UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18516
ARTESIAN RESOURCES CORPORATION
(exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization: DELAWARE
I.R.S. Employer Identification Number: 51-0002090
Address of principal executive officers: 664 CHURCHMANS ROAD
NEWARK, DELAWARE 19702
Registrant's telephone number, including area code: (302) 453 - 6900
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act.
[X] Yes [ ] No
As of April 19, 2004, 3,332,245 shares of Class A Non-Voting Common Stock and 587,680 shares of Class B Common Stock were outstanding.
ARTESIAN RESOURCES CORPORATION
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS Page(s)
Consolidated Balance Sheet
March 31, 2004 and December 31, 2003 3
Consolidated Statement of Income
for the three months ended March 31, 2004 and 2003 4
Consolidated Statement of Retained Earnings
for the three months ended March 31, 2004 and 2003 5
Consolidated Statement of Cash Flows
for the three months ended March 31, 2004 and 2003 5 - 6
Notes to the Consolidated Financial Statements 7 - 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12 - 15
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
ITEM 4 - CONTROLS AND PROCEDURES 15
PART II - OTHER INFORMATION: 15
ITEM 1 - LEGAL PROCEEDINGS 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
INDEX TO EXHIBITS 18
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PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
-----------
March 31, 2004 December 31, 2003
-------------- -----------------
ASSETS
Utility plant, at original cost less accumulated depreciation $ 196,010 $ 187,893
Current assets
Cash and cash equivalents 1,580 1,128
Accounts receivable, net 2,489 2,408
Income tax receivable 404 841
Unbilled operating revenues 2,365 2,745
Materials and supplies-at cost on FIFO basis 768 801
Prepaid property taxes 355 711
Prepaid expenses and other 617 577
--------- ---------
8,578 9,211
--------- ---------
Other assets
Non-utility property (less accumulated depreciation 2004-$79; 2003-$78) 351 334
Restricted cash 10,729 14,219
Other deferred assets 2,772 2,544
--------- ---------
13,852 17,097
Regulatory assets, net 2,066 2,123
--------- ---------
$ 220,506 $ 216,324
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock $ 3,918 $ 3,901
Additional paid-in capital 41,410 41,160
Retained earnings 7,553 7,630
--------- ---------
Total stockholders' equity 52,881 52,691
--------- ---------
Long-term debt, net of current portion 81,328 80,558
--------- ---------
134,209 133,249
--------- ---------
Current liabilities
Notes payable 11,711 12,499
Current portion of long-term debt 266 188
Current portion of mandatorily redeemable preferred stock --- 100
Accounts payable 4,588 3,951
Overdraft payable 2,445 1,337
Deferred income taxes 141 213
Interest accrued 400 267
Customer deposits 435 422
Other 1,020 697
--------- ---------
21,006 19,674
--------- ---------
Deferred credits and other liabilities
Net advances for construction 19,859 19,175
Postretirement benefit obligation 1,217 1,232
Deferred investment tax credits 836 843
Deferred income taxes 12,476 11,775
--------- ---------
34,388 33,025
Commitments and contingencies
Net contributions in aid of construction 30,903 30,376
--------- ---------
$ 220,506 $ 216,324
========= =========
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See notes to the consolidated financial statements.
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except per share amounts)
For the Quarter
Ended March 31,
---------------
2004 2003
---- ----
OPERATING REVENUES
Water sales $ 8,466 $ 8,258
Other utility operating revenue 199 177
Non-utility revenue 122 103
-------- --------
8,787 8,538
OPERATING EXPENSES
Utility operating expenses 4,983 4,739
Related party expenses --- 43
Non-utility operating expenses 74 48
Depreciation and amortization 924 847
State and federal income taxes 471 499
Property and other taxes 529 497
-------- --------
6,981 6,673
-------- --------
OPERATING INCOME 1,806 1,865
Allowance for funds used during construction 92 33
Other income, net 277 29
-------- --------
INCOME BEFORE INTEREST CHARGES 2,175 1,927
INTEREST CHARGES 1,457 1,155
-------- --------
NET INCOME 718 772
PREFERRED DIVIDEND REQUIREMENT AND REDEMPTION
PREMIUM 3 64
-------- --------
NET INCOME APPLICABLE TO COMMON STOCK $ 715 $ 708
======== ========
INCOME PER COMMON SHARE:
Basic $ 0.18 $ 0.18
======== ========
Diluted $ 0.18 $ 0.18
======== ========
CASH DIVIDEND PER COMMON SHARE $ 0.2025 $ 0.1983
======== ========
AVERAGE COMMON SHARES OUTSTANDING:
Basic 3,917 3,866
======== ========
Diluted 4,053 3,953
======== ========
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See notes to the consolidated financial statements.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Unaudited
(In thousands)
For the Quarter
Ended March 31,
---------------
2004 2003
---- ----
Balance, beginning of period $ 7,630 $ 6,973
Net income 718 772
------- -------
8,348 7,745
Less: Dividends 795 833
Common stock-Repurchase --- 8
------- -------
Balance, end of period $ 7,553 $ 6,904
======= =======
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See notes to the consolidated financial statements.
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
(In thousands)
For the Quarter
Ended March 31,
---------------
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 718 $ 772
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 923 845
Deferred income taxes, net 623 353
Allowance for funds used during construction (92) (33)
Changes in assets and liabilities:
Accounts receivable (81) (907)
Income tax receivable 437 --
Unbilled operating revenue 380 529
Materials and supplies 33 (64)
Accrued state and federal income taxes -- (3)
Prepaid property taxes 356 323
Prepaid expenses and other (40) (146)
Other deferred assets (227) (133)
Regulatory assets 56 27
Postretirement benefit obligation (15) (16)
Accounts payable 637 (140)
Interest accrued 133 (398)
Customer deposits and other, net 335 287
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,176 1,296
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC) (9,111) (4,280)
Proceeds from sale of assets 9 --
------- -------
NET CASH USED IN INVESTING ACTIVITIES (9,102) (4,280)
------- -------
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CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line of credit agreement (788) 11,948
Proceeds from issuance of long-term debt 770 14,945
Proceeds from issuance of tax-free bonds 3,490 --
Overdraft payable 1,108 712
Net advances and contributions in aid of construction 1,348 603
Net proceeds (repayments) under promissory notes and SRF Loans 78 (275)
Net proceeds from stock transactions 267 79
Dividends (795) (833)
Repayment of long-term debt -- (292)
Retirement of preferred stock (100) (100)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,378 2,891
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 452 (93)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,128 874
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,580 $ 781
======= =======
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 1,304 $ 1,541
======= =======
Income taxes paid $ -- $ 150
======= =======
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See notes to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
Artesian Resources Corporation ("Artesian Resources" or the "Company") operates as a holding company, whose income is derived from the earnings of our four wholly owned subsidiary companies and our one-third interest in AquaStructure Delaware, L.L.C., a Limited Liability Corporation whose primary activity is marketing wastewater services. Artesian Water Company, Inc. ("Artesian Water"), our principal subsidiary, is the oldest and largest public water utility in the State of Delaware and has been providing water service within the state since 1905. We distribute and sell water to residential, commercial, industrial, governmental, municipal and utility customers throughout Delaware. In addition, we provide services to other water utilities, including operations and billing functions, and have contract operation agreements with fourteen private and municipal water providers.
Our other water utility subsidiary, Artesian Water Pennsylvania, Inc., began operations in 2002, providing water service to a residential community, consisting of 41 homes, in Chester County, Pennsylvania. Our other two subsidiaries, neither of which is regulated, are Artesian Wastewater Management, Inc. ("Artesian Wastewater"), which provides wastewater services in Delaware, and Artesian Development Corporation, whose sole activity is the ownership of an eleven-acre parcel of land zoned for office buildings located immediately adjacent to our corporate headquarters. On October 14, 2003, we filed an application with the Pennsylvania Public Utilities Commission to increase our service area in Pennsylvania. The application concerns four specific housing developments that are expected to add 350 customers over 10 years to the extent our application is approved.
The terms "we", "our" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.
At March 31, 2004, the Company had three stock-based compensation plans. The Company applies APB Opinion No. 25 and related interpretations in accounting for compensation expense under its plans. Accordingly, the aggregate compensation cost that has been charged against income for the three plans was $1,200 and $1,100 for the three months ended March 31, 2004 and 2003, respectively. Had compensation cost for the Company's three plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," the Company's net income and net income per common share would have been reduced to the pro-forma amounts indicated below:
For the Quarter
Ended March 31,
---------------
2004 2003
---- ----
In thousands, except per share data
NET INCOME APPLICABLE TO COMMON STOCK
As reported $ 715 $ 708
Add: compensation expense included
in net income (net of tax) -- --
Deduct: compensation expense using
fair value based method (net of tax) (1) (24)
----- -----
Pro-forma $ 714 $ 684
BASIC NET INCOME PER COMMON SHARE
As reported $ .18 $ .18
Pro-forma $ .18 $ .18
DILUTED NET INCOME PER COMMON SHARE
As reported $ .18 $ .18
Pro-forma $ .18 $ .17
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NOTE 2 - REGULATORY ASSETS
Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the Delaware Public Service Commission ("Delaware PSC"). Expenses related to applications to increase rates are amortized on a straight-line basis over a period of two years. The postretirement benefit obligation, which is being amortized over 20 years, is adjusted for the difference between the net periodic postretirement benefit costs and the cash payments. The deferred income taxes will be amortized over future years as the tax effects of temporary differences previously flowed through to the customers reverse. Regulatory assets net of amortization, are comprised of the following:
March 31, 2004 December 31, 2003
-------------- -----------------
(in thousands)
Postretirement benefit obligation $ 1,217 $ 1,232
Deferred income taxes recoverable in future rates 623 627
Expense of rate proceedings 112 220
Other 114 44
------- -------
$ 2,066 $ 2,123
======= =======
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Expenses related to the Net Periodic Pension Cost for the postretirement benefit obligation are as follows:
FOR THE QUARTER ENDED MARCH 31, 2004 2003
---- ----
NET PERIODIC PENSION COST
Interest Cost $ 14 $ 16
Amortization of Net (Gain) or Loss (9) (14)
Amortization of Transition Obligation/(Asset) 2 2
---- -----
Total FAS 106 Net Periodic Benefit Cost 7 4
---- -----
Total Net Periodic Benefit Cost $ 7 $ 4
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CONTRIBUTIONS
Artesian Water contributed $22,000 to its postretirement benefit plan in the first quarter of 2004 and expects to contribute another $66,000 for the remainder of the year.
