43074 Item Number

Control Number: 43074

Item Number: 1

Addendum StartPage : 0

House Bill (HB) 1600 and Senate Bill (SB) 567 83ra Legislature, Regular Session, transferred the functions relating to the economic regulation of water and sewer utilities from the TCEQ to the PUC effective September 1, 2014. APPLICATION FOR SALE, TRANSFER,

OR MERGER OF A RETAIL PUBLIC UTIWT-Y-,,. TCEQ

P U6f i? f TABLE OF CONTENTS

Application For Sale, Transfer Or Merger Of A Retail Public Utility ......

Information That Apply To The Transferor (Current Service Provider Or Seller) ...... <

Information That Apply To The Transferee Or Purchaser ...... =

Texas Comptroller Of Public Accounts ...... 4

Information That Apply To More Than Two Parties Involved In This Transaction ......

Historical Balance Sheets ...... S

Historical Income Statement ...... 11)

Historical Expenses Statement ...... 11

Projected Balance Sheets ...... 12

Projected Income Statement ...... 13

Projected Income Statement Conerning General/Administrative Expenses ...... 14

Projected Sources And Uses Of Cash Statements ...... 15

Information That Apply To The Physically Distinct System Being Transferred Or Acquired ...... 16

Information That Apply To The Franchise Agreement Or Consent Letter From The City Or District ...... 16

Oath For Seller Or Former Service Provider ...... 25

Oath For Purchaser Or Acquiring Entity ...... 26

Notice To Current Customers, Neighboring Systems, Landowner And Cities ...... 27

I ^ f^ l ^ T 4h` k ^..^

TCEQ-10516 ( Rev 0912012) Page 1 of 28 APPLICATION FOR SALE, TRANSFER, OR MERGER OF A RETAIL PUBLIC UTILITY

*RN# 101254084 *CN# 600633093 *If known (See instructions)

1. Proposed action of application (check all the boxes that apply): qSale of nAll Portion of the Water system(s) under CCN No.: 12085 Acquisition OSewer system(s) under CCN No,: 20658 qLease/Rental

Transfer of DAII Portion of the Certificated water service area - CCN No.: 12085 Certificated sewer service area - CCN No.: 20658

If only a portion of a system or certificated service area is affected by this transaction, please specify the areas or subdivision involved:

Aldine Village Subdivision (PWS #1010931 & WQ 12382-001), Azalea Estates Mobile Home Community (PWS #1011253), Cottonwood Park Water System (PWS #1010283) and Cypress Hill Subdivision (PWS #1011792) and to:

Obtain a CCN for the transferee (purchaser) - indicate if purchaser will take the seller's CCN DAmend the transferee's CCN No.: OMerge or consolidate public utilities qCancel CCN of the transferor (seller)

2. Proposed effective date of this transaction: February 1, 2015 (Must be at least 120 days after proper notice is provided) QUESTIONS 3 THROUGH 5 APPLY TO THE TRANSFEROR (CURRENT SERVICE PROVIDER OR SELLER)

3. For the current CCN holder or service provider please indicate: A. Name: J&S Water Company, LLC. (Individual, Corporation or Other Legal Entity)

who is a(n):of DIndividual Corporation q WSC[] HOA or POAFJ Other

B. Utility Name (if different than above): Address: 8010 Thompson Road, Highlands, Texas 77562-3122 Telephone: (AC) (281) 383-9869

C. Contact person. Please provide information about the person to be contacted regarding this application. Indicate if this person is the owner, operator, engineer, attorney or accountant. Name: Bret W. Fenner, P.E. Title: Engineer Address: P.O. Box 500264, Austin, TX 78750 Telephone: (AC) (512) 264-9124 Fax: L512) 692-1967 Email: bretfenner*yahoo.com ZT ^tTvf ^« ^. :

. ... i f •^,i • 4n' . 9, . . ^

TCEQ-10516 (Rev 09/2012) Page 2 of 28 4. About the last rate increase for the system or facilities being transferred: A. What was the effective date of the last rate increase? January 14, 2008

B. Was notice of this increase provided to the Texas Commission on Environmental Quality or it predecessors?

q No ®Yes Application/Docket Number: Docket No. 35878-R Date: January 14, 2008

5. Please provide a list of all customers affected by this transaction who have deposits held by the transferor seller utility, if any, and include the following information (attach wtrlirinnal sheetc if nPrvecarxA• Name and Address of Utility Customer Date of Amount of Amount of Unpai e posit Deposit Interest on De os All deposits are held b operating company

Within 30 days of the actual transaction date, and prior to the transfer of the certificate by the TCEQ, the sell must provide proof to the Commission that these customer deposits were returned to the customers or transferred to the purchasing utility. Proof should include a sworn affidavit.

to, QUESTIONS 6 THROUGH 16 REFER TO THE TRANSFEREE OR PURCHASER 6. For the person or entity acquiring the facilities and/or CCN: Applicant: Utilities Investment Company, Inc. (Individual, Corporation, or Other Legal Entity) Utility Name: d.b.a. UIC13, LLC. ([f different than above) Utility Address: PO Box 279, New Waverly, Texas 77358-0279

Fax: Email: Telephone (AC): (281) 590-4359

CCN Numbers held prior to the filing of this application: Water - 12671 Sewer - 20765

7. Check the appropriate box and provide information regarding the legal status of the transferee applicant: qIndividual qHome or Property Owners Association qPartnership; attach copy of partnership agreement ®Corporation; provide charter number as recorded with the Office of the Secretary of State for Texas: 0801915189 ONon-profit, member-owned, member-controlled Cooperative Corporation (Article 1434(a) Water Supply or Sewer Service Corporation); provide charter number:

qMunicipally-owned utility qDistrict (MUD, SUD, WCID, etc.) qCounty qOther (please explain):

TCEQ-10516 ( Rev 09/2012) Page 3 of 28 8. If the applicant is an Individual or sole proprietorship, provide the following information. If not, skip to

9. If the applicant is other than an Individual provide the following information regarding the officers or partners of the legal entity applying for the transfer. You must complete either question 8 or question 9, whichever applies to the transferee applicant.

•Name: Shannon Marsh Telephone (AC): 281) 590-4359 [Address: PO Box 2482 Conroe, Texas 77305-2482 % (if applicable):

•Name: ele hone (AC): Address: Position: Ownership % (if applicable):

-Name: ele hone (AC): Address: Position: Ownership % (if applicable):

- Attach additional sheet(s) if necessary -

aw Important: • If the applicant is a for-profit corporation, please provide a copy of the corporation's "Certification of Account Status" from the State Comptroller Office. This "Certification of Account Status" can be obtained from: (See Attached Certificate)

Texas Comptroiler of Public Accounts P. O. Box 13528, Capitol Station Austin, Texas 78711 1-800-252-5555

• If the applicant is an Article 1434a water supply or sewer service corporation or other non- profit corporation, please provide a copy of the Articles of Incorporation and By-Laws.

