As filed with the Securities and Exchange Commission on August 15, 2006
Registration Statement No. 333-136184
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ARTESIAN RESOURCES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 51-0002090
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
664 CHURCHMANS ROAD
NEWARK, DELAWARE 19702
(302) 453 - 6900
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
DIAN C. TAYLOR
CHIEF EXECUTIVE OFFICER
ARTESIAN RESOURCES CORPORATION
664 CHURCHMANS ROAD
NEWARK, DELAWARE 19702
(302) 453 - 6900
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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COPY TO:
JOANNE R. SOSLOW, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become effective upon
filing with the Commission pursuant to Rule 462(e) under the Securities Act,
check the following box. [_]
If this form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register additional
securities or additional classes of securities pursuant to Rule 413(b) under the
Securities Act, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PROSPECTUS
ARTESIAN RESOURCES CORPORATION
$30,000,000
CLASS A NON-VOTING COMMON STOCK
Artesian Resources Corporation may offer up to $30,000,000 of Class A
Non-Voting Common Stock from time to time. When we offer these securities, we
will provide a prospectus supplement containing the specific terms of that
offering. This prospectus may not be used to consummate sales of these
securities unless accompanied by a prospectus supplement.
We will receive all proceeds from the sale of securities hereunder.
Our Class A Common Stock is traded on the NASDAQ Global Market under
the symbol "ARTNA." On August 14, 2006, the closing sale price of our Class A
Non-Voting Common Stock on NASDAQ was $19.10 per share. You are urged to obtain
current market quotations for our Class A Non-Voting Common Stock.
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INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is August 15, 2006.
TABLE OF CONTENTS
About this Prospectus...................................................... 2
About Artesian Resources Corporation....................................... 3
Risk Factors............................................................... 6
Special Note Regarding Forward-Looking Statements.......................... 11
Use of Proceeds............................................................ 12
Description of Capital Stock............................................... 13
Plan of Distribution....................................................... 21
Legal Matters.............................................................. 23
Experts.................................................................... 23
Where You Can Find More Information........................................ 23
Information Incorporated By Reference...................................... 24
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration or
continuous offering process. We may from time to time sell Class A Non-Voting
Common Stock in one or more offerings up to a total dollar amount of
$30,000,000.
Each time we sell these securities, we will provide you with a
prospectus supplement containing specific information about the terms of each
such sale. This prospectus may not be used to sell any of the securities unless
accompanied by a prospectus supplement. The prospectus supplement also may add,
update or change information in this prospectus. If there is any inconsistency
between the information in the prospectus and the prospectus supplement, you
should rely on the information in the prospectus supplement. You should read
both this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More Information"
beginning on page 23 of this prospectus.
Unless otherwise indicated or unless the context otherwise requires,
all references in this prospectus to "we," "us," the "Company" or similar
references mean Artesian Resources Corporation and its subsidiaries.
You should rely only on the information contained in this prospectus
or in a prospectus supplement or amendment. We have not authorized anyone to
provide you with information different from that contained or incorporated by
reference in this prospectus. We may offer to sell, and seek offers to buy these
securities only in jurisdictions where offers and sales are permitted. The
information contained in or incorporated by reference in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of securities.
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ARTESIAN RESOURCES CORPORATION
OUR COMPANY
Artesian Resources Corporation is the parent holding company of three
regulated public utilities: Artesian Water Company, Inc., Artesian Water
Pennsylvania, Inc. and Artesian Wastewater Management, Inc., and two
non-regulated subsidiaries: Artesian Utility Development, Inc. and Artesian
Development Corporation. The business activities conducted by each subsidiary
are discussed below.
ARTESIAN WATER COMPANY, INC.
Our principal subsidiary, Artesian Water Company, Inc., or Artesian
Water, is the oldest and largest public water utility in the State of Delaware,
and has been providing water service within the state since 1905. We distribute
and sell water to residential, commercial, industrial, governmental, municipal
and utility customers throughout the State of Delaware. As of December 31, 2005,
we had approximately 72,400 metered customers and served a population of
approximately 239,000 (including contract services), representing approximately
28% of Delaware's total population. We also provide water for public and private
fire protection to customers in our service territories. Our water customer base
is diversified among residential, commercial and industrial customers. Our gross
water sales revenue for 2005 was approximately $41.6 million, and our
percentages of gross water sales revenue by major customer classifications were
62% for residential, 31% for commercial, industrial, governmental, municipal and
utility, and 7% for public fire protection. Substantially all of our water
customers are metered, which enables us to measure and bill for our customers'
water consumption.
Our current primary market area is the State of Delaware, which had a
population of approximately 844,000 at July 1, 2005. Substantial portions of
Delaware, particularly outside of New Castle County, are not served by a public
water system and represent potential opportunities for us to obtain new
exclusive franchised service areas. We continue to focus resources on developing
and serving existing service territories and obtaining new territories
throughout the State. In 2005, we added approximately 28 square miles of
franchised service area. In addition, we hold Certificates of Public Convenience
and Necessity, or CPCNs, which provide us with the exclusive right to serve all
existing and new customers for approximately 186 square miles of exclusive
service territory or about 9.5% of the total square miles in Delaware. The
pursuit of new service territory in the State of Delaware by water companies is
competitive. Our strategy is to continue our efforts to acquire additional
exclusive service areas, although the future rate of increase will depend upon
interest rates, land use rules and our ability to enter into agreements with
landowners, developers or municipalities.
As a public utility, we are regulated by the Delaware Public Service
Commission, or the PSC, with respect to rates and charges for service, the sale
and issuance of securities, mergers and other matters. We periodically seek rate
increases to cover the cost of increased operating expenses, increased financing
expenses due to additional investments in utility plant and other costs of doing
business. The timing of our rate increase requests are therefore dependent upon
the estimated cost of the administrative process in relation to the investments
and expenses that we hope to recover through the rate increase. There is no
guarantee that our rate increase requests will be granted by applicable
regulatory agencies; or that such requests will be granted in a timely manner or
in sufficient amount to cover the investments and expenses for which we
initially sought the rate increase.
ARTESIAN WATER PENNSYLVANIA, INC.
Our other water utility subsidiary, Artesian Water Pennsylvania, Inc.,
began operations as a regulated public water utility in Pennsylvania in 2002. As
of December 31, 2005, we provided water service to a residential community
consisting of 39 customers in Chester County. On February 4, 2005,
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we received approval to expand our service area in Pennsylvania by providing
services to four specific developments that are expected to add 350 customers
over ten years.
ARTESIAN WASTEWATER MANAGEMENT, INC.
Our third utility subsidiary, Artesian Wastewater Management, Inc.,
owns wastewater infrastructure and provides wastewater services to customers in
Delaware. We were recognized as a regulated public wastewater utility by the PSC
in March 2005, and began providing service to a planned 725 home residential
community in Sussex County, Delaware in July 2005. Our rate and tariff for
serving this community was approved by the PSC. In addition, we have approval to
provide service to a planned 97 home residential community in Sussex County,
Delaware, and we began serving this community in February 2006. As of December
31, 2005, we provided wastewater services to 35 customers.
ARTESIAN UTILITY DEVELOPMENT, INC.
Artesian Utility Development, Inc., a non-regulated subsidiary, was
formed in 1996. It is contracted to design and build wastewater infrastructure
and provide wastewater treatment and management services, and is a one-third
participant in a limited liability company that develops and markets proposals
for design, construction and operation of wastewater facilities.
ARTESIAN DEVELOPMENT CORPORATION
The sole operation of our other non-regulated subsidiary, Artesian
Development Corporation, is the ownership of an eleven-acre parcel of land zoned
for office buildings located immediately adjacent to our corporate headquarters.
