400,000 SHARES
ARTESIAN RESOURCES CORPORATION
CLASS A NON-VOTING COMMON STOCK
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UNDERWRITING AGREEMENT
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Philadelphia, Pennsylvania
April __, 1999
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ INC.
Representative of the Several
Underwriters Named in Schedule I Hereto
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Artesian Resources Corporation, a Delaware corporation ("Artesian
Resources"), proposes to sell to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. (the
"Representative") and the several other underwriters named in Schedule I hereto
(together with the Representative, the "Underwriters") 400,000 shares of
Artesian Resources' Class A Non-Voting Common Stock, par value $1 per share
("Class A Non-Voting Common Stock"). The Class A Non-Voting Common Stock to be
sold to the Underwriters by Artesian Resources are referred to herein as the
"Firm Shares." The respective amounts of the Firm Shares to be purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Firm Shares shall be offered to the public at a public offering price of $
per Firm Share (the "Offering Price").
In order to cover over-allotments in the sale of the Firm Shares, the
Underwriters may purchase for the Underwriters' own accounts up to 60,000
additional shares of Class A NonVoting Common Stock from Artesian Resources.
Such 60,000 additional shares of Class A NonVoting Common Stock are referred to
herein as the "Optional Shares." If any Optional Shares are purchased, the
Optional Shares shall be purchased for offering to the public at the Offering
Price and in accordance with the terms and conditions set forth herein. The Firm
Shares and the Optional Shares are referred to collectively herein as the
"Shares."
1. Representations and Warranties of Artesian Resources. Artesian Resources
represents and warrants to, and agrees with, the several Underwriters that:
(a) Artesian Resources has prepared, in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Regulations") of the Securities and Exchange Commission (the
"SEC") under the Act in effect at all applicable times, and has filed with the
SEC a registration statement on Form S-2 (File No. 333-72159) and one or more
amendments thereto for the purpose of registering the Shares under the Act.
Copies of such registration statement and any amendments thereto, and all forms
of the related prospectus contained therein, have been delivered to the
Representative. Any preliminary prospectus included in such registration
statement or filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of such
registration statement, including all exhibits thereto and the information
contained in the form of final prospectus filed with the SEC pursuant to Rule
424(b) of the Regulations in accordance with Section 5(a) of this Agreement and
deemed by virtue of Rule 424 of the Regulations to be part of the registration
statement at the time it was declared effective, each as amended at the time the
registration statement became effective, including the information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A of the Regulations, are hereinafter collectively called
the "Registration Statement." The final prospectus in the form included in the
Registration Statement or first filed with the SEC pursuant to Rule 424(b) of
the Regulations and any amendments or supplements thereto, including the
information (if any) deemed to be part of that prospectus at the time of
effectiveness pursuant to Rule 430A of the Regulations, is hereinafter called
the "Prospectus." All references to the Registration Statement, the Preliminary
Prospectus and the Prospectus include all documents incorporated therein by
reference. If Artesian Resources has filed an abbreviated registration statement
to register additional Class A Non-Voting Common Stock pursuant to Rule 462(b)
under the Act (the "Rule 462 Registration Statement"), then any reference herein
to the term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
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(b) The Registration Statement has become effective under the Act, and
the SEC has not issued any stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of the Preliminary
Prospectus, nor has the SEC instituted or threatened to institute proceedings
with respect to such an order. No stop order suspending the sale of the Shares
in any jurisdiction designated by the Representative as provided for in Section
5(f) hereof has been issued, and no proceedings for that purpose have been
instituted or threatened. Artesian Resources has complied in all material
respects with all requests of the SEC, or requests of which Artesian Resources
has been advised of any state or foreign securities commission in a state or
foreign jurisdiction designated by the Representative as provided for in Section
5(f) hereof, for additional information to be included in the Registration
Statement, any Preliminary Prospectus or the Prospectus. Each Preliminary
Prospectus conformed to all the requirements of the Act and the Regulations as
of its date in all material respects and did not as of its date contain any
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except the foregoing
shall not apply to statements in or omissions from any Preliminary Prospectus in
reliance upon and in conformity with information supplied to Artesian Resources
in writing by or on behalf of any Underwriter through the Representative
expressly for use therein. The Registration Statement, on the date on which it
was declared effective by the SEC (the "Effective Date") and when any
post-effective amendment thereof shall become effective, and the Prospectus, at
the time it is filed with the SEC including, if applicable, pursuant to Rule
424(b), and on the Closing Date (as defined in Section 3 hereof) and any Option
Closing Date (as defined in Section 4(b) hereof), conformed and will conform in
all material respects to all the requirements of the Act and the Regulations,
and did not and will not, on any of such dates, include any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to Artesian Resources in writing by or on
behalf of any Underwriter through the Representative expressly for use therein.
(c) The documents incorporated by reference into the Prospectus pursuant
to Item 12 of Form S-2 under the Act, at the time they were filed with the SEC,
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act") and the Exchange Act Rules and
Regulations and did not contain any untrue statement of material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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(d) Artesian Resources is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with all necessary
power and authority, corporate and otherwise, and all required licenses,
permits, certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its current business as
described in the Prospectus, and to execute, deliver and perform this Agreement.
Artesian Wastewater Management, Inc., a Delaware corporation ("Artesian
Wastewater"), is a wholly owned subsidiary of Artesian Resources. Artesian
Development Corporation, a Delaware corporation ("Artesian Development") is also
a wholly owned subsidiary of Artesian Resources. Each of Artesian Wastewater and
Artesian Development are corporations duly organized, validly existing and in
good standing under the laws of the State of Delaware, with all necessary power
and authority, corporate and otherwise, and all required licenses, permits,
certifications, registrations, approvals, consents and franchises to own or
lease and operate their properties and to conduct their current business.
Artesian Water Company, Inc. ("Artesian Water") is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with all necessary corporate power and authority, and all required licenses,
permits, certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its business as described
in the Prospectus. Artesian Resources, Artesian Water, Artesian Wastewater and
Artesian Development are duly qualified to do business as foreign corporations,
and are in good standing, in all jurisdictions in which such qualification is
required, except where the failure to so qualify would not have a material
adverse effect on the general affairs, properties, condition (financial or
otherwise), results of operations, stockholders' equity, business or prospects
(collectively, the "Business Conditions") of Artesian Resources, Artesian Water,
Artesian Wastewater and Artesian Development taken as a whole. All references
herein to Artesian Water shall collectively refer to Artesian Water, Artesian
Wastewater and Artesian Development, unless otherwise noted and references to
materiality as applicable to Artesian Water shall mean material to the Business
Conditions, operations or assets, as the case may be, of Artesian Water,
Artesian Wastewater and Artesian Development taken as a whole.
(e) All of the outstanding shares of capital stock of Artesian Water
have been duly authorized and validly issued, are fully paid and non-assessable
and are owned by Artesian Resources free and clear of all liens, encumbrances
and security interests; and no options, warrants or other rights to purchase,
agreements or other obligations to issue, or other rights to convert any
obligations into, shares of capital stock or ownership interests in Artesian
Water or securities convertible into or exchangeable for capital stock of, or
other ownership interests in, Artesian Water are outstanding except as disclosed
in the Prospectus. Neither Artesian Resources nor Artesian Water owns any stock
or other interest whatsoever, whether equity or debt, in any corporation,
partnership or other entity other than Artesian Resources' ownership of Artesian
Water, Artesian Wastewater and Artesian Development, except that
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Artesian Water (alone and not together with Artesian Wastewater or Artesian
Development) also has a non-regulated subsidiary, Southwood Corporation, and
Artesian Wastewater is a member of the limited liability company, AquaStructure
Delaware, L.L.C.
(f) This Agreement has been duly authorized, executed and delivered by
Artesian Resources and constitutes its legal, valid and binding obligation,
enforceable against Artesian Resources in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to
applicability of general principles of equity and except, as to this Agreement,
as rights to indemnity and contribution may be limited by federal and state
securities laws or principles of public policy.
(g) The execution, delivery and performance of this Agreement and the
transactions contemplated herein, do not and will not, with or without the
giving of notice or the lapse of time, or both, (i) conflict with any term or
provision of Artesian Resources' or Artesian Water's Certificate of
Incorporation or Bylaws; (ii) result in a breach of, constitute a default under,
result in the termination or modification of, result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties of Artesian Resources or Artesian Water or require any payment by
Artesian Resources or Artesian Water or impose any liability on Artesian
Resources or Artesian Water pursuant to, any contract, indenture, mortgage, deed
of trust, commitment or other agreement or instrument to which Artesian
Resources or Artesian Water is a party or by which any of their properties are
bound or affected other than this Agreement; (iii) assuming compliance with Blue
Sky laws and the rules of the National Association of Securities Dealers, Inc.
(the "NASD") applicable to the offer and sale of the Shares, violate any law,
rule, regulation, judgment, order or decree of any government or governmental
agency, instrumentality or court, domestic or foreign, having jurisdiction over
Artesian Resources or Artesian Water or any of their respective properties or
businesses; or (iv) result in a breach, termination or lapse of Artesian
Resources' or Artesian Water's corporate power and authority to own or lease and
operate their respective properties and conduct their respective businesses.