`I'CEQ-10516 ( Rev 09/2012) Page 4 of 28 10. Contact person. Please provide information about the person to be contacted regarding this application. Indicate if this person is the owner, operator, engineer, attorney or accountant. ame: Bret W. Fenner, P.E. Title: Engineer Address: P.O. Box 500264, Austin, TX 78750 Telephone (AC): 512 264-9124 Fax .# "12 692-1967 Email bretfenne ahoo.com Relationship to the applicant: Engineer

^ IF THERE ARE MORE THAN TWO PARTIES INVOLVED IN THIS TRANSACTION, PLEASE ATTACH SHEETS PROVIDING THE INFORMATION REQUIRED IN QUESTION 6 THROUGH QUESTION 10 FOR EACH PARTY

11. Please respond to each of the following questions. Attach additional sheets if necessary. A. Describe the experience and qualifications of the applicant to provide adequate utility service to the requested area i ne applicant is a local company which owns and operates a number of water and wastewater systems the region. The applicant will maintain this utility in compliance with the rules and regulations of t] TCEQ, as well as federal and local laws, rules and re gulations. B. Has the applicant acquiring the CCN or facilities or an affiliated interest of the applicant been under enforcement action by the TCEQ, Texas Department of Health (TDH), the Office of the Attorney General (OAG) or the Environmental Protection Agency (EPA) in the past for noncompliance with rules, orders or State Statutes? q Yes ® No

If yes, please attach copies of any correspondence with these regulatory agencies concerning these enforcement actions and describe any actions and efforts to comply with those requirements. Attach additional sheets if needed.

C. Describe the source and availability of funds required to make the planned or required improvements, if any, to meet minimum requirements of the TCEQ and ensure continuous and adequate service.

The utility has the financial capability to make improvements if necessary from cash flows generated from its operation and ownership of both water and sewer utilities.

D. Describe the anticipated impact of this transaction on the quality of utility service and explain any anticipated changes in the quality of service.

There will be no change in the quality of utility service, as the applicant has been operating this water and sewer utility for seven year prior to the sale and transfer of this utility. The applicant is located in the region and will be able to response quickly to emergences.

TCEQ-10516 (Rev 09/2012) Page 5 of 28 E. How will the transaction serve the public interest?

The applicant is a local company which owns and operates a number of water and wastewater systems in the region. The applicant will maintain this utility in compliance with the rules and regulations of the TCEQ, as well as federal and local laws, rules and regulations. Since the applicant is located in the region it will be able to response quickly to emergences.

12 Please describe the nature of the proposed transaction:

The purpose of this transaction is for Utilities Investment Company, Inc. d.b.a. UBC13, LLC. to purchase a portion of the water and sewer assets of J&S Water Company, LLC. and to obtain new water and sewer certificates of Convenience and Necessity. (See Attached Sale Agreement between the Parties)

13 If the transferee applicant is an Investor Owned Utility (IOU) and will be under the rate jurisdiction of the TCEQ, please provide the following information. Water supply or sewer service corporations and political subdivisions of the state should mark this section N/A:

A. • Total Purchase Price: $ 217,854 • Total Original Cost (as recorded on books of seller or merging entity): $ 914,841 • Accumulated Depreciation as of the proposed effective date of the transaction: $ (466,885) • Contributions in Aid of Construction: - Specific surcharges approved by TCEQ: 0 - Revenues from explicit customer agreements: 0 - Developer Contributions (please explain): 0 - Other Contributions (please explain): 0

Total Contributions in Aid of Construction

• Net Book Value: $ 447,956

ISO, If the Original Cost or any of the above items has been established in a rate case proceeding by the PUC, the TWC or the TCEQ, please provide the Application/Docket Number and date:

Application/Docket Number: Date:

t4l If the applicant is not under the rate jurisdiction of the TCEQ, only the purchase price and information related to Contributions in Aid of Construction is required.

B. Please provide any other information concerning the nature of the transaction you believe should be given consideration if not explained elsewhere in the application [attach additional sheet(s) if necessary]:

TCEQ-10516 (Rev 09/2012) Page 6 of 28 This application is only for the sale and transfer of the existing water service area. No additional service area is being requested nor is any service area being amended as a part of this application. The applicant is only requesting a water CCN for the existing water service are of these four utilities and a sewer CCN for the sewer service area of Aldine Village.

C. Complete the following proposed entries listed below as shown in books of purchasing (or surviving) company. Additional entries may be made; the following are suggested only, and not intended to pose descriptive limitations. Utility Plant in Service: $ 447,956 Plant Acquisition Adjustment: p Extraordinary Loss on Purchase: p Accumulated Depreciation of Plant: $ 446,885 Cash: Notes Payable: Mortgage Payable: Others (please list):

As the purchaser, I understand that it is my responsibility in any future rate proceeding to provide written evidence and support for the original cost and installation date of all facilities used and useful for providing utility service.

Purchaser's Initials: Date:

14. Please indicate the proposed effect of this transaction on the rates to be charged to the affected customer

® All the customers will be charged the same rates as they were charged before the transaction. q Some qAll customers will be charged different rates than they were charged before the transaction.

If rates are changing, please explain:

No change in the rates charged customers will results from this transaction.

qApplicant is an IOU and intends to file with the Commission or municipal regulatory authority an application to change rates of some/all of its customers as a result of this transaction. If so, please explain:

TCEQ-10516 ( Rev 09/2012) Page 7 of 28 q Other. Please explain:

15. List all neighboring water and /or sewer utilities, cities, and political subdivisions providing the same service within two (2) miles of area affected by this proposed transaction. This information should be available from the water utility database (WUD) or Applicant's licensed water operator. See Attached List

16. Financial, Managerial and Technical information for the acquiring entity.

TCEQ-10516 ( Rev 09/2012) Page 8 of 28 HISTORICAL BALANCE SHEETS CURRENT A-1 YEAR T A-2 YEAR A-3 YEAR A-4 YEAR A-5 YE YEAR (A) CURRENT ASSETS Cash Accounts Receivable Inventories See Attached Income Tax Receivable Financial Statements Other Total FIXED ASSE'rs Land Collection/Distribution System .. Buildings Equipment Other Less: Accum. Depreciation or Reserves Total TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Notes Payable, Current Accrued Expenses Other TOTAL LONGTERM LIABILITIES Notes Payable, Long-term Other TOTAL LIABILITIES OWNER'S EQUITY Paid in Capital Retained Equity Other Current Period Profit or Loss TOTAL OWNER'S EQUITY TOTAL LIABILITIES AND E QUITY WORKING CAPITAL CURRENT RATIO DEBT TO EQUITY RATIO EQUITY TO TOTAL ASSETS

TCEQ-10516 (Rev 09/2012) Page 9 of 28 HISTORICAL INCOME STATEMENT CURRENT A-1 YEAR A-2 YEAR A-3 YEAR A-4 YEAR A-5 YE YEAR (A) METER NUMBER Existing Number of Taps New Taps Per Year Total Meters at Year End METER REVENUE Fees Per Meter Cost Per Meter See Attached Operating Revenue Per Meter Financial Statements GROSS WATER REVENUE Fees Other Gross Income OPERATING EXPENSES General & Administrative Interest Other NET INCOME

TCEQ-10516 ( Rev 09/2012) Page 10 of 28 HISTORICAL EXPENSES STATEMENT CURRENT A-I YEAR A-2 YEAR A-3 YEAR A-4 YEAR A-5 YE YEAR (A) GENERAL/ADMINISTRATIVE EXPENSES Salaries Office Expense Computer Expense Auto Expense See Attached Insurance Expense Financial Statements Telephone Expense Utilities Expense Depreciation Expense Property Taxes Professional Fees Other Total % Increase Per Year OPERATIONAL EXPENSES Salaries Auto Expense Utilities Expense Depreciation Expense Repair & Maintenance Supplies Other Total % Increase Per Year ASSUMPTIONS Interest Rate/Terms Utility Cost/ al. Depreciation Schedule Other

