U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-18552
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Pennichuck Corporation
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(Exact name of small business issuer as specified in its charter)
New Hampshire 02-0177370
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Four Water Street, Nashua, New Hampshire 03061
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(Address of principal executive offices) (Zip Code)
(603) 882-5191
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $1 Par Value-1,722,767 shares as of May 1, 1999
INDEX
PENNICHUCK CORPORATION AND SUBSIDIARIES
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PART I. FINANCIAL INFORMATION PAGE NUMBER
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income--
Three months ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows--
Three months ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements--
March 31, 1999 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31 December 31
1999 (In thousands) 1998
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(Unaudited)
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ASSETS
Property, Plant and Equipment
Land $ 999 $ 999
Buildings 22,351 22,248
Equipment 53,958 53,104
Construction work in progress 182 296
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77,490 76,647
Less accumulated depreciation 18,707 18,258
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58,783 58,389
Current Assets
Cash 4,329 3,602
Accounts receivable, net 2,287 2,331
Inventory 317 320
Other current assets 163 522
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7,096 6,775
Other Assets
Land development costs 2,982 3,029
Deferred charges, net 2,174 2,170
Investment in real estate partnerships 453 475
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TOTAL ASSETS $71,488 $70,838
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STOCKHOLDERS' EQUITY AND LIABILITIES
Common stock-par value $1 per share $ 1,726 $ 1,714
Paid in capital 13,946 13,821
Retained earnings 9,413 9,335
Treasury stock, at cost (63) (59)
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25,022 24,811
Minority Interest 299 314
Long Term Debt, less current portion 28,019 28,002
Current Liabilities
Current portion of long term debt 183 183
Accounts payable 504 568
Accrued interest payable 471 350
Other accrued expenses 1,203 1,180
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2,361 2,281
Other Liabilities
Contributions in aid of construction 9,863 9,509
Other liabilities and deferred credits 5,924 5,921
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TOTAL STOCKHOLDERS' EQUITY & LIABILITIES $71,488 $70,838
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See notes to condensed consolidated financial statements.
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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Three Months Ended
March 31
1999 1998
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(In thousands, except per share amounts)
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Revenues
Water utility operations $3,563 $2,816
Real estate and other operations 329 100
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3,892 2,916
Operating expenses
Water utility operations 2,552 2,042
Real estate and other operations 163 25
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2,715 2,067
Operating income 1,177 849
Other income 44 16
Interest expense (503) (490)
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Income before income taxes 718 375
Provision for income taxes 277 139
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Net income before minority interest 441 236
Minority interest in (loss) of Westwood Park LLC (15) --
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Net Income $ 456 $ 236
=======================
Net earnings per common share:
Basic $ .26 $ .19
Diluted $ .26 $ .19
Weighted average common shares:
Basic 1,735,307 1,226,146
Diluted 1,750,916 1,232,012
Dividends paid per common share $ .22 $ .19
=======================
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See notes to condensed consolidated financial statements
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Three Months Ended
March 31
1999 1998
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(In thousands)
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CASH PROVIDED (USED) BY:
Operating Activities
Net income $ 456 $ 236
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 498 369
Deferred income taxes 23 22
Change in working capital 464 179
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1,441 806
Investing Activities:
Purchase of property, plant and
equipment and other assets (913) (611)
Increase in contributions in aid of
construction 385 32
Increase in other 42 231
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(486) (348)
Financing Activities:
Payments on long-term debt (17) (818)
Proceeds from issuance of long-term debt 34 --
Payment of common dividends (378) (241)
Increase in notes payable to bank -- 345
Proceeds from dividend reinvestment plan
and other 133 76
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(228) (638)
INCREASE (DECREASE) IN CASH 727 (180)
CASH AT BEGINNING OF PERIOD 3,602 448
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CASH AT END OF PERIOD $4,329 $ 268
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Supplemental Cash Flow Information. Interest paid was $370,175 and
$383,755 for the three months ended March 31, 1999 and 1998, respectively.
No income taxes were paid in either of the three month periods ended March
31, 1999 and 1998.
