NOTE 10 – LEGAL PROCEEDINGS

On September 30, 2014, the United States District Court for the Eastern District of Pennsylvania, or the Court, issued an Order regarding the complaint filed on December 22, 2010 by Artesian Water, against Chester Water Authority or CWA. The complaint claimed breach of contract, unjust enrichment, and requested declaratory judgment in relation to an interconnection agreement with CWA to supply bulk water supplies to Artesian Water. The Order of the Court stated the following:

·	The Addendum to the Interconnection Agreement between Artesian Water and CWA is a valid and enforceable contract by which CWA agreed to supply, and Artesian Water agreed to purchase, bulk water supplies, or the Supplies; and

·	CWA's calculation of rate increases for the Supplies in 2008, 2009, and 2010 were valid; and

·	Artesian Water is required to pay CWA amounts withheld related to CWA rate increases from 2008, 2009, and

2010 totaling approximately $3.1 million; and

·	Artesian Water is not required to pay a 10% late fee totaling approximately $300,000 on the amounts withheld related to CWA rate increases from 2008, 2009, and 2010; and

·	CWA shall file documentation no later than October 14, 2014 supporting the total amount of its damages in connection with Artesian Water's failure to pay for Supplies purchased beginning on July 1, 2010 at the rate then charged by CWA.

With regard to the third order above, the approximately $3.1 million withheld from Artesian Water's previous payments to CWA were accrued by Artesian Water when invoiced by CWA. In addition, approximately $378,000 in prejudgment interest related to amounts withheld were accrued as of September 30, 2014. This amount is calculated at 6% per annum on outstanding amounts withheld. The Company believes this amount will be awarded by the Court. The $3.1 million withheld was paid by Artesian Water to CWA in October 2014.