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 June 30, 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
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Four Water Street, Nashua, New Hampshire 03061
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(Address of principal executive offices) (Zip Code)
(603) 882-5191
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(Issuer's telephone number)
Not applicable
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(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--812,537 shares as of August 1, 1998
INDEX
PENNICHUCK CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE NUMBER
- -------------------------------- -----------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income--
Three and six months ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows--
Six months ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements--
June 30, 1998 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
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 14
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
-----------------------
(Unaudited) (Restated)
ASSETS (In thousands)
<S> <C> <C>
Property, Plant and Equipment
Land $ 1,330 $ 424
Buildings 22,268 19,545
Equipment 52,624 45,408
Construction work in progress 248 140
---------------------
76,470 65,517
Less accumulated depreciation 19,528 16,561
---------------------
56,942 48,956
Current Assets
Cash 134 448
Restricted cash 1,906 906
Accounts receivable, net 2,444 1,755
Inventory 372 208
Other current assets 553 497
---------------------
5,409 3,814
Other Assets
Land development costs 2,456 2,408
Deferred charges, net 2,025 1,750
Investment in real estate partnerships 736 310
---------------------
TOTAL ASSETS $67,568 $57,238
=====================
STOCKHOLDERS' EQUITY AND LIABILITIES
Common stock-par value $1 per share $ 815 $ 808
Paid in capital 5,393 5,251
Retained earnings 8,859 8,582
Treasury stock, at cost (59) (53)
---------------------
15,008 14,588
Minority Interest 273 --
Long Term Debt, less current portion 34,380 26,578
Current Liabilities
Current portion of long term debt 100 100
Accounts payable 392 411
Accrued interest payable 384 351
Other accrued liabilities 2,459 922
---------------------
3,335 1,784
Other Liabilities
Contributions in aid of construction 9,121 8,980
Other liabilities and deferred credits 5,451 5,308
---------------------
TOTAL STOCKHOLDERS' EQUITY & LIABILITIES $67,568 $57,238
=====================
</TABLE>
See notes to condensed consolidated financial statements.
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------------- -----------------------
1998 1997(Restated) 1998 1997(Restated)
----------------------------------------------------
(In thousands, except per share amounts
and weighted average number of shares)
<S> <C> <C> <C> <C>
Revenues
Water utility operations $3,694 $2,853 $6,510 $5,298
Real estate operations and other 279 94 379 199
3,973 2,947 6,889 5,497
Operating expenses
Water utility operations 2,452 1,944 4,494 3,867
Real estate operations and other 110 42 135 77
------------------------------------------------
2,562 1,986 4,629 3,944
Operating income 1,411 961 2,260 1,553
Other income 9 6 25 10
Interest expense (592) (440) (1,082) (850)
------------------------------------------------
Income before income taxes 828 527 1,203 713
Provision for income taxes 318 200 457 265
Net income $ 510 $ 327 $ 746 $ 448
------------------------------------------------
Basic earnings per common share $ .62 $ .41 $ .91 $ .56
------------------------------------------------
Diluted earnings per common share $ .62 $ .41 $ .90 $ .56
------------------------------------------------
Dividends paid per common share $ .28 $ .25 $ .58 $ .53
------------------------------------------------
Weighted average number of shares
outstanding for computing earnings
per share:
Basic 819,884 797,374 817,877 796,626
=================================================
Diluted 829,659 805,011 825,208 804,263
=================================================
</TABLE>
See notes to condensed consolidated financial statements
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------
1998 1997(Restated)
-------------------------
(In thousands)
CASH PROVIDED (USED) BY:
<S> <C> <C>
Operating Activities
Net income $ 746 $ 448
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 828 639
Deferred income taxes 45 47
Change in working capital 1,046 1,387
---------------------
2,665 2,521
Investing Activities:
Purchase of property, plant and
equipment and other assets (9,536) (3,687)
Increase in contributions in aid of
construction 208 84
Increase in restricted cash and other (1,107) (2,456)
(10,435) (6,059)
Financing Activities:
Payments on long-term debt (1,159) (877)
Proceeds from issuance of long-term debt 8,961 4,486
Payment of common dividends (469) (394)
Proceeds from dividend reinvestment
plan and other 123 45
---------------------
7,456 3,260
(DECREASE) IN CASH (314) (278)
CASH AT BEGINNING OF PERIOD 448 346
---------------------
CASH AT END OF PERIOD $ 134 $ 68
---------------------
</TABLE>
Supplemental Cash Flow Information. Interest paid was $954,987 and $805,800
for the six months ended June 30, 1998 and 1997, respectively. Income taxes
paid were $169,000 and $118,00 for the six month periods ended June 30, 1998
and 1997.
See notes to condensed consolidated financial statements.
PENNICHUCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 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. ("Pennichuck East"), 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 and six month periods ended June 30, 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, and as such are unaudited. 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.
Diluted earnings per share were computed by dividing actual net income by
the adjusted weighted average number of shares of common stock outstanding
which include the effect of any dilutive unexercised stock options.
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 and six months ended June 30,
1997 and the 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.
NOTE D -- PURCHASE OF WATER UTILITY ASSETS
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. which
is a regulated water utility. As a result of this purchase, the Company has
added 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 effect of this acquisition is reflected in the results of operations for
the quarter ended June 30, 1998.
The water utility assets acquired by 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, areas which are
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 the Company's bank, Fleet Bank-NH. Under a
separate swap agreement between the Company, Pennichuck East, Fleet Bank-NH
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.
NOTE E -- SUBSEQUENT EVENT
On August 7, 1998, the Company's Board of Directors declared a stock
dividend payable on September 1, 1998 to shareholders of record on August
18, 1998 in the amount of one share of common stock, par value $1.00, for
each two shares of common stock, par value $1.00, held by such shareholders
of record. Upon distribution, the Company's retained earnings will be
charged for the aggregate par value of the shares issued as a dividend and
such aggregate par value will be transferred to the Company's common stock
account.
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 June 30, 1998, the Company had $3,641,000
of notes outstanding under this credit facility and the average interest
rate of those notes was 7.44%. Under the terms of the agreement as amended
in April 1998, the maturity date of all amounts borrowed, or to be borrowed
in the next 14 months, has been extended to June 30, 2000. As a result,
outstanding bank borrowings under this agreement at June 30, 1998 totaling
$3,641,000 have been classified as "Long Term Debt" in the Condensed
Consolidated Balance Sheets.
During the first half 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.
As discussed in Note D to the Condensed Consolidated Financial Statements,
the Company funded its acquisition of Pennichuck East's assets through the
issuance of two bank loans totaling $7.5 million. Those loans of $4.5
million and $3.0 million are for terms of 7 years and 2 years, respectively
and are classified as "Long term Debt" in the Condensed Consolidated Balance
Sheet at June 30, 1998. In connection with these two notes, the Company
executed certain interest rate swap agreements under which the interest
rates on the notes are fixed at 6.20% and 6.50%, respectively, for the term
on the notes.
The Company's revised consolidated capital budget for 1998 consists of
approximately $4.0 million for water utility projects, which is
significantly less than the $5.1 expended during 1997. For the first half of
1998, Pennichuck invested $1,650,000 in capital projects and other assets,
excluding the purchase of water utility assets by Pennichuck East. 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 Company's Consolidated Condensed Balance Sheet at June 30, 1998 also
reflects a minority interest of $273,000 representing a 40 percent interest
held by a third party in Westwood Park LLC ("Westwood"), a real estate
development venture. Southwood owns the remaining 60 percent majority
interest in Westwood whose financial statements have been included in the
accompanying consolidated financial statements at June 30, 1998. In May
1998, Westwood sold a tract of land to a third party for approximately $1.3
million. Under the terms of that sale, Westwood is obligated to use the
sales proceeds to construct the necessary access road and infrastructure for
the purchaser. Accordingly, the cash from this sale is reflected in
"Restricted Cash" and the obligation for the estimated road and
infrastructure cost is included in "Other Accrued Liabilities" at June 30,
1998. No gain on the sale of this tract of land has been recognized pending
the final completion of the road and infrastructure required under the terms
of the purchase and sale agreement.
At June 30, 1998, consolidated retained earnings increased to $8,859,000, or
by $277,000 from the beginning of the year. This change reflects the net
income earned for the six months ended June 30, 1998 of $746,000 less
$469,000 of common dividends paid in the first half of 1998. 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 June 30, 1998 Compared to Three
Months Ended June 30, 1997
For the three months ended June 30, 1998, consolidated net income was
$510,000, or $.62 per share compared to $327,000, or $.41 per share for the
same period in 1997. Consolidated revenues for the second quarter increased
from $2,947,000 in 1997 to $3,973,000 in 1998, principally as a result of
increased water revenues generated by the Company's regulated utility
operations, including Pennichuck East and Pittsfield.
The Company's consolidated revenues are generally seasonal due to the
overall significance of the water sales of Pennichuck, Pennichuck East and
Pittsfield 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 (see discussion below).
Water Utility Operations
- ------------------------
Utility operating revenues for the three months ended June 30, 1998
increased to $3,694,000, or a 29.5% increase over the same period in 1997.
Of that increase, $538,000 relates to water revenues generated by the
Company's newly-created operating subsidiary, Pennichuck East, which serves
approximately 3,600 customers in southern New Hampshire. The remainder of
the increase relates to the positive effect of a 16.77% overall rate
increase granted to Pennichuck during the past twelve months by the New
Hampshire Public Utilities Commission (the "Commission"). Billed consumption
in Pennichuck's core system for the quarter ended June 30, 1998 increased
slightly by 2.2% over the same quarter in 1997.
Total utility operating expenses, which include production, distribution
system maintenance, administrative, depreciation and taxes other than income
taxes, were $2,452,000 for the three months ended June 30, 1998, or an
increase of $508,000 over the same period last year. Of that increase,
approximately $339,000 relates to the additional operating costs associated
with Pennichuck East. Due to the establishment of Pennichuck East,
Pennichuck has added eight employees to meet the increased operational
requirements resulting from not only Pennichuck East but also the operation
and maintenance contract with the Town of Hudson, New Hampshire discussed
below. In addition to these increased wage and benefit costs of
approximately $80,000 for the quarter, depreciation expense for Pennichuck
increased $85,000 reflecting a change in Pennichuck's overall composite
depreciation rate from 2.15% to 2.44% as approved by the Commission
effective April 1, 1998.
Real Estate
- -----------
Included under "Revenues - Real estate operations and other" are real estate
revenues of $131,000 and $50,000 for the second quarter of 1998 and 1997,
respectively. In each of those quarters, Southwood has recorded
approximately $20,000 of option fee income earned under a development option
agreement entered into during 1995 with a regional developer. Under the
terms of that agreement, the developer pays 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.
Southwood entered into a joint venture known as Bowers Pond LLC with a local
builder for the development of a 46 unit residential development in April
1996. 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 June 30, 1998 and 1997, Southwood has recorded
$104,000 and $26,000 of revenues from this partnership which includes
payments on the note reflecting the sale of four homes and one home during
the second quarter of 1998 and 1997, respectively. As of June 30, 1998, 30
homes have been constructed and sold to third party buyers.
The operating expenses associated with the Company's real estate activities
for the second quarter of 1998 were approximately $39,000, or $8,000 greater
than in 1997. Real estate expenses are comprised chiefly of property taxes
totaling $19,000 and $24,000 for the three months ended June 30, 1998 and
1997, respectively. The remaining real estate costs during the second
quarters of 1998 and 1997 consist principally of allocated Southwood land
costs associated with the Bowers Pond LLC land sales.
Contract Operations
- -------------------
In April 1998, the Service Corporation entered into a five year contract
with the Town of Hudson, New Hampshire ("Hudson") whereby the Service
Corporation will provide certain operations and maintenance functions for
Hudson in exchange for an annual fee. The results of operations for the
three months ended June 30, 1998 include approximately $117,000 of revenues
from this contract and operating expenses for the Service Corporation were
$76,000 which include costs incurred under this contract and the sundry
other activities of the Service Corporation.