NOTE 3 - RELATED PARTY TRANSACTIONS
The office building and shop complex utilized by Artesian Water were previously leased at an average annual rental of $173,000 from the former limited partners of White Clay Realty, who owned the property jointly as tenants in common. Dian C. Taylor, Chair and Chief Executive Officer of Artesian Resources, was a tenant in common and John R. Eisenbrey, Jr., a director of Artesian Resources, was a beneficiary of a tenant in common. The rental of $173,000 was below market rates. In December 2002, Artesian Water filed a condemnation action in the Delaware Superior Court, seeking to acquire title to the office and shop complex leased by Artesian Water, known as 664 Churchmans Road, Newark, Delaware (the "Property"). Artesian Water filed this action under its statutory power of eminent domain against the owner of the Property, White Clay Realty, a Delaware Limited Partnership, and each of the limited partners. The Superior Court ruled that since White Clay Realty had no general partner, the partnership was dissolved and all of the former partners owned the Property jointly as tenants in common. A special committee of the Board of Directors of Artesian Water, composed entirely of outside directors who had no ownership interest in the Property, made the determination to purchase the Property through the condemnation procedures. Under this procedure, if the acquisition of the Property were to be approved by the court, the fair market value of the Property would be determined by a panel of commissioners after an evidentiary hearing.
Artesian Water's independent appraiser valued the Property to be worth $3,800,000. In December 2002, Artesian Water issued a payment to the Prothonotary for the State of Delaware for $3,800,000. As the court delayed payment until the matter was decided, the amount was refunded to Artesian Water in June 2003. Until a final determination of the condemnation, the parties agreed that Artesian Water could continue to occupy the Property under the terms of the lease with a quarterly rental payment of $43,361. Pursuant to a deadline set by the Superior Court, the owners of the Property submitted an independent appraisal that valued the Property to be worth $4,800,000. The condemnation case was scheduled for trial on October 20, 2003, wherein the fair market value of the Property would have been determined by a panel of three Commissioners after an evidentiary hearing. Prior to the commencement of the trial on October 20, 2003, all parties agreed to settle the case for a purchase price of $4,500,000 paid by Artesian Water. The decision to settle on the part of Artesian Water was made by the Special Committee of independent directors and with the recommendation of special counsel to the Special Committee. The settlement was approved by order of the Superior Court on October 20, 2003. The Court also approved applications of two of the tenants in common (neither of whom is an officer or director of Artesian) for their expenses, totaling $50,000, to be paid by Artesian Water, to which applications Artesian Water did not object.
Expenses associated with related party transactions were as follows:
For the Quarter
Ended March 31,
---------------
2004 2003
---- ----
(in thousands)
White Clay Realty $ --- $ 43
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NOTE 4 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE
Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding and the potentially dilutive effect of employee stock options. The following table summarizes the shares used in computing basic and diluted net income per share:
For the Quarter
Ended March 31,
---------------
2004 2003
---- ----
(in thousands)
Average common shares outstanding during
the period for Basic computation 3,917 3,866
Dilutive effect of employee stock options 136 87
----- -----
Average common shares outstanding during
the period for Diluted computation 4,053 3,953
===== =====
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Equity per common share was $13.50 and $13.24 at March 31, 2004 and 2003, respectively. These amounts were computed by dividing common stockholders' equity, excluding preferred stock, by the number of shares of common stock outstanding on March 31, 2004 and 2003, respectively.
NOTE 5 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued revised Statement No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits-an amendment of FASB Statements No. 87, 88, and 106." This statement requires additional disclosures to those in the original Statement No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined pension plans and other defined benefit postretirement plans. Disclosures for earlier periods presented for comparative purposes are restated. This statement is effective for financial statements with fiscal years ending after December 15, 2003. The additional disclosures required for our postretirement benefit obligation are presented in Note 2.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement is effective for financial instruments entered into or modified after May 31, 2003 and effective for other instruments beginning at the first interim period beginning after June 15, 2003. The adoption of this statement did not have a material impact on the financial condition or results of operation of Artesian Resources.
In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting related to derivatives and hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for contracts entered into or modified, and hedging relationships designated, after June 30, 2003. The adoption of this statement did not have a material impact on the financial condition or results of operation of Artesian Resources.
NOTE 6 - RATE PROCEEDINGS
On February 5, 2004, Artesian Water filed a petition with the Delaware Public Service Commission (the "Delaware PSC") to implement new rates to meet a requested increase in revenue of 24%, or approximately $8.8 million on an annualized basis. The Delaware PSC, on March 16, 2004, suspended the implementation of the proposed new rates pending further investigation and public evidentiary hearings. Pending these hearings and a final ruling by the Delaware PSC, the Company, as permitted by law, placed a portion of the proposed rates into effect under bond on April 6, 2004. These temporary rates were designed to generate an increase in annual operating revenue of approximately 6.98%, or $2.5 million on an annualized basis.
On April 2, 2002, Artesian Water filed a petition with the Delaware PSC seeking to raise rates for water service by 23.12% or $7.5 million. Artesian Water, as permitted by law, placed 7.71% of the proposed rates into effect under bond beginning June 1, 2002. Beginning December 3, 2002, Artesian Water, as permitted by law, placed an additional 3.69% of the proposed rates into effect. On April 15, 2003, the Delaware PSC issued PSC Order No. 6147 approving an increase in Artesian Water's revenue requirement of 9.68% effective May 1, 2003. These rates represented an increase in water consumption charges, customer charges, and fire hydrant ready-to-serve charges necessary to generate an increase in annual operating revenues of approximately $3.3 million. Since the temporary rates that we had placed into effect beginning December 3, 2002, were in excess of the final approved rate increase, in June 2003 we refunded approximately $201,000, plus interest, to our customers. Since Artesian Water had reserved revenue related to the second temporary increase of $234,000, an additional $33,000 was recorded to revenue in the second quarter of 2003.
Delaware statute permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a Distribution System Improvement Charge (DSIC). This charge is available to water utilities to be implemented between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC process significantly reduces expenses when compared to those typically associated with general rate increase requests. We requested on November 30, 2003, and subsequently implemented, a 1.13% DSIC surcharge for bills rendered subsequent to January 1, 2004. This surcharge was designed to generate approximately $204,000 in revenues between January and June of 2004. However, as we placed temporary rates into effect on April 6, 2004, the surcharge was reset to zero as required by law. We billed $100,000 in revenues through March 31, 2004.
NOTE 7 - STOCK SPLIT
On June 30, 2003, the Company completed a three for two stock split on its Class A Non-Voting Common Stock and Class B Common Stock, which was effected in the form of a 50% stock dividend. Shareholders of record on May 30, 2003 received one additional share of common stock for each two shares held. All share and per share data for all prior periods have been restated to give effect to this stock split.
Weighted Average Shares For the Quarter
Outstanding Ended March 31,
---------------
2004 2003
---- ----
Basic 3,917,034 3,866,072
Diluted 4,053,117 3,952,821
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2004
STRATEGIC DIRECTION
Our profitability is primarily attributable to the sale of water by Artesian Water, the amount of which is dependent on seasonal fluctuations in weather, particularly during the summer months when water demand may vary with rainfall and temperature. In the event that temperatures during the typically warmer months are cooler than expected, or rainfall is greater than typical, the demand for water may decrease and our revenues may be adversely affected. We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives.
While customer growth in our utility subsidiaries has been a major focus in the first quarter of 2004, we are aggressively seeking opportunities that produce revenue streams that are not as directly affected by weather. These opportunities include wastewater treatment services by Artesian Wastewater Management, Inc., a non-regulated subsidiary. Artesian Wastewater is actively pursuing design, build and operations contracts with residential developers in Sussex County, Delaware. Artesian Wastewater has a permit pending to construct a 90,300 gallon per day facility to service a residential development in Sussex County. The development is planned to add 750 customers over the next 10 years. In addition, we will continue to focus attention on expanding our contract operations opportunities with municipalities and private water providers in Delaware and surrounding areas.
Ensuring our customers have a dependable supply of safe, high-quality water has been, and will continue to be, a high priority. We have invested $2.8 million through March 31, 2004, and expect to make $5.4 million in investments in the remaining nine months of 2004, that will increase our sources of water and enhance our ability to deliver supply from our Aquifer Storage and Recovery Program. We are the first and only water utility in Delaware to utilize this technology that capitalizes on Delaware's unique geology to provide storage capacity for water to be used during periods of peak water demand.