TCEQ-10516 (Rev 09/2012) Page 1 I of28 PR(liF(`TTII D A 1 A r.Trr, Cri7rrT,, /J111JL 1 ^..7 START UP YEAR 1 YEAR 2 YEAR 3 YEAR 4 CURRENT ASSETS YEAR ` Cash Accounts Receivable Inventories See Attached Income Tax Receivable Other Financial Statements Total FIXED ASSETS Land Collection/Distribution System Buildings Equipment Other Less: Accum De reciation or Reserves Total TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Notes Payable, Current Accrued Expenses Other Total LONGTERM LIABILITIES Notes Payable, Long-term Other TOTAL LIABILITIES OWNER'S EQUITY Paid in Capital Retained Equity Other Current Period Profit or Loss TOTAL OWNER'S EQUITY TOTAL LIABILITIES AND EQUITY WORKING CAPITAL CURRENT RATIO DEBT TO EQUITY RATIO EQUITY TO TOTAL ASSETS

TCEQ-10516 ( Rev 0912012) Page 12 of 28 PROJECTED INCOME STATEMENT YEAR I YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL METER NUMBER Existing Number of Taps New Taps Per Year See Attached Total Meters at Year End Financial Statements METER REVENUE Fees Per Meter Cost Per Meter Operatin Revenue Per Meter GROSS WATER REVENUE Fees Other Gross Income OPERATING EXPENSES General & Administrative Interest Other NET INCONIE

TCEQ-10516 ( Rev 09/2012) Page 13 of 28 PROJECTED INCOME STATEMENT YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TO7 GENERAL/ADMINISTRATIVE EXPENSES Salaries Office Expense Computer Expense Auto Ex ense See Attached Insurance Expense Financial Statements -Telephone Expense Utilities Expense Depreciation Expense Property Taxes Professional Fees Other Total % Increase Per Year OPERATIONAL EXPENSES Salaries Auto Expense Utilities Expense Depreciation Expense Repair & Maintenance Su lies Other Total % Increase Per Year ASSUMPTIONS Interest Rate/Terms Utility Cost/ al. -Depreciation Schedule Other

TCEQ-10516 ( Rev 09/2012) Page 14 of 28 PROJECTED SOURCES AND USES OF CASH STATEMENTS YEAR I YEAR 2 YEAR 3 YEAR 4 YEAR 5 TO] SOURCES OF CASH Net Income Depreciation (If Funded) Loan Proceeds See Attached Other Financial Statements Total Sources USES OF CASH Net Loss Principle Portion of Pmts. Fixed Asset Purchase Reserve Other Total Uses NET CASH FLOW DEBT SERVICE COVERAGE Cash Available for Debt SERVICE (CADS) Net Income (Loss) De reciation, or Reserve Interest Total REQUIRED DEBT SERVICE (RDS) Principle Plus Interest DEBT SERVICE COVERAGF, RATIO CADS Divided_by RDS

TCEQ-10516 ( Rev 09/2012) Page 15 of 28 ALDINE VILLAGE SUBDIVISION

^ PLEASE ANSWER QUESTIONS 17 THROUGH 22 ON A DIFFERENT SHEET FOR EACH PHYSICALLY DISTINCT SYSTEM BEING TRANSFERRED OR ACQUIRED 17. A. For Water Systems. TCEQ Public Water System Identification Number: Ilto{11 oI913i1

Date of last inspection: January 18, 2012

B. For Wastewater Systems:

-TCEQ Discharge Permit Number: W Q[113 1818121- 1 0 1 0 1 1 1 -Name of Permitee: -Date of application to transfer Discharge Permit submitted: -Date of application to transfer Discharge Permit approved by TCEQ:

18. A. Are any improvements required q to meet TCEQ standards? Yes ® No. If yes, please explain:

B. Is there a moratorium on new connections? q Yes ® No. If yes, please explain:

C. Provide details of each required major capital improvement to correct the deficiencies and meet the TCEQ standards (attach additional sheets if necessary): (See Attached Comprehensive Compliance Evaluation Investigation)

19. Does the system being transferred operate within the city limits of a municipality or within district boundaries? q Yes ® No

If yes, indicate the number of customers within the city limits or district boundaries: Water Sewer 2^01 Attach copy of franchise agreement or consent letter from the city or district. 20. Do you currently purchase water or sewer treatment capacity from another source? qWater q E] Yes N No Sewer Purchased on a qRegular q q • Source: Seasonal Emergency Basis % of total supply: TCEQ-10516 (Rev 09/2012) Page 16 of 28 21. List the number of existine connections to be effected by this transaction. water Sewer -Non Metered -2"meter -Residential Connection 32 -5/8" or 3/4 " meter 328 -3 " meter -Commercial Connection - 1" meter 4" meter -Industrial Connection 1 1/2" meter -Other -Other Total Water Connections: 328 Total Sewer Connections t2 22. Has the system reached 85% of its capacity based on TCEQ's minimum requirements? q Yes ® No If yes, please explain what steps are being taken to address the capacity issues:

"I'CEQ-10516 ( Rev 09/2012) Page 17 of 28 AZALEA ESTATES MOBILE HOME COMMUNITY

Date of last inspection: January 25, 2012

B. For Wastewater Systems:

-TCEQ Discharge Permit Number: W Q ^ ^ I L I I L.1 I J -Name of Permitee: -Date of application to transfer Discharge Permit submitted: -Date of application to transfer Discharge Permit approved by TCEQ:

18. A. Are any improvements required to meet TCEQ standards? q Yes ® No. If yes, please explain: None

B. Is there a moratorium on new connections? q Yes ® No. If yes, please explain:

of the Required Schedule to Complete Estimated Cost

19. Does the system being transferred operate within the city limits of a municipality or within district boundaries? q Yes ® No

If yes, indicate the number of customers within the city limits or district boundaries: Water Sewer

2^61 Attach copy of franchise agreement or consent letter from the city or district. 20. Do you currently purchase water or sewer treatment capacity from another source? q Yes ® No qWater qSewer q Purchased on a Regular qSeasonal qEmergency Basis • Source: % of total supply: TCEQ-10516 ( Rev 09/2012) Page 18 of 28 21. . List the number of existing connections to be effected by this transaction. Water Sewer -Non Metered -2"meter -Residential Connection -5/8" or 3/4" meter 23 -3" meter -Commercial Connection -1" meter -4" meter -Industrial Connection -1 1/2" meter -Other -Other Total Water Connections: 23 . Total Sewer Connections

22. Has the system reached 85% of its capacity based on TCEQ's minimum requirements? q Yes ® No If yes, please explain what steps are being taken to address the capacity issues:

TCEQ-10516 (Rev 09/2012) Page 19 of 28 COTTONWOOD PARK WATER SYSTEM

aw PLEASE ANSWER QUESTIONS 17 THROUGH 22 ON A DIFFERENT SHEET FOR EACH PHYSICALLY DISTINCT SYSTEM BEING TRANSFERRED OR ACQUIRED 17. A. For Water Systems. TCEQ Public Water System Identification Number: 1, 1101110121813

Date of last inspection: September 22, 2011

B. For Wastewater Systems:

-TCEQ Discharge Permit Number: W Q f ^ ^ I I I 1___11^ -Name of Permitee:

-Date of application to transfer Discharge Permit approved by TCEQ:

18. A. Are any improvements required to meet TCEQ standards? q Yes ® No. If yes, please explain: None

B. Is there a moratorium on new connections? E] Yes ® No. If yes, please explain:

Description of the Required Improvement Schedule to Complete Estimated Cost

19. Does the system being transferred operate within the city limits of a municipality or within district boundaries? q Yes ® No

If yes, indicate the number of customers within the city limits or district boundaries: Water Sewer

&r Attach copy of franchise agreement or consent letter from the city or district.

