LOAN AGREEMENT

Exhibit 10.1

LOAN AGREEMENT

      LOAN AGREEMENT ( the "Agreement") dated as of this 22nd of March, 2005 by and among PENNICHUCK CORPORATION, a New Hampshire corporation with a principal place of business at 25 Manchester Street, Merrimack, New Hampshire 03054 (the "Borrower") and FLEET NATIONAL BANK, a Bank of America company and a national bank organized under the laws of the United States with a 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 new loan to the Borrower; and

      WHEREAS, the parties wish to set forth in writing the terms and conditions upon which the Bank will make, and the Borrower is willing to take the aforesaid new loan; and

      NOW, THEREFORE, in consideration of the foregoing, the receipt and adequacy of which is hereby acknowledged, and the mutual covenants and agreements herein contained, the parties covenant, stipulate and agree as follows:

ARTICLE I. DESCRIPTION OF LOAN Subject to and upon the following terms and conditions, the Bank agrees to make a certain revolving line of credit loan up to the maximum principal amount of Sixteen Million Dollars ($16,000,000) to the Borrower (the "Loan" or the "Line of Credit").

ARTICLE II. THE LINE OF CREDIT The Bank agrees to make, and Borrower 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 the Borrower shall sign a certain promissory note (the "Line of Credit Note" or the "Note") evidencing its obligation to pay and perform the Line of Credit.

      2.2   Amount . Under the Line of Credit, the Bank agrees to loan the Borrower an amount up to Sixteen Million Dollars ($16,000,000); provided , however , the availability under the Line of Credit for direct borrowings shall be reduced by the aggregate face amount of all outstanding letters of credit issued by the Bank or any affiliate thereof on the account of the Borrower. At no time shall any such letters of credit have expiration dates beyond the maturity date of the Line of Credit.

      2.3   Use of Proceeds . The proceeds of the Line of Credit shall be used by the Borrower to refinance existing indebtedness owed by the Borrower to the Bank and for working capital and general corporate purposes, including, but not limited to, direct borrowings and letters of credit.

      2.4   Interest Rate . Sums advanced under the Line of Credit shall bear interest, at the Borrower's option (subject to the terms and conditions set forth in Article III hereof), at (a) the variable per annum rate equal to the Prime Rate (as hereinafter defined) plus the Prime Applicable Margin (as hereinafter defined), or (b) the per annum rate equal to the one (1), two (2), three (3) or six (6) month LIBOR (as hereinafter defined) plus the LIBOR Applicable Margin (as hereinafter defined). The Borrower may have LIBOR Loans (as hereinafter defined) and Prime Loans (as hereinafter defined) outstanding at the same time under the Line of Credit subject to the terms and conditions of Article III hereof. Interest shall be calculated and charged on the basis of actual days elapsed over a banking year of three hundred sixty (360) days. Notwithstanding the foregoing, at any time prior to maturity of the Line of Credit, the Borrower shall have the option to "swap" the above mentioned LIBOR based interest rate on the Line of Credit pursuant to an interest rate swap agreement (in the form of an International Swap Dealers Association Master Agreement and Confirmation Agreement between the Borrower and the Bank (or any affiliate thereof), both of which agreements are hereinafter referred to collectively as a "Swap Agreement") for a fixed rate of interest and term acceptable to the Bank.

      2.5   Repayment . The Line of Credit shall mature on December 31, 2007. Until maturity, the Borrower shall make payments of interest only to the Bank in arrears (a) on a monthly basis for Prime Loans (as hereinafter defined), with the first such payment being made on that date thirty (30) days from the date hereof, and (b) on the last day of the applicable Interest Period (as hereinafter defined) for LIBOR Loans (as hereinafter defined); provided , however , said payments of interest for any LIBOR Loan shall be no less frequently than every three (3) months. All payments shall be in lawful money of the United States in immediately available funds.

      2.6   Guaranty . The payment and performance of the Line of Credit by the Borrower shall be unconditionally guaranteed by Pennichuck Water Works, Inc. (hereinafter referred to as "PWW" or the "Guarantor" ) on an unlimited basis pursuant to and subject to the terms and conditions of a certain Guaranty Agreement dated as of even date herewith from the Guarantor to the Bank (the "Guaranty").

