SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [SECTION]240.14a-11(c) or
[SECTION]240.14a-12
PENNICHUCK CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a- 6(i)(1) and
0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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PENNICHUCK CORPORATION
4 Water Street
Nashua, New Hampshire 03061
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Thursday, April 20, 2000
To the Shareholders of Pennichuck Corporation:
Notice is hereby given that the Annual Meeting of Shareholders of
Pennichuck Corporation ("Company") will be held at 3:00 p.m. on Thursday,
April 20, 2000, at the Nashua Marriott Hotel, 2200 Southwood Drive, Nashua,
New Hampshire for the following purposes:
(1) To elect three directors;
(2) To ratify the appointment by the Board of Directors of the firm
of Arthur Andersen LLP as independent accountants of the
Company for the fiscal year ending December 31, 2000;
(3) To act upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized common
shares of the Company from 5,000,000 to 11,500,000;
(4) To act upon a proposal to approve the 2000 Stock Option Plan;
and
(5) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 13,
2000 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Annual Meeting. Only holders of common stock
of record at the close of business on that date will be entitled to notice
of, and to vote at, the Annual Meeting or any adjournment thereof. Your
attention is directed to the attached Proxy Statement.
By Order of the Board of Directors,
JAMES L. SULLIVAN, JR.
Secretary
Nashua, New Hampshire
March 20, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN,
DATE AND COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE
GIVING OF THE PROXY WILL NOT AFFECT YOUR RIGHTS TO VOTE AT THE MEETING IF
THE PROXY IS REVOKED AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
----------------------
PENNICHUCK CORPORATION
4 Water Street
Nashua, New Hampshire 03061
---------------------------
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
to be held on
April 20, 2000
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy are being mailed to
shareholders beginning on or about March 20, 2000. They are furnished in
connection with the solicitation of proxies by the Board of Directors of
Pennichuck Corporation ("Company") for use at the Annual Meeting of
Shareholders to be held on Thursday, April 20, 2000, and at any adjournment
or adjournments thereof. Holders of the Company's common stock are entitled
to one vote for each share held of record at the close of business on March
13, 2000. Shareholders are not entitled to cumulate their votes. On March
13, 2000, 1,751,871 shares of common stock of the Company were issued and
outstanding, all of which were entitled to vote, and 15,557 shares were held
as treasury stock.
A copy of the Annual Report to Shareholders for the year ended
December 31, 1999 accompanies this Proxy Statement.
VOTING PROCEDURES
If the accompanying proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with any choice specified. Where no
choice is specified, executed proxies will be voted: (1) FOR the election of
the three nominees as directors of the Company; (2) FOR the ratification of
the appointment of Arthur Andersen LLP as independent accountants of the
Company for the fiscal year ending December 31, 2000; (3) FOR approval of
the proposal to amend the Company's Articles of Incorporation to increase
the number of authorized common shares from 5,000,000 to 11,500,000; and (4)
FOR approval of the proposal to adopt the 2000 Stock Option Plan. If any
matters not specified in this Proxy Statement are properly brought before
the Annual Meeting, the shares represented by executed proxies will be voted
at the discretion of the proxy holders. As of the date hereof, management
is not aware of any other matters to be voted upon.
Any shareholder executing a proxy has the power to revoke it at any
time prior to the voting thereof on any matter (without, however, affecting
any vote taken prior to such revocation) by delivering a duly executed
written notice of revocation to the Secretary of the Company at the above
address, by executing and delivering to the Secretary another duly executed
proxy dated as of a later date, or by voting in person at the Annual
Meeting.
In addition to the solicitation of proxies by mail, the directors,
officers and regular employees of the Company may also solicit proxies
personally or by telephone or other means. None of such directors, officers
and employees will receive any compensation for such solicitation activities
beyond their usual compensation. All costs of soliciting proxies, including
reimbursement of certain brokers, fiduciaries and nominees for their
expenses in obtaining voting instructions from beneficial owners, will be
borne by the Company.
The Company's Bylaws require that the holders of a majority of all
shares of common stock outstanding and entitled to vote at a meeting be
present in person or by proxy at a meeting of shareholders in order to
constitute a quorum for the transaction of business. When a quorum is
present, the Bylaws of the Company also require the affirmative vote of a
majority of the shares of the Company's common stock present in person or by
proxy, and voting, at the meeting in order to elect directors, to approve
the 2000 Stock Option Plan, and to ratify the appointment of Arthur Andersen
LLP. When a quorum is present, the Company's Articles of Incorporation
require the affirmative vote of a majority of the shares of the Company's
common stock entitled to vote at the Annual Meeting in order to adopt the
proposed amendment to the Company's Articles of Incorporation. An
abstention from voting on a particular matter, or, where a broker indicates
on the proxy that it does not have discretionary authority as to certain
shares to vote on a particular matter, will have the same effect as a vote
withheld on the election of directors or as a vote against another matter
submitted to the shareholders for vote, as the case may be.
GENERAL DISCLOSURES
Security Ownership of Certain Beneficial Owners
To the best knowledge of the Company, and except as otherwise
indicated below (see "Security Ownership of Management"), the following are
the only person(s) or group of persons, as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, ("Exchange Act") who
beneficially owned more than 5% of the Company's outstanding common stock as
of March 3, 2000. The following table, based on filings with the Securities
and Exchange Commission, sets forth information with respect to the shares
of the Company's common stock owned by such person or group of persons.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of % Common Stock
Beneficial Owner Beneficial Ownership Outstanding (2)
- ---------------------------- -------------------- ---------------
<S> <C> <C>
Bank of New Hampshire (1) 108,202 5.99%
Trust and Investment Services
143 North Main Street
Concord, New Hampshire 03301
- --------------------
<FN>
<F1> The Bank of New Hampshire claims sole power to vote or to direct the
vote over 91,077 shares; shared power to vote or to direct the vote
over 17,125; sole power to dispose or to direct the disposition of
33,939 shares; and shared power to dispose or to direct the
disposition of 74,263 shares.
<F2> Calculation of percentage is based upon a total of 1,805,866 shares,
which total includes shares outstanding and entitled to vote of
1,751,871 plus 53,995 shares which have not been issued but which may
be issued with 60 days of March 3, 2000 if such persons having rights
to exercise stock options within such period exercise such rights.
</FN>
</TABLE>
Security Ownership of Management
To the best knowledge of the Company, the following table sets forth
information as of March 3, 2000 with respect to the shares of the Company's
common stock beneficially owned by each nominee and director, and by all
nominees, directors and officers as a group:
<TABLE>
<CAPTION>
Amount and % of Common
Nature of Stock Out-
Beneficial standing if
Name of Beneficial Owner (Ownership(1)3) more than 1%)(2)
- ------------------------ --------------- ----------------
<S> <C> <C>
Maurice L. Arel(3)(5) 32,418 1.8%
Joseph A. Bellavance (3)(4) 10,012 -
Charles E. Clough 17,693 1.0%
Stephen J. Densberger (3)(5) 14,223 -
Robert P. Keller 1,568 -
John R. Kreick 261 -
Hannah M. McCarthy 250 -
Martha E. O'Neill(6) 17,126 1.0%
Charles J. Staab(3)(5) 11,876 -
All directors and
officers as a group
(12 persons) (3)(5) 121,804 6.7%
- --------------------
<FN>
<F1> Shares beneficially owned means shares over which a person exercises
sole or shared voting or investment power or shares of which a person
has the right to acquire beneficial ownership within 60 days of March
3, 2000. Unless otherwise noted, the individuals and group above have
sole voting and investment power with respect to shares beneficially
owned.