REGULATORY MATTERS AND INFLATION
As of March 31, 2004, we had approximately 70,000 metered customers and serviced a population of approximately 230,000, representing approximately 29% of Delaware's total population. The Delaware PSC regulates Artesian Water's rates charged for water service, the sale and issuance of securities and other matters. We periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of annual gross water sales. Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief in effect, under bond, until a final resolution is ordered and placed into effect. If such rates are found to be in excess of rates the Delaware PSC finds to be appropriate, the utility must refund the portion found in excess to customers with interest. The timing of our rate increase requests are therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase. We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies; and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.
We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability. The cumulative effect of inflation results in significantly higher facility costs compared to investments made 20 to 40 years ago, which must be recovered from future cash flows.
Delaware statute permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a Distribution System Improvement Charge (DSIC). This charge is available to water utilities to be implemented between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC process significantly reduces expenses when compared to those typically associated with general rate increase requests. We requested on November 30, 2003 and subsequently implemented a 1.13% DSIC surcharge for bills rendered subsequent to January 1, 2004. This surcharge was designed to generate approximately $204,000 in revenues between January and June of 2004. However, as we placed temporary rates into effect on April 6, 2004, the surcharge was reset to zero as required by law. We billed $100,000 in revenues under this surcharge through March 31, 2004.
Revenues totaled $8.8 million for the quarter ended March 31, 2004, $0.3 million, or 2.9% above revenues for the quarter ended March 31, 2003 of $8.5 million. Water sales revenues increased 2.5% for the quarter ended March 31, 2004 over the corresponding period in 2003 due to customer growth. The remaining increase in operating revenues for the three months ended March 31, 2004 is primarily due to additional revenues generated by wastewater and contract operations services. We realized 96.4% of our total revenue for the three months ended March 31, 2004, from the sale of water.
On February 5, 2004, Artesian Water filed a petition with the Delaware PSC to implement new rates to meet a requested increase in revenue of 24%, or approximately $8.8 million on an annualized basis. The Delaware PSC, on March 16, 2004, suspended the implementation of the proposed new rates pending further investigation and public evidentiary hearings. Pending these hearings and a final ruling by the Delaware PSC, the Company, as permitted by law, placed a portion of the proposed rates into effect under bond on April 6, 2004. These temporary rates were designed to generate an increase in annual operating revenue of approximately 6.98%, or $2.5 million on an annualized basis.
On April 2, 2002, Artesian Water filed a petition with the Delaware PSC seeking to raise rates for water service. Artesian Water, as permitted by law, placed 7.71% of the proposed rates into effect under bond beginning June 1, 2002. Beginning December 3, 2002, Artesian Water placed an additional 3.69% of the proposed rates into effect. On April 15, 2003, the Delaware PSC approved an increase in Artesian Water's revenue requirement of 9.68%, effective May 1, 2003. See Note 6 of our financial statements included in this report for additional discussion.
Operating expenses, excluding depreciation and taxes, increased $227,000, or 4.7%, to $5.6 million for the quarter ended March 31, 2004, compared to $4.8 million for the same period in 2003. The components of the increase in operating expenses included an increase in repair and maintenance expense of $71,000, or 26.2%, due to the replacement of the filter media used in a new water treatment process at one of our facilities. We expect to replace this media annually and have requested recovery of this on-going expense in rate charges to customers. Employee benefits expense also increased $62,000, or 13%, due to an increase in medical insurance premiums effective August 2003. Administration expenses increased approximately $88,000 for the quarter ended March 31, 2004, or 12.3%, due primarily to the reimbursement of consulting expenses incurred by the PSC in connection with the review of supply conditions during 2002. The investigation confirmed that our supply was adequate to meet uninterrupted demand during this drought period. Additional expense of $27,000 was incurred in the first quarter of 2004 as a result of costs associated with our Pennsylvania subsidiary's request for new service territory described in Note 1 to the financial statements included in this report. These increases were partially offset by a reduction of $43,000 in related party expense due to our purchase of the office and shop complex in October 2003 which we had previously leased from White Clay Realty. Purchased water expense decreased approximately $85,000, or 11.1%, due to a later start in storing water in our aquifer storage and recovery well in the current year. The ratio of operating expense, excluding depreciation and taxes, to total revenue was 57.5% for the three months ended March 31, 2004, compared to 56.6% for the three months ended March 31, 2003.
Depreciation and amortization expense increased $77,000, or 9.1%, over the quarter ended March 31, 2003 to $924,000 due to increases in our utility plant in service providing supply, treatment, storage and distribution of water. Income tax expense decreased $28,000 due to reduced profitability for the quarter ended March 31, 2004 compared to the quarter ended March 31, 2003.
Other Income increased $248,000 primarily due to increased patronage income from CoBank. This increase in patronage income is related to the Company's issuance of an additional $25 million in First Mortgage Bonds in January 2003 to CoBank, which is a cooperative bank that distributes equity and cash income to its customer-owners.
Interest charges increased $302,000, or 26.2%, over the quarter ended March 31, 2003, primarily due to interest related to the $25 million Series P First Mortgage Bond issued on January 31, 2003 and the $15.4 million Series Q First Mortgage Bond issued on December 1, 2003. The Series P Bond issuance replaced the Series L 8.03% $10 million bond and paid down our line of credit.
Our net income decreased $54,000 for the quarter ended March 31, 2004, compared to the same period a year ago. The decrease in net income for the quarter was due to increased operating expenses discussed above and interest charges associated with the issuance of debt to finance additions to utility plant. Our net income applicable to common stock increased by $7,000 as redemption premium costs of $54,000 associated with the buy-back of all 10,868 shares of our 7% Prior Preferred Stock on February 21, 2003 were reflected in the quarter ended March 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity for the three months ended March 31, 2004 were $4.2 million provided by cash flow from operating activities and $5.4 million from financing activities, which includes $1.3 million in contributions and advances. Cash flow from operating activities is primarily provided by our utility operations, and is impacted by the timeliness and adequacy of rate increases and changes in water consumption as a result of year-to-year variations in weather conditions particularly during the summer. A significant part of our ability to maintain and meet our financial objectives is to assure our investments in utility plant and equipment are recovered in the rates charged to customers. As such, from time to time we file rate increase requests to recover increases in operating expenses and investments in utility plant and equipment. On February 5, 2004, Artesian Water filed a petition with the Delaware PSC seeking to raise rates for water service and on April 6, 2004, the Delaware PSC approved a temporary increase in Artesian Water's revenue requirement of 6.98% as permitted by law. These rates represent an increase in water consumption charges, customer charges and fire hydrant ready-to-serve charges necessary to generate an increase in annual operating revenues of approximately $2.5 million.
At March 31, 2004, Artesian Water had lines of credit with three separate financial institutions totaling $35.0 million to meet its temporary cash requirements. These revolving credit facilities are unsecured. As of March 31, 2004, we had $23.3 million of available funds under these lines. The interest rate for borrowings under each of these lines is the London Interbank Offering Rate plus 1.0% or, at our discretion, the bank's federal funds rate plus 1.0%. At March 31, 2004 the rate on these lines was 2.04%. All the facilities are reviewed annually by each bank for renewal. We expect that our available cash balances, our projected cash generated from operations and available bank credit lines will be sufficient to meet our financial obligations for the next twelve months.
CAUTIONARY STATEMENT
Statements in this Quarterly Report on Form 10-Q which express our "belief," "anticipation" or "expectation," as well as other statements which are not historical fact including statements regarding our customer growth, contract operations opportunities, investment plans in 2004, revenues from temporary rate increases, plans to increase our wastewater treatment operations and other revenue streams less affected by weather, the acquisition of a dependable supply of safe, high-quality water and our ability to obtain final approval on pending rate increase requests or approval to service additional service territories are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected. Certain factors, such as changes in weather, changes in our contractual obligations, changes in government policies, changes in economic conditions, and other matters could cause results to differ materially from those in the forward-looking statements. The Company does not undertake to update any of the forward-looking statements included in the Quarterly Report on Form 10-Q except as required by law.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest rates through the use of fixed rate, long-term debt and, to a lesser extent, short-term debt. The Company's interest rate risk related to existing fixed rate, long-term debt is not material due to the term of our First Mortgage Bonds, which have maturity dates ranging from 2007 to 2043.
ITEM 4 - CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
The Company adopted a code of conduct applicable to its employees which is available upon request.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There are no material legal proceedings pending at this date.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation of the Company effective April 28, 2004.
3.3 Artesian Resources Corporation By-laws
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Forms 8-K
A current report on Form 8-K dated February 5, 2004 was filed with the Securities and Exchange Commission on February 6, 2004 reporting a filing of a petition with the Delaware PSC to increase rates for service.
SIGNATURES
ARTESIAN RESOURCES CORPORATION
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 28, 2004 By: /s/ David B. Spacht
-----------------------
David B. Spacht, Vice President, Chief
Financial Officer and Treasurer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
Principal Executive Officer:
/s/ Dian C. Taylor April 28, 2004
------------------------------
Dian C. Taylor President, Chief Executive Officer and Director
Principal Financial and Accounting Officer:
/s/ David B. Spacht April 28, 2004
------------------------------
David B. Spacht Vice President, Chief Financial Officer
and Treasurer
Directors:
/s/ Norman H. Taylor, Jr. April 28, 2004
------------------------------
Norman H. Taylor, Jr. Director
/s/ Kenneth R. Biederman April 28, 2004
------------------------------
Kenneth R. Biederman Director
/s/ William C. Wyer April 28, 2004
------------------------------
William C. Wyer Director
/s/ John R. Eisenbrey, Jr. April 28, 2004
------------------------------
John R. Eisenbrey, Jr. Director
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INDEX TO EXHIBITS
Exhibit Number Description
-------------- -----------
3.1 Restated Certificate of Incorporation of the Company
effective April 28, 2004.
