UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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PENNICHUCK CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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25 Manchester Street
Merrimack, New Hampshire 03054
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Thursday, May 5, 2011
To Our Shareholders:
The Annual Meeting of Shareholders of Pennichuck Corporation will be held at 9:00 AM (Eastern
Time), on Thursday, May 5, 2011, at the Courtyard by Marriott-Nashua, 2200 Southwood Drive, Nashua,
New Hampshire 03063 for the following purposes:
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To elect four directors, each for a three-year term, to continue
until the Companys Annual Meeting of Shareholders in the year 2014 and
until his or her successor is duly elected and qualified;
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(2)
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To ratify the appointment of ParenteBeard LLC as the Companys
independent registered public accountants for the year ending December 31,
2011;
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To have an advisory (non-binding) vote on the approval of the
compensation of the Companys Named Executive Officers (Say on Pay) as
disclosed in the proxy statement for this meeting;
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To have an advisory (non-binding) vote on the desired frequency on
which shareholders will have an advisory (non-binding) vote on the approval
of the compensation of the Companys Named Executive Officers (Say When on
Pay); and
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To transact such other business as may properly come before the
meeting or any adjournments thereof.
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The Board of Directors has fixed the close of business on Friday, March 4, 2011 as the record
date for the determination of shareholders entitled to notice of, and to vote at, the Annual
Meeting and any postponements or adjournments of the meeting. Only holders of common stock of
record at the close of business on that date will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournment thereof. Your attention is directed to the attached Proxy
Statement.
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By Order of the Board of Directors,
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Roland E. Olivier
Secretary
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Merrimack, New Hampshire
March 25, 2011
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 5, 2011:
The Companys Proxy Statement for the 2011 Annual Meeting of Shareholders and the Companys Annual
Report on
Form 10-K
for the Year ended December 31, 2010 are available at:
www.pennichuck.com/investor/proxy-materials.php.
BROKERS ARE NOT PERMITTED TO VOTE ON THE ELECTION OF DIRECTORS AND/OR ON ANY ADVISORY VOTES
RELATING TO SAY ON PAY AND SAY WHEN ON PAY WITHOUT INSTRUCTIONS FROM THE BENEFICIAL OWNER.
THEREFORE, IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER OR BANK, YOUR VOTE IS ESPECIALLY
IMPORTANT. ACCORDINGLY, WE ENCOURAGE YOU TO VOTE PROMPTLY BY MAIL OR THE INTERNET, AS PROVIDED BY
THE ENCLOSED PROXY CARD, EVEN IF YOU INTEND TO ATTEND THE ANNUAL MEETING. THE GIVING OF THE PROXY
WILL NOT AFFECT YOUR RIGHTS TO VOTE AT THE MEETING IF THE PROXY IS REVOKED AS SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT.
-2-
Table of Contents
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-3-
PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054
PROXY STATEMENT
for
2011 ANNUAL MEETING OF SHAREHOLDERS
to be held on May 5, 2011
Annual Meeting
Why have I received these materials?
This Proxy Statement and the accompanying proxy are being mailed to shareholders on or about
March 25, 2011. The proxy is being solicited by the Board of Directors (the Board) of Pennichuck
Corporation (referred to throughout this Proxy Statement as Pennichuck, the Company, we,
our, our Company or us) in connection with our Annual Meeting of Shareholders that will take
place on Thursday, May 5, 2011, at 9:00 AM (Eastern Time), at the Courtyard by Marriott-Nashua,
2200 Southwood Drive, Nashua, New Hampshire 03063, and at any adjournment thereof. You are
cordially invited to attend the Annual Meeting and are requested to vote on the proposals described
in this Proxy Statement.
A copy of our Annual Report on Form 10-K for the year ended December 31, 2010 has been
enclosed with the Proxy Statement mailed to you. Pennichucks Proxy Statement for the Annual
Meeting and the 2010 Annual Report on Form 10-K can also be viewed on the Companys website at
www.pennichuck.com/investor/proxy-materials.php.
Are these materials related to the merger with the City of Nashua that the Company recently
announced?
No. As you are aware, effective as of November 11, 2010, the Company entered into a merger
agreement (the Merger Agreement) with the City of Nashua, New Hampshire (Nashua) pursuant to
which the Companys Board of Directors has agreed to sell the Company to Nashua for $29.00 per
share in cash (the Merger). This Proxy Statement does not directly relate to the proposed Merger
and refers to it only as necessary to describe its effects on the information contained herein.
However, before the Merger can be completed, numerous conditions must be met including that at
least two-thirds of the outstanding common shares of Pennichuck must be voted in favor of it.
Regarding that required shareholder vote, as of the date of this mailing, the Company has not set
the date of the Special Meeting of Shareholders but we expect to mail out a separate proxy later
this year. The Companys Directors urge you to examine that separate proxy information carefully
when you receive it and to vote in favor of the Merger at that time.
-5-
Who is entitled to vote at the Annual Meeting?
Holders of shares of common stock of Pennichuck as of the close of business on Friday, March
4, 2011, the record date for the Annual Meeting, will be entitled to receive notice of and to vote
at the Annual Meeting. As of the record date, 4
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679,927 shares of our common stock were
outstanding, each of which is entitled to one vote with respect to each matter to be voted on at
the Annual Meeting.
How do I vote my shares at the Annual Meeting?
If you are a record shareholder of common stock (that is, if you hold common stock in your
own name in Pennichucks stock records maintained by our transfer agent, American Stock Transfer &
Trust Company), you may complete and sign the accompanying proxy card and return it to Pennichuck
or deliver it in person or you may attend the Annual Meeting and vote in person. Shareholders of
record may also vote via the Internet. Internet voting information is provided on the proxy card.
If you vote via the Internet, please do not return a signed proxy card.
If your shares are held in street name (for example, if your shares of common stock are held
by a brokerage firm), your brokerage firm, as the record holder of your shares, is required to vote
your shares according to your instructions. In order to vote your shares, you will need to follow
the directions your brokerage firm provides you. Under the current rules of the New York Stock
Exchange (NYSE), which are applicable to all brokers on all exchanges including the NASDAQ Global
Market (NASDAQ) where Pennichucks stock is traded, if you do not give instructions to your
brokerage firm, it will only be able to vote your shares with respect to certain discretionary
items, but will not be allowed to vote your shares with respect to certain non-discretionary
items. The ratification of ParenteBeard LLC as our independent registered public accounting firm
for the year ending December 31, 2011 (Proposal Two) is considered to be a discretionary item under
the NYSE rules and your brokerage firm will be able to vote on that item even if it does not
receive instructions from you, so long as it holds your shares in its name.
If you do not instruct
your broker how to vote your shares with respect to the election of directors (Proposal One), and
the advisory votes regarding Say on Pay (Proposal Three) or Say When on Pay (Proposal Four), your
broker may not vote for directors any of these proposals, and your votes will be counted as broker
non-votes, which means your votes will neither be cast nor counted with respect to director
election, Say on Pay and Say When on Pay.
If your shares are held in street name and you wish to attend the Annual Meeting in person,
you must bring an account statement or letter from your brokerage firm showing that you are the
beneficial owner of the shares as of the record date (Friday, March 4, 2011) in order to be
admitted to the Annual Meeting on May 5, 2011. To be able to vote your shares held in street name
at the Annual Meeting, you will need to obtain a proxy card from the holder of record (e.g. your
brokerage firm) for your shares.
Can I change my vote or revoke my proxy after I return my proxy card?
For record shareholders of common stock, yes you can. After you have submitted a proxy
online or by mail, you may revoke your proxy or change your vote at any time before the proxy is
exercised by submitting a notice of revocation or a duly executed proxy bearing a later date prior
to the date of the Annual Meeting, by voting again prior to the time at which our voting facilities
close, or by attending the Annual Meeting and voting in person. In any event, the latest submitted
vote will be recorded and the earlier vote(s) revoked.
For street name shareholders of common stock, you will need to review the instructions on
the proxy form provided to you by the institution that holds your shares to determine whether you
may change your vote after you have submitted a proxy. If you are permitted to change your vote
after you have submitted a proxy, follow the instructions for revocation on such form to do so.
-6-
What constitutes a quorum for purposes of the Annual Meeting?
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock entitled to vote shall constitute a quorum for the transaction
of business. Proxies marked as withholding or containing broker non-votes on any matter to be
acted upon by shareholders will be treated as present at the meeting for purposes of determining a
quorum. As noted above, a broker non-vote occurs when a registered broker holding a customers
shares in the name of the broker has not received voting instructions on a matter from the customer
and is barred from exercising discretionary authority to vote on that matter, as indicated by the
broker on the proxy.
Brokers may not vote on non-discretionary items including the election of
directors (Proposal One), Say on Pay (Proposal Three) or Say When on Pay (Proposal Four), and may
only vote on other routine discretionary matters, such as the ratification of ParenteBeard LLC as
our independent registered public accounting firm (Proposal Two) without receiving instructions
from their customers.
What vote is required to approve each proposal at the Annual Meeting?
Under New Hampshire law, the election of directors at the Annual Meeting requires the
affirmative vote of a plurality of the votes cast at the Annual Meeting by shares represented in
person or by proxy and entitled to vote on the proposal. Votes that are withheld and broker
no-votes will have no effect on the outcome of the election of directors.
Approval of the proposed ratification of the appointment of ParenteBeard LLC as the Companys
independent registered public auditors requires the affirmative vote of a majority of the votes
cast at the Annual Meeting by shares represented in person or by proxy and entitled to vote on the
proposal.
Approval regarding each advisory vote regarding Say on Pay (Proposal Three) and Say When on
Pay (Proposal Four) for the Companys Named Executive Officers requires a plurality of the votes
cast at the Annual Meeting by shares represented in person or by proxy and entitled to vote on the
proposal. Votes that are withheld and broker no-votes will have no effect on the outcome of
these advisory votes. Shareholder votes regarding Say on Pay and Say When on Pay proposals are
advisory in nature and will be considered by the Companys Board of Directors in implementing
compensation and benefit policies and advisory votes in the future.
Shares held by stockholders who abstain from voting as to a particular matter, and shares held
in street name by brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter, will not be counted as votes
in favor of such matter, and also will not be counted as shares voting on such matter. Broker
non-votes will be counted for the purpose of determining whether a quorum exists.
-7-
How does the Board of Directors recommend that I vote my shares?
Unless you give other instructions on your proxy, the persons named as proxy holders on the
proxy will vote in accordance with the recommendations of the Board of Directors. The Board of
Directors recommendation is set forth together with the description of the proposal in this Proxy
Statement. In summary, the Board of Directors recommends a vote:
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FOR
the Board of Directors proposal to elect as directors of
Pennichuck the four nominees named in this Proxy Statement.
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FOR
the Board of Directors proposal to ratify the appointment of
ParenteBeard LLC as the Companys independent registered public
accountants for the year ending December 31, 2011.
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FOR
the Board of Directors proposal to approve the 2011 compensation
for the Companys Named Executive Officers (Say on Pay advisory vote).
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FOR
the Board of Directors proposal to hold a shareholder advisory
vote every year on the compensation for the Companys Named Executive
Officers (Say When on Pay advisory vote).
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With respect to any other matter that properly comes before the Annual Meeting, the proxy
holders will vote as recommended by the Board of Directors or, if no recommendation is given, in
their own discretion in the best interests of Pennichuck. At the date of this Proxy Statement, the
Board of Directors had no knowledge of any business other than that described in this Proxy
Statement that will be presented for consideration at the Annual Meeting.
Where can I find the voting results?
Pennichuck will report the voting results in a Form 8-K within four business days after the
end of its 2011 Annual Meeting.
Who will bear the expense of soliciting proxies?
Pennichuck will bear the cost of soliciting proxies in the form enclosed. In addition to the
solicitation by mail, proxies may be solicited personally or by telephone, facsimile or electronic
transmission by our directors, officers and employees. We may reimburse brokers holding common
stock in their names or in the names of their nominees for their expenses in sending proxy
materials to the beneficial owners of such common stock.
When must a shareholder proposal for the 2012 Annual Meeting of Shareholders be delivered to
the Company?
Any shareholder who intends to present a proposal for inclusion in the Proxy Statement for the
2012 Annual Meeting of Shareholders (the 2012 Annual Meeting) must deliver the proposal to the
Company Secretary at 25 Manchester Street, Merrimack, New Hampshire 03054 in writing not later than
November 28, 2011, if the proposal is submitted for inclusion in our proxy materials for that
meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. Any shareholder who
intends to present a proposal directly at the 2012 Annual Meeting rather than submitting it for
inclusion in next years Proxy Statement (
i.e.
, outside the process of Rule 14a-8 of the Securities
Exchange Act of 1934) should provide a notice of their intention to do so to the Company Secretary
at 25 Manchester Street, Merrimack, New Hampshire 03054. To be timely, such notice must be
received by the Company before the close of business on February 9, 2012. For any such proposal sought to be presented
directly at the 2012 Annual Meeting, Securities and Exchange Commission (SEC) rules permit the
persons named as proxy holders on proxies relating to such meeting to vote the proxies in their
discretion if we: (1) receive notice of the proposal before the close of business on February 9,
2012, and advise shareholders in the 2012 Proxy Statement about the nature of the matter and how
the proxy holders appointed by the Board of Directors intend to vote on such matter; or (2) do not
receive notice of the proposal prior to the close of business on February 9, 2012.
-8-
How will documents be delivered to me if I share an address with other shareholders?
Some brokers and other nominees may participate in the practice of householding proxy
statements and annual reports. This means that only one copy of our Proxy Statement and Annual
Report on Form 10-K may have been sent to multiple shareholders in your household. Pennichuck will
promptly deliver a separate copy of either document to you if you contact us at the following
address: Attention Investor Relations, Pennichuck Corporation, 25 Manchester Street, Merrimack,
New Hampshire 03054; or telephone number: (603) 882-5191. If you would like to receive separate
copies of our Proxy Statements and/or annual reports to shareholders in the future, or if you are
receiving multiple copies and would like to receive only one copy per household, you should contact
your broker or other nominee, or contact us at the above address or telephone number.
Corporate Governance, Board and Committee Membership
As of the date of this Proxy Statement, the Board of Directors has determined in its business
judgment that all of the members of the Board of Directors and all director nominees are
independent under the applicable NASDAQ listing standards and SEC rules and regulations, except for
Duane C. Montopoli due to his being President and CEO of the Company.
In considering status of Pennichuck directors and nominees as independent within the meaning
of the relevant NASDAQ rules and all other applicable laws and standards, the Board of Directors
specifically considered the relationships and transactions described under the heading Certain
Relationships and Related Party Transactions located under, Director Compensation in this Proxy
Statement.
Board Leadership Structure and Role in Risk Oversight
Pennichuck separates the roles of the President/Chief Executive Officer (CEO) and the
Chairman of the Board of Directors in recognition of the differences between the two roles and the
Boards active role in risk oversight of managements risk identification, risk management and risk
mitigation strategies. The President/CEO is responsible for setting the strategic direction of the
Company and its day-to-day leadership, management and performance. The Chairman of the Board is an
independent director who provides guidance to the President/CEO, approves the agenda for Board
meetings and presides over meetings of the full Board as well as executive sessions of
non-management directors. The Board generally holds executive sessions at the end of each
regularly scheduled meeting of the full Board. During 2010, the Board of Directors met five times
for regularly scheduled meetings and five times for special meetings.
-9-
The Board takes an active role in the Companys risk oversight process, which includes
receiving regular reports from members of senior management on areas of material risk to the
Company, including eminent domain, operational, financial, legal, regulatory, strategic and
reputational risks. The full Board (or the appropriate Committee in the case of risks that are
under the purview of a particular Committee) receives these reports from the appropriate risk
owner within the organization to enable it to understand Pennichucks risk identification, risk management and risk mitigation strategies. When a
Committee receives the report, the Chairman of the relevant Committee reports on the discussion to
the full Board during the Committee reports portion of the next Board meeting. This enables the
Board and its Committees to coordinate the risk oversight role, particularly with respect to risk
interrelationships. The full Board regularly reviews information regarding the Companys credit,
liquidity and operations, as well as the risks associated with each including any environmental,
health and safety risks. As part of its charter, the Audit Committee oversees management of
financial risks, and related legal and regulatory risks, and discusses Pennichucks policies and
procedures with respect to risk identification and risk management by the Companys senior
management. The Compensation & Benefits Committee is responsible for overseeing the management of
risks relating to the Companys executive and non-executive compensation plans and arrangements.
The Corporate Governance & Nominating Committee is responsible for overseeing the management of
risks associated with the independence of the Board of Directors, potential conflicts of interest
and other corporate compliance risks.
The respective membership and functions of the Audit Committee, the Compensation and Benefits
Committee, and the Corporate Governance and Nominating Committee, are discussed below.
Audit Committee
The Audit Committee is presently comprised of Robert P. Keller (Chairman), Clarence A. Davis
and Janet M. Hansen. The composition of the Audit Committee following the Annual Meeting will be
determined at the meeting of the Board of Directors immediately following the Annual Meeting. The
Audit Committee is responsible for the appointment of the independent auditors, oversight of the
integrity of the Companys financial statements, its compliance with legal and regulatory
requirements, the qualifications and independence of its independent auditors, and other
significant financial matters. The Board of Directors has determined in its business judgment that
each of the members of the Audit Committee is independent under the applicable NASDAQ listing
standards and SEC rules and regulations. The Board of Directors has also determined in its
business judgment that each of Mr. Keller, Mr. Davis and Ms. Hansen are qualified as Audit
Committee financial experts within the meaning of applicable rules and regulations of the SEC. The
relevant experience and qualifications of each of Mr. Keller, Mr. Davis and Ms. Hansen are included
in this Proxy Statement under Proposal One Election of DirectorsInformation as to Nominees
and Continuing Directors. During 2010, the Audit Committee met four times.
The Audit Committee has adopted a Charter governing its mission, membership, duties and
responsibilities; a copy of the Charter for the Audit Committee is attached to this Proxy Statement
as Exhibit A and can be accessed electronically at the Companys website at
www.pennichuck.com/investor/corporate_governance.php.