Out of the eleven acre parcel of land, four acres are under a contract for sale.
According to the contract, the sale must close no later than August 2006. The
sale is contingent on the buyer's ability to obtain all governmental approvals
necessary to construct a medical office facility of at least 42,000 square feet
of leasable space and an acceptable environmental audit report. If the buyer
fails to perform any of the terms or conditions specified in the contract,
Artesian Development Corporation has the right and option to declare this
contract null and void. This option expires in August 2006.
RECENT STOCK DIVIDEND
On May 12, 2006, the Company's Board of Directors approved a three for
two stock split in the form of a stock dividend. Shareholders of record on May
30, 2006 received one additional share for each two shares held. All share and
per share information presented below for each of the five years in the 5-year
period ended December 31, 2005 are derived from the audited financial statements
of the Company and for the three months ended March 31, 2006 are derived from
the Form 10-Q for the quarterly period ended March 31, 2006 and have been
restated to retroactively show the effect of the stock split.
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THREE MONTHS Three Months
ENDED Ended
MARCH 31, March 31,
2006 2005 2005 2004 2003 2002 2001
------------ ------------ ------ ------ ------ ------ ------
STATEMENT OF OPERATIONS DATA
Net income per share of
common stock:
Basic $ 0.17 $ 0.16 $ 0.84 $ 0.75 $ 0.66 $ 0.78 $ 0.71
Diluted $ 0.16 $ 0.16 $ 0.81 $ 0.72 $ 0.64 $ 0.76 $ 0.70
Avg. shares of common
stock outstanding
(in thousands)
Basic 6,027 5,951 5,984 5,904 5,820 5,300 4,559
Diluted 6,217 6,141 6,182 6,098 5,989 5,419 4,661
Cash dividends per share
of common stock $ 0.15 $ 0.14 $ 0.58 $ 0.55 $ 0.53 $ 0.52 $ 0.49
GENERAL INFORMATION
We are a Delaware corporation with our principal executive offices
located at 664 Churchmans Road, Newark, Delaware 19702. Our telephone number is
(302) 453-6900 and our website address is www.artesianwater.com. General
information about us can be found at this website. We make available free of
charge through the Investor Relations section of our website our annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
all amendments to those reports as soon as reasonably practicable after such
material is electronically filed with or furnished to the Securities and
Exchange Commission, or the SEC. In addition, you can find at the Investor
Relations section of our website our Code of Ethics that is applicable to our
chief executive officer, chief financial officer, controller or principal
accounting officer and any person performing a similar function. We include our
website address in this prospectus only as an inactive textural reference and do
not intend it to be an active link to our website. The material on our website
is not part of our prospectus. You may also obtain a free copy of these reports
and amendments, as well as our Code of Ethics, by contacting Nicholle Taylor at
Artesian Resources Corporation, Churchmans Road, Newark, Delaware 19702.
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RISK FACTORS
Investing in our Class A Non-Voting Common Stock involves a high
degree of risk. You should carefully consider the risks and uncertainties
described below before purchasing our securities. If any of the following risks
actually occur, our business, financial condition or results of operations would
likely suffer. In that case, the trading price of our Class A Non-Voting Common
Stock could fall, and you may lose all or part of the money you paid to buy our
securities.
RISKS RELATED TO OUR BUSINESS
OUR OPERATING REVENUE IS PRIMARILY FROM WATER SALES. THE RATES THAT WE
CHARGE OUR CUSTOMERS ARE SUBJECT TO THE REGULATIONS OF THE PSC. ADDITIONALLY,
OUR BUSINESS REQUIRES SIGNIFICANT CAPITAL EXPENDITURES ON AN ANNUAL BASIS AND
THESE EXPENDITURES ARE MADE FOR ADDITIONS AND REPLACEMENT OF PROPERTY. IF THE
PSC DISAPPROVES OR IS UNABLE TO TIMELY APPROVE OUR REQUESTS FOR RATE INCREASE OR
APPROVES RATE INCREASES THAT ARE INADEQUATE TO COVER OUR INVESTMENTS OR
INCREASED COSTS, OUR PROFITABILITY MAY SUFFER.
We file rate increase requests, from time to time, to recover our
investments in utility plant and expenses. Once a rate increase petition is
filed with the PSC, the ensuing administrative and hearing process may be
lengthy and costly. We can provide no assurances that any future rate increase
request will be approved by the PSC; and if approved, we cannot guarantee that
these rate increases will be granted in a timely manner and/or will be
sufficient in amount to cover the investments and expenses for which we
initially sought the rate increase.
OUR BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH COULD AFFECT
DEMAND FOR OUR WATER SERVICE AND OUR REVENUES.
Demand for water during warmer months is generally greater than during
cooler months primarily due to additional requirements in irrigation systems,
swimming pools, cooling systems and other outside water use. In an event when
temperatures during typically warmer months are cooler than normal, or if there
is more rainfall than normal, the demand for our water may decrease and
adversely affect our revenues.
DROUGHT CONDITIONS MAY IMPACT OUR ABILITY TO SERVE OUR CURRENT AND
FUTURE CUSTOMERS, AND MAY IMPACT OUR CUSTOMERS' USE OF OUR WATER, WHICH MAY
ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We believe that we have in place sufficient capacity to provide water
service for the foreseeable future to all existing and new customers in all of
our service territories. However, severe drought conditions could interfere with
our sources of water supply and could adversely affect our ability to supply
water in sufficient quantities to our existing and future customers. This may
adversely affect our revenues and earnings. Moreover, governmental restrictions
on water usage during drought conditions may result in a decreased demand for
water, which may adversely affect our revenue and earnings.
OUR OPERATING COSTS COULD BE SIGNIFICANTLY INCREASED IF NEW OR
STRICTER REGULATORY STANDARDS ARE IMPOSED BY FEDERAL AND STATE ENVIRONMENTAL
AGENCIES.
Our water and wastewater services are governed by various federal and
state environmental protection and health and safety laws and regulations,
including the federal Safe Drinking Water Act, the Clean Water Act and similar
state laws. These federal and state regulations are issued by the United States
Environmental Protection Agency and state environmental regulatory agencies.
Pursuant to these laws, we are required to obtain various water allocation
permits and environmental permits for our operations. The water allocation
permits control the amount of water that can be drawn from water
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resources. New or stricter water allocation regulations can adversely affect our
ability to meet the demands of our customers. While we have budgeted for future
capital and operating expenditures to maintain compliance with these laws and
our permits, it is possible that new or stricter standards would be imposed that
will raise our operating costs. Thus, we can provide no assurances that our
costs of complying with, or discharging liability under current and future
environmental and health and safety laws will not adversely affect our business,
results of operations or financial condition.
TURNOVER IN MANAGEMENT TEAM
Our success depends significantly on the continued contribution of our
management team both individually and collectively. The loss of the services of
any member of our management team or the inability to hire and retain
experienced management personnel could harm our operating results.
WE FACE COMPETITION FROM OTHER WATER UTILITIES FOR THE ACQUISITION OF
NEW EXCLUSIVE SERVICE TERRITORIES.
Water utilities competitively pursue the right to exclusively serve
territories in Delaware by entering into agreements with landowners, developers
or municipalities and, under current law, then applying to the PSC for a CPCN,
which grants a water utility the exclusive right to serve all existing and new
customers of a water utility within a designated area. Typically, water
utilities enter into agreements with developers who have approval from county
governments with respect to proposed subdivisions or developments. Once a CPCN
is granted to a water utility, generally it may not be suspended or terminated
unless the PSC determines in accordance with its rules and regulations that good
cause exists for any such suspension or termination. Therefore, we face
competition from other water utilities as we pursue the right to exclusively
serve territories. If we are unable to enter into agreements with landowners,
developers or municipalities and secure CPCNs for the right to exclusively serve
territories in Delaware, our ability to expand may be significantly impeded.
