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ORDINANCE AMENDED 0O-19-040

15. In Chapter 50 “Personnel”, Article 1 “General Provisions”, Section 50-3 “Amendments”,
subsection B:

Ҥ50-3. Amendments.

B, The merit system may from time to time be amended or changed by
ordinance....For all amendments or changes introduced by the Board of
Aldermen, the views of the Director of Administrative Services, the Director of
the Financial Services Division, the Human Resources Department and the
Personnel Advisory Board with the Mayor shall be sought with respect to each
amendment or change.”

16. In Chapter 50 “Personnel”, Article Il] “Employment of New Personnel’, Section 50-9
“Human Resources Department and Human Resources Manager”:

-9. Human Resources Department and Human Resources irector.
Ҥ 50-9. H R Depart tand H R Direct

C. The Human Resources Manager Director, with the approval of the Mayor_and the
Director of Administrative Services, shall issue policies needed to implement this
chapter.”

This ordinance shall become effective upon passage.

The following table sets forth information regarding our DB Plan and our OPEB Plans as of
December 31, 2014 and for the year then ended:

(in thousands) DB Plan OPEB Plans
Projected benefit obligations $ 21,512 $ 3,000
Employer contribution 986 -
Benefits paid, excluding expenses (429) (34)
Fair value of plan assets 13,495 962
Accumulated benefit obligation 19,374 -
Funded status (8,017) (2,038)
Net periodic benefit cost 893 130

Amount of the funded status recognized in the
Consolidated Balance Sheet consisted of:

Current liability : (22)
Non-current liability (8,017) (2,016)
Total $ (8,017) $ (2,038)

Changes in plan assets and benefit obligations recognized in regulatory assets, for the year
ended December 31, 2015, were as follows:

(in thousands) DB Pian OPEB Plans
Regulatory asset balance, beginning of period $ = 6,668 $ (185)
Net actuarial loss incurred during the period 347 332
Prior service cost incurred during the period - 16
Recognized net actuarial (gain)/loss (357) 74
Regulatory asset balance, end of period $6,658 $ 237

Changes in plan assets and benefit obligations recognized in regulatory assets, for the year
ended December 31, 2014, were as follows:

(in thousands) DB Pian OPEB Plans
Regulatory asset balance, beginning of period $ 3,815 $ (473)
Net actuarial gain incurred during the period 2,986 299
Prior service cost incurred during the period - (51)
Recognized net actuarial (gain)/loss (133) 40
Regulatory asset balance, end of period $ 6,668 § (185)

PENNICHUCK” 25 MANCHESTER STREET

PO BOX 1947
MERRIMACK, NH 03054-1947

(603) 882-5191
FAX (603) 913-2305

VIA HAND DELIVERY

WWW.PENNICHUCK.COM

March 25, 2019

Ms. Lori Wilshire, President
Board of Aldermen

City of Nashua

229 Main Street

Nashua, NH 03060

Dear President Wilshire:

On behalf of the Pennichuck Corporation Board of Directors, I am enclosing the following items
with respect to the Annual Meeting of Sole Shareholder to be held on Saturday, May 4, 2019, at
the DoubleTree Hilton, 2 Somerset Parkway, in Nashua:

1. Notice of Annual Meeting of Sole Shareholder and Proxy Statement;
2. Proxy Card; and

3. Annual Report to the Sole Shareholder (includes the Audited Consolidated
Financial Statements for December 31, 2018 and 2017).

Please contact ‘Thomas J. Leonard, Chairman of the Board of Directors, or me, if you need
further information.

Regards,

CLAS
Larry D. Goodhue
Chief Executive Officer,

Chief Financial Officer
and Treasurer

ce. Mayor James Donchess
Board of Aldermen
Steven Bolton, Corporation Counsel
Patricia Piecuch, City Clerk

YW, PENNICHUCK’

OE

PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054

NOTICE OF ANNUAL MEETING OF SOLE SHAREHOLDER
To be Held on Saturday, May 4, 2019 at 9:00 a.m.