      2.7   Security . Borrower's payment and performance of the Line of Credit shall be unsecured.

      2.8   Fees and Expenses . In connection with the Line of Credit, the Borrower agrees to pay the Bank the following fees:

      (a)   an unused facility fee equal to the Unused Fee per annum, as determined in accordance with the table set forth in Section 3.2 hereof, on the average daily principal amount of the unused portion of the Line of Credit to be calculated and paid in arrears at the end of each calendar quarter (March 31, June 30, September 30 and December 31); and

      (b)   the Commitment Fee in the amount of Thirty Two Thousand Dollars ($32,000) at or before closing.

      2.9   Cross Default . The Borrower'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 the Borrower or the Guarantor owed to the Bank, or any affiliate of the Bank, as the same may have been and may hereafter be modified, amended or restated, and any now existing or hereafter arising foreign exchange contracts, interest rate swap, cap, floor or hedging agreement, and all obligations of the Borrower or the Guarantor arising out of or in connection with any Automated Clearing House ("ACH") agreements related to the processing of any ACH transactions.

ARTICLE III. LIBOR AND OTHER APPLICABLE PAYMENT AND INTEREST RATE PROVISIONS AND DEFINITIONS .

      3.1   Definitions .

      (a)   The term "LIBOR" shall mean, as applicable to any LIBOR Loan, the rate per annum as determined on the basis of the offered rates for deposits in U.S. Dollars, for a period of time comparable to such LIBOR Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two (2) London Banking Days preceding the first day of such LIBOR Loan; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to such LIBOR Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) London Banking Days preceding the first day of such LIBOR Loan as selected by Bank. The principal London office of each of the four major London banks will be requested to provide a quotation of its U.S. Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to such LIBOR Loan offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that is two London Banking Days preceding the first day of such LIBOR Loan. In the event that Bank is unable to obtain any such quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR Loan cannot be determined. In the event that the Board of Governors of the Federal Reserve Systems shall impose a Reserve Percentage with respect to LIBOR deposits of Bank, then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. "Reserve Percentage" shall mean the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed on member banks of the Federal Reserve System against "Euro-currency Liabilities" as defined in Regulation D. Banking Day shall mean with respect to any city, any day on which commercial banks are open for business in that city.

      (b)   The term "LIBOR Loan" shall mean any Loan bearing interest calculated by reference to LIBOR.

      (c)   The term "Prime Rate" means the variable per annum rate of interest so designated by Fleet National Bank (and its successors or assigns) as its Prime Rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Each time the Prime Rate changes, the interest rate on a Prime Loan shall immediately change without notice or demand of any kind.

      (d)   The term "Prime Loan" shall mean any Loan bearing interest calculated by reference to the Prime Rate.

      (e)   The term "Interest Period" shall mean with respect to any LIBOR Loan under any Loan, a period of one (1), two (2), three (3) or six (6) months, subject to availability; provided , however , no Interest Period shall ever extend beyond the maturity date for the applicable Loan.

      3.2   Determination of Margins and Unused Fee Rate . Prior to the receipt of the quarterly compliance certificate to be delivered for the quarter ending March 31, 2005, the Prime Applicable Margin and the LIBOR Applicable Margin referenced in Section 2.4 and the Unused Fee referenced in Section 2.8(a) shall be as follows:

      (a)   The Prime Applicable Margin for the Line of Credit shall be zero percent (0%);

      (b)   The LIBOR Applicable Margin for the Line of Credit shall be one and one quarter percent (1.25%); and

      (c)   The Unused Fee shall be one quarter percent (.25%).

