Document:

exv4w1

Exhibit 4.1

EQUITY ONE, INC.,

ISSUER,

THE

GUARANTORS

SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO

AND

U.S. BANK NATIONAL ASSOCIATION, AS

TRUSTEE

 

SUPPLEMENTAL INDENTURE NO. 12

DATED AS OF DECEMBER 9, 2009

 

$250,000,000

6.25% SENIOR NOTES DUE 2014

 

 

     SUPPLEMENTAL INDENTURE NO. 12, dated as of December 9, 2009 (this “Supplemental
Indenture”), among Equity One, Inc., a corporation duly organized and existing under the laws
of the State of Maryland (the “Company”), each of the Guarantors set forth on the signature
pages attached hereto (the “Guarantors”), and U.S. Bank National Association, as successor
to SunTrust Bank (formerly known as SunTrust Bank, Atlanta), a national banking corporation duly
organized and existing under the laws of the United States, as trustee (the “Trustee”).

R E C I T A L S

     WHEREAS, the Company, as successor by merger to IRT Property Company, and the Trustee have
heretofore entered into an Indenture dated as of September 9, 1998 (the “Original
Indenture” and as amended, supplemented or otherwise modified through the date hereof, the
“Indenture”), which has been filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, as an exhibit to the Company’s Registration Statement on Form
S-3 (Registration No. 333-132227), providing for the issuance from time to time of senior debt
securities of the Company;

     WHEREAS, Section 901(7) of the Indenture permits the Company and the Trustee to enter into an
indenture supplemental to the Indenture to establish the form or terms of Securities of any series
as provided by Sections 201 and 301 of the Indenture;

     WHEREAS, the Guarantors will provide the guaranty herein set forth (the “Guaranty”) of
the Obligations (as defined herein);

     WHEREAS, Sections 901(6) and 901(10) of the Indenture permit the Company and the Trustee to
enter into indentures supplemental thereto without the consent of any Holder of Securities to
evidence the Guaranty of each Guarantor and to make any change to the Indenture, provided that such
change does not adversely affect the interests of the Holders of Securities of any series or any
related coupons in any material respect;

     WHEREAS, each Guarantor has determined that its execution, delivery and performance of this
Supplemental Indenture directly benefits, and are within the purposes and best interests of, such
Guarantor;

     WHEREAS, the Board of Directors of the Company has duly adopted resolutions authorizing the
Company to execute and deliver this Supplemental Indenture and the Board of Directors (or
equivalent governing body) of each Guarantor has duly adopted resolutions authorizing such
Guarantor to execute and deliver this Supplemental Indenture; and

     WHEREAS, all other conditions and requirements necessary to make this Supplemental Indenture,
when duly executed and delivered, a valid and binding agreement in accordance with its terms and
for the purposes herein expressed, have been performed and fulfilled.

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

 

     For and in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and each Guarantor agrees as
follows:

ARTICLE ONE

DEFINITIONS

     SECTION 1.1. Definitions. For all purposes of this Supplemental Indenture, except as otherwise expressly provided for
or unless the context otherwise requires:

          (a) capitalized terms used but not defined herein shall have the respective meanings assigned
to them in the Indenture;

          (b) all references herein to Articles and Sections refer to the corresponding Articles and
Sections of this Supplemental Indenture; and

          (c) as used herein the following terms have the following meanings:

     “Acquired Debt” means Debt of a Person (i) existing at the time such Person becomes a
Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each
case, other than Debt incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person becomes a Subsidiary.

     “Annual Service Charge” for any period means the maximum amount which is payable
during such period for interest on, and the amortization during such period of any original issue
discount of, Debt of the Company and its Subsidiaries and the amount of dividends which are payable
during such period in respect of any Disqualified Stock.

     “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which banking institutions in the City of New York or in the City of Atlanta
are authorized or required by law, regulation or executive order to close.

     “Capital Stock” means, with respect to any Person, any capital stock (including
preferred stock), shares, interest, participations or other ownership interest (however designated)
of such Person and any rights (other than debt securities convertible into or exchangeable for
capital stock), warrants or options to purchase any thereof.

     “Consolidated Income Available for Debt Service” for any period means Earnings from
Operations of the Company and its Subsidiaries plus amounts which have been deducted, and minus
amounts which have been added, for the following (without duplication): (a) interest on Debt of the
Company and its Subsidiaries, (b) provision for taxes of the Company and its Subsidiaries based on
income, (c) amortization of debt discount, (d) provisions for gains and losses on properties and
property depreciation and amortization, (e) the effect of any noncash charge resulting from a
change in accounting principles in determining Earnings from Operations for such period and (f)
amortization of deferred charges.

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     “Debt” of the Company or any Subsidiary means any indebtedness (without duplication)
of the Company or any Subsidiary, whether or not contingent, in respect of (i) money borrowed or
evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness for borrowed money
secured by any mortgage, lien, charge, pledge, or security interest of any kind existing on
property owned by the Company or any Subsidiary (each securing such debt, an
“Encumbrance”), (iii) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the balance deferred and unpaid
of the purchase price of any property or services, except any such balance that constitutes an
accrued expense or trade payable, or all conditional obligations or obligations under any title
retention agreement, (iv) the principal amount of all obligations of the Company or any Subsidiary
with respect to redemption, repayment or other repurchase of any Disqualified Stock or (v) any
lease of property by the Company or any Subsidiary as lessee which is reflected on the Company’s
consolidated balance sheet as a capitalized lease in accordance with GAAP, to the extent, in the
case of items of indebtedness under (i) through (iii) above, that any such items (other than
letters of credit) would appear as a liability on the Company’s consolidated balance sheet in
accordance with GAAP, and also includes, to the extent not otherwise included, any obligations by
the Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business), Debt of another Person
(other than the Company or any Subsidiary) (it being understood that Debt shall be deemed to be
incurred by the Company or any Subsidiary whenever the Company or such Subsidiary shall create,
assume, guarantee or otherwise become liable in respect thereof).

     “Disqualified Stock” means, with respect to any Person, any Capital Stock of such
Person which by the terms of such Capital Stock (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the happening of any event or
otherwise (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise (other than Capital Stock which is redeemable solely in exchange for common stock), (ii)
is convertible into or exchangeable or exercisable for Debt or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part (other than Capital Stock which
is redeemable solely in exchange for common stock), in each case on or prior to the Stated Maturity
of the Notes.

     “Earnings from Operations” for any period means net income excluding gains and losses
on sales of investments, extraordinary items, and net property valuation losses, as reflected in
the financial statements of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.

     “Encumbrance” has the meaning specified in the definition of “Debt” set forth in this
ýSection 1.1.

     “Financial Statements” has the meaning specified in Section 1009 of the Indenture.

     “Guaranteed Securities” means the Notes issued pursuant to this Supplemental
Indenture.

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     “Make-Whole Amount” means, in connection with any optional redemption or accelerated
payment of any Notes, the excess, if any, of (i) the aggregate present value as of the date of such
redemption or accelerated payment of each Dollar of principal being redeemed or
paid and the amount of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of each such Dollar if such redemption
or accelerated payment had not been made, determined by discounting, on a semi-annual basis (on the
basis of a 360-day year consisting of twelve 30-day months), such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated payment had not
been made to the date of redemption or accelerated payment, over (ii) the aggregate principal
amount of the Notes being redeemed or paid.

     “Notes” has the meaning specified in ýSection 2.1 hereof.

     “Obligations” means (x) all payment and performance obligations of the Company (i)
under the Indenture with respect to the Guaranteed Securities, (ii) under the Guaranteed Securities
and (iii) as a result of the issuance of the Guaranteed Securities and (y) the obligation to pay an
amount equal to the amount of any and all damages which the Trustee and the Holders, or any of
them, may suffer by reason of a breach by either the Company or any other obligor of any
obligation, covenant or undertaking under (i) the Indenture with respect to the Guaranteed
Securities or (ii) the Guaranteed Securities.

     “Redemption Price” has the meaning specified in Section 2.5 hereof.

     “Reinvestment Rate” means 0.50% (one half of one percent) plus the arithmetic mean of
the yields under the heading “Week Ending” published in the most recent Statistical Release under
the caption “Treasury Constant Maturities” for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the principal being
redeemed or paid. If no maturity exactly corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding in each of such relevant periods to the nearest
month. For the purposes of calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount shall be used.

     “Statistical Release” means the statistical release designated “H.15(519)” or any
successor publication which is published weekly by the Board of Governors of the Federal Reserve
System and which reports yields on actively traded United States government securities adjusted to
constant maturities, or, if such statistical release is not published at the time of any
determination hereunder, then such other reasonably comparable index which shall be designated by
the Company.

     “Subsidiary” means (i) a corporation, partnership, joint venture, limited liability
company or other Person the majority of the shares, if any, of the nonvoting capital stock or other
equivalent ownership interests of which (except directors’ qualifying shares) are at the time
directly or indirectly owned by the Company and/or any other Subsidiary or Subsidiaries, and the
majority of the shares of the voting capital stock or other equivalent ownership interests of which
(except directors’ qualifying shares) are at the time directly or indirectly owned by the Company
and/or any other Subsidiary or Subsidiaries and (ii) any Person the accounts of which are
consolidated with the Company’s accounts.

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     “Total Assets” as of any date means the sum of (i) the Undepreciated Real Estate
Assets and (ii) all other assets of the Company and its Subsidiaries determined in accordance with
GAAP (but excluding accounts receivable and intangibles).

     “Total Unencumbered Assets” means the sum of (i) those Undepreciated Real Estate
Assets not subject to an Encumbrance for borrowed money and (ii) all other assets of the Company
and its Subsidiaries not subject to an Encumbrance for borrowed money determined in accordance with
GAAP (but excluding accounts receivable and intangibles).

     “Undepreciated Real Estate Assets” as of any date means the cost (original cost plus
capital improvements) of real estate assets of the Company and its Subsidiaries on such date,
before depreciation and amortization determined on a consolidated basis in accordance with GAAP.

     “Unsecured Debt” means Debt which is not secured by any Encumbrance upon any of the
properties of the Company or any Subsidiary

ARTICLE TWO

THE SERIES OF NOTES

     SECTION 2.1. Title of the Securities.

     There shall be a series of Securities designated the 6.25% Senior Notes due 2014 (the
“Notes”).

     SECTION 2.2. Limitation on Aggregate Principal Amount.

     The aggregate principal amount of the Notes shall be limited to $250,000,000 (the “Initial
Original Principal Amount”). Notwithstanding the foregoing, the Company, without the consent
of any Holders of Securities or coupons, by Board Resolutions or indentures supplemental to the
Indenture from time to time may reopen such series of Notes and issue additional Notes in an
aggregate principal amount as set forth in any such Board Resolution or indenture supplemental to
the Indenture which additional Notes shall be fungible with any previously issued Notes to the
extent set forth in such Board Resolutions or indenture supplemental to the Indenture. Except as
provided in this Section, any such Board Resolutions or indentures supplemental to the Indenture
and in Section 306 of the Indenture, the Company shall not execute and the Trustee shall not
authenticate or deliver Notes in excess of the Initial Original Principal Amount.

     Nothing contained in this ýSection 2.2 or elsewhere in this Supplemental Indenture, or in the
Notes, is intended to or shall limit execution by the Company or authentication or delivery by the
Trustee of the Notes under the circumstances contemplated in Sections 303, 304, 306, 906 and 1305
of the Indenture.

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     SECTION 2.3. Interest and Interest Rates; Maturity Date of Notes.

     The Notes will bear interest at a rate of 6.25% per annum from December 9, 2009 or from the
immediately preceding Interest Payment Date to which interest has been paid or duly provided for,
payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2010
(each, an “Interest Payment Date”), to the Person in whose name such Note is registered at
the close of business on June 1 or December 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date (each, a “Regular Record Date”). Interest will be
computed on the basis of a 360-day year composed of twelve 30-day months. The interest so payable
on any Note which is not punctually paid or duly provided for on any Interest Payment Date shall
forthwith cease to be payable to the Person in whose name such Note is registered on the relevant
Regular Record Date, and such Defaulted Interest shall instead be payable to the Person in whose
name such Note is registered on the Special Record Date or other specified date determined in
accordance with the Indenture.

     If any Interest Payment Date or Maturity falls on a day that is not a Business Day, the
required payment shall be made on the next Business Day as if it were made on the date such payment
was due and no interest shall accrue on the amount so payable for the period from and after such
Interest Payment Date or Maturity, as the case may be.

     The Notes will mature on December 15, 2014.

     SECTION 2.4. Limitations on Incurrence of Debt.

          (a) The Company will not, and will not permit any Subsidiary to, incur any Debt if,
immediately after giving effect to the incurrence of such additional Debt and the application of
the proceeds thereof, the aggregate principal amount of all outstanding Debt of the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP is greater than 60% of the
sum of (without duplication) (i) the Total Assets of the Company and its Subsidiaries as of the end
of the latest calendar quarter covered in the Company’s Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the Commission (or, if such
filing is not permitted under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Debt and (ii) the purchase price of any real estate assets or mortgages receivable
acquired, and the amount of any securities offering proceeds received (to the extent such proceeds
were not used to acquire real estate assets or mortgages receivable or used to reduce Debt), by the
Company or any Subsidiary since the end of such calendar quarter, including those proceeds obtained
in connection with the incurrence of such additional Debt.

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          (b) In addition to the limitation set forth in subsection (a) of this ýSection 2.4 the Company
will not, and will not permit any Subsidiary to, incur any Debt if the ratio of Consolidated Income
Available for Debt Service to the Annual Service Charge for the four consecutive fiscal quarters
most recently ended prior to the date on which such additional Debt is to be incurred shall have
been less than 1.5:1, on a pro forma basis after giving effect thereto and to the application of
the proceeds therefrom, and calculated on the assumption that (i) such Debt and any other Debt
incurred by the Company and its Subsidiaries since the first day of such four-quarter period and
the application of the proceeds therefrom, including to refinance other Debt, had occurred at the
beginning of such period; (ii) the repayment or retirement of any other Debt
by the Company and its Subsidiaries since the first day of such four-quarter period had been
repaid or retired at the beginning of such period (except that, in making such computation, the
amount of Debt under any revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period); (iii) in the case of Acquired Debt or Debt incurred in
connection with any acquisition since the first day of such four-quarter period, the related
acquisition had occurred as of the first day of such period with the appropriate adjustments with
respect to such acquisition being included in such pro forma calculation; and (iv) in the case of
any acquisition or disposition by the Company or its Subsidiaries of any asset or group of assets
since the first day of such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related repayment of Debt had
occurred as of the first day of such period with the appropriate adjustments with respect to such
acquisition or disposition being included in such pro forma calculation.

          (c) In addition to the limitations set forth in subsections (a) and (b) of this ýSection 2.4,
the Company will not, and will not permit any Subsidiary to, incur any Debt secured by any
Encumbrance, if, immediately after giving effect to the incurrence of such additional Debt and the
application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis which is secured by any Encumbrance is greater
than 40% of the sum of (without duplication) (i) the Total Assets of the Company and its
Subsidiaries as of the end of the latest calendar quarter covered in the Company’s Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not permitted under the Exchange Act, with the Trustee) prior to
the incurrence of such additional Debt and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering proceeds received (to the
extent that such proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Debt), by the Company or any Subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such additional Debt.

          (d) The Company and its Subsidiaries may not at any time own Total Unencumbered Assets equal
to less than 150% of the aggregate outstanding principal amount of the Unsecured Debt of the
Company and its Subsidiaries on a consolidated basis.

          (e) For purposes of this ýSection 2.4, Debt shall be deemed to be “incurred” by the
Company or a Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or
otherwise become liable in respect thereof.

     SECTION 2.5. Optional Redemption.

          (a) Subject to this ýSection 2.5, the Notes may be redeemed at any time at the option and in
the sole discretion of the Company, in whole or from time to time in part, at a redemption price
equal to the sum of (i) the principal amount of the Notes being redeemed plus accrued interest
thereon to the redemption date and (ii) the Make-Whole Amount, if any, with respect to such Notes
(the “Redemption Price”). If (i) notice has been given as provided in Sections ý2.5(b) and
ý(c) and (ii) funds for the redemption of any Notes called for redemption shall have been made
available as provided in the Indenture on the redemption date referred to in such
notice, such Notes will cease to bear interest on the date fixed for such redemption specified
in such notice, and the only right of the Holders of the Notes will be to receive payment of the
Redemption Price upon surrender of the Notes in accordance with such notice.

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          (b) Notice of any optional redemption of any Notes will be given to Holders at their
addresses, as shown in the Security Register, not more than 60 nor less than 30 days prior to the
date fixed for redemption. The notice of redemption will specify, in addition to the items required
by the Indenture, the Redemption Price and the principal amount of the Notes held by each Holder to
be redeemed.

          (c) If less than all the Notes are to be redeemed at the option and in the sole discretion of
the Company, the Company will notify the Trustee in writing at least 45 days prior to giving the
notice of redemption required by ýSection 2.5(b) (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of Notes to be redeemed and their redemption date. The
Trustee shall select not more than 60 days prior to the redemption date, in such manner as it shall
deem fair and appropriate, in its sole discretion, Notes to be redeemed in whole or in part.

     SECTION 2.6. Places of Payment.

     The Places of Payment where the Notes may be presented or surrendered for payment, where the
Notes may be surrendered for registration of transfer or exchange and where notices and demands to
and upon the Company in respect of the Notes and the Indenture may be served shall be in (i) the
Borough of Manhattan, The City of New York, New York, and the office or agency for such purpose
shall initially be U.S. Bank National Association, Attention: Corporate Trust Services, 100 Wall
Street, 16th Floor New York, New York 10005 and (ii) the City of Atlanta, Georgia, and
the office or agency for such purpose shall initially be U.S. Bank National Association, Attention:
Corporate Trust Services, Two Midtown Plaza, 1349 W. Peachtree St. NW., Suite 1050, Atlanta,
Georgia 30309.

     SECTION 2.7. Method of Payment.

     Payment of the principal of and interest on the Notes will be made at the office or agency of
the Company maintained for that purpose in the Borough of Manhattan, The City of New York (which
shall initially be an office or agency of the Trustee), in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company, payments of principal and interest on
the Notes may be made (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) by wire transfer to an account maintained by
the Person entitled thereto located inside the United States.

     SECTION 2.8. Currency.

     Principal and interest on the Notes shall be payable in Dollars.

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     SECTION 2.9. Registered Securities; Global Form.

     The Notes shall be issuable and transferable in fully registered form as Registered
Securities, without coupons. The Notes shall be issued in the form of one or more permanent global
Securities. The depositary for the Notes shall be DTC. The Notes shall not be issuable in
definitive form except as provided in Section 305 of the Indenture.

     SECTION 2.10. Form of Notes.

     The Notes shall be substantially in the form attached as Exhibit A hereto.

     SECTION 2.11. Security Registrar and Paying Agent.

     The Trustee shall initially serve as Security Registrar and Paying Agent for the Notes.

     SECTION 2.12. Defeasance.

     The provisions of Sections 1402 and 1403 of the Indenture, together with the other provisions
of Article XIV of the Indenture, shall be applicable to the Notes. The provisions of Section 1403
of the Indenture shall apply to the covenants set forth in Section 2.4 of this Supplemental
Indenture.

ARTICLE THREE

GUARANTY

     SECTION 3.1. Guaranty. Each Guarantor hereby unconditionally guarantees to the Trustee and the Holders full and
prompt payment and performance when due, whether at maturity, by acceleration or otherwise, of all
Obligations. Each Obligation shall rank pari passu with each other Obligation.

     SECTION 3.2. Obligations Several. Regardless of whether any proposed Guarantor or any other Person or Persons is, are or shall
become in any other way responsible to the Trustee and the Holders, or any of them, for or in
respect of the Obligations or any part thereof, and regardless of whether or not any Person or
Persons now or hereafter responsible to the Trustee and the Holders, or any of them, for the
Obligations or any part thereof, whether under the Guaranty or otherwise, shall cease to be so
liable, each Guarantor hereby declares and agrees that the Guaranty provided thereby is and shall
continue to be a several obligation (as well as a joint one), shall be a continuing guaranty and
shall be operative and binding on such Guarantor. Each Guarantor hereby agrees that it will not
exercise any rights which it may acquire by way of subrogation under the Guaranty, by any payment
made hereunder or otherwise, unless and until all of the Obligations shall have been paid in full.
If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when
all of the Obligations shall not have been paid in full, such amount shall be held in trust for the
benefit of the Trustee and the Holders and shall forthwith be paid to the Trustee to be credited
and applied upon the Obligations, whether matured or unmatured, in accordance with the terms of the
Indenture, but subject to the provisions of ýSection 3.7 hereof.

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     SECTION 3.3. Guaranty Final. Upon the execution and delivery of this Supplemental Indenture by the parties hereto, this
Supplemental Indenture shall be deemed to be finally executed and delivered by the parties hereto
and shall not be subject to or affected by any
promise or condition affecting or limiting any Guarantor’s liability, and no statement,
representation, agreement or promise on the part of the Trustee, the Holders, the Company, or any
of them, or any officer, employee or agent thereof, unless contained herein forms any part of this
Supplemental Indenture or has induced the making hereof or shall be deemed in any way to affect any
Guarantor’s liability hereunder. The Guarantors’ obligations hereunder shall remain in full force
and effect until all Obligations shall have been paid in full.

     SECTION 3.4. Dealings With the Company. The Company, the Trustee and the Holders, or any of them, may, from time to time, without
exonerating or releasing any Guarantor in any way under the Guaranty, (i) take such further or
other security or securities for the Obligations or any part thereof as the Trustee and the
Holders, or any of them, may deem proper, consistent with the Indenture, (ii) release, discharge,
abandon or otherwise deal with or fail to deal with any Guarantor of the Obligations or any
security or securities therefor or any part thereof now or hereafter held by the Trustee and the
Holders, or any of them, as the Trustee and the Holders, or any of them, may deem proper,
consistent with the Indenture, or (iii) consistent with the Indenture, amend, modify, extend,
accelerate or waive in any manner any of the provisions, terms, or conditions of the Indenture and
the Guaranteed Securities, all as the Company, the Trustee and the Holders, or any of them, may
consider expedient or appropriate in their sole discretion. Without limiting the generality of the
foregoing, or of ýSection 3.5 hereof, it is understood that the Company, the Trustee and the
Holders, or any of them, may, without exonerating or releasing any Guarantor, give up, or modify or
abstain from perfecting or taking advantage of any security for the Obligations and accept or make
any compositions or arrangements, and realize upon any security for the Obligations when, and in
such manner, as the Trustee and the Holders, or any of them, may deem expedient, consistent with
the Indenture, all without notice to any Guarantor.

     SECTION 3.5. Guaranty Unconditional. Each Guarantor acknowledges and agrees that no change in the nature or terms of the
Obligations, the Indenture or the Guaranteed Securities, or other agreements, instruments or
contracts evidencing, related to or attendant with the Obligations (including any novation), nor
any determination of lack of enforceability thereof, shall discharge all or any part of the
liabilities and obligations of such Guarantor pursuant to the Guaranty; it being the purpose and
intent of the Guarantors, the Company, the Trustee and the Holders that the covenants, agreements
and all liabilities and obligations of the Guarantors hereunder are absolute, unconditional and
irrevocable under any and all circumstances. Without limiting the generality of the foregoing, each
Guarantor agrees that until each and every one of the covenants and agreements of this Supplemental
Indenture is fully performed, such Guarantor’s undertakings hereunder shall not be released, in
whole or in part, by any action or thing which might, but for this ýSection 3.5, be deemed a legal
or equitable discharge of a surety or guarantor, or by reason of any waiver or omission of the
Company, the Trustee and the Holders, or any of them, or their failure to proceed promptly or
otherwise, or by reason of any action taken or omitted by the Company, the Trustee and the Holders,
or any of them, whether or not such action or failure to act varies or increases the risk of, or
affects the rights or remedies of, such Guarantor or by reason of any further dealings among the
Company, the Trustee and the Holders, or any of them, or any other guarantor or surety, and each
Guarantor hereby expressly waives and surrenders any defense to its liability hereunder, or any
right of counterclaim or offset of any nature or description which it may have or which may exist
based upon, and shall
be deemed to have consented to, any of the foregoing acts, omissions, things, agreements or
waivers.

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     SECTION 3.6. Bankruptcy. Each Guarantor agrees that upon the bankruptcy or winding up or other distribution of
assets of the Company or any Subsidiary of the Company (other than such Guarantor) or of any other
Guarantor or surety or guarantor for the Obligations, the rights of the Trustee and the Holders, or
any of them, against such Guarantor shall not be affected or impaired by the omission of the
Trustee or the Holders, or any of them, to prove its or their claim, as appropriate, or to prove
its or their full claim, as appropriate, and the Trustee and the Holders may prove such claims as
they see fit and may refrain from proving any claim and in their respective discretion they may
value as they see fit or refrain from valuing any security held by the Trustee and the Holders, or
any of them, without in any way releasing, reducing or otherwise affecting the liability to the
Trustee and the Holders of such Guarantor. If acceleration of the time for payment of any amount
payable by the Company under the Indenture or the Guaranteed Securities of any series is stayed
upon the insolvency, bankruptcy or reorganization of the Company, all such amounts otherwise
subject to acceleration under the terms of the Indenture or the Guaranteed Securities of that
series shall nonetheless be payable by each Guarantor hereunder forthwith on demand by the Trustee
made at the written request of the Holders of not less than 25% in principal amount of the
outstanding Guaranteed Securities of that series. If at any time any payment of the principal of
or interest on any Guaranteed Security or any other amount payable by the Company under the
Indenture is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company, any other Guarantor or otherwise, the Guarantors’ obligations
hereunder with respect to such payment shall be reinstated as though such payment had been due but
not made at such time.

     SECTION 3.7. Application of Payments. The Trustee hereby acknowledges and agrees, and each Holder shall be deemed to hereby
acknowledge and agree, that to the extent any of the Existing Senior Obligations (as defined below)
is then in default, any funds, payments, claims or distributions (the “Guaranty Proceeds”)
actually received hereunder shall be made available for distribution equally and ratably (based on
the principal amounts then outstanding) among (a) the holders of the Obligations and (b) the
holders of the Existing Senior Obligations. For purposes hereof, “Existing Senior Obligations”
shall mean Debt for borrowed money owed or guaranteed in connection with any unsecured and
non-subordinated Debt for borrowed money of the Company or the Guarantor (aa) issued in offerings
registered under the Securities Act of 1933, as amended or in placements exempt from registration
pursuant to Rule 144A or Regulation S thereunder, or (bb) otherwise incurred, which is, in either
case, outstanding on the date hereof or incurred hereafter in accordance with the Indenture
(including, without limitation, the Debt of the Company incurred in connection with the Second
Amended and Restated Credit Agreement dated as of October 17, 2008, as amended or supplemented from
time to time, among the Company, Wells Fargo Bank, National Association, as Administrative Agent
under the Credit Agreement, and the lenders named therein, and certain other lenders party thereto
from time to time, or any replacement facility thereof). This ýSection 3.7 shall not apply to any
payments, funds, claims or distributions received by the Trustee or any Holder directly or
indirectly from the Company or any other Person other than from the Guarantors hereunder. Each
Guarantor acknowledges and agrees with the Trustee and each Holder as follows:

11

 

          (a) to the extent any Guaranty Proceeds are distributed to the holders of the Existing Senior
Obligations, the Obligations shall not be deemed reduced by any such distribution (other than a
distribution made in respect of the Guaranteed Securities), and the Guarantors will continue to
make payments pursuant to the Guaranty until such time as the Obligations have been paid in full
after taking into effect any distributions of Guaranty Proceeds to the holders of Existing Senior
Obligations;

          (b) nothing contained herein shall be deemed to limit, modify or alter the rights of the
Trustee and the Holders or be deemed to subordinate the Obligations to the Existing Senior
Obligations, nor give to any holder of Existing Senior Obligations any rights of subrogation;

          (c) nothing contained herein shall be deemed for the benefit of any holders of Existing Senior
Obligations nor shall anything be construed to impose on the Trustee or any Holder any fiduciary
duties, obligations or responsibilities to the holders of the Existing Senior Obligations; and

          (d) the Guaranty is for the sole benefit of the Trustee and the Holders and their respective
successors and assigns, and any amounts received by the Trustee and the Holders, or any of them,
from whatever source and applied toward the payment of the Obligations shall be applied in such
order of application as is set forth in the Indenture, if any.

     SECTION 3.8. Waivers by Guarantors. Each Guarantor hereby expressly waives:
(a) notice of acceptance of the Guaranty, (b) notice of the existence or creation of all or
any of the Obligations, (c) presentment, demand, notice of dishonor, protest, and all other notices
whatsoever, (d) all diligence in collection or protection of or realization upon the Obligations or
any part thereof, any obligation hereunder, or any security for any of the foregoing and (e) all
rights of subrogation, indemnification, contribution and reimbursement against the Company, all
rights to enforce any remedy the Trustee and the Holders, or any of them, may have against the
Company, and any benefit of, or right to participate in, any collateral or security now or
hereinafter held by the Trustee and the Holders, or any of them, in respect of the Obligations,
even upon payment in full of the Obligations. Any money received by any Guarantor in violation of
this ýSection 3.8 shall be held in trust by such Guarantor for the benefit of the Trustee and the
Holders. If a claim is ever made upon the Trustee and the Holders, or any of them, for the
repayment or recovery of any amount or amounts received by any of them in payment of any of the
Obligations and the Trustee or the Holders repays all or part of such amount by reason of (a) any
judgment, decree, or order of any court or administrative body having jurisdiction over the Trustee
or the Holders or any of its or their property, or (b) any good faith settlement or compromise of
any such claim effected by the Trustee or the Holders with any such claimant, including the
Company, then in such event each Guarantor agrees that any such judgment, decree, order,
settlement, or compromise shall be binding upon such Guarantor, notwithstanding any revocation
hereof or the cancellation of any promissory note or other instrument evidencing any of the
Obligations, and such Guarantor shall be and remain obligated to the Trustee and the Holders
hereunder for the amount so repaid or recovered to the same extent as if such amount had never
originally been received thereby.

12

 

     SECTION 3.9. Remedies Cumulative. No delay by the Trustee and the Holders, or any of them, in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by the Trustee and the
Holders, or any of them, of any right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy. No action by the Trustee and the Holders, or any of
them, permitted hereunder shall in any way impair or affect the Guaranty. For the purpose of the
Guaranty, the Obligations shall include, without limitation, all Obligations of the Company to the
Trustee and the Holders, notwithstanding any right or power of any third party, individually or in
the name of the Company or any other Person, to assert any claim or defense as to the invalidity or
unenforceability of any such Obligation, and no such claim or defense shall impair or affect the
obligations of any Guarantor hereunder.

     SECTION 3.10. Miscellaneous. The Guaranty is a guaranty of payment and not of collection. In the event of a demand upon
any Guarantor under the Guaranty, such Guarantor shall be held and bound to the Trustee and the
Holders directly as debtor in respect of the payment of the amounts hereby guaranteed. All
reasonable costs and expenses, including attorneys’ fees and expenses, incurred by the Trustee and
the Holders, or any of them, in obtaining performance of or collecting payments due under the
Guaranty shall be deemed part of the Obligations guaranteed hereby. The provisions of the Guaranty
are for the benefit of the Trustee and the Holders and may not be relied upon or enforced by any
other Person and, as to enforcement, may only be enforced in accordance with this Supplemental
Indenture and the Indenture.

     SECTION 3.11. Benefit to Guarantor. Each Guarantor expressly represents and acknowledges that the issuance and sale of the
Guaranteed Securities under the Indenture has been, and will be, of direct interest, benefit and
advantage to such Guarantor.

     SECTION 3.12. Solvency. Each Guarantor expressly represents and warrants that as of the date hereof and after
giving effect to the transactions contemplated by the Indenture (a) the capital of such Guarantor
will not be unreasonably small to conduct its business; (b) such Guarantor will not have incurred
debts, or have intended to incur debts, beyond its ability to pay such debts as they mature; and
(c) the present fair salable value of the assets of such Guarantor is greater than the amount that
will be required to pay its probable liabilities (including debts) as they become absolute and
matured. For purposes of this ýSection 3.12, “debt” means any liability on a claim, and “claim”
means (x) the right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or
unsecured, or (y) the right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, undisputed, secured or unsecured.

     SECTION 3.13. Additional Guarantors; Release of Guarantors. Any Subsidiary of the Company or any other entity may become a party to this Guaranty by
executing and delivering a Supplemental Indenture providing for a guaranty of the Obligations under
the terms of this Article Three, provided that such Supplemental Indenture conforms to the
requirements of Article Nine of the Indenture. Under certain circumstances, a Guarantor may be
released by the Trustee of its obligations under this Guaranty. Each other Guarantor consents and
agrees to any
such releases and agrees that no such release shall affect its obligations hereunder, except
as to the Guarantor so released.

13

 

     SECTION 3.14. Contribution Agreement. To the extent that any Guarantor shall, under the Guaranty, make a payment (a “Guarantor
Payment”) of a portion of the Obligations, then, without limiting its rights of subrogation
against the Company, such Guarantor shall be entitled to contribution and indemnification from, and
be reimbursed by, each of the other Guarantors and the Company (each of the foregoing referred to
herein individually as a “Contributing Party” and collectively as the “Contributing
Parties”) in an amount, for each such Contributing Party, equal to a fraction of such Guarantor
Payment, the numerator of which fraction is such Contributing Party’s Allocable Amount (as defined
below) and the denominator of which is the sum of the Allocable Amounts of all of the Contributing
Parties.

     As of any date of determination, the “Allocable Amount” of each Contributing Party
shall be equal to the maximum amount of liability which could be asserted against such Contributing
Party hereunder with respect to the applicable Guarantor Payment without (i) rendering such
Contributing Party “insolvent” within the meaning of Section 101(31) of the Federal Bankruptcy Code
(the “Bankruptcy Code”) or Section 2 of either the Uniform Fraudulent Transfer Act (the
“UFTA”) or the Uniform Fraudulent Conveyance Act (the “UFCA”), (ii) leaving such
Contributing Party with unreasonably small capital, within the meaning of Section 548 of the
Bankruptcy Code or Section 4 of the UFTA or Section 5 of the UFCA, or (iii) leaving such
Contributing Party unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA or Section 6 of the UFCA or in any case, any successor
to the Bankruptcy Code or any such section thereof or any successor to the UFTA or the UFCA or any
such sections thereof.

     This Section 3.14 is intended only to define the relative rights of the Contributing Parties,
and nothing set forth in this Agreement is intended to or shall impair the obligations of the
Guarantors, jointly and severally, to pay any amounts, as and when the same shall become due and
payable in accordance with the terms of the Guaranty.

     The parties hereto acknowledge that the rights of contribution and indemnification hereunder
shall constitute assets in favor of each Guarantor to which such contribution and indemnification
is owing.

     This Section 3.14 shall continue in full force and effect and may not be terminated or
otherwise revoked by any Contributing Party until all of the Guaranteed Obligations shall have been
indefeasibly paid in full (in lawful money of the United States of America) and discharged and the
Indenture and Guaranteed Securities shall have been terminated.

     SECTION 3.15. NO NOVATION. THE PARTIES DO NOT INTEND THIS SUPPLEMENTAL INDENTURE, NOR THE TRANSACTIONS CONTEMPLATED
HEREBY, TO BE, AND THIS SUPPLEMENTAL INDENTURE AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT
BE CONSTRUED TO BE, A NOVATION OR WAIVER OF ANY OF THE OBLIGATIONS OWING BY ANY GUARANTOR OF ANY
OBLIGATIONS UNDER OR IN CONNECTION WITH ANY GUARANTY IN EXISTENCE AS OF THE DATE OF THIS
SUPPLEMENTAL INDENTURE.

14

 

ARTICLE FOUR

MISCELLANEOUS PROVISIONS

     SECTION 4.1. Ratification of Indenture. Except as expressly modified or amended hereby, the Indenture continues in full force and
effect and is in all respects confirmed and preserved.

     SECTION 4.2. Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the laws
of the State of Georgia. This Supplemental Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended and shall, to the extent applicable, be governed by such
provisions.

     SECTION 4.3. Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall together constitute but
one and the same instrument.

     SECTION 4.4. Notices. Any notice required or permitted hereunder or under the Indenture to be given or made to the
Company or a Guarantor shall be given or made in writing and mailed, first class postage prepaid,
(i) to the Company or (ii) to such Guarantor care of the Company, at the address of the Company set
forth below its signature hereon, or at any other address previously furnished in writing to the
Trustee and the Company by such Guarantor, with a copy to the Company given or made in accordance
with Section 105 of the Indenture.

     SECTION 4.5. Successors and Assigns. This Supplemental Indenture shall be binding upon the Company and each Guarantor, and their
respective successors and assigns and inure to the benefit of the respective successors and assigns
of the Trustee and the Holders.

     SECTION 4.6. Time of the Essence. Time is of the essence with regard to the Company’s and the Guarantors’ performance of their
respective obligations hereunder.

     SECTION 4.7. Rights of Holders Limited. Notwithstanding anything herein to the contrary, the rights of Holders with respect to this
Supplemental Indenture and the Guaranty shall be limited in the manner and to the extent the rights
of Holders are limited under the Indenture with respect to the Indenture and the Securities.

     SECTION 4.8. Rights and Duties of Trustee. The rights and duties of the Trustee shall be determined by the express provisions of the
Original Indenture and, except as expressly set forth in this Supplemental Indenture, nothing in
this Supplemental Indenture shall in any way modify or otherwise affect the Trustee’s rights and
duties thereunder. The Trustee makes no representation or warranty as to the validity of this
Supplemental Indenture and, except insofar as relates to the validity hereof with respect to the
Trustee specifically, the Trustee shall not be liable in connection therewith. The Trustee makes
no representation or warranty, express or implied, as to the accuracy or completeness of any
information contained in any offering or disclosure document related to the sale of the Securities,
except for such information that specifically pertains to the Trustee itself, or any information
incorporated therein by reference.

15

 

     SECTION 4.9. Amendment and Waiver. This Supplemental Indenture shall not be amended unless such amendment (i) complies with
the terms of the Indenture, (ii) is in writing
and (iii) is executed by each of the parties hereto. No alteration or waiver of this
Supplemental Indenture or of any of its terms, provisions or conditions shall be binding upon the
parties against whom enforcement is sought unless made in writing and signed by an authorized
officer of such party or its general partner, as applicable.

     SECTION 4.10. Conflicts. In the event of any conflict between the terms of this Supplemental Indenture and the terms
of the Indenture, the terms of this Supplemental Indenture shall control.

[Signatures on Next Page]

16

 

     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed by their respective officers hereunto duly authorized, all as of the day and year first
written above.

	 	 	 	 	 
	 	EQUITY ONE, INC., Issuer

 	 
	 	By:  	/s/ Arthur L. Gallagher
 	 
	 	 	Name:  	Arthur L. Gallagher 	 
	 	 	Title:  	Executive Vice President, General Counsel and Secretary
	 	 	Address:  	1600 N.E. Miami Gardens Drive

Miami, Florida 33179 	 
	 

	 	 	 	 	 
	 	GUARANTORS:

Cashmere Developments, Inc.

Centrefund Realty (U.S.) Corporation

Equity One (Commonwealth) Inc.

Equity One (Delta) Inc.

Equity One (Florida Portfolio) Inc.

Equity One (Louisiana Portfolio) LLC

Equity One (North Port) Inc.

Equity One (Northeast Portfolio) Inc.

Equity One (Point Royale) Inc.

Equity One (Sky Lake) Inc.

Equity One (Southeast Portfolio) Inc.

Equity One (Summerlin) Inc.

Equity One (Sunlake) Inc.

Equity One (Walden Woods) Inc.

Equity One Acquisition Corp.

Equity One Realty & Management FL, Inc.

Equity One Realty & Management NE, Inc.

Equity One Realty & Management SE, Inc.

 	 
	 	 	 
	 	 	 
	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                              /s/ Arthur L. Gallagher
 	 
	 	 	Name:  	Arthur L. Gallagher 	 
	 	 	Title:  	Vice President and Secretary 	 

17

 

	 	 	 	 	 

	 	 	 	 	 
	 	Gazit (Meridian) Inc.

IRT Alabama, Inc.

IRT Capital Corporation II

IRT Management Company

Louisiana Holding Corp.

Prosperity Shopping Center Corp.

Shoppes at Jonathan’s Landing, Inc.

Southeast U.S. Holdings Inc.

The Meadows Shopping Center, LLC

The Shoppes of Eastwood, LLC

 	 
	 	 	 
	 	 	 
	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                              /s/ Arthur L. Gallagher
 	 
	 	 	Name:  	Arthur L. Gallagher 	 
	 	 	Title:  	Vice President and Secretary
	 
	 
	 	IRT Partners, L.P. 	 
	 
	 	By: Equity One, Inc.
 	 

	 	 	 	 	 
	 	 	 
	 	By:  	                              /s/ Arthur L. Gallagher
 	 
	 	 	Name:  	Arthur L. Gallagher 	 
	 	 	Title:  	Executive Vice President, General

Counsel and Secretary 	 
	 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as Trustee

 	 
	 	By:  	/s/ George Hogan
 	 
	 	 	George Hogan 	 
	 	 	Vice President 	 

18

 

	 	 	 	 	 

EXHIBIT A TO SUPPLEMENTAL INDENTURE

     Unless this Certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to the Company (as defined below) or its agent for
registration of transfer, exchange or payment, and any certificate issued is registered in the name
of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

	 	 	 	 	 
	Registered No.
	 	Principal Amount
	 	CUSIP No.:
	-001-
	 	$250,000,000
	 	294752 AG5

EQUITY ONE, INC.

6.25% SENIOR NOTE DUE 2014

Unconditionally Guaranteed By The Guarantors Described Below

     EQUITY ONE, INC., a corporation duly organized and existing under the laws of the State of
Maryland (herein referred to as the “Company” which term shall include any successor
corporation under the Indenture hereinafter referred to), for value received, hereby promises to
pay to CEDE & CO., or registered assigns, upon presentation, the principal sum of TWO HUNDRED FIFTY
MILLION AND 00/100 DOLLARS on December 15, 2014, and to pay interest on the outstanding principal
amount thereon from December 9, 2009, or from the immediately preceding Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears on June 15 and December
15 of each year, commencing June 15, 2010, at the rate of 6.25% per annum, until the entire
principal hereof is paid or made available for payment. The interest so payable and punctually paid
or duly provided for on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Security is registered at the close of business on the Regular Record
Date for such interest which shall be the June 1 or December 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may either be paid to the Person in whose name this Security is registered at the close
of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of the Notes not more than 15 days and not less
than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of and interest on this Security will be made at the office or
agency maintained for that purpose in the City of New York, New York, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that at the option of
the Company payments of principal and interest on the Notes may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer to an account of the Person entitled thereto
located inside the United States.

A-1 

 

     Securities of this series (herein called the “Notes”) are one of a duly authorized
issue of securities of the Company, issued and to be issued in one or more series under the
Indenture, dated as of September 9, 1998, as supplemented by Supplemental Indenture No. 1, dated as
of September 9, 1998, Supplemental Indenture No. 2, dated as of November 1, 1999, Supplemental
Indenture No. 3, dated as of February 12, 2003, Supplemental Indenture No. 4, dated as of March 26,
2004, Supplemental Indenture No. 5, dated as of April 23, 2004, Supplemental Indenture No. 6, dated
as of May 20, 2005, Supplemental Indenture No. 7, dated as of September 20, 2005, Supplemental
Indenture No. 8 dated as of December 30, 2005, Supplemental Indenture No. 9 dated as of March 10,
2006, Supplemental Indenture No. 10 dated as of August 18, 2006, Supplemental Indenture No. 11,
dated as of April 18, 2007, and Supplemental Indenture No. 12, dated as of December 9, 2009
(“Supplemental Indenture No. 12”) (as so supplemented, herein called the
“Indenture”), among the Company, as successor to IRT Property Company, the Guarantors
listed in such Supplemental Indenture No. 12, and U.S. Bank National Association, as successor to
SunTrust Bank (formerly SunTrust Bank Atlanta), as trustee (herein called the “Trustee,”
which term includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the Guarantors, the Trustee
and the Holders of the Notes and of the terms upon which the Notes are authenticated and delivered.
This Security is one of the series designated in the first page hereof, limited in aggregate
principal amount to $250,000,000, except as otherwise permitted by the Indenture.

     The Notes may be redeemed at any time at the option and in the sole discretion of the Company,
in whole or from time to time in part, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued interest thereon to the redemption date and (ii)
the Make-Whole Amount, if any, with respect to such Notes (the “Redemption Price”). If (i)
notice has been given as provided in the next paragraph and (ii) funds for the redemption of the
Notes called for redemption shall have been made available as provided in the Indenture on the
redemption date referred to in such notice, such Notes will cease to bear interest on the date
fixed for such redemption specified in such notice, and the only right of the Holders of such Notes
will be to receive payment of the Redemption Price upon surrender of such Notes in accordance with
such notice.

     Notice of any optional redemption of any Notes will be given to Holders at their addresses, as
shown in the Security Register, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the Redemption Price and the
principal amount of the Notes held by each Holder to be redeemed. If less than all the Notes are to
be redeemed at the option and in the sole discretion of the Company, the Company will notify the
Trustee in writing at least 45 days prior to giving notice of redemption (or such shorter period as
is satisfactory to the Trustee) of the aggregate principal amount of the Notes to be redeemed and
their redemption date. The Trustee shall select not more than 60 days prior to the redemption date,
in such manner as it shall deem fair and appropriate, in its sole discretion, the Notes to be
redeemed in whole or in part.

A-2 

 

     The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of
the Company on this Security and (b) certain restrictive covenants and the related defaults and
Events of Default applicable to the Company, in each case, upon compliance by the Company with
certain conditions set forth in the Indenture, which provisions apply to this Security.

     If an Event of Default with respect to the Notes shall occur and be continuing, the principal
of the Notes may be declared due and payable in the manner and with the effect provided in the
Indenture.

     As provided in and subject to the provisions of the Indenture, the Holder of this Security
shall not have the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall
have previously given written notice to the Trustee of a continuing Event of Default with respect
to the Notes, the Holders of not less than 25% in principal amount of the Notes at the time
Outstanding shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee indemnity satisfactory to the Trustee and
the Trustee shall not have received from the Holders of a majority in principal amount of the Notes
at the time Outstanding a direction inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or any interest on or after the respective due
dates expressed herein.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected thereby. The
Indenture also contains provisions permitting the Holders of specified percentages in principal
amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all
Securities of such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration of transfer hereof
or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.

     No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the Company in any Place of Payment where
the principal of and interest on this are payable duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security Registrar duly
executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more
new Securities of this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.

A-3 

 

     The Notes are issuable only in registered form without coupons in denominations of $2,000 and
any integral multiple of $1,000. As provided in the Indenture and subject to certain limitations
therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a
different authorized denomination, as requested by the Holder surrendering the same.

     No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

     No recourse under or upon any obligation, covenant or agreement contained in the Indenture or
in this Security, or because of any indebtedness evidenced hereby or thereby, shall be had against
any promoter, as such, or against any past, present or future shareholder, officer or director, as
such, of the Company or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement of any assessment
or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and
released by the acceptance of this Security by the Holder thereof and as part of the consideration
for the issue of the Notes.

     All capitalized terms used in this Security which are not defined herein shall have the
meanings assigned to them in the Indenture.

