Search

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 27, 2018

Mr. Brian McCarthy, President
Board of Aldermen

City of Nashua

229 Main Street

Nashua, NH 03060

Dear President McCarthy:

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 5, 2018, at
the Crowne Plaza, 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, 2017 and 2016).

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

2)

ean D. Goodhue

Chief Executive Officer,
Chief Financial Officer
and Treasurer

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

VO PENNICHUCK?

PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054

NOTICE OF ANNUAL MEETING OF SOLE SHAREHOLDER
To be Held on Saturday, May 5, 2018 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 Crowne Plaza, 2 Somerset Parkway, Nashua, New
Hampshire, on Saturday, May 5, 2018 at 9:00 a.m., for the following purpose:

1. To elect three directors, each for a three-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,

She

LARRY D. GOODHUE
Chief Executive Officer,
Chief Financial Officer

and Treasurer

Merrimack, New Hampshire
March 27, 2018

V2 PENNICHUCK®

PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054

PROXY STATEMENT

2018 Annual Meeting of Sole Shareholder
To be Held on Saturday, May 5, 2018 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 Crowne Plaza, 2 Somerset Parkway, Nashua, New
Hampshire, on Saturday, May 5, 2018 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 David P. Bernier, Stephen D. Genest and Thomas J. Leonard as
directors, each for a three-year term, and until their successors are 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 | 1, 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. It 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.

ARTICLE 2 — PERIOD OF PERFORMANCE

The CONTRACTOR shall perform and complete all work within the time periods set forth. The time
periods may only be altered by the parties by a written agreement to extend the period of performance
or by termination in accordance with the terms of the contract. The CONTRACTOR shall begin
performance upon receipt of an Executed Contract, a valid Purchase Order issued from the
OWNER, and a Notice to Proceed.

ARTICLE 3 - CONTRACT TIMES
3.01 Time of the Essence

All time limits for Milestones, if any, Substantial Completion, and completion and readiness
for final payment as stated in the Contract Documents are of the essence of the Contract.

3.02 Date of Final Completion
The Work will be completed within 180 Calendar Days from Notice to Proceed.
3.03 Liquidated Damages

If CONTRACTOR breaches their obligation to install product within 180 calendar days of
Notice to Proceed, CONTRACTOR shall pay OWNER $0.20 per calendar day per fixture for
each day of delay as liquidated damages. Should CONTRACTOR fail to make such payment,
the OWNER may reduce further applications for payment on a dollar for dollar basis
commensurate with damages incurred to date. Liquidated damages shall be capped at
$400,000.

The parties agree that quantifying losses arising from CONTRACTOR’s delay in inherently
difficult, and further stipulate that the agreed upon sum is not a penalty, but rather a
reasonable measure of damages, based upon the parties’ knowledge of anticipated savings
resulting from fixture conversion.

This provision shall apply in the event of concurrent delay or delay caused by a third party.

Furthermore, should CONTRACTOR complete installation of product sooner than 150
calendar days from date of Notice to Proceed, they will be entitled to an early completion
bonus equal to $0.10 per calendar day per fixture installed complete, for every day between
the completion date (as recognized by Eversource and reflected in the OWNER’s billing
statement) and 180 calendar days from date of Notice to Proceed. Such bonus will be
recognized via change order executed by both parties. Early bonus incentive shall be capped
at $50,000.

ARTICLE 4— CONTRACT SUM

Subject to additions and deductions by Change Order, the OWNER shall pay CONTRACTOR, in
accordance with the Contract Documents, the Contract Sum of:

One Million Four Hundred Fifty-Five Thousand Six Hundred Ninety-Four & 00/100 Dollars
($1,455,694.00)
AG-2

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. On September 22, 2017, Paul A. Indeglia
resigned as a Director, which has resulted in a vacancy on the Board in Class B.

The Board currently has ten “seated” directors. Of the ten directors, three have terms ending in
2018 (Class C), four have terms ending in 2019 (Class A), and three have terms ending in 2020

(Class B).

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

Term Expiring 2018 Term Expiring 2019 Term Expiring 2020
Class C Class A Class B
David P. Bernier C. George Bower James P. Dore
Stephen D. Genest Jay N. Lustig Elizabeth A. Dunn
Thomas J. Leonard John D. McGrath John M. Murphy
Preston J. Stanley, Jr. [ Vacancy |

Board Meetings, Committee Meetings and Attendance. In 2017, the Company’s Board of
Directors held twelve meetings. Each member of the Board participated in all Board meetings
held, except for three directors who missed one Board meeting, three directors who missed two
Board meetings, and one director who missed three Board meetings. All but one member of the
Board of Directors attended the 2017 Annual Meeting of Sole Shareholder.

In 2017, fourteen Board Committee meetings were held. Each member of the Board of Directors
participated in all meetings of the Committees on which they served, except for six directors,
who each missed one Committee meeting.

Board Compensation. In 2017, each director, with the exception of Paul Indeglia and John
Murphy, received an annual retainer of $12,000. Mr. Indeglia, who served on the Board until his
resignation on September 22, 2017, received nine month’s compensation of $9,000 for his
services as a director. Mr. Murphy, who joined the Board on March 24, 2017, received ten
month’s compensation of $10,000.

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 2017.

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 1 meeting in 2017.

Compensation and Benefits Committee. The Compensation and Benefits Committee is
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 2017.

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 2017.
The Nominating and Governance Committee held 4 meetings in 2017.

As part of the nomination process, the Nominating and Governance Committee reviewed the
current composition of the Board as a whole, and reviewed the qualifications and performance of
the incumbent directors who are up for re-election to the Board in 2018. Also, due to the
resignation of Paul Indeglia as a director in 2017, the Nominating and Governance Committee
has begun a process to identify and evaluate potential candidates to fill the vacancy on the Board.

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 2, 2017 was $198,500.

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 School at the University of
New Hampshire. Mr. Ware’s base annual salary beginning as of April 2, 2017 was
$195,898.

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

On February 23, 2018, the Company’s Board of Directors took action to recommend that the
Sole Shareholder elect David P. Bernier, Stephen D. Genest and Thomas J. Leonard as directors,
each for a three-year term and until their successors are elected and qualified. Mr. Bernier,

Mr. Genest and Mr. Leonard have been directors of the Company since January 2012.

COPY - FOR INFORMATION ONLY

VO PENNICHUCK®

PROXY CARD
PENNICHUCK CORPORATION

PROXY for Annual Meeting of Sole Shareholder - May 5, 2018

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The Sole Shareholder, the City of Nashua, New Hampshire, hereby appoints LARRY D. GOODHUE or DONALD
L. WARE, as proxies to represent and vote as designated hereon, all shares of common stock of Pennichuck
Corporation (the “Company”) which the Sole Shareholder would be entitled to vote if personally present at the -
Annual Meeting of Sole Shareholder of the Company to be held at the Crowne Plaza, 2 Somerset Parkway, Nashua,
New Hampshire, on Saturday, May 5, 2018 at 9:00 a.m. The shares represented by this proxy will be voted as’
directed by the Sole Shareholder.

The Board of Directors recommends a vote “FOR” each of the nominees named in Proposal 1.

Proposal 1:

To elect David P. Bernier, Stephen D. Genest and Thomas J. Leonard as directors,
each for a three-year term, and until their successors are elected and qualified.

For Against

David P. Bernier Oo Oo
Stephen D. Genest O oO
Thomas J. Leonard O Cc]

Authorized Signature:

CITY OF NASHUA, NEW HAMPSHIRE (Sole Shareholder)

By: Date:

Name:

Title:

This Proxy Card is Valid Only When Signed and Dated