U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission file number 0-18552
Pennichuck Corporation
(Exact name of small business issuer as specified in its charter)
New Hampshire 02-0177370
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Four Water Street, Nashua, New Hampshire 03061
(Address of principal executive offices) (Zip Code)
(603) 882-5191
(Issuer's telephone number)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $1 Par Value-809,894 shares as of May 1, 1998
INDEX
PENNICHUCK CORPORATION AND SUBSIDIARIES
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PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--March 31, 1998 and
December 31, 1997 3
Condensed Consolidated Statements of Income--Three months
ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows--Three months
ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements--March
31, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
</TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31 December 31
1998 1997
----------- -----------
(Unaudited) (Restated)
(In thousands)
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ASSETS
Property, Plant and Equipment
Land $ 425 $ 424
Buildings 19,603 19,545
Equipment 45,509 45,408
Construction work in progress 438 140
----------------------
65,975 65,517
Less accumulated depreciation 16,913 16,561
----------------------
49,062 48,956
----------------------
Current Assets
Cash 268 448
Restricted cash 633 906
Accounts receivable, net 1,907 1,755
Inventory 223 208
Other current assets 143 497
----------------------
3,174 3,814
----------------------
Other Assets
Land development costs 2,407 2,408
Deferred charges, net 1,844 1,750
Investment in real estate partnerships 352 310
----------------------
TOTAL ASSETS $56,839 $57,238
======================
STOCKHOLDERS' EQUITY AND LIABILITIES
Common stock-par value $1 per share $ 813 $ 808
Paid in capital 5,326 5,251
Retained earnings 8,577 8,582
Treasury stock, at cost (59) (53)
----------------------
14,657 14,588
----------------------
Long Term Debt, less current portion 26,105 26,578
----------------------
Current Liabilities
Current portion of long term debt 100 100
Accounts payable 279 411
Accrued interest payable 449 351
Other accrued expenses 947 922
----------------------
1,775 1,784
----------------------
Other Liabilities
Contributions in aid of construction 8,980 8,980
Other liabilities and deferred credits 5,322 5,308
----------------------
TOTAL STOCKHOLDERS' EQUITY & LIABILITIES $56,839 $57,238
======================
</TABLE>
See notes to condensed consolidated financial statements.
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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Three Months Ended
March 31
--------------------
1998 1997
------ ----------
(Restated)
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues
Water utility operations $2,816 $2,445
Real estate operations and other 100 105
------------------
2,916 2,550
Operating expenses
Water utility operations 2,042 1,923
Real estate operations and other 25 35
------------------
2,067 1,958
Operating income 849 592
Other income 16 4
Interest expense (490) (410)
Income before income taxes 375 186
Provision for income taxes 139 65
Net income $ 236 $ 121
------------------
Net earnings per common share based on 806,987 and
796,018 weighted average common shares in 1998
and 1997, respectively $ .29 $ .15
Dividends paid per common share $ .30 $ .24
</TABLE>
See notes to condensed consolidated financial statements
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<CAPTION>
Three Months Ended
March 31
--------------------
1998 1997
------ ----------
(Restated)
(In thousands)
<S> <C> <C>
CASH PROVIDED (USED) BY:
Operating Activities
Net income $ 236 $ 121
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 369 313
Deferred income taxes 22 23
Change in working capital 179 933
------------------
806 1,390
------------------
Investing Activities:
Purchase of property, plant and equipment and other assets (611) (756)
Increase in contributions in aid of construction 32 37
Increase (Decrease) in other 231 (12)
------------------
(348) (731)
------------------
Financing Activities:
Payments on long-term debt (818) (132)
Proceeds from issuance of long-term debt --- 339
Payment of common dividends (241) (194)
Increase (Decrease) in note payable to bank 345 (445)
Proceeds from dividend reinvestment plan and other 76 24
------------------
(638) (408)
------------------
INCREASE (DECREASE) IN CASH (180) 251
CASH AT BEGINNING OF PERIOD 448 346
------------------
CASH AT END OF PERIOD $ 268 $ 597
==================
</TABLE>
Supplemental Cash Flow Information. Interest paid was $383,755 and
$382,816 for the three months ended March 31, 1998 and 1997, respectively.
No income taxes were paid in either of the three month periods ended March
31, 1998 and 1997.
See notes to condensed consolidated financial statements.
PENNICHUCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
NOTE A -- BACKGROUND
The financial statements include the accounts of Pennichuck Corporation
(the "Company") and its wholly-owned subsidiaries, Pennichuck Water Works,
Inc. ("Pennichuck"), Pittsfield Aqueduct Company, Inc. ("Pittsfield"),
Pennichuck East Utility, Inc. ("PEU"), The Southwood Corporation
("Southwood") and Pennichuck Water Service Corporation (the "Service
Corporation"). All significant intercompany accounts have been eliminated
in consolidation.
NOTE B -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998. The Balance Sheet amounts shown under the
December 31, 1997 column have been derived from the audited financial
statements of the Company as contained in its Annual Report to
Shareholders as restated to reflect the acquisition of Pittsfield which is
discussed in Note C below. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report for the year ended December 31, 1997.
NOTE C -- ACQUISITION OF PITTSFIELD AQUEDUCT COMPANY
On January 30, 1998, the Company acquired all of the outstanding common
stock of Pittsfield Aqueduct Company in exchange for 49,428 common shares
of the Company. This acquisition has been accounted for using the pooling-
of-interests method and accordingly, the historical consolidated 1997
financial statements have been restated to include the effect of
Pittsfield Aqueduct Company's operating results for the quarter ended
March 31, 1997 and financial condition at December 31, 1997. However, the
Company's consolidated financial statements did not change materially as a
result of the inclusion of Pittsfield Aqueduct Company's financial data
for the periods presented.
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Financial Condition
The financial position of Pennichuck Corporation (the "Company") and its
wholly-owned operating subsidiaries, Pennichuck Water Works, Inc.
("Pennichuck"), Pittsfield Aqueduct Company, Inc. ("Pittsfield"),
Pennichuck East Utility, Inc. ("Pennichuck East"), The Southwood
Corporation ("Southwood") and Pennichuck Water Service Corporation (the
"Service Corporation") is shown in the accompanying Condensed
Consolidated Balance Sheets.
The Company's cash needs for operations, capital projects and dividends
throughout the year are funded primarily by operating cash flow as
supplemented by borrowings under a revolving credit agreement (the
"agreement") with Fleet Bank-NH ("Fleet"). The agreement allows the
Company to borrow up to $4.5 million at interest rates tied to Fleet's
cost of funds or LIBOR, whichever is lower. At March 31, 1998, the Company
had $4,025,000 of notes outstanding under this credit facility which
matured in April 1998 and the average interest rate of those notes was
7.35%. Under the terms of the agreement, the maturity date of all amounts
borrowed, or to be borrowed in the next 14 months, has been extended to
May 31, 1999. As a result, outstanding bank borrowings at March 31, 1998
totaling $4,025,000 have been classified as "Long Term Debt" in the
Condensed Consolidated Balance Sheets.
During the first quarter of 1998, the Company refinanced $800,000 of a
$1.1 million mortgage note issued by Pittsfield to a local bank. The
Company utilized its revolving credit facility with Fleet to refinance
that mortgage repayment and the remaining balance on that mortgage was
subsequently refinanced in April 1998. Furthermore, on April 24, 1998, the
Company refinanced $1.5 million of outstanding indebtedness under its
revolving credit facility into a seven year note. The terms of that note
provide for payment of interest only for seven years at a fixed rate of
6.50% and is secured by, among other things, the guarantees of Southwood
and the Service Corporation.
Total long-term indebtedness decreased by $473,000 during the first
quarter of 1998 principally due to (i) the $806,000 of cash flow generated
from operating activities and (ii) from the utilization of $180,000 and
$273,000 of unrestricted and restricted cash, respectively, used to fund
certain capital projects undertaken in February and March of 1998.
The Company's consolidated capital budget for 1998 consists of
approximately $3.3 million for water utility projects, which is
significantly less than the $5.1 expended during 1997. For the quarter
ended March 31, 1998, Pennichuck invested $611,000 in capital projects and
other assets, the most significant of which was $300,000 for the purchase
and installation of certain varidrive pumps in Pennichuck's water
treatment facility. For the remainder of 1998, the Company expects that
internally generated funds, together with available short-term borrowings,
will be sufficient to fund its planned capital expenditures.
The other major change in the Company's financial position during the
first quarter was a decrease of $354,000 in "Other Current Assets"
resulting from prepaid property taxes which were fully amortized in the
first quarter of 1998.