WE DEPEND ON THE AVAILABILITY OF CAPITAL FOR EXPANSION, CONSTRUCTION
AND MAINTENANCE.
Our ability to continue our expansion efforts and fund our utility
construction and maintenance program depends on the availability of adequate
capital. There is no guarantee that we will be able to obtain sufficient capital
in the future on favorable terms and conditions for expansion, construction and
maintenance. In the event we are unable to obtain sufficient capital, our
expansion efforts could be curtailed, which may affect our growth and may affect
our future results of operations.
ANY FUTURE ACQUISITIONS WE UNDERTAKE OR OTHER ACTIONS TO FURTHER GROW
OUR WATER AND WASTEWATER BUSINESS MAY INVOLVE RISKS.
An element of our growth strategy is the acquisition and integration
of water and wastewater systems in order to broaden our current service areas,
and move into new ones. It is our intent, when practical, to integrate any
businesses we acquire with our existing operations. The negotiation of potential
acquisitions as well as the integration of acquired businesses could require us
to incur significant costs and cause diversion of our management's time and
resources. We may not be successful in the future in identifying businesses that
meet our acquisition criteria. The failure to identify such businesses may limit
the rate of our growth. In addition, future acquisitions by us could result in:
o Dilutive issuance of our equity securities;
o Incurrence of debt and contingent liabilities;
o Difficulties in integrating the operations and personnel of the
acquired businesses;
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o Diversion of our management's attention from ongoing business
concerns;
o Failure to have effective internal control over financial
reporting;
o Shuffling of human resources; and
o Other acquisition-related expense.
Some or all of these items could have a material adverse effect on our business
and our ability to finance our business and comply with regulatory requirements.
The businesses we acquire in the future may not achieve sales and profitability
that would justify our investment.
CONTAMINATION OF OUR WATER SUPPLY MAY RESULT IN DISRUPTION IN OUR
SERVICES AND COULD LEAD TO LITIGATION THAT MAY ADVERSELY AFFECT OUR BUSINESS,
OPERATING RESULTS AND FINANCIAL CONDITION.
Our water supplies are subject to contamination from
naturally-occurring compounds as well as pollution resulting from man-made
sources. Even though we monitor the quality of water on on-going basis, any
possible contamination due to factors beyond our control could interrupt the use
of our water supply until we are able to substitute it from an uncontaminated
water source. Additionally, treating the contaminated water source could involve
significant costs and could adversely affect our business. We could also be held
liable for consequences arising out of human or environmental exposure to
hazardous substances, if found, in our water supply. This could adversely affect
our business, results of operations and financial condition.
POTENTIAL TERRORIST ATTACKS MAY DISRUPT OUR OPERATIONS AND ADVERSELY
AFFECT OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION.
In the wake of the September 11, 2001 terrorist attacks, we have taken
steps to increase security measures at our facilities and heighten employee
awareness of threats to our water supply. We also have tightened our security
measures regarding delivery and handling of certain chemicals used in our
business. We are currently not aware of any specific threats to our facilities,
operations or supplies, however, it is possible that we would not be in a
position to control the outcome of terrorist events, if they occur.
RISKS RELATED TO OUR COMMON STOCK
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT CONTROL OVER THE OUTCOME
OF MOST FUNDAMENTAL CORPORATE MATTERS.
As of July 11, 2006, members of the Taylor family, which include Dian
C. Taylor, our Chair of the Board, Chief Executive Officer and President, and
Norman H. Taylor, Jr. and John R. Eisenbrey, Jr., two of our other directors,
beneficially owned 73% of the outstanding Class B Common Stock and 5% of the
outstanding Class A Non-Voting Common Stock and our directors and executive
officers as a group beneficially owned 55% of the outstanding Class B Common
Stock and 5% of the outstanding Class A Non-Voting Common Stock. The holders of
Class B Common Stock generally have the exclusive right to vote on most
fundamental corporate decisions, including the election of our board of
directors. As a result, these principal stockholders will have significant
control over the outcome of most fundamental corporate matters. If you purchase
shares of Class A Non-Voting Common Stock, you will not be able to vote on most
fundamental corporate matters, including the election of our board of directors.
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OUR ABILITY TO PAY DIVIDENDS IS LIMITED BY OUR RESTATED CERTIFICATE OF
INCORPORATION, TERMS OF OUR PREFERRED STOCK AND COVENANTS IN OUR DEBT
INSTRUMENTS.
Our Restated Certificate of Incorporation requires that we pay or set
aside for payment all accrued dividends and sinking fund payments payable on any
outstanding preferred stock before we can pay dividends on our common stock. In
addition, we have outstanding debt instruments containing covenants restricting
our ability to pay dividends on our common stock.
There are a number of other factors that determine both our ability to
pay dividends on our common stock and the amount of those dividends. These
factors include:
o Dilutive issuance of our equity securities;
o Certain limitations on dividend payments in our bond covenants
included in our trust indentures;
o Our earnings, capital requirements and financial condition; and
o Other factors, including the timeliness and adequacy of rate
increases granted to Artesian Water.
We cannot guarantee that we will continue to pay dividends on our
common stock in the future or in amounts similar to past dividends.
THERE IS A LIMITED TRADING MARKET FOR OUR CLASS A NON-VOTING COMMON
STOCK. YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAY
FOR THEM.
Although our Class A Common Stock is listed for trading on the NASDAQ
Global Market, the trading in our Class A Non-Voting Common Stock has
substantially less liquidity than many other companies quoted on the NASDAQ
Global Market. A public trading market having the desired characteristics of
depth, liquidity and orderliness depends on the presence in the market of
willing buyers and sellers of our Class A Non-Voting Common Stock at any given
time. This presence depends on the individual decisions of investors and general
economic and market conditions over which we have no control. Because of the
limited volume of trading in our Class A Non-Voting Common Stock, a sale of a
significant number of shares of our Class A Non-Voting Common Stock in the open
market could cause our stock price to decline. We cannot provide any assurance
that this offering will increase the volume of trading in our Class A Non-Voting
Common Stock.
PROVISIONS IN OUR RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS AND
UNDER DELAWARE LAW MAY PREVENT OR FRUSTRATE A CHANGE IN CONTROL OR A CHANGE IN
MANAGEMENT THAT STOCKHOLDERS BELIEVE IS DESIRABLE.
Provisions of our Restated Certificate of Incorporation and Bylaws may
discourage, delay or prevent a merger, acquisition or other change in control
that stockholders may consider favorable, including transactions in which you
might otherwise receive a premium for your shares. These provisions may also
prevent or frustrate attempts by our stockholders to replace or remove our
management. These provisions include:
o A classified board of directors;
o Higher stockholder voting requirements for certain corporate
actions;
o Limitations on the removal of directors; and
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o Advance notice requirements for stockholder proposals and
nominations.
Subject to certain exceptions, the affirmative vote of the holders of
at least 75% of the voting power of all of the then-outstanding shares entitled
to vote generally in the election of directors, voting together as a single
class, is required to alter, amend or repeal the provisions of our Restated
Certificate of Incorporation establishing our classified board of directors and
limitations on the removal of directors or our Bylaws.
In addition, Section 203 of the General Corporation Law of the State
of Delaware prohibits a publicly held Delaware corporation from engaging in a
business combination with an interested stockholder, generally a person which
together with its affiliates owns or within the last three years has owned 15%
of our voting stock, for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. Accordingly, Section
203 may discourage, delay or prevent a change in control of our company.