Compensation and Benefits Committee
The Compensation and Benefits Committee (the Compensation Committee) is presently comprised
of James M. Murphy (Chairman), Steven F. Bolander and Michael I. German. The composition of the
Compensation Committee following the Annual Meeting will be determined at the meeting of the Board
of Directors immediately following the Annual Meeting. The Compensation Committee is charged
generally (a) to establish the Companys executive compensation programs, (b) to monitor the
operation of the Companys qualified noncontributory, defined benefit pension plan and the
Companys 401(k) Elective Savings Plan for Employees and the performance of the trustee(s) and
administrator(s) of those plans, and (c) to administer the Companys 2009 Equity Incentive Plan,
and in each case, to recommend changes to the Board as and when appropriate. The Board of
Directors has determined in its business judgment that each of the members of the Compensation
Committee is independent under the applicable NASDAQ listing standards and SEC rules and regulations.
During 2010, the Compensation Committee met four times. For information on the Companys
compensation practices, see Executive CompensationCompensation Discussion and Analysis.
-10-
The Compensation Committee has adopted a Charter governing its mission, membership, duties and
responsibilities; a copy of the Charter for the Compensation Committee can be accessed
electronically at the Companys web site at www.pennichuck.com/investor/corporate_governance.php.
Compensation Committee Interlocks and Insider Participation
The following directors served as members of the Compensation Committee during some or all of
2010: Messrs. Murphy, Bolander and German. During 2010, no member of the Compensation Committee
had a relationship that requires disclosure as a Compensation Committee interlock.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee (the Nominating Committee) is presently
comprised of John R. Kreick (Chairman), Joseph A. Bellavance, Hannah M. McCarthy and Martha E.
ONeill. The composition of the Nominating Committee following the Annual Meeting will be
determined at the meeting of the Board of Directors immediately following the Annual Meeting. The
Nominating Committee is charged generally with identifying individuals qualified to become members
of the Board of Directors and recommending to the Board of Directors the director nominees for
election at the next annual meeting of shareholders and/or for interim director appointments to the
Board of Directors. The Nominating Committee also recommends to the Board of Directors the
director candidates for each committee of the Board of Directors for appointment by the Board of
Directors. The Board of Directors has determined in its business judgment that each of the members
of the Nominating Committee is independent under the applicable NASDAQ listing standards and SEC
rules and regulations. During 2010, the Nominating Committee met one time.
The Nominating Committee has adopted a Charter governing its mission, membership and duties
and responsibilities; a copy of the Charter for the Nominating Committee can be accessed
electronically at the Companys website at www.pennichuck.com/investor/ corporate_governance.php.
The Nominating Committee will consider nominees recommended by Company shareholders provided
that the recommendations are made in accordance with the procedures set forth herein and if
received in writing no later than November 28, 2011 with respect to the 2012 Annual Meeting. A
shareholder who wishes to recommend a prospective nominee for the Board of Directors should notify
the Companys Secretary or any member of the Nominating Committee, in writing at the Companys
mailing address, with the name of the recommended candidate for director, the consent of the
shareholder and any proposed nominee to be identified, and whatever supporting material the
shareholder considers appropriate. If the recommending shareholder is not the registered owner of
the securities, he or she can submit one of the following to the registrant to evidence the
required ownership percentage and holding period: (i) a written statement from the record holder of
the securities (usually a broker or bank) verifying that, at the time the security holder made the
recommendation, he or she had held the required securities for at least one year; or (ii) if the
security holder has filed a Schedule 13D, Schedule 13G, Form 3, Form 4, and/or Form 5, or
amendments to those documents or updated forms, reflecting ownership of the securities as of or
before the date of the recommendation, a copy of the schedule and/or form, and any subsequent
amendments reporting a change in ownership level, as well as a written statement that the security
holder continuously held the securities for the one-year period as of the date of the
recommendation.
-11-
In addition to considering candidates suggested by shareholders, the Nominating Committee
identifies nominees for director through a variety of sources including, but not limited to, the
services of executive search firms and referrals from the Companys current directors and executive
officers as well as through certain outside service providers such as its outside counsel, outside
auditors, commercial and investment banking firms. The Company did not employ an executive search
firm or otherwise pay a fee to any third party in connection with the identification or evaluation
of the nominees included in this Proxy Statement, each of whom is a continuing director. The
Nominating Committee screens all candidates in the same manner regardless of the source of the
recommendation.
Criteria and Diversity
The Nominating Committee will consider whether to nominate any candidate for director in
accordance with criteria set forth in its Charter, including:
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the potential nominees experience, qualifications, knowledge, skills
and attributes that makes him/her qualified to serve on the Board of
Directors;
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the independence of the potential nominee under applicable NASDAQ
listing standards and SEC rules and regulations;
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the ability of the potential nominee to represent the interests of the
shareholders of the Company;
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the potential nominees integrity, commitment and judgment;
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the potential nominees availability to dedicate time and energy to the
performance of his or her duties, taking into account the number of other
boards he or she sits on in the context of the needs of the Board of
Directors and the Company;
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the extent to which the potential nominee contributes to the overall
expertise, skills and diversity appropriate for the Board of Directors; and
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such other factors relative to the overall composition of the Board as
the Committee shall determine to be relevant at the time.
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The charter of the Nominating Committee requires the Committee and the Board to consider the
value of diversity in the director identification and nomination process. The Nominating Committee
seeks nominees with a broad diversity of experience, professions, skills, geographic representation
and backgrounds. The Company and the Board believes that the backgrounds and qualifications of the
directors, considered as a group, should provide the significant composite mix of diverse
experience, knowledge, abilities and perspectives that will allow the Board to fulfill its
responsibilities. Nominees are not discriminated against on the basis of race, religion, national
origin, sexual orientation, disability or any other basis proscribed by law.
Director Attendance
During the year ended December 31, 2010, the Board of Directors of the Company held five
regular meetings and five special meetings. Each director nominee and continuing director attended
75% or more of the total of the number of meetings of the Board of Directors and the number of
meetings of all committees of the Board of Directors on which he or she served. As a general
matter, members of the Board of Directors are expected to attend the Companys annual meetings.
All continuing members of the Board of Directors and nominees for election to the Board of
Directors were present at Pennichucks 2010 Annual Meeting of Shareholders (2010 Annual Meeting).
-12-
Contacting the Board of Directors
Any shareholder who desires to contact Pennichucks Chairman, or the other members of the
Board of Directors, or the Chairman of the Audit, Compensation or Nominating Committee, may do so
by writing to: Board of Directors, Pennichuck Corporation, 25 Manchester Street, Merrimack, New
Hampshire 03054. Communications received in writing are distributed to the Chairman or other
members of the Board of Directors, or the Chairman of the relevant committee, as appropriate,
depending on the facts and circumstances outlined in the communication received. For example, as
comments or questions regarding accounting or auditing matters are received, they will be forwarded
to the Chairman of the Audit Committee for review.
Security Ownership of Certain Beneficial Owners
To the knowledge of Pennichuck, based solely upon filings made with the SEC, the following are
the only persons or entities to beneficially own more than 5% of the outstanding shares of our
common stock as of March 10, 2011:
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Amount and
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Nature of
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Name and Address of
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Beneficial
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Title of Class
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Beneficial Owner
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Ownership
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Percent of Class
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Common Stock
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GAMCO Investors, Inc.
One Corporate Center
Rye, New York 10580-1435
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737,975
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15.8
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%
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Common Stock
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Thomson Horstmann
& Bryant, Inc.
501 Merritt 7
Norwalk, CT 06851
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263,392
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5.6
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%
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Calculation of percentage is based upon a total of 4,679,927 shares
outstanding and entitled to vote at March 10, 2011.
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The information reported here is based on Schedule 13G/A filed with the SEC on
February 9, 2011.
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The information reported here is based on Schedule 13D filed with the SEC on
February 18, 2011 by GAMCO Investors, Inc., Gabelli Funds, LLC, GAMCO Asset
Management Inc., Teton Advisors, Inc., Gabelli Securities, Inc., MJG Associates,
Inc., GGCP, Inc., and Mario J. Gabelli. The aggregate number of shares of
Pennichuck common stock to which the Schedule 13D relates is 737,975 shares, of
which 375,000 shares are beneficially owned by Gabelli Funds, LLC, 240,300 shares
are beneficially owned by GAMCO Asset Management Inc., 82,200 shares are
beneficially owned by Teton Advisors, Inc., 27,475 shares are beneficially owned by
Gabelli Securities, Inc. and 13,000 shares are beneficially owned by MJG
Associates, Inc.
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Based solely on the information provided by the beneficial owners of more than
5% of the Companys common shares in a Schedule 13D or 13G, and with the exception
of GAMCO Investors, Inc., the Company believes that none of such owners has a
specific right to acquire or beneficially own, within 60 days, any additional
shares.
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-13-
Security Ownership of Management
To the knowledge of Pennichuck, the following table sets forth information as of March 10,
2011 with respect to shares of our common stock beneficially owned by each nominee and continuing
director, the current or former executive officers named in the executive compensation table below
(the Named Executive Officers), and by all directors and executive officers as a group:
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Amount and
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Nature of
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Beneficial
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Percent of
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Title of Class
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Name of Beneficial Owner
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Ownership
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Class
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Common Stock
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Joseph A. Bellavance
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10,300
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*
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Common Stock
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Steven F. Bolander
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133
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*
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Common Stock
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Clarence A. Davis
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*
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Common Stock
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Michael I. German
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2,500
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*
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Common Stock
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Janet M. Hansen
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1,100
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*
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Common Stock
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Robert P. Keller
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3,213
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*
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Common Stock
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John R. Kreick
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1,060
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*
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Common Stock
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Hannah M. McCarthy
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1,333
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*
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Common Stock
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Duane C. Montopoli
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79,000
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1.7
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%
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Common Stock
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James M. Murphy
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500
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*
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Common Stock
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Martha E. ONeill
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16,266
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*
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Common Stock
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Thomas C. Leonard
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15,233
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*
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Common Stock
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Donald L. Ware
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19,841
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*
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Common Stock
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Stephen J. Densberger
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47,465
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1.0
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%
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Common Stock
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Roland E. Olivier
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13,398
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*
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All Directors and Executive Officers as a Group
(16 Persons)
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236,383
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5.0
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%
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*
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Less than one percent.
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Shares beneficially owned means shares over which a person exercises sole or
shared voting or investment power or shares of which a person has the right to
acquire beneficial ownership within 60 days of March 10, 2011. Unless otherwise
noted, the individuals and group noted above have sole voting and investment power
with respect to shares beneficially owned.
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Calculation of percentages is based upon 4,679,927 shares outstanding and
entitled to vote on March 10, 2011 plus shares that may be issued within 60 days of
March 10, 2011 to the applicable individuals and group noted above having rights to
exercise stock options if such persons or group members exercise such rights within
such period.
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The individuals and group noted above have sole voting and investment power with
respect to shares beneficially owned, except as stated in Note
below and
except that voting and investment power is shared as follows: Mr. Bellavance-10,300
shares held in trust; Mr. Kreick-531 shares held in trust and 529 shares owned by
his wife in trust; Ms. McCarthy-1,333 shares owned jointly with her husband; Mr.
Densberger-17,065 shares owned jointly with his wife; and all directors and
executive officers as a group-32,935.
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Includes shares subject to unexercised stock options previously granted that the
individuals and group noted above have a right to acquire within 60 days of March
10, 2011. Mr. Montopoli holds options to acquire 78,000 shares, Mr. Leonard holds
options to acquire 2,368 shares, Mr. Ware holds options to acquire 19,440 shares,
Mr. Densberger holds options to acquire 26,400 shares, Mr. Olivier holds options to
acquire 13,398 shares, and all directors and executive officers as a group hold
options to acquire 160,939 shares.
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-14-
Proposal One Election of Directors
General
Our Board of Directors is currently divided into three classes, each class serving for three
years, with one class being elected each year. Our Bylaws give the Board of Directors the
discretion to set from time to time the number of directors constituting the entire Board of
Directors, provided that the Company has at least three and not more than 13 directors. In 2009,
the Board of Directors voted to expand the Board to 11 directors. Of the 11 current directors,
four have terms ending in 2011, four have terms ending in 2012 and three have terms ending in 2013.
The Board of Directors has nominated Joseph A. Bellavance, Janet M. Hansen, Hannah M. McCarthy
and James M. Murphy, each an incumbent director, each for election to three-year terms expiring at
the Annual Meeting of Shareholders in 2014 and until his or her successor is duly elected and
qualified.
The Board of Directors recommends a vote
FOR
the election of the four nominees as directors of
the Company.
Information as to Nominees and Continuing Directors
Unless otherwise directed in the proxy, each proxy executed and returned by a shareholder will
be voted
FOR
the election of the four nominees. If any person named as nominee should be unable or
unwilling to stand for election at the time of the Annual Meeting, Pennichuck expects that the
proxies will nominate and vote for a replacement nominee or nominees recommended by the Board of
Directors. All nominees have indicated to the Company their willingness to be nominated as
directors and to serve as directors if elected. At this time, the Board of Directors knows of no
reason why any of the nominees listed below would not be able to serve as a director if elected.
The following table sets forth information concerning the persons nominated to serve on the
Board of Directors and concerning the other directors continuing in office beyond the Annual
Meeting.
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Year Present
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Director of
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Term Will
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Nominees
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Age
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Company Since
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Expire
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Position with Company
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Joseph A. Bellavance
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71
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1983
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2011
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Janet M. Hansen
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68
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2008
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2011
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Hannah M. McCarthy
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64
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1994
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2011
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James M. Murphy
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63
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2006
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2011
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-15-
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Year Present
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Director of
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Term Will
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Continuing Directors
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Age
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Company Since
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Expire
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Position with Company
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Steven F. Bolander
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66
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2004
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2012
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Clarence A. Davis
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69
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2009
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2012
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Michael I. German
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60
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2009
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2012
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Robert P. Keller
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73
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1983
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2012
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John R. Kreick
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66
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1998
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2013
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Non-Executive Chairman
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Duane C. Montopoli
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62
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2006
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2013
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President and Chief Executive Officer
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Martha E. ONeill
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53
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1998
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2013
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All nominees will be and all continuing directors are also directors of the
Companys wholly owned subsidiaries, Pennichuck Water Works, Inc. and The Southwood
Corporation.
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The following includes information as of the date of this Proxy Statement about each nominee
and each director. This includes information each nominee and director has given Pennichuck about
his/her age, all positions he/she holds, his/her principal occupation and business experience for
the past five (5) years, and the names of other publicly-held companies of which he/she currently
serves as a director or has served as a director during the past five (5) years. In addition to
the information presented below regarding each nominees and each directors experience,
qualifications, attributes and skills that led our Board to the conclusion that he/she should serve
as a director, Pennichuck also believes that all of our director nominees and directors have
demonstrated a commitment of service to Pennichuck and our Board. We value their significant
experience on other boards of directors and board committees for other publicly traded companies as
well as privately held and not-for-profit entities. Finally, the Company believes that the
backgrounds and qualifications of the directors, considered as a group, should provide a
significant composite mix and diversity of experience, knowledge, abilities and perspective that
will allow the Board to fulfill its responsibilities.
Nominees for Election at this Annual Meeting
Joseph A. Bellavance
Mr. Bellavance has been a director since 1983. Mr. Bellavance is
Chairman of Bellavance Beverage Company, Inc., and President of Bellavance Realty Corporation, in
Nashua. Since 1963, Mr. Bellavance has managed every aspect of his family-owned beverage
distributorship, which has been operating in Nashua for over 100 years. During this time, Mr.
Bellavance has developed a close working relationship with Anheuser-Busch, Pennichucks largest
industrial customer. He has also been a joint owner/manager of PROSIT, LLC, which is principally
involved with the ownership and management of real estate, since August 2003. Mr. Bellavance
received his Bachelor of Science degree in Business Administration from the University of New
Hampshire. He is a director and past president of the New Hampshire Wholesale Beverage
Association, a director of New Hampshire The Beautiful, a member of the Nashua Rotary Club and
previously served as a director of the National Beer Wholesalers Association. We believe Mr.
Bellavances qualifications to sit on our Board of Directors include his years of executive and
management experience, his knowledge of Pennichuck resulting from his 28 years of service on the
Board of Directors, his knowledge of the real estate market in the greater Nashua area and his
relationship with Pennichucks customers, including Anheuser-Busch.
-16-
Janet M. Hansen
Ms. Hansen worked in the water utility industry for 30 years until her
retirement in 2005. She was Executive Vice President of Aquarion Company, the largest investor
owned water utility in New England, from 1995 to 2005 and its Chief Financial Officer from 1992 to
2000. She was Chairman of Aquarion Water Company, Aquarion Companys principal operating
subsidiary, from 2003 to 2005 and its CEO from 2000 to 2003. Ms. Hansen has been a member of the
Board of Directors of Peoples United Financial Inc., (NasdaqGS: PBCT), a bank holding company,
since 2004. She serves on their Executive Committee and Audit Committee, on which she has been
designated the Audit Committee Financial Expert. She also serves on the Boards of Directors of
Bridgeport Hospital and the University of Connecticut Foundation. We believe Ms. Hansens
qualifications to sit on our Board of Directors include her 30 years of water industry management
and operations experience and her extensive financial expertise.
Hannah M. McCarthy
Ms. McCarthy has been a director since 1994 and served as interim Chief
Executive Officer of the Company from April 15, 2006 until August 21, 2006. Since September 1,
2006, Ms. McCarthy has been serving as President of Newbury College in Brookline, Massachusetts, a
position she accepted immediately following her five months as interim President and Chief
Executive Officer of Pennichuck Corporation. She was named President Emeritus of Daniel Webster
College in Nashua, where she was President for 25 years, when she stepped down from that post in
June 2005. She earned her Bachelor of Arts degree at Simmons College, and did graduate work at
Rivier College and Southern New Hampshire University. Ms. McCarthy has served as a director of the
Boys and Girls Club of Nashua, the New Hampshire Charitable Foundation, and the Foundation of
International Society of Transport Aircraft Traders. We believe Ms. McCarthys qualifications to
sit on our Board of Directors include her extensive executive and leadership experience and her
knowledge of Pennichuck, its products and services gained from her many years of service as a
director and as interim President and CEO of Pennichuck.
