アルテシアンリソーシズの四半期報告

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ 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 000-18516

ARTESIAN RESOURCES CORPORATION

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(Exact name of registrant as specified in its charter)

Delaware	51-0002090
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(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

664 Churchmans Road, Newark, Delaware 19702

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Address of principal executive offices

(302) 453 – 6900

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Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock	ARTNA	The Nasdaq Stock Market

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.

☑

Yes

□

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑

Yes

□

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.

Large Accelerated Filer □

Accelerated Filer ☐

Non-accelerated Filer ☑

Smaller Reporting Company ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ).

☐

Yes

☑

As of May 8, 2023, 8,628,221 shares of Class A Non-Voting Common Stock and 881,452 shares of Class B Common Stock were outstanding.

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ARTESIAN RESOURCES CORPORATION

FORM 10-Q

Part I	-	Financial Information:

Item 1	-	Financial Statements	Page(s)

		Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	3

		Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	5 - 6

		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)	7

		Notes to the Condensed Consolidated Financial Statements	8 - 24

Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	25 - 31

Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4	-	Controls and Procedures	32

Part II	-	Other Information	32

Item 1	-	Legal Proceedings	32

Item 1A	-	Risk Factors	32

Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3		Defaults Upon Senior Securities	32

Item 4		Mine Safety Disclosures	32

Item 5		Other Information	32

Item 6	-	Exhibits	33
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Signatures

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PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

ASSETS	March 31, 2023		December 31, 2022
Utility plant, at original cost (less accumulated depreciation - 2023 - $176,243; 2022 - $172,954)	$	679,714	$	668,031
Current assets
Cash and cash equivalents		115		1,309
Accounts receivable (less allowance for doubtful accounts - 2023 - $410; 2022 - $416)		10,218		13,511
Income tax receivable		737		1,632
Unbilled operating revenues		1,296		1,586
Materials and supplies		5,260		4,702
Prepaid property taxes		1,085		2,186
Prepaid expenses and other		2,898		2,878
Total current assets		21,609		27,804
Other assets
Non-utility property (less accumulated depreciation - 2023 - $1,007; 2022 - $990)		3,727		3,740
Other deferred assets		11,056		10,536
Goodwill		1,939		1,939
Operating lease right of use assets		502		467
Total other assets		17,224		16,682
Regulatory assets, net		7,239		7,274
Total Assets	$	725,786	$	719,791

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	9,504	$	9,502
Preferred stock		—		—
Additional paid-in capital		107,290		107,143
Retained earnings		72,345		71,286
Total stockholders' equity		189,139		187,931
Long-term debt, net of current portion		176,263		175,619
		365,402		363,550
Current liabilities
Lines of credit		21,609		20,174
Current portion of long-term debt		2,090		2,003
Accounts payable		8,103		10,929
Accrued expenses		4,060		4,246
Overdraft payable		210		43
Accrued interest		1,441		989
Income taxes payable		618		6
Customer and other deposits		2,510		2,489
Other		2,899		3,190
Total current liabilities		43,540		44,069

Commitments and contingencies

Deferred credits and other liabilities
Net advances for construction		3,633		3,686
Operating lease liabilities		496		466
Regulatory liabilities		28,664		28,721
Deferred investment tax credits		435		439
Deferred income taxes		54,457		54,552
Total deferred credits and other liabilities		87,685		87,864

Net contributions in aid of construction		229,159		224,308
Total Liabilities and Stockholders’ Equity	$	725,786	$	719,791

See notes to the condensed consolidated financial statements.

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ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In thousands, except per share amounts)

	For the Three Months Ended March 31,
	2023		2022
Operating revenues
Water sales	$	18,016	$	18,143
Other utility operating revenue		2,817		2,525
Non-utility operating revenue		1,662		1,519
Total Operating Revenues		22,495		22,187

Operating expenses
Utility operating expenses		11,272		10,495
Non-utility operating expenses		1,085		943
Depreciation and amortization		3,224		3,085
State and federal income taxes		1,313		1,419
Property and other taxes		1,541		1,502
Total Operating Expenses		18,435		17,444

Operating income		4,060		4,743

Other income
Allowance for funds used during construction (AFUDC)		459		181
Miscellaneous income		1,603		1,446

Income before interest charges		6,122		6,370

Interest charges		2,417		1,887

Net income applicable to common stock	$	3,705	$	4,483

Income per common share:
Basic	$	0.39	$	0.48
Diluted	$	0.39	$	0.47

Weighted average common shares outstanding:
Basic		9,504		9,423
Diluted		9,510		9,455

Cash dividends per share of common stock	$	0.2784	$	0.2675

See notes to the condensed consolidated financial statements.

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ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands)

	For the Three Months Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,705		$	4,483
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,224			3,085
Deferred income taxes, net		(99	)		34
Stock compensation		56			49
AFUDC, equity portion		(288	)		(125	)

Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts		3,293			1,878
Income tax receivable		895			1,257
Unbilled operating revenues		290			(60	)
Materials and supplies		(558	)		(919	)
Income tax payable		612			244
Prepaid property taxes		1,101			1,827
Prepaid expenses and other		(20	)		333
Other deferred assets		(529	)		(499	)
Regulatory assets		6			92
Regulatory liabilities		(116	)		(109	)
Accounts payable		(874	)		(2	)
Accrued expenses		(511	)		(137	)
Accrued interest		452			422
Deposits and other		(131	)		(34	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		10,508			11,819

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(16,794	)		(9,776	)
Investment in acquisitions, net of cash acquired		—			(2,842	)
Proceeds from sale of assets		53			2
NET CASH USED IN INVESTING ACTIVITIES		(16,741	)		(12,616	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under lines of credit agreements		1,435			706
Increase in overdraft payable		167			103
Net advances and contributions in aid of construction		5,259			2,764
Net proceeds from issuance of common stock		93			537
Issuance of long-term debt		1,120			—
Dividends paid		(2,646	)		(2,518	)
Deferred debt issuance costs		—			(30	)
Principal repayments of long-term debt		(389	)		(379	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		5,039			1,183

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(1,194	)		386

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		1,309			92

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	115		$	478

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ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED

Unaudited

(In thousands)

Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	$	545	$	1,878
Change in amounts included in accounts payable, accrued payables and other related to capital expenditures		(1,771)		684

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	1,965	$	1,465
Income taxes paid	$	10	$	—


Purchase price allocation of investment in acquisitions:
Utility plant	$	—	$	25,354
Cash		—		280
Goodwill		—		1,939
Other assets		—		1,033
Total assets		—		28,606
Less:
Liabilities		—		2,808
Contributions in aid of construction		—		22,676
Cash paid for acquisitions		—		3,122
Cash received from acquisitions		—		280
Net cash paid for acquisitions	$	—	$	2,842

See notes to the condensed consolidated financial statements.

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ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited

(In thousands)

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total

Balance as of December 31, 2021		8,532		881	$	8,532	$	881	$	104,989	$	63,607		$	178,009
Net income		–		–		–		–		–		4,483			4,483
Cash dividends declared
Common stock		–		–		–		–		–		(2,518	)		(2,518	)
Issuance of common stock
Dividend reinvestment plan		2		–		2		–		87		–			89
Employee stock options and awards(4)		22		–		22		–		475		–			497
Employee Retirement Plan(3)		–		–		–		–		–		–			–
Balance as of March 31, 2022		8,556		881		8,556		881		105,551		65,572			180,560

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings		Total

Balance as of December 31, 2022	$	8,621	$	881	$	8,621	$	881	$	107,143	$	71,286	$	187,931
Net income		–		–		–		–		–		3,705		3,705
Cash dividends declared
Common stock		–		–		–		–		–		(2,646)		(2,646)
Issuance of common stock
Dividend reinvestment plan		2		–		2		–		91		–		93
Employee stock options and awards(4)		–		–		–		–		56		–		56
Employee Retirement Plan(3)		–		–		–		–		–		–		–
Balance as of March 31, 2023	$	8,623	$	881	$	8,623	$	881	$	107,290	$	72,345	$	189,139

(1)	At March 31, 2023, and March 31, 2022, Class A Common Stock had 15,000,000 shares authorized. For the same periods, shares issued, inclusive of treasury shares, were 8,651,976 and 8,585,947, respectively.

(2)	At March 31, 2023, and March 31, 2022, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

(3)	Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted for stock splits, available for purchase through the Company’s 401(k) retirement plan.

(4)

Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for March 31, 2023 and March 31, 2022, see Note 6-Stock Compensation Plans.

See notes to the condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED UTILITY SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware. In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private, municipal and state water providers. Artesian Water also provides water for public and private fire protection to customers in our service territories.

In May 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware. This purchase agreement is discussed further in the “Strategic Direction and Recent Developments” section.

Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005. Artesian Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc. Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI. TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company. Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex. This acquisition more than doubled the number of wastewater customers served by Artesian’s Delaware wastewater subsidiaries in Sussex County, Delaware and included all residents within the Town of Milton, Delaware.

MARYLAND REGULATED UTILITY SUBSIDIARIES

Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, was incorporated on June 3, 2008 and is authorized and able to provide regulated wastewater services to customers in the State of Maryland. It is currently not providing these services.

PENNSYLVANIA REGULATED UTILITY SUBSIDIARY

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002. It provides water service to a residential community in Chester County, Pennsylvania.

OTHER NON-UTILITY SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions. Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental agencies. Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.

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Artesian Utility currently operates wastewater treatment facilities for the Town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039. Artesian Utility currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan (collectively, SLP Plans). The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit. The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware. The office facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas. The ability to offer storm water services will complement the primary water and wastewater services that we provide. Artesian Storm Water is not actively seeking new opportunities.

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2022 as filed with the SEC on March 10, 2023.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of March 31, 2023, the results of its operations for the three-month periods ended March 31, 2023 and March 31, 2022, its cash flows for the three-month periods ended March 31, 2023 and March 31, 2022 and the changes in stockholders’ equity for the three-month periods ended March 31, 2023 and March 31, 2022. The December 31, 2022 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2022 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Regulated Utility Accounting

The accounting records of Artesian Water, Artesian Wastewater, and, effective January 14, 2022, TESI are maintained in accordance with the uniform system of accounts as prescribed by the Delaware Public Service Commission, or the DEPSC. The accounting records of Artesian Water Pennsylvania are maintained in accordance with the uniform system of accounts as prescribed by the Pennsylvania Public Utility Commission, or the PAPUC. The accounting records of Artesian Water Maryland and Artesian Wastewater Maryland are maintained in accordance with the uniform system of accounts as prescribed by the Maryland Public Service Commission, or the MDPSC. Each of these subsidiaries follow the provisions of Financial Accounting Standards Board, or FASB, ASC Topic 980, which provide guidance for companies in regulated industries. These regulated subsidiaries account for the majority of our operating revenue. See Note 16 to our Condensed Consolidated Financial Statements for a full description of our segment information.

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Use of Estimates

The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions regarding the reported amounts of assets and liabilities including unbilled revenues, credit losses and reserves for bad debt, regulatory asset recovery, lease agreements, goodwill and contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management's estimates.

All additions to utility plant are recorded at cost. Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency. Artesian Wastewater acquired TESI in January 2022 and Artesian Water purchased substantially all of the water operating assets from the Town of Clayton in May 2022. As of December 31, 2022, the fair value determination for TESI and the town of Clayton is finalized. A third-party valuation specialist assisted with the valuation of the assets acquired.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. These reclassifications had no effect on net income or stockholders' equity.

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon regulated tariff rates approved by the DEPSC, the MDPSC, and the PAPUC. Regulated tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices. Our non-tariff contract revenues, which are primarily non-utility revenues, consist of SLP Plan fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees. Other regulated operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory. We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period. As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware. We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred. These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue. The contract also provides for a minimum required volume of wastewater flow to our facility. At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue. Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.

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Artesian generates revenue from metered wastewater services provided to certain customers in Sussex County, Delaware. We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period. As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of these wastewater customers are billed for the volume of water transferred on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next quarterly cycle.

Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory. Our wastewater territory is located in Sussex County, Delaware. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service. These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis. For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle. For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges. These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed. There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements. This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period. This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement. Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services. These contract services are billed in advance on a monthly or quarterly basis. As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing. An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

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Artesian generates contract operation revenue from water and wastewater operation services provided to customers. We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues. We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided. An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness. The related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract. We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost). These services are invoiced at the end of every month based on incurred costs to date. As of March 31, 2023, there is no associated contract asset or liability. There is no allowance for doubtful accounts or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities. These fees are paid by developers in advance when a service is requested for a new phase of a development. Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed. As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected. There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax. Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax. Therefore, no sales tax is collected on revenues.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2023		Three months ended March 31, 2022
Tariff Revenue
Consumption charges	$	10,447	$	10,566
Fixed fees		8,038		7,778
Service charges		180		156
DSIC		1,178		1,182
Metered wastewater services		106		140
Industrial wastewater services		446		407
Total Tariff Revenue	$	20,395	$	20,229

Non-Tariff Revenue
Service line protection plans	$	1,363	$	1,222
Contract operations		244		211
Design and installation		105		123
Inspection fees		78		41
Total Non-Tariff Revenue	$	1,790	$	1,597

Other Operating Revenue	$	310	$	361

Total Operating Revenue	$	22,495	$	22,187

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Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2023		December 31, 2022
Contract Assets – Tariff	$	2,332	$	2,618

Deferred Revenue
Deferred Revenue – Tariff	$	1,241	$	1,231
Deferred Revenue – Non-Tariff		414		438
Total Deferred Revenue	$	1,655	$	1,669

For the three months ended March 31, 2023, the Company recognized revenue of $1.2 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.3 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of March 31, 2023 and December 31, 2022, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of March 31, 2023 and December 31, 2022, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, contract water operation services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months for the SLP revenue, approximately seven years for the contract service revenue and one year for the inspection fee revenue.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable are recorded at the invoiced amounts. As set forth in a settlement agreement, Artesian Water will receive reimbursements from the Delaware Sand and Gravel Remedial Trust, or Trust, for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site, or Site, in groundwater that Artesian Water uses for public potable water supply. Approximately $2.5 million was paid in August 2022. The remaining $7.5 million is due in three equal installments no later than August of each year from 2023 through 2025.

An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant. The following table summarizes the changes in the Company’s accounts receivable balance:

	March 31,		December 31,
(in thousands)	2023		2022

Customer accounts receivable – water	$	5,972	$	5,981
Customer accounts receivable – wastewater		483		482
Settlement agreement receivable		2,567		2,532
Miscellaneous accounts receivable		692		3,781
Developer receivable		914		1,151
		10,628		13,927
Less allowance for doubtful accounts		410		416
Net accounts receivable	$	10,218	$	13,511

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NOTE 5 – LEASES

The Company leases land and office equipment under operating leases from non-related parties. Our leases have remaining lease terms of 5 years to 74 years, some of which include options to automatically extend the leases for up to 66 years and are included as part of the lease liability and right of use assets as we expect to exercise the options. Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease. The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements. Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land. None of the operating leases contain contingent rent provisions. The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment. The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases. As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

Rent expense for all operating leases, except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022

Minimum rentals		$	2		$	7
Contingent rentals			–			–

		$	2		$	7

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	2	$	7
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	502	$	446

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2023			December 31, 2022

Operating Leases:
Operating lease right-of-use assets	$	502		$	467

Other current liabilities	$	8			2
Operating lease liabilities		496			466
Total operating lease liabilities	$	504		$	468


Weighted Average Remaining Lease Term
Operating leases	57 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

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Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2023 are as follows:

	(in thousands)
	Operating Leases
Year
2024	$	34
2025		34
2026		34
2029		34
2030		34
Thereafter		1,405
Total undiscounted lease payments	$	1,575
Less effects of discounting		(1,071	)
Total lease liabilities recognized	$	504

As of March 31, 2023, we have not entered into operating or finance leases that will commence at a future date.

