UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 19, 2010


ARTESIAN RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)


Delaware
 
000-18516
 
51-0002090
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)


 
664 Churchmans Road, Newark, Delaware
 
19702
 
 
(Address of principal executive offices)
 
(Zip Code)
 


Registrant's telephone number, including area code:
 
302-453-6900
 


 
Not Applicable
 
 
(Former name or former address, if changed since last report.)
 


 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
 
o Written communications pursuant to Rule 425 under the Securities Act

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

 



 
 

 

Item 1.01 Entry Into a Material Definitive Agreement


Revolving Credit Agreement with CoBank, ACB:

On January 19, 2010, Artesian Water Company, Inc. (“Artesian Water” or the “Company”) entered into a Revolving Credit Agreement (the “CoBank Agreement”) with CoBank, ACB (“CoBank”).  The CoBank Agreement provides that CoBank will make loans to the Company from time to time, not to exceed $20 million, expiring on January 18, 2011 (the “Maturity Date”).  The CoBank Agreement allows for the financing of operations of Artesian Water and up to $10 million for the operations of Artesian Water Maryland, Inc.  Interest rates on the CoBank Agreement are based on one of the following interest rate options.
(1)  
At a rate per annum equal to the rate of interest established by CoBank on the first business day of each week.
(2)  
At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance.
(3)  
At a fixed rate per annum equal to the London Interbank Offering Rate (“LIBOR”) plus 1.50%.
Subject to certain limited exceptions, the Company shall select the applicable rate option each time a loan is requested.  Interest payments are due monthly and the principal amount outstanding can be repaid at any time, subject to a prepayment surcharge if paid prior to the Maturity Date.

The Company’s obligations are secured by a first priority lien on all equity of CoBank currently owned or acquired in the future by the Company and any proceeds thereof.  The CoBank Agreement contains certain covenants, including but not limited to, covenants committing the Company to purchase equity in CoBank as required by CoBank from time to time, restricting the Company’s ability to incur additional indebtedness, make certain investments, and pay dividends or other distributions above a specified threshold and requiring the Company to have an EBITDA to total interest expense ratio of not greater than 2.5 to 1 at the end of each fiscal year.  The CoBank Agreement contains customary events of default, including, but not limited to, the occurrence of payment default, a covenant default, a failure to pay when due any other indebtedness of the Company and an event of default under certain other indebtedness of the Company.  In the event of a default by the Company, the interest rate will be increased to the specified default rate, CoBank may stop making additional credit available, and require the Company to repay its entire debt immediately.

The above summary of the CoBank Agreement is qualified in its entirety by the complete copy of the CoBank Agreement, which is attached hereto as Exhibit 10.1 and is hereby incorporated by reference.  All readers are encouraged to read the entire text of the CoBank Agreement.

Demand Line of Credit Agreement with Citizens Bank of Pennsylvania:

On January 19, 2010, Artesian Resources Corporation and each of its subsidiaries (“Artesian Resources” or the “Company”) entered into a Demand Line of Credit Agreement (the “Citizens Agreement”) with Citizens Bank of Pennsylvania (“Citizens”).  The Citizens Agreement provides for a $40 million Demand Line of Credit (or “Line of Credit”) which may be used by the Company for short-term working capital needs, investments in facilities or equipment or letters of credit only.  The Citizens Agreement provides that Citizens will make loans to the Company from time to time, not to exceed $40 million, expiring on the earlier of January 18, 2011 or any date on which Citizens demands payment.  The Citizens Agreement is a demand loan facility and therefore Citizens may demand payment under the Citizens Agreement for any outstanding amounts at any time.  In the event that Citizens makes a demand for payment, Citizens may increase the interest rate to the specified default rate, stop making additional credit available and require the Company to repay the entire principal balance and any accrued interest immediately.  Interest rates on the Citizens Agreement are based on LIBOR.  Interest payments are due monthly and the principal amount outstanding can be repaid at anytime.

The Company is required to maintain its primary operating account with Citizens and the Company’s obligations are secured by a lien on all of the property of the Company or its affiliates in the possession of Citizens or any of its affiliates, including but not limited to any deposit, trust or agency account or any other bank account with Citizens or any of its affiliates.  The Citizens Agreement also contains certain customary operating covenants.

The above summary of the Citizens Agreement is qualified in its entirety by the complete copy of the Citizens Agreement, which is attached hereto as Exhibit 10.2 and is hereby incorporated by reference  All readers are encouraged to read the entire text of the Citizens Agreement.
 
Due to the execution of the CoBank Agreement and the Citizens Agreement, the previously existing lines of credit held by Artesian Water, Artesian Utility Development, Inc. and Artesian Wastewater Management, Inc. will no longer be utilized.
 
 
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure set forth in Item 1.01 above is hereby incorporated by reference.


Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

  10.1
 Revolving Credit Agreement dated January 19, 2010 between Artesian Water Company, Inc. and CoBank, ACB.

  10.2
 Demand Line of Credit Agreement dated January 19, 2010 between Artesian Resources Corporation and each of its subsidiaries and Citizens Bank of Pennsylvania.



 
 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

   
ARTESIAN RESOURCES CORPORATION
 
Date:  January 25, 2010
 
By:    /s/ David B. Spacht
 
   
David B. Spacht
 
   
Chief Financial Officer
 


 
 

 

REVOLVING CREDIT AGREEMENT




BETWEEN



ARTESIAN WATER COMPANY, INC.


AND


COBANK, ACB



DATED AS OF JANUARY  19, 2010

 

 
 

 

REVOLVING CREDIT AGREEMENT

THIS REVOLVING   CREDIT AGREEMENT (this " Agreement ") is entered into as of January  19, 2010, between ARTESIAN WATER COMPANY, INC., a Delaware corporation (the " Company "), and CoBANK, ACB, a federally chartered instrumentality of the United States ( the “ Lender ” or “ CoBank ”).
 
In consideration of the agreements herein and in the other "Credit Documents" (as hereinafter defined) and in reliance upon the representations and warranties set forth herein and therein, the parties agree as follows:
 
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
 
SECTION 1.01.                                  Definitions. Except as otherwise expressly provided in this Agreement, capitalized terms used in this Agreement and defined in Exhibit A hereto shall have the meanings set forth in such Exhibit.
 
SECTION 1.02.                                  Rules of Interpretation. Except as otherwise expressly provided in this Agreement, the rules of interpretation set forth in Exhibit A hereto shall apply to this Agreement.

ARTICLE 2
AMOUNT AND TERMS OF LOANS
 
SECTION 2.01.                                  The Commitment. On the terms and conditions set forth in this Agreement, the Lender agrees to make loans (each a “ Loan ” and collectively the “ Loans ”) to the  Company from time to time during the period commencing on the date hereof and ending on January 18, 2011 (the “ Maturity Date ”), in an aggregate principal amount not to exceed, at any one time outstanding, $20,000,000 (the " Commitment "). Within the limits and during the term of the Commitment, the  Company may borrow, prepay pursuant to Section 2.07 hereof, and reborrow.

SECTION 2.02.                                  Purpose. The purpose of the Loans is to finance the operations of the Company and to provide up to $10,000,000 for the purpose of making loans to Artesian Water Maryland, Inc. The Company agrees to use the proceeds of the Loans for those purposes and no other.

SECTION 2.03.                                  Availability. Loans will be made available on any Business Day upon the telephonic or written request of an authorized employee of the Company; provided, however, that any request made telephonically shall be promptly confirmed in writing by the Company if required by CoBank. Requests for Loans must be received not later than 12:00 Noon, Eastern time on the date the Loan is to be made.  Loans will be made available by wire transfer of immediately available funds. Wire transfers shall be made to such account or accounts as may be authorized by the Company on forms supplied or approved by CoBank.

            SECTION 2.04.                                  Interest.

                       (A) Interest Rate Options. The Company agrees to pay interest on the unpaid principal balance of the Loans in accordance with one or more of the following interest rate options, as selected by the  Company in accordance with the terms hereof:

                                 (1)             Weekly Variable Rate Option. At a rate per annum equal to the rate of interest established by CoBank on the first Business Day of each week (the “ Variable Rate Option ”). The rate established by CoBank shall be effective until the first Business Day of the next week. Each change in the rate shall be applicable to all balances subject to this option and information about the then current rate shall be made available upon telephonic request.

(2)             Quoted Fixed Rate Option.   At a fixed rate per annum to be quoted by the Lender in its sole discretion in each instance (the “ Quoted Fixed Rate Option ”). Under this option, rates may be fixed on such balances and for such periods (each a " Quoted Fixed Rate Period), as may be agreeable to CoBank in its sole discretion in each instance, provided that:  (1) rates may not be fixed for Quoted Fixed Rate Periods of less than 30 days or extending beyond the Maturity Date; (2) rates may only be fixed on balances of $100,000.00 or in multiples thereof; and (3) the maximum number of balances that may be subject to this option at any one time shall be five (5).

                                 (3)             LIBOR Option .  At a fixed rate per annum equal to the LIBOR plus 1.50% (the “ LIBOR Option ”). Under this option rates may be fixed: (A) for Interest Periods of 1, 2, 3, 6, and 9 months, as selected by the  Company; provided, however, that in no event may rates be fixed for Interest Periods expiring after the Maturity Date; (B) on balances of $100,000 or in multiples thereof; (C) on a Banking Day on 3 Banking Days’ prior notice; and (D) on not more than five (5) separate balances at any one time.

                       (B)             Elections . Subject to the limitations set forth above, the  Company: (1) shall select the applicable rate option(s) each time it requests a Loan; (2) may, on any Business Day, elect to convert balances bearing interest at the Variable Rate Option to the Quoted Fixed Rate Option; (3) may, on the last day of any Quoted Fixed Rate Period, elect to refix the rate under the Quoted Fixed Rate Option or convert the balance to the Variable Rate Option; (4) may, on the last day of any Interest Period, elect to convert the balances bearing interest at the LIBOR Option to the Variable Rate Option or Quoted Fixed Rate Option; and (5) may, on three (3) Banking Days' prior notice, elect to convert balances bearing interest at the Variable Rate Option or the Quoted Fixed Rate Option to the LIBOR Option or refix a rate under the LIBOR Option; provided, however, that balances bearing interest at the Quoted Fixed Rate Option or the LIBOR Option may not be converted or continued until the last date of the Quoted Fixed Rate Period or Interest Period applicable thereto.  In the absence of an election provided for herein, the Company shall be deemed to have elected the Variable Rate Option.  All elections provided for herein may be made telephonically, in writing, or, if agreed to in a separate agreement, electronically, and must be received by 12:00 Noon Company's local time on the applicable day.  Any election made telephonically, shall be promptly confirmed in writing if so requested by CoBank.

                       (C)             Calculation and Payment .  Interest shall be calculated on the actual number of days each Loan is outstanding   on the basis of a year consisting of 360 days.  In calculating interest, the date each Loan is made shall be included and the date each Loan is repaid shall, if received before 3:00 P.M. Mountain time, be excluded.   Interest shall be: (1) calculated monthly in arrears as of the last day of each month and on the Maturity Date; and (2) due and payable on the 20 th day of the following month and on the Maturity Date.   Notwithstanding the foregoing, at CoBank's option, interest on balances bearing interest at the LIBOR Option shall be payable on the last day of the Interest Period or, in case of Interest Periods of longer than three months, at three month intervals.

            (D)             Additional Provisions Regarding LIBOR Option .  Notwithstanding any other provision hereof, CoBank shall have the right to temporarily suspend or permanently terminate the  Company’s ability to fix rates under the LIBOR Option or for one or more Interest Periods if, for any reason whatsoever (including a change in Applicable Law): (1) LIBOR is no longer being quoted in the London interbank market or is no longer being quoted for an Interest Period; (2) CoBank is prohibited from offering rates based on LIBOR; or (3) CoBank’s cost to fund balances bearing interest at the LIBOR Option (as determined by CoBank in its sole discretion) increases beyond any corresponding increase in LIBOR or decreases less than any corresponding decrease in LIBOR. In addition, if as a result of a change in Applicable Law or otherwise, CoBank is required to allocate additional capital to, or otherwise bear increased costs as a result of maintaining balances under, the LIBOR Option, the  Company agrees to indemnify CoBank upon demand against all such costs.

            SECTION 2.05.                                  Commitment Fees.   In consideration of the Commitment, the  Company agrees to pay to the Lender a commitment fee on the average daily unused portion of the Commitment from the date hereof until the Commitment expires or is terminated at the rate of 1/4 th of 1% (0.25%) per annum (calculated on an actual/360 day basis). Such fees shall be: (a) calculated quarterly in arrears as of the last day of each calendar quarter and on the date the Commitment expires or is terminated; and (b) due and payable on the 20 th day of each January, April, July and October and on the date the Commitment expires or is terminated.  Such fee shall be payable for each quarter or portion thereof during the original or any extended term of the Commitment; provided, however, that nothing contained herein shall obligate CoBank to extend the term of the Commitment.

            SECTION 2.06.                                  Repayment.   The Loans shall mature and be due and payable on the Maturity Date.

           SECTION 2.07.                                Prepayment.

(A)             Voluntary. The  Company shall have the right upon one, or, in the case of Fixed Rate Balances, three Business Days prior notice (which notice shall be irrevocable), to prepay the Loans in whole or part. In the event the Company prepays any Fixed Rate Balance, then at the time thereof, the Company shall pay to CoBank a prepayment surcharge calculated in accordance with Section 2.11 hereof.

(B)             Mandatory . The Company shall prepay the Loans if required pursuant to Section 7.02 hereof.

            SECTION 2.08.                                  Note. The  Company’s obligation to repay the Loans shall be evidenced by a promissory note in substantially the form of Exhibit B hereto, duly completed, dated the date hereof, and in the amount of the Commitment (the " Note ").

SECTION 2.09.                                  Security.   The  Company’s obligations under the Credit Documents shall be secured by a statutory first priority Lien on all equity which the Company may now own or hereafter acquire or be allocated in the Lender and all proceeds thereof. The Company agrees to take such steps (including the execution and recording of such instruments and documents) as the Lender may from time to time require in order to confirm or enable the Lender to realize upon its Lien.

           SECTION 2.10.                                Payments.

                       (A)             Manner of Making Payments. The  Company shall make all payments to the Lender under this Agreement and the other Credit Documents by wire transfer of immediately available funds in accordance with the following wire transfer instructions (or in accordance with such other wire transfer instructions as the Lender may direct by notice):

Name of Bank:  COBANK
Location:                     Greenwood Village, CO
ABA No.                     307088754
Reference:                     Artesian Water Company, Inc.

                       (B)             Business Days . In the event any day on which any payment required to be made hereunder or under the Note is not a Business Day, then such payment shall be due and payable on the next Business Day and, in the case of principal, interest shall continue to accrue thereon.

                       (C)             Records . The Lender shall keep a record of the unpaid principal balance of the Loans, the interest rate elections made with respect thereto, the interest accrued on the Loans, and all payments made with respect to the Loans, and such record shall, absent proof of error, be conclusive evidence of the outstanding principal and interest on the Loans.

SECTION 2.11.                                  Broken Funding Surcharge .  In the event the Company:  (i) repays any Fixed Rate Balance prior to the last day of the Interest Period or Quoted Fixed Period applicable thereto, whether such payment is made voluntary, by reason of acceleration, or otherwise; or (ii) fails for any reason to borrow, convert to, or renew any Fixed Rate Balance on the date fixed therefor, then the  Company shall pay to the Lender a surcharge calculated in accordance with the next sentence hereof.  Such surcharge shall be in an amount equal to the greater of: (i) the present value of the sum of: (a) any funding losses imputed by t he Lender to have been incurred as a result of such payment, conversion or failure; and (b) a per annum yield of ½ of 1% on the amount prepaid, converted or not borrowed for the period such amount was scheduled to have been outstanding at such fixed rate; or (ii) $300.  Such surcharge shall be determined and calculated in accordance with methodology established by the Lender , a copy of which will be made available upon request.

ARTICLE 3
CONDITIONS PRECEDENT

SECTION 3.01.                                  Conditions Precedent to Initial Loan.   The obligation of the Lender to make the initial Loan to the Company is subject to the conditions precedent that the Lender shall have received, on or before the day of such initial Loan, each of the following (which, in the case of instruments or documents, must be originals and in form and content satisfactory to the Lender):

(A)             This Agreement. This Agreement, duly executed by each of the parties hereto in sufficient counterparts for each party hereto.

(B)             The Note. The Note duly executed by the  Company.

                       (C)             Secretary’s Certificate . A certificate of the Secretary of the Company in form and content prescribed by CoBank, attaching and certifying as to each of the following (each of which must be in form and content reasonably acceptable to CoBank): (1) resolutions of the  Company’s board of directors authorizing the transactions contemplated herein and in the other Credit Documents; (2) a certificate of incumbency showing the names and true ink signatures of the officers of the  Company that are authorized to enter into this Agreement and the other Credit Documents; (3) a duly completed and executed copy of a CoBank Delegation and Wire and Electronic Transfer Authorization Form; (4)   the certificate of incorporation of the  Company, as amended to the date hereof; (5) the bylaws of the  Company, as amended to the date hereof; and (6) a certificate of the Secretary of State of Delaware attesting to the due incorporation and good standing of the Company in the State of Delaware.