Results of Operations -- Six Months Ended June 30, 1998 Compared to Six
Months Ended June 30, 1997
For the six month period ended June 30, 1998, consolidated net income was
$746,000, or $.91 per common share compared to $448,000, or $.56 per common
share for the same period in 1997. The year-to-date consolidated revenues in
1998 were $6,889,000, representing nearly a $1.4 million, or 25.3%, increase
over last year. As discussed below, that increase in operating revenues is
principally attributable to the Company's utility operations which now
include the operating activities of Pennichuck, Pennichuck East and
Pittsfield.
Water Utility Operations
- ------------------------
Utility operating revenues for the first half of 1998 totaled $6,510,000, or
a $1,212,000 increase over the same period in 1997. Of that increase,
approximately $574,000 relates to the 16.77% rate increase granted to
Pennichuck and effective in the past year by the Commission as well as a
4.4% increase in billed consumption over 1997. As mentioned, Pennichuck East
generated $538,000 during 1998 and Pittsfield revenues increased from
$105,000 in 1997 to $207,000 thus far in 1998. The 97% increase in
Pittsfield's revenues is attributable to 101% rate increase approved by the
Commission in December 1997 principally due to the increased costs
associated with a $900,000 treatment facility constructed in October 1997.
The utility operating expenses increased by $627,000 or 16.2%, to $4,494,000
for the six months ended June 30, 1998. That increase is primarily comprised
of (i) $339,000 relating to the addition of Pennichuck East during the
second quarter of 1998, (ii) $134,000 of additional depreciation expense
recognized by Pennichuck for the first half of 1998 as a result of the
increase in its composite depreciation rate discussed earlier and its $5.97
million investment in plant assets during 1997 and (iii) $106,000 of
additional production and administrative costs incurred in the first half of
1998 over the first half of 1997.
Real Estate and Other Operations
- --------------------------------
For the six months ended June 30, 1998 and 1997, revenues from real estate
and other activities totaled $379,000 and $199,000, respectively. Of those
amounts, approximately $207,000 and $129,000 relate to real estate revenues
earned by Southwood during the comparative periods. Southwood revenues thus
far in 1998 include (i) $156,000 in partnership revenues earned through its
Bowers Pond LLC joint venture, representing the sale of six homes and (ii)
$42,000 of option fee income earned under its development option agreement
discussed earlier. For the six months ended June 30, 1997, revenues from
those activities were $78,000 and $46,000, respectively.
Revenues from other operating activities during the six months ended June
30, 1998 include $130,000 for contract operations performed by the Service
Corporation and $14,000 for miscellaneous lease and rental income. For the
same period in 1997, revenues of the Service Corporation were approximately
$39,000 consisting of $30,000 in contract operations income and $9,000 of
sundry revenues.
The operating expenses associated with the Company's real estate and other
non-utility activities increased from $77,000 in 1997 to $135,000 in 1998.
Principally all of that increase relates to the additional operating costs
incurred by the Service Corporation in connection with the aforementioned
contract operations agreement with the Town of Hudson. The remaining
expenses related primarily to property taxes on Southwood's real estate
holdings which for the first six months of 1998 were $38,000 compared to
$51,000 in same period of 1997.
Year 2000 Issue
- ---------------
The Company has performed an exhaustive review of its hardware and software
systems in order to determine the level of readiness to meet the next
millenium. Because the Company owns some operating assets which pre-date
1900, it has been aware of the potential Year 2000 problem well before the
recent publicity and in fact, 8 digit dates have been a requirement for all
in-house software developed since 1987. The Year 2000 issue has also been
addressed and included in all computer migration and upgrades since 1990.
As part of our project planning, the Company identified mission-critical
applications and implemented a 5 year plan in early 1994 to replace or
upgrade for both hardware and software. The Company's central computer
platform, consisting primarily of its minicomputer servers, is not
completely Year 2000 ready. However, those servers that are not Year 2000
ready are expected to be retired and replaced with Year 2000 ready servers
within the next 12 months.
Additionally, all of the Company's software applications have been evaluated
to identify any Year 2000 problems, their importance to Company operations
and efficiencies to be gained with newer and updated software. A software
development schedule was created based on this risk assessment with the most
critical applications being implemented first. At this time, the Company's
NT network, financial accounting, billing, customer service information and
meter management, human resources and SCADA management systems are Year 2000
ready. The Company's remaining software systems for work orders, inventory
control, and various maintenance programs are 90% compliant and are expected
to be fully ready by the end of 1998.
The Company is currently in the process of identifying all external vendors
who provide and/or require date dependent information to ensure that they
are capable of being in compliance with the Year 2000 issue. Once
identified, the Company will be contacting each vendor to determine their
Year 2000 status. For any vendors who are determined to be critical to the
Company's operation, it will develop a disaster recovery plan containing
alternative actions plans in the event of vendor non-compliance. The Company
anticipates having all critical resource alternative plans in place by May
1999.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote Of Security Holders
(a) On April 17, 1998, the Company held its Annual Meeting of Shareholders
to elect three directors and to ratify the appointment by the Board of
Directors of the firm of Arthur Andersen LLP as independent accountants of
the Company for the year ending December 31, 1998.
(b) The following incumbent director was re-elected to a three year term
expiring at the Annual Meeting of Shareholders in 2001:
<TABLE>
<CAPTION>
Number of Shareholders Voting --
For Withheld
----------------------
<S> <C> <C>
Charles E. Clough 630,175 3,741
</TABLE>
The following new directors were elected to three year terms expiring at the
Annual Meeting of Shareholders in 2001:
<TABLE>
<CAPTION>
Number of Shareholders Voting --
For Withheld
----------------------
<S> <C> <C>
John R. Kreick 626,790 7,125
Martha E. O'Neill 630,259 3,657
</TABLE>
The continuing directors whose terms expire beyond the April 17, 1998 Annual
Meeting date are:
Maurice L. Arel Joseph A. Bellavance
Stephen J. Densberger Hannah M. McCarthy
Charles J. Staab Robert P. Keller
(c) By a vote of 632,918 shares FOR, 660 shares AGAINST and 338 shares
ABSTAINING, the Board of Directors' appointment of Arthur Andersen LLP as
the Company's independent accountants for the year ending December 31, 1998
was ratified.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) The following exhibits are filed herewith:
Exhibit Number Exhibit Description
-------------- -------------------
Exhibit 10.11 Loan Agreement dated April 8, 1998 between Pennichuck
Corporation, Pennichuck East Utility, Inc. and Fleet
Bank-NH
Exhibit 10.12 Amendment Agreement dated April 24, 1998 to Loan
Agreement dated April 8, 1998 between Pennichuck
Corporation, Pennichuck East Utility, Inc., The
Southwood Corporation, Pennichuck Water Service
Corporation and Fleet Bank-NH
(b) The following reports on Form 8-K and Form 8-KA were filed during
the second quarter of 1998:
Form 8-K Filed April 24, 1998, for the acquisition of certain
water utility assets as shown in Exhibit 28.3 of that
report
Form 8-KA Filed June 19, 1998, relating to the financial
statements for the Form 8-K filed April 24, 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: August 13, 1998 /s/ Maurice L. Arel
--------------- --------------------------
Maurice L. Arel, President and
Principal Executive Officer
Date: August 13, 1998 /s/ Charles J. Staab
--------------- --------------------------
Charles J. Staab, Vice President,
Treasurer and Principal Financial Officer
EXHIBIT 10.11
LOAN AGREEMENT
LOAN AGREEMENT ( the "Agreement") dated as of this 8th day of April,
1998 by and among PENNICHUCK CORPORATION, a New Hampshire corporation with a
principal place of business at 4 Water Street, P.O. Box 448, Nashua, New
Hampshire 03061-0448 ("PC") and PENNICHUCK EAST UTILITY, INC., a New
Hampshire corporation with a principal place of business of 4 Water Street,
P.O. Box 448, Nashua, New Hampshire 03061-0448 ("PEU") (PC and PEU are
referred to individually and collectively as the "Borrower") 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 (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower has requested and the Bank has agreed to make a
certain Four Million Five Hundred Thousand Dollar ($4,500,000) line of
credit loan to PC and PEU (the "Acquisition Line of Credit") and a certain
Three Million Dollar ($3,000,000) line of credit loan to PC (the "Line of
Credit") (the Acquisition Line of Credit and the Line of Credit are
hereinafter on occasion referred to individually and collectively as the
"Loan"); and
WHEREAS, the parties wish to set forth in writing the terms and
conditions upon which the Bank will make the Loan to the Borrower;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties covenant, stipulate
and agree as follows:
ARTICLE I. THE ACQUISITION LINE OF CREDIT The Bank agrees to make, and the
Borrower agrees to take, the Acquisition Line of Credit subject to and upon
the following terms and conditions:
1.1 Borrower. The Borrower under the Acquisition Line of Credit
shall be PENNICHUCK CORPORATION and PENNICHUCK EAST UTILITY, INC. and the
Borrower shall sign a promissory note (the "Line of Credit Note") evidencing
their joint and several obligation to pay and perform the Acquisition Line
of Credit.
1.2 Amount. Under the Acquisition Line of Credit, the Bank agrees
to loan the Borrower an amount up to Four Million Five Hundred Thousand
Dollars ($4,500,000).
1.3 Duration of Advance Commitment. The Bank's commitment to make
advances under the Acquisition Line of Credit available to the Borrower
shall cease at the close of the Bank's business on April 8, 2000.
1.4 Use of Proceeds. The proceeds of the Acquisition Line of
Credit shall be used by the Borrower to acquire certain utility assets
consisting of real and personal property from the Town of Hudson which are
located outside the Town of Hudson (also referred to as the Non Hudson
Assets) pursuant to the terms of a certain Agreement of Purchase and Sale of
Assets dated November 5, 1997.
1.5 Interest Rate. Sums advanced under the Acquisition Line of
Credit shall bear interest at a fixed rate equal to the one month LIBOR Rate
(as defined in the Acquisition Line of Credit Note) plus 65 basis points per
annum, which rate shall be adjusted every month. At or prior to closing,
the Borrower and the Bank (or its agent) shall exchange the foregoing LIBOR
based interest rate pursuant to a forward interest rate swap contract (in
the form of an International Swap Dealers Association Master Agreement and
Confirmation Agreement between the Borrower and Fleet National Bank, a
national banking association ("FNB"), both of which are hereinafter
collectively referred to as the "Master Agreement") for a fixed rate of
interest for up to a seven (7) year period with respect to up to Four
Million Five Hundred Thousand Dollars ($4,500,000). In any event, interest
shall be calculated and charged on the basis of actual days elapsed over a
banking year of 360 days. In the event the Borrower prepays the Acquisition
Line of Credit during the period when the interest rate is fixed, prepayment
of that portion of the Acquisition Line of Credit will require the payment
of a premium and other charges as more fully set forth in the Acquisition
Line of Credit Note. If the interest rate under the Acquisition Line of
Credit is swapped pursuant to the Master Agreement, the Master Agreement
sets forth additional restrictions, limitations, and penalties associated
with prepayment of that portion of the Acquisition Line of Credit under the
Acquisition Line of Credit Note.
1.6 Repayment. The Borrower shall make payments of interest only
to the Bank on a monthly basis, in arrears, with the first such payment
being made on that date thirty (30) days from the date hereof (or on such
other date as the parties may agree upon in writing to provide for a
convenient payment date) with subsequent payments being made on the
corresponding day of the succeeding months until maturity. Notwithstanding
anything herein to the contrary, the entire principal balance of the
Acquisition Line of Credit and the Acquisition Line of Credit Note together
with all interest and other charges shall be due and payable in full on
April 8, 2005. All payments shall be in lawful money of the United States
in immediately available funds.