RISKS RELATED TO AN OFFERING
WE HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS FROM AN
OFFERING AND MAY NOT USE THEM EFFECTIVELY.
Our management will have broad discretion in the application of the
net proceeds from an offering and could spend the proceeds in ways that do not
necessarily improve our results of operations or enhance the value of our Class
A Non-Voting Common Stock. The failure by our management to apply these funds
effectively could result in financial losses that could have a material adverse
effect on our business and cause the price of our Class A Non-Voting Common
Stock to decline.
ONCE THIS REGISTRATION STATEMENT IS DECLARED EFFECTIVE BY THE SEC, A
LARGE NUMBER OF SHARES OF OUR CLASS A NON-VOTING COMMON STOCK WILL BECOME
ELIGIBLE FOR FUTURE SALE INTO THE MARKET. THIS MAY ADVERSELY IMPACT THE MARKET
PRICE OF OUR CLASS A NON-VOTING COMMON STOCK.
Once this registration statement is declared effective by the SEC, a
large number of shares of our Class A Non-Voting Common Stock will become
eligible for future issuance and sale. Solely for purpose of estimation, based
on $19.10 per share, the last reported closing sale price of our Class A
Non-Voting Common Stock as reported by the NASDAQ Global Market on August 14,
2006, the registration statement covers 1,570,681 shares of Class A Non-Voting
Common Stock, or 30.3% of our total outstanding shares of Class A Non-Voting
Common Stock based on 5,175,722 total outstanding shares of Class A Non-Voting
Common Stock as of July 11, 2006. This availability of a significant number of
additional shares of our Class A Non-Voting Common Stock for future sale and
issuance or the perception in the market that we intend to sell a substantial
number of shares could depress the price of our Class A Non-Voting Common Stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus which express our "belief,"
"anticipation" or "expectation," as well as other statements which are not
historical fact, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, or the Securities Act, Section
21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act and
the Private Securities Litigation Reform Act of 1995. Statements including, but
not limited to, those regarding our goals, priorities and growth and expansion
plans for our water and wastewater subsidiaries, our belief regarding our
capacity to provide water services for the foreseeable future to our customers,
our belief relating to our compliance with relevant governmental regulations,
the impact of weather on our operations and the execution of our strategic
initiatives and our expectations regarding the sale of land are forward-looking
statements and involve risks and uncertainties that could cause actual results
to differ materially from those projected. Certain factors discussed in "Risk
Factors" commencing on page 6, such as changes in weather, changes in our
contractual obligations, changes in government policies, the timing and results
of our rate requests, changes in economic and market conditions generally, and
other matters could cause results to differ materially from those in the
forward-looking statements. While we may elect to update forward-looking
statements, we specifically disclaim any obligation to do so and you should not
rely on any forward-looking statement as representation of our views as of any
date subsequent to the date of the filing of this prospectus.
You should read and interpret any forward-looking statements together
with the documents incorporated by reference in this prospectus and our other
filings with the SEC.
-11-
USE OF PROCEEDS
We will receive all of the net proceeds from the sale of our
securities registered under the registration statement of which this prospectus
is a part.
Unless the applicable prospectus supplement states otherwise, we will
retain broad discretion in the allocation of the net proceeds of this offering.
We currently intend to use the net proceeds of this issuance to fund a paid-in
capital contribution in the same amount to our principal subsidiary, Artesian
Water. Artesian Water will use the paid-in capital contribution for the
following purposes:
o Repayment of short-term borrowings; and
o General corporate purposes, including working capital and capital
expenditures.
These proceeds will reduce Artesian Water's debt to total
capitalization ratio, which we believe will improve Artesian Water's ability to
issue additional long-term debt to finance future capital investments.
Artesian Water has available two unsecured lines of credit, with no
financial covenant restrictions, totaling $40.0 million at December 31, 2005,
which are renewable annually at lenders' discretion. Borrowings under the lines
of credit bear interest based on the London Interbank Offering Rate, or LIBOR,
plus 1.0% for 30, 60, 90, or 180 days or the banks' federal funds rate plus
1.0%, at the option of Artesian Water. At July 11, 2006, Artesian Water had
$6,081,607 outstanding under these lines at average interest rates of 6.35%
We have not determined the amount of net proceeds to be used for each
of the purposes indicated. The amounts and timing of the expenditures may vary
significantly depending on numerous factors, such as identification of
appropriate acquisition opportunities. Accordingly, we will have broad
discretion to use the proceeds as we see fit. Pending such uses, we intend to
invest the net proceeds in interest-bearing, investment grade securities.
-12-
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our
Restated Certificate of Incorporation and Bylaws are summaries and are qualified
by reference to the Restated Certificate of Incorporation and Bylaws that we
have filed with the SEC.
Our authorized capital stock consists of 15,000,000 shares of Class A
Non-Voting Common Stock, par value $1.00 per share, 1,040,000 shares of Class B
Common Stock, par value $1.00 per share, 10,868 shares of 7% Prior Preferred
Stock, par value $25.00 per share, 80,000 shares of Cumulative Prior Preferred
Stock, par value $25.00 per share, and 100,000 shares of Series Preferred Stock,
par value $1.00 per share.
As of July 11, 2006, we had issued and outstanding:
o 5,175,722 shares of Class A Common stock, held by 884
stockholders of record; and
o 881,452 shares of Class B Common Stock, held by 192
stockholders of record.
As of July 11, 2006, there were no shares of 7% Prior Preferred stock,
Cumulative Prior Preferred Stock or Series Preferred Stock outstanding. We
sometimes refer to our 7% Prior Preferred Stock, Cumulative Prior Preferred
Stock and Series Preferred Stock collectively as Preferred Stock in this
"Description of Capital Stock."
CLASS A NON-VOTING COMMON STOCK
VOTING RIGHTS
Under our Restated Certificate Incorporation, generally, holders of
shares of our Class A Non-Voting Common Stock do not have voting rights with
respect to the election of directors and other matters voted upon by
stockholders.
However, Section 242(b)(2) of the General Corporation Law of the State
of Delaware confers voting rights, or statutory voting rights, to holders of the
outstanding shares of a class that is not entitled to vote under the certificate
of incorporation, with respect to a proposed amendment to the certificate of
incorporation, if "the amendment would increase or decrease the aggregate number
of authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences, or special
rights of the shares of such class so as to affect them adversely." The vote
required to approve such amendments is a majority of the outstanding shares of
the class.
Holders of our Class A Non-Voting Common Stock have statutory voting
rights as set forth above. In addition, under Section 4.20 of our Restated
Certificate of Incorporation, we may not issue any shares of Series Preferred
Stock without the approval of the holders of a majority of the shares of Class A
Non-Voting Common Stock.
DIVIDENDS
Subject to dividends that we may be required to pay on outstanding
shares of Preferred Stock, the holders of Class A Non-Voting Common Stock are
entitled to receive dividends, as, when and if declared from time to time by our
board of directors out of funds legally available for such purpose. Our Restated
Certificate of Incorporation requires that we declare and pay the same dividend
per share on the Class A Non-Voting Common Stock and on the Class B Common
Stock.
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Holders of Class A Non-Voting Common Stock may participate in our
dividend reinvestment plan by automatically reinvesting cash dividends declared
on all or a portion of their shares to purchase additional shares of Class A
Non-Voting Common Stock.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of Artesian
Resources, the holders of Class A Non-Voting Common Stock are entitled to share
pro rata with the holders of Class B Common Stock in all assets and funds
remaining after we pay all of our creditors and make required distributions to
the holders of outstanding shares of Preferred Stock pursuant to our Restated
Certificate of Incorporation.