(h) At the date or dates indicated in the Prospectus, Artesian Resources
had the duly authorized and outstanding capitalization set forth in the
Prospectus under the caption "Capitalization" and will have, as of the issuance
of the Firm Shares on the Closing Date, the as adjusted capitalization set forth
therein as of the date indicated in the Prospectus. On the Effective Date, the
Closing Date and any Option Closing Date, there will be no options or warrants
or other outstanding rights to purchase, agreements or obligations to issue or
agreements or other rights to convert or exchange any obligation or security
into, capital stock of Artesian Resources or securities convertible into or
exchangeable for capital stock of Artesian Resources,
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except as described in the Prospectus or the grant of options after the date of
the Prospectus under option plans of the Company. The information in the
Prospectus insofar as it relates to all outstanding options and other rights to
acquire securities of Artesian Resources as of the Effective Date and
immediately prior to the Closing Date and any Option Closing Date is true and
correct in all material respects.
(i) The currently outstanding shares of Artesian Resources' capital
stock have been duly authorized and are validly issued, fully paid and
non-assessable, and none of such outstanding shares of Artesian Resources'
capital stock has been issued in violation of any preemptive rights of any
security holder of Artesian Resources. The holders of the outstanding shares of
Artesian Resources' capital stock are not subject to personal liability solely
by reason of being such holders. All previous offers and sales of the
outstanding shares of Artesian Resources' capital stock, whether described in
the Registration Statement or otherwise, were made in conformity with applicable
federal, state and foreign securities laws. The authorized capital stock of
Artesian Resources, including, without limitation, the outstanding Class A
Non-Voting Common Stock, the Shares being issued, and the outstanding options to
purchase shares of Common Stock conform in all material respects with the
descriptions thereof in the Prospectus, and such descriptions conform in all
material respects with the instruments defining the same.
(j) When the Shares have been duly delivered against payment therefor as
contemplated by this Agreement, the Shares will be validly issued, fully paid
and non-assessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. The certificates representing
the Shares are in proper legal form under, and conform in all respects to the
requirements of, the Delaware General Corporation law, as amended (the "DGCL").
Neither the filing of the Registration Statement nor the offering or sale of
Shares as contemplated by this Agreement gives any security holder of Artesian
Resources any rights for or relating to the registration of any Class A
Non-Voting Common Stock or any other capital stock of Artesian Resources or any
rights to convert or have redeemed or otherwise receive anything of value with
respect to any other security of Artesian Resources.
(k) No consent, approval, authorization, order, registration, license or
permit of, or filing or registration with, any court, government, governmental
agency, instrumentality or other regulatory body or official is required for the
valid and legal execution, delivery and performance by Artesian Resources of
this Agreement and the consummation of the transactions contemplated hereby or
described in the Prospectus, except such as may be required for the registration
of the Shares under the Act, the Exchange Act, and for compliance with the
applicable state securities or Blue Sky laws or the Bylaws, rules and other
pronouncements of the NASD.
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(l) The Class A Non-Voting Common Stock (including the Shares) is
registered pursuant to Section 12(g) of the Exchange Act. The issued and
outstanding shares of Class A Non-Voting Common Stock are included for quotation
on the Nasdaq National Market. Neither Artesian Resources nor, to Artesian
Resources' knowledge, any other person has taken any action designed to cause,
or likely to result in, the termination of the registration of the Class A
Non-Voting Common Stock under the Exchange Act. Artesian Resources has not
received any notification that the SEC or the NASD is contemplating terminating
such registration or inclusion.
(m) The statements in the Registration Statement and Prospectus, insofar
as they are descriptions of or references to contracts, agreements or other
documents, are accurate in all material respects and present or summarize
fairly, in all material respects, the information required to be disclosed under
the Act or the Regulations, and there are no contracts, agreements or other
documents, instruments or transactions of any character required to be described
or referred to in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement that have not been so described, referred
to or filed, as required.
(n) Each contract or other instrument (however characterized or
described) to which Artesian Resources or Artesian Water is a party or by which
any of their respective properties or businesses is bound or affected and which
is material to the conduct of Artesian Resources', or Artesian Water's, business
has been duly and validly executed by Artesian Resources or Artesian Water, as
applicable, and, to the knowledge of Artesian Resources, by the other parties
thereto. Each such contract or other instrument is in full force and effect and
is enforceable in all material respects against the parties thereto in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and subject to applicability of general principles of equity, and
neither Artesian Resources nor Artesian Water is, and to the knowledge of
Artesian Resources, no other party is, in default thereunder, and no event has
occurred that, with the lapse of time or the giving of notice, or both, would
constitute a default under any such contract or other instrument. All necessary
consents under such contracts or other instruments to the disclosure in the
Prospectus with respect thereto have been obtained.
(o) The consolidated financial statements of Artesian Resources
(including the notes thereto) filed as part of any Preliminary Prospectus, the
Prospectus and the Registration Statement present fairly, in all material
respects, the financial position of Artesian Resources as of the respective
dates thereof, and the results of operations and cash flows of Artesian
Resources for the periods indicated therein, all in conformity with generally
accepted accounting principles. The supporting notes included in the
Registration Statement fairly state in all material respects the information
required to be stated therein in relation to the financial
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statements taken as a whole. The financial information included in the
Prospectus under the captions "Prospectus Summary - Summary Consolidated
Financial Information," and "Selected Consolidated Financial Information"
presents fairly the information shown therein and has been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement. The unaudited pro forma adjustments to financial
information included in the Registration Statement have been properly applied to
the historical amounts in the compilation of that information to reflect the
sale by Artesian Resources of 400,000 shares of Common Stock offered thereby at
an assumed offering or actual price set forth in the Preliminary Prospectus or
the Prospectus, as the case may be, and the application of the estimated net
proceeds therefrom.
(p) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
there has not been (i) any material adverse change (including, whether or not
insured against, any material loss or damage to any material assets), or
development involving a prospective material adverse change, in the Business
Conditions of Artesian Resources; (ii) any material adverse change, loss,
reduction, termination or non-renewal of any material contract to which Artesian
Resources or Artesian Water is a party; (iii) any transaction entered into by
Artesian Resources or Artesian Water not in the ordinary course of its business
that is material to Artesian Resources; (iv) any dividend or distribution of any
kind declared, paid or made by Artesian Resources on its capital stock, except
for and to the extent described in the Prospectus; (v) any liabilities or
obligations, direct or indirect, incurred by Artesian Resources or Artesian
Water that are material to Artesian Resources or Artesian Water; (vi) any change
in the capitalization of Artesian Resources or Artesian Water; or (vii) any
change in the indebtedness of Artesian Resources or Artesian Water that is
material to Artesian Resources or Artesian Water. Neither Artesian Resources or
Artesian Water has any contingent liabilities or obligations that are material
and that are not expressly disclosed in the Prospectus.
(q) Artesian Resources has not distributed, and will not distribute, any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, a Preliminary Prospectus, the Prospectus and
other material, if any, permitted by the Act and the Regulations. Neither
Artesian Resources nor any of its officers, directors or affiliates has taken,
nor shall Artesian Resources or such persons take, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Class A Non-Voting Common Stock.
(r) Artesian Resources and Artesian Water have filed with the
appropriate federal, state and local governmental agencies, and all foreign
countries and political subdivisions thereof, all tax returns that are required
to be filed or have duly obtained extensions
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of time for the filing thereof and have paid all taxes shown on such returns or
otherwise due and all material assessments received by them to the extent that
the same have become due. Neither Artesian Resources nor Artesian Water has
executed or filed with any taxing authority, foreign or domestic, any agreement
extending the period for assessment or collection of any income or other tax and
neither of them is a party to any pending action or proceeding by any foreign or
domestic governmental agency for the assessment or collection of taxes, and no
claims for assessment or collection of taxes have been asserted against Artesian
Resources or Artesian Water that might materially adversely affect the Business
Conditions of Artesian Resources or Artesian Water.
(s) KPMG LLP, which has given its report on certain financial statements
included as part of the Registration Statement, is a firm of independent
certified public accountants as required by the Act and the Regulations with
respect to Artesian Resources.
(t) Neither Artesian Resources nor Artesian Water is in violation of, or
in default under, any of the terms or provisions of (i) its Certificate of
Incorporation or Bylaws or similar governing instruments, (ii) any indenture,
mortgage, deed of trust, contract, commitment or other agreement or instrument
to which it is a party or by which it or any of its assets or properties is
bound or affected, (iii) any law, rule, regulation, judgment, order or decree of
any government or governmental agency, instrumentality or court, domestic or
foreign, having jurisdiction over it or any of its properties or business, or
(iv) any license, permit, certification, registration, approval, consent or
franchise, except with respect to clause (ii), (iii) or (iv) above, where any
such default would be reasonably expected to have a material adverse effect on
the Business Conditions of Artesian Resources, or Artesian Water.