1.7 Security. Borrower's payment and performance of the
Acquisition Line of Credit shall be secured by: (a) a perfected first
priority security interest in all of PEU's tangible and intangible business
assets; (b) a first priority mortgage lien on all real property, easements,
and fixtures of PEU (collectively, the "Real Estate"); (c) a collateral
assignment of all contracts, plans and permits, including, but not limited
to, a certain Water Supply and Transmission Agreement dated November 5,
1997, as amended, between PC and the Town of Hudson, as assigned to PEU on
the date hereof; and (d) a pledge by PC of one hundred percent (100%) of all
the issued and outstanding stock of each of its subsidiary companies,
including THE SOUTHWOOD CORPORATION, PENNICHUCK WATER WORKS, INC., PEU,
PITTSFIELD AQUEDUCT COMPANY, INC. and PENNICHUCK WATER SERVICE CORPORATION.
In addition, PC shall execute a double negative pledge agreement.
1.8 Guaranty, Security Therefor. The payment and performance of
the Acquisition Line of Credit by the Borrower shall be unconditionally
guaranteed, on a joint and several basis, by each of THE SOUTHWOOD
CORPORATION and PENNICHUCK WATER SERVICE CORPORATION (collectively, the
"Guarantors" and individually, a "Guarantor"). THE SOUTHWOOD CORPORATION
shall also execute a double negative pledge agreement.
1.9 Fees and Expenses. The Borrower agrees to pay the Bank an
origination fee in the amount of Twenty-Five Thousand Dollars ($25,000)
which shall be payable at closing and shall include the bank fee for both
the Acquisition Line of Credit and the Line of Credit.
1.10 Repayment Relative to Master Agreement. In the event that the
Borrower fails to pay any amount that is due and owing to FNB under and
pursuant to the Master Agreement (after giving effect to any applicable
grace period), then upon demand by FNB, in its sole discretion, the Bank
shall pay such amount directly to FNB for the account of the Borrower and
the Borrower hereby authorizes and consents to such payment by the Bank.
The Borrower agrees that (i) FNB shall have no obligation to demand the Bank
to advance such funds on behalf of the Borrower, (ii) the making of such a
demand by FNB will not create any obligation to made such a demand in the
future, and (iii) at all times FNB may choose not to make such demand and
choose, instead to exercise its rights under the Master Agreement. It shall
be an additional obligation of the Borrower to reimburse the Bank for any
amount the Bank may pay on account of any amount that is due and owing by
the Borrower to FNB. Such additional obligation shall be due upon demand
and shall bear interest at a rate per annum equal to the default rate set
forth in the Acquisition Line of Credit Note from, and including, the date
of payment by the Bank to, but excluding, the date the Borrower reimburses
the Bank for such additional Obligation. FNB is an intended third-party
beneficiary of the Bank's obligations under this Article I, Section 1.10.
1.11 Cross Default. The Borrower's obligations to the Bank with
respect to the Acquisition Line of Credit shall be and hereby are cross
defaulted with all loans or obligations, now existing or hereafter arising,
of any Borrower, any Guarantor or any affiliates thereof, owed to the Bank
or any affiliate thereof, including, but not limited to, any Borrower's
obligation under the Line of Credit, the Master Agreement and under a
certain $4,500,000 Line of Credit to PC from the Bank, all as the same may
have been and may hereafter be amended (collectively, the "Other Loans").
ARTICLE II. THE LINE OF CREDIT The Bank agrees to make, and PC agrees to
take, the Line of Credit subject to and upon the following terms and
conditions:
2.1 Borrower. The Borrower under the Line of Credit shall be
PENNICHUCK CORPORATION and PC shall sign a promissory note (the "Line of
Credit Note") evidencing its obligation to pay and perform the Line of
Credit. The Acquisition Line of Credit Note and the Line of Credit Note are
hereinafter referred to individually and collectively as the "Note".
2.2 Amount. Under the Line of Credit, the Bank agrees to loan PC
an amount up to Three Million Dollars ($3,000,000).
2.3 Duration of Advance Commitment. The Bank's commitment to make
advances under the Line of Credit available to PC shall cease at the close
of the Bank's business on April 8, 2000.
2.4 Use of Proceeds. The proceeds of the Line of Credit shall be
used by PC; (a) to assist its subsidiary, PEU, in the acquisition of certain
utility assets consisting of real and personal property from the Town of
Hudson which are located outside the Town of Hudson (also referred to as the
Non Hudson Assets) pursuant to the terms of a certain Agreement of Purchase
and Sale of Assets dated November 5, 1997; and/or (b) to pay down
approximately $1,500,000 of existing indebtedness of PC owed to the Bank.
2.5 Interest Rate. Sums advanced under the Line of Credit shall
bear interest at a fixed rate equal to the one month LIBOR Rate (as defined
in the Note) plus 65 basis points per annum, which rate shall be adjusted
every month. At or prior to closing, PC and the Bank (or its agent) shall
exchange the foregoing LIBOR based interest rate pursuant to a forward
interest rate swap contract (in the form of an International Swap Dealers
Association Master Agreement and Confirmation Agreement between PC and FNB,
both of which are hereinafter collectively referred to as the "Master
Agreement") for a fixed rate of interest for up to a seven (7) year period
with respect to up to One Million Five Hundred Thousand Dollars ($1,500,000)
and for a two (2) year period with respect to up to One Million Five Hundred
Thousand Dollars ($1,500,000). In any event, interest shall be calculated
and charged on the basis of actual days elapsed over a banking year of 360
days. In the event the Borrower prepays the Line of Credit during the
period when the interest rate is fixed, prepayment of that portion of the
Line of Credit will require the payment of a premium and other charges as
more fully set forth in the Line of Credit Note. If the interest rate under
the Line of Credit is swapped pursuant to the Master Agreement, the Master
Agreement sets forth additional restrictions, limitations, and penalties
associated with prepayment of that portion of the Line of Credit under the
Note.
2.6 Repayment. PC shall make payments of interest only to the Bank
on a monthly basis, in arrears, with the first such payment being made on
that date thirty (30) days from the date hereof (or on such other date as
the parties may agree upon in writing to provide for a convenient payment
date) with subsequent payments being made on the corresponding day of the
succeeding months. In addition, on that date two (2) years from the date
hereof, PC shall make a payment of principal to the Bank in the amount of
One Million Five Hundred Thousand Dollars ($1,500,000). Notwithstanding
anything herein to the contrary, the entire principal balance of the Line of
Credit and the Line of Credit Note together with all interest and other
charges shall be due and payable in full on April 8, 2005. All payments
shall be in lawful money of the United States in immediately available
funds.
2.7 Security. PC's payment and performance of the Line of Credit
shall be secured by; a pledge by PC of one hundred percent (100%) of all the
issued and outstanding stock of each of its subsidiary companies, including
THE SOUTHWOOD CORPORATION, PENNICHUCK WATER WORKS, INC., PEU, PITTSFIELD
AQUEDUCT COMPANY, INC. and PENNICHUCK WATER SERVICE CORPORATION. In
addition, PC shall execute a double negative pledge agreement.
2.8 Guaranty, Security Therefor. The payment and performance of
the Line of Credit by PC shall be unconditionally guaranteed, on a joint and
several basis, by each of THE SOUTHWOOD CORPORATION and PENNICHUCK WATER
SERVICE CORPORATION. THE SOUTHWOOD CORPORATION shall also execute a double
negative pledge agreement.
2.9 Fees and Expenses. PC agrees to pay the Bank an origination
fee in the amount of Twenty-Five Thousand Dollars ($25,000) which shall be
payable at closing and shall include the bank fee for both the Line of
Credit and the Acquisition Line of Credit.
2.10 Repayment Relative to Master Agreement. In the event that PC
fails to pay any amount that is due and owing to FNB under and pursuant to
the Master Agreement (after giving effect to any applicable grace period),
then upon demand by FNB, in its sole discretion, the Bank shall pay such
amount directly to FNB for the account of PC and PC hereby authorizes and
consents to such payment by the Bank. PC agrees that (i) FNB shall have no
obligation to demand the Bank to advance such funds on behalf of PC, (ii)
the making of such a demand by FNB will not create any obligation to made
such a demand in the future, and (iii) at all times FNB may choose not to
make such demand and choose, instead to exercise its rights under the Master
Agreement. It shall be an additional obligation of PC to reimburse the Bank
for any amount the Bank may pay on account of any amount that is due and
owing by PC to FNB. Such additional obligation shall be due upon demand and
shall bear interest at a rate per annum equal to the default rate set forth
in the Line of Credit Note from, and including, the date of payment by the
Bank to, but excluding, the date PC reimburses the Bank for such additional
obligation. FNB is an intended third-party beneficiary of the Bank's
obligations under this Article II, Section 2.10.
2.11 Cross Default. PC's obligations to the Bank with respect to
the Line of Credit shall be and hereby are cross defaulted with all loans or
obligations, now existing or hereafter arising, of any Borrower, any
Guarantor or any affiliates thereof, owed to the Bank or any affiliate
thereof, including, but not limited to, any Borrower's obligation under the
Master Agreement, the Acquisition Line of Credit and under a certain
$4,500,000 Line of Credit to PC from the Bank, all as the same may have been
and may hereafter be amended.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTORS To
induce the Bank to enter into this Agreement and to make the Loan, the
Borrower and the Guarantors warrant and represent to the Bank that:
3.1 Legal Existence. Each Borrower is a corporation duly organized
and validly existing under the laws of the State of New Hampshire with the
power to own its property and to carry on its business as it is now being
conducted. In addition, each Borrower is duly qualified to do business and
is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business
makes such qualification necessary.
3.2 Authority of Borrower. Each Borrower has full power and
authority to enter into this Agreement and to borrow hereunder, to execute
and deliver this Agreement, and any other documents the purpose of which are
to evidence or secure the Loan (the foregoing, including, without
limitation, this Agreement, being hereinafter sometimes collectively
referred to as the "Loan Documents" and the security described therein
sometimes hereinafter collectively referred to as the "Collateral") and to
incur the obligations provided for herein and in the Loan Documents, all of
which have been duly authorized by all proper and necessary corporate or
other action. Any consent or approval of stockholders, or of any agency or
of any public authority, or of any other party required as a condition to
the legal validity of this Agreement or the Loan Documents has been
obtained.
3.3 Authority of Guarantors. Each Guarantor has full power and
authority to enter into, to execute and deliver all of the Loan Documents
and to incur the obligations provided for herein and in the Loan Documents,
all of which have been duly authorized by all proper and necessary action.
Any consent or approval of any agency or of any public authority, or any
other party required as a condition to the legal validity of this Agreement
or the Loan Documents has been obtained.
3.4 Binding Agreement. This Agreement and the Loan Documents
constitute the valid and legally binding obligations of each Borrower and
each of the Guarantors enforceable in accordance with their terms; provided,
that the enforceability of any provisions in the Loan Documents, or of any
rights granted to the Bank pursuant thereto may be subject to and affected
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and that the right of the
Bank to specifically enforce any provisions of the Loan Documents is subject
to general principles of equity.
3.5 Litigation. There are no suits pending or, to the knowledge of
any Borrower or any of the Guarantors, threatened, against or affecting any
Borrower or any of the Guarantors or any of the Borrower's or the
Guarantors' assets which, if adversely determined, would have a material
adverse effect on the condition, financial or otherwise, or business of any
Borrower or any of the Guarantors and which have not been disclosed in
writing to the Bank. There are no proceedings by or before any governmental
commission, board, bureau or other administrative agency pending, or, to the
knowledge of any Borrower or any of the Guarantors, threatened against any
Borrower or any of the Guarantors, which, if adversely determined, would
have a material adverse effect on the condition, financial or otherwise, or
business of any Borrower or any of the Guarantors and which have not been
disclosed in writing to the Bank. Notwithstanding the above, there are
certain suits pending or threatened which are listed on Schedule 3.5 and
which have been disclosed by Borrower or the Guarantors to Bank ("Disclosed
Suits").