See notes to condensed consolidated financial statements.
PENNICHUCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE A -- BACKGROUND
The financial statements include the accounts of Pennichuck Corporation
(the "Company") and its wholly-owned subsidiaries, Pennichuck Water Works,
Inc. ("Pennichuck"), Pittsfield Aqueduct Company, Inc. ("Pittsfield"),
Pennichuck East Utility, Inc. ("Pennichuck East"), The Southwood
Corporation ("Southwood") and Pennichuck Water Service Corporation (the
"Service Corporation"). All significant intercompany accounts have been
eliminated in consolidation.
NOTE B -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB
and Item 310 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1999. The Balance Sheet amounts shown under the December 31, 1998
column have been derived from the audited financial statements of the
Company as contained in its Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission and its Annual Report to Shareholders.
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Financial Condition
The financial position of Pennichuck Corporation (the "Company") and its
wholly-owned operating subsidiaries, Pennichuck Water Works, Inc.
("Pennichuck"), Pittsfield Aqueduct Company, Inc. ("Pittsfield"),
Pennichuck East Utility, Inc. ("Pennichuck East"), The Southwood
Corporation ("Southwood") and Pennichuck Water Service Corporation (the
"Service Corporation") is shown in the accompanying Condensed Consolidated
Balance Sheets.
During the first quarter of 1999, our cash needs for operations, capital
projects and dividends were funded primarily by the operating cash flow
from our subsidiaries. We were able to generate approximately $1.44 million
in consolidated operating cash flow for the three months ended March 31,
1999, consisting of net income and non-cash charges of $977,000 and working
capital of $464,000. Typically, our cash needs are at their lowest point of
the year during the first quarter since construction activity for our water
utilities and the related capital expenditures do not normally begin until
the second quarter. For the quarter ended March 31, 1999, our Company's
cash and cash equivalents on hand increased by $727,000 to $4.33 million,
which is currently held in short-term money market investments. These funds
represent the unexpended proceeds from a $9.4 million public equity offering
which we completed in late November 1998. We expect to use this cash to fund
any future acquisitions and to fund any cash flow deficiencies in 1999 and
2000 which may result from our continued investment in capital projects.
We also maintain a revolving credit agreement (the "agreement") with Fleet
Bank-NH ("Fleet"). The agreement allows us to borrow up to $4.5 million at
interest rates tied to Fleet's cost of funds or LIBOR, whichever is lower.
At March 31, 1999, there were no borrowings outstanding under this
agreement.
The Company's consolidated capital budget for 1999 consists of
approximately $4.4 million for various projects of our three operating
utilities. Of that amount, we expect to spend
(i) $1.18 million for replacement of our aging infrastructure,
(ii) $1.9 million for new distribution lines and storage,
(iii) $760,000 for water treatment and supply, and
(iv) the remainder on technology-related upgrades to our operating
and administrative systems.
So far in 1999, we have spent approximately $900,000, of which $385,000 has
been in the form of contributions in aid of construction from area
developers. We believe that our operating cash flow, together with a
portion of available short-term investments, will be sufficient to fund our
1999 capital expenditure program, dividend and principal payments.
Besides the change in our cash accounts from December 31, 1998 to March 31,
1999, the other major change in our financial position was a decrease of
$359,000 in "Other Current Assets" resulting from prepaid property taxes
which were amortized and charged against our earnings during the first
quarter of 1999.
At March 31, 1999, consolidated retained earnings increased slightly to
$9,413,000, or by $78,000 from the beginning of the year. This increase is
due to consolidated net income of $456,000 earned during the first quarter
less a payout of $378,000 in common dividends.
Results of Operations -- Three Months Ended March 31, 1999 Compared to Three
Months Ended March 31, 1998
For the three months ended March 31, 1999, our consolidated net income was
$456,000 compared to $236,000 for the same period in 1998. Basic and
diluted earnings per common share were $.26 for the first quarter of 1999
and $.19 for the first quarter of 1998. All of the 1998 per share amounts
have been restated to reflect a three for two stock split which we
completed in September 1998; 1999 per share amounts include the impact of
the 483,000 common shares issued in November 1998 in our public offering.