(D)           [Intentionally Omitted].

(E)             Fees and Expenses. Payment by the  Company of all fees and expenses owed by it to the Lender.

(F)             Insurance.   Such evidence as the Lender shall require that the  Company is in compliance with Section 6.14 hereof .

(G)             Officer's Certificate .  A certificate of a Financial Officer of the Company as of the Closing Date in form and content prescribed by CoBank.
 

SECTION 3.02.                                  Conditions to Each Loan.   The obligation of the Lender to make any Loan to the  Company, including the initial Loan, is subject to the conditions precedent that: (A) each of the representations and warranties set forth herein and in such other Credit Documents be true and correct   on the date of such Loan, except to the extent such representations and warranties expressly related to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date); (B) no Default or Event of Default shall have occurred and be continuing; and (C) at the time of such Loan, there shall not exist any event which could reasonably be expected to have a Material Adverse Effect.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

The  Company hereby represents and warrants to the Lender that:

SECTION 4.01.                                  Organizations and Good Standing.   The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware with corporate power and authority to own and operate its properties and to carry on its business as now conducted, which consists of the gathering, purification, transportation, storage and distribution of water solely in the State of Delaware. The Company is a wholly ­owned subsidiary of Artesian Resources Corporation, a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware (the " Corporation ").

SECTION 4.02.                                  Subsidiaries. The Company has no Subsidiaries.

SECTION 4.03.                                  Financial Statements . (A) The balance sheets of the Company for the year ended December 31 in each of the years 2006, 2007, and 2008 and the related statements of income, retained earnings and cash flows for the years ended on said dates, copies of all of which have been furnished to the Lender, accompanied by a report thereon containing an opinion unqualified as to scope limitations imposed by the Company and otherwise without qualification except as therein noted, by BDO Seidman, LLP, have been prepared in accordance with generally accepted accounting principles consistently applied and the applicable provisions of the regulatory authorities having jurisdiction in the premises except as therein noted, are correct and complete, and present fully and fairly the financial position of the Company as of such dates and the results of its operations and changes in its financial position for such periods.
 
(B)            Since December 31, 2008, there has been no change in the condition, financial or otherwise, of the Company as shown on the balance sheet as of such date except increases, if any, in its current indebtedness to banks incurred for working capital and except changes in the ordinary course of business, none of which individually or in the aggregate has had a Material Adverse Effect.
 
(C)            All budgets, projections, feasibility studies, and other similar documentation submitted by the Company to the Lender in connection with the transactions contemplated by this Agreement were based upon assumptions that were reasonable and, as of the date hereof, no fact has come to light, and no event has occurred, that would cause any such assumption not to be reasonable.
 
SECTION 4.04.                                             Litigation . Except as set forth in Schedule 4.04 hereof, there are no actions, suits or proceedings pending or, to the best of the knowledge of the Company, threatened against or affecting the Company at law or in equity or before or by any Governmental Authority, that would reasonably be expected to involve the possibility of any material judgment or liability against the Company or otherwise have a Material Adverse Effect. The Company is not in default with respect to any order of any court or Governmental Authority.

SECTION 4.05.                                  Taxes . The Company has filed prior to delinquency all required tax returns and paid all applicable federal, state and local taxes, other than taxes not yet due or that may hereafter be paid without penalty, and the Company has no knowledge of any material deficiency or additional assessment in connection therewith not provided for on the books of the Company.

SECTION 4.06.                                  Liens . There are no Liens on any property of the Company other than the Lien of the Indenture and Permitted Encumbrances.

SECTION 4.07.                                  Title to Properties . The Company has good title to all its property and assets reflected on the balance sheet of the Company as of December 31, 2008 (other than property or assets subsequently disposed of in the normal and ordinary course of business).

SECTION 4.08.                                  [Reserved ].

SECTION 4.09.                                  Calamities, Strikes, etc . Since December 31, 2008, the business, properties and assets of the Company have not been adversely affected in any substantial way as the result of any fire, explosion, accident, windstorm, strike, labor disturbance, lockout, combination of workmen, requisition or taking of property by the United States or any agency thereof or by the State of Delaware or any municipality or other agency thereof, flood, drought, embargo, riot, war or act of God or the public enemy.

SECTION 4.10.                                  Restrictions on the Company . The Company is not a party to or bound by any contract, indenture, agreement or instrument, or any law, rule or regulation, any judgment or order of any court or Governmental Authority that restricts or limits the right or ability of the Company to enter into and perform the Credit Documents; and no approval, authorization, consent or withholding of objection on the part of any Governmental Authority is necessary in connection with the execution or performance of the Credit Documents. No action on the part of any shareholder of the Company is necessary in connection with the execution and delivery by the Company of and the performance by the Company of its obligations under the Credit Documents.

SECTION 4.11.                                  No Conflicts . The execution and delivery of the Credit Documents and the consummation of the transactions therein contemplated, and the compliance with the Credit Documents by the Company, will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any Lien upon any of the property or assets of the Company pursuant to the terms of, the charter or by-laws of the Company, or any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or the Corporation is a party, or by which the property or assets of either may be bound or affected.

SECTION 4.12.                                  No Defaults . The Company is operating its business in compliance with the terms of the Credit Documents, and no Default or Event of Default exists.

SECTION 4.13.                                  Compliance with Laws .

(A) The Company is not (i) in default with respect to any order, writ, injunction or decree of any court or (ii) in default in any material respect under any law, ordinance, order, regulation, license or demand (including ERISA, the Occupational Safety and Health Act of 1970 and laws and regulations establishing quality criteria and standards for air, water, land and toxic waste) of any Governmental Authority, default under which would have consequences that could reasonably be expected to have a Material Adverse Effect.

(B)           The Company is not in violation of any applicable Federal, state or local
laws, statutes, rules, regulations, ordinances, permit, licenses or authorizations relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, crude oil or any fraction thereof or other hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or other controlled, prohibited or regulated substances which violation could reasonably be expected to have a Material Adverse Effect . The Company does not know of any liability or class of liability of the Company under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.).

SECTION 4.14.                                  Validity . Enforceable Obligations . This Agreement and the other Credit Documents have been duly executed and delivered and constitute legal, valid and binding obligations of the  Company enforceable against the  Company in accordance with their respective terms, except as may be limited by bankruptcy or insolvency laws or similar laws affecting creditors' rights generally or by general equitable principles.

SECTION 4.15.                                  Full Disclosure . The financial statements referred to in Section 4.03 of this Agreement do not, nor does any other written statement furnished to the Lender by the Company in connection herewith, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading. There is no fact peculiar to the Company that the Company has not disclosed to the Lender in writing that materially affects adversely nor, so far as the Company now can reasonably foresee, will materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company.

SECTION 4.16.                                  Use of Proceeds . None of the transactions contemplated in the Agreement (including, without limitation, the use of proceeds from the Loans) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Company does not intend to purchase, with the proceeds from the sale of the Loans, any "margin stock" within the meaning of said Regulation G. None of the proceeds from the Loans will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any "security" within the meaning of the Securities Exchange Act of 1934, as amended.

SECTION 4.17.                                  ERISA.   The consummation of the transactions provided for in the Agreement and compliance by the Company with the provisions thereof will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code . Each "Plan" (as hereinafter defined) complies in all material respects with all applicable statutes and governmental rules and regulations, and (i) no "Reportable Event" (as hereinafter defined) has occurred and is continuing with respect to any Plan, (ii) the Company has not withdrawn from any Plan or instituted steps to do so, and (iii) no steps have been instituted to terminate any Plan. No condition exists or event or transaction has occurred in connection with any Plan that could result in the incurrence by the Company of any material liability, fine or penalty. No Plan maintained by the Company, nor any trust created thereunder, have incurred any "accumulated funding deficiency" as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits. The Company does not have any contingent liability with respect to any post-retirement "welfare benefit plans" (as such term is defined in ERISA) except as has been disclosed to the Lender. As used herein, the following terms shall have the meanings set forth: "Plan" shall mean a "pension plan," as such term is defined in ERISA, established or maintained by the Company or as to which the Company contributed or is a member or otherwise may have any liability; and "Reportable Event" shall have the meaning given to such term in ERISA.

SECTION 4.18.                                  Principal Place of Business; Records . The principal place of business and chief executive office of the Company and the place where the records of the Company are kept is at the address of the Company shown in Schedule 8.01 of this Agreement.

SECTION 4.19.                                  Rate Matters . The Company's current rates for the provision of water services have been approved by all necessary Governmental Authorities, including, without limitation, the Delaware Public Service Commission. There are no pending, nor to the Company's knowledge, any threatened, proceedings before any Governmental Authority the objective or result of which is or could be to materially reduce or otherwise materially change adversely any of the Company's rates for the provision of water services or otherwise have a Material Adverse Effect .

SECTION 4.20.                                  System Condition; Water Rights . The Company's utility facilities reasonably meet present demand in all material respects, are constructed in a good and workmanlike manner, are in good working order and condition, and comply in all material respects with all applicable laws, rules, regulations, orders, codes, and the like. The Company has water rights with such quantities, priorities and qualities as are necessary adequately to service the present and reasonably anticipated needs of its customers. The Company controls, owns, or has access to all such water rights free and clear of the interest of any third party which would individually or in the aggregate materially adversely affect the Company's intended use thereof and has not suffered or permitted any transfer or encumbrance of such water rights, has not abandoned such water rights, or any of them, and has not done any act or thing which would materially impair or cause a material loss of any such water rights.

SECTION 4.21.                                [Intentionally Omitted

SECTION 4.22.                                  Investment Company Act The Company is not an "investment company" as that term is defined in, or otherwise subject to regulation under, the Investment Company Act of 1940, as amended.

SECTION 4.23.                                  No Default Under Other Agreements . The  Company is not in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound which default has ha d or would be reasonably expected to have a Material Adverse Effect .

SECTION 4.24.                                  Indebtedness. As of the Closing Date, the Company has  no secured Indebtedness or Off Balance Sheet Indebtedness other than, in each case, as set forth in the Company’s most recent annual report filed on Form 10-K and quarterly report filed on Form 10-Q, in each case as  filed with the Securities and Exchange Commission.

SECTION 4.25.                                  Solvency. The Company is and, after the consummation of the transactions contemplated by this Agreement and the other Credit Documents, will be Solvent.

SECTION 4.26.                                  Insurance. The Company maintains insurance for the benefit of the  Company with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar business and owning similar properties in the same general areas in which the  Company operates.

SECTION 4.27.                                  Franchise, Licenses, Etc . The Company possesses all material franchises, certificates, licenses, permits and other authorizations necessary for the operation of its businesses.

ARTICLE 5
FURNISHING FINANCIAL AND OTHER INFORMATION

The  Company hereby covenants and agrees that so long as this Agreement is in effect and until the Loans, together with interest, fees and other monetary obligations hereunder have been paid in full and the Commitment expires or is terminated:

SECTION 5.01.                                  Annual Financial Statements of Company . The Company will furnish, or cause to be furnished, to the Lender as soon as available, and in any event within 120 days after the close of each fiscal year of the Company:

(i) a balance sheet of the Company as of the close of such fiscal year, and

(ii) statements of income, retained earnings and cash flow of the Company for such fiscal year,

in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the financial statements have been prepared in conformity with generally accepted accounting principles consistently applied and present fairly the financial condition of the Company as of the end of such fiscal year and the results of its operations for the fiscal year then ended and a written statement from such accountants that their examination in connection with such financial statements has been made in accordance with generally accepted auditing standards and auditing procedures as were considered necessary in the circumstances, and, to the extent applicable, disclosing all defaults by the Company in the performance of any obligation or under its certificate of incorporation of which they have obtained knowledge in making the examination necessary to their opinion.

SECTION 5.02.                                  Financial Statements of the Corporation .

( i)             Quarterly Statements . As soon as available and in any event within forty five (45) days after the end of each quarterly fiscal period (except the last) of each fiscal year of the Corporation, the Company will deliver to the Lender copies of:

(A) consolidated balance sheets of the Corporation and its subsidiaries as of the close of such quarterly period, and

(B) consolidated statements of income, retained earnings and cash flows of the Corporation and its subsidiaries, for such quarterly period and for the portion of the fiscal year ending with such period,

in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as presenting fairly the financial condition of the Corporation and its subsidiaries as of the end of such period and the results of their operations for such period, subject to changes resulting from year-end adjustments, by the chief financial officer of the Corporation.

(ii)             Annual Statements . As soon as available and in any event within one hundred twenty (120) days after the close of each fiscal year of the Corporation, the Company will deliver to the Purchaser (and any such institutional or other holder), copies in duplicate of:

(A) consolidated balance sheets of the Corporation and its subsidiaries as of the close of such fiscal year, and

(B) consolidated statements of income, retained earnings and cash flow of the Corporation and its subsidiaries for such fiscal year,
 
in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of a firm of independent public accountants of recognized national standing selected by the Corporation to the effect that the consolidated financial statements have been prepared in conformity with generally accepted accounting principles consistently applied and present fairly the financial condition of the Corporation and its subsidiaries as of the end of such fiscal year and the results of their operations for the fiscal year then ended and a written statement from such accountants that their examination in connection with such financial statements has been made in accordance with generally accepted auditing standards and auditing procedures as were considered necessary in the circumstances, and, to the extent applicable, disclosing all defaults by the Corporation in the performance of any obligation or under its certificate of incorporation of which they have obtained knowledge in making the examination necessary to their opinion

SECTION 5.03.                                  SEC and Other Related Reports . The Company will deliver to the Lender (and any such institutional holder), promptly upon their becoming available, copies of all registration and proxy statements and reports that the Company or the Corporation shall file with the Securities and Exchange Commission or any successor and corresponding Governmental Authority, and copies of such financial statements, reports, proxy statements and returns as it, or the Corporation, shall send to its or their stockholders or to the Trustee or file with any securities exchange.

SECTION 5.04.                                  Requested Information . The Company with reasonable promptness shall furnish the Lender such other data and information as may reasonably be requested.

SECTION 5.05.                                  Officer's Annual Certificate . Concurrently with delivery of the financial statements referred to in Section 5.01 hereof, the Company will deliver to the Lender a certificate of its President or its Treasurer or Controller in the form attached hereto as Exhibit C.

SECTION 5.06.                                  Inspection . The Company will permit the Lender, or such person or persons as the Lender may designate in writing, to visit and inspect any of the properties of the Company and to examine its books of account and discuss its affairs, finances and accounts with its officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss with the Lender the finances and affairs of the Company), all at such reasonable times and as often as the Lender may desire; provided that, unless a Default or Event of Default exists, the Lender shall bear the cost of any such inspection.

SECTION 5.07.                                  Notice of Default . Promptly after becoming aware thereof, the Company will deliver to the Lender notice of  the occurrence of any Default or Event of Default provided, however, that the failure to give such notice shall not affect the Lender’s rights and power to exercise any and all of the remedies specified herein.

SECTION 5.08.                                  Notice of Non-Environmental Litigation . Promptly after the commencement thereof, the Company will deliver to the Lender notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or Governmental Authority affecting it that, if adversely determined, could have a Material Adverse Effect .

SECTION 5.09.                                  Notice of Environmental Matters . Without limiting the provision of Section 5.08 hereof, promptly after receipt thereof, the Company will deliver to the Lender notice of its receipt of all pleadings, orders, complaints, indictments, or other written communications alleging a condition that would reasonably be expected to require the Company to undertake or to contribute to a cleanup or other response under any Environmental Law, or that seeks material penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of any Environmental Law, or that makes any material claim for personal injury or property damage as a result of environmental factors or conditions or that, if adversely determined, could otherwise have a Material Adverse Effect .

SECTION 5.10.                                  ERISA Reportable Events . Within 10 days after the Company becomes aware of the occurrence of any Reportable Event (as defined in Section 4043 of ERISA) with respect to the Company, a statement describing such Reportable Event and the actions proposed to be taken in response to such Reportable Event.

ARTICLE 6
COVENANTS

The  Company hereby covenants and agrees that so long as this Agreement is in effect and until the Loans, together with interest, fees and other monetary obligations hereunder have been paid in full and the Commitment expires or is terminated:

SECTION 6.01.                                  Compliance With Laws and Agreements . The Company will comply with (i) all Applicable Laws  of all Governmental Authorities and of any court, arbitrator or grand jury, in respect of the conduct of its business and the ownership of its properties (including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to equal employment opportunities or Environmental Laws), the violation of which could reasonably be expected to have a Material Adverse Effect ; and (ii) all agreements, indentures, mortgages and other instruments to which it is a party or by which it or any of its property is bound, the violation of which could reasonably be expected to have a Material Adverse Effect .

