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Shareholder Approval of Borrowings Required. Under Article IX of Pennichuck’s Articles of
Incorporation, the City, acting in its capacity as Pennichuck’s sole shareholder, must approve:
“(3) any action to (A) create, incur or assume any indebtedness for borrowed
money or guarantee any such indebtedness of any person, (B) issue or sell
any debt securities or warrants or other rights to acquire any debt securities
of the [Pennichuck] Corporation or any of its Subsidiaries, or (C) guarantee
any debt securities of any person.”
Proposed Borrowings from the SRF Program. Pennichuck requests the City’s approval for
three loans from the SRF Program to PWW, PEU, and PAC. The specifics of these loans are
described below.
(1) PWW Borrowings. Under the proposal, PWW would enter into a new long-
term loan from the SRF Program in the principal amount of up to $1,400,000 to
finance the cost of replacing approximately 4,265 linear feet of water main in the
Nashua Core Water System (Amherst Street area) in Nashua.
(2) PEU Borrowings. Under the proposal, PEU would enter into a new long-term
loan from the SRF Program in the principa! amount of up to $1,650,000 to
finance the cost of replacing approximately 18,600 linear feet of water main in
the Varney Road area at Locke Lake in Barnstead.
(3) PAC Borrowings. Under the proposal, PAC would enter into a new long-term
loan from the SRF Program in the principal amount of up to $440,000 to finance
the cost of installing approximately 4,650 linear feet of water main on Fairview
Road/Catamount Road in Pittsfield.
The Lender — SRF Program. The funds for these loans will be provided by the State of New
Hampshire Drinking Water Revolving Loan Fund Program, This SRF Program is administered
by the New Hampshire Department of Environmental Services (“NHDES”). The SRF Program
provides public and private water systems the opportunity to borrow funds on favorable terms at
interest rates that are below commercial loan rates. Pennichuck has received confirmation from
the NHDES that funding is available for each of these loans and projects.
Terms of the SRF Borrowings. All of the loans will have the same favorable terms, which will
be reflected in separate written Loan Agreements and Promissory Notes issued by each of PWW,
PEU and PAC, as required by the SRF Program. Amounts advanced pursuant to the loans during
the construction period will accrue interest at a rate of 1% per annum, and the total accrued
interest will be due upon substantial completion of the project. The terms of the SRF loans will
require repayment of the loan principal plus interest over a 30-year period for PWW and PAC
and a 20-year period for PEU, commencing six months after the project is substantially
complete. The current interest rate on the SRF Program borrowings is 2.464% per annum,
though the final rate is not locked in until the loan commences its repayment period. The loans