3.3 Artesian Resources Corporation By-laws
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
RESTATED
CERTIFICATE OF INCORPORATION
OF
ARTESIAN RESOURCES CORPORATION
(originally incorporated under the name
Artesian Water Company on February 10, 1927)
FIRST: The name of the Corporation shall be ARTESIAN RESOURCES
CORPORATION.
SECOND: The location of the registered office in the State of Delaware is 664 Churchmans Road, in the City of Newark (19702), in the County of New Castle. The name of the registered agent therein and in charge thereof against whom process may be served is the Corporation itself.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware, including but not limited to manufacturing, processing, owning, using and dealing in personal property of every class and description, engaging in research and development, furnishing services, and acquiring, owning, using and disposing of real property of any nature whatsoever. The Corporation shall not engage in any activity which the Corporation could not engage in prior to January 1, 1984 unless, if any shares of cumulative Prior Preferred Stock are then outstanding, the consent of the holders of such Cumulative Prior Preferred stock thereto shall first be obtained as provided by Section 4.15(A)(c) of Article Fourth hereof.
FOURTH: Section I. Authorized Shares and Designations. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 16,230,868. Such shares shall be divided as follows:
1. 10,868 shares of 7% Prior Preferred Stock, par value $25.00 per share, designated 7% Prior Preferred Stock, aggregating $271,700.00;
2. 80,000 shares of Cumulative Prior Preferred Stock, par value $25.00 per share, designated Cumulative Prior Preferred Stock, aggregating $2,000,000.00;
3. 15,000,000 shares of Class A Non-Voting Common Stock, par value $1.00 per share, designated Class A Non-Voting Common Stock;
4. 1,040,000 shares of Class B Common Stock, par value $1.00 per share, designated Class B Common Stock; and
5. 100,000 shares of Series Preferred Stock, par value $1.00 per share.
The powers, preferences, and rights, and the qualifications, limitations, or restrictions of the designated classes and series of stock of the Corporation are as follows:
PART I
Section 4.01. Dividends Generally. The 7% Prior Preferred Stock shall entitle the holders thereof to cumulative dividends thereon at the rate of, but not exceeding, 7 per centum, per annum, payable out of the net earnings of the Corporation quarter-yearly on the first day of February, May, August, and November in each year.
Section 4.02. Dividend Priority. No dividends may be declared and paid on the Series Preferred Stock, or the Common Stock in any year unless and until the full dividends on the 7% Prior Preferred Stock then outstanding shall have been paid or declared and set apart for payment.
Section 4.03. Redemption. The 7% Prior Preferred Stock may, at the discretion of the Board of Directors, be redeemed in whole or in part at any time or from time to time, upon at least 30 days' notice, at the price of $30 for each share, plus accrued but unpaid dividends.
Section 4.04. Liquidation Rights. In the event of any liquidation, dissolution or winding up of the corporation or the sale by the Corporation of all of its assets, the holders of the 7% Prior Preferred Stock shall be entitled to be paid in cash the par value of said shares, together with an amount equal to accrued but unpaid dividends, before anything shall be paid to the holders of junior stock. The holders of the 7% Prior Preferred Stock shall not be entitled to receive any amounts with respect thereto upon any liquidation, dissolution, or winding up of the Corporation other than the amounts referred to in this paragraph. The consolidation or merger of the Corporation with any other corporation or corporations shall not be deemed to be a liquidation, dissolution, or winding up of the Corporation.
Section 4.05. Pari Passu Status as to Dividends. The 7% Prior Preferred Stock and the Cumulative Prior Preferred Stock shall rank equally with respect to the payment of dividends so that no dividends shall be declared on the 7% Prior Preferred Stock or an any series of the Cumulative Prior Preferred Stock unless there shall likewise be declared on all shares of the 7% Prior Preferred Stock and on all shares of all series of the Cumulative Prior Preferred Stock at the time outstanding, like proportionate dividends, ratably, in proportion to the respective annual divided rates fixed therefore, in respect of the same quarter-yearly dividend period, to the extent that such shares are entitled to receive dividends for such quarter-yearly dividend period.
Section 4.06. Pari Passu Status as to Liquidation. Except that the sale of all of its assets by the Corporation shall be deemed to be a liquidation, dissolution, or winding up of the Corporation in the case of the 7% Prior Preferred Stock and shall not be so deemed in the case of the Cumulative Prior Preferred Stock, the 7% Prior Preferred Stock and the Cumulative Prior Preferred Stock shall rank equally with respect to distributions upon any liquidation, dissolution, or winding up of the Corporation, so that the holders of the 7% Prior Preferred Stock and of each series of the Cumulative Prior Preferred Stock at the time outstanding shall be entitled upon any liquidation, dissolution, or winding up of the Corporation, and after paying or providing for the payment of all creditors of the Corporation, to be paid in cash the amount for the 7% Prior Preferred Stock or the particular series of the Cumulative Prior Preferred Stock fixed therefore as herein provided, together with an amount equal to accrued but unpaid dividends; but no payments on account of such distributive amounts shall be made to the holders of the 7% Prior Preferred Stock or of any series of the Cumulative Prior Preferred Stock unless there shall likewise be paid at the same time to the holders of the 7% Prior Preferred Stock and (except in the case of a sale of all of the assets of the Corporation) like proportionate distributive amounts to the holders of all series of the Cumulative Prior Preferred Stock at the time outstanding, ratably, in proportion to the full distributive amounts to which they are respectively entitled as herein provided.
Section 4.07. Voting Rights. The holders of the 7% Prior Preferred Stock shall have no voting power in the Corporation, except in statutory proceedings as to which their vote may be required by law.
Section 4.08. Designation. The 7% Prior Preferred Stock constitutes a redesignation of the previously-authorized class heretofore designated as the "7% Preferred Stock."
PART II
Section 4.09. Issuable in Series. The Cumulative Prior Preferred Stock may be issued from time to time in one or more series. The designations, preferences and other rights, and limitations or restrictions of the Cumulative Prior Preferred Stock of each series shall be such as are stated and expressed in this article, and to the extent not stated and expressed herein, shall be such as may be fixed by the Board of Directors (authority so to do being hereby
expressly granted) and stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the initial issue of Cumulative Prior Preferred Stock of such series. Each series shall be designated so as to distinguish the shares thereof from the shares of all other series. All shares of the Cumulative Prior Preferred Stock of all series, whether now or hereafter created, shall be of equal rank and all shares of any particular series of the Cumulative Prior Preferred Stock shall be identical except as to the date or dates from which dividends thereon shall be cumulative as provided in Section 4.10 hereof. The shares of the Cumulative Prior Preferred Stock of different series, subject to any applicable provision of law, may vary as to the following rights and preferences, and restrictions and qualifications thereof, which shall be fixed, in the case of each such series, at any time prior to the issuance of the shares thereof in the manner provided in this section and in Section 4.14 hereof:
(a) The annual dividend rate (within such limits as shall be permitted by law) for the particular series and the date from which dividends on all shares of such series issued prior to the record date for the first dividend for such series shall be cumulative;
(b) The redemption price or prices for the particular series and the terms and conditions of which shares may be redeemed;
(c) The amount or amounts per share for the particular series payable to the holders thereof upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation;
(d) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the particular series;
(e) The terms upon which the stock of the particular series may be converted into or exchanged for stock of any other series, class or classes; and
(f) The designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions, if any, of the particular series.
Section 4.10. Dividend Rights. The holders of each series of the Cumulative Prior Preferred Stock at the time outstanding shall be entitled to receive, but only when and as declared by the Board of Directors, out of funds legally available for payment of dividends, dividends at the annual dividend rate for the particular series fixed therefore as herein provided, payable quarter-yearly on the first day of February, May, August, and November in each year, to stockholders of record on the respective dates, not exceeding thirty (30) days preceding such dividend payment dates, fixed for the purpose by the Board of Directors in advance of the payment of the respective dividends. No dividends shall be declared on any series of the Cumulative Prior Preferred Stock in respect of any quarter-yearly dividend period unless there shall likewise be declared on all shares of all series of the Cumulative Prior Preferred Stock at the time outstanding, like proportionate dividends, ratably, in proportion to the respective annual dividend rates fixed therefore, in respect of the same quarter-yearly dividend period, to the extent that such shares are entitled to receive dividends for such quarter-yearly dividend period. The dividends on shares of all series of the Cumulative Prior Preferred Stock shall be cumulative. In the case of all shares of each particular series, the dividends on shares of such series shall be cumulative:
(a) If issues prior to the record date for the first dividend on the shares of such series, then from the date for the particular series fixed therefore as herein provided;
(b) If issued during the period commencing immediately after a record date for a dividend and terminating as the close of the payment date for such dividend, then from such dividend payment date; and
(c) Otherwise from the quarter-yearly dividend payment date next preceding the date of issue of such shares; so that unless dividends on all outstanding shares of each series of the Cumulative Prior Preferred Stock, at the annual dividend rate and from the dates for accumulation thereof fixed as herein provided, shall have been paid for all past quarter-yearly dividend periods, but without interest on cumulative dividends, no dividends shall be paid or declared and no other distribution shall be made on stock ranking junior to the Cumulative Prior Preferred Stock with respect to the payment of dividends, and no such stock shall be purchased or otherwise acquired for value by the Corporation. The holders of Cumulative Prior Preferred Stock of any series shall not be entitled to receive any dividends thereon other than the dividends referred to in this Section 4.10.
