any liability.

Section 4.13. Personnel: Labor Relations.

(a) Schedule 4.13(a) sets forth all collective bargaining agreements and relationshipsto which the Seller is a party, including the identification of the parties thereto and the expirationdates. Other than the collective bargaining agreements and relationships set forth in Schedule4.13(,a), there are no commitments, Contracts, agreements, anangements or understandings(whether written or oral, formal or informal) of the Seller with respect to the Union or the UnionPersonnel, and the collective bargaining agreements described on Schedule 4.13(a) constitute theentire agreement between the Seller and the other parties thereto, with respect to the subjectmatter thereof.

(b) With respect to all Personnel:

(i) except as set forth in Schedule 4.13(bXi), there is no labor strike, lockout,dispute, slowdown or stoppage pending or, to the Knowledge of the Seller threatenedagainst or involving the operation of the System, nor has any such event or labordifficulty occurred within the past five (5) years;

(iD except as set forth in Schedule 4.l3ftXii), the Seller is in compliance in allmaterial respects with all applicable Laws respecting employment and employmentpractices, terms and conditions of employment, wages, hours of work, classification ofPersonnel and independent contractors, and occupational safety and health;

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(iii) except as set forth in Schedule 4.13(bXiii), there is no unfair labor practicecharge or complaint against the Seller with respect to the System pending or, to theKnowledge of the Seller threatened before the Pennsylvania Labor Relations Board orany other Govemmental Authority;

(i") the Seller has no present intention to terminate the employment of anyPersonnel due to misconduct or unsatisfactory perfonnance and, to the Knowledge of theSeller, no event has occurred or circumstance exists with respect to any Personnel,including any event or circumstance involving misconduct (whether or not involving anyactual or potential violation of Law) or other wrongful or improper acts or omissions byany Personnel, which would in any case give the Seller grounds for terminating theemployment of any such Personnel; and

(v) the Seller has not received notice of any assertion or allegation of anywrongful employment action or practice, including discrimination and harassment, byany present or former Personnel or any applicant for employment with respect to theSystem.

(c) Except as set forth on Schedule 4.13(c), the Seller has, and as of the Closing shallhave timely paid, or cause to be timely paid, the Personnel as required under its policies and/orby applicable Law for accrued but unused and unpaid vacation, sick leave and other accruedbenefits as of the Closing Date.

(d) The Seller has not, in the past five (5) years, effectuated:

(i) a "plant closing" (as defined in the Worker Adjustment and RetrainingNotification Act ("WARN Act")) affecting any site of employment or one or morefacilities or operating units within any site of employment or facility of the System; or

(ii) a "mass layoff' (as deflrned in the WARN Act) affecting any site ofemployment or facility of the System; nor has the System been affected by anytransaction or engaged in layoffs or employment terminations sufficient in number totrigger application of any similar state or local Law.

(e) None of the Personnel has suffered an "employment loss" (as defined in theWARN Act) during the previous six months.

Section 4.14. Environmental Compliance. Except as set forth in Schedule 4.14:

(a) The System as currently operated by the Seller and all operations and activitiesconducted by the Seller with respect to the System are in compliance in all material respects withall applicable Environmental Requirements.

(b) The Seller has generated, used, handled, treated, stored and disposed of allHazardous Materials in (i) compliance in all material respects with all applicable EnvironmentalRequirements and (ii) a manner that has not given, and could not reasonably be anticipated togive, rise to Environmental Liabilities.

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(c) The Seller has not received notice of any Environmental Claims related to theSystem that have not been fully and finally resolved, and to the Knowledge of Seller no claims ofEnvironmental Liabilities have been threatened allegedly arising from or relating to the Systemthat have not been fully and finally resolved.

(d) Hazardous Materials are not present at or on the System or Acquired Assets, therehas been no Release of Hazardous Materials at, on or from any part of the System or theAcquired Assetso and there has been no Release of Hazardous Materials for which the Seller isresponsible at any Off-Site Location, in each case in a manner that violates any EnvironmentalRequirements or has resulted in, or could reasonably be anticipated to give rise to,Environmental Liabilities.

(e) No Lien or activity use limitation or instirutional control has been recordedaffecting any Acquired Assets by any Governmental Authority due to either the presence of anyHazardous Material on or off the Acquired Assets or a violation of any EnvironmentalRequirement.

(f) There are no underground storage tanks on or at any of the Acquired Assets. Anyunderground storage tanks previously located at the Acquired Assets have been removed orotherwise closed, plugged and abandoned in compliance with applicable EnvironmentalRequirements in effect at the time of such closure.

(g) There is no PCB Equipment on or at any of the Acquired Assets. Any PCBEquipment that previously existed at the Acquired Assets has been flushed of polychlorinatedbyphenyls or has been removed and properly disposed of, in compliance with applicableEnvironmental Requirements, and any remaining PCB Equipment is labeled to the extentrequired under applicable Environmental Requirements and being managed in compliance withapplicable Environmental Requirements.

(h) No Regulated Asbestos Containing Material exists in or on the Acquired Assets inan aggregate amount that would reasonably be expected to result in an Environmental Liability;and any Regulated Asbestos Containing Material is being managed in compliance with allapplicable Environmental Requirements.

(i) The Seller has delivered to Buyer (l) all material environmental site assessments

or reasonable and accurate summaries thereof pertaining to the System, (2) all materialcompliance audits or compliance assurance reviews prepared within the previous five (5) years

or reasonable and accurate summaries thereof relating to compliance with EnvironmentalRequirements by the System, and (3) reasonable and accurate summaries of, or all materialdocuments pertaining to, any known and unresolved Environmental Liabilities incurred inrelation to the System, to the extent possessed by or under the reasonable control of the Seller.

Section 4.15. Consent Decree Matters.

(a) The Seller is in compliance with all terms, conditions and requirements of theConsent Decree and no claims, actions, suits, proceedings, arbitral actions or investigations arepending, or to the Knowledge of the Seller, have been threatened against the Seller with respectto the Consent Decree. The Seller has not incurred or accrued any liabilities for payment of

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stipulated penalties under the terms of the Consent Decree with respect to any conditions, events,circumstances, actions or inactions prior to the date hereof or prior to the Closing (whether or notEPA or PaDEP have asserted demands for such stipulated penalties).

(b) The Seller has completed all requirements or undertaken all actions required to beperformed by the Seller prior to the date hereof and prior to the Closing Date pursuant to:

(D the Consent Decree, including all control, operation, maintenance andmitigation requirements and the implementation of the CSO Control Measures and theApproved Revised CSO Control Measures Plan;

(ii) the Compliance Schedule; and

(iiD the Acquired Authorizations.

(c) The CSO Control Measures are being implemented in accordance with theConsent Decree. All work performed by or on behalf of the Seller pursuant to the ConsentDecree, including work performed by architects, design professionals, and civil, mechanical orother engineers, whether by contract or pursuant to employment with the Seller or as an agent ofthe Seller is being performed and has been performed in accordance with the terms andconditions of the Consent Decree and on schedule in a manner sufficient to achieve thecompletion of the CSO Control Measures by the dates required under the Consent Decree.

(d) As of the Effective Date and as of the Closing, (i) the Seller is in compliance in allmaterial respects with its obligations under the Long Term Control Plan and (ii) all planning,engineering, design, procurement, financing and construction activities on all Phase A and Phase

B Projects within the Long Term Control Plan are on schedule with the milestones set forth theCompliance Schedule attached as Schedule 7.06 to this Agreement.

Section4.16. Licenses and Permits. Schedule 4.16 sets forth a complete and accuratelist of all Licenses and Permits held by the Seller, all of which are in full force and effect and noappeals or other proceedings are pending or threatened with respect to the issuance, terms orconditions of any such Licenses and Permits. The Seller has provided to Buyer true andcomplete copies of all Licenses and Permits set forth on Schedule 4.16. Except as set forth onSchedule 4.16, (i) the Seller holds all Licenses and Permits which are necessary or requiredunder applicable Law for the ownership, operation and maintenance of the System and theAcquired Assets as currently or previously operated and maintained, (ii) the Seller is, and for thepast five (5) years has been, in compliance in all material respects with all terms, conditions andrequirements of all Licenses and Permits held by it (whether or not set forth on Schedule 4.16)and all applicable Laws relating thereto, and (iii) the Seller has not received any written notice orother written communication from any Governmental Authority or other Person regarding (l)any actual or alleged violation or failure to comply with any such Licenses and Permits, or (2)any revocation, withdrawal, non-renewal, suspension, cancellation or termination of any suchLicenses and Permits. With respect to any Licenses and Permits held by the Seller that arescheduled to expire within six (6) months following the date of this Agreement, any applicationsfor renewal of such Licenses and Permits have been or will be duly filed by the Seller with theapplicable Governmental Authority within the time frame required under applicable Law.

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Section 4.17. Insurancet Bonds.

(a) (i) Schedule 4.17(a) lists all of the Seller's policies Of liability, frre, casualty,business intemrption, workers' compensation and other forms of insurance and fidelity bondsinsuring the properties, assets or operations of the System or the Acquired Assets (collectively,the "Policies" and individually, a "Policy"); (ii) the Seller has provided true and complete copiesof the Policies to Buyer; (iii) the Policies, with respect to their amounts and types of coverage,are reasonably adequate to protect the insured properties against the insured risks, subject toreasonable deductibles, and the risks insured against are normal and customary for the industry.and (iv) all premiums with respect to each Policy are currently paid and such policies are in fullforce and effect. There are no material claims by the Seller pending under any of the Policies as

to which coverage has been questioned, denied or disputed by the underwriters of such Policiesor in respect of which such underwriters have reserved their rights, and no notice of cancellation,termination or non-renewal has been received with respect to any Policy.

(b) Except as set forth on Schedule 4.17(b), (i) the Seller has no outstanding suretybonds or other surety arrangements issued or entered into in connection with the Acquired Assetsor the System; and (ii) no surety bond is required to satisfy any contractual, statutory, orregulatory requirement applicable to the Seller with respect to the System.

Section 4.18. Contracts and Commitments.

(a) Schedule4.l8 lists all of the following Contracts (x) by which any of theAcquired Assets are bound or affected or (y) to which the Seller is a party or by which it isbound in connection with the System or the Acquired Assets (collectively, the "MaterialContracts"):

(D Contracts with any Personnel, consultant or other Person providingservices to the Seller or with respect to the System;

(iD Contracts which are notes, mortgages, agreements, swaps or otherderivatives or commitments for the repayment or borrowing of money by the Seller,including those related to the Outstanding Indebtedness, or for a line of credit includingborrowings by the Seller in the form of a guarantee of, indemnification for, or agreementto acquire any obligation of others, and all security or pledge agreements related thereto;

(iii) Contracts, including management, operating, engineering, design, orservice agreements (including professional services agreements), providing for paymentsin excess of Ten Thousand Dollars ($10,000) by the Seller in any twelve (12) monthperiod;

(iv) Contracts relating to any joint venture or partnership to which the Seller isaparty or is bound;

(v) Contracts containing covenants purporting to limit the freedom of Seller orany Personnel to compete in any business or in any geographic area;

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("i) Contracts relating to ongoing construction, including related to CSOControl Measures, insurance Contracts, surety bonds, management agreement, architectagreement or consultant agreement;

(vii) Contracts for any capital expenditure or leasehold improvements;

(viii) Contracts involving any resolution or settlement of any actual orthreatened litigation, arbitration, claim or other dispute involving Seller, the City, theBorough or the System, and any other Person; and

(ix) Contracts, including inter-municipal agreementso between the Seller andany Governmental Authority.

(b) The Seller has provided to Buyer true and complete copies of all the foregoingMaterial Contracts, together with all amendments, supplements or modifrcations thereto, andaccurate descriptions of all material terms of all oral Contracts, set forth or required to be set

forth on Schedule 4.18.

(c) All of the Material Contracts are in full force and effect. Each Material Contractis a legal, valid and binding obligation enforceable against the Seller and, to the Knowledge ofSeller, the other party or parties thereto, except to the extent that enforceability may be limitedby applicable bankruptcy, insolvency, reorganization or other Laws affecting the enforcement ofcreditors' rights generally. The Seller is not and, to the Knowledge of Seller, no other party toany Material Contract is, in any material respect, in breach or violation of, or default under, orhas delivered a notice of termination of, any Material Contract, nor does any condition existwhich, with notice or lapse of time, or both, would cause the Seller, or to the Knowledge ofSeller, any other party, to be in default under any Material Contract. The Seller has not receivedany communication from any Person that is party to a Material Contract indicating that suchPerson intends to (i) terminate such Material Contract, (ii) allow such Material Contract to expirewithout renewal, or (iii) seek an amendment or modification to such Material Contract thatwould increase in any material respect any amounts required to be paid by the Seller thereunder.

Section 4.19. Compliance with Law. Except as set forth on Schedule 4.19:

(a) the Seller is, and for the last five (5) years has been, in compliance in all materialrespects with all Laws applicable to Seller, the System, the Personnel and any of the AcquiredAssets, and to the Knowledge of the Seller there are no factual circumstances that are likely toresult in any such failure to be in compliance in any material respect;

(b) within the last five (5) years, the Seller has not received any written or, to theKnowledge of the Seller, verbal notices and, to the Knowledge of the Seller, no claims have beenfiled against the Seller, alleging a violation of any such Laws;

(c) to the Knowledge of Seller, neither Seller nor any Personnel is, or within the lastfive (5) years was, under investigation with respect to, and has not been threatened to be chargedwith or given notice of any violation of, any Law applicable to Seller, the System, the Personneland any of the Acquired Assets; and

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(d) except for the Consent Decree, there is no judgment, decree, injunction, rule ororder of any arbitrator or Governmental Authority outstanding against the Seller, the System, thePersonnel or any of the Acquired Assets.

Section 4.20. Litieation. Except as set forth on Schedule 4.20, (a) there are no claims,actions, suits, proceedings, arbitral actions, inquiries or investigations (whether judicial,administrative or otherwise) before or by any Governmental Authority pending or, to theKnowledge of the Seller, threatened against the Seller or with respect to the System or any of theAcquired Assets or which in any manner challenge or seek to prevent, enjoin, alter or materiallydelay the transactions contemplated by this Agreement, and no event has occurred, and no claimhas been asserted, that could reasonably be expected to result in any such claims, actions, suits,proceedings, arbitral actions, inquiries or investigations, and (b) there are no unsatisfiedjudgments of any kind against the Seller with respect to the System or the Acquired Assets. Allpending or threatened claims, actions, suits, proceedings, arbitral actions, inquiries orinvestigations against the Seller or with respect to the System or the Acquired Assets are fullycovered by insurance except to the extent described in Schedule 4.20.

Section 4.21. Title to the Acquired Assets; Sufficiencv.

(a) Except as set forth on Schedule 4.21(a), the Seller has good and marketable titleto, valid leasehold interest in or valid licenses to use, all of the Acquired Assets, free and clear ofall Liens, other than Permitted Liens and Liens which will be fully and unconditionally releasedat or prior to Closing. The use of the Acquired Assets is not subject to any Liens, other thanPermitted Liens, and such use does not encroach on the property or the rights of any Person.

(b) The Acquired Assets are sufficient for, and constitute all the assets, properties,business, goodwill and rights of every kind and description, and services required for, thecontinued conduct and operation of the System by Buyer in substantially the same manner as

currently conducted and operated by the Seller. Except for the Excluded Assets, (i) the AcquiredAssets, taken as a whole, comprise all the assets, properties, business, goodwill and rights ofevery kind and description used or held for use in, or useful or necessary to the operation of theSystem as currently operated by the Seller, and (ii) there are no assets, properties, business,goodwill, rights or services used in the conduct or operation of the System that are owned by anyPerson other than the Seller that will not be licensed or leased to Buyer under valid, currentlicense arrangements or leases. None of the Excluded Assets are material to the System.

Section 4.22. Broker's and Finder's Fees. Except as set forth on Schedule 4.22, nobroker, finder, or Person is, or will be, entitled to any commission or broker's or frnder's feesfrom any of the Parties or from any of their Affiliates by reason of any agreement or action ofSeller, the City or the Borough (or any Person acting on their behalfl or otherwise in connectionwith this Agreement or the transactions contemplated by this Agreement. The Seller is solelyresponsible for the fees and expenses of any Person set forth on Schedule 4.22 and any otherfinancial or technical advisor engaged by or on behalf of Seller, the City or the Borough.

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ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer makes only the representations and warranties which are set forth in this Article V.Any matter, information or item disclosed on any particular Schedule delivered by Buyer whichis numbered to correspond to the representations and warranties contained in this Article V shallbe deemed to have been disclosed in response to such other representations or warranties in thisArticle V in respect of which such disclosure is reasonably apparent on its face notwithstandingthe omission of an appropriate cross-reference.

As a material inducement to the Seller to enter into this Agreement and to consummatethe transactions contemplated hereby, Buyer hereby represents and warrants to the Seller, as ofthe date hereof and as of the Closing Date, as follows:

Section 5.01. Existence and Power. Buyer is a corporation duly orgarized and in goodstanding under the Laws of the Commonwealth of Pennsylvania. Buyer has all requisite powerand authority to execute and deliver this Agreement and all Related Agreements and to performits obligations hereunder and thereunder.

Section 5.02. Authorization and Validitv of Asreement. The execution and deliveryof this Agreement and the Related Agreements and the performance of the obligations of Buyerhereunder and the consummation by Buyer of the transactions contemplated by this Agreementand the Related Agreements have been duly and validly authorized by all necessary action ofBuyer, including Buyer's board of directors and the board of directors of Buyer Parent, and noother proceeding on the part of Buyer is necessary to authorize the execution, delivery andperformance of this Agreement or any Related Agreement to which Buyer is or will be a party.This Agreement has been duly executed and delivered by Buyer and constitutes, and the RelatedAgreements, when executed and delivered, will constitute legal, valid and binding obligations ofBuyer, enforceable against Buyer in accordance with their respective terms and conditions,except to the extent that enforceability may be limited by applicable bankruptcy, insolvency,reorgarization or other Laws affecting the enforcement of creditors' rights generally. A ffue,correct and complete copy of the authorizing resolutions duly adopted by the board of directorsof Buyer is attached hereto as Exhibit E, which resolutions of the board of directors of Buyer,and the resolutions of the board of directors of Buyer Parent with respect to this Agreement andthe transactions contemplated hereby, in each case have not been, and at the Closing will nothave been, revoked, rescinded or amended.

Section 5.03. No Conflict or Violation. Except as set forth on Schedule 5.03, theexecution, delivery and performance of this Agreement and the Related Agreements by Buyer donot and shall not: (a) violate or conflict with, or result in a breach or constitute a default under,any provision of the charter, bylaws or other similar organizational or governing documents ofBuyer, (b) violate, conflict with, result in a breach or constitute a default under any provision of,or require any Governmental Approval or any notice, filing, consent, authorization or approvalunder, any Licenses and Permits held by Buyer or any applicable Law of any GovernmentalAuthority having jurisdiction over Buyer or its assets or properties, or (c) violate, conflict with,or result in a breach of or constitute (with due notice or lapse of time or both) a default under any

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provision of, or require any notice, f,rling, consent, authorization or approval under, or give riseto any rights of termination, amendment, modification, acceleration or cancellation of or loss ofany benefit under, or result in the creation of any Lien on any assets or properties of Buyerpursuant to, any Contract to which Buyer is a party, or by which any material assets andproperties of Buyer are bound or subject, or (d) result in the imposition of any Liens or otherrestrictions on the material assets and properties of Buyer, except, in the case of the foregoingclauses (b), (c) and (d), where such violation, conflict, breach, default, requirement, or resultingLien or other restriction would not reasonably be expected to have a material adverse effect onBuyer, Buyer Parent and their business, or materially impair Buyer's ability to timelyconsummate the transactions contemplated hereby or perform its obligations hereunder.

Section 5.04. Consents and Approvals. Schedule 5.04 sets forth a list of each consent,waiver, authorization or approval of any Governmental Authority, or of any other Person, andeach declaration or notice to or filing or registration with any Governmental Authority requiredto be obtained, given or made by Buyer in connection with the execution and delivery of thisAgreement and each Related Agreement by Buyer and the performance by Buyer of itsobligations hereunder and thereunder, except for any such consent, waiver, authorization,approval, declaration, notice, filing or registration, which if not obtained, given or made, wouldnot reasonably be expected, individually or in the aggregate, to materially impair Buyer's abilityto performs its obligations hereunder or thereunder and to consummate the transactionscontemplated hereby or thereby.

Section 5.05. Broker's and Finder's Fees. No broker, frnder, or Person is, or will be,entitled to any commission or broker's or finder's fees from any of the Parties or from any oftheir Affiliates by reason of any agreement or action of Buyer or its Affiliates (or any Personacting on Buyer's or Buyer's Affiliates' behalf) or otherwise in connection with this Agreementor the transactions contemplated by this Agreement.

Section 5.06. Financial Abilitv. Immediately after giving effect to the transactionscontemplated hereby, Buyer will have the financial ability and will have adequate capital to carryon its business and to operate the System as a certificated public utility system regulated by thePaPUC authorized, among things, to provide wastewater utility services to retail residential,commercial and industrial customers in the Service Area, in each case assuming (i) the accuracyof the Seller's representations and warranties set forth in this Agreement (without regard to anymateriality, Material Adverse Effect or other similar qualifiers contained therein) and (ii)material compliance by the Seller with the covenants required to be performed prior to theClosing set forth herein in all material respects.

Section 5.07. Sufficient Funds. Buyer will have at the Closing (a) sufficientimmediately available funds available and the financial ability to pay the Purchase Price inaccordance with Section 3.01 and any fees and expenses incurred by Buyer in connection withthe transactions contemplated by this Agreement and (b) the resources and capabilities (financialand otherwise) to perform its obligations hereunder.

Section 5.08. Independent Decision. Except as expressly set forth in this Agreement,or any of the Related Agreements, Buyer acknowledges that (a) neither the Seller nor any otherPerson has made any representation or warranty, express or implied, as to the accuracy or

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completeness of any information provided to Buyer regarding the System, and (b) neither theSeller nor any other Person shall have or be subject to any liability to Buyer (except in the case

of fraud) or any other Person resulting from the distribution to Buyer, or Buyer's use of, anyinformation regarding the System or Acquired Assets that has been furnished or made availableto Buyer and its Representatives. Buyer acknowledges that other than as expressly set forth inthis Agreement or any Related Agreement, Buyer is acquiring the Acquired Assets without anyother representation or warranty, whether express or implied, including any representation orwarranty as to merchantability or fitness for any particular pupose, except as otherwiseexpressly represented or warranted in Article IV of this Agreement; provided, however, thatnothing in this Section 5.08 is intended to limit or modifu the representations and warrantiescontained in Article IV.

Section 5.09. Indenendent Investisation. Buyer acknowledges that it has conducted anindependent investigation of the financial condition, assets, liabilities, properties and projectedcapital needs and operations of the System in making its determination as to the propriety of thetransactions contemplated by this Agreement and, in entering into this Agreement and RelatedAgreements, has relied solely on the results of its investigation and on the representations andwarranties of the Seller expressly contained in Article IV of this Agreement; provided, thatnothing in this Section 5.09 will limit, in any way, any rights that Buyer may have to bring,pursue or prosecute a claim or action grounded in or based upon fraud.

Section5.lO. Litieation. There are no claims, actions, suits, proceedings, arbitralactions, inquiries or investigations (whether judicial, administrative or otherwise) pending or, tothe Knowledge of Buyer, threatened, against Buyer, Buyer Parent or any of their Affrliates whichin any manner challenge or seek to prevent, enjoin, alter or materially delay the transactionscontemplated by this Agreement.

ARTICLE VI.

COVENANTS REGARDING REAL PROPERTY AND EASEMENTS

Section 6.01. Title Examination: Missins Easements.

(a) Prior to the Closing, the Seller will, at its sole cost and expense, cause DavidDurkovic, or another abstractor selected by the Seller and reasonably acceptable to Buyer and theTitle Company (the "Abstractor"), to perform, at the Seller's sole cost and expense, a search ofthe public land records of Lackawanna County, based on the Seller's and Labella Associates',Seller's outside consulting engineering company, records and plans of the System (and suchother sources of information as are reasonably related thereto), by means of searching the grantee

index in the names of the City, the Scranton Redevelopment Authority, Seller and the Borough,and such other searches as the Abstractor may reasonably make, to (i) identifu and provide Buyerwith title information on any and all recorded Held Easements, such information to be providedin the form of the chart attached hereto as Exhibit F (the "Abstractor Search Result Chart"), and(ii) together with the Seller, identifu all Missing Easements. During such process, as theAbstractor provides written search results to Seller (including updated versions of the AbstractorSearch Result Chart), the Seller will promptly provide the same to Buyer for its review, and,without limiting the foregoing, the Seller shall, or shall cause the Abstractor to, provide Buyer

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with periodic updates (which shall occur no less frequently than bi-weekly) on the status of theactivities set forth in the previous sentence.

(b) In the event that during the process of Abstractor's review and investigation of theLackawanna County land records, Seller determines, based on the Abstractor's investigation, thatthere is a Missing Easement, the Seller shall take any and all actions (including the use of itspower of condemnation) to obtain any such Missing Easements so that the same may be sold,assigned, transferred and conveyed to Buyer at the Closing pursuant to the terms and conditionsof this Agreement. All costs and expenses incurred in connection with obtaining each MissingEasement (including any consideration payable to the landowner in connection withcondemnation, in lieu of condemnation or otherwise to obtain Missing Easements) shall be paidby the Seller. In the event Seller has not obtained all Missing Easements by the date that is sixty(60) days after the date that Abstractor has completed his review of the County land records anddelivered the last results of the same to Seller (the "Abstract Completion Date"), then, no laterthan thirty (30) days after the Abstract Completion Date (but in any event no later than thirty(30) days prior to the Closing), the Seller shall commence and file in the Court of CommonPleas, Lackawanna County, a condemnation or eminent domain proceeding to obtain any and allsuch Missing Easements. For the purposes of clarity, upon obtaining each Missing Easement(including upon the final resolution of a condemnation proceeding), each Missing Easement thathas been acquired or obtained by the Seller shall be considered a Held Easement.

(c) The Seller shall take any and all actions to ensure that, as of the Closing, (i) allEssential Easements are Eligible Easements and (ii) no more than ten (10) other Easements(whether Held Easements or Missing Easements) that are appurtenant to any Combined SewerSystem Asset or necessary for access to any Combined Sewer System Asset or for the operationof any Combined Sewer System Asset (including Easements for utilities and power to anyCombined Sewer System Asset) or otherwise are necessary for or used in connection with theoperation of the System or to provide continuous and unimpeded rights of way for the CombinedSewer System Assets (including access thereto) are not Eligible Easements.

(d) With respect to any Easement that is described in clause (b) of the definition ofEligible Assets that is conveyed to Buyer at the Closing, the Seller shall complete thecondemnation proceedings with respect to such Easement at its sole cost and expense followingthe Closing and pay the fair value to the landowner for the taking of such Easement.

Section 6.02. Obiections to Title: Conveyance bv the Citv.

(a) Notice of Title Objections. With respect to all Real Property including any titleinformation provided by the Abstractor with respect to any Held Easements, Buyer shall have theright to obtain, at its sole cost and expense, one or more commitments for an owner's policy orpolicies of title insurance on ALTA's Owner's Form 2006 (each, a "Title Commitment"), issuedby a title insurance company selected by Buyer and licensed by the Commonwealth ofPennsylvania (the "Title Company") covering any such Real Property. Within thirty (30) days ofBuyer's receipt from the Title Company of any such Title Commitment, Buyer shall deliver tothe Seller a complete copy of such Title Commitment and copies of any and all exceptiondocuments listed in the same, each as received from the Title Company, along with Buyer'swritten notice to the Seller of any of the exceptions to title set forth on Schedule B of the Title

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Commitment to which Buyer objects (such written notice of Buyer being referred to as the

"Objection Notice") provided such exceptions (i) are not Permitted Liens, (ii) are not ScheduleB-I exceptions to be satisfied by Buyer prior to Closing, (iii) being matters of record and set forthin the Title Commitment, do not adversely restrict or prevent the use of the Real Property in theoperation of the System as currently operated, and (iv) are not the Title Company's pre-printedstandard "survey", "unrecorded easement" or "discrepancy in boundary line" exceptions do notadversely restrict or prevent the use of the Real Property in the operation of the System as

currently operated (such exceptions objected to in the Objection Notice, provided the same are

not any as described in clauses (i) through and including (iv) as aforesaid, being referred to as the"Title Obiection ltems"). Buyer acknowledges and agrees that for purposes of any Real PropertyLease, the term Permitted Lien shall also include (v) any Lien which was created or suffered toexist by the lessor, or any predecessor in title to such lessor, encumbering the title to any realproperty which is subject to a Real Property Lease. In the event that Buyer provides the Sellerwith an Objection Notice, the Seller shall use commercially reasonable efforts to have all of theTitle Objection Items cured, satisfied or released of record, or insured over, by the TitleCompany (individually, "Cure" and collectively, "Cured") prior to or as of the Closing. At orprior to the Closing, the Seller shall deliver written evidence to Buyer, in form and substancereasonably satisfactory to Buyer, evidencing that Seller has Cured all such Title Objection Items.For avoidance of doubt, Buyer acknowledges that no item listed in clauses (i) through andincluding (v) aforesaid, may be objected to by Buyer as a Title Objection Item.

(b) Liens. Without limiting the Seller's obligations pursuant to Section 6.02(a)above, prior to or as of the Closing, the Seller shall be obligated, at its sole cost and expense, toCure any Lien encumbering the Real Property which can be Cured by the payment of money(other than Permitted Liens).

(c) Title Endorsements/Survey. Any endorsements required by Buyer or anymortgagee of Buyer to Buyer's title insurance policy, except for available endorsementsnecessary to Cure any Title Objection Items, shall be paid for solely by Buyer. In the event anysurvey is required by Buyer or its mortgagee, either as a condition to any such endorsement orotherwise, the same shall be obtained solely at Buyer's cost and expense. In the event Buyerobtains a survey of any or all of the Real Property and desires the deed to contain the legaldescription based on such survey, if the same is not identical to the legal description contained inthe Seller's deed of record, the Seller shall not be obligated to include the same in the deed toBuyer unless the survey is certified to the Seller and such description is included in the deed on a"quitclaim" basis only and without warranty of title, so long as such title is insurable by the TitleCompany.

(d) Conveyance by the City. With respect to the parcels of Real Property describedon Schedule 4.08 as being owned by the City as of the Effective Date (such parcels of RealProperty, the "Citv-Owned Real Property"), following the Effective Date the Seller shall takeany and all action necessary to cause the conveyance by the City to the Seller of such City-Owned Real Property and to ensure that, as of the Closing, such City-Owned Real Propertyconstitutes Owned Real Property of the Seller included in the Acquired Assets and with respectto which the Seller holds a valid fee simple estate capable of being conveyed to Buyer at Closingpursuant to Section 2.03(ii).

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Section 6.03. UCC Searchl Releases. Not later than sixty (60) days after the EffectiveDate, Buyer shall obtain, at its sole cost and expense, a Uniform Commercial Code searchagainst the Seller covering any of the personal property or fixtures included among the AcquiredAssets from the Office of the Secretary of the Commonwealth of Pennsylvania and the Recorderof Lackawanna County, Pennsylvania (the "UCC Search"). On or prior to the Closing Date, theSeller shall, at its sole cost and expense, obtain releases ofany and all security interests in any ofthe Acquired Assets which are not Permitted Liens. The form of the releases of such securityinterests shall be provided by the Seller to Buyer on or prior to the Closing Date and the formand substance thereofshall be reasonably satisfactory to Buyer.

Section 6.04. Consents. The Seller shall, prior to the Closing, at the Seller's sole costand expense, obtain any required consents or satisfy any preconditions necessary to assign ortransfer a Real Property Lease or an Easement to Buyer at the Closing and, at or prior to theClosing, the Seller shall deliver written evidence to Buyer, in form and substance reasonablysatisfactory to Buyer, evidencing that the Seller has obtained all such consents and satisfied allsuch preconditions. If, prior to the Closing, Buyer identifies any consents required to beobtained or preconditions necessary to assign or transfer a Real Property Lease or an Easementto Buyer at the Closing and Buyer delivers written notice to the Seller of such consent orprecondition, the Seller shall use good faith efforts to obtain any such consent or satisfy any suchprecondition, as the case may be, and, so long as the Seller in good faith seeks to obtain any such

consents or satisfy such preconditions as may be identified by Buyer and with respect to whichBuyer delivers notice to the Seller prior to the Closing, the Parties acknowledge and agree thatthe Seller shall not be deemed to have intentionally or willfully breached this Section 6.04 as aresult of the Seller's failure, prior to the Closing, to (x) obtain any such consent or satisfy anysuch condition so identified by Buyer, or (y) to seek to obtain any other required consent orsatisfy any other necessary precondition with respect to which Buyer does not identifr or deliverwritten notice to the Seller prior to the Closing. If after the Closing Date, Buyer determines thata third-party consent or precondition must be satisfied in order to assign or transfer a RealProperty Lease or an Easement, the Seller shall obtain such third-party consent or satisfu suchprecondition and execute any documents necessary to effectuate such transfer pursuant to theSeller's obligations in Section 2.03.

ARTICLE VII.

OTHER AGREEMENTS

Section7.0l. Taxes. The Seller shall prepare and file or cause to be flrled all TaxReturns arising out of the ownership of the Acquired Assets and out of the operation of theSystem before the Closing for all taxable periods ending on or before the Closing Date whetherfiled before or after the Closing Date. The Seller shall pay all Taxes arising out of the ownershipof the Acquired Assets and out of the operation of the System before the Closing for all taxableperiods ending on or before the Closing Date. Buyer shall prepare or cause to be prepared and

file or cause to be filed any Tax Returns arising out of the ownership of the Acquired Assets andout of the operation of the System for periods which begin before the Closing Date and end afterthe Closing Date (a "Straddle Period"). In the case of Taxes arising in a Straddle Period, theallocation of such Taxes between the pre-Closing taxable period portion and the post-Closingtaxable period portion of the Straddle Period shall be made on the basis of an interim closing of

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the books as of the end of the Closing Date based on a schedule prepared by Buyer and providedto the Seller. The Seller shall pay to Buyer its allocable share of the Straddle Period Taxes as

reasonably determined by Buyer within ten (10) days of the delivery of a notice requiring suchpayment.

Section 7.02. Cooperation on Tax Matters. The Seller shall furnish or cause to befurnished to Buyer, as promptly as practicable, whether before or after the Closing Date, suchinformation and assistance relating to the System as is reasonably necessary for the preparationand filing by Buyer of any filings relating to any Tax matters.

Section 7.03. Files and Records.

(a) During the seven (7) year period following the Closing Date (or such longerperiod as may be required under applicable Law), the Seller shall preserve and keep any and allfiles, documents and records held by the Seller relating to the System (including any copies ofany Files and Records in the possession of the Seller and not otherwise delivered or required tobe delivered to Buyer at the Closing), and the Seller shall, upon reasonable notice and duringnormal business hours, make all such files, documents and records available to Buyer as may bereasonably requested or required by Buyer to enable Buyer or its Aff,iliates to prepare for, file,prove, answer, prosecute, or defend any retum, filing, audit, protest, claim, suit, inquiry or otherproceeding against or involving Buyer or any of its Afliliates (including any matter pertaining toTaxes), or any governmental investigation of or involving Buyer or any of its Affiliates, or inorder to enable Buyer to comply with its obligations under this Agreement and any RelatedAgreement or other agreement, document or instrument contemplated hereby or thereby. In theevent the Seller desires to destroy such records after such seven (7) year period, the Seller shallfrrst give sixty (60) days prior written notice to Buyer and Buyer shall have the right, at its optionand expense, upon prior written notice given to Seller within such sixty (60) day period, to takepossession of the records within ninety (90) days after the date of such notice.

(b) Without limiting anything contained in Section 7.03(a), on the Closing Date, theSeller shall transfer to Buyer all Files and Records relating to operation of the System, includingall documents, records, electronically stored data and other information referenced in Sections 77and 78 of the Consent Decree ("Consent Decree Required Information"). To the extent that theSeller retains any such Consent Decree Required Information following the Closing (includingany copies of any Files and Records in the possession of the Seller and not otherwise deliveredor required to be delivered to Buyer at the Closing), at the conclusion of the record retentionperiod specified in Section 79 of the Consent Decree, the Seller or its successor shall notifuBuyer, EPA and PaDEP at least ninety (90) days prior to the desffuction of any such ConsentDecree Required Information, and upon the request of Buyer, EPA or PaDEP (or otherapplicable Governmental Authority), the Seller shall deliver such Consent Decree RequiredInformation to Buyer, EPA or PaDEP, subject to the provisions set forth in Section 80 of theConsent Decree relating to privileged information.

(c) For the avoidance of doubt, nothing contained in this Section 7.03 shall bedeemed to (i) limit the Seller's obligation to deliver all Files and Records to Buyer at the Closingas provided in Section 13.02 or (ii) permit the Seller, the iity or the Borough to refuse to deliver

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to Buyer, upon Buyer's reasonable request therefor, any Files and Records that are or remain inthe possession of the Seller, the City or the Borough as of or following the Closing.

Section 7.04. Personnel Matters.

(a) Subject to the obligations of Seller under the Collective Bargaining Agreementand applicable Law and Buyer's obligations set forth in Section 7.04(h) with respect to UnionPersonnel, Buyer shall, or shall cause an Affiliate of Buyer to, offer employment effective on theClosing Date, to all active Union and Non-Union Personnel employed by the Seller as of theClosing Date, subject to Buyer's existing standard hiring policies and procedures applicable tonew employees, which shall be limited to a criminal background check and drug screening of allUnion and Non-Union Personnel, except with respect to benefits as otherwise provided inSection 7.0a@). The active Union and Non-Union Personnel who accept such offer ofemployment and commence employment with Buyer (or its Affiliate) on the Closing Date, shallbereferredtointhisAgreementasthe''@.''ForpurpoSeSofclarity,nothingcontained in this Section 7.04 shall be deemed to limit, restrict or prohibit Buyer frominterviewing the applicable Union and Non-Union Personnel for informational purposes only inconnection with the transfer of employment of the Union and Non-Union Personnel to Buyer asprovided in this Section 7.04.

(b) Subject to the obligations of Seller under the Collective Bargaining Agreementand applicable Law and Buyer's obligations set forth in Section 7.04(h) with respect to UnionPersonnel, Transferred Personnel who are Non-Union Personnel shall be employees-at-will ofBuyer. Buyer shall provide each of the Transferred Persorurel who are Non-Union Personnelcompensation and benefits which are substantially comparable to (i) in the aggregate to Seller'scompensation and benefits as of the Effective Date and (ii) the compensation and benefits thenprovided to similarly situated employees of Buyer. Nothing in this Agreement shall requireBuyer to provide any particular form or type of employee benefit program, plan or policy to anyTransferred Personnel who are Non-Union Personnel as a result of the transactions contemplatedby this Agreement.

(c) The Seller shall make a payment to each Union Personnel equal to such UnionPersonnel's accrued but unused paid sick days and paid vacation days as of the Closing Date(collectively, the "Accrued PTO"). The Accrued PTO shall be paid to the applicable UnionPersonnel through the Seller's payroll system and shall be included in the last payroll period thatends prior to the Closing Date. Subject to the obligations of Seller under the CollectiveBargaining Agreement and Law and Buyer's obligations set forth in Section 7.04(h) with respectto Union Personnel, with respect to any employee benef,rt plan maintained by Buyer or anAffiliate of Buyer for the benefit of any Transferred Personnel, effective as of the Closing, Buyershall, or shall cause its Affiliate to, recognize all service of the Transferred Personnel with Seller,as if such service were with Buyer for eligibility and vesting under Buyer's employee benefitplans and programs.

(d) Subject to the obligations of Seller under the Collective Bargaining Agreementand applicable Law and Buyer's obligations set forth in Section 7.04(h) with respect to UnionPersonnel, effective as of the Closing, the Transferred Personnel who are Non-Union Personnelshall cease active participation in the Seller's Plans. The Seller shall remain liable for all eligible

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claims for benefits under the Seller's Plans that are incurred by the Non-Union Personnel prior tothe Closing Date. Subject to the obligations of Seller under the Collective BargainingAgreement and applicable Law and Buyer's obligations set forth in Section 7.04(h) with respectto Union Personnel, the Seller shall remain liable to make any contributions to Seller's Plansrelated to, and/or to fund any retirement benefits accrued by, the Transferred Personnel prior toClosing. For purposes of this Agreement, the following claims shall be deemed to be incurred as

follows: (i) life, accidental death and dismemberment, short-term disability, and workers'compensation insurance benefits, on the event giving rise to such benefits; (ii) medical, vision,dental, and prescription drug benefits, on the date the applicable services, materials or supplieswere provided; and (iii) long-term disability benefits, on the eligibility date determined by thelong-term disability insurance carrier for the plan in which the applicable Personnel participates.

(e) This Section7.04 shall be binding upon and inure solely to the benefit of each ofthe Parties to this Agreement, and nothing in this Section 7.04, express or implied, shall conferupon any other Person any rights or remedies of any nature whatsoever under or by reason of thisSection 7.04. The Parties acknowledge and agree that the terms set forth in this Section 7.04shall not create any right in any Transferred Personnel or any other Person to any continuedemployment with Buyer or any of its Affiliates or compensation or benefits of any nature or kindwhatsoever, and shall not be deemed to restrict Buyer in the exercise of its independent businessjudgment in establishing or modifuing any of the terms or conditions of the employment of theTransferred Personnel. Nothing contained in this Section 7.04 shall constitute an amendment of,or an undertaking to amend, any employee benefit plan, program or arrangement maintained byBuyer or its Affiliates or is intended to prevent Buyer or its Affiliates from amending orterminating any such employee benefit plan, program or arrangement in accordance with itsterms.

(f) Subject to applicable Law and Buyer's obligations set forth in Section 7.04(h)with respect to Union Personnel, it is expressly understood that Buyer will not acquire any asset,or assume any liability or obligation in connection with the transactions contemplated by thisAgreement relating to any of the Seller's Benefit Plans, Seller's Benefit Obligations or Contractsdescribed in Section a.18(a)(i) of this Agreement. Subject to Buyer's obligations set forth inSection 8.03(c), the Seller shall be solely responsible for any liability, funding obligation, claimor expense arising from the Seller's Plans, Seller's Benefit Obligations or Contracts described inSection a.l8(a)(i) of this Agreement, both prior to, and after, the Closing Date, except asprovided in Section 7.04(c).

(g) No later than the Closing Date, the Seller shall transfer all records pertaining tothe employment of the Transferred Personnel to Buyer including all personnel and humanresources Files and Records.

(h) Prior to the Closing, Buyer shall bargain in good faith with the Union regardingamendments to the Collective Bargaining Agreement that are intended to allow Buyer and theUnion to enter into an amended Collective Bargaining Agreement in a form that is consistentwith Buyer's existing compensation and benefits strategy (the "Amended CBA"). Buyer shalloffer to provide Union Personnel Substantially Comparable Compensation and Benefits. In theevent that Buyer and the Union do not reach an agreement on the terms of an Amended CBAprior to the Closing Date, Buyer shall have the right to set the initial terms and conditions of

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employment of the Union Personnel, and Buyer shall recognize and bargain with the Union ingood faith to reach agreement on the terms of a successor agreement to the Collective BargainingAgreement.

Section 7.05. Restrictions on Sale or Lease of Svstem: Rieht of First Refusal.

(a) Buyer hereby acknowledges and agrees that for a period of twenty (20) years

following the Closing Date (the "ROFR Period"), the Seller (or any Person to which the Sellerassigns its rights under this Section 7.05) shall have a right of first refusal with respect to a SaleTransaction, as set forth in this Section 7.05.

(b) Buyer agrees that, during the ROFR Period, it shall not enter into any legallybinding wriffen agreement or consummate a Sale Transaction, except in compliance with theterms and conditions of this Section 7.05. Upon Buyer's or any Affiliate of Buyer's receipt of abona fide Proposal from a Person that is not a direct or indirect Affiliate of Buyer (such Person,the "Independent Third Party") which Buyer desires to accept, Buyer shall, within five (5)Business Days of Buyer's determination of its desire to accept such Proposal, deliver to theSeller written notice of such Proposal (the "Proposal Notice"), which Proposal Notice shallinclude (i) a true and correct copy of the Proposal, including all schedules, exhibits and ancillarydocuments related thereto, if any, (ii) identifu or describe any other assets of Buyer or itsAffiliates, in addition to the System, to be included in such Sale Transaction, and (iii) theexpected date of consummation of the Sale Transaction contemplated by such Proposal (suchdate, together with any other dates or deadlines reflected in the Proposal and the financial andother material terms and conditions of such Proposal, collectively the "Material Terms"). Duringthe twenty (20) Business Day period following the Seller's receipt of the Proposal Notice (suchtwenty (20) Business Day period, the "Sale Proposal Review Period") (x) Buyer and Buyer'sAffiliates shall, and shall direct their Representatives to, cease any and all discussions andcommunications with the Independent Third Party and its Representatives, and (y) the Sellershall have the exclusive right to determine whether to elect to pursue the Sale Transaction;provided that the Seller, in making such determination, shall act reasonably and in good faith andtake into account the Seller's capability (financial or otherwise) to purchase the System and anyother assets to be included in the Sale Transaction on terms substantially the same as (and in anyevent no less favorable to Buyer than) the Material Terms and within a time period reasonablyproximate to the anticipated date of consummation set forth in the Proposal Notice; and provided

further, that the Seller shall only be permitted to exercise its right of first refusal pursuant to thisSection 7.05(b) with respect to all (and not less than all) of the assets of Buyer or its Affiliatesidentified or described in the Proposal Notice (including, for the avoidance of doubt, any assets

of Buyer or its Affiliates in addition to the System identified or described in such ProposalNotice). During the Sale Proposal Review Period, Buyer shall, reasonably promptly followingthe Seller's reasonable written request and subject to the Seller's execution of a customaryconfidentiality agreement containing cornmercially reasonable terms, provide the Seller and itsauthorized Representatives access to, and, if requested, copies of, such documents and otherwritten materials that were supplied by or on behalf of Buyer to the Independent Third Party andits Representatives, if any, prior to delivery of the Proposal Notice.

(c) If the Seller elects to exercise its right of first refusal hereunder pursuant toSection 7.05(b) with respect to the Proposal Notice and all assets described therein (including

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any assets in addition to the System), the Seller shall deliver a written notice (the "SellerProposal Notice") to Buyer of such election no later than 5:00 p.m. (Eastern time) on the lastBusiness Day of the Sale Proposal Review Period. The Seller's failure to provide a SellerProposal Notice prior to the expiration of the Sale Proposal Review Period shall be deemed toconstitute a decision not to exercise its right of first refusal hereunder pursuant to Section 7.05(b)with respect to the Proposal Notice, and the Seller shall be deemed to have waived its rights withrespect to the Sale Transaction contemplated by the Proposal, but not with respect to any futureProposal, subject to the other restrictions contained herein.

(d) [f the Seller timely delivers a Seller Proposal Notice, then following such deliveryand until expiration of the ROFR Sale Transaction Negotiation Period (as defined below), theSeller and Buyer shall, acting reasonably and in good faith, engage in exclusive discussions andnegotiations regarding the term and conditions of a Sale Transaction between Buyer and theSeller (a "ROFR Sale Transaction") which terms and conditions (financial and otherwise) shallbe substantially the same as (and in any event no less favorable to Buyer than) the MaterialTerms as set forth in the Proposal Notice, unless otherwise agreed by Buyer in its sole andabsolute discretion and set forth in a definitive binding agreement duly executed by Buyer. TheROFR Sale Transaction shall be conditioned upon obtaining required approvals from the PaPUC.The "ROFR Sale Transaction Negotiation Period" means the period commencing on the date ofdelivery of the Seller Proposal Notice and ending on the date that is the earlier of (i) ninety (90)days following delivery of the Seller Proposal Notice, (ii) such date as the Seller notifies Buyerthat the Seller is unwilling, unable or no longer interested in pursuing discussions andnegotiations concerning a ROFR Sale Transaction, or (iii) such date as the Seller ceases toengage in good faith negotiations concerning a ROFR Sale Transaction, as determined by Buyeracting reasonably and in good faith.

(e) If Buyer and the Seller have not entered into a definitive agreement (containingterms and conditions (financial and otherwise) substantially the same as (and in any event no lessfavorable to Buyer than) the Material Terms as set forth in the Proposal Notice (unless otherwiseagreed by Buyer in its sole and absolute discretion and set forth in a definitive binding agreementduly executed by Buyer) and such other terms as are reasonably acceptable to each of Buyer andthe Seller in their respective reasonable, good faith discretion) with respect to the ROFR SaleTransaction prior to expiration of the ROFR Sale Transaction Negotiation Period, the Seller shallbe deemed to have waived its rights with respect to the Sale Transaction contemplated by theProposal, but not with respect to any future Proposal, subject to the other restrictions containedherein.

(D For the avoidance of doubt, unless and until Buyer and the Seller duly executeand deliver a definitive agreement in respect of a ROFR Sale Transaction, Buyer shall (l) havethe right, in its sole and absolute discretion, to terminate negotiations and discussions with theSeller conceming a ROFR Sale Transaction at any time and retain ownership of the System, and(2) not be obligated or required to enter into any definitive agreement with the Seller orconsummate a ROFR Sale Transaction, provided, that, in the event that Buyer exercises its rightto terminate negotiations and discussions with the Seller concerning a ROFR Sale Transaction bygiving notice of such termination to the Seller prior to expiration of the ROFR Sale TransactionNegotiation Period, the Seller shall not be deemed to have waived its rights with respect to theSale Transaction contemplated by the Proposal giving rise to such negotiations and discussions

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concerning a ROFR Sale Transaction, nor with respect to any future Proposal, and subject to theother restrictions contained herein.

(g) With respect to each Proposal for which Buyer delivered a Proposal Notice andotherwise complied in all material respects with all of the applicable procedures andrequirements of this Section 7.05 (the "Noticed Proposal"), in the event that (i) the Seller doesnot deliver a Seller Proposal Notice to Buyer prior to the expiration of the applicable SaleProposal Review Period or (ii) Buyer and the Seller, acting reasonably and in good faith, havenot executed and delivered a definitive agreement with respect to the ROFR Sale Transactionprior to the expiration of the ROFR Sale Transaction Negotiation Period, then, and only then,Buyer and Buyer's Affiliates, as applicable, shall be free, for a period of one hundred twenty(120) days following expiration of the Sale Proposal Review Period or the ROFR Sale

TransactionNegotiationPeriod,asapplicable(the''@''),toenterintoadefinitive agreement with respect to the Sale Transaction contemplated by the Proposal Noticewith respect to such Noticed Proposal with Independent Third Party on terms and conditionssubstantially similar to, and in any event not more favorable in any material respect to theIndependent Third Party than, the terms and conditions described in the Proposal Notice;provided, however, that no such definitive agreement shall impose limitations or restrictions onthe ability of Buyer or any of its Affiliates to comply with the terms of this Section 7.05 in theevent of a Material Change with respect thereto.

(h) If, during a Sale Proposal Review Period or a Noticed Proposal Period, theIndependent Third Party proposes in writing to any changes or amendments to the applicableProposal or Noticed Proposal which (i) individually or in the aggregate are more favorable in anymaterial respect to the Independent Third Party than the original Material Terms as set forth inthe Proposal Notice, and (ii) Buyer desires to accept (such changes or amendments, collectively a''@h44re'''),thensuchProposalorNoticedProposal,aschangedoramended'shallconstitute a new Proposal which shall be subject to the terms and conditions of this Section 7.05.

(i) Buyer acknowledges and agrees that irreparable damage would occur and Sellerwould not have an adequate remedy at law in the event that any of the provisions of this Section7.05 were not performed by it in accordance with their specific terms or were otherwisebreached, and that monetary damages would not be an adequate remedy therefor, and thereforefully intend for specific performance to be the principal remedy for breaches of this Section 7.05.It is accordingly agreed that the Seller shall be entitled to an injunction or injunctions to preventbreaches of this Section 7.05 and to enforce specifically the performance of terms and provisionsof this Section 7.05 in any action instituted in any court having jurisdiction over the Parties andthe matter, without proof of actual damages, in addition to any other remedy to which the Selleris entitled at law or in equity. Buyer further agrees not to assert that a remedy of specihcperformance is unenforceable, invalid, contrary to applicable Law or inequitable for any reason,nor to object to a remedy of specif,rc performance on a basis that a remedy of monetary damageswould provide an adequate remedy for any such breach.

0) The Seller's rights and obligations under this Section 7.05 may be assigned (inwhole, but not in part) by the Seller at any time prior to the earlier of the expiration of the ROFRPeriod or the consummation of a Sale Transaction with any Person other than the Seller (subjectto Buyer's compliance with the terms of this Section 7.05); provided that the Seller shall deliver

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to Buyer written notice of any such assignment prior to the effectiveness of such assignment.For the avoidance of doubt, each reference to "the Seller" in this Section 7.05 shall mean theSeller or any Person to which the Seller assigns its rights under this Section 7.05 in compliancewith this Section 7.050).

Section 7.06. Consent Decree.

(a) Consent Decree Oblieations: Comoliance Schedule. Between the Effective Dateand the Closing, (i) the Seller shall diligently perform and implement the CSO Controls, the NineMinimum Control Plan, and the Long Term Control Plan in accordance with the requirements ofthe Consent Decree, and (ii) the Seller shall continue to implement activities relating to theConsent Decree and Long Term Control Plan projects in accordance with, and shall comply with,the schedule set forth in Schedule 7.06 (the "Compliance Schedule"), which ComplianceSchedule sets out and requires the Seller to continue to perform certain activities during theperiod between the Effective Date and the Closing Date relating to the Seller's obligations underthe Consent Decree and the Long Term Control Plan. The Seller shall confer with Buyer prior toproposing any revisions to the deadlines or projects contained in Appendix B of the ConsentDecree proposed by the Seller, which require approval by parties to the Consent Decree; and theSeller shall not agree to the expansion or acceleration of any such project without the priorwritten approval of Buyer. Any change to the deadlines or projects contained in Appendix B ofthe Consent Decree following the Effective Date that has been agreed to by Buyer and has beenseparately approved by the parties to the Consent Decree before the Closing Date shall beincluded in the Amended Consent Decree.

(b) Acknowledement of Seller Notice to Buver the Consent Decree. Buyeracknowledges that it has received from the Seller a true, correct and complete copy of theConsent Decree and that Buyer understands and agrees to assume, as of the Closing Date, allobligations set forth in the Consent Decree, as amended in accordance with Section 7.06(d).

(c) Notice to the United States. EPA and PaDEP. Buyer and the Seller shall, on theEffective Date, cause notice of execution of this Agreement and Buyer's agreement to assumethe Seller's obligations under the Consent Decree, which shall become effective as of theClosing Date, to be sent to the United States Department of Justice ("DOJ"), EPA and PaDEP as

required under Section II and Section XVI of the Consent Decree.

(d) Transition Plan and Amended Consent Decree. Buyer, in consultation with theSeller, shall prepare a transition plan ("Transition Plan") setting forth (i) Buyer's financial andtechnical ability to assume the Seller's obligations and liabilities under the Consent Decree, (ii)Buyer's plans for implementation of the obligations under the Consent Decree after Closing(including plans for organization and management of the CSO Controls and implementation ofthe Long Term Control Plan). The Seller and Buyer shall jointly seek the agreement of the DOJ,EPA and PaDEP to an amendment to the Consent Decree that contains the following elements:(l) any necessary updates to the factual recitals of the Consent Decree; (2) substitution of Buyerfor the Seller as the "Defendant" under the Consent Decree; (3) release of the Seller inaccordance with Article II, Section 5 of the Consent Decree; (4) recognition that the System willcontinue to be governed by the provisions of the Consent Decree, implementing the EPA CSOPolicy; (5) modihcation of the Nine Minimum Controls Plan to reflect the manner and methods

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by which Buyer, as a public utility, would implement the Nine Minimum Controls Plan,including identification of those activities (such as street sweeping and enforcement ofordinances) that would continue to be performed by the City; (6) incorporation of the elementpreviously agreed to pursuant to the Notice of Non-Material Modification of Consent Decreedated December 18, 2015; (7) updates to the notice provisions in Sections 83-84 of the ConsentDecree; and (8) such other amendments as agreed to by the Parties to the Consent Decree (the"Amended Consent Decree"). Assuming the accuracy of the Seller's representations set forth inSection 4.15 and the Seller's compliance with and performance of its obligations under Section7.06(a), the Seller and Buyer, in seeking approval to the Amended Consent Decree, do notanticipate requesting any material modification to the substantive obligations set forth in theConsent Decree, including the schedule for implementation of the Long Term Control Plan;provided, however, that in the event that Buyer, reasonably and in good faith, determines that theSeller has breached any of its representations and warranties set forth in Section 4.15 or that theSeller has failed to comply with and perform its obligations under Section 7.06(a)Section7 .06(a), Buyer shall have the right to negotiate with the DOJ, EPA and PaDEP an adjustment tothe schedules for the Long Term Control Plan and Nine Minimum Controls Plan so as to allowBuyer sufficient time to complete such work after the Closing Date without incurring fines orpenalties. The Parties acknowledge and agree that the release of the Seller pursuant to theprovisions of Article II, Section 5 of the Consent Decree shall require approval by the UnitedStates District Court for the Middle District of Pennsylvania of the substitution of Buyer as aDefendant and the Amended Consent Decree. For the avoidance of doubt, in no event shall anyrelease of the Seller under or with respect to the Consent Decree constitute, or be deemed toconstitute a release or waiver, or in any way affect the Seller's obligations under this Agreementwith respect to the Consent Decree and the performance of the Seller's obligations with respectto the Consent Decree prior to the Closing.

(e) Cooperation. The Seller and Buyer shall cooperate and act in good faith innegotiating and securing agreements with the City, the Borough and municipalities served byintermunicipal agreements under which the City, the Borough, and such other municipalitiescommit to undertake and perform those actions required to implement obligations under therevised Nine Minimum Control Plan to be approved by EPA and PaDEP and the IndustrialPretreatment Program, including activities relating to street sweeping, and the adoption,maintenance and enforcement of ordinances relating to prohibited or regulated discharges to theSystem. The Seller and Buyer shall also cooperate and act in good faith in evaluating thefeasibility of transferring and allowing the City and the Borough to utilize, in relation tooperation of their MS4 System, nutrient and sediment reduction offsets or credits generated

through operation of the existing wastewater treatment plant at loadings less than the sedimentand nutrient cap loads established in the NPDES Permit in excess of those offsets or creditsrequired by Buyer in relation to operation of the System ("Excess Offsets and Credits"), and ifdetermined to be feasible, negotiating in good faith arrangements on reasonable terms fortransferring to the City and the Borough such Excess Offsets and Credits to the extent required tomeet the nutrient and sediment loading limitations applicable to the MS4 System.

Section 7.07. Current and Future Rates.

(a) The Parties acknowledge that following the Closing, (i) the initial customercharge and consumption charge applicable to wastewater customers in the Service Area shall be

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the customer charge and consumption charge being paid by those customers for wastewaterservice being provided by the Seller immediately prior to the Closing Date and said charges shallcontinue in full force and effect until changed in accordance with this Agreement and applicableLaw, (ii) Buyer may, subject to PaPUC approval and applicable Law, bill wastewater customersin the Service Area a monthly customer charge, provided that the aggregate amount of thecustomer charge does not change until changed in accordance with this Agreement andapplicable Law, and (iii) the base rate and non-base rate increases (collectively, "Ra!eIncrease(s)") for Service Area wastewater customers, subject to PaPUC approval and applicableLaw, will likely vary each year or more frequently and, in some years, there may be no Ratelncrease. The Parties fuither acknowledge that tariffed rates, as set by the PaPUC, are subject toapplicable Law and binding upon the Parties. The Parties agree, subject to PaPUC approval andapplicable Law, that wastewater customers in the Service Area will immediately following theClosing be subject to Buyer's prevailing wastewater tariff on file with and as approved by thePaPUC with respect to all rates other than the customer charge (known under Buyer's currenttariff as "monthly service charge") and consumption charge, including but not limited to capacityreservation fees, tapping fees and the like, as well as non-rate related terms and conditions ofservice, including but not limited to billing frequency, termination procedures and the like.

(b) Notwithstanding anything to the contrary in Section 7.07(a), Buyer shall notimplement a Rate Increase for the Service Area wastewater customers that would be effectiveprior to January 1, 2018. Buyer shall not propose or implement a distribution improvementsystem charge for the Service Area wastewater customers before January 1,2019.

(c) In the first base rate case filed by Buyer after the Effective Date of thisAgreement, subject to PaPUC approval and applicable Law, Buyer shall not propose or requestany rate increase to the base rates or change in rate design to be applicable to wastewatercustomers in the Service Area. However, the Parties acknowledge that Buyer shall have thereasonable discretion to address and agree to base rate increases and changes in rate design forwastewater customers in the Service Area in the context of settlement of the base rate case.

subject to PaPUC approval and applicable Law.

(d) Not later than ninety (90) days after the end of year ten (10) following the ClosingDate, Buyer shall provide to Seller a written statement and calculation showing as accurately as

possible the cumulative positive difference, if any, over that ten-year period between (i) theannual revenues associated with the provision of wastewater service to customers in the ServiceArea calculated at PaPUC rates in accordance with Schedule 7.07(d) and (ii) a l.9o/o CompoundAnnual Growth Rate ("CAGR") rate increase in annual revenues associated with the provision ofwastewater service to customers in the Service Area over that ten-year period relative to thestarting amount of annual revenues calculated in accordance with Schedule 7.07(d) ("VarianceAdjustment"). Seller shall review and advise Buyer within 30 days of Seller's receipt of suchstatement of any problems or suggested modihcations to the calculation of the VarianceAdjustment and written statement. The Parties shall timely and in good faith, resolve anyproblems or suggested modifications to the Variance Adjustment identified by Seller or Buyer.Any dispute regarding the calculation of the Variance Adjustment shall be timely submitted forresolution to the office of a mutually acceptable nationally recognized firm specializing in utilityratemaking, other than consultants of Buyer or Seller or their Affiliates who, acting as expertsand not arbitrators, shall resolve the dispute. The dispute shall be resolved within thirty (30)

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days and the costs of retaining the firm and resolving the dispute shall be shared equally byBuyer and Seller. Buyer shall make an adjustment, without interest or other penalty, to thePurchase Price in the amount of the Variance Adjustment, if any, in accordance with theprocedures and timing set forth in Section 7.07(e).

(e) Within thirty (30) days of final resolution of the calculation of the VarianceAdjustment, Seller shall notify Buyer whether the adjustment to the Purchase Price in the amountof the Variance Adjustment shall be paid directly to Seller or distributed to Buyer's then-currentwastewater customers in the Service Area. If Seller elects direct payment to itself, Buyer shallmake such payment within thirty (30) days without further obligation. If Seller electsdistribution of the adjustment of the Purchase Price for the Variance Adjustment to Buyer's then-current wastewater customers in the Service Area, Buyer shall at its sole cost and expense,subject to PaPUC approval and applicable Law, timely implement procedures and protocolsreasonably acceptable to Seller and then make a one-time equal, flat-rate distribution to allcustomers then being served by Buyer in the Service Area their proportionate share of theVariance Adjustment as mutually agreed-upon by Buyer and Seller. Buyer shall timely certify inwriting to Seller when the distribution of the Variance Adjustment has commenced and beencompleted. In the event the PaPUC fails to allow Buyer to timely implement procedures andprotocols and make distributions to customers in the Service Area as aforesaid, Buyer shall paythe Variance Adjustment as an adjustment to the Purchase Price directly to Seller within thirty(30) days of final resolution of the calculation of the Variance Adjustment. If Buyer fails to paythe Variance Adjustment as an adjustment to the Purchase Price within thirty (30) days of thefinal resolution of the calculation of the Variance Adjustment (whether where Seller initiallyrequests direct payment or the PaPUC fails to allow distribution to customers), Buyer shall paySeller an amount of $2,500.00 per day for each day that all or any portion of the VarianceAdjustment has been unpaid after 30 days following resolution of the calculation of the VarianceAdjustment. The Parties intend that such damages constitute compensation, and not a penalty,and acknowledge and agree that the harm caused by the Buyer's breach of its obligations underthis Section would be impossible or very difficult to accurately estimate, and that such damagesare a reasonable estimate of the anticipated or actual harm that might arise from Buyer's breachof its obligations under this Section. In the event the PaPUC fails to allow distribution by Buyerto then-current Service area wastewater customers, Buyer shall also timely pay Seller thereasonable costs of (i) hiring a third party to administer and pay the Variance Adjustment towastewater customers in the Service Area and (ii) establishing the processes and protocols tomake such payment as described herein. Notwithstanding anything in this subparagraph to thecontrary, Buyer shall have the right to reasonably approve the third party selected by Seller toadminister and pay any Variance Adjustment to wastewater customers in the Service Area, but inno event shall such approval be unreasonably delayed, conditioned, withheld or denied.

(0 The Variance Adjustment shall be calculated in accordance with Schedule7.07(d\.

(g) If requested by the Seller (not more than once per year), no later than (60) daysafter such request, Buyer shall provide to the Seller a written statement showing (i) for the 12

month period ending on the most recently completed anniversary of the Closing Date, theprojected Variance Adjustment calculated in accordance with Schedule 7.07(d) and (ii) the then-current Annual Variance (as defined in Schedule 7.07(d)). The written statement shall be

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provided for informational purposes only and shall not trigger an affirmative duty of Buyer totake a specific action, or be deemed to be any agreement or acquiescence of Seller to any of thedata and information contained therein. The written statement referenced herein shall besubstantially in the form of the Hypothetical Example contained in Schedule 7.07(d), along withreasonable supporting workpapers.

(h) At the end of year ten (10) following the Closing Date, if the wastewater baserates for the Service Area are lower by customer class than the Average System Rates forwastewater service charged to Buyer's non-Service Area wastewater customers, Buyer may seekfrom the PaPUC base rate increases for Service Area wastewater customers that would beeffective during years eleven (l l) through thirteen (13) following the Closing that wouldequalize the base rates charged by Buyer to Service Area wastewater customers with AverageSystem Rates effective for Buyer's non-Service Area wastewater customers throughoutPennsylvania. Buyer will attempt to implement the base rate increases over the three-year periodin approximately one-third (1/3) increments each year, subject to PaPUC approval and applicableLaw. However, the Parties acknowledge that Buyer shall have the reasonable discretion toaddress and agree to base rate increases for wastewater customers in the Service Area in thecontext of settlement of a base rate case, subject to PaPUC approval and applicable Law.

(i) If during years eleven (11) through thirteen (13) wastewater base rates in theService Area are higher by customer class than the Average System Rates for wastewater servicecharged to Buyer's other wastewater customers, Buyer shall not seek a base rate increase for theService Area wastewater customers during this period. However, the Parties acknowledge thatBuyer shall have the reasonable discretion to address and agree to base rate increases forwastewater customers in the Service Area in the context of settlement of a base rate case. subiectto PaPUC approval and applicable Law.

0) If at the end of year ten (10) following the Closing Buyer's wastewater customersin the Service Area are not paying the same non-base rates (including the distribution systemimprovement charge) as Buyer's other customers being served under Average System Rates,Buyer will attempt to bring the non-base rates of customers in the Service Area into conformitywith the non-base rates of the other customers being served under Average System Rates by theend of year thirteen (13) following the Closing, subject to PaPUC approval and applicable Law.

(k) After year thirteen (13) following the Closing, the Parties acknowledge that Buyermay, subject to PaPUC restrictions and applicable Law, propose rate adjustments reasonablynecessary to make the total rates (inclusive of base rates and non-base rates such as thedistribution system improvement charge) for wastewater customers of the Service Areaconsistent with the total rates (inclusive of base rates and non-base rates such as the distributionsystem improvement charge) of Buyer's customers who are subject to Average System Rates.

(l) Solely for the purposes of any calculation of the projected or actual VarianceAdjustment and the provisions of written statements related thereto pursuant to this Section 7.07,the "Closing Date" shall be deemed to have occurred on the date that is the last day of the monthin which the Closing actually occurs.

Section 7.08. Operation and Maintenance of the MS4 Svstem.

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(a) General operation and maintenance oblisations. Subject to applicable Law, theSeller, the City and the Borough, as the case may be, shall at all times maintain ownership of theMS4 System, the Stormwater System Assets and the City's NPDES Permit.

(b) Communitv-based Public-Private Partnership Approach for Inteeration of theMS4 System and the System. Following the Closing, Buyer shall cooperate with the City andthe Borough, and use corlmercially reasonable good faith efforts to evaluate the feasibility ofand develop a mutually-acceptable plan for financing, management and operation of the MS4System in a manner that is consistent with the community-based public-private partnershipapproach described in Section 6 of Buyer's response to the Request for Best and Final Offers forthe Purchase of the Seller's Sewer System and Sewage Treatment Works dated as of October 5,

2015, and in compliance with applicable Law.

Section 7.09. Additional Asreements.