NOTE 6 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company’s stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan, that replaced the 2005 Equity Compensation Plan, or the 2005 Plan, which expired on May 24, 2015. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee of the Board of Directors, or the Committee. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, determine the type, size and terms of the grants, determine the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan) and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries are eligible for grants under the 2015 Plan. Non-employee directors of the Company are also eligible to receive grants under the 2015 Plan.

Compensation expense of $56,000, related to the May 2022 issue of restricted stock awards, was recorded for the three months ended March 31, 2023. Compensation expense of $49,000 was recorded for the three months ended March 31, 2022 for restricted stock awards issued in May 2021. Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

On May 3, 2022, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards. The fair value per share was $45.58, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 3, 2022. Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the three months ended March 31, 2023:

	Options								Restricted Awards
	Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date FairValue
Plan options/restricted stock awards
Outstanding at January 1, 2023		6,750	$	21.86			$	248		5,000	$	45.58
Granted		—		—				—		—		—
Exercised/vested and released		—		—				—		—		—
Expired/cancelled		—		—				—		—		—
Outstanding at March 31, 2023		6,750	$	21.86		1.103	$	226		5,000	$	45.58

Exercisable/vested at March 31, 2023		6,750	$	21.86		1.103	$	226		—		—

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There were no options exercised during the three months ended March 31, 2023.

There were no unvested option shares outstanding under the 2015 Plan during the three months ended March 31, 2023.

As of March 31, 2023, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.

As of March 31, 2023, there was $20,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan. The cost will be recognized over 0.09 years, the remaining vesting period for the restricted stock awards.

NOTE 7 – OTHER DEFERRED ASSETS

The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements. The settlement agreement receivable is related to the long-term portion of reimbursements due in years 2024 and 2025 as further discussed in Note 4-Accounts Receivable.

(in thousands)	March 31, 2023	December 31, 2022

Investment in CoBank	$5,882	$5,351
Settlement agreement receivable-long term	4,991	4,991
Other deferred assets	183	194
	$11,056	$10,536

NOTE 8 - REGULATORY ASSETS

The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. 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 DEPSC, MDPSC, and PAPUC.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from efforts necessary to secure water allocations in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water. These costs were specifically included for cost recovery pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery by the PAPUC and were reclassed from deferred costs to a regulatory asset in 2022.

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Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Deferred costs affiliated interest agreement	20
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2023		December 31, 2022

Deferred income taxes	$	460	$	465
Deferred contract costs and other		255		227
Debt related costs		4,593		4,682
Goodwill		264		266
Rate case studies		99		57
Deferred costs affiliated interest agreement		1,114		1,114
Deferred acquisition and franchise costs		454		463
	$	7,239	$	7,274

NOTE 9 – REGULATORY LIABILITIES

FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. Each year the liability is increased by an annual amount authorized by the DEPSC.

Deferred settlement refunds consist of reimbursements from the Delaware Sand and Gravel Remedial Trust for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site in groundwater that Artesian Water uses for public potable water supply, pursuant to the Settlement Agreement. Approximately $2.5 million was paid in August 2022. The remaining $7.5 million is due in three equal installments no later than August of each year from 2023 through 2025. Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these reimbursements for past capital and operating costs. The refund for the reimbursements will be applied to current and future customer bills in annual installments. The first refund occurred in October 2022, and future customer refunds will occur no later than August of each year from 2023 through 2025. The amount of the credit will be calculated by dividing the amount of the reimbursement by the number of eligible customers. Beginning in 2022, Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications. For a full discussion of the Settlement Agreement, refer to Note 17 - Legal Proceedings.

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Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 12) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland. The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes. On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, the Company received a rate order from the DEPSC instructing the Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing. The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2023		December 31, 2022

Utility plant retirement cost obligation	$	47	$	-
Deferred settlement refunds		7,487		7,487
Deferred income taxes (related to TCJA)		21,130		21,234
	$	28,664	$	28,721

NOTE 10 - 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, the potentially dilutive effect of employee stock options and restricted stock awards.

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended March 31,
	2023		2022
	(in thousands)

Weighted average common shares outstanding during the period for Basic computation		9,504		9,423
Dilutive effect of employee stock options and awards		6		32

Weighted average common shares outstanding during the period for Diluted computation		9,510		9,455

For the three months ended March 31, 2023 and 2022, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of March 31, 2023, 8,622,999 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of March 31, 2022, 8,556,970 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share.

Equity per common share was $19.90 and $19.16 at March 31, 2023 and December 31, 2022, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2023 and December 31, 2022, respectively.

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NOTE 11 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company’s requested level of rates.

We are subject to regulation by the following state regulatory commissions:

• The DEPSC, regulates Artesian Water, Artesian Wastewater, and TESI.

• The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

• The PAPUC, regulates Artesian Water Pennsylvania.

Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.

Water and Wastewater Rates

Our regulated subsidiaries 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. Artesian Water provided notice to the DEPSC of its intent to file a request in the second quarter of 2023 to implement new rates to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations. 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. Any DSIC rate in effect will be reset to zero upon implementation of a temporary increase in base rates charged to customers. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales. Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect. If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest. The timing of our rate increase requests is 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. See Note 19 – Subsequent Events.

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

The following table summarizes (1) Artesian Water’s application with the DEPSC to collect DSIC rates and (2) the rate upon which eligible plant improvements are based:

Application Date	11/20/20
DEPSC Approval Date	12/14/20
Effective Date	01/01/21
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

The rate reflects the eligible plant improvements installed through April 30, 2019. The January 1, 2021 rate currently remains in effect and is subject to periodic audit by the DEPSC. For each of the three months ended March 31, 2023 and March 31, 2022, we earned approximately $1.2 million in DSIC revenue.

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NOTE 12 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated subsidiaries recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. The statute of limitations for the 2018 tax returns lapsed during the third quarter of 2022, which resulted in the reversal of the reserve in the amount of approximately $212,000. The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense. During the third quarter of 2022, the Company reversed approximately $10,000 in penalties and interest leaving a zero balance. The Company remains subject to examination by federal and state authorities for the tax years 2019 through 2022.

Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.

NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of March 31, 2023 and December 31, 2022 was fixed-rate. The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825. Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements. Level 2 is valued using observable inputs other than quoted prices. The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates. The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

(in thousands)
	March 31, 2023		December 31, 2022
Carrying amount	$	178,353	$	177,622
Estimated fair value	$	151,673	$	155,425

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

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NOTE 14 – BUSINESS COMBINATIONS

As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware. Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware. The acquisition is being accounted for as a business combination under ASC Topic 805, “Business Combinations.” The purchase price allocation is primarily attributed to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date. The Company utilized a third-party valuation firm to assist with the fair value of the assets acquired. A combination of methods was used to determine the reasonableness of the purchase price: the cost approach and the comparative sales (market) approach. Given the majority of the net assets acquired were tangible utility plant assets and related contributions in aid of construction, the Company primarily utilized the cost approach to record the fair value of the assets as well as some of the assumed liabilities. This approach values the underlying assets to derive market value based on the estimated replacement cost, adjusted for depreciation. Real property was valued using the comparative sales approach. Goodwill was recognized primarily as a result of expected synergies of operations and interconnections to our existing utility plant infrastructure. Any goodwill as a result of the transaction is not expected to be deductible for tax purposes.

The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case.

The results of operations for the three months ended March 31, 2023 and March 31, 2022 related to the business acquired are included in the Company’s condensed consolidated statements of operations.

The table below sets forth the final purchase price allocation of this acquisition as of December 31, 2022.

(in thousands)
		TESI
	Utility plant	$	25,354
	Cash		280
	Goodwill		2,983
	Other assets		1,033
	Total assets		29,650
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		3,852
	CIAC		22,676
	Net cash purchase price	$	3,122

Additionally, as part of the Company’s growth strategy, on May 26, 2022, Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. At closing, Artesian Water paid approximately $3.4 million of the total purchase price. The remaining $1.6 million is payable in five equal annual installments on the anniversary date of the closing. Each annual installment is payable with interest at an annual rate of 2.0%. The acquisition was accounted for as a business combination under ASC Topic 805. The purchase price allocation is $7.9 million of utility plant assets offset by $2.9 million of CIAC. The Company utilized similar valuation methodologies to those described above.

This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022. The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case. The pro forma effects of the business acquired are not material to the Company’s financial position or results of operations based on estimated annual revenue of approximately $0.5 million related to customers acquired.

As of December 31, 2022, the fair value determination for TESI and the town of Clayton is finalized.

NOTE 15 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of March 31, 2023, Artesian Water was serving approximately 95,000 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. As of March 31, 2023, the number of wastewater customers served was approximately 7,700, including one large industrial customer.

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NOTE 16 – BUSINESS SEGMENT INFORMATION

The Company’s operating segments are comprised of its businesses which generate revenues and incur expenses, for which separate operational financial information is available and is regularly evaluated by management for the purpose of making operating decisions, assessing performance, and allocating resources. The Company operates its businesses primarily through one reportable segment, the Regulated Utility segment. The Regulated Utility segment is the largest component of the Company’s business and includes an aggregation of our five regulated utility subsidiaries that are in the business of providing regulated water and wastewater services on the Delmarva Peninsula. Our regulated water utility services include treating, distributing, and selling water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware and in Cecil County, Maryland and to a residential community in Chester County, Pennsylvania. Our regulated wastewater utility services include the treatment and disposal of wastewater for customers in Sussex County, Delaware. The Company is subject to regulations as to its rates, services, and other matters by the states of Delaware, Maryland and Pennsylvania with respect to utility service within these states.

The Company also operates other non-utility businesses, primarily comprised of: Service Line Protection Plan services for water, sewer and internal plumbing; design, construction and engineering services; and contract services for the operation and maintenance of water and wastewater systems in Delaware and Maryland. These non-utility businesses do not individually or in the aggregate meet the criteria for disclosure of a reportable segment in accordance with generally accepted accounting principles and are collectively presented throughout this Quarterly Report on Form 10-Q within “Other” or “Non-utility”, which is consistent with how management assesses the results of these businesses.

The accounting policies of the operating segments are the same as those described in Note 2 – Basis of Presentation. The Regulated Utility segment includes inter-segment costs related to leased office space provided by one non-utility business, calculated on the lower of cost or market method, which are eliminated to reconcile to the Consolidated Statements of Operations. The Regulated Utility segment also allocates certain corporate costs to the non-utility businesses. The measurement of depreciation, interest, and capital expenditures are predominately related to our Regulated Utility segment. These amounts in our non-utility business are negligible and account for approximately less than 1% of consolidated amounts as of March 31, 2023 and March 31, 2022.

(in thousands)
	Three Months Ended March 31,
	2023			2022
Revenues:
Regulated Utility	$	20,832			20,668
Other (non-utility)		1,716			1,552
Inter-segment elimination		(53	)		(33	)
Consolidated Revenues	$	22,495			22,187

Operating Income:
Regulated Utility	$	3,705			4,338
Other (non-utility)		355			405
Consolidated Operating Income	$	4,060			4,743

Income Taxes:
Regulated Utility	$	1,066			1,243
Other (non-utility)		247			176
Consolidated Income Taxes	$	1,313			1,419

	March 31, 2023		December 31, 2022
Assets:
Regulated Utility	$	721,564	$	713,113
Other (non-utility)		4,222		6,678
Consolidated Assets	$	725,786	$	719,791

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NOTE 17 – LEGAL PROCEEDINGS

Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business. We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations. However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention.

On July 19, 2022, final judgment was entered by the United States District Court, or Court, for a Consent Decree between the Delaware Sand and Gravel Remedial Trust, or Trust, and the United States Environmental Protection Agency, or USEPA, that governs the implementation of Amendment No 2 to the USEPA’s 1988 Record of Decision for the Delaware Sand & Gravel Landfill Superfund Site, or Site, located in New Castle County, Delaware, issued on December 12, 2017, or ROD Amendment No. 2, confirming, among other things, the terms and conditions set forth in a Settlement Agreement upon which The Chemours Company FC, LLC, Hercules, LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage Settlors, and the Trust, on one hand, and Artesian Water, on the other hand, have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from the Site.

ROD Amendment No. 2 sets forth the remedy for the contamination existing at and emanating from the Site, or the Remedy, to address a release of contaminants of concern and of emerging concern, or COC’s, from the Site into groundwater. Artesian Water has found in groundwater that Artesian Water uses for public potable water supply certain COC’s that the Remedy is designed to address, as a result of which Artesian has incurred, and potentially will incur additional, capital and operating costs to treat the groundwater to meet applicable drinking water standards. The Remedy includes requirements that are directly linked to Artesian’s continued operation of the treatment plant associated with groundwater around the Site.

As set forth in the Settlement Agreement, Artesian Water shall have access to financial assurances that the Percentage Settlors have provided, or will provide, to the USEPA in connection with the Consent Decree governing the implementation of the Remedy. In addition, the Trust shall reimburse Artesian Water for past capital and operating costs, totaling approximately $10.0 million. Approximately $2.5 million was paid in August 2022, and the remaining $7.5 million will be payable in three equal installments annually on the anniversary date of the Court’s approval of the Consent Decree. In addition, the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs after July 1, 2021 that Artesian Water incurs to treat Site-related COC’s. Any reimbursements Artesian Water receives from the Trust shall be subject to final determination by the DEPSC as to the appropriate regulatory rate-making treatment. Artesian Water received approval from the DEPSC in October 2022 to refund the reimbursements for past capital and operating costs to its customers. The refund for the reimbursements will be applied to current and future customer bills in annual installments. The first refund occurred in October 2022, and future customer refunds will occur no later than August of each year from 2023 through 2025. The amount of the credit is calculated by dividing the amount of the reimbursement by the number of eligible customers. Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications. The Trust’s reimbursement of such costs shall end if and when, based upon testing information from the Trust’s Remedy facilities and Artesian Water’s facilities, treatment of Site-related COC’s is no longer necessary for Artesian Water to meet the treatment levels that Artesian Water chooses to not exceed in water it distributes to the general public throughout its service territory to provide a margin of safety in complying with applicable drinking water standards.

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NOTE 18 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

There was no new guidance issued by the FASB during the three months ended March 31, 2023 that is applicable to the Company.