At March 31, 1998, consolidated retained earnings decreased slightly to
$8,577,000, or by $5,000 from the beginning of the year. This decline is
due to a payout of $241,000 in common dividends which exceeded the
Company's consolidated net income of $236,000 for the first quarter. Due
to the generally seasonal nature of the Company's water utility business,
it is not uncommon for the Company's dividend payout to exceed its
earnings in the first quarter of the calendar year. The Company's ability
to pay common dividends is dependent on the level of its future earnings
and the capital needs of its operating business units.
Results of Operations -- Three Months Ended March 31, 1998 Compared to
Three Months Ended March 31, 1997
For the three months ended March 31, 1998, consolidated net income was
$236,000, or $.29 per share compared to $121,000, or $.15 per share for
the same period in 1997, which period has been restated to reflect the
acquisition of Pittsfield. Consolidated revenues for the first quarter
increased 14.3% from $2,550,000 in 1997 to $2,916,000 in 1998. This increase
resulted from the water utility operations of the Company's subsidiaries as
discussed below.
The Company's consolidated revenues are generally seasonal due to the
overall significance of the water sales of Pennichuck as a percent of
consolidated revenues. Water revenues are typically at their lowest point
during the first and fourth quarters of the calendar year while water
revenues in the second and third quarters tend to be greater as a result
of increased water consumption during the late spring and summer months.
In addition, the Company's consolidated revenues may be significantly
affected by sales of major real estate parcels which may occur from time
to time.
Water Utility Operations
The Company's water utility operations include the activities of
Pennichuck and Pittsfield, both of which are regulated by the New
Hampshire Public Utilities Commission (the "Commission"). For the three
months ended March 31, 1998, approximately 96.6% and 3.4% of the total
utility operating revenues of $2,816,000 were generated by Pennichuck and
Pittsfield, respectively. That total represents a 15.2% increase over the
same period in 1997, reflecting (i) an increase in Pennichuck's
consumption and water rates during the first quarter of 1998 compared to
the first quarter of 1997 and (ii) an increase in Pittsfield's core water
rates for the same periods. Billed consumption in Pennichuck's core system
for the first three months of 1998 was approximately 6.9% greater than
last year as a result of increased consumption by Pennichuck's commercial
and industrial customers.
In addition, the utility revenues of Pennichuck for the three months ended
March 31, 1998 reflect an additional $175,000 resulting from an overall
rate increase of 5.1% which was granted by the Commission in August 1997.
Subsequently, on March 25, 1998, the Commission also approved an
additional rate increase of 11.7% for water bills rendered on or after
April 1, 1998, thus concluding the rate case filed by Pennichuck in May
1997. The annualized effect of the combined 16.8% rate increase is
estimated to be $1.7 million. Utility revenues of Pittsfield for the first
quarter in 1998 increased by approximately $43,000, or 81%, over the same
period in 1997 principally as a result of a 101% rate increase approved by
the Commission effective for service rendered on or after October 31,
1997. That rate increase was granted by the Commission to enable
Pittsfield to recover the capital and operating costs associated with a
new treatment facility which became operational in October 1997.
Total operating expenses of the water utility operations were $2,042,000
for the three months ended March 31, 1998, or an increase of $119,000 over
the same period last year. Of that increase, depreciation expense alone
accounted for $48,000 as a result of Pennichuck's and Pittsfield's
continued investment in operating assets of $5.97 million during 1997.
Production and treatment costs increased by $40,000 between the two
periods principally due to the increased pumpage realized in Pennichuck's
core system and the addition of Pittsfield's water treatment facility.
Real Estate and Other Operations
For the three months ended March 31, 1998, revenues from real estate and
other activities were $100,000 which was not materially different from the
same period in 1997.
In April 1996, Southwood entered into a joint venture agreement with a
local builder for the development of a 46 unit residential development in
Nashua. Under the terms of the agreement, Southwood conveyed the related
land parcel to the partnership in exchange for a non-interest bearing note
from the partnership secured by a second mortgage on the real estate
conveyed. For the three months ended March 31, 1998 and 1997, Southwood
has recorded $52,000 of revenues from this partnership which includes
payments on the note reflecting the sale of two homes during each of those
quarters.
Real estate and other revenues in the first quarter of 1998 and 1997 also
include $21,000 and $26,000, respectively, of option income accrued by
Southwood under a development option agreement which was entered into
during 1995 with a regional developer. Under the terms of that agreement,
the developer will pay Southwood an annual option fee equal to the
carrying costs associated with Southwood Corporate Park, principally
property taxes and property maintenance costs, in exchange for the
exclusive development rights of that Park. As lots are readied for
development, the agreement provides for a per acre payment to Southwood.