3.6 Conflicting Agreements. There is no charter provision or bylaw
of any Borrower, and no provision(s) of any existing mortgage, indenture,
contract or agreement binding on any Borrower or any of the Guarantors or
affecting any of the Borrower's or Guarantors' property, which would
conflict with, be in contravention hereof, have a material adverse effect
upon, or in any way prevent the execution, delivery, or performance of the
terms of this Agreement or the Loan Documents.
3.7 Financial Condition. The annual financial statements
heretofore delivered to the Bank by Borrower and the Guarantors have been
prepared in accordance with generally accepted accounting principles,
consistently applied, are complete and correct, and fairly present the
financial condition and results of the Borrower and the Guarantors. There
are no material liabilities, direct or indirect, fixed or contingent, of the
Borrower or the Guarantors which are not reflected therein or in the notes
thereto which would be required to be disclosed therein and there has been
no material adverse change in the financial condition or operations of the
Borrower since the date of such financial statements. The Borrower's and
the Guarantors' assets are free of encumbrances of any nature, except those
disclosed in the aforementioned balance sheets and liens permitted under
this Agreement.
3.8 Taxes. The Borrower and the Guarantors have filed all federal,
state and local tax returns required to be filed by the Borrower and the
Guarantors and have paid all taxes shown by such returns to be due and
payable on or before the due dates thereof. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction and the Guarantors and the officers of the Borrower know of no
basis for any such claim.
3.9 Licenses, Franchises, Etc. The Borrower possesses all material
permits, approvals, licenses, franchises, patents, trademarks, service
marks, trademark and service mark rights, trade names, trade name rights and
copyrights necessary to conduct its business substantially as now conducted,
and as proposed to be conducted, in each case subject to no mortgage,
pledge, lien, lease, encumbrance, charge, security interest, title retention
agreement or option which is not permitted by this Agreement to exist, and,
without any known conflict with any such rights or assets of others.
3.10 No Purchase of Margin Stock. No part of the proceeds received
by the Borrower from the Loan will be used directly or indirectly for the
purpose of purchasing or carrying, or for payment in full or in part of
indebtedness which was incurred for the purposes of purchasing or carrying
any margin stock, as such term is used and defined in Regulation U of the
Board of Governors of the Federal Reserve System.
3.11 Solvency. The present fair saleable value of the Borrower's
assets is greater than the amount required to pay its total liabilities, the
amount of Borrower's capital is adequate in view of the type of business in
which it is engaged and the Borrower is able to pay its debts as they
mature.
3.12 Not a Successor. Except as set forth in Section 1.4 hereof and
except for PC's acquisition of PITTSFIELD AQUEDUCT COMPANY, INC. on or about
January 30, 1998, the Borrower has not, within the six (6) year period
immediately preceding the date of this Agreement, changed its name, been the
surviving corporation of a merger or consolidation, or acquired all or
substantially all of the assets of any person, corporation, partnership or
entity.
3.13 Brokerage. There are no claims against the Borrower or any of
the Guarantors for brokerage commissions, finder's fees or similar
compensation arising out of or due to any act of the Borrower or any of the
Guarantors in connection with the transactions contemplated by this
Agreement or based on any agreement or arrangement made by or on behalf of
the Borrower or any of the Guarantors; and the Borrower or any of the
Guarantors will defend, indemnify and hold the Bank harmless against any
liability or expenses arising out of any such claim.
3.14 Employee Benefit Plans. The Borrower has not incurred any
material accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), has not
incurred any material liability to the Pension Benefit Guaranty Corporation
established under ERISA (or any successor thereto) in connection with any
profit sharing, group insurance, bonus, deferred compensation, percentage
compensation, stock option, severance pay, insurance, pension or retirement
plan or other oral or written agreement or commitment relating to employment
or fringe benefits or perquisites for employees, officers or directors of
the Borrower (an "Employee Benefit Plan"), and no Employee Benefit Plan
which is subject to ERISA had, as of its latest valuation date, accrued
benefits (whether or not vested) the present value of which exceeded the
value of the assets of such Employee Benefit Plan, based upon actuarial
assumptions utilized for such Plan.
3.15 Subsidiaries. The Borrower does not have any subsidiaries
except those subsidiaries identified in Section 1.7 hereof.
3.16 Ownership and Liens. The Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in the
financial statements referred to in Section 3.7 (other than any properties
or assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Borrower and none of its leasehold
interests is subject to any lien, except such as may be permitted pursuant
to Section 5.6 of this Agreement.
3.17 Statutory Compliance. The Borrower is in compliance, in all
material respects, with all statutes, regulations, ordinances, directives,
and orders of every federal, state, municipal or other governmental
authority which has or claims jurisdiction over them, any of its assets, or
any person in any capacity under which it would be responsible for the
conduct of such person and does not use any of its assets in violation of
any insurance policy carried by it.
3.18 Real Estate. To the best of the Borrower's knowledge: (a)
There is not now pending against the Real Estate, nor is there threatened,
any litigation, investigation, eminent domain or any proceedings before any
court or administrative or governmental agency, the outcome of which might
adversely affect the Real Estate. There exists no unrepaired casualty with
respect to the Real Estate.
(b) The Real Estate has not been used for the generation,
treatment, storage or transportation of hazardous waste, or material, as
that term is defined under applicable federal and state and local laws.
(c) There are no underground fuel storage tanks located on the Real
Estate.
(d) The Real Estate is not located in a Flood Hazard Zone, so-
called.
(e) All utility services necessary for the construction, use and
operation of the Real Estate are available on or at the boundary of the Real
Estate or by unencumbered easement and have sufficient capacity for the use
and operation of the Real Estate.
3.19 Full Disclosure. None of the information with respect to any
Borrower and any of the Guarantors which has been prepared and furnished by
any Borrower and any of the Guarantors to the Bank in connection with the
transactions contemplated hereby is false or misleading with respect to any
material fact, or omits to state any material fact necessary in order to
make the statements therein not misleading.
ARTICLE IV. AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTORS. Until
payment in full of the indebtedness now existing or hereafter incurred under
this Agreement and the performance of all its obligations hereunder, the
Borrower and the Guarantors agree that, unless the Bank shall otherwise
consent in writing, the Borrower and/or the Guarantors (as applicable)
shall:
4.1 Prompt Payment. Pay promptly when due all amounts due and
owing to the Bank under this Agreement.
4.2 Use of Proceeds. Use the proceeds of the Loan only for the
purposes set forth herein and will furnish the Bank such evidence as it may
reasonably require with respect to such use.
4.3 Financial Statements. (a) The Borrower shall furnish the Bank
within forty-five (45) days after the end of each month during Borrower's
fiscal year internally prepared consolidated monthly (including year to
date) financial statements of the Borrower and its Subsidiaries (as
hereinafter defined), including a balance sheet and a profit and loss
statement. All such statements shall be prepared in the format acceptable
to the Bank, applied on a consistent basis, and shall include a monthly
comparison. The term "Subsidiary" shall mean any corporation, firm,
association, entity or trust of which the Borrower shall at the time own
directly or indirectly through one or more of its Subsidiaries, more than
fifty percent (50%) of the outstanding shares of capital stock or shares of
beneficial interest having ordinary voting power for the election of
directors.
(b) The Borrower shall furnish the Bank within one hundred twenty
(120) days after the close of each fiscal year (i) a consolidated statement
of stockholders' equity and a statement of changes in financial position of
the Borrower and its Subsidiaries for such fiscal year; (ii) a consolidated
income statement of the Borrower and its Subsidiaries for such fiscal year;
and (iii) consolidated balance sheets of the Borrower and its Subsidiaries
as of the end of such fiscal year. All such annual statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied, shall present fairly the financial position and result
of operations of Borrower and its Subsidiaries. The annual financial
statements of Borrower and its Subsidiaries shall be prepared on an audited
basis, by an independent certified public accountant selected by Borrower
and acceptable to the Bank. The Bank shall have the right, from time to
time, to discuss the affairs of Borrower and its Subsidiaries directly with
Borrower's accountant after reasonable notice to Borrower and opportunity of
Borrower to be represented at any such discussions.
(c) The Borrower shall promptly deliver to the Bank upon receipt
thereof, copies of any reports submitted to Borrower by Borrower's
accountants in connection with any examination of the financial statements
of Borrower and its Subsidiaries made by such accountants.
(d) The Borrower shall promptly furnish the Bank with all financial
and other information filed with the Securities and Exchange Commission or
furnished to PC's stockholders, including reports on Forms 10-KSB, 10-QSB
and 8-K, annual reports and proxy materials.
(e) The Borrower shall furnish the Bank with a fully executed
compliance certificate substantially in the form of compliance certificate
attached hereto as Schedule 4.3(e) (the "Compliance Certificate") on a
quarterly basis.
(f) Furnish the Bank with such other financial information or
reports as the Bank may reasonably request.
4.4 Maintenance of Existence. Take all necessary action to
maintain the Borrower's existence, including the filing of required reports
and tax returns with the Secretary of State of the State of New Hampshire
and with the appropriate authorities in any other state where required.
4.5 Maintenance of Property, Plant, Equipment and Collateral.
Maintain the Borrower's property, plant and equipment, including the
Collateral and Real Estate, in good working order, subject only to
reasonable wear and tear and make all necessary repairs thereto and
replacements therefor so that operations may be properly conducted in
accordance with prudent business management. The Borrower shall take all
reasonably necessary steps to keep the Collateral in good operating
condition and repair (reasonable wear and tear excepted) and free of
unpermitted liens.
4.6 Maintenance of Insurance. During the term of this Agreement,
the Loan Documents and any modifications, amendments, extensions,
replacements or renewals thereof, the Borrower will maintain insurance as
follows:
(a) The Borrower will provide and maintain insurance in full force
and effect and will deposit binders or certificates of insurance with the
Bank for the following:
(i) Public liability insurance in such amount and with such
coverage as is required by the Bank, including, if requested by
the Bank, liability insurance on vehicles owned or operated by
the Borrower;
(ii) Worker's compensation insurance as required by statute;
(iii) Fire and broad form extended coverage in an amount not less
than one hundred percent (100%) of the full replacement value
of the Real Estate; and
(iv) Such other hazard insurance as the Bank may reasonably request
including, but not limited to, business interruption, flood
insurance (if the Real Estate is located in a flood hazard
zone; if not, the Borrower shall furnish a certificate to such
effect) and boiler insurance.
(b) All such insurance:
(i) Shall be issued in such amounts and by such companies
satisfactory to the Bank and authorized to do business in the
State of New Hampshire (unless otherwise agreed to by the
Bank);
(ii) Shall show the Borrower and the Bank as insureds, as their
interests may appear, or, where appropriate, showing the Bank
as a first mortgagee, an additional named loss-payee and/or
named insured; and
(iii) Shall contain provisions providing for thirty (30) days prior
written notice to the Bank of any intended cancellation.
(c) All premiums for insurance policies required hereunder shall be
fully paid when due by the Borrower. The Bank may, at its option, require
the Borrower to pay such sums to the Bank on a monthly basis as would permit
the Bank to pay such premiums in full when due out of such funds.
4.7 Inspection by the Bank. Upon prior reasonable notice (other
than in emergencies when no notice shall be required), permit any person
designated by the Bank to inspect any of its properties, including its
books, records, and accounts (and including the making of copies thereof and
extracts therefrom).
4.8 Prompt Payment of Taxes. Accrue the Borrower's and the
Guarantors' tax liability in accordance with usual accounting practice and
pay or discharge (or cause to be paid or discharged) as they become due all
taxes, assessments, and government charges upon its property, operations,
income and products (as well as all claims for labor, materials or
supplies), which, if unpaid might become a lien upon any of its property;
provided, that the Borrower and/or the Guarantors (as applicable) shall,
prior to payment thereof, have the right to contest such taxes, assessments
and charges in good faith by appropriate proceedings so long as the Bank's
interests are protected by bond, letter of credit, escrowed funds or other
appropriate security or adequate reserves have been established therefor.