      Thereafter, each of the foregoing Prime Applicable Margin, LIBOR Applicable Margin and the Unused Fee shall be determined in accordance with the following table (with adjustments based on the Borrower's Basic Fixed Charge Coverage Ratio [calculated as set forth below]) commencing after receipt of the Borrower's quarterly compliance certificate:

Tier

Basic Fixed
Charge
Coverage Ratio

Prime Applicable
Margin: Line of Credit

LIBOR Applicable
Margin: All Loans

Unused Fees

I

> 3.25 to 1.0

0%

1.00%

0.125%

II

> 1.75 to 1.0 but

< or = 3.25 to 1.0

0%

1.25%

0.250%

III

< or = 1.75 to 1.0

0%

1.50%

0.375%

      For purposes of this Section 3.2, the Borrower's Basic Fixed Charge Coverage Ratio shall be tested as of the end of each fiscal quarter of the Borrower as more fully set forth in Section 5.18(a) hereof. Basic Fixed Charge Coverage Ratio shall have the meaning set forth in and be calculated in accordance with Section 5.18(a) hereof; provided , however , that for purposes of calculating the Basic Fixed Charge Coverage Ratio for pricing under this Section 3.2, eminent

domain related expenses [identified as "taking and other expenses" on its financial statements] will not be deemed an extraordinary expense in the Basic Fixed Charge Coverage Ratio calculation.

      Upon delivery of the quarterly compliance certificate pursuant to Section 5.3 hereof, the Unused Fee and applicable margins shall automatically be adjusted to the fee or rate, as applicable, to the corresponding Basic Fixed Charge Coverage Ratio set forth in the table above, such automatic adjustment to take effect as of the first day of the month following the Bank's receipt of said compliance certificate.

      3.3   Additional LIBOR Loan Provisions .

      (a)   Notwithstanding the foregoing, if as a result of any change in any foreign or United States law or regulation (or change in the interpretation thereof) it is determined by Bank that it is unlawful to maintain a LIBOR Loan, or if any central bank or governmental authority (foreign or domestic) shall assert that it is unlawful to maintain a LIBOR Loan, then such LIBOR Loan shall terminate and the Borrower shall have no further right hereunder to elect or maintain a LIBOR Loan. If the Bank determines that by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for determining the LIBOR in the relevant amount and for the relevant maturity are not available to the Bank in the London interbank market, with respect to a proposed LIBOR Loan, the Bank shall give the Borrower prompt notice of such determination. Until such notice has been withdrawn, the Bank shall have no obligation to make any LIBOR Loan, or maintain outstanding LIBOR Loans and the Bank may substitute its Prime Rate or other comparable interest rate for the LIBOR.

      (b)   If, due to any one or more of: (i) the introduction of any applicable law or regulation or any change in the interpretation or application by any authority charged with the interpretation or application thereof of any law or regulation; or (ii) the compliance with any guideline or request from any governmental central bank or other governmental authority (whether or not having the force of law), there shall be an increase in the cost to the Bank of agreeing to make or making, funding or maintaining LIBOR Loans with respect to all or any portion of the LIBOR Loans, or any corporation controlling the Bank, on account thereof, then the Borrower from time to time shall, upon written demand by the Bank, pay the Bank additional amounts sufficient to indemnify the Bank against the increased cost. A certificate as to the amount of the increased cost and the reason therefor submitted to the Borrowers by the Bank in the absence of manifest error, shall be conclusive and binding for all purposes.

      (c)   The election by the Borrower of LIBOR Loans under the Line of Credit shall each be in the minimum amount of Five Hundred Thousand Dollars ($500,000) and there shall be no more than four (4) LIBOR Loans outstanding at any one time. Any Interest Period chosen by the Borrower will be so structured that the principal amount to be repaid at maturity under such Loan shall either be a Prime Loan, or a LIBOR Loan with an Interest Period which terminates on a day that such principal payment is to be made. At the expiration of each Interest Period, any part of the principal amount of the Line of Credit bearing interest as a LIBOR Loan as to which the Borrower fails to make a Fixed Rate Request as set forth in Section 3.3(d) below, no notice of renewal has been received as provided below, shall automatically convert to a Prime Loan.

      (d)   In order for the Borrower to select LIBOR Loans (and the applicable Interest Period), the following conditions must be met:

(i)

The Bank shall have received a written notice (the "Fixed Rate Request") from the Borrower at least two (2) Business Days prior to the first day of any Interest Period requested, such notice to specify that it is for a LIBOR Loan and the first day and length of the Interest Period (a "Fixed Rate Period"), the dollar amount of the portion of the Loan as to which the Fixed Rate Request shall apply and as to which Loan the Fixed Rate Request shall apply; and

(ii)

The Bank shall not have determined in good faith that it is unable to determine the LIBOR in respect of the requested Fixed Rate Period.

      3.4   Prepayment . (a) The Borrower may prepay a Prime Loan at any time and from time to time without the payment of any penalty.

      (b)   The Borrower may prepay a LIBOR Loan only upon at least three (3) Business Days prior written notice to the Bank (which notice shall be irrevocable), and any such prepayment shall occur only on the last day of the Interest Period for such LIBOR Loan. The Borrower shall pay to the Bank, upon request of the Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank) to compensate it for any loss, cost, or expense incurred as a result of: (i) any payment of a LIBOR Loan on a date other than the last day of the Interest Period for such Loan; (ii) any failure by the Borrower to borrow a LIBOR Loan on the date specified by Borrower's written notice; (iii) any failure by the Borrower to pay a LIBOR Loan on the date for payment specified in the Borrower's written notice. Without limiting the foregoing, such loss, cost or expense shall include (but not be limited to) and the Borrower shall pay to the Bank a "yield maintenance fee" in an amount computed as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the term chosen pursuant to the applicable Interest Period as to which the prepayment is made, shall be subtracted from the LIBOR in effect at the time of prepayment. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the term chosen pursuant to the Interest Period as to which the prepayment is made. Said amount shall be reduced to present value calculated by using the number of days remaining in the designated term and using the above-referenced United States Treasury securities rate and the number of days remaining in the term chosen pursuant to the Interest Period as to which the prepayment is made. The resulting amount shall be the yield maintenance fee due to the Bank upon prepayment of the LIBOR Loan. If by reason of an Event of Default the Bank elects to declare such Loan to be immediately due and payable, then any yield maintenance fee with respect to such Loan shall become due and payable in the same manner as though the Borrower had exercised such right of prepayment. If the interest rate under any Loan is swapped pursuant to a Swap Agreement, the Swap Agreement sets forth additional restrictions, limitations, and penalties associated with prepayment under said Loan.

      3.5   Payments .

      (a)   All payments required under this Agreement, the Note or any other Loan Documents (as hereinafter defined) shall be made by the Borrower to the Bank at 1155 Elm Street, Manchester, New Hampshire or such other place as the Bank may from time to time specify in writing in lawful currency of the United States of America in immediately available funds, without counterclaim, or setoff and free and clear of, and without any deduction or withholding for any taxes or other payments.

      (b)   The Following Business Day Convention shall be used to adjust any relevant date if that date would otherwise fall on a day that is not a Business Day. For the purposes herein, the term Following Business Day Convention shall mean that an adjustment will be made if any relevant date would otherwise fall on a day that is not a Business Day so that the date will be the first following day that is a Business Day. "Business Day" means, in respect of any date that is specified in this Loan Agreement or any Loan Document to be subject to adjustment in accordance with the Following Business Day Convention, a day on which commercial banks settle payments in (i) London, if the payment obligation is calculated by reference to LIBOR, or (ii) New York, if payment obligation is calculated by reference to Prime Rate. All payments or under any Loan Documents hereunder shall be adjusted in accordance with the Following Business Day Convention.

      (c)   All payments under the Loan Documents shall be applied first to the payment of all fees, expenses and other amounts due to the Bank (excluding principal and interest), then to accrued interest, and the balance on account of outstanding principal; provided, however, that after default with regard to any Loan, payments will be applied to the obligations of the Borrowers to Bank pursuant to the Loan Documents as Bank determines in its sole discretion.

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTOR To induce the Bank to enter into this Agreement and to make the Loan, the Borrower and the Guarantor warrant and represent to the Bank that:

      4.1   Legal Existence . The Borrower and the Guarantor 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, the Borrower and the Guarantor 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.