Currently, 47 acres in the Corporate Park lot are subject to this
development agreement.
The operating expenses associated with the Company's real estate and other
non-utility activities decreased from $35,000 in the first quarter of 1997
to $25,000 in 1998. Property taxes for the three months ended March 31,
1998 and 1997 were $19,000 and $27,000, respectively for Southwood and for
calendar year 1998, Southwood's property taxes on all of its landholdings
are estimated to be $93,000, most of which relates to its Corporate Park.
Subsequent Event
On April 9, 1998, the Company acquired certain water utility assets from
the Town of Hudson, New Hampshire (the "Town") for $7.5 million pursuant
to an Agreement of Purchase and Sale of Assets dated November 5, 1997.
This purchase immediately followed the Town's acquisition of those assets
(in addition to certain water utility assets located within the Town) from
an investor-owned water utility which previously served the Town and
surrounding communities. The Company acquired these water utility assets
through a new, wholly-owned subsidiary, Pennichuck East Utility, Inc.
("Pennichuck East") which is a regulated water utility. As a result of
this purchase, the Company expects to add approximately 3,600 new
customers to its existing customer base and annual revenues from these
added customers is estimated to be $2.3 million.
The water utility assets acquired by the Company and Pennichuck East
consist principally of water transmission and distribution mains,
hydrants, wells, pump stations and pumping equipment, water services and
meters, vehicles and a certain tract of land and building serving as the
previous utility's administrative office. The assets are located in the
New Hampshire towns of Litchfield, Pelham, Windham, Londonderry, Derry,
Raymond and Hooksett, an area adjacent to the service franchise served by
the Company's principal operating subsidiary, Pennichuck.
In order to finance this purchase from the Town, the Company and
Pennichuck East obtained bank loans from Fleet Bank-NH. Under a separate
swap agreement between the Company, Pennichuck East, Fleet and Fleet
National Bank, the $7.5 million financing has been structured as two
separate notes, in the principal amounts of $3 million and $4.5 million,
with maturities of 2 and 7 years and fixed interest rates of 6.20% and
6.50%, respectively. These notes are secured by, among other things, the
operating assets of Pennichuck East.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
The following exhibit is filed herewith:
Exhibit Number Exhibit Description
- -------------- -------------------
Exhibit 10.10 Amendment Agreement dated March 18, 1998 to Amended and
Restated Revolving Credit Agreement dated March 24, 1994
between Pennichuck Corporation and Fleet Bank-New Hampshire
(b) There were no reports on Form 8-K filed during the first quarter of 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pennichuck Corporation
(Registrant)
Date: May 11, 1998 /s/ Maurice L. Arel
Maurice L. Arel, President and
Principal Executive Officer
Date: May 11, 1998 /s/ Charles J. Staab
Charles J. Staab, Vice President,
Treasurer and Principal Financial
Officer
AMENDMENT AGREEMENT
-------------------
This Amendment Agreement ("Agreement") entered into as of the 18th day of
March, 1998, by and among PENNICHUCK CORPORATION, a New Hampshire corporation
with an address of 4 Water Street, Nashua, New Hampshire 03060 (the
"Borrower"), PENNICHUCK WATER WORKS, INC., a New Hampshire corporation with an
address of 4 Water Street, Nashua, New Hampshire 03060 (the "Guarantor"), and
FLEET BANK - NH, a bank incorporated under the laws of the State of New
Hampshire with a principal place of business at 1155 Elm Street, Manchester,
New Hampshire 03101.
W I T N E S S E T H :
WHEREAS, the Bank and the Borrower entered into a Loan Agreement dated
October 2, 1991 establishing a Revolving Line of Credit Loan (the "Loan" or the
"Line of Credit") in favor of the Borrower, as amended and modified by
agreements dated on or about June 4, 1993, March 23, 1994, May 4, 1995 and July
31, 1996 (the "Loan Agreement");
WHEREAS, the Guarantor executed a Limited Guaranty Agreement dated as of
March 23, 1994, as amended and ratified, in which it guaranteed the payment of
the Loan as governed by and limited in said Limited Guaranty Agreement (the
"Limited Guaranty Agreement");
WHEREAS, the parties have executed certain documents and instruments in
connection with the Loan (collectively the "Loan Documents"); and
WHEREAS, the Borrower, the Guarantor and the Bank have agreed to amend
the Loan Documents to, among other things, reduce the rate of interest under
the Line of Credit and amend the period of loan commitment under the Line of
Credit to June 30, 2000.