<F2> Calculation of percentages is based upon a total of 1,805,866 shares,
which total includes shares outstanding and entitled to vote of
1,751,871 plus 53,995 shares which have not been issued but which may
be issued within 60 days of March 3, 2000 if persons having rights to
exercise stock options within such period exercise such rights.
<F3> The individuals and group noted above have sole voting and investment
power with respect to shares beneficially owned, except as stated in
notes (4) through (6) below and except that voting and investment
power is shared as follows: Mr. Arel - 3,761 shares, Mr. Bellavance
- 4,179 shares, Mr. Densberger - 4,473 shares, Mr. Kreick - 261shares,
Ms. McCarthy - 250 shares, Mr. Staab - 4,376 shares, and non-director
officers as a group - 5,144 shares.
<F4> Mr. Bellavance disclaims beneficial ownership of 1,483 of these
shares.
<F5> Includes shares subject to unexercised stock options previously
granted which officers have a right to acquire within 60 days of March
3, 2000. Mr. Arel holds options to acquire 8,000 shares, Mr.
Densberger holds options to acquire 7,500 shares, Mr. Staab holds
options to acquire 4,500 shares and the officers of the Company as a
group hold options to acquire a total of 7,993 shares within 60 days
of March 3, 2000.
<F6> Includes 8,217 shares owned by the Charles H. Nutt Surgical Hospital
Trust, of which Ms. O'Neill is a trustee. Ms. O'Neill shares voting
and investment power with the other Trustees over these shares. Ms.
O'Neill disclaims beneficial ownership of these shares.
</FN>
</TABLE>
ELECTION OF DIRECTORS
General
The Company's Board of Directors consists of nine members. The
Articles of Incorporation classify the directors into three classes, each
serving for three years, with one class being elected each year. The Board
has nominated Maurice L. Arel, Joseph A. Bellavance and Robert P. Keller,
all incumbent directors, for re-election to three-year terms expiring at the
Annual Meeting of Shareholders in 2003.
The Board of Directors recommends a vote FOR the election of the three
nominees as directors of the Company.
Information as to Nominees and Continuing Directors
Unless otherwise directed in the proxy, each proxy executed and
returned by a shareholder will be voted FOR the election of the three
nominees. If any person named as nominee should be unable or unwilling to
stand for election at the time of the Annual Meeting, the proxies will
nominate and vote for a replacement nominee or nominees recommended by the
Board of Directors. All nominees have indicated to the Company their
willingness to be nominated as directors and to serve as directors if
elected. At this time, the Board of Directors knows of no reason why any of
the nominees listed below would not be able to serve as a director if
elected.
The following table sets forth information concerning the three
persons nominated to serve on the Board of Directors and concerning the
other directors continuing in office beyond the Annual Meeting.
<TABLE>
<CAPTION>
Other
Director Year Present Position
of Company Term Will With
Nominees (1) Age Since Expire Company
- ------------ --- ---------- ------------ --------
<S> <C> <C> <C> <C>
Maurice L. Arel 62 1984 2000 President and
Chief Executive
Officer
Joseph A. Bellavance 60 1983 2000 ---
Robert P. Keller 62 1983 2000 ---
Continuing Directors (1)
- ------------------------
Charles E. Clough 69 1968 2001
John R. Kreick 55 1998 2001 ---
Martha E. O'Neill 42 1998 2001 ---
Stephen J. Densberger 49 1986 2002 Executive
Vice President
Hannah M. McCarthy 53 1994 2002 ---
Charles J. Staab 50 1986 2002 Vice President,
Treasurer and
Chief Financial
Officer
- --------------------
<FN>
<F1> Except for Messrs. Densberger and Staab, all nominees and continuing
directors are also directors of the Company's wholly-owned
subsidiaries, Pennichuck Water Works, Inc. and The Southwood
Corporation. Mr. Densberger is a director of Pennichuck Water Works,
Inc. Messrs. Arel, Densberger and Staab are also directors and
officers of the Company's other wholly-owned subsidiaries, Pennichuck
Water Service Corporation, Pennichuck East Utility, Inc. and
Pittsfield Aqueduct Company, Inc.
</FN>
</TABLE>
The business experience of each of the above nominees, continuing
directors and of the executive officers of the Company during the last five
years, and certain other pertinent information, is as follows:
Maurice L. Arel - Mr. Arel has served as President, Chief Executive
Officer and a director of the Company since October 1984. Mr. Arel also
serves as President, Chief Executive Officer and a director of the Company's
subsidiaries, Pennichuck Water Works, Inc., The Southwood Corporation and
Pennichuck Water Service Corporation. He is Chairman and a director of
Pittsfield Aqueduct Company, Inc and Pennichuck East Utility, Inc.. He is
the former Mayor of the City of Nashua, having served from 1977 to 1984. He
received his Bachelor of Arts degree in Chemistry from St. Anselm College
and his Master of Science degree in Physical Chemistry from St. John's
University. He is a Commissioner of the Nashua Police Department, a
director of Fleet Bank - NH of New Hampshire, a Trustee of St. Anselm College
of Manchester, New Hampshire and a member of the Board of Trustees of the
Public Library of Nashua. He is Chairman of the National Association of Water
Companies Government Relations Committee and a member of the American Chemical
Society, the American Water Works Association and the New England Water Works
Association.
Joseph A. Bellavance - Mr. Bellavance is President and General Manager
of Bellavance Beverage Company, Inc. and President of Bellavance Realty
Corporation, both of Nashua. He received his Bachelor of Science degree in
Business Administration from the University of New Hampshire. He is a
director of the New Hampshire Wholesale Beverage Association, "New Hampshire
The Beautiful," and a member of the American Legion and the Nashua Rotary
Club.
Charles E. Clough - Mr. Clough is currently President of Freedom
Partners, LLC. He holds a Master of Business Administration degree from the
Amos Tuck School of Business and was affiliated with Nashua Corporation from
1957 until 1995. Mr. Clough also serves as a director of Hitchiner
Manufacturing Company, Inc. of Milford, New Hampshire.
Stephen J. Densberger - Mr. Densberger is Executive Vice President of
the Company and has been affiliated with the Company since 1974. Mr.
Densberger was the Treasurer of the Company from 1978 to 1983. Mr.
Densberger also serves as Executive Vice President of Pennichuck Water
Works, Inc. and as Vice President of The Southwood Corporation and
Pennichuck Water Service Corporation. He is a director and President of
Pittsfield Aqueduct Company, Inc. and of Pennichuck East Utility, Inc. and
a director of Pennichuck Water Service Corporation.He holds a Master of
Business Administration degree from the Whittemore School of Business and
Economics of the University of New Hampshire. He is past President of the
New Hampshire Water Works Association, past President of the New England
Water Works Association, and is a member of the City of Nashua Board of
Aldermen.
Robert P. Keller - Mr. Keller is a Certified Public Accountant. From
October 1991 until June 1994, he served as President and Chief Executive
Officer of New Dartmouth Bank, of Manchester, New Hampshire. From August
1994 until March 1995, he served as President and Chief Executive Officer of
Independent Bancorp of Arizona, Inc. of Phoenix, Arizona and Chairman and
Chief Executive Officer of Caliber Bank, also of Phoenix, Arizona. Since
June 1995, he has served as President and Chief Executive Officer of
Dartmouth Capital Group, Inc., and since September 1995, as President and
Chief Executive Officer of Eldorado Bancshares, Inc. and Chairman, President
and Chief Executive Officer of Eldorado Bank of Laguna Hills, California. He
is also Chairman and Chief Executive Officer of Antelope Valley Bank of
Lancaster, California.