OTHER RIGHTS
There are no preemptive, conversion, subscription, redemption or
sinking fund rights applicable to the Class A Non-Voting Common Stock.
All outstanding shares of our Class A Non-Voting Common Stock are
fully paid and non-assessable.
CLASS B COMMON STOCK
VOTING RIGHTS
Except as otherwise described in this "Description of Capital Stock"
with respect to our other classes of stock, the right to vote for the election
of directors and other stockholder matters is exercised exclusively by the
holders of Class B Common Stock. Holders of Class B Common Stock are entitled to
one vote per share on all matters voted upon by stockholders. Our directors,
other than those elected by holders of our Preferred Stock under specified
circumstances as described herein, are classified into three classes. Holders of
shares of Class B Common Stock do not have cumulative voting rights.
DIVIDENDS
Subject to dividends that we may be required to pay on outstanding
shares of Preferred Stock before we may pay dividends on other shares, the
holders of Class B Common Stock are entitled to receive dividends, as, when and
if declared from time to time by our board of directors out of funds legally
available for such purpose. Our Restated Certificate of Incorporation requires
that we declare and pay the same dividend per share on the Class B Common Stock
and on the Class A Non-Voting Common Stock.
LIQUIDATION RIGHTS
In the event of our liquidation, dissolution or winding up of our
operations, the holders of Class B Common Stock are entitled to share pro rata
with the holders of Class A Non-Voting Common Stock in all assets and funds
remaining after we pay all of our creditors and make required distributions to
the holders of outstanding shares of Preferred Stock pursuant to our Restated
Certificate of Incorporation.
OTHER RIGHTS
There are no preemptive, conversion, subscription, redemption or
sinking fund rights applicable to the Class B Common Stock.
All outstanding shares of Class B Common Stock are fully paid and
non-assessable.
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PREFERRED STOCK
As of July 11, 2006, there were no shares of Preferred Stock
outstanding.
7% PRIOR PREFERRED STOCK
Voting Rights
Under our Restated Certificate of Incorporation, holders of 7% Prior
Preferred Stock do not have voting rights except for statutory voting rights as
described above.
Redemption
The 7% Prior Preferred Stock is redeemable at our option, in whole or
in part, from time to time, upon at least 30 days' notice, at $30 per share plus
accrued but unpaid dividends; provided that if we are in default on any dividend
or sinking fund payment on any series of Cumulative Prior Preferred Stock, we
may not redeem any shares of 7% Prior Preferred Stock or any series of
Cumulative Prior Preferred Stock.
Dividends
The 7% Prior Preferred Stock is entitled to cumulative dividends at a
rate of 7% per year out of funds legally available for such purpose, payable
quarterly. The 7% Prior Preferred Stock and the Cumulative Prior Preferred Stock
rank equally with respect to the payment of cash dividends. No dividends may be
declared and paid on the Series Preferred Stock, Class A Non-Voting Common Stock
or Class B Common Stock unless the full cash dividends on the 7% Prior Preferred
Stock then outstanding have been paid or set apart for payment.
Liquidation Rights
In the event of our liquidation, dissolution or winding up or our sale
of all of our assets, the holders of 7% Prior Preferred Stock are entitled,
after we pay all of our creditors, to be paid in cash the par value of their
shares and any accrued but unpaid dividends before we make any payment to the
holders of our Series Preferred Stock, Class A Non-Voting Common Stock or Class
B Common Stock
The 7% Prior Preferred Stock and the Cumulative Prior Preferred Stock
rank equally with respect to payments upon a liquidation, dissolution or winding
up, except that a sale of all of our assets will be deemed to be a liquidation,
dissolution or winding up with respect to the 7% Prior Preferred Stock, but will
not be deemed a liquidation, dissolution or winding up with respect to the
Cumulative Prior Preferred Stock.
CUMULATIVE PRIOR PREFERRED STOCK
Issuance in Series
The Cumulative Prior Preferred Stock may be issued from time to time
in one or more series. Subject to certain stockholder approval requirements
described below, our board of directors may fix the designations, preferences
and other rights, and limitations or restrictions of authorized and unissued
Cumulative Prior Preferred Stock in a resolution providing for the initial
issuance of each such series.
All shares of the Cumulative Prior Preferred Stock of all series must
be of equal rank, and all shares of any particular series of the Cumulative
Prior Preferred Stock must be identical except as to the date(s) from which
dividends thereon start to cumulate.
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Different series of Cumulative Prior Preferred Stock may vary as to:
o The annual dividend rate and the date from which dividends
start to cumulate;
o The redemption price(s) and other terms and conditions of
redemption;
o The amount(s) payable upon our liquidation, dissolution or
winding up;
o The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the particular series;
o Terms relating to conversion; and
o The designations, preferences, and relative, participating,
optional, or other special rights, and the qualifications,
limitations, or restrictions, if any of the particular
series.
Voting Rights
Except for the statutory voting rights, in the case of certain
defaults in dividend or sinking fund payments described below, and as described
below for certain of our actions, the holders of Cumulative Prior Preferred
Stock generally do not have voting rights under our Restated Certificate of
Incorporation.
If we are in default on dividend or sinking fund payments on any
series of Cumulative Prior Preferred Stock for certain periods of time specified
in our Restated Certificate of Incorporation, the holders of Cumulative Prior
Preferred Stock are entitled to vote as a class for not less than one-third (if
the default continues for certain shorter periods) or a majority (if the default
continues for certain longer periods), as the case may be, of the members of our
board of directors. Upon such defaults, holders of Cumulative Prior Preferred
Stock may call a special meeting of such holders to elect directors as described
in this paragraph to serve until the next annual meeting of stockholders. Upon
cure of such defaults, voting rights revert to the Class B Common Stock.
In addition, the approval of at least 75% of the total number of
shares of Cumulative Prior Preferred Stock then outstanding is required for us
to:
o Incur any long-term indebtedness that would result in total
long-term indebtedness exceeding 65% of our capitalization
(as defined in our Restated Certificate of Incorporation);
o Create or authorize any class of stock or any obligation or
security convertible into shares of stock unless such stock
ranks junior to the Cumulative Prior Preferred Stock with
respect both to the payment of dividends and distributions
upon our liquidation, dissolution or winding up of
operations;
o Amend, alter, change or repeal any of the provisions of our
Restated Certificate of Incorporation with respect to our
business purposes so as to substantially change such
purposes, or amend, alter, change or repeal any of the terms
of the Cumulative Prior Preferred Stock then outstanding in
a manner prejudicial to the holders of such stock; provided
that if only a particular series of Cumulative Prior
Preferred Stock is prejudiced by such changes, then only the
vote of 75% of the total number of outstanding shares of
such series will be required;
-16-
o Merge or consolidate if, among other things, the purposes of
the resulting corporation would be substantially different
from ours or if any adverse change in the terms and
provisions of the Cumulative Prior Preferred Stock would
result;
o Reissue any previously purchased, redeemed or retired shares
of Cumulative Prior Preferred Stock;
o Issue any shares of Cumulative Prior Preferred Stock or any
stock senior to the Cumulative Prior Preferred Stock unless
certain financial tests specified in our Restated
Certificate of Incorporation are met; or
o Increase the total number of authorized shares of Cumulative
Prior Preferred Stock of all series to over 80,000 shares.
