FINANCING AGREEMENT

BETWEEN

ARTESIAN WATER COMPANY, INC.

AND

DELAWARE DRINKING WATER STATE REVOLVING FUND
DELAWARE DEPARTMENT OF HEALTH & SOCIAL SERVICES,
DIVISION OF PUBLIC HEALTH

Loan No.  D-4046
 

FINANCING AGREEMENT

THIS FINANCING AGREEMENT (this "Agreement") is made as of this 12th day of
February, 2010, between the DELAWARE DRINKING WATER STATE REVOLVING FUND, acting
by and through the DELAWARE DEPARTMENT OF HEALTH & SOCIAL SERVICES, DIVISION OF
PUBLIC HEALTH, a public agency of The State of Delaware (the "Department") and
ARTESIAN WATER COMPANY, INC., a corporation organized under the laws of The
State of Delaware (the "Borrower").

Pursuant to Title 29 Delaware Code Section 7903 (the "Act"), the General
Assembly established a permanent and perpetual fund known as the "Delaware Safe
Drinking Water Revolving Fund" (the "Fund") and empowered the Secretary of the
Department of Health & Social Services to administer such Fund.  From the Fund,
the Department from time to time makes loans to and acquires obligations of
eligible persons in Delaware to finance the costs of drinking water facilities
in accordance with the Federal Safe Drinking Water Act.

The Borrower requested a loan from the Fund and will evidence its obligation to
repay the loan by the signing of this Agreement and by the delivery of its
General Obligation Note (New Castle County Water Main Projects), Series of
2010-SRF (the "Note").  The Borrower will use the Loan Proceeds from the Fund to
finance all or a portion of the (i) cost of various improvements and upgrades to
the System of the Borrower located throughout New Castle County, Delaware, as
more fully described in Exhibit A (collectively, the "Project") and (ii) costs
of issuing the Note.

ARTICLE I
 
DEFINITIONS
 
Section 1.1. Definitions.
 
The capitalized terms contained in this Agreement shall have the meanings set
forth below unless the context requires otherwise and any capitalized terms not
otherwise defined herein shall have the meaning assigned to such terms in the
Act:

"Agreement" means this Financing Agreement between the Department and the
Borrower, together with any amendments or supplements hereto.

"Authorized Representative" means the Chief Financial Officer and Treasurer, the
President or any Vice President and the Secretary of the Borrower or any
employee of the Borrower authorized by resolution of the Borrower to perform the
act or sign the document in question.

"Borrower's Engineer" means any of the Borrower's engineers who are of
recognized standing and experience in the field of environmental engineering and
registered to do business in Delaware.  Any such firm shall be subject to the
reasonable approval of the Department.

"Business Day" means a day of the year which is not a Saturday or Sunday or a
day on which banking institutions located in New York or Delaware are required
or authorized to remain closed or on which the New York Stock Exchange is
closed.

"Closing Date" means the date this Agreement is executed and delivered by the
Borrower and the Department.

"Commitment Letter" shall mean the commitment letter from the Department to the
Borrower dated January 15, 2010 and all extensions and amendments thereto.

"Department" means the Department of Health & Social Services, Division of
Public Health.

"Event of Default" shall have the meaning set forth in Section 9.1.

"Fiscal Year" means the period of twelve months established by the Borrower as
its annual accounting period.

"Loan Proceeds" means the funds applied to make the loan to the Borrower
pursuant to this Agreement.

"Notice to Proceed" means a written notice given by the Borrower and signed by
an Authorized Representative issued to each construction contractor fixing the
date on which construction, equipping, acquisition, expansion or renovation of
the Project as described in Exhibit A will commence, a copy of which must be
furnished to the Department by the Borrower within one year of the Closing Date.

"Penalty" shall have the meaning set forth in Section 3.3.

"Project" means, collectively, the various improvements and upgrades to the
System of the Borrower, as more fully described in Exhibit A, the costs of the
construction, acquisition or equipping of which are to be financed in whole or
in part with the Loan Proceeds.

"Project Budget" means the budget for the financing of the Project, a copy of
which is attached to this Agreement as Exhibit B.

"Project Costs" means the costs of the construction, acquisition or equipping of
the Project, as further described in the Project Budget, and such other costs as
may be approved in writing by the Department, provided such costs are permitted
by the Act.

"System" means all plants, systems, facilities, equipment or property, of which
the Project constitutes the whole or a part, owned, operated or maintained by
the Borrower and used in connection with the drinking water services for the
systems which comprise the Project, all as described in Exhibit A.

Section 1.2. Rules of Construction.
 
The following rules shall apply to the construction of this Agreement unless the
context requires otherwise:

(a) Singular words shall connote the plural number as well as the singular and
vice versa.
 
(b) All references in this Agreement to particular Sections or Exhibits are
references to Sections or Exhibits of this Agreement unless otherwise indicated.
 
(c) The headings and table of contents as used in this Agreement are solely for
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect its meaning, construction or effect.
 
ARTICLE II
 
REPRESENTATIONS
 
Section 2.1. Representations by Borrower.
 
The Borrower makes the following representations as the basis for its
undertakings under this Agreement:

(a) The Borrower is a duly organized and validly existing corporation in good
standing under the laws of the State of Delaware.
 