20. Do you currently purchase water or sewer treatment capacity from another source? q Yes ® No q q Water Sewer Purchased on a qRegular qSeasonal qEmergency Basis • Source: % of total supply:

TCEQ-10516 ( Rev 09/2012) Page 20 of 28 21. List the number of existina connections to be effected b y this transaction. Water Sewer -Non Metered -2"meter -Residential Connection -5/8" or 3/4" meter 56 -3" meter -Commercial Connection -1 " meter -4" meter -Industrial Connection -1 1 /2" meter -Other -Other Total Water Connections: 56 ' Total Sewer Connections

22. Has the system reached 85% of its capacity based on TCEQ's minimum requirements? q Yes ® No If yes, please explain what steps are being taken to address the capacity issues:

TC EQ-10516 ( Rev 09/2012) Page 21 of 28 ^ PLEASE ANSWER QUESTIONS 17 THROUGH 22 ON A DIFFERENT FOR EACH PHYSICALLY DISTINCT SYSTEM BEING SHEET 17. A. For Water Systems. TCEQ pub^NWa ACQUIRED System TRANSFERRED Identificationentification Number: L1 ^ 1 ^ 1 7 9 ^ Date of last inspection: February 23, 2012 B. For Wastewater Systems:

-TCEQ Discharge Permit Number: -Name of Permitee: W Q ^-- ^ __LJ ^ J

-Date of application to transfer Discharge Permit approved by TCEQ: 1 I. A. Are any improvements re uired to meet TCEQ q standards? E] Yes None ® No. If yes, please explain:

B. Is there a moratorium on new connections? E] Yes ® No. If yes, please exp lain. •

C. Provide details of each required major capital improvement to correct the deficien TCEQ standards (attach additional sheets if necess cies and meet the (See Attached Comprehensive Compliance Evaluation Investigation) Description of the Rern^;, Schedule to Complete Estimated Cost

19. Does the system being transferred operate within the city limits of a munici ali p ty or within district

If yes, indicate the number of customers within the city limits or district boundaries: Water Sewer Eap Attach copy of franchise agreement or consent letter from the city or district. 20. Do you currently purchase water or sewer treatment capacity from another sourc ? Water qSewer Purchased on a q q Yes ® No - Source: Regular q e Seasonal qEmergency Basis % of total supply: TCEQ-10516 (Rev 09/2012)

Page 22 of 28 21. List the number of e^ connections to be effected by this transaction. Water Sewer -Non Metered -2"meter -Residential Connection -5/8" or 3/4" meter 37 -3" meter -Commercial Connection -1 " meter -4" meter -Industrial Connection -1 1 /2" meter -Other -Other Total Water Connections: 37 Total Sewer Connections

22. Has the system reached 85% of its capacity based on TCEQ's minimum requirements? q Yes ® No If yes, please explain what steps are being taken to address the capacity issues:

TCEQ-10516 (Rev 09/2012) Page 23 of 28 23. List the name, class, and license number of the operator(s) that will be responsible for the system:

24. Attach the following maps with each copy of the application: : ( See Attached Maps) a. One small scale map clearly showing affected service area with enough detail to accurately locate the area if the application is for the transfer of all or a portion of a CCN. b. One large scale map showing the proposed service area boundaries being sold, transferred, or merged and, if available, the existing and proposed facilities. Color coding should be used to differentiate existing from proposed facilities. Facilities and service area boundaries should be shown with such exactness that they can be located on the ground. If transferring area not currently in a CCN or a portion of an existing CCN area please attach the following hard copy maps with each copy of the application: l. A general location map delineating the proposed service area with enough detail to accurately locate the proposed area within the county. 2. A map showing only the proposed area by: i. metes and bounds survey certified by a licensed state or registered professional land surveyor; or ii. projectable digital data with metadata (proposed areas should be in a single record and clearly labeled, data disk should be included); or iii. following verifiable natural and man-made landmarks, or iv. a copy of recorded plat map with metes and bounds. 3. A written description of the proposed service area.

This application is only for the sale and transfer of the existing water service area. No additional service area is being requested nor is any service area being amended as a part of this application.

TCEQ-10516 ( Rev 09/2012) Page 24 of 28 OATH FOR SELLER OR FORMER SERVICE PROVIDER

STATE' OF TEXAS

COUNTY OF

I, `^,^^r^^S J• ^^\ ^^ ----- being duly sworn, file this application for sale, lease, rental or merger or consolidation as <-, __ (indicate relationship to applicant) that is, owner, member of partnership, title as officer_ of corporation_, or other authorized representative of applicant); that, in such capacity, I am qualified and authorized to file and verify such application, am personally familiar with the documents filed with this application, and have complied with all the requirements contained in the application; and, that all such statements made and matters set forth therein with respect to applicant are true and correct. Statements about other parties are made on information and belief. I further state that the application is made in good faith and that this application does not duplicate any tiling presently before the Commission.

I further state that I. have provided to the purchaser or transferee a written disclosure statement about any contributed property as rc uired under Section I3.301(j) and codaies of any outstandin€* Urders of tlie Commission or Attorney General and_hae als^> conz^ed with the notice requirements in Section l 3.3UI(k} of the Water Code.

IANT (Utility's Ad RRepresentative))

If the Affiant to this form is any person other than the sole owner, partner, officer of the Applicant, or its attorney, a properly verified Power of Attorney must be enclosed.

SUBSCRIBED AND SW OR TO BEFORE ME, a Notary Public in and for the State of'I'exas, day ^,Ar^ of 20 1^^

SEAL BARBARA A. LEMMA My COMMISSION EXPIRES i )Q48'2016 --^ ^.^ N0TAI2Y P[.JBLIC (N AND I OR THF; STA'I'E OF TEXAS

v^l wkCt_ PRINT OR TYPE NAME OF NU'I.ARY

MY COMMISSION EXPIRES R, - sl - k(

One copy of this page must he submitted for each utility involved in this transaction.

7'CEQ-10516 ( Rev 09/2012) Page 25 ot'28 0ATH FO`^ 01[-4'. A.C(,)U;1R11S}(..;: ^,'NIITV STATE CF TEXAS ("Ol1Iv`TY OF _------4 1' duly sworn, file this application for sale, lease, rental or merger or consolidation as . i ^-s^^ 3+'^- ^C (zi7t^ft'x1, r^,Tcziio;rsltrp to (applrct111t) ^.^^ `rS^ G. ^niC_ tl^e^t is, o^vn°r, =r:enz^)er of partnership, title as officer of corporation, or other tzrIthc2rized representative oi'app1icarzt) tilat, in such capacity,l arn qualified and authorized to fj^lr and verify such application, atn personally i:arniliar with the documents filed with this application, and have complied with all the requirements contained in the application; and, that all such statements made and matters set forth therein with respect to applicant are true and correct. Statements about other parties are made on information and belief. I further state that the application is made in good faith and that this application does not duplicate any filing presently bel'ore the Commission.

I arri also authorized and do a rc;e to be bound by ad cvirr 71v with any outstaziciin^c^rders of the Commission or the Attorney Gencral v^hrch -2a^^e ^)^;crr i5su^d to the s stem or and recognize that facilities being- acquired I will 17e Rit,^t_l^

______---- A FF1A-i`ITT (Utility's Authorized Representative)

if the Afflant to this form is any person other than the sole owner^, partner, officer of the Applicant, or its attorney, a properly verified Power of Attorney must be enclosed.