4.9 Notification of Default Under This and Other Loan or Financing
Arrangements. Promptly notify the Bank in writing of the occurrence of any
Event of Default under this Agreement (or any occurrence that would, with
the passage of time, constitute an Event of Default) or any other loan or
financing arrangement.
4.10 Notification of Litigation. Promptly notify the Bank in
writing of any litigation that has been instituted or is pending or
threatened involving aggregate amounts of One Hundred Thousand Dollars
($100,000) or more or the outcome of which might have a material adverse
effect on the Borrower's or any of the Guarantors' continued operations or
condition, financial or otherwise.
4.11 Notification of Governmental Action. Promptly notify the Bank
in writing of any material governmental investigation or proceeding that has
been instituted or is pending or threatened and the outcome thereof,
including without limitation, material matters relating to the federal or
state tax returns of the Borrower, compliance with the Occupational Safety
and Health Act, or proceedings by the Treasury Department, Labor Department,
or Pension Benefit Guaranty Corporation with respect to matters affecting
employee welfare, benefit or retirement programs.
4.12 Notification of Material Adverse Change. Promptly notify the
Bank in writing of (a) any material adverse changes in the business
prospects or financial condition of the Borrower or any of the Guarantors;
and (b) any accounting rule change that would have a material adverse effect
on the business or financial condition of the Borrower.
4.13 Maintenance of Records. Keep adequate records and books of
account, in which appropriate entries will be made in a manner reasonably
acceptable to the Bank and consistently applied, reflecting all financial
transactions of the Borrower required to be stated therein.
4.14 Compliance With Laws; Environmental Matters. Comply in all
material respects with all applicable material laws, rules, regulations, and
orders; provided, however, that Borrower shall be entitled to contest the
same in good faith so long as such action does not have an adverse effect
upon the Bank's rights hereunder or the security furnished therefor.
Without limiting in any manner the scope or generality of the foregoing,
each of the Borrower and the Guarantors agrees to comply with all federal,
state and other laws and regulations regarding the generation, treatment,
storage, disposal or transportation of hazardous waste or materials, as
defined under applicable federal and state law; and agrees to defend,
indemnify and hold the Bank harmless from and against any and all
liabilities, costs and expenses (including reasonable attorneys' fees)
attributable to or in any way connected with the failure to comply with such
laws and regulations.
4.15 Accounts and Deposits. The Borrower hereby agrees to maintain
all of its main operating accounts with the Bank during the term of this
Agreement. The Borrower hereby authorizes the Bank to charge such accounts
directly for payments of principal, interest and fees due under the Loan
Documents. The Borrower shall also compensate the Bank for certain services
to be provided to the Borrower by the Bank through the payment of the Bank's
standard service charges, such services to include monthly checking account
activity, cash management services and electronic funds transfers.
4.16 Appraisals. The Bank shall have the right to appraise all of
Borrower's assets at reasonable times and upon reasonable notice and at
reasonable frequency at the expense of the Borrower.
4.17 Subordination of Sums Payable. All of the Borrower's
obligations, if any, to any of the Guarantors, shareholders, officers or
directors of the Borrower for borrowed money shall be subordinated to the
Borrower's performance of its obligations to the Bank with respect to the
Loan.
4.18 Maintenance of Selected Financial Ratios and Measures.
Maintain or achieve the following financial ratios or measures determined or
computed in accordance with GAAP with respect to PC on a consolidated basis:
(a) Minimum Net Worth. At all times, PC's Net Worth shall not be
less than Twelve Million Five Hundred Thousand Dollars ($12,500,000). Net
Worth is defined as stockholders equity plus preferred stock.
(b) Funded Debt-to-Net Worth. The ratio of (i) the sum of long
term debt plus current maturities of long term debt to (ii) Net Worth shall
not exceed 2.75 to 1.0, tested quarterly.
(c) Debt Service Coverage. The ratio of earnings before interest,
taxes, depreciation and amortization expenses, for such fiscal year to the
sum of current maturities of long term debt plus scheduled interest payments
due for such fiscal year under the Loan shall be a minimum of 1.5 to 1.0,
tested quarterly and measured on a twelve month basis, to begin at the first
quarter ending twelve months after the acquisition of the Non Hudson Assets
by PEU, after phasing in the calculation during the first year of owning
PEU.
(d) Plowback. At the end of PC's fiscal year, the Plowback shall
not be less than 20%. Plowback is defined as the percentage of net income
retained within PC. This requirement shall automatically terminate when
PC's net worth reaches Eighteen Million Seven Hundred Fifty Thousand Dollars
($18,750,000) or upon the successful completion of a common equity offering
in the minimum amount of Five Million Dollars ($5,000,000) after the date of
this Agreement.
4.19 Special Covenants Relating to Inventory and Accounts. (a) At
such intervals as the Bank may reasonably request in writing, the Borrower
shall notify the Bank of all Collateral which has come into existence or
changes in Collateral since the date of the last such notification and shall
provide the Bank with schedules of the Collateral (which notification and
schedules shall be in such forms as the Bank may reasonably specify).
(b) The Borrower shall accord the Bank and the Bank's
representatives with access from time to time (including periodic audits
performed at the Bank's reasonable discretion) as the Bank and such
representatives may require to all properties owned by or over which the
Borrower has control, for the purposes of auditing the Borrower's books and
records. The Borrower shall pay the Bank such fees and expenses as it
customarily charges in connection with such audits, during the term of this
Agreement. The Bank and the Bank's representatives, shall have the right,
and the Borrower will permit the Bank and such representatives from time to
time as the Bank and such representatives may request, to examine, inspect,
copy and make extracts from any and all of the Collateral, and any and all
of the Borrower's books, records, electronically stored data, papers and
files, and to verify the Collateral or any portion thereof (such
verification, including, without limitation, through contact with account
debtors).
(c) The Borrower may grant such allowances or other adjustments to
the Borrower's account debtors as the Borrower may reasonably deem to be in
accord with sound business practice; provided, however, the authority
granted the Borrower pursuant to this paragraph may be limited or terminated
by the Bank upon the occurrence of an Event of Default which has not been
remedied within any applicable cure period.
(d) At such intervals as the Bank may reasonably request, the
Borrower shall promptly furnish the Bank with detailed reports in such form
as the Bank may prescribe of all allowances, adjustments, returns, and
repossessions concerning the Borrower's accounts and accounts receivable and
its inventory, and of any downgrading in the quality of any of the inventory
or event affecting the marketability of the inventory, and of all inventory
detained from, refused entry into, or required to be removed from the United
States by the appropriate governmental authorities.
(e) Upon the occurrence of an Event of Default which has not been
remedied within any applicable cure period, the Bank shall have the right to
notify any of PEU's account or contract debtors, either in the name of the
Bank or PEU, to make payments directly to the Bank, and to advise any person
of the Bank's security interest in and to any of the Collateral, and to
collect all amounts due on account of the Collateral. Upon request by the
Bank, the Borrower agrees to provide written notification to any or all of
PEU's account or contract debtors regarding the Bank's security interest in
the receivables Collateral and will request that such account or contract
debtors forward payment thereof to the Bank. The within obligations on the
part of the Borrower directly, being unique, shall be specifically
enforceable by the Bank.
(f) Upon the occurrence of an Event of Default which has not been
remedied within any applicable cure period, the Borrower hereby irrevocably
constitutes and appoints the Bank as the Borrower's true and lawful
attorney, with full power of substitution, to convert the Collateral into
cash at the sole risk, cost and expense of the Borrower. The rights and
powers granted the Bank by the within appointment include, but are not
limited to, the right and power to compromise, settle, or execute releases
with any of the Borrower's account debtors, and to prosecute, defend,
compromise, or release any action relating to the Collateral; to receive,
open, and dispose of all mail addressed to the Borrower and to take
therefrom any remittances on or proceeds of any Collateral in which the Bank
has a security interest; to notify Post Office authorities to change the
address to which the Borrower's mail is to be sent as the Bank shall
designate; to endorse the name of the Borrower in favor of the Bank upon all
checks, drafts, money orders, notes, acceptances, or other instruments of
the same or different nature; to sign and endorse the name of the Borrower
on, and to receive as a secured party, any of the Collateral, invoices,
schedules of Collateral, freight or express receipts, or bills of lading,
storage receipts, warehouse receipts, or other documents to title of a same
or different nature relating to the Collateral; to sign the name of the
Borrower on any notice to the Borrower's account debtors for verification of
the receivables Collateral; and to sign and file or record on behalf of the
Borrower any financing or other statement in order to perfect or protect the
Bank's security interest. The Bank shall not be obligated to do any of the
acts or to exercise any of the powers authorized herein, but if the Bank
elects to do any such act or to exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise
of power, and shall not be responsible to the Borrower except for the Bank's
gross negligence or willful misconduct. All powers conferred upon the Bank
by this Agreement, being coupled with an interest, shall be irrevocable
until the within Agreement is terminated as provided herein.
4.20 Line of Credit Balance. Maintain a Debit Balance, as defined
in the Note, of not more than the maximum principal sum provided for in such
note or under this Agreement at any time.
ARTICLE V. NEGATIVE COVENANTS OF BORROWER AND GUARANTORS. Until payment
in full of the indebtedness now existing or hereafter incurred under this
Agreement and the performance of all obligations hereunder, the Borrower and
the Guarantors (as applicable) will not, without the express prior written
consent of the Bank (which consent will not be unreasonably withheld),
engage in the following:
5.1 Nature and Scope of Business. The Borrower shall not enter
into any type of business other than that in which it is presently engaged,
or otherwise significantly change the scope or nature of its business.
5.2 Merger, Consolidation or Acquisitions. The Borrower shall not
be a party to any merger, consolidation or any other reorganization, or
acquire by purchase, lease or otherwise all or substantially all of the
assets or capital stock of any person, partnership, corporation or entity.
5.3 Sale or Disposition of Assets. The Borrower shall not sell,
lease, transfer or otherwise dispose of all or, in the opinion of the Bank,
a substantial portion of the Borrower's assets and properties, except in the
ordinary course of business. Notwithstanding the foregoing, the Bank hereby
consents to the sale by PEU of the land and buildings located on Route 102
in Londonderry (which previously served as the headquarters of Consumers New
Hampshire Water Company).
5.4 Additional Indebtedness. The Borrower shall not incur
indebtedness annually for borrowed money (or lease expense or issue or sell
any of its bonds, debentures, notes or similar obligations) except:
(a) Borrowings under this Agreement;
(b) Other obligations to the Bank;
(c) Borrowings used to prepay in full borrowing under this
Agreement;
(d) Trade debt incurred in the ordinary course of business; and
(e) Long term tax exempt bond financing for PEU or state revolving
loans made available by the State of New Hampshire to the Borrower, provided
that in either instance the Bank is given prior written notice of such
financing; and
(f) Borrowings disclosed to the Bank in the financial statements
previously delivered to the Bank described in Section 3.7.
5.5 Guaranties, Endorsement and Contingent Liabilities. The
Borrower and the Guarantors shall not guarantee, endorse or otherwise become
absolutely or contingently liable for the obligations of any other person,
partnership, corporation or other entity except as set forth on Schedule 5.5
attached hereto.