Redemption
Our board of directors may determine that the whole or any part of any
series of the Cumulative Prior Preferred Stock may be redeemed, at any time or
from time to time, by paying in cash the redemption price plus accrued but
unpaid dividends, and by following the procedures as set forth in Section 4.11
of our Restated Certificate of Incorporation; provided that if we are in default
on any dividend or sinking fund payment on any series of Cumulative Prior
Preferred Stock, we may not redeem any series of Cumulative Prior Preferred
Stock or any shares of 7% Prior Preferred Stock. Subject to the limitations set
forth in our Restated Certificate of Incorporation, our board of directors has
full power and authority to determine the manner and the terms and conditions of
such redemption. If a particular series of the Cumulative Prior Preferred Stock
has a sinking fund, the redemption price must not be in excess of the sinking
fund redemption price.
Sinking Fund
With respect to all series of Cumulative Prior Preferred Stock for
which a sinking fund requirement must be met in each year, we are required to
set aside on or before February 1 of such year cash required for sinking fund
payments in such year. To the extent that the terms of any series permit the
sinking fund requirement for such series to be met by the surrender of stock,
the aggregate par value of the shares surrendered for such purpose will be
considered as equivalent in amount to cash set aside for such series. The
sinking fund requirement for each series of the Cumulative Prior Preferred Stock
for which a sinking fund has been established will be cumulative, so that if in
any year we do not satisfy the sinking fund requirement for such year, the
amount of the deficiency will be added to the sinking fund requirement for the
next succeeding year. Unless and until we cure all such deficiencies, we may not
declare dividends or make other payments on our stock that rank junior to
Cumulative Prior Preferred Stock, nor may we purchase, redeem or otherwise
acquire for value such junior stock.
Dividends
Holders of our Cumulative Prior Preferred Stock are entitled to
receive dividends out of legally available funds when and as declared by our
board of directors. The Cumulative Prior Preferred Stock and the 7% Prior
Preferred Stock rank equally with respect to the payment of cash dividends. No
dividends may be declared and paid on the Series Preferred Stock, Class A
Non-Voting Common Stock or Class B Common Stock unless the full cash dividends
on the 7% Prior Preferred Stock then outstanding have been paid or set apart for
payment.
-17-
Power of Board with Respect to Series
We may, at any time or from time to time, within the then total
authorized amount of the Cumulative Prior Preferred Stock of all series,
increase the authorized amount of any series of the Cumulative Prior Preferred
Stock or of any unclassified Cumulative Prior Preferred Stock, classify or
reclassify any unissued shares of the Cumulative Prior Preferred Stock as shares
of the Cumulative Prior Preferred Stock of any series or as unclassified
Cumulative Prior Preferred Stock, create one or more additional series of the
Cumulative Prior Preferred Stock, fix the authorized amount of any series and
fix the designations and the rights and preferences, and restrictions and
qualifications, of any series of the Cumulative Prior Preferred Stock, by the
vote of a majority of the total number of shares of each series of the Series
Preferred Stock and of a majority in interest of the total number of shares of
the Class B Common Stock then outstanding given at a meeting called for that
purpose, and no vote or consent of the holders of shares of the Cumulative Prior
Preferred Stock, as a class or otherwise, will be required in connection
therewith nor will the holders of shares of the Cumulative Prior Preferred Stock
be entitled to notice of any such meeting.
In case and to the extent that under the laws of Delaware at the time
in effect, our board of directors will be authorized by law to create new series
of the Cumulative Prior Preferred Stock or to fix the amounts, designations,
rights and preferences, and restrictions and qualifications of the shares of any
series of the Cumulative Prior Preferred Stock, or to take any other action with
respect to the Cumulative Prior Preferred Stock specified in the preceding
paragraph, no action of our stockholders will be required and all action
authorized (as described above in the preceding paragraph) to be taken by vote
of the holders of the Class B Common Stock may be taken by vote of our board of
directors.
Liquidation Rights
In the event of our liquidation, dissolution or winding up of
operations or our sale of all of our assets, the holders of the outstanding
series of Cumulative Prior Preferred Stock are entitled, after we pay all of our
creditors, to be paid in cash the par value of their shares and any accrued but
unpaid dividends before any amounts are paid to the holders of our Series
Preferred Stock, Class A Non-Voting Common Stock or Class B Common Stock.
As described above, the 7% Prior Preferred Stock and the Cumulative
Prior Preferred Stock rank equally with respect to payments upon a liquidation,
dissolution or winding up, except that a sale of all of our assets will be
deemed to be a liquidation, dissolution or winding up with respect to the 7%
Prior Preferred Stock, but will not be deemed a liquidation, dissolution or
winding up with respect to the Cumulative Prior Preferred Stock.
SERIES PREFERRED STOCK
With the prior approval of the holders of a majority of the shares of
Class A Non-Voting Common Stock, our board of directors may issue Series
Preferred Stock from time to time in one or more series. The board of directors
has the power to fix, subject to preferences that may be applicable to the 7%
Prior Preferred Stock or Cumulative Prior Preferred Stock under our Restated
Certificate of Incorporation, the full, limited or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof of any such
series of Series Preferred Stock.
The issuance of Series Preferred Stock, while providing us flexibility
in connection with acquisitions and other corporate purposes, may be used by us,
in certain circumstances, to create voting impediments to extraordinary
corporate transactions or to frustrate persons seeking to effect a merger with
or otherwise gain control of us. We have no present plans to designate any
series or issue any shares of Series Preferred Stock.
-18-
OPTIONS
As of July 11, 2006, options to purchase 598,835 shares of Class A
Non-Voting Common Stock were outstanding at a weighted average exercise price of
$13.80 per share, of which options to purchase 565,085 shares of Class A
Non-Voting Common Stock were exercisable. As of that date, an additional 581,700
shares were available for issuance under our 2005 Equity Compensation Plan.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
Our Restated Certificate of Incorporation provides that we will be
governed by Section 203 of the General Corporation Law of the State of Delaware
which prohibits a "business combination" between a corporation and an
"interested stockholder" within three years of the stockholder becoming an
"interested stockholder." An "interested stockholder" is one who, directly or
indirectly, owns 15% or more of the outstanding voting stock of the corporation.
A "business combination" includes:
o A merger;
o Consolidation;
o Sale or lease or other disposition of assets having an
aggregate value in excess of 10% of either the aggregate
fair market value of the consolidated assets of the
corporation or the aggregate market value of all the
outstanding stock of the corporation; and
o Certain transactions that would increase the interested
stockholder's proportionate share ownership in the
corporation or which provide the interested stockholder with
a financial benefit.
These restrictions do not apply where:
o The business combination or the transaction in which the
stockholder becomes interested is approved by the
corporation's board of directors prior to the time the
interested stockholder acquired its shares;
o Upon consummation of the transaction in which the
stockholder became an interested stockholder, the
stockholder owns at least 85% of the voting stock
outstanding at the commencement of such transaction,
excluding, for determining the number of shares outstanding,
shares owned by persons who are directors as well as
officers and by employee stock plans in which participants
do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender
or exchange offer; or
o The business combination is approved by the board of
directors and the affirmative vote of two-thirds of the
outstanding voting stock not owned by the interested
stockholder at an annual or special meeting.
The business combinations provisions of Section 203 of the General
Corporation Law of the State of Delaware may have the effect of deterring merger
proposals, tender offers or other attempts to effect changes in control of us
that are not negotiated and approved by our board of directors.
We have adopted certain provisions in our Restated Certificate of
Incorporation and By-laws which may have anti-takeover implications. Our
Restated Certificate of Incorporation provides that without the affirmative vote
of at least 75% of the voting power of all of the then outstanding shares
entitled to vote generally in the election of directors, voting together as a
class, the provisions in our
-19-
Restated Certificate of Incorporation and the Bylaws establishing a classified
board of directors may not be altered, amended or repealed. These supermajority
voting provisions, along with various supermajority voting provisions for
certain classes of stock required for certain business combinations and other
corporate actions described above, may have an effect of discouraging, delaying
or preventing a change of control which may be at a premium above the prevailing
market price.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Non-Voting Common
Stock is Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016.
