Pennichuck Water Special Committee

AMENDED PENNICHUCK WATER SPECIAL COMMITTEE FEBRUARY 28, 2013 7:00 p.m. Aldermanic Chamber ROLL CALL PUBLIC COMMENT COMMUNICATIONS From: Thomas J. Leonard, Chairman, Pennichuck Board of Directors Re: Proposed Timeline for Nomination of Directors and Business for Annual Mtg. of Sole Shareholder From: John L. Patenaude, CEO, Pennichuck Corporation Re: Annual Meeting of Sole Shareholder UNFINISHED BUSINESS - None j NEW BUSINESS - RESOLUTIONS R-13-96 Endorsers: Alderman-at-Large Barbara Pressly Alderman-at-Large Mark S. Cookson Alderman Arthur T. Craffey, Jr. Alderman-at-Large David W. Deane Alderman Daniel T. Moriarty Alderman-at-Large Jim Donchess AMENDING THE BY-LAWS OF THE PENNICHUCK CORPORATION R-13-97 Endorser: Alderman Daniel T. Moriarty /^derman-at-Large Jim Donchess Alderman-at-Large Barbara Pressly Alderman Arthur T. Craffey, Jr. Alderman-at-Large David W. Deane PROCEDURE FOR A PROXY VOTE FOR PENNICHUCK CORPORATION'S ANNUAL MEETING OF THE SOLE SHAREHOLDER I NEW BUSINESS r ORDINANCES - None TABLED IN COMMITTEE R-12-39 Endorsers: Alderman-at-Large Jim Donchess Alderman-at-Large David W. Deane Alderman-at-Large Barbara Pressly Alderman Daniel T. Moriarty RELATIVE TO ASKING PENNICHUCK TO CONTRIBUTE THE PROCEEDS OF THE SAL^ OF PARCEL F TO THE CITY CONSERVATION FUND • Tabled 8/2/12 R-12-65 Endorser: Alderman-at-Large Barbara Pressly REGARDING AN INTENTION TO APPROPRIATE FUTURE FUNDS RECEIVED FROM PENNICHUOK CORPORATION FOR EMINENT DOMAIN COST REIMBURSEMENT INTO THE NASHUf CONSERVATION FUND • Tabled 1/29/13 i PUBLIC COMMENT REMARKS BY THE ALDERMEN POSSIBLE NON-PUBLIC SESSION ADJOURNMENT  PENNICHUCK ?.t> Manchester street pn Rux 19« MLKRIMACK, NH D30S4f347 ifiri3i aaz a i 91 Ptx <fioa> 9 13 23IJ5 WWW.PCNNICHUPK.CPM January 21, 2013 Mr. Brian McCarthy, President Nashua Board o f Aldermen City of Nashua 229 Main Street Nashua, N H 03060 Dear Mr. McCarthy: The Board o f D i r e c l o r s o f Pennichuck Corporation is reviewing the proxy material and procedures for the nomination of directors and business to be taken up at the C o m p a n y ' s Annual Meeting of Sole Shareholder. Our proposed timeline is as follows: • Nominating and Governance Committee to recommend January 25, 2013 a slate of director nominees to the full Board of Directors of Pennichuck Corporation • Board of Directors to vote on the recommendation of the February 22,2013 slate of director nominees and the proxy material to be submitted to the Board of Aldermen • Proxy material to be submitted to the Sole Shareholder February 25,2013 represented by the Board of Aldermen • Annual Meeting of Sole Shareholder March 23, 2013 (Saturday) 1 would appreciate your input relative to the timeline. You can reach me at 603-883-0797. Regards, 1 Thomas J . X e o n a r d Chairman Board of Directors  PENNICHUCK 2 -j M«NtHí»IF.ll StHET =>Cl Dux 1 "JA / MthH'MAFií. NHD3r)S4-l947 tGOrìi UBH 1-t Vt TAX töG3) <3 ' 3-230S WWWi.LNHICHUCK.CDM February 2 2 , 2 0 1 3 Mr. Brian McCarthy, President Nashua Board of Aldermen City of Nashua 229 Main Street Nashua, NH 03060 Dear Brian: On behalf of the Pennichuck Corporation Board of Directors, I am enclosing the following with respect tó the Annual Meeting of Sole Shareholder to be held on Saturday, March 23,2013 at the Radisson Hotel, 11 Tara Boulevard in Nashua: 1 Notice of Annual Meeting of Sole Shareholder 2. Proxy Statement 3. Proxy Card The package does not includc the final 2012 Financial Statements as they are being reviewed by the Company's external auditors, Melanson Heath & Company, PC. We expect to issue the financials to the City during the week of March 11th after the meeting of the auditors with Ihe Audit Committee. 1 have included 15 copies for distribution to the Board of Aldermen. Please contact me or Thomas J. Leonard, Chairman of the Board of Directors, if you need further information. Regards, John L. Patcnaudc Chief Exeèutive Officer cc. Mayor Donnalee Lozeau Board of Aidermen Paul Bergeron, City Clerk / Stephen Bennett, Deputy Corporation Counsel  PENNICHUCK PENNICHUCK CORPORATION 25 Manchester Street Mcrrimack, New Hampshire 03054 NOTICE OF ANNUAL MEETING OF SOLE SHAREHOLDER To be Held on March 23,2013 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 Radisson Hotel, 11 Tara Boulevard, Nashua, New Hampshire, on Saturday, March 23,2013 at 9:00 a.m., for the following purposes: 1. To increase the number of Directors from ten to eleven and to elect four Directors, cach for a three-year term. 2. To approve amendments to the Pennichuck Corporation By-Laws. 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 JOHN L. PATENA LDH Chief Executive Officer Merrimack, New Hampshire February 22, 2013  PENNICHUCK PENNICHUCK CORPORATION 25 Manchester Street Merrimack, New Hampshire 03054 PROXY STATEMENT Annual Meeting of Sole Shareholder fhis Proxy Statement is furnished to the City of Nashua, New Hampshire, in its capacity as the Soie 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 purposes set forth in the accompanying Notice of Annual Meeting of Sole Shareholder. The Annual Meeting will be held at the Radisson Hotel, 11 fara Boulevard, Nashua, New 1 lampshire, on Saturday, March 23, 2013 at 9:00 a.m., for the following purposes: Matters 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 increase the number of Directors from ten to eleven and to elect Jay N Lustig, John D. McGrath, Martha E. O'Neill and Preston J. Stanley, Jr. as Directors, each for a three-year term. (2) To approve amendments to the Pennichuck Corporation By-Laws. Voting at the Annual Meeting Background. This is the first Annual Meeting of Pennichuck Corporation since it was acquired by the City of Nashua 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 acquisition represented a negotiated resolution of a longstanding dispute between the City and Pennichuck, which began over a decade ago with an effort by the City to acquire the assets of the Pennichuck utilities initiated 1 just after an announcement that Pennichuck was to be acquired by a large utility holding company. The 2012 acquisition had strong support by many parties. 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 cffect 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 of Nashua is the sole shareholder of Pennichuck Corporation. Pennichuck continues to own its five corporate subsidiaries, including its three regulated public utilities (Pennichuck Water Works, Inc., Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc.), a service company (Pennichuck Water Service Corporation), and its real estate company (The Southwood Corporation). This corporate structure was retained for several reasons. First, the City's Mayor and Board of Aldermen desired to maintain some stability and continuity for all of the customers and employees of the Pennichuck companies. Retaining the existing corporate structure minimized the need for any radical changes to the utility companies and operations and encouraged support by all of the communities served by the utilities. Second, retaining the corporate structure provided continuity for the regulatory and financial status of the corporations and their respective businesses. The New Hampshire Public Utilities Commission will continue to provide regulatory oversight for the utility companies, and banks, lenders and other contract parties will continue to be able to rely on existing contracts and other rules with respect to financing and other operations. Third, the Mayor and Board of Aldermen unanimously agreed to establish a corporate governance system for the purposes of managing Pennichuck Corporation. This corporate governance system relies upon well-established principles of corporate law, and is established pursuant to Pennichuck Corporation's Articles of Incorporation and By-Laws, as adopted by the City and the Company at the time of the acquisition pursuant to the Merger Agreement. 