SECTION 6.02.                                  Capitalization . The Company agrees to purchase such equity in the Lender as the Lender may from time to time require in accordance with its Bylaws and Capital Plan (as each may be amended from time to time), except that the maximum amount of equity that the Company may be required to purchase in the Lender in connection with the Loans may not exceed the maximum amount permitted by the Lender’s Bylaws at the time this Agreement is entered into. The rights and obligations of the parties with respect to such equity and any distributions made on account thereof or on account of Borrower's patronage with CoBank shall be governed by the Lender’s Bylaws and Capital Plan (as each may be amended from time to time). All such investments and all other equities that the Company may now own or hereafter acquire or be allocated in the Lender shall be subject to a statutory first Lien in favor of the Lender. The Lender shall not be obligated to set off or otherwise apply such equities to the Company's obligations to the Lender.

SECTION 6.03.                                             Licenses, Etc. The Company will duly and lawfully obtain and maintain in full force and effect all licenses, certificates, permits, authorizations, approvals and the like that are material to the conduct of its business or that otherwise may be required by laws, to the extent the failure to do so could have a Material Adverse Effect .

SECTION 6.04 .                                 Water Rights . The Company will maintain and procure water rights with such quantities, priorities and qualities as are necessary adequately to serve the present and reasonably anticipated needs of its customers. The Company will continue to control, own or have access to all such water rights free and clear of the interest of any third party, will not suffer or permit any transfer or encumbrance of such water rights, will not abandon such water rights, or any of them, and will not do any act or thing which would impair or cause the loss of such water rights.

SECTION 6.05 .                                 Loans and Investments . The Company will not, after the date hereof, make any loan or advance to, invest in, purchase or make any commitment to purchase any commercial paper, stock, bonds, notes, or other securities of any person or entity (each, whether made directly or indirectly, (an " Investment "), other than:

(A)           commercial paper maturing not in excess of one year from the date of acquisition and rated "P1" by Moody's or "A1" by S&P on the date of acquisition;

(B)           certificates of deposit in North American commercial banks rated "C" or better by Keefe, Bruyette & Woods, Inc., or "3" or better by Cates Consulting Analysts, maturing not in excess of one year from the date of acquisition;

(C)           securities or deposits issued, guaranteed, or fully insured as to payment by the United States government or any agency thereof, and equity or investments in the Lender;

(D)           repurchase agreements of any bank or trust company incorporated under the laws of the United States of America or any state thereof and fully secured by a pledge of obligations issued or fully and unconditionally guaranteed by the United States government;

(E)           stocks and other voting securities that are not included within the scope of clauses (A) through (D) above and are issued by corporations or other entities not engaged in any business other than the water or wastewater utility business and that are incorporated or organized under the laws of the United State of America or any state thereof; provided that prior to or as a result of such investment the Company holds not less than seventy five percent (75%) of the voting securities of such corporation or entity;

(F)           commercial paper, bonds, stocks or other securities that are not included within the scope of clauses (A) through (E) above and are issued by corporations or other entities incorporated or organized under the laws of the United State of America or any state thereof (collectively, " Other Investments "); provided that the aggregate amount (calculated based on cost) of all such Other Investments shall not at any time exceed One Million Dollars ($1,000,000); and

(G)           Loans to Artesian Water Maryland, Inc. in an aggregate principal amount not to exceed, at any one time outstanding, $10,000,000.

SECTION 6.06.                                  Guarantees. The Company will not guarantee, assume or otherwise become obligated or liable with respect to the indebtedness or other obligations of any person or entity, other than in the ordinary course of its business.

SECTION 6.07.                                  Mergers; Acquisitions: Etc . The Company will not: (A) merge or consolidate with any other entity unless the Company shall be the continuing and surviving corporation and, after such merger or consolidation, there shall exist no Default or Event of Default; or (B) commence operations under any other name, organization or entity, including any joint venture.

SECTION 6.08.                                  Transfer of Assets . The Company will not sell, transfer, lease, enter into any contract for the sale, transfer or lease of, or otherwise dispose of, any of its assets, except in the ordinary course of its business.

SECTION 6.09.                                  Change in Business . The Company will not engage in any business activity or operation different from or unrelated to its current business activities or operations.

SECTION 6.10.                                  Distributions . The Company will not make, declare or pay, directly or indirectly, any dividend or other distribution of assets to shareholders of the Company, or retire, redeem, purchase or otherwise acquire for value any shares of stock of the Company, if such dividend, distribution, retirement, redemption, purchase or acquisition would cause the Company's consolidated capital to be less than Seventy Five Million Dollars ($75,000,000).

SECTION 6.11.                                  Preservation of Existence, Franchise and Assets . The  Company will do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority. The  Company shall generally maintain its properties, real and personal, in good condition, and the  Company shall not waste or otherwise permit such properties to deteriorate, reasonable wear and tear excepted.

            SECTION 6.12.                                  Books and Records . The Company will keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves).

            SECTION 6.13.                                  Payment of Taxes and Other Indebtedness . The  Company will pay, settle or discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (c) all of its other Indebtedness as it shall become due (to the extent such repayment is not otherwise prohibited by this Agreement); provided, however, that the  Company shall not be required to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefore have been established in accordance with GAAP, unless the failure to make any such payment (i) would give rise to an immediate right to foreclose or collect on a Lien securing such amounts or (ii) would have or would reasonably be expected to have a Material Adverse Effect.

            SECTION 6.14.                                  Insurance . The Company will at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) with responsible and reputable insurance companies in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the  Company operates.

SECTION 6.15.                                  Performance of Obligation . The  Company will perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other debt instruments to which it is a party or by which it is bound.

SECTION 6.16.                                  Audits/Inspections. Upon reasonable prior notice and during normal business hours, the  Company will permit representatives appointed by the Lender, including, without limitation, employees of the Lender, independent accountants, agents, attorneys, and appraisers, to visit and inspect the  Company's property, including its books and records, its accounts receivable and inventory, the  Company's facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Lender or its representatives to investigate and verify the accuracy of information provided to the Lender and to discuss all such matters with the officers, employees and representatives of the  Company.

SECTION 6.17                                  .             Nature of Business . The Company will not alter the character of its business from that of a water or wastewater utility company.

SECTION 6.18.                                  Arm's-Length Transactions . The Company will not enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any officer, director or Affiliate other than on terms and conditions substantially as favorable to the Company as would be obtainable in a comparable arm's-length transaction with a Person other than an officer, director or Affiliate.

SECTION 6.19.                                  Fiscal Year; Organization Documents . The  Company will not (a) change its fiscal year or (b) change its form of organization from a corporation organized under the laws of the State of Delaware.

SECTION 6.20.                                  Liens . The  Company will not contract, create, incur, assume or permit to exist any Lien with respect to any of its property or assets of any kind (whether real or personal, tangible or intangible), whether now owned or after acquired, except for the Lien of the Indenture and Liens permitted by the Indenture.

SECTION 6.21.                                  Indebtedness . The Company will not, nor will it permit any of its Subsidiaries to incur, assume, guarantee or in any other manner become liable, with respect to:

(A)            Short-Term Debt (including Company Obligations) in excess of, at any one time outstanding, $40,000,000.

(B)            Funded Indebtedness in excess of, at any one time outstanding, 66.67% of Total Permanent Capital of the Company and its consolidated subsidiaries.

SECTION 6.22.                                  EBITDA to Total Interest Expense Ratio. The Company and its consolidated subsidiaries, if any, will have at the end of each fiscal year, an " EBITDA to Total Interest Expense" of not greater than 2.50 to 1.

ARTICLE 7
EVENTS OF DEFAULT

SECTION 7.01.                                  Events of Default . An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"):

(A)             Payment .  The  Company shall default in the payment when due of any principal of any of the Loans or in the payment when due of any interest on the Loans or of any fees or other amounts owing hereunder or under any of the other Credit Documents.

(B)             Representations .  Any representation, warranty or statement made or deemed to be made by the Company herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made.

                       (C)             Certain Covenants . The failure by the Company to perform or comply with any covenant or agreement set forth in this Agreement (excluding Sections 2.02, 5.07, 5.08, 5.09,  6.21, and 6.22) , and such failure continues for thirty (30) days after written notice thereof shall have been delivered by the Lender to the Company;

                       (D)             Other Covenants . The failure by the Company to perform or comply with Sections 2.02, 5.07, 5.08, 5.09, 6.21 or 6.22 of this Agreement.

(E)             Cross-Default . The occurrence of any event of default under, or lapse of or failure on the part of the Company to observe, keep, or perform any covenant or agreement contained in any other Credit Document or any other agreement between the Company and the Lender, including, without limitation, any guaranty, loan agreement, security agreement, pledge agreement, indenture, mortgage or other agreement.

(F)             Other Indebtedness.   The Company should fail to pay when due any indebtedness to any other person or entity for borrowed money or any long-term obligation for the deferred purchase price of property (including any capitalized lease), or any other event occurs which, under any agreement or instrument relating to such indebtedness or obligation, has the effect of accelerating or permitting the acceleration of such indebtedness or obligation, whether or not such indebtedness or obligation is actually accelerated or the right to accelerate is conditioned on the giving of notice, the passage of time, or otherwise.

(G)             Judgment. The rendering against the Company of a judgment for the payment of moneys in excess of Five Hundred Thousand Dollars ($500,000) and the continuance of such judgment unsatisfied and without stay of execution thereon for a period of forty-five (45) days after the entry of such judgment, or the continuance of such judgment unsatisfied for a period of forty-five (45) days after the termination of any stay of execution thereon entered within such first mentioned forty-five (45) days.

(H)             Bankruptcy, etc . The occurrence of any of the following with respect to the  Company (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the  Company or for any part of its property or order the winding up or liquidation of its affairs; or (ii) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against the and such petition remains un stayed and in effect for a period of 60 consecutive days; or (iii) the  Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the  Company or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) the Company shall become insolvent or shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by the Company  in furtherance of any of the aforesaid purposes.

(I)             ERISA .  The occurrence of any of the following events or conditions if the same, individually or in the aggregate, would be reasonably expected to result in a liability of an amount greater than or equal to $500,000: (A) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any Lien shall arise on the assets of the  Company or any ERISA Affiliate in favor of the PBGC or a Plan; (B) a Termination Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Lender, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (C) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Lender, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) the  Company or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of such Plan; or (D) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which would be reasonably expected to subject the  Company or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the  Company or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability.

(J)             Indenture .  An "Event of Default" (as defined in the Indenture) shall exist.


SECTION 7.02.                                  Acceleration; Remedies . Upon the occurrence and during the continuance of a Default or an Event of Default, the Lender shall have no obligation to make any Loan to the Company and may discontinue doing so at any time without prior notice. In addition, upon the occurrence of an Event of Default and at any time thereafter unless and until such Event of Default has been waived by the Lender, the Lender may, by written notice to the Company take any of the following actions without prejudice to the rights of the  Lender to enforce its claims against the Company, except as otherwise specifically provided for herein.

(A)             Termination of Commitments .  Declare the Commitment terminated whereupon the Commitment shall be immediately terminated.

(B)             Acceleration of Loans .  Declare the unpaid amount of all  Company Obligations to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the  Company.

(C)             Enforcement of Rights .  Enforce any and all rights and interests created and existing under the Credit Documents, including, without limitation, all rights of set-off.

(D)             Other Rights . Exercise all other rights provided in this Agreement, any other Credit Document, or under law.

In addition to the foregoing, upon the occurrence and during the continuance of an Event of Default the unpaid principal balance of the Loans, together with any overdue payments of interest, fees or other charges hereunder, shall automatically accrue interest at the Default Rate.

SECTION 7.03.                                  Application of Payments After Event of Default .  Notwithstanding any other provisions of this Agreement, after the exercise of any remedies by the Lender pursuant to Section 7.02 (or after the Commitments shall automatically terminate and the Loans (with accrued interest thereon) and all other amounts under the Credit Documents shall automatically become due and payable in accordance with the terms of such Section), all amounts collected or received by the Lender on account of amounts outstanding under any of the Credit Documents shall be applied as follows:

FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable Attorney Costs) of the Lender in connection with enforcing the rights of the Lender under the Credit Documents;

SECOND, to payment of any fees or surcharges owed to the Lender;

THIRD, to the payment of all accrued interest payable to the Lender hereunder;

FOURTH, to the payment of the outstanding principal amount of the Loans;

FIFTH, to all other obligations which shall have become due and payable under the Credit Documents and not repaid pursuant to clauses "FIRST" through "FOURTH" above; and

SIXTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

In carrying out the foregoing, amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category.
 
ARTICLE 8
MISCELLANEOUS

SECTION 8.01.                                Notices and Other Communications; Facsimile Copies.

            (A)             General .  Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission). All written notices and all other communications expressly permitted hereunder to be given by telephone shall be made to the applicable address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 8.01 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B)  if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (C) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (C) below), when delivered.

                       (B)             Effectiveness of Facsimile Documents and Signatures .  Credit Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as manually-signed originals and shall be binding on the  Company and the Lender. The Lender may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.

                       (C)             Limited Use of Electronic Mail.   Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Sections 5.01 through 5.04, and to distribute Credit Documents for execution by the parties thereto, and may not be used for any other purpose.

                       (D)             Reliance by Lender .  The Lender shall be entitled to rely and act upon any notices (including telephonic notices of borrowing and interest elections) purportedly given by or on behalf of the  Company even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The  Company shall indemnify the Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the  Company. All telephonic notices to and other communications with the Lender may be recorded by the Lender, and the  Company hereby consents to such recording.

SECTION 8.02.                                  Rights of Set-Off. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default and the commencement of remedies described in Section 7.02, the Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to hold, set-off and appropriate and apply any and all proceeds of any equity in the Lender , any deposits (general or special), and any other indebtedness at any time held or owing by the Lender (whether or not due) to or for the credit or the account of the Company against the  Company Obligations irrespective of whether the Lender shall have made any demand hereunder and although such  Company Obligations, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of the Lender subsequent thereto; provided, however, that the Lender shall not be obligated to effect any such setoff. The  Company hereby agrees that any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 8.03 may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder.

SECTION 8.03.                                Successors and Assigns

            (A)             Generally .  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the  Company may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participation Purchasers to the extent provided in subsection (B) of this Section and, to the extent expressly contemplated hereby, the indemnities) any legal or equitable right, remedy or claim under or by reason of this Agreement.

                       (B)             Participations .  Without limiting the foregoing, the Lender may at any time, without the consent of, or notice to, the Company, sell participations to any Participation Purchaser in all or a portion of the Lender's rights and/or obligations under this Agreement (including all or a portion of the Commitment and/or the Loans); provided that (i) if such sale is other than to a Farm Credit System
Institution, such sale shall be subject to the  Company's consent, which shall not be unreasonably withheld or delayed, (ii) the Lender's obligations under this Agreement shall remain unchanged, ( iii ) the Lender shall remain solely responsible to the  Company for the performance of such obligations and ( iv ) the Company and the Lender shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement.  Any agreement or instrument pursuant to which the Lender sells such a participation shall provide that the Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that the Lender will not, without the consent of the Participation Purchaser, agree to any amendment, waiver or other modification described in Section 8.06 that directly affects such Participation Purchaser. To the extent permitted by law, each Participation Purchaser also shall be entitled to the benefits of Section 8.02 as though it were a Lender, provided such Participation Purchaser agrees to share any amount received in excess of its pro rata share with the Lender and all other Participation Purchasers.

                       (C)             Nonrestricted Assignments .  The Lender may at any time pledge or assign a security interest in all or any portion of its rights under the Credit Documents (including under the Note) to secure obligations of such Lender, including any pledge or assignment to secure obligations arising in connection with the issuance of notes by the Federal Farm Credit Banks Funding Corporation; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

                       (D)             Information .  The Lender may furnish any information concerning the  Company in the possession of such Lender from time to time to Participation Purchasers (including prospective Participation Purchasers).
 
 
            SECTION 8.04.                                  No Waiver; Remedies Cumulative . No failure or delay on the part of the Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the  Company and the Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Lender would otherwise have. No notice to or demand on the  Company in any case shall entitle the  Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Lender to any other or further action in any circumstances without notice or demand.

            SECTION 8.05.                                  Payment of Expenses, Etc .

                       (A)             The  Company agrees (i) to pay or reimburse the Lender for all costs and expenses incurred in connection with the preparation, negotiation and execution of this Agreement and the other Credit Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs (including, without limitation, the reasonable fees and expenses of Sherman & Howard L.L.C., special counsel to the Lender), and (ii) to pay or reimburse the Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Credit Documents (including all such costs and expenses incurred during any "workout" or restructuring in respect of the Company Obligations and during any legal proceeding, including any bankruptcy or insolvency proceeding of the  Company), including all Attorney Costs. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Lender and the cost of independent public accountants and other outside experts retained by the Lender. All amounts due under this Section 8.05(A) shall be payable within ten Business Days after written notice is provided to the Company demanding payment therefor. In addition, the Company will pay all taxes (including interest and penalties) that may be payable in respect of the execution and delivery of this Agreement or any other Credit Documents or of any amendment of, or waiver or consent under or with respect to, this Agreement, the or the Note and will hold the Lender harmless against any loss or liability resulting from nonpayment or delay in payment of any such tax. The obligations of the Company under this Section 8.05 shall survive the payment of the Loans.