NOW, THEREFORE, in consideration of the foregoing and mutual covenants
and agreements therein contained, the receipt and adequacy of which is hereby
acknowledged, the parties covenant, stipulate and agree as follows:
1. Representations and Warranties of the Borrower and the Guarantor.
Each of the Borrower and the Guarantor represents and warrants to the Bank as
follows:
(a) The representations, warranties and covenants of the Borrower and
the Guarantor made in the Loan Documents remain true and accurate and are
hereby reaffirmed as of the date hereof.
(b) Each of the Borrower and the Guarantor has performed, in all
material respects, all obligations to be performed by it to date under the Loan
Documents and no event of default exists thereunder.
(c) Each of the Borrower and the Guarantor is a corporation duly
organized, qualified and existing in good standing under the laws of the State
of New Hampshire and is duly qualified to do business in all jurisdictions in
which the character of the property owned by or the nature of its activities
causes such qualification to be necessary.
(d) The execution, delivery and performance of this Agreement and the
documents relating hereto (the "Amendment Documents") are within the power of
the Borrower and the Guarantor and are not in contravention of law, of either
of the Borrower's or the Guarantor's Articles of Incorporation, By-laws or the
terms of any other documents, agreements or undertaking to which either the
Borrower or the Guarantor is a party or by which either the Borrower or the
Guarantor is bound. No approval of any person, corporation, governmental body
or other entity not provided herewith is a prerequisite to the execution,
delivery and performance by the Borrower or the Guarantor of the Amendment
Documents or any of the documents submitted to the Bank in connection with the
Amendment Documents, or upon execution by the Bank to ensure the validity or
enforceability thereof.
(e) When executed on behalf of the Borrower and the Guarantor, the
Amendment Documents will constitute the legally binding obligations of the
Borrower and the Guarantor, enforceable in accordance with their terms.
2. Amendment to Loan Agreement. The Loan Agreement is hereby amended
as follows:
(a) The phrase "June 30, 1992" appearing in the tenth and eleventh
lines of Article II C of the Loan Agreement is hereby deleted and replaced with
"June 30, 2000".
(b) The second paragraph of Article IV of the Loan Agreement is hereby
deleted and replaced with the following:
"In connection with the Loan, the Borrower agrees to pay the Bank a fee
equal to one-quarter of one percent (1/4%) per annum on the unused
portion of the Line of Credit, such fee to be calculated and billed
quarterly in arrears."
3. Amendment to Amended and Restated Revolving Credit Promissory Note.
The Amended and Restated Revolving Promissory Note made payable by the Borrower
to the Bank in the principal amount of $4,500,000 dated March 23, 1994, as
amended (the "Note") is hereby further amended as follows:
(a) The phrase "on June 4, 1993 and on the date hereof" appearing in
the third line of the second paragraph of the Note is hereby deleted.
(b) The third through and including the eighth paragraphs of the Note
are hereby deleted and replaced by the following:
"Sums hereunder shall bear interest at a variable per annum rate equal to
the Prime Rate (as hereinafter defined). The term Prime Rate means the
variable per annum rate of interest so designated from time to time by
the Bank as its Prime Rate. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate being charged to any
customer. Each time the Prime Rate changes, the interest rate hereunder
shall change. Interest shall be calculated and charged on the basis of
actual days elapsed over a banking year of three hundred sixty (360)
days. Notwithstanding anything herein to the contrary, in the event that
the interest rate hereunder violates any applicable usury or similar
statute, the interest rate shall automatically be deemed to be the
highest rate of interest then permitted.