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 2  I I from individuals nominated by the Penniehuck 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 votes 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 Pcnnichuck 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 Pcnnichuck 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 your proxy card. Corporate Governance Matters Current Board of Directors. On January 25,2012, the date on which the City acquired Pcnnichuck Corporation, an initial Board of Directors, as previously approved by the City, was appointed and took office. Each director elected was assigned to Class A, Class B or Class C. Following this initial appointment, Class A directors serve for a one-year term, Class B for a two-year term, and Class C for a three-year term. Following these initial terms, each new class of directors shall serve for a three-year term following their election and until their successors have been elected and qualified. The Pennichuck Corporation Board currently has ten directors. Of the ten directors, three have terms ending in 2013, four have terms ending in 2014 and three have terms ending in 2015. 3 The current members of the Company's Board of Directors are as follows: Class A Class B Class C (Term Expiring 2013) (Term Expiring 20141 (Term Expiring 2015) Jay N. Lustig Elizabeth A. Dunn David P. Bernicr John D. McGrath Paul A. Indeglia Stephen D. Genest Preston J. Stanley, Jr. Donnalee Lozeau Thomas J. Leonard Jim McMahon Board Meetings and Attendance. In 2012, the Board of Directors held 13 meetings. Each member of the Board participated in at least 90% of all Board and applicable Committee meetings held. Board Compensation. In 2012, with the exception of Donnalee Lozeau who received no compensation for her services as a director, each director received an annual retainer of $12,000. Annual Performance Evaluation, fhe Board of Directors conducts an annual self-evaluation of the Board and its Committees to determine whether they are functioning effectively. The Audit Committee, the Compensation and Benefits Committee, and the Nominating and Governance Committee are also required to each 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" scction. Board Committees. The Board of Directors has established three standing committees: the Audit 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" section. The current members of the Board Committees are as follows: Compensation and Nominating and Audit Committee Benefits Committee Governance Committee Jim McMahon, Chairman Stephen D. Genest, Chairman Elizabeth A. Dunn, Chairman John D. McGrath David P. Bernier Paul A. Indeglia Preston J. Stanley, Jr. Jay N. Lustig Donnalec Lozeau 4 Audit Committee. The Audit 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; and oversight of the integrity of the Company's financial statements. The Audit Committee held 4 meetings in 2012. 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 establishing, terminating or amending existing compensation and employee benefit plans. The Compensation and Benefits Committee held 5 meetings in 2012. 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; and overseeing an annual self-evaluation of the Board. The Nominating and Governance Committee held 7 meetings in 2012. The proccss followed by the Nominating and Governance Committee to identify and evaluate director candidates included a review of previously submitted resumes received during the 2011 Board selection process, requests to Board members for recommendations, meetings from time to time to evaluate biographical information and background relating to potential candidates and interviews of selected candidates by members of the Nominating and Governance Committee. 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 2012. The Nominating and Governance Committee will consider whether to nominate any candidate lor 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. 5 Senior Management The members of the Company's Senior Management team are as follows: John L. Patenaude, Chief Executive Officer Mr. Patenaude has been the Chief Executive Officer of Pennichuck Corporation and its subsidiaries since January 27,2012. He served in a consulting capacity to the City of Nashua as the Transaction Executive in connection with the acquisition of Pennichuck Corporation from June 2010 to January 2012. Mr. Patenaude was the Vice President- Finance and Chief Financial Officer of Nashua Corporation from 1998 to 2009, and the Treasurer from August 2000 to 2009. Mr. Patenaude holds a Master of Science in Taxation degree from Bentley College and a Bachelor of Science degree from Boston College. Mr. Patenaude's current annual salary is $190,000. Donald L. Ware, Chief Operating Officer Mr. Ware has been the Chief Operating Officer of Pennichuck Corporation and its subsidiaries since January 27,2012. He was the Vice President of Engineering of Pennichuck Corporation from 1996 to January 2012 and has been the President of Pennichuck Water Works, Inc. and the Company's other water utilities since March 2006. 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 current annual salary is $182,100. Larry D. Goodhue, Chief Financial Officer, Treasurer and Controller Mr. Goodhue has been the Chief Financial Officer and Treasurer of Pennichuck Corporation and its subsidiaries since March 2012 and Controller since December 2006. 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 1998 to April 2000. Mr. Goodhue holds a Bachelor of Science degree in Business Administration from Merrimack College. Mr. Goodhue's current annual salary is $140,000. 6  Summary of Proposals to be Voted Upon at the Annual Meeting PROPOSAL 1 - ELECTION OF DIRECTORS On February 22,2013, the Company's Board of Directors took action to recommend that the Sole Shareholder (1) increase the number of directors from ten to eleven and (2) elect Jay N. Lustig, John D. McGrath, Martha E. O'Neill and Preston J. Stanley, Jr., each for a three-year term. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THESE FOUR NOMINEES. Information about the professional backgrounds for each nominee follows: Nominees for Director: Jay N. Lustig Mr. Lustig has been a Financial Advisor for Edward Jones Investments since September 2012. He was the Chief Operating Officer of Scientific Solutions, Inc., a research and development business in Nashua, New Hampshire, from September 2009 to February, 2012. From June 2001 to September 2009, Mr. Lustig was the Director of Business Development for Scientific Solutions, Inc. Prior to June 2001, Mr. Lustig was the Product Manager/Sales for Pacific Packaging Products in Wilmington, Massachusetts. Mr. Lustig holds a Bachelor's degree in Business Administration and Marketing from the University of Massachusetts-Amherst. John D. McGrath Mr. McGrath has been a Project Manager for Methuen Construction Co., Inc. in Salem, New Hampshire since 2007. From 1999 to 2007, Mr. McGrath was a Project Engineer for Barletta Engineering Corporation in Canton, Massachusetts. Mr. McGrath has spent more than 9 years managing projects specifically related to the rehabilitation, upgrade and construction of water and wastewater facilities. Mr. McGrath holds a Bachelor of Science degree in Civil and Environmental Engineering from Northeastern University. Martha E. O'Neill Ms. O'Neill has been an Attorney with the law firm of Clancy & O'Neill, P.A. since 1982. She was a former member of the Board of Directors of Pennichuck Corporation from 1998 to January 2012. Ms. O'Neill is currently a member of the Board of Trustees of Rivicr University, Southern N.H. Medical Center, Mary A. Sweeney Home, Boys & Girls Club of Greater Nashua Charitable Foundation, Nutt Hospital Fund, Bishop's Charitable Assistance Fund, and the J. Wilfred Anctil Foundation. Ms. O'Neill received an A.B. degree from Wellesley College and a J.D. from Georgetown University Law Center. 