(B )           Whether or not the transactions contemplated hereby are consummated, the  Company shall indemnify and hold harmless the Indemnities from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Credit Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) the Commitment or any Loan, (c) any actual or alleged presence or release of hazardous materials on or from any property currently or formerly owned or operated by the  Company, any Subsidiary of the  Company, or any liability resulting from any actual or alleged violation of Environmental Laws related in any way to the  Company, any Subsidiary of the  Company or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any indirect or consequential damages relating to this Agreement or any other Credit Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). All amounts due under this Section 8.05(B) shall be payable within ten Business Days after written notice is provided to the Company demanding payment therefor.  The agreements in this Section shall survive the  termination of the Commitment and the repayment, satisfaction or discharge of all the other  Company Obligations.

SECTION 8.06.                                  Amendments, Waivers and Consents . Neither this Agreement, nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Lender and the Company; provided that no such amendment, change, waiver, discharge or termination shall without the consent of each Participation Purchaser affected thereby:

 
                       (A)            extend the Maturity Date, or postpone or extend the time for any payment or prepayment of principal;

                       (B)            reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or fees or other amounts payable hereunder;

                       (C)            reduce or waive the principal amount of any Loan;

            (D)            increase or extend the Commitment (it being understood and agreed that a waiver of any Default or Event of Default shall not constitute a change in the terms of the Commitment);

            (E)            release the  Company from its obligations under the Credit Documents;

                       (F)            amend, modify or waive any provision of this Section 8.06 , or Sections 7.01(A), 8.02, 8.03 or 8.05 ; or

                       (G)            consent to the assignment or transfer by the  Company of any of its rights and obligations under (or in respect of) the Credit Documents.

 
            SECTION 8.07.                                  Counterparts . This Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.

            SECTION 8.08.                                  Headings . The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

            SECTION 8.09.                                  Survival of Indemnification and Representations and Warranties . All indemnities set forth herein and all representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of the Loans, and the repayment of the Loans and other  Company Obligations and the termination of the Commitment hereunder.
 
 
            SECTION 8.10.                                  Governing Law. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE . The  Company irrevocably consents to the service of process out of any competent court in any action or proceeding with respect to this Agreement by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address for notices pursuant to Section 8.01 , such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Lender to serve process in any other manner permitted by law.

           SECTION 8.11.                                Waiver of Jury Trial. EACH OF THE PARTIES TO THIS  AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

            SECTION 8.12.                                  Severability . If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

            SECTION 8.13.                                  Further Assurances . The  Company agrees, upon the request of the Lender, to promptly take such actions, as reasonably requested, as are necessary to carry out the intent of this Agreement and the other Credit Documents.

            SECTION 8.14.                                  Entirety . This Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein.

           SECTION 8.15.                                Binding Effect; Continuing Agreement.

(A)            This Agreement shall become effective at such time as all of the conditions set forth in Section 3.01 have been satisfied or waived by the Lender and it shall have been executed by the  Company and the Lender, and thereafter this Agreement shall be binding upon and inure to the benefit of the  Company and the Lender and their respective successors and assigns.

(B)            This Agreement shall be a continuing agreement and shall remain in full force and effect until all Loans, interest, fees and other Company Obligations have been paid in full and the Commitment expires or has been terminated. Upon termination, the  Company shall have no further obligations (other than the indemnification provisions that survive) under the Credit Documents; provided that should any payment, in whole or in part, of the  Company Obligations be rescinded or otherwise required to be restored or returned by the Lender, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, then the Credit Documents shall automatically be reinstated and all amounts required to be restored or returned and all costs and expenses incurred by the Lender in connection therewith shall be deemed included as part of the  Company Obligations.

            SECTION 8.16.                                  Confidentiality . The Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process (provided, in the event of any disclosure pursuant to this clause (c), the Lender shall promptly notify the  Company of its disclosure of such Information); (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section 8.16 , to (i) any  Participation Purchaser in, or any prospective Participation Purchaser in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the  Company; (g) with the consent of the  Company; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 8.16 or (ii) has been available or becomes available to the Lender on a nonconfidential basis from a source other than the  Company; or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender's or its Affiliates' portfolio in connection with ratings issued with respect to such Lender or its Affiliates. For the purposes of this Section 8.16 , "Information" means all information received from the  Company relating to the  Company or its Subsidiaries or business. Any Person required to maintain the confidentiality of Information as provided in this Section 8.16 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the contrary, "Information" shall not include, and the Lender and the  Company may disclose to any and all Persons, without limitation of any kind, any information with respect to the "tax treatment" and "tax structure" (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Lender or the  Company relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Loans and transactions contemplated hereby.

SECTION 8.17.                                  USA PATRIOT ACT . CoBank hereby notifies the Company that pursuant to the requirements of the USA Patriot Act (Title III of Publ. 107 56 (signed into law October 26, 2001)) (the “ Act ”), it is required to obtain, verify and record information that identifies the Company, which information includes the name and address of the Company and other information that will allow CoBank to identify the Company in accordance with the Act.
 

[Remainder of Page Intentionally Left Blank]


 
 

 

Each of the parties hereto has caused a counterpart of this Revolving Credit Agreement to be duly executed and delivered as of the date first above written.
 
BORROWER :
ARTESIAN WATER COMPANY, INC.



 
By:
   
 
Name:
   
 
Title:
   

 
 

 

LENDER :
CoBANK, ACB



 
By:
 
 
Name:
 
 
Title:
 


 
 

 
 

 

EXHIBIT A

DEFINITIONS AND RULES OF INTERPRETATION

            SECTION 1.01 Definitions. As used in the Agreement, any amendment thereto, or in any other Credit Document, the following terms shall have the following meanings:

" Affiliate " means, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (a) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (b) to direct or cause direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. “ Agreement ” shall have the meaning set forth in the introductory paragraph hereof.
 
Applicable Law ” means all laws, rules, regulations, codes, and ordinances applicable to the Person, conduct, transaction, covenant or contract in question.
 
" Attorney Costs " means all reasonable fees and disbursements of any law firm or other external counsel.
 
Banking Day” shall mean a day that is both a Business Day and a day on which dealings between banks are carried on in U.S. dollar deposits in the London interbank market.
 
" Business Day " means any day other than a Saturday, a Sunday, a legal holiday or a day on which the Lender is closed for business.
 
" Capital Stock " means (a) in the case of a corporation, all classes of capital stock of such corporation, (b) in the case of a partnership, partnership interests (whether general or limited), (c) in the case of a limited liability company, membership interests and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
 
" Closing Date " means the date hereof.
 
“CoBank Base Rate” shall mean the rate of interest established by CoBank from time to time as its CoBank Base Rate, which rate is intended by CoBank as a reference rate and not its lowest rate. The CoBank Base Rate will change on the effective date of each change in the rate.
 
" Code " means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder.
 
" Commitment " shall have the meaning set forth in Section 2.01 .
 
" Company " means Artesian Water Company, Inc.
 
" Company Obligations " means, without duplication, all of the obligations of the Company to the Lender, whenever arising, under this Agreement, the Note or any of the other Credit Documents, including, without limitation, the obligation to pay principal, interest, fees, surcharges, premiums, expense, and other amounts owing hereunder.
 
Corporation ” shall have the meaning set forth in Section 4.01 hereof.
 
" Credit Documents " means this Agreement, the Note, and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.
 
" Default " means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.
 
Default Rate ” shall mean the CoBank Base Rate plus 2 % per annum.
 
" Dollars " and " $ " means dollars in lawful currency of the United States of America.
 
" Environmental Laws " means any current or future legal requirement of any Governmental Authority pertaining to (a) the protection of health, safety, and the indoor or outdoor environment, (b) the conservation, management, or use of natural resources and wildlife, (c) the protection or use of surface water and groundwater or (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation or handling of, or exposure to, any hazardous or toxic substance or material or (e) pollution (including any release to land surface water and groundwater) and includes, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendment of 1984, 42 USC 6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977,33 USC 1251 et seq., Clean Air Act of 1966, as amended, 42 USC 7401 et seq., Toxic Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous Materials Transportation Act, 49 USC App. 1801 et seq., Occupational Safety and Health Act of 1970, as amended, 29 USC 651 et seq., Oil Pollution Act of 1990, 33 USC 2701 et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42 USC 11001 et seq., National Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking Water Act of 1974, as amended, 42 USC 300(f) et seq., any analogous implementing or successor law, and any amendment, rule, regulation, order, or directive issued thereunder.
 
" ERISA " means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.
 
" ERISA Affiliate " means an entity, whether or not incorporated, which is under common control with the  Company or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the  Company or any of its Subsidiaries and which is treated as a single employer under Sections 414(b), (c), (m), or (0) of the Code.
 
Eurocurrency Liabilities ” shall have meaning as set forth in Regulation D.
 
" Event of Default " has the meaning specified in Section 7.01.
 
" Financial Officer " means any one of the chief financial officer, the chief accounting officer, the Vice President, Finance or the Senior Vice President, Finance and Planning of the Company.
 
Fixed Rate Balances” shall mean balances bearing interest at either the Quoted Fixed Rate Option or the LIBOR Option.
 
" Funded Indebtedness " shall mean all bonds, debentures and other evidence of indebtedness of the Company and its Subsidiaries, secured or unsecured, for money borrowed but excluding (i) indebtedness maturing on demand or within one year from the date incurred and not renewable or extendable at the option of the debtor, (ii) indebtedness of the Company to any Subsidiary and any indebtedness of a Subsidiary to the Company, and (iii) indebtedness that has been called for redemption and for the payment of which monies have been irrevocably deposited with a trustee.  Funded Indebtedness shall be calculated on a consolidated basis, excluding all intercompany items, in accordance with GAAP consistently applied and shall include the portion of bonds, notes or other indebtedness maturing, or required to be redeemed, within one year from the date as of which Funded Indebtedness is being determined, provided that for purposes of computations under this Agreement, capitalized lease obligations shall be excluded from Funded Indebtedness.
 
" GAAP " means generally accepted accounting principles in the United States applied on a consistent basis.
 
" Governmental Authority " means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.
 
" Guaranty Obligations " means, with respect to any Person, without duplication, any obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (a) to purchase any such Indebtedness or other obligation or any property constituting security therefore, (b) to advance or provide funds or other support for the payment or purchase of such Indebtedness or obligation or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, maintenance agreements, comfort letters, take or pay arrangements, put agreements or similar agreements or arrangements) for the benefit of the holder of Indebtedness of such other Person, (c) to lease or purchase property, securities or services primarily for the purpose of assuring the owner of such Indebtedness or (d) to otherwise assure or hold harmless the owner of such Indebtedness or obligation against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made.
 
" Indebtedness " of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person to the extent of the value of such property (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations, other than intercompany items and trade payables incurred in the ordinary course of business, of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person which would appear as liabilities on a balance sheet of such Person, (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (f) all Guaranty Obligations of such Person, (g) the principal portion of all obligations of such Person under (i) capital lease obligations and (ii) Off Balance Sheet Indebtedness, (h) all obligations of such Person to repurchase any securities which repurchase obligation is related to the issuance thereof, including, without limitation, obligations commonly known as residual equity appreciation potential shares, (i) all net principal obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements, (j) the maximum amount of all performance and standby letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), and (k) the aggregate amount of uncollected accounts receivable of such Person subject at such time to a sale of receivables (or similar transaction) regardless of whether such transaction is effected without recourse to such Person or in a manner that would not be reflected on the balance sheet of such Person in accordance with GAAP .
 
" Indemnified Liabilities " has the meaning set forth in Section 8.05(B) .
 
" Indemnities " means, collectively, the Lender and its respective Affiliates, directors, officers, employees, counsel, agents and attorneys- in-fact.
 
" Indenture " means that certain Indenture of Mortgage dated as of July 1, 1961 between the Company (successor to the Corporation) and Wilmington Trust Company, as Trustee as the same may from time to time be supplemented, modified, amended, renewed, extended or consolidated.
 
" Interest Period " means  a period commencing on the date the LIBOR Option is to take effect (including continuations and conversions) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3, 6, or 9 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the ending month, then such period shall end on the last Banking Day in the relevant month.
 
Investment ” shall have the meaning set forth in Section 6.05 hereof.
 
" Lender " means CoBank, ACB, together with its successors and assigns.
 
LIBOR Option ” shall have the meaning set forth in Section 2.04(A)(3) .
 
LIBOR ” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on Eurocurrency Liabilities for banks subject to Regulation D or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time 2 Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company, as published by Bloomberg or another major information vendor listed on BBA’s official website.
 
" Lien " means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof).
 
" Loans "  shall have the meaning set forth in Section 2.01 hereof.
 
" Material Adverse Effect " means a material adverse effect on (a) the operations, business, assets, or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, (b) the ability of the Company to perform its obligations under this Agreement or (c) the validity or enforceability of this Agreement, any of the other Credit Documents, or the rights and remedies of the Lender hereunder or thereunder.
 
" Maturity Date " shall have the meaning set forth in Section 2.01.
 
" Moody's " means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities.
 
" Multiemployer Plan " means a Plan covered by Title IV of ERISA which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA.
 
" Multiple Employer Plan " means a Plan covered by Title IV of ERISA, other than a Multiemployer Plan, which the  Company or any ERISA Affiliate and at least one employer other than the  Company or any ERISA Affiliate are contributing sponsors.
 
Note ” shall have the meaning set forth in Section 2.08 hereof, as amended, modified, supplemented or replaced from time to time.
 
" Off Balance Sheet Indebtedness " means any obligation of a Person that would be considered indebtedness for tax purposes but is not set forth on the balance sheet of such Person, including, but not limited to, (a) any synthetic lease, tax retention operating lease, off balance sheet loan or similar off-balance sheet financing product of such Person, (b) the aggregate amount of uncollected accounts receivables of such Person subject at such time to a sale of receivables (or similar transaction) and (c) obligations of any partnership or joint venture that is recourse to such Person.
 
Other Investments ” shall have the meaning set forth in Section 6.05(F) hereof.
 
" Participation Purchaser " means any Person (other than a natural person or the  Company or any of the  Company's Affiliates or Subsidiaries) to whom a Lender sells a participation as specified in Section 8.03(B) .
 
" PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
 
Permitted Encumbrances ” shall have the meaning set forth in the Indenture.
 
" Person " means any individual, partnership, joint venture, firm, corporation, association, trust, limited liability company or other enterprise (whether or not incorporated), or any government or political subdivision or any agency, department or instrumentality thereof
 
" Plan " means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the  Company or any ERISA Affiliate is ( or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA.
 
Quoted Fixed Rate Option     shall have the meaning set forth in Section 2.04(A)(2).
 
Quoted Fixed Rate Period ” shall have the meaning set forth in Section 2.04(A)(2).
 
" Regulation D, O, T, U or X " means Regulation D, O, T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect, any amendment thereto and any successor to all or a portion thereof
 
" Reportable Event " means a "reportable event" as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived.
 
" S&P " means Standard & Poor's Ratings Services, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities.
 
" Short-Term Debt " means debt of the Company that matures within one year of the date created.
 
" Single Employer Plan " means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
 
" Solvent " means, with respect to the  Company as of a particular date, that on such date (a) the  Company is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (b) the  Company does not intend to, and does not believe that it will, incur debts or liabilities beyond the  Company's ability to pay as such debts and liabilities mature in their ordinary course, (c) the  Company is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which the  Company's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the  Company is engaged or is to engage and (d) the fair value of the assets of the Company, taken as a whole on a going concern basis, is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of the  Company. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed as the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
 
" Subsidiary " means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not, at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, association, joint venture, limited liability company or other entity in which such Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time.
 
" Termination Event " means (a) with respect to any Single Employer Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA), (b) the withdrawal of the  Company or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041 (a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA, (e) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (f) the complete or partial withdrawal of the  Company or any ERISA Affiliate from a Multiemployer Plan.
 
" Total Assets " means all assets of the Company and its consolidated Subsidiaries as shown on its most recent annual audited consolidated balance sheet, as determined in accordance with GAAP .
 
" Total Permanent Capital " shall mean, with respect to the Company and its Subsidiaries: (i) the sum of the par or stated value of all outstanding capital stock of the Company and all paid-in premiums thereon; (ii) all surplus, including capital and earned surplus but not including surplus from any revaluation of the Company's assets after December 31, 2008; (iii) the minority interest (if any) in consolidated Subsidiaries, but not including any earned surplus of Subsidiaries prior to the date of acquisition of such Subsidiaries; and (iv) all Funded Indebtedness of the Company and such Subsidiaries.  Total Permanent Capital shall be calculated on a consolidated basis, excluding all intercompany items, and in accordance with GAAP consistently applied.
 
Variable Rate Option ” shall have the meaning set forth in Section 2.04(A)(1).
 
RULES OF INTERPRETATION

SECTION 2.01 Rules of Interpretation.   The following rules of interpretation shall apply to the Agreement, the other Credit Documents and all amendments to either of the foregoing:

            Accounting Terms. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared, in accordance with GAAP applied on a consistent basis.