(u) Except as expressly disclosed in the Prospectus, there are no
claims, actions, suits, protests, proceedings, arbitrations, investigations or
inquiries pending before, or, to Artesian Resources' knowledge, threatened or
contemplated by, any governmental agency, instrumentality, court or tribunal,
domestic or foreign, or before any private arbitration tribunal to which
Artesian Resources, or Artesian Water is or may be made a party that could
reasonably be expected to affect the validity of any of the outstanding Class A
Non-Voting Common Stock, or that, if determined adversely to Artesian Resources
or Artesian Water would, in any case or in the aggregate, result in any material
adverse change in the Business Conditions of Artesian Resources, nor to Artesian
Resources' knowledge is there any reasonable basis for any such claim, action,
suit, protest, proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency,
instrumentality or other tribunal enjoining Artesian Resources or Artesian Water
from, or requiring Artesian
9
Resources or Artesian Water to take or refrain from taking, any action, or to
which Artesian Resources or Artesian Water or their properties, assets or
businesses are bound or subject.
(v) Each of Artesian Resources and Artesian Water owns, or possesses
adequate rights to use, all patents, patent applications, trademarks, trademark
registrations, applications for trademark registration, trade names, service
marks, licenses, inventions, copyrights, know-how (including any unpatented
and/or unpatentable proprietary or confidential technology, information,
systems, design methodologies and devices or procedures developed or derived
from or for Artesian Resources' or Artesian Water's business), trade secrets,
confidential information, processes and formulations and other proprietary
information necessary for, used in, or proposed to be used in, the conduct of
the business of Artesian Resources and Artesian Water as described in the
Prospectus (collectively, the "Intellectual Property"). To Artesian Resources'
knowledge, neither Artesian Resources nor Artesian Water has infringed, is
infringing and Artesian Resources and Artesian Water have not received any
notice of conflict with, the asserted rights of others with respect to the
Intellectual Property that, individually or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, could materially adversely affect
the Business Conditions of Artesian Resources, and Artesian Resources knows of
no reasonable basis therefor. To the knowledge of Artesian Resources, no other
parties have infringed upon or are in conflict with any Intellectual Property.
Neither Artesian Resources nor Artesian Water is a party to, or bound by, any
agreement pursuant to which royalties, honorariums or fees are payable by
Artesian Resources or Artesian Water to any person by reason of the ownership or
use of any Intellectual Property.
(w) Each of Artesian Resources and Artesian Water has good and
marketable title to all property described in the Prospectus as being owned by
it, free and clear of all liens, security interests, charges or encumbrances and
the like, except such as are expressly described or referred to in the
Prospectus or such as do not materially adversely affect the Business Conditions
or the conduct of the business of Artesian Resources and Artesian Water as
described in the Prospectus. Each of Artesian Resources and Artesian Water has
insured its property against loss or damage by fire or other casualty, in
amounts reasonably believed by Artesian Resources to be adequate, and maintains
insurance against such other risks as management of Artesian Resources deems
appropriate. All real and personal property leased by Artesian Resources and
Artesian Water as described or referred to in the Prospectus, is held by
Artesian Resources and Artesian Water as applicable, under valid leases. The
executive offices and facilities of Artesian Resources and Artesian Water (the
"Premises"), and all operations presently or formerly conducted thereon by
Artesian Resources or Artesian Water or any predecessors thereof, are now and,
since Artesian Resources or Artesian Water began to use such Premises, always
have been and, to the knowledge of Artesian Resources prior to when Artesian
Resources or Artesian Water began to use such Premises, always had been, in
compliance with
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all federal, state and local statutes, ordinances, regulations, rules, standards
and requirements of common law concerning or relating to industrial hygiene and
the protection of health and the environment (collectively, "the Environmental
laws"), except to the extent that any failure in such compliance would not
materially adversely affect the Business Conditions of Artesian Resources or
Artesian Water. To the knowledge of Artesian Resources, the facilities of
Artesian Resources and Artesian Water produce water of sufficient quality and
quantity to supply the current and planned customers and service areas of
Artesian Resources and Artesian Water, and are not subject to any restriction on
groundwater withdrawal under any federal, state or local law, regulation, rule,
order or permit, except as expressly described in the Prospectus or as provided
in State of Delaware allocation permits and such as do not materially adversely
affect the Business Conditions or the conduct of the business of Artesian
Resources and Artesian Water as described in the Prospectus. To the knowledge of
Artesian Resources, there are no conditions on, about, beneath or arising from
the Premises, in close proximity to the Premises or at any other location that
might give rise to liability, the imposition of a statutory lien or require a
"Response," "Removal" or "Remedial Action," as defined herein, under any of the
Environmental laws, or affect the quality of the groundwater withdrawn by
Artesian Resources or Artesian Water, and that would materially adversely affect
the Business Conditions of Artesian Resources except as described in the
Prospectus. Except as expressly disclosed in the Prospectus, or which will not
materially adversely affect the Business Conditions of Artesian Resources (i)
neither Artesian Resources nor Artesian Water has received notice or has
knowledge of any claim, demand, investigation, regulatory action, suit or other
action instituted or threatened against Artesian Resources or Artesian Water or
any portion of the Premises or any parcel in close proximity to the Premises
relating to any of the Environmental laws and (ii) neither Artesian Resources or
Artesian Water has received any notice of material violation, citation,
complaint, order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule to or from any governmental or
regulatory agency arising out of or in connection with "hazardous substances"
(as defined by applicable Environmental laws) on, about, beneath, arising from
or generated at the Premises, near the Premises or at any other location. As
used in this subsection, the terms "Response," "Removal" and "Remedial Action"
shall have the respective meanings assigned to such terms under Sections
101(23)-101(25) of the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. 9601(23)-9601(25).
(x) Each of Artesian Resources and Artesian Water maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
11
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) Artesian Resources, Artesian Water and any Related Employer (which
for purposes of this Paragraph means any entity that with Artesian Resources or
Artesian Water is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of 1986 as amended (the
"Code"), is, individually or collectively, a trade or business under common
control within the meaning of Section 414(c) of the Code, or is a member of the
same affiliated service group within the meaning of Section 414(m) of the Code)
have established, maintain, contribute to, are required to contribute to, are a
party to, or are bound by certain pension, retirement, profit-sharing plans,
deferred compensation, bonus, or other incentive plans, or medical, vision,
dental, or other health plans, or life insurance or disability plans, or any
other employee benefit plans, programs, arrangements, agreements, or
understandings, some of which are subject to the Employee Retirement Income
Security Act of 1974 as amended ("ERISA") and the rules and regulations
thereunder ("Plans"). Any disclosure regarding the Plans required under the Act
or the Exchange Act has been made in the Prospectus and the documents
incorporated therein. All Plans that are subject to ERISA are in compliance with
ERISA, in all material respects, and, to the extent a Plan is intended to be
tax-qualified within the meaning of Section 401(a) of the Code, such Plan is in
compliance with the Code in all material respects and is the subject of a
current favorable determination letter from the Internal Revenue Service as to
its tax qualification. No Plan is an employee pension benefit plan that is
subject to Part 3 of Subtitle B of Title I of ERISA, a defined benefit plan
subject to Title IV of ERISA, or a multiemployer plan. Neither Artesian
Resources nor Artesian Water nor any Related Employer maintains or has
maintained retiree life or retiree health insurance plans that are employee
welfare benefit plans providing for continuing benefit or coverage for any
employee or any beneficiary of any employee after such employee's termination of
employment, except as required by Section 4980B of the Code and except as
disclosed in the Prospectus. No fiduciary or other party in interest with
respect to any of the Plans has caused any of such Plans to engage in a
prohibited transaction as defined in Section 406 of ERISA and Section 4975 of
the Code. As used in this subsection, the terms "defined benefit plan,"
"employee benefit plan," "employee pension benefit plan," "employee welfare
benefit plan," "fiduciary" and "multiemployer plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
(z) No labor dispute exists with Artesian Resources' or Artesian Water's
employees, and to Artesian Resources' knowledge, no such labor dispute is
threatened. Artesian Resources has no knowledge of any existing or threatened
labor disturbance by the employees of any of the principal suppliers,
contractors or customers of Artesian Resources or Artesian Water that would
materially adversely affect the Business Conditions of Artesian
12
Resources or Artesian Water. None of Artesian Resources' or Artesian Water's
employees is covered by a collective bargaining agreement and no union
organizing activity exists with respect to any of such employees.
(aa) Neither Artesian Resources nor Artesian Water has incurred any
liability for any finder's fees or similar payments in connection with the
transactions contemplated herein other than as disclosed in the Prospectus.
(bb) Artesian Resources is familiar with the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder, and
has in the past conducted, and Artesian Resources intends to conduct, its
affairs in such a manner as to ensure that it will not be an "investment
company" within the meaning of the 1940 Act and the rules and regulations
thereunder.
(cc) No statement, representation, warranty or covenant made by Artesian
Resources or Artesian Water in this Agreement or in any certificate or document
required by this Agreement to be delivered to the Representative is, or as of
the Closing Date or any Option Closing Date will be, inaccurate, untrue or
incorrect in any material respect. No transaction has occurred or is proposed
between or among Artesian Resources or Artesian Water and any of their
respective officers, directors or stockholders or any affiliate of the
foregoing, or any affiliate of the foregoing that is required to be described in
and is not described in the Registration Statement and the Prospectus.