James M. Murphy
Mr. Murphy is Chairman of Q10 Capital, LLC, a national mortgage banking
firm (owned and operated by 18 independent mortgage bankers), a position he has held since November
of 2003, and Founder and Chairman of Q10 New England Realty Resources, an independent mortgage
banking company, a position he has held since July of 1982. Prior to founding Q10 New England
Realty Resources, Mr. Murphy held executive position in the investment departments of Mass Mutual
Life Insurance Company and Union Mutual Life Insurance Company. Mr. Murphy has been a Certified
Mortgage Banker since 1999, a member of the Society of Chartered Realty Investors since July of
2005 and a director since 2006, and has held a State Certified Appraiser designation since February
1993. Mr. Murphy has been a director of the Mortgage Bankers Association of America since 2000 and
was the Associations Chairman in 2002. Mr. Murphy is also a Director of The Francis Ouimet
Scholarship Fund. He also has held public office as Chairman of the Board of Selectmen in his home
town of Duxbury, MA. We believe Mr. Murphys qualifications to sit on our Board include his years
of executive experience in commercial real estate and capital markets as well as his leadership
experience as national Chairman of his trade association.
-17-
Directors with Terms Expiring in 2012
Steven F. Bolander
Dr. Bolander has been a director since April 2004. Dr. Bolander is Dean
Emeritus of the University of New Hampshires Whittemore School of Business and Economics. He has
been a consultant to BAE Systems since October 2003 and has consulted with over 50 major
corporations during the past 30 years. He holds a Doctor of Business Administration degree from
Kent State University, a Master of Business Administration degree from the University of Colorado,
and a Bachelor of Science in Chemistry degree from Iowa Wesleyan College. We believe Dr.
Bolanders qualifications to sit on our Board of Directors include his extensive experience in
business administration and organizational management and his leadership experience gained as Dean
of the Whittemore School of Business and Economics.
Clarence A. Davis
Mr. Davis is retired from active employment status. He served as Chief
Executive Officer of Nestor, Inc. (NasdaqG: NEST), a software solution company, from 2007 to 2009.
He served as Chief Operating Officer from 2000 to 2005 and Chief Financial Officer from 1998 to
2000 of The American Institute of Certified Public Accountants (AICPA). He earned a BS in
accounting at Long Island University and is a Certified Public Accountant. He serves on the Board
of Directors of Gabelli SRI Fund, Gabelli Global Deal Fund, Telephone and Data Systems, Inc. and
Sonesta International Hotels. We believe Mr. Davis qualifications to sit on our Board of
Directors include his 23 years of public accounting experience, his leadership and management
experience as Chief Operating Officer and Chief Financial Officer of the AICPA, and his extensive
financial expertise and strategic perspective gained from serving on other boards.
Michael I. German
Mr. German is Chief Executive Officer and President of Corning Natural
Gas Corporation (OTCBB: CNIG), a position he has held since December 2006. He has served as a
director of Corning since November 2006. From August 2005 through December 2006, Mr. German was
Senior Vice President, Utility Operation of Southern Union Company. From 2003 until 2005, he was
President of Southern Connecticut Gas, Connecticut Natural Gas and Maine Natural Gas, all
subsidiaries of Energy East Corporation, a publicly-held energy services and delivery provider.
Mr. German has a BA degree from Trinity College and an MBA from Columbia University. He also has a
JD from Boston University and is a member of the District of Columbia Bar. Mr. German serves on
the Board of Directors of Three Rivers Development Corporation, American Gas Association and
Northeast Gas Association. He also serves as a Trustee of Adirondack Park Institute. We believe
Mr. Germans qualifications to sit on our Board of Directors include his extensive management and
operational experience in regulated industries and his leadership experience gained from serving on
other boards.
Robert P. Keller
Mr. Keller has been a director since 1983. Mr. Keller is a Certified
Public Accountant. Since November 2003, he has been managing director of Triumph Investment Funds
(two community bank private equity funds) located in Bedford, New Hampshire. From March 2002 until
May 2003, he was Chairman and Chief Executive Officer of InStar Services Group, Inc. (a nationwide
provider of insurance restorations and reconstruction services), headquartered in Fort Worth,
Texas. Since September 2002, he has served as Chairman of the Board of Directors and Chairman of
the Compensation Committee of Security Business Bank of San Diego and as Chairman of Security
Business Bancorp, Inc (OTCBB: SBBC). In addition, he is a director of Homeland Renewable Energy,
Inc. (HRE), a biomass power company in Langhorne, Pennsylvania, and serves as a member of HREs
Compensation and Audit Committees. Mr. Keller is also the Chairman of the Board of Directors of
First State Bank in Cranford, New Jersey. We believe Mr. Kellers qualifications to sit on our
Board of Directors include his extensive experience in finance, banking and capital markets and his
knowledge of Pennichuck and its business resulting from his 28 years of service on Pennichucks
Board.
-18-
Directors with Terms Expiring in 2013
John R. Kreick
Dr. Kreick has been a director since 1998 and was elected Chairman of
Pennichucks Board of Directors in September 2003. Dr. Kreick served as our interim Chief
Executive Officer from April 2, 2003 until August 4, 2003. He previously served as President of
Lockheed Sanders from 1989 to 1998 and as a Vice President of the Lockheed Martin Corporation
(NYSE: LMT) from 1988 until 1998. Dr. Kreick was elected a director of Draper Lab in January 2001,
and Chairman of its Board in October 2001. He completed his term as a Draper director in October
2008. He was elected a director of EMS Technologies, Inc. (NasdaqGS: ELMG), a public company, in
February of 2003. He is retired from active employment status and currently consults for various
companies, including Lockheed Martin and BAE Systems. Dr. Kreick received his Bachelor of Science
degree in physics from the University of Michigan in 1965. As a Rackman graduate fellow, he worked
at the Universitys Space Physics Research Laboratory and received his Masters of Science degree in
physics in 1966. He received his Ph.D. in theoretical physics from the University of Michigan in
1969 and he holds eight patents in infrared and electro-optical technology. He has also served on
numerous Department of Defense panels and committees. In 1993, Dr. Kreick received the Electronic
Warfare Associations highest awardthe Gold Medal of Electronic Warfare and is a recipient of
Aviation Week magazines Aerospace Laurels Award for his long-term contributions to electronic
warfare. We believe Dr. Kreicks qualifications to sit on our Board of Directors include his
experience as President of New Hampshires largest employer, Lockheed Sanders, combined with his
executive leadership and management experience in business and non-profit organizations and as
Pennichucks Chairman for the past eight years.
Duane C. Montopoli
Mr. Montopoli has been President, Chief Executive Officer and a director
of Pennichuck since he joined the Company in August 2006. He brought to Pennichuck more than 30
years business experience including 16 years as a CEO. From January 2005 until joining Pennichuck,
Mr. Montopoli was Principal of Montopoli & Company LLC of North Andover, MA, which he founded to
provide management consulting services. During this period, from February 2005 until January 2006,
he worked as a Senior Consultant for LoftusGroup LLC of Greenwich, Connecticut, a management
consulting firm. From February 2002 until October 2004, Mr. Montopoli was employed by Hitchiner
Manufacturing Co., Inc. of Milford, New Hampshire as Chief Financial Officer until April 2002 and
thereafter as President and Chief Executive Officer. Hitchiner is a privately-held manufacturer of
ferrous investment cast metal parts and assemblies. From 1998 until 2000, Mr. Montopoli served as
Chief Executive Officer of Medical Resources, Inc. of Hackensack, New Jersey, formerly a
NASDAQ-listed provider of outpatient diagnostic imaging services. From 1986 until 1998, he served
as Chief Executive Officer of Chemfab Corporation of Merrimack, New Hampshire, formerly a
NYSE-listed manufacturer of polymer-based engineered products. He began his career in public
accounting with Arthur Young & Company, a predecessor firm of Ernst & Young LLP, where he rose to
the level of general partner. Mr. Montopoli completed the Advanced Management Program at Harvard
Business School in 1997, received his MBA degree from Golden Gate University in San Francisco in
1978, and received his BBA degree from the University of Cincinnati in 1972 where he graduated
magna cum laude. He is a director of Southworth International Group, Inc. of Falmouth, Maine, a
privately-held manufacturer and distributor of materials handling equipment. We believe Mr.
Montopolis qualifications to sit on our Board of Directors include his background in public
accounting and his extensive executive management experience leading public and private companies,
including nearly five years as Pennichucks President and CEO.
-19-
Martha E. ONeill
Ms. ONeill is a third-generation director of Pennichuck who has been
serving on the Board since 1998. Ms. ONeill has been practicing as an attorney with the Nashua
law firm of Clancy & ONeill, P.A. since 1982, and is currently President of the firm. She is a
graduate of Wellesley College and Georgetown University Law Center. Ms. ONeill serves on the
Rivier College Board of Trustees, Mary A. Sweeney Home Board of Trustees, Charles H. Nutt Surgical
Hospital Board, the Boys & Girls Club of Greater Nashua, Inc. Charitable Foundation Board of Trustees, the
Currier Museum of Art Advisory Council, the Bishops Charitable Assistance Fund, the J. Wilfred
Anctil Foundation and the Southern New Hampshire Medical Center Board of Trustees. We believe Ms.
ONeills qualifications to sit on our Board of Directors include a deep understanding of
Pennichuck, its history and connection to the greater Nashua area, and her leadership experience
gained from serving on key boards of directors in the Nashua community.
Director Compensation
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Fees Earned
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or Paid in
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Cash
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Total
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Name
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($)
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($)
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Joseph A. Bellavance
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16,625
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16,625
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Steven F. Bolander
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17,800
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17,800
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Clarence A. Davis
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18,400
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18,400
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Michael I. German
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18,400
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18,400
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Janet M. Hansen
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18,400
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18,400
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Robert P. Keller
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20,900
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20,900
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John R. Kreick
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22,475
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22,475
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Hannah M. McCarthy
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16,000
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16,000
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James M. Murphy
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19,900
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19,900
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Martha E. ONeil
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16,600
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16,600
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Each of the non-employee members of the Companys Board of Directors currently receives a fee
of $10,000 annually. Additionally, each non-employee director receives a fee of $600 for each
Board of Director and committee meeting they attend in person or by telephone participation. Each
committee Chairman also receives an additional fee of $1,500 annually, other than the Chairman of
the Audit Committee, who receives an additional fee of $2,500 annually. The Chairman of the Board
of Directors receives an additional fee of $5,000 annually. The one director who is also a
salaried employee of the Company (
i.e.
, the CEO) does not receive any separate compensation for his
services as a director of the Company or of its subsidiaries. Customarily, the Board votes on new
committee assignments immediately following the Annual Meeting of Shareholders, typically in early
May.
Executive Officers
Duane C. Montopoli
Mr. Montopoli is listed under Directors with Terms Expiring in 2013
located under Proposal One Election of Directors in this Proxy Statement. He is 62 years old.
Thomas C. Leonard
Mr. Leonard assumed the position of Senior Vice President Finance,
Treasurer and Chief Financial Officer of Pennichuck Corporation on July 7, 2008. From June 2006
until July 2008, he served as Vice President of CRA International (NasdaqGS: CRAI), an economics
and finance based litigation consulting firm in Boston, Massachusetts, where he was responsible for
providing expert accounting services. From December 2002 to May 2006, Mr. Leonard served as
Managing Director of Huron Consulting Group (NasdaqGS: HURN), a litigation consulting firm in
Boston, Massachusetts and Washington, D.C., where he evaluated financial matters and provided
forensic analysis. Prior to 2002, Mr. Leonard was an audit partner with Arthur Andersen LLC and
also was the Audit Division Head for the New England Region. He is a member of the Board of
Directors of Kadant Inc. (NYSE: KAI) where he chairs the Audit Committee and is a member of the Compensation
Committee. Mr. Leonard is a Certified Public Accountant and is 56 years old.
-20-
Donald L. Ware
Mr. Ware was appointed President of Pennichuck Water Works, Inc. and our
other water utilities on March 17, 2006. Mr. Ware has been our Vice President of Engineering since
1996, and has been Senior Vice President, Operations and Chief Engineer for Pennichuck Water Works,
Inc. since May 2004. He has also been a Vice President and director of Pennichuck Water Service
Corporation since 1995, and a director of Pennichuck East Utility, Inc. and Pittsfield Aqueduct
Company, Inc. since 1998. He holds a Bachelor of Science degree in Civil Engineering from Bucknell
University and is a licensed professional engineer in New Hampshire, Massachusetts and Maine. He
also holds a Masters of Business Administration degree from the Whittemore Business School at the
University of New Hampshire. Mr. Ware is 54 years old.
Stephen J. Densberger
Mr. Densberger is our Executive Vice President and has been
affiliated with Pennichuck since 1974. Mr. Densberger was the Treasurer of Pennichuck from 1978 to
1983. He also served as President and a director of Pennichuck Water Service Corporation since
1995 and as a director of Pittsfield Aqueduct Company, Inc. and of Pennichuck East Utility, Inc.
since 1998. Mr. Densberger is a graduate of Assumption College and holds a Master of Business
Administration degree from the Whittemore School of Business and Economics of the University of New
Hampshire. He is an active member and past President of the New Hampshire Water Works Association
and past President of the New England Water Works Association. Mr. Densberger serves as a Trustee
and Chair of the Management Division of the American Water Works Association. He is a Councilor on
the New Hampshire Department of Environmental Services Water Council and a former Alderman in the
city of Nashua. Mr. Densberger is 60 years old.
Roland E. Olivier
Mr. Olivier assumed the position of General Counsel and Corporate
Secretary of Pennichuck Corporation and President of the Southwood Corporation on August 25, 2008.
He has served as director of Pennichuck East Utility, Inc., Pittsfield Aqueduct Company, Inc. and
Pennichuck Water Service Corporation since 2009. From 2003 until August 2008, he was the Corporate
Counsel to Hitchiner Manufacturing Co., Inc. in Milford, New Hampshire, one of New Hampshires
largest manufacturing companies. At Hitchiner, Mr. Olivier reported to the President of the
company, was a member of the companys senior management committee and the Assistant Secretary to
the Board of Directors. He has been practicing law for over thirty years and specializes in
corporate, regulatory, mergers and acquisitions, technology, intellectual property and
international law. Mr. Olivier earned a BS at the U.S. Military Academy, West Point, New York and
a JD at Columbus School of Law at Catholic University of America. Over the past 13 years, Mr.
Olivier has also been actively involved in leadership positions and as a member of the board for a
number of non-profit organizations, state boards and advisory councils in New Hampshire. He is a
member of the Business and Industry Association committees for Economic Development, and Energy and
Regulated Utilities and a director of the New Hampshire Legends of Hockey. Mr. Olivier has served
as the President and Board Member of the New Hampshire International Trade Association,
Vice-Chairman and Board Member of the Software Association of New Hampshire, and Board Member of
the New Hampshire licensing Board for state foresters. He is 64 years old.
Bonalyn J. Hartley
Ms. Hartley has been with Pennichuck since 1979. Since 2001, she has
served as Vice President Administration & Regulatory Affairs for Pennichuck Corporation, Pennichuck
Water Works, Inc., Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc. and as a
director of Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc. since 1998. She
has also been Vice President Administration and a director of the Pennichuck Water Service
Corporation since 1995. Ms. Hartley serves as Pennichuck Corporations Corporate Compliance
officer. She is a graduate of Rivier College with a Bachelor of Science degree in Business
Management. Ms. Hartley is a member of the Finance Committee for Home Health & Hospice, Nashua NH and Director of YMCA of Greater
Nashua. She is also a director of the New England Chapter of the National Association of Water
Companies and a member of the New England Water Works Association. She is a joint owner of
Lakeview Antique Center, LLC. Ms. Hartley is 66 years old.
-21-
Report of the Audit Committee
The Audit Committee assists the Board of Directors in fulfilling its oversight
responsibilities, relating to
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the integrity of the Companys financial statements;
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the Companys compliance with legal and regulatory requirements;
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the Companys independent registered public accounting firms
qualifications and independence; and
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the performance of the Companys independent registered public
accounting firm.
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The Audit Committee meets with management periodically to consider the adequacy of the
Companys system of internal controls and the objectivity of its financial reporting. The Audit
Committee discusses these matters with the Companys independent registered public accounting firm
and with appropriate Company financial personnel. The Audit Committee appoints the independent
registered public accounting firm and reviews periodically its performance and independence from
management.
Management has primary responsibility for the preparation, presentation and integrity of the
Companys financial statements and the overall reporting process, including the Companys system of
internal controls. Management has represented to the Audit Committee that the Companys audited
financial statements for the year ended December 31, 2010 were prepared in accordance with
generally accepted accounting principles.
ParenteBeard LLC (ParenteBeard), the Companys independent registered public accounting
firm, audits the annual financial statements prepared by management, expresses an opinion as to
whether those financial statements present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company and its subsidiaries in conformity
with generally accepted accounting principles, and discusses with the Audit Committee any issue
that it believes should be raised with the Audit Committee.
In fulfilling the Audit Committees oversight responsibilities, the Audit Committee reviewed
and discussed with management and ParenteBeard the Companys audited financial statements included
in the Companys Annual Report on Form 10-K for the year ended December 31, 2010, which review
included discussing the quality of the accounting principles, practices and judgments, the
reasonableness of significant judgments, the clarity of disclosures in the financial statements,
and the integrity of the Companys financial reporting processes and controls. As part of that
process, the Audit Committee also met with ParenteBeard, with and without management present, and
discussed with ParenteBeard the overall scope and plans for, and results of, its audit. The Audit
Committee also considered, with and without management present, the selection and evaluation of
ParenteBeard, including all of the relationships between ParenteBeard and the Company and the
compatibility of non-audit services with ParenteBeards independence. The Audit Committee held
four meetings during 2010.