Number.   All terms stated in the singular shall include the plural, and all terms stated in the plural shall include the singular.

            Including.   The term "including" shall be construed as meaning "including, but not limited to".

            Default . The expression "while any Default or Event of Default shall have occurred and be continuing" (or like expression) shall be deemed to include the period following any acceleration of the  Company Obligations (unless such acceleration is rescinded).

References in this Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits of or to this Agreement unless otherwise specifically provided.

            Renewal of Commitment. References in the Agreement to the renewal of the Commitment shall not be construed as obligating the Lender to renew the Commitment, and no obligation to renew the Commitment shall arise unless contained in a writing signed by the Lender .




 
 

 


 

 

 

 

 

 

 
DEMAND LINE OF CREDIT AGREEMENT
 
by and between
 
CITIZENS BANK OF PENNSYLVANIA
 
and
 
ARTESIAN RESOURCES CORPORATION
ARTESIAN WATER COMPANY, INC.
ARTESIAN WATER PENNSYLVANIA, INC.
ARTESIAN WATER MARYLAND, INC.
ARTESIAN WASTEWATER MANAGEMENT, INC.
ARTESIAN WASTEWATER MARYLAND, INC.
ARTESIAN UTILITY DEVELOPMENT, INC.
ARTESIAN DEVELOPMENT CORPORATION
ARTESIAN CONSULTING ENGINEERS, INC.




January 19, 2010



 
 
 

 

DEMAND LINE OF CREDIT AGREEMENT
 
THIS DEMAND LINE OF CREDIT AGREEMENT (the “Agreement”) is made as of the 19th day of January, 2010, by and between ARTESIAN RESOURCES CORPORATION, a Delaware corporation, ARTESIAN WATER COMPANY, INC., a Delaware corporation, ARTESIAN WATER PENNSYLVANIA, INC., a Pennsylvania corporation, ARTESIAN WATER MARYLAND, INC., a Delaware corporation, ARTESIAN WASTEWATER MANAGEMENT, INC., a Delaware corporation, ARTESIAN WASTEWATER MARYLAND, INC., a Delaware corporation, ARTESIAN UTILITY DEVELOPMENT, INC., a Delaware corporation, ARTESIAN DEVELOPMENT CORPORATION, a Delaware corporation, ARTESIAN CONSULTING ENGINEERS, INC., a Delaware corporation, (jointly and severally, “Borrower”), and CITIZENS BANK OF PENNSYLVANIA (“Bank”).  Borrower and Bank agree, under seal, as follows:
 
BACKGROUND
 
A.           The Borrower has requested the Bank to extend a $40,000,000 demand line of credit (“Line of Credit”) to the Borrower.
 
B.           The Bank is willing to agree to provide the Line of Credit, subject to the terms and conditions of this Agreement.
 
ARTICLE 1
 
DEFINITIONS
 

 
Section 1.1.   Definitions .  When used in this Agreement, the following terms shall have the respective meanings set forth below.
 
a.   Adjusted LIBOR Rate   means, relative to any LIBOR Rate Loan to be made, continued or maintained as a LIBOR Rate Loan for any LIBOR Interest Period, a rate per annum determined by dividing (x) the LIBOR Rate for such LIBOR Interest Period by (y) a percentage equal to one hundred percent (100%) minus the LIBOR Reserve Percentage.
 
1.1.1.    “ Advance ” means a borrowing under the Line of Credit in accordance with Section 2.5 hereof.
 
1.1.2.   Affiliate ” means as to any Person, each other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Person in question. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.
 
1.1.3.   Agreement ” means this Demand Line of Credit Agreement and all exhibits and schedules hereto, as each may be amended from time to time.
 
1.1.4.   Applicable Margin ” means one hundred forty (140) Basis Points if Bank provides such cash management services.
 
1.1.5.   Available Amount ” means $40,000,000.
 
1.1.6.   Bank ” means Citizens Bank of Pennsylvania and its successors and assigns pursuant to Section 8.3 hereof.
 
1.1.7.   Bank Indebtedness ” means all obligations and Indebtedness of Borrower to Bank, whether now or hereafter owing or existing, including, without limitation, all obligations under the Credit Documents, all other obligations or undertakings now or hereafter made by or for the benefit of Borrower under any other agreement, promissory note or undertaking now existing or hereafter entered into by Borrower with Bank, including, without limitation, all obligations of Borrower to Bank under any guaranty or surety agreement and all obligations of Borrower to immediately pay to Bank the amount of any overdraft on any deposit account maintained with Bank, together with all interest and other sums payable in connection with any of the foregoing.
 
1.1.8.   Basis Point ” means one-hundredth of one percent.
 
1.1.9.   Borrower ” means, jointly and severally, ARTESIAN RESOURCES CORPORATION, a Delaware corporation, ARTESIAN WATER COMPANY, INC., a Delaware corporation, ARTESIAN WATER PENNSYLVANIA, INC., a Pennsylvania corporation, ARTESIAN WATER MARYLAND, INC., a Delaware corporation, ARTESIAN WASTEWATER MANAGEMENT, INC., a Delaware corporation, ARTESIAN WASTEWATER MARYLAND, INC., a Delaware corporation, ARTESIAN UTILITY DEVELOPMENT, INC., a Delaware corporation, ARTESIAN DEVELOPMENT CORPORATION, a Delaware corporation, and ARTESIAN CONSULTING ENGINEERS, INC., a Delaware corporation.
 
1.1.10.   Borrowing Notice ” means the certificate in the form attached hereto as Exhibit A to be delivered by Borrower to Bank as a condition of each Advance.
 
1.1.11.   Business Day ” means:
 
(a)   any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Wilmington, Delaware;
 
(b)   when such term is used to describe a day on which a borrowing, payment, prepaying, or repaying is to be made in respect of any LIBOR Rate Loan, any day which is: (i) neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in New York City; and (ii) a London Banking Day; and
 
(c)   when such term is used to describe a day on which an interest rate determination is to be made in respect of any LIBOR Rate Loan, any day which is a London Banking Day..
 
1.1.12.   Code ” means the Internal Revenue Code of 1986, as amended from time to time, and all rules and regulations with respect thereto in effect from time to time.
 
1.1.13.   Credit Documents ” means this Agreement, the Note and any other agreements, documents, instruments and writings now or hereafter existing, creating, evidencing, or relating to any of the liabilities of Borrower to the Bank together with all amendments, modifications, renewals or extensions thereof.
 
1.1.14.   Daily LIBOR Rate   shall mean, for any day, the rate of one (1) month U.S. Dollar deposits as reported on Reuters Page LIBOR01 as of 11:00 a.m., London time, on such day, or if such day is not a London Banking Day (as defined herein), then the immediately preceding London Banking Day (or if not so reported, then as determined by the Bank from another recognized source or interbank quotation).
 
1.1.15.   Daily LIBOR  Rate Loan ” means any loan or advance the rate of interest applicable to which is based upon the Daily LIBOR Rate.
 
1.1.16.   " Default Rate " has the meaning set forth in Section 2.4.3 hereof.
 
1.1.17.   Dollars” or “$” means the lawful currency of the United States.
 
1.1.18.   Environmental Control Statutes ” means any federal, state, county, regional or local laws governing the control, storage, removal, spill, release or discharge of Hazardous Substances, including without limitation CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous Materials Transportation Act, the Emergency Planning and Community Right to Know Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of 1990, any similar or implementing state law, and in each case including all amendments thereto and all rules and regulations promulgated thereunder and permits issued in connection therewith.
 
1.1.19.   EPA ” means the United States Environmental Protection Agency, or any successor thereto.
 
1.1.20.   ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, any successor statute of similar import, and all rules and regulations with respect thereto in effect from time to time.
 
1.1.21.   ERISA Affiliate ” means any Person that is a member of any group or organization within the meaning of Code sections 414(b), (c), (m) or (o) of which Borrower is a member.
 
1.1.22.   GAAP ” means generally accepted accounting principles as in effect in the United States of America set forth in the Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and in statements of the Financial Accounting Standards Board and in such other statements by such other entity as Bank may reasonably approve, which are applicable in the circumstances as of the date in question; and such principles observed in a current period shall be comparable in all material respects to those applied in a preceding period.
 
1.1.23.   Hazardous Substance ” means petroleum products and items defined in the Environmental Control Statutes as “hazardous substances”, “hazardous wastes”, “pollutants” or “contaminants” and any other toxic, reactive, corrosive, carcinogenic, flammable or hazardous substance or other pollutant.
 
1.1.24.   Hedging Contracts ” means, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, or any other agreements or arrangements entered into between the Borrower or its affiliates and the Bank and designed to protect the Borrower against fluctuations in interest rates or currency exchange rates.
 
1.1.25.   Hedging Obligations ” means, with respect to the Borrower, all liabilities of the Borrower or its affiliates to the Bank under Hedging Contracts.
 
1.1.26.    “ Indebtedness ” means:
 
(a)   all items (except items of capital stock or of surplus) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, excluding (i) contributions in aid of construction, (ii) advances in aid of construction and (iii) deferred taxes;
 
(b)   to the extent not included in the foregoing, all indebtedness, obligations, and liabilities secured by any mortgage, pledge, lien, conditional sale or other title retention agreement or other security interest to which any property or asset owned or held by such Person is subject, whether or not the indebtedness, obligations or liabilities secured thereby shall have been assumed by such Person; and
 
(c)   to the extent not included or specifically excluded in the foregoing, all indebtedness, obligations and liabilities of others which such Person has directly or indirectly guaranteed, endorsed (other than for collection or deposit in the ordinary course of business), sold with recourse, or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable.
 
1.1.27.   Interest Payment Date   means, relative to (i) any LIBOR Rate Loan with a one (1) month LIBOR Interest Period, the last Business Day of such LIBOR Interest Period, (ii) any LIBOR Rate Loan will a LIBOR Interest Period greater than one (1) month or any Daily LIBOR Rate Loan, the ____ day of each month .
 
1.1.28.   LIBOR Interest Period ” means relative to any LIBOR Rate Loans:
 
(a)   initially, the period beginning on (and including) the date on which such LIBOR Rate Loan is made or continued as a LIBOR Rate Loan and ending on (but excluding) the day which numerically corresponds to such date one, two or three months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in each case as selected by Borrower by irrevocable notice to the Bank pursuant to Section 2.11 hereof; and
 
(b)   thereafter, each period commencing on the last day of the preceding LIBOR Interest Period applicable to such LIBOR Rate Loan and ending one, two or three months thereafter, as selected by Borrower by irrevocable notice to the Bank pursuant to Section 2.5 hereof;
 
provided, however , that
 
(a)           at no time may there be more than four (4) LIBOR Interest Periods in effect with respect to the LIBOR Rate Loans;
 
(b)           LIBOR Interest Periods commencing on the same date for LIBOR Rate Loans comprising part of the same Advance under this Agreement shall be of the same duration;
 
(c)           LIBOR Interest Periods for LIBOR Rate Loans in connection with which Borrower has or may incur Hedging Obligations with the Bank shall be of the same duration as the relevant periods set under the applicable Hedging Contracts;
 
(d)           if such LIBOR Interest Period would otherwise end on a day which is not a Business Day, such LIBOR Interest Period shall end on the next following Business Day unless such day falls in the next calendar month, in which case such LIBOR Interest Period shall end on the first preceding Business Day; and
 
(e)           no LIBOR Interest Period may end later than the Maturity Date.
 
1.1.29.   Late Charge ” has the meaning set forth in Section 2.4.3 hereof.
 
1.1.30.   Letter(s) of Credit ” means the letter(s) of credit issued by Bank on account of Borrower, as account party in favor of a beneficiary.
 
1.1.31.   LIBOR Rate ” means, relative to any LIBOR Interest Period, the offered rate for deposits of U.S. Dollars in an amount approximately equal to the amount of the requested LIBOR Rate Loan for a term coextensive with the designated LIBOR Interest Period which the British Bankers’ Association fixes as its LIBOR rate as of 11:00 a.m. London time on the day that is two London Banking Days prior to the beginning of such LIBOR Interest Period.  If such day is not a London Banking Day, the LIBOR Rate shall be determined on the next preceding day which is a London Banking Day.  If for any reason the Bank cannot determine such offered rate by the British Bankers’ Association, the Bank may, in its discretion, select a replacement index based on the arithmetic mean of the quotations, if any, of the interbank offered rate by first class banks in London or New York for deposits in comparable amounts and maturities.
 
1.1.32.   LIBOR Rate Loan ” means any loan or advance the rate of interest applicable to which is based upon the LIBOR Rate.
 
1.1.33.   LIBOR Reserve Percentage ” means, relative to any day of any LIBOR Interest Period, the maximum aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) under any regulations of the Board of Governors of the Federal Reserve System (the “Board”) or other governmental authority having jurisdiction with respect thereto as issued from time to time and then applicable to assets or liabilities consisting of “Eurocurrency Liabilities”, as currently defined in Regulation D of the Board, having a term approximately equal or comparable to such LIBOR Interest Period.
 
1.1.34.    “ Line of Credit” has the meaning set forth in the Background of this Agreement.
 
1.1.35.   Local Authorities ” means individually and collectively the state and local governmental authorities and administrative agencies which govern the commercial or industrial facilities owned or operated by the Borrower.
 
1.1.36.   London Banking Day ” means a day on which dealings in US dollar deposits are transacted in the London interbank market.
 
1.1.37.    “ Material Adverse Effect ” means either singly or in the aggregate, the occurrence of any event, condition, circumstance or proceeding of any Borrower that materially and adversely affects the financial condition or operations of Artesian Resources Corporation.
 
1.1.38.   Note ” shall mean the demand note, dated the date hereof, of the Borrower payable to the order of the Bank, as the same may be amended, renewed, replaced, or supplemented from time to time.
 
1.1.39.   Other Taxes ” has the meaning set forth in Section 2.9.2 hereof.
 
1.1.40.   PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.
 
1.1.41.   Person ” means an individual, corporation, trust, limited partnership, general partnership, limited liability company or unincorporated association and any government agency, department or political subdivision thereof.
 
1.1.42.   Plan ” means any pension benefit or welfare benefit plan as defined in sections 3(1), (2) or (3) of ERISA maintained or sponsored by, contributed to, or covering employees of, Borrower or any ERISA Affiliate.
 
1.1.43.   Prime Rate ” means the annual interest rate publicly announced by Bank from time to time as its prime rate.  The Prime Rate is determined from time to time by Bank as a means of pricing some loans to its borrowers.  The Prime Rate is not tied to any external rate of interest or index, and does not necessarily reflect the lowest rate of interest actually charged by Bank to any particular class or category of customers.  If and when the Prime Rate changes, the rate of interest with respect to any amounts hereunder to which the Prime Rate applies will change automatically without notice to Borrower, effective on the date of any such change.
 
1.1.44.   Prime Rate Loan ” means any loan for the period(s) when the rate of interest applicable to such Loan is calculated by reference to the Prime Rate.
 
1.1.45.    “ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations, as amended from time to time, and any successor thereto.
 
1.1.46.   Release ” means any spill, leak, emission, discharge, release or the pumping, pouring, emptying, disposing, injecting, escaping, leaching or dumping of a Hazardous Substance.
 
1.1.47.   Taxes ” has the meaning set forth in Section 2.9.1 hereof.
 
1.1.48.   Termination Date” means the earlier of (i) January ___, 2011 or (ii) on DEMAND .
 
Section 1.2.   Rules of Construction, Interpretation.
 
1.2.1.   GAAP .  Except as otherwise provided herein, financial and accounting terms used in the foregoing definitions or elsewhere in this Agreement, shall be defined in accordance with GAAP.  Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement.
 
1.2.2.   Directly or Indirectly .  Where any provision in this Agreement refers to action to be taken by any Person, or that such person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person.
 
1.2.3.   Plural/Singular.   Except as otherwise provided herein, capitalized terms used in the foregoing definitions or elsewhere in this Agreement that are defined in the singular may also be used in the plural and any such terms which are defined in the plural may also be used in the singular.
 
1.2.4.   DEMAND .  BORROWER UNDERSTANDS AND ACKNOWLEDGES THAT THE LINE OF CREDIT IS A PAYMENT ON DEMAND LOAN FACILITY.  BORROWER UNDERSTANDS AND ACKNOWLEDGES THAT BANK MAY DEMAND PAYMENT HEREUNDER AT ANY TIME AND WITHOUT ANY REASON.  NOTHING CONTAINED IN THIS NOR ANY OTHER CREDIT DOCUMENT SHALL BE CONSTRUED TO PREVENT BANK FROM MAKING DEMAND FOR PAYMENT HEREUNDER AT ANY TIME THAT BANK, IN THE EXERCISE OF ITS SOLE DISCRETION, DEEMS NECESSARY OR DESIRABLE; AND IN THE EVENT OF ANY SUCH DEMAND, (i) BANK SHALL HAVE NO FURTHER OBLIGATION TO MAKE ADVANCES OR TO EXTEND CREDIT AND (ii) THE ENTIRE UNPAID PRINCIPAL BALANCE HEREUNDER AND ALL ACCRUED INTEREST AND ALL OTHER OBLIGATIONS HEREUNDER SHALL BECOME DUE AND PAYABLE IMMEDIATELY UPON THE MAKING OF SUCH DEMAND.
 