NOTE 19 – SUBSEQUENT EVENTS

On April 28, 2023, Artesian Water Company, Inc. (“Artesian Water”), the principal subsidiary of Artesian Resources Corporation, filed a request with the Delaware Public Service Commission to implement new rates to meet a requested increase in revenue of 23.84%, or approximately $17.5 million, on an annualized basis. The actual effective increase is less than 23.84% since Artesian Water has been permitted to recover specific investments made in infrastructure through the assessment of a 7.50% Distribution System Infrastructure Charge (“DSIC”). Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental increase of 16.34%, the net of the overall 23.84% increase less the DSIC rate of 7.50% currently in effect, if the requested increase is granted in full by the Delaware Public Service Commission. The new rates are designed to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality testing, fuel, taxes, interest, labor and benefits. In accordance with applicable Delaware law, Artesian Water is permitted to implement temporary rates of 15% or $2.5 million, whichever is lower, 60 days after the application is accepted. Since Artesian Water has DSIC surcharges in excess of the allowable temporary increase and imposing the temporary increase would require DSIC to be reset to zero, Artesian Water has elected not to request the initial temporary rate increase. However, should the application not be resolved within the seven-months statutory timeframe, Artesian Water would be permitted to place into effect temporary rates of up to 15% of gross water sales on an annual basis, subject to refund, until permanent rates are determined by the Delaware Public Service Commission. Artesian Water’s last comprehensive application for an increase in base rate charges was filed in April 2014.

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ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q that express our "belief," "anticipation" or "expectation," as well as other statements that are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act and the Private Securities Litigation Reform Act of 1995. Statements regarding our goals, priorities, growth and expansion plans and expectation for our water and wastewater subsidiaries and non-regulated subsidiaries, customer base growth opportunities in Delaware and Cecil County, Maryland, our belief regarding the timing and results of our rate requests, our belief regarding our capacity to provide water services for the foreseeable future to our customers, our belief relating to our compliance and the cost to achieve compliance with relevant governmental regulations, our expectation of the timing of decisions by regulatory authorities, the impact of weather on our operations and the execution of our strategic initiatives, our expectation of the timing for construction on new projects, our expectation relating to the adoption of recent accounting pronouncements, contract operations opportunities, legal proceedings, our properties, deferred tax assets, adequacy of our available sources of financing, the expected recovery of expenses related to our long-term debt, our expectation to be in compliance with financial covenants in our debt instruments, our ability to refinance our debt as it comes due, our ability to adjust our debt level, interest rate, maturity schedule and structure, the timing and terms of renewals of our lines of credit, plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement benefit plan, anticipated growth in our non-regulated division, the impact of recent acquisitions on our ability to expand and foster relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally generated funds and credit facilities to provide working capital and our liquidity needs 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. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements. Certain factors as discussed under Item 1A -Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022, and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, such as changes in weather, changes in our contractual obligations, changes in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally, and other matters could cause results to differ materially from those in the forward-looking statements. While the Company may elect to update forward-looking statements, we specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as a representation of the Company's views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2023

OVERVIEW

Our profitability is primarily attributable to the sale of water and wastewater services in our regulated utility business. Our regulated utility segment comprised 92.4% of total operating revenues for the three months ended March 31, 2023 and 93.0% for the three months ended March 31, 2022. Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature. In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected. We believe these effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services provide a revenue stream that is not affected by these changes in weather patterns. We continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas.

Our profitability is also attributed to other non-utility business, such as various contract operations, water, sewer and internal SLP Plans and other services we provide. Our contract operations, SLP Plans and other services also provide a revenue stream that is not affected by changes in weather patterns. We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services. We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers. Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions. We anticipate continued growth in our non-utility subsidiaries due to our water, sewer, and internal SLP Plans.

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Inflation

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 replacement costs which must be recovered from future cash flows. Our ability to recover increases in investments in facilities is dependent upon future rate increases, which are subject to approval by the applicable regulatory authority. We can provide no assurances that any future rate increase request will be approved, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase. The impact of inflation could adversely affect our results of operations, financial position or cash flows.

Materials and Supplies

We are highly dependent on the availability of essential materials and parts from our suppliers for expansion, construction and maintenance of our services. The majority of the materials required for our water and wastewater utility business are typically under contract at fixed prices, however, supply chain issues associated with the COVID-19 pandemic resulted in price increases and delays in procuring certain materials and equipment in 2021 and 2022. We have been successful in minimizing these delays with thorough planning and pre-ordering. However, there is no assurance that our future financial results or business operations will not be negatively affected.

Regulated Water Subsidiaries

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water service to residential, commercial, industrial, governmental, municipal and utility customers. Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue. As of March 31, 2023, the number of metered water customers in Delaware increased approximately 3.2% compared to March 31, 2022. The number of metered water customers in Maryland increased approximately 1.0% compared to March 31, 2022. The number of metered water customers in Pennsylvania remained consistent compared to March 31, 2022. For the three months ended March 31, 2023, approximately 1.9 billion gallons of water were distributed in our Delaware systems and approximately 22.3 million gallons of water were distributed in our Maryland systems.

Regulated Wastewater Subsidiaries

Artesian Wastewater and TESI own wastewater collection and treatment infrastructure and provide regulated wastewater services to customers in Sussex County, Delaware. Artesian Wastewater Maryland is able to provide regulated wastewater services to customers in Maryland. It is not currently providing these services in Maryland. Our residential and commercial wastewater customers are billed a flat monthly fee, which contributes to providing a revenue stream unaffected by weather. As of March 31, 2023, the number of Delaware wastewater customers increased approximately 8.3% compared to March 31, 2022.

Non-Utility Subsidiaries

Artesian Utility provides contract water and wastewater operation services to private, municipal, and governmental institutions. Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan. SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather. There has been consistent customer growth over the years. As of March 31, 2023, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 1.6%, 0.5% and 5.1%, respectively, compared to March 31, 2022. The non-utility customers enrolled in one of our three protections plans decreased 1.7%.

Strategic Direction and Recent Developments

Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula. We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance. Our strategy has included a focus on building strategic partnerships with county governments, municipalities and developers. By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously. We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue. We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas.

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In our regulated water subsidiaries, our strategy is to focus on a wide spectrum of activities, which include strategic acquisitions of existing systems, expanding certificated service area, identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water. Our strategy includes focused efforts to expand through strategic acquisitions and in new regions added to our Delaware service territory over the last 10 years. We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems. The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state.

Our ability to develop partnerships with various county governments, municipalities and developers has provided a number of opportunities. In the last four years, we completed seven acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems.

We believe that Delaware's generally lower cost of living in the region and availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County have resulted, and will continue to result, in increases to our customer base. Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities. Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added.

On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022.

In our regulated wastewater subsidiaries, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal. In addition, Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another. In addition, since closing the transaction with TESI noted below, Artesian’s Delaware wastewater subsidiaries are the sole regional regulated wastewater utilities in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional opportunities to expand our wastewater operations.

On January 14, 2022, Artesian Wastewater acquired TESI, a wholly-owned subsidiary of Middlesex Water Company, or Middlesex, that provides regulated wastewater services in Delaware. Artesian Wastewater purchased all of the stock of TESI from Middlesex for $6.4 million in cash and other consideration, including, forgiveness of a $2.1 million note due from Middlesex. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware and included all residents in the Town of Milton.

The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth, more protective water quality standards, aging infrastructure and acquisitions. Our planned and budgeted capital improvements over the next three years include projects for water infrastructure improvements and expansion in both Delaware and Maryland and wastewater infrastructure improvements and expansion in Delaware. The DEPSC and MDPSC have generally recognized the operating and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges for new customers.

In our non-utility subsidiaries, we continue pursuing opportunities to expand our contract operations. Through Artesian Utility, we will seek to expand our contract design, engineering and construction services of water and wastewater facilities for developers, municipalities and other utilities. We also anticipate continued growth due to our water, sewer and internal SLP Plans. Artesian Development owns two nine-acre parcels of land, located in Sussex County, Delaware, which will allow for construction of a water treatment facility and wastewater treatment facility. Artesian Storm Water was formed to expand contract work related to the design, installation, maintenance and repair services associated with existing or proposed storm water management systems in Delaware and the surrounding areas.

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Results of Operations – Analysis of the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022.

Operating Revenues

Revenues totaled $22.5 million for the three months ended March 31, 2023, $0.3 million, or 1.4%, more than revenues for the three months ended March 31, 2022. Other utility operating revenue increased approximately $0.3 million, or 11.6%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. This increase is primarily due to an increase in wastewater revenue associated with customer growth.

Non-utility operating revenue increased approximately $0.1 million, or 9.4%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. This increase is primarily due to an increase in Service Line Protection Plan revenue.

Water sales revenue decreased $0.1 million, or 0.7%, for the three months ended March 31, 2023 from the corresponding period in 2022, primarily related to a one-time customer refund to be issued to Town of Frankford customers for a rate change retroactive to February 2022, as approved by the DEPSC in the first quarter of 2023, in accordance with the agreement for the purchase of Frankford’s water assets. We realized 80.1% and 81.8% of our total operating revenue for the three months ended March 31, 2023 and March 31, 2022, respectively, from the sale of water.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $0.9 million, or 7.4%, for the three months ended March 31, 2023, compared to the same period in 2022.

Utility operating expenses increased $0.8 million, or 7.4%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The net increase is primarily related to the following.

Payroll and employee benefit costs increased $0.6 million, primarily related to an increase in overall compensation, an increase in the number of employees and an increase in medical benefit costs.

Repair and maintenance costs increased $0.2 million, primarily associated with wastewater treatment and disposal facilities and water treatment and distribution operations along with a one-time acquisition adjustment related to TESI in 2022. In addition, hardware and software maintenance costs and fuel costs increased. These increases are partially offset by a decrease in water treatment filter replacements, due to the timing of scheduled replacements.

Water treatment costs increased $0.2 million, primarily due to an increase in the cost of chemicals as well as an increase in water treatment testing costs.

Purchased power costs increased $0.1 million due to an increase in usage in wastewater and water operations.

Administrative costs increased $0.1 million, primarily due to a one-time acquisition adjustment related to TESI’s allowance for doubtful accounts in 2022.

Purchased water costs decreased $0.5 million, related to a decrease of water purchased under contract, in which the minimum amount of water required to be purchased was reduced in July 2022.

Non-utility operating expenses increased $0.1 million primarily due to an increase in plumbing services related to Service Line Protection Plan repairs.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 61.8% for the three months ended March 31, 2023, compared to 58.3% for the three months ended March 31, 2022.

Depreciation and amortization expense increased $0.1 million, or 4.5%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense decreased $0.1 million, or 7.5%, primarily due to lower pre-tax income in 2023 compared to 2022, partially offset by a decrease in 2022 income tax expense related to stock options exercised in the first quarter of 2022.

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Other Income

Other income increased $0.4 million, primarily due to a $0.3 million increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC for the three months ended March 31, 2023 compared to the same period in 2022. Miscellaneous income increased $0.1 million related to an increase in the annual patronage refund from CoBank, ACB. The primary refund calculation for both 2023 and 2022 was based on the average loan balance outstanding.

Interest Charges

Long-term debt interest increased $0.3 million, primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022. Short-term debt interest increased $0.2 million, primarily related to higher interest rates. The average short-term interest rate for the three months ended March 31, 2023 was 5.71% compared to 1.48% for the same period in 2022.

Net Income

Our net income applicable to common stock decreased $0.8 million, or 17.4%. Total operating revenues increased $0.3 million and other income increased $0.4 million, offset by a $1.0 million increase in total operating expenses and $0.5 million increase in interest charges.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity for the three months ended March 31, 2023 were $10.5 million of cash provided by operating activities, $5.3 million in net contributions and advances from developers, which includes $1.8 million of grant funds from the State of Delaware, $1.1 million from the issuance of long-term debt and $0.1 million in net proceeds from the issuance of common stock. 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 ensure that 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. See Note 19 – Subsequent Events. We will continue to borrow on available lines of credit in order to satisfy current liquidity needs. In addition, the Company has a long history of paying regular quarterly dividends as approved by our Board of Directors using net cash from operating activities.

Investment in Plant and Systems

The primary focus of our investments is to continue to provide high quality reliable service to our growing service territory. Capital expenditures during the first three months of 2023 were $16.8 million compared to $9.8 million during the same period in 2022. During the first three months of 2023, we continued to focus our investment through our rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new mains, enhancing or improving existing treatment facilities, construction of new water storage tanks, and replacing aging wells and pumping equipment to better serve our customers. Developers contributed $1.4 million of these total investments during the first three months of 2023.

We depend on the availability of capital for expansion, construction and maintenance. We rely on our sources of liquidity to finance our investments in utility plant and to meet our various payment obligations. We estimate that future investments will be financed by our operations and external sources, including short-term borrowings under our revolving credit agreements discussed below. We expect to fund our activities for the next twelve months using our available cash balances, bank credit lines, projected cash generated from operations, state revolving fund loans and capital market financing. We believe that internally generated funds along with existing credit facilities will be adequate to provide sufficient working capital to maintain normal operations and to meet our financing requirements. However, because part of our business strategy is to expand through strategic acquisitions, we may seek additional debt financing or issue additional equity securities to finance future acquisitions or for other purposes. There is no assurance that we will be able to secure funding on terms acceptable to us, or at all. Our cash flows from operations are primarily derived from water sales revenues and may be materially affected by changes in water sales due to weather and the timing and extent of increases in rates approved by state public service commissions.

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Lines of Credit and Long-Term Debt

At March 31, 2023, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources. As of March 31, 2023, there was $27.5 million of available funds under this line of credit. The previous interest rate for borrowings under this line was the London Interbank Offered Rate, or LIBOR, plus 1.00%. It is expected that the LIBOR rate for USD currency will be discontinued after June 30, 2023. As a result, effective May 20, 2022, this line of credit agreement was amended to replace LIBOR with the Daily Secured Overnight Financing Rate, or SOFR. The interest rate is a one-month SOFR plus 10 basis points, or Term SOFR, plus an applicable margin of 0.85%. Term SOFR cannot be less than 0.00%. This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line of credit expires on the earlier of August 18, 2023 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At March 31, 2023, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland. As of March 31, 2023, there was $10.9 million of available funds under this line of credit. The previous interest rate for borrowings under this line allowed the Company to select either LIBOR plus 1.50% or a weekly variable rate established by CoBank; the Company historically used the weekly variable interest rate. In October 2022, this line of credit was amended to replace the previous interest rate options with a daily SOFR rate plus 1.45% option or a term SOFR rate plus 1.45% option that is locked in for either one or three months. The term of this line of credit expires on October 29, 2023. Artesian Water expects to renew this line of credit.

The Company’s material cash requirements include the following lines of credit commitments and contractual obligations:

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Material Cash Requirements	Payments Due by Period
In thousands	Less than 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
First mortgage bonds (principal and interest)	$	7,902	$	15,714	$	40,610	$	204,564	$	268,790
State revolving fund loans (principal and interest)		1,011		1,838		1,602		7,277		11,728
Promissory note (principal and interest)		959		1,923		1,923		10,373		15,178
Asset purchase contractual obligation (principal and interest)		345		672		647		---		1,664
Lines of credit		21,609		---		---		---		21,609
Operating leases		34		68		68		1,405		1,575
Operating agreements		76		111		116		771		1,074
Unconditional purchase obligations		818		1,554		580		---		2,952
Tank painting contractual obligation		626		783		---		---		1,409
Total contractual cash obligations	$	33,380	$	22,663	$	45,546	$	224,390	$	325,979

Artesian’s long-term debt agreements and revolving lines of credit contain customary affirmative and negative covenants that are binding on us (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on our ability to make certain loans and investments, guarantee certain obligations, enter into, or undertake, certain mergers, consolidations or acquisitions, transfer certain assets or change our business. As of March 31, 2023, we were in compliance with these covenants.

Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due if not refinanced earlier. One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per calendar quarter. The state revolving fund loan obligation and promissory note obligation have an amortizing mortgage payment payable over a 20-year period. The first mortgage bonds, the state revolving fund loan and the promissory note have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest. We have not experienced conditions that would result in our default under these agreements.

The asset purchase contractual obligation is related to the purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, in May 2022, by Artesian Water. The total purchase price was $5.0 million. At closing, Artesian Water paid approximately $3.4 million. The remaining $1.6 million is payable in five equal annual installments on the anniversary date of the closing date. Each annual installment is payable with interest at an annual rate of 2.0%.

In order to control purchased power cost, in February 2021, Artesian Water entered into an electric supply contract with MidAmerican that is effective from May 2021 to May 2025. The fixed rate was lowered 5.6% starting in May 2021. In February 2022, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2022 through November 2025. In January 2022, following the acquisition of Tidewater Environmental Services, Inc., TESI dba Artesian Wastewater assumed an electricity supply contract with WGL Energy that is effective through December 2024. These fixed rate electric supply contracts are for normal purchases and are not derivative instruments.

Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change under an interconnection agreement with the Chester Water Authority. The agreement is effective from January 1, 2022 through December 31, 2026, includes automatic five-year renewal terms, unless terminated by either party, and has a “take or pay” clause which required us to purchase water on a step-down schedule through July 5, 2022, and now requires us to purchase a minimum of 0.5 million gallons per day. In addition, payments for unconditional purchase obligations reflect minimum water purchase obligations based on a contract rate under our interconnection agreement with the Town of North East, which expires June 26, 2024.

In April 2021, Artesian Water entered into a 3-year agreement with Worldwide Industries Corporation effective July 1, 2021 to paint elevated water storage tanks. Pursuant to the agreement, the total expenditure for the three years was $1.2 million. In September 2022, this agreement was amended to paint an additional elevated water storage tank and to extend the term of the agreement for an additional year. Pursuant to the amended agreement, the total expenditure for the four years is $2.2 million.

Critical Accounting Assumptions, Estimates and Policies; Recent Accounting Pronouncements

This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2022 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, 2022. The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those based on such assumptions and estimates.

Our critical accounting assumptions, estimates and policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2022. There have been no changes in our critical accounting assumptions, estimates and policies. Our significant accounting policies are described in our notes to the 2022 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2022.

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2022 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2022 and also in the notes to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q. We did not adopt any accounting policy in the first three months of 2023 that had a material impact on our financial condition, liquidity or results of operations.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is 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 exposure to interest rate risk related to existing fixed rate, long-term debt is due to the term of the majority of our First Mortgage Bonds and the term of the promissory note, which have final maturity dates ranging from 2028 to 2049, and interest rates ranging from 4.24% to 5.96%, which exposes the Company to interest rate risk as interest rates may drop below the existing fixed rate of the long-term debt prior to such debt’s maturity. In addition, the Company has interest rate exposure on $60 million of variable rate lines of credit, with two banks, under which the interim bank loans payable at March 31, 2023 were approximately $21.6 million. An increase in the variable interest rates has resulted and is expected to continue to result in an increase in the cost of borrowing on these variable rate lines of credit. Also, changes in SOFR could affect our operating results and liquidity. We are also exposed to market risk associated with changes in commodity prices. Our risks associated with price increases in chemicals, electricity and other commodities are mitigated by our ability to recover our costs through rate increases to our customers. We have also sought to mitigate future significant electric price increases by signing multi-year supply contracts at fixed prices.

Table of Contents

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In addition, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to achieve the foregoing objectives. A control system cannot provide absolute assurance, however, that the objectives of the control 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.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors described in such Annual Report on Form 10-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

None.

Table of Contents

ITEM 6 - EXHIBITS

Exhibit No.	Description

3.1	Amended and Restated By-laws of Artesian Resources Corporation incorporated by reference to Exhibit 3.1 filed with the Company’s Form 8-K filed on November 23, 2020.
3.2	Restated Certificate of Incorporation of the Company effective April 28, 2004 incorporated by reference to Exhibit 3.1 filed with the Company’s Form 10-Q for the quarterly period ended March 31, 2004.

4.1	Amended and Restated Demand Line of Credit Agreement between Artesian Resources Corporation, and Citizens Bank, N.A. dated May 20, 2022. *

31.1	Certification of Chief Executive Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*

31.2	Certification of Chief Financial Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*

32	Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350).**

101.BAL	Inline XBRL Condensed Consolidated Balance Sheets (unaudited)*
101.OPS	Inline XBRL Condensed Consolidated Statements of Operations (unaudited)*

101.CSH	Inline XBRL Condensed Consolidated Statements of Cash Flows (unaudited)*

101.NTS	Inline XBRL Notes to the Condensed Consolidated Financial Statements (unaudited)*

104	The cover page from Artesian Resources Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, formatted in Inline XBRL (contained in exhibit 101).*

* Filed herewith

** Furnished herewith

Table of Contents

SIGNATURES

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

ARTESIAN RESOURCES CORPORATION

Date: May 10, 2023	By:	/s/ DIAN C. TAYLOR
		Dian C. Taylor (Principal Executive Officer)

Date: May 10, 2023	By:	/s/ DAVID B. SPACHT
		David B. Spacht (Principal Financial Officer)

* Filed herewith

** Furnished herewith

EX-31.1 2 exhibit31-1.htm EXHIBIT 31.1

Exhibit 31.1
Certification of Chief Executive Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended

I, Dian C. Taylor, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2023 of Artesian Resources Corporation;

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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		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 (the registrant's fourth fiscal quarter in the case of annual report) 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(s) 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 the registrant's board of directors (or persons performing the equivalent functions):

a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that 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: May 10, 2023			/s/ DIAN C. TAYLOR
			Dian C. Taylor
			Chief Executive Officer (Principal Executive Officer)

EX-31.2 3 exhibit31-2.htm EXHIBIT 31.2

Exhibit 31.2

Certification of Chief Financial Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended

I, David B. Spacht, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2023 of Artesian Resources Corporation;

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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		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 (the registrant's fourth fiscal quarter in the case of an annual report) 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(s) 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 the registrant's board of directors (or persons performing the equivalent functions):

a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that 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: May 10, 2023			/s/ DAVID B. SPACHT
			David B. Spacht
			Chief Financial Officer (Principal Financial Officer)

EX-32 4 exhibit32.htm EXHIBIT 32

Exhibit 32


Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350


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 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on our knowledge:

(1)	The Company's Quarterly Report on Form 10-Q for the period ended March 31, 2023 (the " Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m(a) or Section 78o(d)), as amended; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.




Date: May 10, 2023

CHIEF EXECUTIVE OFFICER:		CHIEF FINANCIAL OFFICER:


/s/ DIAN C. TAYLOR		/s/ DAVID B. SPACHT
Dian C. Taylor		David B. Spacht



These certifications accompany the Report to which they relate, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

EX-4 5 ex4.htm AMENDED AND RESTATED DEMAND LINE OF CREDIT AGREEMENT BETWEEN ARTESIAN RESOURCES CORPORATION, AND CITIZENS BANK, N.A. DATED MAY 20, 2022

AMENDED AND RESTATED

DEMAND LINE OF CREDIT AGREEMENT

by and between

CITIZENS BANK, N.A.

and

ARTESIAN RESOURCES CORPORATION

ARTESIAN WATER COMPANY, INC.

ARTESIAN WATER PENNSYLVANIA, INC.

ARTESIAN WATER MARYLAND, INC.

ARTESIAN WASTEWATER MANAGEMENT, INC.

ARTESIAN WASTEWATER MARYLAND, INC.

ARTESIAN UTILITY DEVELOPMENT, INC.

ARTESIAN DEVELOPMENT CORPORATION

TIDEWATER ENVIRONMENTAL SERVICES, INC.

May 20, 2022

AMENDED AND RESTATED

DEMAND LINE OF CREDIT AGREEMENT

THIS AMENDED AND RESTATED DEMAND LINE OF CREDIT AGREEMENT (the “Agreement”) is made as of the 20th day of May, 2022, by and between ARTESIAN RESOURCES CORPORATION, a Delaware corporation, ARTESIAN WATER COMPANY, INC., a Delaware corporation, ARTESIAN WATER PENNSYLVANIA, INC., a Pennsylvania corporation, ARTESIAN WATER MARYLAND, INC., a Delaware corporation, ARTESIAN WASTEWATER MANAGEMENT, INC., a Delaware corporation, ARTESIAN WASTEWATER MARYLAND, INC., a Delaware corporation, ARTESIAN UTILITY DEVELOPMENT, INC., a Delaware corporation, ARTESIAN DEVELOPMENT CORPORATION, a Delaware corporation, TIDEWATER ENVIRONMENTAL SERVICES, INC., a Delaware corporation (jointly and severally, “Borrower”), and CITIZENS BANK, N.A. (“Bank”). Borrower and Bank agree, under seal, as follows:

BACKGROUND

A. Borrower (excluding Tidewater Environmental Services, Inc.) and Bank are parties to a Demand Line of Agreement, dated as of January 19, 2010 (as amended, the “Existing Agreement”), pursuant to which the Bank has extended a $40,000,000 demand line of credit (“Line of Credit”) to the Borrower.

B. Borrower and Bank desire to amend and restate the Existing Agreement in its entirety as set forth in this Agreement.

C. The Bank is willing to agree to continue provide the Line of Credit, subject to the terms and conditions of this Agreement.

ARTICLE 1
DEFINITIONS

Section 1.1. Definitions. When used in this Agreement, the following terms shall have the respective meanings set forth below.

1.1.1. “ABR Loan” means an Advance bearing interest based on the Alternate Base Rate.

1.1.2. “Advance” means a borrowing under the Line of Credit in accordance with Section 2.5.

1.1.3. “Affiliate” means as to any Person, each other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Person in question. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.

1.1.4. “Agreement” means this Amended and Restate Demand Line of Agreement and all exhibits and schedules hereto, as each may be amended from time to time.

1.1.5. “Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50% per annum and (c) the Daily SOFR Rate on such day plus 1.00% per annum, provided that the Alternate Base Rate shall at no time be less than the Floor. If Bank shall have determined (which determination shall be conclusive absent clearly manifest error) that it is unable to ascertain the Federal Funds Rate or the Daily SOFR Rate for any reason, including the inability or failure of Bank to obtain sufficient quotations in accordance with the terms of the definition of the term Federal Funds Rate, the Alternate Base Rate shall be determined without regard to clause (b) or (c), as applicable, of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the Daily SOFR Rate, as applicable, shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or the Daily SOFR Rate, as applicable, respectively.

1.1.6. “Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or their respective Subsidiaries from time to time concerning or relating to bribery or corruption.

1.1.7. “Anti-Terrorism Laws” has the meaning assigned to such term in Section 3.19(c).

1.1.8. “Applicable Margin” means eighty-five (85) Basis Points.

1.1.9. “Available Amount” means $40,000,000.

1.1.10. “Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an Interest Period pursuant to this Agreement, or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof), as applicable, that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.13(d).

1.1.11. “Bank” means Citizens Bank, N.A. and its successors and assigns pursuant to Section 8.3.

1.1.12. “Bank Indebtedness” means all obligations and Indebtedness of Borrower to Bank, whether now or hereafter owing or existing, including, without limitation, all obligations under the Credit Documents, all other obligations or undertakings now or hereafter made by or for the benefit of Borrower under any other agreement, promissory note or undertaking now existing or hereafter entered into by Borrower with Bank, including, without limitation, all obligations of Borrower to Bank under any guaranty or surety agreement and all obligations of Borrower to immediately pay to Bank the amount of any overdraft on any deposit account maintained with Bank, together with all interest and other sums payable in connection with any of the foregoing.

1.1.13. “Basis Point” means one-hundredth of one percent.

1.1.14. “Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.13(a). Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.

1.1.15. “Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by Bank for the applicable Benchmark Replacement Date:

(a) Daily Simple SOFR; or

(b) the sum of (i) the alternate benchmark rate that has been selected by Bank giving due consideration to (A) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a benchmark rate and an adjustment as a replacement for the then-current Benchmark for Dollar-denominated credit facilities at such time and (ii) the related Benchmark Replacement Adjustment;

provided, that any such Benchmark Replacement shall be administratively feasible as determined by Bank in its sole discretion. If the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Credit Documents.

1.1.16. “Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method of calculating or determining such spread adjustment (which may be a positive or negative value or zero), that has been selected by Bank giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated credit facilities at such time.

1.1.17. “Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);

(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or

(c) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

1.1.18. “Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Credit Document in accordance with Section 2.13 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Credit Document in accordance with Section 2.13.

1.1.19. “Borrower” means, jointly and severally, ARTESIAN RESOURCES CORPORATION, a Delaware corporation, ARTESIAN WATER COMPANY, INC., a Delaware corporation, ARTESIAN WATER PENNSYLVANIA, INC., a Pennsylvania corporation, ARTESIAN WATER MARYLAND, INC., a Delaware corporation, ARTESIAN WASTEWATER MANAGEMENT, INC., a Delaware corporation, ARTESIAN WASTEWATER MARYLAND, INC., a Delaware corporation, ARTESIAN UTILITY DEVELOPMENT, INC., a Delaware corporation, ARTESIAN DEVELOPMENT CORPORATION, a Delaware corporation, and TIDEWATER ENVIRONMENTAL SERVICES, INC., a Delaware corporation.

1.1.20. “Borrowing Notice” means the certificate in the form attached hereto as Exhibit A to be delivered by Borrower to Bank as a condition of each Advance.

1.1.21. “Business Day” means any day other than a Saturday, Sunday or day on which banks in New York City, New York are authorized or required by law to close.

1.1.22. “Change in Law” means the occurrence, after the Agreement Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority or the compliance therewith by Bank; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines and directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

1.1.23. “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all rules and regulations with respect thereto in effect from time to time.

1.1.24. “Conforming Changes” means, with respect to either the use or administration of the Benchmark, or any Benchmark Replacement, any technical, administrative or operational changes (including, for example and not by way of limitation or prescription, changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “Interest Period” or any similar or analogous definition, the definition of “Government Securities Business Day,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 2.11, and other technical, administrative or operational matters) that Bank decides may be appropriate in connection with the use or administration of the Benchmark or to reflect the adoption and implementation of any Benchmark Replacement or to permit the use and administration thereof by Bank in a manner substantially consistent with market practice (or, if Bank decides that adoption of any portion of such market practice is not administratively feasible or if Bank determines that no market practice for the administration of any such rate exists, in such other manner of administration as Bank decides is reasonably necessary in connection with the administration of this Agreement and the other Credit Documents).