5.6 Liens and Mortgages. The Borrower shall not, and The Southwood
Corporation shall not, except in the ordinary course of its business
consistent with past practice, incur, create, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever
on any of their respective assets, now or hereafter owned, other than (a)
the security interests, liens or mortgages, granted to the Bank pursuant to
the Loan Documents; (b) deposits under Workmen's Compensation, Unemployment
Insurance and Social Security laws; (c) liens imposed by law, such as
carriers, warehousemen's or mechanic's liens and other liens incurred in
good faith in the ordinary course of business; or (d) those presently
existing liens and encumbrances permitted under the Borrower's Security
Agreement of even date (the "Security Agreement").The Southwood Corporation
agrees, except in the ordinary course of its business consistent with past
practices, and the Borrower agrees that they will not enter into any
agreement not to incur or permit any security interest in any of its assets
(such as a negative pledge) with a third party.
5.7 Loan and Advances. The Borrower shall not make any loans or
advances to any individual, firm or corporation in excess of the aggregate
amount of $25,000, including, without limitation, any parent, affiliate,
Subsidiaries, shareholders, directors, officers and employees; provided,
however, that the Borrower may make advances to (a) Subsidiaries; and (b)
the employees of the Borrower and any of its Subsidiaries, including their
officers, with respect to reasonable expenses incurred by such employees,
which expenses are reimbursable by the Borrower or its Subsidiaries and
directly related to the conduct of the business of the Borrower or its
Subsidiaries.
5.8 Conversion; Capital Structure; Acquisition of Stock. The
Borrower and the Guarantors shall not alter, amend or convert PEU's form of
organization, capital structure or purchase, obligate itself to purchase,
redeem or otherwise acquire for value any of its outstanding capital stock
or any other of its equity securities.
5.9 Investments. The Borrower shall not invest in or purchase any
stock or securities of any individual, firm, or corporation; provided,
however, that the Borrower may invest in direct obligations of the United
States of America or in certificates of deposit in the Bank.
ARTICLE VI. CONDITIONS PRECEDENT TO MAKING OF LOAN
6.1 Conditions Precedent to Initial Disbursement.
(a) The obligation of the Bank to make the Loan and make
disbursements of the proceeds of the same to the Borrower is subject to the
satisfaction by the Borrower or its representatives of the following
conditions precedent (unless waived by the Bank in each particular
instance):
(i) The Borrower's and Guarantors' warranties and representations
as contained herein shall be accurate and complete, in all
material respects, as of the date of Closing and as of the date
of each subsequent disbursement (if any).
(ii) The Borrower and Guarantors shall not be in default under any
of the covenants contained herein as of the date of Closing and
as of the date of each disbursement.
(iii) The Borrower and Guarantors shall have executed and delivered
all of the Loan Documents as described herein. Without
limiting the foregoing, the Borrower shall have delivered to
the Bank all of those items identified as "Borrower's and the
Guarantors' Documents" on the Closing Agenda attached hereto as
Schedule 6.1a)(iii) and made a part hereof, all of which must
be reasonably acceptable, in form and substance, to the Bank,
unless waived in a particular instance by the Bank.
(b) Without limiting in any manner the scope or generality of the
foregoing, certain of said items are more particularly described as follows:
(i) All of the Borrower's obligations, if any, to its Subsidiaries
or the Guarantors and any officers or directors thereof or of
the Borrower shall have been subordinated to the Borrower's
performance of its obligations to the Bank with respect to the
Loan.
(ii) The Bank shall have received:
(A) acknowledgment copies of proper financing statements (Form
UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the opinion of
the Bank, desirable to perfect the security interests
created under the Loan Documents;
(B) certified copies of Requests for Information or Copies
(Form UCC-11) listing the financing statements referred to
in paragraph (i) above and all other effective financing
statements which name PEU (under its present name and any
previous names) as debtor and which are filed in the
jurisdictions referred to in said paragraph (A), together
with copies of such other financing statements (none of
which shall cover the Collateral purported to be covered
by the Security Agreement);
(C) a title insurance policy written with a company acceptable
to the Bank, insuring that the Bank has a valid first lien
of record on Real Estate and that the title to Real Estate
is good and marketable subject only to those exceptions
approved by the Bank. In addition, the policy shall have
all standard exceptions, so-called, deleted, and shall
include such other affirmative insurance and endorsements
as may be requested by the Bank; and
(D) a survey of Real Estate which shall locate the
improvements as well as all easements and utilities on
Real Estate and shall show (u) no violation of any
applicable zoning or building requirements, restrictive
covenants or the terms of any permits; (v) no encroachment
of the improvements onto abutting premises; (w) no
encroachment of improvements located on abutting premises
onto Real Estate; (x) no material deviation from the
acreage of Real Estate as the same may have been
represented to the Bank; (y) that Real Estate has access
to or abuts a publicly accepted way; and (z) that Real
Estate is not located in a flood hazard zone.
(iii) The Borrower shall pay the costs and fees of the Bank
hereinbefore described herein.
(iv) Counsel to the Borrower and the Guarantors shall deliver an
opinion to the Bank to the effect that (A) each of the Borrower
and Guarantor is a business corporation duly organized and
validly existing under the laws of the State of New Hampshire
and is duly qualified to do business in all jurisdictions in
which the nature of its business or assets make such
qualification necessary; (B) that the Loan Documents constitute
valid and binding obligations of the Borrower or the Guarantors
enforceable in accordance with their terms; (C) that the
Borrower's and the Guarantors' entrance into the obligations
evidenced by the Loan Documents does not constitute a breach of
the articles of incorporation or bylaws of the Borrower or the
Guarantors or any other arrangements or agreements by which the
Borrower or any of the Guarantors is bound and that the
Borrower's and the Guarantors' entrance into and performance of
the Borrower's loan obligations will not require any further
approvals or consents; (D) that there is neither pending nor,
to the knowledge of such counsel, threatened any litigation,
administrative proceedings or investigations that would have a
material adverse effect on the Borrower or any of the
Guarantors or the Borrower's or any of the Guarantors'
condition, financial or otherwise; (E) that the security
interests granted to the Bank in connection with the Loan
constitute a valid perfected first security interest in the
collateral described therein; (F) that the Borrower's and
Guarantors' business operations, the Real Estate and the
intended use thereof are in full compliance with zoning and all
other governmental laws and regulation applicable to the Real
Estate; and (G) addressing such other matters as deemed
appropriate by the Bank.
(c) Borrower shall furnish the Bank with such other documents,
opinions, certificates, evidence and other matters as may be requested by
the Bank at or prior to Closing.
6.2 Subsequent Borrowing. The obligation of the Bank to make each
Loan to be made by it hereunder (including the initial Loan) is subject to
the following conditions precedent:
(a) At the time of each Loan (as evidenced by a certificate
executed on behalf of the Borrower if the Bank shall so require):
(i) The Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of this
Agreement which are binding on it;
(ii) There shall exist no Event of Default as defined in this
Agreement or no event (including an event caused by such Loan)
which would be an Event of Default but for the requirement that
notice be given or time elapse or both;
(iii) The representations and warranties contained in this Agreement
shall be true and correct as of the date of such Loan; and
(iv) There shall have been no material adverse change (in the Bank's
reasonable judgment) in the Borrower's financial condition as
evidenced by the financial information submitted to the Bank
pursuant to this Agreement.
(b) All of the Loan Documents shall remain in full force and effect
and the validity of any Loan Document shall not have been contested.
6.3 Disbursement of the Loan. The Bank shall credit the proceeds
of the Loan to the deposit accounts of the Borrower with the Bank for the
benefit of the Borrower or as otherwise directed in writing by the Borrower,
including payments to third parties through electronic funds transfers.
Advances under the Acquisition Line of Credit and the Line of Credit shall
(1) be made in accordance with the disbursement procedures set forth in the
respective Note; (2) shall not cause the Debit Balance, as defined in the
Note, to exceed the face amount thereof; and (3) shall be for a purpose
defined in Article I and Article II herein.
ARTICLE VII. EVENTS OF DEFAULT; ACCELERATION; REMEDIES
7.1 The occurrence of any one or more of the following events shall
constitute an event of default (an "Event of Default") after the expiration
of applicable notice and cure periods, if any, under this Agreement:
(a) If any statement, representation or warranty made by any
Borrower or any of the Guarantors herein or in the Loan Documents shall
prove to have been false or misleading when made, or subsequently becomes
false or misleading, in any materially adverse respect.
(b) Default by the Borrower in payment within ten (10) business
days of the due date of any principal or interest called for under its
payment obligations with respect to the Line of Credit or the Acquisition
Line of Credit.
(c) Default by the Borrower, any of its Subsidiaries or any of the
Guarantors, in any material respect, in the performance or observance of any
of the other provisions, terms, conditions, warranties or covenants of the
Loan Documents.
(d) Default by any Borrower or any of its Subsidiaries, not cured
within any applicable cure period, in the payment or performance of any
other obligations due the Bank, FNH or any affiliate thereof, whether
created prior to, concurrent with, or subsequent to obligations arising out
of the Loan Documents (including without limitation, the Master Agreement).
(e) Default by any Borrower or any of its Subsidiaries, not cured
within any applicable cure period, of any other obligation for borrowed
monies or any lease in an aggregate amount of $100,000 or more.
(f) The dissolution, termination of existence, death, merger or
consolidation of any Borrower, Subsidiary or any of the Guarantors or a sale
of all or substantially all of the assets of the Borrower or any of its
Subsidiaries or any of the Guarantors out of the ordinary course of business
without the prior written consent of the Bank.
(g) The transfer of the majority voting capital stock of any
Borrower or any of its Subsidiaries.
(h) Any Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of it or any
of its property, (ii) admit in writing its inability to pay its debts as
they mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition
in bankruptcy, or a petition or an answer seeking reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law or statute, or an answer admitting the material allegations of a
petition filed against it in any proceeding under any such law or (vi) offer
or enter into any composition, extension or arrangement seeking relief or
extension of its debts.
(i) Proceedings shall be commenced or an order, judgment or decree
shall be entered, without the application, approval or consent of any
Borrower or any Subsidiary, in or by any court of competent jurisdiction,
relating to the bankruptcy, dissolution, liquidation, reorganization or the
appointment of a receiver, trustee or liquidator of any Borrower or any
Subsidiary, of all or a substantial part of its assets, and such
proceedings, order, judgment or decree shall continue undischarged or
unstayed for a period of sixty (60) days.
(j) A final and unappealable judgment for the payment of money, in
excess of One Hundred Thousand Dollars ($100,000) shall be rendered against
any Borrower or any Subsidiary and the same shall remain undischarged for a
period of thirty (30) days, during which period execution shall not be
effectively stayed.
(k) Any Borrower assigns this Agreement (or its rights or duties
hereunder), if the Real Estate is conveyed or transferred in any way or
encumbered in any way without the prior written consent of the Bank or if
any other Collateral is conveyed or transferred in any way, except in the
ordinary course of business, or encumbered in any way without the prior
written consent of the Bank except as otherwise permitted in this Agreement.
(l) The Collateral is materially injured or destroyed by fire or
otherwise which casualty is not insured, or the Real Estate or any material
portion thereof are taken by eminent domain.
(m) Any attachment or mechanic's, laborer's, materialman's
architect's, artisan's or similar statutory liens or any notice thereof in
excess of an aggregate amount of $25,000 shall be filed against the Real
Estate or any other Collateral and shall not be discharged within thirty
(30) days of such filing.
(n) The Line of Credit, the Acquisition Line of Credit and the
Other Loans (as defined in Section 1.11) are hereby cross-defaulted, to the
end that a default under one loan shall constitute a default under all of
such loans and obligations.