To the City of Nashua, New Hampshire, in its capacity as the Sole Shareholder of Pennichuck
Corporation:

In accordance with the By-Laws of Pennichuck Corporation and applicable laws, Pennichuck
Corporation hereby provides notice that you are cordially invited to attend the Annual Meeting
of Sole Shareholder of Pennichuck Corporation. The City of Nashua, New Hampshire, is the
Sole Shareholder of Pennichuck Corporation.

The Annual Meeting will be held at the DoubleTree by Hilton, 2 Somerset Parkway, Nashua,
New Hampshire, on Saturday, May 4, 2019 at 9:00 a.m., for the following purpose:

1. To elect four directors, each for a three-year term, and to elect one director, for
a one-year term, and until their successors are elected and qualified.

To facilitate the City’s review of the matters to be addressed at the Annual Meeting, the
Pennichuck Corporation Board of Directors have approved the delivery of the Proxy Statement
attached to this Notice.

By Order of the Board of Directors,
> f)

S pAh

LARRY D. GOODHUE

Chief Executive Officer,

Chief Financial Officer
and Treasurer

Merrimack, New Hampshire
March 25, 2019

V2 PENNICHUCK”

PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054

PROXY STATEMENT

2019 Annual Meeting of Sole Shareholder
To be Held on Saturday, May 4, 2019 at 9:00 a.m.

This Proxy Statement is furnished to the City of Nashua, New Hampshire (the “City”), in its
capacity as the Sole Shareholder of Pennichuck Corporation (“Pennichuck Corporation” or the
“Company’’), by the Board of Directors of Pennichuck Corporation, in connection with the
solicitation of a proxy to be voted at the Annual Meeting of Sole Shareholder for the purpose set
forth in the accompanying Notice of Annual Meeting of Sole Shareholder.

The Annual Meeting will be held at the DoubleTree by Hilton, 2 Somerset Parkway, Nashua,
New Hampshire, on Saturday, May 4, 2019 at 9:00 a.m.

Matter to be Voted Upon at the Annual Meeting

At the Annual Meeting, the City, in its capacity as the Sole Shareholder of Pennichuck Corporation,
is being asked to consider and vote upon the following:

(1) To elect C. George Bower, Jay N. Lustig, John D. McGrath and Preston J.
Stanley, Jr. to the Pennichuck Corporation Board of Directors, as Class A directors,
each for a three-year term, and until their successors are elected and qualified; and to
elect Deborah Novotny to the Pennichuck Corporation Board of Directors, as a Class
B director, for a one-year term, and until her successor is elected and qualified.

Voting at the Annual Meeting

Background. Pennichuck Corporation was acquired by the City on January 25, 2012. This
acquisition was accomplished pursuant to an Agreement and Plan of Merger reached between the
City and Pennichuck Corporation dated November 11, 2010 (the “Merger Agreement”). The
transaction, in which the City issued $150.6 million of general obligation bonds to acquire the
outstanding stock of Pennichuck Corporation and pay all transaction costs, was authorized by
special legislation enacted by the State Legislature in 2007 and 2010. The Mayor and the Board

of Aldermen unanimously approved the acquisition pursuant to this special legislation on
January 11,2011. The New Hampshire Public Utilities Commission approved the Merger
Agreement on November 23, 2011, concluding that “the transaction is in the public interest and
will not have an adverse effect on rates, terms, service, or operation of the utilities.”

Corporate Structure. As part of the acquisition, the corporate structure of Pennichuck
Corporation and its utility subsidiaries was retained. Under this structure, the City is the sole
shareholder of Pennichuck Corporation. Pennichuck Corporation continues to own five
corporate subsidiaries, including three regulated public utilities (Pennichuck Water Works, Inc.,
Pennichuck East Utility, Inc., and Pittsfield Aqueduct Company, Inc.), an unregulated service
company (Pennichuck Water Service Corporation), and a real estate holding company (The
Southwood Corporation).