NASDAQ GLOBAL MARKET
Our Class A Non-Voting Common Stock is listed on the Global National
Market under the symbol "ARTNA."
-20-
PLAN OF DISTRIBUTION
We may sell our Class A Non-Voting Common Stock through underwriters
or dealers, through agents, or directly to one or more purchasers. The
prospectus supplement will describe the terms of the offering of our Class A
Non-Voting Common Stock, including:
o The number of shares of Class A Non-Voting Common Stock we
are offering;
o The name or names of any underwriters;
o Any securities exchange or market on which the Class A
Non-Voting Common Stock may be listed;
o The purchase price of our Class A Non-Voting Common Stock
being offered and the proceeds we will receive from the
sale;
o Any over-allotment options pursuant to which underwriters
may purchase additional shares of Class A Non-Voting Common
Stock from us;
o Any underwriting discounts or agency fees and other items
constituting underwriters' or agents' compensation; and
o Any discounts or concessions allowed or reallowed or paid to
dealers.
If underwriters are used in the sale, they will acquire our Class A
Non-Voting Common Stock for their own account and may resell our Class A
Non-Voting Common Stock from time to time in one or more transactions at a fixed
public offering price or at varying prices determined at the time of the sale.
The obligations of the underwriters to purchase the Class A Non-Voting Common
Stock will be subject to the conditions set forth in the applicable underwriting
agreement. We may offer the Class A Non-Voting Common Stock to the public
through underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Subject to certain conditions, the
underwriters will be obligated to purchase all the shares of Class A Non-Voting
Common Stock offered by the prospectus supplement. We may change from time to
time the public offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
We may sell our Class A Non-Voting Common Stock directly or through
agents we designate from time to time. We will name any agent involved in the
offering and sale of our Class A Non-Voting Common Stock, and we will describe
any commissions we will pay the agent in the prospectus supplement. Unless the
prospectus supplement states otherwise, our agent will act on a best-efforts
basis for the period of its appointment.
We may provide underwriters and agents with indemnification against
civil liabilities related to this offering, including liabilities under the
Securities Act, or contribution with respect to payments that the underwriters
or agents may make with respect to these liabilities. Underwriters and agents
may engage in transactions with, or perform services for, us in the ordinary
course of business. We will describe such relationships in the prospectus
supplement naming the underwriter and the nature of any such relationship.
Rules promulgated by the SEC may limit the ability of any underwriters
to bid for or purchase shares of Class A Non-Voting Common Stock before the
distribution of the shares of Class A Non-Voting Common Stock is completed.
However, underwriters may engage in the following activities in accordance with
the rules:
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o Stabilizing transactions - Underwriters may make bids or
purchases for the purpose of pegging, fixing or maintaining
the price of the shares, so long as stabilizing bids do not
exceed a specified maximum.
o Over-allotments and syndicate covering transactions -
Underwriters may sell more shares of our Class A Non-Voting
Common Stock than the number of shares that they have
committed to purchase in any underwritten offering. This
over-allotment creates a short position for the
underwriters. This short position may involve either
"covered" short sales or "naked" short sales. Covered short
sales are short sales made in an amount not greater than the
underwriters' over-allotment option to purchase additional
shares in any underwritten offering. The underwriters may
close out any covered short position either by exercising
their over-allotment option or by purchasing shares in the
open market. To determine how they will close the covered
short position, the underwriters will consider, among other
things, the price of shares available for purchase in the
open market, as compared to the price at which they may
purchase shares through the over-allotment option. Naked
short sales are short sales in excess of the over-allotment
option. The underwriters must close out any naked position
by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters
are concerned that, in the open market after pricing, there
may be downward pressure on the price of the shares that
could adversely affect investors who purchase shares in the
offering.
o Penalty bids - If underwriters purchase shares in the open
market in a stabilizing transaction or syndicate covering
transaction, they may reclaim a selling concession from
other underwriters and selling group members who sold those
shares as part of the offering.
Similar to other purchase transactions, an underwriter's purchases to
cover the syndicate short sales or to stabilize the market price of our Class A
Non-Voting Common Stock may have the effect of raising or maintaining the market
price of our Class A Non-Voting Common Stock or preventing or mitigating a
decline in the market price of our Class A Non-Voting Common Stock. As a result,
the price of the shares of our Class A Non-Voting Common Stock may be higher
than the price that might otherwise exist in the open market. The imposition of
a penalty bid might also have an effect on the price of shares if it discourages
resales of the shares.
If commenced, the underwriters may discontinue any of these activities
at any time.
Our Class A Non-Voting Common Stock is quoted on the NASDAQ Global
Market. One or more underwriters may make a market in our Class A Non-Voting
Common Stock, but the underwriters will not be obligated to do so and may
discontinue market making at any time without notice. We cannot give any
assurance as to liquidity of the trading market for our Class A Non-Voting
Common Stock.
Any underwriters who are qualified market makers on the NASDAQ Global
Market may engage in passive market making transactions in the Class A
Non-Voting Common Stock on the NASDAQ Global Market in accordance with Rule 103
of Regulation M, during the business day prior to the pricing of the offering,
before the commencement of offers or sales of our Class A Non-Voting Common
Stock. Passive market makers must comply with applicable volume and price
limitations and must be identified as passive market makers. In general, a
passive market maker must display its bid at a price not in excess of the
highest independent bid for such security; if all independent bids are lowered
below the passive market maker's bid, however, the passive market maker's bid
must then be lowered when certain purchase limits are exceeded.
-22-
In compliance with guidelines of the National Association of
Securities Dealers, or NASD, the maximum consideration or discount to be
received by any NASD member or independent broker dealer may not exceed 8% of
the aggregate amount of the securities offered pursuant to this prospectus and
any applicable prospectus supplement.
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered by this
prospectus will be passed upon for us by Morgan, Lewis & Bockius LLP,
Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements and schedules and management's
report on the effectiveness of internal control over financial reporting
incorporated by reference in this prospectus have been audited by BDO Seidman,
LLP, an independent registered public accounting firm, to the extent and for the
periods set forth in their reports incorporated herein by reference, and are
incorporated herein in reliance upon such reports given upon the authority of
said firm as experts in auditing and accounting.
KPMG LLP, or KPMG, our former independent registered public accounting
firm, has audited our consolidated financial statements as of December 31, 2004
and for the years ended December 31, 2004 and December 31, 2003, included in our
Annual Report on form 10-K for the year ended December 31, 2005 as set forth in
the annual report, which is incorporated by reference in this registration
statement. Our consolidated financial statements are incorporated by reference
in reliance on the reports of KPMG given upon the authority of the said firm as
experts in accounting and auditing.
We have agreed to indemnify and hold KPMG harmless against and from
any and all legal costs and expenses incurred by KPMG in successful defense of
any legal action or proceeding that arises as a result of KPMG's consent to the
incorporation by reference of its audit report on our past financial statements
incorporated by reference in this registration statement.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes part of the registration statement,
does not include all of the information contained in the registration statement.
You should refer to the registration statement and its exhibits for additional
information. Whenever we make reference in this prospectus to any of our
contracts, agreements or other documents, the references are not necessarily
complete and you should refer to the exhibits filed with the registration
statement for copies of the actual contract, agreement or other document. We are
subject to the information and periodic reporting requirements of the Exchange
Act, and, in accordance therewith, we file annual, quarterly and special
reports, proxy statements and other information with the SEC. These documents
are publicly available, free of charge, on our website at www.artesianwater.com.