(b) The Borrower has full right, power and authority to (i) execute this
Agreement and the other documents related thereto, (ii) own and operate the
System, (iii) construct, acquire or equip the Project and finance the Project
Costs by borrowing money for such purpose pursuant to this Agreement, and (iv)
carry out and consummate all of the transactions contemplated by this Agreement.
 
(c) All permits, licenses, registrations, certificates, authorizations and
approvals required to have been obtained as of the date of signing of this
Agreement have been obtained for (i) the execution by the Borrower of this
Agreement, (ii) the performance and enforcement of the obligations of the
Borrower thereunder, (iii) the acquisition, construction, equipping, occupation,
operation and use of the Project, and (iv) the operation and use of the
System.  The Borrower knows of no reason why any other necessary permits or
approvals cannot be obtained as required.
 
(d) This Agreement has been executed by a duly authorized officer of the
Borrower and constitutes the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with the terms of this Agreement.
 
(e) There are not pending nor, to the best of the knowledge of the undersigned
officer of the Borrower, threatened, any actions, suits, proceedings or
investigations of a legal, equitable, regulatory, administrative or legislative
nature, in which a judgment, order or resolution may have a material adverse
effect on the Borrower, or its business, assets, condition (financial or
otherwise), operations or prospects or in its ability to perform its obligations
under this Agreement.
 
(f) There have been no material defaults by any contractor or subcontractor
under any contract made in connection with the construction or equipping of the
Project.
 
(g) No material adverse change has occurred in the financial condition of the
Borrower from that indicated in the financial statements, application and other
information furnished to the Department in connection with this Agreement.
 
(h) No Event of Default has occurred and is continuing.
 
(i) Except as may otherwise be approved by the Department or permitted by the
terms hereof, the Project and the System at all times will be owned by the
Borrower and will not be operated or controlled by any other entity or person.
 
(j) The Project will be a part of the System.
 
(k) The Loan Proceeds and funds available from the other sources specified in
the Project Budget will be sufficient to pay the estimated Project Costs.
 
(l) The Borrower has received or has commitments to obtain all funds and other
financing for the Project as contemplated in the Project Budget.
 
(m) The Borrower will complete the acquisition, construction and equipping of
the Project on or before February 11, 2011.
 
ARTICLE III
 
ADVANCE AND USE OF LOAN PROCEEDS; CONSTRUCTION OF PROJECT
 
Section 3.1. Advance of Loan Proceeds.
 
The Department agrees to advance to the Borrower pursuant to this Agreement up
to Three Million Nine Hundred and Seventeen Thousand Dollars ($3,917,000) to pay
Project Costs in accordance with the Project Budget.

Section 3.2. Application of Loan Proceeds.
 
(a) The Borrower agrees to apply the Loan Proceeds solely and exclusively to the
payment, or the reimbursement of the Borrower for the payment, of Project Costs
and further agrees, upon the request of the Department, to exhibit to the
Department, vouchers, statements, bills of sale or other evidence of the actual
payment of such Project Costs.  The Department shall disburse the Loan Proceeds
to or for the account of the Borrower upon execution of this Agreement and upon
receipt by the Department of the following:
 
(1)           A requisition (upon which the Department shall be entitled to
rely) signed by an Authorized Representative and containing all information
called for by, and otherwise being in the form of, Exhibit C.

(2)           If such requisition includes an item for payment for labor or to
contractors, builders or materialmen (i) a certificate, signed by an Authorized
Representative, stating that such work was actually performed or such materials,
supplies or equipment were actually furnished or installed in or about the
construction of the Project; and (ii) a certificate signed by an Authorized
Representative stating either that such materials, supplies or equipment are not
subject to any lien or security interest or that such lien or security interest
will be released or discharged upon payment of the requisition.

Upon receipt of each such requisition and accompanying certificate or
certificates, the Department shall disburse Loan Proceeds hereunder to or for
the account of the Borrower in accordance with such requisition in an amount and
to the extent approved by the Department and shall note the date and amount of
each such disbursement on a schedule of principal disbursements appended hereto
as Exhibit D.  The Department shall have no obligation to disburse any such Loan
Proceeds if the Borrower is in default hereunder, nor shall the Department have
any obligation to approve any requisition if the Borrower is not in compliance
with the terms of this Agreement.

(b) The Borrower shall comply with all applicable State and federal
laws.  Except as may otherwise be approved by the Department, disbursements
shall be held at ninety-five percent (95%) of the maximum amount authorized
hereunder to ensure satisfactory completion of the Project.  Upon receipt from
the Borrower of the certificate specified in Section 3.4 and a final requisition
detailing all retainages to which the Borrower is then entitled, the Department,
to the extent approved by the Department and subject to the provisions of this
Section and Section 3.4, will disburse Loan Proceeds to or for the account of
the Borrower to the extent of such approval.
 
(c) The Department may apply Loan Proceeds to pay any Penalty assessed pursuant
to Section 3.3.
 
(d) The Department shall have no obligation to disburse Loan Proceeds in excess
of the amount necessary to pay for approved Project Costs.
 
Section 3.3. Agreement to Draw Loan Proceeds and Penalty for Delay.
 
The Borrower agrees after the Closing Date to commence work in earnest on the
Project and make draws on the Loan Proceeds of at least ten percent (10%) of the
Project Costs within one year of the Closing Date.  The Borrower further agrees
to provide a copy of each Notice to Proceed given by the Borrower to each
construction contractor within one year of the Closing Date.