(a) From and after the Closing Date and for a period of no less than ten (10) yearsfollowing the Closing (except, in the case of clause (xi) of this Section 7 .09(a), for such shorterperiod set forth therein), Buyer shall comply with the following covenants and agreements,subject to applicable Law and subject in all cases to Section 7.09(b):

(i) Buyer will establish, in consultation with the Seller, within a reasonableperiod of time following the Closing, and maintain, a public outreach program, pursuantto which Buyer will, in good faith, use cofilmercially reasonable efforts to explore andconsider the formation of a citizens' advisory council comprising representatives from thecommunities served by the System and the adoption of other public outreach practicesestablished in the Service Area;

(ii) Buyer shall, within a reasonable period of time following Closing,establish and maintain or caused to be maintained (either directly by Buyer, by Buyer'sAffiliates or by a third party engaged by Buyer, in any case at Buyer's sole discretion) a

local, publicly accessible facility that accepts bill payment from the System's customers;

(iii) Buyer shall, within a reasonable period of time following Closing,establish and maintain or caused to be maintained a 24-hour toll-free customer servicetelephone number for emergencies with respect to the System, and will use commerciallyreasonable efforts to dispatch service requests for the efficient provision of customerservices;

(iv) Buyer shall, within a reasonable period of time following Closing,establish policies, procedures and systems designed to (l ) ensure that billing, account andservice questions with respect to the System will be answered by live customer servicerepresentatives between the hours of 7:00 am to 7:00 pm (ET) and (2) enable customersof the System to pay their bills by mail, direct debit, online or at a local payment station;

(v) Buyer shall, within a reasonable period of time following Closing,establish policies, procedures and systems designed to provide (1) that each customer ofthe System that receives both water and sewer services from Buyer will receive a singlebill that incorporates such customer's charges for both water and sewer utilities and (2) a

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single point of contact for customer service requests for both water and sewer utilitiesprovided by Buyer within the Service Area;

(vi) Buyer will maintain a website or similar service for customers to accessfor information related to the System, provided that the content and scope of suchinformation shall be determined by Buyer in its sole discretion;

(vii) Buyer and Buyer's Affiliates shall, after the Closing Date and no later thanthe end of the calendar year 2020, hire or offer to hire in the City or otherwise inconnection with the System no less than one hundred (100) individuals (expresslyexcluding Transferred Personnel) for positions with Buyer or Buyer's Affiliates that donot exist on, and are created by Buyer and its Affiliates following, the Closing Date, andthe compensation and benefits of such newly-created positions will be substantiallycomparable in the aggregate to the compensation and benefits of Buyer's water systememployees in similar positions as of the date hereof, and Buyer and Buyer's Affiliatesshall continue to offer to hire such individuals for such positions until the earlier of (x)such time as Buyer and Buyer's Affiliates hire one hundred (100) individuals for suchpositions or (y) the end of the calendar year 2020;

(viii) Buyer will ensure its Building Better Communities program, buildingtrails, parks and playgrounds within the community, its H2O - Help to Others Programfor low-income customers, frre fighter grant program and other charitable programs (orsubstantially similar equivalents) will be either continued within or expanded into, as

applicable, the communities served by the System;

(ix) to the extent consistent with policies and initiatives of Buyer in effect as ofthe date hereof and otherwise permitted under applicable Law, Buyer will, within a

reasonable period of time following the Closing, establish policies and proceduresdesigned to provide minority business enterprises, women-owned business enterprises,veteran-owned business enterprises and locally-based businesses the opporhrnity tocompete for work related to the System and contract with Buyer;

(x) in Buyer's first base rate proceeding with respect to the System followingthe Closing, Buyer shall include a request in such proceeding to combine partially, underPennsylvania's System Improvement Charges Act l1 of 2012 ("Act 11"), Buyer's waterand wastewater revenue requirements for ratemaking purposes to ensure the System'scustomers benefit from Act 1l in the same manner as its other customers throughoutPennsylvania and to the extent permitted by the PaPUC and applicable Law; provided,that Buyer shall nonetheless have the reasonable discretion to address and agree to base

rate increases for wastewater customers in the Service Area in the context of settlementof a base rate case, and nothing contained in this clause (x) shall be deemed to restrict orlimit Buyer in the context of any such settlement, subject to PaPUC approval andapplicable Law; and

(xi) subject to applicable Law, during the one (1) year period following theClosing Date, Buyer's collection standards and practices with respect to customers of theSystem will be consistent in all material respects with the collection standards and

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practices utilized by Buyer as of the date hereof with respect to customers of the WaterSystem.

(b) Notwithstanding anyhing in this Section 7.09 to the contrary, neither Buyer norany of Buyer's Affiliates shall be liable or responsible to the Seller or any other Person, nor bedeemed to have defaulted under or breached this Section 7.09, for any failure or delay by Buyeror its Affiliates in fulfilling or performing any obligation under any provision of Section 7.09(a),when and to the extent such failure or delay is directly or reasonably proximately caused by, or adirect or reasonably proximate result of, any of the following events, states of facts, occurrences,non-occurrences, circumstances, developments or changes, in each case beyond the reasonablecontrol of Buyer (but not including, for the avoidance of doubt, any such event, state of facts,occurrence, non-occrurence, circumstance, development or change which results from anyintentional or willful act by Buyer or Buyer's Affiliates or their respective Representatives (intheir capacities as such) designed or intended to result in Buyer being relieved of its obligationsunder Section 7.09(a)): (i) flood, earthquake, hurricane, tornado, fire, explosion, landslide,natural disaster or other "acts of God", (ii) war, invasion, hostilities (whether war is declared ornot), sabotage, terrorist threats or acts, riot or other civil uffest, (iii) enactment of or changes inapplicable Law or the interpretation or enforcement thereof, (iv) action by any GovernmentalAuthority, (v) national or regional emergency, (vi) strikes, labor stoppages or slowdowns orother industrial disturbances, (vii) shortage of adequate power or transportation facilities, (viii)breakage or accidents to machinery, pipelines, dams or canals or partial or entire failure orcontamination of water supply, and (ix) other similar events and circumstances beyond thereasonable control of Buyer. In the event of a failure or delay by Buyer in fulfilling orperforming any term of this Section 7.09 due to any such event, state of facts, occurrence, non-occurrence, circumstance, development or change beyond Buyer's reasonable control, Buyershall use commercially reasonable efforts to end the failure or delay and commence or resumethe performance of its obligations as soon as reasonably practicable after the end of such event,state of facts, occurrence, non-occrurence, circumstance, development or change (includingthrough the use of alternate sources, workaround plans or other commercially reasonable meansto permit Buyer to perform such obligations), and Buyer and its Affiliates shall use commerciallyreasonable efforts and act in good faith in the performance of their obligations under this Section7.09; provided that (l) Buyer's commercially reasonable efforts under this Section 7.09(b) shallin no event require Buyer to incur any extraordinary costs or expend resources which are notreasonably proportional to the costs that would be incurred or resources that would be expendedin Buyer's performance of the applicable obligation Section 7.09(a), and (2) in the event thatBuyer's performance of any obligation under this this Section 7.09 is prevented, delayed orotherwise adversely impacted by the enactrnent of or change in applicable Law or theinterpretation or enforcement thereof or an action by any Governmental Authority, in no eventshall this Section 7.09(b) be deemed to require Buyer to violate any such Law or take any actionwith respect to a Governmental Authority (including requesting any unique or extraordinaryconcession or other Governmental Approval) which Buyer, acting reasonably and in good faithand based on the advice of counsel, determines would reasonably be expected to adversely affectBuyer's or its Affiliates' standing or relationship with such Governmental Authority.

(c) Buyer acknowledges that, upon conveyance of the Acquired Assets to Buyer,Buyer will be subject to, among other Taxes, real estate Taxes, which shall be paid by Buyer.During the two (2) year period following the Closing Date, in the event of any real property Tax

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assessment of the Real Property owned in fee by Buyer that would result in Buyer being requiredto pay an aggregate amount of real estate Taxes equal to or less than $400,000 for such year,Buyer shall not appeal any such assessment during such two (2) year period.

Section 7.10. Exclusivitv. From and after the Effective Date and until the earlier of theClosing Date or the termination of this Agreement in accordance with its terms, except for thetransactions contemplated by this Agreement, (a) without the prior written consent of Buyer, theSeller, the City and the Borough and their respective Affiliates will not, and will cause theirrespective Representatives and other advisors not to, directly or indirectly, (i) solicit, initiate orencourage submission of any inquiry, proposal or offer from any Person relating to anytransaction involving any sale or transfer of any of the Acquired Assets or the System, (ii) enterinto or participate in any discussions or negotiations regarding, or furnish any information to orcooperate with any Person with respect to, any fransaction involving any of the Acquired Assetsor the System, or (iii) enter into any negotiation, discussion, Contract, agreement, instrument,arrangement or understanding with any Person relating in any manner to any transactioninvolving any sale, transfer or other disposition of any of the Acquired Assets or the System; and(b) in the event that the Seller, the City, the Borough, their respective Affiliates or any of theirrespective Representatives or other advisors receives any proposal with respect to any of thematters described in the foregoing clause (a), the Seller shall promptly (but in no event later thantwo (2) Business Days after receipt thereof) communicate to Buyer the existence of any suchproposal.

Section 7.1 1. Outstandinq Indebtedness.

(a) As provided in Section 3.01(a), Buyer has the option, upon reasonable advancewritten notice to the Seller, in lieu of paying (on behalf of the Seller) in full the total amount ofOutstanding Indebtedness at the Closing, to assume any of the Seller's and the City's obligationsunder the Outstanding Indebtedness which may be lawfully assigned to and assumed by Buyerpursuant to applicable Law and the terms of the Contracts governing the OutstandingIndebtedness (such portion of the Outstanding Indebtedness, the "Assisnable OutstandinsIndebtedness").

(b) Not less than forty five (45) days prior to the Closing Date, Buyer shall notifu theSeller in writing which items of the Outstanding Indebtedness Buyer desires to assume as

Assignable Outstanding Indebtedness. Recognizing that it may be necessary for Buyer and theSeller to obtain consents and approvals from third parties and take other actions in order forBuyer to assume Assignable Outstanding Indebtedness, the Seller and Buyer shall cooperate withrespect to the giving of all notices and the making of all requests and the furnishing of allinformation and documents as Buyer shall reasonably determine to be necessary or appropriatein order to qualifu any portions of Outstanding Indebtedness as Assignable OutstandingIndebtedness. Notwithstanding anything herein contained to the contrary, in connection with anyAssignable Outstanding Indebtedness which Buyer elects to assume, in no event may suchAssignable Outstanding Indebtedness be assumed by Buyer unless in connection with such

assignment and assumption, the Seller and the City are released from any and all obligationsunder such Assignable Outstanding Indebtedness.

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(c) With respect to all Outstanding Indebtedness other than Assignable OutstandingIndebtedness (if any), the Seller shall take all such action as shall be required under the terms ofsuch Outstanding Indebtedness (including any indentures and loan agreements relating thereto)to call such Outstanding Indebtedness for prepayment or redemption on the Closing Date (if suchOutstanding Indebtedness is then subject to prepayment or redemption) and to terminate and

cancel all commitments to lend as of the Closing Date (in the case of lines of credit under whichthe Seller is the borrower) or to arrange for the legal defeasance of such OutstandingIndebtedness (if such Outstanding Indebtedness is not then subject to prepayment or redemption)as of the Closing Date, which arrangements may be required to include the creation of a

defeasance escrow, the subscription for investment securities for the defeasance escrow, theobtaining of an accountant's verification report and the delivery of legal opinions. All such

action of the Seller shall be subject to the reasonable review and approval of Buyer.

Section7.12. PaPUC Approval.Commencing on the Effective Date, Buyer covenantsand agrees to timely initiate and faithfully prosecute, along with Seller as co-applicant, thenecessary proceedings to obtain from the PaPUC (i) the issuance of certificates of publicconvenience to Buyer to provide wastewater services in the Service Area and the acquisition ofthe System by Buyer, (ii) approval of this Agreement and any other contractual arrangements

between Buyer and municipalities for the provision of wastewater services in the Service Area inaccordance with Section 507 of the Public Utility Code, 66Pa. C.S. $ 507, (iii) approval to allowBuyer to implement procedures and protocols and then distribute the Variance Adjustment towastewater customers being served by Buyer in the Service Area as provided in and limited bySection 7.07(e), (iv) approval of Buyer's initial pro forma tariff applicable to Service Areacustomers, and (v) approval of a tariff supplement incorporating Buyer's Industrial PretreatmentProgram applicable to the System into Buyer's tariff to be frled by Buyer during the course of thePaPUC proceeding. The Seller shall assist and cooperate with Buyer in connection with Buyer'sperformance of its obligations under this Section 7.12(a) in accordance with the Seller'sobligations pursuant to Section 9.02 and Section 9.04.

(b) The Parties acknowledge and agree that Buyer shall be primarily responsible forprosecuting the PaPUC proceedings referenced in Section 7.I2(a), that Buyer may establishreasonable processes and procedures for prosecuting the PaPUC proceedings to which Seller andits representatives shall be required to comply, and that Seller shall act with due diligence and

dispatch in addressing all matters pertinent to the prosecution of the PaPUC proceedings so as tonot prejudice the Parties' participation in that proceeding or the potential outcome thereof.Notwithstanding the foregoing, the Parties shall in good faith timely cooperate with each other indeveloping and implementing procedures and protocols for addressing all aspects of the PaPUCproceedings referenced in Section 7 .12(a) including developing case strategy, pre-filing meetingswith regulators and stakeholders, preparing all pleadings, responding to discovery, developingtestimony, conducting evidentiary hearings, preparing briefs and other pleadings, etc. In theevent of a good faith dispute between the Parties regarding strategy, tactics or other aspects ofthe PaPUC proceeding that cannot in the exercise of good faith and due diligence be resolvedtimely, Buyer shall have the right in such circumstances to take such action as it reasonablydeems necessary consistent with this Agreement.

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(c) Nothing contained herein shall preclude, consistent with Section 7.12(b), thefiling for reconsideration of or appealing a PaPUC Final Order if the order contains terms orconditions that are not reasonably satisfactory.

(d) Notwithstanding anything to the contrary in this Agreement, in the event thePaPUC issues an order approving the transaction as contemplated by this Section 7.12 and if allother conditions precedent to Closing have been fully satisfied in accordance with the terms ofthis Agreement, the Parties may elect in their discretion and by mutual agreement to close on thetransaction (i) notwithstanding a pending appeal or request for reconsideration with respect tosuch order or (ii) during the otherwise applicable appeal/reconsideration periods if no party has

been aggrieved by the PaPUC order and the Panies reasonably believe there is little likelihood ofa successful legal or other challenge to said PaPUC order.

Section7.13. Insurance. To the extent that the Seller (with respect to the System orany Acquired Assets), the System or any Acquired Assets were insured under any occurence-based insurance policies of the City or the Borough (or with respect to any Acquired Assets, anyoccurrence-based insurance policies of the Seller) prior to the Closing Date, following theClosing, at Buyer's written request, the Seller shall, and shall cause the City or the Borough, as

applicable, to, make claims under such policies with respect to occurrences, events, conditions,or circumstances to the extent relating to the System or any Acquired Asset that occurred orexisted prior to the Closing. The Seller does not represent, warrant or covenant that (i) suchinsurance policies will provide coverage for any claims reported after the Closing that Buyermay elect to make, (ii) issuers of such policies will not wrongfully refuse to honor any suchclaims, or (iii) it, the City or the Borough will maintain any such insurance policies following theClosing Date. The Seller, the City or the Borough, as the case may be, shall provide reasonableassistance to Buyer (at Buyer's sole cost and expense) in connection with the tendering of suchclaims to the applicable insurers under such insurance policies, including providing Buyer with acopy of the applicable policy following the request of Buyer. The Seller, the City or theBorough, as the case may be, shall remit any recoveries with respect to any claims asserted byBuyer under any such insurance policies in excess ofreasonable costs ofrecovery ofthe Seller,the City or the Borough, as the case may be, including deductibles and the amount of anyincreased premiums retroactively applied as a result of the payment by the applicable insurers ofsuch claims, or any increases in premiums for the year following the year in which any suchclaims were paid by the applicable insurers, in either case to the extent the Seller, the City or theBorough, as the case may be, can demonstrate to Buyer that the amount of any such increasedpremiums was attributable to such claims. In the event of any dispute regarding the date of anyloss or occurrence, the terms of the applicable policies shall govern.

ARTICLE VIII.

INDEMNIFICATION

Section 8.01. Survival. All representations and warranties contained in this Agreementshall survive until the Escrow Release Date, except that (a) the representations and warranties ofthe Seller set forth in Section 4.01 (Existence and Power), Section 4.02 (Authorization andValidity of Agreement), Section 4.14 (Environmental Compliance), Section 4.15 (ConsentDecree Matters), Section 4.21 (Title to the Acquired Assets; Sufficiency) and Section 4.22

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(Brokers' and Finders' Fees) (collectively, the "Seller Fundamenta ") shallsurvive the Closing indefinitely or until the latest date permitted by applicable Law, and (b) therepresentations and warranties of Buyer set forth in Section 5.01 (Existence and Power), Section5.02 (Authoization and Validity of Agreement), and Section 5.05 (Brokers' and Finders' Fees)(collectively, the "Buyer Fundamental Representations") shall survive the Closing indefinitely oruntil the latest date permitted by applicable Law. The covenants and agreements of the Partiescontained herein shall survive the Closing indefinitely or for the shorter period explicitlyspecified therein, except that for such covenants and agreements that survive for such shorterperiod, breaches thereof shall survive indefinitely or until the latest date permitted by applicableLaw. Notwithstanding the preceding sentences, (x) any breach of representation, warranty,covenant or agreement in respect of which indemnity may be sought under this Agreement shallsurvive the time at which it would otherwise terminate pursuant to the preceding sentences, ifnotice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have beengiven to the party against whom such indemnity may be sought prior to such time, and (y)nothing contained in this Section 8.01 shall limit in any way any rights a Party may have to bringclaims grounded in fraud, intentional misrepresentation or willful misconduct, which rights shallsurvive the Closing indefinitely.

Section 8.02. Indemnification bv the Seller. Subject to the terms and conditions ofthis Article VIII, the Seller shall indemnify, defend and hold harmless, Buyer and its successorsand Affiliates and their respective employees, officers, directors, trustees and agents (the "BuyerIndemnified Persons"), from and against any and all Damages arising from or relating to: (a) anymisrepresentation as to, or any inaccuracy in, any of the representations and warranties of theSeller contained in this Agreement, in any of the Related Agreements or in any exhibit, schedule,certificate or other instrument or document furnished by or on behalf of the Seller pursuant tothis Agreement (provided, that for purposes of determining the existence of any inaccuracy in orbreach of any representation or warranty and calculating the amount of any Damages withrespect thereto under this Article VIII, any materiality, Material Adverse Effect or similarqualifications shall be disregarded and deemed deleted therefrom for such purposes (except withrespect to (i) the representations and warranties contained in Section 4.06(a) and (ii) where suchprovision requires disclosure of lists of items of a material nature or above a specifiedthreshold)); (b) any breach or nonfulfillment of any of the covenants or agreements of the Sellercontained in this Agreement, in any of the Related Agreements or in any exhibit, schedule,certificate or other instrument or document furnished by or on behalf of the Seller pursuant tothis Agreement; or (c) any Excluded Liability (regardless of whether or not the Seller disclosedany such Excluded Liability in any Schedule or otherwise, including any Excluded Liabilityimposed on Buyer as a result of transferee, successor or similar liability (including bulk sales,bulk transfer or similar Laws) or otherwise, and including any Taxes arising out of the ownershipof the Acquired Assets and out of the operation of the System before the Closing and the Seller'sportion of any Straddle Period Taxes, and including the matters set forth on Schedule 4.14) orany Excluded Asset.

Section 8.03. Indemnification bv Buver. Subject to the terms and conditions of thisArticle VIII, Buyer shall defend, indemniff and hold harmless the Seller and its successors andAffiliates and each of their respective employees, officers, directors and agents (the "SellerIndemnified Persons") from and against any and all Damages arising from or relating to: (a) anymisrepresentation as to, or any inaccuracy in, any of the representations and warranties of Buyer

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contained in this Agreement, in any of the Related Agreements or in any exhibit, schedule,certificate or other instrument or document furnished by or on behalf of Buyer pursuant to thisAgreement Qtrovided, that for purposes of determining the existence of any inaccuracy in orbreach of any representation or warranty and calculating the amount of any Damages withrespect thereto under this Article VIII, any materiality, material adverse effect or similarqualifications shall be disregarded and deemed deleted therefrom for such purposes (exceptwhere such provision requires disclosure of lists of items of a material nature or above aspecified threshold)); (b) any breach or nonfulfillment of any of the covenants or agreements ofBuyer contained in this Agreement, any of the Related Agreements or in any exhibit, schedulecertificate or other instrument or document furnished by or on behalf of Buyer pursuant to thisAgreement; (c) any unfair labor practice charges or other claims that Seller violated Article 16,

Transfer of Authority, of the Collective Bargaining Agreement, or failed to condition the sale ofthe Acquired Assets on Buyer's assumption of the Collective Bargaining Agreement, includingany and all awards of lost contractual wages or benefits against the Seller which Union Personnelwould have received had the Buyer adopted all complete terms and conditions of the CollectiveBargaining Agreement; provided, however that no Seller Indemnifred Person have the right toassert a claim seeking indemnification pursuant to this Section 8.03(c) (and Buyer shall have noobligation to indemnify any Seller Indemnified Person pursuant to this Section 8.03(c)) unlessand only in the event that Buyer, in bargaining with the Union, fails to offer to provideSubstantially Comparable Compensation and Benefits in breach of Buyer's obligation pursuantto Section 7.0a(fi; (d) any Assumed Liability as and when payment and performance is due,including any liability related to any CSO Control Measures to the extent arising after theClosing and any claims by any Governmental Authority for any events, circumstances orliabilities arising after the Closing; (e) Buyer's violation of Environmental Requirements withrespect to the System after the Closing Date; (f) Buyer's management of Hazardous Materials inconnection with the System after the Closing Date; (g) any Environmental Claims resulting fromBuyer's operation of the System after the Closing Date; or (h) the ownership, operation orcontrol of the Acquired Assets or the System after the Closing Date.

Section 8.04. Indemnification Procedure.

(a) Third Partv Claims. If any Indemnified Party receives notice of the assertion orcommencement of any action, suit, claim or other legal proceeding made or brought by anyPerson who is not a party to this Agreement (or a successor to a Party to this Agreement) (a

"Third Party Claim") against such Indemnified Party with respect to which the IndemnifyingParfy may be obligated to provide indemnification under this Agreement, the Indemnifred Partyshall give the Indemnifying Party prompt written notice thereof. The failure to give such promptwritten notice shall not, however, relieve the Indemnifying Party of its indemnificationobligations, except and only to the extent that the IndemniffingParty forfeits material rights ormaterial defenses by reason of such failure. Such notice by the Indemnified Party shall describethe Third Party Claim in reasonable detail and shall indicate the estimated amount, if reasonablypracticable, of the Damage that has been or may be sustained by the Indemnified Party. TheIndemnifying Party shall have the right to participate in, or by giving written notice to theIndemnified Party (and subject to the other requirements contained herein) to assume the defenseof any Third Party Claim at the Indemnifying Party's expense and by the Indemnifying Party'sown counsel (which counsel shall be reasonably acceptable to the Indemnified Party), so long as

(i) the Indemniffing Party notifies the Indemnified Party, within ten (10) Business Days after the

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Indemnified Party has given notice of the Third Party Claim to the Indemnifying Parly (or bysuch earlier date as may be necessary under applicable procedural rules in order to file a timelyappearance and response) that the Indemnifying Party is assuming the defense of such ThirdParty Claim, provided, that if the Indemnifying Party assumes control of such defense it mustfirst agree and acknowledge in such notice that the Indemnifuing Party is fully responsible (withno reservation of any rights other than the right to be subrogated to the rights of the IndemnifredParty) for all Damages relating to such Third Party Claim, (ii) the Indemnifying Party conductsthe defense of the Third Party Claim actively and diligently and at its own cost and expense, and(iii) the Third Party Claim (A) does not involve injunctive relief, specific performance or othersimilar equitable relief, any claim in respect of Taxes, any Governmental Authority, any criminalallegations or any potential damage to the goodwill or reputation of Buyer, (B) is not one inwhich the Indemnifying Party is also a party and joint representation would be inappropriate orthere may be legal defenses available to the Indemnified Party which are different from oradditional to those available to the Indemnifying Party, or (C) does not involve a claim which,upon petition by the Indemnified Party, the appropriate court rules that the Indemni$ing Partyfailed or is failing to vigorously prosecute or defend, and provided further, that notwithstandinganything to the contrary contained herein, if the Seller is the Indemnifying Party with respect to aThird Party Claim and (i) Buyer or any insurer under the R&W Insurance Policy is required toassume such defense pursuant to the terms thereof or (ii) the Seller's assumption of the defensecould cause a Buyer Indemnified Person to lose coverage under the R&W Insurance Policy, theSeller shall not be permitted to assume the defense of such Third Party Claim. The IndemnifredParty shall reasonably cooperate in good faith in such defense. In the event that theIndemniffing Party assumes the defense of any Third Party Claim, subject to Section 8.04(b), itshall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal ormake counterclaims pertaining to any such Third Party Claim in the name and on behalf of theIndemnified Party. The Indemnified Party shall have the right, at its own cost and expense, toparticipate in the defense of any Third Party Claim with counsel selected by it subject to theIndemnifying Party's right to control the defense thereof. If the Indemniffing Party elects not tocompromise or defend such Third Party Claim or fails to promptly notiff the Indemnified Patyin writing of its election to defend as provided in this Agreement, the Indemnified Party may,subject to Section 8.04(b), pay, compromise, defend such Third Party Claim and seekindemnification for any and all Damages based upon, arising from or relating to such Third PartyClaim. The Seller and Buyer shall reasonably and in good faith cooperate with each other in allreasonable respects in connection with the defense of any Third Party Claim, including makingavailable records relating to such Third Party Claim and furnishing, without expense (other thanreimbursement of actual out-of-pocket expenses) to the defending party, management employeesof the non-defending party as may be reasonably necessary for the preparation of the defense ofsuch Third Parfy Claim.

(b) Settlement of Third Partv Claims. Notwithstanding any other provision of thisAgreement, the Indemnifying Parfy shall not enter into or agree to settlement of any Third PartyClaim without the prior written consent of the Indemnified Party (which consent shall not beunreasonably withheld or delayed), except as provided in this Section 8.04(b). If a firm offer ismade to settle a Third Party Claim without leading to liability or the creation of a financial orother obligation on the part of the Indemnified Party and provides for the unconditional releaseof each Indemnified Party from all liabilities and obligations in connection with such Third ParryClaim, and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying

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Party shall give prompt written notice to that effect to the Indemnihed Party. If the IndemnifiedParty fails to consent to such firm offer within fifteen (15) days after its receipt of such notice,the Indemnified Party may continue to contest or defend such Third Party Claim and in suchevent, provided that the Indemnifying Party continues to diligently contest or defend such ThirdParty Claim in good faith and otherwise complies with its obligations hereunder, the maximumliability of the Indemniffing Party as to such Third Party Claim shall not exceed the amount ofsuch settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails toassume defense of such Third Party Claim, the Indemnifying Party may settle the Third PartyClaim upon the terms set forth in such frrm offer to settle such Third Party Claim. If theIndemnified Party has assumed the defense of a Third Party Claim pursuant to Section 8.04(a), itshall not agree to any settlement without the written consent of the IndemnifyingParty (whichconsent shall not be unreasonably withheld or delayed).

(c) Direct Claims. Any claim by an Indemnified Party with respect to any Damageswhich do not arise or result from a Third Party Claim (a "Direct Claim") shall be asserted by theIndemnified Party giving the Indemnifying Party prompt written notice thereof. The failure togive such prompt written notice shall not, however, relieve the Indemnifuing Party of itsindemnification obligations, except and only to the extent that the Indemniffing Party forfeitsmaterial rights or material defenses by reason of such failure. Such notice by the IndemnifiedParty shall describe the Direct Claim in reasonable detail and shall indicate the estimatedamount, if reasonably practicable, of the Damage that has been or may be sustained by theIndemnified Party. The Indemni&ing Party shall have thirty (30) days after its receipt of suchnotice to respond in writing to such Direct Claim. During such thirty (30) day period, thelndemnified Party shall reasonably cooperate and assist the Indemnifuing Party and itsRepresentatives with respect to Indemnifying Party's investigation of such Direct Claimincluding determining the validity and amount of such Direct Claim. If the Indemnifuing Partydoes not so respond within such thirty (30) day period by delivery of written notice disputing thebasis or amount of the Direct Claim, the Indemnifying Party shall be deemed to have rejectedsuch claim, in which case the Indemnified Party shall be free to pursue such remedies as may beavailable to the Indemnified Party on the terms and subject to the provisions of this Agreement.If the Indemnifying Party has timely disputed its indemnity obligation for any Damages withrespect to such Direct Claim, the Parties shall proceed in good faith to negotiate a resolution ofsuch dispute and, if not resolved through negotiations, such dispute shall be resolved by litigationin an appropriate court ofjurisdiction determined pursuant to this Agreement.

Section 8.05. Limitations on Indemnification Oblieations.

(a) Subject to the other limitations contained in this Section 8.05, neither Buyer norany other Buyer Indemnified Persons shall be entitled to indemnification pursuant toSection 8.02(a) unless the aggregate amount of Damages incurred by Buyer and any other BuyerIndemnified Persons that would otherwise be subject to indemnification pursuant toSection 8.02(a) exceeds One Million Two Hundred Fifty Dollars ($1,250,000) in the aggregate(the "Threshold Amount"), in which case the Seller shall then be liable for Damages in respectthereof in excess of the Threshold Amount; provided, however, that the foregoing limitationscontained in this Section 8.05(a) shall not apply to any claims for indemnification based on (x) a

breach of any of the Seller Fundamental Representations or (V) fraud, intentionalmisrepresentation or willful misconduct.

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(b) Subject to the other limitations contained in this Section 8.05, neither Seller northe Seller Indemnified Persons shall be entitled to indemnification pursuant to Section 8.03(a)unless the aggregate amount of Damages incurred by the Seller and any other Seller IndemnifiedPersons that would otherwise be subject to indemnification pursuant to Section 8.03(a) exceedsthe Threshold Amount, in which case Buyer shall then be liable for Damages in excess of theThreshold Amount; provided, however, that the foregoing limitations contained in this Section8.05(b) shall not apply to any claims for indemnification based on (x) a breach of any of theBuyer Fundamental Representations or (y) fraud, intentional misrepresentation or willfulmisconduct.

(c) Except in the case of fraud, intentional misrepresentation or willful misconduct(for which all applicable legal and equitable remedies will be available to Buyer), the BuyerIndemnified Persons shall only be entitled to assert (i) claims under Section 8.02(a) (other thanclaims with respect to breaches of any of the Seller Fundamental Representations, which shallnot be limited by this Section 8.05(c)(i) but shall be limited by Section 8.05(c)(ii)) against theEscrow Funds up to the aggregate amount of the Escrow Amount (the "Liability Cap"), whichshall represent the sole and exclusive remedy of Buyer and the other Buyer Indemnified Personsfor any such claims under Section 8.02(a) (other than claims with respect to breaches of any ofthe Seller Fundamental Representations or in the case of fraud, intentional misrepresentation orwillful misconduct which shall not be subject to the Liability Cap, and subject to recourse to theR&W Insurance Policy), and (ii) claims under Section 8.02(a) with respect to breaches of any ofthe Seller Fundamental Representations and claims under Sections 8.02(b) or 8.02(c) up to theaggregate amount equal to the Purchase Price (the "Maximum Liability Cap"), which shallrepresent the maximum aggregate liability of the Seller for all claims under Section 8.02 (otherthan claims in the case of fraud, intentional misrepresentation or willful misconduct, which shallnot be subject to the Maximum Liability Cap). Following the release of the Escrow Funds, theR&W Insurance Policy shall be the sole recourse for any Damages to which a Buyer IndemnifiedPerson is entitled pursuant to Section 8.02(a), other than claims with respect to breaches of anyof the Seller Fundamental Representations or in the case of fraud, intentional misrepresentationor willful misconduct; provided, that Buyer shall first seek recovery from the R&W InsurancePolicy, if coverage is available, with respect to any Damages in respect of breaches of the SellerFundamental Representations, prior to seeking recovery from the Seller in respect of suchDamages. In the case of Damages to which a Buyer Indemnified Person is entitled (x) pursuantto Section 8.02(a) with respect to breaches of any Seller Fundamental Representations (providedthat Buyer has first sought recovery from the R&W Insurance Policy to the extent available inaccordance with the proviso of the immediately preceding sentence, or to the extent of anyDamages for which recovery is not available under the R&W Insurance Policy for any reason inrespect of any such breaches of any Seller Fundamental Representations), (y) pursuant to anyclause of Section 8.020) or Section 8.02(c), or (z) in the event of fraud, intentionalmisrepresentation or willful misconduct, Buyer may seek recourse for such Damages from theEscrow Funds or from the Seller directly pursuant to this Article VIII, at Buyer's sole andabsolute discretion.

(d) Payments by an Indemnifying Party pursuant to Section 8.02 or Section 8.03 inrespect of any Damage shall be limited to the amount of any liability or damage that remainsafter deducting therefrom any insurance proceeds actually received and any indemnity,contribution or other similar payment actually received by the Indemnihed Party in respect of

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any such claim (other than the R&W Insurance Policy) (in any case, net of expenses incurred incollecting such amount, including any deductible amount paid by such Indemnified Party orincreased cost of insurance in connection with such insurance recovery).

(e) Payments by an Indemnifying Party pursuant to Section 8.02 or Section 8.03 inrespect of any Damages shall be reduced by an amount equal to any net Tax benefit actuallyrealized by the Indemnified Party in the year such Damages were incurred to the extentattributable to such Damages.

(0 Except with respect to claims (i) relating to the adjustments to the Purchase Pricepursuant to Section 3.02, (ii) for equitable relief or specific performance pursuant to Section 7.05or Section 15.15, and (iii) grounded in fraud, intentional misrepresentation or willful misconduct,the Parties acknowledge and agree that their sole and exclusive remedy with respect to any andall claims for any breach of any representation, warranty, covenant, agreement or obligation setforth herein or otherwise relating to the subject matter of this Agreement and the RelatedAgreements, shall be pursuant to the indemnifrcation provisions set forth in this Article VIILFor the avoidance of doubt, nothing in this Section 8.05(0 shall limit any Person's right to seekand obtain any equitable relief or specific performance to which any Person shall be entitledpursuant to this Agreement.

(g) Each Indemnified Party shall use, and cause its Affiliates to use, commerciallyreasonable efforts to mitigate any Damages which form the basis of an indemnification claimhereunder.

(h) Notrvithstanding anything to the contrary in this Agreement, including anythingthis Article VIII, with respect to any claims for indemnity by Buyer for or with respect to anyReal Property, Buyer shall, to the extent available, first proceed to recover under the Title Policyof the Title Company for any Damages prior to seeking indemnification under this Article VIII.Buyer acknowledges and agrees that it shall not have a claim under the warranty of title of anydeed, assignment or other instrument of transfer or conveyance, which is separate and apart fromthe provisions and limitations of this Article VIII.

Section 8.06. Insurance Policv. The Seller acknowledges that Buyer will, effective as

of the Closing, enter into the R&W Insurance Policy and that, in connection therewith, a BuyerIndemnified Person may, subject to the provisions of this Article VIII, make claims for the sameDamages or series of related Damages under both this Article VIII and the R&W InsurancePolicy. The Seller further acknowledges and agrees that the denial of any claim by any BuyerIndemnified Person under the R&W Insurance Policy shall not be construed as, or used as

evidence that, such Buyer Indemnified Person is not entitled to indemnification under this ArticleVIII.

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ARTICLE IX.

PRE.CLOSING COVENANTS OF THE SELLER

Section 9.01. Operation of the Svstem Prior to Closins.

(a) Except as otherwise expressly contemplated by this Agreement, as required byapplicable Law or with the prior written consent of Buyer (which consent shall not beunreasonably withheld, delayed or conditioned), from the Effective Date until the Closing, theSeller shall (i) operate and manage the System only in the ordinary course of business inaccordance with past practices and procedures, (ii) comply in all material respects with allapplicable Laws and all Licenses and Permits, (iii) comply in all respects on a timely basis withthe Seller's obligations under the Consent Decree and the Compliance Schedule, (iv) in the eventof any loss, damage, impairment, confiscation or condemnation of any Acquired Assets,including any of the Real Property (and regardless of whether any such any loss, damage,impairment, confiscation or condemnation is of the tlpe or magnitude contemplated by Section15.04), apply the proceeds of any insurance policy, judgment or award with respect thereto torepair, replace or restore such Acquired Assets as soon as possible to their prior condition, and(v) use commercially reasonable efforts to maintain and preserve intact the business and assets ofthe System and to preserve the rights, franchises, goodwill and relationships of the Seller and theSystem and their customers, lenders, suppliers, regulators and others having businessrelationships with the Seller and the System.

(b) Without limiting anything contained in Section 9.01(a), except as expresslypermitted by the terms of this Agreement or a Related Agreement, from the Effective Date anduntil the Closing, the Seller shall not, without the prior written consent of Buyer:

(i) amend its charter, bylaws or other similar organizational documents;

(ii) sell, rent, lease or otherwise dispose of any of the Acquired Assets, otherthan in the ordinary course of business consistent with past practice with respect to assets

which are not, individually or in the aggregate, material to the business or operations ofthe Seller;

(iii) incur, create or assume any Lien with respect to the System or anyAcquired Asset, other than Permitted Liens, or give or agree to give or become a party toor bound by any guarantee, surety or indemnity in respect of indebtedness or otherobligations or liabilities of any other Person;

(iv) hire any new employees (including as a result of the retirement,resignation, or other termination of any Personnel employed by the Seller prior to or as ofthe Effective Date), or increase the number of System employees or the basecompensation of any employee of the System or grant any bonuses, benehts or otherforms of direct or indirect compensation to any employee, officer, director or consultantof the System, except (x) as required by the Collective Bargaining Agreement, (y) as

required under the terms of any Seller's Plan in existence as of the date hereof, or (z) as

required by applicable Law; provided that in the event of a vacancy following the date

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hereof in a non-administrative position of employment with the Seller which is critical tothe operation and maintenance of the System, the Seller shall be permitted to hireindividuals on a temporary basis to perform such critical functions;

(v) enter into, amend or modiff any employment or severance agreement,plan or arrangement or increase, terminate, amend or otherwise modify in any materialrespect any plan or arrangement for the benefit of employees of the System, except as

required by the Collective Bargaining Agreement;

(vi) amend, waive, terminate, otherwise modify the Collective BargainingAgreement or any term or condition thereof, or enter into any agreement, arrangement orunderstanding, whether oral or in writing, formal or informal, or otherwise, with theUnion or any other Person with respect to the foregoing, except as to settle anyforthcoming grievances in accordance with the Seller's obligations under the CollectiveBargaining Agreement;

(vii) incur any or increase any of the Assumed Liabilities, or the other liabilitiesor obligations of the System other than (l) as expressly required to comply with theCompliance Schedule, (2) obligations or liabilities in respect of capital expendituresexpressly contemplated by the capital expenditure budget provided to Buyer prior to thedate hereof and attached to Schedule 9.01(bXvii) or (3) undrawn amounts underOutstanding Indebtedness;

(viii) make any changes to its method of accounting, except as required byGASB or applicable Law;

(ix) pay, settle or offer to settle or dismiss any litigation or other claiminvolving or against the Seller or the System, except such claims related to grievancesand arbitrations under the Collective Bargaining Agreement and any such claims (orseries of related claims) seeking solely monetary damages; provided, that in no eventshall the Seller, the City, the Borough or any of their respective Affrliates make anyagreement in connection with the foregoing which would, or would reasonably beexpected to, limit the conduct of Buyer's or its Affiliates' business on or after the ClosingDate;

(x) amend, modify or waive performance in any material respect or terminateany Material Contract (other than the expiration of such Material Contract in accordancewith its terms) or enter into any Contract that, had such Contract been entered into priorto the date hereof, would have been a Material Contract;

(xi) make any material change in the manner of billing of any customers of theSystem;

(xii) cancel or fail to renew any insurance policy or fail to give all notices andpresent all claims (if any) under all such policies in a timely fashion;

(xiii) cause or permit any material change in cash management practices of theSystem and the Seller's and the System's policies, practices and procedures with respect

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to collection of accounts receivable, establishment of reserves for uncollectible accounts,accrual of accounts receivable, inventory control, prepayment of expenses, payment oftrade accounts payable, accrual ofother expenses, deferral ofrevenue and acceptance ofcustomer deposits (including any such changes intended to or having the effect of,accelerating the collection of accounts receivable or postponing payments of accountspayable);

(xiv) enter into any commitment or transaction that would constitute a breach ofthe representations, warranties or agreements contained in this Agreement, or take anyaction or fail to take any action or, to the extent within the Seller's control, permit tooccur any event that, individually or in the aggregate, would reasonably be expected toresult in a Material Adverse Effect; or

(xv) agree, resolve or commit to do any of the foregoing.

Section 9.02. Cooperation. The Seller shall reasonably cooperate with Buyer and itsemployees, attorneys, accountants and other agents and, generally, act in reasonably good faithto timely effectuate the purposes of this Agreement and the consummation of the transactionscontemplated by this Agreement.

Section 9.03. Updates to Seller's Schedules. Following the date hereof and prior to theClosing, the Seller shall promptly deliver written notice (any such notice, a "Seller ScheduleSupplement") to Buyer (i) if any of the representations and warranties contained in Article IV ofthis Agreement was inaccurate or untrue when made, or (ii) of any event, condition orcircumstance frrst occurring after the date of this Agreement that would cause or constifute a

breach of any of the representations and warranties of the Seller contained in Article IV if anysuch representation or warranty had been made at the time of such event, condition orcircumstance (any such event, condition or circumstance referenced in this clause (ii), a "SellerPost-Sienins Event"). Without limiting the foregoing, at least three (3) Business Days prior tothe Closing Date, the Seller shall advise Buyer of any facts which would constitute a breach of a

representation or wananty as of the date made or a default under any covenant contained herein.Any disclosure in any Seller Schedule Supplement shall be for informational purposes only andshall not be deemed to have cured any inaccuracy in or breach of any representation or warrantycontained in this Agreement, including for purposes of the indemnification or termination rightscontained in this Agreement or for purposes of determining whether or not the conditions setforth in Article XII have been satisfied; provided, however, that in the event that the Sellerdelivers a Seller Schedule Supplement with respect to a Seller Post-Signing Event and suchSeller Post-Signing Event would give Buyer the right to terminate this Agreement pursuant toSection 14.01(b), and Buyer does not deliver notice of termination of this Agreement pursuant toSection 14.01(b) (i) within five (5) Business Days of the later of (x) Buyer's receipt of suchSeller Schedule Supplement and (y) the expiration of any applicable cure period a provided inSection 14.01(b) or (ii) prior to Closing if such Seller Schedule Supplement is delivered less thanfive (5) Business Days prior to the Closing Date, then Buyer shall be deemed to have irrevocablywaived any right to terminate this Agreement with respect to such Seller Post-Signing Event and,further, Buyer shall have irrevocably waived its right to indemnification under Section 8.02(a)with respect to such Seller Post-Signing Event.

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Section 9.04. Governmental Approvals. Promptly after the execution of thisAgreement, upon the terms and subject to the conditions set forth in this Agreement, the Sellershall file all applications and reports that are required to be filed by the Seller with anyGovernmental Authority, and shall use commercially reasonable efforts to take, or cause to betaken, all actions and to do, or cause to be done, all things necessary or desirable underapplicable Law to consummate the transactions contemplated hereby and by the RelatedAgreement, including (a) preparing and filing as promptly as practicable with any GovernmentalAuthority all documentation to effect all necessary, proper or advisable filings, notices, petitions,statements, registrations, submissions of information, applications and other documents and (b)obtaining and maintaining as promptly as practicable all consents, approvals, registrations,permits, authorizations and other confirmations required to be obtained from any GovernmentalAuthority or other Person that are necessary, proper or advisable to consummate the transactionscontemplated by this Agreement or the other Related Agreements. In furtherance and not inlimitation of the foregoing, the Seller shall (x) provide or cause to be provided to anyGovernmental Authority information and documents requested by any such GovernmentalAuthority or necessary, proper or advisable to permit consummation of the transactionscontemplated by this Agreement or the other Related Agreement as promptly as possible afterthe execution of this Agreement, including by supplying as promptly as practicable anyadditional information and documentary material that may be requested by the DOJ, the EPA,the PaDEP or any other Governmental Authorities, and (y) assist, consult with and cooperatewith Buyer in doing all things necessary, proper or advisable to consummate and make effective,in the most expeditious manner practicable, the transactions contemplated by this Agreement,including bV (l) furnishing to Buyer all information required or reasonably necessary for anyfiling to be made with any Governmental Authority (including Buyer's filing with PaPUC), (2)promptly informing Buyer of any communication with any such Governmental Authorityregarding any such filings, (3) cooperating with Buyer in the filing and prosecution of anyapplications required for any Governmental Approvals, and (4) at the request of Buyer,executing such application forms and other documents as necessary to apply for the transferand/or reissuance of any necessary Governmental Approvals.

ARTICLE X.

PRE.CLOSING COVENANTS OF BUYER

Section 10.01. R&W Insurance Policv. Buyer shall use commercially reasonable effortsto procure and cause to be bound as promptly as practicable following the date hereof, arepresentations and warranties insurance policy containing customary terms consistent withtransactions of the size and type contemplated by this Agreement, with a base liability limit of nomore than S12,500,000 and an initial retention equal to the Escrow Amount (subject to reductionto a retention amount equal to the Threshold Amount at the Escrow Release Date, and containingsuch other customary terms, conditions and exclusions as are reasonably acceptable to Buyer (the"R&W Insurance Policy"). The R&W Insurance Policy shall provide that the insurer shall waiveand not pursue any subrogation rights against the Seller. The Seller and its Representatives shallreasonably cooperate with Buyer in connection with Buyer's procurement of the R&W InsurancePolicy and, subject to the provision of such cooperation, Buyer shall in good faith seek tominimize the number and scope of any exclusions from coverage under the R&W InsurancePolicy. Buyer shall not intentionally take any actions to cause the R&W lnsurance Policy to not

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be effective as of the Closing. The aggregate cost of the premium for the R&W Insurance Policy(including, for the avoidance of doubt, any underwriting fees and any portion of the premiumcost for the R&W Insurance Policy paid by Buyer prior to the Closing, to the extent such fees orpayments are credited against the aggregate premium cost pursuant to the terms of the R&WInsurance Policy) (the "R&W Premium") shall be borne by the Seller, and the R&W Premiumshall be included in the Transaction Expense Amount (with the effect that the net payment to theSeller at Closing shall be reduced by the R&W Premium (and any other amounts included in theTransaction Expense Amount), as provided in Section 3.01(d)). Notwithstanding the foregoing,the R&W Premium required to be paid by Seller hereunder shall not exceed $550,000.

Section 10.02. Governmental Approvals. Promptly after the execution of thisAgreement, upon the terms and subject to the conditions set forth in this Agreement (includingthe PaPUC approvals in Article VII), Buyer shall hle all applications and reports that are

required to be filed by Buyer with any Governmental Authority, and shall use commerciallyreasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, allthings necessary or desirable under applicable Law to consummate the transactions contemplatedhereby and by the Related Agreement, including (a) preparing and filing as promptly as

practicable with any Governmental Authority all documentation to effect all necessary, proper oradvisable filings, notices, petitions, statements, registrations, submissions of information,applications and other documents and (b) obtaining and maintaining as promptly as practicableall consents, approvals, registrations, permits, authorizations and other conf,rrmations required tobe obtained from any Governmental Authority or other Person that are necessary, proper oradvisable to consummate the transactions contemplated by this Agreement or the other RelatedAgreements. In furtherance and not in limitation of the foregoing, Buyer shall (x) provide orcause to be provided to any Governmental Authority information and documents requested byany such Governmental Authority or necessary, proper or advisable to permit consummation ofthe transactions contemplated by this Agreement or the other Related Agreement as promptly as

possible after the execution of this Agreement, including by supplying as promptly as practicableany additional information and documentary material that may be requested by the DOJ, theEPA, the PaDEP or any other Governmental Authorities, and (y) assist, consult with andcooperate with the Seller in doing all things necessary, proper or advisable to consummate andmake effective, in the most expeditious manner practicable, the transactions contemplated by thisAgreement, including bV (1) furnishing to the Seller all information required or reasonablynecessary for any filing to be made with any Governmental Authority (including the filing withPaPUC), (2) promptly informing the Seller of any communication with any such GovernmentalAuthority regarding any such filings, (3) cooperating with the Seller in the filing and prosecutionof any applications required for any Governmental Approvals, and (4) at the reasonable requestof the Seller and subject to Buyer's reasonable approval thereof, executing such applicationforms and other documents as necessary to apply for the transfer or reissuance of anyGovernmental Approvals to Buyer which are necessary for Buyer's ownership or operation ofthe System from and after the Closing.

Section 10.03. Cooperation. Buyer shall reasonably cooperate with the Seller and itsemployees, attorneys, accountants and other agents and, generally, do such other acts and thingsin good faith as may be reasonable to timely effectuate the purposes of this Agreement and theconsummation of the transactions contemplated in accordance with the provisions of thisAgreement.

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Section 10.04. Updates to Buver's Schedules. Following the date hereof and prior tothe Closing, Buyer shall promptly deliver written notice (any such notice, a "Buyer ScheduleSupplement") to the Seller (i) if any of the representations and warranties contained in Article Vof this Agreement was inaccurate or untrue when made, or (ii) of any event, condition orcircumstance first occurring after the date of this Agreement that would cause or constitute a

breach of any of the representations and warranties of the Seller contained in Article V if anysuch representation or warranty had been made at the time of such event, condition orcircumstance (any such event, condition or circumstance referenced in this clause (ii), a "Buyg1Post-Sienine Event"). Without limiting the foregoing, at least three (3) Business Days prior tothe Closing Date, Buyer shall advise the Seller of any facts which would constitute a breach of arepresentation or warranty as of the date made or a default under any covenant contained herein.Any disclosure in any Buyer Schedule Supplement shall be for informational purposes only andshall not be deemed to have cured any inaccuracy in or breach of any representation or warrantycontained in this Agreement, including for purposes of the indemnification or termination rightscontained in this Agreement or for pu{poses of determining whether or not the conditions setforth in Article XI have been satished; provided, however, that in the event that Buyer delivers aBuyer Schedule Supplement with respect to a Buyer Post-Signing Event and such Buyer Post-Signing Event would give the Seller the right to terminate this Agreement pursuant to Section14.01(a), and the Seller does not deliver notice of termination of this Agreement pursuant toSection 14.01(a) (i) within five (5) Business Days of the later of (x) the Seller's receipt of suchBuyer Schedule Supplement and (y the expiration of any applicable cure period as provided inSection 1a.01(a) or (ii) prior to Closing if such Buyer Schedule Supplement is delivered less thanfive (5) Business Days prior to the Closing Date, then the Seller shall be deemed to haveirrevocably waived any right to terminate this Agreement with respect to such Buyer Post-Signing Event and, further, the Seller shall have irrevocably waived its right to indemnihcationunder Section 8.03(a) with respect to such Buyer Post-Signing Event.

{RTICLE XI.

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER

The obligation of the Seller to consummate the transactions provided for in thisAgreement is subject to the satisfaction, at or before the Closing, of the following conditions, anyone or more of which may be waived in writing by the Seller in its sole discretion:

Section I 1.01. Consents and Approvals.

(a) The PaPUC shall have issued a Final Order approving the transactionscontemplated hereby without a material modification to the rate-related provisions of Section7.07.

(b) The DOJ, EPA and PaDEP shall have agreed to the lodging of the AmendedConsent Decree, and the United States District Court for the Middle District of Pennsylvaniashall have issued a Final Order approving the Amended Consent Decree, to be effective as of theClosing; provided that subject to the issuance of each such Final Order, this condition shall besatisfied so long as the Amended Consent Decree contains the complete release of the Seller and

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sole substitution of Buyer in Seller's place as described in clause (3) of the definition ofAmended Consent Decree set forth in Section 7.06(d).

Section 11.02. Representations and Warranties of Buyer. The representations andwarranties made by Buyer in Article V which are (a) not qualified by materiality shall be trueand correct in all material respects on and as of the Closing Date (except for representations orwarranties that speak of a specific date or time other than the Closing Date which shall be trueand correct in all material respects as of such specified date) and (b) qualified by materiality shallbe true and correct in all respects on and as of the Closing Date (except for representations orwarranties that speak of a specific date or time other than the Closing Date which shall be trueand correct in all respects as of such specified date), and the Seller shall have received a

certificate to the effect of the foregoing from a duly authorized officer of Buyer dated as of theClosing Date.

Section 11.03.No Iniunctions. Neither the Seller nor Buyer shall be subject to anyinjunction, writ, temporary or preliminary restraining order or other similar decree of a court ofcompetent jurisdiction restraining or prohibiting the consummation of the transactionscontemplated by this Agreement, and no action or proceeding (or any investigation or otherinquiry that would reasonably be expected to result in such action or proceeding) shall have beeninstituted or shall be pending which seeks to restrain or prohibit, the transactions contemplatedby this Agreement.

Section I 1.04. Performance of the Oblisations of Buver. Buyer shall have compliedwith and performed in all material respects all covenants and obligations required under thisAgreement to be complied with and performed by Buyer on or before the Closing Date, and theSeller shall have received a certificate from Buyer dated as of the Closing Date certifying that theconditions set forth in this Section 1 1.04 have been satisfied.

Section I 1.05. Deliveries bv Buver. Buyer shall have made delivery to the Seller of thedocuments and items specified in Section 13.03 herein.

ARTICLE XII.

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

The obligation of Buyer to consummate the transactions provided for in this Agreementis subject to the satisfaction, at or before the Closing, of the following conditions, any one ormore of which may be waived in writing by Buyer in its sole discretion:

Section 12.01. Consents and Approvals.

(a) Buyer shall have received all of the third party consents and other approvals set

forth in Schedule 12.01(a), each of which shall (i) be in form and substance and contain termsand conditions reasonably satisfactory to Buyer, (ii) not be subject to the satisfaction of anycondition that has not been satisfied or waived, and (iii) be in full force and effect.

(b) The PaPUC shall have issued a Final Order approving the transactionscontemplated hereby on terms and conditions reasonably satisfactory to Buyer.

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(c) The PaPUC shall have issued a Final Order approving a tariff supplementincorporating Buyer's Industrial Pretreatment Program applicable to the System into Buyer'stariff, and Buyer's Industrial Pretreatment Program shall have been approved, to the extentrequired, by PaDEP and EPA.

(d) The DOJ, EPA and PaDEP shall have agreed to the lodging of the AmendedConsent Decree and the United States District Courl for the Middle District of Pennsylvania shallhave issued a Final Order approving the Amended Consent Decree, to be effective as of theClosing, on terms and conditions reasonably satisfactory to Buyer.

(e) All Govemmental Approvals and other actions of, filings with and notices to anyGovemmental Authority (other than the Governmental Approvals set forth in Section 12.01(b),Section 12.01(c) and Section 12.01(d)) necessary to permit Buyer and the Seller to perform theirrespective obligations under this Agreement and the Related Agreements and to consummate thetransactions contemplated hereby and thereby (including with respect to the transfer of anyLicenses and Permits by the Seller to Buyer) (i) shall have been duly obtained, made or given,(ii) shall be in substance reasonably satisfactory to Buyer, (iii) shall not be subject to thesatisfaction of any condition that has not been satisfied or waived, (iv) shall be in full force andeffect, and all terminations or expirations of waiting periods imposed by any GovernmentalAuthority necessary for the consummation of the transactions shall have occurred, and (v) to theextent permitted by applicable Laws and Environmental Laws, all Licenses and Permits,including Environmental Requirements, shall have been transferred or issued to Buyer, as

applicable, effective from and after the Closing Date, in form and substance and containing termsand conditions reasonably satisfactory to Buyer.

(f) The Authority Board shall have approved: (iXA) defeasance and redemption ofany outstanding bonds issued by the Seller on the System included in the OutstandingIndebtedness and (B) discharge of any other outstanding debt issued to the Seller and payable toany current lender and (ii) the transfer to Buyer or for its benefit of related funds held in anyconstruction fund or account under any indenture(s) being held by the Seller or any lender to theSeller on any outstanding debt (it being understood that any debt service funds or debt servicereserye funds will be applied to the defeasance, redemption and discharge of outstanding debt).

Section 12.02. Representations and Warranties of Seller. The representations andwarranties made by Seller in Article IV which are (a) not qualified by materiality shall be trueand correct in all material respects on and as of the Closing Date (except for representations orwarranties that speak of a specific date or time other than the Closing Date which shall be trueand correct in all material respects as of such specified date) and (b) qualified by materiality shallbe true and correct in all respects on and as of the Closing Date (except for representations orwarranties that speak of a specific date or time other than the Closing Date which shall be trueand correct in all respects as of such specified date), and Buyer shall have received a certificateto the effect of the foregoing from a duly authorized officer of the Seller dated as of the ClosingDate.

Section 12.03. No Iniunctions. Neither the Seller nor Buyer shall be subject to anyinjunction, writ, temporary or preliminary restraining order or other similar decree of a court ofcompetent jurisdicti,on restraining or prohibiting the consummation of the trahsactions

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contemplated by this Agreement, and no action or proceeding (or any investigation or otherinquiry that would reasonably be expected to result in such action or proceeding) shall have beeninstituted or shall be pending which seeks to restrain or prohibit, the transactions contemplatedby this Agreement.

Section 12.04. No Material Adverse Effect. There shall not have occurred any event,development or condition which has had, or would reasonably be expected to have, a MaterialAdverse Effect, the effect of which has not been cured by the Seller.

Section 12.05. Deliveries bv Seller. The Seller shall have made delivery to Buyer of thedocuments and items specified in Section 13.02 herein.

Section 12.06. Performance of the Oblisations of Seller. The Seller shall havecomplied with and performed in all material respects all covenants and obligations requiredunder this Agreement to be complied with and performed by the Seller on or before the ClosingDate, other than the covenants and obligations contained in Article VI and Section 9.01(a)(iii),with respect to which the Seller shall have complied with and performed in all respects on orprior to the Closing Date, and Buyer shall have received a certiflrcate from the Seller dated as ofthe Closing Date certifying that the conditions set forth in this Section l2.06have been satisfred.

Section 12.07. R&W Insurance Policv. The R&W Insurance Policy shall be in fullforce and effect; provided, that this condition shall be deemed satisfied if Buyer shall havebreached its obligations in Section 10.01 and such breach shall have proximately caused theR&W Insurance Policy to not have been bound prior to, and issued effective as of, the Closing.

Section 12.08. Assignment of Easements. As to Easements: (D All Essential Easementsshall be Eligible Easements and (ii) there are to be no more than ten (10) other Easements(whether Held Easements or Missing Easements) that are appurtenant to any Combined SewerSystem Asset or necessary for access to any Combined Sewer System Asset or for the operationof any Combined Sewer System Asset (including Easements for utilities and power to anyCombined Sewer System Asset) or otherwise which are necessary for or used in connection withthe operation of the System or to provide continuous and unimpeded rights of way for theCombined Sewer System Assets (including access thereto) which are not Eligible Easements.

ARTICLE XIII.

CLOSING

Sectionl3.0l.Closins Date.The Closing shall take place at the offices of Reed SmithLLP, l7l7 Arch Street, Suite 3100, Philadelphia, PA 19103, at 10:00 a.m. Eastern time on theearliest agreed upon date or within frve (5) Business Days after the date upon which all theconditions precedent to Closing described in this Agreement have been fulfilled or waived, or atsuch other place and time, by such other method, or on such other date, as may be mutuallyagreed to by the Parties (the "Closing Date"). The Closing shall be effective at l2:0I a.m.,Eastern time, on the Closing Date (the "@").

Section 13.02. Deliveries by the Seller. At orpriorto the Closing, the Seller shall havedelivered or cause to be delivered to Buyer executed copies of the following:

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(a) a duly executed Bill of Sale transfening all of the Acquired Assets comprisingtangible personal property, in substantially the form attached hereto as Exhibit A;

(b) a duly executed counterpart to an Assignment and Assumption Agreement withrespect to the Assumed Liabilities and the Acquired Assets (other the Acquired Assetscomprising tangible personal property to be conveyed pursuant to the Bill of Sale) (the

"Assiqnment and Assumption Agreement"), in substantially the form attached hereto as

Exhibit B;

(c) a duly executed counterpart to the Escrow Agreement;

(d) the consents to transfer all of the Assigned Contracts, Intellectual Property Assetsand all Licenses and Permits held by the Seller (including environmental Licenses and Permits)which are set forth on Schedule 12.01(a), each of which shall (i) be in form and substance andcontain terms and conditions reasonably satisfactory to Buyer, (ii) not be subject to thesatisfaction of any condition that has not been satisfied or waived, and (iii) be in full force andeffect:

(e) title certif,rcates to any motor vehicles included in the Acquired Assets, dulyexecuted by the Seller (together with any transfer forms necessary to transfer title to suchvehicles);

(0 all such special warranty deeds, bills of sale, realty transfer tax statements ofvalue, assignments and other instruments of transfer or conveyance in order to sell, transfer,assign, convey and deliver title to the Real Property and the other Acquired Assets duly executedby Seller pursuant to the terms and provisions of Section 2.03;

(g) to the extent requested by Buyer prior to the Closing to be delivered by the Sellerto Buyer at or prior to the Closing, copies or originals of all Files and Records, materials,documents and records in possession of the Seller relating to the System, the Acquired Assets orthe Assumed Liabilities, including the Real Property and the Assigned Contracts;

(h) any documents duly executed by the Seller required by the Title Company toissue final owner's title policies in accordance with the procedures set forth in Article VI;

(D such documents, instruments and information, in each case in form and substancereasonably acceptable to Buyer, evidencing the Seller's compliance with its obligations pursuantto Section 7.11(c) and the Seller's performance of its other obligations under this Agreementwith respect to the prepayment, redemption, cancellation, termination or legal defeasance, as

applicable, of all Outstanding Indebtedness at the Closing (other than any such OutstandingIndebtedness being lawfully assumed by Buyer as provided in this Agreement), including anyand all such documents, instruments or information (i) necessary to enable Buyer to effect thepayment in full (in the case of Outstanding Indebtedness then subject to prepayment orredemption) or make provision for the payment in full so as to effect a legal defeasance (in thecase of Outstanding Indebtedness not then subject to prepayment or redemption), on behalf ofthe Seller, of such Outstanding Indebtedness at the Closing, pursuant to Section 3.01(a), (ii)evidencing the full and unconditional release, satisfaction and discharge of any Liens in

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connection therewith, or (iii) that are otherwise reasonably requested by Buyer in connectionwith any of the foregoing; and

0) all such other instruments of conveyance or other documents as shall, in thereasonable opinion of Buyer and its counsel, be necessary to transfer to Buyer the AcquiredAssets in accordance with this Agreement or to carry out the terms of this Agreement, dulyexecuted and acknowledged by the Seller, if necessary, and in a recordable form.

Section 13.03. Deliveries bv Buver. At the Closing, Buyer shall have delivered orcaused to be delivered to the Seller the following:

(a) payment in full of the Purchase Price pursuant to Section 3.01 (including deliveryto the Escrow Agent and the other payees thereof);

(b) a duly executed counterpart to the Assignment and Assumption Agreement;

(c) the Escrow Agreement, duly executed by each of Buyer and the Escrow Agent;and

(d) such other instruments of assumption as shall, in the reasonable opinion of Sellerand its counsel, be necessary for Buyer to assume the Assumed Liabilities in accordance withthis Agreement.

ARTICLE XIV.

TERMINATION

Section 14.01. Events of Termination. This Agreement may be terminated at any timeprior to the Closing:

(a) subject to Section 10.04, by the Seller (if the Seller is not then in material breachof any of its representations, warranties, covenants or agreements under this Agreement so as tocause any of the conditions set forth in Article XII not to be satisfied), upon written notice toBuyer, if there has been a material violation, breach or inaccuracy of any representation,warranty, covenant or agreement of Buyer contained in this Agreement, which violation, breachor inaccuracy would cause any of the conditions set forth in Article XI not to be satisfied, andsuch violation, breach or inaccuracy has not been waived by the Seller or cured by Buyer, as

applicable, within thirty (30) days after receipt by Buyer of written notice thereof from the Selleror is not reasonably capable of being cured prior to the Outside Date;

(b) subject to Section 9.03, by Buyer (if Buyer is not then in material breach of any ofits representations, warranties, covenants or agreements under this Agreement so as to cause anyof the conditions set forth in Article XI not to be satisfied), upon written notice to the Seller, ifthere has been a material violation, breach or inaccuracy of any representation, warranty,covenant or agreement of the Seller contained in this Agreement, which violation, breach orinaccuracy would cause any of the conditions set forth in Article XII not to be satisfied, and suchviolation, breach or inaccuracy has not been waived by Buyer or cured by the Seller, as

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applicable, within thirty (30) days after receipt by the Seller of written notice thereof from Buyeror is not reasonably capable of being cured prior to the Outside Date;

(c) by Buyer if, in the reasonable judgment of Buyer, a Material Adverse Effect has

occurred since the Effective Date, and (x) such Material Adverse Effect is not reasonablycapable of being cured prior to the Outside Date or (y) the effect of such Material AdverseEffect, if capable of being cured, has not been cured by the Seller within thirry (30) days afterreceipt by the Seller of notice specifying with panicularity such Material Adverse Effect;

(d) by Buyer, as provided in Section 15.0a(a) or Section 15.04(b), as applicable;

(e) by Buyer, as provided in Article VI;

(D by the Seller or Buyer at any time after the Outside Date, if the Closing has notoccurred and the Party seeking to terminate this Agreement is not in breach or default of anyprovisions of this Agreement; provided that the right to terminate this Agreement pursuant to thisSection 14.01(0 shall not be available to any Party whose breach of any provision of thisAgreement results in the failure of the Closing to be consummated by such time; and provided

further, that if (i) on October 15,2016, any of the conditions set forth in Article XI or Article XIIhave not been satisfied or waived (other than those conditions which, by their terms, are to be

satisfied or waived at the Closing), then either Party shall have the right (which right pursuant tothis clause (i) may only be exercised on one (1) occasion by Buyer and on one (l) occasion bythe Seller) to extend the Outside Date to a date that is not later than December 31, 2016, andwhich right shall be exercised by written notice to the other Party on or before October 15,2016(and which written notice shall speciff the new Outside Date as extended pursuant to thisSection 14.01(0(D), and (ii) the Outside Date has been extended by either Party pursuant toSection 14.01(fxi), and on such new Outside Date, any of the conditions set forth in Section11.01(a), Section I l.0l(b), Section 12.01(b), Section 12.01(c) or Section 12.01(d) have not been

satisfied, and all of the other conditions to Closing set forth in Article XI or Article XII (otherthan those conditions which, by their terms, are to be satisfied or waived at the Closing), theneither Party shall have the right (which right pursuant to this clause (ii) may only be exercised onone (1) occasion by Buyer and on one (l) occasion by the Seller) to extend the Outside Date to adate that is not later than March 3I,2017, and which right shall be exercised by written notice tothe other Party on or before the then-current Outside Date (and which written notice shall speci$the new Outside Date as extended pursuant to this Section 1a.01(f)(ii));

(g) by the Seller or Buyer if (i) any Governmental Authority, the consent from orapproval by which is a condition to the obligations of the Parties to consummate the transactionscontemplated hereby shall have determined not to grant its consent or approval (or conditionedits consent or approval in such manner that is not reasonably acceptable to the Parties orconstitutes a material deviation from the consent or approval contemplated hereunder) as

applicable and all appeals of or other legal challenges to such determination have been taken andhave been unsuccessful; or (ii) any court of competent jurisdiction shall have issued an order,judgment or decree (other than a temporary restraining order) restraining, enjoining or otherwiseprohibiting the transactions contemplated hereby and such order, judgment or decree shall have

become final and non-appealable; or

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(h) by mutual agreement of the Seller and Buyer.

For the avoidance of doubt, this Agreement may not be terminated after completion ofthe Closing.

Section 14.02. Effect of Termination. In the event of termination of this Agreement as

expressly permitted under Section 14.01, this Agreement shall forthwith become void and of nofurther force and effect and there shall be no liability on the part of any Party hereto (or any of itsAffi liates) except that:

(a) the provisions of this Article XIV and Section 15.01 (Confidentiality), Section15.02 (Public Announcements), Section 15.03 (Expenses; Brokers) Section 15.13 (Successors

and Assigns), Section 15.14 (Governing Law), Section 15.15 (Specific Performance) and Section15.16 (Limitations of Liability) shall continue in full force and effect; and

(b) notwithstanding anything to the contrary herein, no Party shall be relieved fromliability for (i) fraud or (ii) any intentional or willful breach of any of its representations,warranties covenants or agreement set forth in this Agreement prior to such termination, all ofwhich claims will survive and remain actionable, and such Party shall be fully liable for any andall Damages incurred or suffered by the other Party as a result of such fraud or intentional orwillful breach.

ARTICLE XV.

MISCELLANEOUS

Section 15.01. Confidentialitv. Except as and to the extent required by applicable Law(including the Pennsylvania Right-To-Know Act at 65 Pa $ 67.101) or pursuant to an order of acourt of competent jurisdiction and as required hereunder to obtain any and all requiredGovernmental Approvals, neither Party hereto shall, directly or indirectly, disclose or use (andno party shall permit its Representatives to disclose or use) any Confidential Information (as

defined below) with respect to the other Party furnished by such other Party hereto or itsshareholders, directors, offrcers, agents, or other Representatives to the other Party hereto or itsemployees, directors, officers, agents or other Representatives in connection herewith at any timeor in any manner other than in connection with the completion of the transactions contemplatedby this Agreement and the Related Agreements. For purposes of this paragraph, the term''@''meanSallinformationofaconfidentialorproprietarynature(whetheror not specifically labeled or identified as "confidential"), in any form or medium, that relates toBuyer or its Affiliates or their respective business, products, services or research or development,or to the Seller or the System; provided, however, that Confidential Information of a Party doesnot include information which the receiving Party can demonstrate (a) is generally available to orknown by the public other than as a result of improper disclosure by the receiving Party, (b) isobtained by the receiving Party from a source other than the disclosing Party, provided that suchsource was not bound by a duty of confidentiality to the disclosing Party with respect to suchinformation, or (c) is legally in the public domain. After the execution of this Agreement, theParties shall timely and in good faith execute a common interest agreement applicable to the

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transactions contemplated by this Agreement, in form and substance and containing terms andconditions reasonably acceptable to each Party in its reasonable and good faith discretion.