1.1.25. “Credit Documents” means this Agreement, the Note and any other agreements, documents, instruments and writings now or hereafter existing, creating, evidencing, or relating to any of the liabilities of Borrower to the Bank together with all amendments, modifications, renewals or extensions thereof.

1.1.26. “Daily Simple SOFR” means, for any day, a rate per annum equal to the greater of (a) the sum of (i) SOFR, with the conventions for this rate (which will include a lookback) being established by Bank in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for business loans; provided, that if Bank decides that any such convention is not administratively feasible for Bank, then Bank may establish another convention in its reasonable discretion plus (ii) the Daily Simple SOFR Adjustment, and (b) the Floor.

1.1.27. “Daily Simple SOFR Adjustment” means 0.11448%.

1.1.28. “Daily SOFR Rate” means, for any day, a rate per annum equal to Term SOFR in effect on such day for a one-month Interest Period (subject to the Floor referred to in the definition of “Term SOFR”).

1.1.29. "Default Rate" has the meaning set forth in Section 2.4.3.

1.1.30. “Dollars” or “$” means the lawful currency of the United States.

1.1.31. “Environmental Control Statutes” means any applicable federal, state, county, regional or local laws governing the control, storage, removal, spill, release or discharge of Hazardous Substances, including without limitation CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous Materials Transportation Act, the Emergency Planning and Community Right to Know Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of 1990, any similar or implementing state law, and in each case including all amendments thereto and all rules and regulations promulgated thereunder and permits issued in connection therewith.

1.1.32. “Existing Credit Agreement” has the meaning assigned to such term in the Background section of this Agreement.

1.1.33. “EPA” means the United States Environmental Protection Agency, or any successor thereto.

1.1.34. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, any successor statute of similar import, and all rules and regulations with respect thereto in effect from time to time.

1.1.35. “ERISA Affiliate” means any Person that is a member of any group or organization within the meaning of Code sections 414(b), (c), (m) or (o) of which Borrower is a member.

1.1.36. “Excluded Taxes” means any of the following Taxes imposed on or with respect to Bank or required to be withheld or deducted from a payment to Bank: Taxes imposed on or measured by net income, franchise Taxes, and branch profits Taxes, in each case, imposed as a result of Bank being organized under the laws of the jurisdiction imposing such Tax (or any political subdivision thereof).

1.1.37. “Federal Funds Rate” means, for any day, a rate per annum (expressed as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average of the quotations for such day on such transactions received by Bank from three federal funds brokers of recognized standing selected by it and (c) if the Federal Funds Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

1.1.38. “Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States.

1.1.39. “Floor” means 0.00% per annum.

1.1.40. “GAAP” means generally accepted accounting principles as in effect in the United States of America set forth in the Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and in statements of the Financial Accounting Standards Board and in such other statements by such other entity as Bank may reasonably approve, which are applicable in the circumstances as of the date in question; and such principles observed in a current period shall be comparable in all material respects to those applied in a preceding period.

1.1.41. “Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.

1.1.42. “Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any department, commission, board, bureau, agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

1.1.43. “Hazardous Substance” means petroleum products and items defined in the Environmental Control Statutes as “hazardous substances”, “hazardous wastes”, “pollutants” or “contaminants” and any other toxic, reactive, corrosive, carcinogenic, flammable or hazardous substance or other pollutant.

1.1.44. “Hedging Contracts” means, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, or any other agreements or arrangements entered into between the Borrower or its affiliates and the Bank and designed to protect the Borrower against fluctuations in interest rates or currency exchange rates.

1.1.45. “Hedging Obligations” means, with respect to the Borrower, all liabilities of the Borrower or its affiliates to the Bank under Hedging Contracts.

1.1.46. “Indebtedness” means:

(a) all items (except items of capital stock or of surplus) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, excluding (i) contributions in aid of construction, (ii) advances in aid of construction and (iii) deferred taxes;

(b) to the extent not included in the foregoing, all indebtedness, obligations, and liabilities secured by any mortgage, pledge, lien, conditional sale or other title retention agreement or other security interest to which any property or asset owned or held by such Person is subject, whether or not the indebtedness, obligations or liabilities secured thereby shall have been assumed by such Person; and

(c) to the extent not included or specifically excluded in the foregoing, all indebtedness, obligations and liabilities of others which such Person has directly or indirectly guaranteed, endorsed (other than for collection or deposit in the ordinary course of business), sold with recourse, or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable.

1.1.47. “Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrower under any Credit Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

1.1.48. “Interest Payment Date” means (a) with respect to any ABR Loan, the last Business Day of each calendar month and the Termination Date, and (b) with respect to any SOFR Loan, the last day of the Interest Period therefor.

1.1.49. “Interest Period” means, with respect to any Advance, the period commencing on the date of such Advance and ending on the numerically corresponding day in the calendar month that is one month thereafter (in each case, subject to the availability thereof); provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) no Interest Period shall extend beyond the Termination Date and (iv) no tenor that has been removed from this definition pursuant to Section 2.13(d) shall be available for specification in a Borrowing Notice. For purposes hereof, the date of an Advance initially shall be the date on which such Advance is made and thereafter shall be the effective date of the most recent conversion or continuation of such Advance. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.

1.1.50. “Late Charge” has the meaning set forth in Section 2.4.3.

1.1.51. “Letter(s) of Credit” means the letter(s) of credit issued by Bank on account of Borrower, as account party in favor of a beneficiary.

1.1.52. “Line of Credit” has the meaning set forth in the Background of this Agreement.

1.1.53. “Local Authorities” means individually and collectively the state and local governmental authorities and administrative agencies which govern the commercial or industrial facilities owned or operated by the Borrower.

1.1.54. “Loan” means the loan resulting from an Advance.

1.1.55. “Material Adverse Effect” means either singly or in the aggregate, the occurrence of any event, condition, circumstance or proceeding of any Borrower that materially and adversely affects the financial condition or operations of Artesian Resources Corporation.

1.1.56. “Note” shall mean the demand note, dated January 19, 2010, of the Borrower payable to the order of the Bank, as the same may be amended, renewed, replaced, or supplemented from time to time.

1.1.57. “Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Credit Document.

1.1.58. “PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

1.1.59. “Person” means an individual, corporation, trust, limited partnership, general partnership, limited liability company or unincorporated association and any government agency, department or political subdivision thereof.

1.1.60. “Plan” means any pension benefit or welfare benefit plan as defined in sections 3(1), (2) or (3) of ERISA maintained or sponsored by, contributed to, or covering employees of, Borrower or any ERISA Affiliate.

1.1.61. “Prime Rate” means the annual interest rate publicly announced by Bank from time to time as its prime rate. The Prime Rate is determined from time to time by Bank as a means of pricing some loans to its borrowers. The Prime Rate is not tied to any external rate of interest or index, and does not necessarily reflect the lowest rate of interest actually charged by Bank to any particular class or category of customers. If and when the Prime Rate changes, the rate of interest with respect to any amounts hereunder to which the Prime Rate applies will change automatically without notice to Borrower, effective on the date of any such change.

1.1.62. “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations, as amended from time to time, and any successor thereto.

1.1.63. “Release” means any spill, leak, emission, discharge, release or the pumping, pouring, emptying, disposing, injecting, escaping, leaching or dumping of a Hazardous Substance.

1.1.64. “Relevant Governmental Body” means the Federal Reserve Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York.

1.1.65. “SOFR” means a rate equal to the secured overnight financing rate published by the SOFR Administrator on the website of the SOFR Administrator, currently at http//www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by SOFR Administrator from time to time).

1.1.66. “SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

1.1.67. “SOFR Loan” means an Advance that bears interest at a rate based on Term SOFR, other than pursuant to clause (c) of the definition of “Alternate Base Rate” or the definition of “Daily SOFR Rate.”

1.1.68. “Sanctioned Country” means any country, territory or region which is itself the subject or target of any comprehensive Sanctions (which may include the Crimean region of Ukraine, Cuba, Iran, North Korea, Darfur, South Sudan and Syria).

1.1.69. “Sanctioned Person” means (a) any Person or group listed in any Sanctions related list of designated Persons maintained by OFAC, including the List of Specially Designated Nationals and Blocked Persons, or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person subject to any law that would prohibit all or substantially all financial or other transactions with that Person or would require that assets of that Person that come into the possession of a third-party be blocked (c) any legal entity organized or domiciled in a Sanctioned Country, (d) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, (e) any natural person ordinarily resident in a Sanctioned Country, or (f) any Person 50% or more owned, directly or indirectly, individually or in the aggregate by any of the above.

1.1.70. “Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.

1.1.71. “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

1.1.72. “Term SOFR” means a rate per annum equal to the greater of (a) the sum of (i) Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Term SOFR Determination Day”) that is two (2) Government Securities Business Days prior to the first day of such Interest Period: provided, however, that if as of 5:00 p.m. (New York City time) on any Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding Government Securities Business Day is not more than three (3) Government Securities Business Days prior to such Term SOFR Determination Day plus (ii) the Term SOFR Adjustment, and (b) the Floor.

1.1.73. “Term SOFR Adjustment” means 0.10000%.

1.1.74. “Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by Bank in its reasonable discretion).

1.1.75. “Term SOFR Determination Day” has the meaning specified in the definition “Term SOFR.”

1.1.76. “Term SOFR Reference Rate” means the forward-looking term rate based on SOFR published by the Term SOFR Administrator and displayed on CME’s Market Data Platform (or other commercially available source providing such quotations as may be selected by Bank from time to time).

1.1.77. “Termination Date” means the earlier of (i) May 21, 2023 or (ii) on DEMAND.

1.1.78. “Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

Section 1.2. Rules of Construction, Interpretation.

1.2.1. GAAP. Except as otherwise provided herein, financial and accounting terms used in the foregoing definitions or elsewhere in this Agreement, shall be defined in accordance with GAAP. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement.

1.2.2. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or that such person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person.

1.2.3. Plural/Singular. Except as otherwise provided herein, capitalized terms used in the foregoing definitions or elsewhere in this Agreement that are defined in the singular may also be used in the plural and any such terms which are defined in the plural may also be used in the singular.

1.2.4. DEMAND. BORROWER UNDERSTANDS AND ACKNOWLEDGES THAT THE LINE OF CREDIT IS A PAYMENT ON DEMAND LOAN FACILITY. BORROWER UNDERSTANDS AND ACKNOWLEDGES THAT BANK MAY DEMAND PAYMENT HEREUNDER AT ANY TIME AND WITHOUT ANY REASON. NOTHING CONTAINED IN THIS NOR ANY OTHER CREDIT DOCUMENT SHALL BE CONSTRUED TO PREVENT BANK FROM MAKING DEMAND FOR PAYMENT HEREUNDER AT ANY TIME THAT BANK, IN THE EXERCISE OF ITS SOLE DISCRETION, DEEMS NECESSARY OR DESIRABLE; AND IN THE EVENT OF ANY SUCH DEMAND, (i) BANK SHALL HAVE NO FURTHER OBLIGATION TO MAKE ADVANCES OR TO EXTEND CREDIT AND (ii) THE ENTIRE UNPAID PRINCIPAL BALANCE HEREUNDER AND ALL ACCRUED INTEREST AND ALL OTHER OBLIGATIONS HEREUNDER SHALL BECOME DUE AND PAYABLE IMMEDIATELY UPON THE MAKING OF SUCH DEMAND.

ARTICLE 2
CREDIT FACILITY

Section 2.1. The Facility. From time to time prior to the Termination Date, subject to the provisions below, the Bank shall make Advances to Borrower, which Borrower shall pay and may reborrow, so long as the aggregate amount of Advances outstanding at any one time shall not exceed the Available Amount.

Section 2.2. Note. The indebtedness of the Borrower to the Bank will be evidenced by the Note. The original principal amount of the Note will be the Available Amount; provided, however, that notwithstanding the face amount of the Note, Borrower’s liability under the Note shall be limited at all times to its actual indebtedness, principal, interest and fees, then outstanding hereunder.

Section 2.3. Use of Proceeds. Funds advanced under the Line of Credit shall be used solely for (i) short-term working capital, (ii) investment in facilities or equipment, or (iii) Letters of Credit.

Section 2.4. Repayment, Prepayments and Interest.

2.4.1. The aggregate principal balance outstanding on the Termination Date under the Note shall be due and payable on the Termination Date. Except as set forth in Section 2.13, all Advances shall be Term SOFR Loans.

2.4.2. Continuations. All Term SOFR Loans shall mature and become payable in full on the last day of the Interest Period relating to such Term SOFR Loan. Upon maturity, a Term SOFR Loan shall be continued for an additional Interest Period.

2.4.3. Interest Provisions. Interest on the outstanding principal amount of each loan, when classified as a: (i) Term SOFR Loan, shall accrue during each Interest Period at a rate per annum equal to the sum of the Term SOFR for such Interest Period plus the Applicable Margin, and be due and payable on each Interest Payment Date and on the Termination Date and (ii) Alternate Base Rate Loan, shall accrue at a rate per annum equal to the sum of the Alternate Base Rate and be due and payable on each Interest Payment Date and on the Termination Date.

2.4.4. Voluntary Prepayment of Advances. Advances may be prepaid upon the terms and conditions set forth herein. For Advances in connection with which the Borrower has or may incur Hedging Obligations, additional obligations may be associated with prepayment, in accordance with the terms and conditions of the applicable Hedging Contracts. The Borrower shall give the Bank, no later than 10:00 a.m., New York City time, at least four (4) Business Days notice of any proposed prepayment of any Advances, specifying the proposed date of payment of such Advances, and the principal amount to be paid. Each partial prepayment of the principal amount of an Advance shall be in an integral multiple of $10,000 and accompanied by the payment of all charges outstanding on such Advance (including any amount due under Section 2.11) and of all accrued interest on the principal repaid to the date of payment.

2.4.5. Late Charge and Default Rate. Notwithstanding the foregoing, if the Borrower fails to make any payment of principal, interest or other amount coming due pursuant to the provisions of the Note within ten (10) calendar days of the date due and payable, the Borrower also shall pay to the Bank a late charge equal to five percent (5.0%) of the amount of such payment (the “Late Charge”). Such ten (10) day period shall not be construed in any way to extend the due date of any such payment. Upon maturity, whether by acceleration, demand or otherwise, and at the Bank’s option upon the occurrence of any Event of Default and during the continuance thereof, the Note shall bear interest at a rate that shall be three percentage points (3.0%) in excess of the interest rate in effect from time to time under the Note but not more than the maximum rate allowed by law (the “Default Rate”). The Default Rate shall continue to apply whether or not judgment shall be entered on the Note. Both the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Bank’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under the other Credit Documents or under applicable law, and any fees and expenses of any agents or attorneys which the Bank may employ. In addition, the Default Rate reflects the increased credit risk to the Bank of carrying a loan that is in default. The Borrower agrees that the Late Charge and Default Rate are reasonable forecasts of just compensation for anticipated and actual harm incurred by the Bank, and that the actual harm incurred by the Bank cannot be estimated with certainty and without difficulty.

2.4.6. Term SOFR Conforming Changes. In connection with the use or administration of Term SOFR, Bank will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Credit Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Credit Document. Bank will promptly notify Borrower of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.

Section 2.5. Advances.