-22-
In addition, the Audit Committee has received from ParenteBeard the written disclosure and the
letter required by Independence Standards Board Standard No. 1 (
Independence Discussions with Audit Committees
) and has discussed with ParenteBeard its independence from the Company. The Audit
Committee has also discussed with ParenteBeard any matters required to be discussed by Statement on
Auditing Standards No. 61 (
Communication with Audit Committees
).
In reliance on the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors that the Companys audited financial statements for the fiscal year ended
December 31, 2010 be included in the Companys Annual Report on Form 10-K for that year and filed
with the SEC.
Robert P. Keller (Chairman)
Clarence A. Davis
Janet M. Hansen
The foregoing Report of the Audit Committee shall not be deemed incorporated by reference by
any general statement incorporating this Proxy Statement into any filing under the Securities Act
of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent
that the Company specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys
officers and directors, and beneficial owners of more than ten percent of the Companys common
stock, to file reports of ownership and changes in ownership of such common stock with the SEC.
Generally, these persons must file such reports at the time they first become subject to Section
16(a) reporting, and thereafter following any change in beneficial ownership. Officers, directors
and such greater than ten percent shareholders are required by SEC rules and regulations to furnish
the Company with copies of all Section 16(a) reports they file. The Company is required by SEC
rules and regulations to identify in its Proxy Statement those individuals for whom one of the
referenced reports was not filed on a timely basis during the most recent fiscal year or prior
fiscal years.
To the Companys knowledge, based solely on a review of the copies of such reports furnished
to the Company and written representations from each of such persons that no other reports were
required, the Company believes that during the fiscal year ended December 31, 2010, all Section
16(a) filing requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with on a timely basis, except that on March 25, 2010, 30,000 stock
options were granted to Duane C. Montopoli, the Companys President and Chief Executive Officer,
pursuant to the terms of Section 4.4 of Mr. Montopolis employment agreement. A report for this
grant was not timely filed. Mr. Montopoli filed a Form 4 on April 7, 2010 reporting this grant.
Executive Compensation Compensation Discussion and Analysis
What are the objectives of the Companys compensation programs?
The Companys primary compensation objective is to provide a total compensation package that
enables the Company to attract, retain, and motivate highly qualified and dedicated executives.
The Company recognizes its compensation packages must be competitive with those offered by peer
companies in order to meet these objectives. The Company defines its peers from two perspectives:
regulated and non-regulated utilities, primarily water utilities, both for-profit and municipally
owned; and other companies of a comparable size located in southern New Hampshire and adjacent
areas.
-23-
Another important objective of the compensation program is to provide incentives for the
Companys executives to achieve the Companys financial and business objectives. Accordingly,
bonuses paid to executives under the Companys written bonus plans or otherwise are principally
based upon the achievement of corporate earnings at levels that meet the Companys financial and
business objectives and are expected to produce competitive returns for shareholders.
The Companys equity incentive plan is designed to align the interests of its executives with
its shareholders and, accordingly, to provide additional incentives for executives to pursue
operating and financial objectives that serve to enhance and maximize the share price over time.
A significant factor in recent years in hiring and retaining senior management employees has
been the threatened eminent domain taking of a substantial portion of the Companys assets. The
proposed taking has affected new hires as well as existing employees and has necessitated special
incentives such as certain Change of Control provisions that might not have been offered in the
absence of this circumstance.
What is the compensation plan designed to reward and how does each element of the Companys
decision regarding that element fit into the Companys overall compensation objectives and affect
decisions regarding other elements?
The Companys executive compensation structure is designed to reward executives for the
achievement of both individual and corporate-level goals and objectives. Corporate goals and
objectives include, (i) achieving or exceeding the Companys annual targeted profit level, and (ii)
achieving or exceeding annually established target performance metrics which measure the Companys
level of customer service, product quality and reliability, and respect for the environment
(referred to in this Proxy as Key Customer Metrics). Corporate goals and objectives also include
systematically achieving established long-term strategic goals.
The CEO annually reviews and approves individual goals and objectives for each of the
executive officers who report directly to him. These goals reflect each officers primary duties
and responsibilities, including areas such as rate case administration, finance and accounting,
acquisitions and other new business development, engineering, operating expense and/or capital
spending control, legal compliance and other managerial and administrative duties. Each
executives compensation is tied to his or her overall performance including consideration of the
extent to which the executive achieved his or her specific goals and objectives.
Similarly, the Compensation Committee annually reviews and approves the CEOs individual goals
and objectives, reflecting his primary duties to increase earnings through revenue growth and cost
control, resolve the Companys long-standing eminent domain dispute, develop the senior management
team, oversee the development and implementation of longer term corporate strategies, and produce
competitive economic returns for shareholders. The CEOs individual goals and objectives also
include leading the Companys effort to achieve or exceed the Key Customer Metrics.
Individual elements of compensation are neither dependent upon nor intended to affect
decisions regarding other elements with the exception that bonus payments may be, in some cases,
proportional to base salary levels (as more fully described below) and an executives total
compensation may also be considered when considering various elements of compensation.
-24-
What benchmarks does the Company use to evaluate its Compensation programs?
The Company periodically engages Saje Consulting, Inc. to conduct competitive salary studies
for all non-union positions including those of the Companys executive officers; the last such year
being 2008. In its 2008 competitive salary study, the Saje firm surveyed both general industry and
the utility industry and then determined an overall consensus based on a weighting of 3:1 in favor
of the utility industry. This weighting was considered appropriate due to the fact that the
Company generally endeavors to fill executive positions from within the utility industry whenever
possible. Based on this approach, the Saje firm determined that while 2008 actual base salaries
for all but one (1) of the executive officers were below their respective Recommended Midpoint
amounts, overall they were generally competitive since they ranged from 90.5% to 103.6% of said
Recommended Midpoint levels. The Companys General Counsel & Corporate Secretary was not included
in the Saje analysis because his position was not filled or included in the organization structure
at the time of the Saje work.
The Compensation Committee also periodically directs the CEO and/or the Vice President,
Administration & Regulatory Affairs to retain outside compensation consultant(s) to develop peer
company executive compensation data (for both other water companies and/or other similarly sized
companies) and to provide such data to assist the CEO and the Compensation Committee in determining
competitive levels and mix of salary, bonus and long term incentives. The last study of total
compensation at the executive officer level was completed by W. F. Conover, III Ltd. in 2008 based
on 2007 data and was considered by the CEO and the Compensation Committee in assessing the
appropriateness of the Companys current mix of salary, bonus, long term incentive compensation and
benefits.
Based on the Conover firm data, the Compensation Committee and the CEO considered the need for
restricted stock or other equity awards and concluded that share-based grants such as restricted
stock could be an important component of executive compensation for the purpose of enabling the
Company to better attract, retain, and motivate highly qualified and dedicated executives. In
deciding to add restricted stock to its equity compensation award alternatives, the Company
considered accounting rules requiring that stock options be expensed, compensation trends at other
companies, and the findings of the Conover firm.
On March 11, 2009, our Board of Directors approved, and on May 6, 2009, the Shareholders of
the Company approved, an amendment and restatement of what was then named the 2000 Stock Option
Plan to allow the Board of Directors to grant restricted stock awards in place of, or in
combination with, stock options to employees and directors (upon such approval, the 2009 Equity
Incentive Plan).
What is each element of compensation, why does the Company choose to pay each element and how does
the Company determine the amount for each element?
Currently, the principal elements of executive compensation are base salary, bonus, and equity
incentive awards. Each non-employee member of the Board of Directors currently receives cash fees,
reimbursement for travel expense in accordance with corporate policy and may be granted equity
awards (although none have been granted in the last five years).
-25-
Executive Officers
Base Salary.
Each executive officers base salary is reviewed and adjusted annually based on
his/her individual performance and to ensure competitiveness with peer companies. During the first
quarter of each calendar year, the CEO recommends to the Compensation Committee base salary
amounts, based in part on the use of outside studies and surveys, as further described below, for
each of the Companys other five executive officers to become effective the week which includes April
1
st
. Except for the CEO, no other executive is involved in making executive salary
recommendations to the Compensation Committee. The Compensation Committee reviews the
recommendations of the CEO and recommends base salary changes (including changes to the CEOs base
salary, if and as applicable) to the full Board for approval.
For 2010, the Compensation Committee recommended and the full Board approved base salary
increases for the six (6) executive officers averaging 2%. This recommendation reflected the
continuing difficult economic conditions, the current low inflation rate, the fact that the Company
had recently negotiated with its union employees a 2% base pay increase, and the fact that this
percentage increase was consistent with the 2% average base pay increase that applied, generally,
to all other non-union employees for that period.
For 2011, the Compensation Committee recommended and the full Board approved base salary
increases for the Companys six (6) executive officers averaging 3%. This percentage increase was
consistent with the 3% average base pay increase that applied to union employees for the year and,
generally, to all other non-union employees of the Company. It also reflects a gradually improving
economy while still being less than the 3.5% base salary increase limitation for officers and
management established in the Companys Merger Agreement with the City of Nashua.
Bonus Plan.
For 2009, no formal written cash bonus plan was established for the Companys
executive officers. This was decided by the Compensation Committee because it wanted to evaluate
what, if any, non-operating economic factors (positive or negative) should be disregarded for the
purpose of determining bonus pool amounts for any given year. The Committee further determined
that because this evaluation would take several months to complete, no written bonus plan could
reasonably be established for 2009. Accordingly, for 2009, bonus determinations for all executive
officers were discretionary and determined by the Compensation Committee upon consideration of each
executives achievement of both corporate-level and individual goals and objectives and subject to
full Board approval.
Based on this criteria, for 2009, the Compensation Committee recommended and the full Board
approved the following bonus amounts, which totaled $53,000 for all executive officers including
all Named Executive Officers: CEO $15,000; Chief Financial Officer (CFO) $9,500; President,
Regulated Utilities $9,500; Executive Vice President $5,000; General Counsel & Corporate Secretary
$7,000; and Vice President Administration & Regulatory Affairs $7,000. In determining these bonus
amounts, the Compensation Committee considered the Companys operating performance for the full
year relative to the preceding year (e.g., the 2008 gain on the sale of real estate was disregarded
for purposes of comparison). The Committee also considered the individual performance of each of
the officers relative to their goals and objectives for the year, and the reviews and
recommendations of the CEO. Regarding specific performance, factors considered included such
things as: the management and administration of rate case filings for the Companys Pennichuck
Water and Pittsfield Aqueduct utility subsidiaries; the successful completion of the upgrade to the
Companys water treatment plant in Nashua; the management of the Companys eminent domain dispute
with the City of Nashua; the completion of various financing activities including the 2009 common
equity offering; etc.
For 2010, the Compensation Committee recommended and the full Board approved the establishment
of a written performance-based cash bonus plan for the Companys executive officers other than the
CEO. Pursuant to the terms of his employment agreement, the CEOs annual target cash bonus is 40%
of his then base salary, with the actual amount determined at the discretion of the Compensation
Committee and the full Board based on the Companys financial performance and the CEOs individual
performance, in particular in relation to his goals and objectives for the year. In determining
the CEOs cash bonus for any year, the Compensation Committee and the Board also consider the bonus
amounts that can be earned by the Companys other executive officers for that year and the fact
that the Company operates predominately as a regulated water utility (albeit as three separate
companies).
-26-
Under the terms of the 2010 Officer Bonus Plan, varying dollar amounts are credited into a
pool based on the Companys operating profit before taxes and bonuses for the year (Company-Wide
Income) in relation to the approved budget for the year. More specifically, no amount is credited
into the pool if Company-Wide Income falls below 88% of budgeted income and the amount credited
into the pool is capped upon Company-Wide Income reaching 112% of budgeted income for the year. At
100% of budgeted income for the year, the bonus pool amount would be $128,690, or 17% of the
beginning-of-year aggregate base salaries of the five participants in the plan. At or above 112%
of budget, the bonus pool amount would be $158,970, or 21% of the beginning-of-year aggregate base
salaries of the five participants in the plan.
Once determined, up to 100% of the established bonus pool amount is paid out as cash awards as
follows: 30% of the bonus pool amount is non-discretionary and allocated among eligible
participants pro-rata based on their beginning-of-year base salary levels; up to an additional 30%
of the bonus pool amount (in 5% increments) is paid out for the achievement of six (6) Key Customer
Metrics established for the year up, also allocated among the eligible participants pro-rata based
on their beginning-of-year base salary levels; and 40% is discretionary and allocated among
eligible participants based on an assessment of each participants absolute and relative
performance with respect to their specific personal goals and objectives for the year. Due to the
operation of the payout for achieving the Key Customer Metrics, some portion of the bonus pool
amount may be forfeited (i.e., less than 100% of the bonus pool amount may be paid out for the
year).
Based on Company-Wide Income for 2010 and other factors, the bonus pool amount for the year
reached the maximum of $158,970, of which $7,949 was forfeited due to failure to achieve one of the
six Key Customer Metrics. The resultant $151,021 was rounded to $151,500 and paid out as follows:
President, Regulated Utilities $36,200; Chief Financial Officer $34,300; Executive Vice President
$20,000; General Counsel & Corporate Secretary $31,000; and Vice President, Administration &
Regulatory Affairs $30,000. The discretionary component of each of these amounts was determined by
the Compensation Committee and approved by the full Board, in significant part, based on the input
and recommendations of the CEO.
The Company was unable to achieve its goals in the Key Customer Metric category entitled
NHDES non-compliance violations due to operational error because an adequate informational sample
related to compliance monitoring was not taken and was not a failure of the Companys compliance
monitoring program. The compliance monitoring to which this sample related is not scheduled to
begin until 2013.
As previously stated, pursuant to the terms of his employment agreement, the CEOs annual
target cash bonus is 40% of his then base salary, with the actual amount determined at the
discretion of the Compensation Committee and the full Board based on the Companys financial
performance and the CEOs individual performance, in particular in relation to his goals and
objectives for the year. In setting the CEOs bonus for any year, the Compensation Committee and
the Board shall also consider the bonus amounts that can be earned by the Companys other executive
officers for that year and the fact that the Company is comprised predominately of regulated water
utilities. Based on this criteria, the Compensation Committee recommended and the Board approved a
2010 cash bonus for the CEO of $68,000, or 25.7% of his beginning-of-year base salary.
-27-
For 2011, the Company has established a 2011 Officer Bonus Plan that operates differently
depending on whether the proposed Merger with Nashua does not (Variant I) or does (Variant II)
close by the end of calendar 2011 or shortly thereafter. Variant I of the 2011 Plan operates
similar to the 2010 Officer Bonus Plan except that under Variant I, the bonus pool amounts are
somewhat greater at corresponding levels of performance. For example, if Company-Wide Income under
the 2011 Officer Bonus Plan is at 100% of budgeted income for the year, the bonus pool amount will
be $138,960, or 18% of the beginning-of-year aggregate base salaries of the five officer
participants in the plan. If Company-Wide Income is at or above 112% of budget, the bonus pool
amount will be capped at $169,860, or 22% of the beginning-of-year aggregate base salaries of the
five participants in the plan. These amounts are $10,270 and $10,890 greater than the
corresponding amounts in the 2010 plan.
Variant II of the 2011 Officer Bonus Plan operates differently than both Variant I and the
2010 Officer Bonus Plan in recognition of the fact that, for example, if the proposed Merger with
Nashua closes before the end of calendar 2011 or shortly thereafter, a number of the officers of
the Company might not otherwise have any cash bonus opportunity for 2011 as a consequence of the
termination of their employment in connection with a Change of Control and regardless of their
performance during the year. Variant II of the 2011 Officer Bonus Plan is intended to address this
issue by providing to the officer participants in the 2011 Plan a cash bonus opportunity with
respect, generally, to that portion of the year prior to a Change of Control.
The same bonus pool schedule applies to both Variant I and Variant II of the 2011 Officer
Bonus Plan, although the potential bonus payout under Variant II is likely to be smaller because of
a required scale-back adjustment in the event that a Merger closing occurs before the end of the
calendar year. Under Variant II, once the final bonus pool amount has been determined, it shall be
paid out as cash awards to qualifying non-CEO Plan participants at least one business day prior to
the Merger closing date. 60% of the final bonus pool amount shall be
paid pro-rata to the non-CEO
Plan participants based on their 2011 beginning base salaries and 40% shall be allocated on a
discretionary basis among the same persons by the pre-sale Compensation Committee of the Board of
Directors based on an absolute and relative assessment of their individual performance for the
year.
Also if Variant II of the 2011 Officer Bonus Plan becomes applicable, the Companys CEO shall
be a participant in that plan for the purpose of establishing a bonus guideline for 2011 only.
More specifically, if closing of a sale to Nashua occurs on or before March 15, 2012 and Variant II
bonuses become payable to the non-CEO Plan participants, then the CEOs separate bonus pool amount
for 2011 shall be that amount equal to his 2011 beginning base salary multiplied by a percentage
which is equal to 1.3 times the percent of covered compensation contributed into the non-CEO
participants bonus pool. For example, since a $128,660 bonus pool for the non-CEO Plan
participants represents 16.7% of their beginning base salaries, the CEOs separate bonus pool
amount will be 21.7% of his beginning base salary. Once determined, an amount up to the total of
his bonus pool amount may be awarded to him at the discretion of the pre-sale Compensation
Committee of the Board and otherwise subject to the terms of his employment agreement.
Equity Awards.
Historically, upon the recommendation of the CEO, the Compensation Committee
has traditionally awarded stock options, subject to Board approval, annually at or near the
beginning of each calendar year based on performance for the preceding year and in recognition of
the recipients expected long-term contribution to the Companys business. The exercise price of
stock options shall be equal to the closing market price on the trading day preceding the date of
grant. Aggregate awards are subject to a number of factors including, but not limited to, the
Companys financial results, its stock price and trading activity, and general business, economic,
and financial market conditions. The Company did not award any stock options in 2007 or in 2008
(other than an initial grant of 18,000 and 16,200 options to the new CFO and General Counsel &
Corporate Secretary, respectively, upon their hiring in 2008). The principal reason for the absence of stock option awards in 2007 and 2008
was the continuing extraordinary circumstance of the threatened eminent domain taking of a majority
of the Companys assets by the city of Nashua, New Hampshire.