ARTICLE 2
 
CREDIT FACILITY
 
Section 2.1.   The Facility .  From time to time prior to the Termination Date, subject to the provisions below, the Bank shall make Advances to Borrower, which Borrower shall pay and may reborrow, so long as the aggregate amount of Advances outstanding at any one time shall not exceed the Available Amount.
 
Section 2.2.   Note .  The indebtedness of the Borrower to the Bank will be evidenced by the Note.  The original principal amount of the Note will be the Available Amount; provided , however , that notwithstanding the face amount of  the Note, Borrower’s liability under the Note shall be limited at all times to its actual indebtedness, principal, interest and fees, then outstanding hereunder.
 
Section 2.3.   Use of Proceeds .  Funds advanced under the Line of Credit shall be used solely for (i) short-term working capital, (ii) investment in facilities or equipment, or (iii) Letters of Credit.
 
Section 2.4.   Repayment, Prepayments and Interest.
 
2.4.1.   The aggregate principal balance outstanding on the Termination Date under the Note shall be due and payable on the Termination Date.  Except as set forth in Section 2.4.7 hereof, all Advances shall be either LIBOR Rate Loans or Daily LIBOR Rate Loans, as selected by Borrower.  All Advances to which the “sweep” product offered by the Bank will be applied, shall be Daily LIBOR Rate Loans.
 
2.4.2.   Continuations.  All LIBOR Rate Loans shall mature and become payable in full on the last day of the LIBOR Interest Period relating to such LIBOR Rate Loan.  Upon maturity, a LIBOR Rate Loan shall be continued for an additional LIBOR Interest Period.
 
2.4.3.   Interest Provisions.   Interest on the outstanding principal amount of each loan, when classified as a: (i) LIBOR Rate Loan, shall accrue during each LIBOR Interest Period at a rate per annum equal to the sum of the Adjusted LIBOR Rate for such LIBOR Interest Period plus the Applicable Margin, and be due and payable on each Interest Payment Date and on the Termination Date, (ii) Daily LIBOR Rate Loan, shall accrue daily at a rate per annum equal to the sum of the Daily LIBOR Rate plus the Applicable Margin, and be due and payable on each Interest Payment Date and on the Termination Date and (iii) Prime Rate Loan, shall accrue at a rate per annum equal to the sum of the Prime Rate and be due and payable on each Interest Payment Date and on the Termination Date.
 
2.4.4.   Voluntary Prepayment of LIBOR Rate Loans.  LIBOR Rate Loans and Daily LIBOR Rate Loans may be prepaid upon the terms and conditions set forth herein.  For LIBOR Rate Loans and Daily LIBOR Rate Loans in connection with which the Borrower has or may incur Hedging Obligations, additional obligations may be associated with prepayment, in accordance with the terms and conditions of the applicable Hedging Contracts.   The Borrower shall give the Bank, no later than 10:00 a.m., New York City time, at least four (4) Business Days notice of any proposed prepayment of any LIBOR Rate Loans and Daily LIBOR Rate Loans, specifying the proposed date of payment of such LIBOR Rate Loans and Daily LIBOR Rate Loans, and the principal amount to be paid.  Each partial prepayment of the principal amount of LIBOR Rate Loans and Daily LIBOR Rate Loans shall be in an integral multiple of $10,000 and accompanied by the payment of all charges outstanding on such LIBOR Rate Loans (including the LIBOR Breakage Fee) and Daily LIBOR Rate Loans and of all accrued interest on the principal repaid to the date of payment.
 
2.4.5.   LIBOR Breakage Fees.  Upon: (i) any default by Borrower in making any borrowing of or continuation of any LIBOR Rate Loan following Borrower’s delivery of a borrowing request or continuation notice hereunder or under the Agreement or (ii) any prepayment of a LIBOR Rate Loan on any day that is not the last day of the relevant LIBOR Interest Period (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise), the Borrower shall pay an amount (“ LIBOR Breakage Fee ”), as calculated by the Bank, equal to the amount of any losses, expenses and liabilities (including without limitation any loss of margin and anticipated profits) that Bank may sustain as a result of such default or payment.  The Borrower understands, agrees and acknowledges that: (i) the Bank does not have any obligation to purchase, sell and/or match funds in connection with the use of the LIBOR Rate as a basis for calculating the rate of interest on a LIBOR Rate Loan, (ii) the LIBOR Rate may be used merely as a reference in determining such rate, and (iii) the Borrower has accepted the LIBOR Rate as a reasonable and fair basis for calculating the LIBOR Breakage Fee and other funding losses incurred by the Bank.  Borrower further agrees to pay the LIBOR Breakage Fee and other funding losses, if any, whether or not the Bank elects to purchase, sell and/or match funds.
 
2.4.6.   Late Charge and Default Rate.  Notwithstanding the foregoing, if the Borrower fails to make any payment of principal, interest or other amount coming due pursuant to the provisions of the Note within ten (10) calendar days of the date due and payable, the Borrower also shall pay to the Bank a late charge equal to five percent (5.0%) of the amount of such payment (the “Late Charge ”).  Such ten (10) day period shall not be construed in any way to extend the due date of any such payment.  Upon maturity, whether by acceleration, demand or otherwise, and at the Bank’s option upon the occurrence of any Event of Default and during the continuance thereof, the Note shall bear interest at a rate that shall be three percentage points (3.0%) in excess of the interest rate in effect from time to time under the Note but not more than the maximum rate allowed by law (the Default Rate ”).  The Default Rate shall continue to apply whether or not judgment shall be entered on the Note.  Both the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Bank’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under the other Credit Documents or under applicable law, and any fees and expenses of any agents or attorneys which the Bank may employ.  In addition, the Default Rate reflects the increased credit risk to the Bank of carrying a loan that is in default.  The Borrower agrees that the Late Charge and Default Rate are reasonable forecasts of just compensation for anticipated and actual harm incurred by the Bank, and that the actual harm incurred by the Bank cannot be estimated with certainty and without difficulty.
 
2.4.7.   Miscellaneous LIBOR Rate Loan Terms .
 
(a)   LIBOR Rate Lending Unlawful.  If the Bank shall determine (which determination shall, upon notice thereof to the Borrower be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law, rule, regulation or guideline, (whether or not having the force of law) makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for the Bank to make, continue or maintain any LIBOR Rate Loan as a LIBOR Rate Loan and/or a Daily LIBOR Rate Loan as a Daily LIBOR Rate Loan, the obligations of the Bank to make, continue or maintain any such LIBOR Rate Loans and/or Daily LIBOR Rate Loans shall, upon such determination, forthwith be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist, and all LIBOR Rate Loans and/or Daily LIBOR Rate Loans of such type shall automatically convert into Prime Rate Loans at the end of the then current LIBOR Interest Periods (or in the case of Daily LIBOR Rate Loans, the same day) with respect thereto or sooner, if required by such law or assertion.
 
(b)   Unavailability of LIBOR Rate.  In the event that Borrower shall have requested a LIBOR Rate Loan and/or a Daily LIBOR Rate Loan in accordance with the Note and this Agreement and the Bank, in its sole discretion, shall have determined that U.S. dollar deposits in the relevant amount and for the relevant LIBOR Interest Period are not available to the Bank in the London interbank market; or by reason of circumstances affecting the Bank in the London interbank market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate and/or the Daily LIBOR Rate applicable to the relevant LIBOR Interest Period; or the LIBOR Rate or the Daily LIBOR Rate no longer adequately and fairly reflects the Bank’s cost of funding loans; upon notice from the Bank to the Borrower, the obligations of the Bank hereunder and under this Agreement to make or continue any loans as, or to convert any loans into, LIBOR Rate Loans and/or Daily LIBOR Rate Loans of such duration shall forthwith be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist.
 
(c)   Increased Costs.   If, on or after the date hereof, the adoption of any applicable law, rule or regulation or guideline (whether or not having the force of law), or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (a) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System of the United States) against assets of, deposits with or for the account of, or credit extended by, the Bank or shall impose on the Bank or on the London interbank market any other condition affecting its LIBOR Rate Loans, Daily LIBOR Rate Loans or its obligation to make LIBOR Rate Loans or Daily LIBOR Rate Loans; or (b) shall impose on the Bank any other condition affecting its LIBOR Rate Loans, Daily LIBOR Rate Loans or its obligation to make LIBOR Rate Loans or Daily LIBOR Rate Loans, and the result of any of the foregoing is to increase the cost to the Bank of making or maintaining any LIBOR Rate Loan or Daily LIBOR Rate Loans, or to reduce the amount of any sum received or receivable by the Bank under this agreement with respect thereto, by an amount deemed by the Bank to be material, then, within fifteen (15) days after demand by the Bank, the Borrower shall pay to the Bank such additional amount or amounts as will compensate the Bank for such increased cost or reduction.
 
(d)   Increased Capital Costs.  If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by the Bank, or person controlling the Bank, and the Bank determines (in its sole and absolute discretion) that the rate of return on its or such controlling person’s capital as a consequence of its commitments or the loans made by the Bank is reduced to a level below that which the Bank or such controlling person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by the Bank to the Borrower, the Borrower shall immediately pay directly to the Bank additional amounts sufficient to compensate the Bank or such controlling person for such reduction in rate of return.  A statement of the Bank as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower.  In determining such amount, the Bank may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable.
 
(e)   Taxes.  All payments by the Borrower of principal of, and interest on, the LIBOR Rate Loan and the Daily LIBOR Rate Loan and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by the Bank’s net income or receipts (such non-excluded items being called “ Taxes ”).  In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will:
 
(i)   pay directly to the relevant authority the full amount required to be so withheld or deducted;
 
(ii)   promptly forward to the Bank an official receipt or other documentation satisfactory to the Bank evidencing such payment to such authority; and
 
(iii)   pay to the Bank such additional amount or amounts as is necessary to ensure that the net amount actually received by the Bank will equal the full amount the Bank would have received had no such withholding or deduction been required.
 
Moreover, if any Taxes are directly asserted against the Bank with respect to any payment received by the Bank hereunder, the Bank may pay such Taxes and the Borrower will promptly pay such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by the Bank after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount the Bank would have received had not such Taxes been asserted.
 
If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Bank the required receipts or other required documentary evidence, the Borrower shall indemnify the Bank for any incremental Taxes, interest or penalties that may become payable by the Bank as a result of any such failure.
 
Section 2.5.   Advances .
 
2.5.1.   Except as set forth in the next sentence, Borrower shall give the Bank prior written notice not later than three o’clock (3:00) p.m. (Eastern Standard Time), on the date of an Advance.  Any such notice shall be in the form of the Borrowing Notice, shall be certified by the chief financial officer, the president or the executive vice president of the Borrower, and shall set forth the aggregate amount of the requested Advance; provided, however, so long as Borrower uses the “sweep” product offered by the Bank, no Borrowing Notice shall be required for any Advance except the initial Advance.
 
2.5.2.   Upon receiving a request for an Advance in accordance with subsection 2.5.1 above, the Bank shall promptly make the requested Advance available to Borrower (i) by crediting such amount to Borrower’s deposit account with the Bank on the day of the requested Advance, or (ii) otherwise in accordance with such instructions as have been provided by Borrower to the Bank with sufficient notice to permit the Bank, in accordance with standard Banking practices, to timely comply with such instructions.
 
2.5.3.   Each request for an Advance pursuant to this Section 2.5 shall be irrevocable and binding on the Borrower.  With respect to any Advance, Borrower shall indemnify the Bank against any loss, cost or expense incurred by the Bank as a result of any failure to fulfill on or before the date specified in such request for an Advance the applicable conditions set forth in Article 5, including, without limitation, any loss (including loss of margin and anticipated profits), cost or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Bank to fund the Advance when such Advance, as a result of such failure, is not made on such date, as calculated by the Bank.
 
Section 2.6.   Letter of Credit .  In addition to making Advances to the Borrower as provided in Section 2.5 hereof, the Bank may issue Letter(s) of Credit.  All amounts drawn or that could be drawn under the Letter of Credit shall be deemed to be an Advance under the Line of Credit and evidenced by the Note and the Available Amount shall be reduced by the aggregate amounts drawn and available to be drawn under the Letter(s) of Credit.  Any amounts disbursed by Bank pursuant to any Letter of Credit shall automatically be deemed an Advance to the Borrower and shall bear interest from the date of advance at the rate set forth in this Agreement.  The Letter(s) of Credit shall be governed by the terms of this Agreement and by one or more reimbursement or application agreements, in form and content satisfactory to the Bank, executed by the Borrower in favor of the Bank.  Each Letter of Credit will be issued in the Bank’s sole discretion and in form acceptable to the Bank.  The Borrower shall pay to Bank all transactional and customary fees required by Bank in connection with the issuance of the Letter of Credit.  Bank shall have no obligation to issue Letter(s) of Credit which would result in the Bank’s obligation thereunder to exceed $500,000.
 
Section 2.7.   Prepayment .  Borrower may prepay the outstanding principal balance under the Line of Credit at any time without premium or penalty.  Prepayments of all or any portion of the Line of Credit prior to the Termination Date shall not reduce the Line of Credit amount and may be reborrowed.
 
Section 2.8.   Payments; Application .  All payments of principal, interest, fees and other amounts due hereunder, including any prepayments thereof, shall be made by Borrower to the Bank in immediately available funds before twelve o’clock (12:00) noon on any Business Day at the office of the Bank set forth in Section 8.9 hereof or Bank’s office that is located at 919 N. Market Street, Wilmington, Delaware 19801, or to such other office or location as the Bank from time to time so notifies Borrower.  Borrower hereby authorizes the Bank to charge any account maintained by Borrower with the Bank from time to time for all payments of principal, interest, fees and costs when due hereunder.  Any and all payments on account of the Line of Credit will be applied to accrued and unpaid interest, outstanding principal and other sums due hereunder or under the Credit Documents, in such order as Bank, in its discretion, elects.  If Borrower makes a payment or payments and such payment or payments, or any part thereof, are subsequently invalidated, declared to be fraudulent or preferential, set aside or are required to be repaid to a trustee, receiver, or any other person under any bankruptcy act, state, provincial or federal law, common law or equitable cause, then to the extent of such payment or payments, the obligations or part thereof hereunder intended to be satisfied shall be revived and continued in full force and effect as if said payment or payments had not been made.
 
ARTICLE 3
 
REPRESENTATIONS AND WARRANTIES
 
Borrower represents and warrants as follows:
 
Section 3.1.   Organization; Good Standing; Qualification .  Borrower is a corporation duly organized and validly existing under the laws of the State of its organization.  Borrower has full power and authority to execute, deliver and comply with the Credit Documents and to carry on its business as it is now being conducted.  Borrower is duly licensed or qualified as a corporation in any jurisdiction where the failure to be so qualified would have a Material Adverse Effect.
 
Section 3.2.   Licenses .  Borrower and its respective employees and agents have all licenses, registrations, approvals and other authority as may be necessary to enable them to own and operate its business and perform all services and business that they have agreed to perform in any state, municipality or other jurisdiction, and the same are valid, binding and enforceable without any adverse limitations thereon, except where the failure to have any or all such licenses, registrations, approvals or other authority would not have a Material Adverse Effect.
 
Section 3.3.   Accuracy of Information; Full Disclosure.
 
3.3.1.   All financial information furnished to Bank concerning the Borrower and other entities in accordance with the terms of the Agreement, have been prepared in accordance with GAAP and fairly present the financial condition of Borrower and such other entities as of the dates and for the periods covered and there has been no material adverse change in the financial condition or business of Borrower or such other entities considered as a whole from the date of such statements to the date hereof; and
 
3.3.2.   All financial statements and other documents furnished by Borrower to the Bank in connection with this Agreement do not and will not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading.  Borrower has disclosed to the Bank in writing any and all facts which materially and adversely affect the business, properties, operations or condition, financial or otherwise, of Borrower and its Affiliates considered as a whole, or Borrower’s ability to perform its obligations under this Agreement and the other Credit Documents.
 
Section 3.4.   Pending Litigation or Proceedings .  There are no judgments outstanding or actions, suits or proceedings pending or, to Borrower’s knowledge, threatened against or affecting Borrower or its Affiliates, at law or in equity or before or by any federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign that would have a Material Adverse Effect.
 