The Borrower shall have the option to elect (six of which may be utilized
simultaneously) that the interest rate payable hereunder, for one (1)
month periods up to a maximum period of six (6) months (the "Fixed Rate
Interest Period(s)"), in the minimum amount of Five Hundred Thousand
Dollars ($500,000.00) and if greater in minimum additional increments of
One Hundred Thousand Dollars ($100,000), shall be equal to the LIBOR Rate
(as hereinafter defined) plus one and one-quarter percent (1 1/4%) per
annum (the "LIBOR Fixed Rate Option") or the Bank's Costs of Funds (as
hereinafter defined) plus one and one-quarter percent (1 1/4%) per annum
(the "COF Fixed Rate Option"). In the absence of such an election, sums
advanced hereunder shall bear interest at a variable rate equal to the
Prime Rate (the "Floating Rate Option") and said interest rate shall
apply to the entire principal amount outstanding thereunder or such
amount thereof as to which no LIBOR Fixed Rate Option or COF Fixed Rate
Option has been made by the Borrower. Any Fixed Rate Interest Period or
combination of Fixed Rate Interest Periods chosen by the Borrower will be
so structured such that the principal amount to be repaid at maturity
hereunder shall either bear interest at the Prime Rate or bear interest
at a LIBOR Fixed Rate Option having a Fixed Rate Interest Period which
terminates on or before the day such principal repayment is to be made.
Any Fixed Rate Interest Period which would otherwise end on a day which
is not a Banking Day shall be extended to the next Banking Day, as
otherwise determined by the Bank in accordance with the then current
foreign banking practice. At the expiration of each Fixed Rate Interest
Period, any part of the principal amount hereunder bearing interest based
on Fixed Rate Option as to which no notice of renewal has been received
as provided below shall automatically be converted to the Floating Rate
Option. The Bank shall attempt to notify the Borrower of any such
automatic conversion.
The Bank's Cost of Funds shall mean the per annum rate of interest which
the Bank is required to pay, or is offering to pay, for wholesale
liabilities, for the applicable Fixed Rate Interest Period, adjusted for
reserve requirements and such other requirements as may be imposed by
federal, state or local government and regulatory agencies, as determined
by Fleet Treasury Group.
"LIBOR RATE" shall mean the per annum rate as determined by the Bank
(rounded upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in U.S.
dollars, for the applicable Fixed Rate Interest Period, which appears on
the Telerate page 3750 as of 11:00 a.m. London time on the day that is
two (2) London Banking Days preceding the first day of such Fixed Rate
Interest Period; provided, however, if the rate described above does not
appear on the Telerate System on any applicable interest determination
date, the LIBOR Rate shall be the rate (rounded upwards as described
above if necessary) for deposits in dollars for a period substantially
equal to LIBOR Rate Interest Period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose
of displaying such rates), as of 11:00 a.m. (London Time), on the day
that is two (2) London Banking Days prior to the beginning of such
interest period. "Banking Day" shall mean any date on which commercial
banks are open for business in London, England, Manchester, New Hampshire
and Boston, Massachusetts.
If both the Telerate and Reuters system are unavailable, then the rate
for that date will be determined on the basis of the offered rates for
deposits in U.S. dollars for a period of time comparable to such Fixed
Rate Interest Period which are offered by four major banks in the London
interbank market at approximately 11:00 a.m. London time, on the day that
is two (2) London Banking Days preceding the first day of such Fixed Rate
Interest Period as selected by the Bank's calculation agent. The
principal London office of each of the four major London banks will be
requested to provide a quotation of its U.S. dollar deposit offered rate.
If at least two such quotations are provided, the rate for that date will
be the arithmetic mean of the quotations. If fewer than two quotations
are provided as requested, the rate for that date will be determined on
the basis of the rates quoted for loans in U.S. dollars to leading
European banks for a period of time comparable to such Fixed Rate
Interest Period which are offered by major banks in New York City at
approximately 11:00 a.m. New York City time, on the day that is two (2)
London Banking Days preceding the first day of such Fixed Rate Interest
Period. In the event that Bank is unable to obtain any such quotation as
provided above, it will be deemed that LIBOR Rate cannot be determined.