If by February 12, 2011, which is one year from the Closing Date, (i) the
Borrower has not submitted requisition(s), in the manner required by Section
3.2, for more than ten percent (10%) of the Project Costs, and (ii) the
Department has not received a copy of each Notice to Proceed, the Department may
in its discretion assess a penalty equal to one percent (1%) of the Loan
Proceeds (the "Penalty").  Such Penalty may be drawn by the Department from the
Loan Proceeds.  It is within the Department’s complete discretion whether to
impose the Penalty based upon its review of affirmative steps taken by the
Borrower to commence and complete the Project and the totality of the
circumstances surrounding any such delay in requesting disbursement of Loan
Proceeds.

Section 3.4. Agreement to Accomplish Project.
 
The Borrower will cause the Project to be acquired, constructed, expanded,
renovated or equipped as described in Exhibit A and in accordance with the
Project Budget and the plans, specifications and designs prepared by the
Borrower’s Engineer and approved by the Department.  The Borrower will complete
the Project by the date set forth in Section 2.1(m).  All plans, specifications
and designs have been approved by all applicable regulatory agencies.  The
Borrower agrees to maintain complete and accurate books and records of the
Project Costs and permit the Department through its duly authorized
representatives to inspect such books and records at any reasonable time.  The
Borrower and the Department may amend the description of the Project set forth
in Exhibit A.

The Borrower will deliver to the Department a certificate signed by an
Authorized Representative of the Borrower and by the Borrower’s Engineer stating
(i) that the Project has been completed substantially in accordance with this
Section, the plans and specifications as amended from time to time, as approved
by the Department, and in substantial compliance with all material applicable
laws, ordinances, rules and regulations, (ii) the date of such completion, (iii)
that all certificates of occupancy or other material permits necessary for the
Project’s use, occupancy and operation have been issued or obtained, and (iv)
the amount, if any, to be reserved for payment of Project Costs.

Section 3.5. Permits.
 
The Borrower, at its sole cost and expense, shall comply with, and shall obtain
all permits, consents and approvals required by local, state or federal laws,
ordinances, rules, regulations or requirements in connection with the
acquisition, construction, equipping, occupation, operation or use of the
Project.  The Borrower shall, upon request, promptly furnish to the Department
copies of all such permits, consents and approvals.  The Borrower shall also
comply with all lawful program or procedural guidelines or requirements duly
promulgated and amended as of the date hereof by the Department in connection
with the acquisition, construction, equipping, occupation, operation or use of
projects financed by the Fund under the Act.  The Borrower shall also comply in
all respects with all applicable State and federal laws, regulations and other
requirements relating to or arising out of or in connection with the Project and
the funding thereof by the Fund.

Section 3.6. Construction Contractors.
 
Each construction contractor employed in the accomplishment of the Project shall
be required in the construction contract to furnish a performance bond and a
payment bond, each in an amount equal to one hundred percent (100%) of the
particular contract price.  Such bonds shall list the Borrower as
beneficiary.  Each contractor shall be required to maintain, during the
construction period covered by the particular construction contract, builder’s
risk insurance, workers compensation insurance, public liability insurance,
property damage insurance and vehicle liability insurance in amounts and on
terms customarily maintained on such projects.  Upon request of the Department,
the Borrower shall cause each contractor to furnish evidence of such bonds and
insurance to the Department.  In addition to the foregoing,

(a) Each construction contractor employed in the accomplishment of the Project
is required to comply with the Anti-Kickback Act (and is required to insert
similar requirements in all subcontracts) and all other applicable federal laws
and regulations.
 
(b) All construction contracts and contractors’ estimate forms will be prepared
so that materials and equipment may be readily itemized and identified as to
eligible and noneligible costs.
 
(c) Any change in a construction contract that will alter the contract price or
completion time or will substantially modify the proposed treatment processes
must be submitted to the Department via a change order for prior approval in the
form of the change order attached hereto as Exhibit E.
 
(d) The construction of the Project facilities will conform to applicable
federal, state and local laws, ordinances and regulations.
 
(e) The Borrower will proceed expeditiously and complete the Project facilities
in accordance with the approved application, project schedule, surveys, plans,
profiles, cross-sections, specifications and amendments approved by the
Department.
 
Section 3.7. Engineering Services.
 
The Borrower’s Engineer will provide engineering services covering planning and
design, operation of the System, and the supervision and inspection of the
construction of the Project.  The Borrower’s Engineer will provide to the
Department the certificate required by Section 3.4.

ARTICLE IV
 
REPAYMENT OF LOAN; GENERAL OBLIGATION
 
Section 4.1. Repayment of Loan.
 
The Borrower shall repay the Loan pursuant to the terms of the Note issued to
the Department.

Section 4.2. General Obligation.
 
The Borrower’s repayment obligation constitutes a general obligation of the
Borrower.

Section 4.3. [RESERVED]
 
ARTICLE V
 
PREPAYMENTS
 
Section 5.1. Prepayments of Loan.
 
At its option and upon giving prior written notice to the Department, the
Borrower may prepay the Loan, in whole or in part, without penalty, at any
time.  Such prior written notice shall specify the date on which the Borrower
will make such prepayment and whether the Loan will be prepaid in full or in
part, and if in part, the principal amount to be prepaid.  Any such prepayment
shall be applied against Loan principal installments then outstanding as shall
be directed by the Borrower.

ARTICLE VI
 
OPERATION AND USE OF SYSTEM
 
Section 6.1. Inspection of System and Borrower’s Books and Records.
 