Our consolidated revenues for the first quarter of 1999 increased 33.5%
from $2,916,000 in 1998 to $3,892,000 in 1999. This increase resulted
primarily from the water utility operations of the Company's subsidiaries
as discussed below.
Our consolidated revenues are generally seasonal due to the overall
significance of the water sales of Pennichuck, Pennichuck East and
Pittsfield as a percent of consolidated revenues. Water revenues are
typically at their lowest point during the first and fourth quarters of the
calendar year while water revenues in the second and third quarters tend to
be greater as a result of increased water consumption during the late
spring and summer months. In addition, our consolidated revenues may be
significantly affected by sales of major real estate parcels which may
occur from time to time.
Water Utility Operations
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The Company's water utility operations include the activities of
Pennichuck, Pennichuck East and Pittsfield, each of which is regulated by
the New Hampshire Public Utilities Commission (the "Commission"). For the
three months ended March 31, 1999, approximately 82%, 15% and 3% of the
total utility operating revenues of $3,563,000 were generated by
Pennichuck, Pennichuck East and Pittsfield, respectively. Total water
utility revenues for 1999 represents a 26.5% increase, or $747,000, over
the same period in 1998, principally due to:
(i) a 16.8% permanent rate increase granted to Pennichuck for
bills rendered on or after April 1, 1998,
(ii) the additional revenues of $567,000 from Pennichuck East which
began its operations on April 9, 1998, and
(iii) a modest increase of 1.4% in Pennichuck's billed consumption
to its core franchise system customers.
The total operating expenses of our water utility operations were
$2,552,000 for the three months ended March 31, 1999, or an increase of
$510,000 over the quarter ended March 31, 1998. Our water utilities'
operating costs increased because of :
(i) the additional operating costs associated with Pennichuck East
which were $334,000 for the first quarter of 1999,
(ii) approximately $121,000 of additional depreciation and
amortization expense resulting from an increase in
Pennichuck's composite depreciation rate from 2.15% to 2.44%,
and
(iii) a $25,000 quarterly increase in fees charged by the City of
Nashua for the disposal of our treatment plant residual by-
products.
For the three months ended March 31, 1999, the combined operating income of
our three water utilities was $1.01 million, an increase of $237,000 from
the same quarter in 1998. Of that increase, $178,000 relates to the
addition of Pennichuck East in April 1998. Thus far in 1999, approximately
80%, 18% and 2% of the combined utilities' operating income have been
provided by Pennichuck, Pennichuck East and Pittsfield, respectively.
Real Estate and Other Operations
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For the three months ended March 31, 1999, revenues from our real estate
activities and revenues from our other activities were $185,000 and
$144,000, respectively.
Nearly one half, or $87,000, of our real estate revenues for the first
quarter of 1999 were provided by the sale of homes through our two residential
joint ventures in which Southwood is a 50% owner. Those two joint ventures,
Bowers Pond LLC and Heron Cove LLP, were formed for the construction and
sale of 46 and 87 homes, respectively. Under the terms of the partnership
agreements, Southwood conveyed the related land parcels to the partnerships
in exchange for non-interest bearing notes from the partnerships secured by
a second mortgage on the real estate conveyed. As of March 31, 1999, only
one lot remained to be sold in our Bowers Pond joint venture. Our Heron
Cove residential joint venture began construction of homes in the fourth
quarter of 1998 and as of March 31, 1999, three homes have been sold and
sixteen additional homes are under purchase and sale agreements pending
completion of construction.
We also sold a one-half interest in a land parcel to a local developer which
resulted in a $72,000 pretax gain for Southwood in the first quarter of
1999. Subsequently, we conveyed our remaining interest in that land parcel
to a limited liability corporation - Heron Cove Office Park I ("HECOP I")
in which Southwood is a 50% owner. HECOP I is constructing a 39,000 square
foot office building which will be partially occupied by the local
developer and the remaining space is expected to be leased to third
parties.