Notwithstanding the foregoing, if as a result of any change in any
foreign or United States law or regulation (or change in the
interpretation thereof) it is determined by Bank that it is unlawful to
maintain a LIBOR Rate based loan, or if any central bank or governmental
authority (foreign or domestic) shall assert that it is unlawful to
maintain a Fixed Rate based loan, then such LIBOR Rate based loan shall
terminate and the Borrower shall have no further right hereunder to elect
the LIBOR Fixed Rate Option. If for any reason a LIBOR Rate based loan is
terminated or prepaid by the Borrower prior to the end of the applicable
LIBOR Rate Interest Period for which the LIBOR Rate is to be in effect,
the Borrower shall, upon demand by Bank, pay to Bank any amounts required
to compensate Bank for any additional losses, costs, or expenses which it
may reasonably incur as a result of such termination or prepayment,
including, without limitation, any losses, costs, or expenses incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund or maintain such LIBOR Rate based loan. If
the Bank determines that by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for
determining the LIBOR Rate in the relevant amount and for the relevant
maturity are not available to the Bank in the London interbank market,
with respect to a proposed LIBOR Rate based loan, the Bank shall give the
Borrower prompt notice of such determination. Until such notice has been
withdrawn, the Bank shall have no obligation to make LIBOR Rate based
loans, or maintain outstanding LIBOR Rate based loans. In the event that
the Bank can not determine the LIBOR Rate or the LIBOR Rate is
unavailable, all amounts under the Line of Credit shall bear interest at
the Floating Rate Option unless the Borrower elects the COF Fixed Rate
Option.
If, due to any one or more of: (i) the introduction of any applicable law
or regulation or any change in the interpretation or application by any
authority charged with the interpretation or application thereof of any
law or regulation; or (ii) the compliance with any guideline or request
from any governmental central bank or other governmental authority
(whether or not having the force of law), there shall be an increase in
the cost to the Bank of agreeing to make or making, funding or
maintaining LIBOR Rate based loans, including, without limitation,
changes which affect or would affect the amount of capital or reserves
required or expected to be maintained by the Bank, with respect to all or
any portion of the LIBOR Rate based loans, or any corporation controlling
the Bank, on account thereof, then the Borrower from time to time shall,
upon written demand by the Bank, pay the Bank additional amounts
sufficient to indemnify the Bank against the increased cost. A
certificate as to the amount of the increased cost and the reason
therefor submitted to Borrower by the Bank in the absence of manifest
error, shall be conclusive and binding for all purposes.
In order for the Borrower to elect the LIBOR Fixed Rate Option or a COF
Fixed Rate Option, the following conditions must be met:
(i) The Bank shall have received a written notice (the "Fixed Rate
Request") from the Borrower at least two (2) Banking Days prior to
the first day of any Fixed Rate Interest Period requested, such
notice to specify whether it is electing the LIBOR Fixed Rate
Option or the COF Fixed Rate Option, the first day and length of
the Fixed Rate Interest Period (a "Fixed Rate Period") and the
dollar amount that the Borrower elects to bear interest at the
applicable COF or LIBOR Fixed Rate Option; and
(ii) The Bank shall not have determined in good faith that it is unable
to determine the LIBOR Rate or the Cost of Funds in respect of the
requested Fixed Rate Interest Period.
If, at any time (i) the interest rate on the Line of Credit is a fixed
rate, and (ii) the Bank in its sole discretion should determine that
current market conditions can accommodate a prepayment request, the
Borrower shall have the right at any time and from time to time to prepay
the Line of Credit in whole (but not in part) and the Borrower shall pay
to the Bank a yield maintenance fee in an amount computed as follows: The
current rate for United States Treasury securities (bills on a discounted
basis shall be converted to a bond equivalent) with a maturity date
closest to the term chosen pursuant to the applicable COF Fixed Rate
Option or the LIBOR Fixed Rate Option as to which the prepayment is made,
shall be subtracted from the "cost of funds" component of the fixed rate
in effect at the time of prepayment. If the result is zero or a negative
number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied by the
amount of the principal balance being prepaid. The resulting amount shall
be divided by 360 and multiplied by the number of days remaining in the
term chosen pursuant to the applicable COF Fixed Rate Option or the LIBOR
Fixed Rate Option as to which the prepayment is made. Said amount shall
be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United
States Treasury securities rate and the number of days remaining in the
term chosen pursuant to the applicable COF Fixed Rate Option or the LIBOR
Fixed Rate Option as to which the prepayment is made. The resulting
amount shall be the yield maintenance fee due to the Bank upon prepayment
of the fixed rate loan. If the Bank elects to declare the amounts due
hereunder to be immediately due and payable, then any yield maintenance
fee with respect to the Line of Credit shall become due and payable in
the same manner as though the Borrower had exercised such right of
prepayment. The Borrower may prepay any amounts outstanding under this
Note, which bear interest at the Floating Rate Option, in whole or in
part, at any time without the payment of any penalty, premium or charge
of any nature whatsoever. In the event that any such prepayment shall be
made by the Borrower, the amount thereof shall be applied first to
accrued interest and delinquency charges and thereafter to principal. In
the event any such prepayment is made by the Borrower, the amount thereof
will be applied first to accrued interest and delinquency charges and
thereafter to principal in the reverse order of maturity."