The Department and its duly authorized representatives and agents shall have
such reasonable rights of access to the System as may be necessary to determine
whether the Borrower is in compliance with the requirements of this Agreement
and shall have the right at all reasonable times and upon reasonable prior
notice to the Borrower to examine and copy the books and records of the Borrower
insofar as such books and records relate to the System.

Section 6.2. Performance Certification.
 
The Borrower will notify the Department when the Project is completed and
operation commenced on or before the date set out in Section 2.1(m).

Section 6.3. Operation, Maintenance and Use of System.
 
At its own cost and expense, the Borrower shall operate the System in a proper,
sound and economical manner and in compliance with all legal requirements, shall
maintain the System in good repair and operating condition and from time to time
shall make all necessary repairs, renewals and replacements.

ARTICLE VII
 
INSURANCE, DAMAGE AND DESTRUCTION
 
Section 7.1. Insurance.
 
Unless the Department otherwise agrees in writing, the Borrower shall maintain
or cause to be maintained insurance against such risks as are customarily
insured against by owners of systems similar in size and character to the
System.

ARTICLE VIII
 
SPECIAL COVENANTS
 
Section 8.1. Maintenance of Existence.
 
The Borrower shall maintain its existence as a "Person" (as defined in the
Federal Safe Drinking Water Act) and, without consent of the Department, which
consent shall not be unreasonably withheld, shall not dissolve or otherwise
dispose of all or substantially all of its assets or consolidate or merge with
or into another entity.  Notwithstanding the foregoing, the Borrower may
consolidate or merge with or into, or sell or otherwise transfer all or
substantially all of its assets to a political subdivision of The State of
Delaware, and the Borrower thereafter may dissolve, if the surviving, resulting
or transferee political subdivision, if other than the Borrower, assumes, in
written form acceptable to the Department, all of the obligations of the
Borrower contained in this Agreement, and there is furnished to the Department
an Opinion of Counsel acceptable to the Department subject to customary
exceptions and qualifications, to the effect that such assumption constitutes
the legal, valid and binding obligations of the surviving, resulting or
transferee entity in accordance with its terms.

Section 8.2. Financial Records and Statements.
 
The Borrower shall maintain proper books of record and account in which proper
entries shall be made in accordance with generally accepted accounting
principles, consistently applied, of all its business and affairs related to the
System.  The Borrower shall have an annual audit made by an independent
certified public accountant within one hundred and twenty (120) days after the
end of each Fiscal Year.  Such report shall include a certificate of the
accountants to the effect that, during the course of such accountant's regular
examination of the Borrower's financial condition, nothing came to such
accountant's attention that would constitute an Event of Default hereunder.  A
copy of the audited annual report shall be forwarded to the Department when
completed.

Section 8.3. Certificate as to No Default.
 
The Borrower shall deliver to the Department, within one hundred and twenty
(120) days after the close of each Fiscal Year, a certificate signed by an
Authorized Representative stating that, during such year and as of the date of
such certificate, no event or condition has happened or existed, or is happening
or existing, which constitutes an Event of Default, or if such an event or
condition has happened or existed, or is happening or existing, specifying the
nature and period of such event or condition and what action the Borrower has
taken, is taking or proposes to take to rectify it.

Section 8.4. Further Assurances.
 
The Borrower shall to the fullest extent permitted by law pass, make, do,
execute, acknowledge and deliver such further resolutions, acts, deeds,
conveyances, assignments, transfers and assurances as may be necessary or
desirable for the better assuring, conveying, granting, assigning and confirming
the rights of the Department under this Agreement, or as may be required to
carry out the purpose of this Agreement.  The Borrower shall at all times, to
the fullest extent permitted by law, defend, preserve and protect all rights of
the Department under this Agreement against all claims and demands of all
persons.

Section 8.5. Other Indebtedness.
 
In the event that the Borrower is required to borrow additional funds in order
to complete the Project, the Borrower agrees to consult with the Department
before borrowing any such additional funds.  The Borrower agrees to pay when due
all amounts required by any other bonded indebtedness and to perform all of its
obligations in connection therewith.

Section 8.6. Assignment by Borrower.
 
The Borrower may not assign its rights under this Agreement without the prior
written consent of the Department, which consent shall not be unreasonably
withheld.  If the Borrower desires to assign its rights under this Agreement to
another "Person" (as defined in the Federal Safe Drinking Water Act), the
Borrower shall give notice of such fact to the Department.  If the Department
consents to the proposed assignment, the Borrower may proceed with the proposed
assignment, but such assignment shall not become effective until the Department
is furnished: (i) an assumption agreement in form and substance satisfactory to
the Department by which the assignee agrees to assume all of the Borrower’s
obligations under this Agreement, and (ii) an Opinion of Counsel to the
assignee, subject to customary exceptions and qualifications, that the
assumption agreement and this Agreement constitute legal, valid and binding
obligations of the assignee enforceable against the assignee in accordance with
their terms and that the assignment and assumption comply in all respects with
the provisions of this Agreement.  Notwithstanding the foregoing, the assignment
of the rights of the Borrower under this Agreement or the assumption of the
obligations thereunder by the assignee shall in no way be construed as releasing
the Borrower’s obligations unless specifically agreed to by the Department.

ARTICLE IX
 
DEFAULTS AND REMEDIES
 
Section 9.1. Events of Default.
 