7 Nominees for Director (cont.): Preston J. Stanley, Jr. Mr. Stanley has been the Owner and Manager of Stanley Ironworks in Nashua, New Hampshire since 1982. From 1961 to 1982, Mr. Stanley served in various positions with Ingersoll Rand, including Project Engineer and Supervisor, Manager of Materials and Service Center Manager. Mr. Stanley holds a Bachelor of Science degree in Mechanical Engineering and a Master's degree in Business and Economics from the University of Maine. PROPOSAL 2 - PROPOSED AMENDMENTS TO BY-LAWS On January 25,2012, the date on which the City acquired Pennichuck Corporation, the By-Laws of the Company, as previously approved by the City, became effective. There have been no amendments since that original date. The By-Laws may only be amended by a vote of the Sole Shareholder at a proper meeting. The Company's Board of Directors has had an opportunity to review and work with the existing By-Laws for almost a year. During that time, the Board has identified several areas of the current By-Laws that require change. The Board is proposing that the City, in its capacity as Sole Shareholder, vote to amend the By-Laws to effect these changes at the Annual Meeting. A copy of a version of the By-Laws showing each of the proposed changes is attached to this Proxy Statement as Attachment A. A complete final version of the By-Laws including all of the proposed changes is attached to this Proxy Statement as Attachment B. The proposed changes fall into three categories. First, there are a number of typographical errors that were in the original By-Laws that took effect on the acquisition date. These includc omitted words, punctuation, incorrect cross references and section numbering. Second, as the Board has established the officers of the Company, it discovered that the titles of the officers as stated in the By-Laws did not reflect the actual titles required for actual operation. Accordingly, the proposed changes include using the term "Chairman" consistently throughout the document and using the actual titles "Chief Executive Officer", "Chief Operating Officer", "Chief Financial Officer", "Treasurer" and "Secretary". Finally, the proposed changes include clarifications to the terms of the members of the Board of Directors, including reflecting New Hampshire law that each director serves until his or her successor is elected and qualified and that the City, in its capacity as Sole Shareholder, may vote to approve a replacement nominated by the Board to fill any vacancy on the Board that may occur, including in the event of a "disqualification" or "removal" of a Board member. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDING THE BY-LA WS TO INCLUDE EACH OF THESE PROPOSED CHANGES, 8  ATTACHMENT A MARKED TO SHOW PROPOSED AMENDMENTS (Additions in fflKB: deletions as ) BY-LAWS or PENNICHUCK CORPORATION ARTICLE I SOLE SHAREHOLDER Section 1. City of Nashua, New Hampshire as Sole Shareholder. As set forth in the Articles of Incorporation of the Corporation, the sole holder of all of the outstanding shares of the capital stock, of the Corporation shall be the City of Nashua, New Hampshire (the "Sole Shareholder"). All actions of the Sole Shareholder taken pursuant to these By-Laws shall comply with all requirements for such actions applicable to actions taken by the City of Nashua. Section 2. Place of Meetings. All annual and special meetings of the Sole Shareholder shall be held at such places within the State of New Hampshire as the Board of Directors may designate. Scction 3. Annual Meetings. A meeting of the Sole Shareholder for the election of Directors and for the transaction of any other business of the Corporation shall be held annually, at such time and on such date as the Board of Directors may designate. Section 4. Special Meetings. Special meetings of the Sole Shareholder for any purpose or purposes, unless otherwise prescribed by the laws of the State of New Hampshire, may be called at any time by the Chairman of the Board the :'• i rfIWi^RitetfMifftg^dyftfegj1 or a majority of the Board of Directors and shall be called upon the written request of the Sole Shareholder. Such written request shall state the purpose or purposes of the meeting and shall be delivered at the principal office of the Corporation addressed to the Chairman of the Board, the 5frMl Executive ¡Officei or the Secretary not less than fourteen days before the date of the meeting. Section 5. Notice of Meetings. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than five nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board, the v , the Secretary or the officers or persons calling the meeting, to the Sole Shareholder. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the Sole Shareholder at the address that appears on the stock transfer books or records i 1 Change otTiccr titles to reflect actual titles. A -fI  2 with postage thereon prepaid. Subject to Article 1, Section 7 below (relating to RSA Chapter 91-A), the Sole Shareholder may waive notice of any meeting. Section 6. Conduct and Requirements of Meetings. All meetings of the Sole Shareholder shall comply with all provisions and requirements applicable to meetings of the Board of Aldermen of the City of Nashua, New Hampshire. The Sole Shareholder shall exercise all powers and rights of the Sole Shareholder pursuant to vote of the Board of Aldermen of the City of Nashua, considered and adopted in accordance with applicable law and the provisions of the City Charter Section 7. Right-to-Know Law. All meetings of the Sole Shareholder shall comply in all respects with the requirements of RSA Chapter 91-A. ARTICLE II BOARDiH 3 DIRECTORS Scction 1. Establishment of Board of Directors. Pursuant to the Articles of Incorporation, the management of the Corporation shall be vested in a Board of Directors which shall have the composition and be subject to election and appointment as provided in this Article II. Section 2. Number and Qualifications. A. The Board of Directors shall consist of a number to be determined at the annual meeting of the Sole Shareholder between seven and thirteen persons with the following qualifications: (1) at least five shall be residents of the City of Nashua; and (2) at least one shall be a natural person (a) who is not a resident of the City of Nashua, and (b) who takes water service from Pennichuck Water Works, Inc., Pennichuck East Utility, Inc., or Pittsfield Aqueduct Company, Inc. (the "Water Utility Subsidiaries^).4 (3) at least one shall be nominated by the Merrimack Valley Regional Water District. B During the term of any member of the Board of Directors, a member of the Board of Directors shall not be: (1) except as set forth in Article II, Section 4 below with respect to the initial Board of Directors, the Mayor of the City of Nashua; (2) a member of the Board of Aldermen of the City of Nashua or of an elected member of the governing body of any municipality having residents served by any of the Water Utility Subsidiaries; 2 Delete unnecessary carryover from prior by-laws when Company was owned by many shareholders. 