4. Guarantor Consent. By execution hereof, the Guarantor consents to
this Agreement and the transactions contemplated hereby and acknowledges and
agrees that its guaranty under the Limited Guaranty Agreement applies to all
amounts advanced or to be advanced under the Loan Agreement, the Note and all
Loan Documents, as amended, in accordance with the terms of the Limited
Guaranty Agreement.
5. Conditions Precedent. The obligations of the Bank hereunder are
subject to delivery by the Borrower and the Guarantor to the Bank of this
Agreement and all other documents set forth on the Closing Agenda attached
hereto as Exhibit A.
6. Loan Documents. The Borrower and the Guarantor shall deliver this
Agreement to the Bank and this Agreement shall be included in the term "the
Loan Documents" in the Loan Agreement. The collateral granted to the Bank
therein, including without limitation, the Limited Guaranty Agreement, shall
continue to secure the Loan as set forth in the Loan Documents, as amended
hereby.
7. Future References. All references to the Loan Documents shall
hereinafter refer to such documents as amended.
8. Continuing Effect. The provisions of the Loan Document, as modified
herein, shall remain in full force and effect in accordance with their terms
and are hereby ratified and confirmed.
9. General. (a) The Borrower and the Guarantor shall execute and
deliver such additional documents and do such other acts as the Bank may
reasonably require to implement the intent of this Agreement fully.
(b) The Borrower shall pay all costs and expenses, including, but not
limited to, attorneys' fees incurred by the Bank in connection with this
Agreement. The Bank, at its option, but without any obligation to do so, may
advance funds to pay any such costs and expenses that are the obligation of the
Borrower and all such funds advanced shall bear interest at the highest rate
provided in the Loan Documents.
(c) This Agreement may be executed in several counterparts by the
Borrower, the Bank and any obligor or guarantor of the Loan Agreement, each of
which shall be deemed an original but all of which together shall constitute
one and the same Agreement.
IN WITNESS WHEREOF, the Bank, the Borrower and the Guarantor have
executed this agreement by their duly authorized officers (if appropriate) as
of the date set forth above.
FLEET BANK - NH
___________________________ By: /s/________________________________
Witness Roger J. Archambault, Its Duly
Authorized Vice President
PENNICHUCK CORPORATION
___________________________ By: /s/________________________________
Witness Charles J. Staab, Its Duly
Authorized Vice President
PENNICHUCK WATER WORKS, INC.
___________________________ By: /s/________________________________
Witness Charles J. Staab, Its Duly
Authorized Vice President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this __ day of
February, 1998 by Roger J. Archambault, duly authorized Vice President of FLEET
BANK - NH, a bank incorporated under the laws of the State of New Hampshire, on
behalf of same.
_______________________________________
Justice of the Peace/Notary Public
My Commission Expires:
Notary Seal
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 18th day of
March, 1998 by Charles J. Staab, duly authorized Vice President of PENNICHUCK
CORPORATION, a New Hampshire corporation, on behalf of same.
/s/____________________________________
Justice of the Peace/Notary Public
My Commission Expires:
Notary Seal
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 18th day of
March, 1998 by Charles J. Staab, duly authorized Vice President of PENNICHUCK
WATER WORKS, INC., a New Hampshire corporation, on behalf of same.
/s/___________________________________
Justice of the Peace/Notary Public
My Commission Expires:
Notary Seal
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 901,000
<SECURITIES> 0
<RECEIVABLES> 1,932,000
<ALLOWANCES> (25,000)
<INVENTORY> 223,000
<CURRENT-ASSETS> 3,174,000
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<DEPRECIATION> (16,913,000)
<TOTAL-ASSETS> 56,839,000
<CURRENT-LIABILITIES> 1,775,000
<BONDS> 26,105,000
0
0
<COMMON> 813,000
<OTHER-SE> 13,844,000
<TOTAL-LIABILITY-AND-EQUITY> 56,839,000
<SALES> 2,916,000
<TOTAL-REVENUES> 2,916,000
<CGS> 2,067,000
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<INTEREST-EXPENSE> 490,000
<INCOME-PRETAX> 375,000
<INCOME-TAX> 139,000
<INCOME-CONTINUING> 236,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236,000
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