Each of the following events shall be an "Event of Default" hereunder:

(a) The failure to pay any payment of principal, interest and/or any
administrative fee when due hereunder or under the Note;
 
(b) The Borrower’s failure to perform or observe any of the other covenants,
agreements or conditions of this Agreement and the continuation of such failure
for a period of thirty (30) days after the Department gives the Borrower written
notice specifying such failure and requesting that it be cured, unless the
Department shall agree in writing to an extension of such time prior to its
expiration; provided, however, if the failure stated in the notice is
correctable but cannot be corrected within the applicable period, the Department
will not unreasonably withhold its consent to an extension of such time if
corrective action is instituted by the Borrower within the applicable period and
diligently pursued until the default is corrected;
 
(c) Any warranty, representation or other statement by or on behalf of Borrower
contained in this Agreement or in any instrument furnished in compliance with or
in reference to this Agreement is false or misleading in any material respect;
 
(d) An order or decree shall be entered, with the Borrower’s consent or
acquiescence, appointing a receiver or receivers of the System or any part
thereof or of the income thereof, or if such order or decree, having been
entered without the Borrower’s consent or acquiescence, shall not be vacated,
discharged or stayed on appeal within ninety (90) days after the entry thereof;
 
(e) Any proceeding shall be instituted, with the Borrower’s consent or
acquiescence, for the purpose of effecting a composition between the Borrower
and its creditors, pursuant to any federal or state statute now or hereafter
enacted, if the claims of such creditors are under any circumstances payable
from the revenues of the System; or
 
(f) Any bankruptcy, insolvency or other similar proceeding shall be instituted
by or against the Borrower under any federal or state bankruptcy or insolvency
law now or hereinafter in effect and, if instituted against the Borrower, is not
dismissed within ninety (90) days after filing.
 
Section 9.2. Notice of Default.
 
The Borrower agrees to give the Department prompt written notice if any order,
decree or proceeding referred to in Section 9.1(d)-(f) is entered or instituted
against the Borrower or of the occurrence of any other event or condition which
constitutes an Event of Default immediately upon becoming aware of the existence
thereof.

Section 9.3. Remedies on Default.
 
Whenever any Event of Default referred to in Section 9.1 shall have happened and
be continuing, the Department shall, in addition to any other remedies provided
herein or by law, have the right, at its option without any further demand or
notice, to take one or both of the following remedial steps:

(a) Discontinue advances of Loan Proceeds hereunder;
 
(b) Declare immediately due and payable all payments due or to become due under
this Agreement, and upon notice to the Borrower, the same shall become
immediately due and payable by the Borrower without further notice or demand;
and
 
(c) Take whatever other action at law or in equity may appear necessary or
desirable to collect the payments then due and thereafter to become due under
this Agreement or to enforce any other of the Department’s rights under this
Agreement or to enforce performance by the Borrower of its covenants, agreements
or undertakings contained herein.
 
Section 9.4. Delay and Waiver.
 
No delay or omission to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or acquiescence therein, and every such
right and power may be exercised from time to time and as often as may be deemed
expedient.  No waiver of any Event of Default under this Agreement shall extend
to or shall affect any subsequent Event of Default or shall impair any rights or
remedies consequent thereto.

Section 9.5. Right to Cure Default.
 
If the Borrower shall fail to make any payment or to perform any act required by
it under this Agreement, the Department without prior notice to or demand upon
the Borrower and without waiving or releasing any obligation or default, may
(but shall be under no obligation to) make such payment or perform such
act.  All amounts so paid by the Department and all costs, fees and expenses so
incurred shall be payable by the Borrower as an additional obligation under this
Agreement, together with interest thereon at the rate of interest of five
percent (5%) per annum until paid.  The Borrower’s obligation under this Section
shall survive the repayment of the Note.

ARTICLE X
 
MISCELLANEOUS
 
Section 10.1. Successors and Assigns.
 
This Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.

Section 10.2. Amendments.
 
The Department and the Borrower shall have the right to amend from time to time
any of the terms and conditions of this Agreement, provided that all amendments
shall be in writing and shall be signed by or on behalf of the Department and
the Borrower.

Section 10.3. Limitation of Liability of Borrower’s Officers.
 
No present or future director, official, officer, employee or agent of the
Borrower shall be liable personally in respect of this Agreement or for any
other action taken by such individual pursuant to or in connection with the
financing provided for in this Agreement.

Section 10.4. Applicable Law.
 
This Agreement shall be governed by the applicable laws of the State of
Delaware.

Section 10.5. Severability.
 
If any clause, provision, or section of this Agreement shall be held illegal or
invalid by any court, the illegality or invalidity of such clause, provision or
Section shall not effect the remainder of this Agreement which shall be
construed and enforced as if such illegal or invalid clause, provision or
section had not been contained in this Agreement.  If any agreement or
obligation contained in this Agreement is held to be in violation of law, then
such agreement or obligation shall be deemed to be the agreement or obligation
of the Department and the Borrower, as the case may be, only to the extent
permitted by law.

Section 10.6. Notice.
 