John R. Kreick - Dr. Kreick served as President of Sanders Associates
and as a vice president of the Lockheed Martin Corporation from January 1988
until March 1998. Dr. Kreick received his Bachelor of Science degree in
physics from the University of Michigan in 1965. As a Rackman graduate
fellow, he worked at University's Space Physics Research Laboratory and
received his Masters of Science degree in physics in 1966. He received his
Ph.D. in theoretical physics from the University of Michigan in 1969 and he
holds eight patents in infrared and electro-optical technology. Dr. Kreick
is a member of the National Research Council's Commission of Physical
Sciences, Mathematics and Applications; a trustee of Rivier College; a
member of the board of directors of the New England Council, Draper Labs and
the Southern New Hampshire Regional Medical Center; and has served on
numerous Department of Defense panels and committees. In 1993, Dr. Kreick
received the Electronic Warfare Association's highest award - the Gold Medal
of Electronic Warfare and is a recipient of Aviation Week magazine's
Aerospace Laurels Award for his long-term contributions to electronic
warfare.
Hannah M. McCarthy - Ms. McCarthy is President of Daniel Webster
College in Nashua, New Hampshire, a position which she has held since June,
1980. She earned her BA at Simmons College, and has done graduate work at
Rivier College and New Hampshire College. Ms. McCarthy serves as a director
of the New Hampshire College and University Council and the Boys & Girls
Club of Nashua.
Martha E. O'Neill - Ms. O'Neill has been practicing as an attorney
with the law firm of Clancy & O'Neill, P. A. in Nashua since 1982. She is a
graduate of Wellesley College and Georgetown University Law Center. Ms.
O'Neill serves on the Rivier College Board of Trustees, Rivier College
Paralegal Department Advisory Board, Mary A. Sweeney Home Board of Trustees,
Charles H. Nutt Surgical Hospital Board and the Boys & Girls Club of Greater
Nashua, Inc. Charitable Foundation Board of Trustees.
Charles J. Staab - Mr. Staab is Vice President, Treasurer and Chief
Financial Officer of the Company and has been Treasurer since 1983. Mr.
Staab also serves as Vice President and Treasurer of Pennichuck Water Works,
Inc. and The Southwood Corporation. He is Treasurer and a director of
Pennichuck Water Service Corporation, Pennichuck East Utility, Inc. and
Pittsfield Aqueduct Company, Inc. He holds a Master of Business
Administration degree from Rivier College, and is a Certified Public
Accountant. He is a member of the Finance Committee of the National
Association of Water Companies, a member of the Board of Directors of the
Nashua YMCA and the Home Health & Hospice Care. He is a past director of the
Nashua Children's Association and the United Way of Greater Nashua, and
former President of the Northern New England chapter of the Financial
Executives Institute.
Bonalyn J. Hartley - Ms. Hartley has been with the Company since 1979
and was elected Vice President-Controller of the Company, Pennichuck Water
Works, Inc. and The Southwood Corporation in 1991. She is also Controller
and a director of Pennichuck Water Service Corporation, Pennichuck East
Utility, Inc. and Pittsfield Aqueduct Company, Inc. She is a graduate of
Rivier College with a Bachelor of Science Degree in Business Management.
Ms. Hartley serves as a Trustee and Vice Chairperson of the Southern New
Hampshire Regional Medical Center and as a Director and Vice Chairperson of
the Rivier College Alumni Association. She is also a member of the New
England Chapter of the National Association of Water Companies and a member
of the New England Water Works Association. Ms. Hartley is 55 years old.
Donald L. Ware - Mr. Ware is Vice President of Engineering for the
Company. He joined the Company in April 1995 and also serves as the Vice
President of Engineering for Pennichuck Water Works, Inc. and The Southwood
Corporation. He is also a Vice President and director of Pennichuck Water
Service Corporation, Pennichuck East Utility, Inc. and Pittsfield Aqueduct
Company, Inc. Prior to joining the Company, Mr. Ware was the general manager
of the Augusta Water District in Augusta, Maine. He holds a Bachelor of
Science degree in Civil Engineering from Bucknell University and is a
licensed professional engineer in New Hampshire, Massachusetts and Maine.
Mr. Ware is 43 years old.
During the year ended December 31, 1999, the Board of Directors of the
Company held 7 meetings. The Board of Directors has established an Audit
Committee, a Compensation and Benefits Committee and a Nominating Committee.
These committees served the specific functions, and held the number of
meetings, as described below. Each director nominee and continuing director
attended 75% or more of the total of the number of meetings of the Board of
Directors and the number of meetings of all committees of the Board on which
he or she served.
Audit Committee
The Audit Committee, presently comprised of Messrs. Keller and
Bellavance and Ms. McCarthy, met twice in 1999. The Audit Committee is
required to recommend an independent firm to serve as the Company's auditors
and to review with such firm the scope of its audit and its findings with
respect thereto.
Compensation and Benefits Committee
The Compensation and Benefits Committee, comprised of Messrs. Clough,
Keller and Kreick met four times during 1999. The Compensation and
Benefits Committee is charged generally (i) to establish compensation for
employees of the Company, (ii) to monitor the operation of the Company's
qualified noncontributory, defined benefit pension plan and the Company's
Savings Plan for Employees and the performance of the trustee and
administrator of these Plans, and to recommend changes to the Board, as and
when appropriate, and (iii) to administer the Company's 1995 Stock Option
Plan.
Nominating Committee
The Nominating Committee, comprised of Mr. Bellavance, Ms. McCarthy
and Ms. O'Neill met once during 1999. The Nominating Committee is charged
generally with recommending for nomination to the Board of Directors, and as
officers of the Company, those available individuals who are best qualified
to serve in such capacities. The Nominating Committee will consider
recommending names submitted by shareholders for nomination as Directors
provided that such names are delivered to the Secretary of the Company by
December 15 preceding the annual meeting at which such nominations will be
acted upon.
Compensation of Directors
The Directors of the Company currently receive a fee of $6,000
annually and $600 for each Board and committee meeting they attend. Each
Committee chairman also receives an additional $1,500 annually. Each of the
independent members of the Board of Directors, namely Messrs. Bellavance,
Keller and Kreick, and Mesdames McCarthy and O'Neill, also received 100
shares of common stock as additional compensation for services rendered as
Directors; independent Director Clough received such compensation in the
form of common share equivalents pursuant to a deferred compensation
agreement. Directors who are also salaried employees of the Company do not
receive any separate compensation for services as a Director of the Company
or of its subsidiaries.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and beneficial owners of more than ten
percent of the Company's common stock, to file reports of ownership and
changes in ownership of such common stock with the Securities and Exchange
Commission ("SEC"). Generally, these persons must file such reports at the
time they first become subject to Section 16(a) reporting, and thereafter on
a monthly basis following a change in ownership, if any. Officers,
directors and such greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports
they file. The Company is required by SEC regulation to identify in its
proxy statement those individuals for whom one of the referenced reports was
not filed on a timely basis during the most recent fiscal year or prior
fiscal years.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations from each
of such persons that no other reports were required, the Company believes
that during the fiscal year ended December 31, 1999, all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with on a timely basis.