7.2 Upon the occurrence of any Event of Default (which, in the case
of an event of default listed in Sections 7.1 (a), (c), (d) or (e) remains
unremedied for a period of thirty (30) days after the earlier of the date of
notice thereof to the Borrower by the Bank or the date either Borrower
becomes aware of such default), the Bank's commitment to make further loans
under this Agreement or any other agreement with the Borrower will
immediately cease and terminate and, at the election of the Bank, all of the
obligations of the Borrower to the Bank under this Agreement will
immediately become due and payable without further demand, notice or
protest, all of which are hereby expressly waived. Thereafter, the Bank may
proceed to protect and enforce its rights, at law, in equity, or otherwise,
against the Borrower, and any other endorser or guarantor of the Borrower's
obligations, either jointly or severally, and may proceed to liquidate and
realize upon any of its security in accordance with the rights of a secured
party under the Uniform Commercial Code, or any Loan Document, any agreement
between the Borrower and the Bank relating to the Loan, or any other
agreement between any guarantor or endorser of the Borrower's obligations to
the Bank hereunder.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1 Entire Agreement; Waivers. This Agreement and the Loan
Documents together constitute the entire agreement between the Borrower and
the Bank and no covenant, term, condition or other provision thereof nor any
default in connection therewith may be waived except by an instrument in
writing signed by the Bank and the Borrower and delivered to the Borrower.
The Bank's failure to exercise or enforce any of its rights, powers or
privileges under this Agreement or the Loan Documents shall not operate as a
waiver thereof. In the event of any conflict between the terms, covenants,
conditions and restrictions contained in the Loan Documents, the term,
covenant, condition or restriction which confers the greatest benefit upon
the Bank shall control. The determination as to which term, covenant,
condition or restriction is more beneficial shall be made by the Bank in its
sole discretion.
8.2 Remedies Cumulative. All remedies provided under this
Agreement and the Loan Documents or afforded by law shall be cumulative and
available to the Bank until all of the Borrower's obligations to the Bank
have been paid in full.
8.3 Survival of Covenants, Etc. All covenants, agreements,
representations and warranties made herein and in certificates delivered in
connection herewith shall be deemed to have been relied on by the Bank,
notwithstanding any investigation made by the Bank or in its behalf, and
shall survive the execution and delivery of this Agreement and the Loan
Documents until payment in full of the Loan. All such covenants,
agreements, representations and warranties shall be joint and several
obligations of the Borrower and bind and inure to the benefit of the
Borrower's and the Bank's successors and assigns, whether so expressed or
not.
8.4 Governing Law; Jurisdiction. This Agreement and the Loan
Documents shall be construed and their provisions interpreted under and in
accordance with the laws of the State of New Hampshire. The Borrower and
the Guarantors, to the extent they may legally do so, hereby consent to the
jurisdiction of the courts of the State of New Hampshire and the United
States District Court for the State of New Hampshire, as well as to the
jurisdiction of all courts from which an appeal may be taken from such
courts for the purpose of any suit, action or other proceeding arising out
of any of their obligations hereunder or with respect to the transactions
contemplated hereby, and expressly waive any and all objections they may
have to venue in any such courts. THE BORROWER AND THE BANK MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY
IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED
IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS AGREEMENT AND
MAKE THE LOAN.
8.5 Assurance of Execution and Delivery of Additional Instruments.
The Borrower agrees to execute and deliver, or to cause to be executed and
delivered, to the Bank all such further instruments, and to do or cause to
be done all such further acts and things, as the Bank may reasonably request
or as may be necessary or desirable to effect further the purposes of this
Agreement and the Loan Documents. Without limiting the foregoing, given the
fact that certain of the permits and licenses are not transferable without
the consent of certain public authorities, the Borrower agrees to fully
cooperate in facilitating the transfer of the same to the Bank or its
successors upon an Event of Default hereunder. Upon receipt of an affidavit
of an officer of the Bank as to the loss, theft, destruction or mutilation
of the Note or any other security document which is not of public record,
and, in the case of any such loss, theft, destruction or mutilation, upon
surrender and cancellation of such Note or other security document, Borrower
will issue, in lieu thereof, a replacement Note or other security document
in the same principal amount thereof and otherwise of like tenor.
8.6 Waivers and Assents. With the exception of specific notices
provided in the Loan Documents (if any), the Borrower and any Guarantor or
endorser of the Borrower's obligations to the Bank hereunder hereby waive,
to the fullest extent permitted by law, demand, notice, protest, notice of
acceptance of this Agreement, notice of loans made, credit extended,
collateral received or delivered or other action taken in reliance hereon
and all other demands and notices of any description with respect both to
the Loan Documents and Collateral. The Borrower and the Guarantors assent
to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of Collateral, to the
addition or release of any party or person primarily or secondarily liable,
to the acceptance of partial payments thereon and the settlement,
compromising or adjusting of any thereof, all in such manner and at such
time or times as the Bank may deem advisable. Any demand upon or notice to
the Borrower that the Bank may be required or may elect to give shall be
mailed by registered or certified mail, return receipt requested, postage
prepaid and shall be effective on the date of the first attempted delivery
thereof by the U.S. Postal Service, as shown on the registered or certified
mail return receipt for such notice addressed to the Borrower at their
address as set forth at the beginning of the Agreement.
8.7 No Duty of the Bank With Respect to the Collateral. The Bank
shall have no duty as to the collection or protection of Collateral security
furnished to it hereunder or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto, beyond the safe custody thereof.
8.8 Election of the Bank. The Bank may exercise its rights with
respect to the Collateral without resorting or regard to other collateral or
sources of reimbursement for the liabilities.
8.9 Assignment by the Bank. If at any time, by assignment or
otherwise, the Bank transfers its rights in the Borrower's obligations
hereunder and its rights in the security therefor, in whole or in part, such
transfer shall carry with it the powers and rights of the Bank under this
Agreement and the Collateral so transferred and the transferee shall become
vested with such powers and rights whether or not they are specifically
referred to in the instrument evidencing the transfer. If, and to the
extent that the Bank retains such rights and Collateral, the Bank shall
continue to have the rights and powers herein set forth with respect
thereto. This Agreement shall be binding upon and inure to the benefit of
the Bank, the Borrower, and their successors, assigns, heirs and personal
representatives; provided, however, the rights and obligations of the
Borrower hereunder are not assignable, delegable or transferable without the
consent of the Bank. All of the rights of the Bank hereunder shall inure to
the benefit of any participating bank or banks and its or their successors
and assigns.
The Bank shall have the unrestricted right at any time and from time
to time, and without the consent of or notice to Borrower or any Guarantor,
to grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in the Bank's obligation to lend
hereunder and/or any or all of the Loans held by the Bank hereunder. In the
event of any such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower, the Bank shall
remain responsible for the performance of its obligations hereunder and the
Borrower shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations hereunder. The Bank may
furnish any information concerning the Borrower in its possession from time
to time to prospective assignees and Participants, provided that the Bank
shall require any such prospective assignee or Participant to agree in
writing to maintain the confidentiality of such information.
8.10 Expenses; Proceeds of Collateral. The Borrower covenants and
agrees that it shall pay to the Bank, on demand, any and all reasonable out-
of-pocket expenses, including reasonable attorneys' fees incurred or paid by
the Bank in protecting and enforcing its rights under this Agreement, the
costs of preparation of this Agreement and its supporting documents
including all filing and appraisal fees (as provided herein), and the
participation of interests in the Loan (including the reasonable attorneys
fees of such participants). Without limiting the foregoing, the Bank shall
have the right to recover its out-of-pocket costs in connection with the
administration of the Loan, and to recover its out-of-pocket costs and/or
collect fees in connection with requests for consents and waivers of
compliance with covenants, or other material changes in the Loan. After
deducting all of said expenses and the reasonable expenses of retaking,
holding, preparing for sale, selling and the like, the residue of any
proceeds of collections of sale of the Collateral shall be applied to the
payment of principal of or interest on the Loan in such order or preference
as the Bank may determine, and any excess shall be returned to the Borrower
(subject to the provisions of Section 9-504 of the Uniform Commercial Code)
and the Borrower shall remain liable for any deficiency.
8.11 The Bank's Right of Setoff. Borrower and any Guarantor hereby
grant to the Bank, a lien, security interest and right of setoff as security
for all liabilities and obligations to the Bank, whether now existing or
hereafter arising, upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or
control of the Bank or any entity under the control of Fleet Financial
Group, Inc., or in transit to any of them. At any time, without demand or
notice, the Bank may set off the same or any part thereof and apply the same
to any liability or obligation of the Borrower and any Guarantor even though
unmatured and regardless of the adequacy of any other collateral securing
the loan. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR
TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR
OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
IN WITNESS WHEREOF, the BANK and the BORROWER have executed this
Agreement by their duly authorized officers.
FLEET BANK-NH
______________________________ By:__________________________________
Witness Roger J. Archambault, Its Duly
Authorized Vice President
PENNICHUCK CORPORATION
______________________________ By:__________________________________
Witness ________________________, Its Duly
Authorized _______________________
PENNICHUCK EAST UTILITY, INC.
______________________________ By:__________________________________
Witness ________________________, Its Duly
Authorized _______________________
STATE OF NEW HAMPSHIRE
COUNTY OF _______________
The foregoing instrument was acknowledged before me this 8th day of
April, 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 _______________
The foregoing instrument was acknowledged before me this 8th day of
April, 1998, by ____________________, duly authorized ______________________
of PENNICHUCK CORPORATION, a New Hampshire corporation, on behalf of the
same.
_____________________________________
Justice of the Peace/Notary Public
My Commission Expires:_______________
Notary Seal
STATE OF NEW HAMPSHIRE
COUNTY OF _______________
The foregoing instrument was acknowledged before me this 8th day of
April, 1998, by ____________________, duly authorized ______________________
of PENNICHUCK EAST UTILITY, INC., a New Hampshire corporation, on behalf of
the same.
_____________________________________
Justice of the Peace/Notary Public
My Commission Expires:_______________
Notary Seal
JOINDER OF GUARANTORS
The undersigned, being the persons named as the Guarantors in the
foregoing Loan Agreement, hereby join therein and agree to be legally and
equitably bound by all of the terms, covenants, warranties, representations,
conditions and other provisions thereof, this 8th day of April, 1998.
THE SOUTHWOOD CORPORATION
______________________________ By: ___________________________________
Witness _______________________, Its Duly
Authorized _____________________
PENNICHUCK WATER SERVICE CORPORATION
______________________________ By: ___________________________________
Witness _______________________, Its Duly
Authorized _____________________
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 8th day of
April, 1998, by __________, duly authorized __________ of THE SOUTHWOOD
CORPORATION, a New Hampshire corporation, on behalf of the 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 8th day of
April, 1998, by __________, duly authorized __________ of PENNICHUCK WATER
SERVICE CORPORATION, a New Hampshire corporation, on behalf of the same.
_____________________________________
Justice of the Peace/Notary Public
My Commission Expires:_______________
Notary Seal
SCHEDULE 3.5
Litigation
None.
SCHEDULE 4.4(e)
Compliance Certificate
Fleet Bank-NH
1155 Elm Street
Manchester, NH 03101
Attention: Roger J. Archambault, Vice President
Dear Mr. Archambault:
Pursuant to the provisions of a certain Loan Agreement dated April 8,
1998 (the "Loan Agreement") with respect to a certain $3,000,000 Line of
Credit to Pennichuck Corporation from Fleet Bank-NH and a certain $4,500,000
Acquisition Line of Credit to Pennichuck Corporation and Pennichuck East
Utility, Inc. (collectively, the "Borrower") from Fleet Bank-NH (the
"Bank"), the undersigned hereby certifies as follows:
1. That the financial statements (the "Financial Statements") of the
Borrower and/or Guarantors delivered to the Bank with this Certificate are
true and accurate in all material respects for the periods covered therein
as of the date hereof.
2. That the undersigned is a duly elected, qualified and acting
President of the Borrower and as such officer is authorized to make and
deliver this Compliance Certificate.
3. That during the period set forth in the Financial Statements, the
Borrower was in compliance with all financial covenants of the Loan
Agreement. As of __________, 199__, the Net Worth was $_____; the Debt
Service Coverage Ratio was _____ to 1.0; and the ratio of Funded Debt to Net
Worth was _____ to 1.0. The Borrower's plowback was %.