Unless otherwise provided for herein, all demands, notices, approvals, consents,
requests, opinions and other communications under this Agreement shall be in
writing and shall be deemed to have been given when delivered in person or
mailed by first class registered or certified mail, postage prepaid, addressed
as follows:

 
Department:
Delaware Department of Health & Social Services

 
Division of Public Health

 
Office of Drinking Water

 
Blue Hen Corporate Center

 
Suite 203, 655 Bay Road

 
Dover, DE   19901

 
Attention:  DWSRF Program Director

 
and

Delaware Department of Natural Resources & Environmental Control
Division of Water Services
Financial Assistance Branch
5 East Reed Street – Suite 200
Dover, DE   19901
Attention:  Program Director

and

 
Borrower:
Artesian Water Company, Inc.

 
664 Churchmans Road

 
Newark, DE   19702

 
Attention:  David B. Spacht

The Department, and the Borrower may designate, by notice given hereunder, any
further or different addresses to which subsequent demands, notices, approvals,
consents, requests, opinion or other communications shall be sent or persons to
whose attention the same shall be directed.

Section 10.7. Headings.
 
The headings of the several articles and sections of this Agreement are inserted
for convenience only and do not comprise a part of this Agreement.

Section 10.8. Terms of Agreement.
 
This Agreement shall be effective upon its execution and delivery by the
Borrower and the Department.  Except as otherwise specified, the Borrower’s
obligations under this Agreement shall expire upon payment in full of the Note
and all other amounts payable by the Borrower under this Agreement.

Section 10.9. Counterparts.
 
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which together shall constitute but one and the
same instrument.

 
 
 

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WITNESS the following signatures, all duly authorized.

DELAWARE DRINKING WATER STATE REVOLVING FUND ACTING BY AND THROUGH THE DELAWARE
DEPARTMENT OF HEALTH & SOCIAL SERVICES, DIVISION OF PUBLIC HEALTH

By:           
Thomas V. May, REHS/RS
Chief
Health Systems Protection

ARTESIAN WATER COMPANY, INC.

By:           
David B. Spacht
Chief Financial Officer and Treasurer

(SEAL)

Attest:

By:           
Joseph A. Dinunzio
Secretary

 
 
 

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EXHIBIT A

Project Description

Artesian Water Company, Inc. has submitted applications for Delaware Drinking
Water State Revolving Fund financing for water main renewals for the following
six service areas, all of which projects are located in New Castle
County:  Willow Run, Brookemeade, Middleboro Manor, Silview, Stanton and Collins
Park.

Each of the projects will replace transmission mains constructed of asbestos
cement, unlined cast iron and galvanized pipe which when installed met industry
design specifications, but over the passage of time has been deemed inferior by
industry standards to the current products available such as ductile iron pipe
or PVC alternatives.  All of the three installed types of pipes are subject to
service interruptions as a result of main breaks due to reduced strength after
50 to 60 years of service.  Maintenance of asbestos cement type of pipe also
creates health and safety concerns since asbestos particles become airborne when
the pipe is cut during routine repairs.  Unlined cast iron and galvanized pipe
have been well documented to produce rust or iron deposits which create
secondary water quality problems and reduce the ability of the transmission main
to deliver optimum flows and pressures.

 
 
 

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EXHIBIT B

Project Budget

   
Non-Construction:
Administrative Expense
$213,868.20
Engineer Basic Fees
$229,144.50
Project Inspection Fees
$61,105.20
Other
$5,092.10
Sub-Total
$509,210.00
Construction:
Distribution
$2,762,268.40
Other
$449,671.60
Contingencies
$195,850.00
Construction Sub-Total
$3,407,790.00
   
Totals
$3,917,000.00
 
Drinking Water SRF Loan            $3,917,000.00
                         

 
 
 

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EXHIBIT C

Form of Requisition

PROJECT
NAME:___________________________                                                                                                           FUNDING
RECIPIENT:___________________________

E. I. #____________________

UNITED
STATES                                                                           AND/           STATE
OF
DELAWARE                                                                REQUISITION
NO:___________
    DEPARTMENT OF
AGRICULTURE                                                                                      OR              DHSS
OR DNREC
    RURAL
DEVELOPMENT                                                                                                                                DATE:______________________

    USDA LOAN
NO._______________                                                                                                                                STATE
LOAN NO.____________

    USDA GRANT
NO._____________                                                                                     SEPARATELY                                OR                      STATE
GRANT NO.___________
JOINTLY  FUNDED  PROJECT

ACCOUNT SUMMARY AND REQUEST FOR LOAN/GRANT DISBURSEMENT

DISBURSEMENT
        ITEMS
  AMOUNT
BUDGETED
    PREVIOUS
DISBURSEMENTS
        THIS
      PERIOD
        TOTAL
      TO DATE
   REMAINING
         FUNDS
CONSTRUCTION
 
         
CONTRACT
NAME OR #
         
CONTRACT
NAME OR #
         
CONTRACT
NAME OR #
         
 
LAND  AND R.O.W.
         