Section 15.02. Public Announcements. Subject to applicable Law or listing rules of anexchange on which Buyer Parent's stock is listed, the initial public announcement relating to thetransactions contemplated herein shall be mutually agreed upon and jointly made by the Parties;provided, that for the avoidance of doubt, the foregoing shall not be deemed to restrict or prohibitBuyer or its Affiliates from issuing or causing publication of any press release or publicannouncement regarding this Agreement to the extent that Buyer or its Affiliates reasonablydetermine that such disclosure is required by applicable Law (including securities Laws) orlisting rules of an exchange on which Buyer Parent's stock is listed, in which case Buyer will, ifpracticable in the circumstances, use commercially reasonable efforts to allow the Sellerreasonable time to comment on such release or announcement in advance of its issuance. TheSeller shall cause the City and the Borough to provide to Buyer and the Seller contactinformation for a designated individual who will receive prior notice of any subsequent publicannouncement relating to the transactions contemplated herein. Subject to applicable Law orlisting rules of an exchange on which Buyer Parent's stock is listed, following the initial publicannouncement relating to the transactions contemplated hereby as provided in the first sentenceof this Section 15.02, and until the Closing, neither Buyer nor the Seller, nor any of theirrespective Aff,rliates or Representatives (or any Representative of the City or the Borough), shallmake or issue any press release regarding this Agreement, the contents hereof, or the transactionscontemplated hereby, without the prior wriffen consent of Buyer (in the case of announcementsby the Seller, the City, the Borough or their respective Affiliates or Representatives) or the Seller(in the case of announcements by Buyer or its Affiliates or their respective Representatives),which consent shall not be unreasonably withheld, conditioned or delayed.

Section 15.03. Expenses; Brokers.

(a) Except as otherwise provided in this Section 15.03, Buyer and the Seller shall beresponsible for and bear all of their respective costs and expenses incurred in connection withthis Agreement, including any legal, accounting or other representative or advisor costs andexpenses.

(b) Each Party will be responsible for and shall defend and indemnify the other Partyagainst any claims relating to, any fees or expenses of any financial advisor, broker or finderretained by such Party payable upon consummation of the transactions contemplated by thisAgreement.

(c) Except as otherwise expressly provided herein, the Parties agree that theprevailing party in any action brought with respect to or to enforce any right or remedy underthis Agreement shall be entitled to recover from the other Party all reasonable costs and expensesof any nature whatsoever incurred by the prevailing party in connection with such action,including attorneys'fees and expert fees.

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Section 15.04. Casualtv and Condemnation.

(a) Condemnation. If, prior to the Closing Date, there occurs any condemnation withrespect to any material portion of the Real Property, or any Real Property that is material to theoperation of the System, the Seller shall give Buyer prompt written notice thereof, and Buyershall have the right, exercisable by delivering written notice to Seller within ten (10) BusinessDays after the later of the final determination of the scope of such taking or Buyer's receipt ofwritten notice from the Seller of such condemnation, to either (i) terminate this Agreement inaccordance with Section 14.01(d), in which case neither Party shall have any further rights orobligations hereunder except as otherwise provided in Section 14.02, or (ii) accept that portion ofthe Real Property which has not been taken by, or is not subject to taking by, a condemnationaction in their then-existing condition and proceed with the Closing, subject to the final sentenceof this Section 15.04(a). Buyer's failure to deliver such notice within the ten (10) Business Dayperiod specified above shall be deemed to constitute a waiver of Buyer's right to terminate thisAgreement as provided in this Section 15.04(a) with respect to such condemnation (but not anysubsequent condemnation). In the event that Buyer elects to proceed with the Closing asprovided in clause (ii) of the foregoing sentence, or in the event of any condemnation of any ofthe Real Property not covered by the first sentence of this Section 15.04(a), the Seller shallassign to Buyer any and all rights of the Seller to any condemnation award received as a result ofsuch event, and to the extent the Seller receives such condenmation award (x) prior to theClosing, then the amount of such condemnation award, less the aggregate amount thereofexpended by the Seller prior to the Closing in compliance with its obligations under Section9.01(a)(iv), shall not be included as part of the calculation of the Closing Cash Balance, or (y)following the Closing, the Seller shall (but in no event later than ten (10) days after receiptthereof) deliver such amount to Buyer.

(b) Casualty. If, prior to the Closing Date, there occurs any destruction of, or damageor loss to any of the Acquired Assets from any cause whatsoever and the cost to repair or replacesuch destruction, damage or loss exceeds by at least One Million Dollars ($1,000,000.00) theinsurance coverage covering such destruction, damage or loss, then, except as hereinafterprovided, Buyer shall have the right, exercisable by delivering written notice to the Seller withinten (10) Business Days after the final determination of the scope of such casualty event andcompletion of an appraisal and insurance coverage determination of such casualty event by theSeller's insurance provider and delivery of written copies of such f,rnal appraisal and insurancecoverage determination to Buyer, to terminate this Agreement in accordance with Section14.01(d), in which case neither Party shall have any further rights or obligations hereunderexcept as otherwise provided in Section 14.02; provided, however, that Buyer shall have theoption, but not the obligation, to consummate the Closing of the transactions contemplated in thisAgreement and acquire the Acquired Assets in their then-existing condition, with an equitableadjustment of the Purchase Price to compensate Buyer for such destruction, damage or loss, as

agreed to by the Parties acting reasonably and in good faith, and in which case the Seller shallassign to Buyer any and all rights of the Seller to any insurance proceeds received as a result ofsuch casualty event, and to the extent the Seller receives such insurance proceeds (x) prior to theClosing, then the amount of such insurance proceeds, less the aggregate amount thereofexpended by the Seller prior to the Closing in compliance with its obligations under Section9.01(a)(iv), shall not be included as part of the calculation of the Closing Cash Balance, or (y)following the Closing, the Seller shall (but in no event later than ten (10) days after receipt

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thereof) deliver such amount to Buyer. Buyer's failure to deliver such notice within such ten (10)Business Day period following Buyer's receipt of written copies of such final appraisal andinsurance coverage determination with respect to such casualty event shall be deemed toconstitute a waiver of Buyer's right to terminate this Agreement as provided in this Section15.04(b) with respect to such casualty event (but not any subsequent casualty event).

Section 15.05. Reasonable Efforts: Cooperation. Subject to the terms and conditions ofthis Agreement, each Party will use its commercially reasonable efforts to take, or cause to betaken, all actions and to do, or cause to be done, all things necessary or desirable to consummatethe transactions contemplated by this Agreement and the Related Agreements. The Parties eachagree to execute and deliver such other documents, certificates, agreements and other writingsand to take such other actions as may be necessary or desirable in order to consummate orimplement expeditiously the transactions contemplated by this Agreement and the RelatedAgreements, and from time to time, upon the request of the other Parties to this Agreement andwithout fuither consideration, to execute, acknowledge and deliver in proper form any furtherinstruments, and take such other action as the other Parties may reasonably require, in order toeffectively carry out the intent of this Agreement and the Related Agreements.

Section 15.06. Notices. All notices, requests, demands and other communications thatare required or may be given pursuant to the terms of this Agreement or any of the RelatedAgreements shall be in writing, and delivery shall be deemed effective in all respects and to havebeen duly given as follows: (a) when delivered by hand (with written confrmation of receipt);(b) when received by the addressee if sent by a nationally recognized overnight courier (receiptrequested); (c) on the date sent by facsimile (with confirmation of transmission) if sent duringnormal business hours of the recipient, and on the next Business Day if sent after normalbusiness hours of the recipient or (d) on the third day after the date mailed, by certif,red orregistered mail, return receipt requested, postage prepaid. Such communications must be sent tothe respective Parties at the following addresses (or at such other address for a party as shall bespecifred in a notice given in accordance with this Section):

If to Buyer, to:

Pennsylvania-American Water Company800 West Hershey Park DriveHershey, PA 17033Attention: General Counselfacsimile: 7 17 -531-3399

With a copy to:

American Water Works Company, Inc.1025 Laurel Oak RoadVoorhees, NJ 08043Attention: Senior Vice President, Strategy and Business DevelopmentFacsimile: 856-346-5827

and

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Reed Smith LLPl7I7 Arch Street, Suite 3100Philadelphia, PA 19103Attention: Brian C. MinerFacsimile: (21 5) 851-1420

If to the Seller, to:

The Sewer Authority of the City of Scranton312 Adams AveScranton, PA 18503Attn: Executive DirectorFacsimile No.: (570) 348-5317

With a copy to:

Jeff Belardi, Esq.Co-SolicitorThe Sewer Authority of the City of ScrantonThe Jones Building410 Spruce Street, 4fr FloorScranton, PA 18503Facsimile No.: (570) 961-3985

Paul J. Walker, Esq.Co-SolicitorThe Sewer Authority of the City of Scranton205-207 N. Washington Avenue, Suite CScranton, PA 18503Facsimile No.: (570) 344-1061

Buchanan Ingersoll & Rooney PCTwo Liberty Place50 S. 16fl'Sfteet, Suite 3200Philadelphia, PA I 9 1 02-2555Attn: Steven W. Smith, EsquireFacsimile No.: (21 5) 665-87 60

Any Party may change its address and preferred recipient or other contact information for noticeby giving notice to each other Party in accordance with the terms of this Section 15.06. In noevent will delivery to a copied Person alone constitute delivery to the Party represented by suchcopied Person.

Section 15.07 . Headings. The article, section and paragraph headings in this Agreementare for reference purposes only and shall not affect the meaning or interpretation of thisAgreement.

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Section I 5.08. Construction.

(a) The Parties have participated jointly in the negotiation and drafting of thisAgreement, and, in the event of an ambiguity or a question of intent or a need for interpretationarises, this Agreement shall be construed as if drafted jointly by the Parties and no presumptionor burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of anyof the provisions of this Agreement.

(b) Words of any gender used in this Agreement shall be held and construed toinclude any other gender; words in the singular shall be held to include the plural; and words inthe plural shall be held to include the singular; unless and only to the extent the context indicatesotherwise.

(c) Reference to any Law means such Law as amended, modified, codified, replacedor reenacted, in whole or in part, and in effect from time to time, including rules and regulationspromulgated thereunder, and reference to any section or other provision of any Law means thatprovision of such Law from time to time in effect and constituting the substantive amendment,modifrcation, codification, replacement or reenactment of such section or other provision.

(d) Wherever the word "include," "includes," or "including" is used in thisAgreement, it shall be deemed to be followed by the words "without limitation".

(e) References in this Agreement to documents, instruments or agreements shall bedeemed to refer as well to all addenda, appendices, exhibits, schedules or amendments thereto.

(0 The words "hereof," "herein," and "hereunder" and words of similar import, whenused in this Agreement, shall refer to this Agreement as a whole and not to any particularprovision of this Agreement.

(g) References in this Agreement to a specific Section, Subsection, recital,Schedule or Exhibit shall refer, respectively, to Sections, Subsections, recitals, Schedules orExhibits of this Agreement.

(h) As used in this Agreement, the term "or" has the inclusive meaning representedby the phrase "andlor".

(i) When calculating the period of time before which, within which or followingwhich any act is to be done or step taken pursuant to this Agreement, if the last day of suchperiod is not a Business Day, the period shall end on the next succeeding Business Day.

Section 15.09. Severabilitv. If any term, provision, covenant or restriction contained inthis Agreement is held by a court of competent jurisdiction or the PaPUC to be invalid, void orunenforceable, the remainder of the terms, provisions, covenants and restrictions contained inthis Agreement shall remain in full force and effect and shall in no way be affected, impaired orinvalidated.

Sectionl5.l0.Entire Agreement. This Agreement and the Related Agreementsrepresent the entire agreement among the Parties with respect to the subject matter hereof thereof

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and supersede all prior or contemporaneous written or oral agreements or understandings of anykind among the Parties hereto and thereto with respect to the subject matter hereof and thereof,including the MOU, the RFP, the BAFO and the Clarifying Correspondence. All Exhibits andSchedules hereto are expressly made a part of this Agreement as fully as though completely setforth herein.

Section 15.11. Amendmentst Waivers. Except as hereinafter provided or allowed bystatute, this Agreement may be amended or modified, and any of the terms, covenants,representations, warranties or conditions hereof may be waived, only by a written instrumentexecuted by the Parties hereto, or in the case of a waiver, by the Party waiving compliance. Anywaiver by any Parry of any condition, or of the breach of any provision, term, covenant,representation or warranty contained in this Agreement, in any one or more instances, shall notbe deemed to be or construed as a further or continuing waiver of any condition or of the breachof any other provision, term, covenant, representation or warranty of this Agreement.

Section 15.12. Parties in Interest: Third Partv Beneficiarv. Except as hereinafterprovided, this Agreement is not intended to and shall not be construed to create upon any Personother than the Parties any rights or remedies hereunder. Notwithstanding the prior sentence, theCity and the Borough are intended third party beneficiaries, with rights, among others, to enforcethe covenants and agreements of Buyer contained in Article VII of this Agreement and toprovide any notices on behalfofSeller, subject to Section 15.13(c).

Section 15.13. Successors and Assiqns.

(a) Except as otherwise set forth herein and subject to Sections 15.13(b) and (c),neither Party hereto shall assign or delegate this Agreement or any rights or obligationshereunder without the prior written consent of the other Parties hereto, and any attemptedassignment or delegation without prior written consent shall be void and of no force or effect.Subject to Section 15.13(b), this Agreement shall inure to the benefit of and shall be bindingupon the successors and permitted assigns of the Parties hereto.

(b) With respect to any assignment or delegation permitted pursuant to Section15.13(a) or in connection with any proposed sale, lease, liquidation or transfer of all orsubstantially all of the System or the Acquired Assets by Buyer, Buyer shall cause such assigneeor successor to acknowledge and agree in writing for the benefit of Buyer and the Seller, to fullyperform and be liable for all of Buyer's obligations set forth in Article VII, which obligationsshall continue to be subject to the Seller's rights and remedies hereunder. In the event of anyassignment or delegation by Buyer of its rights and obligations under this Agreement to anyPerson, Buyer shall be fully liable to the Seller to the extent that such Person fails to pay or assistSeller in distributing to customers the Variance Adjustrnent as provided under this Agreement,and such assignment or delegation by Buyer to such Person shall in no event relieve Buyer of itsobligations pursuant to this Section 15.13(b) in the event of any failure by such Person to pay orassist Seller in distributing to customers the Variance Adjustment in breach of this Agreement.

(c) The Parties hereto acknowledge and agree that the limitation on assignment ordelegation contained in Section 15.13(a) in no way limits the rights or obligations of the City andthe Borough, as the municipalities creating the Seller, under the Municipality Authorities Act. [n

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the event of the termination of the Seller in accordance with the Municipality Authorities Actand other applicable Law following the Closing:

(D the City and the Borough shall (x) obtain all property of the Seller andsucceed to all of the Seller's rights under this Agreement, and (y) assume and be jointlyand severally liable for all of the Seller's obligations under this Agreement (includingwith respect to the System), in each case as if the City and the Borough were originallydirect parties hereto;

(ii) the City, or such other Person as may be designated by mutual writtenagreement of the City and the Borough (the City or such other Person, the "Se!!91

Successor"), is hereby appointed to act as agent for and on behalf of the City and theBorough in connection with, and to facilitate, any and all transactions arising from, inconnection with and incident to this Agreement;

(iii) a decision, act, consent or instruction of the Seller Successor shallconstitute a decision of the Seller and shall be final, binding and conclusive upon each ofthe City and the Borough, and Buyer and the Escrow Agent may rely upon any decision,act, consent or instruction of the Seller Successor as being the decision, act, consent orinstruction of the Seller, the City and the Borough;

(iv) Buyer and the Escrow Agent are hereby irrevocably relieved from anyliability to any Person for any acts done by them in accordance with such decision, act,

consent or instruction of the Seller Successor; and

(v) the Seller or the Seller Successor, as the case may be, shall constitute thesole point of contact for purposes of any notices to be given, consents to be obtained orother communications, by Buyer or Buyer's Affiliates pursuant to or in connection withthis Agreement or any matters arising out of or relating hereto, and in no event shallBuyer be required or obligated in any way to give notice to, obtain the consent of orotherwise communicate with any Person other than the Seller or the Seller Successor.

Section 15.14. Governins Law: Jurisdiction. This Agreement shall be construed andenforced in accordance with, and governed by, the Laws of the Commonwealth of Pennsylvania(without giving effect to the principles of conflicts of laws thereof). The Parties heretoirrevocably agree and consent to the jurisdiction of the United States District Court for theMiddle District of Pennsylvania, the Court of Common Pleas of Lackawanna County,Pennsylvania, and the PaPUC for the adjudication of any matters arising under or in connectionwith this Agreement. Any action initiated shall be frled and litigated (including all discoveryproceedings) exclusively in the United States District Court for the Middle District ofPennsylvania, the Court of Common Pleas of Lackawanna County, Pennsylvania and thePaPUC, and each Party irrevocably submits to the jurisdiction of such courts and the PaPUC inany such suit, action or proceeding. Service of process, summons, notice or other document bymail to such Party's address set forth herein shall be effective service of process for any suit,action or other proceeding brought in any such court. EACH PARTY ACKNOWLEDGES ANDAGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENTOR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE

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COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTYIRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO ATRIAL BY ruRY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF ORRELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS ORTHE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TOTHIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NOREPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OROTHERWISE. THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THEFOREGOING WATVER TN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HASCONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THISWAIVER VOLTINTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTERINTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS ANDCERTIFICATIONS IN THIS SECTION. Notwithstanding the foregoing, this Section 15.14 shallnot apply to the dispute resolution procedures set forth in (i) Section 3.02, which shall be theexclusive manner to resolve any dispute surrounding the determination of the Post-ClosingAdjustment, provided, that, any dispute arising out of a breach of any of the provisions ofSection 3.02 or a Party's failure to pay an amount determined to be due under Section 3.02 (andnot out of a disagreement relating to the determination of such amounts) shall be resolvedpursuant to this Section 15.14 or (ii) Section 7.07(d), which shall be the exclusive manner toresolve any dispute regarding the calculation of the Variance Adjustment as set forth in Section7.07(d), provided, that, any dispute arising out of a breach of any of the provisions of Section7.07(d) (other than a disagreement relating to the calculation of the Variance Adjustment) shallbe resolved pursuant to this Section 15.14.

Section 15.15. Specific Performance. The Parties agree that irreparable damage wouldoccur in the event that any of the provisions of this Agreement were not performed by them inaccordance with the terms hereof or were otherwise breached and that each Party shall beentitled to an injunction or injunctions to prevent breaches of the provisions hereof and tospecific performance of the terms hereof, in addition to any other remedy at law or in equity.

Section 15.16. Limitations of Liabilitv.

(a) No present or future officer, director, manager, employee, advisor, agent orattorney of or in the Seller or Buyer shall have any personal liability, directly or indirectly, underor in connection with this Agreement or the Related Agreements, or any amendments thereto,and the Parties and their successors and assigns and all other Persons shall look solely to theParties for the payment of any claim or for any performance, and the Parties hereby waive anyand all such personal liability.

(b) No officer, director, employee, agent or other Representative of the Seller orBuyer shall have any personal liability or obligation whatsoever with respect to any of thematters set forth in this Agreement, the Related Agreements and any other documents,agreements, or instruments related thereto or any of the representations made by the Seller orBuyer being or becoming untrue, inaccurate or incomplete in any respect.

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(c) The limitations on liability contained in this Section 15.16 are in addition to, andnot in limitation of, any limitation on liability applicable to Seller or Buyer provided in any otherprovisions of this Agreement or by Law or by any other contract.

Section 15.17. Attornev-Client Privilege. Buyer understands and agrees that the Sellerwill be entitled to retain the services of Buchanan Ingersoll & Rooney PC as its attorney even inthe event of any dispute of Buyer with the Seller concerning this Agreement or any of theRelated Agreements or any of the transactions contemplated hereby and thereby notwithstandingany result of prior representation of Seller. Notwithstanding the sale of the Acquired Assets toBuyer, Buyer agrees that Buyer shall not have the right to assert the attorney/client privilege as

to pre-Closing and post-Closing communications between Seller, on one hand, and its counsel,Buchanan Ingersoll & Rooney PC, on the other hand, to the extent that the privilegedcommunications relate to this Agreement or any of the Related Agreements or to the transactionscontemplated hereby and thereby. The Parties agree that only the Seller shall be entitled to assertsuch attorney/client privilege in connection with such communications following the Closing.The files generated and maintained by Buchanan Ingersoll & Rooney PC as a result of theirrepresentation of the Seller in connection with this Agreement or any of the Related Agreementsor any of the transactions contemplated hereby are and will remain the exclusive property of theSeller.

Section 15.18. Counterparts. This Agreement may be executed in multiplecounterparts, each of which shall be deemed an original, but all of which shall together constitutethe same instrument. A signed copy of this Agreement delivered by facsimile, e-mail or othermeans of electronic transmission shall be deemed to have the same legal effect as delivery of anoriginal signed copy of this Agreement.

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SIGNATURES NEXT PAGE]

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[Signann'e Page- Asset Purchase AgreenentJ

lN WI'INESS WHEREOF, the Pafties hereto have executed, or caused to be executed bytheir duly authorized representatives, this Agreement as of the Effective Date.

"SELLERn "BUYERt'

THE SEWER AUTFIORITY OF THE PENNSYLVANTA-AMERICAN WAT'ERCITY OF SCRANTON COMPANY

ev, Yhu(rWdt,* By:

Prirrted: /l,r/!nec tr /ff"llek Printed:

Its: tA.s,*rrt*^t Its:

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[Signature Page- Asset Purchase AgreementJ

IN WITNESS WHEREOF, the Parties hereto have executed, or caused to be executed bytheir duly authorized representatives, this Agreement as of the Effective Date.

'ISELLERI'

THE SEWER AUTHORITY OF THECITY OF SCRANTON

By:

Printed:

Its:

NBTTYERII

PENNSYLVANIACOMPA}IY

LQ:

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BXHIBIT A

BILL OF SALE

This BILL OF SALE (this "Eill_g[_&le"), dated this Iol day of [o], [rl, is madc by TheSewer Authority of the City of Scranton ('&ngfefq5") for the benefit of Pennsylvania-AmericanWater Company ("Transferee").

RECITALS:

A. Pursuant to that certain Assct Purchase Agreement, dated as of March29,2016, by and between Transferor and Transferee (the "Purchase Agreemenf'), Transferoragreed to sell, transfer, assign, convey and deliver to Transferee at the Closing, and Transfereeagreed to purchase from Transferor at the Closing, all of Transferor's right, title and interqst inand to the Acquired Assets.

B. Pursuant to the Purchase Agreement, Transferor is executing anddelivering this Bill of Sale, effective as of the Closing, as evidencc of such sale, transfer,assignment, conveyance and delivery to Transferee all of Transferor's right, title and interest inand to the Acquired Assets comprising tangible personal property.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy ofwhich are hereby acknowledged, Transferor hereby agrees as follows:

l. Defined Terms. Capitalized terms which are used but not otherwise defined inthis Bill of Sale shall have the meaning ascribed to such terms in thc Purchase Agreement.

2. Transfer. For good and valuable consideration, the receipt and adequacy of whichare hereby acknowledged, Transferor doe.s hereby sell, transfer, assign, convey and deliver toTransferee all of Transferor's right, title and interest in and to all of the Acquired Assetscomprising tangible personal property, on the terms and subject to the conditions set forth in thePurchase Agreement.

3. Bindigg Effect. This Bill of Sale and all of the provisions hereof will be bindingupon and inwe to the benefit of each of Transferor and Transfcree and their respectivesuccessors and permitted assigns.

4. Governing ["aw. This Agreement shall be construed and enforced in accordancewith, and governed by, the Laws of the Commonwealth of Pennsylvania (without giving effect tothe principles of conflicts of law thereo$.

5. Construction. This Bill of Sale is delivered pursuant to, and is subject to theterms of, the Purchase Agreement. Nothing contained in this Bill of Sale shall amend, cnlarge,restrict or otherwise modify the terms of the Purchase Agreement or any Related Agreement. Inthe event of any ambiguity or conflict between the terms hereof and the Purchase Agreement, theterms of the Purchase Agreement shall govern and be controlling.

[email protected]

6. Execution and Elcctronic Dclivery. A signed copy of this Bill of Sale deliveredby facsimile, e-mail or othcr me:ms of electronic transmission shall be decmed to havc the samelegal effect as delivery of an original signed copy of this Bill of Sale.

[Signaturc page follows.]

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IN WIINESS WHEREOF, this Bill of Sale has been duly executcd and delivcred byTransferor as of the date first above written.

TIIE SEWER AUTHORITY OF THE CITYOF SCRANTON:

Name:Title:

By:

Signature Page to Bill of Sale

EXHIBIT S

FORM OF ASSIGNMENT AND ASSTJMPTION AGRtsEMENT

This ASSUMPTION AND ASSIGNMENT AGREEMENT (this "Agreeme4!"), datedthis [oJ day of [ol, [ol, by and between The Scwer Authority of the City of Scranton("Assi snqr"), and Pennsyl vania-American Watcr Company ("4$$.!gnge").

RECITALS:

A. Pursuant to that certain Asset Purchase Agrecment, dated as of March 29,2016, by and between Assignor and Assignec (the "Purchase Aereemenf'), Assignor agreed tosell, transfer, assign, convey and deliver to Assignee all of Assignor's right, title and interest inand to the Acquired Assets, and Assignee agreed assumc and to pay, perform and dischargewhen due the Assumed Liabilities, in each case effective as of the Closing.

B. Pursuant to the Purchase Agreement, Assignor and Assignee ar€ executingand delivering this Agreement to be effective as of the Closing as svidence of the sale, transfer,assignment, conveyance and delivery by Assignor to Assignee of all of the Acquired Assets, andthe assumption by Assignee of all of the Assumed Liabilities.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuableconsideration" the receipt and sufficiency of which are hereby acknowledged, Assignor andAssignee hereby agree as follows:

1. Defined Terms. Capitalized terms which arc used but not otherwise defined inthis Agreement shall havc the meaning ascribed to such terms in the Purchase Agrecment.

2. Transfer and Assienment. Assignor hereby sells, transfers, assigns, conveys anddelivers to Assignee all of Assignor's right, title and inlerest in and to all of the Acquired Assets,on thc terms and subject to the conditions set forth in the Purchase Agrecment.

3. Acceptance and Assumntion. Assignee hereby assumes and agrees to pay,perform and discharge when due the Assumed Liabilities (and no other liabilities or obligationsof Assignor), on the tenns and subject to the conditions set forth in the Purchase Agreement.

4. Binding Effect. This Agreement and all of the provisions hereof shall be bindingupon and inure to the benefit of each of Assignor and Assignee and their respective successor$and permitted assigns.

5. No Third Partv Beneficiarv. This Agreement is not intended to and shall not beconstrued to create upon any Person other than Assignor and Assignee any rights or remedieshereunder.

6. Govemine Law. This Agreement shall be construed and enforced in accordancewith, and governed by, the Laws of the Commonwealth of Pennsylvania (without giving effect tothe principles of conflicts of law thereof;.

us_AcTlvE-t 261 0s349.3

7. Construction. This Agreemcnt is delivcrcd pursuant to, and is subjcct to the termsof, the Purchase Agreement. Nothing contained in this Agreement shall amend, cnlarge, restrictor otherwise modify the terrn^s of the Purchase Agreement or any othcr Relatcd Agreement orconstitute a waiver or relcase by Assignor or Assignee of any liabilities, duties or obligationsimposcd upon either of them by the terms of the Purchase Agrccment. ln the cvent that anyprovision of this Agreement is construed to conflict with any provision of the PurchaseAgreement, the provisions of the Purchase Agreement shall be deemed controlling.

8. Assignment. This Agreement may only be assigned pursuant to the provisions dfSection 15.13 of the Purchase Agreement.

9. Countemarts. This Agreement may be executed in one or more coun&erparts(including facsimile or othef, electronically transmitted counterparts), each of which shall bedeemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of page intentionally left bknkl

IN WITNESS WHEREOF, this Agreement has bcen duly executed and delivered by theparties hereto as of the date first above written.

.dSSIGNOR:

TIIE SEWER AUTHORITY OF TTTE CITY iOF SCRANTON

By:Name:Title:

ffiTIEE;PENNSYLVAMA.AMERICAN WATERCOMPA}IY

Name:Title:

By:

Signature Page to Assignment and Assumption Agreement

EXHIBIT C

FORM OF ESCROW AGREEMENT

'Ihis Escrow Agreement (this "Esg1qy Aglgement"), dated as of the effective date (thco'Effective Date") set fbrth on Schedule I attachcd hereto ("Eghg4ule !_') is entered into by andamong Pennsylvania-American Water Company (together with any succ.essors and permittedassigns, the "fluyer"), The Sewer Authority of thc City of Scranton (together with any successorsand permitted assigns, the "Seller") and f)elaware f'rust Compmy, s escrow agent hereunder(together with any successors and permitted assigns, the "Escrow Agent').

WIIEREAS, reference is hereby made to that certain Asset Purchase Agreement dated as

of March 29,2016, by and between the Buyer and the Sellcr (the "Purchasg Aereement");

WIIEREAS, pursuant to the Purchase Agleement, the Buyer and the Seller have ageedto establish onc or more escrow arrangsments for the purposes set forth therein;

WHEREAS, at the Closing (as defined in the Purchase Agreement) and simultaneouswith the execution and dclivery of this Escrow Agreement, the Buyer is delivering to the HscrowAgent the Indemnity Escrow Deposit (as defined in Section 2(a) hereof), by wire transfer ofimmediately available funds to a segregated account designated by the Escrow Agent (the"Indemnity Escrow Accounf') to be held by thc Escrow Agent as security for theindemnification obligations of the Sellcr set fcrrth in Article VIII of the Purchase Agreement; and

IWHEREAS, at the Closing and simultaneous with the execution and delivery of thisEscrow Agreement, the Buyer is delivering to the Hscrow Agent the Withdrawal LiabilityEscrow Deposit (as defined in Section 2(b) hereof), by wire transfer of immediately availablefunds to a segregated account (separate from the Indemnity Escrow Account) designated hy theEscrow Agent (the "Withdrawal Liability Escrow Account") to be held by the Escrow Agent forthe purpose set forth in Section 2.07 of the Purchase Agreement]'; and

WHEREAS, the Escrow Agent agrees to hold and distribute the Indemnity Escrow Fund

fand the Withdrawal Liability Escrow Fund] subjcct to the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the foregoing and of the mutual covenantshereinafter set forth, the parties hereto agree as follows:

l. Appointment. The Buyer and the Seller hereby appoint the Escrow Agent as theirescrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts suchappointmant under the terms and conditions set forth herein.

2. Escrow Fundg.

(a) Indcmnity Hscrow Fund. Sirnultaneous with the execution and delivery of thisEscrow Agreemen! the Seller is depositing with the Escrow Agent the sum indicated as the

I Note to Draft: Withdrawal Liability Escrow languagc/concept to bc included if applicablc, subject to Section 2.07of the Purchase Agreernent.

"lndcmnity Escrow Deposit" on Schedule I (the "lndemnrty Esprow Deposit"). the HscrowAgent shall hold the lndemnity Escrow Deposit in the Indcmnity Escrow Account, and, subjectto the terms and conditions hereof, shall invest and reinvest the lndemnity Escrow Dcposit andthe procecds thereof (the aggregate amount of funds in the Indemnity Escrow Account from timeto time, the "Indemnity Escrow Fd") a-s directed in Section 3 hereof.

(b) [IVithdrawal .Liability Escrow Fund. Simultaneous with the execution anddelivery of this Hscrow Agreement the Seller is depositing with the Escrow Agcnt the sumindicated as the Withdrawal Liability Escrow Deposit on Schedule I (the "Withdrawal LiabilityI{scrow Deposit"). the Escrow Agcnt shall hold the Withdrawal I-iability Escrow Deposit in theWithdrawal Liability Escrow Account pursuant to the terms hereof and, subject to the terms andconditions hereo{ shall invest and reinvest the Withdrawal Liability Esuow Deposit and theproceeds thercof (the aggregate amount of funds in the Withdrawal Liability Escrow Accountfrom time to time, the "Withdrawal Liability Escrcw ') as directed in Section 3 hereof.l

3. Investment of Escrow Fund. During the term of this Hscrow Agtecmcnt, the IndemnityEscrow Fund [and the Withdrawal Liability Escrow Fund] shall be invested and reinvested bythe Escrow Agent in the investment indicatcd on Schedule 1 or such other invcstments as shallbe dirccted in writing by the Buyer and the Seller and as shall be acceptable to the BserowAgent. All investment orders involving U.S. Treasury obligations, commercial paper and otherdirect investments may be executed through broker-dealers selected by the Escrow Agent.Periodic statcments will be provided to the Buyer and the Seller reflecting tansactions executedon behalf of the Indemnity Escrow Fund [and the Withdrawal Liability Escrow Fund], whichstatements shall be provided no less frequently than on a monthly basis and, except as providedbelow, shall be provided in hard copy via regular mail. l-he lSuyer and the Seller, upon writtenrcqucst, will receive a statement of tmnsaction details upon completion of any securitiestransaction in the Indemnity Escrow Fund [and the Withdrawal Liability Escrow lrund] withoutany additional cost. Should any party hereto opt to receive monthly statements electronicallythrough the Escrow Agent's online service, such party hereby agrces that it shall have no furlherright under this Escrow Agreement to receive hard copy statements via regular mail. 'lheEscrow Agent shall have the right to liquidatc any investnents held in order to providc firndsnecessary to make required payments under this Escrow Agreement. The Bscrow Agent shallhave no liability for any loss sustained as a result of any investment in an investrnent indicatedon Schedule I or any investmcnt made pursuant to the instructions of the parties hereto or as aresult of any liquidation of any investment prior to its maturity or for the failure of the parties togive the Escrow Agent instructions to invest or reinvest the Indemnity Escrow F'und [or'theWithdrawal Liability Escrow Fundl. thc Ilscrow Agent may earn compensation in the form ofshort-term interest ('float") on items like unsashcd distribution checks (from the date issued untilthe datc cashed), funds that the Escrow Agent is directed not to invest, deposits awaitinginvesfinent direction or received too late to be invcsted ovemight in previously dircctedinvestments.

4" Disposition and Termination.

(a) The Buyer and thc Seller may al any time deliver to the Esoow Agent a jointwitten notice executed by each of the Buycr and the Seller as evidenced by the signatures of oneof the persons listed on Schedule 2 as the authorized rcprescntative of each of the Buyer and the

Scllcr, as applicable, instructing the Escrow Agent to distribute all or a portion of the IndcmnityEscrow Fund [or the Withdrawal l.iability Escrow Fundl (a "Joint Relcasc Instru "). Withinthree (3) Business Days (as defined in $ection l0) after thc datc on which the Escrow Agentreceives a properly exec.uted Joint Release Instruction, the Escrow Agcnt shall disburse theportion of the Indemnity Escrow Fund [or thc Withdrawal Liability Escrnw Fund, as applicable,]as set forth in the Joint Release Instruction, to the accounts of such persons designated on suchJoint Release Instruction.

O) If the Buyer makes one or more claims against the Seller for indemnificationpursuant to Artiqle VllI of the Purchasc Agreemsnt (each, an "Indemnification Claim") and theBuyer elects to exercise its rights with respect to such lndemnification Claim pursuant to thisEscrow Agreement, the Buyer shall deliver simultaneously to thc Escrow Agent and the Sellerwritten notice of such lndemnification Claim (an "Indemnification Claim No '), whichlndemnification Claim Notice shall be delivered using one of the means of delivery set forth inSection l0 of this Escrow Agrecment and shall set forth in reasonable detail (x) the nature of thelndemnification Claim, and (y) the amount of the Indemnification Claim (the "IndemnificationClaim Amount"). The Escrow Agent shall provide noticc of its receip of an IndemnificationClaim Notice from the Buyer to the Seller within five (5) days of its receipt thereof.

(c) If the Seller elects to contest an Indernnification Claim, the Sellcr shall give theBuyer and the Escrow Agcnt written notice of such election setting forth in reasonable detail thenature and basis for such contest (including the relevant portion or portions of theIndemnification Claim Notice being contested) and the portion of the Indemnification ClaimAmount being contested (the "eontesl_Nq!ig"), which Contest Notice shall be delivered usingone of the mcans of delivery set forth in Section l0 of this Escrow Agreement, on or before thcthirtieth (30th) day aftcr delivery by the Buyer of an Indernnification Claim Notice to the Sellerand the Escrow Agent (the "Contest Resppnse Period"). lhe Escrow Agent shall conclusivelydeem that any Indemnification Claim Notice it receives was simultaneously delivered to theSeller and any Contest Notice it receives was simultaneously delivered to the lluyer.

(d) If the Buyer makcs an Indemnification Claim, the Escrow Agent shall disbursethe Indemnity Escrow Fund as to such Indemnification Claim as follows:

(i) if the Escrow Agent has not received a Contest Notice with respect to anIndemnification Claim within the Contest Response Period in accordance with Section 4(c) ofthis Escrow Agreement, within ttuee (3) Ilusiness Days following the expiration of the ContestResponsc Period, the Escrow Agent shall disbursc from the Indemnity Escrow Account to anaccount designated in writing by the Buyer an amount equal to the lesser of (A) theIndemnification Claim Amount or (B) the Indemnity tsscrow Fund; and

(iD if the llscrow Agent has rcceived a Contest Notice with respect to anIndemnification Claim withirr the Contest Response Period in accordance with Section 4(p) ofthis Escrow Agreement, thc liscrow Agent shall not disburse from the Indemnity EsmowAccount to the Buyer the Indemnification Claim Amount with rcspect to such IndcmnificationClaim except: (A) in accordance with a Joint Release Instruction; or (B) in accordance with a

final, non-appealable order of a court of competent jurisdiction (a "Court_Qrder"), together witha certificate of the presenting party to the effect that such judgment is final end from a court of

competent jurisdiction, upon which certificatc the Escrow Agent shall be entitled to conclusivclyrely without further invcstigation. 'fhe Dsuow Agent shall take the action specificd in a JointReleasc Instruction or a Court Order prior to the third (3'o) Business f)ay from the date on whichthe Escrow Agent received such Joint Release Instruction or Court Order.

(e) On the date that is the eighteen (18) month anniversary of the Effective Date, or,if such date is not a Business Day, on the next zucceeding Rusiness Day (the "Indemnity EscrqwReleasc Datc"), the Escrow Agent shall disburse from the Indemnity Esuow Account to an

account designated in writing by the Seller (A) the balance of the Indemnity Escrow Fund(including, for the avoidance of doubt, all interest accrued thereon) not previously disbursedpursuant to this Escrow Agrcement less (B) the aggrcgate amount of Indemnification ClaimAmounts with respcct to the Indemnification Claim Notices that remain outstanding andunresolved as of the Indemnity Escrow Release Date. Any amount retained in thc IndemnityEscrow Account after the Indemnity Escrow Release Date shall be disbursed pursuant to Section4(d)(ii) hereof.

(f) [For the avoidance of doubt, the Withdrawal Liability Escrow Fund shall only bcreleased pursuant to a Joint Release Instnrction, delivered by the Buyer and the Seller pursuant toSection 2.07 ofthe Purchase Agreement.]

(d Upon payment in full of the entire Indemnity Escrow Fund [and the WithdrawalLiability Esmow Fundl by the Escrorv Agent in accordance with the tcrms of this EscrowAgreemen! this Escrow Agreement shall terminate, subject to the provisions of Section 7.

5. Escrow Agent. 'f-he Bscrow Agent undertakes to perform only such duties as areexpressly set forth herein and no duties shall be irnplied. The Escrow Agent shall havc noliability under and no duty to inquire as to the provisions of any agreement othcr than thisEscrow Agreement. l'he Escrow Agent may rely upon and shall not be liable for acting orrefraining from acting upon any written notice, inskuction or request fumished to it hcreunderand believed by it to be genuine and to have been signed or presented by the proper party orparties. The Escrow Agent shall bc under no duty to inquire into or investigate the validity,accuracy or content of any such document. The Escrow Agent shall have no duty to solicit anypayments which may be due it or the Inderxrnity Escrow Fund [or thc Withdrawal LiabilityIlscrow Fund]. The Escrow Agent shall not be liable for any action taken or omitted by it ingood faith except to the extent that a court of competent jurisdiction determines that the EscrowAgent's gross negligence or willful misconduct was the primary cause of any loss to thc Buyer orthe Seller. The Escrow Agcnt may execute any of is powers and perform any of its dutieshercundcr directly or through agents or attomeys (and shall bc liable only for the caret'ulselection of any such agent or attomey) and may consult with counsel, accountants and otherskilled p6:rsons to be selected and retained by it. The Escrow Agent shall not be liablc foranything done, suffered or omittcd in good faith by it in accordance with the advice or opinion nfany such counscl, accountants or other skilled persons. In the event that the Escrow Agent shallbe uncertain as to its duties or righm hereunder or shall reccivc instructions, claims or demandsfrom any party hereto which, in its apinion, con{lict with any of the provisions of this EscrowAgreement, it shall be entifled to rcfrain from taking any action and its sole obligation shall be tokeep safely all property held in sscrow until it shall be directcd otherwise in writing by all of theothcr parties hcreto or by a final ordcr or judgment of a court of compctent jurisdiction.

Anything in this Escrow Agreement to the contrary notwithstanding, in no event shall theEscrow Agent be liable for special, indirect or conscquential loss or damage of any kindwhatsoever (including but not limited to lost profits), even if the Escrow Agcnt has been advisedof the likelihood of such loss or damage and regardless of the f<rrm of action. 'IlT e Escrow Agcntfuither acknowlcdges and agrees that the Indemnity Escrow Fund [and the Withdrawal LiabilityEscrow F'undl shall bc held for the exclusive account and bencfit of Buyer and the Scllerpursuant to the applicable provisions of the Purchase Agreement and that Hscrow Agcnt shall notbe entitled to assert any lien on, right of setoff or other claim against, or security interest in theIndcmnity Escrow Fund [or the Withdrawal Liability Esuow F'und] for any obligations due andowing to Iiscrow Agent by a party as a result of such party's deposit, credit or other independentrelationship with Escrow Agent pursuant to separate agreements with such partics, provided,that, the foregoing shall not limit Escrow Agent's rights under Sections 6, 7 and 8 hereof. 'lheEscrow Agent shall never be required to use or advance its own funds in its performance of itsduties or the exercise of any of its rights and powers hereunder.

6. Succession. The Escrow Agent may rcsign and bc dischargcd from its duties orobligations hereunder by giving thirty (30) days' advance notice in writing of such resignation tothe other parties hereto specifying a date when such resignation shall take effect. In thc event ofsuch rcsignation, the Seller and the Buyer agree that they will jointly appoint a bankingcorporation, trust cornpany, or other appropriate financial institution as successor escrow agentwithin thirty (30) days of notice of such resignation. The Escrow Agcnt shall refrain from takingany action until it shall receive joint written instructions from the Seller and the Buyerdesignating the successor escrow agent. The Escrow Agent shall deliver all of the thenremaining balance of the Indemnity Escrow Fund [and the Withdrawal Liability Escrow Fund, as

applicable] to such succcssor escrow agent in accordance with such instructions and, uponreceipt of the Indemnity Escrow F'und [and the Withdrawal Liability Escrow Fund, as applicable]and the execution by such successor escrow agent of a joinder to this Agteement, the successorescrow agent shall be bound by all of the pnrvisions of this Agreement. 'fhe Escrow Agent shallhave the right to withhold an amount equal to any amount due and owing to the Escrow Agent,plu-s any costs and expcnses the Escrow Agent shall reasonably believe may be incuned by theEscrow Agent in connection with the termination of this Escrow Agreement. Any corporation orassociation into which the Escrow Agent may be merged or converted or with which it may be

consolidated shall be the Escrow Agent under this Escrow Agreement without further act.

7, Fees. The Buyer and the Seller agree jointly and severally to pay thc liscrow Agent uponcxecution of this Escrow Agreement and from time to time thereafter reasonable compensationfor the services to be rendercd hereunder, which unlcss otherwise agreed in writing shall be as

dcscribed in Schedule I attached hereto. The lluyer and the Seller shall each pay and be

responsible for payment of fifty percent (50%) of the fces payable to the Escrow Agent pursuantto this Escrow Agreement from time to time as set forth on $chdulg l attached hereto.

8. Indemnity. 'Ihc Buyer and the Seller shalljointly and severally indemnify, defend andsave harmless the Escrow Agent and its directors, officers, agents and employees (the"indemnitecs") from all loss, liability or expense (including the fees and cxpenses of in house oroutside counsel) arising out of or in connection with (i) the Escrow Agent's cxecution andpcrformance of this Escrow Agreement, except in the case of any indemnitce to the extent thatsuch loss, liability or expense is due to thc gross negligence or willful misconduct of the Escrow

Agent, or (ii) its following any instructions or other directions from the Buycr or the Seller,except to the extent that its following any such instruction or direction is expressly forbidden bythe terms hereof. 'l'he parties hereto acknowledge that thc foregoing indemnities shall survive thercsignation or removal of the Escrow Agent or the termination of this Escrow Agreement.Subject to the last sentence of Scction 5, the parties hereby grant the Escrow Agcnt a lien on,right of set-off against and security interest in the Indemnity Esuow F'und [or the WithdrawalLiability Escrow Fund] for the payment of any claim for indemnification! compensation,cxpenses and amounts duc hereunder. Notwithstanding anything to the contrary set forth herein,in no evcnt shall the Escrow Agent charge against or withdraw from the Indemnity Hscrow Fund

[or the Wifidrawal Liability Escrow Fund, as applicable] any amounts due and owing to EscrowAgent by the Buyer or the Seller under Section 7 hereof, the payment of which shall be the soleresponsibility of the Buyer or the Seller as the casc may be" as set forth therein, and subject to theterms thereof.

9. TINs. The Buyer and the Seller each represent that its correct'Iaxpayer IdentificationNumber ("TlN') assigned by the lntemal Revenue Service or any other taxing authority is setforth in Schedule l. All interest or other income earned under this Esuow Agreement shall beallocated to the Seller and reported, to the extent required by law, by the Escrow Agent to theIRS or any other taxing authority, as applicable, on IRS form 1099-INT, 1099-DfV or 10425 (orother appropriatc form) a.s income eamed from the Indemnity Escrow Fund [or the WithdrawalLiability Hscmw Fundl by the Seller whether or not said income has been distributed during theyear. Unless otherwisc indicated in writing by the parties hereto, no taxes or other withholdingsare required to be made under applicable law or otherwise with respect to any payment to bemade by the Escrow Agent. All documenlation necessary to support a claim of exemption orreduction in such taxes or other withholdings has been timely collected by the Seller and copieswill be provided to the Escrow Agent promptly upon a request therefor. Unless otherwise agrecdto in writing by the Escrow Agent, all tax returns required to be filed with the IRS and any othertaxing authority as required by law with respect to payments made hereundcr shall be timelyfiled and preparcd by the Seller including but not limited to any applicable reporting orwithholding pursuant to the Foreign Account Tax Reporting Act ("FATCA"). fte parties heretoacknowledge and agree that the Escrow Agent shall have no responsibility for the preparationand/or filing of any tax retum or any applicable FATCA reporting with respect to the IndemnityIiscrow Fund [or the Withdrawal Liability Escrow Fund]. The Escrow Agcnt shall withhold anytaxes it deems appropriate, including but not limited to required withholding in the absence ofproper tax documentation, and shall remit such taxes to the appropriate authorities as itdetermines may bc rcquired by any law or rcgulation in etlbct at thc time of the dishibution.

10. Notices. All communications hereunder shall be in writing and shall bc deemed to beduly given and received: (i) upon delivery if delivercd personally, or upon confirmed transmittalif by facsimile; (ii) on the next Business Day (as hereinafter defined) if sent by overnight courier;or (iii) four (4) Business Days after mailing if mailed by prepaid registered mail, retum receiptrequested, to the appropriate notice addrcss set forth on Sshedule I or at such other address as

any party hereto may have fumished to the other parties in writing by registcred mail, returnreceipt requested.

Notwithstanding the above, in the case of communications delivered to the Escrow Agentpursuant to the foregoing clauses (ii) and (iii) ofthis Section 10. zuch communications shall be

deemed to have been given on the date receivcd by the Escrow Agent. In the event that thcEscrow Agent, in its sole discretion, shall determine that an emergency exists, the Escrow Agentmay use such other msans of communication as the Escrow Agent deems appropriate. "Business

Dgy" shall mean any day other than a $aturday, Sunday or any other day on which the EscrowAgent located at the notice address set forth on Schedule 1 is authorizcd or required by law orexecutive order to remain closed.

11. Security Procedures. In the event funds transfer instruetions are given (other than inwriting at the time of execution of this Escrow Agreement), whether in writing, by telecopier orotherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephonecall-bask to the person or persons designated Schedule 2. and the Escrow Agcnt may rely uponthe confirmation of anyone purporting to be the person or persons so designated. The persons

and telephone numbers for call-backs may be changed only in a writing actually received andacknowledged by the Escrow Agent. The Esoow Agent and the beneficiary's bank in any fundstransfer may rely solely upon any account numbers or similar identifying numbers provided bythe Buyer or the Seller to identifr (i) the beneficiary, (ii) the beneficiary's bank, or (iii) an

intermediary bank. The Escrow Agent may apply any of the escrowed funds for any paymentorder it executes using any sueh identifying number, even where its use may result in a pcrsonother than the beneficiary being paid, or the transfer of funds to a bank other than thebeneficiary's bank or an intermediary bank designated. The parties to this Esuow Agreementacknowledge that these security procedures are commercially reasonable.

t2. Miscellaneous. The provisions of this Escrow Agreement may be waived, altered,amended or supplemented, in whole or in part, only by a writing signed by all of thc partieshercto. Neither this Escrow Agrcement nor any right or interest hereunder may be assigned inwhole or in part by any pmty, except as provided in Section 6 hereof, without the prior consentof the other parties. This Escrow Agrcement shall be governed by and construed under the lawsof the State of Delaware. Each party hereto irrevocably waives any objcction on the grounds ofvenue, forum non-conveniens or any similar grounds and irrevocably consents to scrvice ofprocess by mail or in any other manner permitted by applicable law and consents to thejurisdiction of the courts located in the State of Delaware. The partics further hereby waive anyright to a trial by jury with respect to any lawsuit or judicial proceeding arising or relating to thisEscrow Agreement. No party to this Escrow Agreement is liable to any other party for lossesdue to, or if it is unable to perform its obligations under the terms of this Esuow Agreementbecause of, acts of God, firc, floods, strikes, equipment or transmission failure, or other causes

reasonably beyond its control. This Escrow Agreement may be executed in one or morecounterparts, each of which shall be deemed an original, but all of which togcther shall constituteone and the same instrument.

13. Patriot Act Compliance. In order to comply with laws, rules, regulations andcxccutive orders in effect from time to time applicable tn banking institutions, including thoscrelating to thc funding of terorist activities and money laundering nnd the CustomerIdentification Program ("eIP') requirements under the LISA PATRIOT Act and itsimplementing regulations, pursuant to which the Escrow Agent must obtain, verify and recordinformation that allows the }iscrow Agent to identify customers ("Applicable Law"), the EscrowAgent is required to obtain, veriff and record certain information relating to individuals andentities which maintain a business relationship with the Hscrow Agent, Accordingly, each of the

parties hereto agrees to provide to the liscrow Agent upon its request from time to time suchidentifying information and documentation as may be available for such party in order to enablethe Escrow Agent to comply with Applicable Law, including, but not limited to, information as

to name, physical addrcss, tax identification numbcr zurd other infbrmation that will help theEserow Agent to idcntify and verify such party such as organizational documents, certificates ofgood standing (where applicable), licenses to do business or other pertinent identifringinformation. Each party undcrstands and agrees that thc Hscrow Agent cannot open theIndemnity Escrow Account [or the Withdrawal Liability Escrow Account] unless and until theEscrow Agent vcrifies the identities of the parties in accordance with its CIP.

14. If the Seller is dissolved and its legal existence terminated tbllowing the Effective Datc,prior to such dissolution, the Seller shall deliver or cause to be delivered a written noticc (signedby of one of the persons listed on Schedule 2 as the authorized representative of the Seller) toeach of the lluyer and the Escrow Agent, which notice shall identify (i) the City or zuch otherPerson that has been designated as the Seller Successor pursuant to Section I 5.13 ofthe PurchascAgreement, and (ii) an updated Schcdule 2 to this Agreement identiffing the new persons (andtheir respective telephone numbers) as the authorized representative of the Seller Successor, andfollowing reccipt of such written notice by the Buyer and the Escrow Agent, the Seller Successorshall be deemed 'the Seller" for all purposes under this Agreement. Any such Seller Successorhereby agrees to deliver any such additional information as rcasonably requested by EscrowAgent.

[Signature page follows.]

IN WITNESS WHEREC)F, the parties hereto have executed this Escrow Agreement as

of the Effective Date.

ESCROW AGENT:

DELAWARE TRUST COMPAIIY

ElrYE&:

PENNSYLVAMA-AMERICAN WATERCOMPAIIY

SELLER:

THE SEWER AUTHORITY OF' THECITY OF SCRANTON

By:Name:Title:

By:-Name:Title:

By:-Name:Title:

Schedule I

Effective Date: [rl

Seller: The Sewer Authority of the City of Scranton.Seller Notice Address: The Sewer Authority of the City of Scranton

312 Adarns Ave.Scranton, PA 18503Attention: Executive DirectorFacsimile: [o]

With a copy to: Jeff Belardi, Esq.Co-Solicitor'lhe Sewer Authority of the City of Scranton

[.]Facsimile: [o]

and Paul J. Walkeq Esq.Co-SolieitorThe Sewer Authority of the City of Scranton

[.]Facsimile: [r]

and Buchanan Ingersoll & Rooney PCTwo Libertv Place50 S. l6th Sireet, Suite 3200Philadelphia, PA I 9102-2555Attention: Steven W. Smith, Esquirc.Facsimile: 2 I 5.665.8760

Seller TIN: [r]

Buyer: Pcnnsylvania-American Water CompanyBuyerNotice Address: pgnnsylvania-American Water Company

800 West Hershey Park f)riveHershey, PA 1703

Attcntion: General CounselFacsimile: [rl

With a copy to : Arnerican Watcr Works Company, lnc.1025 Laurel Oak RoadVoorhees, NJ 08043

10

and

Buyer T'IN:

Escrow Agent:

Attention: Senior Vice President, Strategy andBusiness Development

Facsimile: [ol

Recd Smith LLP'Ihree Logan SquareI 71 7 Arch Street, Suite 3 I 00Philadelphia, PA 19103Attention: Brian C. MinerFacsirnile: (2 1 5) 85 l-1420

[.]

Delaware Trust CompanyEscrow Agent Notice Address: 271I Centerville Road, Suite 400

Wilmington, DE 19808Attn: Hscrow AdministrationTelephone: (866) 291-61 19

Facsimile: (302) 636-8666

Escrow Agent tr'ees:

51,000.00 - set up fee payable in advance of the closing of the transaction$2,500.00 - Indemnity Escrow Account - escrow agent fee payable in advance of the closing

ofthe transaction and upon each subsequent annual anniversary date.

J$2,000.00 - Withdrawal Liability Escrow Account [if neededl - escrow agent fee payablein advance of the closing of the transaction and upon each subsequentannual anniversary date.l

TRANSACTION FEES:

Wire transfer of fund: $3S.O0/domestis wire initiatcd; $75.00/intcrnational payment

Checks Cut: $10.00/oheck cut

I 099 Preparation: $ 12.00/1 099 prepared

I 042-5 Preparation: $50.00/per 1042-5

Rctumed Check: $30.00/retumed item

An additional annual fee of 15 basis points on the escrow account balancc payable in advance

may be charged for investments other than institutional moncy market funds with which the

Escrow Agent has established servicing arrangsmcnts. Out-of-pocket expcnscs, fees and

disbursements and services of an unanticipated or unexpected nature are not included in the

above schedule and will bc billed at cost.

(a) Indemnity Escrow Deposit: $5,000,000

11

tl

(b) [Withdrawal Liability l{scrow Deposit: $[r]l

Investment (Indemnity Escrow lleposit): [select one]

BlackRock '['emp Fund Cash Management Class (the "Share Class"), an institutional

money market mutual fund for which the Escrow Agent serves as shareholder servicing

agent and/or custodian or suboustodian. The parties hereto: (i) acknowledge the Hscrow

Agent's disclosure of the services the Escrow Agent is providing to and the fees itreceives from BlackRock; (ii) consent to thc Escrow Agcnt's receipt of these fees in

return for providing sharcholder services for the Share Class; and (iii) acknowledge that

the Escrow Agent has provided on or before the date hcreof a BlackRock Temp F'und

Cash Management Class prospectus which discloses, among other things, thc various

exp€Rses of the Share Class and ths fces to be received by the Escrow Agent.

Such other investments as the Buyer, the Seller and the Escrow Agent may from time to

time mutually agree upon in a writing executed and delivercd by the Buyer and the Seller

and accepted by the Escrow Agent.

The Indemnity Escrow Deposit shall bc held in a non-interest bcaring account.

[Investment (Withdrawal Liabilify Escrow Deposit): [select onc]

BlackRock Temp F'und Cash Management Class (the "Share Class"), an institutional

money market mutual fund for which the Esuow Agent serves as shareholder servicing

agent and/or custodian or subcustodian. The parties hereto: (i) acknowledge the Escrow

Agent's disclosure of the services the Escrow Agent is providing to and the fees it

rcceives from BlackRock; (ii) consent to thc Escrow Agent's receipt of these fees in

retum for providing shareholder services for the Share Class; and (iii) acknowledgc that

the Escrow Agent has provided on or before thc date hereof a BlackRock Temp Fund

Cash Management Class prospectus which discloses, among other things, the various

expcnses of the Share Class and the fees to be received by the Escrow Agent.

Such other investmcnts as the Buyer, the Seller and the Escrow Agent may from time to

time mutually agree upon in a writing executed and dclivered by the Buyer and the Seller

and accepted by the Escrow Agent.

'the Withdrawal Liability Escrow Deposit shall be hcld in a non-interest bearing

account.]

tl

n

t1

tl

I]

L2

Schedule 22

Telephone Number(s) for Call-Backs and

Person(s) Designated to Confirm Funds Transfer Instructions

If to the Buyer:

Name l'elephone Number

t.

I

J.

If to the Seller:

Name Telephone Number

1.

2,

J,

Telephone call-backs may be made to both the Buyer and the Seller if joint instructionsare required pursuant to this Escrow Agteement.

l4

t Note to Prafl To be provided.

RESOLUTION

OF THE BOARD OF

THE SEWER AUTHORITY OF THE CITY OF SCRANTON,PENNSYLVANIA

MARCH 28,20t6

SELLING THE ASSETS, Ah[D SELLING ALL RIGHT,TITLE AND INTERST IN THE ASSETS, THAT CONSTITUTE

AND COMPRISE THE WASTEWATER COLLECTION SYSTEMAND WASTEWATER TREATMENT PLANT OF THE SEWER

AUTHORITY OF THE CITY OF SCRANTON AND COIWEYINGTHEREWITII ALL PERMITS, REVENUES, REAL ESTATE,

OBLIGATIONS AND LIABILITIES OF TTIE SEWERAUTHORITY OF THE CITY OF SCRANTON

A RESOLUTION AUTHORIZING THE SALE OF THE SEWER AUTHORITYOF TFM CITY OF SCRANTON'S WASTEWATER COLLECTION SYSTEMAND WASTEWATER TREATMENT PLANT; AUTHORIZING THEENTERING INTO OF AN ASSET PURCHASE AGREEMENT AS THE SOLEAND SINGULAR MEANS OF CONVEYANCE OF SAID COLLECTIONSYSTEM AND TREATEMENT PLANT; AND AUTHORIZING TTIE,

OFFICERS OF THE BOARD OF DIRECTORS OF TIIE SEWER AUTHRITYOF T}tE CITY OF SCRANTON TO SIGN AN ASSET PIJRCHASEAGREEMENT AND ANY AI{D ALL DOCUMENTS NECESSARY TOEFFECTUATE THE TRANSACTION CONTEMPLATED IN SAID ASSETPURCHASE AGREEMENT.

WHEREAS, Ihe Sewer Authority of the City of Scranton, Pennsylvania (the "Authority"), apublic body, body corporate, body politic, and extension of the Commonwealttr, created andexisting under the Municipality Authorities Act of 1945, as amended and supplemented; and

WHEREAS, the Authority, which primarily services the residents and ratepayers of the City ofScranton and the Borough of Dunmore, acting by and through a Board of Directors, owns andoperates a wastewater collection system and wastewater treatment plant (the "System'); and

WHEREAS, the collection system is a 100 year-old, gravity fed, combined sewer andstormwater, conveyance system with a 60 MGD capacity, wastewater treatment plant built in1969-1970; and

WHEREAS, as a result of litigation brought by the United States Deparbinent of Justice(*USDOJ") on behalf of the United States Environmental Protection Agency (*USEPA"),(United States of America v. The Sewer Authority of the City of Scranton, Civil Action No.3:CV-09-1873) for combined sewer overflow events in wet and dry weather scenarios alike, theAuthority entered into a Consent Decree with DOJ, datedNovember 15, 2012 and signed byDOJ on December 13,2012, and, thereunder, the Authority has committed to a 25 year, LongTerm Control Plan, infrastructure improvement obligation to minimize, and to a certain extent ina majority of the system eliminate, combined sewer ovErflows at estimated construction costs of140 million, said improvements requiring a series of rate increases; and

WHEREAS, the Authority, after thorough investigation and significant deliberation, hasdetermined that the synergies, economies of scale, multiple abilities to raise capital, and expertiseof a nationwide water and sewer public utility are the best way to accomplish the environmentalgoals contemplated by the Consent Decree and are in the best interests of the ratepayers of theCity of Scranton and the Borough of Dunmore; and

WHEREAS, the Authority issued on March 3,2015, a Request for Proposals ("RFP") regardingthe management and/or sale of the System, as it explored ways to achieve operating efficiencies,to improve wastewater service, to keep future customer rates as low as possible and to raise thecapital necessary to fund and implement the important, necessary, and federally mandatedinfrastructure improvements; and

WHEREAS, Pennsylvania American Water Company ("PAWC"), ^mong

other potential buyers,responded to the RFP and, subscquently, to the Authority's request for Best and Final Offers

C'BAFO'), and engaged in extensive discussions with the Authority which resulted in theAuthority and PAWC entering into a Memorandum of Understanding ("MOU"), datedDecember 15,2015, which was modified on March 14,2016, for the sale and transfer of theSystem; and

WHEREAS, the Authority, on January 14,2016, hired the law firm of Buchanan Ingersoll &Rooney to aid in the transaction contemplated herein, to draft a definitive agreement thatencapsulates the terms of the MOU and the subsequent agreements between the parties, and tofile a joint application to the Pennsylvania Public Utility Commission ("PAPUC") with PAWC;and

WHEREAS, the Authority and PAWC, since executing the MOU, have engaged in extensive duediligence, discussions and negotiations and have agreed upon terms for an Asset PurchaseAgreement (*APA') in substantially the same form presented to the Authority and its Board ofDirectors herewith; and

WHEREAS, in reliance upon the representations, warranties and covenants of the Authority setforth in the APA , the Authority shall (i) selt, transfer, assign and deliver to the PA WC all the

assets of the Sewer System ( other than excluded assets) and in connection therewith and IItransfer certain ongoing obligations and liabilities to PAWC ( which they agree to assume) thatrelate to the operation of the system, all on the terms and subject to the condition set forth in theAPA; and

WHEREAS, pursuant to the terms of the APA, the customers of the System will experience inttre first ten years after the transaction a significant reduction in the Authority's currently plannedsewer rates, meaning that, as per the terms of the APA, the sewer rates will not increase to theextent that the Authority, acting on its own, would require; and

WHEREAS, the APA sets forth that during the first ten years of ownership PAWC may not raisethe sewer rates more than an average of l.9Yo compound annual growth rate ("CAGR") per year;and

WI"IEREAS, the APA will shift to PAWC the obligations of Consent Decree compliance andLong Term Control Plan implementation currently estimated to be at or near $140,000,000; and

WHEREAS, the purchase price for the sale, transfer, assignmenf conveyance and delivery of theassets shall be One Hundred Ninety-Five Million Dollars ($195,000,000.00) subject to theadjustments contemplated in the APA; and

WHEREAS, in the opinion of the Board of Directors of thb Authority, it is in the best interests ofthe Authorif, the ratepayers, the stakeholders, the City of Scranton and the Borough ofDunmore, to sell the Authority's assets pursuant to the terms of the APA;

NOW THEREFORE, BE IT RESOLVED by the Board of Directors of The Sewer Authorityof the City of Scranton, Pennsylvania hereby authorizes to the Authority enter into execute anddeliver the APA and other related documents and take all necessary actions necessary to closethe transaction herein contemplated and be it;

1. TRANSACTIONS

FURTIIER RESOLVED, In reliance upon the representations, warranties, andcovenants of the Authority set forth in the Asset Purchasing Agreement, the authority shall sell,transfer, assign, and deliver to PAWC all the assets of the Sewer System (other than excludedassets) and in connection therewith, to PAWC. The Authority shall transfer certain ongoingobligations and liabilities to PAWC (which the agree to assume) that relate to the operation ofthe System, all on the terms and subject to the conditions set forth in the Asset PurchasingAgreement; and be it

2, SALE PRICE

FURTHER RESOLVED, The Authority of the City of Scranton shall enter into an

Asset Purchase Agreement with the PAWC in the gross total price of 195,000,000. Said priceshall be reduced by the amount necessary to bring closing Cash Balance to 38,340,626.00Further, at closing there will be a cost of full defeasances of the total amounl of the outstanding

indebtedness as of the closing effective time; and be it

3. REDUCTIONS IN SALE PRICE:ESCROW

F'UTHER RESOLVED, Authority agrees that an Escrow in the amount of Five Million($5,000,000) Dollars shall be held for a period of eighteen months to ensure the representationsand warranties made by the Authority. Further, Authority shall be responsible to secure a policyof insurance for other representations and warranties to secure any and all amounts above thefive million dollar escrow not to exceed 12.5 million dollars: and be it

4.WFURTHER RESOLVED, the Authority agrees to pay Twenty-Five Q5%) percent of

said transfer tax, not to exceed $100, 562.28 of the estimated transfer tax. (estimated to be

$403,000.00) ; and be it

5. ASSETS TO BE TRANFERREI)

FURTHER RESOLVED, the Authority shall transfer all assets, properties, business,goodwill and rights of the Authority of every kind and description, whether tangible ofintangible, real, personal, leased or owned, which are used for the operation of the system shallbe transferred unless specifically excluded.

FURTHER RESOLVED, that the Authority shall transfers ie cash and cashequivalents, including certain accounts receivable, assigned contracts, supplies, equipment,machinery, system pipes, plants and plant equipment security deposits, files and records, licenseand permits, combined sewer system assets and goodwill, and any other assets as defined by theAPA; and be it

6. EXCLUDED ASSETS

FURTHER RESOLVED, that the Authority shall exclude from the sale all storm watersystem assets; all insurance policies and rights to applicable claims thereunder- certainequipment and machinery necessary to operate the storm water system, excluded accountsreceivable and liens held by the Authority which are not assignable as a matter of law, as providein the APA; and be it

T.ASSUMED LIABILITIES-

FURIITER RESOLVED, that the Authority by way of the APA and as a fundamentalcondition to this Resolution and the execution of the APA shall be discharged from and PAWCshall assume all liabilities and obligations under what is commonly referred to as the "ConsentDecree." PAWC shall assume responsibilities for any obligations regarding implementation ofthe CSO Control Measures to be performed after closing; and be it

s.WASTE WATER RATDS

FURTHER RESOLVEI) that t he Authority is authorizing the tansaotion with theexpress understanding that (i) PAWC will not implement any rate increase for the Sorvice Areawastewater customers that would effestive prior to January l, 2018, (ii) PAWC will notimplerrent a rate increase for the Ssrvice Area wastewater customers greater than the average1,9% CACR over the inirial ten (10) year period, and (iii) the APA sets forth additionalrestictions for rate increases foryears eleven(l1) throughthirteen (13) ; and be it

g.EMPLOYMENT MATTEBS

FURTHER RESOLVED that th€ Authority is entering this tansaction with theunderstanding that PAWC will offcr employment to Union and Non-Union personnel withoverall benefits and at a ratre of compensation that is substantially comparable to thecompensation offered by the Autbority, as of April 1, 2016; and be it

ro. copPERATroN

FURflmR RESOLVED that the Authority shall cooperate with PAWC to effectuatethe transaction herein contemplatedn including but not limited to; (i) filing with any Court andthe Pennsylvania Public Utility Commission, and(ii) filing a joint motion with the United States

Deparhent of Justice in the United States District Cornt for the Middle Disbict of Pennqylvauia;andbe it

11. ATJTHORIZATION

F'URTIIER RESOLVBII, that the Authority hereby authorizes and directs any of itsofficers to o<eoute, and to deliver the Asset Purchase Agreement in substantially the formprovided to the Board of Directors with such changes as approved by the Auftority Solicitors.and zuch other documents and to do suoh other things as may be necessary to carry out thepurposes ofthe Asset Purohase Agreeme,nt.