Other operating revenues of $144,000 for the quarter ended March 31, 1999
were $120,000 greater than the same quarter in 1998. These revenues consist
chiefly of fees charged by our Service Corporation under various operations
and billing contracts with local municipalities as well as rental income
from several tower leases. The 1999 increase over 1998 resulted primarily
from an operations and maintenance contract entered into with the Town of
Hudson, New Hampshire in April 1998.
Other Matters - Year 2000 Issue
We have performed an exhaustive review of our hardware and software systems
in order to determine the level of readiness to meet the next millennium.
Because we own some operating assets which pre-date 1900, we have been
aware of the potential Year 2000 problem well before the recent publicity
and in fact, 8 digit dates have been a requirement for all in-house
software developed since 1987. The Year 2000 issue has also been addressed
and included in all computer migration and upgrades since 1990.
As part of our Year 2000 project planning, we identified mission-critical
applications and implemented a 5 year plan in early 1994 to replace or
upgrade both hardware and software. Our central computer platform,
consisting primarily of minicomputer servers, is not completely Year 2000
ready. However, those servers that are not Year 2000 ready are expected to
be retired and replaced with Year 2000 ready servers during 1999.
Additionally, all of our software applications have been evaluated to
identify any Year 2000 problems, their importance to our operations and
efficiencies to be gained with newer and updated software. A software
development schedule has been created based on this risk assessment with
the most critical applications being implemented first. At this time, our
NT network, financial accounting, billing, customer service information and
meter management, human resources and SCADA management systems are Year
2000 ready. Our remaining software systems for work orders, inventory
control, and various maintenance programs are 90% compliant and are
expected to be fully ready by the end of 1999.
We have identified and contacted all external vendors who provide and/or
require date dependent information and those customers who are material to
our operations to ensure that they will be in compliance with the Year 2000
issue. For any vendors or customers who are determined to be critical to
our operations, we are developing a disaster recovery plan containing
alternative actions plans in the event of vendor non-compliance. We
anticipate having all critical resource alternative plans in place during
the third quarter of 1999.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) The following exhibit is filed herewith:
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Exhibit Number Exhibit Description
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Exhibit 10.14 Form of Change of Control Agreement by and between
Pennichuck Corporation and executive officers
(Stephen J. Densberger, Charles J. Staab, Bonalyn
J. Hartley and Donald L. Ware) each dated January
8, 1999
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(b) There were no reports on Form 8-K filed during the first quarter
of 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Pennichuck Corporation
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(Registrant)
Date: May 13, 1999 /s/ Maurice L. Arel
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Maurice L. Arel, President and
Principal Executive Officer
Date: May 13, 1999 /s/ Charles J. Staab
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Charles J. Staab, Vice President,
Treasurer and Principal Financial
Officer
Exhibit 10.14
CHANGE OF CONTROL AGREEMENT
This Agreement, made and entered into as of the 8th day of January,
1999 by and between _________________ (the "Executive") of ________, New
Hampshire and Pennichuck Corporation (the "Corporation"), a New Hampshire
corporation with principal offices in Nashua, New Hampshire.
WHEREAS, the Executive presently serves as the ________________ of the
Corporation, the _________________ of its subsidiaries ___________________
and ___________________, and the ___________________ of its subsidiaries
_______________ and _________________, as such positions may be revised from
time-to-time by action of the Board of Directors of the Corporation or a
committee thereof having authority with respect to such appointment;
WHEREAS, the Corporation wishes to assure the continued availability of
the Executive's services and to create an environment which will promote the
Executive's giving impartial and objective advice in any circumstances
resulting from the possibility of a Change of Control of the Corporation (as
herein defined); and
WHEREAS, the Corporation and the Executive wish to provide the
Executive with financial protection in the event significant changes in the
Executive's employment status occur following a Change of Control of the
Corporation.