 
LEGAL  AND  ADMIN
         
 
ENGINEERING  FEES
         
 
INTEREST
         
 
CONTINGENCIES
         
 
INITIAL  O & M
         
OTHER
(describe)
         
DISBURSEMENT
TOTALS
         
 
SOURCES  OF  FUNDING
         
 
USDA  LOAN
         
 
USDA  GRANT
         
 
STATE  LOAN
         
 
STATE  GRANT
         
OTHER
(describe)
         
OTHER
(describe)
         
OTHER
(describe)
         
SOURCE  TOTALS (must
equal disbursement totals above)
         

See Notes on Page 2 (other side)
Page 2
LOAN/GRANT DISBURSEMENT FORM
Requisition No._________

________________________________________________                                                                                                           ______________________________________
PREPARED
BY                                (BORROWER/GRANTEE)         DATE                                                                           APPROVED
BY  (DHSS/ODW)    DATE

________________________________________________                                                                                                           _______________________________________
APPROVED
BY   (ARCHITECT/ENGINEER)      DATE                                                                                                                     APPROVED
BY   (USDA/RD)          DATE

                   Borrower/Grantee’s Certification
 
The undersigned certifies that (1) the amounts requested by
this requisition will be applied solely and exclusively to the
payment, or the reimbursement of the recipient for the payment,
of Project Costs, and (2) any materials, supplies or equipment
covered by this requisition are not subject to any lien or
security interest or such lien or security interest will be released upon
payment of this requisition.
 
 
Recipient’s Authorized Representative                 Date
 
               Consulting  Engineer’s  Certification
 
The undersigned Consulting Engineer for the Recipient hereby
Certifies that insofar as the amounts covered by this
Requisition include payment for labor or to contractors,
builders or materialmen, such work was actually performed or
such materials, supplies or equipment were actually furnished
to or installed in the Project.
 
 
 
Authorized Consulting Engineer                              Date

 
NOTES:
1.
Include copies of all invoices or other acceptable documentation to support
above request.  Provide one (1) set for each funding agency.

2.           On jointly funded projects, disbursements will  not be processed
until  this document is approved by authorized representatives of both the U. S.
Department of Agriculture and the State of Delaware, Department of Health and
Social Services.

Forms-Jointly
Funded-Disbursement.doc                                                                           This
form provides all information required by USDA Form RD 440-11

 
 
 

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EXHIBIT D

Schedule of Disbursements

Date                                                                Amount ($)

 
 
 

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EXHIBIT E

Form of Change Order

UNITED  STATES                                                                AND           STATE  OF  DELAWARE ORDER  NO:________
DEPARTMENT  OF  AGRICULTURE                                                                           OR               DHSS   OR   DNREC
RURAL  DEVELOPMENT
DATE______________

STATE:_____________
SEPARATELY  OR  JOINTLY  FUNDED  PROJECT
COUNTY:___________
CONTRACT  CHANGE  ORDER

CONTRACT  FOR:________________________________

OWNER:___________________________________________________________________________________________

To:________________________________________________________________________________________________
(Contractor)

You are hereby requested to comply with the following changes from the contract
plans and specifications:
Description of Changes (Supplemental Plans and Specifications Attached)
 
     DECREASE
  in Contract Price
    INCREASE
  In Contract Price
 
$
$
 
                                                                                            TOTALS
$
$
 
                                                        NET  CHANGE  IN  CONTRACT  PRICE
$
$

JUSTIFICATION: Explain (Differing Site Conditions) (Errors or Omissions in
Drawings or Specifications) (Changes in Regulatory Requirements) (Design
Changes) (Over run or Under run in Quantities) (Factors Affecting Time of
Completion) (Other: Describe below)

___________________________________________________________________________________________________

___________________________________________________________________________________________________

The original amount of the
Contract:_____________________________________________________________________

__________________________________________________________________Dollars
($________________________)

The amount of the Contract as adjusted by all previously approved Change
Orders:________________________________

__________________________________________________________________Dollars
($________________________)

The amount of the Contract will be (Decreased) (Increased) through this Change
Order by the sum of:_________________

__________________________________________________________________Dollars
($________________________)

The Contract Total including this and all  previous Change Orders will
be:_______________________________________

__________________________________________________________________Dollars
($________________________)

The Contract Period provided for completion will be (Increased) (Decreased)
(Unchanged) by:___________ Calendar Days

Page 2
CONTRACT CHANGE  ORDER  FORM
CHANGE  ORDER  NO.____________

This document will become a supplement to the contract and all provisions will
apply hereto.

Requested:______________________________________________________________________  ________________
(Owner)                                                                                                (Date)

Recommended:___________________________________________________________________  ________________
(Owner’s
Architect/Engineer)                                                                                                (Date)

Accepted:_______________________________________________________________________  _________________
(Contractor)                                                                                     (Date)

Approved by State of
Delaware:_____________________________________________________  _________________
(Date)

Approved by U. S. Department of
Agriculture:__________________________________________  _________________
(Date)

After all five (5) copies of the Change Order have been signed and dated by
authorized representatives of all the applicable parties in the spaces provided
above, transmit one (1)  copy to each party as listed below.

(  ) U. S. Department of Agriculture’s Copy

(  ) State of Delaware’s Copy

(  ) Contractor’s Copy

(  ) Borrower/Grantee’s Copy

(  ) Architect/Engineer’s Copy

Forms- Jointly Funded-Change
Order.doc                                                                           This
form provides all information required by USDA Form RD 1924 (Rev. 2-97)

 
 
 

--------------------------------------------------------------------------------

 

REGISTERED
R-1                                                                                                                                                                            $3,917,000

ARTESIAN WATER COMPANY, INC.
GENERAL OBLIGATION NOTE
(NEW CASTLE COUNTY WATER MAIN PROJECTS)
SERIES OF 2010-SRF

                                             Final Maturity Date: February 1,
2031

REGISTERED OWNER:
Delaware Drinking Water State Revolving Fund, Delaware Department of Health &
Social Services, Division of Public Health

PRINCIPAL AMOUNT:
Three Million Nine Hundred and Seventeen Thousand Dollars ($3,917,000)

ARTESIAN WATER COMPANY, INC., a corporation of the State of Delaware
(hereinafter referred to as the "Company"), for value received hereby
acknowledges itself indebted and promises to pay to DELAWARE DRINKING WATER
STATE REVOLVING FUND, or to any other registered owner hereof, the principal sum
of THREE MILLION NINE HUNDRED AND SEVENTEEN THOUSAND DOLLARS ($3,917,000) or so
much thereof as shall actually be advanced to the Company by the Delaware
Drinking Water State Revolving Fund acting by and through Delaware Department of
Health & Social Services, Division of Public Health (the "Department") pursuant
to the Financing Agreement dated as of February 12, 2010 (the "Financing
Agreement") between the Company and the Department.