Aitopted tlns&-tl-aay of ,4<r- 4 zOrc.

ATTEST: THE SEWER AUTHORITY OF TIIE CITY OFSCRANTON, PENNSYLVANIA

SECRETARY CIIAIRMAN

(AU"THORTTY SEAL)

Unrnlmour Conrentc - Acquirc thc Scrrnton Scwer Authority Wrstewater System

PEN NSYLVAN IA AM ERICAN WATER

Unanimous Consent of Directors

The undersigned, being all of the Directors of Pennsylvania American

Water, a Pennsylvania corporation (the "Company"), do hereby approve, adopt

and consent to the following resolutions and agree that said resolutions shall

have the same force and effect as though duly adopted at a meeting of the Board

of Directors duly called and held:

RESOLVED, that the proper officers of theCompany be, and hereby are, authorized and directed toexecute and deliver to the Scranton Sewer Authority an

agreement to purchase assets of the Scranton SewerAuthorit't/s wastewater system; and

RESOLVED, that the proper officers including butnot limited to the President or a Vice President of theCompany be, and hereby are, authorized and directed toexecute and deliver any and all documents, make allfilings and do any other thing which they may deemnecessary, proper or desirable to effectuate thepurposes of the foregoing resolution, and to carry outthe closing of the purchase of the Scranton Sewer

Authority's wastewater system.

All signatures need not appear on the same copy of this consent.

C}* r-lt -ss.*rt -=-*

J.L. Gulleyo3'15'2018 1:30 PM

03.21.2016 9;14 AM

K.L. Pape

R.w. simmT'14.2016 3:34 PM

11 nl4/U-f.'- v*1/

uir8r016 ""31

AM

W.M. Varley

l3

EXHIAIT F

FORM OF ABI'TiACIOR SEARCIH RESULT O{ART

OWIIERNAME TOCATION ADDRESS OMTATE ArcODE PRMAP DEEDBOOKNO DEEDPAGENO DEKnbT OEKpI

DISCLOSURE SCHEDULES (THE "SCHEDULES")

TO THE

ASSET PURCHASE AGREEMENT

(THE "AGREEMENT")

DATED MARCH 29,2016

BY AND BETWEEN

THE SEWER AUTHORITY OF THE CITY OF SCRANTON, and

PENNSYLVANIA-AMERICAN WATER COMPANY

UNLESS THE CONTEXT OTHERWISE REQUIRES, CAPTTALIZED TERMS USEDHEREIN WHICH ARE NOT O'II{ERWISE DEF'INED SHALL HAVB 'I'TIE RESPECTIVEMEANINGS ASCRIBED TO ST]CH TERMS IN T}IE AGREEMENT.

SECI]ON NUMBERS IN TIIESE SCHEDULES CORRESPOND TO THE SECTIONNUMBERS IN THE AGREEMENT; PROVIDED, I{OWHVER,'llIAT WI'[H RESPEC'I. TOSCFIEDULES CORRtsSPONDING TO ARTICLE IV AND ARTICLE V OF THEAGREEMENT, ANY DISCLOSURE IN A PARTICUI,AR SECTION OR SUBSECIfON OFTHESE SCHEDULES SHALL BE DEEMED TO BE AN EXCEPTION TO (OR, ASAPPLICABLE, A DISCLOSURE FOR PURPOSES OF) THE PARTTCULARREPRESENTATION OR WARRANTY THAT IS CONTAINED IN THE CORRESPONDINGSECTION OR SUBSECTION OF THE AGREEMENT AND ANY OTHERRE,PRESENTATION OR WARRANTY MADE IN fiIE AGREEMENT (OffiER TIIANSI1CTTON 4.15 OF'TIIH AGREEMENT) IF THE RELEVANCE OF THAT REFERENCE ASAN EXCEPTION TO (OR" AS APPLICABI,E, A DISCLOSURI{ F'OR PURPOSES OI.) SUCHREPRESENTATION OR WARRANTY IS REASONABLY APPARENT ON THE FACE OF'

SUCH DISCLOSURE, NOTWI'THS'I'ANDING lHE OMISSION OF' A SPECIFIC CROSS-REFERENCE.

ANY AT1ACIIMENTS TO ANY SECTION OF THESE SCHEDTJLES FORM ANINTEGRAL PART OF THESE SCIIEDUI,ES AND ARE INCORPORATI'D BY REF-ERENCEFOR ALI, PURPOSES AS IF SET FORTH FULLY HEREIN. REFERENCES TO ALI,AGREEMENTS AND DOCUMHNTS IN TI{ESE SCHEDULES ARE ONLY SUMMARIESAND ARE NOT INTENDED TO BE FULL DESCRIPTIONS OF SUCH AGRI1EMENTSAND DOCUMENI'S. IN NO EVENT SHALL ANY DISCLOSURE HEREI.]NDER BEDEEMED TO CONSTITUTE AN ACKNOWI,EDGMEN'I'ITIA'T SUCII DISCI,OSURH ISMATERIAI, TO'NIE BUSINESS OR FINANCIAL CONDITION OF THE SELLER OR THESYSTEM.

TIIE SCHEDIJLES IIEREIN CORRESPONDING TO ARflCLE IV AND ARTICLE VOI.' 'TIIE AGREEMF]N]'AND THE INIIORMATION AND DISCLOSURTJS CONTAINIiD INSUCH SCIIHDULES, ARIi INTENDED ONLY TO QUAI,IFY AND I,IMIT THF]RIiI'RESENTATIONS AND WARRAN'TIES OF THIi SELLER CON'|AINED IN AR'I'ICLEIV OF THH AGREEMENT AND OF THE BUYER CONTAINHD IN ARTICI.H V OF THEAGRHEMENT, AS APPLTCABLE, AND SHALL NO'T BE DEEMED 'fO EXPAND IN ANYWAY TIIE SCOPE OR IiFI.'ECT OF ANY OF SUCII REPRESENTA NONS ORWARRANTIES.

TIIIi REPRESEN'IATIONS, WARRANTIES, COVENANTS AND OTHEROBI,IGATIONS AND AGREEMENTS OF THE SEI,LER IN TIII] AGREEMEN'T AREMADE, GIVEN AND LTNDHRTAKEN SUBJECT TO TIII] DISCLOSURES IN THESESCI{HDULES AND AS PROVIDED IN THE AGREEMENT.

SCHEDULE I.OI

CERTAIN PERMITTED LIENS

None

SCHEDULE 2.01(c)

ASSIGNED CONTRACTS

l. .

2.

3.

4.

5.

6.

7.

8.:

9. i

:

SCHEDULE 2.or(h)

INTANGIBLE ASSETS

None

SCHEDULE 2.02(d)

EXCLUDED INTELLECTUAL PROPERTY

None

SCHEDULE,2.02(h)

ADDITIONAL EXCLUDED ASSETS

None

SCHEDULE 2.02(i)

RETAINED EQUIPMENT AND MACHINERY

I. 2OI I INTERNATIONAL GAPVAX MC SERIES VACTORIHTMMAAL3BJ387OO3, VIN# 1 IITMMAAL3BJ3STOO3

2. 2015l'oRD F250 TRIJCK, VIN# IFTBF2B68FI'B55265

3. 2015 MACK GIJ7I3 DUMP TRUCK, VIN# IM2AXO4C1FMO25I2I

4. 2014 SCHWART.E, VIN# 3ALACXDTXEDFN5O49

5. 2OO3 MACK CLAM TRUCK DIFSHL, VIhI# 1M2P263CX3M034392

6. 1989INGERSOI, RAND COMPRESSOR 41, VIN# 237964VHD328

7. 1999 JOHN DEERE 3IOE BACKFIOE, VIN# TO3IOEX873O3I

8. 2007 QUICKVIEW Ii-5100-9002 CAMERA, VIN#0807QV02

SCHEDULE 2.02(o)

MS4 SYSTEM REAL PROPERTY

None

SCHEDULE 4.03

EXCEPTIONS TO NO CONFLICT OR VIOLATION

l. All consents required pursuant to Schedule 4.04.

SCHEI}ULE 4.04

CONSENTS AND APPROVALS

1.

2.

3.

4.

5.

6.

7.

8.

9.

10

I l.

:

12

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

46.

47.

48.

49.

50"

51.

52.

53.

54.

55.

56.

57.

58.

59.

60.

61.

62.

63.

SCHEDULE 4.05

FINANCIAL STATEMENTS

l. As reflected in thc notcs to The Sewer Authority of the City of Scranton, A ComponentUnit of the City of Scranton lndependent Auditor's Report dated March 31,2015, theScllcr omitted lhe management's discussion and analysis that accounting principlesgenerally accepted in the Unitsd Statcs of America require to be presented to supplementthe basic financial statements. Such missing information, although not a part of thefinancial statements, is required by the Governmental Accounting Standards Board, whoconsiders it to be an essential part of financial reporting for placing the financial in anappropriate operational, economic or historical context.

See Financial Statements attached.

i..r

THE SEWER AUTHORITY OF THE CITY OF SCRANTONA COMPONENT UNIT OF THE CITY OF SCMNTON

I N DEPEN DENT AUDITORS' REPORTl\,tARCH tl,2015

THE SCRANTON SEWER AUTHORITY OF THE CITY OF SCMNTONINDEX TO FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES

AND SI NGLE AUDIT ATTACHMENTSYEAR ENDED MARCH 31,2015

Table of Contents

Transmittal Lefter

Report Distribution List

lndependent Auditors' Report

Basic Financial Statements:

Statement of Net Position

Statement of R^evenues, Expenses, and Changes inNet Position

Stdement of Cash Flows

Notes to Basic Financial Statements

Supplementary | nformation:

Supplemental Schedule l- Restricted Assets

Supplemental Schedule ll- Openting fxpenses

Single Audit Attachments:

Schedule of Expenditures of Federal Awards for theYear Ended March 37,2015

Independent Auditors' Report on Compliarrce and onlntemalControl Over Financial Reporting Based onan Audit of Financial Staternents Performed in Accordancewith Covemment Auditing Standards

PAGE2-3

4

910

1l

12

1 3-30

33-34

3s-36

5

ffi

rlt;i''

I

31

32

'i I

,lil

THE SCMNTON SEWER AUTHORITY OF THE CIry OF SCRANTONINDEX TO FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES

AND SINCLE AUDIT ATTACHMENTSYEAR ENDED MARCH 31,2A1s

PAGE

i;iL1

5)4

\'FiJt1I'

til-:t

6:-F..b:tiiii.f:l:,

;aL"

iil':t't!I:,

i,;i'.

i

40

4l

Independent Auditors' Report on Compliance withRequirements Applicable to Each fr4ajor Programand IntemalControl Over Compliance in Accordancewidr OMB CircularA-133

Schedule of Findings and Questioned Costs fortheYear Ended March 31, 2015

Schedule of Prior Year Findings

37-39

I.i

:;

rl;l

i

ROBERT L ROSSI, C,PA,

ROBERT T. AR1'ON'O, C.Pl-PETER D, ARVONIO. JR.. C.PAROBERTA }IANS. C.PA

ROBERT ROSSI & CO,CERNFIED PUBLIC ACCOUNTANTS

299 MAIN ST, 2I\O FLRoLYPt-lAl.{T, PA 1 8447-2326

TEL. (570) 67G,2300- F&\ (570) 87s5r53Webaite: unn,rtcD.not

SATVATOREA, NOLE. JR., C.PA.JOSEFfl E ROSsr. C.P.A.

SEANJ,GRASSI, C.PARAI,PH R MORRIS. III, C.Pl"

September 22,2015

Board of DirectorsThe Sewer Authority of the City of ScrantonScnnton, Pennsylvania

We have performed the Single Audit of The Sewer Authority of the City of Scrantonfor the fiscal year ended March 31, 2015t and have enclosed the Single Audit reportpackage.

The Single Audit was done to fulfill the requirements of OMB Circular A - 133. ltentailed: 1. An audit of the basic financial statements and Supplementary Schedule ofExpenditures of Federal Awards and our opinion thereon; 2. A review of Compliance andInternal Controls over Financial Reporting Based on an audit of Financial Statementsperformed in accordance with Covemmental Auditing Standards and 3. A review ofcompliance with requirements applicable to each major program and internal controls overcompliance in accordance with OMB Circular A - 133.

A management letter was not issued and therefore is not included as part of ourreport.

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MEMBER OF AMERNAN & PENNSYLVANIA INSTITUTES OF CERTIFIED PUBUC ACCOUNTAT{TS

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REPORT DISTRIBUTION LIST

Federal Audit Clearing HouseU. S Census Bureau1201 E 10h Street

leffenonville, lndiana 471 32Attn: Single Audit Clearing House

Commonwealth of PennsylvaniaBureau of AuditsDivision of Special Audit ServicesSubrecipient Single AuditForum Place - 8s Floor555 Walnut StreetHarrisburg, PA'17101

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ROSERT L ROSSI. C.PAROBERT T. AFI/ONIO, C.Pl"PETER D. ARVONIO, JR, C.PA.

ROBERT A" HAr,fiS. C.P-A.

ROBERT ROSSI & CO.CEFMfl ED PUSLIC ACCOTJNTANTS

299 tvlAtN Sr. zl|D runOLYPFiANT, P A 1W47 -2328

TEL. (S/0) 87S.2300. F,q,\ G70) 87es153Webslto: tr^/Yw.trco.n€l

I N DEPENDENT AU DITORS' REPORT

SALVATOREA, NOLE, JR,, C,P"E..

JOSEPH E. ROSSI, C.PAsE N J. GRASS|, C.P.A.

FELPH R, MORRIS. NI, C,PI.

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September 22,2015

To the Board of DirectonThe Sewer Authorig of the City of Scranton

Report on the Financial Statements

We have audited the accompanying financial statements of The Sewer Authority ofScranton, a component unit of the City of Scranton, as of and for the yeai ended March 31,2015, and related notes to the financial statements, which collectively comprise theAuthority's basic financiil statements.

Managemenfb Responsibility for the Financial Stafemen{u

Management is responsible for the preparation and fair presentation of thesefinancial staternents in accordance with accounting principles generally accepted in theUnited States of America; this includes the design, implementation, and maintenance ofinternal control relevant to the preparation and fair presentation of financial statements thatare fiee from material misstatement, whether due to fraud or error.

Auditor's Res pnsibit ity

Our responsibility is to express opinions on these financial statements based on ouraudit. We conducted our audit in accordance with auditing standards generally accepted inthe United States of America and the standards applicable to financial audits contained inCovernment Auditing Standards, issued by the Comptroller Ceneral of the United States.

Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial $atements'are free from rnaterial misstatement.

An audit involves performing procedures to obtain .audit evidence about theamounts and disclosures in the financial statements. The procedures selected depend onthe auditol's judgment, including the assessment of the risk of material misstatement of thefinancial statements, whether due to fraud or enor. In making those risk assessments, theaudltor considers internal control relevant to the entity's preparation and fair presentationof *re financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's intemal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness ofsignificant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtainod is sufficient and appropriate toprovide a basis for our audit opinions.

MEMBER OFAI'ERICAN & PENNSYLVANIA INSTITUTES OF CERTIFIED PUBUC ACCOTJNTANTS

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THE SEWER AUTHORITY OF THE CITY OF SCRANTONNOTES TO FINANCIAL STATEMENTS

Opinions

In our opinion, the financial statements referred to above present fairly, in allmaterial respects, the respective financial position of The Sewer Authority of the City ofScranton, a component unit of the City of Scranton, as of March 31,2015, and therespective changes in financial position and cash flows thereof fur the year then ended inaccordance with accounting principles generally accepted in the United States of America.

Other Maffers

Reguired Supplementary I nformation

Management has omified the management's discussion and analysis that accountingprinciples generally accepted in the United States of America require to be presented tosupplement the basic firiancial statements. Such missing information, although not a part ofthe financial statements, is required by the Covemmental Accounting Standards Board, whoconsiders it to be an essential part of financial reporting for placing the financial in anappropriate operational, economic, or historical context. Our opinion on the financialstatements is not affected by this missing information.

Other lnformation

In connection with our audit, nothing came to our aftention that caused us to believethat the Authority was not in compliance with the provisions of the Trust lndenture betweenThe Sewer Authority of the City of Scranton, Pennsylvania and Fidelity Deposit andDiscount Bank insofar as they relate to accounting and auditing maters. lt should be noted,however, that our audit was not directed primarily toward obtaining knowledge of suchnoncompliance.

Our audit was conducted for the purpose of forming opinions on the financialstatements that collectively comprise The Sewer Authority of the City of Scranton's basicfinancial statements. The supplementary information on Pages 31 and 32, as listed in thetable of contents, are presented for purposes of additional analysis and are not required partof the basic financial statements. The schedule of expenditures of federal awards ispresented for purposes of additional analysis as required by U. S. Office of Managementand Budget Circular A-133, Audits of States, Local Govenments, and Non-ProfitOrganizations, and is also not a required part of the basic financial statements.

The supplemcntary information on pages 31 and 32, as listed in thc table ofcontents, and the schedule of expenditures of federal awards are the responsibility ofmanagement and were derived from and relate directly to the underlying accounting andother records used to prepare the financial statemenb. Such information has been subjectto the auditing procedures applied in the audit of the basic financial statements and certainadditional procedures, including comparing and reconciling such information directly to theunderlying accounting and other records used to prepare the financial statements or to thebasic financial statements themselves, and other additional procedures in accordanco withauditing standards genenlly accepted in the United States of America. In our opinion, thesupplementary information on pages 31 and 32, as listed in the table of contents, and theschedule of expenditures of federal awards are fairly stated in all material respects inrelation to the basic financial statements as a whole.

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.THE SEWER AUTHORITY OF THE CITY OF SCRANTON

NOTES TO FINANCIAL STATEMENTS

Other Reporting Required by Government Auditing $fandards

fn accordance with Covernment Auditing Standards, we have also issued our reportdated September 22, 2015, on our consideration of The Sewer Authority of the City ofScranton's intemal control over financial reporting and on our tests of iE compliance withcertain provisions of laws, regulations, contracts, and grant agreements and other mafters.The purpoee of that report is to describe the scope of our testing of internal control overfinancial reporting and compliance and the resulb of that testing, and not to provide anopinion on internal control over financial reporting or on compliance. That report is anintegral part of an audit performed in accordance with Covernment Auditing Sandards inconsidering The Sewer Authority of the City of Scranton's intemal control over financialreporting and compliance.

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THE SEWER AUTHORITY OF THE CITY OF SCRANTONSTATEMENT OF NET POSITION

MARCH 31,2015

ASSETS

CURRENT ASSFTS

Cash and Cash EquivalentsAccounts Receivable, Net of Allowance

for Doubtful Accounts of $2,800,000Other Cunent Assets

TOTAL CURRENT ASsETS

NONCURRENT ASSETS

Restricted Assets - See Schedule I

Cash and Cash Equivalentslnvestrnents

Accrued Intrerest Receivable

Total Restricted Assets

Accoun$ Receivable - Assessments

Capital tusetsProperty, Plant and Equipment, Net

TOTAL NONCURRENT ASSETS

TOTAL ASSETS

DEFERRED OUTFLOWS OF RESOURCES

Deferred Bond Insurance Costs

Defened Loss on Extinguishment of Debt

TOTAL DEFERRED OUTFLOWS OFRESOURCES

$ 11,281,286

6,42Q,244950,293

$ 18,651,823

$ 4M,12526,406,275

593

$ 26,410,993

382,963

74,660,819

1O1,454,775

_$_120,106,599_

$ szo,at t353,975

880,786

"See accompanying notes and independent auditors' repoft"

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THE SEWER AUTHORITY OF THE CIry OF SCRANTONSTATEMENT OF NET POSITION

MARCH 3I,2015

LIABILITIES

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CU RRENT LIABI LlTl ES (Payable from Currpnt fusets)Lines of CreditCurrent Portion of Long-Term DebtAccounts Payable

Accrued I nterest Payable

Accrued Payroll and PayrollTaxesCurrent Portion of Compensated Absences

TOTAL CURRENT LIABI LITIES

(Payable from Cunent fusets)

CURRENT LIABILITIES fayable from Restricted tusets)Revenue Bonds Payable

Accrued Revenue Bond lnterest Payable

Accrued Expenses

TOTAL CURRENT LIABILITIES

(Payable from Restricted Assets)

NONCURRENT LIABILITIES

Long-Term Debt, Net of Curent PortionCompensated Absences, Net of Current Pottion

TOTAL NONCURRENT LIABI LITIES

TOTAL LIABILITIES

DEFERRED INFLOWS OF RESOURCES

Defened Bond Premium

TOTAL DEFERRED INFLOWS OFRESOURCES

NET POSITIONInvested in Capital fusets, Net of Related Debt

Restricted for Debt Service and Capital Expenditure

Unrestricted

TOTAL NET POSITION

$o1,499,261

715,07433,166

211 $32450,866

$ 2,909,999

$ 850,000677,918

1,30?,959

2,830,777

$ 59,583,288302,724

59,986,012

$ 65,626,788

$ 85,261

$ 14,373,79523,580,21617,321,324

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THE SEWER AUTHORIry OF THE CITY OF SCMNTONSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

FOR THE YEAR ENDED MARCH 31,2015

OPEMTINC REVENUES

Sewer Rental Charges, including penalties

aqd interost, net of credit adjustrnents

TOTAL OPERATING REVEN UES

OPERATING EXPENSES

Sewer Plant and Sewer System - Schedufe llAdministrative and Ceneral - Schedule llDepreciation Expense

TOTAL OPERATINC EXPENSES

OPERATING INCOME

NON OPERATINC REVENUES (EXPENSES)

Investment Revenues

Interest Expense

Amortization of Bond Insurance Cost

Bond lssuance CosG

Amortization of Bond PremiumOther Revenue

$ 22,694,320

$ 22,694,320

$ 9,023,3393,175,0422,934,441

$ 6g,ggl(1,495,454)

(122,868)(201,918)

6,379288,866-

15,132,422

$ 2,561,898

(1,455,063)

$ 6,106,835

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CHANCE IN NET POSITION

NET POSITION, BEGINNINC OF YEAR

NET POSIION, END OF YEAR

'See acoompanylng notes and Independent auditors' reporf'

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THE SEWER AUTI-IORTTY OF THE CITY OF SCMNTONSTATEMENT OF CASH FLOWS

FOR THE YEAR ENDED MARCH 3I, 2015

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CASH FLOWS TROM OPEMT]NG ACTIVITIES:

C.ash Received from CustomersCash Paymens to Supplien for Goods and Services

Cash Paymens to Employees for Services

Net Cash Flows Provided by Openting Actlvitles

CASH FLOWS FROM NONCAPITAL F]NANC]NG ACTIVTTIES:

Other Rwenue RecclvedNet Cash Flows Prwided by

Nonapital Financing Aaivities

CASH FLOWS FROM CAPffAL AND RELATED FINANCINC ACIIVffIES:Payment of DettPayment of lnterest

Proccreds from Loans Payable

Revenue Bond Payablg Net of Discount lssued for Refunding DebtPaymenl of Bond lssuance Costs

Payment of Bond Insurance Costs

Payment to Escrow for Rcfunding Debt - PrincipalPayment !o Escrow for Rcfunding Debt - InterestCapialGrantPurchase and Constructlon of Gpital fuser

Net Cash Flows Used for Capital and Related Financing Activities

CASH FLOWS FROM INVESTINC ACIIV]TIES:Proceeds from Maturity of lnvestmentsPurchase of lnvestmenb

Recelpt of Interest

Net Cash Flows Used ln Investing Activities

NFr DICREAST rN CASH AND CASH EQU]VALENTS

cAsH AND CASH EQUTVALENTS, BECINNING OF YEAR

cAsH AND O\SH EQUIVAITNTS, END OF YEAR

RECONCILIATION OF OPEMTINC INCOME TO NET CiSH FLOWS

PROVIDED BY OPTRATING ACTIVITIES:

Operating IncomeDeprerlation(lncrease) in Acmunts Receivable(lncrease) in Other Current AsseB

Decrease in Accounb Receivable - AssessmenB

Increase In Accounts Payable(Decrease) in Oher Liabilities(tlecrease) in Compensated Absences

NON-CASH CAPITAI AND RELATED FINANCINC ACTMITIEST

Non€ash Financing - Bond Premium AmortizaiionNon-Cash Financing - Bond lnsurance Cost AmortizationNon-Cash Flnancing - Bord Original lssue Discount Accretion

Non{ash Financing - Loss on Debt Extinguishment Amortieation

$ 21,962,246(4,948,1751

17,o22,34O)9,W1J31

s 288,866

288,866

$ Q,272,5651(2,514,849)

6,460,3(X9,791,O45

(2O1,918)

(48,511)(9,285,000)

(451,953)125,000

(6.806,292).

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i 2,303,962(8,483f903)

, 73,994(6,105,947)

s (1,030,099)

12,715,51O

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$ 7F61,8982,934,M1

(1 20,61 2)

1430,371l3,1 66

76,962(1,523)

.-. (31,830)

$ 9,997,731

$ 6,378$ (122,868)

$ 2,5s1

$ 6,lu

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Note 1 - Summary of Significant Accounting Policies

Organization: The Sewer Authority of the City of Scranton (the Authority) is abody corporate and politic organized under the Pennsylvania Municipalities Act of 1945,P.C.382, as amended and supplemented. By a Certificate of loinder dated August 17,1966, the Borough of Dunmore became an Authority member.

On f uly 14, 197'a, the City of Scranton appointed the Authority to be its agent inthe operation of the sewer system. The terms of this service agreement continue for a one-year period and will automatically extend itself on a year-teyear basis until one of theparties thereto gives notice of iG intent to cancel 30 days prior to the termination of anyyearly period.

The Sewer Authority of the City of Scranton, Pennsylvania, has determined that itis a component unit of the City of Scranton since the City has guaranteed the Authority'sloans with the Pennsylvania Infrastructure lnvestment Authority (PENNVEST); therefore,the Authority is included in the reporting entity of the City of Scranton.

Reporting Entityr The reporting entity has been defined in accordance with thecriteria established in CASB Statement No. 39, nDetermining Whether Organizations areComponent Units. The specific criteria used is as follows: a) financial interdepcndenqy; b)selection of goveming authority; c) designation of management; d) ability to significantlyinfluence operations; e) accountability for fiscal matters; 0 scope of public service: anC g)

special financing relationships. As defined, there are no other related organizations,which should be included in the financial statements.

Basis of Accounting: The Sewer Authority of the City of Scranton, Pennsylvaniauses the accrual basis of accounting. The Authority's revenues are recognized wheneamed and expenses are recognized when the obligation is incurred. The Authorityapplies the financial reporting guidance of GASB Staternent No. 62, "Codification ofAccounting and Financial Reporting Cuidance Contained in Pre-November 30, 1989FASB and AICPA Pronouncementsn which has incorporated all GASB pronouncements as

well as the Financial Accounting Standards Board pronouncements issued on or beforeNovember 30, 1989, unless those pronouncements conflict with or contradict CASBpronouncements.

Basis of Presentation: The fund category used by the Authori$ is the proprietaryfund. Proprietary category funds are used to account for and report those govemmental

activities that are designed to be self-supporting from fees charged to consumers of thefunds, goods and services or where the goveming board has decided that the periodicdetermination of revenues, expenses, and net income is appropriate for capitalmaintenance, public policy, management control, accountability or other purposcs. Thaaccounting and financial reporting practices of proprietary funds are similar to those used

for business enterprises and focus on capital maintenance and the flow of economicresources.

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THE SEWER AUTHORITY OF THE CIIY OF SCMNTONNOTES TO FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies (Continued)

Proprietary fund statements provide both long-term and short-term financialinformation which is similar to the information repofted by a business-type entity. Netposition is segregated into invested in capital asseB, net of related debf restricted for debtservice and capital expenditures; and unrestricted components. Net position is increasedby rwenues and decreased by expenses.

Two fund types are included in tho proprietary fund category! enterprise andinternal service funds. The Authority uses the enterprise fund type.

Enterprise funds account for opentions that provide goods or services to thegeneral public on a continuing basis. Such operations are financed and operated in amanner similar to private businesses and are intended to be self-supporting throughcharges to users.

Measurement Focus: The accounting and financial reporting treatment applied toa fund is determined by its measurement focus. The proprietary funds are accounted foron a flow of economic resources measurement focus. With dris measurement focus, allassets and all liabilities associated with the operation of each fund are included on theStatement of Net Position. Proprietary fund type operating statements present increases(i.e., revenues) and decreases (i.e., expenses) in net total position.

Proprietary funds distinguish operating revenues and expenses from non-operatingitems. Operating revenues and expenses generally result from providing services andproducing and delivering goods in connection with a proprietary fund's principal ongoingoperations. The principal operating revenues of the enterprise funds are charges tocustomers for sewer system services. Operating expenses for enterprise funds include thecosts of sewer system services, administrative expenses, and other costs of running theactivity. All revenues and expenses not meeting this definition are reported as non-openrting revenues and expenses.

Use of Estimates: The preparation of financial statements in conformity with U.S.genenlly accepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenditures/expenses during the reporting period. Actualresults could differ from those estimates.

Allowance for Doubtful Accounts: The Authority's policy for providing foruncollectible accounts is to charge current year earnings for accounts receivableconsidered currently uncollectible based on the historical collection experience of theAuthority and collection percentages applicable to public utilities.

A major portion of the allowance for doubtful accounts is feh to be collectible inthe future because of the Authority's power to convert past due accounts into municipalclairns. This procedure is an operation of faw and the claims have the status of a legal lienor judgment, There are currently in force municipal claims of approximately $4,833,000.

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THE SEWER AUTHORIW OF THE CIry OF SCRANTONNOTES TO FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies tContinued)

lnvestments: All of the Authority's investments are classified as hel&to,maturity,

Property, Plant and Equipment Property, plant and equipment are stated at cost.Normal maintenance and repairs are charged to expense as incurred; major renewals andextraordinary repairs, which extend the useful life of an asset are capitalized.Depreciation is provided using the stnight-line method based on the following estimateduseful lives:

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Uscful LifeNot Applicable40 years10 years10 years3-6 years

20 years

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lmpairment of Long-Lived Assets: Management reviews longJived assets held andused by the Authority for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. In the event that facts andcircumstances indicate frat the cost of any longJived ixsets may be impaired, an ev;aluationof recoverability would be performed.

Accrued Compensated Absences: lt is the Authority's policy to permit employeesto accumulate vacation and sick days which will be paid to employees upon sepantionfrom the Authority's service. These amounts have been recorded in the statement of netposition split between current and noncunent liabilities as noted in the statement.

Statements of Cash Flows: For purposes of the Statements of Cash Flows, theAuf,rority considers all highly liquid investments with an original maturity of three monthsor less when purchased to be cash equivalents.

Cash and cash equivalents, at March 31, 2015 were as follows:

LandSewerTreatment PlantLand lmprovernentsOpenting EquipmentVehiclesExtraordinary Repairs:Sewer SystemEquipment

UnrestrictedRestrictedTotal Cash and Cash Equivalents

$11,281,286404,125

$11.68s,411

Interest peiid by the Authority for the year ended March 31, 2015, amount to

$2,51+,849. Of this amount, $1,001,445 was capitalized as construction-in-progress.

Accounting for Authority Bond lssus: The Authority financed the construction ofthe sewer system through the issuance of two series of bonds designated as Sewer

Assessment Bonds in the aggregate principal of $2,600,000 and Sewer Revenue Bonds inthe aggregate principal amount of $33,000,000. The hond issue is subject to the provision

of a Trust Indenture dated April 1, 1968 between the Authority and JP Morgan (formorly

Chase Manhattan Bank) as Trustee. The bond issue was defeased July, 2000.

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THE SEWER AUTHORIry OF THE CITY OF SCRANTONNOTES TO FINAT{CIAL STATEMENTS


In September 2007, the Authority issued bonds in the amount of $16.810,000, witha final maturity of December 2036, with interet costs varying from 3.70% to 5.00%.Proceeds from the bonds were turned over to the Trustee for initial distribution to variousfunds in accordance with the terms of the Trust Indenture of the Authority. The Trusteemaintains all funds enumerated in Note 2 and shall continue to function for the life of thisbond issue in the collection of rentals, the payment of operating expenses and semi-annualinterest payments, and the repurchase and retirement of bonds until the ultimateretiremenl of all outstanding bonds.

ln fune 2011, the Authority issued sewer revenue bonds in the amount of$29,475,000 with a final maturity of December 2035, with interest costs varying from1.28% to 6.3%. The bond issue is subject to the provision of a Trust Indenture dated as ofSeptember 1,2007t as supplomented by a First Supplemental Indenture dated June 1,

2011 between the Authority and Fidelity Deposit and Discount Bank as successor trustee,and are secured under the indenture by the assignment and pledge to the Trustee ofReceipts and Revenue from the Sewer System.

ln November 2014, the Authority issued $10,000,000 of Sewer Revenue Bonds,Series 2014 with a final maturity of December 1, )O36, with interest costs varying from3.25olo to 3.75o1o. Proceeds from the issuance provided funds for the partial advancedrefunding of the Authority's Sewer Revenue Bonds, Series 2007 in the amount of$9,285,000; which debt was defeased at such date. The Series 2014 Bond issue is

subjecl to the provisions of a Trust Indenture dated as of September 1,2Q07, as

suppfernented by a First Supplemental lndenture dated June 1, 2011, and as

supplemented by Second Supplemental Indenture dated November l, 2014 between theAuthority and the Fidelity Depooit Discount Bank as successor trustee, and are securedunder the lndenture by the assignment and pledge to the Trustee of Receipts andRevenues from the Sewer System.

In accordance with CASB Statement No. 23, 'Accounting and Reportlng forRefunding of Debt by Proprietary Aaivities', the excess of the reacquisition price overthe net carrying amount of debt refunded with proceeds from the Series 2014 Bonds has

been recorded as a defened loss on extinguishment of debt The resulting $360,739 isbeing amortized using a method that approximates the effective interest method over theoriginally scheduled life of the defeased issue which extends to 2036. The unamortizedbalance of $353,975 is reflected as a defcrred outflow of resources in the statement of netposition.

Income'faxes: As a municipal authority the Authority is not subject to income.

Bond Insurance costs are being amortized over the terms of the respective bondsusing the stnight-line method. Bond premiums are being amortized over the terrns of therespective bonds using a method that approximates the effective interest method.

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THE SEWER AUTHORITY OF THE CIry OF SCRANTONNOTES TO FINANCIAL STATEMENTS


Net Position: Net position represents the difference htween asseE and deferredoutflow of resources and defened inflows of resources, and liabilities. Net positioninvested in capital assets, net of related debt, consists of capital assets, net of accumulateddepreciation, reduced by outstanding balances of any borrowings used for theacquisition, construction or improvement of those assets. Net position invested in capitalassets, net of related debt excludes unspent debt proceeds. Net position is reported asrestricted when there are limiations imposed on their use either through the enablinglegislation adopted by the Authority or through external restrictions imposed by creditors,grantors or laws or regulations of other Bovemments.

CASB Statement No" 63, FinancialReporting of Deferred Outflows of Resources,Defened lnflows of Resources, and Net Position and GASB Statement No. 65, ftemsPreviously Reported as Assets and Liabilitr'es have been adopted by the Authority. T'hese

statements incorporate defened outflows of resources and deferred inflows of resources,as defined by CASB Concep8 Statement No. 4, into the definitions of the requiredcomponents of the residual measure of net position, formerly net assets. The Statement ofNet Position now reports the following components: assets, deferred outflows ofresources, liabilities, defened inflows of resources, and net position, when applicable.

Note2-RestricdAsseb

Assessment Fund: To provide a portion of the cost of sewer line extensions, theAuthority issued Sewer Assessment Bonds in the amount of $2,600,000. fusessrnentswere billed to property owners with an option of current or deferred payment. All bondsoutstanding were rdeemed as a result of a transfer of funds from the existing constructionfund. Additional Sewer extensions, including some deferred under the originalconstruction plan, are being assessed to propefi owners under the terms of the lndentureand the Authority's assessment resolution.

As of March 31, 2015, the majority of the sewer assessment accounts receivableare delinquent. To insure collection, municipal liens have been filed against thoseproperti es with de I i nq uent sewer assessments.

Sewer Revenue Bonds: The aforementioned Trust Indenture, among other things,provides for the creation of the following funds which are restricted by terms of theindenture:

(A) Clearing Fund: The Trust Indenture requires the Trustee to establish a

Clearing Fund into which any monies held by the Authority in theOperating Account at the end of any fiscal year, commencing with thefiscal year ending March 31, 2008, not required to pay accrued expensesfor such fiscal year and not required to be retained as a reserve in suchamount as the Authority may deem prudent, but not in excess of theestimated amount of the Openting Expenses and Administrative Expenses

contained in the Annual Engineer's Report for the following fiscal year,shall be transferred.

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THE SEWER AUTHORITY OF THE CIW OF SCRANTONNOTES TO FINANCIAL STATEMENTS

Note 2 - Restricted fusets (Continued)

Debt Service Fund: Terms of the Indenture require the Trustee to transferfrom the Clearing Fund interest falling due on fune I and December 1,respectively, plus on December 1 and April 1, the aggregate principalamount of the Bonds maturing or subject to mandatory redemption on suchDecember 1.

Debt Servica Reserve Fund: The lndenture established Debt ServiceReserve Fund of $4,333,811 to be used to make up any deficienry in theDebt Service Funds. At March 31, 2015, Debt Service Reserve Funds heldby the Trustee, amounted to $4,545,399, which include accumulatedearnings and additions made to the reserve accounts by the Authority.

Bond Redemption and lmprovomont Fund: The surplus from time to timein the Clearing Fund, after payments and deposits mentioned above aresatisfied, is to be deposited in the Bond Redemption and lmprovementFund and applied to make good any deficiencies in the Debt Service Fund,Bond Sinking Fund or the Debt Sorvice Reserue Fund. lf there is nodeficiency in any of such Funds, monies rnay be applied as follows and as

more fully provided in the Indenture:

(1) to make capitaladditions(21 to make up any deficiency in the Construction Fund(3) to purchase or redeem Bonds issued under the Indenture(4) for any other lawful purpose of the Authority

Construction Fund: The Construction Fund shall consist of fundsdeposited therein pursuant to provisions of the Indenture for purposes ofpaying Costs, Cosg of Acquisition or Costs of Construction relating to theScwer System, including Capital additions and acquisition or constructionof property in the nature of Capital Additions.

(n Settlement Fund: The Settlement Fund was established for the issuance ofthe 2015 Sewer Revenue Bonds to pay costs associated with the issuance ofthe Bonds.

Note 3 - Deposits and Investments

CustodialCredit Risk- Deposits: At March 31, 2015, the bank balance of theAuthority's cash deposits with financial institutions was $11,676,688, compared to a

carrying amount of $11,685,411. The total bank balance that was secured by FedenlDepository Insurance was $654,125; and $11,022,563 of the remaining bank balancewas covered by securities pledged by the financial institution for such funds, but not inthe Authority's name. The Authority does not have a deposit policy for custodial creditrisk.

(B)

(c)

(D)

(E)

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Note 3 - Deposib and Investments (Continued)

Credit Risk: Credit risk is the risk that an issuer of an investrnent will not fulfill its

obligation to the holder of the investment. ln accordance with the Trust Indenture, anyrestricted assets held by the Tru*ee can be invested as detailed in the lndenture.Unrestricted funds are invested at management's discretion.

Investments: The Authority's investments are carried at fair market value andconsisted of the following at March 31, 2015:

Average Weighted

Amortized carrying 8f"t ,*:"fi;Mutuar Money Market Funds:

' cost Value $atilt' Maturitv

Fedented Treasury Obligations Fund (CAP) J25,112,876 i25,112,876 AAAm/AAAmf 0.23

CertificaG of Deposit 148,451 148,451 tl/A 0.68

Total SIIZSJ,LU, S2LzQlfiJ

U5 Covemment Obligations:Federal Home Loan Bank (FHLB) !1-M.9h Sf.&948 A-1+/P-1 1.72

(1) Ratings are provided where applicable to indicate associated Credit Risk. l.UA indicates not applicable.(2) Interest Rate Risk is estimated weighted average montrs to maturity.(3) Concentrattonofcreclitr'skbyamountandbyissuerinvestrnentsinanyoneissuerdratrepresent5%or

more of bhl invesrnenb seperately disclosed.

Interest Rate Risk: Interest rate risk is the risk that changes in market interest rates

will adversely affect the fair value of an investment. The longer the maturity aninvestment has the greater its fair value has sensitivity to changes in market interest rates.

The Authority does not have a formal investment poliry that limits investment maturitiesas a means of managing its exposure to fair value losses'arising from increasing interestrates.

Concentration of Credit Risk The Authority's investments are managed under atrust indenture agreement with an area financia[ institution. Investment choices arelimited under this agreement to specified investments with stipulated credit ratings as

permitted by legislation under the Pennsylvania Municipal Authorities Act. Thisagreement does not place a limit on the amount the Authority may invest in any oneissuer. As of March 31, 2015, the Authority's investment in Federated TreasuryObligations Fund (CAP) was rated AAAm by Standard & Poor's and represented 96% ofthe Authority's investments. Certificates of deposit represent 1% of the Authority'sinvestments, and are invested at various financial institutions in amounts which are fullysecured by Federal Depository lnsurance (FDIC). The Authority's remaining 3oA ofinvestment were invested in Fixed Income U.S. Government Obligations of the Federal

Home Loan Bank which was rated A-1 + by Standard & Poor's.

i;

19

li, .':J

.,{i:;.i't:

THE SEWER AUTHORIW OF THE CITY OF SCRANTONNOTES TO FINANCIAL STATEMENTS

Note4-Capitalfusets

A summary of changes in the capital assets is as follows:

Balance

3h1nO14 Additions Deletions.

$ 0$ o7,567,584 0

55,171 04,527 0

365,989 16,449,8421

s 7,993,271 J $A49,842)

$ 130p2922,601,110

121,851 ,845253,572

10,986256

$155,822,812

Balance341/2015

$ 130.02930,1 68,694

121 807 p16258,099

4!902,403

i157,366,241

Land (notdepreciatedi

Consruction in Progrcss (Not DepreciaEd)Sewage TrcatnentPlant

and Related FacllitkslmpovemcntOperating Equiprnmt

Total Histofical Costs

I.ESS: Accumulated Depreciation:

Sorage Trealment Plantand Relaed Facilities

lmprovementOpenting Equipment

Total ActumulatedDepreciation

Capibl Asseb, Net

i77,401,169 j2,332,474 $ O j79,736,643219,110 10,048 O 229,158

8,597,944 591J19 (6A49,842) 2,739,621

$ 86,221223 $ 2,934,041 | (6,449,842',) | 82,705A22

$69,601589 $5,059130 $ O 174,6ffi,819

Depreciirtrbn expense forSre year ended March 31,2015 amounted to $2,934,041.

At March 3't, 2015, the Authority has entered into contracts for construction, as

follows:

Project Expended

Au$rorization To Date Commitnent

Biological Nwient Removal(BNR) Proiect - Various Contractors

Otrer NonSNR Projecb-Various Contracbrs

$ 23,604,038 $23,280,542 $ 323,496

1,028,385 $ 585,952 $ 342,433

i

20


Note5-Long-TermDebt

The changes in long-term obligations payable during the year ended2015 are as follows:

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Balance

3Elncl4hmodization)/

Additions Accretion

Balance

Repaymenb 3f1.n0l.5

March 31,

Principal

DueWifiinOne Year

Fidelity

Sewer Re/enue

Bonds Payable

Series of2007

Fidelig

Scl'ver Rwenue

Bonds Payable

Series of201 1A

Fidelity

Sewer Revenue

Eonds Payabb

Series of201 lB

Fidellty

Sewer Ret'enue

Bonds Payable

Series of2014

Pennvesl

Prumissory

Nore #71192

Pennvest

Promissory

Nore *71 162

Pennvest

Promirsory

Nob#71281

Pennve*Promisory

Note *27682

PennvciPromissory

Note #79906

Pennved

Promissory

Note#71375

TOTAL

$ 16,605,000 $

19,460,000

7p55,000

0

2A71,A50

2,626,665

1A42,579

2A76p33

3213,672

r,88s,41 5

{57,236,215

9,791 ,045

0

0

0

0

0

6,460J04

I r62sr"349

9,793,596

2,224,176

' 2,4Q4,O57

1.326,809

2,320,946

3,022,009

9,256,057

$61,932J49

0

2st32r

228,962

119,023

15%e91

194,941

541,93

$ e,:+g,z0t

$ o $ 9l9o,ooo $ 7,315,000 $

790,000 18,670,000 375,000

0 455,000 6,600,000 470,000

2,551 0

o 247,674

222,608

0 t 15,770

0 155,187

0 191,664

0 8s,663

$ zJsr $1lJs7J65

21

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Note 5 - Long-Term Debt (Continued)

The aggregate maturities of long-term debt are as follows:

Year End March 31 Principal Interest TotalT-Wiwt;W!i;i,:ii

'.i:irali.Yf 2,N7,O93 2,319,729

2,470,769 2,253,1292,545,311 2,1 90,0502,619,939 2,1O9t7A2 4,729,U1

11,744,786 9,307,293 21,O52,M913,656,7yt 6,586,009 2O,242,W314,805,(D0 3,335,494 19,140,4949,540,000 32-?,325 9,863,325

$ 62,134953 $ SO,806,ZOS $ 92,9+S,o5a

Original lssue Discount, Ne{ (206,4o4.1

rotal $_9lpt&s49Note 6 - Revenue Bonds Payable 2007 Series

On September 1, 2007, the Authority issued $16,810,000 of Sewer RevenueBonds. The proceeds from this issue were primarily used to fund capital improvementprojects.

Optional Redemption: The 2007 Series Bonds maturing on or after December 1,2015 are subject to redemption prior to maturity, at the option of the Authority beginningDecember 1, 2015, out of monics deposited with or held by the Trustee for suchpurposes as a whole or in part at any time, and, in any order of maturities selected by theAuthority, 100% of the par amount, plus accrued interest.

Mandatory Redemption: The 2007 Series Bonds stated to mature on December 1,

2Q24, December 1, 2032 and December l, 2036 are subject to mandatory redemptionprior to maturity on December 1 of each of the years set forth below, in each case at aredemption price equaf to tOO% dre principal amount thereof to be redeemed plusaccrued interest to the redemption date, from funds to be deposited in the Sinking Fund,on or before December 1 of each of the years set for the below, in amounts sufficient toredeem by lot on each December 1 the following amounts of the Bonds:

201 62017201820192020

2021-2Q25202610302031-2035203G2037

4,725,9224,723,9974,725,371

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Term Bonds Slated toMature on December 1,

2024Year Amount

2032Year Amount

2036Year Amount

Term Bonds Slated to Term Bonds Slated toMature on December 1, lvlature on Decernber 1,

--20'T6- -s-Eom- -T.oaE,- -$lffim- ---m33- -$1Fo,000--

2022 5,000

2029 1,265,000 2A34 1,935,0002030 1,395,000 2035 2,030,0002031 1,680,000 2036 2,135,000 +

2032 1,260,000 *

201924202021

20232024

* At maturity

5/0005,0005.000

5,0005,000 +

22

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Note 6 - Revenue Bonds Payable 2007 Series (Continued)

Refunding of Debt On November t8; 2014, the Authority issued $10,000,000 ofSeries 2014 Sewer Revenue Bonds, the proceeds of which were used to partially defeasethrough an advanced refunding $9,285,000 of the outstanding Series 2007 Sewer RevenueBonds. The net proceeds, after deducting the costs associated with this issuancgamounting to $9,736,963 has been placed into escrow to provide funding for all interestand principal payments on the defeased Series 2007 Sewer Revenue Bonds through theDecember l, 2015 scheduled repayment date.

As more fully described in Note 13. the Authority's remaining $7,315,000 Series2007 Sewer Revenue Bonds were subsequently defeased on April 22,2A15, through theissuance of the Authority's Series 2015 Sewer Revenue Bonds.

Series A of 2011

On June 10, 2011, the Authority issued $21,340,000 of Sedes A of 2011 SewcrRevenue Bonds, The procceds from this issue will primarily be used to fund various capitalimprovement projects,

Optional Redemption: The Series A of 2011 Bonds maturing on or afterDecember 1, 2CI22 are subject to redemption prior to maturity, at the option of theAuthority in any order of maturity either as a whole, or in paft/ at any time on or afterDecember 1, 2021 , and if in part, by lot within a maturity, at a redemption price equal to10O?o of the principal amount, together with accrued interest to the date fixed forredemption.

Mandatory Redemption: The Series A of 2011 Bonds stated !o mature onDecember 1,2031 and on December 1, 2035 are subjecl to mandatory redemption, inpart, priorto maturity, by lot within a maturity, at a redemption price equal to 100% ofthe principal amount, together with accrued interest, to the dates fixed for redemption, onDecember 1 of the years and in the following amounts:

Year Amount Ye,ar Amount

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202920302031

* At maturity

$ 1,250,000910,000

1,095,0001,075,40CI'1,390,000 *

$ 1,265,0001,315,0001,205,0001,51 5,000 ',r

2032203320342035

23

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THE SEWER AUTHORIry OF THE CITY OF SCRANTONNOTES TO FINANCIAL STATEMENTS


Series B of 2011

On June 10, 201 1, the Authority issued $8,135,000 of Series B of 201 1 FederallyTaxable Sewer Revenue Bonds. The proceeds from this issue were used to cunentlyrefund the Authority's outstanding $8,000,000 loan from Firsl National Community Bankdated April 24,2007.

Optional Redemption: The 2Q11 E Series Bonds maturing on or ifter December 1,

2O25 are subject to redemption prior to maturity, at the option of the Authority in anyorder of maturity either as a whole, or in part, at any time on or aftcr December 1, 2021,at a redemption price equal to 100% of the principal amount, together with accruedinterest to the date fixd for redemption.

Mandatory Redemption: The Series B of 20i 1 Bonds stated to mature onDecember 1t 2A25 are subject to mandatory redemption, in part, prior to maturity, by lotwithin a maturity, at a redemption price equal to 100% of the principal amount, togctherwith accrued interest, to the dates fixed for redemption, on December 1 of the years andin the following amounts:

Term Bonds Due December 1,2025:

Year Amount

a1)

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I!

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iiii i':

2A22202320242025*

$650,000690,000735,000785,000:

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*At maturity

Series o( 2O14

On November 18, 2014, the Authority issued $10,000,000 of Series 2014 SewerRevenue Bonds. The Bond issuance, net of original issue discount of $208,955 was used toadvance refund $9,285,000 of the Authority's outstanding Series 2007 Rcvenue Bonds.

fu a result of the advanced refunding. the Authority decreased its total future dcbtservice requiremens by $t,S02,965, rvhich resulted in a future cconomic gain of$1,494,041.

The proceeds of the Bords were as follows:

Bond lssue $10,000,000Original lssue Discount (208,955)

s 9.791,O45I

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THE SFWER AUTHORITY OF THE CITY OF SCRANTONNOTES TO FINANCIAL STATEMENTS


At March 31, 2015, the outstanding bonds are recorded net of the unamortizedportion of dre origi nal issue dismunt of $205,4M.

Bond Closing Cost incuned for the issuance of the Series af 2014 Sewer RevenueBonds amounted to $250,429 as follows:

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U nderwriter's DiscountLegalFeesFinancialAdvisory Fees

Rating Fees

Paying Agant Fees

Printing CosbBond lnsunnce Cosb

$65,00080,50033,00012,0001r4lg5,000

48,511

.i

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I

20252026

il

Original Redemption: The Series of 2014 Bonds are subject to redemption prior tomaturity at the option of the Authority in any ordar of maturity either a whole, or in part, atany time on or after June 1 2020, and, if in pail, by lot within a maturity, at a redemptionprice equal to 100% of the principal amount thereof, together with aerued interest to tredate fixed for redemption.

Mandatory Redemption: The Series of 2014 Bonds stated to mature on December 1,

2029, Dwnmber l, 2032, December l, 2034, and December "1, 2036 are subject tomandatory redemption, in part, prior to maturity, by lot within a maturity, at a redemptionprice equal to 100% of the principal amount thereof, together with accrued.interest thereon,to the dates fixed for redemption, on December 1 of the years and in the amounts set forthbelow;

Term Bonds Due Decqmber 1,2029 Term Bonds Due December 1,202Year Amount Year Amount

20,00020,00020,00020,00085,000 +

203020312032

100,000105,000

1,4501000 *2027

20282029

Term Bonds Due t@mbetll9ll Term Bonds Due Decembar 1,2036Year Amount Year Amount20332034

$ 1,935,0002,005,000 *

20352036

2,090,0002,160,000

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25

THE SFWER AUTHORITY OF THE CITY OF SCRANTONNOTES TO FINANCIAL STAI'EMENTS

Note 7 - Conduit Debt Obligation

On December 22, 2O04, the Authority issued a Guaranteed Lease Revenue Notein the amount of $4,000,000 to finance the cost of a project on behalf of the City ofScranton. The note is due December 15,2016 and has an intarest rate of 5.99?o. lnconnection with the issuance, the Authority and the City entered into a sale agreementand a lease agreement, Through these agreemenb, the City sold property to the Authority,which in turn leased the property back to the City, with payments due in amountssufficient to pay the debt service on the note.

Under the terms of the note and the agreements, the Authority is a conduit issuer.The Authority has no obligation beyond the resources provided by the subleaseagreement. The sublease agreernent constitutes a general obligation of the City ofScranton and the full faith and credit and taxing power of the City of Scranton is pledgedto the payment of all amounb due under the sublease. The sublease agreement expires onDecember 15, 2016. The notes are not general obligations of the Authority and theAuthority has no taxing power. The amount outstanding on the Notes as of March 31,2015 is $1,135,000" Due to the nature of the transaction, the Authority is not required torecord the obligation for fie Notes or the related lease receivable in its financialstatements.

Note I - Capital lmprovement Program

During the year ended March 31, 2000 a capital improvement program wasadopted in the amount of $25,000,000. The prognm consists of two phases. Phase I wasbudgeted at $10,261,000 and was primarily for improvements at the treatment plant.Funding for the program is from the Pennsylvania Infrastructure Investment Authority(PENNVESD. The first application filed was for $5,M5,157 ($4,879,765 as modified) andthe loan closed in March 2002. The balance outstandinB at March 31, 2A15 amounted to$2,224,176. The loan is secured by the gross revenues of the Authority and the guarantee

of the City of Scranton. Interest only was payable on advances until July 1, 2003, whenmonthly principal and interest payments are:due up to and including January zA?3.Interest is 1.522% for the first 5 months and 3.045% thereafter. Legal fees relating toobtaining the financing amounted to $441338. Construction was completed for this phase

in July 2003, and the final disbursement on this loan was received June 20&1. in theamount of $86,856.

The second PENNVESI' application was for $4,947,000 and the loan closed inOctober 2002. The balance outstanding at March 31, 2015 amounted ta 52,4A4,A57. Thesmurity is *re same as'above. lnterest only was payable on advances until August 1,

zOC/., when monthly principal and interest payments were due up to and including July1, 2024.Interest is at 1.387% for the first 81 months and 2.774o1o thereafter. Constructionwas completed for this phase at March 31, 2007, and the final disbursement of $12,150was received May 2007.

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THE SEWER ATJTHORITY OF THE CITY OF SCRANTONNOTES TO FINANCIAL STATEMENTS

Note I - Capital lmprovement Program (Continued)

The third PENNVEST loan closed in December 2A03, in the amount of$2,&06,264. The balance outstanding at March 31,2015 arnounted to $1,326,809. Thesecurity is the same as above. Interest only was payable on advances until February 1,2O05, when monthly principal and interest payments were due up to and includingJanuary 1,2025. Interest is at 1.387% for the fir:st 23 months and 2.774% thereafter.Construction was completed for this phase at March 31 , 2007, and the final disbursementof 5125,221was received May 2007.

ln December 2004, the Authority closed on a fourth loan in the amount of$3,690,127.The balance outstanding at March 31,2015 was $2,320,846. The security isthe same as above, Monthly principal and interest payments began June 2007 and aredue up to and including May 2027. lnterest is at 1 .942olo for the first 50 months and3.05201" thereafter. Construction was completed for this phase in April 2007, and the finaldisbursement of $151,815 was received November 2007.

ln November 2OQ7, the Authority closed on a fifth loan in the amount of$4,329,181. The balance outstanding at March 31, 2015 was $3,0221008. The security is

the same as above. Monthly principal and interest payments began May 1, 2009 and areup to and including April 2029. Interest is at 1.2I4% f<rr the first 6O months and 2.428%thereaftdr. Construction was completed for this phase in March 201 1. At March 31, 2015,the final disbursement of $1 30,764 has not been received and is awaiting final settlement.

In March 2012, the Authority closed on a PENNVEST loan in the amount of$11,256,361. The proceeds to be utilized primarily for Wastewater Treatment Plantlmprovements. The loan is secured by the gross revenues of the Sewer Authority of theCity of Scranton. Interest only is payable on advances for 36 months at a rate of 10,6.

lnterest is 1.5lYo thereafter, when monthly principal and interest payments are due foranother 204 months. The outstanding loan balance at March 31, 2015 was $.8,256,052.The Authority has submitted requests for loan advances under this loan commitmenttotaling $8,345,720 to reimburse for Waste Water Treatment Plant improvements it had

incurred through March 31,2014. At March 31t 2015, an additional loan advancerequest for the submission of the Authority's reimbursement of $1,870,143 in WasteWater Treatment Plant improvements incuned during the current fiscal year is

outstanding. The remaining balance of this PENNVEST Loan Comnritment is awaitingfinal setlement as of March 31, 2015.

The PENNVEST loans are federally and state funded and therefore subject tovarious compliance requi rements.

In November 2010, the Authority renewed a $4,000,000 line of credit to provideinterim financing for the program. lnterest was payable monthly at a variable rate egual to7A% of the prime rate (2.275% at March 31, 2015). Security for the line of credit was allreceipE and accounts receivable. The line of credit matures in November 2015. Thebalance of the line of credit at March 31, 2015 amounted to $0. There was no activity forthe year ended March 31, 2015.

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Note 8 - Capital lmprovement Program (Continued)

The Authority renewed a $2,000,000 line of credit to be used for gencral workingcapital. Interest is payable monthly at a variable rate equal to National Prime, but neverless than a floor of +%. (4% at March 31, 2015). Securiry for the line of credit is allreceipr and accounE receivable accounts, instruments and contract rights. The line ofcredit will expire July 2015, and is renewable annually at the option of the Bank. Therewas no activity for the year ended March 31, 2015 and the balance at March 31, 2015was $0.

Note 9 - Defined Contribution Plans

The Authority contributes to the Central Pennsylvania Teamsters Pension Fund, a

defined contribution pension plan covering substantially all of its full time unionemployees. Employees become eligible after they have been on the payroll for thirteenweeks. Contributions made by the Authority were $441 per month for the year endedMarch 31,2015 foreach covered employee; contributions vest according to the Plan'sschedule. Pension expense for the year ended March 31,2015 amounted to $388,685.

Effective January 1, 2005 the Authority adopted a money purchase pansion planfor employees who meet age and service requirements and are not members of theUnion. Employer contributions are 4% of eligible compensation and employees mustcontribute 2%. Employees are also permitted to make additional contributions up to themaximum allowed by law. For the year ended March 31, 2015, employer contributionstotaled $20,760 and employee contributions totaled $15,584.

Note 10 - Operating Lease

The Authority leases ib office space under an operating lease dated April 2012 atamonthly rental of $5,125. The lease term is for a fiv+year term through April 2017. Theloase provides for the option of renewing the lease for (5) additional five years terms, wlthno increase. The Authority is responsible to pay all utility and normal maintenance costs,

associated with the office lease. Minimum rental commitments at March 31,2015 are as

follows:

FiscalYear20162017

Amount$ 6l,500

61,500

_$_l2g*o-qq

Rental expense for the year ended March 31, 2015 amounted to $61,500.

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28

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Note 11 - Contingent Liabilities

The Authority participates in both Federal and State assisted grant programs. Theseprograms are subject to prognm compliance audits by the grantors or theirrepresentatives. The Authority is potentially liable for any expenditures which may bedisallowed purcuant to the terms of these grant prognms. Management is not aware ofany material items of noncompliance, which would result in the disallowance of prcgramexpenditures.

The Authority is involved in various claims and legal actions arising in the ordinarycourse of business. ln the opinion of dre Authority, the ultimate disposition of any mattersoubtanding at March 31, 2015 will not have a material effect on the Authority's financialposition.

Note l2 - Consent Decree

On January 31, 2013, the Authority entered into a consent decree with the UnitedStates of America, acting on behalf of the U.S. Environmental Protection Agency, and thePennsylvania Department of Environrnental Protection that will require the Authority totake steps to achieve compliance with the Clean Water Act and the Clean Streams Law byDecember 2037. The Authority adopted a Long Term Control PIan to address compliancewith the consent decree by December 2037. The cost to accomplish the Long TermControl Plan is estimated to be approximately $140 million.

Note 13 - Subsequent Events

The Authority has evaluated subsequent events through September 22, 2015, thedate, which the financial statements were available to be issued.

Sewer Revenue Bonds, Series 2015

On April 22t 2015, the Authority issued $7,985,000 of Series 2015 SewerRevenue Bonds with a final maturity of December 1 | 2032, with interest costs varyingtrom 2.625% to 3.4%. The proceeds from this issuance provided funds for the advancedrefunding of the Authority's remaining $7,315,000 Sewer Revenue Bonds, Series 2OO7;which debt was defeased at such date. Net Bond proceeds after deducling the costsassociated with issuance and adding $8U,244 in available Series 2O07 Debt ServiceReserve Funds and the 2015 Settlement Funds amounted to $7,652,851. The funds wereplaced into escrow to provide funding for all interest and principal payments on thedefeased Serics 2007 Sewer Revenue Bonds through the December 1,2015 scheduledrepayment date, and to fund $298,500 placed into the Series 2014, Debt Service Reserve

Fund. fu a result of the advanced refunding, the Authority has decreased its total futuredebt service requirements by $849,262; which has resulted in a future economic gainapproximating $845,000.

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THE SEWER AUTHORITY OF THE CITY OF 5CRANTONNOTES TO FINANCIAL STATEMENTS

Note 13 - Subsequent Events (Continued)

Optional Redemption: The 2015 Bonds stated to mature on or after December 1,

2025 are subject to redemption prior to maturity at the option of the Authority in anyorder of maturity either as a whole, or in paft, at any time on or after June 1, 2O2O, and, ifin part, by lot within a maturity, at a redemption price equal to 100o4 of the principalamount thereof, together with accrued interest to the date fixed for redemption.

Mandatory Redemption: The 2015 Bonds stated to mature on December 31,2O25are subject to mandatory redemption, in part, prior to maturity, by lot within a maturity, ata redernption price equal to 100% of the principal amount hereof, together with accruedinterest thereon, to the dates fixed for redemption, on December 1 of the years and in thearnounts set forth below:

Term Bonds MaturingDccember 31.2025

Year2Q22202320242025*

Amg,unJ

$ 35,ooo95,00095,000

355,000

r Maturity

30

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SU PPLEMENTARY I N FORMATION

TI{F SEWER AUTHORITY OF THE CIW OF SCMNTONSUPPLEMENTAL SCHEDUI.E I . RESTRICTED ASSFTS

MARCT-| 31,20't5

ClearingDebt ServiceDebt Service Reserve

Sefilement Fund

Cash and Cash

Equivalents

$00

404,1250

-!-pe-

AccruedInvestments lnterest

$ 21,749,3611,233

4,144,681115,OO0

-!-?!,906,215_

$00

5930T sei-

$ 21,749,3611,233

4,545,399115,000

_uffl_9,991_

I

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nsce accompanying independent auditors' reportn

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THE SEWER AUTFIORITY OF THE CITY OF SCRANTONSUPPLEMENTAL SCHEDULE II- OPIRATING EXPENSES

FOR THE YEAR ENDED MARCH 31, 2015

SEWER PLANT AND SEWER SYSTEM

irl

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Salaries

PayrollTaxesEmployee BenefitsUtilitiesChemicalsSupplies

Repairs, Maintenance and RentalsVehicle Operating Expense

Landfill Disposal

TOTAL SEWER PLANT ANDSEWER SYSTEM EXPENSES

TOTAL ADMINISTRATIVE ANDGENERAL EXPENSES

$ 3,529,601272,114

1,595,0657O9,154954,008313,756476,lU354,5U7t 9,893

$ 1,a24,7o178,999

4OQ,024

49,2352M,U561,500

5,330198,139161,O27

86,59115,500

32O,261

61,571302,519205,ooo

ADMI NISTRATIVE AND CENEMLSalaries

Payroll Taxes

Employee Benefits

utilitiesOffice Supplies and Expenses

Rent

Repairs and MaintenancePostage and Billing Expenses

Legal Fees

Engineering Fees

Accounting Fees

Other Professional Fees

Collection Expense

lnsuranceBad Debt Expense

$ 9,023,339

$ 3,175,042

"See accompanying Independent auditors' reporf

32

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IHE 5EWER AUTHORTTY OF THE CITY OF SCMNTONSCHEDUI.I OF D(PENDITURS OF FEO€R^! AWARDS

FORTHEYf,AR CNDINC MARCH 3I,2015

ACCRT EDOR ActiuEoof,F@EIAI. PN$THIO(JGH CiAN'PEi]OD PROCTAM OT IOTAI OEEIIIDI I'EF€RRTD)aEoal^l,ctaNrov souicE cEx ctANroRS tEctNMNol WARD iEcavtDfoR tlvtNu€At tdE{LE Rot u€ T

PAr6txRoUcHGr r{lor copE Nrr{a€R NUMdR _-ENsug.ptc-___-4!9!tq__l!!.!!4E__!4!4!!l__!@g!@_ ExpE{ofrunB 3r31rro1smoficlnruErMtoMtI|tr |. FtgIEcnoN Ace{crtF..dthorh t Pairlw ttuntflL lnltdrafr h€u'.rr AdFdla

qrb adrn cdr t, dr $rdr$r.reMuFridr | 56/|1r! ^37s

Wnz.lfin t11,!4,l!1,6 ECfSr$p. !-egJ!4. tjgzgJa3r@_ | uro,r,B.oo trnm,r.!.ool6/a60.!0{IE t6r6ol0a.m t rl'o.rtr16 I rrm.r,.3.m !!.rm1.s

sou*clqrat& O - olra Fsdl|!I - hd'td F!'dll|

"See acoompanying independent audltors' report'

33

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THE SEWER AUTHORITY OF THE CITY OF SCRANTONNOTES TO SCHEDULE OF EXPENDITURES OI. FEDERAL AWARDS


l"i Note A - Basis of Presentationl::..1

iilJ

The accompanying schedule of expenditures of federal awards includes all i;

lil significant federally funded grant programs of The Sewer Authority of the City of Scranton i :i;: and has been prepared on the modified accrual basis of accounting i. i

i;i Note B - Accrued and Deferred Reimbursement

i,i Various reimbursement procedures are used for federal awards received by The

i11 Sewer Authority of the City of Scranton. Timing differences may occur between':' expcnditures and reimbursernents during the year. Accrued revenues at year-end

i.l repruent an excess of expenditures over cash reimbursements received. Deferred

i i revenues at year-end represent an excess of cash received over eligible programexpenditures. Cenerally, accrued and deferred amounts caused by timing differences will

[j be reversed in the subsequentyear.

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ROBERT L ROSSI, C.PA,

ROBERT T. ARVONIO, C.PA.

PETER D.ARVONIO, JR,. C,PJ\

ROEERTA HANIS, C.PA

ROBERT ROSSI & CO^CERTIFIED PUBLIC ACCOUNTANTS

299 i,lAlN ST. 2m rmoLYPf-tANT, P A 18d47 n,g26

TEL (570) 87&2300 - FA)( (570) 876-51s3

Webgf,e: wwwnoo.not

SALVATOREA. NOLE. JR.. C.P.A.

JOSEPH E. ROSSI. C.PA,

SEAN J. GMSSI. C.P.A,

RALPH R. UORRIS. III. C,PA.

I i';

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INDEPENDENT AUDITORS'REPORT ON INTERNAT CONTROI OVER FINANCIATREPORTINC AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGOVER,N MENT AU DTT' NG SIANDARDS

September 22,2015

Board of DirectorsThe Sewer Authority of the City of ScrantonScnnton, Pennsylvania

We have audited, in accordance with auditing standards generally accepted in theUnited States of America and the standards applicable to financial audits contained inCovernment Auditing Standards issued by the Cornptroller General of the United States,

the financial statements of The Sewer Authority of the City of Scranton, a component unitof the City of Scranton, as of and for the yoar ended March 31, 20"15, and the relatednotes to the financial statements which collectively comprise the Authority's basicstatements, and have issued our repoft thereon dated September 22,201 5.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we consideredThe Sewer Authority of the City of Scranton's internal control over financial reporting(intemal control) to determine the audit procedures that are appropriate in thecircumstances for the purpose of expressing our opinions on the financial statements, butnot for the purpose of expressing an opinion on the effectiveness of The Sewer Authorityof the City of Scranton's internal control. Accordingly, we do not express an opinion on,the effectiveness of The Sewer Authority of the City of Scnnton's intemal control.

A deficrency in intemal control exists when the design or operation of a controldoes not allow management or employees, in the normal course of performing theirassigned functions, to prevent, or detect and correct misstatements on a timely basis. Amaterial weakness is a deficiencl, et combination of deficiencies, in internal control such

that there is a reasonable possibility that a material misstatement of the Authority'sfinancial statements will not be prevented, or detected and corrected on a timely basis. Asignificant deficienq is a deficienoi,, or a combination of deficiencies, in intemal controlthat is less severe than a material weakness, yet important enough to merit aftention bythose charged with govemance.