3 Correct typographical error. " Correct typographical error. A -fI  (3) the director of the City of Nashua Public Works Department or a member of the Board of Public Works of the City of Nashua; (4) any person who served at any time during the two-year period immediately preceding the date on which he or she stands for election as a member of the Board of Directors as (i) Mayor of the City of Nashua, (ii) an elected member of the governing body of any municipality having residents served by any of the Water Utility Subsidiaries, or (iii) as the director of the City of Nashua Public Works Department or a member of the Board of Public Works of the City of Nashua; or (5) any person who is an immediate family member (as that term is defined below) of the Mayor of the City of Nashua or of any person who is excluded from service as a member of the Board of Directors under paragraphs (2). (3) or (4) above. C. For all purposes of these By-Laws, the term "immediate family member" shall mean a person's spouse, parent, stepparent, parent-in-law, child, child's spouse, stepchild, stepchild's spouse, son-in-law, daughter-in-law, sibling, grandparent, grandchild, or grandchild's spouse. Section 3. Classes and Term. At the time of his or her election, each director shall be assigned to Class A, Class B, or Class C, each of which shall consist of at least two directors. Each director shall hold office for a term of three years, IflSflBSTCHTOSn ^ «iflSlffiBH^fMSjBjj 3 except that for the initial Board established at the time that the City of Nashua first becomes the Sole Shareholder of the Corporation (the "Commencement Date")- (1) Directors in Class A shall have their term expire in the first full calendar year following the Commencement Date (and every three years thereafter); (2) Directors in Class B shall have their term expire in the second full calendar year following the Commencement Date (and every three years thereafter); and (3) Directors in Class C shall have their term expire in the third full calendar year following the Commencement Date (and every three years thereafter). Section 4. Initial Board of Directors. On the Commencement Date, the initial Board of Directors shall be established pursuant to this Section 4. A. Mayor to Serve on the Initial Board of Directors. Notwithstanding the prohibition in Article II, Section 2 above, at the Commencement Date, the Mayor of the City ofNashua shall be appointed as a member of the Board of Directors, to hold office as a Class B Director. Upon conclusion of the initial term as a Class B Director, the Mayor of the City ofNashua shall no longer serve as a member of the Board of Directors. 5 Clarify director term of office to be consistent with NH corporate law (directors serve until successors elected and qualified). A- 3  B. Other Members of the Initial Board of Directors. Except as provided in 6 below, each member of the initial Board of Directors (other than the Mayor of the City of Nashua) shall be nominated by the Mayor and approved and appointed at any meeting called for such purpose by the City of Nashua Board of Aldermen by a vote of a majority of those members present at such meeting. The initial Board of Directors, and their respective classes shall be as set forth in the following chart: Class Name City/Town Class A Jay Lustig Nashua Class A John McGrath Londonderry Class A Preston Stanley Nashua To be nam&jyjjmjsu^ to Class A Class B Donnalee Lozeau Nashua Cass B Elizabeth Dunn Windham Class B Paul Indeglia Amherst ! Class B Jim McMahon Nashua f Class C David Bemier North Conway I ! Class C Stephen Genest Nashua Class C Thomas Leonard Nashua Section 5. Election Subsequent to the Initial Board of Directors. A. Nomination. Subsequent to the initial Board of Directors, each member of the Board of Directors shall be nominated by (i) a nominating committee duly appointed by the Board of Directors or (ii) if required to satisfy the requirement in Article II, Section 2, A, (3) above, the Merrimack Valley Regional Water District, and then, in either case, shall be approved for submission to the Sole Shareholder by action of the full Board of Directors. B. Approval and Appointment by Sole Shareholder. A nominee, having been nominated pursuant to paragraph A and having met the qualifications set forth in Section 2 above, shall be electcd by the Sole Shareholder at the annual meeting of the Sole Shareholder. " Clarify cross reference. A-4  C. Following ihe Commencement Date, the Merrimack Valley Regional Water District may nominate one additional member of the initial Board of Directors, and that member shall be elected to hold office as a Class A Director by the Sole Shareholder at a meeting duly called for such purpose. Scction 6. Vacancy. Any vacancy occurring in the Board of Directors in between annual 7 meetings of the Sole Shareholder, due to death, or resignation, may be filled by the affirmative vote of Sole Shareholder at a meeting duly called for such purpose; provided, however, that any person who may fill a vacancy shall satisfy the qualification requirements set forth in Section 2 above. Section 7. Removal. Any Director may be removed from office with or without cause by a vote of the Sole Shareholder at a meeting duly called for such purpose. Section 8. Regular Meetings. The Board of Directors shall hold regular meetings not less frequently than quarterly on such dates and at such times as the Board may designate. The annual meeting of the Board of Directors shall be held immediately following the annual meeting of the Sole ¿ S I K B Section 9. Special Meetings. Special meetings of the Board in lieu of or in addition to the regular meetings shall be held at such times as the Chairman of the Board, !i3iSSÜBI~ CM or any four Directors may require. Section 10. Notice. Notice of regular and special meetings shall be sent by the j5t*ra by mailing, a written noticc of such meeting, at least five days prior to the day of the meeting. Any Director may waive notice of any meeting in writing filed with the Secretary. Scction 11. Quorum. No less than a majority of Directors shall constitute a quorum for the transaction of business at the meetings of the Board, and the concurrencc of a majority of those present at any meeting shall be necessary to give validity to any vote. Section 12. Duties and Powers. Subjcct to the provisions of the Articles of Incorporation (including but not limited to those provisions concerning ccrtain reserved powers) and these By- Laws, the Board of Directors shall be vested with the management and direction of the affairs of the Corporation and shall have and exercise all the powers possessed by the Corporation so far as such delegation of authority is not inconsistent with the laws of the State of New Hampshire, the Articles of Incorporation and these By-Laws. Scction 13. Executive Committee^ Other Committees. The Board of Directors, by resolution adopted by a majority of the full Board, may designate from its members an Executive Committee and one or more other committees each of which, subject to the limitations of the laws of the State of New Hampshire, shall have and may exercise all of the authority of the Board to the extent provided in these By-Laws or in any such resolution. Correct failure to state two other events that may result in a vacancy. A -fI Section 14. Compensation. The compensation (if any) of any member of the Board shall be determined, fixed and approved by the Sole Shareholder. Section 15. Right-to-Know Law. All meetings of the Board of Directors shall comply in all respccts with the requirements of RS A Chapter 91-A. ARTICLE III OFFICERS Section 1. Number. The officers of the Corporation shall consist of a Chairman of the Board, a iinir Uwutflfll/urilflimJud ill l i i n i r JtTu£>1iiiTiJ J illffJy u Treasurer, a and such other officers as the Board of Directors may, from time to time, determine. Two or more offices may be held by the same person." Section 2. Election. A. Chairman : , 'ofthe Board, Operating Officer; Secretary TreasurerfefiflPintgBfTffiTj^^ Each year at the first regular meeting of the Board of Directors following the annual meeting of the Sole Shareholder, the Board of Directors shall elect persons to serve in the offices Chairman oftBiffBffffft*?