2.5.1. Except as set forth in the next sentence, Borrower shall give the Bank prior written notice not later than three o’clock (3:00) p.m. (Eastern Standard Time), on the date of an Advance. Any such notice shall be in the form of the Borrowing Notice, shall be certified by the chief executive officer, chief financial officer, the president or the executive vice president of the Borrower, and shall set forth the aggregate amount of the requested Advance; provided, however, so long as Borrower uses the “sweep” product offered by the Bank, no Borrowing Notice shall be required for any Advance except the initial Advance.

2.5.2. Upon receiving a request for an Advance in accordance with subsection 2.5.1 above, the Bank shall promptly make the requested Advance available to Borrower (i) by crediting such amount to Borrower’s deposit account with the Bank on the day of the requested Advance, or (ii) otherwise in accordance with such instructions as have been provided by Borrower to the Bank with sufficient notice to permit the Bank, in accordance with standard Banking practices, to timely comply with such instructions.

2.5.3. Each request for an Advance pursuant to this Section 2.5 shall be irrevocable and binding on the Borrower. With respect to any Advance, Borrower shall indemnify the Bank against any loss, cost or expense incurred by the Bank as a result of any failure to fulfill on or before the date specified in such request for an Advance the applicable conditions set forth in Article 5, including, without limitation, any loss (including loss of margin and anticipated profits), cost or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Bank to fund the Advance when such Advance, as a result of such failure, is not made on such date, as calculated by the Bank.

Section 2.6. Letter of Credit. In addition to making Advances to the Borrower as provided in Section 2.5, the Bank may issue Letter(s) of Credit. All amounts drawn or that could be drawn under the Letter of Credit shall be deemed to be an Advance under the Line of Credit and evidenced by the Note and the Available Amount shall be reduced by the aggregate amounts drawn and available to be drawn under the Letter(s) of Credit. Any amounts disbursed by Bank pursuant to any Letter of Credit shall automatically be deemed an Advance to the Borrower and shall bear interest from the date of advance at the rate set forth in this Agreement. The Letter(s) of Credit shall be governed by the terms of this Agreement and by one or more reimbursement or application agreements, in form and content satisfactory to the Bank, executed by the Borrower in favor of the Bank. Each Letter of Credit will be issued in the Bank’s sole discretion and in form acceptable to the Bank. The Borrower shall pay to Bank all transactional and customary fees required by Bank in connection with the issuance of the Letter of Credit. Bank shall have no obligation to issue Letter(s) of Credit which would result in the Bank’s obligation thereunder to exceed $500,000.

Section 2.7. Prepayment. Borrower may prepay the outstanding principal balance under the Line of Credit at any time without premium or penalty, except for any amount due pursuant to Section 2.11. Prepayments of all or any portion of the Line of Credit prior to the Termination Date shall not reduce the Line of Credit amount and may be reborrowed.

Section 2.8. Payments; Application. All payments of principal, interest, fees and other amounts due hereunder, including any prepayments thereof, shall be made by Borrower to the Bank in immediately available funds before twelve o’clock (12:00) noon on any Business Day at the office of the Bank set forth in Section 8.9 or Bank’s office that is located at 919 N. Market Street, Wilmington, Delaware 19801, or to such other office or location as the Bank from time to time so notifies Borrower. Borrower hereby authorizes the Bank to charge any account maintained by Borrower with the Bank from time to time for all payments of principal, interest, fees and costs when due hereunder. Any and all payments on account of the Line of Credit will be applied to accrued and unpaid interest, outstanding principal and other sums due hereunder or under the Credit Documents, in such order as Bank, in its discretion, elects. If Borrower makes a payment or payments and such payment or payments, or any part thereof, are subsequently invalidated, declared to be fraudulent or preferential, set aside or are required to be repaid to a trustee, receiver, or any other person under any bankruptcy act, state, provincial or federal law, common law or equitable cause, then to the extent of such payment or payments, the obligations or part thereof hereunder intended to be satisfied shall be revived and continued in full force and effect as if said payment or payments had not been made.

Section 2.9. Inability to Determine Rates. Subject to Section 2.13, if, on or prior to the first day of any Interest Period for any SOFR Loan:

(a) Bank determines (which determination shall be conclusive and binding absent manifest error) that the Term SOFR cannot be determined pursuant to the definition thereof; or

(b) Bank determines that for any reason in connection with any request for a SOFR Loan or a conversion thereto or a continuation thereof that Term SOFR for any requested Interest Period with respect to a proposed SOFR Loan does not adequately and fairly reflect the cost to Bank of funding such Loan;

Bank will promptly so notify Borrower.

Upon notice thereof by Bank to Borrower, any obligation of Bank to make or maintain SOFR Loans shall be suspended until Bank revokes such notice. Upon receipt of such notice, (i) Borrower may revoke any pending request for a borrowing of or continuation of SOFR Loans or, failing that, Borrower will be deemed to have converted any such request into a request for a Loan of or conversion to ABR Loans in the amount specified therein and (ii) any outstanding affected SOFR Loans will be deemed to have been converted into ABR Loans at the end of the applicable Interest Period. Upon any such conversion, Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 2.11. Subject to Section 2.13, if Bank determines (which determination shall be conclusive and binding absent manifest error) that the "Term SOFR" cannot be determined pursuant to the definition thereof on any given day, the interest rate on ABR Loans shall be determined by Bank without reference to clause (c) of the definition of "Alternate Base Rate" until Bank revokes such determination.

Section 2.10. Increased Costs; Illegality.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve (including pursuant to regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement), special deposit, liquidity, compulsory loan, insurance charge or similar requirement (including any emergency, special, supplemental or other marginal reserve requirement) against assets of, deposits with or for the account of, or credit extended by, Bank;

(ii) subject Bank to any Taxes (other than Indemnified Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on Bank any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by Bank or any Letter of Credit;

and the result of any of the foregoing shall be to increase the cost to Bank of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to Bank of issuing or maintaining any Letter of Credit (or of maintaining its obligation to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by Bank hereunder (whether of principal, interest or any other amount) then, upon request of Bank, Borrower will pay to Bank such additional amount or amounts as will compensate Bank for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If Bank determines that any Change in Law affecting Bank or Bank’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on Bank’s capital or on the capital of Bank’s holding company, if any, as a consequence of this Agreement, the Commitments or the Loans or the Letters of Credit issued by Bank, to a level below that which Bank or Bank’s holding company could have achieved but for such Change in Law (taking into consideration Bank’s policies and the policies of Bank’s holding company with respect to capital adequacy and liquidity), then from time to time Borrower will pay to Bank such additional amount or amounts as will compensate Bank or Bank’s holding company for any such reduction suffered.

(c) Certificates for Reimbursement. A certificate of Bank setting forth the amount or amounts necessary to compensate Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to Borrower, shall be conclusive absent manifest error. Borrower shall pay Bank, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of Bank to demand compensation pursuant to this Section shall not constitute a waiver of Bank’s right to demand such compensation.

(e) Illegality. If Bank determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for Bank to make, maintain or fund Loans whose interest is determined by reference to SOFR or Term SOFR, or to determine or charge interest rates based upon SOFR or Term SOFR, then, upon notice thereof by Bank to Borrower, (a) any obligation of Bank to make or maintain SOFR Loans, and any right of Borrower to continue SOFR Loans, shall be suspended, and (b) the interest rate on which ABR Loans shall, if necessary to avoid such illegality, be determined by Bank without reference to clause (c) of the definition of “Alternate Base Rate”, in each case until Bank notifies Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (i) Borrower shall, if necessary to avoid such illegality, upon demand from Bank, prepay or, if applicable, convert all SOFR Loans to ABR Loans (the interest rate on which ABR Loans of Bank shall, if necessary to avoid such illegality, be determined by Bank without reference to clause (c) of the definition of “Alternate Base Rate”), on the last day of the Interest Period therefor, if Bank may lawfully continue to maintain such Loans to such day, or immediately, if Bank may not lawfully continue to maintain such Loans to such day, and (ii) if necessary to avoid such illegality, Bank shall during the period of such suspension compute the Alternate Base Rate without reference to clause (c) of the definition of “Alternate Base Rate” in each case until Bank determines that it is no longer illegal for Bank to determine or charge interest rates based upon SOFR or Term SOFR. Upon any such prepayment or conversion, Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 2.11.

Section 2.11. Compensation for Losses. In the event of (a) the payment or prepayment of any principal of any SOFR Loan other than on the last day of the Interest Period applicable thereto whether voluntary, mandatory, automatic, by reason of acceleration (including as a result of an Event of Default), (b) the conversion of any SOFR Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (c) the failure to borrow, convert, continue or prepay any SOFR Loan on the date specified in any notice delivered pursuant hereto, then, in any such event, Borrower shall compensate Bank for any loss, cost and expense attributable to such event, including any loss, cost or expense arising from the liquidation or redeployment of funds. A certificate of Bank setting forth any amount or amounts that Bank is entitled to receive pursuant to this Section shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay Bank the amount shown as due on any such certificate within 10 days after receipt thereof.

Section 2.12. Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of Borrower under any Credit Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of Borrower or Bank) requires the deduction or withholding of any Tax from any such payment by any such party, then such party shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) Bank receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Borrower. Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of Bank timely reimburse it for the payment of, any Other Taxes.

(c) Indemnification by the Borrower. Borrower shall jointly and severally indemnify Bank, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by Bank or required to be withheld or deducted from a payment to Bank and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by Bank.

(d) [Reserved]

(e) Evidence of Payments. As soon as practicable after any payment of Taxes by Borrower to a Governmental Authority pursuant to this Section 2.12, Borrower shall deliver to Bank the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Bank.

(f) Confidentiality. Nothing contained in this Section shall require Bank or any other indemnified party to make available any of its Tax returns (or any other information that it deems to be confidential or proprietary) to the indemnifying party or any other Person.

Section 2.13. Benchmark Replacement Setting.

(a) Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Credit Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to any setting of the then-current Benchmark, then (x) if a Benchmark Replacement is determined in accordance with clause (a) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Credit Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent (subject to clause (y) below) of any other party to, this Agreement or any other Credit Document and (y) if a Benchmark Replacement is determined in accordance with clause (b) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Credit Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the date notice of such Benchmark Replacement is provided to Borrower without any amendment to, or further action or consent of any other party to, this Agreement or any other Credit Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.

(b) Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, Bank will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Credit Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Credit Document.

(c) Notices; Standards for Decisions and Determinations. Bank will promptly notify Borrower of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. Bank will notify Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.13(d) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by Bank pursuant to this Section 2.13, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Credit Document, except, in each case, as expressly required pursuant to this Section 2.13.

(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Credit Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by Bank in its reasonable discretion or (B) the administrator of such Benchmark or the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then (i) Bank may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement), or (B) is not, or is no longer, subject to an announcement that is not or will not be representative for a Benchmark (including a Benchmark Replacement), then Bank may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.

(e) Benchmark Unavailability Period. Upon Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of SOFR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans. During a Benchmark Unavailability Period at any time that a tenor for the then current Benchmark is not an Available Tenor, the component of the Alternate Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of the Alternate Base Rate.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

Section 3.1. Organization; Good Standing; Qualification. Borrower is a corporation duly organized and validly existing under the laws of the State of its organization. Borrower has full power and authority to execute, deliver and comply with the Credit Documents and to carry on its business as it is now being conducted. Borrower is duly licensed or qualified as a corporation in any jurisdiction where the failure to be so qualified would have a Material Adverse Effect.

Section 3.2. Licenses. Borrower and its respective employees and agents have all licenses, registrations, approvals and other authority as may be necessary to enable them to own and operate its business and perform all services and business that they have agreed to perform in any state, municipality or other jurisdiction, and the same are valid, binding and enforceable without any adverse limitations thereon, except where the failure to have any or all such licenses, registrations, approvals or other authority would not have a Material Adverse Effect.

Section 3.3. Accuracy of Information; Full Disclosure.

3.3.1. All financial information furnished to Bank concerning the Borrower and other entities in accordance with the terms of the Agreement, have been prepared in accordance with GAAP and fairly present the financial condition of Borrower and such other entities as of the dates and for the periods covered and there has been no material adverse change in the financial condition or business of Borrower or such other entities considered as a whole from the date of such statements to the date hereof; and

3.3.2. All financial statements and other documents furnished by Borrower to the Bank in connection with this Agreement do not and will not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading. Borrower has disclosed to the Bank in writing any and all facts which materially and adversely affect the business, properties, operations or condition, financial or otherwise, of Borrower and its Affiliates considered as a whole, or Borrower’s ability to perform its obligations under this Agreement and the other Credit Documents.

Section 3.4. Pending Litigation or Proceedings. There are no judgments outstanding or actions, suits or proceedings pending or, to Borrower’s knowledge, threatened against or affecting Borrower or its Affiliates, at law or in equity or before or by any federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign that would have a Material Adverse Effect.

Section 3.5. Due Authorization; No Legal Restrictions. Borrower has the power and authority under the laws of the state of its organization, and under its organizational documents, to enter into and perform this Agreement, the Note, the other Credit Documents and other agreements and documents required hereunder and to which it is a party. The execution and delivery by Borrower of the Credit Documents to which it is a party, the consummation of the transactions contemplated by the Credit Documents and the fulfillment and compliance with the respective terms, conditions and provisions of the Credit Documents: (i) have been duly authorized by all requisite action of Borrower, (ii) will not conflict with or result in a breach of, or constitute a default (or might, upon the passage of time or the giving of notice or both, constitute a default) under, any of the terms, conditions or provisions of any applicable statute, law, rule, regulation or ordinance or Borrower’s certificate of incorporation or bylaws, or any indenture, mortgage, loan or Agreement or instrument to which Borrower is a party or by which it may be bound or affected, or any judgment or order of any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and (iii) will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of Borrower under the terms or provisions of any such agreement or instrument.

Section 3.6. Enforceability. The Credit Documents have been duly executed by Borrower and delivered to Bank and constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their terms.

Section 3.7. Compliance with Laws, Agreements, Other Obligations, Orders or Governmental Regulations. Borrower is not in default of its certificate of incorporation or bylaws. Borrower has not been declared in default of the performance or observance of any of its obligations, covenants or conditions contained in any indenture or other agreement creating, evidencing or securing any Indebtedness or pursuant to which any such Indebtedness is issued and Borrower is not in violation of or in default under any other agreement or instrument or any judgment, decree, order, statute, rule or governmental regulation, applicable to it or by which its properties may be bound or affected.

Section 3.8. Governmental Consents, No Violations of Laws or Agreements. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of Borrower is required in connection with the execution, delivery or performance by Borrower of the Credit Documents or the consummation of the transactions contemplated thereby.

Section 3.9. Taxes. Borrower has filed all tax returns which it is required to file, if any, and has paid, or made provision for the payment of, all taxes which have or may have become due pursuant to such returns or pursuant to any assessment received by it. Such tax returns are complete and accurate in all respects. Borrower has no knowledge of any proposed additional assessment or basis for any assessment of additional taxes.

Section 3.10. Current Compliance. Borrower is currently in compliance with all of the terms and conditions of the Credit Documents.