     THE INDENTURE AND THE NOTES, INCLUDING THIS SECURITY, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.

     Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused “CUSIP” numbers to be printed on the Notes as a
convenience to the Holders of such Notes. No representation is made as to the correctness or
accuracy of such CUSIP numbers as printed on the Notes, and reliance may be placed only on the
other identification numbers printed hereon.

     Unless the certificate of authentication hereon has been executed by or on behalf of the
Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture
or be valid or obligatory for any purpose.

A-4 

 

     IN WITNESS WHEREOF, EQUITY ONE, INC. has caused this instrument to be duly executed under its
corporate seal.

     Dated: December 9, 2009

	 	 	 	 	 
	 	EQUITY ONE, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	[Corporate Seal]

 	 
	 	Attest:
 	 
	 	Arthur L. Gallagher 	 
	 	Secretary 	 
	 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION:

This is one of the Notes referred to in the within-mentioned Indenture.

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as Trustee

 	 
	 	By:  	
 	 
	 	 	George Hogan 	 
	 	 	Vice President 	 

A-5 

 

	 	 	 	 	 

GUARANTY

     Each guarantor listed in Supplemental Indenture No. 12 (the “Guarantors”), dated as of
December 9, 2009 to the Indenture among Equity One, Inc., as successor to IRT Property Company
(the “Company”), the Guarantors and U.S. Bank National Association, as successor to
SunTrust Bank (formerly SunTrust Bank, Atlanta), as trustee (the “Trustee”) as further
supplemented by Supplemental Indenture No. 1 dated as of September 9, 1998, Supplemental Indenture
No. 2, dated as of November 1, 1999, Supplemental Indenture No. 3, dated as of February 12, 2003,
Supplemental Indenture No. 4, dated as of March 26, 2004, Supplemental Indenture No. 5, dated as of
April 23, 2004, Supplemental Indenture No. 6, dated as of May 20, 2005, Supplemental Indenture No.
7, dated as of September 20, 2005, Supplemental Indenture No. 8, dated as of December 30, 2005,
Supplemental Indenture No. 9, dated as of March 10, 2006, Supplemental Indenture No. 10, dated as
of August 18, 2006, Supplemental Indenture No. 11, dated as of April 18, 2007, and Supplemental
Indenture No. 12, dated as of December 9, 2009 (as so supplemented, herein called the
“Indenture”), has unconditionally guaranteed to the Trustee and the Holder of the
Guaranteed Securities upon which this Guaranty is endorsed full and prompt payment and performance,
when due, whether at maturity, by acceleration or otherwise, of (x) all payment and performance
obligations of the Company, (i) under the Indenture with respect to the Guaranteed Securities, (ii)
under the Guaranteed Securities and (iii) as a result of the issuance of the Guaranteed Securities
and (y) the obligation to pay an amount equal to the amount of any and all damages which the
Trustee and the Holders, or any part of them, may suffer by reason of a breach by either the
Company or any other obligor of any obligation, covenant or undertaking under (i) the Indenture
with respect to the Guaranteed Securities or (ii) the Guaranteed Securities (collectively, the
“Obligations”). Each Obligation shall rank pari passu with each other Obligation.

     This Guaranty shall not be valid or obligatory for any purpose until the certificate of
authentication of the Note upon which this Guaranty is endorsed shall have been manually executed
by or on behalf of the Trustee under the Indenture.

     All capitalized terms used in this Guaranty which are not defined herein shall have the
meanings assigned to them in the Indenture.

     This Guaranty shall be governed by and construed in accordance with the laws of the State of
Georgia, except to the extent that the Trust Indenture Act shall be applicable.

     This Guaranty may be executed in any number of counterparts and by the different parties
hereto on separate counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same agreement.

     IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be duly executed under seal

     Dated: December 9, 2009

A-6 

 

	 	 	 	 	 
	 	GUARANTORS:

Cashmere Developments, Inc.

Centrefund Realty (U.S.) Corporation

Equity One (Commonwealth) Inc.

Equity One (Delta) Inc.

Equity One (Florida Portfolio) Inc.

Equity One (Louisiana Portfolio) LLC

Equity One (North Port) Inc.

Equity One (Northeast Portfolio) Inc.

Equity One (Point Royale) Inc.

Equity One (Sky Lake) Inc.

Equity One (Southeast Portfolio) Inc.

Equity One (Summerlin) Inc.

Equity One (Sunlake) Inc.

Equity One (Walden Woods) Inc.

Equity One Acquisition Corp.

Equity One Realty & Management FL, Inc.

Equity One Realty & Management NE, Inc.

Equity One Realty & Management SE, Inc.

Gazit (Meridian) Inc.

IRT Alabama, Inc.

IRT Capital Corporation II

IRT Management Company

Louisiana Holding Corp.

Prosperity Shopping Center Corp.

Shoppes at Jonathan’s Landing, Inc.

Southeast U.S. Holdings Inc.

The Meadows Shopping Center, LLC

The Shoppes of Eastwood, LLC

 	 
	 	 	 
	 	 	 
	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	IRT Partners, L.P.

 	 
	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                                Equity One, Inc.
 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

A-7 

 

	 	 	 	 	 

ASSIGNMENT FORM

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

 

Please Insert Social Security Or Other Identifying Number Of Assignee (Please Print or Typewrite Name and Address including Zip Code of Assignee)

the within Security of Equity One, Inc. and hereby does irrevocably constitute and appoints
                                                  
           Attorney to transfer said Security on the books of the within-named
Company with full power of substitution in the premises.

     Dated:                                  

     NOTICE: The signature to this assignment must correspond with the name as it appears on the
first page of the within Security in every particular, without alteration or enlargement or any
change whatever.

A-8exv10w1

Exhibit 10.1

Conformed Copy

 

Pennichuck Water Works, Inc.

Loan Agreement

Dated March 4, 2005

Re:

$5,000,000 5.00% Senior Notes

Due March 4, 2010

 

 

 

Table of Contents

	 	 	 	 	 	 	 
	Section	 	Description	 	Page
	Section 1.

	 	Description of Notes
	 	 	1	 
	 
	 	 	 	 	 	 
	Section 2.

	 	Prepayment of Note
	 	 	2	 
	 
	 	 	 	 	 	 
	     Section 2.1.

	 	Required Prepayments
	 	 	2	 
	     Section 2.2.

	 	Optional Prepayment with Premium
	 	 	2	 
	     Section 2.3.

	 	Notice of Optional Prepayments
	 	 	2	 
	     Section 2.4.

	 	Prepayment in Connection with a Government Taking
	 	 	3	 
	     Section 2.5.

	 	Application of Prepayments
	 	 	3	 
	 
	 	 	 	 	 	 
	Section 3.

	 	Conditions
Precedent
	 	 	3	 
	 
	 	 	 	 	 	 
	Section 4.

	 	Representations
and Warranties of the Company
	 	 	5	 
	 
	 	 	 	 	 	 
	Section 5.

	 	Covenants of the Company
	 	 	9	 
	 
	 	 	 	 	 	 
	Section 6.

	 	Representations
and Warranties of Purchaser
	 	 	20	 
	 
	 	 	 	 	 	 
	Section 7.

	 	Events
of Default
	 	 	21	 
	 
	 	 	 	 	 	 
	Section 8.

	 	General
	 	 	23	 
	 
	 	 	 	 	 	 
	Section 9.

	 	Amendments
to the Loan Agreement
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 10.

	 	Conversion
to First Mortgage Bonds
	 	 	25	 
	 
	 	 	 	 	 	 
	Signature Page	 	 	27	 
	 
	 	 	 	 	 	 
	Attachments
to Loan Agreement:	 	 	 	 
	 
	 	 	 	 	 	 
	Schedule I — Name and Address of Purchaser	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit A — Form of Note	 	 	 	 
	Exhibit B — Description of Debt and Leases	 	 	 	 
	Exhibit C — Description of Pennichuck Properties	 	 	 	 

 

 

Pennichuck
Water Works, Inc.

25 Manchester Street

Merrimack, Hampshire 03054

March 4, 2005

American United Life

   Insurance Company 

One American Square 

Indianapolis, Indiana 46206

Gentlemen:

          The undersigned, Pennichuck Water Works, Inc., a New Hampshire corporation with its principal
place of business in Nashua, New Hampshire (hereinafter called the
“Company”), a wholly owned
subsidiary of Pennichuck Corporation (hereinafter called “Pennichuck”), proposes to create, issue
and sell in accordance with the provisions of this agreement
(hereinafter called the “Loan Agreement”) its notes maturing March 4, 2010 in the principal amount of $5,000,000 (hereinafter
called the “Notes”) more fully hereinafter described.

          The Company hereby agrees to sell and, by acceptance of this Loan Agreement but subject to
the representations and warranties and upon the terms and conditions herein set forth, American
United Life Insurance Company (hereinafter called
“Purchaser”) hereby agrees to purchase the Notes
from the Company at a price equal to the total principal amount thereof on the Closing Date
hereinafter mentioned.

Section
l. Description of Notes.

     Section 1.1. The Notes to be issued, sold and delivered at the closing to Purchaser without
any expense to Purchaser (i) shall be in the form of registered notes specified in Schedule I
hereto in the aggregate principal amount of $5,000,000 dated the Closing Date, (ii) shall bear
interest from the date of issue at the rate of 5.00% per annum, payable semiannually on the fourth
day of each March and September in each year, commencing with the fourth day of September next
succeeding the date hereof (hereinafter called “Interest
Payment Dates”), except that the rate of
interest on overdue principal and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest shall be 6.00% per annum after maturity, whether by acceleration
or otherwise, until paid, (iii) shall become due and payable on March 4, 2010, (iv) shall be
executed in the form of Exhibit A attached hereto and (v) may be in typewritten form. Interest on
the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are
not subject to prepayment or redemption at the option of the Company prior to their expressed
maturity dates except on the terms and conditions and in the amounts and with the premium, if any,
set forth in Section 2 of this Loan Agreement.

 

 

     Section 1.2. Prior to the maturity and payment of the Notes and of any registered note or
notes received in exchange therefor (the term “Notes” as used in this Agreement shall be deemed to
include any registered note or notes received in exchange therefor), any holder of any Note may
present the Note at the Company’s office in Nashua, New Hampshire, for immediate exchange for an
equal principal amount of registered Notes of other denominations having the same maturity, rate of
interest and covenants as the Note so presented, and so far as consistent with their form, subject
to the same terms and conditions as the Note so surrendered. Each such new Note shall be payable to
such person or persons as such holder may designate, and such exchange or transfer shall be made
without expense to such holder, and in such manner that no gain or loss of principal or interest
shall result therefrom. If any such Note is issued in the name of some person other than Purchaser,
the Company reserves the right to employ a banking institution of its choice, and reasonably
acceptable to Purchaser, to act as registrar of the Notes.

     Section 1.3. Interest and principal and premium, if any, to be paid in respect of the Notes
shall be paid in such coin or currency of the United States of America as, at the time of payment,
is legal tender for the payment of public and private debts and shall be payable in accordance
with the provisions of Section 5.1 of this Loan Agreement.

     Section 1.4. Purchaser shall make payment to the Company for the Notes to be purchased by
Purchaser hereunder on the Closing Date (as defined in Section 3.1) by wiring Federal or other
funds immediately available to the order of the Company at the principal office of Bank of
America, 650 Elm Street, Manchester, New Hampshire 03101, ABA No. 01-1500010, Account Number
1126210 in the principal amount of said Notes at the closing.

Section
2. Prepayment of Notes.

     Section 2.1. Required Prepayments. Except as otherwise provided in Section 2.4, there shall
be no scheduled principal prepayments on account of the Notes. The unpaid principal amount of each
Note, together with accrued unpaid interest thereon, shall be due and payable on March 4, 2010.

     Section 2.2. Optional Prepayment with Premium. In addition to the payments required by
Section 2.4, upon compliance with Section 2.3, the Company shall have the privilege, at any time
and from time to time on any interest payment date of prepaying the outstanding Notes, either in
whole or in part (but if in part then in a minimum principal amount of $1,000,000), by payment of
the principal amount of the Notes, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment, together with a premium equal to the Make-Whole Amount (as defined
in Section 5.2), determined as of two business days prior to the date of such prepayment pursuant
to this Section 2.2.

     Section 2.3. Notice of Optional Prepayments. The Company will give notice of any prepayment
of the Notes pursuant to Section 2.2 to each holder thereof not less than 30 days nor more than 60
days before the date fixed by the Company for such optional prepayment specifying (a) such date,
(b) the principal amount of the holder’s Notes to be prepaid on such date, (c) that a premium may
be payable, (d) the date when such premium will be calculated, (e) the estimated premium, together
with a reasonably detailed computation of such estimated

-2-

 

premium, and (f) the accrued interest applicable to the prepayment. Such notice of prepayment shall
also certify all facts, if any, which are conditions precedent to any such prepayment. Notice of
prepayment having been so given, the aggregate principal amount of the Notes specified in such
notice, together with accrued interest thereon and the premium, if any, payable with respect
thereto shall become due and payable on the prepayment date specified in said notice. Two business
days prior to the prepayment date specified in such notice, the Company shall provide each holder
of the Notes written notice of the premium, if any, payable in connection with such prepayment and,
whether or not any premium is payable, a reasonably detailed computation of the premium.

     Section 2.4. Prepayment in Connection with a Government Taking. The Company will provide not
less than 15 or more than 30 days advance written notice of any Governmental Taking. Upon the
occurrence of a Government Taking while any Note is outstanding, the Company shall concurrently
with such Governmental Taking, prepay all of the outstanding Notes in an amount equal to 101% of
the outstanding principal amount of such Notes, plus all accrued and unpaid interest thereon to
the date of such prepayment, plus all other amounts due and owing to the holders of the Notes
under this Loan Agreement and the Notes (but without the Make-Whole Amount or premium).

     Section 2.5. Application of Prepayments. All partial prepayments made pursuant to Section
2.2 or 2.4 shall be applied on all outstanding Notes ratably in accordance with the unpaid
principal amounts thereof.

Section
 3. Conditions Precedent.

          The purchase and sale of the Notes are subject to the following conditions precedent:

     Section 3.1. The closing date shall be March 4, 2005 at 10:00 a.m. unless some other date
(the “Closing Date”) shall be agreed upon in writing by the Company and Purchaser. The place of
closing shall be the office of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois
60603 unless the parties agree upon another place.

     Section 3.2. The representations and warranties contained in this Loan Agreement shall not
be false, misleading or erroneous or omit to state a material fact and the Company, from
September 30, 2004, shall have duly observed all the covenants and agreements set forth in this
Loan Agreement, including those in Section 4.18 and Section 5 hereof which, for this purpose,
shall be applicable before the Notes become outstanding.

     Section 3.3. No material adverse change in the financial condition or in the condition of
the property or operations of the Company shall have occurred since September 30, 2004.

     Section 3.4. All necessary approvals of the New Hampshire Public Utilities Commission or any
other commission or governmental body or regulatory authority having jurisdiction over the issue,
execution and delivery of the Notes shall have been obtained without conditions deemed by the
Company and Purchaser to be impracticable or unduly burdensome and any such

-3-

 

approvals shall not be subject to any appeal or modification which could affect the validity or
terms of the Notes.

     Section 3.5. All proper corporate proceedings shall have been duly taken to authorize this
Loan Agreement and the Company’s issue of the Notes and Purchaser shall have received satisfactory
evidence thereof together with a certificate dated the Closing Date and duly signed by authorized
officers of (i) the Company with respect to the matters set
forth in Sections 3.2 through 3.4,
inclusive, this Section 3.5 and in Section 4 of this Loan Agreement and (ii) Pennichuck with
respect to the matters set forth in this Section 3.5 and Sections 4.2, 4.5, 4.6, 4.7, 4.8 and 4.19
of this Loan Agreement.

     Section
 3.6. Purchaser shall have received from Chapman and Cutler LLP of Chicago, Illinois,
special counsel to the Purchaser, in scope and form satisfactory to Purchaser, their written
opinion (i) that the Company is a corporation duly organized, in good standing and validly
existing under the laws of the State of New Hampshire; (ii) that this Loan Agreement has been duly
authorized, executed, issued and delivered and is a binding and valid agreement of the Company
enforceable in accordance with its terms subject to applicable bankruptcy, insolvency or similar
laws affecting creditors’ rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at
law); (iii) that the Notes have been duly authorized, executed, issued and delivered in accordance
with the terms of this Loan Agreement, and constitute valid obligations of the Company enforceable
in accordance with their terms subject to applicable bankruptcy, insolvency or similar laws
affecting creditors’ rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or at law); (iv)
that the issuance, sale and delivery of the Notes under the circumstances contemplated in this
Loan Agreement is an exempt transaction under the Securities Act of 1933, as now amended, and does
not require qualification under the Trust Indenture Act of 1939, as now amended; and (v) that the
opinion of McLane, Graf, Raulerson & Middleton, Professional Association, referred to in Section
3.7 is satisfactory in scope and form and the Purchaser is justified in relying thereon.

          The opinion of Chapman and Cutler LLP may rely upon the opinion of McLane, Graf, Raulerson &
Middleton, Professional Association as to matters of New Hampshire law. In rendering the opinion
set forth in clause (i) above of this Section 3.6, Chapman and Cutler LLP may rely solely upon an
examination of the charter of the Company certified by, and a certificate of good standing of the
Company from, the Secretary of State of the State of New Hampshire and the bylaws of the Company.
With respect to matters of fact upon which such opinion is based, Chapman and Cutler LLP may rely
on appropriate certificates of public officials and officers of the Company.

     Section 3.7. Purchaser shall have received from McLane, Graf, Raulerson & Middleton,
Professional Association, of Manchester, New Hampshire, special counsel to the Company, in scope
and form satisfactory to Purchaser, their written opinion in substantially the form set forth in
Schedule 3.7 hereto.

-4-

 

     Section 3.8. The Purchaser shall have received evidence satisfactory to it that the
Securities Valuation Office of the National Association of Insurance Commissioners has given the
unsecured debt obligations of the Company a rating of “2” or better.

     Section 3.9. All instruments and legal proceedings in connection with the authorization, issue
and sale of the Notes shall be satisfactory in form and substance to Purchaser and its special
counsel, Chapman and Cutler LLP of Chicago, Illinois, and Purchaser and its special counsel shall
have received copies of all documents, including records of corporate proceedings which it may have
requested in connection therewith, such documents, where appropriate, to be certified by the proper
corporate or governmental authorities.

Section
4. Representations and
Warranties of the Company.

          The Company represents and warrants to the Purchaser as follows:

     Section 4.1. The Company is a corporation duly organized and validly existing in good
standing under the laws of the State of New Hampshire and now has the power and authority to
engage in the business now conducted by it which is the collection, distribution and sale of water
in and about the City of Nashua, New Hampshire and in and about certain limited areas in the towns
of Merrimack, Amherst, Bedford, Derry, Epping, Hollis, Milford, Newmarket, Plaistow, and Salem, New
Hampshire and the power and authority to sell the Notes and comply with all of the provisions of
the Loan Agreement and the Notes. The Company has no subsidiaries. The Company does business in no
state other than in the State of New Hampshire.

     Section 4.2. The consolidated balance sheets of Pennichuck and its subsidiaries as of
December 31 in each of the years 1998 to 2003, inclusive, and related consolidated statements of
income, stockholders’ equity and changes in financial position
or cash flows for the twelve-months’
period then ended, copies of which have been audited, reported on and signed by independent public
accountants and have been delivered to Purchaser, are correct and complete, and fairly present the
financial condition of Pennichuck and its subsidiaries, including the Company, at the respective
dates thereof and the results of their operations for the period
covered thereby; said balance
sheets and statements of income, stockholders’ equity and changes in financial position or cash
flows have been prepared in accordance with generally accepted accounting principles consistently
applied and with the applicable provisions of the uniform system of accounts for water companies
prescribed by the New Hampshire Public Utilities Commission; the unaudited consolidated balance
sheets of Pennichuck and its subsidiaries as of September 30, 2004, and the unaudited statements
of income and retained earnings and cash flows for the nine-month period ended on said date
prepared by Pennichuck have been prepared in accordance with generally accepted accounting
principles consistently applied, are correct and complete and present fairly the financial
position of Pennichuck and its subsidiaries as of said date and the results of their operations
and changes in their cash flows for such period; and there has been, and prior to the Closing Date
there will be, no material adverse change in the condition, financial or otherwise, of Pennichuck
and its subsidiaries from that shown in its consolidated balance sheet as of September 30, 2004.

-5-

 

     Section 4.3. Exhibit B attached hereto correctly describes all Short-Term Debt, Funded Debt
and Capitalized Leases of the Company outstanding on March 1, 2005.

     Section 4.4. The Purchaser has heretofore been furnished with a copy of the offering circular
entitled “$5,000,000 Unsecured Taxable Bonds Pennichuck Water
Works, Inc.” (the “Circular”) which
generally sets forth the business conducted and proposed to be conducted by the Company and the
principal properties of the Company.

     Section 4.5.
The financial statements referred to in Section 4.2 do not, nor does the Circular
or any other written statement furnished by Pennichuck or the Company to Purchaser in connection
with the negotiation of the sale of the Notes, contain any untrue statement of a material fact or
omit a material fact necessary to make the statements contained therein or herein not misleading.
There is no fact peculiar to the Company which is known to Pennichuck or the Company and which
Pennichuck or the Company has not disclosed to Purchaser in writing which materially affects
adversely nor, so far as Pennichuck or the Company can now foresee, will materially affect
adversely the properties, business, prospects, profits or condition (financial or otherwise) of the
Company.

     Section 4.6.
Except as set forth on Schedule 4.6 attached hereto, there is not now and at the
Closing Date there will be no litigation at law or in equity, nor any proceeding before any
federal, state or municipal board or other governmental or administrative agency pending as to
Pennichuck or the Company or to the Company’s or Pennichuck’s knowledge threatened which, in its
opinion, involves the possibility of any material judgment or liability against the Company
(except proceedings for damages fully covered by insurance) or which may substantially affect
adversely any material asset of the Company or its right to carry on its business, and no rate
proceeding is pending or to its knowledge threatened against the rates now being charged by it.
The Company is not in default with respect to any order of any court, federal, state or municipal
board or other governmental or administrative agency.

     Section 4.7.
The Company or Pennichuck, which holds all of the issued and outstanding shares
of the Company’s common stock, has good title to substantially all of the fixed properties and
assets of the Company or Pennichuck, as the case may be (except easements acquired since July 8,
1977) used or useful in the Company’s business as a water company, and at the Closing Date the
same will not be subject to any mortgage or other lien, provided,
however, that this
representation shall not apply to: (a) liens for taxes not yet due and payable, or payable without
penalty or interest or being contested in good faith and for which the Company has provided an
adequate reserve by proper charges to income or earned surplus; (b) mechanics’ liens and similar
liens incurred in the ordinary course of business to secure debts of the Company not yet due; (c)
easements, reservations or rights of way in property for purposes that do not impair the use of
such property in the operation of the business of the Company; (d) conditions which would be
disclosed only by an accurate professional survey of the properties; and (e) attachments against
which the Company is adequately covered by insurance or which are discharged within sixty days
from the making thereof, and liens of judgments or awards adequately covered by insurance or which
have been in force for less than the applicable appeal period so long as execution is not levied
thereunder or in respect of which an appeal or proceedings for review are pending and a stay of
execution shall have been secured pending such appeal or review,
provided, however, that

-6-

 

such attachments, judgments or awards do not exceed in the aggregate the amount of $50,000.
Pennichuck owns the real estate used in the Company’s business which is described in Exhibit C
attached hereto (“Pennichuck Properties”).

     Section 4.8. The consummation of the transaction contemplated by this Loan Agreement and
compliance with the provisions of the Notes and this Loan Agreement will not result in any breach
of any of the terms, conditions or provisions of, or constitute a default under, or result in the
creation of any lien or encumbrance upon any property or assets of the Company pursuant to any
provision of law, franchise, indenture, mortgage, deed of trust, agreement, corporate charter,
bylaws or other instrument to which the Company or Pennichuck is a party or by which the Company
or Pennichuck may be bound.

     Section 4.9. No Event of Default under this Loan Agreement has occurred and is continuing.
The Company is not in default in the payment of principal or interest on any indebtedness for
borrowed money and is not in default under any instrument or instruments or agreements under and
subject to which any indebtedness for borrowed money has been issued and no event has occurred and
is continuing under the provisions of any such instrument or agreement which with the lapse of
time or the giving of notice, or both, would constitute an event of default thereunder.

     Section 4.10. The New Hampshire Public Utilities Commission has issued an order authorizing
the issue and sale of the Notes upon terms not inconsistent with this Loan Agreement, which order
contains no burdensome restrictions and is in full force and effect and will not, on the Closing
Date, be subject to any appeal or modification which could affect the validity or terms of the
Notes. No other approval, consent or withholding of objection on the part of any regulatory body,
state, Federal or local, is necessary in connection with the execution and delivery by the Company
of this Loan Agreement or the Notes or compliance by the Company with any of the provisions of
this Loan Agreement or the Notes.

     Section 4.11. The Company is not a party to any contract, franchise or agreement or subject to
any charter or other corporate restriction, which will remain in effect after the issue of Notes,
adversely affecting in any material manner the business, obligations or financial condition of the
Company.

     Section 4.12. The Company has adequate franchises, licenses, permits and rights for the
operation of its properties and business as now conducted.

     Section 4.13. Since September 30, 2004, neither the operations nor the properties of the
Company have been adversely affected, in any substantial way as the result of any fire, explosion,
accident, flood, drought, embargo, strike, lockout, riot, sabotage, confiscation of any property
by the United States of America or agency thereof, activities of the armed forces or acts of God
or of the public enemy.

     Section 4.14. The Company is not a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company”, as those terms are defined in the Public
Utility Holding Company Act of 1935, as amended.

-7-

 

     Section 4.15. The Company is not and has not at any time since April 10, 1940 been controlled
directly or indirectly by any foreign country as those terms are defined either in Executive Order
8389 of the President of the United States, as amended, or in any
regulation promulgated by the
Secretary of the Treasury of the United States of America under authority of the Trading with the
Enemy Act, as amended, and no material amount of any class of stocks, bonds, debentures or other
securities or obligations of the Company is or has been, since April 10, 1940, owned or controlled
directly or, to the knowledge of the Company, indirectly by any such foreign country or by any
national or group of nationals of any such foreign country.

     Section 4.16. The Company has timely filed all federal and state franchise or tax returns
which are required to be filed and has paid, or made adequate provision for the payment of, all
taxes which have or may become due pursuant to said returns or pursuant to assessments received by
the Company except such as are being or may be contested in good faith. The Company has no
knowledge of any additional assessments or any basis therefor. The Company has made adequate
provision for all current taxes. Any issue taxes payable under any federal or state law on the
original issue to Purchaser of the Notes has been paid.

     Section 4.17. The net proceeds from the sale of the Notes will be used to repay $3,500,000
aggregate principal amount of those certain 9.10% Senior Notes due April 1, 2005 and $1,500,000
aggregate principal amount of Short Term Debt. None of the transactions contemplated in this Loan
Agreement (including, without limitation thereof, the use of proceeds from the issuance of the
Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934,
as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations
U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The
Company does not own or intend to carry or purchase any “margin stock” within the meaning of said
Regulation U. None of the proceeds from the sale of the Notes will be used to purchase, or
refinance any borrowing, the proceeds of which were used to purchase any “security” within the
meaning of the Securities Exchange Act of 1934, as amended.

     Section 4.18. Neither the Company nor anyone acting on its behalf has offered the Notes, or
similar notes, for sale to, or solicited any offers to purchase the same from or engaged in any
negotiations to dispose of such notes to any person, firm or corporation other than Purchaser and
not more than 19 other institutional investor(s), each of whom was offered a portion of the Notes
at private sale for investment and the Company agrees that neither it nor anyone acting in its
behalf has offered or will offer to sell the Notes or any similar notes to, or solicit offers
with respect thereto from, or enter into preliminary conversations or negotiations relating
thereto with any person, firm or corporation so as to bring the issue or sale of the Notes under
the registration provisions of the Securities Act of 1933, as amended.

     Section 4.19. The consummation of the transactions provided for in this Loan Agreement and
compliance by Pennichuck and the Company with the provisions hereof and the Notes issued
hereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975
of the Internal Revenue Code of 1986, as amended. No “employee pension benefit plans”, as defined
in ERISA (“Plans”), maintained by Pennichuck or any Person which is under common control with
Pennichuck within the meaning of Section 400l(b) of ERISA, nor any trusts created thereunder,
have incurred any “accumulated funding deficiency” as defined in

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Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as
of June 1, 2004, the last annual valuation date, the value of the assets of the Plans. The Company
has no separate employee pension benefit plan.

     Section 4.20. The Company is not in violation of any applicable Federal, state, or local laws,
statutes, rules, regulations or ordinances relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges, emissions or disposals to air,
water, land or ground water, to the withdrawal or use of ground water, to the use, handling or
disposal of polychlorinated biphenyls, asbestos or urea formaldehyde, to the treatment, storage,
disposal or management of hazardous substances (including, without limitation, petroleum, crude oil
or any fraction thereof, or other hydrocarbons), pollutants or contaminants, to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances which violation could have a
material adverse effect on the business, prospects, profits, properties or condition (financial or
otherwise) of the Company. The Company has no knowledge of any liability or class of liability of
the Company under the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et seq., or the Resource Conservation and Recovery Act of 1976,
as amended (42 U.S.C. Section 6901 et seq.). The Company has no knowledge of any activities or
events which might cause a lien to arise in the future pursuant to the provisions of New Hampshire
RSA 147-B.

     Section 4.21. Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate (i) the Trading with the Enemy Act, as amended, (ii) any of the
foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating thereto, (iii)
Executive Order 13224, 66 Fed Reg 49, 079 (2001), issued by the President of the United States
(Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism) (and the Company is not a “blocked person” as described in
Section 1 of such Executive Order or engages in any dealings or transactions with or is otherwise
associated with, any such blocked person) or (iv) the United and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of
2001, Public Law 107-56 (October 26, 2001).

Section
5. Covenants of the Company.

          The Company covenants that, so long as the Notes are outstanding, unless notice pursuant to
this Loan Agreement has been given and payment made to the holder thereof, the Company will:

     Section 5.1. Punctually pay or cause to be paid the principal and interest (and premium, if
any) to become due in respect of the Notes according to the terms thereof; notwithstanding
anything to the contrary in this Loan Agreement or the Notes, with respect to any of the Notes
then outstanding in the name of Purchaser or in the name of any other institutional holder who has
given written notice to the Company requesting that the provisions of this Section apply, the
Company will make such payments without any presentment thereof directly to Purchaser or such
subsequent holder at the address of Purchaser set forth in Schedule I or at such other

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address as Purchaser or such subsequent holder may from time to time designate in writing to the
Company or, if a bank account is designated for Purchaser on Schedule I hereto or in any written
notice to the Company from Purchaser or any such subsequent holder, the Company will make such
payments in immediately available funds to such bank account, marked for attention as indicated, or
in such other manner or to such other account of Purchaser or such holder in any bank in the United
States as the Purchaser or any such subsequent holder may from time to time direct in writing.

     Section 5.2. Not create, issue, incur, assume or guarantee: (a) any Short-Term Debt (as
hereinafter defined) if thereby as of the date of such creation, issuance, incurring, assumption or
guarantying, after giving effect to such Short-Term Debt, the sum of all Short-Term Debt and Funded
Debt (as hereinafter defined) then outstanding of the Company will exceed 65% of the sum of (i) its
Short-Term Debt, (ii) its Funded Debt, (iii) its capital stock and (iv) all surplus accounts (which
term here and elsewhere herein includes the retained earnings account), unless any Short-Term Debt
in excess of said 65% constitutes Subordinated Debt; the limitations imposed by this Section 5.2(a)
shall terminate upon any conversion of the Notes to first mortgage bonds pursuant to Section 10
hereof; (b) any Funded Debt (i) if thereby the total outstanding Funded Debt of the Company, after
giving effect to the additional Funded Debt, will exceed 60% of its Net Amount of Capital
Properties (as hereinafter defined) and (ii) unless Earnings Available for Interest (as hereinafter
defined) for at least twelve (12) consecutive months within the fifteen (15) months next preceding
the creation of the Funded Debt shall equal at least one and one-half (1-1/2) times the Pro Forma
Interest Charges payable on account of Funded Debt, after giving effect to such additional Funded
Debt.

          For the purposes of this Loan Agreement:

          “Affiliate” means any corporation, firm or individual (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under common control with,
the Company, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of
the Company or (iii) 5% or more of the Voting Stock (or in the case of an individual or firm, 5%
or more of the equity interest) of which is beneficially owned or held by the Company. The term
“control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a corporation, individual or firm, whether through the
ownership of Voting Stock, by contract or otherwise.

          “Capital Properties” means, without duplication, (i) Pennichuck Properties, (ii) all
tangible property of the Company used or useful in the Company’s business as a water company,
including, at the option of the Company, construction work in progress, and which are properly
chargeable to the capital account of the Company in conformity with any applicable rules of the
New Hampshire Public Utilities Commission, as shown on the books of the Company and (iii) amounts
set aside in a trust to be held and administered by an independent trustee for the sole purpose
of constructing Capital Properties of the Company described in clause (ii) of this definition but
not in excess of an aggregate amount of $30,000,000.

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          “Capitalized Lease” means any lease the obligation for Rentals with respect to which is
required to be capitalized on a balance sheet of the lessee in accordance with generally accepted
accounting principles.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time.

          “Company” shall mean Pennichuck Water Works, Inc., a New Hampshire corporation, and any person
who succeeds to all, or substantially all, of the assets and business of Pennichuck Water Works,
Inc.

          “Debt” means all obligations of the Company which in accordance with generally accepted
accounting principles shall be classified upon a balance sheet of the Company as liabilities of
the Company, and in any event shall include all (i) obligations of the Company for borrowed money
or which has been incurred in connection with the acquisition of property or assets, (ii)
obligations secured by any lien or other charge upon property or assets owned by the Company, even
though the Company has not assumed or become liable for the payment of such obligations, (iii)
obligations created or arising under any conditional sale or other title retention agreement with
respect to property acquired by the Company, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, and (iv) Rentals under any Capitalized Lease. For the purpose of
computing the “Debt” of the Company, there shall be excluded (1) any particular Debt to the extent
that, upon or prior to the maturity thereof, there shall have been deposited with the proper
depositary in trust the necessary funds (or evidences of such Debt, if permitted by the instrument
creating such Debt) for the payment, redemption or satisfaction of such Debt and thereafter such
funds and evidences of Debt so deposited shall not be included in any computation of the assets of
the Company and (2) accounts payable, customers’ deposits and advances, accrued wages and similar
obligations incurred in the ordinary course of business.

          “Earnings Available for Interest” for any period means the excess of (i) the sum of the
operating revenues of the Company plus its net non-operating revenues for such period, over (ii)
the sum of all operating expenses during such period, including taxes (except any allowance for
income, excess profits and other taxes measured by or dependent on net taxable income for the
period for which the earnings are being computed) plus adequate and reasonable allowances for
maintenance and depreciation as charged by the Company (not in any case less than the amount
required to be charged therefor pursuant to Sections 5.5 and 5.15 hereof).

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time in effect.

          “ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated
as a single employer together with the Company under section 414 of the Code.

          “Funded Debt” means Debt maturing, or which the Company has a right to extend or renew, so
that it will mature more than twelve months after it first became Debt of the Company,

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including all payments in respect thereof that are required to be made within twelve months from
the date of any determination of Funded Debt, and all Guaranties of Funded Debt of others.

          “Government Taking” means (a) the acquisition by any governmental entity of all or
substantially all of the properties of the Company or any of its subsidiaries or affiliates by
condemnation or under threat of condemnation, or (b) as a result of any requirements of law or
other action by any governmental authority, the use thereof in the normal course of Company’s
business being prohibited, directly or indirectly, for a period in excess of 90 days.

          “Guaranties” means all obligations (other than endorsements in the ordinary course of business
of negotiable instruments for deposit or collection) of the Company guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other corporation, firm or
individual (the “primary obligor”) in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or otherwise, by such
corporation, firm or individual: (i) to purchase such indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or
payment of such indebtedness or obligation, (y) to maintain working capital or other balance sheet
condition or otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation, or (iii) to lease property or to purchase securities or other property
or services primarily for the purpose of assuring the owner of such indebtedness or obligation of
the ability of the primary obligor to make payment of the indebtedness or obligation, or (iv)
otherwise to assure the owner of the indebtedness or obligation of the primary obligor against loss
in respect thereof. For the purposes of all computations made under this Loan Agreement, a Guaranty
in respect of any indebtedness for borrowed money shall be deemed to be indebtedness equal to the
principal amount of such indebtedness for borrowed money which has been guaranteed, and a Guaranty
in respect of any other obligation or liability or any dividend shall be deemed to be indebtedness
equal to the maximum aggregate amount of such obligation, liability or dividend.

          “Interest Charges” for any period means the sum of (i) the interest portion of all Rentals on
Capitalized Leases payable during such period by the Company and (ii) all interest and all
amortization of debt discount and expense on all Debt (other than Capitalized Leases) of the
Company during such period for which such calculations are being made.

          “Make-Whole Amount” shall mean in connection with any prepayment or acceleration of the Notes
the excess, if any, of (a) the aggregate present value as of the date of such prepayment or
payment of each dollar of principal being prepaid or paid (taking into account the application of
such prepayment or payment required by Section 2.1) and the amount of interest (exclusive of
interest accrued to the date of prepayment or payment) that would have been payable in respect of
such dollar if such prepayment or payment had not been made, determined by discounting such
amounts at the Reinvestment Rate from the respective dates on which they would have been payable,
over (b) 100% of the principal amount of the outstanding Notes being prepaid or paid. If the
Reinvestment Rate is equal to or higher than 5.00%, the Make-Whole Amount shall be zero. For
purposes of any determination of the Make-Whole Amount:

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          “Reinvestment Rate” shall mean (1) the sum of .50%, plus the yield reported on page
“USD” of the Bloomberg Financial Markets Services Screen (or, if not available, any other
nationally recognized trading screen reporting on-line intraday trading in the United States
government Securities) at 11:00 A.M. (Indianapolis, Indiana time) for the United States
government Securities having a maturity (rounded to the nearest month) corresponding to the
remaining Weighted Average Life to Maturity of the principal of the Notes being prepaid or
paid (taking into account the application of such prepayment or payment required by Section
2.1) or (2) in the event that no nationally recognized trading screen reporting on-line
intraday trading in the United States government Securities is available, Reinvestment Rate
shall mean the sum of .50%, plus the arithmetic mean of the yields for the two columns under
the heading “Week Ending” published in the Statistical Release under the caption “Treasury
Constant Maturities” for the maturity (rounded to the nearest month) corresponding to the
Weighted Average Life to Maturity of the principal of the Notes being prepaid or paid
(taking into account the application of such prepayment or payment required by Section 2.1).
If no maturity exactly corresponds to such Weighted Average Life to Maturity, yields for the
two published maturities most closely corresponding to such Weighted Average Life to
Maturity shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding in each of such relevant periods to the nearest month. For the purposes of
calculating the “Reinvestment Rate”, the most recent Statistical Release published prior to
the date of determination of the Make-Whole Amount shall be used.

          “Statistical Release” shall mean the then most recently published statistical release
designated “H.15(519)” or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded U.S. Government
Securities adjusted to constant maturities or, if such statistical release is not published
at the time of any determination hereunder, then such other reasonably comparable index
which shall be designated by the holders of 66-2/3% in aggregate principal amount of the
outstanding Notes.

          “Weighted Average Life to Maturity” of the principal amount of the Notes being prepaid
or paid shall mean, as of the time of any determination thereof, the number of years
obtained by dividing the then Remaining Dollar-Years of such principal by the aggregate
amount of such principal. The term “Remaining Dollar-Years” of such principal shall mean
the amount obtained by (1) multiplying (i) the remainder of (A) the amount of principal
that would have become due on each scheduled payment date if such prepayment or payment had
not been made, less (B) the amount of principal on the Notes scheduled to become due on
such date after giving effect to such prepayment or payment and the application thereof in
accordance with the provisions of Section 2.1, by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between the date of determination and such
scheduled payment date, and (2) totaling the products obtained in (1).

          “Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in
section 4001(a)(3) of ERISA).

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          “Net Amount of Capital Properties” means the amount of Capital Properties (as hereinabove
defined) of the Company minus the amount of depreciation or retirement reserve applicable thereto
as shown by the books of the Company. It shall be calculated as of the end of the last preceding
quarter and shall reflect amounts as recorded or required to be recorded on the books of the
Company in accordance with applicable rules and regulations of the governmental authority having
jurisdiction, or in the absence thereof, generally accepted accounting principles.

          “Net Worth” shall mean the stockholders’ equity of the Company consisting of (i) its capital
stock (including preferred stock) and (ii) all surplus accounts (including the retained earnings
account), all determined in accordance with generally accepted accounting principles.

          “Pennichuck Properties” shall have the meaning set forth in Section 4.7.

          “Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) that is or,
within the preceding five years, has been established or maintained, or to which contributions are
or, within the preceding five years, have been made or required to be made, by the Company or any
ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any
liability.

          “Pro Forma Interest Charges” means, as of the date of any determination thereof, the
aggregate amount of Interest Charges which would be payable by the Company on an annualized basis
on Debt outstanding on such date after giving effect to the incurrence of any Debt (including
Capitalized Leases) on such date and the concurrent retirement of outstanding Debt or termination
of any Capitalized Leases. Computations of Interest Charges for Debt having a variable interest
rate shall be calculated at the rate in effect on the date of any determination.

          “Rentals” means and includes all fixed rents (including as such all payments which the lessee
is obligated to make to the lessor on termination of the lease or surrender of the property)
payable by the Company, as lessee or sublessee under a lease of real or personal property, but
shall be exclusive of any amounts required to be paid by the Company (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called “percentage leases” shall be computed solely on the basis
of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or
gross revenues.

          “Short-Term Debt” means all Debt other than Funded Debt, and all Guaranties of Short-Term
Debt of others.

          “Subordinated Debt” means Debt of the Company which is subordinate to the Notes as to claims
for the payment of principal and interest and other matters pursuant to subordination provisions
approved in writing by the holders of not less than 66-2/3% in aggregate principal amount of the
Notes then outstanding.

          “Voting Stock” shall mean securities of any class or classes the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate
directors.

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     Section 5.3. Not issue, subject to Sections 4.7 and 5.4 herein, any Funded Debt which is
senior to the Notes so long as the Notes are outstanding. The Notes shall be ranked equally with
other Funded Debt.

     Section 5.4. Not pledge or place or suffer to exist any mortgage or other encumbrance or lien
of any kind upon Capital Properties or any part thereof, except (i) encumbrances permitted by
Sections 4.7(a) through (d) inclusive hereof, (ii) a mortgage securing first mortgage bonds
pursuant to Section 10 hereof, provided that the bonds are secured equally and ratably with the
Notes and all other Debt previously issued and the total indebtedness of the Company being secured
under such mortgage shall not exceed 60% of its Net Amount of Capital Properties, (iii) purchase
money or construction mortgages or security interests, or mortgages or security interests existing
on the Capital Properties at the time of acquisition thereof, or created for the purpose of
financing such acquisition, provided that (a) no such mortgage or security interest shall affect
any Capital Properties other than that being so acquired or constructed and (b) the Debt being
secured by such mortgage or security interest shall not exceed 60% of the cost to the Company of
such acquisition or construction and (iv) any renewal, extension or replacement of any mortgage or
security interest described in clause (iii) of this Section 5.4 (a “Replacement Mortgage”); provided that (a) the aggregate principal amount of Debt (the “New Debt”) secured by the
Replacement Mortgage shall not be in excess of the aggregate principal amount of Debt (the “Old
Debt”) secured by the mortgage or security interest being renewed, extended or replaced (the “Old
Mortgage”), (b) the interest rate payable on the New Debt shall not be in excess of the interest
rate payable on the Old Debt, (c) the property subject to the lien of the Replacement Mortgage (the
“New Mortgaged Property”) shall not include any additional Capital Properties which were not
subject to the lien of the Old Mortgage, (d) at the time of the execution and delivery of the
Replacement Mortgage, the aggregate amount of New Debt secured thereby whether or not assumed by
the Company shall not exceed an amount equal to 60% of the lesser of (x) the total book value of
New Mortgaged Property or (y) the fair market value at such time of such New Mortgaged Property (to
be determined in good faith by the Board of Directors of the Company) and (e) all such New Debt
shall have been incurred within the applicable limitations provided in Section 5.2.

     Section 5.5. Annually, as an operating expense, provide for depreciation of its properties
and record the same on its books in an amount computed at a rate acceptable to the New Hampshire
Public Utilities Commission, but in any event equal to or not less than 1-1/4% of its depreciable
properties as of the preceding December 31.

     Section 5.6. Not declare or pay any dividends or make any distributions on any shares of its
common stock of any class or purchase, acquire or otherwise retire for a consideration any shares
of its common stock of any class if, after giving effect thereto, either (a) an Event of Default
shall have occurred and be continuing or (b) the Net Worth of the Company shall be less than
$4,500,000.

     Section 5.7. Within twenty days of the closing hereunder, apply the proceeds of the sale of
the Notes in accordance with and pursuant to the Order of the New Hampshire Public Utilities
Commission authorizing the issue of the Notes.

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     Section 5.8. Promptly pay when due, or in conformance with customary trade terms and within
ninety days from the date when incurred, all indebtedness incident to operations including,
without limiting the generality of the foregoing, interest on and principal of any Debt, indebtedness
with respect to taxes, assessments, insurance, salaries, labor, public liability claims, industrial
injury compensation claims, fuel, purchased electric energy, equipment, purchased gas, materials
and supplies, merchandise and other similar operating charges, and maintenance and general expense
incurred in the ordinary course of business, and dividends declared and payable within ninety days
from the date of their declaration; but this requirement shall not apply to customers’ deposits and
advances and interest thereon or to public liability claims, or to any disputed claims which are
being contested in good faith and for which the Company has provided an adequate reserve by proper
charges to income or earned surplus.

     Section 5.9. Not make any investments in securities of any corporation or make any
advance, extend credit or issue any guaranty to any corporation, firm or individual, except:

          (a) investments in commercial paper maturing in 270 days or less from the
date of issuance which, at the time of acquisition, is accorded the highest rating by
Standard & Poor’s Corporation, Moody’s Investors Service, Inc. or other nationally
recognized credit rating agency of similar standing;

          (b) investments in direct obligations of the United States of America, or any
agency thereof, maturing in twelve months or less from the date of acquisition
thereof;

          (c) investments in certificates of deposit maturing within one year from the
date of origin, issued by a bank or trust company organized under the laws of the
United States or any state thereof, having capital, surplus and undivided profits
aggregating at least $25,000,000;

          (d) loans or advances in the usual and ordinary course of business to officers,
directors and employees for expenses (including moving expenses related to a
transfer) incidental to carrying on the business of the Company; or

          (e) receivables arising from the sale of goods and services in the ordinary
course of business of the Company.

     Section 5.10. Not sell, lease, transfer or otherwise dispose of any of the Capital
Properties other than property no longer used or useful in the conduct of the business of the
Company, if thereby the Funded Debt of the Company at the time outstanding will exceed 60% of
its Net Amount of Capital Properties after giving effect to such sale, lease, transfer or other
disposition and the application of the net proceeds therefrom except where the Company is a
party to a merger or a consolidation permitted pursuant to Section 5.12.

     Section 5.11. Not change the general nature of the business engaged in by the Company on
the Closing Date; nor make any sale or disposition of Capital Properties which will materially
adversely affect the operation of its water business.

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     Section 5.12. Not become a party to any merger or consolidation unless the corporation
resulting from such merger or consolidation is a water utility authorized to do business in New
Hampshire and (i) for twelve consecutive months out of the
fifteen months next preceding the
merger or consolidation, the combined Earnings Available for Interest of the companies which are
parties to the merger or consolidation shall have equalled at least one and one-half (1-1/2) times
the Pro Forma Interest Charges which the resulting or continuing corporation will be obligated to
pay on account of Funded Debt after giving effect to the merger or consolidation; (ii) the merger
or consolidation shall not result in the resulting or continuing corporation having an amount of
Funded Debt which is in excess of 60% of its Net Amount of Capital Properties; (iii) after giving
effect to such merger or consolidation the Company would be permitted to incur at least $1.00 of
additional Funded Debt under the provisions of Section 5.2; (iv) at the time of such consolidation
or merger and after giving effect thereto no Event of Default shall have occurred and be
continuing; and (v) if, after giving effect to any such merger or consolidation, there will be a
mortgage on Capital Properties of the resulting corporation securing first mortgage bonds,
concurrently with the consummation of such merger or consolidation, the resulting corporation shall
comply with clause (ii) of Section 5.4 by delivering to the holders of the Notes then outstanding,
in exchange for their Notes, bonds of the resulting corporation under a mortgage creating a first
and prior lien on substantially all of the Capital Properties of said resulting corporation to
secure such bonds, which bonds and mortgage shall contain provisions comparable to the provisions
of the Notes including the covenants contained in this Section 5 (allowing for appropriate
adjustments in form and substance to reflect the different nature of the securities).

     Section 5.13. Keep true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to the business and affairs of the
Company, in accordance with such system of accounts as shall be prescribed by governmental
agencies having jurisdiction in the premises, or, in the absence thereof, in accordance with
generally accepted accounting principles.

     Section 5.14. At all times carry such insurance on the Capital Properties and against such
casualties and losses as is reasonably necessary adequately to protect it against the hazards and
risks to which the Capital Properties and operations are or may be subject.

     Section 5.15. Maintain, preserve, protect and keep the Capital Properties in good repair,
working order and condition, and from time to time make or cause to be made all needful and proper
repairs, renewals and replacements so that the business carried on in connection therewith and
every portion thereof may be properly and advantageously conducted at all times, and, upon request
of a majority in principal amount of Notes then outstanding appoint an independent engineer of
recognized standing to inspect the Capital Properties for the purpose of determining whether they
are being maintained in reasonably good condition, the Company to correct any deficiencies in
maintenance reported by such engineer within a year after such report or such longer time as such
engineer shall determine to be reasonable; provided the Company shall not be required to make such
appointment if, within five years prior to such request, an independent engineer of recognized
standing shall have reported in writing that the Capital Properties have been maintained in
reasonably good condition; and provided, further, that the Company shall not

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be required to make any expenditure for maintenance if it would thereby violate any applicable law
or governmental regulation, order or directive.

     Section 5.16. At its own cost and expense, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its corporate existence and its rights,
franchises, licenses and permits.

     Section 5.17. When and as requested by Purchaser, furnish information, execute and file
applications prepared at the expense of Purchaser and otherwise cooperate in qualifying or
registering such principal amount of the outstanding Notes then held by Purchaser as Purchaser may
designate for offer and sale under the securities or “Blue Sky” laws of such states as Purchaser
may designate and will, in each instance, similarly execute and file and make such statements as
are or may be required by the laws of such states to maintain such qualification or registration.

     Section 5.18. Pay all issue taxes, if any, payable under any federal or state law on the
original issue of the Notes.

     Section 5.19. Whether or not the transactions herein contemplated shall be consummated, pay
all of the reasonable out-of-pocket expenses of the Purchaser in connection with the preparation,
execution and delivery of this Loan Agreement and the Notes and the transactions contemplated
thereby, including but not limited to the reasonable charges and disbursements of Chapman and
Cutler LLP, Purchaser’s special counsel, duplicating and printing costs and charges for shipping
the Notes, to Purchaser, and all such expenses relating to any amendment, waivers or consents
pursuant to the provisions hereof, including, without limitation, any amendments, waivers or
consents resulting from any work-out, restructuring or similar proceedings relating to the
performance by the Company of its obligations under this Loan Agreement and the Notes. The Company
agrees to protect and indemnify Purchaser against any liability for any and all brokerage fees and
commissions payable or claimed to be payable in connection with the transactions contemplated by
this Loan Agreement.

     Section 5.20. Will not enter into or be a party to any transaction or arrangement with any
Affiliate (including, without limitation, the purchase from, sale to or exchange of property with,
or the rendering of any service by or for, any Affiliate), except in the ordinary course of and
pursuant to the reasonable requirements of the Company’s business and upon fair and reasonable
terms no less favorable to the Company than would obtain in a comparable arm’s-length transaction
with a corporation, firm or individual other than an Affiliate.

     Section 5.21. Furnish Purchaser promptly with the following information:

     A. From time to time, upon request, such information regarding the business
and affairs and financial condition of the Company, and in such detail, as Purchaser may reasonably request.

     B. Within forty-five days after the close of each of the first three quarters of
its fiscal year, and within one hundred and twenty days after the close of the fourth

-18-

 

quarter of its fiscal year, the Company’s balance sheet as of the close of such period,
statements of income for the twelve months and for the expired portion of the fiscal year
then ended and statements of cash flows for the portion of the fiscal year then ended, all
certified  as complete and correct by the chief financial or accounting officer of
the Company and showing similar figures for the same period of the preceding year.

     C. As soon as practicable and in any event within one hundred and twenty days after the
close of each fiscal year, copies of the consolidated balance sheet of Pennichuck and its
subsidiaries as of the end of such fiscal year and the related consolidated statements of
income, stockholders’ equity and cash flows for such year, audited and accompanied by a
report thereon by (i) PricewaterhouseCoopers LLP or some other independent public accounting
firm of recognized national standing or (ii) any other independent public accounting firm
which is satisfactory to the Company and Purchaser
(“Accountants”) to the effect that the
consolidated financial statements have been prepared in accordance with generally accepted
accounting principles and present fairly, in all material respects, the financial condition
of Pennichuck and its subsidiaries and that the examination of such Accountants in
connection with such financial statements has been made in accordance with generally
accepted auditing standards and accordingly includes such tests of the accounting records
and such other auditing procedures as were considered necessary in the circumstances. The
Company will cooperate with the Purchaser to ensure that the National Association of
Insurance Commissioners does not change its rating, due solely to the lack of acceptable
financial statements of the Company including without limitation, by (i) causing Pennichuck
to deliver a guaranty of the Company’s obligations under this Loan Agreement and the Notes
in form and substance satisfactory to the Purchaser or (ii) providing acceptable financial
statements (including audited financial statements, if necessary) within 60 days of the
Purchaser’s request.

     D. Copies of all such reports and financial statements as it shall send or make
available to its stockholders.

     E. Copies of detailed reports submitted to the Company by the Accountants in connection
with the annual audits of the Company’s books of account.

     F. Copies of the annual report of the Company to the New Hampshire Public Utilities
Commission and when requested by Purchaser copies of all reports and returns filed by the
Company with any governmental department, bureau, commission or agency and such reasonable
information pertaining to the valuation of Purchaser’s investment as it may from time to
time request.

     Section 5.22. Permit Purchaser’s agents and representatives at the expense of Purchaser to
visit any of the Capital Properties and inspect any of the Company’s books of accounts and
discuss the Company’s affairs and finances with the officers of the Company or the Accountants
at such reasonable times and so often as Purchaser may reasonably desire.

-19-

 

     Section 5.23. Within the periods provided in paragraphs B and C of Section 5.21, file with
Purchaser a certificate of the President or a Vice President of the Company stating that the
Company has kept, observed, performed and fulfilled each and every covenant contained in this Loan
Agreement, and stating whether there existed at any time during the period covered by the financial
statement, or on the date of the certificate, an Event of Default and if any Event of Default
exists on the date of the certificate, specifying the nature and period of existence thereof and
the action being taken by the Company with respect thereto, of which the officer so certifying may
have knowledge.

     Section 5.24. Company shall immediately notify Purchaser during the term of the Notes at the
address first above written or any substitute address designated by Purchaser in writing, by
certified mail return receipt requested of any and all (i) Events of Default by Company hereunder
or on any other notes or other loan agreements of the Company and (ii) Events of Default of
Company which are alleged by the holders of the Notes or any of its other notes or other loan
agreements.

     Section 5.25. Within 10 days after the Company becomes aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:

     (A) with respect to any Plan, any reportable event, as defined in section
4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date of the Closing; or

     (B) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan; or

     (C) any event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a material adverse effect.

     Section
6. Representations and
Warranties of Purchaser.

     Section 6.1. Purchaser represents and warrants to the Company that it is acquiring the Notes
for investment and has no present intention of making any disposition of the Notes but subject,
nevertheless, to its right to dispose of all or any part of the Notes if at some future time in
its sole discretion it deems it advisable to do so.

-20-

 

     Purchaser further represents and warrants that either: (i) no part of the funds to be used by
Purchaser to purchase the Notes constitutes assets allocated to any
separate account maintained by
Purchaser such that the application of such funds constitutes a prohibited transaction under
Section 406 of ERISA; or (ii) all or part of such funds constitute assets of one or more separate
accounts maintained by Purchaser, and Purchaser has disclosed to the Company the names of such
employee benefit plans whose assets in such separate account or accounts exceed 10% of the total
assets or are expected to exceed 10% of the total assets of such account or accounts as of the date
of such purchase and the Company has advised Purchaser in writing (and in making the
representations set forth in this clause (ii) Purchaser is relying on such advice) that the Company
is not a party-in-interest nor are the Notes employer securities with respect to the particular
employee benefit plan disclosed to the Company by Purchaser as aforesaid (for the purpose of this
clause (ii), all employee benefit plans maintained by the same employer or employee organization
are deemed to be a single plan); or (iii) the source of funds to be used by Purchaser to purchase
the Notes is an “insurance company general account” within the meaning of Department of Labor
Prohibited Transaction Exemption (“PTE”) 95-60 (issued July 12, 1995) and the purchase of the Notes
by Purchaser is eligible for exemption under, and satisfies the requirements of, PTE 95-60. As used
in this Section 6.1, the terms “separate account”, “party-in-interest”, “employer securities” and
“employee benefit plan” shall have the respective meanings assigned to them in ERISA.

     Section 6.2. Purchaser represents and warrants to the Company that in entering into this Loan
Agreement it has not relied upon any oral representations made or given to it by a representative
of the Company or by anyone on the Company’s behalf.

     Section 6.3. Purchaser and any subsequent institutional holder of any Notes to which this
Section applies agrees that in the event it shall sell or transfer the Notes (i) it will, prior to
the delivery of the Notes (unless it has already done so), make a notation thereon of all
principal, if any, prepaid on the Notes and will also note thereon the date to which interest has
been paid on the Notes, and (ii) it will promptly notify the Company of the name and address of
the transferee of any Notes so transferred and of the amount of prepaid principal and the date to
which interest has been so paid, as so noted. With respect to any Notes to which this Section
applies, the Company shall be entitled to presume conclusively that the original or such
subsequent institutional holder as shall have requested the provisions of Section 5.1 to apply to
its Notes remains the holder of such Notes until (y) the Company shall have received notice of the
transfer of such Notes, and of the name and address of the transferee, or (z) such Notes shall
have been presented to the Company as evidence of the transfer.

Section
7. Events of Default.

     Section 7.1. An “Event of Default” under this Loan Agreement shall occur if: (a) the Company
shall fail to make payment of any interest or principal when due on the Notes; (b) the Company
shall fail to make payment of any interest or principal when due on any other notes of the Company
or shall be in default under any loan agreement related to said other notes; (c) the Company shall
fail to perform any of the covenants set forth in Sections 5.2, 5.6, 5.11 or 5.12; (d) the Company
shall fail to perform any of the other covenants or agreements set forth in the form of note
attached as Exhibit “A” hereto or in this Loan Agreement and such failure shall not

-21-

 

have been remedied or made good within thirty days after it becomes known to the Company; (e) any
of the representations or warranties contained in this Loan Agreement shall be false or erroneous;
(f) the Company shall become insolvent or be unable to pay its debts as they mature, or shall
admit in writing its inability to pay its debts as they mature, or shall make a general assignment
for the benefit of creditors or to a representative for creditors (authorized to liquidate any
substantial amount of its property or assets), or shall become or be adjudicated a bankrupt, or
shall apply for or consent to the appointment of a custodian, receiver or trustee of itself or of
all or a major part of its properties, or if an order for the appointment of such receiver or
trustee shall be made without its consent and such order shall remain unvacated for a period of
sixty days; (g) any judgments, one or more, aggregating an amount in excess of $100,000 shall be
filed against any property or assets of the Company and, after a period of 60 days, remain unpaid,
unvacated, unbonded or unstayed; (h) the Company voluntarily files or consents to a petition to
adjudicate it a bankrupt or for its reorganization or to effect a plan or other arrangement with
its creditors or files an answer to a creditors’ petition or other petitions filed against it
(admitting the material allegations thereof) for an adjudication of bankruptcy or for
reorganization or to effect a plan or other arrangement with creditors; or (i) (A) any, Plan shall
fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part
thereof or a waiver of such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (B) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have
notified the Company or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (C) the aggregate “amount of unfunded benefit liabilities” (within the meaning of
section 4001 (a)(18) of ERISA) under all Plans subject to Title IV of ERISA, determined in
accordance with Title IV of ERISA, shall exceed $10,000,000, (D) the Company or any ERISA Affiliate
shall have incurred or is reasonably expected to incur any liability in the nature of a penalty,
excise tax or fine pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, (E) the Company or any ERISA Affiliate withdraws from
any Multiemployer Plan, or (F) the Company establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would increase the liability of the
Company thereunder; and any such event or events described in clauses (A) through (F) above, either
individually or together with any other such event or events, could reasonably be expected to have
a material adverse effect. As used in Section 7.l(i), the terms “employee benefit plan” and
“employee welfare benefit plan” shall have the respective meanings assigned to such terms in
section 3 of ERISA.

     Section 7.2. In an Event of Default specified in paragraph (a) of Section 7.1 hereof, by
notice to the Company, the holder of any Notes may, and in each and every Event of Default
specified in paragraphs (b) through (e), inclusive, or paragraph (g) of Section 7.1 hereof, by
notice to the Company, the holder or holders of 25% of the aggregate principal amount of the
Notes may, declare the principal of and all interest then accrued on the Notes to be immediately
due and payable, and when any Event of Default specified in paragraph
(f) or (h) of Section 7.1
hereof has occurred, then the principal of and all interest then accrued on the above-described
Notes plus reasonable attorneys fees and costs of collection, shall become and be immediately due
and payable, without presentation, demand, protest, notice of protest or other notice of dishonor
of any kind, all of which are hereby expressly waived. Upon the Notes becoming due

-22-

 

and payable as a result of any Event of Default as aforesaid, the Company will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes and, to the extent not
prohibited by applicable law, an amount as liquidated damages for the loss of the bargain
evidenced hereby (and not as a penalty) equal to the Make-Whole Amount, determined as of the date
on which the Notes shall so become due and payable. No course of dealing on the part of the holder
or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any
right shall operate as a waiver of such right or otherwise prejudice such holder’s rights, powers
and remedies.