^ of the Board, 11icf" Executive Officer. Ch.igf Operating Officer. Secretary Treasurer, a nd Chief Fi nan ç Lai Office! for the ensuing year and until their successors arc duly qualified, or until their death or until they shall resign or be removed in the manner hereinafter provided. The Board of Directors may from time to time fill any vacancy that may exist in any office and may elect such other officers as they may determine to be necessary to manage the affairs of the Corporation. B. Other Officers. Each year at the annual meeting of the Board of Directors, the Directors shall determine the number of offices other than J ^ f ^ g t S S a t * - ! ^ , ^fosS W i f f ^ t t ^ f l i l i ^ j S l i y L ^ to be filled and shall elect officers to fill such positions for the ensuing year and until their successors are duly qualified, or until their death or until they shall resign or be removed in the manner hereinafter provided. Directors from time to time may fill any vacancy that may exist in any office and may elect such other officers as they may determine to be ncccssary to manage the affairs of the Corporation. C. General Provisions. Election or appointment of an officer, employee or agent, shall not of itself create contract rights. The Board of Directors may authorize the Corporation to enter into an employment contract with any officer in accordance with applicable law and regulation, but no such contract shall impair the right of the Board of Directors to remove any officer at any time in accordance with Section 3 of this Article III. All officers shall be sworn to the faithful performance of their duties. 4 The changes to this section are to correct titles to reflect actual titles being used; conforming changes throughout entire document. 9 Change "Chair" to "Chairman" to be consistent throughout the entire document. A-6 S c c t i o n 3. R e m o v a l . Tb® mlifïi2-htidvBpaid_of I )irector io may at any time suspend the U.'A. right of any officer to perform such officer's duties and may remove any officer with or without cause at any duly called meeting, whenever, in the judgment of the the best interests of the Corporation will be served thereby, but such removal, other than for cause, shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Duties and Powers. The duties of certain officers shall be as specified in this Section 4, as otherwise provided in these By-Laws, and as determined from time to time by the Board of Directors A. ftMilìfolit ^ of the Board. The of the Board, if any, shall preside at all meetings of the Board and shall exercise overall supervision of the officers and affairs of the Corporation. B. Cliièf Executive Office The ¡ S S S ^ C h i e f Executive Officer of the Corporation.^^ shall have the general management of the affairs of the Corporation as far as they are not specifically regulated by the Sole Shareholder or the Directors, including the BBftBBWRIi&'til of the Board, if any. The , 'hR m < ~ 1 * shall preside at all the meetings of the Board in the absence of the (SltJHflWf' 1 '^-" IÍ hc_CjntJf Ope!,i;i:ir, Officer of Iho Coip^fljjitiQtì^shal I be responsible for supi:>ortim'[flftimfi the Chief Executive Officer \ •_» V ùv I Vèsidetrt m the manaueinentofthc operatÌQng_ofjhd Combration andjlie Cllief Qp.eratjng O f f i . shall havel i i r e e ' they y f f powersS f f TofT T thef f ^ P f e s H i ^ ^¿TüíTTSfi r'hiej T IjxegiLtiyQ during the absence or OfficeiffW[]ffllIìTTÌ»H''" disability of the Fff? ^^^^ Ü^ffi (jhjefE.S^Cüiivg.Officiti Dl Treasurer. •- ' " " i i ï f " , K i Tiff ij r shall negotiate loans and receive and disburse all other funds of the Corporation, and, for this purpose, shall have authority to sign checks upon any account of the Corporation in any bank or similar type of institution. The Treasurer shall supervise the keeping of the accounts of the Corporation in books which shall be the property of the Corporation and shall cause to be prepared periodic statements of the financial condition of the Corporation and shall submit such statements to the Board. E. The£rèfkCììlef Financial O l'fì ce r^i The C lije Q: i n an c i a I Office "versee the^management a n d co orti i nati on of al I lì sea f actj y i ties. lo r_ th e Cor p oratio n : " .Secretary: TlfflSecretar» u shall record the proceedings of the meetings of the Sole Shareholder and Directors showing the names of the persons present. The ££ SpffEfei^ may give noticc of all meetings of the Sole Shareholder and the Directors required by these By-Laws. The ^ p ^ ^ t shall furnish a certificate identifying the officers annually to the clerk of the City of Nashua. Iu Clarify reference to Board, which is the appointing body for officers. 11 Add a description of duties for Chief Operating Officer. 12 Add a description of duties for Chief Financial Officer. A -fI  ARTICLE M INDEMNIFICATION Section 1 Suits, etc., Other Than by or in the Right of the Corporation. The Corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal or administrative or investigative, other than an action by or in the right of the Corporation, by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Suits, etc. by or in the Right of the Corporation. The Corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, oris or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, actually and reasonably incurred by him in conncction with the defense or settlement of the action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which the person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses which the court shall deem proper. Section 3. Scopc of Indemnification. To the extent that a Director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section I or 2 above, or in defense of any claim, issue or matter based on Section 1 or 2 above, he shall be indemnified against expenses, including attorneys^ fees, actually and reasonably incurred by him in connection therewith. Section 4. Determination of Indemnification. Any indemnification under Section 1 or 2 above, unless ordered by a court, shall be made by the ^r^^'^'j^n^ioftiftiT^ only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or A- 8 agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or 2 above. This determination shall be made: (1) By the Board of Directors by a majority of vote of a quorum consisting of Directors who were not parties to the action, suit or proceeding; (2) By independent legal counsel in a written opinion if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Directors so directs; or (3) By the Sole Shareholder. Section 5. Payment of Expenses. Expenses, including attorneys' fees, incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of the action, suit or proceeding as authorized in the manner provided in Section 4 above, upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay the amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this section. Section 6. Other Rights. The indemnification provided by this j f f i s i j shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of the Sole Shareholder or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of that person Section 7. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officcr, employee, agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify htm against this liability under the provisions of this section. A-9  ARTICLE SUS CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Documents and Instruments. To the extent permitted by the laws of the State of New Hampshire, and except as otherwise prescribed by these Bylaws with respect to certificates for shares, the Chairman (jpffitWIi) of the Board, Chief Q m a t i n ^ O f f i eg ly Chief Fi nage [al Office?! or the Treasurer shall be authorized to execute contracts, deeds, leases and all other documents. Notwithstanding the foregoing, the Board of Directors may by special vote authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Sole Shareholder. Such authority may be general or confined to specific instances. Section 3. Checks.]) Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by one or more officers, employees or agents of the Corporation in such manner as shall from time to time be determined by the Board of Directors. Section 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in any of its duly authorized depositories as the Board of Directors may select. ARTICLE V t f V J FISCAL Tihe fiscal year of the Corporation shall be the calendar year. ARTICLE CONFLICT OF INTEREST A director shall not participate in debate or vote on matters that involve a direct personal and pecuniary interest for the director or any immediate family member of the director. ARTICLE DISCRIMINATION PROHIBITED In administering its affairs, the Corporation shall not discriminate against any person on the basis of race, creed, color, national or ethnic origin, sex, physical disability, age or sexual orientation. ARTICLE 13 Delete incorrect reference to annual audit (section no longer addresses annual audit). A - 10  INSPECTION OF BOOKS AND RECORDS The Sole Shareholder of the Corporation shall have such right to inspect and copy the books and records of the Corporation as is provided by the New Hampshire Business Corporation Act, N.H. RSA 293-A. or any successor thereto, exercise of which right shall be subject to compliancc with all notice or other requirements set forth therein, and subject to payment of reasonable copying or other fees as may be provided therein. The books and records of the Corporation shall be subject to the requirements and exemptions set forth in RSA Chapter 91-A. ARTICLE 2 S AMENDMENTS These By-Laws may be amended at any time by the Sole Shareholder at a meeting expressly called for such purpose, except that Articlc II, Section "4A J(3) 14 of these By-Laws shall not be amended without the consent of the Merrimack Valley Regional Water District. 1,1 Correct citation formal. A- fI  ATTACHMENT B BY-LAWS OF PENNICHUCK CORPORATION ARTICLE 1 SOLE SHAREHOLDER Section 1. City of Nashua, New Hampshire as Sole Shareholder. As set forth in the Articles of Incorporation of the Corporation, the sole holder of all of the outstanding shares of the capital stock of the Corporation shall be the City of Nashua, New Hampshire (the "Sole Shareholder''). All actions of the Sole Shareholder taken pursuant to these By-Laws shall comply with all requirements for such actions applicable to actions taken by the City of Nashua. Section 2. Place of Meetings. All annual and special meetings of the Sole Shareholder shall be held at such places within the State of New Hampshire as the Board of Directors may designate. Section 3. Annual Meetings. A meeting of the Sole Shareholder for the election of Directors and for the transaction of any other business of the Corporation shall be held annually, at such time and on such date as the Board of Directors may designate. Section 4. Special Meetings. Special meetings of the Sole Shareholder for any purpose or purposes, unless otherwise prescribed by the laws of the State of New Hampshire, may be called at any time by the Chairman of the Board, the Chief Executive Officer or a majority of the Board of Directors and shall be called upon the written request of the Sole Shareholder. Such written request shall state the purpose or purposes of the meeting and shall be delivered at the principal office of the Corporation addressed to the Chairman of the Board, the Chief Executive Officer or the Secretary not less than fourteen days before the date of the meeting. Section 5. Notice of Meetings. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than five nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board, the Chief Executive Officer, the Secretary or the officers or persons calling the meeting, to the Sole Shareholder. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the Sole Shareholder at the address that appears on the stock transfer books or records of the Corporation, with postage thereon prepaid. Subject to Article I, Section 7 below (relating to RSA Chapter 91-A), the Sole Shareholder may waive notice of any meeting. Section 6. Conduct and Requirements of Meetings. All meetings of the Sole Shareholder shall comply with all provisions and requirements applicable to meetings of the Board of Aldermen of the City of Nashua, New Hampshire. The Sole Shareholder shall exercise all powers and rights B-l of the Sole Shareholder pursuant to vote of the Board of Aldermen of the City of Nashua, considered and adopted in accordance with applicable law and the provisions of the City Charter, Scction 7. Right-to-Know Law, All meetings of the Sole Shareholder shall comply in all respccts with the requirements of RSA Chapter 91-A. ARTICLE II BOARD OF DIRECTORS Section 1. Establishment of Board of Directors. Pursuant to the Articles of Incorporation, the management of the Corporation shall be vested in a Board of Directors which shall have the composition and be subject to election and appointment as provided in this Articlc II. Section 2. Number and Qualifications. A. The Board of Directors shall consist of a number to be determined at the annual meeting of the Sole Shareholder between seven and thirteen persons with the following qualifications: (1) at least five shall be residents of the City of Nashua; and (2) at least one shall be a natural person (a) who is not a resident of the City of Nashua, and (b) who takes water service from Pennichuck Water Works, Inc., Pennichuck East Utility, Inc., or Pittsfield Aqueduct Company, Inc. (the "Water Utility Subsidiaries"). (3) at least one shall be nominated by the Merrimack Valley Regional Water District. B. During the term of any member of the Board of Directors, a member of the Board of Directors shall not be: (1) except as set forth in Article II, Section 4 below with respect to the initial Board of Directors, the Mayor of the City of Nashua; (2) a member of the Board of Aldermen of the City of Nashua or of an elected member of the governing body of any municipality having residents served by any of the Water Utility Subsidiaries; (3) the director of the City of Nashua Public Works Department or a member of the Board of Public Works of the City of Nashua; (4) any person who served at any time during the two-year period immediately preceding the date on which he or she stands for election as a member of the Board of Directors as (i) Mayor of the City of Nashua, (ii) an elected member of the governing body of any municipality having residents served by any of the Water Utility Subsidiaries, or (iii) as the director of the City of Nashua Public B-2  Works Department or a member of the Board of Public Works of the City of Nashua; or (5) any person who is an immediate family member (as that term is defined below) of the Mayor of the City of Nashua or of any person who is excluded from service as a member of the Board of Directors under paragraphs (2), (3) or (4) above. C. For all purposes of these By-Laws, the term "immediate family member" shall mean a person's spouse, parent, stepparent, parent-in-law, child, child's spouse, stepchild, stepchild's spouse, son-in-law, daughter-in-law, sibling, grandparent, grandchild, or grandchild's spouse. Section 3. Classes and Term. At the time of his or her election, each director shall be assigned to Class A, Class B, or Class C, each of which shall consist of at least two directors. Each director shall hold office for a term of three years, and shall serve until their successors are elected and qualified, except that for the initial Board established at the time that the City of Nashua first becomes the Sole Shareholder of the Corporation (the "Commencement Date"): (1) Directors in Class A shall have their term expire in the first full calendar year following the Commencement Date (and every three years thereafter); (2) Directors in Class B shall have their term expire in the second full calendar year following the Commencement Date (and every three years thereafter); and (3) Directors in Class C shall have their term expire in the third full calendar year following the Commencement Date (and every three years thereafter). Section 4. Initial Board of Directors. On the Commencement Date, the initial Board of Directors shall be established pursuant to this Section 4. A. Mayor to Serve on the Initial Board of Directors. Notwithstanding the prohibition in Article II, Section 2 above, at the Commencement Date, the Mayor of the City of Nashua shall be appointed as a member of the Board of Directors, to hold office as a Class