You can read the registration statement and our future filings with
the SEC, over the Internet at the SEC's website at http://www.sec.gov. You may
also read and copy any document that we file with the SEC at its public
reference room at 100 F Street, NE, Washington, DC 20549.
You may also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 100 F Street, NE,
Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference room.
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INFORMATION INCORPORATED BY REFERENCE
The SEC requires us to "incorporate by reference" into this prospectus
information that we file with the SEC in other documents. This means that we can
disclose important information to you by referring to other documents that
contain that information. The information incorporated by reference is
considered to be part of this prospectus. Information contained in this
prospectus and information that we file with the SEC in the future and
incorporate by reference in this prospectus automatically updates and supersedes
previously filed information. We incorporate by reference the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, prior to the sale of all the shares covered by
this prospectus.
(1) Our Annual Report on Form 10-K for the year ended December 31,
2005, as filed with the SEC on March 17, 2006;
(2) Our Quarterly Report on Form 10-Q for the period ended March 31,
2006, as filed with the SEC on May 10, 2006 and our Quarterly
Report on Form 10-Q for the period ended June 30, 2006, as filed
with the SEC on August 8, 2006;
(3) Our Current Reports on Form 8-K filed with the SEC on April 13,
2006, May 15, 2006 (Item 8.01 only), May 18, 2006, August 2, 2006
and August 15, 2006; and
(4) The description of our Class A Non-Voting Common Stock contained
in our Registration Statement on Form 10, as amended (File No.
000-18516), filed with the Commission on April 30, 1990 to
register our Class A Non-Voting Common Stock under the Exchange
Act, including any amendments or reports filed for the purpose of
updating such description.
You may request a copy of these documents, which will be provided to
you at no cost, by writing or telephoning us using the following contact
information:
Artesian Resources Corporation
664 Churchmans Road
Newark, Delaware 19702
Attention: Nicholle Taylor
Telephone: (302) 453-6900
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF CLASS A NON-VOTING COMMON
STOCK.
-24-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by us.
SEC registration fees.............................................. $3,210
Legal fees and expenses............................................ $20,000*
Accounting fees and expenses....................................... $15,000*
Printing Fees...................................................... $10,000*
Miscellaneous Expenses............................................. $21,790*
Total Expenses.................................................. $70,000*
* estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of the State of
Delaware permits a corporation to eliminate the personal liability of directors
of a corporation to the corporation or its stockholders for monetary damages for
a breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Article TENTH of the registrant's Restated Certificate of
Incorporation provides that our directors will not be personally liable to us or
our stockholders for monetary damages for a breach of fiduciary duty as a
director, except for liability:
o for any breach of such person's duty of loyalty;
o for acts and omissions not in good faith or involving
intentional misconduct or a knowing violation of law;
o for the payment of unlawful dividends and certain other
actions prohibited by Delaware corporate law; and
o for any transaction resulting in receipt by such person of
an improper personal benefit.
In addition, Article TENTH of the registrant's Restated Certificate of
Incorporation provides that liability of a director shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware.
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Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation has the power to indemnify a director, officer,
employee, or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by the person in connection with an action, suit or
proceeding to which he is or is threatened to be made a party by reason of such
position, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
in any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except that, in the case of actions brought by or in the
right of the corporation, no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or other adjudicating court determines that, despite the adjudication
of liability but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the Court of
Chancery or such other court shall deem proper.
Article VIII of the registrant's Bylaws provides that the registrant
will indemnify each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (each, a "proceeding"),
by reason of the fact that he or she is or was a director, officer or controller
of the registrant or is or was serving at the request of the registrant as a
director, officer, or trustee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (all such persons being referred to as an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, controller or trustee or in any other capacity while
serving as a director, officer, controller or trustee, shall be indemnified and
held harmless by the registrant to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended to provide broader indemnification rights, against all expense,
liability and loss (including attorneys' fees) reasonably incurred or suffered
by such indemnitee in connection therewith; provided, however, that, subject to
the right of the indemnitee to bring suit against the registrant to enforce a
right to indemnification or to an advance of expenses permitted under this
Article VIII, the registrant shall indemnify any such indemnitee in connection
with a proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the registrant's board of
directors. Article VIII also provides that the indemnitee has the right to
advancement of expenses in connection with a proceeding.
As authorized by Section 145 of the General Corporation Law of the
State of Delaware and Article VIII of registrant's Bylaws, the registrant
maintains, on behalf of its directors and officers, insurance protection against
certain liabilities arising out of the discharge of their duties, as well as
insurance covering the registrant for indemnification payments made to its
directors and officers for certain liabilities. The premiums for such insurance
are paid by the registrant.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits
1.1 Form of Underwriting Agreement *
5.1 Opinion of Morgan, Lewis & Bockius LLP **
23.1 Consent of BDO Seidman, LLP
23.2 Consent of KPMG LLP
23.3 Consent of Morgan, Lewis & Bockius LLP (Included in Exhibit
5.1) **
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24.1 Power of Attorney (Included on signature page) **
----------
* To be filed, if necessary, by amendment or as an exhibit to a report
pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(iii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not
exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iiii) To include any material information with respect to the
plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
provided, however, that:
Paragraphs (1)(i), (1)(ii) and (1)(iii) of this section do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the
Securities and Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
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(4) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration
statement as of the date the filed prospectus was deemed
part of and included in the registration statement; and
(iii) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the
purpose of providing the information required by section
10(a) of the Securities Act of 1933 shall be deemed to be
part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used
after effectiveness of the date of the first contract of
sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes
of the issuer and any person that is at the date an
underwriter, such date shall be deemed to be a new effective
date of the registration statement relating to the
securities in the registration statement to which that
prospectus relates, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made
in a registration statement or prospectus that is part of
the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time
of contract of sale prior to such effective date, supersede
or modify any statement that was made in the registration
statement or prospectus that was part of the registration
statement or made in any such document immediately prior to
such effective date.
(5) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities:
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to
the purchaser, if the securities are offered or sold to such purchaser by means
of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or
used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating
to the offering containing material information about the
undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
(6) The registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement shall be
II-4
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newark, State of Delaware, on August 15, 2006.
ARTESIAN RESOURCES CORPORATION
By: /s/ David B. Spacht
------------------------------------
Name: David B. Spacht
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------------------------- -------------------------------------------- ---------------
* Chair of the Board of Directors, Chief August 15, 2006
--------------------------- Executive Officer and President (Principal
Dian C. Taylor Executive Officer)
Director
---------------------------
Kenneth R. Biederman
* Director
---------------------------
John R. Eisenbrey, Jr. August 15, 2006
* Director
---------------------------
Norman H. Taylor, Jr. August 15, 2006
* Director
---------------------------
William C. Wyer August 15, 2006
/s/ David B. Spacht Chief Financial Officer (Principal Financial
--------------------------- and Accounting Officer)
David B. Spacht August 15, 2006
* BY: /s/ David B. Spacht
---------------------
David B. Spacht
Attorney - in - fact
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
1.1 Form of Underwriting Agreement *
5.1 Opinion of Morgan, Lewis & Bockius LLP **
23.1 Consent of BDO Seidman, LLP
23.2 Consent of KPMG LLP
23.3 Consent of Morgan, Lewis & Bockius LLP (Included in Exhibit 5.1)**
24.1 Power of Attorney (Included on signature page)**
----------
* To be filed, if necessary, by amendment or as an exhibit to a report
pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act.
** Previously filed.