This Note is being issued in order to provide funds to:  (i) finance the cost of
various improvements and upgrades to the System (as defined in the Financing
Agreement) of the Company, as more fully described in Exhibit A to the Financing
Agreement (the "Project") and (ii) pay certain administrative costs and costs of
issuing this Note.  Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to them in the Financing Agreement.

The Company shall pay to the Department, on the principal amount drawn down and
outstanding hereunder from the date(s) drawn, interest at the rate of 1.705% per
annum and an administrative fee at the rate of 1.705% per annum (collectively,
interest and the administrative fee are referred to herein as "Fee").  Such Fee
shall accrue starting on the date hereof (the "Closing") through the Final
Maturity Date or prepayment in full hereof.  The Company shall pay Fee hereunder
initially on August 1, 2010 and semiannually thereafter on each February 1 and
August 1 (each, a "Payment Date").  The Company shall pay only Fee and no
principal during the period commencing with the Closing through the earlier of
(i) the Payment Date next succeeding the date on which the Project is actually
completed and (ii) February 11, 2011 (which, as of the Closing, is the date by
which the Project is projected to be completed) (the date which is the earlier
of (i) and (ii) is herein referred to as the "Amortization Start Date").  After
the Amortization Start Date, Fee and principal shall be payable on the
outstanding principal amounts drawn hereunder semiannually, on each Payment
Date, commencing on the Payment Date next succeeding the Amortization Start Date
and continuing on each of the next 39 following Payment Dates, in an amount
sufficient to amortize all principal drawn with substantially equal semiannual
payments of principal and Fee over twenty (20) years.

If by February 12, 2011, which is one year from the date of Closing, (i) the
Company has not submitted requisition(s), in the manner required by Section 3.2
of the Financing Agreement, for more than ten percent (10%) of the Project
Costs, and (ii) the Department has not received a copy of each Notice to
Proceed, the Department may in its discretion assess a penalty equal to one
percent (1%) of the Loan Proceeds (the "Penalty").  Such Penalty may be drawn by
the Department from the Loan Proceeds.  It is within the Department’s complete
discretion whether to impose the Penalty based upon its review of affirmative
steps taken by the Company to commence and complete the Project and the totality
of the circumstances surrounding any such delay in requesting disbursement of
Loan Proceeds.

Notwithstanding the foregoing, all unpaid principal and Fee shall be paid in
full on February 1, 2031 (the “Final Maturity Date”).  The Fee hereon shall be
calculated on the basis of a 360-day year and paid for the actual number of days
elapsed.  Both the principal of and Fee on this Note are payable in lawful money
of the United States of America.  Principal and Fee on this Note shall be paid
by check or draft mailed or remitted electronically to the Registered Owner, as
shown on the books and records of the Company, not later than 5:00 p.m. (eastern
time zone) on the Payment Date.

This Note is authorized and issued pursuant to the governing laws of the Company
and the laws of the State of Delaware and resolution(s) adopted by the Company
on February 3, 2010.

At the option of the Company and upon providing prior written notice to the
Registered Owner hereof, as shown on the books and records of the Company, this
Note may be prepaid in whole or in part, without penalty, at any time, and any
prepayment in part of this Note shall be applied to all or a portion of the
principal installments then outstanding as shall be specified by the
Company.  If all or a portion of this Note is called for redemption, it or the
portion so called will cease to bear Fee on the specified redemption date
provided that funds for the payment of the principal amount of the portion of
the Note so called for redemption and the accrued Fee thereon to the redemption
date are on deposit at the place of payment on the redemption date.

It is hereby certified and recited that all conditions, acts, and things
required to exist, be performed or happen, precedent to or in the issuance of
this Note, do exist, have been performed and have happened.  This Note is a
valid and legally binding general obligation of the Company.

This Note may be transferred by the Registered Owner hereof in person or by its
attorney duly authorized in writing.  The Company may deem and treat the
Registered Owner as the absolute owner hereof for the purpose of receiving
payment of, or on account of, the principal hereof and Fee due hereon and for
all other purposes.

The provisions of this Note shall be construed and enforced under the laws of
the State of Delaware.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 
 
 

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IN WITNESS WHEREOF, the Company has caused this Note to be signed by a duly
authorized officer of the Company and its seal to be impressed hereon and
attested by the manual signature of the Secretary of the Company, and this Note
to be dated February 12, 2010.

ARTESIAN WATER COMPANY, INC.

(SEAL)                                                                           By:           
Name:           David B. Spacht
 
Title:
Chief Financial Officer and Treasurer

___________________________________
Joseph A. Dinunzio
Secretary