Section 4.11. Redemption. The Corporation, by action of its Board of Directors, subject to the terms and conditions on which shares of a particular series of the Cumulative Prior Preferred Stock may be redeemed, may redeem the whole or any part of any series of the Cumulative Prior Preferred Stock, at any time or from time to time, by paying in cash the redemption price of the shares of the particular series fixed therefore as herein provided, together with accrued but unpaid dividends in the case of each share of each series so to be redeemed; provided, that the Corporation shall not redeem any shares of any series of the Cumulative Prior Preferred Stock (other than redemptions through a fixed sinking fund) or any shares of the 7% Prior Preferred Stock at any time when the Corporation shall be in default with respect to the setting aside or application of any sinking fund installment for any series of Cumulative Prior Preferred Stock or at any time when the Corporation shall be in default with respect to the payment of any dividend on any series of Cumulative Prior Preferred Stock. The Corporation shall pay from its general funds all accrued dividends payable on any such redemption and all expenses in connection therewith. Notice of redemption shall be given at least thirty (30) day prior to the date fixed for such redemption by first class mail to the holders of record of the shares of the Cumulative Prior Preferred Stock so to be redeemed, at their respective addresses as the same shall appear on the books of the Corporation. In case of the redemption of a part only of any series of the Cumulative Prior Preferred Stock at the time outstanding, the shares to be redeemed shall be selected by lot or pro-rata, in such manner as the Board of Directors may determine. The Board of Directors shall have full power and authority, subject to the limitations and provisions herein contained, to prescribe the manner in which and the terms and conditions upon which the shares of the Cumulative Prior Preferred Stock shall be redeemed from time to time. If such notice of redemption shall have been duly given, and if on or before the redemption date specified in such notice all funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the account of the holders of the shares to be redeemed, so as to be and continue to be available therefore, then, notwithstanding that any certificate for such shares so called for redemption shall not have been surrendered for cancellation, from and after the date fixed for redemption, the shares represented thereby shall no longer be deemed outstanding, the right to receive dividends thereon shall cease to accrue and all rights with respect to such shares so called for redemption shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive, out of the funds so set aside in trust, the amount payable upon redemption thereof, without interest; provided, however, the Corporation may, after giving notice of any such redemption as herein before provided or after giving to the bank or trust company hereinafter referred to irrevocable authorization to give such notice, and at any time prior to the redemption date specified in such notice, deposit in trust, for the account of the holders of the shares to be redeemed, funds necessary for such redemption, with a bank or trust company in good standing, organized under the laws of the United States of America, or of the State of Delaware or of the Commonwealth of Pennsylvania, doing business in the City of Wilmington, Delaware, or in Philadelphia, Pennsylvania, and having capital, surplus and undivided profits aggregating at least $2,000,000, designated in such notice of redemption; and upon such deposit in trust, all shares with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, and all rights with respect to such shares shall forthwith cease and terminate, except only the right of the holders thereof to receive, out of the funds so deposited in trust, from and after the date of such deposit, the amount payable upon the redemption thereof, without interest.
The Corporation may purchase or otherwise acquire any shares of any series of the Cumulative Prior Preferred Stock, provided, that in the case of any series of the Cumulative Prior Preferred Stock for which there is a sinking fund, the purchase price shall not be in excess of the sinking fund redemption price of the shares of the particular series so purchased or otherwise acquired; and provided, further, that the Corporation shall not purchase or otherwise acquire for value any shares of any series of Cumulative Prior Preferred Stock (other than redemptions through a fixed sinking fund) or any shares of the 7% Prior Preferred Stock at any time when the Corporation shall be in default with respect to the setting aside or application of any sinking fund installment for any series of Cumulative Prior Preferred Stock or any time when the Corporation shall be in default with respect to the payment of any dividend on any series of Cumulative Prior Preferred Stock.
Section 4.12 Sinking Fund. There shall be set aside on or before February 1 in each year cash required for sinking fund payments in such year with respect to all series of Cumulative Prior Preferred Stock for which a sinking fund requirement must be met in that year. To the extent that the terms of any series permit the sinking fund requirement for such series to be met by the surrender of stock, the aggregate par value of the shares surrendered for such purpose shall be considered as equivalent in amount to cash set aside for such series. The sinking fund requirement for each series of the Cumulative Prior Preferred Stock for which a sinking fund has been established shall be cumulative, so that if in any year the Corporation shall not satisfy the sinking fund requirement for such year, the amount of the deficiency shall be added to the sinking fund
requirement for the next succeeding year. Unless and until all such deficiencies shall have been made good, no dividends shall be declared or paid and no other payment or distribution shall be made on stock ranking junior to the Cumulative Prior Preferred Stock with respect to the payment of dividends, and no such stock shall be purchased, redeemed or otherwise acquired for value by the Corporation.
Section 4.13. Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of each series of the Cumulative Prior Preferred Stock at the time outstanding shall be entitled to be paid in cash the amount for the particular series fixed therefore as herein provided, together with an amount equal to accrued but unpaid dividends, before any amount shall be paid to, or any assets distributed among, the holders of stock ranking junior to the Cumulative Prior Preferred Stock with respect to payments upon liquidation, dissolution, or winding up; but no payments on account of such distributive amounts shall be made to the holders of any series of the Cumulative Prior Preferred Stock unless there shall likewise be paid at the same time to the holders of each other series of the Cumulative Prior Preferred Stock at the time outstanding like proportionate distributive amounts, ratably, in proportion to the full distributive amounts to which they are respectively entitled as herein provided. The holders of the Cumulative Prior Preferred Stock of any series shall not be entitled to receive any amounts with respect thereto upon any liquidation, dissolution or winding up of the Corporation other than the amounts referred to in this section. Neither the consolidation or merger of the Corporation with any other corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, shall for the purpose of this Section 4.13 be deemed to be a liquidation, dissolution or winding up of the Corporation.
Section 4.14. Power of Board With Respect to Series. The Corporation may, at any time or from time to time, within the then total authorized amount of the Cumulative Prior Preferred Stock of all series, increase the authorized amount of any series of the Cumulative Prior Preferred Stock or of any unclassified Cumulative Prior Preferred Stock, classify or reclassify any unissued shares of the Cumulative Prior Preferred Stock as shares of the Cumulative Prior Preferred Stock of any series or as unclassified Cumulative Prior Preferred Stock, create one or more additional series of the Cumulative Prior Preferred Stock, fix the authorized amount of any series (which amount shall be subject to change from time to time by like action), and fix the designations and the rights and preferences, and restrictions and qualifications thereof, of any series of the Cumulative Prior Preferred Stock in the respects in which the shares of any series may vary from the shares of other series of the Cumulative Prior Preferred Stock as provided in Section 4.09 hereof, by the vote of a majority in interest of the total number of shares of each series of the Series Preferred Stock and of a majority in interest of the total number of shares of the Class B Common Stock of the Corporation then outstanding given at a meeting called for that purpose in accordance with the provisions of Section 4.30 hereof, and no vote or consent of the holders of shares of the Cumulative Prior Preferred Stock, as a class or otherwise, shall be required in connection therewith nor shall the holders of shares of the Cumulative Prior Preferred Stock be entitled to notice of any such meeting. In case and to the extent that under the laws of Delaware at the time in effect, the Board of Directors of the Corporation shall be authorized by law to create new series of the Cumulative Prior Preferred Stock or to fix the amounts, designations, rights and preferences, and restrictions and qualifications thereof, of the shares of any series of the Cumulative Prior Preferred Stock or to take any other action with respect to the Cumulative Prior Preferred Stock of the Corporation specified in this Section 4.14, no action of stockholders of the Corporation with respect thereto shall be required under the provisions of this Section 4.14 and all action authorized by the provisions of this Section 4.14 to be taken by vote of the holders of the Class B Common Stock may be taken by vote of the Board of Directors of the Corporation.
Section 4.15. Restrictions on Corporate Action.