Applicant represents that all other i;larEif„s to this transaction have been furnished copies of this completed application.

SUBSC BE- of ^ SWORNSWORN TO I^3,h;1^{} 1: n-11;, aNotary day Public in and for the State of Tex^r.s, ^ SEAL

DIANA GARZA Notary Public State of Texas My commission DECEMBER 16, 2016 ^+ ) I'ARY 1'ti I3L1C Ii^ AND PC)R T^ STATE DFTBXAS

C, FRliv'C ^R "1 ^^ PE NAME (^1^ Nf)'1'^Y

My C01VD4lSSfON EXPIRES

One t-' 3p}' of this page must be t>ul)il;itted i or each UL111tY involved, in this l7aIlsa4t3d)rl.

09r, 0 12) ('ag-^ 26 of?e FORM B Application No. Notice to Current Customers, Neighboring Systems, Landowner and Cities

J&S WATER COMPANY, LLC. IS NOTICE OF INTENT TO SELL FACILITIES TO (Seller's or Transferor's Name)

UTILITIES INVESTMENT COMPANY, INC. AND FOR UTILITIES INVESTMENT COMPAN DBA UIC13, LLC. INC. DBA UIC13, LLC. (Purchaser's or Transferee's Name) Purchaser's or Transferee's Name]

TO OBTAIN A CERTIFICATE OF CONVENIENCE AND NECESSITY (CCN) IN HARRIS COUNTY, TEXAS

To: Date Notice Mailed ,20 (Name of Customer, Neighboring System, Landowner or City)

(Address)

City State Zip

J&S WATER COMPANY, LLC. 8010 Thompson Road Highland, TX 77562-312 Sellers or Transferors' Name Address City/State/Zip Code has submitted an application with the Texas Commission on Environmental Quality to sell water and sei Facilities in Harris County to:

UTILITIES INVESTMENT COMPANY, INC. PO Box 279 DBA UIC131 LLC. New Waverly, TX 77358 Purchasers or Transferee's Name Address City/State/Zip Code

The transferee has also requested to amend CCNs in this application. The sale is scheduled to take place approved by the Executive Director (V.T.C.A., Water Code §13.301). The transaction and the proposed serv area include the following subdivision(s) and zip codes:

Aldine Village Azalea Estates Mobile Home Cottonwood Park Water Cypress Hill Subdivision Subdivision community System 77060 77379 77433 77038

Aldine Village Subdivision (PWS #1010931 & WO 12382-001) The area subject to this transaction is located approximately 10 miles north downtown Houston [direction] of [City or Town] Texas, and is generally Branding Iron Street bounded on the north by ;on the east by Henry Street ;on the south by Walston Street ;and on the west by Lilija Street The total area being requested includes approximately 26 acres and serves 328 current customers. Azalea Estates Mobile Home Community (PWS #1011253) The area subject to this transaction is located approximately 23 miles northwest downtown Houston [direction] of [City or Town] Texas, and is generallv Hooks Memorial bounded on the north by Airport ;on the east by Valka Road ;on the south by Byron Lane ;and on the west by Vivian Court TCEQ-10516 (Rev 09/2012) Page 27of28 The total area being requested includes approximately 19 acres and serves 23 current customer.

Cottonwood Park Water Svstem (PWS #1010283 The area subject to this transaction is located approximately 10 miles Northwest [direction] of downtown Houston [City or Town] Texas, and is generally bounded on the north by Farm to Market Road 149 ;on the east by Braunston Road ;on the south by Lochiand Street ;and on the west by Cordoba Drive The total area being requested includes approximately 32 acres and serves 56 current customer: Cypress Hill Subdivision (PWS #1011792) The area subject to this transaction is located approximately 28 miles nothwest [direction downtown Houston [City or Town] Texas, and is generally bounded on the north by Juergen Street ;on the east by Cypress-Rose Hill Road ;on the south by K-Z Road ;and on the west by Hanberry Road The total area being requested includes approximately 96 acres and serves 37 current customerE

This transaction will have the following effect on the current customer's rates and services: No change in the rates charged customers will results from this transaction .

Affected persons may file written protests and/or request a public hearing within 30 days of this notice.

To request a hearing, you must: (1) state your name, mailing address and daytime telephone number; (2) state the applicant's name, application number or another recognizable reference to this application; (3) include the statement "I/we request a public hearing"; (4) write a brief description of how you, the persons you represent, or the public interest would be adversely affected by the proposed transaction and transfer of the CCN; and (5) state your proposed adjustment to the application or CCN which would satisfy your concerns and cai you to withdraw your request for a hearing.

Only those persons who submit a written request to be notified of a hearing will receive notice if a hearing is scheduled. The Executive Director will issue the CCN requested in the referenced application unless a hearing scheduled to consider the transaction. If no protests or requests for hearing are filed during the comment period the Executive Director may issue the CCN 30 days after publication of this notice.

Persons who wish to protest or request a hearing on this application should write the: Texas Commission on Environmental Quality Water Supply Division Utilities and Districts Section, MC- 153 P. O. Box 13087, Austin, TX 78711-3087

Se desea informacion on Espanol, puede llamar al 512-239-0200.

SHANNON MARSH Utility Representative

UIC13, LLC. Utility Name

TCEQ-10516 ( Rev 09/2012) Page 28 of 28 Certification of Account Status Franchise Tax Account Status https://mycpa.cpa.state.tx.us/coa/servlet/cpa.app.coa.CoaGetTp

^ `71•X^^ ^

Franchise Tax Account Status

As of. 08/25/2014 02:17:50 PM

This Page is Not Sufficient for Filings with the Secretary of State

I^ UIC 13, L.L.C. Texas Taxpayer Number 32052919365 Mailing Address 10724 BLACKLAND RD WILLIS, TX 77318-6995 Right to Transact Business ACTIVE in Texas State of Formation TX Effective SOS Registration 01/14/2014 Date Texas SOS File Number 0801915189 Registered Agent Name SHANNON MARSH Registered Office Street 10724 BLACKLAND ROAD Address WILLIS, TX 77318

I of 1 8/25/2014 2:1 SALE AGREEMENT NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER

SALE AGREEMENT

THE STATE OF TEXAS § § KNOW ALL MEN BY THESE PRESENTS: COUNTY OF HARRIS §

J & S WATER COMPANY, LLC a Texas limited liability company ("Grantor"), for the consideration stated hereinbelow, paid to Grantor by UTILITIES INVESTMENT CO., a Texas corporation ("Grantee"), the receipt and sufficiency of which is hereby acknowledged, has granted, sold, and conveyed, and by these presents does grant, sell, assign and convey unto Grantee, its successors and assigns, the following:

Water/Sewer Utility Plants & Personal Property. The following sewer plants with collection systems, water plants with distribution systems and all items of tangible personal property owned by Grantor, and located in Harris County, Texas used in conjunction with, located on or within the following state-certificated retail public water and/or sewer systems:

(a) Aldine Village Sewer Plant and collection system

(b) Aldine Village Water Plant & distribution system

(d) Cottonwood Water Plant and distribution system

(e) Cypress Hill Water Plant and distribution system consisting of all of the personal property used and/or owned by Grantor in connection with Grantor's water and sewer utility systems herein conveyed. Said water and sewer systems are identified on Exhibit "1" attached hereto and incorporated herein. Said personal property is located on, under and or in conjunction with water or sewer utility systems located on real property described on Exhibit "2" attached hereto and incorporated herein. Property Aqreements. All of the Grantor's right, title, and interest as owner of the Real Property, Personal Property, Intangibles, water plants, distribution systems, sewer plants and collection systems herein conveyed and, to the extent Grantor's interest is assignable, in and to any and all agreements that relate solely to the ownership, use, leasing, management, advertising, security, maintenance, construction, or operation of the Real Property, Personal Property, Intangibles, water plants, distribution systems, sewer plants and collection systems herein conveyed.