Election of the Board of Directors. Under this corporate governance system, the City exercises
its control over Pennichuck Corporation in its capacity as the Company’s Sole Shareholder in
accordance with the Articles of Incorporation, the By-Laws and the New Hampshire laws
governing business corporations. In accordance with these rules, Pennichuck Corporation’s
business affairs are managed and overseen by a Board of Directors. One of the most important
responsibilities of the City, in its capacity as Sole Shareholder, is to elect members of the Board
of Directors from individuals nominated by the Pennichuck Corporation Board of Directors at
the Company’s Annual Meeting.

Voting at the Annual Meeting. \t is important to remember that the City itself is the Sole
Shareholder, not any individual person who may hold an office with the City. The City must
exercise its responsibilities as Sole Shareholder through public meetings of the City’s Board of
Aldermen and Mayor, acting in accordance with applicable New Hampshire laws and the
provisions of the City Charter. As a municipal entity, the City is not typically in a position to
“attend” an annual meeting, or any other meeting of the Sole Shareholder, “in person.”

Traditional corporate law principles provide a ready solution for this type of “institutional”
voting of shares. As the Sole Shareholder, the City may review the proposed vote and take
action at appropriate City meetings determined by the City. The City may then either designate
an individual person to attend the Annual Meeting in person with the authority to vote the City’s
shares in accordance with the City’s determination, or the City may vote its shares by proxy.

To facilitate these options, the Pennichuck Corporation Board of Directors has prepared this
Proxy Statement which contains details of the business to be conducted at the Annual Meeting.
If the City determines to vote its shares by proxy, it should cause the enclosed proxy card to be
completed and returned to Pennichuck Corporation prior to the Annual Meeting. By executing
the enclosed proxy card, the City will be designating the actions it has determined to take with
respect to the matters to be heard at the Annual Meeting and will be authorizing the officers of
the Company named on the proxy card to act as the City’s proxy to vote on the City’s behalf at
the Annual Meeting in accordance with the instructions set forth on the proxy card.

Corporate Governance Matters

Current Board of Directors. The Pennichuck Corporation Board of Directors is divided into
three classes, each class serving for three years following their election and until their successors
have been elected and qualified.

The number of Directors is currently fixed at eleven. There is a vacancy on the Board in Class B
due to the resignation of a Board member in September 2017. The Board of Directors is
nominating Deborah Novotny for election as a Class B director to fill the vacancy in Class B.

The Board currently has ten “seated” directors. Of the ten directors, four have terms ending in
2019 (Class A), three have terms ending in 2020 (Class B), and three have terms ending in 2021
(Class C).

The current members of the Company’s Board of Directors are as follows:

Term Expiring 2019 Term Expiring 2020 Term Expiring 2021
Class A Class B Class C
C. George Bower James P. Dore David P. Bernier
Jay N. Lustig Elizabeth A. Dunn Stephen D, Genest
John D. McGrath John M. Murphy Thomas J. Leonard
Preston J. Stanley, Jr. [Vacancy]

Board Meetings, Committee Meetings and Attendance. \n 2018, the Company’s Board of
Directors held 12 Board meetings and 15 Committee meetings. Each current member of the
Board attended 75% or more of the total number of meetings of the Board of Directors and the
number of meetings of all committees of the Board on which they served. All but one member
of the Board of Directors attended the 2018 Annual Meeting of Sole Shareholder.

Board Compensation. \n 2018, cach director received an annual retainer of $12,000.

Annual Performance Evaluation. The Board of Directors conducts an annual self-evaluation
of the Board and its Committees to determine whether they are functioning effectively. Each
Committee is also required to evaluate their performance.

Corporate Code of Conduct. The Company has adopted a written Corporate Code of Conduct
that applies to its directors, officers and employees. A current copy of the Corporate Code of
Conduct can be found on the Company’s website at www.pennichuck.com, under the “Board of
Directors — Meetings, Minutes and Corporate Governance” caption.