(A) So long as any shares of the Cumulative Prior Preferred Stock of any series are outstanding, the corporation shall not, without the consent (given in writing or by vote at a meeting called for that purpose in accordance with the provisions of Section 4.30 hereof) of the holders of at least three-fourths of the total number of shares of the Cumulative Prior Preferred Stock of all series then outstanding:
(a) Incur any long-term indebtedness if, after giving effect thereto, the
total long-term indebtedness will exceed sixty-five percent (65%) of the
capitalization of the Corporation. For the purpose of this Subsection (a), the
term "long-term indebtedness" shall mean all indebtedness of the Corporation
except indebtedness which by its terms matures within twelve (12) months of the
date as of which the computation is made and which is not by its terms renewable
or extendable at the option of the Corporation so as to mature more than twelve
(12) months after said date and purchase money obligations maturing within two
(2) years after said date. For the purpose of this paragraph (a), (i)
"capitalization" of the Corporation shall be deemed to consist of the total of the long-term indebtedness of the Corporation, the aggregate par or stated value of all issued and outstanding shares of stock of the Corporation (including premiums on capital stock) and (ii) any write-up of the Corporation's properties made on the books of the Corporation subsequent to December 31, 1960, or any charges (whether against income or surplus) representing provision for the amortization or the write-down or write-off of any excess of book value of the Corporation's properties over the original cost thereof or over the cost thereof to any previous owner, made on the books of the Corporation subsequent to December 31, 1960, shall be disregarded;
(b) Create or authorize any class of stock unless such stock ranks junior to the Cumulative Prior Preferred Stock with respect both to the payment of dividends and distributions upon liquidation, dissolution, or winding up of the Corporation, or create or authorize any obligation or security convertible into shares of stock of any class other than shares of a class the creation or authorization of which is permitted as aforesaid;
(c) Amend, alter, change, or repeal any of the provisions of the Certificate of Incorporation dealing with the purposes of the Corporation so as to substantially change such purposes (an expansion, contraction, or change in territory to be served not being considered, within the meaning of the foregoing provision, as a change in purpose), or amend, alter, change, or repeal any of the express terms, whether in the Certificate of Incorporation or the authorizing resolution, of the Cumulative Prior Preferred Stock or of any series of the Cumulative Preferred Stock then outstanding in a manner prejudicial to the holders thereof; provided, however, that if any such amendment, alteration, change, or repeal would be prejudicial to the holders of one or more, but not all, of the series of the Cumulative Prior Preferred Stock at the time outstanding, the consent of the holders of at least three-fourths of the total number of shares of each series of Cumulative Prior Preferred Stock then outstanding and so affected (each such series being considered separately as a class) shall be required in lieu of the consent of the holders of at least three-fourths of the total number of shares of the Cumulative Prior Preferred Stock of all series then outstanding;
(d) Issue any shares of any series of the Cumulative Prior Preferred Stock or any shares of stock ranking prior to or on a parity with the Cumulative Prior Preferred Stock with respect to the payment of dividends or distributions upon liquidations, dissolution, or winding up of the Corporation,
(i) unless the gross income of the Corporation (determined in accordance with accepted accounting principles after deduction of all taxes based on income but before deduction of the interest charges hereinafter described), for any twelve (12) consecutive calendar months within the fifteen (15) calendar months preceding the calendar month within which such additional shares of stock shall be issued, shall have been at least 140% of the sum of (x) an amount equal to the interest for one (1) year on all indebtedness of the Corporation to be outstanding after the proposed issuance, except indebtedness which by its terms matures within twelve (12) months of the date on which such additional shares shall be issued and which is not by its terms renewable or extendable at the option of the Corporation so as to mature more than twelve (12) months after said date and except purchase money obligations maturing within two (2) years after said date, and (y) an amount equal to the dividend requirement for one (1) year on all shares of Cumulative Prior Preferred Stock of all series and on all other shares of stock ranking equally with or prior to the Cumulative Prior Preferred Stock with respect to the payment of dividends or distributions upon liquidation, dissolution or winding up of the Corporation, to be outstanding immediately after such issue, (including the shares proposed to be issued but not including any shares proposed to be redeemed or otherwise retired in connection with such issue); and
(ii) unless, after such issuance, the equity of junior stock shall equal or exceed the sum of the total par value, accrued and unpaid dividends, and any premium payable upon a voluntary liquidation applicable to all outstanding shares of Cumulative Prior Preferred Stock and any class ranking prior to or on a parity with the Cumulative Prior Preferred Stock with respect to the payment of dividends or distributions upon liquidation, dissolution or winding up of the Corporation; or
(e) Reissue any shares of the Cumulative Prior Preferred Stock previously purchased, redeemed, or retired, whether or not purchased, redeemed, or retired through operation of any sinking fund; or
(f) Merge or consolidate if the purposes of the resulting corporation would be substantially different from those of the Corporation (an expansion, contraction or change in territory to be served not being considered, within the meaning of the foregoing provision, as a change in purpose), or if any adverse change in the terms and provisions of the Cumulative Prior Preferred Stock would result, or if the voting rights or potential voting rights of the Cumulative Prior Preferred Stock would be in any way diluted, or if the equity of the Cumulative Prior Preferred Stock would be reduced below the equity applicable to such shares determined from the balance sheet of the Corporation as of a date no more than ninety (90) days prior to the effective date of such consolidation or merger, or if the resulting corporation would have outstanding any stock ranking prior to the Cumulative Prior Preferred Stock with respect to the payment of dividends or distributions upon liquidation, dissolution or winding up of the Corporation other than shares of stock of the Corporation outstanding immediately prior to such effective date.
(B) So long as any shares of the Cumulative Prior Preferred Stock of any series are outstanding, the Corporation shall not, without the consent (given in writing or by vote at the meeting called for that purpose in accordance with the provisions of Section 4.30 hereof) of the holders of at least a majority of the total number of shares of the Cumulative Prior Preferred Stock of all series then outstanding, increase the total number of authorized shares of the Cumulative Prior Preferred Stock of all series so that such authorized number of shares shall exceed Eighty Thousand (80,000).
Section 4.16. Preemptive Rights. No holder of shares of any series of the Cumulative Prior Preferred Stock shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock, or securities convertible into stock, of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services, by way of dividends, or otherwise.
Section 4.17. Voting Rights.
(A) The holders of the Cumulative Prior Preferred Stock shall have no
voting power except as may be by statute otherwise mandatorily provided or
except as otherwise provided in Article Third or in this Section 4.17 or in
Section 4.15 of this Article Fourth.
(B) If and when dividends on any shares of the Cumulative Prior Preferred Stock at the time outstanding shall be in default in whole or in part for each of three (3) quarter-yearly periods, whether or not successive, then the holders of all shares of the Cumulative Prior Preferred Stock shall be entitled to vote as a class for not less than one-third of the Board of Directors; and, if and when dividends on any shares of the Cumulative Prior Preferred Stock at the time outstanding shall be in default in whole or in part for each of seven (7) quarter-yearly periods, whether or not successive, then the holders of all shares of the Cumulative Prior Preferred Stock shall be entitled to vote as a class for not less than a majority of the Board of Directors.
(C) If and when the Corporation fails to pay in full the amount of the sinking fund payment applicable to any shares of the Cumulative Prior Preferred Stock in any year, then the holders of all shares of the Cumulative Prior Preferred Stock shall be entitled to vote as a class for not less than one-third of the Board of Directors, irrespective of any default in dividends or of failure of the holders of shares of the Cumulative Prior Preferred Stock to exercise their rights under sub-section (B) above; and, if and when the Corporation fails to pay in full the amount of the sinking fund payment applicable to any shares of the Cumulative Prior Preferred Stock for two years, whether or not successive, then the holders of all shares of the Cumulative Prior Preferred Stock shall be entitled to vote as a class for not less than a majority of the Board of Directors, irrespective of any default in dividends or of failure of the holders of the shares of the Cumulative Prior Preferred Stock to exercise their rights under sub-section (B) above. The rights of the holders of shares of the Cumulative Prior Preferred Stock to vote for directors under this sub-section (C) shall be an alternative to, and not an addition to, their rights under sub-section (B) above.
(D) If and when all dividends then in default on the Cumulative Prior Preferred Stock then outstanding shall be paid (and such dividends shall be declared and paid out of any funds legally available therefore as soon as reasonably practicable), and if and when the Corporation has paid the full amount of the sinking fund payments applicable to the Cumulative Prior Preferred Stock, the Cumulative Prior Preferred Stock shall thereupon be divested of any special rights with respect to the election of directors and the voting power of the Cumulative Prior Preferred Stock and the Class B Common Stock shall revert to the status existing either before the occurrence of the dividend default, as provided in sub-section (B) hereof, or before the sinking fund payment failure, as provided in sub-section (C) hereof; but always subject to the same provisions
for vesting such special rights in the Cumulative Prior Preferred Stock in case of further like default or defaults in dividends thereon or further like failure to pay the full amount of the sinking fund payment.
(E) In case of any vacancy in the office of a director occurring among the directors elected by the holders of Cumulative Prior Preferred Stock, as a class, pursuant to the foregoing provisions of sub-sections (B) and (C) hereof, the remaining director or directors elected by the holders of Cumulative Prior Preferred Stock may appoint a successor to hold office for the unexpired term of the director whose place shall be vacant.
(F) Whenever under the provisions of sub-sections (B) and (C) hereof, the right shall have accrued to the holders of the Cumulative Prior Preferred Stock to elect directors, the Board of Directors shall within ten (10) days after delivery to the Corporation at its principal office of a request to such effect signed by any holder of the Cumulative Prior Preferred Stock entitled to vote, call a special meeting of the holders of the Cumulative Prior Preferred Stock to be held within thirty (30) days from delivery of such request for the purpose of electing the number of directors which the Cumulative Prior Preferred Stock is entitled to elect to serve until the next annual meeting of stockholders. At all meetings of stockholders held for the purpose of electing directors during such times as the holders of shares of the Cumulative Prior Preferred Stock shall have the special right to elect directors pursuant to sub-sections (B) and (C) hereof, the presence in person or by proxy of the holders of a majority of the outstanding shares of all series of the Cumulative Prior Preferred Stock entitled to vote in the election shall be required to constitute a quorum of such class for the election of directors; provided, however, that in the absence of such a quorum the holders of a majority of the stock of such class entitled to vote in the election who are present in person or by proxy shall have power to adjourn the election of the directors to be elected by such class from time to time without notice other than announcement at the meeting until the requisite amount of holders of such class shall be present in person or by proxy, but such adjournment shall not be made to a date beyond the date for the mailing of notice of the next annual meeting of the Corporation or special meeting in lieu thereof.
Section 4.18. Designation. The Cumulative Prior Preferred Stock constitutes a redesignation of the previously-authorized class heretofore designated as the "Cumulative Preferred Stock."
PART III
Section 4.19. Issuable in Series. The Series Preferred Stock may be issued from time to time in one or more series. Subject to Parts I and II of this Article Fourth, the voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, shall be such as may be fixed by the Board of Directors (authority so to do being hereby expressly granted) and stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the initial issue of Series Preferred Stock of such series.
Section 4.20. Restrictions on Issuance. No shares of the Series Preferred Stock shall be issued without the prior consent of the holders of the Class A Non-Voting Common Stock.
Section 4.21. Except as otherwise provided in the express terms of any series of the Series Preferred Stock, the number of authorized shares of the Series Preferred Stock may be increased or decreased by the affirmative vote of the holders of the majority of the stock entitled to vote thereon under this Article Fourth.