-28-
During 2008, the CEO and the Compensation Committee reviewed the competitiveness of the
Companys total direct compensation (cash compensation plus long-term incentives such as stock
options) and pay mix (e.g., option grants vs. grants of restricted stock) with respect to the
executive officers. Based on its evaluation, which included the use of the firm of W. F. Conover,
III Ltd. to help gather and summarize compensation information from various public company proxies,
the CEO and the Compensation Committee determined that the Companys absence of stock option grants
in recent years was negatively impacting the overall competitiveness of its executive compensation
packages and also noted that most organizations are now making more and greater use of restricted
stock grants in their long-term incentive compensation programs.
In March 2009, the Compensation Committee and the CEO considered the need for restricted stock
or other equity awards (in addition to stock options) and concluded that share-based grants such as
restricted stock could enable the Company to better attract, retain, and motivate highly qualified
and dedicated executives. In deciding to add restricted stock to its equity compensation award
alternatives, the Company considered accounting rules requiring stock options to be expensed,
compensation trends at other companies and the findings of the Conover firm.
On March 11, 2009, our Board of Directors approved, subject to shareholder approval, an
amendment and restatement of what was then named the 2000 Stock Option Plan to allow the Board of
Directors to grant restricted stock awards in place of, or in combination with, stock options to
employees and directors. At the May 6, 2009 Annual Meeting of Shareholders, the shareholders of
the Company approved the 2009 Equity Incentive Plan. To date, no restricted stock awards have been
granted under the 2009 Equity Incentive Plan.
The CEO has stated his intention to recommend to the Compensation Committee that, under normal
conditions, annual total awards of stock options or other equity awards (excluding awards to
recruit new executives and for other special circumstances) be in the range of 1.0% 1.5% of total
common shares outstanding or, in the event the Company grants restricted stock awards, a lower
range that would provide the executives with an approximately equivalent level of incentive reward.
Such a range reflects a balance between the dilutive effects of equity awards and the adequacy of
amounts to properly motivate key employees to achieve the Companys business objectives. The
Company considers stock options and other equity awards to be a critical element of long-term
incentive compensation.
Traditionally, the Companys annual stock option awards have been fully vested as of the grant
date in recognition of services rendered for the prior fiscal year. This approach also reflected
the relatively stable nature of the Companys primary business, regulated water utility services,
as well as its historically low employee turnover. Notwithstanding the foregoing, the current CEO
has recommended to the Compensation Committee that future equity grants, including restricted
stock, normally be subject to vesting over time (with acceleration of vesting under certain
circumstances such as a Change of Control of the Company).
At the January 28, 2009 regular meeting of the Companys Board of Directors, 38,000
Non-Statutory Stock Options (also known as non-qualified stock options) were granted to a total of
18 employees, 21,000 of which were granted to the five Named Executive Officers, at an exercise
price of $17.64 per share. At the January 27, 2010 regular meeting of the Companys Board of
Directors, 41,900 Non-Statutory Stock Options were granted to a total of 18 employees, 25,200 of
which were granted to the five Named Executive Officers, at an exercise price of $20.11 per share.
All of these options vest (i.e., become exercisable) over a three-year period, are subject to accelerated vesting in the
event of a Change of Control, and generally expire at the end of ten years from the grant date if
not exercised.
-29-
Mr. Montopolis initial employment agreement with the Company dated October 24, 2006 provides
that upon certain events of resolution of the Companys eminent domain dispute with the City of
Nashua (see discussion below under Executive Agreements), he would be granted non-qualified stock
options to acquire 30,000 common shares of the Company. The March 25, 2010 decision of the New
Hampshire Supreme Court regarding the eminent domain dispute satisfied the conditions for this
option grant and so, effective that same date, Mr. Montopoli was granted 30,000 non-qualified stock
options at an exercise price of $21.14 per share. In accordance with the provisions of his
employment agreement, these options were fully vested and immediately exercisable as of the grant
date.
Under the terms of the Merger Agreement, which became effective as of November 11, 2010, the
Company is prohibited from issuing additional equity (options or shares) until the earlier of the
consummation of the merger or the termination of the Merger Agreement. Accordingly, no employee
stock options or restricted shares have been issued by the Company since the effective date of the
Merger Agreement.
As of the date of this Proxy Statement, there were 111,934 shares available for stock option
grant and/or restricted stock grant under the 2009 Plan.
Other Compensation.
The Company provides certain executive officers a number of other
recurring cash and non-cash forms of compensation not normally available to other employees of the
Company. These include provision of a company vehicle and reimbursement of related vehicle
expenses (or alternatively, a vehicle allowance), reimbursement of civic and industry membership
fees and dues (one executive officer holds a social membership to a country club), and
reimbursement of the cost of premiums on term life insurance covering three times initial or
current base salary (four times initial base salary for the CEO).
The Company has also provided certain executives non-recurring cash compensation in the form
of retention bonuses and relocation allowances. In addition, the Company has entered into
agreements with its six executive officers (including its CEO) that provide for severance payments
in the event of a Change of Control and termination of employment by the Company (other than for
cause) or resignation by the executive for good reason, all as defined in the agreements. Payments
consist of up to two years salary, target bonus, and benefits (generally payable as a lump sum
amount), all as defined in the agreements. The Company believes these provisions to be consistent
with peer company practices in general and particularly appropriate in the present case considering
the City of Nashuas ongoing attempt to acquire substantially all the Companys assets through
eminent domain taking or otherwise.
Executive officers are also eligible for certain benefits that are available to other
employees, including substantially full funding of medical and dental insurance, group life, and
short-term disability plans, 100% matching of the first 3% of salary contributed to the Companys
401(k) plan (subject to certain limitations), cash payments beginning upon retirement pursuant to
the Companys defined benefit pension plan, and full or partial funding of premiums pursuant to the
Companys post-retirement health care plan.
A description of the employment agreements for each Named Executive Officer is included in
Executive Agreements below.
Compensation Consultants.
The Compensation Committee has determined that there is no conflict
of interest to report with respect to fiscal years 2009, 2010 or 2011 (to date) regarding Saje
Consulting, Inc. since that firm did not perform other services for the Company totaling $120,000 or more
in any of these years.
-30-
Risk Consideration in Pennichucks Compensation Program
The Compensation Committee has discussed the concept of risk as it relates to the Companys
compensation programs. The Committee does not believe its compensation programs encourage
excessive or inappropriate risk taking, for the following reasons:
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We structure our pay to consist of both fixed and variable compensation for executive
officers and selected senior non-officer managers and individual contributors. The fixed
(or salary) portion of compensation is designed to provide a reasonable and steady income
regardless of Pennichucks stock price performance so that our executives do not feel
pressured to unduly focus on stock price performance to the detriment of other important
business metrics. The variable (cash bonus and equity) portions of compensation are
designed to reward both short and long-term corporate performance. For short-term
performance, and as noted above, cash bonuses may be awarded based on achieving certain
annual corporate targets for Company-Wide Income, Key Customer Metrics, and individual
goals and objectives (collectively Performance Targets). For long-term performance, our
stock option awards now generally vest over three years and increase in value if our stock
price increases over time. We believe that these variable elements of compensation are a
sufficient percentage of overall compensation such that they motivate our executives to
produce excellent short and long-term corporate results, while the fixed element is also
sufficiently high that said executives are not encouraged to take unnecessary or excessive
risks.
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Because of the nature of the Performance Targets the Company uses in determining
incentive payments, we believe our executives are encouraged to take a balanced approach
that focuses on corporate profitability and expense control. If we are not profitable at a
reasonable level, there are no payouts under the bonus program.
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Our Performance Targets are generally communicated to the Companys entire workforce.
We believe this encourages consistent behavior across the organization, rather than
establishing different performance metrics depending on a persons position in the Company
or the business unit he/she works in. For example, a person in our most profitable
business unit is not encouraged to take more risk than someone in a less profitable
business unit.
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Bonus pool amounts under the Companys 2010 and 2011 Officer Bonus Plans and Non-Officer
Senior Manager Bonus Plans, from which cash bonus awards are paid, are capped upon the
Company achieving 112% of budgeted income for the year, with the bonus payout potential at
that level of performance being limited to 22% of base salaries for the officer plans and
13% of base salaries for the non-officer plans. As such, these incentive plans do not
unduly promote or encourage Company executives to take excessive risks in the interest of
maximizing bonuses for the year.
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We believe that we have sufficient internal controls over the measurement and
calculation of earnings and other Performance Targets, designed to keep them from being
susceptible to manipulation by Company employees. In addition, all of our employees are
required to comply with our Code of Conduct, which covers among other things, accuracy of
books and records.
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Our cash bonus plans have generally been structured around budgeted Company-Wide Income,
Key Customer Metrics and individual performance goals for several years and we have seen no
evidence that they encourage unnecessary or excessive risk taking.
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-31-
Report of the Compensation and Benefits Committee
The Compensation and Benefits Committee of the Board of Directors (the Compensation
Committee) has reviewed and discussed with management the foregoing compensation discussion and
analysis (CD&A). The Compensation Committee recommended to the Board of Directors that the CD&A
be included in this Proxy Statement and incorporated by reference in the Companys Annual Report on
Form 10-K for the year ended December 31, 2010.
Respectfully submitted,
James M. Murphy (Chairman)
Steven F. Bolander
Michael I. German
The foregoing Report of the Compensation and Benefits Committee shall not be deemed
incorporated by reference by any general statement incorporating this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Summary of Cash and Certain Other Compensation
Named Executive Officers
The following table sets forth information for the fiscal year ended December 31, 2010
concerning the compensation paid to each person serving as the registrants principal executive
officer or acting in a similar capacity during the last completed fiscal year (CEO); each person
serving as the registrants principal financial officer or acting in a similar capacity during the
last completed fiscal year (CFO); the Companys three most highly compensated executive officers
other than the CEO and CFO who were serving as executive officers at the end of the last completed
fiscal year; and up to two additional individuals who would have been among the Companys three
most highly compensated executive officers other than the CEO and CFO but for the fact that he or
she was not serving as an executive officer at the end of the last completed fiscal year.
-32-
Summary Compensation Table
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Change in
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Option
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Pension
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All Other
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Year
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Salary
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Bonus
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Awards
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Value
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Compensation
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Total
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Name and Principal Position
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($)
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($)
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($)
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($)
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($)
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($)
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Duane C. Montopoli
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2010
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268,846
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68,000
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28,518
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68,840
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16,896
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451,100
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President and Chief Executive
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2009
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265,000
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15,000
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22,000
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76,452
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18,197
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396,649
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Officer
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2008
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268,096
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11,000
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43,115
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21,627
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343,838
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Thomas C. Leonard
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2010
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163,077
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34,300
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17,824
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29,509
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12,777
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257,487
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Senior Vice President
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2009
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160,000
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9,500
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5,789
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13,022
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12,457
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200,768
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Finance, Treasurer and Chief Financial Officer
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2008
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76,923
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5,000
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64,620
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6,467
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153,010
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Donald L. Ware
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2010
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171,692
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36,200
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17,824
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51,278
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10,546
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287,540
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President, Regulated Utilities
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2009
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169,000
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9,500
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13,750
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10,645
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12,226
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215,121
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2008
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170,750
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7,500
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42,661
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12,590
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233,501
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Stephen J. Densberger
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2010
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151,000
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20,000
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11,407
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74,076
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13,608
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270,091
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Executive Vice President
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2009
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151,000
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5,000
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11,000
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22,721
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11,072
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200,793
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2008
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152,654
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6,000
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89,861
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15,240
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263,755
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Roland E. Olivier
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2010
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147,308
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31,000
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14,259
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30,181
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7,400
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230,148
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General Counsel and
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2009
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145,000
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7,000
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5,211
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13,932
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11,383
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182,526
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Corporate Secretary
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2008
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50,192
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4,500
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59,616
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3,068
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117,376
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The Companys fiscal year ends on December 31.
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Bonus awards for services rendered during such year and paid in the following year.
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Amounts shown are the aggregate grant date fair value of awards computed in
accordance with Financial Accounting Standards Board Accounting Standards Codification
Topic 718 Compensation Stock Compensation, excluding the effect of estimated
forfeitures. For a discussion of the assumptions made in such valuation, see note 3 to
the Companys 2010 financial statements. For more details on grants in 2010, see the
Grants of Plan-Based Awards Table below.
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The amounts presented for 2010 in this column include (a) premiums paid by the
Company on term or whole life insurance policies, as the case may be, for the benefit
of the Named Executive Officers, (b) matching contributions made by the Company to the
Companys 401(k) Savings Plan for Employees on behalf of the Named Executive Officers,
(c) the value of personal mileage on behalf of the Named Executive Officers, and (d)
country club membership dues paid by the Company on behalf of the named executive
officer. The dollar value of each such benefit in 2010 was (a) $3,760, $2,200,
$1,175, $2,321 and $2,000 for Montopoli, Leonard, Ware, Densberger, and Olivier,
respectively, for term or whole life insurance premiums, (b) $5,109, $5,178, $5,151
and $4,680 for Montopoli, Leonard, Ware, and Densberger, respectively, for matching
401(k) contributions, (c) $8,028, $5,400, $4,221, $5,152 and $5,400 for Montopoli,
Leonard, Ware, Densberger, and Olivier, respectively, for the value of personal
mileage, and (d) $1,455 for Densberger for country club membership dues.
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Messrs. Leonard and Olivier joined Pennichuck on July 7, 2008 and August 25,
2008, respectively. The salary and bonus reported for fiscal 2008 have not been
annualized and represent the amounts earned by Messrs. Leonard and Olivier,
respectively, for the portion of the year they were employed by Pennichuck.
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-33-
Executive Agreements
Employment Agreement with Duane C. Montopoli.
Effective August 21, 2006, the Company and
Duane C. Montopoli entered into an Employment Agreement (the Montopoli Agreement) pursuant to
which Mr. Montopoli presently serves as the Companys President and Chief Executive Officer, and as
a director. Mr. Montopolis employment with the Company, which commenced on August 21, 2006 (the
Commencement Date), may be terminated by the Company at any time upon thirty (30) days prior
written notice.
Mr. Montopolis initial base salary was $250,000 per year, subject to annual review for
possible discretionary upward adjustment. Additionally, he has the opportunity to earn an annual
target cash bonus of 40% of his then current annual base salary based on the Compensation
Committees and full Boards assessment of the Companys financial performance and Mr. Montopolis
performance.
On the Commencement Date, Mr. Montopoli was granted a non-qualified stock option to purchase
40,000 shares of common stock at an exercise price of $19.00 per share, the closing price of
Company common stock as reported by NASDAQ on the trading day preceding the Commencement Date. The
grant vested (
i.e.
, became exercisable) in three equal annual increments beginning December 31,
2006. As set forth in the Montopoli Agreement, the Company further agreed to grant to Mr.
Montopoli an additional non-qualified stock option to purchase 30,000 shares of common stock
effective on the earlier to occur of (a) the date of final termination or dismissal through any
settlement, adjudication, or other resolution of the eminent domain proceeding (the Eminent Domain
Dispute) or (b) the date of public announcement of any settlement agreement, adjudication
decision, or other resolution of the Eminent Domain Dispute (such earlier date, the Grant Date);
said option (i) terminating ten years from the Grant Date, (ii) having an exercise price equal to
the closing price of the Companys common stock on the trading day prior to the Grant Date, and
(iii) being exercisable beginning on the date of Final Termination. Mr. Montopoli may also receive
other periodic awards of stock options at the discretion of the Board of Directors. Upon the
occurrence of a Change of Control (as defined in the Montopoli Agreement), all of these options
will become immediately exercisable.
In the event Mr. Montopolis employment is terminated by the Company other than for Cause (as
defined in the Montopoli Agreement) or by him for Good Reason (as defined in the Montopoli
Agreement), he will be entitled to a lump sum payment equal to one year of his then current base
salary, plus the continuation of benefits described in the Montopoli Agreement for 12 months. In
the event of termination of employment by the Company without Cause or by Mr. Montopoli for Good
Reason within 24 months following a Change of Control, Mr. Montopoli will be entitled to a lump sum
severance payment equal to two (2) times the sum of (a) his then current annual base salary, and
(b) 100% of his aggregate target bonuses of 40% and any other cash bonus plans. Additionally, he
will be entitled to continuation of certain benefits described in the Montopoli Agreement for a
twenty-four (24) month period.
Under the terms of the Montopoli Agreement, as amended, if it is determined that he has
received a parachute payment under Internal Revenue Code (the Code) Section 280G in connection
with a change of control of the Company, which gives rise to an excise tax to Mr. Montopoli under
Section 4999 of the Code, the Company shall reimburse him for that tax on a grossed up basis such
that he will receive under the Montopoli Agreement the same aggregate after-tax amounts that he
would have received had such excise or penalty tax not applied to him.
-34-
Mr. Montopoli is entitled to receive (A) health and dental insurance coverage to the extent
provided by the Company to its executive officers; (B) group life and disability coverage to the
extent provided by the Company to its executive officers; (C) insurance on his life in the amount
of one million
dollars ($1,000,000). Additionally, he is entitled to participate in the Companys current
pension and other retirement plans, and the Companys other benefit plans which may be in effect
from time to time. The Company also provides Mr. Montopoli with, (i) short term disability
coverage encompassing up to sixty percent (60%) of his base salary for a period of up to twenty six
(26) weeks, (ii) the use of a Company-owned automobile, and (iii) four (4) weeks paid vacation per
year.
Mr. Montopoli agreed, as part of his original employment agreement, to non-competition
provisions preventing him from engaging in any activity or business endeavor which directly
competes with the regulated water utility business operations conducted by the Company within New
Hampshire, Maine, Vermont, Massachusetts, Rhode Island and Connecticut for the term of the
agreement plus one year.