Board Committees. The Board of Directors has established four standing committees: the
Audit, Finance and Risk Committee, the Communications Committee, the Compensation and
Benefits Committee, and the Nominating and Governance Committee.

Each Committee has adopted a written Charter which sets forth its purpose, membership,
duties and responsibilities. A copy of each Charter can be found on the Company’s website at
www.pennichuck.com, under the “Board of Directors — Meetings, Minutes and Corporate
Governance” caption.

The current members of the Board Committees are as follows:

Audit, Finance and Risk Committee Communications Committee
James P. Dore, Chairman Jay N. Lustig, Chairman
C. George Bower James P. Dore
Thomas J. Leonard Thomas J. Leonard
John D. McGrath Preston J. Stanley, Jr.
John M. Murphy
Compensation and Benefits Committee Nominating and Governance Committee
Stephen D. Genest, Chairman Elizabeth A. Dunn, Chairman
David P. Bernier Stephen D. Genest
C. George Bower Thomas J. Leonard
Elizabeth A. Dunn Jay N. Lustig
Thomas J. Leonard Preston J. Stanley, Jr.

Jay N. Lustig

Audit, Finance and Risk Committee. The Audit, Finance and Risk Committee is responsible for
the appointment, compensation and retention of the independent auditors; preapproval of all
audit and non-audit services to be provided by the independent auditors; review and approval of
all related party transactions; review and evaluation of the qualifications, performance and
independence of the lead partner of the independent auditors; oversight of the integrity of the
Company’s financial statements and internal controls; oversight of Company financing activities;
oversight of the policies and procedures established to assess, monitor and control operational
and financial risk; and oversight of the Company’s insurance programs. The Audit, Finance and
Risk Committee held 4 meetings in 2018.

Communications Committee. The Communications Committee develops and assists with the
policies and strategies of external communications between the Board, the Company and the
Sole Shareholder, other stakeholders, and the public, as needed. The Communications
Committee held 2 meetings in 2018.

Compensation and Benefits Committee. The Compensation and Benefits Committee 1s
responsible for annually reviewing and approving corporate goals and objectives relevant to
Chief Executive Officer compensation; evaluating the Chief Executive Officer’s performance in
light of those goals and objectives, and determining and recommending to the Board of Directors
the Chief Executive Officer’s compensation based on evaluation of performance; reviewing and
approving executive salaries; reviewing and approving any employment agreements, special
compensation and benefits, or severance arrangements as they pertain to executive officers other
than the Chief Executive Officer; overseeing the Company’s compensation and benefit policies;
and recommending to the Board of Directors the establishment, termination or amendment of
existing compensation and employee benefit plans. The Compensation and Benefits Committee
held 5 meetings in 2018.

Nominating and Governance Committee. The Nominating and Governance Committee is
responsible for identifying individuals qualified to become Board members; recommending to
the Board the persons to be nominated by the Board for election as directors at the Annual
Meeting of Sole Shareholder; developing and recommending to the Board of Directors a set of
corporate governance principles; overseeing an annual self-evaluation of the Board; and annually
reviewing the Corporate Code of Conduct. The Nominating and Governance Committee is
authorized to retain advisors and consultants and to compensate them for their services. The
Nominating and Governance Committee did not retain such advisors or consultants during 2018.
The Nominating and Governance Committee held 4 meetings in 2018.

As part of the nomination process, the Nominating and Governance Committee reviewed the
current composition of the Board as a whole, reviewed the qualifications and performance of the
incumbent directors who are up for re-election to the Board in 2019, discussed recommendations
from Board members to identify and evaluate director candidates to fill the vacancy on the
Board, and conducted non-public and public interviews of a director candidate.