Intangibles. To the extent and relating solely to the ownership, development use, or projected use, maintenance, or operation of the Property Agreements, Real Property, Personal Property, Intangibles, water plants, distribution systems, sewer plants and collection systems, all of Grantor's right, title, and interest in and to all (i) plans, models, drawings, specifications, surveys, engineering reports, and other technical descriptions or materials that are in the possession of Grantor or its representatives (the "Plans"); (ii) warranties, guaranties, indemnities, and claims (the 'Warranties"); (iii) licenses, permits, franchises, and similar rights issued by any federal, state, or municipal authority, including, without limitation, any waste, wastewater, storm sewer, or other utility capacity reservations or allocations issued solely for the benefit of the Property Agreements, Real Property, Personal Property, Intangibles, water plants, distribution systems, sewer plants and collection systems, or improvements to be constructed on the above described land (the "Permits"); and (iv) all other claims or causes of action related thereto.

Real Property. All realty owned by Grantor upon which the water plants, distribution systems, sewer plants and collection systems are located, including all tracts of realty described within Exhibit "2" attached hereto together with all improvements thereon including but not limited to water wells, pump equipment, pump houses, water storage tanks, water pressure tanks, water treatment plants, water distribution plants, sewer treatment plants and all appurtenances thereto including but not limited to collection lines, distribution lines, easements, right-of-ways and other areas appurtenant thereto and associated with the operation of the water plants, distribution systems, sewer plants and collection systems.

Easements. All of Grantor's right, title, and interest (at law or in equity), if any, in and to any and all pipeline, water distribution system, public utility, sanitary control and other easements, in, on or under the ground, used by or existing for the benefits of the water plants, distribution systems, sewer plants and collection systems. The assigned easements shall include, without limitation, those recorded easements more particularly described on Exhibit "2."

Accounts Receivable of Seller. All uncollected accounts receivable owed to Grantor and arising out of the operation of the plants and systems herein conveyed.

Customer Contracts / Deposits / Refunds. Al! of Grantor's rights and interests in and to the written and verbal contracts and agreements with its customers including customer deposits and rights and claims to refunds and adjustments of any kind owned by Grantor as of the date of this Agreement

Papers / Records. All other papers and records (whether in written or other form) of any kind presently in or in the future coming into the care, custody, or control of Grantor relating to any of the assets sold to Grantee pursuant to this Agreement or the acquisition or past, present, or future operation of the water plants, distribution systems, sewer plants and collection systems, including but not limited to: customer lists, supplier lists, purchase and sales records, personnel and labor relations records, environmental control records, Texas Commission on Environmental Quality records, accounting and financial records, maintenance records, operating and management manuals, computer systems and software documentation, and business forms.

Permits / Licenses. All permits, licenses, franchises, consents, authorities, special authorities, and other similar acts of any government body (federal, state, county, city or local) held by Grantor, or by any individual strictly on behalf of Grantor, related to the operation of the water plants, distribution systems, sewer plants and collection systems that may lawfully be assigned or transferred, subject to any action by such body that may be required in connection with such assignment or transfer. Grantor consents to apply with Grantee for the transfer of any such license or permit to Grantee as may be necessary for the continued operation of the utility systems under applicable state and federal law.

CONSIDERATION

(a) Assumption by Grantee of payment of 42% of the remaining obligation under that one and certain promissory note dated December 4, 2006, in the original principal amount of $1,518,950 payable by J & S Water Company to Crosby State Bank;

(b) Assumption by Grantee of payment of all outstanding bills and other obligations arising from the operation of the water plants, distribution systems, sewer plants and collection systems herein conveyed from the date of this Agreement;

(c) Assumption by Grantee of payment of prorated taxes due on the personal property and real property herein conveyed for the 2011 tax year; and

(d) Assumption by Grantee of all outstanding obligations of Grantor that arise out of the customer contracts herein conveyed.

FURTHER PERFORMANCE

Grantor agrees to acknowledge, execute and deliver to Grantee any further deeds, assignments, conveyances, other assurances, documents, and instruments of transfer reasonably requested by Grantee that are necessary for the performance of this Agreement. Grantor agrees to take any other action consistent with the terms of this Agreement that may be reasonably requested by Grantee for the purpose of assigning,

3 transferring, granting, conveying, and confirming to Grantee or reducing to possession any or all property and assets to be conveyed and transferred by this Agreement. If requested by Grantee, Grantor further agrees to prosecute or otherwise enforce in its own name for the benefit of Grantee any claims, rights, or benefits of Grantor that are transferred to Grantee by this Agreement and that require prosecution or enforcement in Grantor's name. Any prosecution or enforcement of claims, rights, or benefits under this paragraph shall be solely at Grantee's expense, unless the prosecution or enforcement is made necessary by a breach of this Agreement by Grantor. If Grantor incurs any costs to fulfill these requests of Grantee, Grantee shall reimburse or otherwise fund all such endeavors by Grantor as a condition of Grantor's obligation to continue with the same at the request of or for the benefit of Grantee.

RESCISSION OF AGREEMENT UPON TCEQ DENIAL

In the event that TCEQ denies approval in whole or in part of the transaction represented by this Agreement, then in such event, this Agreement shall be immediately and automatically rescinded, at Grantee's option, without notice and the parties hereto shall be excused from performance under this Agreement.

GOVERNING LAW AND VENUE

This Agreement shall be construed and governed Texas. by the laws of the State of Venue over any civil causes arising hereunder shall be Harris County, Texas. Venue vested in the courts of over any administrative causes arising hereunder vested in the TCEQ and the courts of Travis County, Texas. shall be

AMENDMENTS- WAIVER

This Agreement may be amended only in writing by the mutual consent of all of the parties. No waiver of any provision of this Agreement shall arise from any action or inaction of any party, except an instrument in writing expressly waiving the provision executed by the party entitled to the benefit of the provision.

ENTIRE AGREEMENT

This Agreement, together with any documents and exhibits given or delivered pursuant to this Agreement, constitutes the entire agreement between the parties to this Agreement. No party shall be bound by any communications between them on the subject matter of this Agreement unless the communication is (a) in writing, (b) bears a date contemporaneous with or subsequent to the date of this Agreement, and (c) is agreed to by all parties to this Agreement. On execution of this Agreement, all prior agreements or understandings between the parties shall be null and void.

4 APPLICATION TO TCEQ FOR APPROVAL

The parties agree to immediately apply to TCEQ for approval of the conveyance of the assets and transfer of ownership to Purchaser and to use their best efforts to assist each other in timely preparing and filing all necessary forms and documents which are required by TCEQ to obtain approval of this transaction.

ATTORNEY'S FEES

If any party hereto is a prevailing party in any legal proceeding brought under or in relation to this Agreement, such party is entitled to recover from the non-prevailing parties all costs of such proceeding and reasonable attorney's fees, including attorney's fees related to mediation. The terms and provisions of this paragraph shall survive Closing and/or termination of this Agreement.

AGREEMENT DATE

The Agreement Date of this Agreement shall be the date of execution of the Agreement by all signatories hereto.