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES
The authorized capital stock of the Company as of March 3, 2000
consisted of 5,000,000 shares of common stock, par value $1.00 per share, of
which 1,751,871 shares were outstanding; and (i) 15,000 shares of preferred
stock, par value $100.00 per share, none of which is outstanding, and (ii)
100,000 shares of preferred stock, no par value, none of which has been
issued. Accordingly, the Company has available for issuance 3,248,129
authorized but unissued shares of common stock, of which 56,486 shares have
been reserved for issuance under the Company's 1995 Stock Option Plan and
105,535 shares have been reserved for issuance under the Company's Dividend
Reinvestment and Common Stock Purchase Plan. This leaves 3,086,108 shares
of common stock available for other purposes.
The Board of Directors of the Company has adopted a resolution setting
forth a proposed amendment to Article IV of the Company's Articles of
Incorporation to increase the number of authorized shares of common stock
from 5,000,000 shares to 11,500,000 shares, at the same par value of $1.00
per share, and further providing that the amendment be submitted to a vote
of the Company's shareholders. The additional shares of common stock for
which such authorization is sought would be part of the existing class of
common stock and, if and when issued, would have the same rights and
privileges as the shares of common stock presently outstanding.
The Amendment would delete the first sentence of Article IV of the
Articles of Incorporation and substitute in place thereof the following:
Except as provided in Article VII, the aggregate number of shares of
capital stock which the corporation shall have authority to issue is:
Eleven Million Five Hundred Thousand (11,500,000) shares of common
stock, having par value of One Dollar ($1.00) per share, and Fifteen
Thousand (15,000) shares of preferred stock, have par value of One
Hundred Dollars ($100.00) per share. [no change to the remainder of
the Article]
The Company has no present plans or understandings with respect to
issuing the uncommitted authorized shares of common stock. Such shares will
be available for issuance from time to time to such persons and for such
consideration as the Board of Directors of the Company may determine. Such
issuance may be made without shareholder approval except as otherwise
required by applicable law. The additional shares of common stock proposed
to be authorized, together with shares presently authorized but unissued,
will be available for issuance to the Company's shareholders in connection
with stock dividends and stock splits, for issuance in transactions to
support further asset growth, and to finance acquisitions as and when
opportunities for such acquisitions may arise. The additional shares of
common stock will also be available to provide shares of capital stock
necessary to support the implementation of a "shareholder rights plan", or
similar instrument, if any (often called a "poison pill"), that may be
adopted by the Board of Directors in the future.
This Amendment is not being presented in response to any effort to
accumulate the Company's shares or to obtain control of the Company.
Nevertheless, the amendment, if adopted, could be used to thwart a hostile
takeover attempt of the Company. Having a substantial number of shares of
common stock available for issuance could be used by the Company's
established Board of Directors to facilitate placement of a block of stock
in the hands of parties sympathetic to management and opposed to any attempt
to gain control of the Company. No such private placement in friendly hands
is contemplated or foreseen by the Company. The additional shares could
also be used to dilute the stock ownership of persons seeking to gain
control of the Company, as by issuing shares in a defensive acquisition.
However, the Company does not anticipate making acquisitions with a view to
fending off takeover attempts, or for any purpose other than strengthening
the enterprise and benefiting all its shareholders.
Finally, the additional shares would support the defensive mechanisms of
a shareholder rights plan if and when adopted by the Board of Directors.
The Board has recently renewed its evaluation of such a plan; the increase
in the number of authorized common shares sought by this proposed
amendment is directly related to the Board of Directors consideration of
adopting a shareholder rights plan. Rights plans are intended to deter certain
coercive tactics but may have anti-takeover effects; when implemented, such a
plan generally causes substantial dilution to a person or group that acquires
a certain percentage of a company's stock without the board of directors
having redeemed the rights. Such plans are intended to encourage potential
acquirors to negotiate an acquisition with a board of directors prior to the
acquisition bid and thus enable a board of directors to have a reasonable
opportunity to consider any acquisition proposal that may arise. Such rights
do not necessarily interfere with any merger or business combination approved
by a board of directors because such rights are generally redeemable under
certain circumstances.
The Articles of Incorporation and/or Bylaws of the Company already
contain provisions that may be viewed as having the effect of impeding
efforts to acquire control of the Company. The following is an itemization
of these measures.
* The Board of Directors has the existing authority to issue up to
100,000 shares of preferred stock upon terms, including terms relating
to voting rights, as may be determined by the Board of Directors.
* The so-called "fair price" provisions of the Company's Articles of
Incorporation which, in general: (a) require approval by the holders
of two-thirds of the shares entitled to vote in order for the Company
to enter into certain business combinations with a holder of more than
10% of the shares entitled to vote (an "Interested Shareholder")
unless (i) certain minimum price and procedural requirements are met;
or (ii) the transaction is approved by at least a majority of the
Board of Directors who are unaffiliated with the Interested
Shareholder and were Directors before the Interested Shareholder
became an Interested Shareholder; and (b) require that the shareholder
vote required to amend or repeal the fair price provisions, or to
adopt any provision inconsistent therewith, shall be two-thirds of the
shares entitled to vote.
* Classification of the Board of Directors into three classes serving
staggered three-year terms, with approximately one-third of the Board
being elected each year. The classification of directors has the
effect of making it more difficult for shareholders to change the
composition of the Board in a relatively short period of time, thus
providing the Board with additional time to evaluate proposed takeover
efforts and to consider alternatives to such proposals in the best
interests of the shareholders.
* Removal of a Director or Directors only if the removal is approved by
a vote of two-thirds of the shares entitled to vote.
* Fixing the size of the Board of Directors at not less than three and
no more than thirteen, with the exact number of Directors to be
determined from time to time by the Board.
* Providing that vacancies on the Board of Directors, including
vacancies created by an increase in the number of directorships, shall
be filled only by majority vote of the remaining Directors then in
office with Directors elected to fill a vacancy to serve for the
remainder of the full term of his predecessor in office and Directors
elected by reason of an increase in the number of directors to serve
until the next annual meeting of shareholders.
* Requiring vote of two-thirds of the shares entitled to vote in order
to amend or repeal the above provisions, or to amend or repeal Bylaw
changes made by the Board of Directors.
The Board of Directors of the Company recommends a vote FOR the
proposal to amend Article IV of its Articles of Incorporation to increase
the number of authorized shares of common stock from 5,000,00 shares to
11,500,000 shares of common stock, par value $1.00 per share. The
affirmative vote of a majority of shares entitled to vote is necessary to
adopt this proposal to amend the Articles of Incorporation.
APPROVAL OF 2000 STOCK OPTION PLAN
Proposal
The Board of Directors has adopted the 2000 Stock Option Plan (the
"2000 Plan") for key employees of the Company and its subsidiaries, subject
to approval of the 2000 Plan by the Company's shareholders. If approved by
the shareholders, the 2000 Plan will be deemed to have become effective as
of March 3, 2000.
Subject to adjustment for stock splits, stock dividends and similar
events, the total number of shares of the Company's common stock that can be
issued under the 2000 Plan is 150,000. The shares issued by the Company
under the 2000 Plan may be authorized but unissued shares, or shares
reacquired by the Company. To the extent that awards under the 2000 Plan do
not vest or otherwise revert to the Company, the shares of the Company's
common stock represented by such awards may be the subject of subsequent
awards.
Recommendation
The Board of Directors believes that incentive stock options can play
an important role in the success of the Company by encouraging and enabling
key employees of the Company and its subsidiaries, upon whose decisions,
actions and counsel, the Company largely depends for the successful conduct
of its business, to acquire a proprietary interest in the Company. The
Board of Directors anticipates that providing such persons with a direct
stake in the Company will assure a closer identification of the interests of
participants in the 2000 Plan with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to
remain with the Company. Under the Company's stock option plan adopted in
1995 (the "1995 Plan"), no additional options may be granted after March 9,
2005, the tenth anniversary of its adoption. There are currently stock
options to acquire 17,988 shares of the Company's common stock reserved for
future grant under the 1995 Plan.