The Nominating and Governance Committee considers whether to nominate any candidate for
director in accordance with the criteria set forth in its Charter, subject to the restrictions set forth
in the Company’s By-Laws. These criteria include the candidate’s integrity, business acumen,
knowledge of the Company’s business and industry, experience, diligence, conflicts of interest,
and the ability to act in the interests of the Sole Shareholder. The Committee does not assign
specific weights to particular criteria and no particular criterion is a prerequisite for each
prospective nominee. The backgrounds and qualifications of the Company’s directors,
considered as a group, should provide a composite mix of experience, knowledge and abilities
that will allow the Board of Directors to fulfill its responsibilities.

Senior Management. The members of the Company’s Senior Management team are as follows:
Larry D. Goodhue, Chief Executive Officer, Chief Financial Officer and Treasurer

Mr. Goodhue has been the Chief Executive Officer, Chief Financial Officer and Treasurer
of Pennichuck Corporation and its subsidiaries since November 6, 2015, and the Chief
Financial Officer, Treasurer and Controller from March 2012 through November 2015. He
was Controller from December 2006 to March 2012. Mr. Goodhue served as a financial
consultant to Metrobility Optical Systems, Inc. from July 2006 to October 2006 and to
Pennichuck Corporation from October 2006 to November 2006. From October 2005 to
June 2006, he was the Vice President of Finance and Administration for Metrobility
Optical Systems, Inc. and the Corporate Controller from September 2000 to September
2005. From May 2000 to August 2000, he served as Acting Chief Operating Officer for
Annalee Mobilitee Dolls, Inc. and was the Controller from January 1998 to April 2000.
Mr. Goodhue holds a Bachelor of Science degree in Business Administration from
Merrimack College, and is a Certified Public Accountant in the State of New Hampshire
(for which his certification is currently in an inactive status). Mr. Goodhue’s base annual
salary beginning as of April 1, 2018 was $205,448.

Donald L. Ware, Chief Operating Officer

Mr. Ware has been the Chief Operating Officer of Pennichuck Corporation since

January 27, 2012. He was the Senior Vice President of Operations and Engineering of
Pennichuck Corporation from 2004 to January 2012, and Chief Engineer and Vice
President from 1995 to 2004. Mr. Ware is also the Chief Operating Officer of Pennichuck
Water Works, Inc. and the Company’s other water utilities. From 1986 to 1995, Mr. Ware
was General Manager for the Augusta Water District in Augusta, Maine. Mr. Ware holds a
Bachelor of Science degree in Civil Engineering from Bucknell University and a Master of
Business Administration degree from the Whittemore Business Schoo] at the University of
New Hampshire. Mr. Ware’s base annual salary beginning as of April 1, 2018 was
$201,187.

Summary of Proposal to be Voted Upon at the Annual Meeting
PROPOSAL 1 — ELECTION OF DIRECTORS

On February 22, 2019, the Company’s Board of Directors took action to recommend that the
Sole Shareholder (1) elect C. George Bower, Jay N. Lustig, John D. McGrath and Preston J.
Stanley, Jr. (each an incumbent director) as Class A directors, each for a three-year term and
until their successors are elected and qualified, and (2) elect Deborah Novotny as a Class B
director, for a one-year term and until her successor is elected and qualified.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THESE FIVE
NOMINEES.

Information regarding the professional backgrounds for each nominee follows:
Nominees for Director:

C. George Bower
(Director Since: November 2014)

Dr. Bower has been the Principal of ESRA Consulting, LLC, a professional consulting
practice concentrated on the development of safety, health and environmental programs,
from 1994 to present. From 1992 to 1994, Dr. Bower was President of National Soils, Inc.,
an applied technology company specializing in the development and management of
industrial facilities and waste treatment operations. He was Senior Associate and Chief
Scientist of Environmental Science and Engineering, Inc. from 1988 to 1992. Dr. Bower
holds a Bachelor of Science degree in Social Sciences from Lock Haven University; a
Master’s degree in Transportation Safety from the University of Central Missouri; and a
Ph.D. from Michigan State University. In 2018, he was elected as Moderator of the
Souhegan Cooperative Schoo] District.