Section 3.5.   Due Authorization; No Legal Restrictions .  Borrower has the power and authority under the laws of the state of its organization, and under its organizational documents, to enter into and perform this Agreement, the Note, the other Credit Documents and other agreements and documents required hereunder and to which it is a party.  The execution and delivery by Borrower of the Credit Documents to which it is a party, the consummation of the transactions contemplated by the Credit Documents and the fulfillment and compliance with the respective terms, conditions and provisions of the Credit Documents: (i) have been duly authorized by all requisite action of Borrower, (ii) will not conflict with or result in a breach of, or constitute a default (or might, upon the passage of time or the giving of notice or both, constitute a default) under, any of the terms, conditions or provisions of any applicable statute, law, rule, regulation or ordinance or Borrower’s certificate of incorporation or bylaws, or any indenture, mortgage, loan or credit agreement or instrument to which Borrower  is a party or by which it may be bound or affected, or any judgment or order of any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and (iii) will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of Borrower under the terms or provisions of any such agreement or instrument.
 
Section 3.6.   Enforceability .  The Credit Documents have been duly executed by Borrower and delivered to Bank and constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their terms.
 
Section 3.7.   Compliance with Laws, Agreements, Other Obligations, Orders or Governmental Regulations .  Borrower is not in default of its certificate of incorporation or bylaws.  Borrower has not been declared in default of the performance or observance of any of its obligations, covenants or conditions contained in any indenture or other agreement creating, evidencing or securing any Indebtedness or pursuant to which any such Indebtedness is issued and Borrower is not in violation of or in default under any other agreement or instrument or any judgment, decree, order, statute, rule or governmental regulation, applicable to it or by which its properties may be bound or affected.
 
Section 3.8.   Governmental Consents, No Violations of Laws or Agreements .  No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of Borrower is required in connection with the execution, delivery or performance by Borrower of the Credit Documents or the consummation of the transactions contemplated thereby.
 
Section 3.9.   Taxes .  Borrower has filed all tax returns which it is required to file, if any, and has paid, or made provision for the payment of, all taxes which have or may have become due pursuant to such returns or pursuant to any assessment received by it.  Such tax returns are complete and accurate in all respects.  Borrower has no knowledge of any proposed additional assessment or basis for any assessment of additional taxes.
 
Section 3.10.   Current Compliance .  Borrower is currently in compliance with all of the terms and conditions of the Credit Documents.
 
Section 3.11.   Leases and Contracts .  Borrower has complied with the provisions of all leases, contracts or commitments of any kind (such as employment agreements, collective bargaining agreements, powers of attorney, distribution agreements, patent license agreements, contracts for future purchase or delivery of goods or rendering of services, bonus, pension and retirement plans or accrued vacation pay, insurance and welfare agreements) to which it is a party and is not in default thereunder, except to the extent such noncompliance is not reasonably likely to have a Material Adverse Effect.  To Borrower’s knowledge, no other party is in default under any such leases, contracts or other commitments and no event has occurred which, but for the giving of notice or the passage of time or both, would constitute an event of default thereunder.
 
Section 3.12.   Intellectual Property .  Borrower owns or possesses the irrevocable right to use all of the patents, trademarks, service marks, trade names, copyrights, licenses, franchises and permits and rights with respect to the foregoing necessary to own and operate its respective properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others.
 
Section 3.13.   Business Interruptions .  Within three (3) years prior to the date hereof, neither the business nor operations of Borrower or its Affiliates have been materially and adversely affected in any way by any casualty, strike, lockout, combination of workers, order of the United States of America or any state or local government, or any political subdivision or agency thereof, directed against Borrower.  There are no pending or threatened labor disputes, strikes, lockouts or similar occurrences or grievances against the business being operated by Borrower or its Affiliates.
 
Section 3.14.   Accuracy of Representations and Warranties .  No representation or warranty by Borrower contained herein or in any certificate or other document furnished by Borrower pursuant hereto or in connection herewith fails to contain any statement of material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made.  There is no fact which Borrower knows or should know and has not disclosed to Bank, which does or may materially and adversely affect Borrower or any of Borrower’s operations.
 
Section 3.15.   ERISA .  To Borrower’s knowledge, Borrower is in compliance in all material respects with all applicable provisions of ERISA and the regulations promulgated thereunder:
 
3.15.1.   Borrower does not maintain or contribute to nor has Borrower maintained or contributed to any multiemployer plan (as defined in section 4001 of ERISA) under which Borrower or any ERISA Affiliate could have any withdrawal liability;
 
3.15.2.   Borrower does not sponsor or maintain any Plan under which there is an accumulated funding deficiency within the meaning of section 412 of the Code, whether or not waived;
 
3.15.3.   The aggregate liability for accrued benefits and other ancillary benefits under each Plan that is or will be sponsored or maintained by Borrower (determined on the basis of the actuarial assumptions prescribed for valuing benefits under terminating single-employer defined benefit plans under Title IV of ERISA) does not exceed the aggregate fair market value of the assets under each such defined benefit pension Plan;
 
3.15.4.   The aggregate liability of Borrower arising out of or relating to a failure of any Plan to comply with the provisions of ERISA or the Code, will not have a Material Adverse Effect; and
 
3.15.5.   Except as set forth on Schedule 3.15.5 hereto, there does not exist any unfunded liability (determined on the basis of actuarial assumptions utilized by the actuary for the plan in preparing the most recent Annual Report) of Borrower under any plan, program or arrangement providing post-retirement life or health benefits.
 
To Borrower’s knowledge, the foregoing is true and correct with respect to any ERISA Affiliate.
 
Section 3.16.   No Extension of Credit for Securities .  Borrower is not now, nor at any time has it been engaged principally, or as one of its important activities, in the business of extending or arranging for the extension of credit, for the purpose of purchasing or carrying any “margin stock” or “margin securities” within the meaning of Regulations U, G, T or X of the Board of Governors of the Federal Reserve System; nor will the proceeds of the Line of Credit be used by Borrower directly or indirectly, for such purposes.
 
Section 3.17.   Hazardous Wastes, Substances and Petroleum Products.
 
3.17.1.   Borrower (i) has received all permits and filed all notifications required by the Environmental Control Statutes to carry on its respective business(es); and (ii) is in material compliance with all Environmental Control Statutes.
 
3.17.2.   Borrower has given any written or oral notice required to the appropriate United States federal, state or local agency with regard to any actual or imminently threatened Release of Hazardous Substances on properties owned, leased or operated by Borrower or used in connection with the conduct of its business and operations.
 
3.17.3.   Borrower has not received notice that it is potentially responsible for clean-up, remediation, costs of clean-up or remediation, fines or penalties with respect to any actual or imminently threatened Release of Hazardous Substances pursuant to any Environmental Control Statute.
 
Section 3.18.   Foreign Assets Control Regulations .  Neither the borrowing by Borrower nor its use of the proceeds thereof will violate foreign assets, trade or similar control regulations.
 
Section 3.19.   Investment Company Act .  Borrower is not directly or indirectly controlled by or acting on behalf of any person which is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
ARTICLE 4
 
CONDITIONS
 
Section 4.1.   First Advance .  The obligation of the Bank to make the first Advance shall be subject to the Bank’s receipt of the following documents, each in form and substance satisfactory to the Bank:
 
4.1.1.   This Agreement .  This Agreement duly executed by Borrower.
 
4.1.2.   Promissory Note .  The Note duly executed by Borrower.
 
4.1.3.   Intentionally Omitted .
 
4.1.4.   Authorization Documents .  All proceedings taken by Borrower in connection with the transactions contemplated by this Agreement and all documents incident to such transactions shall be satisfactory in form and substance to Bank and Bank’s counsel, and Bank shall have received all documents or other evidence which it reasonably may request in connection with such proceedings and transactions.  Borrower shall have delivered to Bank one or more certificates, in form and substance satisfactory to Bank, dated the date hereof and signed by an authorized officer, certifying; (i) true copies of the certificate of incorporation and bylaws; (ii) true copies of all actions taken relative to the Credit Documents; and (iii) the names, true signatures and incumbency of the officers authorized to execute and deliver this Agreement and the other Credit Documents.  Bank may conclusively rely on such certificate(s) unless and until a later certificate revising the prior certificate has been received by Bank.
 
4.1.5.   Certificate of Good Standing .  A certificate of good standing or subsistence, as applicable issued by the Secretary of State of the state of organization of Borrower.
 
4.1.6.   Intentionally Omitted .
 
4.1.7.   Borrowing Notice .  A completed Borrowing Notice required under Subsection 2.5.1 hereof and any other documents or information reasonably required by the Bank in connection therewith.
 
4.1.8.   Other Documents .  Such additional documents as the Bank reasonably may request.
 
Section 4.2.   Subsequent Advances .  The obligation of the Bank to make additional Advances shall be subject to the Bank’s receipt of a completed Borrowing Notice, if required under Section 2.5.1 hereof.
 
ARTICLE 5
 
GENERAL COVENANTS
 
Borrower covenants and agrees that so long as the Line of Credit or any Indebtedness of Borrower to the Bank is outstanding, Borrower will perform and comply with the following covenants:
 
Section 5.1.   Payment of Principal, Interest and Other Amounts Due .  Borrower will pay when due all Indebtedness owed to the Bank and all other amounts payable by it hereunder.
 
Section 5.2.   Merger; Consolidation; Business Acquisitions; Affiliates .  Borrower shall (i) not merge into or consolidate with any Person or permit any Person to merge into it with a value in excess of $10,000,000 without the Bank’s prior written consent and (ii) provide Bank with prior written notice of all of all other mergers, consolidations and business acquisitions.
 
Section 5.3.   Taxes; Claims for Labor and Materials .  Borrower will pay or cause to be paid when due all taxes, assessments, governmental charges or levies imposed upon it or its income, profits, payroll or any property belonging to it, including without limitation all withholding taxes, and all claims for labor, materials and supplies which, if unpaid, might become a lien or charge upon any of its properties or assets; provided that Borrower shall not be required to pay any such tax (other than real estate taxes which must be paid regardless of challenge), assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings promptly initiated and diligently conducted by it, and neither execution nor foreclosure sale or similar proceedings shall have been commenced in respect thereof (or such proceedings shall have been stayed pending the disposition of such contest of validity), and it shall have set aside on its books adequate reserves with respect thereto.
 
Section 5.4.   Existence; Approvals; Qualification; Business Operations; Compliance with Laws; Notification .
 
5.4.1.   Borrower (i) will obtain, preserve and keep in full force and effect (a) its separate existence and (b) all rights, licenses, registrations and franchises necessary to the proper conduct of its business or affairs, the absence of which could result in a Material Adverse Effect; (ii) will qualify and remain qualified as a foreign corporation in each jurisdiction in which the character or location of the properties owned by it or the business transacted by it requires such qualification; (iii) will continue to engage in its present business substantially as presently conducted; and (iv) will comply with the requirements of all applicable laws and all rules, regulations (including environmental regulations) and orders of regulatory agencies and authorities having jurisdiction over it.
 
5.4.2.   With respect to any Environmental Control Statute, Borrower will immediately notify Bank when, in connection with the conduct of the Borrower’s business or operations, any Person (including, without limitation, any United States federal, state or local agency) provides oral or written notification to Borrower, or Borrower otherwise becomes aware, of a condition with regard to an actual or imminently threatened Release of Hazardous Substances which could reasonably be expected to have a Material Adverse Effect; and notify Bank in detail immediately upon the receipt by Borrower or any Affiliate of an assertion of liability under the Environmental Control Statutes, of any actual or alleged failure to comply with, failure to perform, breach, violation or default under any such statutes or regulations which could reasonably be expected to have a Material Adverse Effect or of the occurrence or existence of any facts, events or circumstances which with the passage of time, the giving of notice, or both, could create such a failure to breach, violation or default.
 
Section 5.5.   Maintenance of Properties, Intellectual Property .
 
5.5.1.   Borrower will maintain, preserve, protect and keep or cause to be maintained, preserved, protected and kept its real and personal property used or useful in the conduct of its business in good working order and condition, reasonable wear and tear excepted, and will pay and discharge when due the cost of repairs to and maintenance of the same.
 
5.5.2.   With respect to any and all trademarks, registrations, copyrights, patents, patent rights and applications for any of the foregoing which are material to Borrower’s business, Borrower shall maintain and protect the same and shall take and assert any and all remedies available to Borrower to prevent any other Person from infringing upon or claiming any interest in any such trademarks, registrations, copyrights, patents, patent rights or application for any of the foregoing.
 
Section 5.6.   Insurance .
 
5.6.1.   Borrower will carry adequate insurance issued by a financially capable insurer against all such liability and hazards as are usually carried by entities engaged in the same or a similar business similarly situated, and in addition, will carry business interruption insurance in such amounts as may be reasonable.
 
5.6.2.   In the event of any loss that has a Material Adverse Effect in excess of $1,000,000, Borrower will give Bank prompt notice thereof.
 
Section 5.7.   Inspections; Examinations .
 
5.7.1.   Borrower authorizes all federal, state and municipal authorities to furnish to Bank copies of reports or examinations relating to Borrower, whether made by Borrower or otherwise.
 
5.7.2.   The officers of Bank, or such Persons as any of them may designate, may visit and inspect any of the properties of Borrower, examine (either by Bank’s employees or by independent accountants) any assets of Borrower, including the books of account of Borrower, and discuss the affairs, finances and accounts of Borrower with their officers at such times as Bank may reasonably request.
 
Section 5.8.   Default Under Other Indebtedness .  Borrower will not permit any of its Indebtedness to be in default. If any Indebtedness of Borrower is declared or becomes due and payable before its expressed maturity by reason of default, the holder of any such Indebtedness shall have the right (or upon the giving of notice or the expiration of any cure period, or both, shall have the right) to declare such Indebtedness to be so due and payable, Borrower will immediately give Bank written notice of such declaration, acceleration or right of declaration.
 
Section 5.9.   Pension Plans .  Borrower shall (i) keep in full force and effect any and all Plans which are presently in existence or may, from time to time, come into existence under ERISA, unless such Plans can be terminated without material liability to Borrower in connection with such termination (as distinguished from any continuing funding obligation); (ii) make contributions to all of Borrower’s Plans in a timely manner and in a sufficient amount to comply with the requirements of ERISA; (iii) comply with all material requirements of ERISA which relate to such Plans so as to preclude the occurrence of any Reportable Event, Prohibited Transaction or material “accumulated funding deficiency” as such term is defined in ERISA; and (iv) notify Bank immediately upon receipt by Borrower of any notice of the institution of any proceeding or other action which may result in the termination of any Plan, including those administered by an ERISA Affiliate, and deliver to Bank, promptly after the filing or receipt thereof, copies of all reports or notices which Borrower files or receives under ERISA with or from the Internal Revenue Service, the PBGC, or the United States Department of Labor.
 
Section 5.10.   Change in Control, etc . Borrower shall not permit a change-in-control of its ownership interests or make any amendment to its organizational documents that would have a Material Adverse Effect without the prior written consent of Bank; provided, however, that Bank shall not unreasonably withhold its consent.
 
Section 5.11.   Transactions with Affiliates .  Borrower shall not enter into or conduct any transaction with any Affiliate except on terms that would be usual and customary in a similar transaction between Persons not affiliated with each other or except as disclosed to Bank prior thereto and accepted by Bank, except for tax sharing and other management agreements that are customary within holding companies and as required by the Delaware Public Service Commission.  Borrower will not make any loans or extensions of credit to any of its Affiliates (except in the ordinary course of business), shareholders or officers.
 
Section 5.12.   Name or Address Change . Borrower shall not change its name or address except upon thirty (30) days prior written notice to Bank.
 
Section 5.13.   Notices .  Borrower will promptly notify Bank of (i) any action or proceeding brought against Borrower that would have a Material Adverse Effect, (ii) any fact, condition or event which, with the giving of notice or the passage of time or both, could cause a Material Adverse Effect, (iii) the failure of Borrower to observe any of its undertakings under the Credit Documents, or (iv) any material adverse change in the assets, business, operations or financial condition of Borrower.
 
Section 5.14.   Additional Documents and Future Actions .  Borrower will, at its sole reasonable cost, take such actions and provide Bank from time to time with such agreements, financing statements and additional instruments, documents or information as the Bank may in its reasonable discretion deem necessary or advisable to carry out the terms of the Credit Documents.
 
Section 5.15.   Restrictions on Use of Proceeds .  Borrower will not carry or purchase with the proceeds of the Line of Credit any “margin stock” or “margin security” within the meaning of Regulations U, G, T or X of the Board of Governors of the Federal Reserve System.
 
Section 5.16.   Fiscal Year .  Borrower shall not change its fiscal year without providing notice of such change to Bank.
 
Section 5.17.   Accounts .  Borrower shall maintain its primary operating account with Bank, which account shall be opened within sixty (60) days after the date hereof.
 
ARTICLE 6
 
ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS
 
Section 6.1.   Financial Statements .  Borrower will submit to Bank the following information in form and content acceptable to Bank, to the extent such information is not publicly available:
 
6.1.1.   Within 120 days of each fiscal year end of the Borrower, annual consolidated financial statements of Artesian Resources Corporation, audited by an independent certified public accountant acceptable to Bank.
 
6.1.2.   Within 120 days of each fiscal year end of the Borrower, annual, management-prepared consolidating financial statements of Artesian Resources Corporation.
 
6.1.3.   Within 120 days of each fiscal year end of Artesian Resources Corporation, the Form 10K of Artesian Resources Corporation filed with the Securities and Exchange Commission.
 