On November 9, 2007, the Montopoli Agreement was amended for compliance with Section 409A of
the Internal Revenue Code of 1986, as amended.
Effective as of November 15, 2010, the Montopoli Agreement was amended principally to, (i)
clarify which benefit plans he is entitled to participate in; (ii) clarify the severance payment
obligations of the Company upon a Change of Control followed by termination of employment without
cause or resignation for good reason; (iii) comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended; (iv) provide for the issuance of release of claims and
causes of action as a condition to the receipt of severance payments; (v) make clear that a Merger
with the city of Nashua will constitute a Change of Control for purposes of determining severance
obligations of the Company thereafter; (vi) establish when Good Cause or Cause, as applicable,
shall be deemed not to exist for purposes of determining severance obligations of the Company
following a Change of Control; (vii) establish when Good Reason shall be deemed to exist for
purposes of determining severance obligations of the Company following a Change of Control; (viii)
broaden or add non-compete provisions; and (ix) clarify and/or harmonize the type and value of
employee benefits includible in the severance obligations of the Company following a Merger.
Employment Agreement with Thomas C. Leonard.
Effective May 19, 2008, the Company and
Thomas C. Leonard entered into an Employment Agreement pursuant to which Mr. Leonard presently
serves as the Companys Senior Vice President Finance, Treasurer and Chief Financial Officer.
Under the Agreement, Mr. Leonard received an initial base salary of one hundred sixty thousand
dollars ($160,000) per annum. He is entitled to participate in the Companys officer bonus plan
for 2009 and thereafter. For 2008, the Agreement provided that he be considered for a non-plan
discretionary bonus.
On his first day of employment, Mr. Leonard was granted non-qualified stock options to acquire
eighteen thousand (18,000) shares of the common stock of the Company, which vest in three equal
installments of six thousand (6,000) per year, beginning on the one year anniversary of the date of
his employment; provided, however, that all of said options shall vest immediately in the event of
a Change of Control (as defined in the Agreement). Mr. Leonard is entitled to participate in the
employee benefit programs available to non-union full-time employees of the Company.
In the event Mr. Leonards employment is terminated by the Company without Cause (as defined
in the Agreement), he is entitled to salary continuation for six (6) months subject to
dollar-for-dollar set-off for cash amounts he receives or accrues from any successor employer or
other entity for services rendered during such period, plus COBRA premium cost reimbursement during
the same six (6) month period (such aggregate amounts, the Severance Amount). Notwithstanding
the foregoing, if such termination without Cause occurs within six (6) months before or twenty four
(24) months after a Change of Control (as defined in the Agreement), the Severance Amount shall be
two (2) years base salary (at the then-current rate) payable in a lump sum without right of
set-off, plus COBRA premium cost reimbursement
for eighteen (18) months.
-35-
Effective as of November 15, 2010, Mr. Leonard entered into a Change of Control Agreement (the
2010 Amendment) with the Company which provides that in the event of a Change of Control (as
defined therein) and termination of Mr. Leonards employment by the Company without good cause or
resignation by Mr. Leonard for good reason, in either case within 24 months after a Change of
Control, Mr. Leonard shall be entitled to a lump sum severance payment equal to two (2) years base
salary plus an additional amount to cover the continuation of certain benefits for specified
periods of time. Relative to the proposed merger with the city of Nashua, New Hampshire
(Merger), the 2010 Amendment also provides that (i) in no event shall Good Cause exist at any
time during the two hundred ten (210) calendar day period commencing on a Change of Control, and
(ii) Good Reason shall be deemed to exist at all times after the expiration of the one hundred
eighty (180) calendar day period commencing on a Change of Control. The 2010 Amendment also
generally broadens or adds non-compete provisions, adds or revises release-of-claims provisions,
and clarifies and/or harmonizes the type and value of employee benefits includible in the severance
obligations of the Company following a Merger.
Employment Agreement with Donald L. Ware.
Effective October 3, 2006, the Company entered
into an Employment Agreement with Donald L. Ware (the Ware Agreement) pursuant to which he
initially served as President of the Companys Pennichuck Water Works, Inc. subsidiary and now
serves as President of all three of the Companys regulated water utility subsidiaries. Under the
Ware Agreement, his initial base salary was $156,000 and he is entitled to participate in the
Companys employee benefit programs, as well as its bonus and stock option plans.
More specifically, Mr. Ware is entitled to participate in the employee benefit programs
available to the Companys executive officers, including health and dental insurance coverage,
group life and disability coverage, life insurance in the amount of three times his annual salary,
participation in the Companys pension and other retirement and profit sharing plans, and short
term and long term disability coverage. During the term of the Ware Agreement, the Company will
also pay for Mr. Wares reasonable out-of-pocket business, entertainment and other related expenses
incident to the performance of his duties under the Ware Agreement. He is entitled to not less
than four weeks of paid vacation, and is provided with the use of an automobile.
The term of the Ware Agreement is two years provided that, commencing on the first anniversary
date and on or about each anniversary date thereafter, the term of this Agreement may be extended
for subsequent one (1) year periods by advance vote of the Board of Directors. Effective as of
February 20, 2010, the Ware Agreement was amended to automatically extend its term for successive
one-year periods without the need each year to obtain specific prior approval of the Board of
Directors.
In the event his employment is terminated by the Company other than for Cause (as defined in
the Ware Agreement), Mr. Ware is entitled to receive severance benefits, payable as a lump sum,
equal to his then current salary and fringe benefits under the Ware Agreement, including any bonus
for which he may be entitled, for the greater of (a) the remaining term of the Agreement, or (b)
the period of twelve (12) months from the date of termination. Under the provisions of the
original Ware Agreement, in the event he terminates his employment for Good Reason (as defined in
the Ware Agreement) within 24 months following a Change of Control, he would be entitled to receive
severance benefits, payable as a lump sum, equal to his then current salary and fringe benefits
under the Ware Agreement, including any bonus for which he may be entitled, for the greater of (A)
the remaining term of the Ware Agreement, or (B) the period of twelve (12) months from the date of
termination. Effective as of the Third Amendment to the Ware Agreement dated November 15, 2010,
the last clause in the preceding sentence has been deleted (i.e., after the word greater) and has
been replaced with the phrase for a period of twenty-four (24) months from the date of employment
termination.
-36-
Mr. Ware agreed, as part of the Ware Agreement, to non-competition provisions preventing him
from engaging in any activity or business endeavors which directly competes with the regulated
water utility business operations conducted by the Company within New Hampshire, Maine, Vermont,
Massachusetts, Rhode Island and Connecticut for one year after the expiration of the term of the
Ware Agreement. On November 7, 2007, the Ware Agreement was amended for compliance with Section
409A of the Internal Revenue Code of 1986, as amended.
The Third Amendment to the Ware Agreement dated November 15, 2010 modified the Ware Agreement
to extend the duration by which the Company would be obligated in the event the Company terminates
the employment of the Executive other than for Cause within twenty-four (24) months following a
Change of Control, to provide the Executive with severance benefits, payable as a lump sum, equal
to the Executives then current salary and fringe benefits provided hereunder, including any bonus
for which he may be entitled, from a period of twelve (12) months to a period of twenty-four (24)
months from the date of employment termination. The Companys obligations are subject to the
condition that the Executive releases all claims and causes of action that the Executive has or may
ever have against the Corporation. The Third Amendment also makes it clear that the proposed
Merger with the city of Nashua, if consummated, would constitute a Change of Control for purposes
of the Ware Agreement.
Change of Control Agreement with Stephen J. Densberger.
Effective as of October 25, 2006,
Mr. Densberger entered into a Change of Control Agreement with the Company which replaced all prior
agreements including a Change in Control Agreement between the parties dated January 8, 1999. The
term (Term) of the 2006 Agreement is two (2) years subject to continuous one (1) year extensions
at the end of each year within the Term unless and until either party gives to the other party a
written notice of termination. Pursuant to the Agreement, as amended, in the event of a Change of
Control (as defined therein) followed by termination of employment or material demotion without
cause or resignation for good reason (i.e., a Termination Event within twenty-four months after
the Change of Control), Mr. Densberger would be entitled to up to two (2) years (and not less than
one years) severance pay, plus the continuation of certain employment benefits, all provided he
gives to the Company a full release of all claims and causes of action. Effective as of February
1, 2007, the 2006 Agreement was amended to provide that the severance pay would be paid in lump sum
form, and effective as of November 13, 2007 the 2006 Agreement was amended to incorporate
provisions related to Section 409A of the Internal Revenue Code of 1986, as amended.
Effective as of November 15, 2010, the 2006 Agreement was further amended and restated (the
2010 Amendment) to provide that in the event of a Change of Control (as defined therein) and
termination of Mr. Densbergers employment by the Company without good cause or resignation by Mr.
Densberger for good reason, in either case within 24 months after a Change of Control, Mr.
Densberger shall be entitled to a lump sum severance payment equal to two (2) years base salary
plus an additional amount to cover the continuation of certain benefits for specified periods of
time. Relative to the proposed merger with the city of Nashua, New Hampshire (Merger), the 2010
Amendment also provides that (i) in no event shall Good Cause exist at any time during the two
hundred ten (210) calendar day period commencing on a Change of Control, and (ii) Good Reason shall
be deemed to exist at all times after the expiration of the one hundred eighty (180) calendar day
period commencing on a Change of Control. The 2010 Amendment also generally broadens or adds
non-compete provisions, adds or revises release-of-claims provisions, and clarifies and/or
harmonizes the type and value of employee benefits includible in the severance obligations of the
Company following a Merger.
-37-
Employment Agreement with Roland E. Olivier.
Effective August 25, 2008, the Company and
Roland E. Olivier entered into an Employment Agreement pursuant to which Mr. Olivier presently
serves as the Companys General Counsel and Corporate Secretary and the President of its Southwood
Corporation
subsidiary. Under the Agreement, Mr. Olivier received an initial base salary of one hundred
forty-five thousand dollars ($145,000) per annum. He was entitled to participate in the Companys
officer bonus plan for 2009 and thereafter. For 2008, the Agreement provided that he be considered
for a non-plan discretionary bonus.
On his first day of employment, Mr. Olivier was granted a non-qualified stock option to
acquire sixteen thousand two hundred (16,200) shares of the common stock of the Company, which vest
in three equal installments of five thousand four hundred (5,400) per year, beginning on the one
year anniversary of the date of his employment; provided, however, that all of said options shall
vest immediately in the event of a Change of Control (as defined in the Agreement). Mr. Olivier is
entitled to participate in the employee benefit programs available to non-union full-time employees
of the Company.
In the event Mr. Oliviers employment is terminated by the Company without Cause (as defined
in the Agreement), he is entitled to salary continuation for six (6) months subject to
dollar-for-dollar set-off for cash amounts he receives or accrues from any successor employer or
other entity for services rendered during such period, plus COBRA premium cost reimbursement during
the same six (6) month period (such aggregate amounts, the Severance Amount). Notwithstanding
the foregoing, if such termination without Cause occurs within six (6) months before or twenty four
(24) months after a Change of Control (as defined in the Agreement), the Severance Amount shall be
two (2) years base salary (at the then-current rate) payable in a lump sum without right of
set-off, plus COBRA premium cost reimbursement for eighteen (18) months.
Effective as of November 15, 2010, Mr. Olivier entered into a Change of Control Agreement (the
2010 Amendment) with the Company which provides that in the event of a Change of Control (as
defined therein) and termination of Mr. Oliviers employment by the Company without good cause or
resignation by Mr. Olivier for good reason, in either case within 24 months after a Change of
Control, Mr. Olivier shall be entitled to a lump sum severance payment equal to two (2) years base
salary plus an additional amount to cover the continuation of certain benefits for specified
periods of time. Relative to the proposed merger with the city of Nashua, New Hampshire
(Merger), the 2010 Amendment also provides that (i) in no event shall Good Cause exist at any
time during the two hundred ten (210) calendar day period commencing on a Change of Control, and
(ii) Good Reason shall be deemed to exist at all times after the expiration of the one hundred
eighty (180) calendar day period commencing on a Change of Control. The 2010 Amendment also
generally broadens or adds non-compete provisions, adds or revises release-of-claims provisions,
and clarifies and/or harmonizes the type and value of employee benefits includible in the severance
obligations of the Company following a Merger.
-38-
Stock Option Grants During the Fiscal Year Ended December 31, 2010
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
Exercise or
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
Base Price of
|
|
|
Grant Date Fair
|
|
|
|
|
|
Securities Underlying
|
|
|
Option
|
|
|
Value of Stock and
|
|
|
|
|
|
Options
|
|
|
Awards
|
|
|
Option Awards
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
|
($/Share)
|
|
|
($)
|
|
|
Duane C. Montopoli
|
|
01/27/2010
|
|
|
8,000
|
|
|
|
20.11
|
|
|
|
28,518
|
|
|
|
03/25/2010
|
|
|
30,000
|
|
|
|
21.14
|
|
|
|
116,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Leonard
|
|
01/27/2010
|
|
|
5,000
|
|
|
|
20.11
|
|
|
|
17,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald L. Ware
|
|
01/27/2010
|
|
|
5,000
|
|
|
|
20.11
|
|
|
|
17,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen J. Densberger
|
|
01/27/2010
|
|
|
3,200
|
|
|
|
20.11
|
|
|
|
11,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roland E. Olivier
|
|
01/27/2010
|
|
|
4,000
|
|
|
|
20.11
|
|
|
|
14,259
|
|
|
|
|
|
|
The grants vested or will vest in equal amounts on 01/27/2011, 01/27/2012 and
01/27/2013.
|
|
|
|
The grant vested entirely on March 25, 2010.
|
|
|
|
Amounts shown are the aggregate grant date fair value of awards computed in accordance
with Financial Accounting Standards Board Accounting Standards Codification Topic 718
Compensation Stock Compensation, excluding the effect of estimated forfeitures. For a
discussion of the assumptions made in such valuation, see note 3 to the Companys 2010
financial statements.
|
For additional information regarding grants of stock options, see Executive
CompensationCompensation Discussion and Analysis in this Proxy Statement.
-39-
Stock Option Exercises and Fiscal Year End Values
The following tables set forth information concerning the exercises of stock options by the
Named Executive Officers during the fiscal year ended December 31, 2010, and the number and the
fiscal year end value of unexercised options held by the Named Executive Officers at December 31,
2010. The value realized on the shares acquired on exercise is the difference between the exercise
price and the fair market value on the date of exercise. The value of unexercised, in-the-money
options at December 31, 2010, is the difference between its exercise price and the fair market
value of the underlying stock on such date. These values have not been, and may never be,
realized. The underlying options have not been, and may never be, exercised; and actual gains, if
any, on exercise will depend on the value of the Companys common stock on the date of exercise.
Option Exercises and Stock Vested During 2010
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
|
Exercise
|
|
|
Exercise
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
Duane C. Montopoli
|
|
|
|
|
|
|
|
|
|
Thomas C. Leonard
|
|
|
12,702
|
|
|
|
26,251
|
|
|
Donald L. Ware
|
|
|
4,690
|
|
|
|
23,170
|
|
|
Stephen J. Densberger
|
|
|
5,333
|
|
|
|
18,932
|
|
|
Roland E. Olivier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercises listed are for the fiscal year ended December 31, 2010.
|
-40-
Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unearned
|
|
|
Option
|
|
|
Option
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Duane C. Montopoli
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
19.00
|
|
|
|
08/21/2016
|
|
|
|
|
2,667
|
|
|
|
5,333
|
|
|
|
|
|
|
|
17.64
|
|
|
|
01/28/2019
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
20.11
|
|
|
|
01/27/2020
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
21.14
|
|
|
|
03/25/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Leonard
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
22.22
|
|
|
|
07/07/2018
|
|
|
|
|
|
|
|
|
1,403
|
|
|
|
|
|
|
|
17.64
|
|
|
|
01/28/2019
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
20.11
|
|
|
|
01/27/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald L. Ware
|
|
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
20.25
|
|
|
|
01/25/2012
|
|
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
20.14
|
|
|
|
10/03/2013
|
|
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
21.24
|
|
|
|
01/23/2014
|
|
|
|
|
2,107
|
|
|
|
|
|
|
|
|
|
|
|
19.67
|
|
|
|
01/28/2015
|
|
|
|
|
|
|
|
|
3,333
|
|
|
|
|
|
|
|
17.64
|
|
|
|
01/28/2019
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
20.11
|
|
|
|
01/27/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen J. Densberger
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
15.29
|
|
|
|
01/12/2011
|
|
|
|
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
20.25
|
|
|
|
01/25/2012
|
|
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
20.14
|
|
|
|
10/03/2013
|
|
|
|
|
4,667
|
|
|
|
|
|
|
|
|
|
|
|
21.24
|
|
|
|
01/23/2014
|
|
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
19.67
|
|
|
|
01/28/2015
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
19.51
|
|
|
|
12/09/2015
|
|
|
|
|
1,334
|
|
|
|
2,666
|
|
|
|
|
|
|
|
17.64
|
|
|
|
01/28/2019
|
|
|
|
|
|
|
|
|
3,200
|
|
|
|
|
|
|
|
20.11
|
|
|
|
01/27/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roland E. Olivier
|
|
|
10,800
|
|
|
|
5,400
|
|
|
|
|
|
|
|
22.51
|
|
|
|
08/25/2018
|
|
|
|
|
632
|
|
|
|
1,263
|
|
|
|
|
|
|
|
17.64
|
|
|
|
01/28/2019
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
20.11
|
|
|
|
01/27/2020
|
|
|
|
|
|
|
The grants vested or will vest in equal amounts on 01/27/2011, 01/27/2012 and
01/27/2013.
|
|
|
|
The grants vested or will vest in equal amounts on 01/28/2011 and 01/28/2012.
|
|
|
|
The grants vest on 07/07/2011.
|
|
|
|
The grants vest on 08/25/2011.
|
-41-
Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value
|
|
|
|
|
|
|
|
|
Number of
|
|
|
of
|
|
|
Payments
|
|
|
|
|
|
Years Credited
|
|
|
Accumulated
|
|
|
During Last
|
|
|
|
|
|
Service
|
|
|
Benefit
|
|
|
Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
Duane C. Montopoli
|
|
Pension Plan for Employees of Pennichuck Corporation
|
|
|
4
|
|
|
|
188,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Leonard
|
|
Pension Plan for Employees of Pennichuck Corporation
|
|
|
2
|
|
|
|
42,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald L. Ware
|
|
Pension Plan for Employees of Pennichuck Corporation
|
|
|
15
|
|
|
|
228,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen J. Densberger
|
|
Pension Plan for Employees of Pennichuck Corporation
|
|
|
36
|
|
|
|
474,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roland E. Olivier
|
|
Pension Plan for Employees of Pennichuck Corporation
|
|
|
2
|
|
|
|
44,113
|
|
|
|
|
|
|
|
|
|
|
The assumptions and valuation methods used to calculate the present value of the
accumulated pension benefits shown are the same as those that we use for financial
reporting purposes. The assumptions used as of December 31, 2010 include a discount
rate of 5.50%, the gender distinct Internal Revenue Service 2010 Static Mortality Table
for Annuitants and Non-annuitants, a normal retirement age of 65 and salary increases of
3.00% per annum.
|
Pension Plan
The Company maintains a qualified, non-contributory defined-benefit pension plan for all
qualifying employees of the Company and its subsidiaries. In general, the pension plan provides
for monthly payments to or on behalf of each covered employee based upon such employees career
averaged annual compensation, consisting of salary and bonus, prior to retirement and the
employees covered years of service. Directors who are not employees are not eligible to
participate in the plan. The pension plan includes optional early retirement benefits, provided a
participant has attained age 55 and has completed ten or more years of covered service. Mr.
Densberger has met the criteria necessary for early retirement benefits under the plan. Under the
pension plan, the Company makes an annual contribution for the benefit of eligible employees
computed on an actuarial basis. All contributions to the fund and expenses of administering the
fund are paid by the Company.
-42-
The following table sets forth severance benefits that would have been paid to the Named
Executive Officers upon certain types of termination of employment quantified as though the
termination occurred on December 31, 2010. Such amounts are payable pursuant to employment-related
agreements as more fully described elsewhere in this Proxy Statement.
Severance and Change of Control Benefits
See Executive Agreements for a description of the following severance and Change of Control
benefits for each of the following executives, including definitions of the terms used in the
column headings, which severance benefits were as follows as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Control Followed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause or
|
|
|
|
|
|
|
Resignation
|
|
|
Termination
|
|
|
Resignation for
|
|
|
Unvested
|
|
|
|
for Good
|
|
|
without
|
|
|
Good Reason
|
|
|
Stock
|
|
|
|
Reason
|
|
|
Cause
|
|
|
|
|
|
Options
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Duane C. Montopoli
|
|
|
287,108
|
|
|
|
287,108
|
|
|
|
790,213
|
|
|
|
109,837
|
|
|
Thomas C. Leonard
|
|
|
|
|
|
|
91,878
|
|
|
|
364,672
|
|
|
|
80,727
|
|
|
Donald L. Ware
|
|
|
|
|
|
|
198,034
|
|
|
|
404,509
|
|
|
|
68,647
|
|
|
Stephen J. Densberger
|
|
|
|
|
|
|
|
|
|
|
328,901
|
|
|
|
49,114
|
|
|
Roland E. Olivier
|
|
|
|
|
|
|
77,541
|
|
|
|
314,829
|
|
|
|
67,466
|
|
|
|
|
|
|
Resignation for Good Reason
generally is defined to mean (i) the assignment
to the Executive of any duties or responsibilities inconsistent with the position and
office held by the Executive immediately prior to such assignment, (ii) the material
reduction in or loss of authority and responsibility, which authority and responsibility
the Executive was empowered with immediately prior to such reduction or loss; or (iii)
the requirement that the Executive be assigned to or based at, without his consent, any
office or location other than one within a 30-mile radius of the Corporations Merrimack,
New Hampshire headquarters.
|
|
|
|
Termination without Cause
generally is defined to mean termination without
the occurrence of gross or willful misconduct (including, without limitation, fraud or
theft) on the executives part in the performance of his or her duties, or being
convicted of a felony.
|
|
|
|
Change of Control
generally is defined to have occurred if a shareholder or
group of shareholders acting in concert obtains 51% of the voting power for the election
of directors, or a transaction is completed after which the Companys shareholders
control less than 50% of the total voting power of the entity existing after the
transaction is completed, a substantial change in the Board of Directors such that the
current directors no longer represent a majority or a transaction or series of
transactions that result in all or substantially all of the assets of the Company no
longer being under the control of the Company. The Company believes that an eminent
domain taking by the City would meet the definition of a Change of Control.
|
|
|
|
In addition, the executive officers would also be entitled to any bonuses earned
under the terms of the 2011 Officer Bonus Plan discussed previously under Executive
CompensationCompensation Discussion and Analysis.
|
-43-
Certain Relationships and Related Party Transactions
The Company considers directors, nominees for directors, 5% or greater security holders, and
executive officers or their immediate family members to be related parties. Under our Audit
Committee charter, the Audit Committee is responsible for reviewing and approving all transactions
involving the Company in which any related person has a direct or indirect interest, regardless of
amount. The Audit Committees policy regarding the review, approval and monitoring of
transactions involving the Company and any related persons is unwritten, however, it intends to
approve only those related party transactions that are on terms no less favorable to the Company
than could be obtained from independent third parties and are otherwise in, or are not
inconsistent with, the best interest of the Company and its shareholders. Any such process would
be documented in the Audit Committee minutes. Ultimately, as a general practice, it is our
preference to avoid related party transactions.
In addition, the Companys Board of Directors has adopted a Code of Conduct applicable to
directors, officers and employees, which generally requires the reporting to management of
transactions or opportunities that constitute conflicts of interest so that they may be avoided.
Our Code of Conduct is available on our website under Investor Relations, and its subdirectory for
Corporate Governance.
Ms. McCarthy served as the Companys interim President and CEO from April 16, 2006 until
August 21, 2006, and was paid $84,923 by the Company for her services. Mr. Kreick served as
interim Chief Executive Officer of the Company for a portion of fiscal year 2003. Neither Ms.
McCarthy nor Mr. Kreick has served as an officer of the Company in any capacity since August 2006
and fiscal year 2003, respectively.
Effective March 18, 2009 the Company entered into the Gabelli Agreement with GAMCO and its
affiliated entities (collectively Gabelli Group) pursuant to which (a) the Gabelli Group is
allowed, subject to certain terms and conditions, to increase its beneficial ownership in the
Company up to but not reaching 20% under the Companys Rights Agreement (the Rights Plan), (b)
the Company increased the size of its Board of Directors from nine (9) to eleven (11) effective as
of May 6, 2009, the date of the 2009 Annual Meeting, and (c) the Board of Directors nominated two
candidates recommended by the Gabelli Group to fill these additional seats.
The Gabelli Group, in turn, and with respect to the 2009 Annual Meeting, withdrew its Notice
of Intent to nominate candidates for election to the Board of Directors and its shareholder
proposal requesting the Board of Directors to redeem the Rights Plan. The Company previously
reported in a Form 8-K filing with the Securities and Exchange Commission that it had amended its
Rights Plan to give the Board of Directors the right, in its sole discretion, to determine if any
Person (as defined in the Rights Plan) should be exempted from the general 15% beneficial ownership
limitation specified therein and, if so, pursuant to what terms and conditions.
The Gabelli Agreement is described in the Companys March 19, 2009 press release, which is
attached as Exhibit 99.1 to the Current Report on Form 8-K filed with the Securities and Exchange
Commission on March 19, 2009 and incorporated herein by reference. The description of the Gabelli
Agreement is qualified in its entirety by reference to the Letter Agreement that is filed as
Exhibit 4.1 to said Form 8-K and is incorporated by reference into this Proxy Statement.
-44-
As noted above and in conjunction with the Gabelli Agreement, in 2009 the Board of Directors
of the Company nominated Clarence A. Davis and Michael I. German for election to three-year terms
expiring at the Annual Meeting of Shareholders in 2012. Both of these individuals were elected by
the shareholders as directors of Pennichuck at the 2009 Annual Meeting for the specified term. If
either Mr. Davis or Mr. German is unable or unwilling to serve at any point prior to the 2012 annual
meeting, and, so long as GAMCO continues to own at least 5% of the shares of Company common stock
then outstanding until the 2012 Annual Meeting, GAMCO may nominate a candidate for election as a
replacement director, subject to the approval of the Board of Directors of the Company, whose
approval shall not be unreasonably withheld, in accordance with the Boards published Corporate
Governance and Nominating policies and procedures.
The Board of Directors voted unanimously to extend the expiration date of the Rights Plan from
April 19, 2010 to November 1, 2010; and, effective November 1, 2010 to extend the Rights Plan to
May 5, 2011, the date of the 2011 Annual Meeting of the Companys shareholders. The Company
originally adopted the Rights Plan in April 2000. In general, the reasons for instituting and
maintaining a Rights Plan include providing shareholders with adequate time to properly assess the
merits of any proposed tender offer or similar transaction; encouraging the development of
alternative transactions or competing take-over bids under such circumstances; giving the directors
adequate time to fully consider any such tender offer and any alternative transaction or competing
take-over bid or other strategy to maximize shareholder value; and enhancing the leverage the
directors have in negotiations with any potential acquirer. The Company amended the Rights Plan on
November 11, 2010 in connection with the Merger Agreement with the City of Nashua. Pursuant to
that amendment, the execution and delivery of the Merger Agreement, the consummation of the Merger,
and the consummation of any other transaction contemplated in the Merger Agreement will not be
deemed to result in events that authorize the exercise of the rights under the Rights Plan.
The Board decided to extend the Rights Plan on November 1, 2010 to the date of the 2011 Annual
Meeting and not extend it further unless put to a vote by shareholders. At the regular meeting of
the Board of Directors on March 3, 2011, the Board decided not to propose a resolution in this
Proxy for a vote by the shareholders that the Rights Plan be extended beyond the date of the 2011
Annual Meeting of the shareholders. Accordingly, the Rights Plan will expire effective as of May
5, 2011.
Code of Ethics for Financial Professionals
The Company has adopted a Code of Ethics for Financial Professionals applicable to the
principal executive officer and all persons serving in a finance, accounting, treasury, tax or
investor relations role. The Code of Ethics sets forth standards designed to deter wrongdoing and
to promote honest and ethical conduct by such persons, including the avoidance of conflicts of
interest, protection of confidential information, and compliance with applicable laws and
regulations. A copy of the Code of Ethics for Financial Professionals is available at the
Companys website, www.pennichuck.com/investor/corporate_governance.php. The Company intends to
satisfy the SEC disclosure requirement regarding amendments to, or waivers from, certain provisions
of its Code of Ethics for Financial Professionals by posting such information on the Companys
website. The Company will provide to any person without charge, upon request, a copy of the Code
of Ethics is available from our Investor Relations department at Pennichuck Corporation, 25
Manchester Street, Merrimack, New Hampshire 03054, Attention: Investor Relations; Telephone No.
(603) 882-5191.
-45-
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2010, relating to the equity
compensation plans of the Company pursuant to which equity securities of the Company are authorized
for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Future Issuance Under
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Plans (Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved
by security
holders
|
|
|
268,409
|
|
|
$
|
19.84
|
|
|
|
111,934
|
|
Equity compensation
plans not
approved by
security
holders
|
|
|
|
|
|
|
|
|
|
No express number set by plan
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
268,409
|
|
|
$
|
19.84
|
|
|
|
111,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys 2009 Equity Incentive Plan.
|
|
|
|
The Company adopted a Deferred Compensation Program for directors of Pennichuck
Corporation in 1987, as amended in 1997 (the Plan). The Plan enables directors
to defer receipt of all or part of their annual retainer and meeting fees until the
individual ceases to be a director or upon age 70, if earlier. Participating
directors under the plan have the option of (1) deferring receipt of such fees,
with interest accruing thereon based on the Companys average cost of money for its
short term borrowings, or (2) converting such fees on a semi-annual basis into
common share equivalents based on the closing bid price of the Companys common
stock on the conversion date, with dividends credited to the participant on such
unit share equivalents and similarly converted into additional common share
equivalents. Upon termination of the deferral period, participating directors
receive a distribution consisting either of the full amount of cash and interest
accrued to his/her account or shares of restricted common stock of the Company
equal to the number of unit share equivalents so accumulated. No directors are
presently participating in this Plan. The Plan does not provide for a maximum
number of shares of common stock that may be issued under the Plan.
|
Proposal Two Ratification of Independent Registered Public Accountants
Our Audit Committee has selected the firm of ParenteBeard LLC (ParenteBeard), an independent
registered public accounting firm, as our accountants for the fiscal year ending December 31, 2011.
Although shareholder approval of the selection of ParenteBeard is not required by law, our Board
of Directors believes that it is advisable to give shareholders an opportunity to ratify this
selection. If this proposal is not approved by our shareholders at the 2011 annual meeting, our
Audit Committee will reconsider its selection of ParenteBeard.
The Board of Directors recommends a vote
FOR
the ratification of ParenteBeard as the Companys
independent registered public accountants for the fiscal year ending December 31, 2011.
Relationship with Independent Accountants
On October 1, 2009, the Company was notified that its independent accountant, Beard Miller
Company LLP (Beard), an independent registered public accounting firm, had merged with Parente
Randolph LLC (Parente) and formed a new entity, ParenteBeard LLC (ParenteBeard). On October 1,
2009, Beard resigned as the auditors of the Company and, with the approval of the Audit Committee
of the Companys Board of Directors, ParenteBeard was engaged as its independent registered public
accounting firm.
-46-
ParenteBeard LLC was formed in connection with the merger of Parente and Beard on October 1,
2009. Prior to engaging ParenteBeard, the Company had used Beard as its independent accountant and
did not consult with Parente regarding the application of accounting principles to a specified
transaction, either completed or proposed, or regarding the type of audit opinion that might be
rendered on the Companys financial statements, and Parente did not provide any written or oral
advice that was an important factor considered by the Company in reaching a decision as to any such
accounting, auditing or financial reporting issue.
The report of Beard regarding the Companys financial statements for the fiscal years ended
December 31, 2008 did not contain any adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended December 31, 2008 and during the interim period from January 1, 2009
through October 1, 2009, the date of Beards resignation, there were no disagreements with Beard on
any matter of accounting principles or practices, financial statement disclosure or auditing scope
or procedures, which disagreements, if not resolved to the satisfaction of Beard, would have caused
it to make reference to such disagreement in its reports.
Fees Paid to Independent Accountants
The following table sets forth the aggregate fees billed, or to be billed, by ParenteBeard,
the Companys independent accountants, and by Beard, the Companys former independent accountants,
for professional services rendered in connection with the audit of the Companys annual financial
statements for the fiscal years ended December 31, 2010 and December 31, 2009, and fees billed for
audit-related services, tax services and all other services rendered during those periods.
|
|
|
|
|
|
|
|
|
Fee Category
|
|
Fiscal 2010
|
|
|
Fiscal 2009
|
|
Audit Fees
|
|
$
|
242,722
|
|
|
$
|
258,310
|
|
Audit-Related Fees
|
|
|
9,800
|
|
|
|
9,000
|
|
Tax Fees
|
|
|
17,000
|
|
|
|
13,200
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
269,522
|
|
|
$
|
280,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit Fees consist of fees billed, or to be billed, for professional services
rendered for the integrated audit of the Companys consolidated financial statements,
including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, review of the
interim consolidated financial statements included in quarterly reports and services
related to registration statements and bond financings. Included in fiscal 2009
figures are fees billed by Beard in the amount of $51,270.
|
|
|
|
Audit-related fees consist of fees, costs and expenses arising from the audit of the
Companys pension plan. All fees listed for fiscal 2009 were billed by Beard.
|
|
|
|
All tax fees listed were paid in connection with tax return preparation and
professional fees related to the eminent domain proceeding. All fees listed for fiscal
2009 were billed by Beard.
|
|
|
|
All other fees consist of fees for all products and services other than those
reported above.
|
The Audit Committees Charter provides that the Audit Committee must pre-approve all audit
services and non-audit services to be provided to the Company by independent registered public
accounting firms. All audit services, audit-related services, tax services and other services for
fiscal 2010 were pre-approved by the Audit Committee, which concluded that the provision of such
services by ParenteBeard was compatible with the maintenance of that firms independence in the
conduct of its
auditing function. During March 2011, the Audit Committee pre-approved ParenteBeard for audit
services to be provided to the Company for fiscal 2011.
-47-
Proposal Three Advisory (non-binding) vote on the approval of the compensation of the Companys
Named Executive Officers (Say on Pay)
In accordance with recent legislation, the Company is providing shareholders with an advisory
(non-binding) vote on compensation programs for our Named Executive Officers (sometimes referred to
as Say on Pay). Accordingly, you may vote on the following resolution at the 2011 annual
meeting:
Resolved, that the shareholders approve, on an advisory basis, the compensation
of the Companys Named Executive Officers as disclosed in the Compensation
Discussion and Analysis, the accompanying compensation tables, and the related
narrative disclosure in this Proxy Statement.
This vote is non-binding. The Board and the Compensation Committee, which is comprised of
independent directors, expect to take into account the outcome of the vote when considering future
executive compensation decisions to the extent they can determine the cause or causes of any
significant negative voting results.
As described in detail under the Compensation Discussion and Analysis section of this Proxy,
our compensation programs are designed to motivate our executives to build a successful company.
If fully earned based on the achievement of performance targets, equity compensation in the form of
restricted stock units that are subject to further time-based vesting is the largest component of
executive compensation. We believe that our compensation program, with its balance of short-term
incentives (including cash bonus awards and performance conditions for awards of restricted stock
units) and long-term incentives (including equity awards that vest over up to five years) and share
ownership guidelines reward sustained performance that is aligned with long-term shareholder
interests. Shareholders are encouraged to read the Compensation Discussion and Analysis, the
accompanying compensation tables, and the related narrative disclosure.