Section 3.11. Leases and Contracts. Borrower has complied with the provisions of all leases, contracts or commitments of any kind (such as employment agreements, collective bargaining agreements, powers of attorney, distribution agreements, patent license agreements, contracts for future purchase or delivery of goods or rendering of services, bonus, pension and retirement plans or accrued vacation pay, insurance and welfare agreements) to which it is a party and is not in default thereunder, except to the extent such noncompliance is not reasonably likely to have a Material Adverse Effect. To Borrower’s knowledge, no other party is in default under any such leases, contracts or other commitments and no event has occurred which, but for the giving of notice or the passage of time or both, would constitute an event of default thereunder, that is reasonably likely to have a Material Adverse Effect.

Section 3.12. Intellectual Property. Borrower owns or possesses the irrevocable right to use all of the patents, trademarks, service marks, trade names, copyrights, licenses, franchises and permits and rights with respect to the foregoing necessary to own and operate its respective properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others.

Section 3.13. Business Interruptions. Within three (3) years prior to the date hereof, neither the business nor operations of Borrower or its Affiliates have been materially and adversely affected in any way by any casualty, strike, lockout, combination of workers, order of the United States of America or any state or local government, or any political subdivision or agency thereof, directed against Borrower. There are no pending or threatened labor disputes, strikes, lockouts or similar occurrences or grievances against the business being operated by Borrower or its Affiliates.

Section 3.14. ERISA. To Borrower’s knowledge, Borrower is in compliance in all material respects with all applicable provisions of ERISA and the regulations promulgated thereunder:

3.14.1. Borrower does not maintain or contribute to nor has Borrower maintained or contributed to any multiemployer plan (as defined in section 4001 of ERISA) under which Borrower or any ERISA Affiliate could have any withdrawal liability;

3.14.2. Borrower does not sponsor or maintain any Plan under which there is an accumulated funding deficiency within the meaning of section 412 of the Code, whether or not waived;

3.14.3. The aggregate liability for accrued benefits and other ancillary benefits under each Plan that is or will be sponsored or maintained by Borrower (determined on the basis of the actuarial assumptions prescribed for valuing benefits under terminating single-employer defined benefit plans under Title IV of ERISA) does not exceed the aggregate fair market value of the assets under each such defined benefit pension Plan;

3.14.4. The aggregate liability of Borrower arising out of or relating to a failure of any Plan to comply with the provisions of ERISA or the Code, will not have a Material Adverse Effect; and

3.14.5. Except as set forth on Schedule 3.14.5 hereto, there does not exist any unfunded liability (determined on the basis of actuarial assumptions utilized by the actuary for the plan in preparing the most recent Annual Report) of Borrower under any plan, program or arrangement providing post-retirement life or health benefits.

To Borrower’s knowledge, the foregoing is true and correct with respect to any ERISA Affiliate.

Section 3.15. No Extension of Credit for Securities. Borrower is not now, nor at any time has it been engaged principally, or as one of its important activities, in the business of extending or arranging for the extension of credit, for the purpose of purchasing or carrying any “margin stock” or “margin securities” within the meaning of Regulations U, G, T or X of the Board of Governors of the Federal Reserve System; nor will the proceeds of the Line of Credit be used by Borrower directly or indirectly, for such purposes.

Section 3.16. Hazardous Wastes, Substances and Petroleum Products.

3.16.1. Borrower (i) has received all permits and filed all notifications required by the Environmental Control Statutes to carry on its respective business(es); and (ii) is in material compliance with all Environmental Control Statutes.

3.16.2. Borrower has given any written or oral notice required to the appropriate United States federal, state or local agency with regard to any actual or imminently threatened Release of Hazardous Substances on properties owned, leased or operated by Borrower or used in connection with the conduct of its business and operations.

3.16.3. Borrower has not received notice that it is potentially responsible for clean-up, remediation, costs of clean-up or remediation, fines or penalties with respect to any actual or imminently threatened Release of Hazardous Substances pursuant to any Environmental Control Statute.

Section 3.17. Foreign Assets Control Regulations. Neither the borrowing by Borrower nor its use of the proceeds thereof will violate foreign assets, trade or similar control regulations.

Section 3.18. Investment Company Act. Borrower is not directly or indirectly controlled by or acting on behalf of any person which is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 3.19. Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws.

(a) Each Borrower, its Subsidiaries and their respective officers and employees and their directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions. None of Borrower, any of its Subsidiaries or any of their respective directors, officers or employees is a Sanctioned Person. Each Borrower and each of its Subsidiaries has implemented and maintains in effect policies and procedures reasonably designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and all applicable Sanctions.

(b) No Loan or Letter of Credit, use of the proceeds of any Loan or Letter of Credit or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions. No part of the proceeds of the Loans or the Letters or Credit will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the Anti-Corruption Laws.

(c) Neither the making of the Loans hereunder nor the use of the proceeds thereof will violate the any regulations passed under the USA PATRIOT Act or will violate the Trading with the Enemy Act, the International Emergency Economic Powers Act, or any regulations passed thereunder, including the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V) or any enabling legislation or executive order relating thereto or successor statute thereto (together with Sanctions, “Anti-Terrorism Laws”). Each Borrower and each of its Subsidiaries are in compliance with applicable Anti-Terrorism Laws.

Section 3.20. Accuracy of Representations and Warranties. No representation or warranty by Borrower contained herein or in any certificate or other document furnished by Borrower pursuant hereto or in connection herewith fails to contain any statement of material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made. There is no fact which Borrower knows or should know and has not disclosed to Bank, which does or may materially and adversely affect Borrower or any of Borrower’s operations.

ARTICLE 4
[RESERVED]

ARTICLE 5
GENERAL COVENANTS

Borrower covenants and agrees that so long as the Line of Credit or any Indebtedness of Borrower to the Bank is outstanding, Borrower will perform and comply with the following covenants:

Section 5.1. Payment of Principal, Interest and Other Amounts Due. Borrower will pay when due all Indebtedness owed to the Bank and all other amounts payable by it hereunder.

Section 5.2. Merger; Consolidation; Business Acquisitions; Affiliates. Borrower shall (i) not merge into or consolidate with any Person or permit any Person to merge into it with a value in excess of $10,000,000 without the Bank’s prior written consent and (ii) provide Bank with prior written notice of all of all other mergers, consolidations and business acquisitions.

Section 5.3. Taxes; Claims for Labor and Materials. Borrower will pay or cause to be paid when due all taxes, assessments, governmental charges or levies imposed upon it or its income, profits, payroll or any property belonging to it, including without limitation all withholding taxes, and all claims for labor, materials and supplies which, if unpaid, might become a lien or charge upon any of its properties or assets; provided that Borrower shall not be required to pay any such tax (other than real estate taxes which must be paid regardless of challenge), assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings promptly initiated and diligently conducted by it, and neither execution nor foreclosure sale or similar proceedings shall have been commenced in respect thereof (or such proceedings shall have been stayed pending the disposition of such contest of validity), and it shall have set aside on its books adequate reserves with respect thereto.

Section 5.4. Existence; Approvals; Qualification; Business Operations; Compliance with Laws; Notification.

5.4.1. Borrower (i) will obtain, preserve and keep in full force and effect (a) its separate existence and (b) all rights, licenses, registrations and franchises necessary to the proper conduct of its business or affairs, the absence of which could result in a Material Adverse Effect; (ii) will qualify and remain qualified as a foreign corporation in each jurisdiction in which the character or location of the properties owned by it or the business transacted by it requires such qualification; (iii) will continue to engage in its present business substantially as presently conducted; and (iv) will comply with the requirements of all applicable laws and all rules, regulations (including environmental regulations) and orders of regulatory agencies and authorities having jurisdiction over it.

5.4.2. With respect to any Environmental Control Statute, Borrower will immediately notify Bank when, in connection with the conduct of the Borrower’s business or operations, any Person (including, without limitation, any United States federal, state or local agency) provides oral or written notification to Borrower, or Borrower otherwise becomes aware, of a condition with regard to an actual or imminently threatened Release of Hazardous Substances which could reasonably be expected to have a Material Adverse Effect; and notify Bank in detail immediately upon the receipt by Borrower or any Affiliate of an assertion of liability under the Environmental Control Statutes, of any actual or alleged failure to comply with, failure to perform, breach, violation or default under any such statutes or regulations which could reasonably be expected to have a Material Adverse Effect or of the occurrence or existence of any facts, events or circumstances which with the passage of time, the giving of notice, or both, could create such a failure to perform, breach, violation or default.

Section 5.5. Maintenance of Properties, Intellectual Property.

5.5.1. Borrower will maintain, preserve, protect and keep or cause to be maintained, preserved, protected and kept its real and personal property used or useful in the conduct of its business in good working order and condition, reasonable wear and tear excepted, and will pay and discharge when due the cost of repairs to and maintenance of the same.

5.5.2. With respect to any and all trademarks, registrations, copyrights, patents, patent rights and applications for any of the foregoing which are material to Borrower’s business, Borrower shall maintain and protect the same and shall take and assert any and all remedies available to Borrower to prevent any other Person from infringing upon or claiming any interest in any such trademarks, registrations, copyrights, patents, patent rights or application for any of the foregoing.

Section 5.6. Insurance.

5.6.1. Borrower will carry adequate insurance issued by a financially capable insurer against all such liability and hazards as are usually carried by entities engaged in the same or a similar business similarly situated, and in addition, will carry business interruption insurance in such amounts as may be reasonable.

5.6.2. In the event of any loss that has a Material Adverse Effect in excess of $1,000,000, Borrower will give Bank prompt notice thereof.

Section 5.7. Inspections; Examinations.

5.7.1. Borrower authorizes all federal, state and municipal authorities to furnish to Bank copies of reports or examinations relating to Borrower, whether made by Borrower or otherwise.

5.7.2. The officers of Bank, or such Persons as any of them may designate, may visit and inspect any of the properties of Borrower, examine (either by Bank’s employees or by independent accountants) any assets of Borrower, including the books of account of Borrower, and discuss the affairs, finances and accounts of Borrower with their officers at such times as Bank may reasonably request.

Section 5.8. Default Under Other Indebtedness. Borrower will not permit any of its Indebtedness to be in default. If any Indebtedness of Borrower is declared or becomes due and payable before its expressed maturity by reason of default, the holder of any such Indebtedness shall have the right (or upon the giving of notice or the expiration of any cure period, or both, shall have the right) to declare such Indebtedness to be so due and payable, Borrower will immediately give Bank written notice of such declaration, acceleration or right of declaration.

Section 5.9. Pension Plans. Borrower shall (i) keep in full force and effect any and all Plans which are presently in existence or may, from time to time, come into existence under ERISA, unless such Plans can be terminated without material liability to Borrower in connection with such termination (as distinguished from any continuing funding obligation); (ii) make contributions to all of Borrower’s Plans in a timely manner and in a sufficient amount to comply with the requirements of ERISA; (iii) comply with all material requirements of ERISA which relate to such Plans so as to preclude the occurrence of any Reportable Event, Prohibited Transaction or material “accumulated funding deficiency” as such term is defined in ERISA; and (iv) notify Bank immediately upon receipt by Borrower of any notice of the institution of any proceeding or other action which may result in the termination of any Plan, including those administered by an ERISA Affiliate, and deliver to Bank, promptly after the filing or receipt thereof, copies of all reports or notices which Borrower files or receives under ERISA with or from the Internal Revenue Service, the PBGC, or the United States Department of Labor.

Section 5.10. Change in Control, etc. Borrower shall not permit a change-in-control of its ownership interests or make any amendment to its organizational documents that would have a Material Adverse Effect without the prior written consent of Bank; provided, however, that Bank shall not unreasonably withhold its consent.

Section 5.11. Transactions with Affiliates. Borrower shall not enter into or conduct any transaction with any Affiliate except on terms that would be usual and customary in a similar transaction between Persons not affiliated with each other or except as disclosed to Bank prior thereto and accepted by Bank, except for tax sharing and other management agreements that are customary within holding companies and as required by the Delaware Public Service Commission. Borrower will not make any loans or extensions of credit to any of its Affiliates (except in the ordinary course of business), shareholders or officers.

Section 5.12. Name or Address Change. Borrower shall not change its name or address except upon thirty (30) days prior written notice to Bank.

Section 5.13. Notices. Borrower will promptly notify Bank of (i) any action or proceeding brought against Borrower that would have a Material Adverse Effect, (ii) any fact, condition or event which, with the giving of notice or the passage of time or both, could cause a Material Adverse Effect, (iii) the failure of Borrower to observe any of its undertakings under the Credit Documents, or (iv) any material adverse change in the assets, business, operations or financial condition of Borrower.

Section 5.14. Additional Documents and Future Actions. Borrower will, at its sole reasonable cost, take such actions and provide Bank from time to time with such agreements, financing statements and additional instruments, documents or information as the Bank may in its reasonable discretion deem necessary or advisable to carry out the terms of the Credit Documents.

Section 5.15. Restrictions on Use of Proceeds. Borrower will not carry or purchase with the proceeds of the Line of Credit any “margin stock” or “margin security” within the meaning of Regulations U, G, T or X of the Board of Governors of the Federal Reserve System.

Section 5.16. Fiscal Year. Borrower shall not change its fiscal year without providing notice of such change to Bank.

Section 5.17. Accounts. Borrower shall maintain its primary operating account with Bank.

ARTICLE 6
ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS

Section 6.1. Financial Statements. Borrower will submit to Bank the following information in form and content acceptable to Bank, to the extent such information is not publicly available:

6.1.1. Within 120 days of each fiscal year end of the Borrower, annual consolidated financial statements of Artesian Resources Corporation, audited by an independent certified public accountant acceptable to Bank.

6.1.2. Within 120 days of each fiscal year end of the Borrower, annual, management-prepared consolidating financial statements of Artesian Resources Corporation.

6.1.3. Within 120 days of each fiscal year end of Artesian Resources Corporation, the Form 10K of Artesian Resources Corporation filed with the Securities and Exchange Commission.

6.1.4. Within 60 days after the end of each fiscal quarter of the Borrower, the Form 10Q of Artesian Resources Corporation filed with the Securities and Exchange Commission.

6.1.5. Such other information requested by Bank that is necessary for Bank to clarify any information provided to Bank pursuant to Sections 6.1.1 through 6.1.4 above.

ARTICLE 7
REMEDIES

Section 7.1. Remedies Generally. Upon DEMAND and at any time thereafter that any Indebtedness owed by Borrower to Bank remains outstanding, the Bank may declare the entire unpaid balance, principal, interest and fees, of all Indebtedness of Borrower to the Bank, hereunder or otherwise, to be immediately due and payable. Upon DEMAND, the Line of Credit shall immediately and automatically terminate and the Bank shall have no further obligation to make any Advances. In addition, the Bank may increase the interest rate on the Line of Credit to the Default Rate, without notice; and the Bank may enter any premises occupied by Borrower; and/or in addition to any rights granted hereunder or in any documents delivered in connection herewith, the Bank shall have all the rights and remedies granted by any applicable law, all of which shall be cumulative in nature.

Section 7.2. Set-Off. Without limiting the rights of Bank under applicable law, Bank has and may exercise a right of set‑off, a lien against and a security interest in all property of Borrower or its Affiliate now or at any time in Bank’s or any Affiliate of Bank’s possession in any capacity whatsoever, including but not limited to any balance of any deposit, trust or agency account, or any other bank account with Bank or any Affiliate of Bank, as security for all Bank Indebtedness. At any time and from time to time following DEMAND by Bank, Bank may without notice or demand, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank to or for the credit of Borrower against any or all of the Bank Indebtedness and the Borrower’s obligations under the Credit Documents.