(dd) Neither Artesian Resources or Artesian Water, nor any officer,
director, employee, partner, agent or other person acting on behalf of Artesian
Resources or Artesian Water has, directly or indirectly, given or agreed to give
any money, property or similar benefit or consideration to any customer or
supplier (including any employee or agent of any customer or supplier) or
official or employee of any agency or instrumentality of any government (foreign
or domestic) or political party or candidate for office (foreign or domestic) or
any other person who was, is or in the future may be in a position to affect the
Business Conditions of Artesian Resources or any actual or proposed business
transaction of Artesian Resources or Artesian Water that (i) could subject
Artesian Resources or Artesian Water to any liability (including, but not
limited to, the payment of monetary damages) or penalty in any civil, criminal
or governmental action or proceeding that would have a material adverse effect
on the Business Conditions of Artesian Resources or (ii) with respect to
Artesian Resources, Artesian Water, or any officer or director thereof, violates
any law, rule or regulation to which Artesian Resources or Artesian Water is
subject.
13
Any certificate signed by any officer of Artesian Resources or Artesian
Water in such capacity and delivered to the Representative or to counsel for the
Underwriters pursuant to this Agreement shall be deemed a representation and
warranty by Artesian Resources or Artesian Water as the case may be, to the
several Underwriters as to the matters covered thereby.
2. Purchase and Sale of Firm Shares. On the basis of the representations,
warranties, covenants and agreements contained herein, but subject to the terms
and conditions set forth herein, Artesian Resources shall sell the firm Shares
to the several Underwriters at the Offering Price less the Underwriting
Discounts and Commissions shown on the cover page of the Prospectus, and the
Underwriters, severally and not jointly, shall purchase from Artesian Resources
on a firm commitment basis, at the Offering Price less the Underwriting
Discounts and Commissions shown on the cover page of the Prospectus, the
respective amounts of the Firm Shares set forth opposite their names on Schedule
I hereto. In making this Agreement, each Underwriter is contracting severally
and not jointly, and except as provided in Sections 4 and 11 hereof, the
agreement of each Underwriter is to purchase only that number of Shares
specified with respect to that Underwriter in Schedule I hereto. The
Underwriters shall offer the Shares to the public as set forth in the
Prospectus.
3. Payment and Delivery. Payment for the Firm Shares shall be made by
certified or official bank check or checks payable to the order of Artesian
Resources in New York Clearing House (next day) funds, at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, or in
immediately available funds wired to such accounts as Artesian Resources may
specify (with all costs and expenses incurred by the Underwriters in connection
with such settlement in immediately available funds, including, but not limited
to, interest or cost of funds and expenses, to be borne by Artesian Resources),
against delivery of the Firm Shares to the Representative at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ for
the respective accounts of the Underwriters. Such payment and delivery will be
made at 10:00 a.m., Philadelphia, Pennsylvania time, on the third business day
after the date of this Agreement, or at such other time on the same or such
other date, not later than seven business days thereafter as shall be designated
in writing by the Representative. Such time and date are referred to herein as
the "Closing Date." The certificates representing the Firm Shares to be sold and
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the
Closing Date, and will be made available to the Representative for inspection,
checking and packaging at the Philadelphia correspondent office of Artesian
Resources' transfer agent not less than one full business day prior to the
Closing Date.
14
4. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in connection with
the distribution and sale of the Firm Shares as contemplated by the Prospectus,
subject to the terms and conditions herein set forth, the several Underwriters
are hereby granted an option by Artesian Resources to purchase all or any part
of the Optional Shares (the "Over-allotment Option"). The purchase price to be
paid for the Optional Shares shall be the Offering Price less the Underwriting
Discounts and Commissions shown on the cover page of the Prospectus. The
Over-allotment Option granted hereby may be exercised by the Representative on
behalf of the several Underwriters as to all or any part of the Optional Shares
at any time and from time to time within 30 days after the date of the
Prospectus. No Underwriter shall be under any obligation to purchase any
Optional Shares prior to an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be exercised by the
Representative on behalf of the several Underwriters by giving notice to
Artesian Resources by a letter sent by registered or certified mail, postage
prepaid, telex, telegraph, telegram or facsimile (such notice to be effective
when received), addressed as provided in Section 13 hereof, setting forth the
number of Optional Shares to be purchased, the date and time for delivery of and
payment for the Optional Shares and stating that the Optional Shares referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Shares. If such notice is given at
least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment shall be not earlier than the Closing
Date. If such notice is given after two full business days prior to the Closing
Date, the date set forth therein for such delivery and payment shall be a date
selected by the Representative not later than five full business days after the
exercise of the Over-allotment Option. The date and time set forth in such a
notice is referred to herein as an "Option Closing Date," and a closing held
pursuant to such a notice is referred to herein as an "Option Closing." Upon
each exercise of the Over-allotment Option, and on the basis of the
representations, warranties, covenants and agreements herein contained, and
subject to the terms and conditions herein set forth, the several Underwriters
shall become severally, but not jointly, obligated to purchase from Artesian
Resources the number of Optional Shares specified in each notice of exercise of
the Over-allotment option (allocated among them in accordance with Section 4(c)
hereof).
(c) The number of Optional Shares to be purchased by each Underwriter
pursuant to each exercise of the Over-allotment Option shall be the number that
bears the same ratio to the aggregate number of Optional Shares being purchased
through such Over-allotment Option exercise as the number of Firm Shares
opposite the name of such Underwriter in Schedule I hereto bears to the total
number of all Firm Shares. Notwithstanding the foregoing, the number of Optional
Shares purchased and sold pursuant to each exercise of the Over-allotment Option
shall be subject to such adjustment as the Representative may approve to
eliminate fractional shares and subject to the provisions for the allocation of
Optional Shares
15
purchased for the purpose of covering over-allotments set forth in the agreement
entered into by and among the Underwriters in connection herewith (the
"Agreement Among Underwriters").
(d) Payment for the Optional Shares shall be made to Artesian Resources,
by certified or official bank check payable to the order of Artesian Resources,
in New York Clearing House (next day) funds, at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, or such other place
as shall be agreed upon by Artesian Resources and the Representative, or in
immediately available funds wired to such accounts as Artesian Resources may
specify (with all costs and expenses incurred by the Underwriters in connection
with such settlement in immediately available funds, including, but not limited
to, interest or cost of funds and expenses, to be borne by Artesian Resources),
against delivery of the Optional Shares to the Representative at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
for the respective accounts of the Underwriters. The certificates representing
the Optional Shares to be issued and delivered will be in such denominations and
registered in such names as the Representative requests upon reasonable notice
prior to such Option Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the Philadelphia
correspondent office of Artesian Resources' transfer agent at a reasonable time
in advance of such Option Closing Date.
5. Certain Covenants and Agreements of Artesian Resources. Artesian
Resources covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, Artesian Resources will
timely file the Prospectus pursuant to and in compliance with Rule 424(b) of the
Regulations and will advise the Representative of the time and manner of such
filing.
(b) Artesian Resources will not file or publish any amendment or
supplement to the Registration Statement, Preliminary Prospectus or Prospectus
at any time before the completion (in the opinion of the Underwriters' counsel)
of the distribution of the Shares by the Underwriters that is not (i) in
compliance with the Regulations and (ii) approved by the Representative (such
approval not to be unreasonably withheld or delayed).
(c) Artesian Resources will advise the Representative immediately, and
confirm such advice in writing, (i) when any post-effective amendment to the
Registration Statement is filed with the SEC under Rule 462(c) under the Act or
otherwise, (ii) any Rule 462(b) Registration Statement is filed, (iii) of the
receipt of any comments from the SEC concerning the Registration Statement,
(iv) when any post-effective amendment to the Registration Statement becomes
effective, or when any supplement to the Prospectus or any
16
amended Prospectus has been filed, (v) of any request of the SEC for amendment
or supplementation of the Registration Statement or Prospectus or for additional
information, (vi) during the period when the Prospectus is required to be
delivered under the Act and Regulations, of the happening of any event as a
result of which the Registration Statement or the Prospectus would include an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, (vii) during the period noted in
clause (vi) above, of the need to amend the Registration Statement or supplement
the Prospectus to comply with the Act, (viii) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, and (ix) of the suspension of the qualification of any of the Shares
for offering or sale in any jurisdiction in which the Underwriters intend to
make such offers or sales, or the initiation or threatening of any proceedings
for any of such purposes known to Artesian Resources. Artesian Resources will
use its best efforts to prevent the issuance of any such stop order or of any
order preventing or suspending such use, and if any such order is issued, to
obtain as soon as possible the lifting thereof.
(d) Artesian Resources has delivered to the Representative, without
charge, as many copies of each Preliminary Prospectus as the Representative has
reasonably requested. Artesian Resources will deliver to the Representative,
without charge, from time to time during the period when delivery of the
Prospectus is required under the Act, such number of copies of the Prospectus
(as supplemented or amended) as the Representative may reasonably request.
Artesian Resources hereby consents to the use of such copies of the Preliminary
Prospectus and the Prospectus for purposes permitted by the Act, the Regulations
and the securities or Blue Sky laws of the states or foreign jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
Artesian Resources has furnished or will furnish to the Representative at least
three original signed copies of the Registration Statement as originally filed
and of all amendments and supplements thereto, whether filed before or after the
Effective Date, at least three copies of all exhibits filed therewith and of all
consents and certificates of experts, and will deliver to the Representative
such number of conformed copies of the Registration Statement, including
financial statements and exhibits, and all amendments thereto, as the
Representative may reasonably request.