      4.2   Authority of Borrower . The 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 and all other documents the purpose of which are to evidence and secure the Loan, being hereinafter sometimes collectively referred to as the "Loan Documents" and the security described therein, if any, 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.

      4.3   Authority of Guarantor . The 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 corporate or other action. Any consent or approval of stockholders, or 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.

      4.4   Binding Agreement . This Agreement and the Loan Documents constitute the valid and legally binding obligations of the Borrower and the Guarantor 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.

      4.5   Litigation . There are no suits pending or, to the knowledge of the Borrower or the Guarantor, threatened, against or affecting the Borrower or the Guarantor or any of the Borrower's or the Guarantor's assets which, if adversely determined, would have a material adverse effect on the condition, financial or otherwise, or business of the Borrower or the Guarantor 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 the Borrower or the Guarantor, threatened against the Borrower or the Guarantor, which, if adversely determined, would have a material adverse effect on the condition, financial or otherwise, or business of the Borrower or the Guarantor 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 4.5 and which have been disclosed by the Borrower and the Guarantor to Bank ("Disclosed Suits").

      4.6   Conflicting Agreements . There is no charter provision or bylaw of the Borrower, and no provision(s) of any existing mortgage, indenture, contract or agreement binding on the Borrower or the Guarantor or affecting the Borrower's or any Guarantor's 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.

      4.7   Financial Condition . The annual financial statements heretofore delivered to the Bank by the Borrower and the Guarantor 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 Guarantor. There are no material liabilities, direct or indirect, fixed or contingent, of the Borrower or the Guarantor 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 Guarantor's assets are free of encumbrances of any material nature, except those disclosed in the aforementioned balance sheets and liens permitted under this Agreement.

      4.8   Taxes . The Borrower and the Guarantor have filed all federal, state and local tax returns required to be filed by the Borrower and the Guarantor 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.

      4.9   Licenses, Franchises, Etc . The Borrower and the Guarantor possess 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.

      4.10   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.

      4.11   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.

      4.12   Not a Successor . Except as set forth on Schedule 4.12 attached hereto, 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.

      4.13   Brokerage . There are no claims against the Borrower or the Guarantor for brokerage commissions, finder's fees or similar compensation arising out of or due to any act of the Borrower or the Guarantor in connection with the transactions contemplated by this Agreement or based on any agreement or arrangement made by or on behalf of the Borrower and the Guarantor; and the Borrower or the Guarantor will defend, indemnify and hold the Bank harmless against any liability or expenses arising out of any such claim.

      4.14   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.

      4.15   Subsidiaries . The Borrower does not have any subsidiaries except those subsidiaries identified on Schedule 4.15 attached hereto.

      4.16   Ownership and Liens . The Borrower and the Guarantor 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 4.7 (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 the Guarantor and none of their leasehold interests is subject to any lien, except such as may be permitted pursuant to Section 7.6 of this Agreement.

      4.17   Statutory Compliance . The Borrower and the Guarantor 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 their 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.

      4.18   Full Disclosure . None of the information with respect to the Borrower or the Guarantor which has been prepared and furnished by the Borrower or the Guarantor 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 V. AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR . 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 Guarantor agree that, unless the Bank shall otherwise consent in writing, the Borrower and/or the Guarantor (as applicable) shall:

      5.1   Prompt Payment . Pay promptly when due all amounts due and owing to the Bank under this Agreement.

      5.2   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.

      5.3   Financial Statements . (a) The Borrower shall furnish the Bank within forty-five (45) days after the end of each fiscal quarter during Borrower's fiscal year with internally prepared consolidated quarterly (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 quarterly 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 the Borrower'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 within forty-five (45) days after the end of each fiscal quarter of the Borrower with a fully executed compliance certificate substantially in the form of compliance certificate attached hereto as Schedule 5.3(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.

      5.4   Maintenance of Existence . Take all necessary action to maintain the Borrower's and the Guarantor'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.

      5.5   Maintenance of Property, Plant and Equipment . Maintain the Borrower's and the Guarantor's property, plant and equipment in good working order, subject only to reasonable wear and tear and make all necessary repairs thereto and replacements therefor so that