PART IV
Section 4.22. Voting Rights. Except in statutory proceedings as to which the vote of holders of Class A Non-Voting Common Stock may be required by law and, except as provided in Section 4.20, no right to vote shall be exercised by the holders of the Class A Non-Voting Common Stock.
Section 4.23. Dividends. Subject to the provisions of Parts I, II and III above, such dividends (payable in cash, stock, or otherwise) as may be determined by the Board of Directors, may be declared and paid on the Class A Non-Voting Common Stock, but only out of funds legally available for the payment of dividends; provided, however, that the same dividend per share is declared and paid on the Class B Common Stock.
Section 4.24. Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Corporation, all assets and funds of the Corporation remaining after paying or providing for the payment of all creditors of the Corporation and after paying or providing for the payment to the holders of shares of the 7% Prior Preferred Stock and of all series of the Cumulative Prior Preferred Stock and Series Preferred Stock of the full distributive amounts to which they are respectively entitled, as provided in or pursuant to Parts I, II and III above, shall be divided among and paid to the holders of the Class B Common Stock and the Class A Non-Voting Common Stock according to their respective shareholdings.
Section 4.25. Preemptive Rights. The holders of Class A Non-Voting Common Stock shall have no preemptive rights.
PART V
Section 4.26. (A) Voting Rights. The right to vote shall be exercised exclusively by the holders of the Class B Common Stock, except as provided in Parts II and III above with reference to voting rights of Cumulative Prior Preferred Stock and Series Preferred Stock, and except in statutory proceedings as to which the vote of other classes of stock may be required by law.
(B) In the event that the holders of shares of Cumulative Prior Preferred Stock are entitled to vote for directors, pursuant to the provisions of Part II above, then, to the extent that the right to elect directors is not expressly given to the holders of shares of Cumulative Prior Preferred Stock, the right to elect directors remains exclusively with the holders of any series of the Series Preferred Stock having voting rights by the express terms of such series and with the holders of the Class B Common Stock.
Section 4.27. Dividends. Subject to the provisions of Parts I, II and III above, such dividends (payable in cash, stock, or otherwise) as may be determined by the Board of Directors, may be declared and paid to the Class B Common Stock, but only out of funds legally available for the payment of dividends; provided, however, that the same dividend per share is declared and paid on the Class A Non-Voting Common Stock.
Section 4.28. Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Corporation, all assets and funds of the Corporation remaining after paying or providing for the payment of all creditors of the Corporation and after paying or providing for the payment to the holders of shares of the 7% Prior Preferred Stock and of all series of the Cumulative Prior Preferred Stock and the Series Preferred Stock of the full distributive amounts to which they are respectively entitled, as provided in or pursuant to Parts I, II and III above, shall be divided among and paid to the holders of the Class B Common Stock and the Class A Non-Voting Common Stock according to their respective shareholdings.
Section 4.29. Preemptive Rights. The holders of Class B Common Stock shall have no preemptive rights.
PART VI
Section 4.30. Notice of Meetings. Notice of any meeting of stockholders of the Corporation, or of the holders of any class of stock, required or authorized by the provisions of the Certificate of Incorporation or by law, setting forth the purpose or purposes of such meeting, shall be mailed by the Corporation, not less than ten (10) days nor more than sixty (60) days prior to such meeting, unless some mandatory provision of law shall require a longer or additional notice, to all stockholders, at their respective addresses appearing on the books of the Corporation, entitled to vote thereat of record as of a date fixed by the Board of Directors of the Corporation for the purpose of determining the stockholders entitled to notice of and to vote at such meeting, unless such notice shall have been waived, either before or after the holding of such meeting, by all stockholders entitled to notice thereof and to vote thereat. Any action authorized to be taken at a meeting called for that purpose in accordance with the provisions of this Section 4.30 may be taken either at a special meeting or at any regular or annual meeting provided that notice of such proposed action is included in the notice of such regular or annual meeting. Except where some mandatory provision of law shall be controlling, no other, longer or additional notice need be given of any such meeting and all holders of shares of stock of the Corporation, by becoming such, thereby consent to the holding of any such meeting upon notice given as hereinbefore provided and thereby waive, to the full extent permitted by law, any right to require the giving of or to receive any such other, longer or additional notice.
Section 4.31. Definitions. As used in this Article Fourth, the following words and phrases have the meanings herein specified unless the context connotes otherwise:
(A) "Corporation" means Artesian Resources Corporation, a Delaware corporation.
(B) "Accrued but unpaid dividends" means, in respect of each particular share having a dividend preference, the amount of the difference between
(a) the amount computed by multiplying the following factors:
(i) dividend preference rate;
(ii) par value (except that if the share shall have no par value, the stated amount of dividends payable with respect to such share shall be deemed to be the product of the dividend preference rate and the par value for the purposes of this definition);
(iii) period of time elapsing between the date from which dividends on such share became cumulative and the date on which the dividends are stated to be accrued; and
(b) the aggregate amount of dividends paid on such share.
(C) "Outstanding" when used in reference to shares of stock means issued shares, excluding shares held by the Corporation
(D) "Junior Stock" means, with respect to the Prior Preferred Stock, the presently outstanding Class A Non-Voting Common Stock, the Class B Common Stock, any series of the Series Preferred Stock and any stock hereafter issued if the rights of the holders of such stock shall be subject or subordinate to the rights of the holders of the Cumulative Prior Preferred Stock in respect of the receipt of dividends and of amounts distributable upon any dissolution, liquidation, or winding up, as the case may be, and with respect to the Series Preferred Stock, and presently outstanding Class A Non-Voting Common Stock, the Class B Common Stock, and any stock hereafter issued if the rights of the holders of such stock shall be subject or subordinate to the rights of the holders of any series of the Series Preferred Stock in respect of the receipt of dividends or of amounts distributable upon any dissolution, liquidation, or winding up, as the case may be.
(E) "Equity" of a particular class of stock means the amount of the Corporation's capital stock and surplus accounts properly allocable to such class of stock in accordance with accepted accounting principles.
FIFTH: In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to make, alter, amend and repeal the By-Laws of the Corporation, subject to the power of the holders of capital stock of the Corporation to alter, amend or repeal the By-Laws; provided, however, that, with respect to the powers of holders of capital stock to make, alter, amend and repeal By-Laws of the Corporation, notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, this Restated Certificate of Incorporation or any Preferred stock, the affirmative vote of the holders of at least 75 percent of the voting power of all of the then-outstanding shares entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class, shall be required to (i) make, alter, amend or repeal any provision of the By-Laws, or (ii) alter, amend or repeal any provision of this Article FIFTH.
SIXTH: Section 6.01. Number, Election and Terms of Directors; Board Action. Subject to the rights of the holders of any series of Preferred stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. The directors, other than those who may be elected by the holders of any series of Preferred stock under specified circumstances, shall be divided, with respect to the time for which they severally hold office, into three classes with the term of office of the first class to expire at the first annual meeting of stockholders following the adoption of this provision, the term of office of the second class to expire at the second annual meeting of stockholders following the adoption of this provision, the term of office of the third class to expire at the third annual meeting of stockholders following the adoption of this provision, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, (i) directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (ii) if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created.
Section 6.02. Newly Created Directorships And Vacancies. Subject to applicable law and to the rights of the holders of any series of Preferred stock with respect to such series of Preferred stock, and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director's successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the entire Board of Directors shall shorten the term of any incumbent director.
Section 6.03. Removal. Subject to the rights of the holders of any series of Preferred stock with respect to such series of Preferred stock, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 75 percent of the voting power of all of the then outstanding shares of the Voting Stock, voting together as a single class.
Section 6.04. Amendment, Repeal or Alteration. Notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock required by law, this Restated Certificate of Incorporation or the terms of any Preferred stock, the affirmative vote of the holders of at least 75 percent of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article.
SEVENTH: The Corporation hereby elects to be governed by Section 203 of the Delaware General Corporation Law. Any amendment of this Restated Certificate of Incorporation reflecting an election to not be so governed shall be adopted in accordance with Section (b) (3) of such Section 203.
EIGHTH: Elections of directors need not be by written ballot unless the By-laws of the Corporation shall so provide.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in the Certificate of Incorporation, in the manner now or hereafter prescribed by the Statutes of the State of Delaware, and all rights conferred on officers, directors and stockholders herein are granted subject to this reservation.
TENTH: LIABILITIES OF DIRECTORS AND OFFICERS
Section 10.01. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
Section 10.02. Interpretation. The provisions of this Article TENTH shall be deemed to be a contract with each director of the Corporation who serves as such at any time while this Article is in effect, and each person who serves as a director of the Corporation while this Article is in effect shall be deemed to be doing so in reliance on the provisions of this Article and such provisions are cumulative of and shall be in addition to and independent of any and all other limitations on the liabilities of directors of the Corporation, as such, or rights of indemnification by the Corporation to which a director of the Corporation, as such, or rights of indemnification by the Corporation to which a director of the Corporation may be entitled, whether such limitations or rights arise under or are created by an statute, rule of law, By-law, agreement, vote of stockholders or disinterested directors or otherwise. No amendment to or repeal of this Article TENTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment, repeal or adoption of an inconsistent provision. In any action, suit or proceeding involving the application of the provisions of this Article TENTH, the party or parties challenging the right of a director to the benefits of this Article shall have the burden of proof.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which restates, integrates and amends the provisions of the Restated Certificate of Incorporation of the Corporation and which has been duly adopted in accordance with Sections 242 and 245 of the Delaware General Corporation Law, has been executed by its President and attested by its Secretary this 28th day of April, 2004.