The Board of Directors believes that the proposed 2000 Plan will help
the Company to achieve its goals by keeping the Company's incentive
compensation program dynamic and competitive with those of other companies.
Accordingly, the Board of Directors believes that the 2000 Plan is in the
best interests of the Company and its shareholders and recommends that the
shareholders approve the Plan. The Board of Directors recommends that the
2000 Stock Option Plan be approved, and therefore recommends a vote FOR this
proposal.
Summary of the 2000 Stock Option Plan
The following description of certain features of the 2000 Plan is
intended to be a summary only. The summary is qualified in its entirety by
the full text of the 2000 Plan which is attached hereto as Appendix I.
Plan Administration; Eligibility. The 2000 Plan is administered by
the Compensation and Benefits Committee (the "Committee"). All members of
the Committee must be "disinterested persons" as that term is defined under
the rules promulgated by the Securities and Exchange Commission.
The Committee has power to make recommendations to the Board
concerning the employees to whom options shall be granted, the number of
shares to be represented by each option and the vesting provisions, if any,
of each option. The Committee also determines the other terms and
conditions of each award, subject to the provisions of the 2000 Plan, and is
empowered to make determinations regarding, and prescribe rules relating to,
the Plan.
Options shall be granted by the Board of Directors and may be granted
only to those employees of the Company and its subsidiaries, who are in
positions in which their decisions, actions and counsel significantly impact
the profitability of the Company, as recommended from time to time by the
Committee. The class of persons eligible to receive options is expected to
be approximately twenty employees of the Company or its subsidiaries.
Stock Options. The 2000 Plan permits the granting of options to
purchase the Company's common stock intended to qualify as incentive stock
options ("Incentive Options") under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and thereby provide Plan participants with
favorable income tax consequences. The exercise price of each option will
be determined by the Committee but may not be less than 100% of the fair
market value of the Company's common stock on the date of grant.
The term of each option will be fixed by the Compensation and Benefits
Committee and may not exceed ten years from date of grant. The Committee
will determine, subject to the provisions of the 2000 Plan, the period of
time, if any, after disability or termination of employment during which
options may be exercised. Options may be exercisable in installments, and
the exercisability of options may be accelerated by the Board of Directors
in certain instances.
Upon exercise of options, the option exercise price must be paid in
full either in cash or by check or other instrument acceptable to the
Committee, or if the Committee so permits, by delivery of shares of the
Company's common stock already owned by the optionee.
To qualify as Incentive Options, options must meet additional federal
tax requirements, including limits on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year,
and a shorter term and higher minimum exercise price in the case of certain
large shareholders.
Adjustment for Stock Dividends, Mergers, etc. The Committee will make
appropriate adjustments in outstanding awards to reflect stock dividends,
stock splits and similar events. In the event of a merger or sale of the
Company, the Board of Directors, in its discretion, may provide for
substitution or adjustments of outstanding options, or may accelerate the
vesting and provide for termination of unexercised options which are not
exercised within the time prescribed by the Board with or without payment of
cash consideration.
Amendments and Termination. Subject to certain limitations, the Board
of Directors may at any time amend or terminate the 2000 Plan. However, no
such action may be taken which affects any rights under outstanding options
without the optionee's written consent and, further, plan amendments shall
be subject to approval by the Company's shareholders if and to the extent
required by the Exchange Act, to ensure that awards granted under the 2000
Plan are exempt under Rule 16b-3 promulgated under the Exchange Act, or
required by the Code to preserve the qualified status of Incentive Options.
Effective Date of the 2000 Stock Option Plan. The 2000 Plan will
become effective as of March 3, 2000; provided, holders of at least a
majority of the shares of the Company's common stock present or represented
and entitled to vote at the Annual Meeting vote to approve the 2000 Plan at
such Meeting. For purposes of the vote on the 2000 Plan, abstentions and
broker non-votes will have the same effect as votes against the 2000 Plan.
Awards of stock options may be granted under the 2000 Plan until March 2,
2010.
Tax Aspects Under the U.S. Internal Revenue Code
The following is a summary of the principal federal income tax
consequences of option grants under the 2000 Plan. It does not describe all
federal tax consequences under the 2000 Plan, nor does it describe state or
local tax consequences.
Incentive Options
- -----------------
Under the Code, an employee will not realize taxable income by reason
of the grant or the exercise of any Incentive Option. If an employee
exercises an Incentive Option and does not dispose of the shares until the
later of (a) two years from the date the option was granted or (b) one year
from the date the shares were transferred to the employee, (such periods
referred to in (a) and (b), the "holding period") the entire gain, if any,
realized upon disposition of such shares will be taxable to the employee as
long-term capital gain, and the Company will not be entitled to any
deduction for Federal income tax purposes. If an employee disposes of the
shares within such one-year or two-year period in a manner so as to violate
the holding period requirements (a "disqualifying disposition"), the
employee generally will realize ordinary income in the year of disposition,
and, provided the Company complies with applicable withholding requirements,
the Company will receive a corresponding deduction, in an amount equal to
the excess of (a) the lesser of (i) the amount, if any, realized on the
disposition and (ii) the fair market value of the shares on the date the
option was exercised over (b) the option price. Any additional gain
realized on the disposition will be long-term or short-term capital gain and
any loss will be long-term or short-term capital loss. The employee will be
considered to have disposed of his or her shares if he or she sells,
exchanges, makes a gift of or transfers legal title to the shares (except by
pledge or by transfer on death). If the disposition of shares is by gift
and violates the holding period requirements, the amount of the employee's
ordinary income (and the Company's deduction) is equal to the fair market
value of the shares on the date of exercise less the option price. If the
disposition is by sale or exchange, the employee's tax basis will equal the
amount paid for the shares plus any ordinary income realized as a result of
the disqualifying disposition. The holding period requirements are waived
in the event of an employee's death. The exercise of an Incentive Option
may subject the employee to the alternative minimum tax ("AMT"). When
calculating income for AMT purposes, the favorable tax treatment accorded
qualified dispositions of employees under Secion 421(a) of the Code is
desregarded and the bargain purchase element of the incentive option will be
considered part of AMT income.
An employee who surrenders shares of the Company's common stock in
payment of the exercise price of his Incentive Option generally will not,
under proposed Treasury Regulations, recognize any gain or loss upon the
surrender of such shares. The surrender of shares of the Company's common
stock previously acquired upon exercise of an Incentive Option in payment of
the exercise price of another Incentive Option is, however, a "disposition"
of such shares of the Company's common stock. If the Incentive Option
holding period requirements described above have not been satisfied with
respect to such shares of the Company's common stock, such disposition will
be a disqualifying disposition that may cause the employee to recognize
ordinary income as discussed above. In the event of a merger or other
acquisition of the Company, the exchange of Company common stock for shares
of the acquiring company's stock upon the exercise of Incentive Options may
be a disqualifying disposition.