MEMBER OFAMERICAN & PET.INSYLVANIA INSTITUTES OF CERTIFIED PUBLIC ACCOUNIANTS

35

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Our consideration of the internal control was for the limited purpose described inthe preceding paragraph of this section and was not designed to identify all deficienciesin internal control that might be material weaknesses or, significant deficiencies. Giventhese limitations, during our audit we did not identify any deficiencies in intemal controlthat we consider to be material weaknesses. However, material weaknesses may existthat have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assuran@ about whether The Sewer Authority ofthe City of Scranton's financial statements are free of material misstatement, weperformed tests of its compliance with certain provisions of laws, regulations, contractsand grant agreements, noncompliance with which could have a direct and material effecton the determination of financial statement amounts. However, providing an opinion oncompliance with those provisions was not an objective of our audit and, accordingly, wedo not express such an opinion. The results of our tests disclosed no instances ofnoncompliance or other mattem that are required to be reported under C-avernmentAuditing Standards.

Purpose of this Report

This report is intended solely to describe the scope of our testing of internalcontrol over cornpliance and the results of that testing, and not to provide an opinion onthe effectiveness of the Authority's internal control or on compliance, This report is an

integnl part of an audit performed in accordance with Government Auditing Standards inconsidering the Authority's internal control and compliance. Accordingln thiscommunication is not suitable for any other purpose.

R **r /L*; . (-

36

ROBERT L. ROSSI C.PJL

ROBERT T. AR\IONIO. C.PA"

PETER D. ARVONICI, JR, C.P*\ROBERTA" tl.AXIS, C,P,A"

ROBERT ROSSI & CO.CERTIFIED PUBLIC ACCOUNTANTS

29S illAtN ST.2ro FLR

OLYPfI,ANT, PA 18447-2326

TEL (570) 87e2300 - FA( (570) 87S51s3Websltel wv/rv.roo.n6t

SALVATOREA. HOTq JR., C,PAJOSEPH E ROSSI, C.PAsEAil J. GRASSI, C.P-A.

RATPH R, MORRIS" III, C.PA.

TNDEPENDENT AUDTTORS'REPORT ON COMPUANCE W|TH REQUTREMENTS THATcourD HAVE A DIRFCTAND MATERTAT EFFECT ON EACH MAfOR PROCRAM AND

ON INTERNAT CONTROL OVER COMPLIANCE IN ACCORDANCE wlTH OMBCTRCUIAR A - 133

September 22,2015

Board of DirectorsThe Sewer Authority of the City of ScrantonScranton, Pennsylvania

R+qtsr Csrpliaurcefq hdr Malr f€derlal PrcFarn

We have audited The Sewer Authority of the City of Scranton's compliance withthe types of compliance requirements described in the OMB Circular A-133 ComplianceSupplement that could have a direct and material effect on each of The Sewer Authorityof the City of Scranton's major federal programs for the year ended March 31, 2015. TheSewer Authority of the City of Scranton, Scranton, Pennsylvania's major federal programs

are identified in the summary of auditors' results section of the accompanying schedule offindings and questioned costs.

M anagement's Ru po n si hi I ity

Management is responsible for compliance with the requirements of laws,regulations, contracts, and grants applicable to its federal prognms.

Au ditor's ResWmibil ity

Our responsibility is to express an opinion on compliance for each of.The SewerAuthority of the City of Scranton, Scranton, Pennsylvania's major federal prognrms basedon our audit of the types of compliance requirements referred to.above. We conductedour audit of compliance in accordance with auditing standards generally accepted in theUnited States of America; the standards applicable to financ.ial audits contained inCoyernmedt Auditing Standards, issued by the Comptroller Ceneral of the United States;

and OMB Circular A-133/ Audits of States, Local Governfnenls, and Non-ProfitOrganizations. Those standards and OMB Circular A-133 require that we plan andperform the audit to obtain reasonable assurance about whether noncompliance with thetypes of compliance requirements referred to above that could have a direct and materialeffect on a major federal program occuned. An audit includes examining, on a test basis,evidence about The Sewer Authority of the City of Scranton, Scranton, Pennsylvania'scompliance with those requirements and performing such other procedures, as weconsidered necessary in the circumstances.

MEMBER OF AMERICA}I & PENNSYLVAilA II{STMUTES OF CERTIFIED PUBUC ACCOUNTANTS

37

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i:t,:i.l We believe that our audit provides a reasonable basis for our opinion on

compliance for aach major fedenl program. However, our audit does not provide a legaldetermination of The Sewer Authority of the City of Scranton, Scranton, Pennsylvania'scompliance,

Opinion on Each Maior Federal Program

In our opinion, The Sewer Authority of the City of Scranton, Scranton,Pennsylvania complied, in all rnaterial respects, with the types of compliancerequirements referred to above that could have a direct and material effect on each of itsmaior federal prograrns for the year ended March 31, 2015.

Report on Internal Control Over Compliance

Management of The Sewer Authority of Sre City of Scranton. Scranton,Pennsylvania is responsible for establishing and maintaining effective intemal controlover compliance with the types of compliance requiremenb referred to above, Inplanning and pe#orming our audit of compliance, we considered I'he Sewer Authority ofthe City of Scranton, Scranton, Pennsylvania's internal control over compliance with thetypes of requirements that could have a direcl and material effect on each major federalprogram to determine the auditing procedures that are appropriate in the circumstancesfcrr the purpose of expressing an opinion on compliance for each major fedenl programand to tsst and report on internal control over compliance in accordance with OMBCircular A-133, but not for the purpose of expressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on theeffecfiveness of The Sewer Authority of the City of Scranton, Scranton, Pennsylvania'sinternal control over compliance.

A deficiency in internal confiol over compliance exists when the design oroperation of a control over compliance does not allow management or employees, in thenormal course of performing their assigned functions, to prevent, or detect and correct,noncompliance with a type of compliance requirement of a federal program on a timelybasis. A material ureakness in internal conuol over compliance is a deficiency, orcombination of deficiencies, in internal control over compliance, such that there is areasonable possibility that material noncompliance with a type of compliancerequirement of a federal program will not be prevented, or detected and corrected, on atimefy basis. A significant deficiency in interna[ control over campliance is a deficiency,or a combination of deficiencies, in internal control over compliancc with a type ofcompliance requirement of a federal prograrn that is less severe than a material weaknessin intemal control over compliance, yet important enough to merit attention by thosecharged with governance.

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Our consideration of internal control over compliance was for the limited purposedescribed in the first paragraph of this section and was not designed to identify alldeficiencies in intemal control over compliance that might be material weaknesses orsignificant deficiencies. We did not identify any deficiencies in intemal control overcompliance that we consider to be material weaknesses. However, material weaknessesmay exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describethe scope of our testing of internal control over compliance and the results of that testingbased on the requirements of OMB Circular A.133. Accordingly, this report is not suitablefor any other purpose.

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I'HE SEWER AUTHORITY OF THE CITY OF SCMNTONSCHEDULE OF FINDtNCS AND QUESTIONED COSTS


Section l- Summarv of Auditors' Result

Financial Statements

Type of auditors' report issued:Intemal control over financial repofting:

Materiaf weakness(es) identified?Si gnifi cant defi ciency(i es) identif ied?

Noncompliance material to financialstatements noted?

FederalAwards

lntemal control over major programs:

Material weakness(es) identified?Significant deficienry(ies) identifi ed?

Type of auditors' repod issued oncompliance for major programs:

Any audit findings disclosed that are

required to be reported in accordancewith Section 510(a) of Circular A-133?

ldentification of major programs:CFDA Number

56.458

Nanle of Federal Program or Clgster

Capitalization Crants for Clean WaterState Revolving Funds

Unmodified

yes

Unmodified

nonone reported

no

nonone reported

no

yes

Dollar threshold used to distinguish between Type A and Typc B Prograrns: $3!Q,000Auditee qualified as low risk auditee? X yes *_._- no

Section ll - FinancialStatement Findings

No matters were reported.

Section lU - Federal Award Findings and Questioned Costs

No matterc were reported.

40

THE SEWER AUTHORITY OF THE CIry OF SCRANTON:r'i, Ii,.ll SCHEDULE OF PRTOR F|NDINCS'-1r Er\t. -,( THE YEAR ENDED MARCH 31. 2015

;;;; O NO PRIOR F]NDNGS NOTED.

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THE SEWER AUTHORITY OF THE CITY OF SCRANTONA COMPONENT UNIT OF THE CITY OF SCRANTON

IN DEPEN DENT AUDITORS' REPORTMARCH 31,2014

THE SCRANTON SEWER AUTHORIWOF THE CITY OF SCRANTONINDEX TO FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES

AND SINCLE AUDIT ATTACHMEMSYEAR ENDED MARCH 31,2014

PAGETable of C-ontenb 2-3

Tnnsmittal Letter 4

Report Distribution List 5

Independent Auditors' Report ffiBasic Financial Sfatement:

Statement of Net Position $.10

Statementof Revenues, Expenses, and Changes inNet Position 11

Statement of Cash Flows 12 r

Notes to Basic FinancialStatenrents 1T27

Supplementary Information:

Supplemental Schedule l- Reshicted fuses 28

Supplemental Schedule ll- Operating Expenses 29

Single Audit Attachrnents:

Schedule of Expenditures of Federal Awanls for treYear Ended March 31,201'4 3&31

Independent Auditors' Report on Compliarrce and onInbmal Control Over Financial Reporting Based on

' an Audit of Financial Statements Performed in Accordancewith Government Auditing Standards 32-33

THE SCRANTON SEWER AUTHORITY OF THE CTTY OF SCRANTONINDEX TO FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES

AND SINCLE AUDIT ATTACHMENTSYEAR ENDED MARCH 31,2014

PACE

Independent Auditor' Report on Compliance withRequiremenb Applicable to Each lviajor Programand Intemal Conrol Over C-ompliance in Accordancewith OMB CircularA-133

Schedule of Findings and Questioned Coss forthiYear Ended March 31,2014

Schedule of PriorYear Findinp

37

38

ROEERT L ROSSI, C.P.A.

ROBERTT. ARVONK}, C.PAPETER D.AruOilIO, JR. C,P.A"

ROBERTA. HANIS, C.P.A.

August 26,2074

ROBERT ROSSI & CO.CERTIFIED PUBUC ACCOUMTANTS

zes MA[.] st.2m FLR

o|-YPMNT, PA18d,47-232sTEL (670) 87&2300 - FAi\ (570) 87S51s3

Webafre: www.nco.net

SALVATOREA NOLE JR, C.P"A.

JOSEPH E RO$SI. C,PASEAI{J. GRASSI. C,P.A"

RALFH R. MORRIS, I', C,PN"


We have performed the Single Audit of The Sewer Authority of the City of Scrantonfor the fiscal year ended March 31, 2014, and have enclosed the Single Audit reportpackage.

The Single Audit was done to fulfill the requirements of OMB Circular A - 133. ltentailed: 1. An audit of the basic financial statements and Supplementary Schedule ofExpenditures of Federal Awards and our opinion thereon; 2. A review of Compliance andIntemal Controls over Financial Reporting Based on an audit of Financial Statementsperformed in accordance with Covemmental Auditing Standards and 3. A review ofcompliance with requirements applicable to each major program and internal controls overcompliance in accordance with OMB Circular A - 133.

A management letter was not issued and therefore is not included as part of ourrepoft,

/1-M/.d ? &

MEMBER OFAI'ERICAN & PEI{T.ISYLVN.IIA INSTrIUIES OFCERNFED PUBLIC ACCOTJNTAMTS

4

REPORT DISTRIBUTION LIST

Fedenl Audit Clearing HouseU. S Census Bureau1201 E 10n Street

Jeffenonville, Indiana 47132Attn: Single Audit Clearing House

Commonwealth of PennsylvaniaBureau of AuditsDivision of Special Audit ServicesSubrecipient Single AuditForum Place - th Floor555 Walnut StreetHarrisburg, PA 17101

1 Copy

1 Copy

ROBERT L, ROSSI, C,P"A.

ROSERTT.ARVONIO. C,P-{PETER D.ARVONIO, JR.. C.PA.

ROSERTA HAfiIS, C.PA.

ROBERT ROSSI & CO.CERTIFIED PUBLIC ACCOINTN.ITS

2Sg t[AlN ST. ZIo fmOLYPHANT, PA1U47-2326

TEL. (570) 87$2300 - FFJ( (570) 87S5153Webelte: untywrco,rpt

I NDEPENDENT AUDITORS' REPORT

SATVATOREA NOLE, JR,, C.PTJOSEPH E. ROSSI. C,PA"sEAl{J OR 65r, C.PJA"

RALPH R. MORRIS, III, C.P.A"

August 26,20"14

To the Board of DirectorsThe Sewer Authority of the City of Scranton


We have audited the accompanying financial statements of The Sewer Authority ofScranton, a component unit of the City of Scranton, as of and for the year ended March 31,2014, and related notes to the financial statements, which collectively comprise theAuthority's basic fi.nancial statements.

Management's Reponsihility for the Financial Stalements

Management is responsible for the preparation and fair presentation of thesefinancial statements in accordance with accounting principles generally accepted in theUnited States of America; this includes the design, irnplementation, and maintenance ofinternal control relevant to the preparation and fair presentation of financial statements thatare free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on ouraudit. We conducted our audit in accordance with auditing standards generally accepted inthe United States of America and the standards applicable to financial audis contained inC,ovemment Auditing Standards, issued by the Comptroller General of the United States.

Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whetherthe financial sktements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about theamounE and disclosures in the financial statements. The procedures selected depend onthe auditor's judgment, including the assessment of the risks of material misstaternent of thefinancial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the entity's preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not forthe purpose of expressing an opinion on the effectiveness of theentity's internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of

'' significant accounting estimates made by management, as well as evaluating the overallpresenration of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinions.

ME}4BER OF AIERICAN & PENNSYLVAI.IIA NSNTUIES OF CERf,IFIED PUBUC ACCOUNTANTS

6

Opinions

In our opinion, the financial statements referred to above present fairly, in allmaterial respects, the respective financial position of The Sewer Authority of the City ofScranton, a component unit of the City of Scranton, as of March 31, 2A14, and therespective changes in financial position and cash flows thereof for the year then ended inaccordance with accounting principles genenlly accepted in the United States of America.

Changes in Acrcunling Principle

fu discussed in Note 1, during the year tlie Authority implemented CASB StatementNo. 63, Financial Reporting of Deferred Autflows of Resources, Deferred lnflows ofResources, and Net Position and GASB Statement No. 65, Items Previously Reported as

Assets and Liabilities. As a result of this implementation, the format and reporting of thefinancial statements has changed to reflect the required components of these CASBStatements, as applicable. Our opinion is not modified with respect to this matter.

Other Matters

Required 5 uppl ementary I nformation

Management has omitted the management's discussion and analysis that accountingprinciples generally accepted in the United States qf America require to be presented tosupplement the basic financial staternents. Such missing information, although not a part ofthe financial statements, is required by the Covernrnental Accounting Standards Board, whoconsiders it to be an essential part of financial repofting for placing the financial in anappropriate operational, economic, or historical context. Our oplnion on the financialstatements is not affected by this missing information.

Other lnformation

In connection with our audit, nothing came to our attention that caused us to believethat the Authority was not in compliance with the provisions of the Trust Indenture betweenThe Sewer Authority of the City of Scranton, Pennsylvania and Fidelity Deposit andDiscount Bank insofar as they relate to accounting and auditing maters. lt should be noted,however, that our audit was not directed primarily toward obtaining knowledge of suchnoncompliance.

Our audit was conducted for the purpose of forming opinions on the financialstatements that collectively comprise The Sewer Authority of the City of Scranton's basicfinancial statements. The supplementary information on Pages 28 and 29, as listed in thetable of contents, are presented for purposes of additional analysis and are not required partof the basic financial statemens, The schedule of expenditures of federal awards ispresented for purposes of additional analysis as required by U. S. Office of Managementand Budget Circular 4-133, Audits of States, Local Covernments, and Non-ProfitOrganizations, and is also not a required part of the basic financial statements.

The supplementary information on pages 28 and 29, as listed in the table ofcontents, and the schedule of expenditures of federal awards are the responsibility ofmanagement and were derived from and relate directly to the underlying accounting andother records used to prepare the financial statements. Such information has been subjectto the auditing procedures applied in the audit of the basic financial statements and certainadditional procedures, including comparing and reconciling such informaticin direaly to theunderlying accounting and other records used to prepare the financial statements or to thebasic financial statements themselves, and other additional procedures in accordance withauditing standards generally accepted in the United States of America. ln our opinion, thesuppfementary information on pages 28 and 29, as listed in the table of contents, and theschedule of expenditures of federal awards are fairly stated in all material respects inrelation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Sfandards

fn accordance with Government Auditing Standards, we have also issued our reportdated August 26, 2014, on our consideration of The Sewer Authority of the City of Scranton'sinternal control over.financial reporting and on our tests of its compliance with certainprovisions of laws, regulations, contracts, and grant agreements and other mafters. Thepurpose of that report is to describe the scope of our testing of internal control over financialreporting and compliance and the results of that testing, and not to provide an opinion onintemal control over financial reporting or on compliance. That report is an integral part ofan audit performed in accordance with Covernment Auditing Sandards in considering TheSewer Authority of the City of Scranton's internal control over financial reporting andcompliance.

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THE SEWER AUTHORITY OF THE CITY OF SCRANTONSTATEMENT OF NET POSTTION

MARCH 31,2014

A55ETS

CURRENT ASSETS

Cash and Cash EquivalentsAccounts Receirable, Net of Allowance

for Doubfful Accounts of $2,595,000Grant ReceivableOther Cunent Assets

lnvestments

Accrued I nterest Receivable

Total Restricted fusets

Accounts. Receivable - Assessments

. Capital fusetsPropefi, Plant and Equipment, Net

TOTAL NONCURRENT ASSETS

DEFERRED OUTFLOWS OF RESOURCES

Defened Bond Insurance Cost

TOTAL DEFERRED OUTFLOWS OF

RESOURCES

TOTAL ASSETS

TOTAL CURRENT ASSETS $ T9,503,711

NONCURRENT ASSETS

Restricted fusets - See Schedule I

Cash and Cash Equivalents $ 156,355

$ 12,559,155

6,299,632125,000519,924

19,826,333

!,654

$ 19,997,342

396,129

69.601.589

$ 601,168

99,975,060

601.168

$ 11A,079,939

"See accompanying notes and independent auditors' report"

9

THE SEWER AUTHORITY OF THE CITY OF SCRANTONSTATEMENT OF NET POSITION

MARCH 31,2014

LIABILITIES

CURRENT LIABILITIES (Payable from Current tusets)Lines of CreditCurrent Portion of Long-Term DebtAccounB Payable

Accrued Interest FayableAccrued Payroll and PayrollTaxes'Current Portion of Compensated AbsencesOther Cunent Liabilities

TOTAL CURRENT LIABILITIES(Payable from Current fusets)

CURRENT LIABILITIES (Payabte from Restricted Asseb)

Revenue Bonds Payable

Accrued Revenue Bond Interest Payable

Accrued Expenses

TOTAL CURRENT LIABILITIES(Payable from Restricted Assets)

NONCURRE NT LIABI LITIES

Long-Tenn Debt, Net of Current PortionCompensated Absences, Net of Cunent Portion

TOTAL NONCURRENT LIABILITIES

TOTAL LIABIUNES

DEFERRED INFLOWS OF RESOURCES

Defened Bond Premium

TOTAL DEFERRED INFLOWS OFRESOURCES

NET POSITIONInvested in Capital Assets, Net of Related DebtRestricted for Debt Service and Capital Expenditure' Unrestricted

TOTAL NET POSITION

$o961,337639,110

26,7992O1,155405,611

l2,o0o

$ 2,245,012

$ 1,250,000711,551

.1,117,326

3,A78,877

$ 55,024,87837g,gog

, 55404,687

$ 6A,748F76

$ 182,863

$ 182,86.3

$ 14,033,68016,909,46518,226,355

$ 49,168,500


TO

THE SEWER AUTHORIry OF THE CITY OF SCRANTONSTATEMENT OF REVENUES, EXPENSES AND CHANCE5 IN NET POSITION


OPERATING REVENUES


and interest, net of credit adjustrnents

TOTAL OPEMTINC REVENUES

OPERATING EXPENSES

Sewer Plant and Sewer System - Schedule llAdministrative and Genenl 'Schedufe llDepreciation Expense

TOTAL OPERATINC EXPENSES

OPERAT]NC INCOME

NON OPERATINC REVENUES (EXPENSES}

lnvestment Revenues

Interest Expense

Amortization of Bond Insurance Cost

Capital GnntAmortization of Bond PremiumOther Revenue

TOTAL NON-OPERATI NG REVE N UES (EXPENSES)

CHANCE IN NET POSITION

RESTATED NET POSITION, BECINt',ttt tC OF YEAR

NET POSIT|ON, END OF YEAR

'See accompanylng notes and Independent auditors reporf

5 24,037,219

$ 9,O74,6Q23,22O,554

- 4,878,5A8

86,1 6g(699,462)

(31,233)

125,0008,099

_ 353,224

$ 24,037,219

15,173,6U

$ 8,863,555

(158,204)

$ 8,705,351

40,463,149

$ 49,168,500

11

THE SEWER AUTHORITY OF THE CITY OF SCRANTONSTATEMENT OF CASH FLOWS


CASH FLOWS FROM OPERATINC ACTIVITIES:

Cash Received from CustomersCash Payments to Suppliers for Goods and ServicesCash Payments to Employees for Services

Net Cash Flows Provided by Operating Activities

CASH FLOWS FROM NONCAPITAL FINANCINC ACTIVITIES:Other Revenue Received

Net Cash Flows Provlded by Noncapital FinancingActivities

CASH FLOWS FR^OM CAPITAL AND RELATED FINANCINO ACTIVITIES:Payment of DebtPayment of lnterestPurchase and Construction of Capital fusets

Net Cash Flows Used for Capital and Related Financing Activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from Maturity of lnvestmentsPurchase of lnvestmentsReceipt of Interest

Net Cash Flows Provided by Investing Activities

NET DECREASE lN CASH AND CASH EQUIVALENTS

cAsH AND CASH EQUTVALENTS, BEGTNNINC OF YEAR

cAsH AND CASH EQUIVALENTS, END OF YEAR

RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWSFROM OPERATING ACTIVITIES:

Operating lncomeDepreciation(lncrease) in Accounts Receivable(lncrease) in Other Current Assets

lncrease in Accounts PayableInqease in Other LiabilitiesIncrease in Accrued Compensated Absences

NON-CASH CAPITAL AND RELATFD FINANCING ACTIVITIES:

Non-Cash Financing - Capital CrantNon-Cash Financing - Bond Premium AmortizationNor'r{ash Financing - Bond lnsurance Cost Amortization

$ 22,680,683(4,755,584)(7,035,6461

$ 10,889,453

$ 353,2:24

353,224 "

$ (2,328,468)(2,453,606)

(11,4O5,O78)

(16,197,152)

$ 8,309,629(7,999,5541 f

196,108416,183

i (4$28,2921

17,243,902 -

-Llarl-lllg_

$ 8,863,5552,g7g,5Og(1,070,319)

(61,185)

758,12951,42469,341

$ 10,889,453

125,0008,099

{31,2331

$

$

$


12

THE SEWER AUTHORITY OF THE CITY OF SCMNTONNOTES TO FINANCIAL STATEMENTS

Note | - Summary of Significant Accounting Policies

Organization: The Sewer Audrority of the City of Scnnton (the Authority) is abody corporate and politic organized under the Pennsylvania Municipalities Act of 1945,P.C.382, as amended and supplemented. By a Certificate of loinder dated August 17,1965, the Borough of Dunmore became an Aufrority member.

On July 14, 1971, the City of Scranton appointed the Authority to be its agent inthe operation of the sewer system. The terms of this service agreement continue for a one-year period ahd will automatically extend itself on a year-teyear basis until one of theparties thereto gives notice of its intent to cancel 30 days prior to the termination of anyyearly period.

The Sewer Authority of the City of Scranton, Pennsylvania, has determined that itis a component unit of the City of Scranton since the City has guaranteed *re Authority'sloans with the Pennsylvania Infrastructure Investment Authority (PENNVEST), thereforgthe Authority is included in the reporting entity of the City of Scranton.

Reporting Entity: The reporting entity has been defined in accordance with thecriteria established in CASB Statement No. 39, "Determining Whether Organizations areComponent Units. The specific criteria used is as follows: a) financial interdependency; b)

selection of goveming authority; c) designation of managemen! d) ability to significantlyinfluence operations; e) accountability for fiscal matters; fl scope of public service: and g)

special financing relationships. fu defined, there are no other related organizations,which should be included in the financial statements.

Basis of Accounting: The Sewer Authority of the City of Scranton, Pennsylvaniauses the accrual basis of accounting. The Authority's revenues are recognized wheneamed and expenses are recognized when the obligation is incuned. The Authorityapplies all GASB pronouncements as well as the Financial Accounting Standards Boardpronouncements issued on or before November 30, 1989, unless those pronouncementsconflict with or contradict GASB pronouncements.

Basis of Presentation: The fund category used by the Authority is the proprietaryfund. Proprietafy category funds are used to account for and report those govemmentalactivities that are designed to be self-supporting from fees charged to consumers of thefunds, goods and services or where the governing board has decided that the periodicdetermination of revenues, expenses, and net income is appropriate for capitalmaintenance, public policy, management control, accountability or other purposes. Theaccounting and financial reporting practices of proprietary funds are similar to those usedfor business enterprises and focus on capital maintenance and the flow of economicresources.

13



Proprietary fund statements provide both long-term and short-term financialinformation which is similar to the information reportd by a business-type entity. Netposition is segregated into invested in capital assets, net of related debq restricted for debtservice and capital expenditures; and unrestricted components. Net position is increasedby revenues and decreased by expenses.

Two fund types are included in the proprietary fund category; enterprise andintemal service.funds. The Authority uses *re enterprise fund type.

Enterprise funds account for opentions that provide goods or services to tfregenenl public on a continuing basis. Such operations are financed and operated in a

manner similar to private businesses and are intended to be self+upporting *rroughcharges to users.

Measurement Focus: The accounting and financial reporting treatment applied toa fund is determined by its measurement focus. The proprietary funds are accounted foron a flow of economic resources measurement focus. With this measurement focus, allassets and all liabilities associated with the operation of each fund are included on theStatement of Net Position. Proprietary fund type operating statements present Increases(i.e., rwenues) and decreases (i.e., expenses) in net total position.

Proprietary funds distinguish operating revenues and expenses from non-operatingitems. Openting revenues and expenses generally rbsult from providing services andproducing and delivering goods in connection with a proprietary fund's princlpal ongoingoperations. The principal operating revenues of the enterprise funds are charges tocustomers for sewer slatem services. Operating expenses for enterprise funds include thecos8 of sewer system services, administrative expenses, and other costs of running theactivity. All revenues and expenses not meeting this definition are reported as non-operating revenues. and expenses.

Use of Estimates: The preparation of financial statements in conformity with U.S.generally accepted accounting principles requires management to make estimates andassumptions drat affect the rqported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial staternents and the repoftdamounts of revenues and expendituredexpenses during the reporting period. Actualresults could differ from those estimates.

Aflowance for Doubtful Accounts: The Authority's policy for providing foruncolleaible accounts is to charge cunent year earnings for accounts receivableconsidered currently uncollectible based on the historical collection experience of theAuthority and collection percentages applicable to public utilities.

A major portion of the allowance for doubtful accounts is felt to be collectible inthe future because of the Authority's power to convert past due accounts into municipalclaims. This procedure is an opention of law and the claims have the status of a legal lienor judgment. There are currently in force municipal claims of approximately $4,790,000.

t4

I

I



lnvestrnents: All of the Authority's investments are classified as hel$to-maturity.

Property, Plant and Equipment Propefi, plant and equipment are stated at cost.Normal maintenance and repairs are charged to expense as incuned; major renewals andextraordinary repairs, which extend' the useful life of an asset, are capitalized.Depreciation ls provided using dre straight-line method based on the following estimateduseful lives:

Useful Life

LandSewerTreatment PlantLand lmprovementsOperating EquipmentVehiclesExtnordinary Repairs:'Sewer SystemEquipment

UnrestrictedRestrictedTotal Cash and Cash Equivalents

Not Applicable40 years10 yean10 yearc3{ years

20 yean5 years

Accrued Compensated Absences: lt is the Authority's policy to permit employeesto accumulate vacation and sick days which will be paid to employees upon separationfrom the Audrority's service. These amounts have been recorded in the statement of netposition split between current and noncunent liabilities as noted in the statement.

Statemenb of Cash Flows: For purposes of the Statemenb of Cash Flows, treAuthority considers all highly liquid investmenE with a maturity of three months or less

when purchased to be cash equivalents.

Cash and cash equivalents, at March 31,2014 were as follows:

$12,559,155156,?55

il2,ra5,519

f nterest paid by the Authority for the year ended March 31, 2014 amount to$2,453,606. Of this amount, $1,769,763 was capitalized as construction-in-progress.

Accounting for Authority Bond lssues: The Authority financed the construction ofthe sewer system through the issuance of two series of bonds designated as Sewerfusessment Bonds in the atgregate principal of $2,50O,00O and Sewer Revenue Bonds inthe aggegate principal amount of $33,000,000. The bond issue is subject to the provisionof a Trust Indenture dated April l, 1968 between the Authority and JP Moqgan (formerly

Chase Manhattan Bank) as Trustee. The bond issuc was defeased July, 2000.

15



ln September 2OO7, the Authority issued bonds in the amount of $16,81O,000, witha final maturity of December, 2036, with interest costs varying from 3.70% to 5.0006.Proceeds from the bonds were turned over to the Trustee for initial distribution to variousfunds in accordance with the terms of the Trust Indenture of the Authority. The Trusteemaintains all funds enumerated in Note 2 and shall continue to function for the life of thisbond issue in the collection of rentals, the payment of operating e-\penses and semiannualinterest payments, and the repurchase and retirement of bonds until the ultimateretircment of all oubianding bonds.

In June 2011, the Authority issued sewer revenue bonds in the amount of$29,475,000, with a final maturity of December 2035, with interest costs varying from1,28olo to 6.3%. The bond issue is subject to Sre provision of a Trust Indenture dated as ofSeptember 1,20A7, as supplemented by a First Supplemental Indenture datedJune 1Q2011 betvveen the Authority and Fidelity Deposit and Discount Bank as successor trustee,and are secured under the indenture by the assignment and pledge to the Trustee ofReceipts and Revenue from the Sewer System.

Income Taxes: As a municipal authority the Authority is not subject to income.

Net Position: Net position represents the difference between assets and deferredoutflow, of resources and deferred inflows of resources, and liabilities. Net positioninvested in capital asseb, net of related debt, consists of capital assets, net of accumulateddepreciation, reduced by outstanding balances of any borrowings used for theacquisition, construction or improvement of those assets. Net position invested in capialasseb, net of related debt excludes unspent debt proceeds, Net position is reported as

restricted when there are limitations imposed on their use either through the enablinglegislation adopted by the Authority or through external restrictions imposed by creditors,grantors or laws or regulations of other govemments.

. GASB Statement No. 63, Financial Rqorting of Deferred Out{lows of Resources,Defened Inflows of Resources, and Net Position and GASB Statement No. 65, ltemsPreviously Reported as Assets and Liabilities were implemented during the cunent year.

These statemen$ incorporate defened outflows of resources and deferred inflows ofresources, as defined by GASB Concepts Statement No. 4, into the definitions of therequired components of the residual rneasure of net position, formerly net asseb. TheStatement of Net Position now reports the followlng components: assets, defenedoutflows of resources, liabilities, deferred inflows of resources, and net position, whenapplicable.

Change in Accounting Principle.Restatement of Net Position: Beginning NetPosition of the Authority was restated to account for the implementation of GASB

Statement No. 65. This change in accounting principle requires bond issuance andfinancing costs to be expensed in the year whiih they were incurred. fu a result, the

16



remaining unamoftized bond issuance and financing costs were written off as of April l,2013 and deferred costs in the Authority's financial statement were restated by $600,350.Beginning Net Position was restated from $41,063,499 to $4O, 463,149 at April 1, 2013.

The effect of the change on the Authority's March 31, 2014 Statement ofRevenues, Expenses and Changes in Net Position was no change in operating incorne; a$33,146 reduction in non-operating expenses; and an increase in Changes in Net Positionof $33,146.

The retroactive impact of the change on the Authority's March 31, 2013 Statementof Revenues, Expenses, and Changes in Net Position was no change in operating income;a $33,146 reduction in Non-Operdting Expenses; and an increase in Changes in NetPosition of $33,146.

Note 2 - Restricted fus€fs

Assessment Fund: To provide a portion of the cost of sewer line extensions, theAuthority issued Sewer Assessment Bonds in the amount of $2,600,000. Assessmentswere billed to properg owners with an option of cunent or deferred paymenl All bondsoutstanding were redeemed as a result of a transfer of funds frorn the existing construclionfund. Additional Sewer extensions, including some deferred under the originalconstruction plan, are being assessed to property owners under the terrns of the Indentureand the Authority's assessment resolution.

fu of March 31,2014 the majority of the sewer assessment accounts receivableare delinquent. To insure collection, municipal liens have been filed against thoseproperties with delinquent sewer asseismenb.

Sewer Revenue Bonds: The aforementioned Trust Indenturen among other thing5,provides for the creation of the following funds which are restricted by terms of theindenture:

W Clearing Fund: The Trust lndenture requires the Trustee tct establish aClearing Fund into which any monies held by the Authority in theOperating Account at the end of any fiscal year, commencing with thefiscal year ending March 31, 2008, not required to pay accrued expensesfor such fiscal year and not required to be retained as a reserve in suchamount as the Authority may deem prudent but not in excess of theestimated amount of the Operating Expenses and Administrative Expenses

contained in the Annual Engineer's Report for the following fiscal year,shall be transferred.

17


Note 2 - Resficted fuse8 (Continued;

(B) Debt Service Fund: Terms of the Indenture require the Trustee to transferfrom the Clearing Fund interest falling due on June 1 and December 1,respectively, plus on December I and April 1, the aggregate principalamount of the Bonds maturing or subject to mandatory redemption on suchDecember 1.

(Cl) Debt Service Reserve Fund: The Indenture established Debt ServiceReserve Fund of $4,333,811 to be used to make up any deficienry in theDebt Service Funds. At March 31, 2014, Debt Service Resewe Funds heldby the Trustee, amounted to $4,910,716, which include accumulatedearnings and additions made to the reserve accounts by the Authority.

(D) Bond Redemption and lmprovement Fund: The surplus from time to timein the Clearing Fund, after payments and deposits mentioned above aresatisfied, is to be deposited in the Bond Redemption and lmprovementFund and applied to make good any deficiencies in the Debt Service Fund,Bond Sinking Fund or the Debt Service Reserve Fund. lf there is nodeficienry in any of such Funds, monies may be applied as follows and asmore fully provided in the Indenture:

(1) to make capital additions(2) to make up any deficienry in the Construction Fund(3) to purchase or redeem Bonds issued under the lndenture(4) for any other lawful purpose of the Authority

(E) Construction Fund: The Construction Fund shall consist of fundsdeposited therein puruant to provisions of the Indenture for purposes ofpaying Costs, Costs of Acquisition or Costs of Construction relating to theSewer System, including Capital additions and acquisition or constructionof property in the nature of Capital Additions.

(n Seftlement Fund: The Settlement Fund was established with the issuanceof the 2011 Sewer Revenue Bonds to pay the costs associated with theissuance ofthe Bonds.

Note 3 - Deposits and Investrnents

Custodial Credit.Risk - Deposits: At March 31, 2014 the bank balance of theAuthority's cash deposits with financial institutions was $13,026,557, compared to acarrying arnount of $12,775,510. The total bank balance that was secured by FederalDepository Insurance was $656,355; and $12,329,887 of the remaining bank balancewas covered by securities pledged by the financial institution for such funds, but not inthe Authority's name. The Authority does not have a deposit policy for custodial creditrisk.

1B


Note 3 - Deposits and Investments (Continued)

Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill itsobligation to the holder of the investnent. In accordance with the Trust Indenture, anyrestricted assets held by the Trustee can be invested as detailed in the Indenture.Unrestricted funds are invested at management's discretion.

lnvestments: The Authority's investments are carried at fair market value andconsisted of the following at March 31, 2Ol4:

Amortized CarrylngCost Value

Average WeightsdCredit Arrerage

Quality MonfisToRating Matu8..

Mutual Money Market Funds:Fedented Treasury Obligations Fund (CAP) $17,4ffi,372Cefficateof Deposit 2,359,500

Total iJ9e?JeZz

i17A64,372 lv\Am/l'rAAmf 0.232,361,961 IVA 3.81

s'1e.8?6.333

(l ) Ratingp are provided where applicable o indicate associated Crcdit Rlsk. l.VA indicates not applicable.(2) lnterest Rate Risk is e*imated weighted avenge montrs to matudty.(3) Concenbation of credit risk by arnount and by issuer invesfnenb in any one issuer that represent 5olo or '

more of onl investrnents seperately disclosed-

Interest Rate Risk: Interest rate risk is the risk that changes in market interest rates

will adversely affect the fair value of an investment. The longer the maturity an

investment has the greater its fair value has sensitivity to changes in market interest rates.

The Authority does not have a formal investment policy that limits investment maturitiesas a means of managing its exposure to fair value losses arising from increasing interestrates.

Concentration of Credit Risk: The Authority's investments are managed under a

trust indenture agreement with an area financial institution. Investment choices arelimited under this agreement to specified investments with stipulated credit ratings as

permitted by legislation under the Pennsylvania Municipal Authorities Act. Thisagreement does not place a limit on the amount the Authority may invest in any oneissuer. As of March 31, 2014, the Authority's investment in Federated TreasuryObligations Fund (CAP) was rated AAAm by Standard & Poor's and represented 88% ofthe Authority's investments. Ceftificates of deposit represent the rernaining 12oh of theAuthority's investrnents, and are invested at various financial institutions in amountswhich are fully secured by Federal Depository Insurance (FDIC).

r9


Note4-Capitalfuseb


Land (not depreciaEd)Constuction in Progress

Sewage Trcatnent Plantand Related Facilities

lrnprovementOpenting Equipment

Total Historical Cosb

LESS: Accumulated Depreciation:

Sewage Treabnent Plantand Related Facilities

lmprovementOpenting Equipment

Total AccumulatedDepreciation

CapihlAsets, Net

$ 0$9848,657

2,154,7760

6t6,86p

$'12,720,299

-

Balance

3R112013

$ 130,02912$52A53

119,697,069253,572

10369,390

$ 143,102,513

Additions DeletionsBalance

3RU2074

$ tgo,ozg22,601,110

1 21 ,85 1 ,945253,572

10.986,2I6

$ 155,822,812

00

000

$0

-$ 75,068,041 $ 2,336,128208,892 10,218

8,065,782 532,'162

0

00

$ 77AU,16921g,1lO

9,597,944

$83342,715 $2,878J0E $ 0 i86,221223

$59,759,798 i9,841,797 $ 0 $69,601,599

Depreciation expense for dre year ended March 31 , 2014 amounted to $2,878,508.

At March 31,2014, the Authority has entered into contracts for construction, asfollows:

Project ExpendedAufrorization To Date Commitrnent

B iological Nutient Removal(B NR) Project - Various Contractors

Ofier Non€NR Project-Various Confactors

i 21,597,992 $20,074,523

814,1 53 $ 639,109

$ 1,523/469

$ 175,049

20


Note5-Long-TermDebt

The changes in long-term obligations payable during the year ended March 31,2O14 are as follows:

Bahnce

. 313112013 Additions Repavmenc _

PrincipalBalance DueW'lthin

313112014 One Year

Sewer Revenue

Bonds PayableSeries of 2007

FidelitySewer Revenue

Bonds Payable

Series of 201 tAFidelitySewer RevenueBonds Payable

Series of 201 1B

Pennvest

Promissory

Nore #71192

Pennvest

PromissoryNote#71162

Pennvest

Promissory

Note #71281

Pennvest

Promissory

NoE #27682

Pennvest

PomissoryNote #79905

PennvestPromissory

NoE #71 375

TOTAL

2,712,'l04

2843,19O

11555,186

2,626,561

3il7,226

1 .885,416

$ 59,564,683

2A71,85O

2,t26,665

1A42r579

2A76,033

3,213,672

1,885,416

s57236,21s

247$74

222,609

115,770

155,197

191,564

28,434

i 2,211,337

$t6,0to,ooo $ o $ 5,ooo $16,605,000 $ 5,000

20A2O,OOO 0 960,000 19,450,000 790,000

7,495,O0O 440,000 7,055,000 455,000

240,254

216,5?5

112,607

150,528

203,554

0

$ 0 $ 2,328A68:-

0

21


Note 5 - Long-Term Debt (Continued)

The aggregate maturities of long.term debt are as follows:

Year End March 31 lnterest Toal201 5

2016201720182019

2024-20242025-2029203U20342035-2037

'l'erm Bonds Slated toMature on December 1,

2024Year _j.tLount2018 $ 5,OOO

$ 2,467,3792,413,6572,357,1702,296,1872,229,1019,966,O197,635,9494F54,O24

853,327

$ 4,678,7164,307,6694,3O44414,302,5144,300,304

19,880,57417,976,24218,093,61314,164,915

Principal

$ 2,211,3371,894,0121,947 2712p06,3272,071,2A39,914,555

"t0,34o,333

. 13,539,589

- 13,311,58q

$ 57,236,215

2cJ1920202021202220232o24

* At maturlty

5,OOO5,OOO5,OOO5,OOO5,OOO5,OOO *

202620292()3020312032

Amount$ 1,2O5pO0

1,265,OOQ1,395,OOO1,680,0001,760,000 *


2036- Ye-ar Amount

2033 $ 1.840,OOO2034 1,9.35pOO2035 2,O30,OOO2036 2,135pAO

$34,772,773 $ 92,008,988

Note 6 - Revenue Bonds Payable 2007 Series

On September 1, 2007 the Authority issued $16,810,000 of Sewer RevenueBonds. The proceeds from this issue were primarily used to fund capital improvementprojecb.

Optional Redemption: The 20OZ Series Bonds maturing on or after December l,2016 are subject to redemption prior to maturity, at the option of the Authority beginningDecember 1, 2015, out of monies deposited with or held by the Trustee for suchpurposes as a whole or in paft at any time, and, in any order of maturities selected by theAuthorjty, 100% of the par amount, plus acoued interest-

Mandatory Redemption: The 2007 Series Bonds stated to mature on December 1,. 2024, December 1,2032 and December 1, 2036 are subjeA to mandatory redemption

prior to.maturity on December 1 of each of the years set forth below, in each case at,aredemption price equal to 100% the principal amount thereof to .be redeemed plusaccrued interest to the redemption date, from funds to be deposited in the Sinking Fund,

on or before December 1 of each of the years set for the below, in amounts sufficient toredeem by lot on each Decernber 1 the following amounts of the Bonds:


2032Year

22



Series A of 2011

On lune 10,2011 theAuthority issued $21,340,000 of Series A of 2011 SewerRevenue Bonds. The proceeds from this issue will primarity be used to fund various capitalimprovementprojects.

Optional Redemption: The Series A of 2011 Bonds maturing on or afterDecember 1, 2022 are subject to redemption prior to maturity, at the option of theAuthority in any order of maturity either as a whole, or in part, at any time on or afterDecember 1, 2021, and if in part, by lot within a maturity, at a redemption price equal tot00% of the principal amount, together with accrued interest to the date fixed forredemption.

Mandatory Redemption: The Series A of 2011 Bonds stated to mature onDecember 1,2031and on December 1, 2035 are subject to mandatory redemption, inpart, prior to maturity, by lot within a maturity, at a redemption price equal to 100% ofthe principal amount together with accrued interest, to the dates fixed for redemption, onDecember 1 of the years and in the following amounts:

Term Bonds DueDecember 1,2031Year Amount

Term Bonds DueDecember 1,2035Year Amount

2027 $ 1,250,000 2032 $ 1,265,0002028202920302031

910,000l,og5,0001p75,0001,390,000 *

203320342035

1,315,OO01,2O5,OOO

l,515,OOO

* At maturity

Series B of 2011

On June 10, 2011 the Authority issued $8,135,000 of Series B of 2011 FederallyTaxable Sewer Revenue Bonds. The proceeds from this issue were uSed to currentlyrefund the Authority's outstanding $8,000,000 loan from First National Comrnunity Bankdated April 24,2OO7.

Optional Redemption: The 2011 B Series Bonds maturing on or after December 1,

2025 are subject to redemption prior to maturity, at the option of the Authority in anyorder of maturity either as a whole, or in part, at any time on or after December l, 2021,at a redemption price equal to 100% of the principal amount, together with accruedinterest to the date fixed for redemption.

23



Mandatory Redemption: The Series B of 2011 Bonds stated to mature onDecember 1, 2025 are subject to mandatory redemption, in part, prior to maturity, by lotwithin a maturity, at a redemption price equal to 100% of the principal amount, togetherwith accrued interest, to the dates fixed for redemption, on December 1 of the years andin the following amounts:

Term Bonds Due December 1, 2O25:

Year Amount2022 $650,000hA?3 690,0002024 735,0002025* 785,000

*At maturity

Note 7- Conduit DebtObligation

On December 22,2004, the Authority issued a Cuaranteed Lease Revenue Notein the amount of $4,00010O0 to finance the cost of a project on behalf of the City ofScranton. The note is due December 15, 2015 and has an interest rate of 5.99%. Inconnection with the issuancg the Authority and the City entered into a sale agreementand a lease agreement. Through these agreements, the City sold property to the Authority,which in tum leased the property back to the City, with payments due in amountssufficient to pay the debt service on the note.

Under the terms of the note and the agreements, the Authority is a conduit issuer.The Authority has no obligation beyond the resources provided by the subleaseagreement. The sublease agreement constitutes a general obligation of the City ofScnnton and the full faith and credit and taxing power of the City of Scranton is pledgedto the payment of all amounts due under the sublease. The sublease agreement expires onDecember 15, 2016. The notes are not general obligations of the Authority and theAuthority has no taxing power. The amount outstanding on the Notes as of March 31,2014 is $1,615,000. Due to the nature of the transaction the Authority is not required torecord the obligation for the Notes or the related lease receivable in its financialstatements.

Note 8 - Capital lmprovement Program

During the year ended March 31, 2000 a capital improvement program wasadopted in the amount of $25,000,000. The progftm consists of two phases. Phase I wasbudgeted at $10,261,000 and was primarily for improvements at the treatment plant.

24


Note 8 - Capital lmprovement Program (Continued)

Funding for the program is from the Pennsylvania Infraskucture Investment Authority(PENNVEST). The first application filed was for $5,M5,157 (i4,879,765 as modified) andthe loan closed in March, 2002. The balance outstanding at lv{arch 31, 2014 amounted tofi2\71,85O. The loan is secured by the gross revenues of the Authority and the guaranteeof the City of Scranton. lnterest only was payable on advances until July 1, 2003, whenmonthly principal and interest payments are due up to and including January,2023.Interest is 1.522"h for the first 5 mon*rs and 3.045% thereafter. Legal fees relating toobtaining the financing amounted to $44,338. Construction was completed for this phasein July, 2003, and the final disbursement on this loan was received June, 2004 in theamount of $86,860.

The second PENNVEST application was for i4,947,A00 and the loan closed inOctober, 2OO2. The balance outstanding at March 31, 20'14 amounted to $2,626,665.The security is the same as above. Interest only was payable on advances until August 1,

20A4, when monthly principal and interest payments were due up to and including July', , 2Q24, f nterest is at 1 .387% for the first 81 months and 2.774% thereafter. Constructionwas cornpleted for this phase at March 31, 20A7, and the final disbursement of $12,150was received May,2OO7.

The third PENNVEST loan closed in December, 2003, in the amount of Ifi2,806,2il. The balance outstanding at March 31, 2014 amounted to $1,442,579. Thesecurity is the same as above. Interest only was payable on advances until February 1,

2005, when monthly principal and interest payments were due up to and including

January 1, 2025. lnterest is at 1 .387s1, for the first 73 months and 2.774% thereafter.Construction was completed for dris phase at March 31, 2007, and the final disbursementof $125,22t was received May, 2007.

In December 2OO4 the Aufiority closed on a fourth loan in the amount offi3,690,127. The balance outstanding at March 31, 2014 was $2,476,033. The security isthe same as above. Monthly principal and interest payments began June, 2007 and aredue up to and including May,2O27. Interest is at 1.942% for the first 60 months and3.0527. thereafter. Construction was completed for this phase in April, 2CfJ7, and thefinaf disbursement of $151,815 was received November, 2007.

ln November 2QO7, the Authority closed on a fifth loan in the amount of$4,329,181. The balance ou8tanding at March 31 , 2014 was $3,21 3,672. The security isthe same as above. Monthly principal and interest payments began May 1, 2009 and areup to and including April, 2029. Interest is at 1 .214oh for the first 60 months and 2.428%thereafter. Construction was completed for this phase in March 2011. At March 31,2014,the final disbursement of $1 3O,7U has not been received and is awaiting final settlement.

25


Note 8 - Capital lmprovement Prognm (Continued)

ln March 2012 the Authority closed on a Pennvest loan in the amount of$11,256,361. The proceeds will be utilized primarily for Wastewater Treatment Plantlmprovements. The loan is secured by the gross revenues of the Sewer Authority of theCity of Scranton. Interest only is payable on advances for 36 months at a rate of 1%.Interest is 1.51o/o thereafter, when monthly principal and interest payments are due foranother 204 months. The Authority's initial loan advance of $1,885,416 was received bythe Authority and represents the balance oubtanding at March 31, 2014. The Authorityhas since submitted trruo additional requests for loan advances under this loancommitment totaling $6,460,304 to reimburse for Waste Water Treatment Plantimprovements it incurred through March 31, 2A14. Such loan advances have beensubsequentfy reimbursed to the Authority in the amounts ol $1,O72,465; and $5,387,839,during the next fiscal year.

The PENNVEST loans are federally and state funded and therefore subject tovarious compl iance requi rements.

In November 2010, the Authority renewed a $4,00O000 line of credit to provideinterim financing for the program. Interest was payable monthly at a variable rate equal to7O% of the prime rate (2.275% at March 31, 20141. Security for the line of credit was allreceipts and accounb receivable. The line of credit matures in October 2015. Thebalance of the line of credit at March 31, 2014 amounted to $0. There was no activity forthe year ended March 31t 2A14.

The Authority renewed a $2,000,000 line of credit to be used for general workingcapital. Interest is payable monthly at a variable rate equal to National Prime, but nenrer

less than a floor af 4olo, (4% at March 31, 2014). Security for the line of credit is allreceipts and accounts receivable accounts, instruments and contract rights. The line ofcreditwifl expire Oaober 31,2014, and will be renewable at the option of the Bank.There was no activity for the year ended March 31,2014 and the balance at March 31,2014 was $0.

Note 9 - Defined Contribution Plans

The Authority contributes to the Centrat Pennsylvania Teamsters Pension Fund, adefined contribution pension plan covering substantially all of its full time unionemployees. Employees become eligible after they have been on the payroll for thirteenweek. Contributions made by the Authority were $421 per month for the year endedMarch 31, 2014 for each covered employee; contributions vest according to the Plan'sschedufe. Pension expense for the year ended March 31, 2014 amounted to $373,555.

Effective fanuary 1, 2006 the Authority adopted a money purchase pension planfor employees who meet a$e and service requirements and are not members of theUnion. Employer contributions are 4% of eligible compensation and employees mustcohtribute 2olo. Employees are also permifted to make additional contributions up to themaximum allowed by law. For the year ended March 31, 2014 employer contributionstotaled $22,107 and employee contributions totaled $ll,tl0.

26

THE SEWER AUTHORITY OF THE CIry OF SCRANTONNOTES TO FINANCIAL STATEMENTs

Note 10 - Operating Lease

The Authority leases ib office space under an operating lease dated April 2012 at amonthly rental of $5,125. The lease term is for a five year term through April 2017. Thelease provides for the option of renewing the lease for (5) additional five years terms, wi*rno increase. The Authority is responsible to pay all utility and normal maintenance costs,associated with the office lease. Minimum rental commitments at March 31, 2013 are as

follows:

FiscalYear Amount2015 $ 61,5002016 61,5002Q17 61,500

$ t&4500

Rental expense for the year endedMarch 3"1,2014 amounted to $61,500.

Note 11 - Contingent Liabilities

The Authority participates in both Federal and State assisted grant programs. Theseprograms ire subject to program compliance audits by the grantors or theirrepresentatives. The Authority is potentially liable for any expenditures which may be G

disallowed pursuant to the terms of these grant programs. Management is not aware ofany material items of noncompliance which would result in the disallowance of programexpenditures,

The Authorig is involved in various claims and legal actions arising in the ordinarycourse of business, In the opinion of the Authority, the ultimate disposition of any matersoutstanding at March 31,2O14 will not have a rnaterial effect on the Authority's financialposition.

Note 12 - Consent Decree

On January 31, 2013 the Authority entered into a consent decree with the UnitedStates of Americ4 acting on behalf of the U.S. Environmental Protec'tion Agency, and thePennsyfvania Department of Environmental Protection that will require the Authority totake steps to achieve compliance with the Clean Water Act and the Clean Streams Law byDecember 2037. The Authority adopted a Long Term Control Plan to address compliancewith the consent decree by December 2037. The cost to accomplish the Long TermControl Plan is estimatdd to be approximately $140 million.

Note 13 - Managements' lieview

The Authority has evaluaied subsequent events through August 26,2014, the datewhich the financial statements were available to be issued.

27

I

SU PP tEM ENTARY I NFORMATI ON

ClearingDebt ServiceOebt Service Reserve

Construction

THE SEWER AUTHORIW OF THE CIryOF SCRANTONSUPPLEMENTAL SCHEDULE I - RESTRICTED ASSETS

MARCH 31.2014

Cash and Cash AccruedEquivalents Investmenls Interest Tohl

$ o $13,158,107 $ o $'t3,158,1070404

156,355 4,749,707 4,654 4,910,716o 1,918,515 0 1,918,515

$ 156,355 $ 19,826,333 $ 4,654 ] 19,997,342

"See accompanying independent auditors' reporf

28

THE SEWER AUTHORITY OF THE CITY OF SCRANTON

SUPPLEMENTAL SCHEDULE II . OPEMTINC EXPENSES


SEWER PLANT AND SEWER SYSTEM

SalariesPayrollTaxesEmployee BenefigUtilitiesChemicalsSuppliesRepairs, Mairrtenance and Rentals

Vehicle Operating Expense

Landfill Disposal

TOTAL SEWER PLANT ANDSEWER SYSTEM EXPENSES

ADMINISTRATIVE AND GENERAL

SalariesPayrollTaxesEmployee BenefitsUtilitiesOffice Supplies and ExPenses

Rent

Repairs and MaintenancePostage and Billing ExPgnses

Legal Fees

Engineering Fees

Accounting Fees

Other Professional Fees

Colleaion Expense

lnsuranceBad Debt Expense

TOTAL ADMINISTRATIVE ANDGENERAL EXPENSES

$ 3,480,657263,O11

1,803,215739,981697,53637O,128653,71O429,463536,901

$ 1,059195680,o94

457,47845,37593,81361,500

. 5,331240,476150,267120,47422,95O

365,65853,594

278,588185,OO0

5 9,074,602

_1J,229jf4_

"See accompan$ng Indedpendent auditors' reporf

2S

THE SEWER AUIHORITY OF THE C1TY OT SCR^T.ITONSCTIEDUU OF D(PENTXTURIS OF FEIXRAL AWARDS

fgR THE YTAR ENOINC fd/iRCH 31.m11

FED€RAT

SOURCf, CFDACODE NUMEER

I 66./tgG 71315 v7n2-1il1n1 t 11156i61.(x, !_ . _ 0

t0

"See accompanylng irdependeql audltors' reportr

30

PA5$IHROUGH GRANTPERODGMNTOR's BEGINNINC/NUMBER ENDING D^TT

ACCI RIDORPROGRAMOR T TAI (oEFERRfTI)

AWARD RECETVED FOR REVENT'E AT iEVENUEATIOUNT TTEYEAR ,I/I2013 RECAGNEED DCENDNURES 3B1NO!'|.

FTDERAT GRANTOR/PAS$TI.IROUGH GRANTORPRO'ECTTTruENVIRONME}TTAI PROIECTKIN AGENCYPrced thmryh hc PenrylvenlaFrnruyhrnh lnfrdnrtur! lmt'trrEnt AutMt)4

Crpitrllzrtlon Gnnt for Cl.ril W{etrstrl!Raolvlng Funds

SOURCT CODES: D - Dl.ect Fundlitr| - Indlnct Frndint

30l!l!!-odo{.oo. t 6,16ojo..oot 6.460JO4.m i 6,460J04rn

ACCURED OR(DEERRED)

RT\4NUE AT

THE SEWER AUTHORITY OF THE CITY OF SCMNTONNOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


Note A - Basis of Presentation

The accompanying schedule of expenditures of fedenl awards includes allsignificant fedenlly funded grant programs of The Sewer Authority of the City ofScranton and has been prepared on the modified accrual basis of accounting.

Note B - Accrued and Defened Reirnbursernent

Various reimbursement procedures are used for federal awards receivgj by TheSewer Authority of the City of Scranton. Timing differences may occur betr,r,eenexpenditures and reimbursemenE during the year. Accrued revenues at year-endrepresent an excess of expenditures over cash reimbursements received. Deferredrevenues at year-end. represent an excess of cash received over eligible prognamexpenditures. Generally, accrued and defened amounts caused by timing differences willbe reversed in the subsequent year.

31

ROBERT L ROSSL C-P.A.

ROBERT T. ARI/ONIO. C.P"A.

PETffi D. ARVONp, JR, C.Plq.

ROSERTA HANIS, C.P.tr

ROBERT ROSSI & CO.CERTIFIED PUBLIC ACCOUNTANTS

299 MAIN ST.2IID FLROLYP'{ANT, P418417.23?s

TEL. (570) 87e2300 - FAX (570) 876-5153

Web*lb: [email protected]

SALVATOREA. NOIE JR., C.PA.

JOSEPH E, ROtsSI, C.PJ"SEAr'l J. GRASSI, C.P,A,

RATPH R, MORRIS. III, C,PA,

INDEPENDENT AUDITORS'REPORT ON INTERNAT CONTROL OVER FINANCIALREPORTING AND ON COMPIIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGOVERN MENT AU DIT' NG STANDARDS

August 26,2014


We have audited, in accordance with auditing standards generally accepted in theUnited States of America and the standards applicable to financial audis contained inCovemment Auditing Standards issued by the Comptroller Ceneral of the United States,the financial statements of The Sewer Authority of the City of Scranton, a component unitof the City of Scranton, as of and for the year ended March 31, 2014, and the relatednotes to the financial statements which collectively comprise the Authority's basicstatements, and have issued our repofi thereon dated August26,2O14.

Internal C-ontrol Over Financial Reporting

ln planning and performing our audit of the financial statements, we consideredThe Sewer Authority of the City of Scranton's intemal control over financial reporting(intemal control) to determine the audit procedures that are appropriate in thecircumstances for the purpose of expressing our opinions on the financial statements, butnot for the purpose of expressing an opinion on the effectiveness of The Sewer Authorityof the City of Scnnton's internal control. Accordingly, we do not express an opinion on,the effectiveness of The Sewer Authority of the City of Scranton's intemal control.

A deficienq in internal control exists when the design or operation of a controldoes not allow management or employees, in the normal course of performing theirassigned functions, to prevent, or detect and correct misstatements on a timely basis. Amaterialwea"kness is a deficiency, or combination of deficiencies, in internal control suchthat there is a reasonable possibility that a material misstatement of the Authority'sfinancial statemenls will not be prevented, or detected and corrected on a timely basis. Asignificant deficienq is a deficiency, or a combination of deficiencies, in intemal controlthat is less severe than a rnaterial weakness, yet important enough to merit attention bythose charged with govemance.

MEITIBER OF AI\'GRICAN & PENNSI/LVANA INSTITU1ES OF CERNRED PUBI.JC ACCOUNTANTS

32

Our consideration of the intemal control was for the limited purpose described inthe preceding paragraph of this section and was not designed to identify all deficienciesin internal control that might be material weaknesses or, significant deficiencies. Giventhese limitations. during our audit we did not identify any deficiencies in intemal controlthat we consider to be material weaknesses. However, material weaknesses may existthat have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether The Sewer Authority ofthe City of Scnnton's financial statements are frm of material misstatement, weperforrned tests of its compliance with certain provisions of laws, regulations, contractsand grant agreements, noncompliance with which could have a direct and material effeaon the determination of financial statement amounts. However, providing an opinion oncompliance with those provisions was not an objective of our audit and, accordingly, wedo not express such an opinion. The resulg of our tests disclosed no instances ofnoncompliance or other matters that are required to be reported under GoveramentAuditing Standards,

Purpose of this Report

This report is intended solely to describe the scope of our testing of internalcontrol over compliance and the results of that testing, and not to provide an opinion onthe effectiveness of the Authority's intemal control or on compliance. This report is an

integral part of an audit performed in accordance with Government Auditing Standards inconsidering the Authority's internal control and confpliance. Accordingly, thiscommunication is not suitable for any other purpose.

/,*,tfU, -(*

33

ROSERT r, ROSS|, C.P"A.

ROBERT T, ARVONIO, C-FI-PETER D. AFS/ON!o. JR, G.F,C-

ROBERTA HAI{IS, C.P"A"

ROBERT ROSSI & CO.GERTIRED PUBUC ACCOUI{TANTS

299 MAIN ST.2'D FLROLYP}ANT, PA 18,f47-296

TEL (570) 878.23m. FN( (s70) 87e5153Websilc: ttna,w.nco.nct

SALVATORE A NOTA JR, C.PA.

JOSEFH E ROSSI. CP,A.

SEAN J. GRASSI, C.PA.RAFH R. ttrORRtS, ttt, C.PA.

TNDEPENDTNT AUDITORS', REPORT ON COMPUANCE WITH REQUTREMENTS THATCOUTD HAVE A DIRBCT AND MATERIAL EFFECT ON EACH MAION PROGRAA,I AND

ON INTERNAL CONTROT OVER COMPLIANCE IN ACCORDANCE WITH OMBCIRCI]LAR A.

'33August 26t 2014

Board of DirectorsThe Sewer Au*rority of the City of ScrantonScranton, Pennsylvania

Reportm Compliirncefc Eadr tvldor federal Prtgarrt

We have audited The Sewer Authority of the City of Scranton's compliance withthe types of compliance requirements described in the OMB Circular A-133 Comp[ianceSupplement that could have a direct and material effect on each of The Sewer Authorityof the City of Scranton's major fedenl prcgrams for the year ended March 31, 2014. TheSewer Authority of the City of Scranton, Scranton, Pennsylvania's major federal programs

are identified in the summary of auditors' results section of the accomparrying schedule offindings and questioned costs.

M anagement's Responsibi lity

Management is responsible for compliance with the requirements of laws,regulations, contracts, and grants applicable to its federal programs.

Attdito r's Re spon sibi I ity

Our responsibility is to express an opinion on compliance for each of The SewerAuthority of the City of Scranton, Scranton, Pennsylvania's mdjor federal programs based

on our audit of the types of compliance requirements referred to above. We conductedour audit of compliance in accordance with auditing standards generally accepted in theUnited States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States;

and OMB Circular A-133, Audiu of States, Local Covernments, and Non-ProfitOrganrzations. Those standards and OMB Circular A-I33 require that we plan andperform the audit to obtain reasonable assurance about whether noncompliance with thetypes of compliance requirements referred to above that could.have a direct and materialeffect on a major fedenl program occurred. An audit includes examining, on a test basis,

evidence about The Sewer Authority of the City of Scranton, Scranton, Pennsylvania'scompliance with those requirements and performing such other procedures as weconsidered necessary in the circumstances.

34

We believe that our audit provides a reasonable basis for our opinion oncompliance for each major feieral progftm. However, our audit does not provide a legaldetermination of The Sewer Authority of the City of Scranton, Scranton, Pennsylvania'scompliance.

Opinion on Each Major Federal Program

In our opinion, The Sewer Authority of the City of Scranton, Scranton,Pennsylvania complied, in all material respects, with the types of compliancerequiremeng referred to above that could have a direct and material effect on each of itsmajor federal programs for the year ended March 31,2014.

Report on lnternal Control Over Compliance

Management of The Sewer Authority of the City of Scranton, Scranton,Pennsylvania is responsible for establishing and maintaining effective internal controlover compliance with the types of compliance requircments referred to above. lnplanning and performing our audit of compliance, we considered The Sewer Authority ofthe City of Scranton, Scranton, Pennsylvania's internal control over compliance with thetypes of requirements that could have a direct and material effed on each major fedenlprogram to determine the auditing procedures that are appropriate in the circumstancesfor the purpose of expressing an opinion on compliance for each major federal programand to test and report on internal control over compliance in accordance with OMBCircular A.133, but not for the purpose of expressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on dreeffectiveness of The Sewer Authority of the City of Scnnton, Scranton, Pennsylvania'sinternal control over compliance.

A deficiency in internal control over compliance exists when the design oroperation of a control over compliance does not allow management or employees, in thenormal course of performing their assigned functions, to prevent, or detect and correct,noncompliance with a type of compliance requirement of a fedenl program on a timelybasis. A material weakness in internal contJol over compliance is a deficiensy, orcombination of deficiencies, in internal control over compliance, such that there is areasonable possibility that material noncompliance with a type of compliancerequirement of a federal prognm will not be prevented, or detected and conected, on atimefy basis. A significant deficienq in internal control aver campliance is a deficiency,or a combination of deficiencies, in internal control over compliance with a type ofcompliance requirement of a federal program that is less severe than a material weaknessin intemal control over compliance, yet important enough to merit attention by thosecharyed with governance.

35

Our consideration of internal control over compliance was for the limited purposedescribed in the first paragraph of this section and was not designed to identify alldeficiencies in internal control over compliance that might be material weaknesses orsignificant deficiencies. We did not identifo any deficiencies in internal control overcompliance that we consider to be material weaknesses. However, material weaknessesmay exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describethe scope of our testing of internal control over compliance and the results of that testingbased on the requirements of OMB Circular A-133. Accordingly, this report is not suitablefor any other purpose.

/2##/b'&

36

THE SEWER AUTHORITY OF THE CTTY OF SCRANTONSCHEDULE OF FIND|NGS AND QUESTIONED COSTS


Section l- Summary of AuditoTs' Result

Financial Statements

Type of auditors' report issued:Intemal control over financial reporting:

Material weakness(es) identified?Signifi cant deficiency(ies) identifi ed?

Noncompliance material to financialstatements noted?

FedenlAwards

Intemal control over major programs:

Material weakness(es) identified?Signifi cant defi ciency(ies) identifi ed?

Type of auditors' report issued oncompliance for major programs:

Any audit findings disclosed that arerequired to be reported in acordancewith Seaion 510(d of Circular A-133?

ldentification of majot programs:CFDA Number

66.458

Unmodified

yes

Name of Federal Program or Cluster

Capitalization Grants for Clean WaterState Revolving Funds

Unmodified

yes

yes

nonone reportd

no

nonone repoqed

yes

yes

no

Dollar threshold used to distinguish between Type A and Type B Programs: $300,000Auditee qualified as low risk auditee?

-

yes X no

Sectionll - Financial Statement Findings


Section lll - Federal Award Fjndines and Questioned C-osts


37

THE SEWER AUTHORIW OF THE CITY OF SCRANTONSCHEDULE OF PRIOR FINDINCS


NO PRIOR FINDNGS NOTED.

38

THE SEWER AUTHORITY OF THE CITY OF. S.CRANTON

A COMPONENT UNIT OFTHE CITY OF SCRANTON

FINANCI,AL STATEMENTS

MARCH 31.2013

THF. SEWER AUTI"TORITY Or TIrE CrTY OF SCRANTONTABLE OF qONTENTS

INDEPENDENT AUDTTOR'S REPORT

F INA}ICIAL STATEMENTS :

STATEMENT OF NET ASSETS

STATEMENT OF CASHFLOWS

NOTES TO THE FINANCI,AL STATEMENTS

SUPPLEMENTARY INFORMATION:

SCHEDULE I . RESTRICTED ASSETS

SC}IEDULE 2. OPERATING E)OENSES

SINGLE AUDTT REPORT

STATEMENT OF REVENLIES, E)(PENSES AND CIIANGES IN NET ASSETS 6

PAGE

t-3

4-5

7

8-23

24

25

26-36

MURPITy, DOUGHERTY & COMPAI{YCertified Public Accountants

I31O CHIIRCg STREETSIIITE 3OOO

MOSCOW PA 18444J. PAUL LIJRPEY, CPA (s70) 848-2866 TelMICHAELDOUGUERTY, CPA (570) E4&2833 FasPAIJLT.MITRPEY, CPA

INDEP ENDENT AUDITOR' S..REPORT

Board of DirectorsThe SewerAuthorityof the Cityof ScrantonS cranton, Pennsylvania


We have audited the accompanying financial statements of the Sewer Authority of the City ofScranton, a component unit of the City of Scranton, as of and for the year ended March 31,2013,and ttre related notes to the financial statemertts, as listed in the table of contents.

Marcgem ent's Responsibility lor the Flnancial Statenents

Management is responsible for the preparation and fair presentation of these financial statementsin accordance witb accounting principles generally acceptcd in the United States of funericq thisincludEs the design, implementation, and maintenance ofinternal control relevant to thepreparation and fair presentation of financial statements that arc free of material misstatement,whether due to fraud orerror.

A u ditor's R espo ns ibility

Our responsibilify is to express an opinion on these financial state,ments based on our audit. Woconducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained ln GovernmentAuditing Standards, issued by the Compholler General of the United States . Those standardsrequire that we plan and perform thc audit to obtain reasonable assurance about whether thefinancial staternents re free of material misstatement.