TO HAVE AND TO HOLD THE Personal Property, Real Property, Leases, Property Agreements, Plans, Warranties, Permits, Intangibles, Easements and Recorded Easements and all other property and rights herein conveyed together with all and singular rights and appurtenances thereto in anywise belonging, unto the said Grantee, its successors and assigns, forever, and Grantor does hereby bind itself and its successors to WARRANT and FOREVER DEFEND title to the Personal Property, Real Property, Leases, Property Agreements, Plans, Warranties, Permits, Intangibles Easements and Recorded Easements unto said Grantee, its successors and assigns, against the lawful claims of any and all persons lawfully claiming or to claim the same or any part hereof.

Grantor warrants that there are no liens, encumbrances, or security agreements affecting the Personal Property, Real Property, Leases, Property Agreements, Plans, Warranties, Permits, Intangibles, Easements and Recorded Easements and all other property and rights herein conveyed and/or Grantor's interest therein other than recorded encumbrances, to the extent, but only to the extent, that said encumbrances are valid and subsisting and affect the Property, and the aforementioned loan, a portion of which is assumed by Grantee as set forth hereinabove.

The remainder of this page is intentional! left blank- Si natures 4 "p ear on next page.

5 EXECUTED AND EFFECTIVE on 2011.

GRANTOR: J&S Water Company, LLC

By: . J RRY WLING, Memb

Date Signed:

.^---... By: ^_. ^._. SHANNON MARSH, Member

Date Signed:

GRANTEE: Utilities Investment Co.

7^ __ ,^... By: SHANNON MARS.H, President

Date Signed: _ `3-'j `1 ) t i

Address of Grantor:

J & S WATER COMPANY, L.L.C. P.O. Box24W dt^g

Address of Grantee:

UTILITIES INVESTMENT CO. P.O. Box 279 New Waverly, TX 77358

Return to Grantee after recording

6 THE STATE OF TEXAS § § COUNTY OF ; .t`,.\ r.„_.

This instrument was acknowledged before me by Jerry Nowling, Member of J&S Water Company, LLC, a Texas limited liability company, who did state under oath that he was authorized and did execute the foregoing in that capacity for the purposes and the considerations recited therein.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this I day of ,2011.

KATHtEEN OLIVER .,, Notaip PubNc Notary Public in and for the State of Texas STATE OF TEXAS COtm1. . 15, 2015 Printed Name`^ '^ , ^ t y= ^ •, ^ ^ , ^^ ^^ My Commission Expires:-4 ! E ; - 4 THE STATE OF TEXAS §

COUNTY OF '^

This instrument was acknowledged before me by Shannon Marsh, Member of J&S Water Company, LLC, a Texas limited liability company, who did state under oath that he was authorized and did execute the foregoing in that capacity for the purposes and the considerations recited therein.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this ,2011. day of

` j^^ ,.^`i ^ ( - • ti ' ^ i Notary Public ►n and for the State of Texas o ;5j Printed Name: C, My Commission Expires:_ ,^- i C=^ THE STATE OF TEXAS § § COUNTY OF ; ;; ;. ^111v)_:I j §

This instrument was acknowledged before me by Shannon Marsh, President of Utilities Investment Co., a Texas corporation, who did state under oath that he was authorized and did execute the foregoing in that capacity for the purposes and the considerations recited therein.

GIVEN hfNDER MY HAND AND SEAL OF OFFICE this day of 2011.

KATHLEEN LINER Notary puDliC Notary Public in and for the State of Texas STATE OF TEXAS ^•, ^ COmm. 15, 2015 Printed Nameg^^^., My Commission Expires: _,-,

8 List of Neighboring Utilities 15. List all neighboring water and for sewer utilities, cities, and political subdivisions providing the same service within two (2) miles of area affected by this proposed transaction

CCN NO. 20385 CCN NO. 11872 CHAMPS WATER COMPANY SWEA GARDENS ESTATES UTILITY 3217A CHRISMAN RD INC HOUSTON, TX 77039-4121 PO BOX 40526 HOUSTON, TX 77240-0526 CCN NO. 13305 COMMUNITY UTILITY CCN NO. 12288 PO BOX 58 SELLER WATER COMPANY SPRING, TX 77383-0058 6811 ROSEMONT PARK LN HIGHLANDS, TX 77494-6590 CCN NO. 13203, 20453, 11157 & 21065 AQUA TEXAS INC CCN NO. 12544 1106 CLAYTON LN STE 400W GREENWOOD PLACE CIVIC CLUB INC AUSTIN, TX 78723-2476 14302 SASHER LN CYPRESS, TX 77429-3422 CCN NO. 20347 SUNBELT FWSD CCN NO. 11782 & 20596 410 W GULF BANK RD BLEACHER REALTY COMPANY HOUSTON, TX 77037 d.b.a. WESTFIELD GARDEN PARK 1617 ENID ST CCN NO. 10963 & 20722 HOUSTON, TX 77009-2503 BLUE BELL MANOR UTILITY CO INC 1330 BLUE BELL RD CCN NO. 20701 HOUSTON, TX 77038-3012 WEST ROAD WSC 50 CORBINDALE STE 255 CCN NO. 11389 & 20500 HOUSTON, TX 77022 SOUTHERN WATER CORP 5710 AIRLINE DR CCN NO. 20878 HOUSTON, TX 77060 WESTSIDE WATER LLC 1704 AVE D CCN NO. 10833 & 20347 KATY, TX 77493-1655 SUNBELT FWSD 410 W GULF BANK RD CCN NO. 12948 HOUSTON, TX 77037 PINE KNOB ESTATES WATER 11915 GREEN PINES CIR CCN NO. 10972 & 20385 HOUSTON, TX 77066-4210 CHAMPS WATER COMPANY 13217A CHRISMAN RD CCN NO. 10342 HOUSTON, TX 77039-4121 H-M-W SUD PO BOX 837 CCN NO. 11582 PINEHURST, TX 77362 NORTH FREEWAY CENTER 8906 NORTH FREEWAY HOUSTON, TX 77037 CCN NO. 12938 CCN NO. 11101 & 20439 HARRIS COUNTY WATER HARRIS COUNTY MUD 24 CORPORATION 8552 KATY FWY STE 122 d.b.a. LINCOLN SQUARE WATER HOUSTON, TX 77024-1804 SYSTEM PO BOX 130179 HARRIS COUNTY HOUSTON, TX 77219-0179 P.O. BOX 1525 HOUSTON, TX 77251-1525 CCN NO. 13218 ARCH UTILITY CITY OF JERSEY VILLAGE PO BOX 1176 16501 JERSEY DRIVE PINEHURST, TX 77362-1176 HOUSTON, TX 77040

CCN NO. 11955 CITY OF HOUSTON ROSEHILL RANCHETTES WATER PO BOX 1562 SYSTEM HOUSTON, TX 77251-1562 7727 MEADOWGLEN LN HOUSTON, TX 77063-4811 HARRIS COUNTY MUD 118 1100 LOUISIANA ST STE 400 CCN NO. 12258 HOUSTON, TX 77002-5211 LASS WATER PO BOX 314 HARRIS COUNTY MUD 24 MAGNOLIA, TX 77353-0314 6750 WEST LOOP S STE 250 BELLAIRE, TX 77401-4111 CCN NO. 20641 HCMUDINC HARRIS COUNTY MUD 321 63 NORTH BELT STE 190 3200 SOUTHWEST FWY STE 2600 HOUSTON, TEXAS 77060 HOUSTON, TX 77027-7537