Under proposed Treasury Regulation, all of the shares of the Company's
common stock received by an employee upon exercise of an Incentive Option by
surrendering shares of the Company's common stock will be subject to the
Incentive Option holding period requirements. Of those shares, a number of
shares (the "Exchange Shares") equal to the number of shares of the
Company's common stock surrendered by the employee will have the same tax
basis for capital gains purposes (increased by any ordinary income
recognized as a result of any disqualifying disposition of the surrendered
shares if they were Incentive Option shares) and the same capital gains
holding period as the shares surrendered. For purposes of determining
ordinary income upon a subsequent disqualifying disposition of the Exchange
Shares, the amount paid for such shares will be deemed to be the fair market
value of the shares surrendered. The balance of the shares received by the
employee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The
Incentive Option holding period for all shares will be the same as if the
option had been exercised for cash. The favorable tax treatment available to
employees is dependent upon employees exercising the options in accordance
with the terms of the Plan and the option grant.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
Executive Officers
The following table sets forth information for the fiscal years ended
December 31, 1999, 1998 and 1997 concerning the compensation paid to the
Chief Executive Officer and the other highest paid executive officers
("Named Executive Officers") for services performed in all capacities; no
other executive officer of the Company received total cash compensation in
excess of $100,000 during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Securities
Name and Principal Fiscal Year Underlying All Other
Position End Dec 31 Salary Bonus (1) Other (2) Options Compensation (3)
- -------- ---------- ------ --------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Maurice L. Arel,
President and Chief
Executive Officer 1999 $166,000 $45,864 -0- 3,000 $43,647
1998 $159,327 $50,000 -0- 3,000 $42,293
1997 $143,125 $37,512 -0- 1,500 $38,862
Stephen J.
Densberger,
Executive Vice
President 1999 $105,306 $20,622 -0- 1,500 $5,524
1998 $100,983 $19,285 -0- 1,500 $5,746
1997 $ 90,742 $15,503 -0- 750 $3,966
Charles J. Staab,
Vice President,
Treasurer and Chief
Financial Officer 1999 $ 93,271 $16,377 -0- 1,500 $4,158
1998 $ 89,031 $14,384 -0- 1,500 $3,943
1997 $ 78,743 $11,473 -0- 750 $2,900
- --------------------
<FN>
<F1> Bonus awards for services rendered during such year and paid in the
following year.
<F2> No information is given with respect to other compensation paid to or
distributed in kind where such compensation did not exceed the lesser
of $50,000 or 10% of the total reported salary and bonus.
<F3> For the fiscal years ended December 31, 1999, 1998 and 1997,
respectively, for Mr. Arel includes (i) the cost to the Company for
the purchase of a term life insurance policy ($6,214, $6,308 and
$3,041), (ii) Company contributions to the elective Savings Plan for
Employees of Pennichuck Corporation ($6,480, $5,264, and $5,300) and
(iii) Company contributions to insurance premium paid with respect to
Insurance Funded Deferred Compensation Agreement ($30,953, $30,721 and
$30,521). For fiscal years ended December 31, 1999, 1998 and 1997,
respectively, for Mr. Densberger includes (i) the cost to the Company
for the purchase of a term life insurance policy ($1,813, $1,786 and
$813) and (ii) Company contributions to the elective Savings Plan for
Employees of Pennichuck Corporation ($3,738, $3,960 and $3,153). For
fiscal years ended December 31, 1999, 1998 and 1997, respectively, for
Mr. Staab includes (i) the cost to the Company for the purchase of a
term life insurance policy ($971, $928 and $538) and (ii) Company
contributions to the Elective Savings Plan for Employees of Pennichuck
Corporation ($3,230, $3,015 and $2,362).
</FN>
</TABLE>
Stock Option Grants During the Fiscal Year Ended December 31, 1999
The following table sets forth information concerning the grant of
stock options to acquire shares of the Company's common stock under the 1995
Stock Option Plan to the Chief Executive Officer and the Named Executive
Officers during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Individual Grants (1)
Number of
Securities Percent of Total
Underlying Options Granted to Exercise Expiration
Name Options Granted Employees in Fiscal Year Price($/Share) Date
- ---- --------------- ------------------------ -------------- -----------
<S> <C> <C> <C> <C>
Maurice L. Arel 2,000 20% $21.00 Jan 8, 2009
Stephen J. Densberger 1,500 15% $21.00 Jan 8, 2009
Charles J. Staab 1,500 15% $21.00 Jan 8, 2009
- --------------------
<FN>
<F1> The exercise price of the options granted is equal to the fair market
value of the Company's common stock on the date of grant. The options
are exercisable on the date of the grant and expire ten years
thereafter.
</FN>
</TABLE>
Stock Option Exercises and Fiscal Year End Values
The following table sets forth information concerning the exercise of
stock options by the Chief Executive Officer and the Named Executive
Officers during the fiscal year ended December 31, 1999, and the number and
value of unexercised options held by those officers at fiscal year end. The
value realized on the shares acquired on exercise is the difference between
the exercise price and the fair market value on the date of exercise. The
value of unexercised, in-the-money options at December 31, 1999, is the
difference between its exercise price and the fair market value of the
underlying stock on such date. These values have not been, and may never
be, realized. The underlying options have not been, and may never be,
exercised; and actual gains, if any, on exercise will depend on the value of
Company common stock on the date of exercise.
<TABLE>
<CAPTION>
Value of Unexercised In-the-
Number of Unexercised Money Options at Fiscal Year
Shares Options at Fiscal Year End End (1)
Acquired On Value -------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Maurice L. Arel 12,000 $127,005 2,000 -0- $23,750 -0-
Stephen J. Densberger 4,500 $55,125 4,500 -0- $80,685 -0-
Charles J. Staab 3,300 $38,208 4,500 -0- $50,377 -0-
- --------------------
<FN>
<F1> The closing price of the Company's common stock as reported on the
Nasdaq National Market System on December 31, 1999 was $32.875 per
share and is used in calculating the value of unexercised options.
</FN>
</TABLE>
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors, as recommended by its Audit Committee, has
appointed Arthur Andersen LLP as the independent accountants for the Company
for the fiscal year ending December 31, 2000, subject to ratification of the
shareholders. The Board of Directors recommends a vote FOR the ratification
of the appointment of Arthur Andersen LLP as independent accountants for the
Company to audit the books and accounts of the Company for the fiscal year
ending December 31, 2000. No determination has been made as to what action
the Board of Directors would take if the shareholders do not ratify the
appointment. Representatives of Arthur Andersen LLP will be in attendance
at the Annual Meeting and will have the opportunity to make a statement,
should they desire to do so, and are expected to be available to respond to
questions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Maurice L. Arel, the Company's President and Chief Executive Officer,
is a director of Fleet Bank-NH. The Company has available a $2.5 million
unsecured line of credit facility with Fleet Bank-NH at interest rates tied
to the Bank's cost of funds; at the end of 1999, no amounts were outstanding
under that credit facility. The Company also has two term notes totaling $6
million with Fleet Bank - NH at December 31, 1999. The Company maintains
its primary depository and disbursing accounts with Fleet Bank-NH.
SHAREHOLDERS' PROPOSALS
Shareholders who desire to present proposals for consideration by the
Company's shareholders at the next Annual Meeting of Shareholders, which
will be held on or about April 20, 2001, will be required to advise the
Company in writing of the proposal on or prior to December 1, 2000.
OTHER MATTERS
The Board of Directors knows of no business which will be presented
for consideration at the Annual Meeting other than those items set forth in
the Proxy Statement. The enclosed proxy confers upon each person entitled
to vote the shares represented thereby discretionary authority to vote such
shares in accordance with his or her best judgment with respect to any other
matters which may properly be presented for action at the meeting.
APPENDIX I
PENNICHUCK CORPORATION
2000 STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of the Plan is to attract and
retain the best available personnel for positions of substantial
responsibility and to provide additional incentive to Employees of
Pennichuck Corporation or any present or future Parent or Subsidiary of
Pennichuck Corporation to promote the success of business by providing for
or increasing the proprietary interests of such Employees in the Company.