(e) Artesian Resources will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of sales of and dealings in the Shares for as long as may be
necessary to complete the distribution of the Shares as contemplated hereby.
17
(f) Artesian Resources will furnish such information and pay such filing
fees and other expenses as may be required, and otherwise cooperate in the
registration or qualification of the Shares, or exemption therefrom, for
offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions in which the Representative
determines to offer the Shares, after consultation with Artesian Resources, and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided,
however, that no such qualification shall be required in any jurisdiction where,
solely as a result thereof, Artesian Resources would be subject to taxation or
qualification as a foreign corporation doing business in such jurisdiction where
it is not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering or
sale of the Shares, in any jurisdiction where it is not now so subject. Artesian
Resources will, from time to time, prepare and file such statements and reports
as are or may be required to continue such qualification in effect for so long a
period as is required under the laws of such jurisdictions for such offering and
sale. Artesian Resources will furnish such information and pay such filing fees
and other expenses as may be required, and otherwise cooperate in the listing of
the Shares on the Nasdaq National Market. Artesian Resources will, from time to
time, prepare and file such statements and reports as are or may be required to
continue such qualification in effect for a period of three years from the
Effective Date.
(g) Subject to Section 5(b) hereof, in case of any event (occurring at
any time within the period during which, in the opinion of counsel for the
Underwriters, a prospectus is required to be delivered under the Act or the
Regulations), as a result of which any Preliminary Prospectus or the Prospectus,
as then amended or supplemented, would contain, in the opinion of counsel for
the Underwriters, an untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, if it is necessary
at any time to amend any Preliminary Prospectus or the Prospectus to comply with
the Act or the Regulations or any applicable securities or Blue Sky laws,
Artesian Resources promptly will prepare and file with the SEC, and any
applicable state and foreign securities commission, an amendment, supplement or
document that will correct such statement or omission or effect such compliance
and will furnish to the several Underwriters such number of copies of such
amendments, supplements or documents (in form and substance satisfactory to the
Representative and counsel for the Underwriters) as the Representative may
reasonably request. For purposes of this Section 5(g), Artesian Resources will
provide such information to the Representative, the Underwriters' counsel and
counsel to Artesian Resources as shall be necessary to enable such persons to
consult with Artesian Resources with respect to the need to amend or supplement
the Registration Statement, Preliminary Prospectus or Prospectus or file any
document, and shall furnish to the
18
Representative and the Underwriters' counsel such further information as each
may from time to time reasonably request.
(h) Artesian Resources will make generally available to its security
holders not later than 45 days after the end of the period covered thereby, an
earnings statement of Artesian Resources (which need not be audited unless
required by the Act or the Regulations) that shall comply with Section 11(a) of
the Act and Rule 158 thereunder and cover a period of at least 12 consecutive
months beginning not later than the first day of Artesian Resources' fiscal
quarter next following the Effective Date (or, if later, the effective date of
the Rule 462(b) Registration Statement).
(i) For a period of three years from the Effective Date, Artesian
Resources will deliver to the Representative and, upon request, to each of the
Underwriters: (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-K and 10-Q (or such similar forms as may be
designated by the SEC), registration statements and any exhibits thereto, filed
or furnished to the SEC or any securities exchange or the NASD, on the date each
such report or document is so filed or furnished; (ii) as soon as practicable,
copies of any reports or communications (financial or other) of Artesian
Resources mailed to its security holders; and (iii) every material press release
in respect of Artesian Resources or its affairs that is released or prepared by
Artesian Resources.
(j) During the course of the distribution of the Shares, Artesian
Resources will not take, directly or indirectly, any action designed to, or that
could reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock.
(k) Artesian Resources has caused each person listed on Schedule II
hereto to execute an agreement (a "Lock-up Agreement") in form and substance
satisfactory to the Representative and the Underwriters' counsel which provides
that for a period of 90 days from the date of the final Prospectus, as amended
or supplemented, such persons will not, without the prior written consent of the
Representative, directly or indirectly, sell, offer or contract to sell or grant
any option to purchase or otherwise dispose of any shares of Common Stock (or
any securities convertible into or exercisable or exchangeable for any shares of
Common Stock). Artesian Resources has delivered such agreements to the
Representative prior to the date of this Agreement. Appropriate stop transfer
instructions will be issued by Artesian Resources to the transfer agent for the
Class A Non-Voting Common Stock, and a copy of such instructions will be
delivered to the Representative.
(l) For a period of 90 days after the Effective Date, Artesian Resources
will not, without the prior written consent of the Representative, offer, sell,
contract to
19
sell or otherwise dispose of any Class A Non-Voting Common Stock or
any securities convertible into or exercisable for any Class A Non-Voting Common
Stock or grant options to purchase any Class A Non-Voting Common Stock, except
(i) the issuance of Class A NonVoting Common Stock upon the exercise of
currently outstanding options and warrants as described in the Prospectus, (ii)
the grant of options to purchase Class A Non-Voting Common Stock under Artesian
Resources' currently outstanding stock option plans and the issuance of Class A
Non-Voting Common Stock upon the exercise thereof and (iii) the issuance of
Class A Non-Voting Common Stock under Artesian Resources' Dividend Reinvestment
Plan and 401(k) Plan.
(m) For a period of three years from the Effective Date, Artesian
Resources will use all reasonable efforts to maintain the listing of the Class A
Non-Voting Common Stock (including, without limitation, the Shares) on the
Nasdaq National Market or on a national securities exchange.
(n) Artesian Resources shall, at its sole cost and expense, supply and
deliver to the Representative and the Underwriters' counsel, within a reasonable
period from the Closing Date, transaction binders in such number and in such
form and content as the Representative reasonably requests.
(o) Artesian Resources will use the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus.
6. Payment of Fees and Expenses.
(a) Whether or not the transactions contemplated by this Agreement are
consummated and regardless of the reason this Agreement is terminated, Artesian
Resources will pay or cause to be paid, and bear or cause to be borne, all costs
and expenses incident to the performance of the obligations of Artesian
Resources under this Agreement, including: (i) the fees and expenses of the
accountants and counsel for Artesian Resources incurred in the preparation of
the Registration Statement and any post-effective amendments thereto (including
financial statements and exhibits), Preliminary Prospectuses and the Prospectus
and any amendments or supplements thereto; (ii) printing and mailing expenses
associated with the Registration Statement and any post-effective amendments
thereto, any Preliminary Prospectus, the Prospectus, this Agreement, the
Agreement Among Underwriters, the Underwriters' Questionnaire, the power of
attorney executed by each of the Underwriters, the Selected Dealer Agreement and
related documents and the Preliminary Blue Sky Memorandum (and any supplement
thereto); (iii) the costs and expenses (other than fees and expenses of the
20
Underwriters' counsel, except such fees incurred in connection with Blue Sky and
NASD filings or exemptions as provided herein) incident to the authentication,
issuance, sale and delivery of the Shares to the Underwriters; (iv) the fees,
expenses and all other costs of qualifying the Shares for sale under the
securities or Blue Sky laws of those states or foreign jurisdictions in which
the Shares are to be offered or sold, including the reasonable fees and expenses
of Underwriters' counsel and such local counsel as may have been reasonably
required and retained for such purpose, except such fees and expenses shall not
exceed $5,000; (v) the fees, expenses and other costs of, or incident to,
securing any review or approvals by or from the NASD, including the reasonable
fees and expenses of the Underwriters' counsel, subject to the limitation on
fees set forth in clause (iv) above; (vi) the filing fees of the SEC; (vii) the
cost of furnishing to the Underwriters copies of the Registration Statement,
Preliminary Prospectuses and Prospectuses as herein provided; (viii) Artesian
Resources' travel expenses in connection with meetings with the brokerage
community and institutional investors; (ix) the costs and expenses associated
with settlement in same day funds (including, but not limited to, interest or
cost of funds expenses), if desired by Artesian Resources; (x) any fees or costs
payable to the Nasdaq National Market as a result of the offering; (xi) the cost
of printing certificates for the Shares; (xii) the costs and charges of any
transfer agent; (xiii) the reasonable costs of advertising the offering,
including, without limitation, with respect to the placement of "tombstone"
advertisements in publications selected by the Representative; (xiv) all taxes,
if any, on the issuance, delivery and transfer of the Shares sold by Artesian
Resources; and (xv) all other costs and expenses reasonably incident to the
performance of Artesian Resources' obligations hereunder that are not otherwise
specifically provided for in this Section 6(a); provided, however, that, except
as specifically set forth in Section 6(c) hereof, the Underwriters shall be
responsible for their out-of-pocket expenses, including those associated with
meetings with the brokerage community and institutional investors, other than
Artesian Resources' travel expenses, and the fees and expenses of their counsel
for other than with respect to Blue Sky and NASD matters.
(b) Artesian Resources shall pay as due any state or foreign
registration, qualification and filing fees and any accountable out-of-pocket
disbursements in connection with such registration, qualification or filing in
the states and foreign jurisdictions in which the Representative determines to
offer or sell the Shares.