NOW THEREFORE, the Corporation and the Executive, in consideration of
the terms and conditions set forth herein and other valuable consideration,
receipt of which is hereby acknowledged, mutually covenant and agree as
follows:
ARTICLE I
TERM
The term of this Agreement shall be for the period commencing on
January 8, 1999 ("Effective Date") and ending three (3) years from the
Effective Date, unless the Executive's employment is sooner terminated as
provided in Section 7.1 hereof ("Term"). Commencing on or about the first
anniversary of the Effective Date and on or about each subsequent anniversary
of the Effective Date, the Term of this Agreement shall automatically be
extended for an additional one (1) calendar year period, and the provisions
hereof shall remain applicable for each such subsequent three-year period,
unless either party gives written notice to the other, not later than each
anniversary of the Effective Date, that it or he does not concur in such
extension.
ARTICLE II
PAYMENTS UPON CHANGE OF CONTROL AND TERMINATION EVENT
The Corporation shall make payments to the Executive as provided for in
Article IV hereof upon the occurrence of both a Change of Control of the
Corporation and a Termination Event, as such terms are defined in Article III
hereof.
ARTICLE III
DEFINITIONS
(a) "Base Amount" shall mean an amount equal to the Executive's
current annual base salary of $__________ , as adjusted from time-to-time by
the Board of Directors or a committee thereof having authority with respect
to the Executive's annual compensation.
(b) A "Change of Control" shall be deemed to have occurred if any of
the following have occurred:
(i) any individual, corporation (other than the Corporation),
partnership, trust, association, pool, syndicate, or any other entity
or any group of persons acting in concert becomes the beneficial owner,
as that concept is defined in Rule 13d-3 promulgated by the Securities
Exchange Commission under the Securities Exchange Act of 1934, as a
result of any one or more securities transactions (including gifts and
stock repurchases but excluding transactions described in subdivision
(ii) following) of securities of the Corporation possessing fifty-one
percent (51%) or more of the voting power for the election of directors
of the Corporation;
(ii) there shall be consummated any consolidation, merger or
stock-for-stock exchange involving securities of the Corporation in
which the holders of voting securities of the Corporation immediately
prior to such consummation own, as a group, immediately after such
consummation, voting securities of the Corporation (or if the
Corporation does not survive such transaction, voting securities of the
corporation surviving such transaction) having less than fifty percent
(50%) of the total voting power in an election of directors of the
Corporation (or such other surviving corporation);
(iii) "approved directors" shall constitute less than a majority
of the entire Board of Directors of the Corporation, with "approved
directors" defined to mean the members of the Board of Directors of the
Corporation as of the date of this Agreement and any subsequently
elected members of the Board of Directors of the Corporation who shall
be nominated or approved by a majority of the approved directors on the
Board of Directors of the Corporation prior to such election; or
(iv) there shall be consummated any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions,
excluding any transaction described in subdivision (ii) above), of
all, or substantially all, of the assets of the Corporation or its
subsidiaries to a party which is not controlled by or under common
control with the Corporation.
(c) A "Termination Event" shall be deemed to have occurred if, within
the twelve month period following a Change of Control: (i) the Executive
experiences the loss of his position by reason of discharge or demotion, for
reasons other than termination or demotion for good cause, or (ii) the
Executive voluntarily resigns his position following the substantial
withholding, substantial adverse alteration or substantial reduction of
responsibility, authority, or compensation (including any compensation or
benefit plan in which the Executive participates or substitute plans adopted
prior to the Change of Control) to which the Executive was charged or
empowered with or entitled to immediately prior to a Change of Control of the
Corporation or to which he would normally be charged or empowered with or
entitled to from time to time by reason of his office, for reasons other than
good cause.
(d) "Good cause" shall mean: (i) the willful or continued failure
by the Executive to perform his duties for the Corporation or a subsidiary
(other than such failure resulting from the Executive's incapacity due to
physical or mental illness), after a written demand for performance is
delivered to the Executive by the President of the Corporation or the
applicable subsidiary (or the respective Board of Directors if the
Executive then serves in the capacity of president thereof) which
specifically identifies the manner in which the President (or, as the case
may be, the Board) believes the Executive has not performed his duties;
(ii) an act or acts intended to result in personal enrichment at the
material expense of the Corporation or a subsidiary; or, (iii) an act or
acts of dishonesty taken by the Executive or of willful misconduct which
are materially injurious to the Corporation or a subsidiary.