ARTICLE 8
MISCELLANEOUS

Section 8.1. Indemnification and Release Provisions; Costs and Expenses.

8.1.1. Except to the extent of the gross negligence or willful misconduct on the part of the specific party indemnified hereunder, Borrower hereby indemnifies and agrees to protect, defend and hold harmless Bank and its directors, officers, officials, agents, employees and counsel and their respective heirs, administrators, executors, successors and assigns, from and against, any and all losses, liabilities (including without limitation settlement costs and amounts, transfer taxes, documentary taxes, or assessments or charges made by any governmental authority), claims, damages, interest, judgments, costs, or expenses, including without limitation reasonable fees and disbursements of counsel, incurred by any of them arising out of or in connection with or by reason of this Agreement, the Line of Credit or any other Credit Document, including without limitation, any and all losses, liabilities, claims, damages, interests, judgments, costs or expenses relating to or arising under the application of any Environmental Control Statute to Borrower’s or any Affiliate’s properties or assets. Borrower hereby releases Bank and its respective directors, officers, agents, employees and counsel from any and all claims for loss, damages, costs or expenses caused or alleged to be caused by any act or omission on the part of any of them arising out of or in connection with or by reason of this Agreement, except to the extent caused by the gross negligence or willful misconduct of any party to be released hereunder. All obligations provided for in this Section 8.1 shall survive any termination of this Agreement or the Line of Credit and the repayment of the Line of Credit.

Section 8.2. Certain Fees, Costs, Expenses and Expenditures. Borrower agrees to pay on demand all costs and expenses of Bank, including without limitation:

8.2.1. all reasonable costs and expenses to third parties in connection with the preparation, review, negotiation, execution and delivery of the Credit Documents, and the other documents to be delivered in connection therewith, or any amendments, extensions and increases to any of the foregoing (including, without limitation, attorney’s fees and expenses, and the cost of appraisals);

8.2.2. all losses, reasonable costs and expenses in connection with the enforcement, protection and preservation of the Bank’s rights or remedies under the Credit Documents, or any other agreement relating to any Bank Indebtedness, or in connection with legal advice relating to the rights or responsibilities of Bank (including without limitation court costs, reasonable attorneys’ fees and reasonable expenses of accountants and appraisers); and

In the event Borrower shall fail to pay taxes, insurance, assessments, costs or expenses which it is required to pay hereunder, or breaches any obligations under the Credit Documents, Bank in its discretion, upon ten (10) days prior notice to Borrower, may make expenditures for such purposes and the amount so expended (including attorney’s fees and expenses, filing fees and other charges) shall be payable by Borrower on demand and shall constitute part of the Bank Indebtedness.

With respect to any amount required to be paid by Borrower under this Section 8.2, in the event Borrower fails to pay such amount within five (5) days of demand, Borrower shall also pay to Bank interest thereon at the Default Rate. Borrower’s obligations under this Section 8.2 shall survive termination of this Agreement.

Section 8.3. Participations and Assignments. Borrower hereby acknowledges and agrees that the Bank may at any time:

8.3.1. at Bank’s sole cost and expense, grant participations in all or any portion of the Line of Credit or the Note or of its right, title and interest therein or in or to this Agreement to any other lending office or to any other bank, lending institution or other entity; and

8.3.2. assign all or any portion of its rights under the Line of Credit; and

8.3.3. pledge or assign its interest in the Line of Credit, the Note or any participation interest, including collateral therefor, to any Federal Reserve Bank in accordance with applicable law.

Section 8.4. Binding and Governing Law. This Agreement and all documents executed hereunder shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed as to their validity, interpretation and effect by the laws of the State of Delaware.

Section 8.5. Survival. All agreements, representations, warranties and covenants of Borrower contained herein or in any documentation required hereunder shall survive the execution of this Agreement and the making of the Line of Credit hereunder and except for Section 10.1, which provides otherwise, will continue in full force and effect as long as any indebtedness or other obligation of Borrower to the Bank remains outstanding.

Section 8.6. No Waiver; Delay. If the Bank shall waive any power, right or remedy arising hereunder or under any applicable law, such waiver shall not be deemed to be a waiver or the later occurrence or recurrence of any of said events. No delay by the Bank in the exercise of any power, right or remedy shall, under any circumstances, constitute or be deemed to be a waiver, express or implied, of the same and no course of dealing between the parties hereto shall constitute a waiver of the Bank’s powers, rights or remedies. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 8.7. Modification; Waiver. Except as otherwise provided in this Agreement, no modification or amendment hereof, or waiver or consent hereunder, shall be effective unless made in a writing signed by appropriate officers of the parties hereto. Whenever any consent, approval or waiver is requested hereunder, the determination to grant such request shall be in the Bank’s sole discretion (unless otherwise indicated).

Section 8.8. Headings. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

Section 8.9. Notices. Any notice, request, consent or other communication made, given or required hereunder or in connection herewith shall be deemed satisfactorily given if in writing (including facsimile transmissions) and delivered by hand, mail (registered or certified mail) or overnight courier to the parties at their respective addresses or facsimile number set forth below or such other addresses or facsimile numbers as may be given by any party to the others in writing:

To Borrower:

Artesian Resources Corporation

Artesian Water Company, Inc.

Artesian Water Pennsylvania, Inc.

Artesian Water Maryland, Inc.

Artesian Wastewater Management, Inc.

Artesian Wastewater Maryland, Inc.

Artesian Utility Development, Inc.

Artesian Development Corporation

Tidewater Environmental Services, Inc.

P.O. Box 15004

Wilmington, Delaware

Attention: David Spacht

Facsimile No.: 302-453-6980

Telephone No.: 302-453-6900

With a copy to:

Artesian Water Company, Inc.

P.O. Box 15004

Wilmington, Delaware

Attention: Courtney A. Emerson, Esquire

Facsimile No.: 302-453-6980

Telephone No.: 302-453-6900

To Bank:

Citizens Bank, N.A.

919 North Market Street

Suite 800

Wilmington, Delaware 19801

Attention: Benjamin B. Rogers

Facsimile No.: 302-425-7336

Telephone No.: 302-425-7340

With a copy to:

Troutman Pepper Hamilton Sanders LLP

Hercules Plaza, Suite 5100

P.O. Box 1709

Wilmington, Delaware 19801

Attention: Christopher J. Lamb, Esquire

Facsimile No.: 302-421-8390

Telephone No.: 302-777-6548

Section 8.10. Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, provided however that such extension of time shall be included in the computation of interest due in conjunction with such payment or other fees due hereunder, as the case may be.

Section 8.11. Time of Day. Except as expressly provided otherwise herein, all time of day restrictions imposed herein shall be calculated using the local time in Wilmington, Delaware.

Section 8.12. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

Section 8.13. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all the signatures on such counterparts appeared on one document, and each such counterpart shall be deemed to be an original.

Section 8.14. Consent to Jurisdiction and Service of Process. Borrower hereby consents to the exclusive jurisdiction of any state or federal court located within the District of Delaware, and irrevocably agree that, subject to the Bank’s election, all actions or proceedings relating to the Credit Documents or the transactions contemplated hereunder shall be litigated in such courts, and Borrower waives any objection which it may have based on lack of personal jurisdiction, improper venue or forum non conveniens to the conduct of any proceeding in any such court. Nothing contained in this Section 8.14 shall affect the right of Bank to serve legal process in any other manner permitted by law or affect the right of Bank to bring any action or proceeding against Borrower or its property in the courts of any other jurisdiction.

Section 8.15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO THIS AGREEMENT.

Section 8.16. ADDITIONAL WAIVERS; LIMITATIONS.

8.16.1. IN CONNECTION WITH ANY PROCEEDINGS UNDER THE CREDIT DOCUMENTS, INCLUDING WITHOUT LIMITATION ANY ACTION BY BANK IN REPLEVIN, FORECLOSURE OR OTHER COURT PROCESS OR IN CONNECTION WITH ANY OTHER ACTION RELATED TO THE CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREUNDER, BORROWER WAIVES:

(a) ALL PROCEDURAL ERRORS, DEFECTS AND IMPERFECTIONS IN SUCH PROCEEDINGS;

(b) ALL BENEFITS UNDER ANY PRESENT OR FUTURE LAWS EXEMPTING ANY PROPERTY, REAL OR PERSONAL, OR ANY PART OF ANY PROCEEDS THEREOF FROM ATTACHMENT, LEVY OR SALE UNDER EXECUTION, OR PROVIDING FOR ANY STAY OF EXECUTION TO BE ISSUED ON ANY JUDGMENT RECOVERED UNDER ANY OF THE CREDIT DOCUMENTS OR IN ANY REPLEVIN OR FORECLOSURE PROCEEDING, OR OTHERWISE PROVIDING FOR ANY VALUATION, APPRAISAL OR EXEMPTION;

(c) PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF DEMAND, NOTICE OF NON‑PAYMENT, PROTEST AND NOTICE OF PROTEST OF ANY OF THE CREDIT DOCUMENTS, INCLUDING THE NOTE; AND

(d) ALL RIGHTS TO CLAIM OR RECOVER ATTORNEY’S FEES AND COSTS IN THE EVENT THAT BORROWER IS SUCCESSFUL IN ANY ACTION TO REMOVE OR SUSPEND A JUDGMENT ENTERED BY CONFESSION.

8.16.2. FORBEARANCE. BANK MAY RELEASE, COMPROMISE, FORBEAR WITH RESPECT TO, WAIVE, SUSPEND, EXTEND OR RENEW ANY OF THE TERMS OF THE CREDIT DOCUMENTS, UPON FIVE (5) DAYS NOTICE TO BORROWER.

8.16.3. LIMITATION ON LIABILITY. BORROWER SHALL BE RESPONSIBLE FOR AND BANK IS HEREBY RELEASED FROM ANY CLAIM OR LIABILITY IN CONNECTION WITH:

(a) SAFEKEEPING ANY PROPERTY (EXCEPT FOR PROPERTY IN BANK’S POSSESSION);

(b) ANY LOSS OR DAMAGE TO ANY PROPERTY (EXCEPT FOR PROPERTY IN BANK’S POSSESSION);

(d) ANY ACT OR DEFAULT OF ANOTHER PERSON.

BANK SHALL ONLY BE LIABLE FOR ANY ACT OR OMISSION ON ITS PART CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT BORROWER BRINGS SUIT AGAINST BANK IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER AND BANK IS FOUND NOT TO BE LIABLE, BORROWER WILL INDEMNIFY AND HOLD BANK HARMLESS FROM ALL COSTS AND EXPENSES, INCLUDING ATTORNEY FEES AND COSTS, INCURRED BY BANK IN CONNECTION WITH SUCH SUIT. THIS AGREEMENT IS NOT INTENDED TO OBLIGATE BANK TO TAKE ANY ACTION WITH RESPECT TO THE COLLATERAL OR TO INCUR EXPENSES OR PERFORM ANY OBLIGATION OR DUTY OF BORROWER.

Section 8.17. ACKNOWLEDGMENTS. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND, SPECIFICALLY, SECTION 8.16, AND FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING WAIVER OF JURY TRIAL AND ADDITIONAL WAIVERS HAVE BEEN FULLY EXPLAINED TO BORROWER BY SUCH COUNSEL.

Section 8.18. Confidential Information. Borrower acknowledges that (i) participations and assignments by Bank and (ii) statutes, regulations and lawful orders of any court or governmental entity having jurisdiction over the parties hereto, may require that certain confidential information be released to third parties. Bank shall use reasonable efforts to limit the distribution of such confidential information to such third parties and their respective employees and agents. Prior to any participation of the Line of Credit by Bank, Bank shall provide notice to Borrower of the distribution of such confidential information to any such participants. Prior to providing confidential information to any Person, Bank shall make reasonable efforts to provide notice to Borrower of provision of such information. Borrower acknowledges that Bank will not be responsible to Borrower for the actions of third parties because of their disclosure or misuse of the information given to them.

Section 8.19. U.S. Patriot Act/OFAC Notice. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person who establishes a formal relationship with such institution. Therefore, when Borrower enter into this business relationship with Bank, Bank will ask Borrower or their officers or owners their name, address, date of birth (for individuals) and other pertinent information that will allow Bank to identify Borrower. Bank may also ask to see Borrowers’ organizational documents or other identifying information.

Section 8.20. Amendment and Restatement. This Agreement amends and restates, in its entirety, the Existing Credit Agreement.

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

BANK:

CITIZENS BANK, N.A.

By:___________________________(SEAL)

Benjamin B. Rogers

Vice President

BORROWER:

ATTEST: ARTESIAN WATER COMPANY, INC.

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Water Company, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

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

ATTEST: ARTESIAN RESOURCES CORPORATION

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Resources Corporation, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST: ARTESIAN WATER PENNSYLVANIA, INC.

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Water Pennsylvania, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST: ARTESIAN WATER MARYLAND, INC.

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Water Maryland, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST:

ARTESIAN WASTEWATER MANAGEMENT, INC.

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Wastewater Management, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST: ARTESIAN WASTEWATER MARYLAND, INC.

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Wastewater Maryland, Inc. by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST: ARTESIAN UTILITY DEVELOPMENT, INC.

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Utility Development, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST: ARTESIAN DEVELOPMENT CORPORATION

___________________________ By:___________________________(SEAL)

Dian C. Taylor

Chief Executive Officer

STATE OF DELAWARE )

) ss.

COUNTY OF NEW CASTLE )

On this, the 20th day of May, 2022, before me, a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Artesian Development Corporation, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

Notary Expiration Date:

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

ATTEST:	TIDEWATER ENVIRONMENTAL SERVICES, INC.
________________________________	By: _______________________________ Dian C. Taylor Chief Executive Officer

STATE OF DELAWARE )
) ss.
COUNTY OF NEW CASTLE )

On this the 20th day of May, 2022, before me a Notary Public, the undersigned officer, personally appeared Dian C. Taylor, who acknowledged herself to be the Chief Executive Officer of Tidewater Environmental Services, Inc., being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing on behalf of said corporation.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

_________________________________
NOTARY PUBLIC

Notary Expiration Date: _________________

EXHIBIT A

Notice of Borrowing

_________________________

[date]

Citizens Bank, N.A.

919 N. Market Street

Suite 800

Wilmington, Delaware 19801

RE: Notice of Borrowing

Gentlemen:

Pursuant to the terms of an Amended and Restated Demand Line of Credit Agreement dated as of May 20, 2022 (“Credit Agreement”), we hereby request you to make an advance in the amount of $ .

This notice constitutes a reaffirmation by the undersigned that the representations and warranties in the Credit Agreement are true, correct and accurate in all material respects and a certification by the undersigned that it is in compliance with the Credit Agreement and no Material Adverse Effect has occurred.

Very truly yours,

__________________________

By:

Name:

Authorized Representative

SCHEDULE 3.14.5
Unfunded Liabilities

Post-Retirement Benefit Plan