ARTESIAN RESOURCES CORPORATION
ARTESIAN RESOURCES CORPORATION
BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
(1) An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at such
place, on such date, and at such time as the Board of Directors shall each year
fix, which date shall be within thirteen (13) months of the last annual meeting
of stockholders.
(2) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's notice of meeting, (b) by or at the direction of the Board
of Directors or (c) by any stockholder of record of the Corporation who was a
stockholder of record at the time of the giving of the notice provided for in
the following paragraph, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in this section.
(3) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(2) of the foregoing paragraph, (1) the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation and (2) such
business must be a proper matter for stockholder action under the General
Corporation Law of the State of Delaware. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not less than 90 days nor more than 120 days prior to the first
anniversary (the "Anniversary") of the date on which the Corporation first
mailed its proxy materials for the preceding year's annual meeting of
stockholders; provided, however, that if the date of the annual meeting is
advanced by more than 30 days before, or delayed by more than 60 days after the
anniversary of the preceding year's annual meeting, notice by the stockholder to
be timely must be so delivered not later than the close of business on the later
of (i) the 100th day prior to such annual meeting or (ii) the 10th day following
the day on which public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person as would be required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such stockholder,
as they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation that are owned beneficially
and of record by such stockholder and such beneficial owner.
(4) Notwithstanding anything in the second sentence of paragraph (3) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 90 days prior to the Anniversary, a stockholder's notice required by this by-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
(5) Only such persons who are nominated in accordance with the procedures set forth in this Section 1 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in these By-laws, and if any proposed nomination or business is not in compliance with these By-laws, to declare that such defectively proposed business or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.
(6) For purposes of these By-laws, "public announcement" shall mean disclosure in a press release reported by at least one newspaper circulated through the State of Delaware or document publicly filed by the Corporation with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of this Section 1, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.
Section 2. Special Meetings: Notice.
(1) Special meetings of the stockholders, other than those required by statute, may be called at any time by the Board of Directors acting pursuant to a resolution approved by a majority of the Whole Board. For purposes of these By-laws, the term "Whole Board" shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The Board of Directors may postpone or reschedule any previously scheduled special meeting.
(2) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of record of the Corporation who is a stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in Section 1 of this Article I. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder's notice required by the third paragraph of Section 1 of this Article I shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.
(3) Notwithstanding the foregoing provisions of this Section 2, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2.
Section 3. Notice of Meetings.
Notice of the place, if any, date, and time of all meetings of the stockholders, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, notice need not be given of the adjourned meeting if the place, if any, date and time thereof and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meetings are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, notice of the place, if any, date, and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by a class or classes or series is required, a majority of the shares of such class or classes or series present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn the meeting to another place, if any, date, or time.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the absence of such a person, the Chairman of the Board or, in his or her absence, the Chief Executive Officer of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. The chairman shall have the power to adjourn the meeting to another place, if any, date and time. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be complete reproduction of the entire original writing or transmission.
The Corporation may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability.
All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast affirmatively or negatively.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting in the manner provided by law.
The stock list shall also be open to the examination of any stockholder during the whole time of the meeting as required by law. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be made by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in the first paragraph of this Section.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number, Election and Term of Directors.
Subject to the rights of the holders of any series of preferred stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. The directors, other than those who may be elected by the holders of any series of preferred stock under specified circumstances, shall be divided, with respect to the time for which they severally hold office, into three classes with the term of office of the first class to expire at the first annual meeting of stockholders following the adoption of this provision, the term of office of the second class to expire at the second annual meeting of stockholders following the adoption of this provision and the term of office of the third class to expire at the third annual meeting of stockholders following the adoption of this provision, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, (i) directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (ii) if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created.
Section 2. Newly Created Directorships and Vacancies.
Subject to applicable law and to the rights of the holders of any series of preferred stock with respect to such series of preferred stock, and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director's successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the entire Board of Directors shall shorten the term of any incumbent director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by the President or by two or more directors then in office and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived by mailing written notice not less than five (5) days before the meeting or by telephone or by telegraphing or telexing or by facsimile transmission or electronic transmission of the same not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the total number of the Whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these By-laws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
Unless otherwise restricted by the certificate of incorporation, the Board of Directors shall have the authority to fix the compensation of the directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or paid a stated salary or paid other compensation as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. The Board of Directors has, by resolution passed by a majority of the Whole Board, elected that the Corporation be governed by Section 141(c)(2) of the Delaware General Corporation Law. Accordingly, any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all powers which may require it; but no such committee shall have the power or authority in reference to the following matter: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval (other than the election or removal of directors) or (ii) adopting, amending or repealing any by-law of the Corporation.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third (1/3) of the members shall constitute a quorum unless the committee shall consist of one (1) or two (2) members, in which event one (1) member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
ARTICLE IV - OFFICERS
Section 1. Generally. The officers of the Corporation shall consist of a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. The salaries of officers elected by the Board of Directors shall be fixed from time to time by the Board of Directors or by such officers as may be designated by resolution of the Board.
Section 2. President.
Unless otherwise provided by the Board of Directors, the President shall be the Chief Executive Officer of the Corporation. Subject to the provisions of these By-laws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation.
Section 3. Vice President.
Each Vice President shall have such powers and duties as may be delegated to him or her by the Board of Directors. One (1) Vice President shall be designated by the Board to perform the duties and exercise the powers of the President in the event of the President's absence or disability.
Section 4. Treasurer.
The Treasurer shall have the responsibility for maintaining the financial records of the Corporation. He or she shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Corporation. The Treasurer shall also perform such other duties as the Board of Directors may from time to time prescribe.
Section 5. Secretary.
The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. He or she shall have charge of the corporate books and shall perform such other duties as the Board of Directors may from time to time prescribe.
Section 6. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.
Section 7. Removal.
Any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these by-laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may, except as otherwise required by law, fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within 10 days after the date on which such a request is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board of Directors pursuant to the first sentence of this paragraph). If no record date has been fixed by the Board of Directors within 10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporation action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, recognized overnight delivery service or by sending such notice by facsimile, receipt acknowledged, or by prepaid telegram or mailgram. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the Delaware General Corporation Law. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand delivered, or deposited in the mail, if delivered through the mails or by telegram or mailgram, shall be the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of Directors.
Section 5. Time Periods.
In applying any provision of these By-laws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or controller of the Corporation or is or was serving at the request of the Corporation as a director, officer, or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, controller or trustee or in any other capacity while serving as a director, officer, controller or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section 3 of this ARTICLE VIII with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
Section 2. Right to Advancement of Expenses.
In addition to the right to indemnification conferred in
Section 1 of this Article VIII, an indemnitee shall also have the right to be
paid by the Corporation the expenses (including attorney's fees) incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director, officer or controller (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 2 or otherwise.
Section 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this ARTICLE VIII is not
paid in full by the Corporation within sixty (60) days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
(20) days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) in any suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the indemnitee
has not met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its directors who are not parties to such action, a committee of such
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its directors who
are not parties to such action, a committee of such directors, independent legal
counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE VIII or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred in this ARTICLE VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation's Certificate of Incorporation, By-laws, agreement, vote of stockholders or disinterested directors or otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
Section 7. Nature of Rights.
The rights conferred upon indemnitees in this ARTICLE VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, controller or trustee and shall inure to the benefit of the indemnitee's heirs, executors and administrators. Any amendment, alteration or repeal of this Article VIII that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.
ARTICLE IX - AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to make, alter, amend and repeal these By-Laws subject to the power of the holders of capital stock of the Corporation to alter, amend or repeal the By-Laws; provided, however, that, with respect to the powers of holders of capital stock to make, alter, amend and repeal By-Laws of the Corporation, notwithstanding any other provision of these By-Laws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, these By-Laws or any preferred stock, the affirmative vote of the holders of at least 75 percent of the voting power of all of the then-outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to make, alter, amend or repeal any provision of these By-Laws.
Exhibit 31.1
I, Dian C. Taylor certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2004 of Artesian Resources Corporation (this "Report");
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e ) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this Report our
conclusions about the effectiveness of the registrant's
disclosure controls and procedures as of the end of the period
covered by this Report based on such evaluation;
c) disclosed in this Report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 28, 2004 /s/ Dian C. Taylor
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Dian C. Taylor
Chief Executive Officer (Principal
Executive Officer)
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Exhibit 31.2
I, David B. Spacht certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2004 of Artesian Resources Corporation (this "Report");
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this Report our
conclusions about the effectiveness of the registrant's
disclosure controls and procedures as of the end of the period
covered by this Report based on such evaluation;
c) disclosed in this Report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 28, 2004 /s/ David B. Spacht
---------------------------------
David B. Spacht
Chief Financial Officer and Treasurer
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Exhibit 32
ARTESIAN RESOURCES CORPORATION
FORM OF OFFICER CERTIFICATIONS REQUIRED BY SECTION 906 OF
THE SARBANES-OXLEY ACT
Certification by the Chief Executive Officer and Chief Financial Officer Relating to a Periodic Report Containing Financial Statements
I, Dian C. Taylor, Chief Executive Officer, and David B. Spacht, Chief Financial Officer, of Artesian Resources Corporation, a Delaware corporation (the "Company"), hereby certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on our knowledge:
(1) The Company's periodic report containing financial statements on Quarterly Report on Form 10-Q for the period ended March 31, 2004 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 USC Section 78m(a) or Section 78o(d)), as amended; and
(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 30, 2004
CHIEF EXECUTIVE OFFICER: CHIEF FINANCIAL OFFICER:
/s/ Dian C. Taylor /s/ David B. Spacht
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Dian C. Taylor David B. Spacht
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