4. The representations and warranties contained in the Loan Agreement
and the representations and warranties of the Borrower and Guarantors
contained in each of the other Loan Documents are to the best of the
Borrower's knowledge, true, correct and complete in every material respect
on and as of the date hereof with the same force in effect as though made on
and as of the date hereof. All covenants contained in the Loan Agreement
have been and continue to be met.
5. To the best of the Borrower's knowledge, no event has occurred or
is continuing which constitutes a default or an Event of Default.
Capitalized terms not expressly defined herein are used herein with the
meaning so defined in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate on this ____ day of _______________, 199_.
PENNICHUCK CORPORATION
_____________________________ By:________________________________
Witness ________________, Its Duly
Authorized ______________
SCHEDULE 5.5
Guarantors, Endorsements
SCHEDULE 6.1(a)(iii)
Closing Agenda
EXHIBIT 10.12
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT (the "Agreement") dated as of this 24th day
of April, 1998, by and among PENNICHUCK CORPORATION, a New Hampshire
corporation with a principal place of business at 4 Water Street, P.O. Box
448, Nashua, New Hampshire 03061-0448 ("PC") and PENNICHUCK EAST UTILITY,
INC., a New Hampshire corporation with a principal place of business at 4
Water Street, P.O. Box 488, Nashua, New Hampshire 03061-0448 ("PEU") (PC and
PEU are referred to individually and collectively as the "Borrower"), THE
SOUTHWOOD CORPORATION, a New Hampshire corporation with a principal place of
business at 4 Water Street, P.O. Box 488, Nashua, New Hampshire 03061-0448
("Southwood") and PENNICHUCK WATER SERVICE CORPORATION, a New Hampshire
corporation with a principal place of business at 4 Water Street, P.O. Box
488, Nashua, New Hampshire 03061-0448 ("PWSC") (Southwood and PWSC are
referred to individually and collectively at "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 (the "Bank").
W I T N E S S E T H
WHEREAS, pursuant to the terms of a certain Loan Agreement dated April
8, 1998 (collectively, the "Loan Agreement") and certain loan documents
referenced therein or contemplated thereby (collectively the "Loan
Documents"), the Bank has made certain loans, including, without limitation,
a $4,500,000 acquisition line of credit loan to the Borrower (the
"Acquisition Line of Credit") and a $3,000,000 line of credit loan to PC
(the "Line of Credit"), both of which loans are guaranteed by the Guarantor;
and
WHEREAS, PC has requested and the Bank has agreed to, among other
things, (i) increase the principal amount of the Line of Credit from
$3,000,000 to $4,500,000 and (ii) amend the Loan Documents in certain other
respects.
NOW, THEREFORE, in consideration of the foregoing and mutual covenants
and agreements therein contained, the receipt and adequacy of which are
hereby acknowledged, the parties covenant, stipulate, and agree as follows:
1. Representations and Warranties of the Borrower and the
Guarantor. The Borrower and Guarantor represent and warrant to the Bank as
follows:
(a) The representations and warranties of each Borrower and each
Guarantor made in the Loan Documents remain true and accurate
and are hereby reaffirmed as of the date hereof.
(b) The Borrower and the Guarantor have performed, in all material
respects, all obligations to be performed by each of them to
date under the Loan Documents.
(c) Each Borrower and Guarantor is a corporation duly organized,
qualified, and existing in good standing under the laws of the
State of New Hampshire and in all other jurisdictions in which
the character of the property owned or the nature of the
existing business conducted by such Borrower or Guarantor
require its qualification as a foreign corporation.
(d) The execution, delivery, and performance of this Agreement and
the documents relating hereto (the "Amendment Documents") are
within the power of each Borrower and each Guarantor and are
not in contravention of law, each Borrower's or Guarantor's
Articles of Incorporation, By-Laws, or the terms of any other
documents, agreements, or undertaking to which any Borrower or
any Guarantor is a party or by which any Borrower or any
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 any
Borrower or any Guarantor of the Amendment Documents or any of
the documents submitted to the Bank in connection with the
Amendment Documents to ensure the validity or enforceability
thereof.
(e) When executed on behalf of the Borrower and the Guarantor, the
Amendment Documents will constitute a legally binding
obligation of the Borrower and the Guarantor, enforceable in
accordance with their terms; provided, that the enforceability
of any provisions in the Amendment Documents, or of any rights
granted to the Bank pursuant thereto may be subject to and
affected by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and that the right of the Bank to specifically
enforce any provisions of the Amendment Documents is subject to
general principles of equity.
2. Amendment To Loan Agreement. The Loan Agreement shall be
amended as follows:
(a) The first WHEREAS clause appearing on page one of the Loan
Agreement is hereby amended by changing the amount "Three
Million Dollars ($3,000,000)" to "Four Million Five Hundred
Thousand Dollars ($4,500,000)".
(b) Section 2.2 of Article II of the Loan Agreement is hereby
amended by changing the amount "Three Million Dollars
($3,000,000)" to "Four Million Five Hundred Thousand Dollars
($4,500,000)".
(c) Section 2.5 of Article II of the Loan Agreement is hereby
amended by deleting the phrase "for a two (2) year period with
respect to up to One Million Five Hundred Thousand Dollars
($1,500,000)" appearing in the ninth and tenth lines thereof
and replacing it with "for a two (2) year period with respect
to Three Million Dollars ($3,000,000)".
(d) Section 2.6 of Article II of the Loan Agreement is hereby
amended by replacing the amount of "One Million Five Hundred
Thousand Dollars ($1,500,000)" appearing in the sixth and
seventh lines thereof and replacing it with "Three Million
Dollars ($3,000,000)".
3. Amendment to Promissory Note. The Promissory Note made payable
by PC to the Bank dated April 8, 1998 (the "Line of Credit Note") in the
original principal amount of $3,000,000, is hereby amended as follows:
(a) The amount "$3,000,000" appearing in the upper left hand corner
of page one of the Line of Credit Note is hereby deleted and
replaced with "$4,500,000".
(b) The amount of "Three Million Dollars ($3,000,000)" appearing in
the eighth and ninth lines of the first paragraph of the Line
of Credit Note is hereby deleted and replaced with "Four
Million Five Hundred Thousand Dollars ($4,500,000)".
(c) The amount "One Million Five Hundred Thousand Dollars
($1,500,000)" appearing in paragraph (2) on page one of the
Line of Credit Note is hereby deleted and replaced with "Three
Million Dollars ($3,000,000)".
(d) The amount "Three Million Dollars ($3,000,000)" appearing in
the first sentence of the first full paragraph on page two of
the Line of Credit Note is hereby deleted and replaced with
"Four Million Five Hundred Thousand Dollars ($4,500,000)".
4. Amendment to Pledge Agreement. The Pledge Agreement by PC to
the Bank dated April 8, 1998 (the "Pledge Agreement") is hereby amended by
deleting the amount "Seven Million Five Hundred Thousand Dollars
($7,500,000)" appearing in the first WHEREAS clause on page one of the
Pledge Agreement and replacing such amount with "Nine Million Dollars
($9,000,000)". PC hereby ratifies and confirms its pledge under the Pledge
Agreement and acknowledges that all amounts advanced under the Loan
Documents to date and in the future, including, but not limited to, all
amounts advanced under the Line of Credit, as amended, shall be Secured
Obligations (as such term is defined in the Pledge Agreement).
5. Amendment to Guaranty Agreement. The Guaranty Agreement by the
Guarantor to the Bank dated April 8, 1998 (the "Guaranty Agreement") is
hereby amended by deleting the amount "Three Million Dollars ($3,000,000)"
appearing in the second WHEREAS clause on page one of the Guaranty Agreement
and replacing such amount with "Four Million Five Hundred Thousand Dollars
($4,500,000)". Each Guarantor hereby acknowledges that all amounts advanced
under the Loan Documents to date and in the future, including, without
limitation, all amounts advanced under the Line of Credit, as amended, shall
be Guaranteed Obligations (as such term is defined in the Guaranty
Agreement).
6. Conditions Precedent. The obligations of the Bank hereunder
are subject to fulfillment of the following conditions precedent:
(a) The Borrower and the Guarantor shall execute and deliver to the
Bank this Agreement and the Amendment Documents.
(b) The Bank shall have received (i) certified copies of
instruments evidencing all corporate action taken by the
Borrower and the Guarantor to authorize the execution and
delivery of this Agreement and the Amendment Documents and (ii)
such other documents, legal opinions, papers and information as
the Bank shall reasonably require including all items listed on
the Closing Agenda attached hereto as Exhibit A.
7. Future References. All references to the Loan Documents shall
hereafter refer to such documents, as amended and shall expressly include,
without limitation, this Agreement and all other Amendment Documents.
8. Loan Documents. The Loan Documents, and the collateral granted
to the Bank therein, shall secure the Loan (as defined in the Loan
Agreement) made pursuant to the Loan Agreement, as amended, and the payment
and performance of the Line of Credit, as amended.
9. Continuing Effect. The provisions of the Loan Documents, as
modified herein, shall remain in full force and effect in accordance with
their terms and are hereby ratified and confirmed.
10. 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 Line of Credit Note, as
amended.
(c) This Agreement may be executed in several counterparts by the
Borrower, the Bank and the Guarantor, each of which shall be
deemed an original but all of which together shall constitute
one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
FLEET BANK - NH
____________________________ By:_________________________________
Witness Roger J. Archambault, Its Duly
Authorized Vice President
PENNICHUCK CORPORATION
____________________________ By:_________________________________
Witness _______________________, Its Duly
Authorized ______________________
PENNICHUCK EAST UTILITY, INC.
____________________________ By:_________________________________
Witness _______________________, Its Duly
Authorized ______________________
THE SOUTHWOOD CORPORATION
____________________________ By:_________________________________
Witness _______________________, Its Duly
Authorized ______________________
PENNICHUCK WATER SERVICE CORPORATION
____________________________ By:_________________________________
Witness _______________________, Its Duly
Authorized ______________________
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 24th day of
April, 1998, by Roger J. Archambault, the duly authorized Vice President of
Fleet Bank-NH, a bank incorporated under the laws of the State of New
Hampshire, on behalf of such bank.
_____________________________________
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 24th day of
April, 1998, by ___________________, the duly authorized _____________ of
Pennichuck Corporation, a New Hampshire corporation, on behalf of such
corporation.
_____________________________________
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 24th day of
April, 1998, by ___________________, the duly authorized _____________ of
Pennichuck East Utility, Inc., a New Hampshire corporation, on behalf of
such corporation.
_____________________________________
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 24th day of
April, 1998, by ___________________, the duly authorized _____________ of
The Southwood Corporation, a New Hampshire corporation, on behalf of such
corporation.
_____________________________________
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 24th day of
April, 1998, by ___________________, the duly authorized _____________ of
Pennichuck Water Service Corporation, a New Hampshire corporation, on behalf
of such corporation.
_____________________________________
Justice of the Peace/Notary Public
My Commission Expires:
Notary Seal
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,040,000
<SECURITIES> 0
<RECEIVABLES> 2,469,000
<ALLOWANCES> (25,000)
<INVENTORY> 372,000
<CURRENT-ASSETS> 5,409,000
<PP&E> 76,470,000
<DEPRECIATION> (19,528,000)
<TOTAL-ASSETS> 67,568,000
<CURRENT-LIABILITIES> 3,335,000
<BONDS> 34,380,000
0
0
<COMMON> 815,000
<OTHER-SE> 14,193,000
<TOTAL-LIABILITY-AND-EQUITY> 67,568,000
<SALES> 6,889,000
<TOTAL-REVENUES> 6,889,000
<CGS> 4,629,000
<TOTAL-COSTS> 4,629,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,082,000
<INCOME-PRETAX> 1,203,000
<INCOME-TAX> 457,000
<INCOME-CONTINUING> 746,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 746,000
<EPS-PRIMARY> $.91
<EPS-DILUTED> $.90
</TABLE>