(c) On the Closing Date, Artesian Resources shall pay the Representative
a non-accountable expense allowance in the amount of $50,000.
(d) If (i) the Underwriters are willing to proceed with the offering,
and the transactions contemplated by this Agreement are not consummated because
Artesian Resources elects not to proceed with the offering for any reason or
(ii) the Representative
21
terminates this Agreement pursuant to Section 10(b) hereof, then Artesian
Resources will pay to the Representative the amount provided in Section 6(c).
7. Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase and pay for the Firm Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which it exercises its right to purchase under Section 4 on an
Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy and fulfillment of the
representations and warranties of Artesian Resources, to the performance by
Artesian Resources of its covenants and obligations hereunder, and to the
following additional conditions:
(a) If required by the Regulations, the Prospectus shall have been filed
with the SEC pursuant to Rule 424(b) of the Regulations within the applicable
time period prescribed for such filing by the Regulations. On or prior to the
Closing Date or any Option Closing Date, as the case may be, no stop order or
other order preventing or suspending the effectiveness of the Registration
Statement (including any document incorporated by reference therein) or the sale
of any of the Shares shall have been issued under the Act or any state or
foreign securities law, and no proceedings for that purpose shall have been
initiated or shall be pending or, to the Representative's knowledge or the
knowledge of Artesian Resources, shall be contemplated by the SEC or by any
authority in any jurisdiction designated by the Representative pursuant to
Section 5(f) hereof. Any request on the part of the SEC or any state or foreign
securities authority for additional information shall have been complied with to
the reasonable satisfaction of counsel for the Underwriters.
(b) All corporate proceedings and other matters incident to the
authorization, form and validity of this Agreement, the Shares and the form of
the Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
satisfactory in all material respects to counsel for the Underwriters. Artesian
Resources shall have furnished to such counsel all documents and information
that they may have reasonably requested to enable them to pass upon such
matters. The Representative shall have received from the Underwriters' counsel,
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP an opinion, dated as of the Closing Date
and any Option Closing Date, as the case may be, and addressed to the
Representative individually and as representative of the several Underwriters,
which opinion shall be satisfactory in all respects to the Representative.
(c) The Representative shall have received a copy of an executed Lock-up
Agreement from each person listed on Schedule II hereto.
22
(d) The Representative shall have received at or prior to the Closing
Date from the Underwriters' counsel a memorandum or summary, in form and
substance satisfactory to the Representative, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the securities or
Blue Sky laws of such jurisdictions designated by the Representative pursuant to
Section 5(f) hereof.
(e) On the Closing Date and any Option Closing Date, there shall have
been delivered to the Representative signed opinions of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius
LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Arsht & ▇▇▇▇▇▇▇, counsels for Artesian Resources, dated
as of each such date and addressed to the Representative individually and as
representative of the several Underwriters to the effect set forth in Exhibits A
and B hereto or to such effect as is otherwise reasonably satisfactory to the
Representative.
(f) At the Closing Date and any Option Closing Date: (i) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the Act and
the Regulations and in all material respects shall conform to the requirements
of the Act and the Regulations, and neither the Registration Statement nor any
post-effective amendment thereto nor the Prospectus and any amendments or
supplements thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; (ii) since the respective dates as
of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments or
supplements thereto, except as otherwise stated therein, there shall have been
no material adverse change in the Business Conditions of Artesian Resources from
that set forth therein, whether or not arising in the ordinary course of
business; (iii) since the respective dates as of which information is given in
the Registration Statement and the Prospectus or any amendment or supplement
thereto, there shall have been no event or transaction, contract or agreement
entered into by Artesian Resources or Artesian Water other than in the ordinary
course of business and as set forth in the Registration Statement or Prospectus,
that has not been, but would be required to be, set forth in the Registration
Statement or Prospectus; (iv) since the respective dates as of which information
is given in the Registration Statement and any post-effective amendment thereto
and the Prospectus and any amendments or supplements thereto, there shall have
been no material adverse change, loss, reduction, termination or non-renewal of
any contract to which Artesian Resources or Artesian Water is a party, that has
not been, but would be required to be set forth in the Registration Statement or
Prospectus; and (v) no action, suit or proceeding at law or in equity shall be
pending or threatened against Artesian Resources or Artesian Water that would be
required to be set forth in the Prospectus, other than as set forth therein, and
no proceedings shall be pending or threatened against or directly affecting
Artesian Resources or Artesian Water
23
before or by any federal, state or other commission, board or administrative
agency wherein an unfavorable decision, ruling or finding would materially
adversely affect the Business Conditions of Artesian Resources.
(g) The Representative shall have received at the Closing Date and any
Option Closing Date certificates of the Chief Executive Officer and the Chief
Financial Officer of Artesian Resources dated as of the date of the Closing Date
or Option Closing Date, as the case may be, and addressed to the Representative,
individually and as representatives of the several Underwriters, to the effect
that (i) the representations and warranties of Artesian Resources in this
Agreement are true and correct, as if made at and as of the Closing Date or the
Option Closing Date, as the case may be, and that Artesian Resources has
complied with all the agreements, fulfilled all the covenants and satisfied all
the conditions on its part to be performed, fulfilled or satisfied at or prior
to the Closing Date or the Option Closing Date, as the case may be, and (ii) the
signers of the certificate have carefully examined the Registration Statement
and the Prospectus and any amendments or supplements thereto, and the conditions
set forth in Section 7(g) hereof have been satisfied.
(h) At the time this Agreement is executed and at the Closing Date and
any Option Closing Date the Representative shall have received a letter, dated
the date of delivery thereof, addressed to the Representative, individually and
as representative of the several Underwriters, in form and substance
satisfactory to the Representative in all respects (including, without
limitation, the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) from KPMG LLP:
(i) confirming they are independent certified public accountants
within the meaning of the Act and the Regulations, and stating that the section
of the Registration Statement under the caption "Experts" is correct insofar as
it relates to them;
(ii) stating that, in their opinion, the consolidated financial
statements, schedules and notes of Artesian Resources audited by them and
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations;
(iii) stating that, on the basis of specified procedures, which
included a reading of the latest available unaudited interim consolidated
financial statements of Artesian Resources (with an indication of the date of
the latest available unaudited interim financial statements), a reading of the
minutes of the meetings of the stockholders and the Boards of Directors of
Artesian Resources and Artesian Water and the Audit and Personnel, Compensation
and Benefits Committees of such Boards and inquiries to certain officers and
24
other employees of Artesian Resources and Artesian Water responsible for
operational, financial and accounting matters and other specified procedures and
inquiries, nothing has come to their attention that would cause them to believe
that at a specified date not more than five business days prior to the date of
such letter, there was any change in the capital stock (other than (1) the
issuance of Class A Non-Voting Common Stock upon the exercise of currently
outstanding options and warrants as described in the Prospectus, (2) the grant
of options to purchase Class A Non-Voting Common Stock under Artesian Resources'
currently outstanding stock options plans and the issuance of Class A Non-Voting
Common Stock upon the exercise thereof and (3) the issuance of Class A
Non-Voting Common Stock under Artesian Resources' Dividend Reinvestment Plan and
401(k) Plan), increase in long-term debt of Artesian Resources or any decrease
in consolidated net current assets or stockholders equity of Artesian Resources
as compared with the amounts shown in the December 31, 1998 audited balance
sheets of Artesian Resources included in the Registration Statement or that for
the periods from December 31, 1998 to the date of the latest available unaudited
financial statements of Artesian Resources, if any, and to a specified date not
more than five days prior to the date of the letter, there were any decreases,
as compared to the corresponding periods in the prior year, in operating income
or total or per share amounts of net income, except in all instances for
changes, decreases or increases that the Registration Statement discloses have
occurred or may occur and except for such other changes, decreases or increases
which the Underwriters shall in their sole discretion accept.
(iv) stating that they have compared specific dollar amounts (or
percentages derived from such dollar amounts), numbers of shares and other
numerical data and financial information set forth in the Registration Statement
that have been reasonably specified by the Representative prior to the date of
this Agreement (in each case to the extent that such dollar amounts, percentages
and other information is derived from the general accounting records subject to
the internal controls of Artesian Resources' or Artesian Water's accounting
systems, or has been derived directly from such accounting records by analysis
or comparison or has been derived from other records and analyses maintained or
prepared by Artesian Resources or Artesian Water) with the results obtained from
the application of readings, inquiries and other appropriate procedures set
forth in the letter, and found them to be in agreement.
All financial statements and schedules included in material incorporated
by reference into the Prospectus shall be deemed included in the Registration
Statement for purposes of this subsection.
(i) There shall have been duly tendered to the Representative for
the respective accounts of the Underwriters, certificates representing all of
the Shares to be purchased by the Underwriters on the Closing Date or Option
Closing Date, as the case may be.
25
(j) All corporate and other proceedings and other matters incident to
the authorization, form and validity of this Agreement and the form of the
Registration Statement and Prospectus and all other legal matters related to
this Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all respects to counsel to the Underwriters. Artesian Resources
shall have furnished to such counsel all documents and information that they
shall have reasonably requested to enable them to pass upon such matters.
(k) At the Closing Date and any Option Closing Date, the Representative
shall have been furnished such additional documents, information and
certificates as they shall have reasonably requested.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Representative and the Underwriters' counsel.