CCN NO. 12671 HARRIS COUNTY MUD 383 ORCHARD CROSSING 3200 SOUTHWEST FWY STE 2600 PO BOX 2482 HOUSTON, TX 77027-7537 CONROE , TX 77305-2482 HARRIS COUNTY MUD 367 CCN NO. 12946 & 20879 3200 SOUTHWEST FWY STE 2600 INLINE DEVELOPMENT HOUSTON, TX 77027-7537 CORPORATION 10100 BOUDREAUX RD HARRIS COUNTY MUD 396 TOMBALL, TX 77375 1301 MCKINNEY ST STE 5100 HOUSTON, TX 77010-3093 CCN NO. 11507 ALBURY MANOR UTILITY COMPANY HARRIS COUNTY WCID 155 INC 1301 MCKINNEY ST STE 5100 400 RANDAL WAY STE 106 HOUSTON, TX 77010-3095 SPRING, TX 77388 MOUNT HOUSTON ROAD MUD CCN NO. 12940 9174 LARSTON ST WOODMARK WATER LC HOUSTON, TX 77055-6415 11703 BEXHILL DR HOUSTON, TX 77065-2610 FINANCIAL STATEMENTS ALAN MAXCY Certified F'c.iblic AccounM, nt

To the Board of Directors of Utilities Investment Company, Inc. P.O. Box 2482 Conroe, TX 77305

I have reviewed the accompanying balance sheet of Utilities Investment Company, Inc. as of December 31, 2012, and the related statement of revenues, expenses and accumulated adjustments for the twelve-month period then ended, and the related statement of cash flows for the twelve-month period then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Utilities Investment Company, Inc.

A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion.

Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.

Alan Maxcy, C.P.A.

September 19, 2013

14515 Briarhills Parkway, Suite 1 18 • Hotiston, Texas 77077 281.496.2877 • Fax 281.496.0061 • [email protected] UTILITIES INVESTMENT COMPANY. INC. BALANCE SHEET DECEMBER 31, 2012

ASSETS Current Assets: Cash and cash equivalents (Note B) $ 114,606 Accounts receivable 90,116 Loan receivable 24,404 Total Current Assets 229,126

Property and Equipment (Note B): Treatment plants 1,647,835 Water wells 41,082 Field equipment 544,316 Office furniture and equipment 4,090 Less accumulated depreciation (1,317,100) Net Property and Equipment 920,223

Other Assets: Land 60,676 Total Other Assets 60,676

TOTAL ASSETS 1,210, 025

LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Loan payable 36,500 Current portion of long-term debt 93,572 Total Current Liabilities 130,072

Long-Term Liabilities: Notes payable (Note B) 306,935 Less current portion of long-term debt (93,572) Total Long-Term Liabilities 213,363

Total Liabilities 343,435

Stockholder's Equity: Common stock, $1 par value, 1,000 shares authorized, issued and outstanding 1,000 Accumulated adjustments 706,584 Retained earnings-current 159,006 Total Stockholders' Equity 866,590

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,210,025

See accompanying notes and accountant's report.

2 UTILITIES INVESTMENT COMPANY , INC. STATEMENT OF REVENUES, EXPENSES AND ACCUMULATED ADJUSTMENTS FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2012

Sales $ 2,782,748

Cost of Sales: Chemicals/Chlorine 29,741 Equipment rental 6,976 Lab expenses 108,556 Licenses and permits 32,990 Meter reading 2,350 Mileage reimbursement 244,917 Miscellaneous 2,946 Outside services 795,124 Salaries and wages 330,405 Sludge disposal 137,574 Supplies 217,644 Utilities 155,511 Total Cost of Sales 2,064,734

GROSS INCOME 718,014

Indirect Expenses: Bank charges 1,427 Computer expenses 244 Credit card fees 10,417 Depreciation 128,249 Donations 3,000 Insurance 64,945 Interest expense 14,794 Lease expense 180,000 Maintenance and repairs 67,397 Office expenses 12,074 Officer's salary 20,800 Postage 11,457 Professional fees 11,830 Property taxes 16,809 Telephone 15,565 Total Indirect Expenses 559,008 NET INCOME 159,006 Accumulated adjustments-beginning of year 819, 816 Distributions to shareholder (113,232)

ACCUMULATED ADJUSTMENTS-END OF YEAR 865,590

See accompanying notes and accountant's report. UTILITIES INVESTMENT COMPANY. INC . STATEMENT OF CASH FLOWS FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2012

CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ^ 159,006

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 128,249 (Increase) decrease in: Accounts receivable 14,571 Increase (decrease) in: Accounts payable (21,882) Loan payable 21,500 Prepaid fees (16,649) NET CASH PROVIDED BY OPERATING ACTIVITIES 284,795

CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (65,294) NET CASH UTILIZED FOR INVESTING ACTIVITIES (65,294)

CASH FLOWS FROM FINANCING ACTIVITIES: Increase ( decrease) in notes payable (95,289) Distributions to shareholder (113,232) NET CASH UTILIZED FOR FINANCING ACTIVITIES (208,521)

NET INCREASE (DECREASE) IN CASH 10,980 Cash-Beginning of period 103,626

CASH AND CASH EQUIVALENTS AT DECEMBER 31, 2012 $ 114.606

See accompanying notes and accountant's report.

4 UTILITIES INVESTMENT COMPANY, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2012

NOTE A-ORGANIZATION

The Company was incorporated in the State of Texas on November 18, 1996. The Company is in the water and sewage treatment industry.

NOTE B-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Method of Accountinq The Company recognizes all items of revenue and expense on the accrual basis of accounting in these financial statements.

Cash and Cash Equivalents Cash and cash equivalents include cash on hand and in banks.

Depreciation of Property and Equipment The Company depreciates its property and equipment over the estimated useful lives of the assets utilizing the straight-line method.

Income Taxes The Company utilizes the accrual method of accounting in recognizing income for Federal income tax purposes. The Company elected to be treated as an S-Corporation on January 1, 1998, so all items of income and deductions pass to its lone shareholder. Therefore, no provision is made for Corporate income tax in these financial statements.

Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Notes Payable The Company purchased a water treatment plant in Harris County, Texas for $157,500 on October 1, 2009. The Company financed $107,500 with the seller, Thomas Newman, to be paid off with a $3,200 monthly payment for 36 months at an interest rate of 6.5% per annum. The principal balance due as of December 31, 2012 is $-0-. The Company paid $991 interest in 2012.

The Company purchased a Kubota tractor from Allied Power Mart on October 14, 2010 for $53,973. The Company financed $48,973 with Kubota Credit to be paid in 60 equal monthly payments of $816.22 interest- free. The principal balance due as of December 31, 2012 is $13,741.

The Company purchased a Kubota tractor from Allied Power Mart on September 20, 2012 for $50,393. The Company financed $48,451 with Kubota Credit to be paid in 60 equal monthly payments of $807.52 interest-free. The principal balance due as of December 31, 2012 is $44,251.

The Company purchased a water treatment plant in Grimes County, Texas for $561,335 on December 28, 2011. The Company assumed $286,076 of an original $300,000 note with First State Bank of Bedias, Texas in the name of the seller Bobby Brown, to be paid off with a $2,965.04 monthly payment for 120 months at an interest rate of 6% per annum. The principal balance due as of December 31, 2012 is $248,943. The Company paid $13,803 interest in 2012. The Company financed $53,994 with the seller, Bobby Brown, to be paid off with a $9,157.14 monthly payment for six months at an interest rate of 6% per annum beginning January 28, 2012. This was completely paid off as of December 31, 2012.