ARTICLE IV
CASH PAYMENTS
Upon the occurrence of both a Change of Control of the Corporation and
a Termination Event, the Corporation shall, immediately upon the occurrence
of the Termination Event, make a lump sum payment (less applicable
withholdings) to the Executive in an amount that equals one (1) times the
Base Amount; provided that, in consideration thereof, the Executive executes
and delivers to the Corporation, in form and content acceptable to the
Corporation, a release of all claims and causes of action the Executive has
or may ever have against the Corporation arising from his employment and
under this Agreement.
ARTICLE V
DEATH OF EXECUTIVE
If the Executive dies before receiving the payment due to him under
this Agreement, the Corporation shall pay to the Executive's designated
beneficiary, or failing such designation, to the estate of the Executive, one
(1) lump sum payment in an amount equal to the amount determined pursuant to
Article IV hereof.
ARTICLE VI
INDEMNIFICATION
The Executive shall be entitled, at all times, to the benefit of the
maximum indemnification and advancement of expenses available from time to
time under the Corporation's Articles of Incorporation and Bylaws, and under
the laws of the State of New Hampshire. Such indemnification shall survive
the termination of the Executive's employment with the Corporation and the
termination of this Agreement unless such termination is for "good cause" (as
that term is defined in Article III above). In addition, the Corporation
shall have in full force and effect an officers' liability insurance policy
providing such coverages, exclusions and deductibles as the Corporation and
the Executive shall reasonably agree and as is available on a reasonable
premium basis.
ARTICLE VII
EMPLOYMENT
7.1 No Right to Continued Employment. This Agreement shall not confer
upon the Executive any right with respect to continuance of employment by the
Corporation or any subsidiary, nor shall it interfere in any way with the
right of his employer to terminate his employment at any time. No payments
hereunder shall be required except upon the occurrence of both a Change of
Control of the Corporation and a Termination Event as set forth in Article
III herein. Thus, except as specifically provided in Article II herein, no
payments hereunder shall be made on account of termination of the Executive's
employment (i) upon the Executive's death, disability or retirement, (ii) by
the Corporation with or without cause or (iii) upon the Executive's voluntary
termination.
7.2 No Duty to Seek Other Employment. Amounts payable to the
Executive under this Agreement shall not be reduced by the amount of any
compensation received by the Executive from any other employer or source, and
the Executive shall not be under any obligation to seek other employment or
gainful pursuit as a result of this Agreement.
ARTICLE VIII
OTHER BENEFITS
8.1 Health Insurance Benefits. Upon the occurrence of a Termination
Event following a Change of Control, the Executive shall be entitled to
continuation of health insurance benefits as defined by federal ("COBRA") and
state law. If the Executive or any qualified beneficiaries elect COBRA
continuation coverage, the Corporation agrees to maintain, or reimburse, the
Executive or his/her qualified beneficiary for the cost of continuation of
coverage for a period of 12 months. After the 12 months has expired, the
Executive and/or his qualified beneficiaries shall be responsible for paying
the premiums in a timely manner for the remaining COBRA period.
8.2 Life Insurance Benefits. For a period of 12 months following the
date of the occurrence of a Termination Event following a Change of Control,
the Corporation agrees to maintain, or to directly reimburse the Executive
for the cost of, the Executive's eligibility for and participation in any
life insurance plans provided by the Corporation upon the same basis and cost
as prior to the Termination Event.
ARTICLE IX
REDUCTION OF PAYMENTS
In the event any of the payments made under this Agreement would be
considered an "excess parachute payment" as defined in Section 280G of the
Internal Revenue Code of 1986, as amended, then there shall be a reduction in
the amount otherwise payable under this Agreement such that all payments are
deductible by the Corporation.
ARTICLE X
ARBITRATION
Any dispute, controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration conducted in Nashua, New Hampshire
or other mutually agreeable location in the State of New Hampshire. The
matter will be heard promptly by a single arbitrator selected by mutual
agreement by the Corporation and the Executive. Should the Corporation and
the Executive be unable to agree upon an arbitrator within a 30-day period,
an arbitrator will be selected in accordance with the commercial arbitration
rules of the American Arbitration Association. Unless the parties mutually
agree otherwise, once appointed, the arbitrator will make all rulings on
procedural and evidentiary matters and will determine the date, time and
place of any hearings. The arbitrator shall have no power to add to,
subtract from, modify or disregard any of the provisions of this Agreement.