The Board of Directors unanimously recommends that you vote FOR the approval, on an advisory
basis, of the compensation of our Named Executive Officers as disclosed in the Compensation
Discussion and Analysis, the accompanying compensation tables, and the related narrative
disclosure.
Proposal Four Advisory (non-binding) vote on the desired frequency on which shareholders should
have an advisory (non-binding) vote on the approval of the compensation of the Companys Named
Executive Officers (Say When on Pay)
In addition to providing shareholders with the opportunity to cast an advisory vote on Named
Executive Officer compensation, the Company this year is providing shareholders with an advisory
vote on whether the advisory vote on Named Executive officer compensation should be held every one,
two or three years (sometimes referred to as Say When on Pay). Accordingly, you may vote on the
following resolutions at the 2011 annual meeting:
Resolved, that the shareholders wish the Company to include an advisory vote on
the compensation of the Companys Named Executive Officers every:
-48-
This vote is non-binding. The Board believes that a frequency of every year for the
advisory vote on Named Executive Officer compensation is the optimal interval for conducting and
responding to a Say When on Pay vote. Shareholders who have concerns about executive compensation
during the interval between Say on Pay votes are welcome to bring their specific concerns to the
attention of the Board. Please refer to Shareholder Communications to the Board in this Proxy
Statement for information about communicating with the Board.
The proxy card provides shareholders with the opportunity to choose among four options
(holding the vote every one, two or three years, or abstaining) and, therefore, shareholders will
not be voting to approve or disapprove the Boards recommendation.
Although this advisory vote on the frequency of the Say When on Pay vote is non-binding, the
Board and the Compensation Committee will take into account the outcome of the vote when
considering the frequency of future advisory votes on executive compensation.
The Board of Directors unanimously recommends that you vote for the option of every year for
future advisory votes on Named Executive Officer compensation.
Annual Report on Form 10-K
The Companys Annual Report on Form 10-K is available without charge upon request from our
Investor Relations department at Pennichuck Corporation, 25 Manchester Street, Merrimack, New
Hampshire 03054, Attention: Investor Relations; Telephone No. (603) 882-5191. The Companys Annual
Report on Form 10-K is also available at www.pennichuck.com/investor/proxy-materials.php.
Other Matters
The Board of Directors knows of no business that will be presented for consideration at the
Annual Meeting other than those items set forth in this Proxy Statement. The enclosed proxy
confers upon each person entitled to vote the shares represented thereby discretionary authority to
vote such shares in accordance with his or her best judgment with respect to any other matters
which may properly be presented for action at the meeting.
By Order of the Board of Directors,
Roland E. Olivier
Secretary
-49-
Appendix A
AUDIT COMMITTEE CHARTER
of
PENNICHUCK CORPORATION
The Audit Committee of Pennichuck Corporation (the Company) is a standing
committee of the Board of Directors (the Board). The Committee shall be comprised of at least
three directors, each of whom:
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1.
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is independent in the judgment of the Board of Directors under the rules of
the Nasdaq Stock Market, Inc., except as permitted by Nasdaq rule and other applicable
laws and regulations (including the Sarbanes-Oxley Act of 2002);
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2.
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does not accept any consulting, advisory or other compensatory fee from the
Company other than in his or her capacity as a member of the Board or any committee of
the Board; and
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3.
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is not an affiliate of the Company or any subsidiary of the Company, as such
term is defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended.
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All members of the Committee must be able to read and understand fundamental financial
statements, including the Companys balance sheet, income statement, and cash flow statement, and
the Committee shall have at least one member who has past employment experience in finance or
accounting, requisite professional certification in accounting, or other comparable experience or
background which results in the members financial sophistication.
Members shall be appointed by the Board based on nominations recommended by the Companys
Nominating Committee and shall serve at the pleasure of the Board and for such term or terms as the
Board may determine.
Committee Purposes
The principal purposes of the Audit Committee are to:
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1.
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assist the Board in fulfilling its oversight responsibility relating to (i) the
integrity of the Companys financial statements, (ii) the Companys compliance with
legal and regulatory requirements, (iii) the independent auditors qualifications and
independence, and (iv) the performance of the independent auditors; and
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2.
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prepare an audit committee report as required by the Securities and Exchange
Commission (the SEC) for inclusion in the Companys annual proxy statements.
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-50-
The management of the Company is responsible for the preparation, presentation and integrity of the
Companys financial statements and for the effectiveness of internal control over financial
reporting. Management is responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures that provide for compliance with
accounting standards and applicable laws and regulation. The independent
auditors are responsible for planning and carrying out a proper audit of the Companys annual
financial statements, reviews of the Companys quarterly financial statements prior to the filing
of each quarterly report on Form 10-Q, annually auditing managements assessment of the
effectiveness of internal control over financial reporting commencing in the fiscal year beginning
on or after January 1, 2005, as the case may be, and other procedures. In fulfilling their
responsibilities hereunder, it is recognized that members of the Audit Committee are not fulltime
employees of the Company and are not, and do not represent themselves to be, performing the
functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit
Committee or its members to conduct field work or other types of auditing or accounting reviews
or procedures or to set auditor independence standards.
The independent auditors shall submit to the Audit Committee annually a formal written statement of
the fees billed in each of the last two (2) fiscal years for each of the following categories of
services rendered by the independent auditors:
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1.
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the audit of the Companys annual financial statements and the reviews of the
financial statements included in the Companys quarterly reports on Form 10-Q or
services that are normally provided by the independent auditors in connection with
statutory and regulatory filings or engagements;
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2.
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assurance and related services not included in clause 1. that are reasonably
related to the performance of the audit or review of the Companys financial
statements, in the aggregate and by each service;
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3.
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tax compliance, tax-advice and tax planning services, in the aggregate and by
each service; and
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4.
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all other products and services rendered by the independent auditors, in the
aggregate and by each service.
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Committee Duties and Responsibilities
To carry out its purposes, the Audit Committee shall have the following duties and
responsibilities:
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1.
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with respect to the independent auditors,
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(i)
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to be directly responsible for the appointment, compensation,
retention and oversight of the work of the independent auditors (including the
resolution of disagreements between management and the independent auditors
regarding financial reporting), who shall report directly to the Audit
Committee;
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(ii)
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to be directly responsible for the appointment, compensation,
retention and oversight of the work of any other registered public accounting
firm engaged for the purpose of preparing or issuing an audit report or to
perform audit, review or attestation services, which firm shall also report
directly to the Audit Committee;
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(iii)
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to pre-approve, or to adopt appropriate procedures to
pre-approve, all audit and non audit services to be provided by the independent
auditors;
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(iv)
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to discuss with the independent auditors any relationships
between the independent auditors and the Company that may impact the quality of
audit services or the objectivity and independence of the Companys
independent auditors;
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-51-
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(v)
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to obtain from the independent auditors in connection with any
audit a timely report relating to the Companys annual audited financial
statements which would include all alternative treatments within generally
accepted accounting principles for policies and practices related to material
items that have been discussed with management, ramifications of the use of
such alternative disclosures and treatments, and the treatment preferred by the
independent auditors, and any material written communications between the
independent auditors and management, such as any management letter or
schedule of unadjusted differences;
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(vi)
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to review and evaluate the qualifications, performance and
independence of the lead partner of the independent auditors;
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(vii)
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to discuss with management the timing and process for
implementing the rotation of the lead audit partner, the concurring partner and
any other active audit engagement team partner and consider whether there
should be a regular rotation of the audit firm itself;
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(viii)
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to review and approve all related party transactions of the Company; and
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(ix)
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to take into account the opinions of management in assessing
the independent auditors qualifications, performance and independence;
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2.
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with respect to accounting principles and policies, financial reporting and
audit control over financial reporting,
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(i)
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to advise management and the independent auditors that they are
expected to provide to the Audit Committee a timely analysis of significant
issues and practices relating to accounting principles and policies, financial
reporting and internal control over financial reporting;
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(ii)
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to consider any reports or communications (and managements
responses thereto) submitted to the Audit Committee by the independent auditors
required by or referred to in Statement on Auditing Standards No. 61 (SAS 61)
(as codified by AU Section 380), as it may be modified or supplemented or other
professional standards including reports and communications related to:
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deficiencies, including significant deficiencies or material weaknesses, in
internal control identified during the audit or other matters relating to
internal control over financial reporting;
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consideration of fraud in a financial statement audit;
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detection of illegal acts;
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the independent auditors responsibility under generally accepted auditing
standards;
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any restriction on audit scope;
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significant accounting policies;
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significant issues discussed with the national office respecting auditing or
accounting issues presented by the engagement;
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-52-
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management judgments and accounting estimates;
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any accounting adjustments arising from the audit that were noted or
proposed by the auditors but were passed (as immaterial or otherwise);
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the responsibility of the independent auditors for other information in
documents containing audited financial statements;
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disagreements with management;
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consultation by management with other accountants;
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major issues discussed with management prior to retention of the independent
auditors;
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difficulties encountered with management in performing the audit;
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the independent auditors judgments about the quality of the entitys
accounting principles; and
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reviews of interim financial information conducted by the independent
auditors;
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(iii)
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to meet with management and the independent auditors:
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to discuss the scope of the annual audit;
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to review and discuss the annual audited financial statements and quarterly
financial statements, including the Companys disclosures under Managements
Discussion and Analysis of Financial Condition and Results of Operations, and
recommend to the Board whether the audited financial statements should be
included in the Companys Form 10-K;
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to discuss any significant matters arising from any audit, including any
audit problems or difficulties, whether raised by management or the independent
auditors, relating to the Companys financial statements;
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to discuss any difficulties the independent auditors encountered in the
course of the audit, including any restrictions on their activities or access
to requested information and any significant disagreements with management;
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to discuss any management or internal control letter issued, or proposed
to be issued, by the independent auditors to the Company;
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to review the form of opinion the independent auditors propose to render to
the Board of Directors and shareholders; and
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to discuss, as appropriate: (a) any major issues regarding accounting
principles and financial statement presentations, including any significant
changes in the Companys selection or application of accounting principles, and
major issues as to the adequacy of the Companys internal controls and any
special audit steps adopted in light of material control deficiencies; (b)
analyses prepared by management and/or the independent auditors setting forth
significant financial reporting issues and judgments made in connection with
the preparation of the financial statements, including analyses of the effects
of alternative GAAP methods on the financial statements; and (c) the effect of
regulatory and accounting initiatives, as well as off-balance sheet structures,
on the financial statements of the Company;
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-53-
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(iv)
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to inquire of the Companys chief executive officer and chief
financial officer as to the existence of any significant deficiencies or
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Companys ability to record, process, summarize and report financial
information, and as to the existence of any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Companys internal control over financial reporting;
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(v)
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to discuss guidelines and policies governing the process by
which senior management of the Company and the relevant departments of the
Company assess and manage the Companys exposure to risk, and to discuss the
Companys major financial risk exposures and the steps management has taken to
monitor and control such exposures;
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(vi)
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to obtain from the independent auditors assurance that the
audit was conducted in a manner consistent with Section 10A of the Securities
Exchange Act of 1934, as amended, which sets forth certain procedures to be
followed in any audit of financial statements required under the Securities
Exchange Act of 1934;
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(vii)
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to discuss with the Companys general or outside counsel any
significant legal, compliance or regulatory matters that may have a material
effect on the financial statements or the Companys business, financial
statements or compliance policies, including material notices to or inquiries
received from governmental agencies;
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(viii)
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to discuss and review the type and presentation of information to be included
in earnings press releases;
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(ix)
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to discuss the types of financial information and earnings
guidance provided, and the types of presentations made, to analysts and rating
agencies;
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(x)
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to establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and for the confidential, anonymous
submission by Company employees of concerns regarding questionable accounting
or auditing matters;
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(xi)
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to review and discuss any reports concerning material
violations submitted to it by Company attorneys or outside counsel pursuant to
the SEC attorney professional responsibility rules or otherwise; and
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(xii)
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to establish hiring policies for employees or former employees
of the independent auditors;
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3.
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with respect to reporting and recommendations,
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(i)
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to prepare any report or other disclosures, including any
recommendation of the Audit Committee, required by the rules of the SEC to be
included in the Companys annual proxy statement;
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(ii)
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to review and reassess the adequacy of this Charter at least
annually and recommend any changes to the full Board of Directors;
|
-54-
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(iii)
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to report its activities to the full Board of Directors on a
regular basis and to make such recommendations with respect to the above and
other matters as the Audit Committee may deem necessary or appropriate; and
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(iv)
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to prepare and review with the Board an annual performance
evaluation of the Audit Committee, which evaluation must compare the
performance of the Audit Committee with the requirements of this charter. The
performance evaluation by the Audit Committee shall be conducted in such manner
as the Audit Committee deems appropriate. The report to the Board may take the
form of an oral report by the chairperson of the Audit Committee or any other
member of the Audit Committee designated by the Audit Committee to make this
report.
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Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson. The Audit Committee shall
meet once every fiscal quarter, or more frequently if circumstances dictate, to discuss with
management the annual audited financial statements and quarterly financial statements, as
applicable. The Audit Committee should meet separately on a periodic basis with management and the
independent auditors to discuss any matters that the Audit Committee or any of these persons or
firms believes should be discussed privately. The Committee shall meet in executive session at
least twice a year. The Audit Committee may request any officer or employee of the Company or the
Companys outside counsel or independent auditors to attend a meeting of the Audit Committee or to
meet with any members of, or consultants to, the Audit Committee. Members of the Audit Committee
may participate in a meeting of the Audit Committee by means of conference call or similar
communications equipment by means of which all persons participating in the meeting can hear each
other.
Delegation to Subcommittee
The Audit Committee may, in its discretion, delegate all or a portion of its duties and
responsibilities to a subcommittee of the Audit Committee. The Audit Committee may, in its
discretion, delegate to one or more of its members the authority to pre-approve any audit or
non-audit services to be performed by the independent auditors, provided that any such approvals
are presented to the Audit Committee at its next scheduled meeting.
Resources and Authority of the Audit Committee
The Audit Committee shall have the resources and authority appropriate to discharge its duties and
responsibilities, including the authority to select, retain, terminate, and approve the fees and
other retention terms of special or independent counsel, accountants or other experts and advisors,
as it deems necessary or appropriate, without seeking approval of the Board or management.
The Company shall provide for appropriate funding, as determined by the Audit Committee, in its
capacity as a committee of the Board, for payment of:
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1.
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compensation to the independent auditors and any other public accounting firm
engaged for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Company;
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2.
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compensation of any advisors employed by the Audit Committee; and
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3.
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ordinary administrative expenses of the Audit Committee that are necessary or
appropriate in carrying out its duties.
|
-55-
PENNICHUCK
CORPORATION ATTN:TOM
LEONARD
25 MANCHESTER STREET
MERRIMACK, NH 03054-1947
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card
in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKSBELOW
IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
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DETACH AND
RETURN THIS PORTION
ONLY
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For
All
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Withhold
All
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For
All
Except
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To withhold authority to vote for any individual
nominee(s), mark For All Except and write the number(s) of the
nominee(s) on the line below.
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The Board of Directors recommends you vote FOR
the following:
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1.
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Election of Directors
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0
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0
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0
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Nominees
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01 Joseph A. Bellavance
02 Janet M. Hansen
03 Hannah M. McCarthy 04 James M. Murphy
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The Board of
Directors recommends you vote FOR proposals 2 and 3:
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For
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Against
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Abstain
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2.
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To ratify the appointment of ParenteBeard LLC as the Companys independent registered
public accountants for the year ending December 31, 2011
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0
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0
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0
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3.
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To have an advisory (non-binding) vote on the approval of the compensation of the Companys
Named Executive Officers (Say on Pay)as disclosed in the proxy statement for this meeting
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0
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0
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0
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The Board of
Directors recommends you vote 1 YEAR on the following proposal:
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1 year
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2 years
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3 years
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Abstain
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4.
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To have an advisory (non-binding) vote on the desired frequency on which shareholders
will have an advisory
(non-binding) vote on the approval of the compensation of the Companys Named Executive
Officers (Say When on Pay)
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0
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0
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0
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NOTE:
To transact such other business as may properly come before the meeting or any adjournment
thereof.
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Yes
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No
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Please indicate if you plan to attend this
meeting
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0
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0
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Please sign exactly as your name(s)
appear(s) hereon. When signing as attorney,
executor, administrator, or other fiduciary,
please give full title as such. Joint owners
should each sign personally. All holders
must sign. If a corporation or partnership,
please sign in full corporate or partnership
name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Special Meeting:
The Notice
& Proxy Statement, Annual Report on
Form 10-K is/are available at
www.proxyvote.com
.
PENNICHUCK CORPORATION
PROXY FOR THE 2011 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 5, 2011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE
As an alternative to completing this form, you may enter your vote instructions
via the internet at
www.proxyvote.com
and follow the simple
instructions. Use the Company Number and Account Number shown on your proxy
card.
The undersigned having received notice of the 2011 Annual Meeting of Shareholders and
the Board of Directors proxy statement therefore, and revoking all prior proxies,
hereby appoint(s) John R. Kreick and Duane C. Montopoli, and each of them, attorneys
or attorney of the undersigned (with full power of substitution in them and each of
them) for and in the name(s) of the undersigned to attend the 2011 Annual Meeting of
Shareholders of PENNICHUCK CORPORATION (the Company) to be held on Thursday, May 5,
2011 at 9:00 a.m., local time, at the Courtyard by Marriott-Nashua, 2200 Southwood
Drive, Nashua, New Hampshire, and any adjournments thereof, and there to vote and act
upon the following matters in respect of all shares of stock of the Company which the
undersigned may be entitled to vote or act upon, with all the powers the undersigned
would possess if personally present.
In their disretion, the proxy holders are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment thereof. The shares
represented by this proxy will be voted as directed by the undersigned. If no
direction is given with respect to any election to office or porposal, this proxy
will be voted as recommended by Board of Directors. Attendance of the undersigned at
the meeting or at any adjournment thereof, will not be deemed to revoke this proxy
unless the undersigned shall revoke this proxy in writing.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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