It is intended that options issued pursuant to this Plan shall constitute
"Incentive Stock Options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Common Stock" means the common stock of the Company, par value
$1.00 per share.
(c) "Company" means Pennichuck Corporation, a business corporation
organized under the laws of The State of New Hampshire.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Committee appointed by the Board in
accordance with Paragraph 4(a) hereof.
(f) "Continuous Employment" or "Continuous Status as an Employee"
means the absence of any interruption or termination of service as an
Employee. Continuous Employment or Continuous Status as an Employee shall
not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Board, or in the case of
transfers between locations of the Company or any Subsidiary or its Parent.
(g) "Disinterested Persons" means an administrator of the Plan who
is not at the time he or she exercises discretion in administering the Plan
eligible, has not at any time within one year prior thereto been
eligible,and for one year after so serving will not be eligible, for
selection as a person to whom stock may be allocated or to whom stock
options may be granted pursuant to the Plan or any other plan of the Company
entitling the participants therein to acquire stock or stock options of the
Company.
(h) "Employee" means any person employed on a full-time basis by the
Company or any present or future Parent or Subsidiary of the Company.
(i) "Option" means a stock option granted pursuant to this Plan.
(j) "Optioned Stock" means Common Stock subject to an Option.
(k) "Optionee" means an Employee who receives an Option.
(l) "Parent" means any present or future corporation which would be a
"parent corporation" as defined in Subsections 424(e) and (g) of the Code.
(m) "Plan" means this 2000 Stock Option Plan.
(n) "Share" means a share of Common Stock, as adjusted in accordance
with Section 11 of the Plan.
(o) "Subsidiary" means any present or future corporation which would
be a "subsidiary corporation" as defined in Subsection 424(f) and (g) of the
Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Paragraph 11 hereof, the aggregate number of Shares of Common
Stock which may be optioned and sold under the Plan is 150,000 Shares.
If an Option issued pursuant to the Plan should be cancelled, expire
or become unexercisable without having been exercised in full, as a result
of termination of the Optionee's employment, voluntary surrender of the
Option or otherwise, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, be available for future
grant of other Options under the Plan.
4. Administration of the Plan.
---------------------------
(a) Committee. The Plan shall be administered by a Committee
consisting of not less than three Disinterested Persons appointed by the
Board.
(b) Powers of the Committee. Subject to the provisions of the
Plan, the Committee shall have the authority, in its sole discretion: (i)
to determine, upon review of relevant information and in accordance with
Section 8 of the Plan, the fair market value of the Common Stock; (ii) to
consider and make recommendations to the Board concerning the Employees to
whom, and the time or times at which, Options shall be granted, the number
of Shares to be represented by each Option and the vesting provisions, if
any, of each Option; (iii) to interpret the Plan; (iv) to prescribe, amend
and rescind rules and regulations relating to the Plan; (v) except as
limited by this Plan, or otherwise determined by the Board, to determine the
terms and provisions of each Option grant (which need not be identical),
including without limitation restrictions on transferability of the Optioned
Stock; (vi) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
by the Board; (vii) to accept the surrender of Options and the substitution
of new Options in exchange therefor; (viii) to recommend to the Board that
the time or times at which any Option may be exercised be accelerated or
deferred (with the consent of the Optionee) but in no event beyond the term
of the Option under Section 7; and (ix) to make all other determinations
deemed necessary or advisable for the administration of the Plan and to
exercise such other power and authority as may be delegated to it by the
Board from time to time.
(c) Effect of the Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
binding on all Optionees.
5. Eligibility.
------------
(a) Options shall be granted by the Board and may be granted only
to Employees who are in positions in which their decisions, actions and
counsel significantly impact the profitability of the Company. In
determining the Employees to whom Options shall be granted, and the number
of Shares to be covered by each Option, the Board shall consider current
position, current salary and other compensation, value of services rendered
and expected to be rendered, recommendations of senior management and other
relevant factors. Directors who are not also Employees shall not be
eligible to receive Options. An Employee who has been granted an Option
may, if otherwise eligible, be granted an additional Option or Options. No
Employee who owns Shares possessing more than 10% of the total combined
voting power of all classes of stock of the Company, or of any Parent or
Subsidiary of the Company, may receive any Options.
The maximum aggregate fair market value (determined at the time the
Option is granted) of the Shares with respect to which Options are
exercisable for the first time during any calendar year by an Employee under
all Incentive Stock Option Plans, as defined in Section 422 of the Code, of
the Company or of any present or future Parent or Subsidiary of the Company,
shall not exceed $100,000.
(b) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment, nor shall it interfere in any way
with his or her right or the Company's or, where applicable, its Parent's or
a Subsidiary's right to terminate his or her employment at any time, which
right is hereby reserved. Selection for participation in the Plan in one
year does not necessarily imply selection in another year.
6. Term of Plan.
-------------
(a) The Plan shall become effective upon the date of its adoption
by the Board ("Effective Date"), subject to the approval of the Plan by the
shareholders of the Company within 12 months after the Effective Date. It
shall continue in effect for a term of 10 years unless sooner terminated
under Section 14 of the Plan. No Option shall be granted after 10 years
from the date of the Plan's adoption by the Board.
(b) Pending shareholder approval of the Plan, grants of Options may
be made by the Board, subject to shareholder approval of the Plan, but any
such options shall be contingent upon such shareholder approval being
obtained and no Option may be exercised prior to the date shareholder
approval is obtained.
7. Term of Option. The term of each Option, within which it may be
exercised, shall be 10 years from the date of grant thereof or such shorter
term as may be provided in the Option grant. In addition, each Option shall
be subject to early termination as provided in the Plan.
8. Exercise Price and Methods of Payment.
--------------------------------------
(a) The price per Share at which each Option granted under the Plan
may be exercised shall not, as to any particular Option, be less than its
fair market value at the time such Option is granted. Fair market value
shall be determined by the Board in the following manner: (i) if on the
date of the granting of an Option, sales prices for the Common Stock are
regularly reported on a stock exchange or market, then the price per Share
shall be no less than the closing price reported on such exchange or market
on the most recent trading day preceding the date such Option is granted or
if there are no such sales on said date, then the price per share shall be
the mean between the closing bid and asked prices on such date as and if so
reported; (ii) if no such sales prices or bid and asked quotations are
reported for such date, then the price per share shall be determined as of
the next reasonably current, prior date for which such final sales price (if
available) or closing bid and asked prices (if no final sales price is
reported) are reported; or (iii) if no information is available which
satisfies the above requirements, the Committee shall make a good faith
determination of fair market value based upon the information reasonably
available to it at that time.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Committee and may consist entirely of cash, check, other Shares of
Common Stock having a fair market value (determined by the Committee) equal
to the aggregate exercise price of the Shares as to which said Option shall
be exercised, or any combination of such methods of payment.
9. Exercise of Option.
-------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable in whole at any time during the term
of the Option, or in part (but not as to less than 10 Shares at any one
time) from time to time during such term, upon such terms and conditions as
determined by the Board at the date of grant and as shall be permissible
under the terms of the Plan; provided, however, that subject to Sections
9(b), (c) and (d), an Option shall be exercisable only by an Optionee who
has maintained Continuous Status as an Employee since the date of the grant
of the Option, unless otherwise determined by the Committee, in its sole
discretion.