B Director. Upon conclusion of the initial term as a Class B Director, the Mayor of the City of Nashua shall no longer serve as a member of the Board of Directors. B. Other Members of the Initial Board of Directors. Except as provided in Section 5.C. below, each member of the initial Board of Directors (other than the Mayor of the City of Nashua) shall be nominated by the Mayor and approved and appointed at any meeting called for such purpose by the City of Nashua Board of Aldermen by a vote of a majority of those members present at such meeting. The initial Board of Directors, and their respective classes shall be as set forth in the following chart: B-3  Class Name City/Town Class A Jay Lustig Nashua Class A John McGrath Londonderry Class A Preston Stanley Nashua To be named pursuant to Section ! Class A 5.C. below 1 ! Class B Donnalee Lozcau Nashua Class B Elizabeth Dunn Windham Class B Paul Indeglia Amherst Class B Jim McMahon Nashua Class C David Bemier North Conway Class C Stephen Genest Nashua Class C fhomas Leonard Nashua Section 5. Election Subsequent to the Initial Board of Directors. A. Nomination. Subsequent to the initial Board of Directors, each member of the Board of Directors shall be nominated by (i) a nominating committee duly appointed by the Board of Directors or (ii) if required to satisfy the requirement in Article II, Section 2, A, (3) above, the Merrimack Valley Regional Water District, and then, in either case, shall be approved for submission to the Sole Shareholder by action of the full Board of Directors. B. Approval and Appointment by Sole Shareholder. A nominee, having been nominated pursuant to paragraph A and having met the qualifications set forth in Section 2 above, shall be elected by the Sole Shareholder at the annual meeting of the Sole Shareholder. C. Following the Commencement Date, the Merrimack Valley Regional Water District may nominate one additional member of the initial Board of Directors, and that member shall be elccted to hold office as a Class A Director by the Sole Shareholder at a meeting duly called for such purpose. B-4 Section 6. Vacancy. Any vacancy occurring in the Board of Directors in between annual meetings of the Sole Shareholder, due to death, disqualification, removal or resignation, may be filled by the affirmative vote of Sole Shareholder at a meeting duly called for such purpose; provided, however, that any person who may fill a vacancy shall satisfy the qualification requirements set forth in Section 2 above. Section 7. Removal. Any Director may be removed from office with or without cause by a vote of the Sole Shareholder at a meeting duly called for such purpose. Section 8. Regular Meetings. The Board of Directors shall hold regular meetings not less frequently than quarterly on such dates and at such times as the Board may designate. The annual meeting of the Board of Directors shall be held immediately following the annual meeting of the Sole Shareholder. Section 9. Special Meetings. Special meetings of the Board in lieu of or in addition to the regular meetings shall be held at such times as the Chairman of the Board, Chief Executive Officer or any four Directors may require. Section 10. Notice. Notice of regular and special meetings shall be sent by the Secretary or Chief Executive Officer, by mailing a written notice of such meeting, at least five days prior to the day of the meeting. Any Director may waive notice of any meeting in writing filed with the Secretary. Section 11. Quorum. No less than a majority of Directors shall constitute a quorum for the transaction of business at the meetings of the Board, and the concurrence of a majority of those present at any meeting shall be necessary to give validity to any vote. Section 12. Duties and Powers. Subject to the provisions of the Articles of Incorporation (including but not limited to those provisions concerning certain reserved powers) and these By- Laws, the Board of Directors shall be vested with the management and direction of the affairs of the Corporation and shall have and exercise all the powers possessed by the Corporation so far as such delegation of authority is not inconsistent with the laws of the State of New Hampshire, the Articles of Incorporation and these By-Laws. Scction 13. Executive Committee; Other Committees. The Board of Directors, by resolution adopted by a majority of the full Board, may designate from its members an Executive Committee and one or more other committees each of which, subject to the limitations of the laws of the State of New Hampshire, shall have and may exercise all of the authority of the Board to the extent provided in these By-Laws or in any such resolution. Section 14. Compensation. The compensation (if any) of any member of the Board shall be determined, fixed and approved by the Sole Shareholder. Section 15. Right-to-Know Law. All meetings of the Board of Directors shall comply in all respects with the requirements of RSA Chapter 91-A. B-5  ARTICLE III OFFICERS Scction I. Number. The officers of the Corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a Chief Operating Officer, a Treasurer, a Chief Financial Officer, a Secretary and such other officers as the Board of Directors may, from time to time, determine. Two or more offices may be held by the same person. Section 2. Election. A. Chairman of the Board, Chief Executive Officer, Chief Operating Officcr, Secretary, Treasurer and Chief Financial Officer. Each year at the first regular meeting of the Board of Directors following the annual meeting of the Sole Shareholder, the Board of Directors shall elect persons to serve in the offices of Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Secretary, Treasurer, and Chief Financial Officer for the ensuing year and until their successors are duly qualified, or until their death or until they shall resign or be removed in the manner hereinafter provided. The Board of Directors may from time to time Fill any vacancy that may exist in any office and may elect such other officers as they may determine to be necessary to manage the affairs of the Corporation. B. Other Officers. Each year at the annual meeting of the Board of Directors, the Directors shall determine the number of offices other than those offices listed in Section 2.A. to be filled and shall elect officers to fill such positions for the ensuing year and until their successors are duly qualified, or until their death or until they shall resign or be removed in the manner hereinafter provided. Directors from time to time may fill any vacancy that may exist in any office and may elect such other officers as they may determine to be necessary to manage the affairs of the Corporation. C. General Provisions. Election or appointment of an officcr, employee or agent, shall not of itself create contract rights. The Board of Directors may authorize the Corporation to enter into an employment contract with any officer in accordance with applicable law and regulation, but no such contract shall impair the right of the Board of Directors to remove any officcr at any time in accordance with Section 3 of this Article III. All officers shall be sworn to the faithful performance of their duties. Section 3. Removal. The Board of Directors may at any time suspend the right of any officer to perform such officer's duties and may remove any officer with or without cause at any duly called meeting, whenever, in the judgment of the Board of Directors, the best interests of the Corporation will be served thereby, but such removal, other than for cause, shall be without prejudice to the contract rights, if any, of the person so removed. Scction 4. Duties and Powers. The duties of certain officers shall be as specified in this Section 4, as otherwise provided in these By-Laws, and as determined from time to time by the Board of Directors. B-6  A. Chairman of the Board. The Chairman of the Board, if any, shall preside at all meetings