     Section 7.3. The provisions of Section 7.2 are subject to the condition that if the principal
of and accrued interest on all or any portion of the outstanding Notes have been declared
immediately due and payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (e), inclusive, or paragraph (g) of Section 7.1, the holders of 66-2/3% in
aggregate principal amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof, provided that at the
time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for
the payment of any monies due pursuant to the Notes or the Loan Agreement; (b) all arrears of
interest upon all of the Notes and all other sums payable under the Notes and under this Loan
Agreement (except any principal or interest on the Notes which has become due and payable solely
by reason of such declaration under Section 7.2 shall have been duly paid); and (c) each and every
other Event of Default shall have been made good, cured or waived pursuant to Section 9.1; and
provided further, that no such rescission and annulment shall extend to or affect any subsequent
Event of Default or impair any right consequent thereto.

Section 8. General.

     Section 8.1. All determinations of amounts under Sections 4 and 5 of this Loan Agreement,
except as otherwise stated herein, shall be in accordance with generally accepted accounting
principles consistently applied.

     Section 8.2. All representations, covenants, conditions, warranties and agreements of the
Company made herein, or in any certificate delivered hereunder shall survive the delivery to
Purchaser of the Notes and any sale or exchange thereof.

     Section 8.3. In the event that the sale of the Notes herein contemplated is not carried out
by reason of the inability of the Company (after good faith efforts) to fulfill any of the
conditions specified in Section 3 hereof, neither Purchaser nor the Company shall be responsible
to the other for any damages or otherwise by reason hereof, except that the Company shall not be
relieved of its obligations under Section 5.19 hereof.

     Section 8.4. This Loan Agreement shall bind and inure to the benefit of the respective
parties hereto, their respective successors and assigns and all holders from time to time of the
Notes issued hereunder.

     Section 8.5. All communications provided for or permitted hereunder shall be in writing and
shall be sent by registered or certified mail or by overnight air courier, in each case prepaid,

-23-

 

and, if to the Company, shall be addressed to it at its office at 25 Manchester Street,
Merrimack, New Hampshire 03054 or such other address as the Company may designate to the Purchaser
or to subsequent holders of the Notes, and, if to the Purchaser, addressed to its address which
appears on Schedule I to this Loan Agreement or such other address as the Purchaser or any
subsequent holders of the Notes may designate to the Company in writing.

     Section 8.6. The Company shall cause to be kept at its principal office a register for the
registration and transfer of the Notes, and the Company will register or transfer or cause to be
registered or transferred, as hereinafter provided and under such reasonable regulations as it may
prescribe, any Note issued pursuant to this Loan Agreement.

     Section 8.7. Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the
Company, or in the event of such mutilation upon surrender and cancellation of the Note, the
Company will make and deliver without expense to the holder thereof, a new Note, of like tenor, in
lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser or any subsequent
institutional holder is the owner of any such lost, stolen or destroyed Note, then the affidavit
of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and
of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a condition to the
execution and delivery of new Notes other than the written agreement of such owner to indemnify
the Company.

     Section 8.8. Should any part of this Loan Agreement for any reason be declared invalid, such
decision shall not affect the validity of any remaining portion, which remaining portion shall
remain in force and effect as if this Loan Agreement had been executed with the invalid portion
thereof eliminated and it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Loan Agreement without including therein any such
part, parts, or portion which may, for any reason, be hereafter
declared invalid.

     Section 8.9. This Loan Agreement and the Notes shall be governed and construed in accordance
with New Hampshire law.

Section
9. Amendments to the
Loan Agreement.

     Section 9.1. This Loan Agreement, may be amended, and compliance with any covenant or
condition herein set forth may be omitted or waived, by any agreement supplemental hereto assented
to in writing by the Company and the holder or holders of 66-2/3% in aggregate principal amount of
the Notes outstanding after notice thereof has been mailed at least thirty days previously to all
registered holders of the Notes outstanding on the books of the Company, except that no such
assent shall be effective to change the principal of or the rate of interest payable on any of the
Notes, or to change the date fixed for the payment of the principal thereof or any premium or
interest thereon or to change the percentage of holders of the Notes required to assent to any
amendment or any provisions of this Section 9.1 unless the holders of 100% of the Notes then
outstanding have assented in writing thereto.

-24-

 

Section
10. Conversion to First
Mortgage Bonds.

     Section 10.1. The Company, at its option, may at any time convert the Notes into
first mortgage bonds of the Company of a like principal amount, bearing interest at the same rate
and maturing on the same date as the Notes, provided that the Company shall, prior to or at the time
of such conversion, enter into an indenture of mortgage with a financial institution organized and
doing business under the laws of the United States or any State or territory thereof or the
District of Columbia and authorized to exercise corporate trust powers, having a combined capital
and surplus of at least $25,000,000 and having its principal office in the State of Connecticut,
Maine, Massachusetts, New Hampshire, Rhode Island or Vermont, as Trustee for the holders of said
bonds, which indenture shall convey to such trustee a first mortgage lien in all of the Capital
Properties of the Company (including any after-acquired Capital Properties) as security for the
payment of said bonds and the performance by the Company of its obligations under said indenture.
Said first mortgage bonds and indenture of mortgage shall contain terms and covenants substantially
the same as the Notes and this Loan Agreement, respectively, including the covenants contained in
Section 5 hereof (allowing for differences in form and minor substance and with appropriate
adjustments to reflect the changed nature of the securities), shall be in such form and contain
such provisions as are acceptable to Purchaser and as are customary for the first mortgage bonds
issued by corporations in the waterworks business and shall not restrict the Company in the
operations of its business to any substantially greater extent than the Company was so restricted
by the provisions of this Loan Agreement and of the Notes. Without limiting the generality of the
foregoing, (i) said indenture of mortgage shall permit the issuance of additional first mortgage
bonds thereunder, equally and ratably secured by the lien thereof, to the same extent as the
Company was permitted to issue Funded Debt by the terms of this Agreement and the Notes, and shall
not limit the creation by the Company of indebtedness other than first mortgage bonds, and (ii)
said indenture shall not prohibit liens on Capital Properties of the Company junior to the lien of
said indenture.

     Section 10.2. The Company shall give at least 30 days’ written notice to the holders of the
Note, by registered or certified mail or overnight air courier, of the effective date of such
conversion of the Notes into first mortgage bonds, specifying such effective date and the
principal office of the trustee at which the Notes shall be exchangeable for first mortgage bonds
on and after such effective date subject to the Purchaser’s acceptance of the provisions of the
indenture of mortgage. First mortgage bonds to be exchanged for the Notes shall be in fully
registered form and shall bear interest from the date to which interest has been paid on the
Notes.

     Section 10.3. Prior to or on the effective date of such conversion, and as a condition to
the effectiveness of such conversion, said indenture of mortgage shall be duly recorded, and
financing statements shall be duly filed in respect thereof, to the extent required by law to
perfect the lien of the mortgage on the Capital Properties, and the Company shall deliver to the
trustee and to each of the holders of the then unpaid principal of the Notes an opinion of
counsel (who may be outside counsel to the Company and satisfactory to each of the holders of the
Notes) as to the validity and binding effect of said first mortgage bonds and indenture of
mortgage and the title of the Company to its Capital Properties free and clear of all
encumbrances except those permitted by said indenture and such other matters as the holders of
the Notes may reasonably request. The holders of the Notes, at the election of 66-2/3% in
aggregate principal amount of

-25-

 

the Notes outstanding, may be represented by such special counsel as they shall select and the
reasonable charges and disbursement of such special counsel shall be paid for by the Company.
 On and after the effective date of such conversion, the Notes shall be deemed to have been
converted into first mortgage bonds, whether or not the holders of the Notes have surrendered the
Notes in exchange for first mortgage bonds, and the indenture of mortgage shall for all purposes
be deemed to have been substituted for and to have superseded this Loan Agreement.

-26-

 

     If the foregoing is in accordance with your understanding, please sign the enclosed
counterpart hereof, whereupon this Loan Agreement and
Purchaser’s acceptance thereof shall
constitute a binding agreement between the Company and Purchaser.

	 	 	 	 	 
	 	Very truly yours,

Pennichuck Water Works, Inc.

 	 
	 	By  	/s/ William D. Patterson
 	 
	 	 	Its Vice President and CFO 	 

     Accepted and agreed to as to Sections 3.5, 5.4 and 5.11 and warranted as to Sections 4.2, 4.5,
4.6, 4.7, 4.8 and 4.19.

	 	 	 	 	 
	 	Pennichuck Corporation

 	 
	 	By  	/s/ William D. Patterson
 	 
	 	 	Its Vice President and CFO 	 

     American United Life Insurance Company hereby accepts and agrees to this Loan Agreement as of
March 4, 2005.

	 	 	 	 	 
	 	American
United Life Insurance
Company

 	 
	 	By  	/s/ Kent R. Adams
 	 
	 	 	Name:  	Kent R. Adams 	 
	 	 	Title:  	Vice President Fixed Income Securities 	 

-27-

 

     Schedule
I

	 	 	 
	Name and Address	 	Principal Amount
	of Purchaser	 	of Note to be Purchased
	American
United Life 
    Insurance Company

Post Office Box 368 
Indianapolis, Indiana
46206 
Attention: Securities Department
	 	$5,000,000
	 
	 	 
	Payments
	 	 
	 
	 	 
	All payments on or in respect of
the Notes to be by Bank wire
transfer of Federal or other
immediately available funds
(identifying each payment as
“Pennichuck Water Works, Inc.,
5.00% Senior Notes due 2010, PPN
70825 @ AD 6, principal,
premium or interest”) to:
	 	 
	 
	 	 
	Bank of New York

Attention: P&I Department

One Wall Street, 3rd Floor, Window A

New York, New York 10286

ABA #021000018

Account Number: 186683, BNF:IOC566
	 	 
	 
	 	 
	Notices
	 	 
	 
	 	 
	All notices and communications,
including notices with respect to
payments and written confirmation
of each such payment, to be
addressed as first provided above.
	 	 
	 
	 	 
	Name of Nominee in which Notes are to be issued: None
	 	 
	 
	 	 
	Taxpayer I.D. No. 35-0145825
	 	 

 

 

Pennichuck
Water Works, Inc.

Note Due March 4, 2010

			
	No.                     
	 	$                             
	Dated
                    ,
20__
	 	Due March 4, 2010

          On March 4, 2010, Pennichuck Waterworks, Inc., a New Hampshire corporation (hereinafter
referred to as the “Company”), for value received, hereby promises to pay to                                         
(hereinafter referred to as the “Payee”), or
registered assigns, at the office of the Company in Nashua, New Hampshire, upon presentation
and surrender of this Note not later than March 4, 2010,                                
Dollars ($                    ), in such coin or currency of the United States of America as at the
time of payment is legal tender for the payment of public and private debts and, until such
principal sum is fully paid, to pay interest thereon (computed on the basis of a 360-day year of
twelve 30-day months) from March 4, 2005 at the rate of 5.00% per annum at said office of the
Company, in like coin or currency, semiannually on the fourth day of each March and September
after the date hereof commencing with the fourth day of September next succeeding the date hereof.
In lieu of the rate of interest of 5.00%, the Company agrees to pay interest on overdue principal
and premium, if any, and (to the extent legally enforceable) on any overdue installment of
interest at the rate of 6.00% per annum after maturity, whether by acceleration or otherwise,
until paid.

          This Note is issued pursuant to the terms of a loan agreement dated as of March 4, 2005
(hereinafter referred to as the “Loan Agreement”), between the Company and American United Life
Insurance Company, providing for the issuance of Notes in an aggregate principal amount of
$5,000,000, and is subject to all the applicable provisions of the Loan Agreement. This Note and
the holder hereof are entitled equally and ratably with the holders of any other Note outstanding
under the Loan Agreement to all benefits and security provided for thereby or referred to therein,
to which Loan Agreement reference is hereby made for the statement thereof. Reference herein to
the Loan Agreement shall not impair the obligation of the Company to pay the principal and
interest on this Note, which obligation is absolute and unconditional.

          Subject to the terms of Section 1.2 of the Loan Agreement, the Payee may surrender this Note,
prior to maturity or prepayment thereof, at the Company’s office in Nashua, New Hampshire, in
exchange for an equal principal amount of registered notes of other denominations.

          This Note is not subject to prepayment or redemption at the option of the Company prior to its
expressed maturity date except on the terms and conditions and in the amounts and with the premium,
if any, set forth in the Loan Agreement.

          This Note is registered on the books of the Company and is transferable only by surrender
thereof at the principal office of the Company duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of this Note or its attorney

Exhibit A

(to Loan Agreement)

 

 

duly authorized in writing. Payment of or on account of principal and interest on this Note shall
be made only to or upon the order in writing of the registered holder.

          Presentation, demand, protest, notice of protest or other notice of dishonor of any kind upon
any default of the terms of this Note, or the terms of the Loan Agreement, are hereby expressly
waived.

	 	 	 	 	 
	 	Pennichuck
Waters Works, Inc.

 	 
	 	By  	
 	 
	 	 	Its President 	 

          
This
Note is not registered
under the Securities
Act of 1933, as amended. No resale or transfer of this Security can be made without registration or exemption from the
registration requirements of said Securities Act.

A-2 

 

     Description
of Debt and
Leases

	1.	 	Short Term Debt of the Company outstanding on March 1, 2005 was as follows:

	 
	 	 	Intercompany short-term debt not in excess of $5,400,000 payable to Pennichuck (the
parent corporation) at a rate specified in the amended and Restated Revolving Credit
Promissory Note dated March 29, 2004.
	 
	2.	 	Funded Debt of the Company, except for the unsecured 9.10% note due April 1,
2005, outstanding on March 1, 2005 was as follows:

	 	(a)	 	Notes, bonds and other securities:

	 	 	 	 	 	 	 
	(i)
	 	Unsecured 7.4% note due March 1, 2021 issued under
a March 1, 1996 loan agreement
	 	$	8,000,000	 
	 	 	 	 	 	 	 
	(ii)
	 	Unsecured New Hampshire State Revolving Fund 3.80%
note due May 1, 2022
	 	$	384,000	 
	 	 	 	 	 	 	 
	(iii)
	 	Unsecured New Hampshire State Revolving Fund Loans
2.315% note due April 1, 2013
	 	$	121,000	 
	 	 	 	 	 	 	 
	(iv)
	 	7.99% automobile loan due September 30, 2007
	 	$	7,000	 
	 	 	 	 	 	 	 
	(v)
	 	Secured 5.00% note due October 1, 2005
	 	$	18,000	 
	 	 	 	 	 	 	 
	(vi)
	 	Unsecured Industrial Development Authority 1988
Revenue Bond, 7.50% due July 1, 2018
	 	$	910,000	 
	 	 	 	 	 	 	 
	(vii)
	 	Unsecured New Hampshire Business Finance Authority
1997 Revenue Bond, 6.30% due May l, 2022
	 	$	4,000,000	 
	 	 	 	 	 	 	 
	(viii)
	 	Unsecured New Hampshire Business Finance Authority
2005 Revenue Bond, Series A, 4.70%, due January 1,
2035
	 	$	1,830,000	 
	 	 	 	 	 	 	 
	(ix)
	 	Unsecured New Hampshire Business Finance Authority
2005 Revenue Bond, Series B, 4.60% due January 1,
2030
	 	$	2,345,000	 
	 	 	 	 	 	 	 
	(x)
	 	Unsecured New Hampshire Business Finance Authority
2005 Revenue Bond, Series C, 4.50% due January 1,
2025
	 	$	1,205,000	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Total Bonds and Notes

	 	$	18,820,000	 
	 	 	 	 	 	 

Exhibit
B

(to Loan Agreement)

 

 

	 	(b)	 	Guaranteed obligations: None.
	 
	 	(c)	 	Capitalized Leases: None.

B-2

 

Description
of Pennichuck Properties

          The
following watershed land currently owned by Pennichuck Corporation:

          Lot 118, consisting of approximately 124 acres, located on Manchester Street and Old Harris
Road in Nashua, New Hampshire, south of the so-called Harris Pond and south and west of the
so-called Pennichuck Brook as shown on a plan of land entitled “Consolidation and Subdivision Plan,
Henri Bourque Highway, Nashua, New Hampshire”, dated June 23, 1986, prepared by Allan H. Swanson,
Inc.

Exhibit
C

(to Loan Agreement)

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