An audit involves performingprocedures to obtain audit evidence about the amounb anddisclosures in the financial statements. The procedures solected depend on thc auditor'sjudgment, including the assessment of the risk ofmaterial misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the e,ntil/s preparation and fairpresentation of the financial

ffHE SEWER.AUTHORITY OF THE CITY OF SCRANTONfINDEPENDENT AUDITORS' REPORT-CONTTNI.JED)

statements in order to design audit procedures that nre appropriate in tbe circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the Authorit;/s internal control.

Accordingly, we express no such opinion. An audit also includes evaluating the appropriatcnessof accounting policies used f,nd the reasonableness of significant accounting estimates made bynranagernent as well as evaluating the overall presentation of the financial staternents.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinions.

Opinions

In our opinion, the financial statements refcrred to above present fairiy, in all material respects,the financial position of the Sewer Authority of the City of Scranton, a component unit of theCity of Scranton, as of and for the year ended March 31, 2013, and the changes in finaneialposition and cash flows thereof for the year then eatled in accordance with accounting principlesgenerally accepted in the United States ofAmeriea-

Oilrer Matters

Req uired Supplementa ry Info tmation

Management has omitted the managernent's discussion and analpis that accounting principlesgenerally accepted in ttre United States of America require to be presented to supplement thebasic financial staternents. Such missing infomration, although not a part of the financialstoternents, is required by the Govemmental Accounting Standards Board, who considers it to bean essential part offinancial reporting for placing the financial staternents in an appropriateoperational, economic, or historical contffit. Our opinion on the financial staternenb is notaffected by this missing information.

Otlwr Information

In connection with our audit, nothing came to our attention that caused us to believe ttrat theAuthority was not in compliance with the provisions of the Trust Indenture betwcen the SewerAuthority of the City of Scranton, Pennsylvania and Fidelity Deposit and Discount Bank insofaras they relate to accounting and auditing mattErs. It should be noted, however, that our audit wasnot directed primarily toward obtaining knowledge of zuch noncompliance.

2.

ffHE SEWER AUTHORITY OF THE CIry OF SCRANTON(INDEPENDENT AUDITORS' REPORT-CONTTNUED)

Our audit was conducted for the purpose of forming an opinion on the financial statements thatcollectively comprise the Sewer Authoriry of the City of Scranton's basic financial statements.The supplementary iriformation on pages 24 and,25, as listed in the table of contents, arepresented for purposes ofadditional analysis and are not a required part ofthe basic financialstatsrn€nts. The schedule of expenditures of federal awards is presented for puqposes ofadditionai analysis as required by Office ofManagernent and Budget Circular A-133, Audiu ofStates, Incal Goventtnenls, and Non-Proft Organizations and is also not a required part of thebasic fi nancial statetnents.

The supplementary information on pages 24 and,25, as listed in the table of contents, and theschedule of expenditures of federal awards the responsibility of management and were dcrivedfrom and relate directly to the underlying accounting and other records used to prepare thefinancial statements. Such information has been subjected to the auditing procedures applied inthe audit of the basic financial statements and certain additional procedures, including comparingand reconciling such infomration directly to the underlying accounting and other records used toprepare the finansial stateme,nts or to the basic financial statements themselves, and otheradditional procodures in accordance with auditing standards generally accepted in the UnitedStates of America- In our opinion, tbe zupplementary information on pages 24 and 25, as listed inthe table of contents, ald the schedule of expenditurcs of federal awanls are fairly stated in allmaterial raErects in relation to the basic financial state,ments as a whole.

Othcr ReporHng Required by Govenntent Auditirtg Standards

In accorrdance with "Governme,nt Auditing Standards", we have also issued our report dated Septernber9,2073, on our consideration ofthe Sewer Authority of the City of Sqanton's intemal conbol overfinancial reporting and our tests of its compliance with certain provisions of laws, regulations,contracts, grant agreements and other matters. The purpose of that report is tro describe the senpe of ourtesting of internal conhol over financial reporting and compliance and the results of that testing andnot to provide an opinion on the internal conhol over financial reporting or on compliance. That r€portis an integral part of an audit performed in acsoxlance wifh'oGoverflmsnt Auditing Standards" inconsidering the Sewer Authority of the City of Scranton's intemal control over financial reporting andcompliance.

Moscow, PennsylvaniaSeptember 9,2013 h

3.

THE SEWER AUTHORITY OF THE CITY OF SCRANTON

ASSETS

Current Assets

Castr and Cash EquivalentsAccounts Receivablq net ofallowance for

doubtful accounts of $2,41O000Other Current Assets

Total Cunent Assets

Noncurreut AssetsReshicted Assets - See Schedule 1

Cash and Cash Equivalents

Inveshnents

Accnred lnterest Receivable

Total Resbicted Assets

Accounts Receivable - Assessments

Deferred Charges, net of accumulated amortization

Capital Assets (Note 4)

Property, Plant and Equipment, net

Total Nonsurrent Asscts

Total Assets

s 14,474,276

5,229,373458,739

20,162,329

2,769,526

2Q,136,409

24,59422,930,529

386,129

1,041,789

59J59,79884,118,244

4104J90ffz=

The accompanyrng notes are an integral part of these financial statements.

4.

THE SEWER AUTHORITY OF THE CITY OF SSRANTONSTATEMENT OE }.{ET 4SSETS-(CONTINIJED}

MARCH 31.20i3

LIABILITIES

Current Liabilities (payable from current assets)

Line of CreditCunent Portion of Long-Term DebtAccounts Payable

Accnred Expenses

Accrued Payroll and Payroll Ta:res

Accrued Compensated Absences

Total Current Liabilities (payable from curent assets)

C,urrent l;iabilitigs (oavable from restricted assels)

Rewnue Bonds Payable

Accnted Revenue Bond Interest Payable

Accrued Expenses

Total Current Liabilities (payable from restricted assets)

Noncr:rrent Li abilitiesLong-Term DSt, net of current portion

Total noncurrent liabilities

Total Uabilities

Net Assets

lnvested in Capital Assets, net of related debt

Restricted for Debt Service and Capital Expenditures

Unrcsticted

Total Net Assets

s-924,243

479,991

161,730

716,079 -

2282,033

1,405,000

722,731

. 1,57i,8683,699599

57235,44157,235,441

.

63,217,073.

t95,l l519,230,929

21,637,455

_qil063199_

The accompanying notes are an ir$egral part of these financial statements.

5"

THE SEWER AUTHORITY OF THE CITY OF SCRANTONSTATEMENT OF REVENUES. E)(PENSES ANp CHANGES INNE:TASSELS

FOR THE YEAR ENDED MARCH 3I. 2OI3

Oneratins Revenues


and interest, net ofcredit adjustnentsTotal Opotating Revcnues

Operating Expenses

SewagePlant and Sewer Systeh - Schedule2

Administrative and General - Schedule 2

Depreciation Expense

Total Operating Expenses

Operating Income

Nonoperating Revenues (Expepses)

Invesfunent Revenue

Interest Expense

Amortieation of Deferred Charges

Gain (Loss) on Sale ofAssetOthsRevenue

Total Non-Opcrating Revenues (Expenses)

Change in Net Assets

Net Assets, beginning

Net Assets, ending

8 23,262,42023262,420

g,3lg,3g0

3,825,334

. 2,g2g,gl I14,973,635

, g,2gg,?95

124,494

Q29,6n)(64,379)

(?28)

362,068(3081156)

7,990,629

33,092,970

_$_3i{p1,4?e_

The accompanyrng notes arc an integral part of these financial statements,

6.

THE SEWER AUJHORITY OF T.HE CITY_QF SCRANTONSTATEMENT OF CASH FLOWg

FORTHE YEAR ENpBp MARCH 31. 2or3

Cash Flows fronr Operating .A,ctivitiqs

Cash Received from Customers

Cash payments to suppliers for goods and services

Cash payrnents to ernployees for services

Net Cash Flows from Operafing Activities

Cash Flows from Noncapitd Financing ActivitiesOther Revenue Received

Net Cash Flows from Noncapital Financing Activitics

Cash Flows from Capital and Related Finanshe Activities(Cain) Loss from Sale of Assets

Proceeds fmm Issuance of Debt

Paymentof DebtPayment of Intercst

Cssh Flows from Investing ActivitisProceeds from investuients

Purchases of investments

Maturity of Certificates of Deposits, net

Reccipt of Interest

Net Cash Flows from lnvesting Activities

Net Change in Cash

Cash and Cash Equivalentq bcginning

Cash and Cash Equivalents, ending, as reported onthe Statement of Net Assets

Reconciliation of Oneratine Income to Net Ca,sh Flowsfrom OperatiJr g Activities:

Operating IncomeDqreciation(Increase) decrcasc in Accounts Receivable(Increase) decrcase in Other Assets(Decrease) increase in Accounts Payable(Decrease) increase in Other Liabilities

@ecrease) increase in Accrued Compensated Absences

Net Cash Provided by Operating Activities

Purchase of Capital Assets (10,512,580)

Net Cash Flows from Capital and Related Financing Activities (13,445,817)

s 2t,542,510(5,422,994)(6,481,46t)9,639,165

362,069

, 362,069

7281,995,416

(2,287,542)(2,531,839)

12,724,444(2,t96,749)

118,420

10,646,1 16

7,200,532

10,cl.3,270

_I_tJ2j3W

s 8,288,795

2,g2g,gl I(t,7lg,gl0)

418,285(238,844)

5,67255,266

$ 9,638,165

The accompanying notes are an integral part of these financial statsments.

7.

THE SEWER AUTHORITY OF TT{E CITY OF SCRANTONNOTES TO FrNAlrCnL STATEMENTS

NOTE I . SUMMARY OF SJGNTFICANT ACCOUNTTNC POLICTES

Orsanizafion

The Sewer Authority of the City of Scranton (the Authority) is a body corporate and politicorgmized under the Pennsylvania Municipalities Act of 1945, P.C. 382, as amended andsupplemented. By a Certificate ofJoinder dated August 77,l966,the Borough of Dunmorebecame an Authority member.

On July 14,1977, the City of Scranton appointed the Authority to be ib agent in the operation ofthe sewer system. The terms of this senrice agreement continue for a oae-year period and willautomaticallyextend itself on a year-to-yearbasis until one of the parties thereto gives notice ofits intent to cancel 30 days prior to the termination of any yearlyperiod"

The Sewer Authority of the City of Scranton, Pennsylvarig has deterrrined that it is acomponent unit of the City of Scranton since the City has guaranteed the Authority's loans withPerursylvania Infrastructure Investment Authority (PENN\IEST), thereforg the Authority isincluded in the reporting entity of the City of Scranton.

Reporting Entitv

The reporting entity has been defined in accordance with the criteria established in GASBStatement No. 39, 'Determining Whether Organizations are Component Units. The specificcriteria used is as follows: a) financial interdependency b) selection ofgoverning authoritg c)designation of managmrent; d) ability to significmtly influence operations; e) accountability forfiscal matte,rs; f) scope of public service: and g) special financingrelationships. As defined, thereare no other related organizations, which should be included in the financial statements.

Basis ofAccountiue

The Sewer Authority of the City of Scranton, Pennsylvania ur€s the accnral basis of accounting.Consequently, revenues are recognized when earned and expenses are recognized when theobligation is incurred. The Authority applies all GASB pronouncements as well as the FinancialAccor:nting Standards Board pronouncements iszued on or before November 30, 1989, unlessthose pronor:ncernents conflict with or conhadict GASB pronouncernents.

L

NOTE I _ SUMMARY OF SICNtrICANT ACCOTINTIIIG POLICIES _ (CONTINUED)

Basis of Presentation: Proprietar.v Fund

The fund catcgoryused by thc Authority is the proprietary fund. Proprietary category funds areused to account for and r€port those govemmental activities that are designed to be self-supporting frorn fees charged to con$umers of the funds, goods and services or where thegoverning bond has decided that the periodic determination ofrevenues, expenses, and netincome is appropriate for capital maintenanco, public policy, management conhol, accorrntabilityor other purposcs. The aecounting and financial reporting praotices of proprietary funds aresimilar to those used forbusiness enterpriscs and focus on capital maintensnce and the flow ofeconomic sources.

Prcprietary fimd staternents provide both long.tcm aod short-term financial information whichis similar to the information rqlorted by a business-ty?e entify.Net assets are segregated intoinvested in capital assets" net of related debt and unreshicted components. Net assets are

increased by revenues and deseased by expenses.

Two fund bpes are included in the proprietary fund category: enterprise and intemal servicefunds. The AuthoriU uses the enterprise fund tlpe.

Enterprise firnds account for operations that provide goods or services to the general public on acontinuing basis. Such operations are financed and operated in a manner similar to privatebusinesses and are intended to be self-supporting through charges to ussrs.

Us-e ofEstimales

The preparation of financial statements in conformity with U.S. gcncrally accepted accountingprinciples requires managqm€nt to make sstimates and assumptions ftat affect therqortedrmounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe financial statemcnts and the reported amoutrts of revemres and expendifures/expenses duringthe reporting period. Actual results could diftbr from those estimates.

Allowance for Doubtful Aecounts

The Authority's policy for providing for uncollectible accounts is to charge current par eamingsfor accounts receivablc considered currently uncollectible bascd on the historical collectionexperience of the Authority and collection percentages applicable to public utilities.

A major portion of the ailowance for doubtful accounts is felt to be collectible in future becauseof the Authority's power to convert past due accor:nts into mrnicipal claims. This procedure isan operation of law and the claims have the status of a legal lien or judgment. There are

cunently in force municipal claims of approximately $3,690,000.

9.

NOTE l - SUMMARY OF STGNTFICANTACCOIJNTING POLTCIES - (CONTIMJEp)

Inv€stnent^S

All ofthe Authority's invesfrnents are classified as held-to-maturity.

Properfy. Plant and Equipment

Property, plant and equipment are stated at cosl Normal maintenanco and repairs are charged toexpense as incuned; major renewals and exhaordinary repairs, wbich odend the useful lie of an

assef are capitalized. Depreciation is provided using the shaighhline method based on thefollowing estimated useful lives:

Uscful LifeLand Not ApplicableSewer Treatlent Plant 40 years

Land Inrprovements l0 years

Operating Equipment l0 years

Vehiclas 3-6 years

Exffaordinary Repairs:Sewcr Sptem 20 years

Equipment 5 years

Accrued Compe.qqgted Absences

It is the Authority's policy to permit errployees to accumulate vacation and sick days which willbe paid to employees upon s€paration from thc Authority's service.

Statements of Cash Flows

For purposes of the Statements of Cash Flows, the Authority considers aU highly liquidinveshnents with a maturity of three months or less when purctrased to be cash equivalents.

Cash and cash equivalents, at March 31, 2013 were as follows:

Unreshicted 914,474,276Reshicted 2.769.526Total cash and cash equivalents $]f24iJ02

Interest paid by the Authority for the year ended March 3 l, 201 3 amount to $2,522,556. Of thisafi ount, 91,792,973 wa"s capitalized as conslruction-in-progress.

10.

NOTE I - SUMMARY OF SIGNTFICANT ACCOUNTFYG POLIQIES - (CONTIIIIJEp)

Non-Cash bansactions for the year ended March 31, 2013 included amortization of deferredcharges of$64,379.

Accountine for Authori8 Bond Issues

The Authority financed the conskuction of the sewer system through the issuance of two series

ofbonds designated as Sewer Assesment Bonds in the aggregate principal of $2,600,000 andSewer Revenue Bonds in the aggregate principal amount of $33,000,000. The bond iszue issubject to the provision of a Tnrst Indenture dated April 1, 1968 between the Autlrority and JP

Morgan (forrnerly Chase Manhattan Bank) as Tnrstee. The bond issue was defeased July, 2000.

In September 2007, the Authority issued bonds in the amount of $16,810,000, with a finalmaturity of December,2036,with interest co$s varying from3,7UYo to 5.00%, Proceeds fromthe bonds were turned over to the Tnrstee for initial disFibution to various funds in accordanco

with the tenns of the Trust Indenture of the Authority. The Trustee maintains all fundsenumerated in Note 2 and shall continue to functiou for the life ofthis bond issue in thecollection of rentals, thepayment of operating expenses and semi-annual interestpayments, andthe repurchase and retirement of bonds until the ultimate retirement of all outstanding bonds.

In Jrure 201 l, the Authority issued sewer revenue bonds in the amount of $29,475,000, with afinal maturity of December 2026, with interest costs varying fiom 2% to 5.95o/a. The bond issueis subject to tle provision of a Tlust lndenture dated as of Septunber 1,2007, as zupplementedby a First Supplemental Indentwe dated June 10, 2011 between the Authority and FidelityDeposit and Discount Bank as succsssor trustee, and are secured under the indenture by theassignment and pledge to the Trustee of Receipts and Revenuc from the Sewer System.

Income Taxes

As a municipal authority the Authority is not subject to income taxes.

Net Assets

Net assets represent the difference bctween assets and liabilities. Net assets invested in capitalassets, net ofrelated debt, consists of capital assets, net of accumulated de,preciation, reduced byoutstanding balances of any borrowings used for ttre acquisition, construction or improvemcnt ofthose assets. Net assets invested in capital sssets, net of related debt excludes unspent debtproceeds. Net assets are reported as reshicted when there are limjtations imposed on thcir useeither through the enabling legislation adopted by the Authority or through erternal resfrictionsimposed by creditors, grantors or laws or regulations of other govemments.

ll.

NOTE 2 -RESTRICTED ASSETS

Assessment Fund

To provide a portion of the cost of sewer line extersions, the Authority issued Sewer AssessmentBonds in the amount of $2,600,000- AssessmenLs were billed to property owners with an optionof current or defened payment. AII bonds outstatrding wcre redeerned as a result of a transfer offtnds from the existing construction firnd. Additional Scws extensions, including some

defened under the original construction plan, are being assessed to propcrty owners undcr theterms of the Indenture and the Authority's assessment resolution.

As of March 3l, 2013 the majority ofthe sewer assessment accounts receivable are delinqucnt.To insure collection, municipal fiens have been filed against those properties with delinquentsewer assessments.

Sewer Revenue Bonds

The aforementioned Tnrst Indenturg among other things, provides for the creation of thefoliowing funds whicb are restricted by terms of the indenture:

(A) Clearine Fund

The Trust Indenture requires the Tnrstee to establish a Clearing Fund into which anymonies held by the Authority in ttre Operating Account at the end of any fiscal year,

commencing with the fiscal year ending March 31, 2008, not required to pay accrued

expenses for such fiscal year and not required to be retained as a reserve in such amountas the Authority rnay deem prudent, but not in excess of the Estimated amount of theOperating Expenses and Adminishative Expenses contained in the Annual Engineer'sReport for the following fiscal year, shall be bansferred.

@) Debt Service Fund

Telnns of the lndenture require the Trustee to transfer from the Clearing Fund interestfafling due on June 1 and December l, respectively, plus on December 1 and April 1,

the aggregate principal amount of the Bonds maturing or subject to mandatoryredemption on such December l.

(C) Debt Service Reserve Fund

The krdenture established a Debt Seffice Reserve Fund of $3,179,347 to be used to makeup any deficiency in the Debt Servicc Fund.

12.

NOTE 2 - RESTRICTED ASSETS - (CONTINUED)

(D) Fond Rqdemption and ImprovementFund

The surplus &om time to time in the Clearing Fund, after payments and depositsmentioned above are satisfied, is to be de,posited in the Bond Redernption andImprovement Fund and applied to make good any deficiencies in the Debt Senice FundBond Sinking Fund or the Debt Service Reserve Fund. If there is no deficiency in any ofSuch Funds, monies maybe applied as follows and as more fully provided in theIndentwe:

(l) to make capital additions

@ to urakeup any deficiency in the Conskuction Fund(3) to purchase or redeem Bonds issued under the Indenture(4) for any other lawful purpose of the Auihority

(E) Construction Fund

The Construction Fund shall consist of funds dcposited therein pursuant to provisionsof the Indentr:re for purposes of paying Costs, Costs of Acquisition or Costs ofConstruction relating to the Sewer SSrstem, including Capital additions and acquisitionor constuction ofpropert5r in the nature of Capital Additions.

(F) Settlement Fun4

The Settlernent Fund was established with the issuance of the 201 I Sewer RevenueBonds to pay the costs associated with fte issuance of the Bonds.

NOTE 3 -DEPOSITS AND II*IVESTMENTS

Custodial Credit Risk - Deposits

At March 3l , 2013 the bank balance of the Authority's cash deposits with financial institutionswas$l7,288,834,comparedtoacarryingamountof $17,243,802. Thetotalbankbalancethatwas secured by Federal Depository Inilrrance was $3,269,526, The remaining bank balance wascovcred by securitics pledged by the financial institution for such funds, but not in tbeAuthority's name. Thc Authority does not have a deposit policy for custodial credit risk.

Credit Risk

Credit risk is the risk that an issucr of an investnent will not fulfill its obligation to the holder ofthe investunent. In accordance with *re Trust Indenfurg any restricted assets held by the Trusteccan be invested as detajled in the Indenfure. Unrestricted finds are invested at managernent'sdiscretion-

13.

NOTE 3 - DEPOSITS AND INVESTMENTS- (CONTINUED)

lnveshnents

The Authorify's inveshnents are canied at fair market value and consisted of the following atMarch 31,2013:

Maturitv ValueMoneyMarket Fund nla $ 18,527,368U.S. Government Obligations 5/29113 1.609.040

Total $?0J36408

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will advcrsely affect the fairvalue of an invesbrent. The longer the maturity an inveshcnt has the greater its fair value hasscnsitivity to changes in market interest rates. The Authority does uot have a formal investmentpolicy that limits investmcnt maturities as a means of managing its exposure to fair value lossesarising from increasing interest rates.

Concenhation of Credit Risk

The Authority has no investment polioy that would limit its investment choiccs to certain creditratings, nor does it place a limit on the amount the Authorify may invest in any one issuer. As ofMarch 31, 2013, the Authority's inveshnent in Federated Treasury Obligations Money MarketFund (CAP) was rated AAAm by Standard & Poor's aud represented92o/o of the Authority'sinveshne,nts. The invashnent in the FHLM Agenry Note was rated AA+ by Standard & Poor'sand representd9% of&e Authority's invesfrnents. TheAuthorityplaces no limit on the arnountthe Authoritymay invest in one issuer.

NOTE4-CAPmALASSETS


Balance Balance3l3lll2 Additions Deletions 3l3lll3

Land(notdepreciated) S 130,029 $ -0- $ -0-$ 130,029Construction in Progress 2,739,394 9,913,059 -0- 12,652,453Sewage Treatment PlantAncl Related Facilities 117,395,146 2,814,913 512,990 I19,697,069Improvements 253,572 -0- -0- 253,572Operating Equipment 9.792.472 761.428 I84.510 10"369.390

Total Historical Cost $130"310.613 $13.489.400 $ 697.500 $143.1q2.513

14.

NOTE 4 - CAPITAL ASSETS-(CONTINI.JED)

LE$S: Accumulated depreciation:

Sewage Treatuent PlantAndRelatedFacilities $72,703,498 $ 2,364,543 $ -0- $ 75,068,041Improvements 198,426 10,466 -0- 208,892Operating Equipment 7.697.753 453.902 85.873 8.065.782

Total AccumulatedDqrreciation 80.599.677 2.828.911 85.873 83.342.715

Capital Assets, net S49.210936- $1^0-66.0-.189- L-6t1.6?7 S59J59J98

Depreciation expense for the year ended March 3l, 2013 amounted to $2,828,911.

NOTE5-LONG-TERMpEEI

The changes in long-term obligations palable during the year ended March 31,2A$are as follows:

Balancc Balance3l3tll2 Additions Deletions 3l3lll3

Sewer RevenueBontls Payable,Series of 2007 16,640,000 -0- 30,000 16,610,000

PennvestPromissoryNote #71162 3,053,796 -0- 210,606 2,843,790

PennvestPromissoryNote #71162 2,945,163 -0- 233,059 2,712,1A4

PennvestPromissoryNote #71281 I ,664,715 -0- 109,529 1,555,186

15.

NOTE 5 -" LONG-TERM DEBT- (COI'ITINUED)

Balance Balance3l31ll2 Additions Dgletions 3l31ll3

PennvestPromissoryNote #27682 2,774,811 -G' 148,250 2,626,561

PennvestPromissoryNote #79906 3,618,324 -0- 201,098 3'417,?26

PerurvestPromissoryNote #71375 -0- 1,885316 -G 1,885J16

FidelitySewer RevenueBonds PayableSeries of 2011,{ 21,340,000 -0- 920,000 20,420,000

FidelitySewer RevenueBonds PayableSeries of 20118 7.930*000 -0- 435.000 7.495.000

rorAl $59966.809 $.-1J85-4lS 52.2&UAZ f59.564S$.3.

16.

NOTE.s - LONG-TERM pEBT - (CONTTNUEpI

The aggregate maturities of long-term debt are as follorvs:

YearEnd March 3l201420152016201720r 8

2019-2023202+2Q282029-20332034-2037

Principa!2,329,2432,232,6941,912,7271,947,5692,014,764

11,181,48212,397,15613,574,049l r 975.000

$J9JC1S!3

Interest2,501,9012,444,3832,394,9422,356,8712,301,366

10,385,1688,0t42665,197,4721.471.850

tiztrsJlg

NOTE 6 - REVENUE BONDS PAYABLE

2OO7 SERIES

On Septembq 1,2|;rc_7 the Authority issued S16,810,000 of Sewer Revenue Bonds. Theproceeds from this issue were primarily used to fi:nd capital improvement projects.

Optional Redemption

Tbe2007 Series Bonds mahring on or afterDecember 1,2016 are subject to redemption prior tomahrity, at the option of the Authority beginning December 1, 2015, out of monies depositedwith or held by the Tntstee for such pulposes as a whole or in part at any timg and, in any orderof maturities selected by the Authority, i00% of the par amount, plus accrued interest.

Mandgtorv Redemption

The 2007 Series Bonds statsd to mature on December 1,2A24, December 1,2032 and Decemberl, 2036 are subject to mandatory redenption prior to maturity on December I of eaoh of theyears set forthbelow, in each case at a redcrnption price equal to 100% the principal arnountthereof to be redeerned plus accrued interest to the redemption datq fro,m funds to be depositedin the Sinking Fund, on or before Decernber 1 of each of the years set for below, in amountssufFcient to redeem by lot on each Decenrber 1 the following amounts of the Bonds:

t7.

NOTE 6 - REVENUE BONDS PAYABLE-(CONTINUEp)

Term Bonds Slated to Term Bonds Slated to Term Bonds Slated toMature on December 1, Mafure on December l, Manue on December l,

2424 ,* 2A32 2A36Year Amount Year Amount Year Amount2018 S5,000 2428 $1,205,000 2033 $1,840,0002019 5,000 2029 1,265,000 2034 1,935,0002020 5,000 2030 1,395,000 2035 2,030,000202t 5,000 2031 1,680,000 2036 2,135,000*2022 5,000 2032 1,760,000*2023 5,000*

* At maturity

SERIES A of20ll

On June 10" 2011 the Authority i*sued $21,340,000 of Srries A of 201 I Sewer Revenue Bonds.The proceeds from this iszue will primarilybe uscd to fund various capital improvernentprojects.

Ootional Redemotion

The Series A of 201I Bonds maturing on or after December 1,2022 are subject to redempfionprior to maturity, at the option of the Authority in any order ofmaturity either as a whole, or inpart, at any time on or after Decernber 1,2021, and if in parL by lot within a maturity, at aredemption price equal to 100% of the principal amount, together with accrued interest to thedate fixed for redemption.

Mandatorv Rsdemption

The Series A of 201I Bonds stated to mature on December l, 2031 and on December l, 2035 aresubject to mandatory redemption, in part, prior to maturity, by lot within a maturity, at aredemption price equal to 100% of the principal amount, together with accrued interest, to thedates fixed for redonption, on December I of the years and in the following amounts:

18.

l$oTE 6 - REVENUE BONpS PAYABLE - (CONTTNUED)

Term Bonds DueDecembqr l. 2031

Term Bonds DueDecembcr 1. 2035

Year Amount Year Amount2027 $1,250,000 2032 $1,265,0002028 910,000 2033 1,315,0002029 1,095,000 2034 1,205,0002030 1,075,000 2035t 1,515,0002031* 1,390,000

+ At maturity

SERIES B of 20ll

On June 10, 201 I the Authority issued 58,135,000 of Series B of 2011 Federally Taxable SewerRevenue Bonds- The procerds from this issue will primarily be used to currently refund theAuthority's outstanding 58,000,000loan from FirstNational CommunityBank dated April24,2007.

Optional Redemption

The 2011 B Series Bonds maturing on or after December 1,2025 are subject to redemption priorto mahrity, at the option of the Authority in any ordcr of maturify either as a whole, or in part, atany time on or after December l, 20Zl , at a redemption price equal to I 00% of the principalamount, together with acqued interest to the date fixed for redemption.

Mandatorv Redemption

The Series B of 2011 Bonds stated to malure on December 1,2025 are subject to mandatoryredemption, io patt" prior to maturity, by lot within a maftrrity, at a redemption price equal to100% of the principal amount, together with accrued interest, to the dates fixed for redernption,on December 1 of the years and in the following amounts:

Terrr Bonds DueDesember l. 2035Year Amount2022 $650,0002023 690,0002024 735,0002A25* 785,000

*Atmaturity

19.

NOTE 7 - CONDUIT DEBT OBLTGATTON

On Dccemb er 22,2004,the Authority issued a Guaranteed Lease Revenue Note in the amount of$4,000,000 to finance the cost of a project on behalf of the City of Ssranton. The note is dueDecember 15, 2016 and has an interest rate of 5.990/o. In connection with the issuance, theAuthority and the City entered into a sale agreerrent and a lease agreernent Through theseagreements, the City sold property to the Authority, which in turn leased the property back to theCity, with payme,nts due in smounts sufficient to pay ttre debt service on the note.

Under the terms of the note and the agreements, the Authority is a conduit i.ssuer. The Authorityhas no obligation beyond the resources provided by the sublease agresment. The subleaseagreement constitutes a general obligation of the City of Scranton and the full faith and sreditand taxing power of the City of Scrsnton is pledged to the pa5anent of all amounfs due under thezublease. The sublease agreernent oxpires on December 15, 2016. The notes arc not general

obligations of the Authority and fte Authority has no ta:<ing power. The amount outstanding onthe Notes as of March 31,2013 is $2,045,000, Due to the nature of the traruaction the Authorityis not required to record the obligation for the Notes or the related lease receivable in its financialstatements.

NOTE 8 - CAPITAL IMPROVEMENT PROGRAM

During the year ended March 31, 2000 a capital improvement prcgram was adopted in theamount of $25,000,000. The program consists of trvo phases. Pbase I was budgeted at510,261,000 and was pnmarily for improvements at the heatnent plant. Funding for tbeprogriun is from the Pennsylvania Infrasbucture Investment Authority (PENIWEST), The firstapplication filed was for $5,045,157 (S4,879,765 as modified) and the loan closed in March,2002. ThebalanceoutstandingatMarch3l,2013nmountedto$2,712,104. Theloanissecuredby thc gross revenues ofthe Authority and the guarantee of the City of Scranton. Interest onlywas payable on advances until JuIy 1, 2003, when monthlyprincipal and interest paymonts aredue up to and including January, 2023. Interest is 1.522% for the first 5 months and 3.045%thereafter. Legal fees relating to obtaining the financing amormted to $44,338 and have beenrecorded as defened charges. Constnrction was comploted for Oris phase in July, 2003, and thefinal disbursement on this loan was received June, 2004 in thc amount of $86,866.

The second PENIWEST application was for $4,947,000 and the loan closed in October, 2002.ThebalanceoutstandingatMarch3l,2013amountedto$2,843,190. Thesecrnityisthesarneasabove. Interest only was payable on advances until August L,20A4, when monthly principal andinterest payrnents were due up to and including July 1, 2024. Interest is at 1.387o/o for tbe first8l months and2.774o/a thereafter. Construction was completed for this phase at March 31,2007,and the final disbursernent of $12,150 was roceived May,2007.

20.

NOTE I - CAPITAL IMPROVEMENT PROGRAM - (CONTINUED)

The third PENNVEST loan closed in December, 2003, in the amount of $2,806,264. Thebalance outstanding at March 31,2013 amounted to $1,555,186. The security is the sarne as

above. Interest onlywas payable on advances until February 1, 2005, when monthlyprincipaland interest payrnents were due up to and including January 1,2025. Interest is at 1.387% forthe first 73 months and2.774% thereafter. Construction was completed for tlris phase at March31, 2007, and the final disbursernent of 8125,22t was received May,2007.

kr December, 20Ol the Authority closed on a fourth loan in the amount of $3,690,127. Thebalance outstanding at March 31,2013 was $2,626,561. The securityis the same as above.Monthly prinoipal and interest payments began June, 2007 and are due up to and including May,2027. Interestis at 7.942Vo for ttre first 60 months and.3.A1Lo/o thereater. Construction wascompleted for this phase in April, 2007, and the fual disbursement of $151,815 was receivedNovember,2007.

In Novernber, 2007, the Authority closed on a fiffh loan in the amount of $4,329,1 8 I . Thebalance outstanding at March 31, 2013 was $3,417,226. T\e security is the same as above.Monthly principal and interest pa3rrnents began May 1, 2009 and are up to and including April,2029. Interesl"isatl.2l4%forthefirst60months end.2.428%thereafrer. Consbuctionwassubstantially completed for this phase in March 2011. The final disbursement of $130,764 wasnot yet received as of March 3I,2072.

kr March 2072 the Auttrority olosed on a Pennvest loan in the amount of $1 1256,361. Theproceeds will be utilized primarily for Wastewater Treatme,nt Plant Improvements. The loan issecured by the gross revcnu€s of the Sewer Authority of the City of Scranton. Interest only ispayable on advances for 36 months at a rate of lYo. Interest is 1.51% thereafter, when monthlyprincipal and interest paymurts are due for another 204 months. ltre Authority drew S1,885,4I6on the loan as of March 31, 2013. Thebalance outstanding at March 31,2013 is 51,885,416.

The PENNVEST loans are fcderally and state fundcd and therefore subject to variouscompliance requirernents.

ln November 2010, the Authority renewd a $4,000,000 line of credit to provide interimfinancing for the program. Interest was payable monthly at a variable rate equal to 70% of theprime rate (2.27 5% at March 3 1, 201 3). Security for the line of credit was all receipts andaccounb receivable. The line of credit mahres in November 20 I 5. The balance of the line ofcredit at March 37, 2013 amounted to $0. There \4ras no activity for the year ended March 3 I ,2013.

2t.

NOTE 8 - CAPITAL IMPROVEMENT PROGRAM - (CONTINUED)

The Authorityrenewed a $2,000,000 line of credit to be used for general working capital-lnterest is payable monthly at a variable rate equal to National Prime, but never less than a floorof 4o/o. (4o/o zt March 31, 2013). Security for the line of credit is all receipts aud accountsreceivable accounts, instnrments and contract rights. The line of credit will expire Decernber 31,2013, and will be renewable at the option of tlre Bank, There was no activity for the year endedMarch 31, 2013 and ttre balance at March 31, 2013 was $0.

NOTE 9 _.DEFINED CONTRIBUTION PLANS

The Authority conhibutes to ttre Central Pennsylvania Teamsters Pe,nsion Fund, a definedconhibution pension plan covering substantially all of its firll time union employees. Employeesbecome eligfrle after they have been on the payroll for thirteen weeks. Conhibutions made bythe Autlrority were $407 per month for the year ended March 31, 2013 for each coveredernployee; conhibutions vest according to the Plan's schedule. Pension expense for the yearended March 31,2013 amounted to $345,024.

Effective January l, 2006 the Authority adopted amoney purchase pension plan for crnployeeswho mcot age and service requirements and are not mombers of the Union. Employorconhibutions arc 4o/o of eligible compansation and employees must conhibute?Yo. Employeesare also perrnitted to make additional contributions up to fit" *6ximrrm allowed by law. For theyear ended March 31, 2013 employer contributions totaled $22312 and ernployes conhibutionstotaled $6,079.

NOTE IO - OPERATING LEASE

The Authority leases its office space under an operating lease dated March 2007. The lease termwas for an initial fivc years and, on April 24, 2012 the Board of the Authority approvedexercising the option of renewing the lease for an additional five years, with no increase.Minimum rental commibncnts are as follows:

Fiscal Year A+rount2014 61,5002015 61,5002016 61,5002017 61.500

$2flil000

Rental expense for the year ended March 31, 2013 amounted to $61,500.

22.

NOTE 11 - CONTTNGENT UABTLTTTES

The Authority participates in both Federal and State assisted grant programs. These programsare subject to program compliance audits by the grantors or their representatives. The Authorityis potentially liable for any expendihres which may be disallowed pursuant to tbe terms of thesegrant programs. Managernent is not aware of any material items of noncompliatrge whicb wouldresult in the disallowance ofprogram expenditures.

The Authority is inrrolved in various claims and legal actions arising in the ordinary course ofbusiness. In the opinion of the Authority, the ultimate disposition of any matters outstanding atMarch 31, 2013 will not havc a material effect on the Authority's financial position.

NOTE 12- CONSENT DECREE

On January 31, 2013 the Authority entered into a musent decree with the United States ofAmerica, acting on behalf of ttre U.S. Environmental Protection Agency, and the PennsylvaniaDepartment of Environmental Protection that will require the Autbority to take steps to achiwecompliance with the Clean Water Act and the Clean Sheams Law by December 2037. 'I\eAuthority adopted a long Term Coubol Plan to address compliance with the consent decree byDecember 2037, \\e cost to accomplish the Inng Term Contol Plan is estimated to beapproximately $ I 40 million

23.

S UPPLEMENTARY INFORMATION

SCHEDULE ITIIE SEWER AUTHORITY OF THE CITY OF SCRANTON

RESTRICTED ASSETSMARCH 31-20t3

ClearingDebt serviceDebt service reserveConstructionSettlement frrnd

$-

1,609,040

Cash and Cash

Equivaleqts$ 6,709,416

12,g4l3,179,342

11,395,295

Investments

Accrued

Interest

24,594

TotalT-Em-rc-

12,841

4,812,97611,395,295

$ 2U96,894 $ 1,609,040

i

The accompanying notes are an integral part of these financial statements.

24.

SCI'IEDIJLE2I]-TESEWER AUTHORTTY OF THE CrTy OF SCRANTON

OPERATINC EXPqNSES.FOR IHE_YEAR ENpED MARCH 3 r . 20 13

Sgu{aee Plant 4nd Sewer Sygem EmensesSalaries and wages

Payroll taxes

Employee benefitsUtilitiesChemicalsSuppliesRepairs, maintenance and rentalsVehicle operating expenses

Landfill disposalTotal sewage plant and sewer systern expenses

Adrninistrative and GeneralSalaries and wages

Payroll ta.'<es

Employee benefitsUtilitiesOffice supplies and e4penses

RentRepairs and maintenancePostage and billing exp€nses

Legal feesEngineering fees

Accounting feesOther professional fees

Collection exlrense

lnsuanceBad debt expense

Iotal administative and general expenses

$ 3,062,979231,538

1,774,069697,92759r,249384,2805gl,l gg

382,218

$ 952,70072,417

466,79841,083

454,05961,5005,2V5

217,167148,008

I lzsos21,950

595,695

40,224241,354

The accompanying notes are an integrd part of thcse {inancial statements.

25.

$ 8,319,390

$ 3,825,334

Certified Public Accoun tants

1310 CET]RCII STREETMOSCOW PA 18444

J. PATJL MuRPIry, CPAMTCIIAEL DOUGEERIY, CPA

PALrLT. MURPFY,CPA

(570) E48-2866 TeI(570) 848-2E33 Fnx

September 9,2073

Board of DirectorsThe SewerAuthority of thc City of ScrantonScrantor" Pe,nnsylvania

To thc Mernbers of tl-rc Board:

We have performed the Singlc Audit of the SewerAuthority of thc City of Scranton for the yearended March 3l , 201 3, md have encloscd the Single Audit repo*ing package.

Thc Single Audit was done to fulfrll the requirements of the OMB Circular A-133. It cntailed:I . An audit of the general purpose financial statements and our opinion thereon;2. A rcview of compliance and internal control over financial reporting based on an audit of fuiancial

statemqlts p€rformed in accordancc with Government Auditing Standards;3. An audit of the Schedule of Expelrditr:rcs of Federal Arvards and our opinion thereon;4. A review of compliance with requirernents applicable to eadr major program and internal control

ovcr compliance in accordancc with OMB Circular A-133.

Please be advised that a msnagem€nl letter was nece$sary as part of our report,

One copy of the Audit Report was distributed to:

a) F€dcral Audit ClearinghouseBureau of the Cenzus

1201 E. l0m StreetJeffersonvillq IN 47132

26.

One copy of the Audit Report was submitted clecbonically to;

a) Commonwealth of PcnnsylvaniaBurcau of AuditsSpecial Audit Services DivisionForurr Place-86 Floor555 Walnut StrectHarrisburg Pcnnsylvania I 7101

Your cooperation in this mattcr is appreciated. ffivMurphy, Porrgbert/ & CompanyCertified Public Accor$tants

MD/mm

27.

MI]RPIIY. DOUGIIERTY & COMPANYCertified Public Accountants

13TO CEURCESTREETSTJITE SOOO

MOSCO\tr, PA 184,14J. PATJL MURPITY, CPAMICHAEL DOUGITERTY, CPAPALL T. MIJRPEY, CPA

(570) 8a&2866 Tel(570) 84&2833 Fax

INDEPENDENT AUpmORS' REPORT ON INTERNAL CONTROL OVER FINANCIALREPORTING AND ON COMPLIANCE AND OTHERMATTERS BASED ON AN AUDIT

OF FINANCI,AL STATEMENTS PERFORMED IN ACCORDANCE WITI{GOWRNMENT AUDITING STANDARD S

Board of DircctorsThe Sewer Au0rority of the City of ScrantonScranton, Pennsylvania

We have audited" in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in GovernmentAuditing Standards issued by the Compholler General of the United States, the financialstatements of tlre Sewer Authority of the City of Scranton, a component unit of the City ofScranton, as of and for theyear ended March 1I,2073, and therelated notes to the financialstatements, and have issued our report thereon dated Septernber 9, 2013.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the SewerAuthority of the City of Scranton, Scrantou, Pennsylvania's internal control over financialreporting (intemal conhol) to determine the audit procedr:res that arc appropriate in thecircumstances for the pu{pose of expressing our opinions of the financial staternents, but not forthe purpose of expressing an opinion on the effectiveness of thc Sewcr Authority of the City ofScranton, Scranton, Pennsylvania's internal conhol. Accordingly, we do not express an opinionon the effectiveness of the Sewer Authority of the City of Suanton, Scranton, Pennsylvania'sinternal control.

A deficiency itr intemal control exists when tbe design or operation of a conhol docs not allowmanagement or employees, in the normal course of performing their assigned functions, toprevetrt, or detect and correcf misstaternents on a timely basis. A material weahtess is adeficiencg or combination of deficiencies, in intemal contool, such that tlrere is a reasonablepossibility that a material misstatemcnt of the entity's financial statements will not be prevented,or detected and corrected on a timely basis. A sigtiJicant deficienqt is a deficiency, or a

28.

REPORT ON INTERNAL CONIROL OVER FINANCIAL REPORTING AND ONCoMPLIANCE AND OTITER MATTERS BASED ON AN AUDrT OF FTN,ANCIALSTATEM EN TS PERFORMEp rN ACC OSDAN CE WrTH GO rzRivndElvr l UDlffffcsI1dlvDLRDS-CONTINUED)

combination of deficiencies, in intemal control that is less severe than a material weakness, yetimportant enough to merit attention by those charged with gove,mance.

Our consideration of interaal conbol was for the limited purposs described in the first paragaphof this section and was not designed to identiff all deficiencies in internal conbol that might bcmaterial weaknesses or, significant deficicncies. Given fhese limitations, during our audit we didnot identifi any deficiencies io intemal conbol that we consider to be material weaknesses.However, material weaknesses may exist that have not bcen identified.

CompUance and Other Matters

As part of obtaining reasonable assurance about whether the Sewer Authority of the City ofScranton, Scranton, Pennsfvania's financial statements are free from material misstaterrenl weperformed tests of its compliance with certain provisions of laws, regulations, conbacts and grantagreements, noncompliance with which could have a direct and materiel effect on thedetermination of financial stat€rnent amounts. However, providing an opinion on compliancewith those provisions was not an objective of our audil and accordingly, we do not express suchan opinion. The results of our tests disclo.sed no instances of noncompliance or other matters thatare required to be reported under Goverturent Audithtg Standards.

Purpose of This Report

The purpose of this report is solely to describe the scope of our testing of internal control andcompliance and the results of the testing, and not to provide an opinion on the effectiveness ofthe entity's intcmal control or on compliance. This report is an integral part of an auditperformed in accordance with Governnent Auditing Staodards in considering the entity'sinternal control and compliance. Accordingly, this communication is not suitable for any other

Purpose.

Moscow, PennsylvaniaSepternber 9, 2013 h

29.

UTURPHY. pOUGHERTY & COMPAFTYCertified Public Accountan ts

I3IO CIITJRCE STREETS{'ITE 3000

MOSCOW PA 18444J. PAITLMURPEY, CP.AMICHAELDOUGHERTY, CPAPATJLT. MT'RPITY, CPA

(570) 848-2866 Tel(570) 64E-2E33 F'ax

INDEPENDENT AUDITgR'S REPORT ON COMPLTANCE FOR EACH MA"IORPROGRAI\4 A]IID oN INTERNAL CONTROL O\GR COMPLTANCE REOITIRED FY

oMB CTRCULAR A-133

To the Board of DirectorsThe SewerAuthority of the City of ScrantonS cranton, Pennsylvania

Report on Compliance for Each Major Federal Program

We have audited the Sewer Authority of the City of Scranton, Scranton, Pennsylvania'scompliance with the typc of compliance requirements described nthe QMB Circular A-133Compliance Supplement that could have a direct md material effect on each of the SewerAuthority of the City of Scranton, Scranton, Pennsylvania's major federal programs for the yearended March 31, 2013. The Sewer Authority of the City of Scrantonn Pennsylvania's majorHeral programs are identified in the sununary of auditor's results section of the accompanyrngschedule offiadings and questioned costs.

Monegement's Responsibility

Management is rcsponsible for compliance with the requirements of laws, regulations, conhacts,and grants applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliancc for eash of the Scwcr Authority of thcCity of Smanton, Pennsylvania's major federal programs based on our audit of the gpes ofcompliance rcquirements referred to above. We conducted our audit of compliance inaccordance with auditing standards gurerally accepted in the United States of America; thestandards applicable to financial audie conhined in Govetnment Auditittg Standards, issued bythe Compholler General of the United States; and OMB Circular 4-133, Audits of States, LocalGoventnrcnts, and Non-PrcJit Organizatiorr. Those standards and OMB Circular4-133 requirethat we plan and perform the audit to obtain reasonable Bssurance about whether noncompliance

30.

(coNTINUEp - INpEPENDENT AUpITOR'S REPORT ON COMPLIANCE FOR EACHMAJOR PROGRAM AND ON TNTERNAL CONTROL O_VER COMPLTANCIE REqUTREpBY OMB Cr&CULAR A-133)

with the types of rxrmpliance reguirements referred to above that could have a direct and materialeffect on a major Heral program occrrrred. An audit includcs examining, on a test basis,evidence about thc Server Authorify of the City of Scraflton, Pennsylvania' compliance withthose reguirements and perforning such other procedures as we considered necassary in thecircumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each

mqior fedcral program. However, ow audit does not provide alegal detcrmination of the SewerAuthority of the Cityof Scranton' compliance.

Opinion on Each Major Federal Program

ln our opinion, the Sewer Authority of the City of Scranton, Pennsylvani4 complied, in allmaterid respects, with the ffpes of compliance requirernents refened to above that could have adirect and material effect on each of its major federal programs for the year ended March 31,2013.

Report on Internal Control Over Compliance

Management of the Sewer Authoriry of the City of ScrantorS Pennsylvanig is responsible forestabiishing and maintaining effective intemal conhol over complianr:e with the types ofcompliance requirements roferred to above" In planning and performing our audit of compliancgwe considered the Sewer Authority of the City of Scranton's intemal conhol over compliancewittr the t5pes ofrequirements that could have a direct and material effect on each major fit'eralprogram to determine the auditing procedures that are appropriate in the circumstances for ttrepurpose of expressing an opinion on compliance for each major federal proglarn and to test andreport on intemal control ovcr compliance in accordance with OMB Cirorlar A-133, but not forthe purpose of expressing an opinion on the effectiveness of intemal conhol over compliance.Accordingly, we do not express an opinion on the effectiveness ofthe Sewer Authority of theCity of Scanton, Pennsylvania's internal control over compliance.

A deJiclenry in intemal control over contpliance exists when the design or operation of a confrolover compliance does not allow management or employees, in the normal course of perfonniugtheir assignal firnctions, to prevent or detect and correct noncompliance with a type ofcompliance requirement of a federal progam on a timely basis. A material wealmess itt internalconlrol over compliance is a deficiency, or combination of deficiencics, in internal control overcompliancc, such that there is a reasonable possibility that material noncompliance with a tlpe ofcompliance requirement of a federal program will not be prevented or detected and corrected, on

31.

coNTINUEp - INDEPENpENT AUDITOR'S REPORT ON COMPLIAI.ICE FOR EACHMAIOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REOUIREDBYOMB CIRCULARA.I33)

a timely basis. A signifcant deficiency in internal conkol over compliance is a deficiency, or acombination of deficiencies, in intemal conhol over compliance with a type of compliancerequirement of a federal program that is less severe than a material wesloess in internal conholover compliance, yet important enough to merit attention bythose charged with govemance.

Our consideration of intemal confol over compliance was for the limited purpose described intbe first paragraph of this section and was not designed to identify all deficiencies in internalconhol over compliance that might be material weaknesses or significant deficiencies, We didnot identi$ any deficiensies in internal control over cornpliance that we consider to be materialweaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on intemal conhol over compliance is solely to describe the scope ofour testing of intemal control over compliance and the results of that testing based on therequirements of OMB Circular A-133. Accordingly, this report is not suitable for any otherpurpose.

Moscow, PennsylvaniaSepiember 9,2073

32.

THE SEWER AUTHORTTY OF THE CrIY OF SCRANTOtr{scHEpuLE oF FrNplNps Ai{p QvFSTToNEp cosTs

YEAR ENDED MARCH 31. 2013

Section I - Sunrmarv of Auditor's Results

Financial Statcments

Tlpe of auditor's report issued: UnqualifiedInternal eonhol over financial reporting:

Material weakness (e.s) identified? -*

yes X noSignificant deficiency(ies) identified? yes X none reportcd

Noncompliance material to fi naocial statemer$snoted?

-yes X no

Federal Awards

Internal conhol over major programs:Material weakness (es) identified?

-yes X no

Significant deficicncy (ies) identified? -

yes X none reported

Type of auditor's report issued on complianeefor major programs: Unqualified

Any audit findings disclosed that are requiredto be reported in accordance with section 510(a)of circular A-133? _ yes X no

Identification of major programs:CFDA Number Nasre of Federal Pro€ram or Cluster

66.458 Capitalization Grants for Clean Water State RevolvingFunds

Dollar tfueshold used to distinguish between type A and type B programs: $300.000Auditec qualified as low risk auditee? _ yes X no

Section II - Financial $tatement Findings

No matters were rqported.

Section III - Federal Awgrd Findings and Questioned Costs

No matters were reported

FEDERALORANTOR'PASS,TTIROUGI{ CR^NTOIITROJECTTTTLE

Pcnflrr'lvanio f nfrnrtructurc lnvtstmcnlAut8ntt.

ftpiF|liatioa Gron( for Clcsn WatrSErcRcvolving Funds I

SOTJRCE FEDERALODE CFDA

NgrrqE&

TIIESE1VERMSC}IEDTJLE OF FilIENDITUR'$ OffEDEBAL ASARDS

KIBIN|E YEAR ENT}TNC NTARCTI 3I. Z()I3

ACCRI,'EDOR ACCRUEDORPASSTHROUOH GRANTFERIOD PFOCR4.VOR TOTAL (DEFERRED) (Df:TERRED)

GTTANTOR'S BEGINNINO/ AWARD RFCEIVED TOR REVENIJE AT REVENT,'E RIiVENUE A'T

MIMBEI ENptNqpAJlE AMOIn{T TilE YEAR {iltmt2 RFCOCNTZEq F:TPFNDITURT'S 3nl120t1

wtr?-n^il4 il.256J61 S r,885.,il6 S - S rJ85,{r6 t r,185,416 S -

-S-T55f.f'f T-ffi.gg.5;-ie-f -fi B3TS'-.5:::::

1trc rccompuyilg trotc! dr rn inlcgrrl prt of t$esc liouchl rtrtcrnrntj,

,4,

SoI.,RCECODF-S: D - Dirrt FurdintI - lndittld f.unding

THE SEWER AUTHORITY OF THE CITY OF SCRANTONNOTES TO SCHEpULE OF E)trENpr-TURES OF FEDERAL AWARDS

FOR THE YEAR ENDED MARCH 3 I. 201 3

NOTE A - BASIS OF PRESENTATTON

The accompanyrng schcdule of expanditures of federal awards includes all significant federallyfundd grant programs of The Sewer Authority of the City of Scranton and has been prepared onthe modified accrual basis of accounting.

NOTE B -ACCRUED AND DEFERRED REIMBURSEMENT

Various reimbursement procedures are used for federal awards received by The Sewer Authorityof City of Scranton. Timing differences may occur between orpendinres and reimbursernentsduring the year. Accrued revenues at year-end represent an excess ofexpendihnes over cash

reimbursements received. Defened revenues at year-end represent an excess of cash receivedover eligible program expenditures. Generally, accrued and deferred amounts caused by timingdifferences will be reversed in the subsequent year.

35.

TI{E SEWER AUTHORITY OF THE CrTy OF $CRANTONSCHEDULE OF PRIOR FINDINGS

FOR THE YEAR ENDED MARCH 3 I. 2OI 3

. NO PRIOR FINDINGS NOTED.

36.

03/18/16Accrual Basls

Scranton Sewer AuthorityBalance Sheet

As ofJanuary 31,2016

ASSETSCurrent Assets

GhecklnglSavlngs{000 .Cash - FNCB Operating{005 .Cash - FNCB Payroll1010 - Cash - EDU Account1012 . Cash - Developers Account{015 . Gash - Petty & Wlndow1020 - Cash - FNCB NoWAccount1031 . Cash - Capx Ptol tA1032 .Gash - Capx Proi 181033 . Cash - Capx Proj lG1034 .Cash - Capx Prol Phase lll1035 'Cash - Gapx ProJ Phase ll1036 .Cash - Capx BNR ProJect1037 .Gash - Gapx CSO #19 & tr20 Pror.1059 .Cash - Debt Serv Fund 2OOl FD1061 .Gash - Bond Glearlng Fund FD1063 'Cash - Debt Serv Resru 201,lA FD1064 .Caeh - Debt Serv Resrv 201{B FD1065 .Cash - Debt Serv Fund 2011A FD1066 .Cash - Debt Serv Fund 20118 FD{070 .Cash - Debt Serv Resrv 2014FD1071 .Gash -DebtServ Fund 2014FO1074 .Cash - Debt Serv Resrv 2015 FD1075 .Cash - Ilebt Serv Fund 2015 FD

Total Ghecklng/Savings

Other Current Assetsll10 . A/R - Sewer Rental Revenue1130.A/R-Other1132.A/R-Asseesments1150 " Allowance for DoubtfulAccountsl{53 " lnterest Recelvable1300 . Deposlts{310 . Inventory1350 . Prepald lnsurance1360 . Prepald Other

Total Other Curtent Assets

Total Cunent Assets

.-- Jan 31, 16 - _

8,401,390.0987,455.76

1,505,501.1651,523.79

1,100.00543,241.9626,625.3224,387.9312,860.2519,049.7522,179.6251,767.36

112.586.02

21,230,202.391,981,816.54

834,490.il3.432.14

982,937.551.05

798,565.95

..-_ 3.02

36,575,224.30

9,#7,217.14123,636.88382,962.54

-2,800,000.00469.74

84,059.56160,215.18204,348.92

17,498.58

7,540,408.54

44,115,632.84

Page 1

03/t8r{6Accrual Basis



Flxed Assets1201 .Land1202 .Land lmprovemenb1203 . Buildlng lmprovements1211 . Sawer System - 40 Years1212.Equlpment1213 . Leasehold lmprovements1214 .Oflice Equlpment1215 .Vehlcles1251 'A/D - Sewer System1252. ND - Equlpment1253 . ArD - Leasehold lmprovements1264. ND - Office Equlpment1255.ND - Vehlcles1256 . A/I) - Land lmprovements1257 ,AlD - Building lmprovemenG

TotalFlxed Assets

Otfter Assets1316 . Prepald Expenses 2011A Bondsl3l7 .Prepald Expenses 20118 Bonds1318 .Prepald Expenses 2014 Bondst3t9 .Prepald Expenses 2015 Bonds1331 .Deferred Loss on Ext of Debt 14f332'Deferred Loss on ExtofDebt {5

Total Other Assets

TOTALASSETS

LIABILITIES & EQUITYLlabillties

Cunent LlabllltlesAccounts Payable

2000 .Accounts Payable

TotalAccounts Payable

Other Gurrent Llabllltles2113 .Interest Payable2133 - 2011A Sewer Rev Bonds Payable21U.20118 Sewer Rev Bonds Payable2l3E .2014 Sewer Rev Bonds Payable2137 .?OIE SerrerRev Bonds Payable214{ . FNGB - Llne of Credit (4M}2l4i! .PennVest UP {B2146 .PennVest UP {A2147'PennVest UP lC2148.PennVest UP Phase lll

l,S1'S9,sI125,021,687.52

1,01_8-,991_?1

1,018,964.21

33,165.6318,295,000.006,130,000.00

10,000,000.007,985,000.001j25,164.412,213,781.342,011,949.021,227,852.592,187,859.98

Jan 31, 16

130,029.12566,271.656',17,071.29

1s7,g't7,202.571,693,865.02

36,158.96467,140.47

3,506,308.62-81,578,22'l.U-1,114,841.11

-23,972.62-365,508.93

-1,708,003.15-213,746.66

- .:9arJs-9":?9

79,844,994.11

305,930.9981,665.9145,938.7731,314.14

338,944.59257,266.17

Page 2

03/18/16AccrualBasis



2{49 .PennVest UP Phase ll2{50 .PennVest UP BNR Profect2200 . FederalTax WH Payable2210 .FICA & MEDIWH Payable2220.PAWll Payable2230 .PA UC W/H Payahla2240.LocalWH Payable2250 .LST Tax WH Payable2260 .LUF-Lack Unlted Way Payable2270 . AFLAC-NonTaxable Payable2310 . AFI-AC-Taxable Payable2330.DRIVEWH Payable2370.PMAA UG Payable2380 .Llfe lns. WH Payable2410 . Accrued Expenses7-420'Accrued Payroll2429 . Accrued Absences GP2€0 .Accrued Absences2450 'Accrued Bond lnterest2501 .Unearned 2014 Bonds OID2502 . Unearned 20{5 Bonds OID2512. Defened 20ltA Bonds Prem Net

Total Other Current Llablllties

Total Current Liabllltles

Total Llabllitles

Equlty3001 .Gontrlbutlons - Federal (Auth)3003 .Retalned Earnlngs (Auth)3050 . Retained Earnings{lB3100 . Retalned Earnlngs-BB3200 . Retained Earnings-PriorNet Income

TotalEqulty

TOTAL LIABILITIES & EQUITY

" {s !!. !9_.-2,859,886.867,805,497.24

23,621.4226,418.925,302.15

257,499,077.70

966.0022.A0

640.422,323.U

16,009,118.22

481.471,359,713.12

121,456.54450,866.00295,340.62312,852.32

-200,612.29-153,182.17

14,106.78

9l,Lq9'91!-92-

" 65117?r9g11q

65,172,907.83

13,273,803.003,921,543.04

33,237,935.757,587,593.49

-2,745,540.224,573,444.63

59,848,779.69

125,421,687.52

Page 3

03/18/16

Accrual Barls

Scranton Sewer AuthorityProfit & Loss Actual vs. Budget

Aprll20l5 through January 2016

Apr '1 5 ' Jen 16 Budget $ Ovar Budgot % of Budgot

Ordlnary Income/Expenselncome

4010 'Sewer Rental Income4020 . Permlt / Surcharge Income4030 .S/R Penalty & Interest Income4050 .S/R Revenue Refunds4070 .Title Search Fees4080 .Mlsc.lncome4090 .NSF / Redeposlted Ghecks4110 .EDU Revenue (Tap Fees)4130 'Bonds Premlum Income4220 .Interest Income4230 .lnterest Income - Bonds4332 .Grant lncome - OECD Local S...41110 . Galn on Sale of Asset

Totallncome

Expense5001 .Payroll-Plant50{12 . Electrlclty-Plant5003 .Water-Plant5005 .Gas-Plant5006 .Plant Chemlcals5007 .Replacement Parts-PL Malnt5008 .Exterlor R&M Plant5010 . Expendable Supplies-Plant5011 . Equlpment Rental-Plant5016 .Lab Supplles5018 .Sanltary Landflll5020 . Extra Ordlnary Repalrs-Plant5024 . Servlce Gonhacts-Plant5027 . Replacement ParG-ElecL5030 . Untform RentaUAllowance5099 . Mlsc. Expense-Plant6001 . Payroll-Collection Llne6002 . Electrlcity-Fump Statlons6003' Water-Pump Statlons6007 .Gollectlon Llne Supplles6008 . Restoatlon Expense4ollectl...6011 . Equip. RentahGollectlon Llne6012 . Fuel & Lubrlcants-Vehlcles6013 'Fleet Parts, Supplles & Malnt6020 . Extra Ordinary Repalrs-Collec...6024 .Outslde Sewsr Servlce6098 . Sewer Rehabllltatlon Program6099 . Mlsc. Expense€ollectlon Line7001 .Payroll - Administratlve7002 .Electrlctty - Admin.

18,491,770.05

11,073.59

478,268.50

-2,856.82

14t24.0067,837.26

3,370.00

27,006.00

592.70

5,310.76

5,712.68

97,75?.58

48,300.00

22,500,000.00

21,000.00

525,000.00

0,00

13,000.00

80.m0.000.00

125,000.00

8,099.(n4.000.00

50,000.00

100,000.00

0.00

-4,(X)8,229.95

-9.926.41

46,731.50-2,856.82

1,420.00

-12.182.71

3,370.00

-97,994.00

-7,506.30

1,310.76

44,281.?2-2,217.42

48,300.00

82.204

52.7o/o

91.104

100.00/6

110.9%

84.8%

100.0%

21.6%

7.304

132-8o/o

11.104gr-80

100.0%

19,248,557.30

1,510,528"01

432,521.ffi15,716.13

28,129.72

757,8n37109,758.69

26,502.20

50,756.91

18,430.07

79,537.02

600,492,51

91,490.56

79,568.66

20.030.33

34,253.07

58,296.80

1*75,175.5?a1jV3,24

1,242.28

173,422.09

29,394.41

1,669.00

92,340.58

187,751.78

0.00

49,402.79

0.00

62,944.18

229,6?3.44,945"12

23,426,0S9.00

2,165,000.00

750,0(x).00

75,000.00

150,000-00

1.750,000.00

200,000.00

100,000.00

75,0(D.00,t5,000.00

100,000.00

1,000,000.00

170,000.00

150,000.00

75,000.00

45,000.00

75,000.00

2,335,000.00

45,000.00

2,000.00

250,000.00

1C10,000.00

50,000.00

200,000.00

235,00O.00

100,000.00

100,000.00

500,000.00

100,000.00

274,m0.006,500.00

-1,177,641.70

€54,471.99-317,475.10

-29,283.87

-121,670.28

-s52,122.63

-39,241.11

-73,497.80

^24,213,05-26,569.93

-20,/162.98

-399,507.49

-7E,509.44

-70,431.3,1

-54,969.67

-10,746.S3

-16,703.20

-859,824.,17

-13,826.76

-757.72

-76,577.91

-70,605.59

-{8,331.00-107.659.{2-47,218.?2

-100,000.00

-50,597.21

-500,000.00

-37,055.82

-,{11,376.56

-1,550^88

82.2e/o

69.80/6

57.7%

61.O%

19.0%

45.67o

84.9%

26.50/6

67.74h

11.O%

79.5%

60.0%

53.8%

53.0o/o

26-7%

76.1%

n.7%632%69.3%

62.1%

69.4%

25j%3.3%

46.2%

79.9%

O.OYo

19.1%

0.0%

82.Eo/b

83.8%

78j%

Pegc't

03/18r16

Accrual Basis


Aprll 2015 through January 2016

7004 ,Telephone7005 . Gas -Admlnlstratlve7007' Adminlstration Supplles701{ . Equlp. Rental - Admin.7020 . Rent - Admlnlstration7025 'Payroll - Management7025 'Management Penslon Expense7031 . Billing Cost - PAWC7033 .Postage Expense7035 . Bllllng Cost & Gomputer Maint7041 .Flca & Medi. Expenses7042 . Health Insurances7043 . Dental Insurances7044 . Workmen's Compensation Ins.7046 . Unlon Penslon Expense7M7 .Slck, Llfe & Accldent Ins.7049 , Unemployment Compensation7050 .General Llablllty & Flre Ins.7052 .Bonding Expense7053 . Mlleage Relmburcement7058 . Trustee Fees7061 .Prof. Fees - Englneerlng7062 .Prof. Fees - Legal7063 .Lien Gosts7064 .Prof. Fees - Audit7065 .Prof. Fees - Other7066 . Gollection Agent Expense7075 .lnsurance Clalm Payments7081 . Legal Advertlsing7082 .Dues & Subscrlptlons7088 .Tralnlng & Semlnar ExPense7093 .Bank Chargee7098 . Bond lssue Expense7099 . Misc. Expense -Admln.

Total Expense

Net Ordinary Income

Other lncome/ExpenseOther Expense

8100 . Interest Expense8110 'lnterest Expense - Loans8320 .Loss on Sale ofAsset8420 .Amortization - Loan Fees

10,362,842.74 17,524,000-00 -7,161,15't.26

^er:15::,Lll637.144.65

49,1.71

30,0s3.26

4,503.08

64,037.50

612,417.75

17,2U.8727,862.37

62,060.05

68,743.17

292,846.09

1,014,651.80

az,ias.q217,104.W

332,9s4.05

35,980,58

s,417.75

225,610.50

0.00

393.82

7,500.00

90,997"50

260,377.38

33,249.00

16,500.00

141,427.62

0.00

8,055259,632.95

3,687.00

11,048.93

2,920.00

203.270-fi40,6ES.21

-__ggq'l__50,000.00

1,500.00

45,000.00

7,000.00

79,000.00

965.000.00

29,m0.00,10,000.00

90,000,00

160,(X)0.00

440,000.00't,$40,000.00

105,000.00

295,(n0.00480,000.00

55,000.00

25,000.00

284,000.00

1,000.00

500.00

10,000.00

125,0U).00

225,000.00

60,000.00

16,500.(x)

450,000.00

500.00

50,000.00

15,000.00

7,000.00

100,000.00

500.00

400,m0.00150,000.00

S Ovot Budget v..ol!ucg9!.

71.3%

33.0%

66.806

6,f.3%

81j%63.5%

59.406

69.7%

69.0%

43.0%

66.6%

65.9%

59.8%

83.8%

69.,t%

65.4c/o

37.7olo

79.1%

0.0%

78.8o/o

75.0%

72.86/o

11s.7%

55.4%

100.0%

32.1o/o

0.0016

'17.s%

u.20h52.7Yn

11.096

584.0%

50.8%

27.1o/o

59.1!6

-12,855.35

-t,005.29-14,946.74

-2,195.52

-1{,962,50

-352,552.25

-'t 1,765"13

-12,137.63

-27,939.95

-91,256.83

-147,'t53.91

-525,348.20

42,2U.53-47,895.t0

-147,045.95

-19,019.42

-15,582.21

-58,389.50

-1,000.00-106.18

-2,500.00

-34,002.50

35,377.3E-26,751.00

0.00

-305,572.38

-5{n.00

41,044.75-5,367.05

-3,313.00

-88,951.07

2,420.4O

-196,729.50-109,310.79

8,885,714.56

194.13

1,810,767.37

0.00

0.00

5,902,0S9.00

5(D.00

2,887,035.00

0.00

0.00

2,983,615.56

-305.87

-1,056,287.63

0.00

0.00

.l 50.6ort

38.8%

63.?c/e

0.0t/6

0.0%

Pagr 2

03/18116

Accrurl Ba:is


April 2015 through January 2016

I'[i|0 . Amortizatlon - Bonds8610 . Depreclation Expense

Total Other Expense

Net Other lncome

Nct lncoma

-lrylr!:J-"Ilx _l-Tl$t --94,670.63 28,300,00

2,,106,637"00 3,500,000.00

t o"9._.8_yqq{. -1_9f F!,gseJ

66.370.63 33,1.5%

-1,093,362.20 68.8%

,r,312269.93 6,395,835.00 -2.083,565.07 67.1%

-{,312,269.93 €,395,835.00 2,083,565.07 67.10h

d573,444.$ 4St,736.00 5,067,180.63 -926.3%

Pege 3

SCHEDULE 4.05(c)

LIABILITIES

(v)

l. Withdrawal Liability

2. Obligations to employees described on Schedule 4.12(d) (all of which constituteHxcluded t,iabilities).

SCHEDULE 4.06

EXCEPTIONS TO ABSENCE OF CERTAIN CHANGES OR EVENTS

Section 4.06(bxi)

l.

Section 4.06(h)

l.

2.

3.

SCIIEDULE 4,07

TAX MATTERS

None

SCHEDULE 4.08

REAL PROPERTY(a)(i) Owned Real Property:

1. Wastc Water Treatment PlantCedar Avenue & Breck StreetScranton, PA 18505

o 'l'he Real Property described above as item I is subject to the possible conflictingownership rights of D&L Realty, its succcssors and assigns, as noted on boundarysurvey prepared by John M. Hennemuth, dated May 22,2012, F'ile No. 40L4,Drawing Number E-19-12, which possiblc conflicting ownership rights shall beCured prior to Closing in accordance with the terms of Article VI of theAgreement.

2. Keyser Valley Pumping Station, Luzerne Street, Scranton, PA

3. Middle Street Pumping Station, Middle Street, Scranton, PA

4. 'lhc below improvements and facilities (which constitute Iiquipment and Machineryincluded in the Acquired Assets) arc owned by the Seller but are located on parcels ofOwned Real Propcrty which are, as of the Effective Date, owned by the City (suchparcels constituting the City-Owned Real Property as defined in the Agreement at Section6.02(d) and by refcrence to this Schedule 4.08), and which City-Owned Real Property, as

of Closing and pursuant to Section 6.02(d), will constitute Owned Real Property of theSeller included in the Acquired Assets with respect to which the Seller will, as of theClosing l)ate, convey the same to Buyer at Closing as ptovided in Article VI oftheAgreement:

a. Dorothy Street Pumping Station, Dorothy Strect, Scranton, PAb. Myrtle Street Pumping Station, Myrtle Street and Richter Avenuc, Scranton, PAc. Parrott Avenue Pumping Station, Parrott Avcnue and Albert PL, Scranton, PAd. Shawnee Avenue Pumping Station, Shawnee Avenue, Scranton, PA

(aXii) Leased Real Propcrty:

l. Lease dated April 1,20L2, by and between Seller, as tenant, and ATR Properties, LLC, as

landlord, goveming the Leased Real Property located at3l2 Adams Avenue, Scranton,Pennsylvania.

SCHEDULE 4.09(a)

EQUIPMENT AND MACHINERY

l. Vchicles:

# YEAR MAKE TYPE ylN

2 2004 STERLING VACTOR TRUCK 2FZHATAK64AM76431

3 2001 MACK RD688 DUMP TRUCK 1M2P267CO2M062842

4 1987 CHEVROLET KODIAK DUMP TRUCK 1GBP7D1Y6HV1O9O37

5 1999 CROSS COUNTRY TRIAXLE TRAILER 431FS182XX1001 131

6 2AO1 CAM TRAILER 4YUUF161X1T004026

7 2005 GHEVROLET 25OO SILVERADO 1GCH24015E124648

8 2006 FORDE45O CUBE VAN/CAM DIESELW/GEN 1 FDXE45P26HB341 07

I 2006 FORD F25O TRUCK 1FTNF21506EB5774lj

10 2006 FORD F25O TRUCK 1 FTNF21 5X6E455075

11 2006 FORD F25O TRUCK 1 FTNF21 546EA55069

12 2007 STERLING LTgsOO DUMP TRUCK 2FZHAZCV17AY15238

13 2008 FORD F55O TRUCK DIESEL 1FDAW57RO8EA872O4

14 2008 CROSS COUNTRY TRAILER FOR SKID STEER 431 FS142981000246

15 2008 FORD F35O TRUCK 1FDWF37538ED00170

16 2008 FORD ESCAPE 1 FMCU92268KE37983

17 2008 CHEVROLET 35OO CUTAWAY VAN 1G8JG31r(X81109304

18 2008 FORD F25O TRUCK 1 FTNF215888E53758

19 2008 FORD F25O TRUCK 1 FTNF21 5X8EE53759

20 2007 MACK TRIru(LE DUMP TRUCK 1M2AT13C57M001781

21 2009PETERBILT MOD340 GAPVAX MC SERIES VACTOR 2NPRLNOX4gM787682

22 2010 FREIGHTLINER STEDT MOD CBCgsO CLAM TRK 1 FVACTBS4ADAP8436

23 2009 CHEVROLET SILVERADO 25OO HD 1 GCHK44K69F125806

24 2009 CHEVROLET SILVERADO 25OO HD 1GCHK44K79E126968

25 2007 FORD E45O & 2 SUPERVIS]ON CAMS 1 FDXE4sP27DA95 1 55

26 2011 CHEVROLET EQUINOX 2CNFLCECo86396328

27 2011 CHEVROLET SILVERADO 25OO HD IGCOIO/CG8BF211916

29 2010 BRI-MAR EH825-24 TRATLER (245ooLB GVVV) 43YDC3100AC077683

30 2012 CHEVROLET SILVERADO 25OO HD 1GCoKVCG0C7273519

31 2012 CHEVROLET TRAVERSE 1GNKVEEDXCJa8?740

32 2012 MACK GUT13TANDEM DUMPTRUCK 1M2AX04C3CM01403s

33 2012 CHEVROLET SILVERADO 35OO DUMP TRUCK 1 G83KZCLoCFI 98408

34 2012 CHEVROLET SILVEMDO 35OO UTIL TRUCK 1 G83KZCL2CF200269

35 N/A N/A CAMERA UPGRADE TRK #16 N/A

36 2013 KENWORTH VACTOR 21OO PLUS TRUCK 1 NKDL7OXXDJ3s7120

37 NIA N/ACAMERA UPGRADES TRKS #16 &#43 N/A

38 2015 GMC TERRAIN 2GKFLVEK1 F6141916

39 2015 GMC TERRAIN 2GKFLVEKgF6141341

41 2015 FORD F25O TRUCK 1 FTBF2B6XFE855266

42 2015 FORD E35O CUTAWAY 1FDWE3FL4FDAOsOg7

43 2015 FORD E35O CUTAWAY 1FDWE3FL6FDAO5O98

44 2015 FORD E35O CUTAWAY lFDWE3FLBFDAO5O99

46 2015PETERBILT MOD348 GAPVAX MC SERIES VACTOR 2NP3JLOXXFM294535

47 2015 MACK GU713 DUMP TRUCK 1M2AX04CXFM025120

49 2010 GMC TERRATN (USED) 2CTFLCEWoA6247077

50 2013 GMC TERRATN (USED) 2GKFLVEK3D6284329

51 2016 FORD F25O TRUCK 1 FTBF2B61GEB973O9

52 2016 FORD F25O TRUCK 1 FTBF2B68GE89731O

I r.

I 2016

| rono

I rzso rRUcK

I trrerzeoxcneszst

I

2. Inactive Vehicles:

3. Miscellaneous Equipment:

SSA# YEAR MAKSMODEL TYPE VIN

3 2006 FORD F25O PICKUP 1 FTNF215X6EA55O57

11 2006 FORD F25O PICKUP 1 FTNF21546EA55069

35 2006 FORD F25O PICKUP 1 FTNFz1506E857744

t YEAR MAKE TYPE VIN

3 2006 JOHN DEERE 41OG BACKHOE T0410GX960813

4 2007 TCM FG25T3 FORKLIFT A,'H502022

6 2007 EZ€O WORKHORSE GOLF CART

7 2008 NEW HOLLAND NL{85 SKID STEER N8M465683

8 2009 JOHN DEERE 41OJ BACKHOE T0410JX17523/l

I 2009 INTERNATIONALSCHWARZE ATOOO STSWEEPER 1HTMMMN29H141336

10 2009JOHN DEEREMOTOR RUNS SWEEPER UNIT 'PART OF SWEEPER"

11 2009 TAKEUCHI T8175 EXCAVATOR 17516643

12 2009 ATLAS COPCO COMPRESSOR & BREAKER HOP031997 &72976

13 2010 WACKER RD12A-90 RIDE ON ROLLER 5927880

14 2012 JOHN DEERE 544K4WD LOADER 1DW544ICCAE646141

15 2013 JOHN DEERE 13OGL EXCAVATOR 1 FFI 30GXJCE0401 1 5

16 2016 HONDA PIONEER SXSTOOM2G ATV 1HFVE0224G4201253

See also attached miscellaneous equipment list.

Equlpment

Equipment LlstScranton Sewer

AveraType Locatlon Department Metered Units Per Day

AD-BL-AR-K-1 - Number BL AD

aeration blower

AD-BL-AR-K-2 - Number BL ADaeration blower

AD-BL-AR-K-3 - Number BL AD

three aeration blower

AD-BL-AR-K4 - Number BL ADaeration blower

AD.BLDG.BMB. BLDG AD

BASEMENT OF MAIN

BUILDING

AD-BLDG.BR - BLO\A/ER BLDG ADROOM

AD.BLDG.HVA - HIGH BLDG ADVOLTAGE AREA

AD-BLDG-ORMB. BLDG ADOPERATORS ROOM

AD-BLDG-PG - PIPE BLDG AD

GALLERY NUMBERS 1 23AD.CP-AR-BLO1.C. CP AD

NUMBER 1 MAIN

COUPLER

AD-CP-AR-BLO2.C - CP AD

NUMBER 2 MAIN

COUPLER

AD.CP-AR-BLO3-C - CP ADNUMBER 3 MAIN

COUPLER

AD-CP.AR-BLO4.C - CP AD

NUMBER4 M'AIN

COUPLER

AD-MO.AR.BLO1.A. MO AR

NUMBER 1 MAIN

No Miles 0.00

No Miles 0.00

No Miles 0.00

No Miles 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0.00

MOTOR

AD.MO.AR.BLO2-A - MO ADNUMBER 2 MAIN

MOTOR

No 2 0.00

AD-MO-AR-BLO+A- MO AD No 2 0.00

NUMBER4 MAINBLOWERAD-PE-PO-SCADA - PE AD No Hours 0.00

SYSTEM

AD-PU-PO.CIRHT - PU AD No Miles 0.00CIRCULATING HEAT

MAIN BUILDING

AD-PU.PO-SMP - SUMP PU AD NO 2 O.OO

PUMP PIPE GALLY

AD-SY-PO-STRN1 - SY AD No Hours 0.00

MANUAL STRAINERNUMBER 1

AD-SY-PO-STRN2 - SY AD No Hours 0.00

MANUAL STRAINERNUMBER 2

AR-GB-AR.RSLPIC - GB AR NO 2 O.OO

NUMBER 1 RETURN

ACTIVATED SLUDGE

GEAR BOX

AR-GB-AR-RSLP2C - GB AR No 2 0.00

NUMBER 2 RETURN

ACTIVATED SLUDGEGEAR BOX

AR-GB-AR-RSLP3C. GB AR NO 2 O.OO

NUMBER 3 RETURN

ACTIVATED SLUDGE

GEAR BOX

AR.GB-AR-RSLP4C. GB AR NO 2 O.OO

NUMBER 4 RETURN

ACTIVATED SLUDGEGEAR BOX

AR.GB.AR-RSLPSC - GB AR NO 2 O.OO

NUMBER 5 RETURN

ACTIVATED SLUDGE

GEAR BOX

AR.GB-AR-RSLP6C - GB AR

NUMBER 6 RETURN

ACTIVATED SLUDGE

GEAR BOX

AR.MO-AR.RSLP1A. MO AR

NUMBER 1 RETURN

ACTIVATED SLUDGE

MOTOR

AR.MO.AR-RSLP2A. MO ARNUMBER 2 RETURN

ACTIVATED SLUDGE

MOTOR

AR.MO.AR-RSLP3A - MO ARNUMBER 3 RETURN

ACTIVATED SLUDGE

MOTOR

AR-MO-AR.RSLP6A. MO ARNUMBER6 RETURN

ACTIVATED SLUDGE

MOTOR

AR-MO.AR.RSLP4A- MO AR NO 2 O.OO

NUMBER 4 RETURN

ACTIVATED SLUDGE

MOTOR

AR-MO-AR-RSLPSA - MO AR No 2 0.00

NUMBER 5 RETURN

ACTIVAETD SLUDGE

MOTOR

No 2 0.00

No 2 0.00

No 2 0,00

No 2 0.00

No 2 0.00

AR-PU-AR-RSLPIU - PU AR No 2 0.00

NUMBER 1 RETURN

ACTIVATED SLUDGEPUMPAR.PU.AR.RSLP2U - PU AR NO 2 O.OO

NUMBER 2 RETURN

ACTIVATED SLUDGEPUMPAR-PU-AR-RSLP3U - PU AR No 2 0.00

NUMBER 3 RETURN

ACTIVATED SLUDGEPUMPAR.PU.AR.RSLP4U - PU AR NO 2 O.OO

NUMBER 4 RETURN

ACTIVATED PUMP

AR-PU-AR-RSLP5U - PU AR No 2 0.00

NUMBER 5 RETURN

ACTIVATED PUMP

AR-PU-AR-RSLP6U - PU AR No 2 0.00

NUMBER 6 RETURN

ACTIVATED PUMP

AR-PILPC-WSTIDO - PU AR Aeration Header No Hours 0.00

NUMBER 1 Dorr-Oliver Tunnel

Waste Activated Sludge

Pump

AR-PU.PC-WSTIPN - PU AR

NUMBER 1 Penn ValleyWaste Activated Sludge

Pump

AR-PU.PC-\A/ST2DO. PU AR

NUMBER2 Don-OliverWasteActivated Sludge

Pump

No Hours 0.00

Aeration Header No Hours 0.00Tunnel

AR-SY-AR-AER - SY AR No Hours 0.00

SYSTEMS

AR.SY.AR.DIF1.U. SY AR NO 2 O.OO

NUMBER 1 FINE BUBBLE

DIFFUSER

AR.SY-AR-D)F2-U - SY AR NO 2 O.OO


DIFFUSER

AR-SY-AR-DIF3-U - SY AR No 2 0.00


DIFFUSER

AR-SY-AR.DIF+U. SY AR NO 2 O,OO


DIFFUSER

AR-SY.AR-RSBXIU - SY AR NO 2 O.OO

NUMBER 1 RAS

DIVERSION BOX

AR-SY-FC - Ferric Chloride Tail End of No 2 0.00

System Aeration Tanks

AR-TK-AR-1A - Fine TK AR No 2 0.00

Aeration System Tank 1A

AR-TK-AR-1B - Fine TK AR No 2 0.00

Aeration System Tank 1B

AR-TK.AR.2A - Fine TK AR NO 2 O.OO


AR;TK-AR-2B - Fine TK AR No 2 0.00

Aeration System Tank 28

AR-TK-AR-3A - Fine TK AR No 2 0.00


AR-TK-AR-3B - Fine TK AR No 2 0.00


AR.TK-AR-4A - FinE TK AR NO 2 O.OO


AR.TK.AR.4B - Fine TK AR NO 2 O.OO


AR-TK-AR-AER01 - TK AR No Hours 0.00

AERATION TANK 1


AERATION TANK 2


AEMTION TANK 3

AR.TK.AR-AERO4 - TK AR NO HOUTS O.OO

AERATION TANK4

CB.BLDG.ALL. CL2 BLDG CB NO 2 O.OO

BUILDINGALL ROOMS

CB-SY-CF-CL2 - SY CB No Hours 0.00

SYSTEMS

CB-SY.CL.ALERT - SY CB NO HOUTS O.OO

CHLORINESYSTEM ALERT

CB-SY-CL-AZTEC - SY CB No Hours 0.00

CHLORINE

SYSTEM AZTECANALYZER

C&SY-CL-CL2 - SY CB No Hours 0.00

CHLORINATOR

CB-SY-CL-GMAN - CL2 SY CB No Hours 0.00

DISINFECTION SYSTEM

GAS MANIFOLD

CB-SY-CL-PCL21- SY CB No 2 0.00

NUMBER 1

CB-SY-CL-PCL22- SY CB No 2 0.00

NUMBER 2CHLORINATORC&SY-CL-PH/ORP - SY CB No Hours 0.00

CHLORINESYSTEM PH/ORP

INDICATOR AND

TRANSMITTER

CB-SY-CL-SNSR - SN CB No Hours 0.00

CHLORINE SENSOR

CB-SY-CL-TON - Chlorine SY CB No Hours 0.00

Disinfection System &

Dioxide Dechlorination

System Ton Contain

CB-SY-CL-VACRG - #2 SY CB No 2 0,00

VACUME R.EGULATOR

CL-MO-CL-MASM- MO CL No 2 0.00

MASS-ASPIRATOR SELF

ASPIMTING AERATOR

MOTOR

CT.MO.CL.SUBX. MO CT

SUBMERSIBLE MIXER

MOTOR

No 2 0.00

CT-SP-FC-TNKSMP - SP CT No Hours 0.00

TANK SAMPLER

CT-SY-CL-DEF1-U - SY CT No 2 0.00

DEFOAMERAPPLICATIONCT-SY-CL-MA - SY CT No 2 0.00

MULTI-ASPIRATOR SELF

ASPIRATING AERATOR

SYSTEM

CT.SY-CL.SARTR. SY CT NO 2 O.OO

MULTI-ASPIRATOR SELF

ASPIRATING AERATORSUBMERSIBLEAERATORCT-SY-CL-SUBX - SY CT No 2 0.00

SUBMERSIBLE MIXER

SYSTEM

CT-SY-CL-SUBXCH - SY CT No 2 0.00

SUBMERSIBLE MIXERSEALING CHAMBER

CT-TK-CL-01-U - TK CT No 2 0.00

CL2 CONTACTTANK

CT'TK-CL-02-U - CT CL No 2 0.00

CL2 CONTACTTANK

EF-SY-EF-FLMTR3' SY EF No 2 0.00

METER FOR OUTFALL003Fecalsampling system - Sigma Plant effluent Maintenance/La No Hours 0.00

Pump and related tubing boratory

FT-BC-FC-01-U - BC FT No 2 0.00

FIML BOTTOM

COLLECTOR


FINAL BOTTOM

COLLECTOR

FT-BGFC-03-U - BC Ff No 2 0.00

FINAL BOTTOM

COLLECTOR


FINAL BOTTOM

COLLECTOR

FT-BC-FG0S-U - BC FT No 2 0.00

FINAL BOTTOM

COLLECTOR

FT-BC-FGOB-U - BC FT No 2 0.00

FINAL BOfiOMCOLLECTOR

FT-BGFC-07-U - BC FT No 2 0.00

FINAL BOfiOM

COLLECTOR

FT-BC-FC-08-U -

FINAL BOTTOM

COLLECTOR

FT.CL.FC.BCL1U.NUMBER 1 SURFACE

SCUM COLLECTOR

FT-CL-FC.BCL2U -

NUMBER 2 SURFACE

SCUM COLLECTOR(FINAL)FT-CL.FC-BCL3U -

NUMBER 3 SURFACE

SCUM COLLECTOR(FTNAL)

FT-CL-FC.BCL4U.

NUMBER4 SURFACE

SCUM COLLECTOR

(FTNAL)

FT.CL-FC-SSCLIU -

NUMBER 1 SURFACE

SCUM COLLECTOR(FINAL)FT-CL-FC-SSCL2U .

NUMBER 2 SURFACE

SCUM COLLECTOR(FINAL)FT-CL-FC-SSCL3U -

NUMBER 3 SURFACE

SCUM COLLECTOR(FINAL)FT-CL-FC.SSCL4U -

NUMBER 4 SURFACE

SCUM COLLECTOR(FINAL)FT-GB-FC.FNCLlC -

NUMBER 1 FINAL

CLARIFIER GEAR BOX

FT.GB-FG-FNCL2C -

NUMBER 2 FINAL

CI.ARIFIER GEAR BOX

FT-GB.FGFNCL3C.NUMBER 3 FINAL

No

No

No

No

No

No

No

FT

FT

FT

FT

FT

FT

FT

BC

CL

CL

CL

CL

CL

CL

CL No

No

No

No

FT

FT

FT

FT

CL

GB

GB

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

GB FT No 0.00

CLARIFIER GEAR BOX

FT-GB.FC.FNCL4C - GB FT No 2 O.OO

NUMBER 4 FINAL

CIARIFIER GEAR BOX

FT-GB-FC-SSCLIC - GB FT No 2 0.00

NUMBER 1 SURFACE

SCUM COLLECTORGEAR BOX

FT-GB-FC-SSCL2C - GB FT No 2 0.00

NUMBER 2 SURFACE

SCUM COLLECTOR

GEAR BOX

FT-GB-FC-SSCL3C - GB FT No 2 0.00

NUMBER 3 SURFACE

SCUM COLLECTOR

GEAR BOX

FT-GB-FC-XCOLIC - GB FT No 2 0"00

NUMBER 1 CROSS

CoLLECTOR (FTNAL)

BOX

FT-GB-FC.XCOL2C - GB FT

NUMBER 2 CROSS

CoLLECTOR (FTNAL)

BOX

FT-GB.FC-XCOL3C - GB FT

NUMBER 3 CROSS

CoLLECTOR (FTNAL)

BOX

FT.GB.FC.XCOL4A - GB FT

NUMBER 4 CROSS

CoLLECTOR (FTNAL)

BOX

No 2 0.00

No 2 0.00

No 2 0.00

F|.-MO-FC-FNCLIA - MO FT No 2 0.00

NUMBER 1 FINAL

CIARIFIER MOTOR

FT-MO-FC-FNCL2A - MO FT No 2 0.00

NUMBER 2 FINAL

CI.ARIFIER MOTOR


NUMBER 3 FINAL

CI.ARIFIER MOTOR


NUMBER 4 FINAL

CLARIFIER MOTOR

FT-MO-FC-SSCLIA - MO FT No 2 0.00

NUMBER 1 SURFACE

SCUM COLLECTORMOTOR

FT-MO-FC-SSCL2A - MO FT No 2 0,00

NUMBER 2 SURFACE

SCUM COLLECTORMOTOR

FT-MO-FC-SSCL3A - MO FT No 2 0.00

NUMBER 3 SURFACE

SCUM COLLECTOR

MOTOR

FT-MO-FC-SSCL4A - MO FT No 2 0.00

NUMBER 4 SURFACE

SCUM COLLECTOR

MOTOR

FT-MO-FC-XCOLIA - MO FT No 2 0.00

NUMBER 1 CROSS

CoLLECTOR (FINAL)

MOTOR

FT-MO-FGXCOL2A - MO FT No 2 0.00

NUMBER 2 CROSS

CoLLECTOR (FtNAL)

MOTOR

FT-MO-FC-XCOL3A - MO FT No 2 0.00

NUMBER 3 CROSS

CoLLECTOR (FTNAL)

MOTOR

FT.PT-DR.CD.CLN1 . DR FT PT NO 2 O.OO

PRIMARYAND FINAL

COLLECTOR DRIVES 1

FT.PT-DR.CD.CLN2. DR FT PT NO 2 O.OO

PRIMARYAND FINAL

COLLECTOR DRIVES 2

FT-PT-DR-CD-CLN3 - DR FT PT NO 2 O.OO

PRIMARYAND FINAL

COLLECTOR DRIVES 3

FT-PT-DR-CD-CLN4 - DR FT PT No 2 0.00

PRIMARYAND FINAL

COLLECTOR DRIVES 4

FT-PU-FC-SCM1 - FIlllAL PU FT No Hours 0,00

SCUM PUMP

FT-PU-FC-SCP - FINAL PU FT No 2 0.00

SCUM PUMP

FT.PU.FC.SW1U - PU FT NO 2 O.OO

1 SLUDGE WASTINGPUMPFT-PU-FC-S\A2U - PU FT No 2 0.00

2 SLUDGE WASTINGPUMPFT-PU-FC-SI/V3U - PU FT No 2 0.00

3 SLUDGE WASTING

FT.TK-FC-FNCLIU - TK FT NO 2 O.OO

NUMBER 1 FIMLCI.ARIFIER TANKS

FT.TK-FC-FNCL2U - TK FT NO 2 O.OO

NUMBER 3 FINAL

CI.ARIFIERTANKS

FT-TK-FC-FNCL3U - TK FT No 2 0.00

NUMBER 4 FINAL

CLARIFIER TANKS

FT-TK.FC.FNCL4 - TK FT NO 2 O.OO

NUMBER 4 FINAL

CI-ARIFIER TANKS

FT.XL-FC-XCOLIU - XL FT NO 2 O.OO

NUMBER 1 CROSS

COLLECTOR F]NAL

FT-XL-FC-XCOL2U - XL FT NO 2 O.OO

NUMBER 2 CROSS

COLLECTOR FINAL

FT-XL-FGXCOL3U - XL FT No 2 0.00

NUMBER 3 CROSS

COLLECTOR FINAL

FT-XL-FGXCOL4U - XL FT No 2 0.00

NUMBER 4 CROSS

COLLECTOR FINAL

HW-BLDG-ALL - SCREEN BLDG HW No 2 0.00AND GRIT ALL LEVELS

HW-BLDG-MPR - BLDG HW No 2 0.00AND GRIT MAIN PUMP

ROOM

HW-BLDG-PPR - BLDG HW No 2 0.00PUMP ROOMS

HW-BS-101-1-A- BAR BS HW No 2 0.00SCREEN

HW-B$101-1-C - BAR MO HW No Hours 24.00

SCREEN DRIVE MOTOR

HW-BS-101-1-U - BS HW No 2 0.00AUTOMATIC BARSCREENHW-BS-101-2-A- BAR BS HW No 2 0.00

SCREEN

HW-BS-101-2-C - BAR MO HW No Hours 24.00

SCREEN

HW-BS-101-2-U - BS HW No 2 0.00AUTOMATIC BARSCREENHW-DR-IT-CSD - DR HW No 2 0.00CONSTANT SPEEDDRIVEHW-DR.IT.DGR1C - DR HW No 2 O.OO

NUMBER 1 GRAVIWDEGRITTER DRIVE

HW.DR.IT.DGR2C - DR HW No 2 O,OO

NUMBER 2 GRAVITYDEGRITTER DRIVE

HW-DR-IT-GRCLIC - DR HW No 2 0.00NUMBER 1 GRIT

CI-ASSIFIER DRIVE

HW-DR-IT-GRCL2C - DR HW No 2 0.00

NUMBER 2 GRIT

CI,ASSIFIER DRIVE

HW.DR.IT-VSD1U. DR HW No 2 O.OO

NUMBER 1 VARIABLE

SPEED DRIVE

HW.DR.IT.VSD2U - DR HW NO 2 O.OO

NUMBER 2 VARIABLE

SPEED DRIVE

HWDR-IT-VSD3U - DR HW No 2 0.00

NUMBER 3 VARIABLESPEED DRIVE

HW-GB-IT-NaOH - GB HW No Hours 0.00

CHEMICAL METERING

PUMP GEARBOX

HW-MO-IT-DGR1A - MO HW No 2 0.00

NUMBER 1 GMVTTYDEGRITTER MOTOR

HW-MO-IT-DGR2A- MO HW No 2 0.00

NUMBER 2 GRAVITY

DEGRITTER MOTOR

HW-MO-IT-GRCLIA - MO HW No 2 0.00

NUMBER 1 GRIT

CLASSIFIER MOTOR

HW-MO-IT-GRCL2A- MO HW No 2 0.00

NUMBER2 GRIT

CISSS1FIER MOTOR

HW.MO.IT.PRSLIA- MO HW NO 2 O,OO

NUMBER 1 PRIMARY

SLUDGE PUMP MOTOR

HW-$/|O-|T-PRSL2A- MO HW No 2 0.00

NUMBER 2 PRIMARY

SLUDGE PUMP MOTOR

HW-MO-IT-PRSL3A- MO HW No 2 0.00

NUMBER 3 PRIMARY

SLUDGE PUMP MOTOR

HW.MO.IT-PRSL4A- MO HW NO 2 O.OO

NUMBER4 PRIMARY

SLUDGE PUMP MOTOR

HW-PE-PM.EHST - PE HW NO 2 O.OO

ELECTRIC HOIST GRIT

HW-PE-PO-A/C-HT - Air PE HW No Miles 0.00

Heating Unit

HW-PU-IT-GRT1 - GRIT PU HW No Hours 0.00

PUMP #1

HW-PU-|T-GRT2 - GRIT PU HW No Hours 0.00PUMP #2

HW-PU-IT-MA!N1 - MAIN PU HW No Hours 0.00PUMP NUMBER 1

HW-PU-|T-MA|N2 - MAIN PU HW No Hours 0.00PUMP NUMBER 2

HW-PU-IT-MA|N3 - MAIN PU HW No Hours 0.00

PUMP NUMBER 3

HW-PU-IT.MAIN4 - MAIN PU HW NO HOUrS O.OO

PUMP NUMBER 4

HW-PU-IT-NaOH - PU HW No Hours 0.00

CHEMICAL METERING

PUMP NaOH

HW.PU-IT-PRPU4U - PU HW NO 2 O.OO

NUMBER 4 PRIMARY

SLUDGE PUMP

HW.PU-IT-PRSLIU - PU HW NO 2 O.OO

NUMBER 1 PRIMARY

SLUDGE PUMP

HW.PU.IT-PRSL2U - PU HW NO 2 O,OO

NUMBER2 PRIMARYSLUDGE PUMP

HW-PU-IT-PRSL3U. PU HW NO 2 O.OO

NUMBER 3 PRIMARY

SLUDGE PUMP

HW-PU-IT-SMP - Sump PU HW No 2 0.00

Pump In Main orBuilding

HW-PU-PO-CIRHT- PU HW No Hours 0.00CIRCUI.ATING HEAT

SCREEN AND GRIT

BUILDING

HWPU-PO-SMPGS - PU HW No 2 0,00

PUMP AT GRIT SLURRY

PUMPS

HW-PU-PS-PRIST - PU HW No Hours 0.00

PRIMARY PUMPSTATIONHW-PV-LO-N103 - #103 PV HW Yes Miles 0.10

GMC TRIAXLE

HW-SY-IT-DGRIU - SY HW No 2 0.00

NUMBER 1 GRAVITYDEGRITTER

HW-SY-IT-DGR2U - SY HW No 2 0.00

NUMBER 2 GMVITYDEGRITTER

HW-SY-IT-GRT1 - SY HW No Hours 0.00

1 GRIT LINE

HW-SY-IT.MAIN - MAIN SY HW NO 2 O.OO

PUMP SYSTEMS

HW.SY-IT.PRSLIC - SY HW NO 2 O.OO

NUMBER 1 PRIMARY

SLUDGE PUMP VOLUTE

HW-SY-IT-PRSL2C - SY HW No 2 0.00

NUMBER2 PRIMARYSLUDGE PUMP VOLUTE

HW-SY-IT-PRSL3C - SY HW No 2 0.00

NUMBER 3 PRIMARYSLUDGE PUMP VOLUTE

HW-SY-|T-PRSL4C - SY HW No 2 O.O0

NUMBER 4 PRIMARYSLUDGE PUMP VOLUTE

HW-SY-IT-QMTR - GAS SY HW No 2 0.00

METER - QUAD SCAN

HW-SY-IT-RDBI - SY HW No Hours 0.00

1 ROTATING DEBRIS

BRUSH

HW.SY-IT-RTB2. SY HW2 ROTATING DEBRIS

BRUSH

HWSY-IT-SMPLR. SY HW

SAMPLER SCREEN AND

No Hours 0.00

No Miles 0.00

GRIT

HW-SY-ITNaOH - SY HW No Hours 0.00

CHEM]CAL METERING

PTFE DIAPHMGM AND

DISC

HW-TK-IT-GRCLIU - TK HW NO 2 O.OO

NUMBER 1 GRIT

CLASSIFIER

HW-TK-IT-GRCL2U - TK HW No 2 0.00

NUMBER 2 GRIT

CLASSIFIER

Laboratory Vacuum Pump - Vaccum Pump Rear Wall of Maintenance No Hours 0.00

Precison Vaccum Pumps Blower Room Department

ModelDD-310

OT-GT.PO.PRIGT. GT OT NO 2 O,OO

OVERFLOWPRIMARYGATE

OT-PU-PS-DTHY - PU OT No Hours 0.00

DOROTHY PUMPSTATIONOT-PU-PS-FRD - PU OT No Hours 0.00

AVE PUMP STATION

OT-PU-P$KYSR - PU OT NO HOUTS O.OO

VALLEY PUMP STATION

OT-PU-PS-MDL - MIDDLE PU OT No Hours 0.00

ST PUMP STATION

OT-PU-PS-MYRT - PU OT No Hours 0.00

ST PUMP STATION

OT-PU-PS-PAR - PU OT No Hours 0.00

AVE PUMP STATION

OT-PU-PS-SHW- PU OT No Hours 0.00

PT-BC-PC-01-U - BC PT No 2 0.00

1 BOTTOM COLLECTORS

PT-BC-PC-02-U - BC PT No 2 0.00

COLLECTORS

PT-CL-PC-SSCLIU - CL PT No 2 0.00

NUMBER 1 SURFACE

SCUM COLLECTOR

(PRIMARN

PT-CL-PC-SSCL2U - CL PT No 2 0.00

NUMBER 2 SURFACE

SCUM

CoLLECTORS(PRTMARY)


NUMBER 3 SURFACE

SCUM

CoLLECTORS(PRIMARY)


NUMBER 4 SURFACE

SCUM

CoLLECTORS(PRTMARY)

PT.DR-CD.CLN1. DR PT NO 2 O.OO

TREATMENTDRIVE 1

PT-DR-CD.CLN2 - DR PT NO 2 O.OO

TREATMENTDRIVE 2

PT-DR-CD-CLN3 - DR PT No 2 0.00

TREATMENTDRIVE 3

PT-DR-CD-CLN4 - DR PT No 2 0.00

TREATMENTDRIVE 4

PT-GB-PC-BCLIC - GB PT No 2 0,00

NUMBER 1 PR]MARY

BOTTOM COLLECTORS(sludge)GEAR BOX

PT-GB-PC-BCL2C - GB PT No 2 0.00

NUMBER 2 PRIMARY

BOTTOM COLLECTORS(sludge) GEAR BOX

PT-GB-PC-BCL3C - GB PT NO 2 O.OO

NUMBER 3 BOTTOM

COLLECTORS (sludge)

GEAR BOX

PT-GB-PGBCL4C - GB PT No 2 0.00

NUMBER 4 BOTTOM

COLLECTORS (sludge)

GEAR BOX

PT.GB.PC.SSCL1C. GB PT

NUMBER 1 SURFACE

SCUM COLLECTOR

BOX

No 2 0.00

PT-G&PGSSCL2C - GB PT No 2 0.00

NUMBER 2 PRIMARY

SURFACE SCUM

COLLECTOR GEAR BOX

PT-GB-PGSSCL3C - GB PT No 2 0.00

NUMBER 3 PRIMARY

SURFACE SGUM

COLLECTOR

PT-GB-PC-SSCL4C - GB PT No 2 0.00

NUMBER 4 PRIMARY

SURFACE SCUM

COLLECTOR GEAR BOX

PT-GB-PGXCOLIC - GB PT No 2 0.00

NUMBER 1 CROSS

COLLECTOR GEAR BOX

PT-G&PC-XCOL2C - GB PT No 2 0.00NUMBER 2 CROSS

COLLECTOR GEAR BOX

PT-GB-PGXCOL3C - GB PT No 2 0.00

NUMBER 3 CROSS

COLECTOR GEAR BOX

PT-GB-PGXCOL4C - GB PT NO 2 O.OO

NUMBER4 CROSS

COLLECTOR GEAR BOX

PT-MG.PC-SSCL2A- MO PT No 2 0.00

NUMBER 2 PRIMARY

SURFACE SCUM

COLLECTOR MOTOR

PT-MO-PC-BCL1A - MO PT No 2 0.00

NUMBER 1 PRIMARY

BOTTOM

COLLECTORS(sludge)

MOTOR

PT-MO.PC-BCL2A.NUMBER 2 PRIMARY

BOTTOM COLLECTOR(sludge) MOTOR

PT-MO-PC.BCL3A-NUMBER 3 BOTTOM

COLLECTORS (sludge)

MOTOR

PT.MG,PC-BCL4A.NUMBER4 BOTTOM

COLLECTORS (sludge)

MOTOR

PT-MO-PGSSCLIA.NUMBER 1 PRIMARYSURFACE SCUM

COLLECTOR MOTOR

PT-MO-PGSSCL3A -

NUMBER 3 PRIMARY

SURFACE SCUM

COLLECTOR MOTOR

PT,MO.PC-SSCL4A -

NUMBER 3 PRII,|ARYSURFACE SCUM

COLLECTOR

PT-MO-PC.XCOL1A.NUMBER 1 CROSS

COLLECTOR MOTOR

PT-MO-PC-XCOL2A -

NUMBER 2 CROSS

COLLECTOR MOTOR

PT.MO-PC.XCOL3A.NUMBER 3 CROSS

COLLECTOR MOTORPT.MO-PC.XCOL4A.NUMBER4 CROSS

COLLECTOR MOTOR

PT-PU-PC-PRSPIU .

NUMBER 1 PRIMARYSCUM PUMP

MO

MO

MO

MO

MO

MO

MO

MO

MO

MO

PT

PT

PT

PT

PT

PT

PT

PT

PT

PT

No

0.00No

0.00No

No

No

No

0.00No

0.00No

0.00No

No

0.00

0.00

0.00

0.00

0.00

PU PT No 0.00

PT-PU.PC.PRSP2U -

NUMBER 2 PRIMARY

SCUM PUMP

PT-SC-PC-o1-U -

1 BOTTOM SLUDGE

COLLECTORS

PT-SC-PC-02.U -

2 BOTTOM SLUDGE

COLLECTORS

PT-SC-PC-03-U -

3 BOTTOM SLUDGE

COLLECTORS

PT-SC-PC-O+U -

SLUDGE COLLECTORS

PT.TK-PC-PRCL1 .NUMBER 1 PRIMARY

CI.ARIFIERS

PT-TK-PC-PRCL2.NUMBER 2 PRIMARY

CLARIFIERS

PT-TK.PC-PRCL3.NUMBER 3 PRIMARYCLARIFIERS

PT-TK-PC-PRCL4.NUMBER4 PRIIilARYCISRIFIERS

PT-XL-PC-XCOLIU .NUMBER 1 CROSS

COLLECTOR

PT.XL.PC.XCOL2U.NUMBER 2 CROSS

COLLECTOR

PT.XL.PGXCOL3U.NUMBER 3 CROSS

COLLECTOR

PT.XL-PC.XCOL4U -

NUMBER 4 CROSS

COLLECTOR

PU PT

PT

PT

PT

PT

PT

No

No

No

No

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

sc

sc

SC

SC

TK

TK

i

No

No

NoPT

No

No

No

PT

PT

PT

PT

TK

TK

XL

XL No

NoXL PT

XL PT No

PTFT-SY-\ /R-CLN 1- \A/EIRS PRIMARYAND OPERATIONS No 2 0.00

PRIMARY AND FINAL FINAL TANKSWEIRS

PTFT-SY-WR-CLN 2 - \A/EIRS PRIMARYAND OPERATIONS No 2 0.00

PRIMARYAND FINAL FINALTANKSV\IEIRS

PTFT-SY-WR-CLN 3- \A,EIRS PRIMARYAND OPERATIONS No 2 0.00

PRIMARY AND FIML FINAL TANKS

\AiEIRS

PTFT-SY-\ JR-CLN 4 - l ,EIRS PRIMARY AND OPERATIONS No 2 0.00

PRIMARY AND FINAL FINAL TANKS

\A'EIRS

SH-AC-101-A - ]NGERSOL MO SH No 2 0.00

RANDAIRMOTOR

SH-AC-101-C - AC SH No 2 0.00

RAND AIRBELT

SH-AC-101-U - AC SH No 2 0.00

RAND AIRCOMPRESSORSH-AG102-A- INGERSOL MO SH No 2 0.00

RAND AIRMOTOR

SH-AG102-C - AC SH No 2 0.00

RAND AIRBELT

SH-AC-102-U - AC SH No 2 0.00

RANDAIRCOMPRESSORSH-AC-PC-ACOMP - AC SH No 2 0.00

COMPRESSOR#2

No 2 0.00SH-BLDG.BFPR-BELT BLDG SH

FILTER PRESS ROOM

SH-BLDG-BSH - BLDG SH No 2 0.00

BASEMENT SLUDGE

HANDLING

SH-BLDG-CFI-A - BLDG SH No 2 0.00

CONVEYOR BELT ROOM

TO FRONT LOADINGAREASH-BLDG-CSA - CAUSTIC BLDG SH No 2 0.00

AREA

SH-BLDG-IRCR - lR BLDG SH No 2 0.00

COMPRESSOR ROOM

SH-BLDG.LR - LUNCH BLDG SH NO 2 O.OO

ROOM

SH.BLDG.MBS. BLDG SH NO 2 O.OO

INCINEMTOR BUILDING

MAIN, BASEMENT,STAIRSSH-BLDG-MR. MENS BLDG SH NO 2 O.OO

ROOM

SH-BLDG-SR - BLDG SH No 2 0.00

ROOM

SH-BLDG-TR - BLDG SH NO 2 O.OO

ROOM

SH-BP-PG101-A- BELT BP SH No Hours 10.00

FILTER PRESSBEARINGSSH-BP-PC-101-C - BELT BP SH No 2 0.00

FILTER PRESS DRIVE

SH-BP-PC-101-U - BELT BP SH No 2 0.00

FILTER PRESS

SH-BP-PG102-A - BELT BP SH No Hours 10.00

FILTER PRESSBEARINGSSH-BP-PC-102-C - BELT BP SH No 2 0.00

FILTER PRESS DRIVE

SH.BP.PC.1O2-U - BELT BP SH NO 2 O.OO

FILTER PRESS

SH-BP-PC-SYS - BELT BP SH No Hours 0.00

FILTER PRESS SYSTEMS

SH-CL-PC-SURFIU - CL SH No 2 0.00

NUMBER 1 SURFACE

CoLLECTOR O|MED)

SH-CL-PC-SURF2U - CL SH No 2 0.00

NUMBER 2 SURFACE

COLLECTOR

SH-DR-PC-PUG1C - OR SH Yes Hours 24.00

NUMBER 1 PUGMILL

SYSTEM DRIVE (OLD)

SH-GM-PC-SLBL - D-600 GM SH No Hours 0.00

SLUDGE BLENDER

GEARMOTOR

SH-GR-PC-BFP - BFP GR SH No 2 0.00

SLUDGE PUMP GEAR

REDUCER

SH-GR-PC-RrySL - GR SH No Hours 0.00

ROTARY SLUDGE

THICKNER

SH-GR-PC-SLCV26 - GR SH No Hours 0.00

SERPENTIX BELT NEWSIDE SPEED RUDUCER

SH-GR.PC-THKSL - GR SH NO 2 O.OO

THICKENED SLUDGEPUMP GEAR REDUCER

SH-MO-PC-BFP - BFP MO Sh No 2 0.00

SLUDGE PUMP MOTOR

SH-MO-PC-CS1-A - MO SH No 2 0.00

NUMBER 1 CAUSTIC

MOTOR

SH-MO-PC-CS2-A - MO SH

NUMBER 2 CAUSTIC

MOTOR

No 2 0.00

SH-MO-PC-LFS - LIME MO SH No Hours 0.00FEED SYSTEM MOTOR

SH.MO-PC-LFS1 . LIME MO SH NO 2 O.OO

FEED SYSTEM MOTOR

SH-MO-PGPPPIA- MO SH No 2 0.00NUMBER 1 POTASSIUM

PERMANGANATEMOTORSH-MO-PGPPP2A - MO SH No 2 0.00NUMBER 2 POTASSIUM

PERMANGANATEMOTOR

SH-MO-PC-PPP3A - MO SH No 2 O.OO

NUMBER 3 POTASSIUM

PERMANGANATEMOTORSH-MO-PC.PUG1A - MO SH No 2 O.OO

NUMBER 1 PUGMILL

SYSTEM MOTOR (OLD)

SH-MO-PC-RCY - MO SH No Hours 0.00

PUMP MOTOR

SH-MO-PC-RTX - MO SH No Hours 0.00SYSTEM CHOPPERMOTOR

No Hours 0.00SH-MO-PC-SLCV26 - 26" MO SH

SLUDGE CONVEYOR

MOTOR

SH.MO.PC.STR1A. MO SH

NUMBER 1 STRAINERMOTOR

SH-MO.PGSTRzA - MO SH

NUMBER 2 STRAINER

MOTOR

No 2 0.00

No 2 0.00

SH-MO.PC-THKSL- MO SH No 2 0.00

THICKENED SLUDGE

PUMP MOTOR

SH-MO-PO-14/81-A - MO SH No 2 0.00

NUMBER I PLANT

BOOSTER PUMP MOTOR

SH-MO-PO-WB2-A - MO SH No 2 0.00

NUMBER 2 PLANT

BOOSTER PUMP MOTOR

SH-PE-PO-A/C-HT - Air PE SH No Miles 0.00

Unit 1st Floor Sludgehandling Building

SH-PE-PO-HSTA/C - PE SH No Miles 0.00

Hastings Air and Heat Unit

SH-PU-PC.BFP. BFP PU SH No 2 O.OO

SLUDGE PUMP

SH-P|."LPC-BFP1-L - PU SH No 2 0.00

NUMBERl BFPPUMP

SH-PU-PC-BFP2-U - PU SH No 2 0.00

NUMBER 2 BFP PUMP

SH-PU-PC-BFP3-U - PU SH No 2 0.00

NUMBER 3 BFP PUMP

SH-PU-PC-CS1-U - PU SH No 2 0.00

NUMBER 1 CAUSTIC

PUMP

SH-PU.PC.DAF.I-U - PU SH NO 2 O.OO

NUMBER 1 DAF PUMP

SH-PU-PC-DAF2-U - PU SH No 2 0.00

NUMBER 1 DAF PUMP

SH-PU-PC-DAF3-U - PU SH No 2 0.00

NUMBER 3 DAF PUMP

SH-PU-PC-POLY1- PU SH No 2 0.00

NUMBER 1 POLYMER

PUMP

SH-PU.PC^CS2.U - PU SH

NUMBER 2 CAUSTIC

PUMP

SH-PU.PC-POLY2. PU SH

NUMBER 2 POLYMER

PUMP

SH-PU-PC.POLY3. PU SH

NUMBER 3 POLYMER

PUMP

No 2 0.00

No 2 0.00

No 2 0.00

SH-PU-PC-PPPIU - PU SH No 2 0.00

NUMBER 1 POTASSIUM

PERMANGANATE PUMP

SH.PU-PC.PPP2U. PU SH NO 2 O.OO

NUMBER 2 POTASSIUM

PERMANGANATE PUMP

SH-PU-PC-PPP3U - PU SH No 2 0.00

NUMBER 3 POTASSIUM

PERMANGAMTE PUMP

SH.PU^PC-RCY - PU SH NO HOUrS O.OO

PUMP

SH-PU-PC-RTX - PU SH No Hours 0.00

SYSTEM (CHOPPER

PUMPS)

SH-PU-PC-RrySLB - PU SH No Hours 0.00

ROTOARY SLUDGE

THICKNER BERKS

TURBINE PUMP

SH.PU-PC-SLTRIU - PU SH NO 2 O.OO

NUMBER 1 SLUDGE

TMNSFER PUMP

SH.PU.PC-SLTR2U. PU SH NO 2 O.OO

NUMBER 2 SLUDGE

TMNSFER PUMP

SH-PU.PC-SLTR3U - PU SH NO 2 O.OO

NUMBER 3 SLUDGE

TRABSFER PUMP

SH-PU-PC-THKSL. PU SH NO 2 O.OO

THICKENED SLUDGE

PUMP

SH-PU-PO-CIRHT- PU SH

CIRCUIATING HEAT

PRESS BUILDING

SH-PU-PO-\A/B1-U - Utility PU Basement of

Water Pumps Admin Building

SH-PU.PO-WB2.U. PU SH

NUMBER 2 PISNTBOOSTER PUMP

sH-se,Po-01-u - sB sHCARBON AIR SCRUBBER

SH-SY.OC-OAS. ODOR SY SH

CONTROL SYSTEMAIRSCRUBBER

SH.SY-OC-OFAN. ODOR SY SH

CONTROL SYSTEM FAN

SH-SY-OC.OFLMTR. SY SH

ODOR CONTROLFLOWMETER

SH.SY.OC.OFMS - ODOR SY SH

CONTROL SYSTEM

No 2 0.00

No 2 0.00

No 2 0.00

No 2 0,00

No Hours 0.00

No Hours 0.00

No Hours 0.00

No Hours 0.00

MEASURING SYSTEM

SH-SY-OC-OLP. ODOR SY SH

CONTROL SYSTEM

PROBE

No Hours 0.00

SH-SY-OC-OSNS - ODOR SY SH No Hours 0.00

CONTROL SYSTEM PH

AND ORP SENSOFY

ANALYZER

SH.SY.PC.BPP - BATCH SY SH NO 2 O.OO

POTASSIUM

PERMANGAMTESYSTEMSH-SY-PC-GYR - LIME SY SH No 2 0,00

FEED SYSTEM

SH€Y-PC-LFS - Lime SY SH No 2 0.00

System

SH'SY.PGLFS1.U - LIME SY SH YES HOurs 8.OO

FEED SYSTEM

SH-SY-PGLFSIC - LIME SY PC No 2 0.00

FEED SYSTEM BREAKER

SH-SY-PC-LFSCM/. SY SH NO 2 O.OO

FEED SYSTEM SCREWCONVEYOR

SH-SY-PC-LFSSRD - SY SH No Hours 0.00

FEED SYSTEM SPEED

REDUCER

SH-SY.PGLFSVFD. LIME SY SH NO 2 O.OO

FEED SYSTEM

VERSIFEEDER

SH-SY.PGLSLO - BULK SY SH NO 2 O.OO

LIME STORAGE SILO

SH.SY-PGMMGRI . SY SH NO 2 O.OO

NUMBER 1 MUFFIN

MONSTER GRINDER

SH-SY-PC-MMGR2 - SY PC No Hours 24.00

NUMBER 2 MUFFIN

MONSTER GRINDER

SH-SY-PGPITIU - SY SH No 2 0.00

PIT

SH-SY-PC.PLY -

SYSTEMS

SH-SY.PC-PLY1-U -

NUMBER 1 POLYMER

SYSTEM

SH-SY.PC-PLY2-U -

NUMBER 2 POLYMER

SYSTEM

SH.SY.PGPUGIU -

NUMBER 1 PUGMILL

SYSTEM (OLD)

SH.SY.PC-RTYSL,1 -

Number One Rotary

Thlckener

SH-SY.PGRTYSL-2.

03/1412016 04:12 pm

NumberTwo Rotary

Thickener

SH-SY-PC-RWSL-3.Number Three Rotary

Thickener

SH.SY-PC-RrySL.SYS -Rotary sludge ThickenerSystems

SH-SY.PC.SCB1U -

SLUDGE CONVEYOR(oLD)

SH.SY.PC.SCB2U.NUMBER 2 SLUDGE

CoNVEYOR BELT (OLD)

SH.SY.PC-SLCV26 .

Serpentix Belt New Side

SH.SY.PC.STR1C.NUMBER 1 STRAINER

ACTUATOR

2 0.00

2 0.00

SY No

No

SH

SY

NoSHSY

SH

SH

SH

SH

SY

SY

SY

0.00

No

No

No

2 0.00

Hours 0.00

Hours 0.00

33 of 40

No Hours 0.00

No

No

Hours 0.00

No

No

2 0.00

Hours 0.00

2 0.00

SHSY

0.00

SH

SH

SY

SY

SY

SHSY

SH

SY SH No

SH-SY-PC-STRIU - SY SH No 2 0.00

NUMBER 1 BASKET

STRAINER

SH-SY-PC-STR2C - SY SH No 2 0.00NUMBER 2 STRAINER

ACTUATOR

SH-SY-PGSTR2U. SY SH No 2 O.OO

NUMBER 2 BASKET

STMINER

SH-SY-PGTHKR - SY PC No Hours 0.00THICKNER CONRTOLBOXSH-SY-PC-WTSRB - \ ,ET SY SH No Hours 0.00SCRUBBER

SH-SY-PCSLBL - S600 SY SH No Hours 0.00Number 2 Pugmill System

(New Side)

SH-TK-PC-CS1-U - TK SH No 2 0.00

NUMBER 1 CAUSTIC

TANK

SH-TK-PC.CS2-U. TK SH

NUMBER 2 CAUSTIC

TANK

No 2 0.00

SH-TK-PC-DOTNKI - TK SH No 2 O.OO

NUMBER 1 DO TANK

SH.TK-PGDOTNK2 - TK SH No 2 O.OO

NUMBER 2 DO TANK

SH-TK-PC-LFST - DAY SH SH No 2 0.00

LIME STOMGE TANK

SH-TK-PC.SLST1U. TK SH No 2 O.OO

SLUDGE STORAGETANKTreatment Plant Varies W /TP maintenance No Hours 0.00

lnftastructure - Allon SSA properiy

XX FURNACE-1 -#1 FURNACE No Hours 0.00

FURNACE

XX GRNDR-MTR - No Hours O.OO

GRINDER MOTOR

XX P2A-ORP-SMP - P2A PUMP No 2 0.00

ORP SAMPLE PUMP

XX P2C.FNL-SMP - FINAL PUMP NO 2 O.OO

RESIDUAL SAMPLEPUMPXX PHGRBX-01-U - lD MOTOR DRY \ /ELL No 2 0.00

#4,47014LV

XX PLUG-THK-O8" - 8" PLUG THICKENER No 2 0.00

PLUG

XX PLWAPU-1O3-U - PUMP AUXILLqRY No 2 0.00

WATERPUMPS SYSTEMS

XX PLWAPU-104-U. PUMP AUXILIARY NO 2 O.OO

WATERPUMPS SYSTEMS

XX SH-PU-PO-\ /ts1 - PU SH No 2 0.00

NUMBER 1 PI.ANT

PUMP

XX SH.PU-PO.\AA2 - PU SH

NUMBER 2 PLANT

PUMP

XX STOR.TNK. TANKTANK

XXMiscellaneous '

No 2 0.00

No Hours 0.00

No Hours 0.00

$n4n\6 04:12 pm 39 of 40

Miscellaneous

SH-SY-OC-SY - Odor SY SH No 2 0.00

System

cRlTl - BARI - Grit Headworks Maintenance No 2 0.00

#1. Automatic Bar Screen#1GRIT2 - BAR2 - Grit Headworks Maintenance No 2 0.00

#2, Automatic Bar Screen#2NPDES 003 - VWTP Bypass V\A /TP Plant Operation No 2 0.00

XXLabMiscellaneous - Miscellaneous Plant Lab Lab No Hours 0.00

Laboratory Miscellaneous

SH-PU-MX-SY - Mixing Pump Thickener Sludge Handling No 2 0.00

Pumps Sludge Handling Building

Basement

HW-DR-IT-VSDIU - DRIVE HEADWORKS HEADWORKS No 2 0.00NUMBER FOURSPEED DRIVE

MgOH System - System Sludge Handling Sludge Handling No Hours 0.00Hydroxide System

SO2 System - Sulfur System Cholrine Building All No Hours 0.00System

4. IT Equipment:

Name Model Assigned To

Executive Assistant IBM Lenovo 13C1802 Admin spare

Admin DVR Custom Built ln storage room

GPS Computer Dell Dimension 4500s GCCWS1 l ln server room downtown

Purchasing Lenovo THinkCentre M72z MJ4sWG Kathy Ruane

SCROO2-CLERKl Lenovo ThinkCentre A70z 0401u1us1w290 Mary Kay Cannon

SCROO2-CLERI(2 Lenovo ThinkCentre A70z 0401 uluslR4764 Christine Porter

SCROO2-CLERK3 Lenovo ThinkCentre A70z 0401ulu s1R4775 GailMorgan

Grochowski Lenovo ThinkCentre E93z MJOODUK6 Debra Grochowski

SCROOz.CLERKs Lenovo ThinkCentre A70z 0401ulu slR4762 NanciWright

SCROO2-CLERK6 Lenovo ThinkCentre M71Z MJGHPRM Marie Mullarkey

sc002-EAIBM Lenovo ThinkCentre A70z 0401R6US1V7662 Bernice Sparacino

scO02-exdir Lenovo ThinkCentre A70z 0401R6US1V7695 Gene Barrett

sc002-HRIBM Lenovo ThinkCentre A70z 0401u1us1R4983 Lisa Moran

scr002-LAB Lenovo ThinkCentre A70z 0401 R6USlY9353 Clerk Spare

SCROO2BMANAGER Lenovo ThinkCentre M72z MJ745WF Andrew Marion

Dispute Lenovo ThinkCentre M71z MJGHPRV Dispute Room

Basinl0-HP HP EliteBook 8570p 5C83390H5H Basin Crew 10

Basinl-HP HP EliteBook 8570p 5C833908GC Basin Crew 1

CLAM4O.HP HP EliteBook 8570p 5C833908FV Clam 40

ClamS-HP HP EliteBook 8570p 5CB339OHTW Clam 8

DigCrewll-HP HP EliteBook 8570p 5C833908FY Dig Crew 11

DigCrew2-HP HP EliteBook 8570p 5C833908YJ Dig Crew2

Flowmeter HP EliteBook 8570p 5C833909WQ Pete Tripodi

PAOneCall-HP HP EliteBook 8570p 5C833908FF PA One Call

scR002cG1-HP HP Elitebook 8560p BgBz114J2V Trevor Lewis

SCROO2.ONCALL HP EliteBook 8570p 5C83390B1^r/ On CallTruck 3

SCROO2-STRM HP EliteBook 8570p 5CB331OPNQ Gene Skelton

scr002-vactorl HP Elitebook 8560p 5C82113K4Y Vactor 56

scrO02-vacto12 HP EliteBook 8560p 5CB2190CRD GapVac 37

SCROO2-VACTOR4 HP EliteBook 8570p 5C833908T4 Vactor 13

SSACSSUPER HP EliteBook 8460p CNU1291HDQMIPP Staff Admin \MA/TPOffice

Vactor50 HP EliteBook 8570p 5C833908XN Vactor 50

Cameral6 Custom built @ Envirosight Camera 16

Camera43 Custom built @ Envirosight Gamera 43

GIS HP ZBook 15 CND413NYH Jeremy Hull

scr002-engineer HP Elitebook 8760w CNU228O1HK Richard Harrison

Spare HP ProBook 4525s 2CE1 18064D Spare

MIPP HP Elitebook 8460p CNVl460HPM Kent Mackaliunas

SCROO2CSOCREW HP Elitebook 8460w cNU2162DV1r6 Spare

scr002-auto Lenovo ThinkCentre M71Z 1761B3UMJGHPTA Automotive Shop

\MA/TPPM Lenovo ThinkCentre A70z 0401R6US1W758 Christine Wesolowski

SCROO2-INVENTOR Lenovo ThinkCentre M92z MJTYXAN Charles Cancelleri

SCROO2-LAB2 Lenovo ThinkCentre M71Z 176183UMJGHPZA Laboratory Office User

SCROO2.MAINT Lenovo ThinkCentre M71Z 176183UMJGHPYZ Mto Lalli

SCROO2.MIPPl Lenovo ThinkCentre M92z MJTYXAKMIPP Straff Admin \AM/TPOffice

scR002-oM Lenovo ThinkOenbe A70z 0401u1u s1R4982 Operations

MIPP-e932 Lenovo ThinkCentre E93z lSlOBSOOSSUSMJOODUJW Sean Loughney

Lenovo ThinkCentre A70z 0401R6US1V7695 Spare

AdminAsst Lenovo ThinkCentre A72z MJ745WE Jim Mack Office

Lenovo ThinkCentre E93z MJO1B4YF Spare

Lenovo ThinkCentre E93z MJO18Q2X Spare

MasterElec HP EliteBook 8570p 5C833908Y9 AlGillette

Dispatch Lenovo ThinkCentre M71z 176183UMJGHPZB Dispatch

Lenovo ThinkCentre A70z slv7711 Bob Murray

HP Compaq Pro 6305 SFF MXL331OB12 Lab TKN

Lenovo ThinkCentre A70z s1w502 Spare

sc002-PStation HP EliteBook 8560p 5CB2113JW Pump Stations

Admin-CFO HP/Compaq dc5000S 2UA442OHOR Ray Alunni

DepDircompliance HP EliteBook 8570p Joseph Nardone Offiee

ExDirHomeTravelMate P TMP276-MG-78KT NXV9WM002429 1 99AF7600 Eugene Banett Home

scr002-DDComp HP EliteBook 8740w cNU1283027 Jay Nardone

SCROO2-INSPECT HP EliteBook 8570p 5C83310PP4 Andrew Marion Home

SCROO2-PLANTM HP EliteBook 850 Gl CNU4O795SV Ghristine Wesolowski Home

SCROO2-VACTOR3 HP EliteBook 8570p 5CB331OPNW James Mack Home

SSA-GIS HP EliteBook 8540p cND120D414 Jeremy HullHome

scO02ddops Lenovo ThinkCentre M71Z 1761B3UMJGHPYR Gene Skelton

Vactor 56 Microsoft Surface Pro 3 56825243353 ln admin office

SCR002-CSSuper HP ProBook 455 Gz CND4326HM8 Todd Hartman

HP ProBook 455G2 CND4326HNLMIPP Staff Admin\MA/TPOffice

5. Scrvers and Networks:

Equipment Type Quantity Manufacturer Model

Servers

1 Dell PowerEdge R320



Routers / Securi$

3 Cisco ASA 5505

1 Barracuda Web Filter210

1 Cradlepoint CBA750 v2

Switches

1 D-Link DGS-12487

1 Linksys SD2O8

2 Cisco WRVS44OON

1 Linksys SLM2O48

1 Cisen Catalyst 2960€

Network AttachedStorage (NAS)

3 Buffalo Terrastation TS-RXL

2 Buffalo Terrastation TS-RVHL

2 Synology RS812

illarch 2016 Network Atlached Storage

N Model SN Assigned Role L St Storage

Gurrentlyoffline,.

ffalo TeraStation TS-RX4.OTURS TSRX01C1731C Old Camera Network room Offline, repurpose 4

notogy RS821+ D7LDN01131 Backup Nstwork room Online 12

ffalo TeraStation TS-RVHI2TURO 9583902040064 Backup IAM/TP Network closet Online 12

ffalo TeraStation TS-RX4.0TURS TSRX01C172F3 Maps Network closet Offline, repurpose 4

no|ogyRS812+D9LDN00514P|antCameraNASNetworkc|oseton|ine12

March 20{6 Network Appliance Inventory

Name

Sophos

Cisco Catalyst

Cisco ASA

Cisco ASA

Cisco ASA

)isco 28 Port PoE

)isco 10 Port PoE

tletgear(SCADA)

{etgear (SCADA)

{etgear (SCADA)

Model

SG 210

2960-5 Series 10

5505

5505

5505

sG 500-28P

sG300-10PP

GS716T

GS724T

GS716T

SN

s20004A5D72DC8

Foc1602Y3EG

JMX1551407H

JMX1339ZOZA

JMX1522Z17J

DNt19040RG5

PSZ19341QFV

2MD5285Y00124

2ME83B5TO29BB

2MD62A51005F9

General Locatlon

Business Office

Business Office

Business Office

Business Office

\A/WTP

\AM/TP

\A/WTP

\AM/TP

\AM/TP

unA/TP

LTNetwork room business office Web Filter

Network room business office Managed

Network room business offiee Security

Network room business office Security

Network closet \MA/TP admin Security

Network closet\AMTP admin Managed

2nd Floor Sludge Handling Managed

Admin building first floor Network

Sludge handling building Network

Electrical room maintenance Network

Nam

GISl

DCFP2

Model

PowerEdge R610

PowerEdge R610

illarch 2016 Server lnventory

TPMHKSI Network room at business office

CRBNVHI Network room at business office

Role

GIS/Asset ManagemenUSQL

Billing Systemrifi2 Domain Controller

VMWare Server "Acronis, Citrixl, DCBedrock, Hydro Analysis"

SCADA HistorianSCADAHistorian PowerEdgeR320 FWlqKO2 NetworkClosetPlantAdmin

New equlpment acquired in connection wlth SSA ServerllT Infrastructure upgrade project, whichhas not yet been delivered:

(a) Storage

Quantity DescriotionI EonStor DS 2000 2UllZbay, Dual Redundant eontroller subsystem

Ports SxlG iSCSI ports +2x host board slot(s), 2x2GB, 2x(PSUeanacitator + Flash modulc). l2xIIDD travs and lXRackmount kit

including 2x6GB SAS EXP,+ F'AN Module), 2x (Super

6 Seagate Enterprise (SED) 3.5'SAS 6Gb/s HDD, 4't11,7200 RPM, 20 in one bundlc package

I Toshiba Entemrise 2.5" SAS l2Gb/s MLC SSD. 200G8I EonStor DS SSD Cache License2 IlonStor DS Host Board with 2 x 12 Gb/s SAS ports

2 SAS lzc external cable, pull type, SFF-8644 to SFF-8644 (l2G to l2G), 120 centimetcrs2 8 GB DDR-III Dim module for EonStor DS, EonNAS and ESVA subsystem

I 3 years PSP - 7124 Help desk & 5x9 next business day parts and engineer onsite (includes HDDspurchased by Infortrend) BBU not inpluded

(b) Server

Ouantitv DescriptionI PowerEdse R630 Server

(c) Software

(d) Networking

(e) Labor

Ouantitv Description7 Microsoft Windows Scrver 2012 R.2 Standard - License - Volume MOLP: Open Value - Pricc

Level C - PC - Sinele Lansuaqe50 Microsoft Windows 2012 Rcmote desktop serviccs - License - 1 Dcvicc CAL - Local Governmcnt,

Volume - MOLP: Ooen License for Government * PC * Enslish50 Citrix XenDesktop Platinum Edition - License - I Userll)cvicc - Standard - PC - Retail50 Microsoft Windows Server 2012 - License - I User CAL - Government Use - Volume, Local

Government - MOLP: Open license for Govemment - PC - Enelish2 Citrix NetScaler VPX l0 Platinum Edition - License

VMware vSphere v6.0 Essentials Plus Kit - License - 3 }Iost 2 Processors per Host - CommercialPC

I VMware Production Support & Subscription - I year- Service -24x7 x30 Minute - Technical -Electronic Service

Ouantity Description2 Cisco Catalyst 2960X-24TD-L - Ethemet Switch * 24 Ports * Manageable - 24 x RJ-45 -2 x

Exoension Slots - 10/100/1000Base-T - Deskton - Rack-mountable2 Cisco Soare FlcxStack - Plus l{ot-Swapoablc Stackins modulc - F'or stackineI lncidentals

Quantitv Description160 Hourlv labor (technical)

(f) Other

Ouantitv Description7 F.asv I vear SW MNI NetScaler VPX 10 MBPS Plat Ed (Citrix Annual Asrecment for New Svstem)

Mfq. Name Base Model Equip. Type Accessorles Include Lease TermCanon tRc2501F MFP Color Tabletop MFP 63 Months

HP P3015 Printer Existino Front Desk Unit 63 Months

HP M6O5DM Printer Printer 63 MonthsCanon 1R14351F MFP Tabletoo MFP 63 Months

Canon 1R14351F MFP Tabletop MFP 63 Months

Canon 1R14351F MFP Tabletop MFP 63 Months

Leased Office Equipment (provided, that the following leased Equipment and Machinery shall onlybe Included as an Acquired Asset to the extent the corresponding Gontracts pursuant to whichthe Seller leases such equipment (and other Gontracts related thereto) are Included in theAcquired Assets as Assigned Gontracts):

6. Tank Rentals

Rental Agreement dated September 28, 2011 between Adler Tank Rentals, LLC and ScrantonSewer Authority, which is in full force and effect and pursuant to which the Seller rents thefollowing liquipment and Machinery (provided, that the following rented Equipment andMaclrinery shall only be included as an Acquired Asset to the extent such Contract purzuant towhich the Seller rents such F4uipment and Machinery is included in the Acquired Assets as an

Assigned Contract and reflected on Schedule 2.01(c) as of thc Closing):

MakellVlodeUAccessories Serial #I LANII]R MPC45O3 COLOR COPIER WI PB3I6O, BRIDGE

SR3I4O. HOLE PUNCTIEt75M4r1996

2. LANIHR MP6OO2SP w/ SR4O6O.2/3IIOLE. FAX w865LAO0204J. LAMER I"D36OSP _ SERVICE AND SUPPLY ONLY v6905601395

Model Product # Description Lcase TermMP6OO2SP 415877 Lanier MP6002SP w/ DF, 3 Trays, Print, Scan 63 MonthsStarter TBS Starter Kit 63 MonthssR4060 415901 Stanler Finisher 63 MonthsTYPE326O 412209 213 Hole Punch 63 MonthsTYPE9OO2 4t5912 Fax 63 MonthsMPC45O3 416518 Lanier MPC4503 il DF, 2 Trays, Print, Scan,

Color63 Months

Starter TBS Starter Kit 63 MonthsPB3160 415544 2 Paper Trays (fotal 4 Travs) 63 Months8U3070 41655 I Bridee Unit 63 MonthssR3140 416s39 Stanler Finisher 63 MonthsPU3050 4r6609 213 Hole Punch 63 Months

Identification Scrial No. Model StyleTank V-543 (soray DI'/1X25-V-679 DMX25-V-679 v-543

Identification Serial No. Modcl Stvlepainted on theside of the tank)

Tank V-544 (spraypainted on theside of the tank)

DMX25-V-680 DMX25-V-680 v-544

SCIIEDULE 4.I1

INTELLECTUAL PROPERTY ASSETS

1. WebsitesA)omainNames

ssauth.org

scrantonsewer.org

scrantonsewer.com

ssauth.net

ssauth.com

SCHEDULE 4.12(b)

SELLER'S PLANS AND SELLER'S BENEFIT OBLIGATIONS

1. Blue Care HMO (health care)

2. Davis Vision Sponsored by Blue Cross of Northeastern Pennsylvania (vision)

3. Delta Dental (dcntal)

4. Standard Life and Accident lnsurance Company (supplemental insurance to majormedical plan)

5. Prudential Group Insurancc Policy (life, accidental death/dismemberment and disabilitycoverage)

6. Scranton Sewer Authority Retirement Savings Plan - Master Money Purchase PensionPlan and Adoption Agreement - Non-Union Employecs

SCHEDULE 4.12(c)

MUI,TIEMPLOYER PLANS

1.

SCHEDULE 4.r2(d)

CERTAIN PLANS

l. Retired personnel are entitled to certain medical, health and life insurancc benefits postretirement as per thc Collective Bargaining Agreement.

SCHEDULE 4.12{0

SEVERANCE ARRANGEMENTS

l. Employment Agreement dated March 4,2005 between Scller and Raymond A. Alunni

SCHRDULE 4.13(a)

COLLECTIVE BARGAINI NG AGREEMENTS

l. Collective Bargaining Agreement dated April l, 2013 for the period April l, 2013 toMarch 31,2077 between Seller and Teamsters Union Local229.

SCHEDULE 4.13(bxi)

NO LABOR STRIKE

None

SCHEDULE 4.r3(bxii)

EMPLOYMENT COMPLIAI\CA,

None

SCHEDULE 4.13(bxiii)

NO UNFAIR LABOR PRACTICE CHARGE

None

SCHEDULE 4.13(c)

PAYMENT OF BENEFITS

None

SCHEDULE 4.I4

ENVIRONMENTAL COMPLIAIYCE

i

SCHEDULE 4"16

LICENSES AND PERMITS

L Pennsylvania Department of Environmental Protection Air Quality Program, State OnlyOperating Pcrmit No: 35-00042 dateA February 28,2017, expires l'ebruary 28,2A17(renewal application must be submitted by August 28, 2016).

2. NPDES Permit No.: PA00A26492 dated October 1,2072. While the NPDDS Permitexpired on9l30ll4, it has been administratively continued by operation of law.Accordingly, Seller, in compliance with lawn is permiued to opcrate under the Permituntil the Permit is rcissued, which Seller is actively pursuing.

3. Commonwcalth of Pennsylvania Department of linvironmental Protection EnvironmentalLaboratory Acoeditation - Accredited Laboratory Certificate No. 009-001, PaDEPLaboratory ID: 35-01259, dated 09110/2015, expircs October 31,2016, Commonwealthof Pennsylvania Waste'l"ransportation Sa&ty Program Written Authoriration (VariousvrNs).

4. Pennsylvania Department of Environmental Protection Watcr Quality ManagcmentPermit No. 3503404, dated March 9,20CI4, for Myrtlc Street Pumping Station, DorothyStreet Pumping Station and F'roude Street Pumping Station.

5. Pcnnsylvania Depanment of Environmcntal Protection Water Quality ManagementPermit No. 3510401, dated August 31, 2010, for Wastewater Treament PIan Upgrades,

6. Pemsylvania Department of Environmental Protection Water Quality ManagcmentPermit No. 3514401, dated January 29,2015, for Combined Detention Basin for CSO's19 and 20.

7. Pennsylvania Department of Environmental Protection Water Qualrty ManagementPermit No. 3514402, dated March 23,2015, for Keyser Valley Pumping Station"

L Pennsylvania Department of Environmental Protection Water Quality ManagementPermit No. 3515401, dated July 20, 2015, for Brown Avenue CSO #37.

9. Pennsylvania Departmcnt of Environmental Protection Water Quality ManagementIlcrmit No. 3515402, dated August 24,2015, for CSO#81 Pittston-Brook Storage Pipe.

10. Pennsylvania Department of Environmental Protcction Water Quality ManagementPcrmit No. 3515403, dated November 19,2015, for Von Storch Outfall #1 I CSO StorageFacility.

I l. Pennsylvania Department of Environmental Protection Water Quality ManagemcntPermitNo. 3515404, dated Novcmber 20,2(t15, fbr Drinker St. CSO #65 Off-LineStorage Conduit.

12. Pcnnsylvania Department of Environmental Protection Water Quality ManagementPermit No. 3516401, datcd Fcbruary 22,2A16, for CSO O78-Shawnee Avenue Facility.

13. Pennsylvania Department of Environmental Protection Water Quality ManagementGeneral Permit for Sewer Extensions and Pump Stations Pcrmit No. WQG0258l50l,issued August I I , 201 5 for l-eggetts Street CSO #72 Project.

14. Pennsylvania Department of Environmental hotection Ch. 105 General PermitRegistration GP043514401 for Coverage Under General Permit GP-4, for Sanderson

Avenue Stormwatcr Outfall, issued April2, 2Ol4 wfi related Coveragc Under U.S. ArmyCorps of Engineers Pennsylvania State Programmatic General Permit PASPGP-4

15. Pennsylvania Department of Environmental Protection Storage Tank RegistrationPermitCertificate, Id: 35-50063, expiration date of April4,2Ol7, for Tanks 0034, 004A, 005A,006A,007A and 008A.

16. Pennsylvania Department of Environmental Protection Water Obstruction andEncroachment Permit (WOEP) No. 835-460 issued January 21,2016 for Von StorchOutfall #l I CSO Facility and related Coverage Under U.S. Army Corps of EngineersPennsylvania State Programmatic General Permit PASPGP-4.

SCHEDULE 4.r7(a)

INSURANCE POLICIES

Insurer/Policv Name Policy Number Effective Date Expiration DateHousing & Redevelopment lnsuranceExchanqe - Workers Compensation HWC307431611-16 01to'v2016

01t01t2017

Housing & Redevelopment lnsuranceExchanoe - Commercial General Liabilitv HFP30743171 1-16 oltuna16

01t01t2017

Housing & Redevelopment lnsuranceExchanoe - Commercial Prooertv HFP3074301 1 1-16 0110112016

01t4il2017

Housing & Redevelopment InsuranceExchanqe - Commercial Auto HCA30743201 1-16 01t01t2016

01t01t20't7

Housing & Redevelopment InsuranceExchanoe - lnland Marine HFP30743091 1-16 01t01t2016

01lu2a17

Housing & Redevelopment lnsuranceExchanqe - Equipment Breakdown HFP30743031 1-16 01t01t2016

auu12017

Housing & Redevelopment InsuranceExchanoe - Crime HCR307432612-16 uto1no16

01t01t2017

Housing & Redevelopment InsuranceExchanqe - Fidelitv Bond HF8307432312-16 011o1t2016

ail0112017

American Alternative lnsuranceGomoration - Commercial Umbrella 60A2U80003875-04 01to1t2016

01t01t2017

AceMestchester Fire - Public Officials G24332792004 01t01t2016 01t0'U2017Travelers - Pension & Welfare 106014662 o'u01t2016 utun017

SCHEDULE 4.17(b)

SURETY BONDS

(g)

(h)

(i)

0)

(k)

(l)

(m)

(n)

(o)

(p)

(q)

(r)

(s)

:'

I

(t) :

.

(u)

(v) :

r

(w)I

(x) i

SCHEDI"ILE 4.I8

CONTRACTS

Section a.l8(a)(i)

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2.

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Section 4.18(a)(ii)

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44.cd

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d :

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46

Section 4.18(a)(iii)

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t'

Section a.f8(aXvi) :

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89.

SCHEDULE 4.19

COMPLIANCE WITH LAW

SCHEDULE 4.24

LITIGATION

I.

2

3

4.

SCHEDULE 4.2r(a)

TmLE TO THE ACQURED ASSETS

l'he following Liens, all of which are granted to secure the Outstanding Indebtedness and all ofwhich will be repaid and fully and unconditionally released, satisfied and discharged of record atthe Closing (except to the extent sccuring only a portion of the Outstanding Indebtedncss that isassumed by Buyer at Closing, as provided in the Agreement):

5" A lien on and security interest in all gross receipts and gross rcvenues, including any andall gross receipts and revenues generated from the operation of the System, to the extentpermittcd by law, in favor of Pennsylvania Infrastructure Investment Authority, relatingto the following agreements:

a. Loan Agreement dated Deccmber 29,2004 by and between The Sewer Authorityof the City of Scranton and Pennsylvania Infrastructure Investment Authority, as

modified on Decemb er 27, 2007

b. Loan Agrcement dated Octobcr 3,2002 by and between The Sewer Authority ofthe City of Scranton and Pennsylvania Infrastructure Investment Authority, as

modified July 10,2007

c. Loan Agreement dated March 5,2002 by and between 'lhe Sewer Authority ofthe City of Scranton and Pennsylvania Infrastructure Investment Authority, as

modified August L3, 2004

d. Loan Agreement dated December 18, 2003 by and between'Ihe Sewer Authorityof thc City of Scranton and Pennsylvania lnfrastructurs lnvestrnent Authorityo a-s

modified Julv 10.2007

e. [,oan Agrecment datcd November 7,2007 by and between The Sewer Authorityof the City of Soranton and Pcnnsylvania Infrastructure Investment Authority

f, Funding Agreement dated March6,2012 by and between The Sewer Authority ofthe City of Scranton and Pennsylvania Infrastructure Investmcnt Authority.

g, Funding Agreemcnt dated October 22,2015 by and between'lhe Sewer Authorityof the City of Scranton and Pennsylvania Infrastructure lnvestrnent Authority.

6. A continuing and irrevocable lien upon and pledge of the receipts and revenues from theSystem, among other things, to secure the principal of, premiun, if any, and intercst onthe following Bonds (as set forth in the'frust Indenture between The Sewer Authority ofthe City of Scranton and Pennstar Bank dated September 5, 2007; as amended andsupplemented by the First Supplemental Indenture between The Sewer Authority of theCity of Scranton and The Fidelity Deposit & Discount Bank dated June 1, 20ll; as

amended and supplcmented by Sccond Supplemcntal Indenture between The SewcrAuthority of the City of Scranton and The Fidelity Deposit & Discount llank datedNovcmber l, 201,4; and as amended and supplemented by Third Supplemental lndenturcbetween The Sewer Authority of the City of Scranton and The Fidelity Deposit &Discount Bank):

a. Sewcr Revenue Bonds Series of 2007

b. Sewer Revenue Bonds. Series A of 201I

c. Sewer Revenue Bonds. Series B of 2011

d. Sewer Revenue Bonds. Series of 2014

e. Sewer Revenue Bonds, Series of 2015

1. Parity liens (with Pennsylvania Infrastructure Investment Authority and the FidelityDeposit & Discount Bank) in favor of First National Commrurity Bank on all of Seller'sreceipts and revenuc re: $4,000,000 and $2,000,000 Lines of Credit.

SCHEDULE 4,22

BROKER'S AI{D FINDER'S FEES

1. Loop Capital

SCHEDULE 5.03

NO CONFLICT OR VIOLATIONS

l. The approvals and notices set forth in Schedule 5.04 are incorporated by reference herein.

SCHEDULE 5.04

CONSENTS AND APPROVALS

2. Approvals by the PaDEP to transfer and/or reissue to Buyer cach of the Licenses andPermits and licenses issued by PaDDP listed in Schcdule 4.16.

3. Submission to EPA and PaDEP of the liansition Plan described in Section 7.06(d) of theAgreement.

4. Agrcement by DOJ, EPA and PaDHP to lodging of the Amcnded Consent Decree andissuance by the U.S. District Court of a Final Order approving the Amended ConsentDecree, including approval of an amended Nine Minimum Controls Plan, as described inSection 7.06(d) of the Agrecment.

5. Approvals by the PaPUC as described in Section 7.12(a) of the Agreement of a tariffsupplement incorporating Buyer's Industrial Pretreatment Program applicable to theSystem into Buyer's tariff.

6. Approval of Buyer's Industrial Pretreatment Program, to the extent required, by PaDEPand EPA.

SCHEDULE 6.0I

ESSENTIAL SYSTEM ASSETS

See attached.

'IANTNAME .ATMJDE IONGMIDE

;CRANTON r1'23' 18.985' 75' 4L'32.121"

to. UAME OF OUTFATI. LAITruDE TONGITUDE

)o3 IVWTP OVERFTOW AT CEDAR AVE AND SRECK ST 01'23' 21.96' 15' AL',26.037"

)04 ,VELLS STREET {1' 26'36.737' 75' 38'34.57s"

)0s .OVE PTACE 41' 26'E.235" 15'39'31.052"

n6 IARDENER AVENUE 11' 25',46.a81' t5'39'37.207

n7 )HILO STREET t1' 25'43.454" 75'39'39.228"

lo8 {AWK STREET u'25'40.361' 15'39'39.464"

109 VIEADE STREET 01' 2s'38"179' 15'39'39.289"

)11 /ON STORCH AVENUE 11'2s'30.708' /5'39'31.392

J12'ROVE

STREET L'?5 28.317" 15'39'31.@2'

113 14" POPI.AR STREET 11' 25'20.889" 15'39'29.0O3"

)14 )0" POPTAR STREET tr'25'20.72L" 15'39'29.189.

)15'ORDON

AVENUE 11' 24'54.198" f5' 39'50.992"

)15 'ETTISONE STREET L'24'51.216" 15'39'59.416"

)t7 /INE STREEI $1' 24',51.578" 15'39'55.478"

)18 IOVE ROAD l1'24'49.704" 15'40'2.824"

)x9 LJNDEN STREET L',24',44.879', 15'40'6.7t3"

120 EAST IACKAWANNA AVENUE t'24'39.447" 75'rto' 15.8136"

)2t WESTSCMNTON +L'24'38.O8t', 75'$',27.8r4"

)2? WAsHBURN STREET 41' 24'30.46" 75',m'$.208"

)23 LUZERNE STREET +I' 24'7.983" 75',40'27.55L',

)24 HICKORY STREET tl' 24',12.735" 75'40'14,697"

)25 WII."LOW STREET L'24'2.692' 75'40' 11.43"

126 IVEST Ettvl STREET 4L'?'3 s7.922', 75'40' 36.1s9"

)27 ;OUTH WASHII.IGTON AVENUE 4f 8 49.4w', 75'40'36.331'

)28 FIG STREET 4L'23'38.712'^ 75'40'38.416"

)29 SENET STREET 41' 23'32.903" 7s'40'51.975'

)30 PRESCOfi STREET 4r'24'3.2?.7" 75'39'8.011'

)31 LEGGETTS CREEK 4L',26',4t-?36' 75'38'36.036'

)32 ,YATXINS STREET 41'26'39.067" /5'38'35.018"

Il3 {VEST PARKER STR€ET 4r' 26'27.73" 75'38'32.036',

)34 EAST PARKER STREET 4f 26'22.U6" ts'38'25,n3"

)35'ANDERSON

AVENUE 41' 26'3.33" 15'38' 47.476"

]36 NOGAAVENUE 41' 26'9.488' /5'38' 51.717'

)37 BROWN STRIET 1'26'14.303" 75'38'53.79"

,38 A'URTZ AVENUE 4L'26't7.342" /5'38' 55.807"

)40 JVEST MARKET STREET 01'26 1?.881' t5'39'22.66"

X3 ]|.JvE STREET 4r' 24'57.L32^ 75'39'49.876"

x4 ESTSCRANTON STREET rL'24'37297' ts'10'26.9L2"

]45 :MMETTSTREET f1'24',18.051" r5'40' 17.55"

)47 ]ROADWAY STREET lI'24'L4.924' 75'.lO' !.6,557"

lrtS ITDER STREET 11' 24'7,888" 75'40' 16.135"

X9 IIVER STREET tL'24',8.746' 75'39'55.7/3'

)50 ;CHIMPFF COURT t1'24'8.519' 75'39' 56.123'

851 lIRCH STREET It'23',49.4t7" 75'40'36.331"

052 /VYOMING AVENUE t1'23'49.417' 75'40' 36.331"

053 :EDAR AVENUE |L'23',41,t54' 75'40' 23,938'

NO. IIAME OF OUTFA1I LATITUDE .ONGlTUDE

]55 )RINKER PTACE 41'26'3.609" 15'38'45.657"

156 ]OULEVARD AVENUE 41' 26'3.129" 15'38'46.293'

)57 TICHMONT STREET 41' 26'3.129' 15'38' 46.293"

158 3RANDVIEW STREET 4t'26'4.643" ts'38'43,444"

)s9 ,I/OODIAWN STREET 4t'26'7.62" 15' 38',39.368"

)60 'ARKSTREET41'26'11.031' 15'38'35.118"

161 VIOREL STREET 41'25'14.085" 15'38' 30.242"

J52 :I5K STREET 41'26'1s.365' 75'38'28.311"

)63 )LYPHANT. SOUTH 41'26'15.733" 15'38' 28.423"

565 )RINKER STREET 41'24'56.&)6" 15'36'31.542'

t65 TURKE STREET 41',24'.35.79L" t5'37'54.OtJ'

J67 GYSER AVENUE 4t'24',51J,M" 15'41'52.288'

158 iOUTH SIXTH AVENUE 41',23'49.t2t 15'41',7.3',

]69 :RANE STREET 41' 22'59.884" 15'42' 18.155"

,70 ;AND STREET 41'24' 28.259" t5'37'42.99"

J77 JKE STREET 4L'24'27.3tE" 15' 37',33.839"

J72 -EGGETT STREFT REGUIATOR CHAMBER lf 26'39.329' rs' 39'39.947'

J73 :RONT STREET CSO tl'24' 10.10E" 15'39'22.578"

i74 MARION STREETCSO l1'25'38.357' 15'39',9.528"

)75 SPOUSE STREET CSO 1' 25'37./159" 15'38'5E.386'

,76 ;AND€RsON AND MARION STREETCSO 11'25'3&841' 15'39' 10.786"

,77 !IIDDLE STREET PUMPING STATION 11'25' 15.863' 15'39'rt4.994"

,77 VIDDTI STREET PUMPING STATION TORCED t1'2s'16.063' ts'39'44.708'

,78 ;HAWNEE AVENUE PUMPING STATION tL'26',12.776" 15'38'35.085',

)78 ;HAWNEE AVENUE PUMPING STATION FORCED 1'25'12.788" 15'38'35.006"

,79 VIYRTLE STREET PUMPING STAIION 4t'24'2L.755" 15'38' 18.119"

)8{) (EYSER VAI.IEY PUMPING STATION 4t'24's6.697" 15'41'56.825"

)81'TTTSTON

AVENUE t1' 23'37.688" 75'40' 19.325'

)82 TOCUST AVENUE 4t'23',40.423" rs'40'22,056'

)83 MCNTCHOT"S lf 23'28.s33" 75'39'52.74"

)u'OO

EIM EAST lr'23'35.061" 15' 40'0.373"

)85'OO

EIMWEST 11'23',35.2fii" 15' 4,0'0.521"

)86 :EDAR/MAPLE 11'23"10.405" ts'4a'27.ot7"

,87 LEGGETTS/KELIY tl'26'43.255' 15'39'40.91:!.

{AME ETTIUDE TONGMJOE

;hawnee Avenue 11'26' 13.402" 75'38'35.318"

)orothy Avenue tx'25'52,745n 75'40'59.711'

vliddle Street l1'25'16.648" 75'39'46.64"

(eyser Valley tt'24's6.974" 75'4r'57.206"

)arrott Avenue tL'24'2.974" 75'41'54.L77"

:roude t!'22'57.707" ts'39'27,586^

vlyrtle Street tt'24'z2.t?5" /s'38' 18.621'

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at63tnD LilS!3otm:to i(bTT t{AROtD I r4rnE i1a s Frtt.}roi€ a\rE )N. PA x l2ilSFll rOlE tas70-El!t843Bt7,5S ta5!to60031 f,OTTIIAROTD & MAIIE 124 5 mll/toi€ a\rE IAI{IOT. PA ,tsfl rx s EIM L57g"E2sra

a3GU7Z|l L5LIOCS3 ;rMNrEil5 taIDt{ilJIl sl ilf,m.tl lfl t2 s Frlmm lw t 25 a/t57oF2t:lt4:t5il7lao rslmx )UUUMSMJINMI iT t2S rnmtFlW cllitTDt- ta ffi 20 r22S tttMorE aw rcto,srrmlTtal taslffi2 nHLMWMllltu.ll LI 3 iil tl,lttlE A\/E cf,Amo[ P tsoa tto s FltMotE alstc12Kr.3aB235 iasrml00r0 ()oT ilcltatD G I aatoN I raL lcaDE}vft sr dArlO'I. PA tsd t|!t TGADEMY Sf rsm-F2531atan826a raslTln{mg IH^XEUFOAVa)WIFlÎ{(13 lt12 ACADEllrT St )t{. P x T.ADEIIY ST lGFrS3r43.31t323 t'|5r?{tl(ml ;oilz lftt.EoNllmAtaloNto| notw^c{xtil9r N. IA .ts{x ltl3wAsflttnN sr |l|570E25lratsTrr212 t56a$ldlll ! ruRiourTtlr I|ETJ ffidt ts tL 3to AvE ta57Gt253l

n'| |5Er90lFt9 rt YEiiln JostPH CI r.OtS f rr0 3tD AvE cr fitoil-tl |s 110412 rtf, aw u9Gr2S{/i36721344 [s!srmtq ffiN L3IS T HN W dAt.IDN. P tsoa fi PtEAslNT oolltEtr t-.ta 56DE25ILAfr'A rGlsmts2 twtumf,D finTrtb l|litc]lttl^. ta .talo 4-EA-S flT^lrf ta52GF2S:r

a36t27z)O [(s!-301620 H6zctzaltt36rES1A rasl501tDl5 ,ffiAt|rAN r{Att t ilrE cH of sf 1006 t{otv€Lst AITTOI{. PA t504 ; MAIN I lloi ftl.L ..{i2sEzs:}r,t35'r25660 L,l5l9oldtli|{l t ,ot"FsxY Mto{afl" I Ljotll{ ;50 N MAIN AVE CIAI{rcN, PA r50{ {M tl Ita?6f27an tast50!6tl it Mrcfl,aEls ur oirHooox c$uicfl I5T mtl lq tcrltxttl S

'{Ti3l

/tt56t50to l3,lll}l8ol Y OF sCR fiXAI ffiil ?a m lmoTHY st {aGF253rl?d?lt I I LGt&mt M 3UPil MTIB tTC rmmflst ,o(xtr ta .t507 talastNM rNaw 56i&f2qrGtil26 L{Sm:ms ffi $9Fi MllG',ts Ltc rlo MAr{ sl

'loogc PA ls{r7 117 I!19 sWETLAND ST ta(to-E2$tr

43672011t Lasl/totofl2 HFrtElfs DitrG slot€ litc IO? HAiPCI 5I'UNMOqE

PA .:'|l N MAtHtaal{s-2t N DEO( l46lo-E2Sitti7 ? I!: N GAIFIEIO VT ffiX,PA t|g B2 t{ ollnElD lvE

l|il6r|?95 iqiffi blldcdt ffibla ItllDlM H .21tflG tOt ct t{Toil.P |lsd ts2 :15{ il uircc}l.N avF T58STGffiT55 1518:ffi16 IU FTE|' F

'r5 il UIr(f,N AVE ct^lftoll. PA [504 Ba r ul€oLil ra620.F?g-lr

a366r{90t Lt51aoloam r^cArrz EDt ltDo o tcr N mot tEYAvt ON, PA tlsfi rel 354 165 X f,ROMLEY AVE $5:St5:ttir36634(m rasl(x'lfir61 illltDil T,UiGAIET lrlAiY rstilittftE A dAtflot{. PA I ts tr lE#ccl ts FE3!435823!r7s l,isloolffiO Ailrt MAf,IE ra1 fl l€tg6A Al/E frHmil.ta IB tr7 f, nmF(tl Aw lil529-t253t43n55il6 tAslrtM llt)ri^sJi ruilMFM W frl|{Trfl. ta lt.loa ru N ftrfCCI VF litg2o"t253l

raslaotmt iowi sfnfrx|!nEffi$M rs ll tr&(rl AvE C'ATTOII- PA tt50l |l0 N tllfcc^ avt lalsf?sttGs??ffi70 trsLdou rMFrcill tosft|l i21 il HYDI Prtr AVE KNAMON, gA tl504 ;22NlrYDet itavE {462S8zsn{t64ttt!t r450afi1000t IIIIIO|IAT CEM€IfNY .tot otraM 9f ict^l{ToN. rA It50l }EIIEIONE ST ttSi:to-c?531

1#m7@ Ltst4(Em34 }E[AX EOWîD ] N MAtla 5t AVIO||" PA ta |59 il St Mt{Ei AVE {{620{2531a36[Tw:2? A ia r sljMilgnAv[ mb{-pi ltw ltr x uf,rsn lw4ffi72'L9 ra5iltm ffiffiffitrT I SHHIR AW cllf{ToN- pa lsm ;WFIUflD I T{'MflET U6ruXI4W7ala trslootomt XDDEII l1reEf,€ T & MAIY IICE i35 }I GAf,fiEtD AvE (IAilTOIt

'Aa50a { G iftElD avE L l3Pl I It {46-20.E 3r

a!62a2tit7 Lit(ltotln'3 ta6tlaiDt Jos &on al{Do ltlRoBr EI lr soulH iD rl ilT(ttr.P^ t8504 ot M)rllt soutlt to {462$t25:tta36721631 ilst {t{blt C'tutP EltA ;26 N }I{OE PAIX AVE DI rr lflDEtAltxAvE {afixFt2s3ra?6r22572 14514re29 [ROt A r:to4Ac ofiYsl ffdH P lrsd L11r r{fwFrt sr,(16./2154s |mrl rlaGDoltlt Mtcfl ft I & caiot ;rr N traFl fi ruilTnf,_ tl IGfl ;TiltrdFId gms{

A1M2I :trof ffil ro u s/sHtmil avttfllY HAt I ;tlarJToil. ta l|s06 I v)t lil RD tcl I gSEAT

'r{ )iMAt )WI{Ii NAME rDorE$r :frrs x nffil .oftn('r rt ta{xxNoa36Xn57t !1,1126m31 ]TY OF sCRANTON fTY HAII namfl-p tasol Ao(soit I PRTCE !4620{253t;,a35235503 t,l4l260qll f TY OF SIoiANION utrw gtffioN^wffiYHftl rfi iltoN- FA IAS { sHtRMlx aw Kt n %?Gf 25{t116627825 $ itNot^x Dt xE rss N ltNmlx Aw INAM|DN- PA Lesoa tss N rtNcotN avf g5m-F253t

f1d\2ffir l8t&tN7 MffSruNE X9 H UilCOS AW fiANTON, PA 1t904 H9-3Sl N :-tNCUlu {'16?0,E2S3f,

tT71n6' 17m3004001 (URAN UNIFE & 'AIMA

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ia3,alc)!XX, l7falo30o41 DPIAWgC MATTHEW I RAVAIOU I 327T PfiTSION A\4 lffP 27 5 HmrON AVE {,91rc-E253r

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'TX)S CfDAi A\G i(x^r{roil, PA I!95 CEDAI A!/E 9r47GE253t

ia:11503116s [5'niml@0105 rswEuMKH ELIS NOM 2331 CTDAR Ar/€ TTAfiTON, PA lts BSI MAR AW w?Gt2slr

'i|3,12|6045 rarrrt2(Ibl 'lrST OF .lEi[l\ll{ IIALW CO INC 15WHNGMX G EftMW '

tr33 tol tNfYlw gm-sil43a27erra r7t!501@01 ftsToFrfttfiN tE lwco iMWAYEISffi*COMMf,T ;YR CUSt. r{Y ull t2(b il-x FITTSTOX AVE {ilrrcE2!3rlv)?92 LruIM2 rsnoill bHt tt & HElfi.tETll rd -bMAi or t ,losco\ 1. PA tt|4. rzr

'|rtstot| avE 't{a7a}.E53tg7t1n6 L6nn3d6!l ;dt^rftot{ HousilG autHoilw io7 r.rNCI)rl. ltu$ aoc CIANION.

'Alts[t wBsltn sAo}{Aw tHllL ToPt s1t7$E2sitl

a!27o.il r76d9d2a rroNc wElu O EAYAiD gtAPTiao {EWrOtl( t{Y rfit13 t25t ]tt{EYAlrE E253rl

tt27s7rE r760tt2ttoa1 bNf MI(IIAELJ OMD t2ronmToilAvE fiofi. tA tlxls r2t0 ilnsrot AvE {.mts434rfsmz r750s2qro tott G['i^ID li 3 rlttRts^ M tl{wGtovEst tlilqqjsuil ta LU!l t2[Ptnffilw utostllgz7aall ctlt I IHEiESA M ril w 6iovE 9r utls flMMlt- tl tull tflt GiEExwmD aw wa7GF2*tr

{ t2qt0101 ircc tfiYti€fi tioPttTf tlc lmfHrust :{tdtco, tr to6cl t!*'lMCCAITT{YsILl {aatdrElg31

t3520!t65 L6ttdmtl )lrsflr m sllrsr )UNMORE PA |.1512 IDAI AVE |.47CA$1rildls6a3 tsmm IORUYA M tua vlPofiD Avt ;dAt{rot{. PA trso6 :oR vtFotJo I G[.toY {4'l7st-?s31r:illlsof! t7Eotolm01 tgE tt{c r3t STtoI,lr 502 ;t{lt|Gm@(rwP,P ll,ltrt rrE {,447I}E2S:t1'a310a617t r664t020011 E-UC[ iottil lo?whtcHE$ErwAY illNldx pl IGfl flmf,o tHtmtl oY qtr

"a3afls:to t6c:lqr:&011o2 lt{Alloituf{€A t25 HUOSON 5T €ffi ra Is nFoilD lw 9ruE2331t9 )MATITY JTFFiFI I EI.EAIEIH f, mwE lvF ra.Nlot{_ Pl Lrs06 [. COINE VE r(t,GE?t!t

qt6?u ttBmlmt9 taDru bt{N wnuM I xlTilnw iar ltD lvE ict ttTot{' PA IES05 ;44 3tD I R[GA{ Pr t{52GE2531

ffitE tidiltrmso 'arc$os& wmrlM I I JoHl{ t 2am wasHtuit{ 3l rtlffrofl- PA tt904 taxtR oot uEiY 15!tt4s6.rsl rSstacroo:t3 :TY OF SCiAttt(}| lto il u/AsH0{GTofi AVE icluffIoN. P ttSrlt 6It{ Ita355666tS t9tLoldll4 r6E[ COAI GJ r11W r. ilnoil 9a ltgfl ir lm.rgt [s?&f2s,4ts669642 t56l{60011 IA[K' GERAI"D M t01 fYNoft 5r trffoil P IIK tol EYl|oN I MEftbLtx s2Gt2qil135712217 0060r rl5AWOS l$lr{C m) slril{ wAsHlHGmN ltr TTI'IOI

' Lt50t ,2tD Sllunl wasl{iNcTot{ av6 r(qtGt2al|

a?4il fldFffi m x w sHxfrof{ lvE ow }H[ [n |.toil.9^ Its(ri w sl{rN6roN avt {{slGt253tt1sg7ffi7 t6Tmtmt fUN PATIllilS PI-\SAN DR MITIGS BANBE. PA ltn l TTNET (520-f253r

lls?85!71 |161&:lOO[2 ;OUfHSIOf STATE UC D ltAWlt{OtftEAV€*WE {Et DAfillr {M. NY u5t0 !2I E IDCUSI ST L'A {a520{253reg'rs2296 r55tto-ooa :lY oF scta|{Iofl !t0 N w^SHlr{Glot{ AvE icit {ToN. rA [503 &t l,l

il:r57SS{!O5 t S6ltrt(xrot DUTHSIDE STAIE TLC )t ltAwTHon?{E A\tE 6uflilm DAMA IIID tua 5w st{tNGToNAvf r.78 Kt&:23*;435t6103t |56eftt10009 toss[tu Ntcttous n7 3RD AVf (TTNTOIT PA LIqG IIr 3lD lvt sb.t5ili/t357519:t1 tt664010010 iA,{ TY DA'{IEI. & MARY ANT lX6tru lb lrE [tEt - pa lrs brwElt st 'Lt20E2s3r

t3Jl t561 ul6N tur tF 86 r_(fl lw [i t{tof'l- FA te90a ,216 ACXEn AVf ils2Gf?53rtgaa 15617ffi17 ilrrYH[ I q[Y tolr sttH gt .IAYON- PA trsr'. 'ct sMtm Sl

'tas:u'E2s3Er3q59111 LtE1m21 )OMM€S FTEDCIrI IjIII LOII LTNE ,TD Ft}f,GE. PA t85tl 07 sMmr 5T *452+82531

it36,as92t9 r5e170t622 }{AMfErS r(x)D L I X^llrtlft{ M D2 CEDFORD 9T Italt T'l SMITHAVE

;a35455467 1561t0&009 r/tClrilMorT WltllAM i I MAIJORIE l2II SNYDER AVE ffiT PA Ltsil r2at ffiltaw {SbEEili43545t413 t56t7flOolt

'v stuwsftrosEPfi le iostM iY ms sr rr^trm[ p ll30a |o!i m7 sMttH s 'tas2GE)titr

ta53 r'a1lo{dt1l f,tflf,addF 2q2 tg smEt lw id x?oN- ta [50{ r2S2 t&t sltrtD€R'fas20-F2531

rrgqil$ r{61Ml0 tffiKIMESINN L9 Sl|tDEt AVE r:Rllltoit- ta 1t504 t2a3 t2a5 sttYo€R avt {,15 Ut'Fzs3titasa6 561mm {owatrH M lGAtEtt ! los illrE tot 11 sMtTl{ I actflr al,iE i(:i t{Tot{PA Its{X ict 11 sr|m{ r aoct t4520{zstl;a3s4dr5?5 156ara002s ravatou orilsnfiE M & totEtr ro2 s nr ANN sr (IAXTOIT PA 02, s {(20-rx{;4it5452596 L36l:||xm2a stooi uc x c\6 cAtEMABx r cvs oixstoiE lcclxc InFI ffiffi.It IB rolt 50 MAlil AvE Gru)g;a:tss2tt10 L6r6fil.(xn )A }IOiIHEAST TFG iAT.ROAD AI'TH ffi6I tA Ltsd| rftrY lt lo tf,K s (5m{2sr;,|3s{acxlt t6rmrco1| tli,lAiE FLOIIDA RfAIY ndffisxmrffiP rt$nol|- ta Ll50!; IOI GE||ET ST tas20-f253r

ia3J7arEo1 tslslffi inf,Fwrrrutnnillt ur m t[MNGTOf, AW icn l.toI. ? It56 L2m lEilnrcroll tl2&t2 {4S20{2S3tr1ffi* rffimml ffiltuflcrsa idrt{tftEcc avF ;(xar{fot{. PA lt5{X tl^tN avr t-4 {4520-c23:rr

rgmm tstrrrm20 lMtutY uFrHoorst cttt,tcfi xo s MA[{ a\,/r lr r{R)fa-t^ ll50a M^|n r4520-f253t[|l2a6tal ls61$100(r, ItD€ @OO tHr{6S lilC roocilllc r{5T ;crAl{Iolt fA [5C st tEM I ottiiYiaitsa6itras IsetiFa0022 lruoRo MtcHELE c 10tu5M tNavE {, fA llg m lo? sMtil lw ssffi;433/ts516 r5617X(m5 lEVl€llO wM lrr,$lrElsf ilttc' r&C )m loffi Pl Llsll Loadffdll gsnc2srt!5'154251 t56170lqtzE CIETTE H 2!SACIEi AVE rffifttH ta Itsora DS6 rlCtEt lrt a4520{6:tt

156lniln23 oWlHUilm&tU 2&tttlssfr iCIAIIION. IA It504 L2a6 l2at s atH sl l{520{2s3r41q[119 tq6tm2a {ormwnHNEtmt-(nEs 12206 Al{lt l{ 6tfN ct tlo{ilollD- V It2!a P5G52 S frH 5t {il52GE25:tt

riia5a15t |l6170aOO27 rR'I 'iOPEITIES

[C rm x ttoMlfY^v( ;('AilTOII. PA 1t50a 1l: st tl;445454195 E6tm{oo25 tfullo\rrrl, D^vto t2z! sto/DEi Ar/E AvtOt" fA rlil 1273 l|mrElAVE Ig?MqIi1t19453950 l56('F7m21 :Mlt RY CSt RClt PAIS ilt tN&tiYilM wR NNOH 9I Ltry mxltlnmm Itt2Gtxatra(tstq ,I lst uwtFwtrll ultfwr ,tlxs )tr?HlilT_ PA tul nl6 tt.f,rDtt st !4s20-f2s:tf,ITOUil 16-1ldolmil )tfatfMEl|l 0F tt Nstotl^noH IlAilS?OiTAflOH & S fETY 8I-D6 IAIRISBUiG. PA 17120 trEcx {'t510.f,2si}r

i43573mL 156r!to10001 rMc REAI ESrA1E HOtDtt{GS LtC xn SAIINGIR cl03t doostc PA tlw tltl sw^sf0t{GrcN avE (tnfxuaSsg6't sa LSattoS{1o10 )sr0

^llErT&MAI6Iolr I MftolAN AvE nffiu-91 Iltr tr RtSillltEIDm u3bf)s

;43!t90dB5 .76mm $OIYOANIEII MAIGAIEI toc P€ufl A\rf rrlitToM- PA Lt56 llmilrMAl|cotatl trs2Gg)53r!ts5t5t)565 rt6tqtruM rammt frlkurmsam MdFFff rxll{roil_ P L'sCE

'APit st To cHtttY sr ta3&€2s34

iltt1?tt1 r6'11flddot nNilLmtmm 11 WEST UHtOr ra nOCoilO H E R/Vrr MIIJ(ES IAIIT- PA raTDt IYAiD UN€ {ia,a70{25+t

u3tt15tt r5't1104m03 or{Es cYltlurl ]l llo9gr fFoioavE iCIANIOII- PA 1t505 LIOg STAfFOND AVE {i1470.C25't5j39n7atl r.6tor01001s ;(t afioil HougNG aut]ro8lw i tfllylNc AvEe PfAR Sl I{, PA ta5€5 EAf, STIVAUEY VTEW rliIACO llilTGI2tts'r447:!n.rJ7 t6?rxcto05r0l : srAilUO Mtclt ft M l roAr'tNE M l5?5 FiOUDI AV€ (umfl pa IM ,sts rmuDl aw gnfaq;445111709 t67t 4 tr(?ffiffbaw ictltrtoil. pl rtsoS 3O2 STAFFOID AVE {t{bFrt{s

q lStrm )w of gtllfltrll rffflrt avt rjlAXIOIT- PA 1t30! $T|rui AVEO{AU AU6 Pff {aslo+2552gsttffi Lgtltd2fiol rEMft) CHAI1FS E IIUSIIE i45 STH ]lVC {EW YOEE M' t00t7 AUITELAVE 9t520-E2552

ilsffiS L67rro2mo:tol & t- iflt tY colt9 too M[-t sr IUT{MO{L PA tlqtT EL AVE

i.ts?a17t3 t571rD(HXl ITMXO CflAtIES E TiUSlte ias 5rH |l/E xu( w lmlT [tt lw glbE2qE?'*ts7aa7a 1571X)2mO1 IEM(O OUIIE E TIUS'I t3 ItW VOTI( MY L0{r1? I ff AVE IELMHTNST BTDI {sDP:.is2iilil536t|:l7 lf,f,rs0Zm$2 JNwftWOFnmr.l ffimF aw I ultD€lt s icta|ltoN_ PA Ltst0 lEr.i itocE iow {45.:lG E25,lS

uqgSg t\7wffi Hil'A3 DdUD D & DOTOTI{Y E nr H^tlls('lrl A\rE K:lA|Tbfi- PA It5rI' 5r, lrAtfisor{ AvE l,as20-EZs,tsggt'ffi t6rum5! ;cRANTOT St{OOr Br$n|cr r2S il WASlltftcYOl{ AVt i('ANIOil. PA Lts(B tu 5T 1.4520.t2545

i,a399621L 1161501m02 ralM ifaL Esralf lJJc bl ss:t s wasHlt{cToil AvI r:E^ilIOI{ PA It505 i{rl503 5 WAStaIltGIOil Ar/E

,lN riMtt }I'I{EI. l{^ME rDot€ss'/sTATE

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4:15t52101 t5ssolmo2 :R^tr,(}{lst ttTY titIft sralf coR .O' S STATE SI '3

MUETIIR A E C ftlxs srrMMlT_ PA Ia41 I W$INGTON AW gs&r?qg4r586lll3 I S6650t(m30t 'o lox 662,0? AMF Ol{Att 1{CA60. [" i0546 w^slililGroN Avf & tEEcH 3t t{sDErs{s;,litSt65243 1566501qn6 It aLltY REstDEitcES Llc 1617 oAJ( itD6t 1n( IOPIONS, MN is:to5 rtclt sr a{52GEI91s{s2tm r5tlzolmsq 4ilII IA MAT m ctowN avr CIANM PA It(os t200 ctowN l{52GE25i15i8srs9951 l9650r(h' rltag Nw cltftRY u artlst0no- or 1772a ;o wAsll l45.lcE254Sias120927 l6t0m:tm3 JHkNOWn OWil€R

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i4450401 20 l57tt0l0oot Dt'rTos{Y cH€sTt t & DllNl vloscow. PA lEiU/t ;1' MAPI"E ST ||5&t2Ja5415960321 t56t50t0005 l4sz)"E25,r5'A4536tUtO IS;r61034n40 'tuMlfio }{Ail(]' & clrRtsTril€ rctowr{AVE icRAttlrJir. ?A Itt05 r cruwN avt t 21 |,(5n![25,t5GSSE St tt6trum2s plRAilFYVlilC!ffi d2E dDm lw NAMN PA ItBd t025 cf,bat Avc .E2545

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5 ]MT.EY AI'E [, ?A ll50't t207cED IAVE ta52t)-t25{5TffiI lSal!roa0050 llYoFS(f,At|rOX ffYil.PI ns 1200 lu ctD r&tRmRlPrltstoN 15

ffisffl tffi:ffi ur,rlEfsdv mM T2EEHSI riaxroit- aa IBB NEU9 G2ffi5;4359tdt12 LSClflm26 )tktwsrYI}sltM l0l1GOlt a\,iE |fIAI'TOiL PA ||30s I(,:ll(ID T rcm{2srs;,t359aat7c I95rgX{D2t utiaN Dot'[{A M lott cEo^i AvE lls05 OI? CCOAi AVE tag20.Et54S

;,13594{r,5t 155t90462t 'YEf,Oil IllOi,tAS N ,i f ?AUIA M l(n5cEoARAvEi[ ff tlAl{rot{, rA ,1505 iOI5 ctDAf, AVE liaS2lll2lrlsrco2. lf, Pl it503 r{G {a32G82545

4ffsrc ItmmE ffiTNffiDIS l2q t wMlNGroil lw ffiN.PA mt il02 s IfiMNG AvE {4520"E2545

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t3sr3t7t2 16-r07ErO62 ,AI{IAr-EON A'lcft r ;lt ttoo( sT t ,tvt5 ;11 !t(x)K tT {{t2GE 5il5;,t35lll5G r5ro03o(l5t |1oM@srcsT ci.AtaroN, Pl r505 ;tt ttoox st ,!l52GI25irsUK2B E76mrm26 fflmHilc I slFhnD aw ffiox.PA .|s STA'FdD AW B5ilt5r?x trs1nsl9l u5Ef2g'{.7a2sr76 r2t1701fiS4 :rTY OF SCnAt{rOa,l CIAXTON- PA .tst 3 v€Ll^s st tazlo-Ez5a5

;a35ta97SO |J61901CO:9 )ML ?IO|EiNES LP l10l ctl|ltE AvE x FRoMM ttfcT DfiG, pA !605 Ioqjst 44520f2S45

r{39t7lG,l 156090rnt9 :AAR EDMUilD 1952 ilEWTON R' xt 5 MAttrt AvE t"E253t

r5625010S2 J6I F6IIN NAIUIAL GAs INC ) lox 1357t XA€CO|.,|JIS fAYAttE rmrre_Dl 9€12 rRloc€ 5T {4570-E253e

rsdrdld ffiffi1t bHHS TmilS I ilf,bl D XIME DT ililmtE. pa .!it2 ?NmuDtl 15 ffq?o-Dqs2ilgsss LtTSaOlmlt rgrt croat avr ctlt{ToM- PA .isoc .51S TINDEil fl {3nt29at

IATMJDE LONGlTUDE MAPBOOK NO.

11'26',38.116 75'38'36.L72 !4720-E2552

tt'26'34.144 75'40',20.379 [4670-82545

1' 25'52.758 75'40',13.803 \t467(}82545

41'26',X5.941 75'10',4.446 \r467GE2545

41'26',16.448 /5'38'55.705 {467G82545

41' 25'48.644 75'39' 14,051 [467GE2545

+L'25'48.822 t5'39' 14,408 {4670-E25{5

41'25',48.862 75'39' 14.488 \t457&82545

01' 25',48.553 15'39' [].870 {467G82545

4l'26'8.752 t5'4t 5.779 N467GE2545

t1' 25'48.632 f5'39' 14.049 N457GE2S45

fl' 25',48.814 75'39' 14.407 N467GE2545

t1'25'48.854 75'39',14.487 [457GE2545

tl'25'48.541 75'39'13.868 u467G82545

11' 26'8.301 75'39',9.497 {4670-E2545

tl'26' 28.889 75'3E 36.818 14570-EZS52

It'25'51.794 7s'40'59.369 [4670-E2538

11'25'51.785 75'40'59,351 v467G82538

tl'25'1.657 75'40' 23.459 I4520-82545

11'25'19.445 75'39'26.685 v462GE254s

l1'25',35,529 75'39'25.7&t {462G82545

41'25'19.351 ts'39' 26.759 M62GE2545

4L'25'35.077 ts'39'22.53r N462&82545

f1' 25'0.314 t5'39',24.232 N4620-E2545

4L'24'57.433 75'39'26.7tO N4620-E2545

f1' 25'36.638 ts'40'L7.706 N/r62GE2545

01'25'30.315 15'40' 16.981 N4620-82545

tL'25'29.817 15'39' 10.785 N4620-82545

t1'25' !t,058 t5'39' 16,829 N452GE2s4s

fl' 25'33,050 15'39' 18.387 N4520-E2545

t1'25'33.306 t5'39' L1.427 1462SE2545

r1'2s'13.221 75'39'16.736 v462GE2545

tL'25',13.22t ts'39' L6.736 {462G829rS

t1' 24'54-661 75'35'3s.833 \l462GE2559

11'24'54.791 75'36'35.768 \|45ztrE2559

tl'25'15.972 7s' 36'3.118 {462SE2559

t'25' 11.704 7s'36' 10.294 v4520-82s59

+I'25'7.936 75'36', t5.372 {452GE2559

41' 24'55.891 75'41',56,944't4570-82531

41'24'35.075 ts'40' 1L.to2 N4570.82545

4L'24',44.654 75'40',5.889 N457GE2545

t'24'14.428 15'40'13.3@ r'14s7GE2545

|r'24'15.868 ts'40'2.499 N457Gt2s4s

1'24'16.690 15'40'2.696 N457G82545

t1'24'16.305 15'40'3.124 il457GE2545

tL'24',16.782 ts'40'z.sv t457GE254s

IAIITUDE [ON6MJDE UAPEOOK NO,

47'24' 15.742 7s'40'L3.77A {4S70-E2545

41'24'22.008 75'39'56.779 N4570-E2545

41'24'21.916 7s'39' 56,883 N457GE2545

It'24'2r.492 75'39'57.365 N457GE2S45

{1' 24',34.853 75'/t0' 11,702 N4S7GE545

t1'24'54.4/S0 75'39'SO.382 N4570.E2545

rL'24'54.283 75'39'50.182 N4570-E2545

tL'24',50.275 75'39'51.738 v457GE2545

r1' 24'50.345 7s'39',51.927 !t457GE2545

11' 24's0.429 z5'39'52.1ss Y457GE2545

11'24'14,438 75'4o',13.3t2 {4570*E2545

tr'24'L7.6?L /5'39'50.147 {4570-E2545

11'24'39.!t0 15'40' 15,872 t4570.62545

rf 24'16.546 ts'40'2.ts8 N457G82545

lt'24', L6.472 15'4d 2359 N457GE2545

41'24'16.096 73'40',2.796 N4s7(}82545

[1'24' 16.565 75'40'2.252 N457GE2545

qL'z4'2L.325 75'39'56.921 N4s7GE254s

{1'24' s2.781 75'39'44554 N4570-E2545

tr'24'50.062 z5'39'52.916 N4570-E2545

[1'24'50.120 75'39'52.924 |l457GE2545

tf 24's0.2s3 75'39'52.940 [457G82545

tf 24't9.7L6 75'.40'22"994 u457SE2545

tl' 24',39.597 75'40', 23"367 !457trE2545

1' 24'39.542 t5' jl,0'23.529 t457G€2545

11'24'39.598 75'40'23.36s {457GE2545

t'24'74.577 15'40 13.348 rt4570-E2545

1'24'51.300 75'39'54,618 [457G€2545

4f 24'50.984 75'39'53.702 \|4570-E2545

41'24'53.823 75'39',32.L32 \t457GE2545

41'24',53.895 75'39',32.279 N457G82545

41'24' 13.520 75'40 13.140 N4570-E2545

t'zt t4.2u 75'40' 13.256 N457(}E2545

41'24',44.089 75'40'.3.742 ,r457GE2545

t'24'M.L72 75'40'4.051 N457G82545

4f 24'56.376 7s'39', 28.368 |\|t1570-E25tl5

11'24' 55.376 75'39'28.409 rl457GE2s45

11'24'31.152 75'37'43.142 {457GE2552

t1'24'58.251 /5'41'54.354 {457(}E2538

r1'24'47,552 ts'40'25,057 {457$E2538

tt'24'47.494 15'4r0' 24.880 \|4570-E2538

tl'24' 38.882 15'40'36.794 {457GE2538

11'24' 34.680 15'tto'39,460 {457GE2538

t1'24'36.167 /5'4d 25.880 Nils7(}E2538

11'24'17.589 t5'40 38.228 N4s7GE2538

11' 25'35.7111 t5'4L'24.?5L N't62GE2538

I;l

J

;i

|ATIruDE TONGITUDE ltAP8()oK NO.

r1'25',14.098 t5'4r'37,464 N462G.82538

41' 23'36.016 75'40'40.706 N452GE2S38

L'23'29.444 t5' 40' 47.707 N4s20-E2538

41' 23',?9.631 15'40'47.859 N4S2GE2538

11'23'29.758 7s'40'47.963 N452&82538

1' 23'38.050 15'40'37.254 N452GE2538

t1' 23'38.0s8 t5'40'37.27L il452GE2538

1'23'37.954 15'40' 37.063 N452GE2538

tl'24'3.011 15'40' 39,224 N4520-82538

+t' 23',38.329 rs'40'36.554 N452(}82538

11'23'48.076 75'40' 29.550 N4s2G82538

tL'23'25.272 75'40'53.283 N4520-E2538

11'23', 25.678 75'40', 53.050 [4520-E2538

1'23'25.046 15'40' 52.839 {4520-E253E

1'23' 19.705 t5'4L'25.617 v4520-82588

4t'24',4.477 75'39'6.566 !t4520-E2545

tx' 24'4,357 7s'39' 6.697 {452G82545

11'24'0.906 75'40' 19,9s4 !4520-E2545

17'23',27.208 75'39'47.105 {452GE2545

NAME IATITUDE LONGITUDE

Road leading to wastewater treatment plant is city owned 41'23', 19.708" 75'41',25.605"

SCHEDULE 7.06

COMPLIANCE SCHEDULN

See attachcd.

Smnton Scr.r Comnt DR fthcdul€ ioaFh$! A Prcj.(tIack Nrme

Pr€pare Con€eptud DesProcure Des. Eng.

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135!Bidi 36 r Construdion and Startup

| ssif,En Ph.se A Proje(B' Drte: Tu? 3/29,/16

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Thu 6/216Mon 8/1fl6Frl 111111?

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Fd ffry14Sun 311/15

Fri 8/2S/14

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wH 10/1n4

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Sun 11/1/15

Thu 10i1l15

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Thu 3/31116

Sat 315/14Thu 6/t14Tu6 5t31/16Tu642d16Tuc 5tr1/16Tus 513l/16

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Tu. llY.Yl6SatE15/14Thu G/5n4

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Fri 3/2814Thu 615/14

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Mon 1z14tl5\ /bd 9/30iit5Tue 126/16Sst 7/3U16

Sst 7f,t0rl6Frl5116114

Tue 9/30/14

Mon 9/21/15Tue 11/3/15

Mon 11130f15

Fn 12111115

7u62ru16Sat 713O16

1066 d.fs97 d.ys

155 d.ys518 da)6

18 d.ys382 d.ys

l!!1 days

27 d3ys

350 d.ys763 d.F97 dlys155 d.ys

235 days

23 drys

197 days

70 dry3

2E dsys

264 days

?16 dryg

105 d.ys155 drys

397 d:ys

12 dryt:*17 rirys

23 day:

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254 drys

24 drys

22 d.ys

52 deys

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121ftys8O5 d.ys

155 deyl

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24 d.ys87 d.ys99 days

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1/tO d.yt31 d.ys33 (hys

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174 days

375 days

23 days

152 deys

99 d:yt28 d.yr166 days

13 drys

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VARIANCE ^A.DJUSTMENT CALCU LATION

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Appendix A

Schedule 7.07(d)

Sewer Authority of the City of Scranton

Example of billing determinants and proof of revenue

Date: XX/XX/XXI{X

Residential - Bl-Monthly Billing

Fixed Charge (CustomerCharge) 190,872

Vol. Charge (Per 1,fi)0gatlons)

Total Residential

Commercial Monthly

Apartments

Fixed Charge (CustomerCharge) 8,448

Vol. Charge (Per t000gallons)

Subtotal

Commercial - Otherthan Apartments

Fixed Charge (CustomerCharge) 37,5@

Vol. Charge (Per 1,000gallons)

Rate Blocks (per 1,000 gallons)

Upto5Over 5

Subtotal

Total Commercial

No. of Bills Usage ln(EDUs) 1,000gals Rates Revenues

s 39.00 s 7,444,@8

L,675,8U 5.00 9,379,420

t9o,872 \67'84 15,823,429

19.50 L&,736

94,938 5.00 474,690

&448 94,938 639,426

19.50 732,420

6L,y7 5.00 306,735

786,838 7.75 6,@7,991

Total Residential and Non Residential

37,5@ 848,185

45,008 Et3.,rZ3

235,880 2,6L9,W7

7,137,L46

7,T16,572

s 23,600,000

SCHEDULE 9.0rft)(vii)

CAPITAL EXPENDITURES BUDGET

Below is the adopted Capital Expenditures Budget for the fiscal year ending March 3L, 2016 andproposed Capital Expenditrues Budget for the fiscal year ending March 31,2017.

SCRANTON SEWER AUTHORITYCAPITAL EXPENDITURES BUDGET

FOR THE FISCAL YEAR ENDING MARCH 31, 2016

PROPOSED CAPITALEXPENDITURES

MISGELLANEOUS:Collection System RepairsIncinerator Building RehabilitationBNR ProjectLTCP CSO PojectGreen Technology - Permeable Pavement, etc.Capitalized interest on20O7 bond issueCapitalized interest on 2011 bond issueCapitalized interest on2014 bond issue

SUB.TOTAL MISCELLANEOUS

PLANT:\ M/TP Upgrade (SCADA, PLCs, HMl, VFDs, Elec., etc.)AdditionalGarage (Replace old removed by BNR)Upgrade electrical to Maintenance buildingPave Plant RoadPave Back LotPave Miscellaneous areas (BNR)Overhead doors and man doorsRoofs (thickener, sludge, admin, vestibule, up top,etc)Address rear loading dockElechic / forklift / pallet jackLarger forkliftPlant HVAG UpgradesWindow ReplacementMCC replace heating and A/CEntrance gatras

Security Cameras/Entry Point Control and AccessSludge Dewatering/Thickening/Conveying UpgradeHeadworks Upgrade for 60 MGDIncinerator fire protection/plumbingActuators for the primary gatesMobile drive for gate actuatorsDisinfection Upgrade (Sodium Hypochlorite)Sludge Building basement tankage containmentStairs in Sludge BuildingMacerator upgrade to BPF sludge lines

AMOUNTBUDGETED

$ 2,340,0002,500,000

350,00013,600,000

300,000

19.090,000

850,000500,000

80,000720,000175,000275,00040,000

300,00050,00028,00042,000

650,000100,000s0,000

100,000100,000

5,000,0004,000,000

450,000150,00025,000

3,250,00075,00065,000

265,000

Polymer tank replacementGhlorine/Utilig water replace 10" to 16" CL2 tanksGrit Settling box purchase

Grit Settling box building and implementationAdditional Plant LightingGrit Pump/Motor RebuildsTwo plant utili$ vehicles / cartsSludge Storage TanUMixer System UpgradesCheck valves / Fittings & install at main pumpsComposite Site Building (s) upgrade (s)

Two pickup trucks/small SUVsAdditional Scrubber / HVAC modifications(Headworks)Primary tank drives (long and cross collectors)Secondary tank drives (long and cross collectors)Spray bar system for scum troughsFaciligffankage clean up, repairs and epoxyISCO Plant Meters (001, 003 and primary)

lnfl uent Flowmeter I nstallationGas monitoring systems UpgradeSludge Dewatering Design StudyRMPSCBA

SUB-TOTAL PLANT

PLANT MAINTENANCE:Cl2 & SO2 system deslgn studyElectrical Preventative MaintenanceMotor controls, stators, breakers, etc.VFDs, PLCs, HMlsToolsAB Diagnostic PLO/SoftwareSCADA Diagnostic/SoftwarePLC repair/replaceTwo Polyblend unitsMisc System lntegrationRebuild Flyght MixersSludge Tank Vacuum lineSpare parts for new grit channelSpare parts for hnkageBar Screen Rebuild / ReplacementParkson Bar Screens/RailsSludge blender rebuilds (two unit)Heating Units MiscSpare Main Pump Motor and DriveBoiler repairs & snorkel add'l to remove debrisSkytrack Lift / Manlift / Bucket Truck (used)Metal working machines (Milling/Lathe/Punch)Vertical bandsaw & Electric Hydraulic Arbor Press

SUB-TOTAL PLANT MAI NTENANCE

cso:

25,000150,00060,000

125,00030,00025,00040,000

1,500,000450,000350,00065,000

550,00060,000

175,00085,00075,000

220,00050,00055,000

100,00010,0006.000

21,546,000

100,00040,00050,00040,00025,00020,00018,00075,00025,00050,00040,00015,00050,000

180,000900,000200,00040,00015,000

220,00025,00050,00050,00018.000

2.246.000

Tideflex Valve (estimate 5)Tide Gates (estimate 5)CSO flow meters (Replacements)003 Flow meter replacementConfined Space and Safety Equipment UpgradeSolids and Floatables BafflesCSO Regulator Upgrades

SUB-TOTAL CSO

PUMP STATIONS:PS Upgrades (SGADA, PLCs, HMl, VFD, l&C, etc.)Myrtle St Pump Station grit removalwellMyrtle St Pump Station pump storage additionNew Pumps at Myrtle StreetReplace pumps and plumbing at Panot SheetPump Rebuilds and sensorsLevel Control System Repair/Replacdupgrade (estimate7)Grinder Replacement and RebuildsReplace Valving (7 stations)

SUB-TOTAL PUMP STATIONS

LAB EQUIPMENT:BNR Supplies / Online probes (DO, Ammonia, andNitrate)Gomputers/ Data stationsSample RefrigeratorReagent RefrigeratorRemodel (lf not relocated)ISCO samplers-replace primary, Aeration & effluentMuffle FumaceForced Air OvenVolumetric GlasswareUpdated Pan BalanceSpectrophometerBOD MeterDO MetersDistillerl filtersCBOD Heat BlockFume Hood

SUB-TOTAL LAB EQUIPMENT

COLLECTION & STORM:Street Sweeper (OECD LocalShare Grant)Two Cube Van with Lift Gate (Basin and Dig Crew)Utility Storm Basin truckOne pick up truck replacementsOne smallSUV (s)PAI Hybrid / Electric VehicleOne MIPP pickup truckRotary LiftDemolition Hammer

100,000100,00045,00038,00020,00025,000

200.00052E.000

150,000625,000150,00095,000

125,00055,000

40,00050,00060,000

1,350.000

75,0003,0005,0005,000

130,00024,0008,0008,0005,0005,0005,0006,0006,00012,0002,00012.000

311,000

245,000120,00065,00035,00030,00045,00035,00012,0002,500

10 ton dump with heated box for black topTandem Dump TruckExcavator trailer5000 watt generator/light plantAdditional Root Cutter for VactorCollection Hand ToolingDiesel/ Gas Mechanics Hand ToolingSafety/ Shoring BoxesOne trash pumps

Hydraulic chain sawCamera upgrade (s)Camera repairsShed replacementRoad PlatesTraffic controUBarricadesRain leader program

SUB-TOTAL COLLECTION & STORM

IT DEPARTMENT:Backup Software Change Per Year (Cloud Solution)UPS Upgrade (2 downtown 1 at VvlA/TP)Desktop/Laptop ReplacementOn-Call SCADA tablets or laptop computersMIL Spec Laptops and MountsNetworUServer U pg rades/C itrix, VMware, H a rdware,etc.Network Switch / FirewallUpgradesMobile Devices (SCADA, VPN or Asset Mgt Access)GIS Data Collectors (GeoXH & Junos)Lucity (U pgrades, lmplementation, Software, etc. )ESRI (Upgrades, lmplementation, Softnare, etc.)SCADA/PLC (Upgrades, I mplementation, Softrrare, etc. )

SUB-TOTAL IT DEPARTMENT

TOTAL CAPITAL EXPENDITURES

110,000135,00025,0005,0004,500

20,00020,00020,0006,50010,000

100,00085,0009,0005,0002,000

200,0001,345,500

6,0006,0008,0008,00010,000

120,0008,0005,00010,00010,00010,00010,000

211

$ 46,627,500

PROPOSED CAPITALEXPENDITURES

MISCELLANEOUS:Collection System Repairslncinerator Building RehabilitationLTCP CSO ProjectGreen Technology - Misc. Projects, etc.BNR WetWeather Hydraulic Upgrades and FixesBNR Aeration System and Blower Upgradeslnterceptor Replacement NS1323 to NPDES 0O4

Capitalized interest on CSO 19 & 20 project loanSUB-TOTAL MISCELLANEOUS

PLANT:\AM/TP Upgrade (SCADA, PLGs, HMl, VFDs, Elec., etc.)AdditionalGarage (Replace old removed by BNR)Upgrade electrical to Maintenance buildingPave Back LotAdd retaining wall and access road west side of\MA/TPOverhead doors and man doorsRoofs (thickener, sludge, admin, vestibule, up top, etc)Address rear loading dockElectric / forklift I pallet jackLarger forkliftPlant HVAC UpgradesWindow ReplacementMCC replace heating and NCEntrance gatesSecurity Gameras/Entry Point Control and AccessSludge Dewateringffhickening/Conveying UpgradeHeadworks Pumps, Valves and Gates ReplacementHeadworks Bar Screen Upgrade for 60 MGDI ncinerator fi re protection/plumbingActuators for the primary gates

Mobile drive for gate actuatorsDisinfection Upgrade (Sodium Hypochlorite)Emergency Gas Scrubber System for Chlorine Bldg.Sludge Building basement tankage containmentMacerator upgrade to BPF sludge linesPolymer tank replacementChlorine/Utility water replace 10" to 16" CL2 tanksGrit Settling box purchase

Grit System UpgradesAdditional Plant LightingGrit Pump/Motor RebuildsTwo plant utility vehicles / carts

SCRANTON SEWER AUTHORITYCAPITAL EXPENDITURES BUDGET

FOR THE FISCAL YEAR ENDING MARCH 31.2017

$ 2,340,0002,500,000

12,600,000500,000

4,000,000500,000

2,500,00078,000

25,018,000

850,000500,000

80,000175,000

250,00040,000

300,00050,00028,00042,000

650,000100,00050,000

100,00050,000

5,000,0003,000,0002,500,000

450,000150,00025,000

3,250,0001,250,000

75,000265,000

25,000150,00060,000

750,00030,00025,00040,000

AMOUNTBUDGETED

Sludge Storage Tank/Mixer System UpgradesCheck valves / Fittings & install at main pumpsComposite Site Building (s) upgrade (s)Two pickup trucks/small SUVsAdditional Scrubber / HVAC modifications (Headworks)Primary tank drives (long and cross collectors)Secondary tank drives (long and cross collectors)Spray bar system for scum troughsFacilityffankage clean up, repairs and epoxyISCO Plant Meters (001, 003 and primary)Effluent Flowmeter lnstallationGas monitoring systems UpgradeSludge Dewatering Design StudyRMPSCBA

SUB-TOTAL PLANT

PLANT MAINTENANGE:Cl2 & SO2 system design studyElectrical Preventative MaintenanceMotor controls, stators, breakers, etc.VFDs, PLCs, HMlsToolsAB Diagnostic PlC/SoftrvareSCADA Diagnostic/SoftwarePLC repair/replaceTwo Polyblend unitsMisc System lntegrationRebuild Flyght MixersSludge Tank Vacuum lineSpare parts for new grit channelSpare parts for tankageSpare Electrical Parts and BreakersParkson Bar Screens PartsSludge blender rebuilds (two unit)Heating Units MiscSpare Main Pump Motor and DriveBoiler repairs & snorkel add'l to remove debrisSkytrack Lift / Manlift / Bucket Truck (used)Metal working machines (Milling/LathelPunch)Vertical bandsaw & Electric Hydraulic Arbor PressTool Van

SUB-TOTAL PLANT MAINTENANCE

CSO:Tideflex Valve (estimate 5)Tide Gates (estimate 5)CSO flow meters (Replacements)003 Flow meter replacementConfined Space and Safety Equipment UpgradeSolids and Floatables BafflesCSO Regulator Upgrades

1,500,000450,000350,00065,000

550,00060,000

175,00085,00075,000

120,000150,00055,000

100,00010,0006.000

24.061,000

100,00040,00050,00040,00025,00020,00018,00075,00025,00050,00040,00015,00050,000

180,00040,000

100,00040,00015,000

220,00025,00050,00050,00018,00030,000

1.316,000

100,000200,00045,00038,00020,00025,000

200,000

New CSO Utility TruckSUB.TOTAL CSO

PUMP STATIONS:PS Upgrades (Pumps, Controls, VFDs, l&C, etc.)Myrtle St Pump Station grit removalwellMyrtle St Pump Station pump storage additionNew Pumps at Myrtle StreetReplace Parrott Ave. PS with SubmersiblesPump Rebuilds and sensorsLevel Control System Repair/Replace/upgrade (estimate7)Grinder Replacement and RebuildsReplace Valving (7 stations)Portable Hoist and GantryNew PS Utility Truck

SUB.TOTAL PUMP STATIONS

LAB EQUIPMENT:BNR Supplies / Online probes (DO, Ammonia, andNitrate)Computers/ Data stationsSample RefrigeratorReagent RefrigeratorRemodel (lf not relocated)ISCO samplers-replace primary, Aeration & effluentMuffle FurnaceForced Air OvenVolumetric GlasswareUpdated Pan BalanceEpectrophometerBOD MeterDO MetersDistiller/ filtersCBOD Heat BlockFume Hood

SUB-TOTAL LAB EQUIPMENT

COLLECTION & STORM:Street Sweeper (OECD LocalShare Grant)Two Cube Van with Lift Gate (Basin and Dig Crew)Utility Storm Basin truckOne pick up truck replacementsOne smallSUV (s)

PA1 Hybrid / Electric VehicleRotary LiftDemolition Hammer10 ton dump with heated box for black topDump TruckExcavator trailer5000 watt generator/light plant

Additional Root Cufter forVactor

98,000726.000

300,000625,000150,00095,000

325,00055,000

60,00050,000

150,00040,00098.000

1,948,000

75,0003,0005,0005,000

130,00024,0009,0008,0005,0005,0005,0006,0006,00012,0002,00012.000

31 1.000

245,000120,00065,00035,00030,00045,00012,0002,500

110,000135,00025,0005,0004,500

Collection Hand ToolingDiesel / Gas Mechanics Hand ToolingSafeg/ Shoring BoxesOne trash pumpsHydraulic chain sawReplace and Upgrade Camera Trucks and SystemsCamera repairsShed replacementRoad PlatesTrafiic control/BanicadesRain leader program

SUB-TOTAL COLLECTION & STORM

ff DEPARTMENT:Backup Software Change (Cloud Solution)UPS Upgrade (2 downtown 1 at \MA/TP)Desktop/Laptop ReplacementOn4all SCADA tablets or laptop computersMIL Spec Laptops and MountsNetworUServer U pg rades/C itrix, Software, Hardware,etc.Network, Server, Server Room and Comp. SystemUpgradesMobile Devices (SCADA, VPN or Asset Mgt Access)GIS Data CollectorsLucity (Upgrades, lmplementation, Software, etc.)ESRI (Upgrades, lmplementation, Software, etc.)SCADA/PLC (U pgrades, I mplementation, Software, etc. )

SUB-TOTAL IT DEPARTMENT

TOTAL CAPITAL EXPENDITURES

20,00020,00020,0006,50010,000

260,00085,0008,0005,0002,000

200.0001,470,500

15,00010,00010,0008,00012,000

120,000

100,00010,00015,00015,00010,00010.000

335,000

$ 55,185,500

SCHEDULE 12.01(a)

CONSENTS

1. Agreement for the Acceptance, Conveyance, 'freatment, and Disposal of Wastewatcr Receivcd from ,

the Montage, Inc. Wastewater Collection System at the Scranton Wastewater Collection System and i

Wastewater Treatment Plant dated luly 24,2003 by and between l,ackawanna County, Lackawannr :

River Basin Sewer Authority and Moosic Borough.

table - pennsylvania · permit no. paii32203 issued by padep to the city with respect to the ms4...

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