of the Board and shall exercise overall supervision of the officers and affairs of the Corporation. B. Chief Executive Officer. The Chief Executive Officer of the Corporation shal I have the general management of the affairs of the Corporation as far as they are not specifically regulated by the Sole Shareholder or the Directors, including the Chairman of the Board, if any. The Chief Executive Officer shall preside at all the meetings of the Board in the absence of the Chairman. C. Chief Operating Officer. The Chief Operating Officer of the Corporation shall be responsible for supporting the Chief Executive Officer in the management of the operations of the Corporation and the Chief Operating Officer shall have the powers of the Chief Executive Officer during the absence or disability of the Chief Executive Officer. D. Treasurer. The Treasurer shall negotiate loans and receive and disburse all other funds of the Corporation, and, for this purpose, shall have authority to sign checks upon any account of the Corporation in any bank or similar type of institution. The Treasurer shall supervise the keeping of the accounts of the Corporation in books which shall be the property of the Corporation and shall cause to be prepared periodic statements of the financial condition of the Corporation and shall submit such statements to the Board. E. Chief Financial Officer. The Chief Financial Officer shall oversee the management and coordination of all fiscal activities for the Corporation. F. Secretary. The Secretary shall record the proceedings of the meetings of the Sole Shareholder and Directors showing the names of the persons present. The Secretary may give notice of all meetings of the Sole Shareholder and the Directors required by these By-Laws. The Secretary shall furnish a certificate identifying the officers annually to the clerk of the City of Nashua. ARTICLE IV INDEMNIFICATION Section 1. Suits, etc., Other Than by or in the Right of the Corporation. The Corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal or administrative or investigative, other than an action by or in the right of the Corporation, by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable causc to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall B-7 not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Suits, etc., by or in the Right of the Corporation. The Corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, actually and reasonably incurred by him in connection widi the defense or settlement of the action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which the person shall have been adjudged to be liable for ncgligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses which the court shall deem proper. Section 3. Scope of Indemnification. To the extent that a Director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or 2 above, or in defense of any claim, issue or matter based on Section 1 or 2 above, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection therewith. Section 4. Determination of Indemnification. Any indemnification under Section 1 or 2 above, unless ordered by a court, shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Scction 1 or 2 above. This determination shall be made: (1) By the Board of Directors by a majority of vote of a quorum consisting of Directors who were not parties to the action, suit or proceeding; (2) By independent legal counsel in a written opinion if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Directors so directs; or (3) By the Sole Shareholder. Section 5. Payment of Expenses. Expenses, including attorneys' fees, incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of the action, suit or proceeding as authorized in the manner provided in Scction 4 above, upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent B-8 to repay the amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this section. Section 6. Other Rights. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of the Sole Shareholder or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of that person. Scction 7. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee, agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against this liability under the provisions of this section. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS Scction 1. Documents and Instruments. To the extent permitted by the laws of the State of New Hampshire, and except as otherwise prescribed by these Bylaws with respect to certificates for shares, the Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or the Treasurer shall be authorized to execute contracts, deeds, leases and all other documents. Notwithstanding the foregoing, the Board of Directors may by special vote authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Sole Shareholder. Such authority may be general or confined to specific instances. Section 3. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by one or more officers, employees or agents of the Corporation in such manner as shall from time to time be determined by the Board of Directors. Section 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in any of its duly authorized depositories as the Board of Directors may select. B-9  ARTICLE VI FISCAL YEAR The fiscal year of the Corporation shall be the calendar year. ARTICLE VII CONFLICT OF INTEREST A director shall not participate in debate or vote on matters that involve a direct persona! and pecuniary interest for the director or any immediate family member of the director. ARTICLE VIII DISCRIMINATION PROHIBITED In administering its affairs, the Corporation shall not discriminate against any person on the basis of race, creed, color, national or ethnic origin, sex, physical disability, age or sexual orientation. ARTICLE IX INSPECTION OF BOOKS AND RECORDS The Sole Shareholder of the Corporation shall have such right to inspect and copy the books and records of the Corporation as is provided by the New Hampshire Business Corporation Act, N.H. RSA 293-A, or any successor thereto, exercise of which right shall be subject to compliance with all noticc or other requirements set forth therein, and subject to payment of reasonable copying or other fees as may be provided therein. The books and records of the Corporation shall be subject to the requirements and exemptions set forth in RSA Chapter 91-A. ARTICLE X AMENDMENTS These By-Laws may be amended at any time by the Sole Shareholder at a meeting expressly called for such purpose, except that Article II, Section 2.A.(3) of these By-Laws shall not be amended without the consent of the Merrimack Valley Regional Water District. B - 10  PENNICHUCK PROXY CARD PENNICHUCK CORPORATION- PROXY for Annual Meeting of Sole Shareholder - March 23,2013 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The Sole Shareholder, the City of Nashua, New I lampshire, hereby appoints JOHN L PATENAUDE or I -ARRY D. GOODHUE, 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 bole Shareholder of the Company to be held at the Radisson Hotel, 11 Tara Boulevard, Nashua. New Hampshire, on March 2 3 , 2 0 1 3 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 all nominees named in Proposal 1 and a vote FOR Proposal 2. Proposals: 1. To increase the number of Directors from ten to eleven and to elect Jay N. Lustig, Juhn D. McGrath, Martha E. O'Neill and Preston J. Stanley, Jr. as Directors, cach for a three-year term. Nominees; • FOR ALLNOMINEES O J a y N . i.ustig • AGAINST ALL NOMINEES O John D. McGrath • KOR ALL NOMINEES EXCEPT (See Instructions Below) O Martha E. O'Neill O Preston J. Stanley, Jr. Instructions: To vote against any individual nominee, mark the box "FOR ALL NOMINEES EXCEPT' and fill in the circle next to cach nominee you wish to vote against. 2. Amendments to By-Laws • FOR • AGAINST Authorized Signature: CITY OF NASHUA, NEW HAMPSHIRE (Sole Shareholder) By: Date: Name: _ Title: _ This Proxy Card is Valid Only When Signed and Dated