An Option may be exercised, subject to provisions hereof relative to
its termination and limitations on its exercise, from time to time only by
(a) written notice of intent to exercise the Option with respect to a
specified number of Shares, and (b) payment to the Company
(contemporaneously with delivery of each such notice) of the amount of the
Option price, payable as determined by the Committee consistent with Section
8(b) of the Plan. If any portion of the exercise price is paid in Shares,
such Shares shall be tendered at their then fair market value as determined
by the Committee in accordance with Paragraph 8(a) hereof. Until the
issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Shares, notwithstanding the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date on which the stock certificate is issued, except as provided in Section
11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Exercise During Employment or Following Death. Unless
otherwise provided in the terms of an Option, and except as provided in
subparagraphs (c) and (d) below, an Option may be exercised by an Optionee
only while he or she is an Employee and has maintained Continuous Status as
an Employee since the date of the grant of the Option, except if his or her
Continuous Employment is terminated by reason of death then to the extent
that the Optionee would have been entitled to exercise the Option
immediately prior to his or her death, such Option of the deceased Optionee
may be exercised within ninety (90) days from the date of his or her death
(but no later than the date on which such Option would otherwise expire) by
the person or persons (including his or her estate) to whom his or her
rights under such Option shall have passed by will or by laws of descent and
distribution.
(c) Option Rights Upon Disability. If an Optionee becomes disabled
within the meaning of Section 22(e)(3) of the Code while an Employee, the
Committee, in its discretion, may allow the Option to be exercised (to the
extent exercisable on the date of termination of employment) at any time
within one year after the date of termination of employment due to
disability, unless either the Option or the Plan otherwise provides for
earlier termination.
(d) Option Rights Upon Termination of Employment. If an Optionee
ceases to be an Employee for any reason other than death or disability, his
or her Option shall immediately terminate; provided, however, that the
Committee may, in its discretion, allow the Option to be exercised (to the
extent exercisable on the date of termination of employment) at any time
within three months after the date of termination of employment, unless
either the Option or the Plan otherwise provides for earlier termination of
the Option.
For purposes of subparagraphs (b), (c) and (d) above the Committee's
determination whether an Optionee's employment has ceased, and the effective
date thereof, shall be final and conclusive with regard to all persons
affected thereby.
10. Non-Transferability of Options. Options may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution. An Option
may be exercised, during the lifetime of the Optionee, only by the Optionee
or by his guardian or legal representative.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of Shares
of Common Stock covered by each outstanding Option, and the number of Shares
of Common Stock which have been authorized for issuance under the Plan but
as to which no Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, as well as the price
per Share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued Shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the aggregate number of issued Shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares of Common Stock subject to an
Option.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his or her Option as to
all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable.
In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Board may accelerate the time or times at which any Option
may be exercised and may provide for cancellation of such accelerated
Options which are not exercised within the time prescribed by the Board in
its sole discretion or the Board may provide for each outstanding Option to
be assumed or for an equivalent Option to be substituted by a successor
corporation in the transaction.
12. Time of Granting Options. The date of grant of an Option under
the Plan shall, for all purposes, be the date on which the Board makes the
determination of granting such Option. Notice of the determination shall be
given to each Employee to whom an Option is so granted within a reasonable
time after the date of such grant.
13. Modification of Options. At any time and from time to time the
Board may authorize the Committee to direct execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option
any right or benefit which could not be conferred on him or her by the grant
of a new Option at such time, or impair the Option without the consent of
the holder of the Options.
14. Amendment and Termination of the Plan.
--------------------------------------
(a) Amendment and Termination. The Board may terminate or
amend the Plan from time to time in such respects as the Board may
deem advisable;provided, however, that the following amendments shall
require approval of the shareholders of the Company:
(i) any change in the number of Shares subject to the
Plan, other than in connection with an adjustment under Section
11;
(ii) any material modification in the designation of
the class of persons eligible to be granted Options;
(iii) any change in the minimum Option price under
Section 8, other than pursuant to Section 11, or any extension
of the period within which Options may be exercised;
(iv) removal of the administration of the Plan from the
Committee; or
(v) any material increase in the benefits accruing to
participants under the Plan.
(b) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan
had not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Committee, which agreement must be in
writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
any applicable provisions of law, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
Inability of the Company to obtain any ruling, decision, order,
registration or approval from any regulatory body or authority deemed by the
Company's counsel to be necessary or advisable for the lawful issuance and
sale of any Shares hereunder shall relieve the Company of any liability with
respect to the non-issuance or sale of such Shares.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to provide at the time of any such
exercise such representations and warranties as the Company shall deem
necessary to assure compliance with applicable laws, rules, regulations and
interpretations, including representations and warranties that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares or any other representations and warranties
necessary or advisable to assure the availability of any exemption from the
registration requirements of federal or state laws.
Each Option shall include such terms, conditions and provisions as the
Committee determines to be necessary or desirable in order to qualify such
Option as a tax-favored Option within the meaning of Section 422 of the
Code, or any amendment thereof, substitute therefor or regulation
thereunder. Subject to the limitations of Section 14, and without limiting
any other provisions hereof, the Committee shall have the power without
further approval to amend the terms of this Plan or any awards or agreements
thereunder for such purpose.
The recipient of any Option under the Plan, unless otherwise provided
by the Plan, shall have no rights as a shareholder with respect thereto
unless and until certificates for Shares are issued to him or her.
16. Reservation of Shares. The Company, during the term of this
Plan, will reserve and keep available a number of Shares sufficient to
satisfy the requirements of the Plan.
17. Option Grant. Options shall be evidenced by written Option
grants in such form as the Board or the Committee shall approve.
18. General Provisions.
-------------------
(a) Whenever the Company proposes or is required to issue or
transfer Shares under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements
prior to the delivery of any certificate or certificates for such
Shares.
The obligations of the Company under the Plan shall be
conditional on the payment of such withholding amount, and the Company
and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such amount from any obligations otherwise due
from any of them to the Optionee.
(b) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of New Hampshire.
PROXY
PENNICHUCK CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Pennichuck Corporation ("Company")
hereby appoints Robert P. Keller and Charles E. Clough, and each of them,
with full power of substitution in each, as proxies for the undersigned to
vote, as designated below, all shares of common stock of the Company which
the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held at 3:00 p.m. on Thursday, April 20, 2000 at the Nashua Marriot
Hotel, 2200 Southwood Drive, Nashua, New Hampshire, or any adjournments
thereof.
This proxy when properly executed will be voted as directed by the
undersigned shareholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR ALL PROPOSALS. The undersigned shareholder may revoke
this proxy at any time before it is voted by delivering to the Secretary of
the Company at 4 Water Street, Nashua, New Hampshire, either a written
revocation of the proxy or a duly executed substitute bearing a later date,
or by appearing at the Annual Meeting and voting in person. The
undersigned shareholder hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and the accompanying Proxy Statement.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED SIDE
ON THE REVERSE SIDE
The Board of Directors Recommends a vote "FOR" Proposals 1, 2, 3 and 4.
1. Election of Directors.
Nominees: Maurice L. Arel, Joseph A. Bellavance and Robert P. Keller
[ ] FOR [ ]WITHHELD
[ ]
For all nominees except as noted above
2. Proposal to ratify the appointment by the Board of Directors of
Arthur Andersen LLP as independent accountants of the Company for
the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve an amendment to the Company's Articles of
Incorporation to increase the number of authorized common shares from
5,000,000 to 11,500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve the Pennichuck Corporation 2000 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
IMPORTANT: THIS IS YOUR PROXY. Please date, sign and return this proxy
promptly in the enclosed envelope.
Please sign exactly as your name appears on the envelope in which this card
was mailed. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held jointly, each
holder should sign.
Signature:_____________________ Date:________________
Signature:_____________________ Date:________________