The arbitrator's decision shall be consistent with the specific terms of this
Agreement. The arbitrator will issue a written decision within 30 days of
the hearing or submission to him. The arbitrator's decision will be final and
binding on all parties.
In the event a Change of Control of the Corporation and a Termination
Event occur and the Executive demands arbitration under the provisions of
this Agreement, the Corporation agrees to share equally the cost of the
arbitrator. If the arbitrator substantially upholds the Executive's
grievance, then the Corporation shall reimburse the Executive for all costs
and expenses reasonably incurred by him in such action or proceeding,
including reasonable attorneys' fees.
ARTICLE XI
MISCELLANEOUS
11.1. Entire Agreement. This Agreement constitutes the entire
agreement between the parties, relating to the subject matter hereof and
replaces all prior agreements relating to said subject matter.
11.2. Governing Law. This Agreement shall be governed by and is to be
construed and enforced in accordance with the laws of the State of New
Hampshire.
11.3. Waivers and Modifications; Termination. This Agreement may not,
in whole or in part, be waived, changed, amended, discharged or terminated
orally or by any course of dealing between the parties, but only by an
instrument in writing signed by the parties hereto. No waiver by either
party of any breach by the other of any provision hereof shall be deemed to
be a waiver of any later or other breach hereof or as a waiver of any other
provision of this Agreement. This Agreement shall terminate as of the time
the Corporation makes the final payment which it may be obligated to pay
hereunder or provides the final benefit which it may be obligated to provide
hereunder.
11.4. Severability. In any case any one or more of the provisions
contained in this Agreement for any reason shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein.
11.5. Counterparts. This Agreement may be made and executed in
counterparts, each of which shall constitute an original for all purposes.
11.6. Section Headings. The descriptive section headings herein have
been inserted for convenience only and shall not be deemed to define, limit,
or otherwise affect the construction of any provision hereof.
11.7 Notices. Any notice or other communication pursuant to this
Agreement shall be in writing and shall be deemed to have been given or made
when personally delivered, or when mailed by registered or certified mail,
postage prepaid, return receipt requested, to the other party. In the case
of the Corporation, any such notice shall be delivered or mailed to its
principal office. In the case of the Executive, any such notice shall be
delivered in person or mailed to his last known address as reflected in the
records of the Corporation.
11.8 Assignment. The Executive acknowledges that the services to be
rendered by him are unique and personal. Accordingly, the Executive may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement or otherwise assign this Agreement. The rights and
obligations of the Corporation under this Agreement shall inure to the
benefit of, and shall be binding upon, the successors and assigns of the
Corporation.
11.09 Confidential Information. At all times during and after his
employment with the Corporation, the Executive shall treat as confidential
and shall not divulge, furnish or make known to or accessible to, or use for
the benefit of anyone other than the Corporation, any confidential
information concerning the Corporation obtained during the course of the
Executive's employment. Confidential information includes, but is not
limited to: ideas, inventions, discoveries, developments, processes,
designs, formulas, patterns, devices, programs, methods, techniques,
compilations of scientific, technological or business information,
proprietary information, and trade secrets. The Executive agrees that during
the term of and following the termination of his employment with the
Corporation, he will not disclose to any person or use in any way any such
confidential information, other than (i) information that is generally known
in the Corporation's industry or acquired from public sources, (ii) as
required by any court, supervisory authority, administrative agency or
applicable law, or (iii) with the prior written consent of the Corporation.
11.10 Authorization. The Corporation represents and warrants that the
execution of this Agreement has been duly authorized by requisite action of
the Board of Directors of the Corporation.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
WITNESS: PENNICHUCK CORPORATION
- ---------------------------
By:
--------------------------
Name:
Its:
- ---------------------------
------------------------------
Executive:
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