Artesian Resources shall furnish the Representative with such conformed copies
of such opinions, certificates, letters and other documents as they shall
reasonably request. If any condition to the Underwriters' obligations hereunder
to be fulfilled prior to or at the Closing Date or any Option Closing Date, as
the case may be, is not fulfilled, the Representative may on behalf of the
several Underwriters, terminate this Agreement with respect to the Closing Date
or such Option Closing Date, as applicable, or, if they so elect, waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment. Any such termination shall be without liability of the Underwriters
to Artesian Resources.
8. Indemnification and Contribution.
(a) Artesian Resources shall indemnify and hold harmless each
Underwriter, and each person, if any, who controls each Underwriter within the
meaning of the Act, against any and all loss, liability, claim, damage and
expense whatsoever, including, but not limited to, any and all reasonable
expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever or in connection
with any investigation or inquiry of, or action or proceeding that may be
brought against, the respective indemnified parties, arising out of or based
upon any breach of Artesian Resources' representations and warranties made in
this Agreement or any untrue statements or alleged untrue statements of material
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, any application or other document filed in any jurisdiction in order
to qualify all or any part of the Shares under the securities laws thereof or
filed with the SEC or the NASD (in this Section 8 collectively called
"application"), or the omission or alleged omission from any of the foregoing of
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the foregoing
indemnity shall not
26
apply in respect of any statement or omission made in reliance upon and in
conformity with written information furnished to Artesian Resources by any
Underwriter through the Representative expressly for use in any Preliminary
Prospectus, the Registration Statement or Prospectus, or any amendment or
supplement thereto, or in any application or in any communication to the SEC, as
the case may be; and further provided, however, that the indemnification
contained in this Section 8(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) on account of any such loss, claim, liability or
expense arising from the sale of the Shares by such Underwriter to any person if
a copy of the Prospectus shall not have been delivered or sent to such person
within the time required by the Act and the regulations thereunder, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, provided that Artesian Resources has delivered the Prospectus to the
several Underwriters in requisite quantity on a timely basis to permit such
delivery or sending. The obligations of Artesian Resources under this Section
8(a) will be in addition to any liability Artesian Resources may otherwise have.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless Artesian Resources, each of the directors of Artesian Resources,
each of the officers of Artesian Resources who shall have signed the
Registration Statement, and each other person, if any, who controls Artesian
Resources within the meaning of the Act to the same extent as the foregoing
indemnities from Artesian Resources to the several Underwriters, but only with
respect to any and all loss, liability, claim, damage or expense resulting from
statements or omissions, or alleged statements or omissions, if any, made in any
Preliminary Prospectus, Registration Statement or Prospectus or any amendment or
supplement thereof or any application or in any communication to the SEC in
reliance upon, and in conformity with written information furnished to Artesian
Resources by any Underwriter through the Representative expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or any application or in any communication to
the SEC, as the case may be. The obligations of each Underwriter under this
Section 8(b) will be in addition to any liability which such Underwriter may
otherwise have.
(c) If any action, inquiry, investigation or proceeding is brought
against any person in respect of which indemnification may be sought pursuant to
Section 8(a) or (b) hereof, such person (hereinafter called the "indemnified
party") shall, promptly after notification of, or receipt of service of process
for, such action, inquiry, investigation or proceeding, notify in writing the
party or parties against whom indemnification is to be sought (hereinafter
called the "indemnifying party") of the institution of such action, inquiry,
investigation or proceeding. The indemnifying party, upon the request of the
indemnified party,
27
shall assume the defense of such action, inquiry, investigation or proceeding,
including, without limitation, the employment of counsel (reasonably
satisfactory to such indemnified party) and payment of expenses. No
indemnification provided for in this Section 8 shall be available to any
indemnified party who shall fail to give such notice if the indemnifying party
does not have knowledge of such action, inquiry, investigation or proceeding to
the extent that such indemnifying party has been materially prejudiced by the
failure to give such notice, but the omission to so notify the indemnifying
party shall not relieve the indemnifying party otherwise than under this Section
8. Such indemnified party shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless the employment of such counsel
shall have been authorized in writing by the indemnifying party in connection
with the defense of such action or if the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party or if such
indemnified party or parties shall have been advised by counsel that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties or that there may be legal defenses available
to such indemnified party or parties different from or in addition to those
available to the indemnifying party or parties, in any of which events the
indemnified party or parties shall be entitled to select counsel to conduct the
defense to the extent determined by such counsel to be necessary to protect the
interests of the indemnified party or parties, and the reasonable fees and
expenses of such counsel shall be borne by the indemnifying party. The
indemnifying party shall be responsible for the fees and disbursements of only
one such counsel so engaged by the indemnified party or parties. Expenses
covered by the indemnification in this Section 8 shall be paid by the
indemnifying party as they are incurred by the indemnified party. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action. Anything in this
Section 8 to the contrary notwithstanding an indemnifying party shall not be
liable for any settlement of a claim effected without its written consent, which
consent shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section 8 is unavailable
or insufficient to hold harmless an indemnified party under Section 8(a) or (b)
hereof in respect of any losses, liabilities, claims, damages or expenses (or
actions, inquiries, investigations or proceedings in respect thereof) referred
to therein, except by reason of the failure to give notice as required in
Section 8(c) hereof (provided that the indemnifying party does not have
knowledge of the action, inquiry, investigation or proceeding and to the extent
such party has been materially prejudiced by the failure to give such notice),
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, liabilities, claims,
28
damages or expenses (or actions, inquiries, investigations or proceedings in
respect thereof in such proportion as is appropriate to reflect the relative
benefits received by Artesian Resources on the one hand and the Underwriters on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law, then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of Artesian Resources on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, liabilities, claims or expenses (or
actions, inquiries, investigations or proceedings in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by Artesian Resources on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by Artesian Resources bears to the total
underwriting discount and commissions received by the Underwriters, in each case
as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Artesian
Resources on the one hand or the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
Artesian Resources and the Underwriters agree that it would not be just
and equitable if contributions to this Section 8(d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, liabilities,
claims, damages or expenses (or actions, inquiries, investigations or
proceedings in respect thereof) referred to above in this Section 8(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), (i) the
provisions of the Agreement Among Underwriters shall govern contribution among
Underwriters, (ii) no Underwriter (except as provided in the Agreement Among
Underwriters) shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, and (iii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their individual underwriting
obligations and not joint.
29
9. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date. All such
representations, warranties and agreements of the Underwriters and Artesian
Resources, including, without limitation, the indemnity and contribution
agreements contained in Section 8 hereof and the agreements contained in
Sections 6, 9 and 10 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person, and shall survive delivery of the Shares and termination of
this Agreement, whether before or after the Closing Date or any Option Closing
Date.
10. Effective Date of This Agreement and Termination Hereof.
(a) This Agreement shall become effective at 10:00 a.m., Philadelphia,
Pennsylvania time, on the first business day following the Effective Date or at
the time of the public offering by the Underwriters of the Shares, whichever is
earlier, except that the provisions of Sections 6, 8, 9 and 10 hereof shall be
effective upon execution hereof. The time of the public offering, for the
purpose of this Section 10, shall mean the time when any of the Shares are first
released by the Underwriters for offering by dealers. The Representative and
Artesian Resources may prevent the provisions of this Agreement (other than
those contained in Sections 6, 8, 9 and 10) hereof from becoming effective
without liability of any party to any other party, except as noted below, by
giving the notice indicated in Section 10(c) hereof before the time the other
provisions of this Agreement become effective.
(b) The Representative shall have the right to terminate this Agreement
at any time prior to the Closing Date or any Option Closing Date as provided in
Sections 7 and 11 hereof or if any of the following have occurred: (i) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, any material adverse change or any development involving a
prospective material adverse change in or affecting the Business Conditions of
Artesian Resources, whether or not arising in the ordinary course of business,
that would, in the Representative's opinion, make the offering or delivery of
the Shares impracticable; (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic, political or financial
market conditions if the effect on the financial markets of the United States of
such outbreak, calamity, crisis or change would, in the Representative's
opinion, make the offering or delivery of the Shares impracticable; (iii) any
suspension or limitation of trading generally in securities on the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
over-the-counter market or any setting of minimum prices for trading or the
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority that in the Representative's
30
opinion materially and adversely affects trading on such exchange or the
over-the-counter market; (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in the Representative's opinion
materially and adversely affects or will materially or adversely affect the
business or operations of Artesian Resources ; (v) declaration of a banking
moratorium by the United States, New York or Pennsylvania authorities; (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs that in the Representative's opinion
has a material adverse effect on the securities markets in the United States; or
(vii) trading in any securities of Artesian Resources shall have been suspended
or halted by NASD or the SEC.
(c) If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Representative shall notify Artesian Resources hereof promptly by
telephone, telex, telegraph, telegram or facsimile, confirmed by letter.
11. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Optional Shares hereunder, and if the Firm
Shares or Optional Shares with respect to which such default relates do not
exceed in the aggregate 10% of the number of Firm Shares or Optional Shares, as
the case may be, that all Underwriters have agreed to purchase on the relevant
Closing Date or Option Closing Date, then the Representative may make
arrangements satisfactory to Artesian Resources for the purchase of such Firm
Shares by other persons, including any of the Underwriters, but if no such
arrangements are made by the relevant Closing Date or Option Closing Date, such
Firm Shares or Optional Shares to which the default relates shall be purchased
severally by the non-defaulting Underwriters in proportion to their respective
commitments hereunder.
(b) If such default relates to more than 10% of the Firm Shares or
Optional Shares, as the case may be, the Representative may in its discretion
arrange for another party or parties (including a non-defaulting Underwriter) to
purchase such Firm Shares or Optional Shares to which such default relates, on
the terms contained herein. In the event that the Representative does not
arrange for the purchase of the Firm Shares or Optional Shares to which a
default relates as provided in this Section 11, this Agreement may be terminated
by the Representative or by Artesian Resources without liability on the part of
the non-defaulting several Underwriters (except as provided in Section 8 hereof)
or Artesian Resources (except as provided in Sections 6 and 8 hereof); provided
that if such default occurs with respect to Optional Shares after the Closing
Date, this Agreement will not terminate as to the Firm Shares
31
or any Optional Shares purchased prior to such termination. Nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to Artesian Resources for damages occasioned by its default
hereunder.
(c) If the Firm Shares or Optional Shares to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to be purchased
by another party or parties, the Representative or Artesian Resources shall have
the right to postpone the Closing Date or any Option Closing Date, as the case
may be, for a reasonable period but not in any event exceeding seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and Artesian Resources agrees to file promptly any amendment to
the Registration Statement or supplement to the Prospectus that in the opinion
of counsel for the Underwriters may thereby be made necessary. The terms
"Underwriters" and "Underwriter" as used in this Agreement shall include any
party substituted under this Section 11 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and/or Optional
Shares.
12. Information Furnished by Underwriters. The statement set forth on the
last paragraph at the bottom of the cover page of the Prospectus regarding the
terms of the Offering by the Underwriters, the legends below the table of
contents on page 3 of the Prospectus regarding stabilization and passive market
making, the identity of the Underwriters set forth in the first paragraph under
the heading "Underwriting", the concession and reallowance figures appearing in
the third paragraph under the caption "Underwriting", the representations with
respect to stabilization activities in the sixth paragraph under the heading
"Underwriting," the seventh paragraph under the caption "Underwriting" regarding
passive market making and discretionary authority in the ninth paragraph under
the heading "Underwriting" constitute the only written information furnished by
reference or on behalf of any Underwriter referred to in Sections 1(b) and 8
hereof.
13. Notice. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Janney ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇-▇▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇; and if
sent to Artesian Resources, shall be mailed, delivered, telexed, telegrammed,
telegraphed or telecopied and confirmed to Artesian Resources Corporation, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, facsimile
number (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP,
32
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, III,
Esquire, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇.
14. Parties. This Agreement shall inure solely to the benefit of, and shall
be binding upon, the several Underwriters, Artesian Resources and the
controlling persons, directors and officers thereof, and their respective
successors, assigns, heirs and legal representatives, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. The terms "successors" and "assigns" shall not include any purchaser
of the Shares merely because of such purchase.
15. Definition of Business Day. For purposes of this Agreement, "business
day" means any day on which the Nasdaq National Market is opened for trading.
16. Counterparts. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
17. Construction. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and performed entirely within such Commonwealth.
If the foregoing correctly sets forth your understanding of our
agreement, please sign and return to Artesian Resources the enclosed duplicate
hereof, whereupon it will become a binding agreement in accordance with its
terms.
Very truly yours,
ARTESIAN RESOURCES CORPORATION
By:
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ INC.
As Representative of the Several Underwriters
named in Schedule I hereto
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ INC.
By:
----------------------------
Authorized Representative
34
SCHEDULE I
Schedule of Underwriters
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. ............................
Total ...................................................
==========
35
SCHEDULE II
Persons Who Are to Deliver Lock-Up Agreements
Lock-Up Agreements are to be delivered by the following persons and
entities immediately prior to the time the SEC declares the Registration
Statement effective:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. & ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
36
EXHIBIT A
Matters to be Covered in the Opinion of
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
Counsel for Artesian Resources
1. Artesian Resources and Artesian Water have been duly organized and are
validly existing as corporations in good standing under the laws of the State of
Delaware with corporate power and authority to own their properties and conduct
their businesses as described in the Prospectus; Artesian Resources and Artesian
Water are qualified to transact business in all jurisdictions where the failure
to qualify would have a material adverse effect upon the business of Artesian
Resources and Artesian Water; the outstanding shares of capital stock of
Artesian Water have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by Artesian Resources; and, to the best of such
counsel's knowledge, the outstanding shares of capital stock of Artesian Water
are owned by Artesian Resources free and clear of all liens, encumbrances and
security interests, and to the best knowledge of such counsel, no options,
warrants or other rights to purchase any shares of capital stock of Artesian
Water are outstanding.
2. Artesian Resources has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus; the authorized
shares of Class A Non-Voting Common Stock and Class B Voting Common Stock
(together, the "Common Stock") have been duly authorized; the outstanding shares
of Common Stock have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Firm Shares and the Optional Shares (together,
the "Shares") conform to the description thereof contained in the Prospectus;
certificates for the Shares are in due and proper form; the Shares to be sold by
Artesian Resources pursuant to this Agreement have been duly authorized and will
be validly issued, fully paid and non-assessable when issued and paid for as
contemplated by this Agreement; and no preemptive rights of stockholders, by
operation of law, or to the knowledge of such counsel, by contract exists with
respect to any of the Shares or the issue and sale thereof.
3. The Registration Statement has become effective under the Act, and no
stop order proceedings with respect thereto have been instituted or are pending
or, to the best knowledge of such counsel, threatened under the Act.
4. The Registration Statement, the Preliminary Prospectus, the Prospectus
and each amendment or supplement thereto and each document incorporated by
reference therein, comply as to form in all material respects with the
requirements of the Act and the Exchange Act, as applicable, and the applicable
rules and regulations thereunder (except that
37
such counsel need express no opinion as to the financial statements, schedules
and other financial information included or incorporated by reference therein).
5. The statements Under the caption "Description of Capital Stock" in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, are accurate summaries in all material
respects and fairly present the information called for with respect to such
documents and matters.
6. Such counsel does not know of any contracts or documents required to be
filed as exhibits to, or incorporated by reference in, the Registration
Statement or described in the Registration Statement or the Prospectus which are
not so filed, incorporated by reference or described as required, and such
required contracts and documents as are summarized in the Registration Statement
or the Prospectus are fairly summarized in all material respects.
7. There are no material legal proceedings pending or to the best knowledge
of such counsel, threatened against Artesian Resources or Artesian water except
as set forth in the Prospectus.
8. This Agreement has been duly authorized, executed and delivered by
Artesian Resources. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of either
Artesian Resources or Artesian Water, or any agreement or instrument known to
such counsel to which Artesian Resources or Artesian Water is a party or by
which either of them may be bound.
9. No approval, consent, order or authorization by any regulatory,
administrative or other governmental body is necessary in connection with the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated (other as may be required by the NASD or by
State securities and Blue Sky laws as to which such counsel need express no
opinion).
10. Artesian Resources is not an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
11. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that such counsel has participated in the
preparation of the Registration Statement and the Prospectus, including review
and discussion of the contents thereof, and while
38
such counsel (for the purposes of this Paragraph 11) in not passing upon the
accuracy or completeness of the statements contained in the Registration
Statement or the Prospectus, in the course of such review and discussion, no
facts came to the attention of such counsel that would cause such counsel to
have reason to believe that (a) the Registration Statement or any post-effective
amendment thereto on the date it became effective, contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, or that (b) the Prospectus on the Effective Date, on the
date it was filed pursuant to Rule 424(b) and on the Closing Date or Option
Closing Date, as the case may be, contains any untrue statement of material fact
or omits to state any material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading; except that
with respect to both clause (a) and (b) above such counsel need express no
opinion with respect to the financial statements, schedules and the notes
thereto included in the Registration Statement or the Prospectus.
The foregoing opinion may be limited to the laws of the United States and
the General Corporation Law of the State of Delaware, and with respect to
Paragraph 9 above shall encompass also the laws of the State of Delaware. In
rendering such opinion with respect to Paragraph 9 above, such counsel may rely
as to matters governed by the laws of the State of Delaware on local counsel in
such jurisdiction, provided that they believe that they and the Underwriters are
justified in relying on such other counsel. Such counsel may rely as to
questions of fact upon the representations of Artesian Resources set forth in
this Agreement and upon certificates of officers of Artesian Resources and of
government officials, all of which certificates must be satisfactory in form and
scope to counsel for the Underwriters.
39
EXHIBIT B
Matters to be Covered in the Opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Arsht & ▇▇▇▇▇▇▇
Counsel for Artesian Resources
1. There is no further Delaware governmental approval in the nature of a
franchise for service territory presently necessary in order for Artesian Water
to provide service as a regulated public water utility within the territory
defined by (and subject to the terms of) the Certificates of Public Convenience
and Necessity which have been issued to Artesian Water by the Delaware Division
of Natural Resources and Environmental Control or by orders of the Delaware
Public Service Commission.
B-1