6.1.4.   Within 60 days after the end of each fiscal quarter of the Borrower, (i) a quarterly financial statement of Artesian Resources Corporation, certified by the chief financial officer of Artesian Resources Corporation and (ii) the Form 10Q of Artesian Resources Corporation  filed with the Securities and Exchange Commission.
 
6.1.5.   Such other information requested by Bank that is necessary for Bank to clarify any information provided to Bank pursuant to Sections 6.1.1 through 6.1.4 above.
 
ARTICLE 7
 
REMEDIES
 
Section 7.1.   Remedies Generally . Upon DEMAND and at any time thereafter that any Indebtedness owed by Borrower to Bank remains outstanding, the Bank may declare the entire unpaid balance, principal, interest and fees, of all Indebtedness of Borrower to the Bank, hereunder or otherwise, to be immediately due and payable.  Upon DEMAND, the Line of Credit shall immediately and automatically terminate and the Bank shall have no further obligation to make any Advances.  In addition, the Bank may increase the interest rate on the Line of Credit to the Default Rate, without notice; and the Bank may enter any premises occupied by Borrower; and/or in addition to any rights granted hereunder or in any documents delivered in connection herewith, the Bank shall have all the rights and remedies granted by any applicable law, all of which shall be cumulative in nature.
 
Section 7.2.   Set-Off .  Without limiting the rights of Bank under applicable law, Bank has and may exercise a right of set-off, a lien against and a security interest in all property of Borrower or its Affiliate now or at any time in Bank’s or any Affiliate of Bank’s possession in any capacity whatsoever, including but not limited to any balance of any deposit, trust or agency account, or any other bank account with Bank or any Affiliate of Bank, as security for all Bank Indebtedness. At any time and from time to time following DEMAND by Bank, Bank may without notice or demand, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank to or for the credit of Borrower against any or all of the Bank Indebtedness and the Borrower’s obligations under the Credit Documents.
 
ARTICLE 8
 
MISCELLANEOUS
 
Section 8.1.   Indemnification and Release Provisions; Costs and Expenses.
 
8.1.1.   Except to the extent of the negligence or wilful misconduct on the part of the specific party indemnified hereunder, Borrower hereby indemnifies and agrees to protect, defend and hold harmless Bank and its directors, officers, officials, agents, employees and counsel and their respective heirs, administrators, executors, successors and assigns, from and against, any and all losses, liabilities (including without limitation settlement costs and amounts, transfer taxes, documentary taxes, or assessments or charges made by any governmental authority), claims, damages, interest, judgments, costs, or expenses, including without limitation reasonable fees and disbursements of counsel, incurred by any of them arising out of or in connection with or by reason of this Agreement, the Line of Credit or any other Credit Document, including without limitation, any and all losses, liabilities, claims, damages, interests, judgments, costs or expenses relating to or arising under any Environmental Control Statute or the application of any such statute to Borrower’s or any Affiliate’s properties or assets.  Borrower hereby releases Bank and its respective directors, officers, agents, employees and counsel from any and all claims for loss, damages, costs or expenses caused or alleged to be caused by any act or omission on the part of any of them, except to the extent caused by the gross negligence or wilful misconduct of any party to be released hereunder.  All obligations provided for in this Section 8.1 shall survive any termination of this Agreement or the Line of Credit and the repayment of the Line of Credit.
 
Section 8.2.   Certain Fees, Costs, Expenses and Expenditures .  Borrower agrees to pay on demand all costs and expenses of Bank, including without limitation:
 
8.2.1.   all reasonable costs and expenses to third parties in connection with the preparation, review, negotiation, execution and delivery of the Credit Documents, and the other documents to be delivered in connection therewith, or any amendments, extensions and increases to any of the foregoing (including, without limitation, attorney’s fees and expenses, and the cost of appraisals);
 
8.2.2.   all losses, reasonable costs and expenses in connection with the enforcement, protection and preservation of the Bank’s rights or remedies under the Credit Documents, or any other agreement relating to any Bank Indebtedness, or in connection with legal advice relating to the rights or responsibilities of Bank (including without limitation court costs, reasonable attorneys’ fees and reasonable expenses of accountants and appraisers); and
 
In the event Borrower shall fail to pay taxes, insurance, assessments, costs or expenses which it is required to pay hereunder, or breaches any obligations under the Credit Documents, Bank in its discretion, upon ten (10) days prior notice to Borrower, may make expenditures for such purposes and the amount so expended (including attorney’s fees and expenses, filing fees and other charges) shall be payable by Borrower on demand and shall constitute part of the Bank Indebtedness.
 
With respect to any amount required to be paid by Borrower under this Section 8.2, in the event Borrower fails to pay such amount within five (5) days of demand, Borrower shall also pay to Bank interest thereon at the Default Rate.  Borrower’s obligations under this Section 8.2 shall survive termination of this Agreement.
 
Section 8.3.   Participations and Assignments .  Borrower hereby acknowledges and agrees that the Bank may at any time:
 
8.3.1.   at Bank’s sole cost and expense, grant participations in all or any portion of the Line of Credit or the Note or of its right, title and interest therein or in or to this Agreement to any other lending office or to any other bank, lending institution or other entity; and
 
8.3.2.   assign all or any portion of its rights under the Line of Credit; and
 
8.3.3.   pledge or assign its interest in the Line of Credit, the Note or any participation interest, including collateral therefor, to any Federal Reserve Bank in accordance with applicable law.
 
Section 8.4.   Binding and Governing Law .  This Agreement and all documents executed hereunder shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed as to their validity, interpretation and effect by the laws of the State of Delaware.
 
Section 8.5.   Survival .  All agreements, representations, warranties and covenants of Borrower contained herein or in any documentation required hereunder shall survive the execution of this Agreement and the making of the Line of Credit hereunder and except for Section 10.1, which provides otherwise, will continue in full force and effect as long as any indebtedness or other obligation of Borrower to the Bank remains outstanding.
 
Section 8.6.   No Waiver; Delay .  If the Bank shall waive any power, right or remedy arising hereunder or under any applicable law, such waiver shall not be deemed to be a waiver or the later occurrence or recurrence of any of said events.  No delay by the Bank in the exercise of any power, right or remedy shall, under any circumstances, constitute or be deemed to be a waiver, express or implied, of the same and no course of dealing between the parties hereto shall constitute a waiver of the Bank’s powers, rights or remedies.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
 
Section 8.7.   Modification; Waiver .  Except as otherwise provided in this Agreement, no modification or amendment hereof, or waiver or consent hereunder, shall be effective unless made in a writing signed by appropriate officers of the parties hereto.  Whenever any consent, approval or waiver is requested hereunder, the determination to grant such request shall be in the Bank’s sole discretion (unless otherwise indicated).
 
Section 8.8.   Headings .  The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.
 
Section 8.9.   Notices .  Any notice, request, consent or other communication made, given or required hereunder or in connection herewith shall be deemed satisfactorily given if in writing (including facsimile transmissions) and delivered by hand, mail (registered or certified mail) or overnight courier to the parties at their respective addresses or facsimile number set forth below or such other addresses or facsimile numbers as may be given by any party to the others in writing:
 

 
To Borrower:
 
Artesian Resources Corporation
Artesian Water Company, Inc.
Artesian Water Pennsylvania, Inc.
Artesian Water Maryland, Inc.
Artesian Wastewater Management, Inc.
Artesian Wastewater Maryland, Inc.
Artesian Utility Development, Inc.
Artesian Development Corporation
Artesian Consulting Engineers, Inc.
P.O. Box 15004
Wilmington, Delaware
Attention:  David Spacht
Facsimile No.: 302-453-6980
Telephone No.: 302-453-6900

With a copy to:
 
Artesian Water Company, Inc.
P.O. Box 15004
Wilmington, Delaware
 
Attention:  John J. Schreppler, Esquire
Facsimile No.: 302-453-6980
Telephone No.: 302-453-6900

To Bank:
 
Citizens Bank of Pennsylvania
919 North Market Street
Suite 800
Wilmington, Delaware 19801
Attention:  Edward Winslow
Facsimile No.:  302-425-7336
Telephone No.:  302-425-7363

With a copy to:
 
Pepper Hamilton LLP
Hercules Plaza, Suite 5100
P.O. Box 1709
Wilmington, Delaware  19801
Attention:  Joy A. Barrist, Esquire
Facsimile No.:  302-421-8390
Telephone No.:  302-777-6574
 
Section 8.10.   Payment on Non-Business Days .  Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, provided however that such extension of time shall be included in the computation of interest due in conjunction with such payment or other fees due hereunder, as the case may be.
 
Section 8.11.   Time of Day .  Except as expressly provided otherwise herein, all time of day restrictions imposed herein shall be calculated using the local time in Wilmington, Delaware.
 
Section 8.12.   Severability .  If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.
 
Section 8.13.   Counterparts .  This Agreement may be executed in any number of counterparts with the same effect as if all the signatures on such counterparts appeared on one document, and each such counterpart shall be deemed to be an original.
 
Section 8.14.   Consent to Jurisdiction and Service of Process .  Borrower hereby consents to the exclusive jurisdiction of any state or federal court located within the District of Delaware, and irrevocably agree that, subject to the Bank’s election, all actions or proceedings relating to the Credit Documents or the transactions contemplated hereunder shall be litigated in such courts, and Borrower waives any objection which it may have based on lack of personal jurisdiction, improper venue or forum non conveniens to the conduct of any proceeding in any such court.  Nothing contained in this Section 8.14 shall affect the right of Bank to serve legal process in any other manner permitted by law or affect the right of Bank to bring any action or proceeding against Borrower or its property in the courts of any other jurisdiction.
 
Section 8.15.   WAIVER OF JURY TRIAL .  EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF BANK.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO THIS AGREEMENT.
 
Section 8.16.   ADDITIONAL WAIVERS; LIMITATIONS.
 
8.16.1.   IN CONNECTION WITH ANY PROCEEDINGS UNDER THE CREDIT DOCUMENTS, INCLUDING WITHOUT LIMITATION ANY ACTION BY BANK IN REPLEVIN, FORECLOSURE OR OTHER COURT PROCESS OR IN CONNECTION WITH ANY OTHER ACTION RELATED TO THE CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREUNDER, BORROWER WAIVES:
 
(a)   ALL PROCEDURAL ERRORS, DEFECTS AND IMPERFECTIONS IN SUCH PROCEEDINGS;
 
(b)   ALL BENEFITS UNDER ANY PRESENT OR FUTURE LAWS EXEMPTING ANY PROPERTY, REAL OR PERSONAL, OR ANY PART OF ANY PROCEEDS THEREOF FROM ATTACHMENT, LEVY OR SALE UNDER EXECUTION, OR PROVIDING FOR ANY STAY OF EXECUTION TO BE ISSUED ON ANY JUDGMENT RECOVERED UNDER ANY OF THE CREDIT DOCUMENTS OR IN ANY REPLEVIN OR FORECLOSURE PROCEEDING, OR OTHERWISE PROVIDING FOR ANY VALUATION, APPRAISAL OR EXEMPTION;
 
(c)   PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF DEMAND, NOTICE OF NON-PAYMENT, PROTEST AND NOTICE OF PROTEST OF ANY OF THE CREDIT DOCUMENTS, INCLUDING THE NOTE; AND
 
(d)   ALL RIGHTS TO CLAIM OR RECOVER ATTORNEY’S FEES AND COSTS IN THE EVENT THAT BORROWER IS SUCCESSFUL IN ANY ACTION TO REMOVE OR SUSPEND A JUDGMENT ENTERED BY CONFESSION.
 
8.16.2.   FORBEARANCE .  BANK MAY RELEASE, COMPROMISE, FORBEAR WITH RESPECT TO, WAIVE, SUSPEND, EXTEND OR RENEW ANY OF THE TERMS OF THE CREDIT DOCUMENTS, UPON FIVE (5) DAYS NOTICE TO BORROWER.
 
8.16.3.   LIMITATION ON LIABILITY .  BORROWER SHALL BE RESPONSIBLE FOR AND BANK IS HEREBY RELEASED FROM ANY CLAIM OR LIABILITY IN CONNECTION WITH:
 
(a)   SAFEKEEPING ANY PROPERTY (EXCEPT FOR PROPERTY IN BANK’S POSSESSION);
 
(b)   ANY LOSS OR DAMAGE TO ANY PROPERTY (EXCEPT FOR PROPERTY IN BANK’S POSSESSION);
 
(c)   ANY DIMINUTION IN VALUE OF THE PROPERTY; OR
 
(d)   ANY ACT OR DEFAULT OF ANOTHER PERSON.
 
BANK SHALL ONLY BE LIABLE FOR ANY ACT OR OMISSION ON ITS PART CONSTITUTING GROSS NEGLIGENCE OR WILFUL MISCONDUCT. IN THE EVENT BORROWER BRINGS SUIT AGAINST BANK IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER AND BANK IS FOUND NOT TO BE LIABLE, BORROWER WILL INDEMNIFY AND HOLD BANK HARMLESS FROM ALL COSTS AND EXPENSES, INCLUDING ATTORNEY FEES AND COSTS, INCURRED BY BANK IN CONNECTION WITH SUCH SUIT. THIS AGREEMENT IS NOT INTENDED TO OBLIGATE BANK TO TAKE ANY ACTION WITH RESPECT TO THE COLLATERAL OR TO INCUR EXPENSES OR PERFORM ANY OBLIGATION OR DUTY OF BORROWER.
 
Section 8.17.   ACKNOWLEDGMENTS .  BORROWER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND, SPECIFICALLY, SECTION 8.16 HEREOF, AND FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING WAIVER OF JURY TRIAL AND ADDITIONAL WAIVERS HAVE BEEN FULLY EXPLAINED TO BORROWER BY SUCH COUNSEL.
 
Section 8.18.   Confidential Information .  Borrower acknowledges that (i) participations and assignments by Lender and (ii) statutes, regulations and lawful orders of any court or governmental entity having jurisdiction over the parties hereto, may require that certain confidential information be released to third parties.  Lender shall use reasonable efforts to limit the distribution of such confidential information to such third parties and their respective employees and agents.  Prior to any participation of the Line of Credit by Lender, Lender shall provide notice to Borrower of the distribution of such confidential information to any such participants.  Borrower acknowledges that Lender will not be responsible to Borrower for the actions of third parties because of their disclosure or misuse of the information given to them.
 
Section 8.19.   U.S. Patriot Act/OFAC Notice .  To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person who establishes a formal relationship with such institution.  Therefore, when Borrower enter into this business relationship with Bank, Bank will ask Borrower or their officers or owners their name, address, date of birth (for individuals) and other pertinent information that will allow Bank to identify Borrower.  Bank may also ask to see Borrowers’ organizational documents or other identifying information.
 
 
 
 
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IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 
BANK:

CITIZENS BANK OF PENNSYLVANIA
 
By:___________________________(SEAL)
Edward Winslow
Vice President
 

 
BORROWER:

ATTEST:                                                                ARTESIAN WATER COMPANY, INC.


___________________________                                                                By:___________________________(SEAL)
     David B. Spacht
     Treasurer / Chief Financial Officer
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer/ Chief Financial Officer of Artesian Water Company, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 





 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 

ATTEST:                                                                ARTESIAN RESOURCES CORPORATION


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Resources Corporation, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date:
 



 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 
ATTEST:                                                                ARTESIAN WATER PENNSYLVANIA, INC.


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer

STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Water Pennsylvania, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date:


 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 

 

ATTEST:                                                                ARTESIAN WATER MARYLAND, INC.


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Water Maryland, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date:
 


 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 

 

ATTEST:
ARTESIAN WASTEWATER MANAGEMENT, INC.


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Wastewater Management, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date:
 


 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 


ATTEST:                                                                ARTESIAN WASTEWATER MARYLAND, INC.


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Wastewater Maryland, Inc. by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date:
 


 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 



ATTEST:                                                                ARTESIAN UTILITY DEVELOPMENT, INC.


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Utility Development, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date:
 


 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 

 

ATTEST:                                                                ARTESIAN DEVELOPMENT CORPORATION


___________________________                                                                By:___________________________(SEAL)
David B. Spacht
Treasurer / Chief Financial Officer

STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared David B. Spacht, who acknowledged himself to be the Treasurer / Chief Financial Officer of Artesian Development Corporation, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                           Notary Expiration Date:
 


 
 
 

 

IN WITNESS WHEREOF, the undersigned, by their duly authorized officers, have executed and delivered this Demand Line of Credit Agreement under seal the day and year first above written.
 

 

ATTEST:
ARTESIAN CONSULTING ENGINEERING, INC.


___________________________                                                                By:___________________________(SEAL)
Name:
Title:
 
STATE OF DELAWARE                                                           )
)  ss.
COUNTY OF NEW CASTLE                                                           )
 
On this, the ____ day of January, 2010, before me, a Notary Public, the undersigned officer, personally appeared _________________________, who acknowledged himself to be the __________________________ of Artesian Consulting Engineering, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 




 
                                                                       Notary Expiration Date: