PNNW Pennichuck Corp. (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2) )
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

 

PENNICHUCK CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee 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:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

25 Manchester Street
Merrimack, New Hampshire 03054

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Thursday, May 5, 2011

To Our Shareholders:

The Annual Meeting of Shareholders of Pennichuck Corporation will be held at 9:00 AM (Eastern Time), on Thursday, May 5, 2011, at the Courtyard by Marriott-Nashua, 2200 Southwood Drive, Nashua, New Hampshire 03063 for the following purposes:

(1)

To elect four directors, each for a three-year term, to continue until the Company’s Annual Meeting of Shareholders in the year 2014 and until his or her successor is duly elected and qualified;

(2)

To ratify the appointment of ParenteBeard LLC as the Company’s independent registered public accountants for the year ending December 31, 2011;

(3)

To have an advisory (non-binding) vote on the approval of the compensation of the Company’s Named Executive Officers (“Say on Pay”) as disclosed in the proxy statement for this meeting;

(4)

To have an advisory (non-binding) vote on the desired frequency on which shareholders will have an advisory (non-binding) vote on the approval of the compensation of the Company’s Named Executive Officers (“Say When on Pay”); 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 Friday, March 4, 2011 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any postponements or adjournments of the 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,
		Roland E. Olivier Secretary

Merrimack, New Hampshire
March 25, 2011

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 5, 2011:

The Company’s Proxy Statement for the 2011 Annual Meeting of Shareholders and the Company’s Annual Report on Form 10-K for the Year ended December 31, 2010 are available at: www.pennichuck.com/investor/proxy-materials.php.

BROKERS ARE NOT PERMITTED TO VOTE ON THE ELECTION OF DIRECTORS AND/OR ON ANY ADVISORY VOTES RELATING TO SAY ON PAY AND SAY WHEN ON PAY WITHOUT INSTRUCTIONS FROM THE BENEFICIAL OWNER. THEREFORE, IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER OR BANK, YOUR VOTE IS ESPECIALLY IMPORTANT. ACCORDINGLY, WE ENCOURAGE YOU TO VOTE PROMPTLY BY MAIL OR THE INTERNET, AS PROVIDED BY THE ENCLOSED PROXY CARD, EVEN IF YOU INTEND TO ATTEND THE ANNUAL MEETING. 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.

Table of Contents

Annual Meeting			5
Corporate Governance, Board and Committee Membership			9
Board Leadership Structure and Role in Risk Oversight			9
Audit Committee			10
Compensation and Benefits Committee			10
Compensation Committee Interlocks and Insider Participation			11
Corporate Governance and Nominating Committee			11
Director Attendance			12
Contacting the Board of Directors			13
Security Ownership of Certain Beneficial Owners			13
Security Ownership of Management			14
Proposal One — Election of Directors			15
General			15
Information as to Nominees and Continuing Directors			15
Nominees for Election at this Annual Meeting			16
Directors with Terms Expiring in 2012			18
Directors with Terms Expiring in 2013			19
Director Compensation			20
Executive Officers			20
Report of the Audit Committee			22
Section 16(a) Beneficial Ownership Reporting Compliance			23
Executive Compensation — Compensation Discussion and Analysis			23
Report of the Compensation and Benefits Committee			32
Summary of Cash and Certain Other Compensation			32
Executive Agreements			34
Grants of Plan-Based Awards			39
Stock Option Exercises and Fiscal Year End Values			40
Option Exercises and Stock Vested During 2010			40
Outstanding Equity Awards at Fiscal Year-End			41
Pension Benefits			42
Pension Plan			42
Severance and Change of Control Benefits			43
Certain Relationships and Related Party Transactions			44
Code of Ethics for Financial Professionals			45
Equity Compensation Plan Information			46

Proposal Two — Ratification of Independent Registered Public Accountants			46
Relationship with Independent Accountants			46
Fees Paid to Independent Accountants			47
Proposal Three — Advisory (non-binding) vote on the approval of the compensation of the Company’s Named Executive Officers (“Say on Pay”)			48
Proposal Four — Advisory (non-binding) vote on the desired frequency on which shareholders should have an advisory (non-binding) vote on the approval of the compensation of the Company’s Named Executive Officers (“Say When on Pay”)			48
Annual Report on Form 10-K			49
Other Matters			49
Appendix A — Audit Committee Charter of Pennichuck Corporation			50

PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054

PROXY STATEMENT
for
2011 ANNUAL MEETING OF SHAREHOLDERS
to be held on May 5, 2011

Annual Meeting

Why have I received these materials?

This Proxy Statement and the accompanying proxy are being mailed to shareholders on or about March 25, 2011. The proxy is being solicited by the Board of Directors (the “Board”) of Pennichuck Corporation (referred to throughout this Proxy Statement as “Pennichuck”, the “Company”, “we”, “our”, “our Company” or “us”) in connection with our Annual Meeting of Shareholders that will take place on Thursday, May 5, 2011, at 9:00 AM (Eastern Time), at the Courtyard by Marriott-Nashua, 2200 Southwood Drive, Nashua, New Hampshire 03063, and at any adjournment thereof. You are cordially invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.

A copy of our Annual Report on Form 10-K for the year ended December 31, 2010 has been enclosed with the Proxy Statement mailed to you. Pennichuck’s Proxy Statement for the Annual Meeting and the 2010 Annual Report on Form 10-K can also be viewed on the Company’s website at www.pennichuck.com/investor/proxy-materials.php.

Are these materials related to the merger with the City of Nashua that the Company recently announced?

No. As you are aware, effective as of November 11, 2010, the Company entered into a merger agreement (the “Merger Agreement”) with the City of Nashua, New Hampshire (“Nashua”) pursuant to which the Company’s Board of Directors has agreed to sell the Company to Nashua for $29.00 per share in cash (the “Merger”). This Proxy Statement does not directly relate to the proposed Merger and refers to it only as necessary to describe its effects on the information contained herein. However, before the Merger can be completed, numerous conditions must be met including that at least two-thirds of the outstanding common shares of Pennichuck must be voted in favor of it. Regarding that required shareholder vote, as of the date of this mailing, the Company has not set the date of the Special Meeting of Shareholders but we expect to mail out a separate proxy later this year. The Company’s Directors urge you to examine that separate proxy information carefully when you receive it and to vote in favor of the Merger at that time.

Who is entitled to vote at the Annual Meeting?

Holders of shares of common stock of Pennichuck as of the close of business on Friday, March 4, 2011, the record date for the Annual Meeting, will be entitled to receive notice of and to vote at the Annual Meeting. As of the record date, 4 , 679,927 shares of our common stock were outstanding, each of which is entitled to one vote with respect to each matter to be voted on at the Annual Meeting.

How do I vote my shares at the Annual Meeting?

If you are a “record” shareholder of common stock (that is, if you hold common stock in your own name in Pennichuck’s stock records maintained by our transfer agent, American Stock Transfer & Trust Company), you may complete and sign the accompanying proxy card and return it to Pennichuck or deliver it in person or you may attend the Annual Meeting and vote in person. Shareholders of record may also vote via the Internet. Internet voting information is provided on the proxy card. If you vote via the Internet, please do not return a signed proxy card.

If your shares are held in “street name” (for example, if your shares of common stock are held by a brokerage firm), your brokerage firm, as the record holder of your shares, is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the directions your brokerage firm provides you. Under the current rules of the New York Stock Exchange (“NYSE”), which are applicable to all brokers on all exchanges including the NASDAQ Global Market (“NASDAQ”) where Pennichuck’s stock is traded, if you do not give instructions to your brokerage firm, it will only be able to vote your shares with respect to certain “discretionary” items, but will not be allowed to vote your shares with respect to certain “non-discretionary” items. The ratification of ParenteBeard LLC as our independent registered public accounting firm for the year ending December 31, 2011 (Proposal Two) is considered to be a discretionary item under the NYSE rules and your brokerage firm will be able to vote on that item even if it does not receive instructions from you, so long as it holds your shares in its name. If you do not instruct your broker how to vote your shares with respect to the election of directors (Proposal One), and the advisory votes regarding Say on Pay (Proposal Three) or Say When on Pay (Proposal Four), your broker may not vote for directors any of these proposals, and your votes will be counted as “broker non-votes,” which means your votes will neither be cast nor counted with respect to director election, Say on Pay and Say When on Pay.

If your shares are held in street name and you wish to attend the Annual Meeting in person, you must bring an account statement or letter from your brokerage firm showing that you are the beneficial owner of the shares as of the record date (Friday, March 4, 2011) in order to be admitted to the Annual Meeting on May 5, 2011. To be able to vote your shares held in street name at the Annual Meeting, you will need to obtain a proxy card from the holder of record (e.g. your brokerage firm) for your shares.

Can I change my vote or revoke my proxy after I return my proxy card?

For “record” shareholders of common stock, yes you can. After you have submitted a proxy online or by mail, you may revoke your proxy or change your vote at any time before the proxy is exercised by submitting a notice of revocation or a duly executed proxy bearing a later date prior to the date of the Annual Meeting, by voting again prior to the time at which our voting facilities close, or by attending the Annual Meeting and voting in person. In any event, the latest submitted vote will be recorded and the earlier vote(s) revoked.

For “street name” shareholders of common stock, you will need to review the instructions on the proxy form provided to you by the institution that holds your shares to determine whether you may change your vote after you have submitted a proxy. If you are permitted to change your vote after you have submitted a proxy, follow the instructions for revocation on such form to do so.

What constitutes a quorum for purposes of the Annual Meeting?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the outstanding shares of common stock entitled to vote shall constitute a quorum for the transaction of business. Proxies marked as “withholding” or containing “broker non-votes” on any matter to be acted upon by shareholders will be treated as present at the meeting for purposes of determining a quorum. As noted above, a “broker non-vote” occurs when a registered broker holding a customer’s shares in the name of the broker has not received voting instructions on a matter from the customer and is barred from exercising discretionary authority to vote on that matter, as indicated by the broker on the proxy. Brokers may not vote on non-discretionary items including the election of directors (Proposal One), Say on Pay (Proposal Three) or Say When on Pay (Proposal Four), and may only vote on other routine discretionary matters, such as the ratification of ParenteBeard LLC as our independent registered public accounting firm (Proposal Two) without receiving instructions from their customers.

What vote is required to approve each proposal at the Annual Meeting?

Under New Hampshire law, the election of directors at the Annual Meeting requires the affirmative vote of a plurality of the votes cast at the Annual Meeting by shares represented in person or by proxy and entitled to vote on the proposal. Votes that are withheld and “broker no-votes” will have no effect on the outcome of the election of directors.

Approval of the proposed ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public auditors requires the affirmative vote of a majority of the votes cast at the Annual Meeting by shares represented in person or by proxy and entitled to vote on the proposal.

Approval regarding each advisory vote regarding Say on Pay (Proposal Three) and Say When on Pay (Proposal Four) for the Company’s Named Executive Officers requires a plurality of the votes cast at the Annual Meeting by shares represented in person or by proxy and entitled to vote on the proposal. Votes that are withheld and “broker no-votes” will have no effect on the outcome of these advisory votes. Shareholder votes regarding Say on Pay and Say When on Pay proposals are advisory in nature and will be considered by the Company’s Board of Directors in implementing compensation and benefit policies and advisory votes in the future.

Shares held by stockholders who abstain from voting as to a particular matter, and shares held in “street name” by brokers or nominees who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular matter, will not be counted as votes in favor of such matter, and also will not be counted as shares voting on such matter. “Broker non-votes” will be counted for the purpose of determining whether a quorum exists.

How does the Board of Directors recommend that I vote my shares?

Unless you give other instructions on your proxy, the persons named as proxy holders on the proxy will vote in accordance with the recommendations of the Board of Directors. The Board of Directors’ recommendation is set forth together with the description of the proposal in this Proxy Statement. In summary, the Board of Directors recommends a vote:

•

FOR the Board of Directors’ proposal to elect as directors of Pennichuck the four nominees named in this Proxy Statement.

•

FOR the Board of Directors’ proposal to ratify the appointment of ParenteBeard LLC as the Company’s independent registered public accountants for the year ending December 31, 2011.

•

FOR the Board of Directors’ proposal to approve the 2011 compensation for the Company’s Named Executive Officers (Say on Pay advisory vote).

•

FOR the Board of Directors’ proposal to hold a shareholder advisory vote every year on the compensation for the Company’s Named Executive Officers (Say When on Pay advisory vote).

With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion in the best interests of Pennichuck. At the date of this Proxy Statement, the Board of Directors had no knowledge of any business other than that described in this Proxy Statement that will be presented for consideration at the Annual Meeting.

Where can I find the voting results?

Pennichuck will report the voting results in a Form 8-K within four business days after the end of its 2011 Annual Meeting.

Who will bear the expense of soliciting proxies?

Pennichuck will bear the cost of soliciting proxies in the form enclosed. In addition to the solicitation by mail, proxies may be solicited personally or by telephone, facsimile or electronic transmission by our directors, officers and employees. We may reimburse brokers holding common stock in their names or in the names of their nominees for their expenses in sending proxy materials to the beneficial owners of such common stock.

When must a shareholder proposal for the 2012 Annual Meeting of Shareholders be delivered to the Company?

Any shareholder who intends to present a proposal for inclusion in the Proxy Statement for the 2012 Annual Meeting of Shareholders (the “2012 Annual Meeting”) must deliver the proposal to the Company Secretary at 25 Manchester Street, Merrimack, New Hampshire 03054 in writing not later than November 28, 2011, if the proposal is submitted for inclusion in our proxy materials for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. Any shareholder who intends to present a proposal directly at the 2012 Annual Meeting rather than submitting it for inclusion in next year’s Proxy Statement ( i.e. , outside the process of Rule 14a-8 of the Securities Exchange Act of 1934) should provide a notice of their intention to do so to the Company Secretary at 25 Manchester Street, Merrimack, New Hampshire 03054. To be timely, such notice must be received by the Company before the close of business on February 9, 2012. For any such proposal sought to be presented directly at the 2012 Annual Meeting, Securities and Exchange Commission (“SEC”) rules permit the persons named as proxy holders on proxies relating to such meeting to vote the proxies in their discretion if we: (1) receive notice of the proposal before the close of business on February 9, 2012, and advise shareholders in the 2012 Proxy Statement about the nature of the matter and how the proxy holders appointed by the Board of Directors intend to vote on such matter; or (2) do not receive notice of the proposal prior to the close of business on February 9, 2012.

How will documents be delivered to me if I share an address with other shareholders?

Some brokers and other nominees may participate in the practice of “householding” proxy statements and annual reports. This means that only one copy of our Proxy Statement and Annual Report on Form 10-K may have been sent to multiple shareholders in your household. Pennichuck will promptly deliver a separate copy of either document to you if you contact us at the following address: Attention Investor Relations, Pennichuck Corporation, 25 Manchester Street, Merrimack, New Hampshire 03054; or telephone number: (603) 882-5191. If you would like to receive separate copies of our Proxy Statements and/or annual reports to shareholders in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your broker or other nominee, or contact us at the above address or telephone number.

Corporate Governance, Board and Committee Membership

As of the date of this Proxy Statement, the Board of Directors has determined in its business judgment that all of the members of the Board of Directors and all director nominees are independent under the applicable NASDAQ listing standards and SEC rules and regulations, except for Duane C. Montopoli due to his being President and CEO of the Company.

In considering status of Pennichuck directors and nominees as “independent” within the meaning of the relevant NASDAQ rules and all other applicable laws and standards, the Board of Directors specifically considered the relationships and transactions described under the heading “Certain Relationships and Related Party Transactions” located under, “Director Compensation” in this Proxy Statement.

Board Leadership Structure and Role in Risk Oversight

Pennichuck separates the roles of the President/Chief Executive Officer (“CEO”) and the Chairman of the Board of Directors in recognition of the differences between the two roles and the Board’s active role in risk oversight of management’s risk identification, risk management and risk mitigation strategies. The President/CEO is responsible for setting the strategic direction of the Company and its day-to-day leadership, management and performance. The Chairman of the Board is an independent director who provides guidance to the President/CEO, approves the agenda for Board meetings and presides over meetings of the full Board as well as executive sessions of “non-management” directors. The Board generally holds executive sessions at the end of each regularly scheduled meeting of the full Board. During 2010, the Board of Directors met five times for regularly scheduled meetings and five times for special meetings.

The Board takes an active role in the Company’s risk oversight process, which includes receiving regular reports from members of senior management on areas of material risk to the Company, including eminent domain, operational, financial, legal, regulatory, strategic and reputational risks. The full Board (or the appropriate Committee in the case of risks that are under the purview of a particular Committee) receives these reports from the appropriate “risk owner” within the organization to enable it to understand Pennichuck’s risk identification, risk management and risk mitigation strategies. When a Committee receives the report, the Chairman of the relevant Committee reports on the discussion to the full Board during the Committee reports portion of the next Board meeting. This enables the Board and its Committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. The full Board regularly reviews information regarding the Company’s credit, liquidity and operations, as well as the risks associated with each including any environmental, health and safety risks. As part of its charter, the Audit Committee oversees management of financial risks, and related legal and regulatory risks, and discusses Pennichuck’s policies and procedures with respect to risk identification and risk management by the Company’s senior management. The Compensation & Benefits Committee is responsible for overseeing the management of risks relating to the Company’s executive and non-executive compensation plans and arrangements. The Corporate Governance & Nominating Committee is responsible for overseeing the management of risks associated with the independence of the Board of Directors, potential conflicts of interest and other corporate compliance risks.

The respective membership and functions of the Audit Committee, the Compensation and Benefits Committee, and the Corporate Governance and Nominating Committee, are discussed below.

Audit Committee

The Audit Committee is presently comprised of Robert P. Keller (Chairman), Clarence A. Davis and Janet M. Hansen. The composition of the Audit Committee following the Annual Meeting will be determined at the meeting of the Board of Directors immediately following the Annual Meeting. The Audit Committee is responsible for the appointment of the independent auditors, oversight of the integrity of the Company’s financial statements, its compliance with legal and regulatory requirements, the qualifications and independence of its independent auditors, and other significant financial matters. The Board of Directors has determined in its business judgment that each of the members of the Audit Committee is independent under the applicable NASDAQ listing standards and SEC rules and regulations. The Board of Directors has also determined in its business judgment that each of Mr. Keller, Mr. Davis and Ms. Hansen are qualified as Audit Committee financial experts within the meaning of applicable rules and regulations of the SEC. The relevant experience and qualifications of each of Mr. Keller, Mr. Davis and Ms. Hansen are included in this Proxy Statement under “Proposal One — Election of Directors—Information as to Nominees and Continuing Directors.” During 2010, the Audit Committee met four times.

The Audit Committee has adopted a Charter governing its mission, membership, duties and responsibilities; a copy of the Charter for the Audit Committee is attached to this Proxy Statement as Exhibit A and can be accessed electronically at the Company’s website at www.pennichuck.com/investor/corporate_governance.php.

Compensation and Benefits Committee

The Compensation and Benefits Committee (the “Compensation Committee”) is presently comprised of James M. Murphy (Chairman), Steven F. Bolander and Michael I. German. The composition of the Compensation Committee following the Annual Meeting will be determined at the meeting of the Board of Directors immediately following the Annual Meeting. The Compensation Committee is charged generally (a) to establish the Company’s executive compensation programs, (b) to monitor the operation of the Company’s qualified noncontributory, defined benefit pension plan and the Company’s 401(k) Elective Savings Plan for Employees and the performance of the trustee(s) and administrator(s) of those plans, and (c) to administer the Company’s 2009 Equity Incentive Plan, and in each case, to recommend changes to the Board as and when appropriate. The Board of Directors has determined in its business judgment that each of the members of the Compensation Committee is independent under the applicable NASDAQ listing standards and SEC rules and regulations. During 2010, the Compensation Committee met four times. For information on the Company’s compensation practices, see “Executive Compensation—Compensation Discussion and Analysis.”

The Compensation Committee has adopted a Charter governing its mission, membership, duties and responsibilities; a copy of the Charter for the Compensation Committee can be accessed electronically at the Company’s web site at www.pennichuck.com/investor/corporate_governance.php.

Compensation Committee Interlocks and Insider Participation

The following directors served as members of the Compensation Committee during some or all of 2010: Messrs. Murphy, Bolander and German. During 2010, no member of the Compensation Committee had a relationship that requires disclosure as a Compensation Committee interlock.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee (the “Nominating Committee”) is presently comprised of John R. Kreick (Chairman), Joseph A. Bellavance, Hannah M. McCarthy and Martha E. O’Neill. The composition of the Nominating Committee following the Annual Meeting will be determined at the meeting of the Board of Directors immediately following the Annual Meeting. The Nominating Committee is charged generally with identifying individuals qualified to become members of the Board of Directors and recommending to the Board of Directors the director nominees for election at the next annual meeting of shareholders and/or for interim director appointments to the Board of Directors. The Nominating Committee also recommends to the Board of Directors the director candidates for each committee of the Board of Directors for appointment by the Board of Directors. The Board of Directors has determined in its business judgment that each of the members of the Nominating Committee is independent under the applicable NASDAQ listing standards and SEC rules and regulations. During 2010, the Nominating Committee met one time.

The Nominating Committee has adopted a Charter governing its mission, membership and duties and responsibilities; a copy of the Charter for the Nominating Committee can be accessed electronically at the Company’s website at www.pennichuck.com/investor/ corporate_governance.php.

The Nominating Committee will consider nominees recommended by Company shareholders provided that the recommendations are made in accordance with the procedures set forth herein and if received in writing no later than November 28, 2011 with respect to the 2012 Annual Meeting. A shareholder who wishes to recommend a prospective nominee for the Board of Directors should notify the Company’s Secretary or any member of the Nominating Committee, in writing at the Company’s mailing address, with the name of the recommended candidate for director, the consent of the shareholder and any proposed nominee to be identified, and whatever supporting material the shareholder considers appropriate. If the recommending shareholder is not the registered owner of the securities, he or she can submit one of the following to the registrant to evidence the required ownership percentage and holding period: (i) a written statement from the record holder of the securities (usually a broker or bank) verifying that, at the time the security holder made the recommendation, he or she had held the required securities for at least one year; or (ii) if the security holder has filed a Schedule 13D, Schedule 13G, Form 3, Form 4, and/or Form 5, or amendments to those documents or updated forms, reflecting ownership of the securities as of or before the date of the recommendation, a copy of the schedule and/or form, and any subsequent amendments reporting a change in ownership level, as well as a written statement that the security holder continuously held the securities for the one-year period as of the date of the recommendation.

In addition to considering candidates suggested by shareholders, the Nominating Committee identifies nominees for director through a variety of sources including, but not limited to, the services of executive search firms and referrals from the Company’s current directors and executive officers as well as through certain outside service providers such as its outside counsel, outside auditors, commercial and investment banking firms. The Company did not employ an executive search firm or otherwise pay a fee to any third party in connection with the identification or evaluation of the nominees included in this Proxy Statement, each of whom is a continuing director. The Nominating Committee screens all candidates in the same manner regardless of the source of the recommendation.

Criteria and Diversity

The Nominating Committee will consider whether to nominate any candidate for director in accordance with criteria set forth in its Charter, including:

•

the potential nominee’s experience, qualifications, knowledge, skills and attributes that makes him/her qualified to serve on the Board of Directors;

•

the independence of the potential nominee under applicable NASDAQ listing standards and SEC rules and regulations;

•

the ability of the potential nominee to represent the interests of the shareholders of the Company;

•

the potential nominee’s integrity, commitment and judgment;

•

the potential nominee’s availability to dedicate time and energy to the performance of his or her duties, taking into account the number of other boards he or she sits on in the context of the needs of the Board of Directors and the Company;

•

the extent to which the potential nominee contributes to the overall expertise, skills and diversity appropriate for the Board of Directors; and

•

such other factors relative to the overall composition of the Board as the Committee shall determine to be relevant at the time.

The charter of the Nominating Committee requires the Committee and the Board to consider the value of diversity in the director identification and nomination process. The Nominating Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Company and the Board believes that the backgrounds and qualifications of the directors, considered as a group, should provide the significant composite mix of diverse experience, knowledge, abilities and perspectives that will allow the Board to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.

Director Attendance

During the year ended December 31, 2010, the Board of Directors of the Company held five regular meetings and five special meetings. 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 of Directors on which he or she served. As a general matter, members of the Board of Directors are expected to attend the Company’s annual meetings. All continuing members of the Board of Directors and nominees for election to the Board of Directors were present at Pennichuck’s 2010 Annual Meeting of Shareholders (“2010 Annual Meeting”).

Contacting the Board of Directors

Any shareholder who desires to contact Pennichuck’s Chairman, or the other members of the Board of Directors, or the Chairman of the Audit, Compensation or Nominating Committee, may do so by writing to: Board of Directors, Pennichuck Corporation, 25 Manchester Street, Merrimack, New Hampshire 03054. Communications received in writing are distributed to the Chairman or other members of the Board of Directors, or the Chairman of the relevant committee, as appropriate, depending on the facts and circumstances outlined in the communication received. For example, as comments or questions regarding accounting or auditing matters are received, they will be forwarded to the Chairman of the Audit Committee for review.

Security Ownership of Certain Beneficial Owners

To the knowledge of Pennichuck, based solely upon filings made with the SEC, the following are the only persons or entities to beneficially own more than 5% of the outstanding shares of our common stock as of March 10, 2011:

Amount and

Nature of

Name and Address of

Beneficial

Title of Class

Beneficial Owner

Ownership „

Percent of Class 

Common Stock

GAMCO Investors, Inc. One Corporate Center Rye, New York 10580-1435 ƒ

737,975

15.8

%

Common Stock

Thomson Horstmann & Bryant, Inc. 501 Merritt 7 Norwalk, CT 06851 ‚

263,392

5.6

%

Security Ownership of Management

To the knowledge of Pennichuck, the following table sets forth information as of March 10, 2011 with respect to shares of our common stock beneficially owned by each nominee and continuing director, the current or former executive officers named in the executive compensation table below (the “Named Executive Officers”), and by all directors and executive officers as a group:

				Amount and
				Nature of
				Beneficial				Percent of
Title of Class		Name of Beneficial Owner		Ownership 				Class ‚
Common Stock		Joseph A. Bellavance ƒ			10,300				*
Common Stock		Steven F. Bolander			133				*
Common Stock		Clarence A. Davis			—				*
Common Stock		Michael I. German			2,500				*
Common Stock		Janet M. Hansen			1,100				*
Common Stock		Robert P. Keller			3,213				*
Common Stock		John R. Kreick ƒ			1,060				*
Common Stock		Hannah M. McCarthy ƒ			1,333				*
Common Stock		Duane C. Montopoli „			79,000				1.7	%
Common Stock		James M. Murphy			500				*
Common Stock		Martha E. O’Neill			16,266				*
Common Stock		Thomas C. Leonard „			15,233				*
Common Stock		Donald L. Ware „			19,841				*
Common Stock		Stephen J. Densberger ƒ „			47,465				1.0	%
Common Stock		Roland E. Olivier „			13,398				*
All Directors and Executive Officers as a Group (16 Persons) ƒ „					236,383				5.0	%

Proposal One — Election of Directors

General

Our Board of Directors is currently divided into three classes, each class serving for three years, with one class being elected each year. Our Bylaws give the Board of Directors the discretion to set from time to time the number of directors constituting the entire Board of Directors, provided that the Company has at least three and not more than 13 directors. In 2009, the Board of Directors voted to expand the Board to 11 directors. Of the 11 current directors, four have terms ending in 2011, four have terms ending in 2012 and three have terms ending in 2013.

The Board of Directors has nominated Joseph A. Bellavance, Janet M. Hansen, Hannah M. McCarthy and James M. Murphy, each an incumbent director, each for election to three-year terms expiring at the Annual Meeting of Shareholders in 2014 and until his or her successor is duly elected and qualified.

The Board of Directors recommends a vote FOR the election of the four 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 four nominees. If any person named as nominee should be unable or unwilling to stand for election at the time of the Annual Meeting, Pennichuck expects that 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 persons nominated to serve on the Board of Directors and concerning the other directors continuing in office beyond the Annual Meeting.

										Year Present
						Director of				Term Will
Nominees 		Age				Company Since				Expire				Position with Company
Joseph A. Bellavance			71				1983				2011				—
Janet M. Hansen			68				2008				2011				—
Hannah M. McCarthy			64				1994				2011				—
James M. Murphy			63				2006				2011				—

										Year Present
						Director of				Term Will
Continuing Directors 		Age				Company Since				Expire				Position with Company
Steven F. Bolander			66				2004				2012				—
Clarence A. Davis			69				2009				2012				—
Michael I. German			60				2009				2012				—
Robert P. Keller			73				1983				2012				—
John R. Kreick			66				1998				2013			Non-Executive Chairman
Duane C. Montopoli			62				2006				2013			President and Chief Executive Officer
Martha E. O’Neill			53				1998				2013				—

The following includes information as of the date of this Proxy Statement about each nominee and each director. This includes information each nominee and director has given Pennichuck about his/her age, all positions he/she holds, his/her principal occupation and business experience for the past five (5) years, and the names of other publicly-held companies of which he/she currently serves as a director or has served as a director during the past five (5) years. In addition to the information presented below regarding each nominee’s and each director’s experience, qualifications, attributes and skills that led our Board to the conclusion that he/she should serve as a director, Pennichuck also believes that all of our director nominees and directors have demonstrated a commitment of service to Pennichuck and our Board. We value their significant experience on other boards of directors and board committees for other publicly traded companies as well as privately held and not-for-profit entities. Finally, the Company believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix and diversity of experience, knowledge, abilities and perspective that will allow the Board to fulfill its responsibilities.

Nominees for Election at this Annual Meeting

Joseph A. Bellavance — Mr. Bellavance has been a director since 1983. Mr. Bellavance is Chairman of Bellavance Beverage Company, Inc., and President of Bellavance Realty Corporation, in Nashua. Since 1963, Mr. Bellavance has managed every aspect of his family-owned beverage distributorship, which has been operating in Nashua for over 100 years. During this time, Mr. Bellavance has developed a close working relationship with Anheuser-Busch, Pennichuck’s largest industrial customer. He has also been a joint owner/manager of PROSIT, LLC, which is principally involved with the ownership and management of real estate, since August 2003. Mr. Bellavance received his Bachelor of Science degree in Business Administration from the University of New Hampshire. He is a director and past president of the New Hampshire Wholesale Beverage Association, a director of “New Hampshire The Beautiful,” a member of the Nashua Rotary Club and previously served as a director of the National Beer Wholesalers’ Association. We believe Mr. Bellavance’s qualifications to sit on our Board of Directors include his years of executive and management experience, his knowledge of Pennichuck resulting from his 28 years of service on the Board of Directors, his knowledge of the real estate market in the greater Nashua area and his relationship with Pennichuck’s customers, including Anheuser-Busch.

Janet M. Hansen — Ms. Hansen worked in the water utility industry for 30 years until her retirement in 2005. She was Executive Vice President of Aquarion Company, the largest investor owned water utility in New England, from 1995 to 2005 and its Chief Financial Officer from 1992 to 2000. She was Chairman of Aquarion Water Company, Aquarion Company’s principal operating subsidiary, from 2003 to 2005 and its CEO from 2000 to 2003. Ms. Hansen has been a member of the Board of Directors of Peoples United Financial Inc., (NasdaqGS: PBCT), a bank holding company, since 2004. She serves on their Executive Committee and Audit Committee, on which she has been designated the Audit Committee Financial Expert. She also serves on the Boards of Directors of Bridgeport Hospital and the University of Connecticut Foundation. We believe Ms. Hansen’s qualifications to sit on our Board of Directors include her 30 years of water industry management and operations experience and her extensive financial expertise.

Hannah M. McCarthy — Ms. McCarthy has been a director since 1994 and served as interim Chief Executive Officer of the Company from April 15, 2006 until August 21, 2006. Since September 1, 2006, Ms. McCarthy has been serving as President of Newbury College in Brookline, Massachusetts, a position she accepted immediately following her five months as interim President and Chief Executive Officer of Pennichuck Corporation. She was named President Emeritus of Daniel Webster College in Nashua, where she was President for 25 years, when she stepped down from that post in June 2005. She earned her Bachelor of Arts degree at Simmons College, and did graduate work at Rivier College and Southern New Hampshire University. Ms. McCarthy has served as a director of the Boys and Girls Club of Nashua, the New Hampshire Charitable Foundation, and the Foundation of International Society of Transport Aircraft Traders. We believe Ms. McCarthy’s qualifications to sit on our Board of Directors include her extensive executive and leadership experience and her knowledge of Pennichuck, its products and services gained from her many years of service as a director and as interim President and CEO of Pennichuck.

James M. Murphy — Mr. Murphy is Chairman of Q10 Capital, LLC, a national mortgage banking firm (owned and operated by 18 independent mortgage bankers), a position he has held since November of 2003, and Founder and Chairman of Q10 New England Realty Resources, an independent mortgage banking company, a position he has held since July of 1982. Prior to founding Q10 New England Realty Resources, Mr. Murphy held executive position in the investment departments of Mass Mutual Life Insurance Company and Union Mutual Life Insurance Company. Mr. Murphy has been a Certified Mortgage Banker since 1999, a member of the Society of Chartered Realty Investors since July of 2005 and a director since 2006, and has held a State Certified Appraiser designation since February 1993. Mr. Murphy has been a director of the Mortgage Bankers Association of America since 2000 and was the Association’s Chairman in 2002. Mr. Murphy is also a Director of The Francis Ouimet Scholarship Fund. He also has held public office as Chairman of the Board of Selectmen in his home town of Duxbury, MA. We believe Mr. Murphy’s qualifications to sit on our Board include his years of executive experience in commercial real estate and capital markets as well as his leadership experience as national Chairman of his trade association.

Directors with Terms Expiring in 2012

Steven F. Bolander — Dr. Bolander has been a director since April 2004. Dr. Bolander is Dean Emeritus of the University of New Hampshire’s Whittemore School of Business and Economics. He has been a consultant to BAE Systems since October 2003 and has consulted with over 50 major corporations during the past 30 years. He holds a Doctor of Business Administration degree from Kent State University, a Master of Business Administration degree from the University of Colorado, and a Bachelor of Science in Chemistry degree from Iowa Wesleyan College. We believe Dr. Bolander’s qualifications to sit on our Board of Directors include his extensive experience in business administration and organizational management and his leadership experience gained as Dean of the Whittemore School of Business and Economics.

Clarence A. Davis — Mr. Davis is retired from active employment status. He served as Chief Executive Officer of Nestor, Inc. (NasdaqG: NEST), a software solution company, from 2007 to 2009. He served as Chief Operating Officer from 2000 to 2005 and Chief Financial Officer from 1998 to 2000 of The American Institute of Certified Public Accountants (“AICPA”). He earned a BS in accounting at Long Island University and is a Certified Public Accountant. He serves on the Board of Directors of Gabelli SRI Fund, Gabelli Global Deal Fund, Telephone and Data Systems, Inc. and Sonesta International Hotels. We believe Mr. Davis’ qualifications to sit on our Board of Directors include his 23 years of public accounting experience, his leadership and management experience as Chief Operating Officer and Chief Financial Officer of the AICPA, and his extensive financial expertise and strategic perspective gained from serving on other boards.

Michael I. German — Mr. German is Chief Executive Officer and President of Corning Natural Gas Corporation (OTCBB: CNIG), a position he has held since December 2006. He has served as a director of Corning since November 2006. From August 2005 through December 2006, Mr. German was Senior Vice President, Utility Operation of Southern Union Company. From 2003 until 2005, he was President of Southern Connecticut Gas, Connecticut Natural Gas and Maine Natural Gas, all subsidiaries of Energy East Corporation, a publicly-held energy services and delivery provider. Mr. German has a BA degree from Trinity College and an MBA from Columbia University. He also has a JD from Boston University and is a member of the District of Columbia Bar. Mr. German serves on the Board of Directors of Three Rivers Development Corporation, American Gas Association and Northeast Gas Association. He also serves as a Trustee of Adirondack Park Institute. We believe Mr. German’s qualifications to sit on our Board of Directors include his extensive management and operational experience in regulated industries and his leadership experience gained from serving on other boards.

Robert P. Keller — Mr. Keller has been a director since 1983. Mr. Keller is a Certified Public Accountant. Since November 2003, he has been managing director of Triumph Investment Funds (two community bank private equity funds) located in Bedford, New Hampshire. From March 2002 until May 2003, he was Chairman and Chief Executive Officer of InStar Services Group, Inc. (a nationwide provider of insurance restorations and reconstruction services), headquartered in Fort Worth, Texas. Since September 2002, he has served as Chairman of the Board of Directors and Chairman of the Compensation Committee of Security Business Bank of San Diego and as Chairman of Security Business Bancorp, Inc (OTCBB: SBBC). In addition, he is a director of Homeland Renewable Energy, Inc. (“HRE”), a biomass power company in Langhorne, Pennsylvania, and serves as a member of HRE’s Compensation and Audit Committees. Mr. Keller is also the Chairman of the Board of Directors of First State Bank in Cranford, New Jersey. We believe Mr. Keller’s qualifications to sit on our Board of Directors include his extensive experience in finance, banking and capital markets and his knowledge of Pennichuck and its business resulting from his 28 years of service on Pennichuck’s Board.

Directors with Terms Expiring in 2013

John R. Kreick — Dr. Kreick has been a director since 1998 and was elected Chairman of Pennichuck’s Board of Directors in September 2003. Dr. Kreick served as our interim Chief Executive Officer from April 2, 2003 until August 4, 2003. He previously served as President of Lockheed Sanders from 1989 to 1998 and as a Vice President of the Lockheed Martin Corporation (NYSE: LMT) from 1988 until 1998. Dr. Kreick was elected a director of Draper Lab in January 2001, and Chairman of its Board in October 2001. He completed his term as a Draper director in October 2008. He was elected a director of EMS Technologies, Inc. (NasdaqGS: ELMG), a public company, in February of 2003. He is retired from active employment status and currently consults for various companies, including Lockheed Martin and BAE Systems. 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 the 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. He has also 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. We believe Dr. Kreick’s qualifications to sit on our Board of Directors include his experience as President of New Hampshire’s largest employer, Lockheed Sanders, combined with his executive leadership and management experience in business and non-profit organizations and as Pennichuck’s Chairman for the past eight years.

Duane C. Montopoli — Mr. Montopoli has been President, Chief Executive Officer and a director of Pennichuck since he joined the Company in August 2006. He brought to Pennichuck more than 30 years business experience including 16 years as a CEO. From January 2005 until joining Pennichuck, Mr. Montopoli was Principal of Montopoli & Company LLC of North Andover, MA, which he founded to provide management consulting services. During this period, from February 2005 until January 2006, he worked as a Senior Consultant for LoftusGroup LLC of Greenwich, Connecticut, a management consulting firm. From February 2002 until October 2004, Mr. Montopoli was employed by Hitchiner Manufacturing Co., Inc. of Milford, New Hampshire as Chief Financial Officer until April 2002 and thereafter as President and Chief Executive Officer. Hitchiner is a privately-held manufacturer of ferrous investment cast metal parts and assemblies. From 1998 until 2000, Mr. Montopoli served as Chief Executive Officer of Medical Resources, Inc. of Hackensack, New Jersey, formerly a NASDAQ-listed provider of outpatient diagnostic imaging services. From 1986 until 1998, he served as Chief Executive Officer of Chemfab Corporation of Merrimack, New Hampshire, formerly a NYSE-listed manufacturer of polymer-based engineered products. He began his career in public accounting with Arthur Young & Company, a predecessor firm of Ernst & Young LLP, where he rose to the level of general partner. Mr. Montopoli completed the Advanced Management Program at Harvard Business School in 1997, received his MBA degree from Golden Gate University in San Francisco in 1978, and received his BBA degree from the University of Cincinnati in 1972 where he graduated magna cum laude. He is a director of Southworth International Group, Inc. of Falmouth, Maine, a privately-held manufacturer and distributor of materials handling equipment. We believe Mr. Montopoli’s qualifications to sit on our Board of Directors include his background in public accounting and his extensive executive management experience leading public and private companies, including nearly five years as Pennichuck’s President and CEO.

Martha E. O’Neill — Ms. O’Neill is a third-generation director of Pennichuck who has been serving on the Board since 1998. Ms. O’Neill has been practicing as an attorney with the Nashua law firm of Clancy & O’Neill, P.A. since 1982, and is currently President of the firm. She is a graduate of Wellesley College and Georgetown University Law Center. Ms. O’Neill serves on the Rivier College Board of Trustees, Mary A. Sweeney Home Board of Trustees, Charles H. Nutt Surgical Hospital Board, the Boys & Girls Club of Greater Nashua, Inc. Charitable Foundation Board of Trustees, the Currier Museum of Art Advisory Council, the Bishop’s Charitable Assistance Fund, the J. Wilfred Anctil Foundation and the Southern New Hampshire Medical Center Board of Trustees. We believe Ms. O’Neill’s qualifications to sit on our Board of Directors include a deep understanding of Pennichuck, its history and connection to the greater Nashua area, and her leadership experience gained from serving on key boards of directors in the Nashua community.

Director Compensation

		Fees Earned
		or Paid in
		Cash				Total
Name		($)				($)
Joseph A. Bellavance			16,625				16,625
Steven F. Bolander			17,800				17,800
Clarence A. Davis			18,400				18,400
Michael I. German			18,400				18,400
Janet M. Hansen			18,400				18,400
Robert P. Keller			20,900				20,900
John R. Kreick			22,475				22,475
Hannah M. McCarthy			16,000				16,000
James M. Murphy			19,900				19,900
Martha E. O’Neil			16,600				16,600

Each of the non-employee members of the Company’s Board of Directors currently receives a fee of $10,000 annually. Additionally, each non-employee director receives a fee of $600 for each Board of Director and committee meeting they attend in person or by telephone participation. Each committee Chairman also receives an additional fee of $1,500 annually, other than the Chairman of the Audit Committee, who receives an additional fee of $2,500 annually. The Chairman of the Board of Directors receives an additional fee of $5,000 annually. The one director who is also a salaried employee of the Company ( i.e. , the CEO) does not receive any separate compensation for his services as a director of the Company or of its subsidiaries. Customarily, the Board votes on new committee assignments immediately following the Annual Meeting of Shareholders, typically in early May.

Executive Officers

Duane C. Montopoli — Mr. Montopoli is listed under “Directors with Terms Expiring in 2013” located under “Proposal One — Election of Directors” in this Proxy Statement. He is 62 years old.

Thomas C. Leonard — Mr. Leonard assumed the position of Senior Vice President — Finance, Treasurer and Chief Financial Officer of Pennichuck Corporation on July 7, 2008. From June 2006 until July 2008, he served as Vice President of CRA International (NasdaqGS: CRAI), an economics and finance based litigation consulting firm in Boston, Massachusetts, where he was responsible for providing expert accounting services. From December 2002 to May 2006, Mr. Leonard served as Managing Director of Huron Consulting Group (NasdaqGS: HURN), a litigation consulting firm in Boston, Massachusetts and Washington, D.C., where he evaluated financial matters and provided forensic analysis. Prior to 2002, Mr. Leonard was an audit partner with Arthur Andersen LLC and also was the Audit Division Head for the New England Region. He is a member of the Board of Directors of Kadant Inc. (NYSE: KAI) where he chairs the Audit Committee and is a member of the Compensation Committee. Mr. Leonard is a Certified Public Accountant and is 56 years old.

Donald L. Ware — Mr. Ware was appointed President of Pennichuck Water Works, Inc. and our other water utilities on March 17, 2006. Mr. Ware has been our Vice President of Engineering since 1996, and has been Senior Vice President, Operations and Chief Engineer for Pennichuck Water Works, Inc. since May 2004. He has also been a Vice President and director of Pennichuck Water Service Corporation since 1995, and a director of Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc. since 1998. 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. He also holds a Masters of Business Administration degree from the Whittemore Business School at the University of New Hampshire. Mr. Ware is 54 years old.

Stephen J. Densberger — Mr. Densberger is our Executive Vice President and has been affiliated with Pennichuck since 1974. Mr. Densberger was the Treasurer of Pennichuck from 1978 to 1983. He also served as President and a director of Pennichuck Water Service Corporation since 1995 and as a director of Pittsfield Aqueduct Company, Inc. and of Pennichuck East Utility, Inc. since 1998. Mr. Densberger is a graduate of Assumption College and holds a Master of Business Administration degree from the Whittemore School of Business and Economics of the University of New Hampshire. He is an active member and past President of the New Hampshire Water Works Association and past President of the New England Water Works Association. Mr. Densberger serves as a Trustee and Chair of the Management Division of the American Water Works Association. He is a Councilor on the New Hampshire Department of Environmental Services Water Council and a former Alderman in the city of Nashua. Mr. Densberger is 60 years old.

Roland E. Olivier — Mr. Olivier assumed the position of General Counsel and Corporate Secretary of Pennichuck Corporation and President of the Southwood Corporation on August 25, 2008. He has served as director of Pennichuck East Utility, Inc., Pittsfield Aqueduct Company, Inc. and Pennichuck Water Service Corporation since 2009. From 2003 until August 2008, he was the Corporate Counsel to Hitchiner Manufacturing Co., Inc. in Milford, New Hampshire, one of New Hampshire’s largest manufacturing companies. At Hitchiner, Mr. Olivier reported to the President of the company, was a member of the company’s senior management committee and the Assistant Secretary to the Board of Directors. He has been practicing law for over thirty years and specializes in corporate, regulatory, mergers and acquisitions, technology, intellectual property and international law. Mr. Olivier earned a BS at the U.S. Military Academy, West Point, New York and a JD at Columbus School of Law at Catholic University of America. Over the past 13 years, Mr. Olivier has also been actively involved in leadership positions and as a member of the board for a number of non-profit organizations, state boards and advisory councils in New Hampshire. He is a member of the Business and Industry Association committees for Economic Development, and Energy and Regulated Utilities and a director of the New Hampshire Legends of Hockey. Mr. Olivier has served as the President and Board Member of the New Hampshire International Trade Association, Vice-Chairman and Board Member of the Software Association of New Hampshire, and Board Member of the New Hampshire licensing Board for state foresters. He is 64 years old.

Bonalyn J. Hartley — Ms. Hartley has been with Pennichuck since 1979. Since 2001, she has served as Vice President Administration & Regulatory Affairs for Pennichuck Corporation, Pennichuck Water Works, Inc., Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc. and as a director of Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc. since 1998. She has also been Vice President Administration and a director of the Pennichuck Water Service Corporation since 1995. Ms. Hartley serves as Pennichuck Corporation’s Corporate Compliance officer. She is a graduate of Rivier College with a Bachelor of Science degree in Business Management. Ms. Hartley is a member of the Finance Committee for Home Health & Hospice, Nashua NH and Director of YMCA of Greater Nashua. She is also a director of the New England Chapter of the National Association of Water Companies and a member of the New England Water Works Association. She is a joint owner of Lakeview Antique Center, LLC. Ms. Hartley is 66 years old.

Report of the Audit Committee

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities, relating to

•

the integrity of the Company’s financial statements;

•

the Company’s compliance with legal and regulatory requirements;

•

the Company’s independent registered public accounting firm’s qualifications and independence; and

•

the performance of the Company’s independent registered public accounting firm.

The Audit Committee meets with management periodically to consider the adequacy of the Company’s system of internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s independent registered public accounting firm and with appropriate Company financial personnel. The Audit Committee appoints the independent registered public accounting firm and reviews periodically its performance and independence from management.

Management has primary responsibility for the preparation, presentation and integrity of the Company’s financial statements and the overall reporting process, including the Company’s system of internal controls. Management has represented to the Audit Committee that the Company’s audited financial statements for the year ended December 31, 2010 were prepared in accordance with generally accepted accounting principles.

ParenteBeard LLC (“ParenteBeard”), the Company’s independent registered public accounting firm, audits the annual financial statements prepared by management, expresses an opinion as to whether those financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of the Company and its subsidiaries in conformity with generally accepted accounting principles, and discusses with the Audit Committee any issue that it believes should be raised with the Audit Committee.

In fulfilling the Audit Committee’s oversight responsibilities, the Audit Committee reviewed and discussed with management and ParenteBeard the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, which review included discussing the quality of the accounting principles, practices and judgments, the reasonableness of significant judgments, the clarity of disclosures in the financial statements, and the integrity of the Company’s financial reporting processes and controls. As part of that process, the Audit Committee also met with ParenteBeard, with and without management present, and discussed with ParenteBeard the overall scope and plans for, and results of, its audit. The Audit Committee also considered, with and without management present, the selection and evaluation of ParenteBeard, including all of the relationships between ParenteBeard and the Company and the compatibility of non-audit services with ParenteBeard’s independence. The Audit Committee held four meetings during 2010.

In addition, the Audit Committee has received from ParenteBeard the written disclosure and the letter required by Independence Standards Board Standard No. 1 ( Independence Discussions with Audit Committees ) and has discussed with ParenteBeard its independence from the Company. The Audit Committee has also discussed with ParenteBeard any matters required to be discussed by Statement on Auditing Standards No. 61 ( Communication with Audit Committees ).

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements for the fiscal year ended December 31, 2010 be included in the Company’s Annual Report on Form 10-K for that year and filed with the SEC.

Robert P. Keller (Chairman)
Clarence A. Davis
Janet M. Hansen

The foregoing “Report of the Audit Committee” shall not be deemed incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 SEC. Generally, these persons must file such reports at the time they first become subject to Section 16(a) reporting, and thereafter following any change in beneficial ownership. Officers, directors and such greater than ten percent shareholders are required by SEC rules and regulations to furnish the Company with copies of all Section 16(a) reports they file. The Company is required by SEC rules and regulations 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, 2010, 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, except that on March 25, 2010, 30,000 stock options were granted to Duane C. Montopoli, the Company’s President and Chief Executive Officer, pursuant to the terms of Section 4.4 of Mr. Montopoli’s employment agreement. A report for this grant was not timely filed. Mr. Montopoli filed a Form 4 on April 7, 2010 reporting this grant.

Executive Compensation — Compensation Discussion and Analysis

What are the objectives of the Company’s compensation programs?

The Company’s primary compensation objective is to provide a total compensation package that enables the Company to attract, retain, and motivate highly qualified and dedicated executives. The Company recognizes its compensation packages must be competitive with those offered by peer companies in order to meet these objectives. The Company defines its peers from two perspectives: regulated and non-regulated utilities, primarily water utilities, both for-profit and municipally owned; and other companies of a comparable size located in southern New Hampshire and adjacent areas.

Another important objective of the compensation program is to provide incentives for the Company’s executives to achieve the Company’s financial and business objectives. Accordingly, bonuses paid to executives under the Company’s written bonus plans or otherwise are principally based upon the achievement of corporate earnings at levels that meet the Company’s financial and business objectives and are expected to produce competitive returns for shareholders.

The Company’s equity incentive plan is designed to align the interests of its executives with its shareholders and, accordingly, to provide additional incentives for executives to pursue operating and financial objectives that serve to enhance and maximize the share price over time.

A significant factor in recent years in hiring and retaining senior management employees has been the threatened eminent domain taking of a substantial portion of the Company’s assets. The proposed taking has affected new hires as well as existing employees and has necessitated special incentives such as certain Change of Control provisions that might not have been offered in the absence of this circumstance.

What is the compensation plan designed to reward and how does each element of the Company’s decision regarding that element fit into the Company’s overall compensation objectives and affect decisions regarding other elements?

The Company’s executive compensation structure is designed to reward executives for the achievement of both individual and corporate-level goals and objectives. Corporate goals and objectives include, (i) achieving or exceeding the Company’s annual targeted profit level, and (ii) achieving or exceeding annually established target performance metrics which measure the Company’s level of customer service, product quality and reliability, and respect for the environment (referred to in this Proxy as “Key Customer Metrics”). Corporate goals and objectives also include systematically achieving established long-term strategic goals.

The CEO annually reviews and approves individual goals and objectives for each of the executive officers who report directly to him. These goals reflect each officer’s primary duties and responsibilities, including areas such as rate case administration, finance and accounting, acquisitions and other new business development, engineering, operating expense and/or capital spending control, legal compliance and other managerial and administrative duties. Each executive’s compensation is tied to his or her overall performance including consideration of the extent to which the executive achieved his or her specific goals and objectives.

Similarly, the Compensation Committee annually reviews and approves the CEO’s individual goals and objectives, reflecting his primary duties to increase earnings through revenue growth and cost control, resolve the Company’s long-standing eminent domain dispute, develop the senior management team, oversee the development and implementation of longer term corporate strategies, and produce competitive economic returns for shareholders. The CEO’s individual goals and objectives also include leading the Company’s effort to achieve or exceed the Key Customer Metrics.

Individual elements of compensation are neither dependent upon nor intended to affect decisions regarding other elements with the exception that bonus payments may be, in some cases, proportional to base salary levels (as more fully described below) and an executive’s total compensation may also be considered when considering various elements of compensation.

What benchmarks does the Company use to evaluate its Compensation programs?

The Company periodically engages Saje Consulting, Inc. to conduct competitive salary studies for all non-union positions including those of the Company’s executive officers; the last such year being 2008. In its 2008 competitive salary study, the Saje firm surveyed both general industry and the utility industry and then determined an overall consensus based on a weighting of 3:1 in favor of the utility industry. This weighting was considered appropriate due to the fact that the Company generally endeavors to fill executive positions from within the utility industry whenever possible. Based on this approach, the Saje firm determined that while 2008 actual base salaries for all but one (1) of the executive officers were below their respective Recommended Midpoint amounts, overall they were generally competitive since they ranged from 90.5% to 103.6% of said Recommended Midpoint levels. The Company’s General Counsel & Corporate Secretary was not included in the Saje analysis because his position was not filled or included in the organization structure at the time of the Saje work.

The Compensation Committee also periodically directs the CEO and/or the Vice President, Administration & Regulatory Affairs to retain outside compensation consultant(s) to develop peer company executive compensation data (for both other water companies and/or other similarly sized companies) and to provide such data to assist the CEO and the Compensation Committee in determining competitive levels and mix of salary, bonus and long term incentives. The last study of total compensation at the executive officer level was completed by W. F. Conover, III Ltd. in 2008 based on 2007 data and was considered by the CEO and the Compensation Committee in assessing the appropriateness of the Company’s current mix of salary, bonus, long term incentive compensation and benefits.

Based on the Conover firm data, the Compensation Committee and the CEO considered the need for restricted stock or other equity awards and concluded that share-based grants such as restricted stock could be an important component of executive compensation for the purpose of enabling the Company to better attract, retain, and motivate highly qualified and dedicated executives. In deciding to add restricted stock to its equity compensation award alternatives, the Company considered accounting rules requiring that stock options be expensed, compensation trends at other companies, and the findings of the Conover firm.

On March 11, 2009, our Board of Directors approved, and on May 6, 2009, the Shareholders of the Company approved, an amendment and restatement of what was then named the 2000 Stock Option Plan to allow the Board of Directors to grant restricted stock awards in place of, or in combination with, stock options to employees and directors (upon such approval, the “2009 Equity Incentive Plan”).

What is each element of compensation, why does the Company choose to pay each element and how does the Company determine the amount for each element?

Currently, the principal elements of executive compensation are base salary, bonus, and equity incentive awards. Each non-employee member of the Board of Directors currently receives cash fees, reimbursement for travel expense in accordance with corporate policy and may be granted equity awards (although none have been granted in the last five years).

Executive Officers

Base Salary. Each executive officer’s base salary is reviewed and adjusted annually based on his/her individual performance and to ensure competitiveness with peer companies. During the first quarter of each calendar year, the CEO recommends to the Compensation Committee base salary amounts, based in part on the use of outside studies and surveys, as further described below, for each of the Company’s other five executive officers to become effective the week which includes April 1 ^st . Except for the CEO, no other executive is involved in making executive salary recommendations to the Compensation Committee. The Compensation Committee reviews the recommendations of the CEO and recommends base salary changes (including changes to the CEO’s base salary, if and as applicable) to the full Board for approval.

For 2010, the Compensation Committee recommended and the full Board approved base salary increases for the six (6) executive officers averaging 2%. This recommendation reflected the continuing difficult economic conditions, the current low inflation rate, the fact that the Company had recently negotiated with its union employees a 2% base pay increase, and the fact that this percentage increase was consistent with the 2% average base pay increase that applied, generally, to all other non-union employees for that period.

For 2011, the Compensation Committee recommended and the full Board approved base salary increases for the Company’s six (6) executive officers averaging 3%. This percentage increase was consistent with the 3% average base pay increase that applied to union employees for the year and, generally, to all other non-union employees of the Company. It also reflects a gradually improving economy while still being less than the 3.5% base salary increase limitation for officers and management established in the Company’s Merger Agreement with the City of Nashua.

Bonus Plan. For 2009, no formal written cash bonus plan was established for the Company’s executive officers. This was decided by the Compensation Committee because it wanted to evaluate what, if any, non-operating economic factors (positive or negative) should be disregarded for the purpose of determining bonus pool amounts for any given year. The Committee further determined that because this evaluation would take several months to complete, no written bonus plan could reasonably be established for 2009. Accordingly, for 2009, bonus determinations for all executive officers were discretionary and determined by the Compensation Committee upon consideration of each executive’s achievement of both corporate-level and individual goals and objectives and subject to full Board approval.

Based on this criteria, for 2009, the Compensation Committee recommended and the full Board approved the following bonus amounts, which totaled $53,000 for all executive officers including all Named Executive Officers: CEO $15,000; Chief Financial Officer (“CFO”) $9,500; President, Regulated Utilities $9,500; Executive Vice President $5,000; General Counsel & Corporate Secretary $7,000; and Vice President Administration & Regulatory Affairs $7,000. In determining these bonus amounts, the Compensation Committee considered the Company’s operating performance for the full year relative to the preceding year (e.g., the 2008 gain on the sale of real estate was disregarded for purposes of comparison). The Committee also considered the individual performance of each of the officers relative to their goals and objectives for the year, and the reviews and recommendations of the CEO. Regarding specific performance, factors considered included such things as: the management and administration of rate case filings for the Company’s Pennichuck Water and Pittsfield Aqueduct utility subsidiaries; the successful completion of the upgrade to the Company’s water treatment plant in Nashua; the management of the Company’s eminent domain dispute with the City of Nashua; the completion of various financing activities including the 2009 common equity offering; etc.

For 2010, the Compensation Committee recommended and the full Board approved the establishment of a written performance-based cash bonus plan for the Company’s executive officers other than the CEO. Pursuant to the terms of his employment agreement, the CEO’s annual target cash bonus is 40% of his then base salary, with the actual amount determined at the discretion of the Compensation Committee and the full Board based on the Company’s financial performance and the CEO’s individual performance, in particular in relation to his goals and objectives for the year. In determining the CEO’s cash bonus for any year, the Compensation Committee and the Board also consider the bonus amounts that can be earned by the Company’s other executive officers for that year and the fact that the Company operates predominately as a regulated water utility (albeit as three separate companies).

Under the terms of the 2010 Officer Bonus Plan, varying dollar amounts are credited into a “pool” based on the Company’s operating profit before taxes and bonuses for the year (“Company-Wide Income”) in relation to the approved budget for the year. More specifically, no amount is credited into the pool if Company-Wide Income falls below 88% of budgeted income and the amount credited into the pool is capped upon Company-Wide Income reaching 112% of budgeted income for the year. At 100% of budgeted income for the year, the bonus pool amount would be $128,690, or 17% of the beginning-of-year aggregate base salaries of the five participants in the plan. At or above 112% of budget, the bonus pool amount would be $158,970, or 21% of the beginning-of-year aggregate base salaries of the five participants in the plan.

Once determined, up to 100% of the established bonus pool amount is paid out as cash awards as follows: 30% of the bonus pool amount is non-discretionary and allocated among eligible participants pro-rata based on their beginning-of-year base salary levels; up to an additional 30% of the bonus pool amount (in 5% increments) is paid out for the achievement of six (6) Key Customer Metrics established for the year up, also allocated among the eligible participants pro-rata based on their beginning-of-year base salary levels; and 40% is discretionary and allocated among eligible participants based on an assessment of each participant’s absolute and relative performance with respect to their specific personal goals and objectives for the year. Due to the operation of the payout for achieving the Key Customer Metrics, some portion of the bonus pool amount may be forfeited (i.e., less than 100% of the bonus pool amount may be paid out for the year).

Based on Company-Wide Income for 2010 and other factors, the bonus pool amount for the year reached the maximum of $158,970, of which $7,949 was forfeited due to failure to achieve one of the six Key Customer Metrics. The resultant $151,021 was rounded to $151,500 and paid out as follows: President, Regulated Utilities $36,200; Chief Financial Officer $34,300; Executive Vice President $20,000; General Counsel & Corporate Secretary $31,000; and Vice President, Administration & Regulatory Affairs $30,000. The discretionary component of each of these amounts was determined by the Compensation Committee and approved by the full Board, in significant part, based on the input and recommendations of the CEO.

The Company was unable to achieve its goals in the Key Customer Metric category entitled “NHDES non-compliance violations due to operational error” because an adequate informational sample related to compliance monitoring was not taken and was not a failure of the Company’s compliance monitoring program. The compliance monitoring to which this sample related is not scheduled to begin until 2013.

As previously stated, pursuant to the terms of his employment agreement, the CEO’s annual target cash bonus is 40% of his then base salary, with the actual amount determined at the discretion of the Compensation Committee and the full Board based on the Company’s financial performance and the CEO’s individual performance, in particular in relation to his goals and objectives for the year. In setting the CEO’s bonus for any year, the Compensation Committee and the Board shall also consider the bonus amounts that can be earned by the Company’s other executive officers for that year and the fact that the Company is comprised predominately of regulated water utilities. Based on this criteria, the Compensation Committee recommended and the Board approved a 2010 cash bonus for the CEO of $68,000, or 25.7% of his beginning-of-year base salary.

For 2011, the Company has established a 2011 Officer Bonus Plan that operates differently depending on whether the proposed Merger with Nashua does not (“Variant I”) or does (“Variant II”) close by the end of calendar 2011 or shortly thereafter. Variant I of the 2011 Plan operates similar to the 2010 Officer Bonus Plan except that under Variant I, the bonus pool amounts are somewhat greater at corresponding levels of performance. For example, if Company-Wide Income under the 2011 Officer Bonus Plan is at 100% of budgeted income for the year, the bonus pool amount will be $138,960, or 18% of the beginning-of-year aggregate base salaries of the five officer participants in the plan. If Company-Wide Income is at or above 112% of budget, the bonus pool amount will be capped at $169,860, or 22% of the beginning-of-year aggregate base salaries of the five participants in the plan. These amounts are $10,270 and $10,890 greater than the corresponding amounts in the 2010 plan.

Variant II of the 2011 Officer Bonus Plan operates differently than both Variant I and the 2010 Officer Bonus Plan in recognition of the fact that, for example, if the proposed Merger with Nashua closes before the end of calendar 2011 or shortly thereafter, a number of the officers of the Company might not otherwise have any cash bonus opportunity for 2011 as a consequence of the termination of their employment in connection with a Change of Control and regardless of their performance during the year. Variant II of the 2011 Officer Bonus Plan is intended to address this issue by providing to the officer participants in the 2011 Plan a cash bonus opportunity with respect, generally, to that portion of the year prior to a Change of Control.

The same bonus pool schedule applies to both Variant I and Variant II of the 2011 Officer Bonus Plan, although the potential bonus payout under Variant II is likely to be smaller because of a required scale-back adjustment in the event that a Merger closing occurs before the end of the calendar year. Under Variant II, once the final bonus pool amount has been determined, it shall be paid out as cash awards to qualifying non-CEO Plan participants at least one business day prior to the Merger closing date. 60% of the final bonus pool amount shall be paid pro-rata to the non-CEO Plan participants based on their 2011 beginning base salaries and 40% shall be allocated on a discretionary basis among the same persons by the pre-sale Compensation Committee of the Board of Directors based on an absolute and relative assessment of their individual performance for the year.

Also if Variant II of the 2011 Officer Bonus Plan becomes applicable, the Company’s CEO shall be a participant in that plan for the purpose of establishing a bonus guideline for 2011 only. More specifically, if closing of a sale to Nashua occurs on or before March 15, 2012 and Variant II bonuses become payable to the non-CEO Plan participants, then the CEO’s separate bonus pool amount for 2011 shall be that amount equal to his 2011 beginning base salary multiplied by a percentage which is equal to 1.3 times the percent of covered compensation contributed into the non-CEO participants bonus pool. For example, since a $128,660 bonus pool for the non-CEO Plan participants represents 16.7% of their beginning base salaries, the CEO’s separate bonus pool amount will be 21.7% of his beginning base salary. Once determined, an amount up to the total of his bonus pool amount may be awarded to him at the discretion of the pre-sale Compensation Committee of the Board and otherwise subject to the terms of his employment agreement.

Equity Awards. Historically, upon the recommendation of the CEO, the Compensation Committee has traditionally awarded stock options, subject to Board approval, annually at or near the beginning of each calendar year based on performance for the preceding year and in recognition of the recipients’ expected long-term contribution to the Company’s business. The exercise price of stock options shall be equal to the closing market price on the trading day preceding the date of grant. Aggregate awards are subject to a number of factors including, but not limited to, the Company’s financial results, its stock price and trading activity, and general business, economic, and financial market conditions. The Company did not award any stock options in 2007 or in 2008 (other than an initial grant of 18,000 and 16,200 options to the new CFO and General Counsel & Corporate Secretary, respectively, upon their hiring in 2008). The principal reason for the absence of stock option awards in 2007 and 2008 was the continuing extraordinary circumstance of the threatened eminent domain taking of a majority of the Company’s assets by the city of Nashua, New Hampshire.

During 2008, the CEO and the Compensation Committee reviewed the competitiveness of the Company’s total direct compensation (cash compensation plus long-term incentives such as stock options) and pay mix (e.g., option grants vs. grants of restricted stock) with respect to the executive officers. Based on its evaluation, which included the use of the firm of W. F. Conover, III Ltd. to help gather and summarize compensation information from various public company proxies, the CEO and the Compensation Committee determined that the Company’s absence of stock option grants in recent years was negatively impacting the overall competitiveness of its executive compensation packages and also noted that most organizations are now making more and greater use of restricted stock grants in their long-term incentive compensation programs.

In March 2009, the Compensation Committee and the CEO considered the need for restricted stock or other equity awards (in addition to stock options) and concluded that share-based grants such as restricted stock could enable the Company to better attract, retain, and motivate highly qualified and dedicated executives. In deciding to add restricted stock to its equity compensation award alternatives, the Company considered accounting rules requiring stock options to be expensed, compensation trends at other companies and the findings of the Conover firm.

On March 11, 2009, our Board of Directors approved, subject to shareholder approval, an amendment and restatement of what was then named the 2000 Stock Option Plan to allow the Board of Directors to grant restricted stock awards in place of, or in combination with, stock options to employees and directors. At the May 6, 2009 Annual Meeting of Shareholders, the shareholders of the Company approved the 2009 Equity Incentive Plan. To date, no restricted stock awards have been granted under the 2009 Equity Incentive Plan.

The CEO has stated his intention to recommend to the Compensation Committee that, under normal conditions, annual total awards of stock options or other equity awards (excluding awards to recruit new executives and for other special circumstances) be in the range of 1.0% — 1.5% of total common shares outstanding or, in the event the Company grants restricted stock awards, a lower range that would provide the executives with an approximately equivalent level of incentive reward. Such a range reflects a balance between the dilutive effects of equity awards and the adequacy of amounts to properly motivate key employees to achieve the Company’s business objectives. The Company considers stock options and other equity awards to be a critical element of long-term incentive compensation.

Traditionally, the Company’s annual stock option awards have been fully vested as of the grant date in recognition of services rendered for the prior fiscal year. This approach also reflected the relatively stable nature of the Company’s primary business, regulated water utility services, as well as its historically low employee turnover. Notwithstanding the foregoing, the current CEO has recommended to the Compensation Committee that future equity grants, including restricted stock, normally be subject to vesting over time (with acceleration of vesting under certain circumstances such as a Change of Control of the Company).

At the January 28, 2009 regular meeting of the Company’s Board of Directors, 38,000 Non-Statutory Stock Options (also known as non-qualified stock options) were granted to a total of 18 employees, 21,000 of which were granted to the five Named Executive Officers, at an exercise price of $17.64 per share. At the January 27, 2010 regular meeting of the Company’s Board of Director’s, 41,900 Non-Statutory Stock Options were granted to a total of 18 employees, 25,200 of which were granted to the five Named Executive Officers, at an exercise price of $20.11 per share. All of these options vest (i.e., become exercisable) over a three-year period, are subject to accelerated vesting in the event of a Change of Control, and generally expire at the end of ten years from the grant date if not exercised.

Mr. Montopoli’s initial employment agreement with the Company dated October 24, 2006 provides that upon certain events of resolution of the Company’s eminent domain dispute with the City of Nashua (see discussion below under “Executive Agreements”), he would be granted non-qualified stock options to acquire 30,000 common shares of the Company. The March 25, 2010 decision of the New Hampshire Supreme Court regarding the eminent domain dispute satisfied the conditions for this option grant and so, effective that same date, Mr. Montopoli was granted 30,000 non-qualified stock options at an exercise price of $21.14 per share. In accordance with the provisions of his employment agreement, these options were fully vested and immediately exercisable as of the grant date.

Under the terms of the Merger Agreement, which became effective as of November 11, 2010, the Company is prohibited from issuing additional equity (options or shares) until the earlier of the consummation of the merger or the termination of the Merger Agreement. Accordingly, no employee stock options or restricted shares have been issued by the Company since the effective date of the Merger Agreement.

As of the date of this Proxy Statement, there were 111,934 shares available for stock option grant and/or restricted stock grant under the 2009 Plan.

Other Compensation. The Company provides certain executive officers a number of other recurring cash and non-cash forms of compensation not normally available to other employees of the Company. These include provision of a company vehicle and reimbursement of related vehicle expenses (or alternatively, a vehicle allowance), reimbursement of civic and industry membership fees and dues (one executive officer holds a social membership to a country club), and reimbursement of the cost of premiums on term life insurance covering three times initial or current base salary (four times initial base salary for the CEO).

The Company has also provided certain executives non-recurring cash compensation in the form of retention bonuses and relocation allowances. In addition, the Company has entered into agreements with its six executive officers (including its CEO) that provide for severance payments in the event of a Change of Control and termination of employment by the Company (other than for cause) or resignation by the executive for good reason, all as defined in the agreements. Payments consist of up to two years’ salary, target bonus, and benefits (generally payable as a lump sum amount), all as defined in the agreements. The Company believes these provisions to be consistent with peer company practices in general and particularly appropriate in the present case considering the City of Nashua’s ongoing attempt to acquire substantially all the Company’s assets through eminent domain taking or otherwise.

Executive officers are also eligible for certain benefits that are available to other employees, including substantially full funding of medical and dental insurance, group life, and short-term disability plans, 100% matching of the first 3% of salary contributed to the Company’s 401(k) plan (subject to certain limitations), cash payments beginning upon retirement pursuant to the Company’s defined benefit pension plan, and full or partial funding of premiums pursuant to the Company’s post-retirement health care plan.

A description of the employment agreements for each Named Executive Officer is included in “Executive Agreements” below.

Compensation Consultants. The Compensation Committee has determined that there is no conflict of interest to report with respect to fiscal years 2009, 2010 or 2011 (to date) regarding Saje Consulting, Inc. since that firm did not perform other services for the Company totaling $120,000 or more in any of these years.

Risk Consideration in Pennichuck’s Compensation Program

The Compensation Committee has discussed the concept of risk as it relates to the Company’s compensation programs. The Committee does not believe its compensation programs encourage excessive or inappropriate risk taking, for the following reasons:

•

We structure our pay to consist of both fixed and variable compensation for executive officers and selected senior non-officer managers and individual contributors. The fixed (or salary) portion of compensation is designed to provide a reasonable and steady income regardless of Pennichuck’s stock price performance so that our executives do not feel pressured to unduly focus on stock price performance to the detriment of other important business metrics. The variable (cash bonus and equity) portions of compensation are designed to reward both short and long-term corporate performance. For short-term performance, and as noted above, cash bonuses may be awarded based on achieving certain annual corporate targets for Company-Wide Income, Key Customer Metrics, and individual goals and objectives (collectively “Performance Targets”). For long-term performance, our stock option awards now generally vest over three years and increase in value if our stock price increases over time. We believe that these variable elements of compensation are a sufficient percentage of overall compensation such that they motivate our executives to produce excellent short and long-term corporate results, while the fixed element is also sufficiently high that said executives are not encouraged to take unnecessary or excessive risks.

•

Because of the nature of the Performance Targets the Company uses in determining incentive payments, we believe our executives are encouraged to take a balanced approach that focuses on corporate profitability and expense control. If we are not profitable at a reasonable level, there are no payouts under the bonus program.

•

Our Performance Targets are generally communicated to the Company’s entire workforce. We believe this encourages consistent behavior across the organization, rather than establishing different performance metrics depending on a person’s position in the Company or the business unit he/she works in. For example, a person in our most profitable business unit is not encouraged to take more risk than someone in a less profitable business unit.

•

Bonus pool amounts under the Company’s 2010 and 2011 Officer Bonus Plans and Non-Officer Senior Manager Bonus Plans, from which cash bonus awards are paid, are capped upon the Company achieving 112% of budgeted income for the year, with the bonus payout potential at that level of performance being limited to 22% of base salaries for the officer plans and 13% of base salaries for the non-officer plans. As such, these incentive plans do not unduly promote or encourage Company executives to take excessive risks in the interest of maximizing bonuses for the year.

•

We believe that we have sufficient internal controls over the measurement and calculation of earnings and other Performance Targets, designed to keep them from being susceptible to manipulation by Company employees. In addition, all of our employees are required to comply with our Code of Conduct, which covers among other things, accuracy of books and records.

•

Our cash bonus plans have generally been structured around budgeted Company-Wide Income, Key Customer Metrics and individual performance goals for several years and we have seen no evidence that they encourage unnecessary or excessive risk taking.

Report of the Compensation and Benefits Committee

The Compensation and Benefits Committee of the Board of Directors (the “Compensation Committee”) has reviewed and discussed with management the foregoing compensation discussion and analysis (“CD&A”). The Compensation Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Respectfully submitted,
James M. Murphy (Chairman)
Steven F. Bolander
Michael I. German

The foregoing “Report of the Compensation and Benefits Committee” shall not be deemed incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

Summary of Cash and Certain Other Compensation

Named Executive Officers

The following table sets forth information for the fiscal year ended December 31, 2010 concerning the compensation paid to each person serving as the registrant’s principal executive officer or acting in a similar capacity during the last completed fiscal year (“CEO”); each person serving as the registrant’s principal financial officer or acting in a similar capacity during the last completed fiscal year (“CFO”); the Company’s three most highly compensated executive officers other than the CEO and CFO who were serving as executive officers at the end of the last completed fiscal year; and up to two additional individuals who would have been among the Company’s three most highly compensated executive officers other than the CEO and CFO but for the fact that he or she was not serving as an executive officer at the end of the last completed fiscal year.

Summary Compensation Table

																		Change in
														Option				Pension				All Other
		Year				Salary				Bonus				Awards				Value				Compensation				Total
Name and Principal Position						($) …				($) ‚ …				($) ƒ				($)				($) „				($)
Duane C. Montopoli			2010				268,846				68,000				28,518				68,840				16,896				451,100
President and Chief Executive			2009				265,000				15,000				22,000				76,452				18,197				396,649
Officer			2008				268,096				11,000				—				43,115				21,627				343,838
Thomas C. Leonard			2010				163,077				34,300				17,824				29,509				12,777				257,487
Senior Vice President —			2009				160,000				9,500				5,789				13,022				12,457				200,768
Finance, Treasurer and Chief Financial Officer			2008				76,923				5,000				64,620				—				6,467				153,010
Donald L. Ware			2010				171,692				36,200				17,824				51,278				10,546				287,540
President, Regulated Utilities			2009				169,000				9,500				13,750				10,645				12,226				215,121
			2008				170,750				7,500				—				42,661				12,590				233,501
Stephen J. Densberger			2010				151,000				20,000				11,407				74,076				13,608				270,091
Executive Vice President			2009				151,000				5,000				11,000				22,721				11,072				200,793
			2008				152,654				6,000				—				89,861				15,240				263,755
Roland E. Olivier			2010				147,308				31,000				14,259				30,181				7,400				230,148
General Counsel and			2009				145,000				7,000				5,211				13,932				11,383				182,526
Corporate Secretary			2008				50,192				4,500				59,616				—				3,068				117,376

Executive Agreements

Employment Agreement with Duane C. Montopoli. Effective August 21, 2006, the Company and Duane C. Montopoli entered into an Employment Agreement (the “Montopoli Agreement”) pursuant to which Mr. Montopoli presently serves as the Company’s President and Chief Executive Officer, and as a director. Mr. Montopoli’s employment with the Company, which commenced on August 21, 2006 (the “Commencement Date”), may be terminated by the Company at any time upon thirty (30) days prior written notice.

Mr. Montopoli’s initial base salary was $250,000 per year, subject to annual review for possible discretionary upward adjustment. Additionally, he has the opportunity to earn an annual target cash bonus of 40% of his then current annual base salary based on the Compensation Committee’s and full Board’s assessment of the Company’s financial performance and Mr. Montopoli’s performance.

On the Commencement Date, Mr. Montopoli was granted a non-qualified stock option to purchase 40,000 shares of common stock at an exercise price of $19.00 per share, the closing price of Company common stock as reported by NASDAQ on the trading day preceding the Commencement Date. The grant vested ( i.e. , became exercisable) in three equal annual increments beginning December 31, 2006. As set forth in the Montopoli Agreement, the Company further agreed to grant to Mr. Montopoli an additional non-qualified stock option to purchase 30,000 shares of common stock effective on the earlier to occur of (a) the date of final termination or dismissal through any settlement, adjudication, or other resolution of the eminent domain proceeding (the “Eminent Domain Dispute”) or (b) the date of public announcement of any settlement agreement, adjudication decision, or other resolution of the Eminent Domain Dispute (such earlier date, the “Grant Date”); said option (i) terminating ten years from the Grant Date, (ii) having an exercise price equal to the closing price of the Company’s common stock on the trading day prior to the Grant Date, and (iii) being exercisable beginning on the date of Final Termination. Mr. Montopoli may also receive other periodic awards of stock options at the discretion of the Board of Directors. Upon the occurrence of a Change of Control (as defined in the Montopoli Agreement), all of these options will become immediately exercisable.

In the event Mr. Montopoli’s employment is terminated by the Company other than for Cause (as defined in the Montopoli Agreement) or by him for Good Reason (as defined in the Montopoli Agreement), he will be entitled to a lump sum payment equal to one year of his then current base salary, plus the continuation of benefits described in the Montopoli Agreement for 12 months. In the event of termination of employment by the Company without Cause or by Mr. Montopoli for Good Reason within 24 months following a Change of Control, Mr. Montopoli will be entitled to a lump sum severance payment equal to two (2) times the sum of (a) his then current annual base salary, and (b) 100% of his aggregate target bonuses of 40% and any other cash bonus plans. Additionally, he will be entitled to continuation of certain benefits described in the Montopoli Agreement for a twenty-four (24) month period.

Under the terms of the Montopoli Agreement, as amended, if it is determined that he has received a “parachute payment” under Internal Revenue Code (the “Code”) Section 280G in connection with a change of control of the Company, which gives rise to an excise tax to Mr. Montopoli under Section 4999 of the Code, the Company shall reimburse him for that tax on a “grossed up” basis such that he will receive under the Montopoli Agreement the same aggregate after-tax amounts that he would have received had such excise or penalty tax not applied to him.

Mr. Montopoli is entitled to receive (A) health and dental insurance coverage to the extent provided by the Company to its executive officers; (B) group life and disability coverage to the extent provided by the Company to its executive officers; (C) insurance on his life in the amount of one million dollars ($1,000,000). Additionally, he is entitled to participate in the Company’s current pension and other retirement plans, and the Company’s other benefit plans which may be in effect from time to time. The Company also provides Mr. Montopoli with, (i) short term disability coverage encompassing up to sixty percent (60%) of his base salary for a period of up to twenty six (26) weeks, (ii) the use of a Company-owned automobile, and (iii) four (4) weeks paid vacation per year.

Mr. Montopoli agreed, as part of his original employment agreement, to non-competition provisions preventing him from engaging in any activity or business endeavor which directly competes with the regulated water utility business operations conducted by the Company within New Hampshire, Maine, Vermont, Massachusetts, Rhode Island and Connecticut for the term of the agreement plus one year.

On November 9, 2007, the Montopoli Agreement was amended for compliance with Section 409A of the Internal Revenue Code of 1986, as amended.

Effective as of November 15, 2010, the Montopoli Agreement was amended principally to, (i) clarify which benefit plans he is entitled to participate in; (ii) clarify the severance payment obligations of the Company upon a Change of Control followed by termination of employment without cause or resignation for good reason; (iii) comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended; (iv) provide for the issuance of release of claims and causes of action as a condition to the receipt of severance payments; (v) make clear that a Merger with the city of Nashua will constitute a “Change of Control” for purposes of determining severance obligations of the Company thereafter; (vi) establish when “Good Cause” or “Cause,” as applicable, shall be deemed not to exist for purposes of determining severance obligations of the Company following a Change of Control; (vii) establish when “Good Reason” shall be deemed to exist for purposes of determining severance obligations of the Company following a Change of Control; (viii) broaden or add non-compete provisions; and (ix) clarify and/or harmonize the type and value of employee benefits includible in the severance obligations of the Company following a Merger.

Employment Agreement with Thomas C. Leonard. Effective May 19, 2008, the Company and Thomas C. Leonard entered into an Employment Agreement pursuant to which Mr. Leonard presently serves as the Company’s Senior Vice President — Finance, Treasurer and Chief Financial Officer. Under the Agreement, Mr. Leonard received an initial base salary of one hundred sixty thousand dollars ($160,000) per annum. He is entitled to participate in the Company’s officer bonus plan for 2009 and thereafter. For 2008, the Agreement provided that he be considered for a non-plan discretionary bonus.

On his first day of employment, Mr. Leonard was granted non-qualified stock options to acquire eighteen thousand (18,000) shares of the common stock of the Company, which vest in three equal installments of six thousand (6,000) per year, beginning on the one year anniversary of the date of his employment; provided, however, that all of said options shall vest immediately in the event of a Change of Control (as defined in the Agreement). Mr. Leonard is entitled to participate in the employee benefit programs available to non-union full-time employees of the Company.

In the event Mr. Leonard’s employment is terminated by the Company without Cause (as defined in the Agreement), he is entitled to salary continuation for six (6) months subject to dollar-for-dollar set-off for cash amounts he receives or accrues from any successor employer or other entity for services rendered during such period, plus COBRA premium cost reimbursement during the same six (6) month period (such aggregate amounts, the “Severance Amount”). Notwithstanding the foregoing, if such termination without Cause occurs within six (6) months before or twenty four (24) months after a Change of Control (as defined in the Agreement), the Severance Amount shall be two (2) years base salary (at the then-current rate) payable in a lump sum without right of set-off, plus COBRA premium cost reimbursement for eighteen (18) months.

Effective as of November 15, 2010, Mr. Leonard entered into a Change of Control Agreement (the “2010 Amendment”) with the Company which provides that in the event of a Change of Control (as defined therein) and termination of Mr. Leonard’s employment by the Company without good cause or resignation by Mr. Leonard for good reason, in either case within 24 months after a Change of Control, Mr. Leonard shall be entitled to a lump sum severance payment equal to two (2) years base salary plus an additional amount to cover the continuation of certain benefits for specified periods of time. Relative to the proposed merger with the city of Nashua, New Hampshire (“Merger”), the 2010 Amendment also provides that (i) in no event shall Good Cause exist at any time during the two hundred ten (210) calendar day period commencing on a Change of Control, and (ii) Good Reason shall be deemed to exist at all times after the expiration of the one hundred eighty (180) calendar day period commencing on a Change of Control. The 2010 Amendment also generally broadens or adds non-compete provisions, adds or revises release-of-claims provisions, and clarifies and/or harmonizes the type and value of employee benefits includible in the severance obligations of the Company following a Merger.

Employment Agreement with Donald L. Ware. Effective October 3, 2006, the Company entered into an Employment Agreement with Donald L. Ware (the “Ware Agreement”) pursuant to which he initially served as President of the Company’s Pennichuck Water Works, Inc. subsidiary and now serves as President of all three of the Company’s regulated water utility subsidiaries. Under the Ware Agreement, his initial base salary was $156,000 and he is entitled to participate in the Company’s employee benefit programs, as well as its bonus and stock option plans.

More specifically, Mr. Ware is entitled to participate in the employee benefit programs available to the Company’s executive officers, including health and dental insurance coverage, group life and disability coverage, life insurance in the amount of three times his annual salary, participation in the Company’s pension and other retirement and profit sharing plans, and short term and long term disability coverage. During the term of the Ware Agreement, the Company will also pay for Mr. Ware’s reasonable out-of-pocket business, entertainment and other related expenses incident to the performance of his duties under the Ware Agreement. He is entitled to not less than four weeks of paid vacation, and is provided with the use of an automobile.

The term of the Ware Agreement is two years provided that, commencing on the first anniversary date and on or about each anniversary date thereafter, the term of this Agreement may be extended for subsequent one (1) year periods by advance vote of the Board of Directors. Effective as of February 20, 2010, the Ware Agreement was amended to automatically extend its term for successive one-year periods without the need each year to obtain specific prior approval of the Board of Directors.

In the event his employment is terminated by the Company other than for “Cause” (as defined in the Ware Agreement), Mr. Ware is entitled to receive severance benefits, payable as a lump sum, equal to his then current salary and fringe benefits under the Ware Agreement, including any bonus for which he may be entitled, for the greater of (a) the remaining term of the Agreement, or (b) the period of twelve (12) months from the date of termination. Under the provisions of the original Ware Agreement, in the event he terminates his employment for “Good Reason” (as defined in the Ware Agreement) within 24 months following a Change of Control, he would be entitled to receive severance benefits, payable as a lump sum, equal to his then current salary and fringe benefits under the Ware Agreement, including any bonus for which he may be entitled, for the greater of (A) the remaining term of the Ware Agreement, or (B) the period of twelve (12) months from the date of termination. Effective as of the Third Amendment to the Ware Agreement dated November 15, 2010, the last clause in the preceding sentence has been deleted (i.e., after the word “greater”) and has been replaced with the phrase “for a period of twenty-four (24) months from the date of employment termination.”

Mr. Ware agreed, as part of the Ware Agreement, to non-competition provisions preventing him from engaging in any activity or business endeavors which directly competes with the regulated water utility business operations conducted by the Company within New Hampshire, Maine, Vermont, Massachusetts, Rhode Island and Connecticut for one year after the expiration of the term of the Ware Agreement. On November 7, 2007, the Ware Agreement was amended for compliance with Section 409A of the Internal Revenue Code of 1986, as amended.

The Third Amendment to the Ware Agreement dated November 15, 2010 modified the Ware Agreement to extend the duration by which the Company would be obligated in the event the Company terminates the employment of the Executive other than for Cause within twenty-four (24) months following a Change of Control, to provide the Executive with severance benefits, payable as a lump sum, equal to the Executive’s then current salary and fringe benefits provided hereunder, including any bonus for which he may be entitled, from a period of twelve (12) months to a period of twenty-four (24) months from the date of employment termination. The Company’s obligations are subject to the condition that the Executive releases all claims and causes of action that the Executive has or may ever have against the Corporation. The Third Amendment also makes it clear that the proposed Merger with the city of Nashua, if consummated, would constitute a Change of Control for purposes of the Ware Agreement.

Change of Control Agreement with Stephen J. Densberger. Effective as of October 25, 2006, Mr. Densberger entered into a Change of Control Agreement with the Company which replaced all prior agreements including a Change in Control Agreement between the parties dated January 8, 1999. The term (“Term”) of the 2006 Agreement is two (2) years subject to continuous one (1) year extensions at the end of each year within the Term unless and until either party gives to the other party a written notice of termination. Pursuant to the Agreement, as amended, in the event of a Change of Control (as defined therein) followed by termination of employment or material demotion without cause or resignation for good reason (i.e., a “Termination Event” within twenty-four months after the Change of Control), Mr. Densberger would be entitled to up to two (2) years (and not less than one year’s) severance pay, plus the continuation of certain employment benefits, all provided he gives to the Company a full release of all claims and causes of action. Effective as of February 1, 2007, the 2006 Agreement was amended to provide that the severance pay would be paid in lump sum form, and effective as of November 13, 2007 the 2006 Agreement was amended to incorporate provisions related to Section 409A of the Internal Revenue Code of 1986, as amended.

Effective as of November 15, 2010, the 2006 Agreement was further amended and restated (the “2010 Amendment”) to provide that in the event of a Change of Control (as defined therein) and termination of Mr. Densberger’s employment by the Company without good cause or resignation by Mr. Densberger for good reason, in either case within 24 months after a Change of Control, Mr. Densberger shall be entitled to a lump sum severance payment equal to two (2) years base salary plus an additional amount to cover the continuation of certain benefits for specified periods of time. Relative to the proposed merger with the city of Nashua, New Hampshire (“Merger”), the 2010 Amendment also provides that (i) in no event shall Good Cause exist at any time during the two hundred ten (210) calendar day period commencing on a Change of Control, and (ii) Good Reason shall be deemed to exist at all times after the expiration of the one hundred eighty (180) calendar day period commencing on a Change of Control. The 2010 Amendment also generally broadens or adds non-compete provisions, adds or revises release-of-claims provisions, and clarifies and/or harmonizes the type and value of employee benefits includible in the severance obligations of the Company following a Merger.

Employment Agreement with Roland E. Olivier. Effective August 25, 2008, the Company and Roland E. Olivier entered into an Employment Agreement pursuant to which Mr. Olivier presently serves as the Company’s General Counsel and Corporate Secretary and the President of its Southwood Corporation subsidiary. Under the Agreement, Mr. Olivier received an initial base salary of one hundred forty-five thousand dollars ($145,000) per annum. He was entitled to participate in the Company’s officer bonus plan for 2009 and thereafter. For 2008, the Agreement provided that he be considered for a non-plan discretionary bonus.

On his first day of employment, Mr. Olivier was granted a non-qualified stock option to acquire sixteen thousand two hundred (16,200) shares of the common stock of the Company, which vest in three equal installments of five thousand four hundred (5,400) per year, beginning on the one year anniversary of the date of his employment; provided, however, that all of said options shall vest immediately in the event of a Change of Control (as defined in the Agreement). Mr. Olivier is entitled to participate in the employee benefit programs available to non-union full-time employees of the Company.

In the event Mr. Olivier’s employment is terminated by the Company without Cause (as defined in the Agreement), he is entitled to salary continuation for six (6) months subject to dollar-for-dollar set-off for cash amounts he receives or accrues from any successor employer or other entity for services rendered during such period, plus COBRA premium cost reimbursement during the same six (6) month period (such aggregate amounts, the “Severance Amount”). Notwithstanding the foregoing, if such termination without Cause occurs within six (6) months before or twenty four (24) months after a Change of Control (as defined in the Agreement), the Severance Amount shall be two (2) years base salary (at the then-current rate) payable in a lump sum without right of set-off, plus COBRA premium cost reimbursement for eighteen (18) months.

Effective as of November 15, 2010, Mr. Olivier entered into a Change of Control Agreement (the “2010 Amendment”) with the Company which provides that in the event of a Change of Control (as defined therein) and termination of Mr. Olivier’s employment by the Company without good cause or resignation by Mr. Olivier for good reason, in either case within 24 months after a Change of Control, Mr. Olivier shall be entitled to a lump sum severance payment equal to two (2) years base salary plus an additional amount to cover the continuation of certain benefits for specified periods of time. Relative to the proposed merger with the city of Nashua, New Hampshire (“Merger”), the 2010 Amendment also provides that (i) in no event shall Good Cause exist at any time during the two hundred ten (210) calendar day period commencing on a Change of Control, and (ii) Good Reason shall be deemed to exist at all times after the expiration of the one hundred eighty (180) calendar day period commencing on a Change of Control. The 2010 Amendment also generally broadens or adds non-compete provisions, adds or revises release-of-claims provisions, and clarifies and/or harmonizes the type and value of employee benefits includible in the severance obligations of the Company following a Merger.

Stock Option Grants During the Fiscal Year Ended December 31, 2010

Grants of Plan-Based Awards

All Other Option

Exercise or

Awards: Number of

Base Price of

Grant Date Fair

Securities Underlying

Option

Value of Stock and

Options

Awards

Option Awards

Name

Grant Date

(#)

($/Share)

($) ƒ

Duane C. Montopoli

01/27/2010

8,000



20.11

28,518

03/25/2010

30,000

‚

21.14

116,100

Thomas C. Leonard

01/27/2010

5,000



20.11

17,824

Donald L. Ware

01/27/2010

5,000



20.11

17,824

Stephen J. Densberger

01/27/2010

3,200



20.11

11,407

Roland E. Olivier

01/27/2010

4,000



20.11

14,259

For additional information regarding grants of stock options, see “Executive Compensation—Compensation Discussion and Analysis” in this Proxy Statement.

Stock Option Exercises and Fiscal Year End Values

The following tables set forth information concerning the exercises of stock options by the Named Executive Officers during the fiscal year ended December 31, 2010, and the number and the fiscal year end value of unexercised options held by the Named Executive Officers at December 31, 2010. 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, 2010, 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 the Company’s common stock on the date of exercise.

Option Exercises and Stock Vested During 2010

		Option Awards 
		Number of Shares
		Acquired on				Value Realized on
		Exercise				Exercise
Name		(#)				($)
Duane C. Montopoli			—				—
Thomas C. Leonard			12,702				26,251
Donald L. Ware			4,690				23,170
Stephen J. Densberger			5,333				18,932
Roland E. Olivier			—				—

Outstanding Equity Awards at Fiscal Year-End

		Option Awards
										Equity Incentive
										Plan Awards:
										Number of
		Number of				Number of				Securities
		Securities				Securities				Underlying
		Underlying				Underlying				Unexercised
		Unexercised				Unexercised				Unearned				Option				Option
		Options (#)				Options (#)				Options				Exercise				Expiration
Name		Exercisable				Unexercisable				(#)				Price ($)				Date
Duane C. Montopoli			40,000				—				—				19.00				08/21/2016
			2,667				5,333	‚			—				17.64				01/28/2019
			—				8,000				—				20.11				01/27/2020
			30,000				—				—				21.14				03/25/2020
Thomas C. Leonard			—				6,000	ƒ			—				22.22				07/07/2018
			—				1,403	‚			—				17.64				01/28/2019
			—				5,000				—				20.11				01/27/2020
Donald L. Ware			3,333				—				—				20.25				01/25/2012
			5,333				—				—				20.14				10/03/2013
			5,333				—				—				21.24				01/23/2014
			2,107				—				—				19.67				01/28/2015
			—				3,333	‚			—				17.64				01/28/2019
			—				5,000				—				20.11				01/27/2020
Stephen J. Densberger			5,333				—				—				15.29				01/12/2011
			3,333				—				—				20.25				01/25/2012
			5,333				—				—				20.14				10/03/2013
			4,667				—				—				21.24				01/23/2014
			5,333				—				—				19.67				01/28/2015
			4,000				—				—				19.51				12/09/2015
			1,334				2,666	‚			—				17.64				01/28/2019
			—				3,200				—				20.11				01/27/2020
Roland E. Olivier			10,800				5,400	„			—				22.51				08/25/2018
			632				1,263	‚			—				17.64				01/28/2019
			—				4,000				—				20.11				01/27/2020

Pension Benefits

								Present Value
				Number of				of				Payments
				Years Credited				Accumulated				During Last
				Service				Benefit				Fiscal Year
Name		Plan Name		(#)				($) 				($)
Duane C. Montopoli		Pension Plan for Employees of Pennichuck Corporation			4				188,407				—
Thomas C. Leonard		Pension Plan for Employees of Pennichuck Corporation			2				42,531				—
Donald L. Ware		Pension Plan for Employees of Pennichuck Corporation			15				228,224				—
Stephen J. Densberger		Pension Plan for Employees of Pennichuck Corporation			36				474,119				—
Roland E. Olivier		Pension Plan for Employees of Pennichuck Corporation			2				44,113				—

Pension Plan

The Company maintains a qualified, non-contributory defined-benefit pension plan for all qualifying employees of the Company and its subsidiaries. In general, the pension plan provides for monthly payments to or on behalf of each covered employee based upon such employee’s career averaged annual compensation, consisting of salary and bonus, prior to retirement and the employee’s covered years of service. Directors who are not employees are not eligible to participate in the plan. The pension plan includes optional early retirement benefits, provided a participant has attained age 55 and has completed ten or more years of covered service. Mr. Densberger has met the criteria necessary for early retirement benefits under the plan. Under the pension plan, the Company makes an annual contribution for the benefit of eligible employees computed on an actuarial basis. All contributions to the fund and expenses of administering the fund are paid by the Company.

The following table sets forth severance benefits that would have been paid to the Named Executive Officers upon certain types of termination of employment quantified as though the termination occurred on December 31, 2010. Such amounts are payable pursuant to employment-related agreements as more fully described elsewhere in this Proxy Statement.

Severance and Change of Control Benefits

See “Executive Agreements” for a description of the following severance and Change of Control benefits for each of the following executives, including definitions of the terms used in the column headings, which severance benefits were as follows as of December 31, 2010:

										Change of
										Control Followed
										by Termination
										Without Cause or
		Resignation				Termination				Resignation for				Unvested
		for Good				without				Good Reason				Stock
		Reason 				Cause ‚				ƒ „				Options
Name		($)				($)				($)				($)
Duane C. Montopoli			287,108				287,108				790,213				109,837
Thomas C. Leonard			—				91,878				364,672				80,727
Donald L. Ware			—				198,034				404,509				68,647
Stephen J. Densberger			—				—				328,901				49,114
Roland E. Olivier			—				77,541				314,829				67,466

Certain Relationships and Related Party Transactions

The Company considers directors, nominees for directors, 5% or greater security holders, and executive officers or their immediate family members to be related parties. Under our Audit Committee charter, the Audit Committee is responsible for reviewing and approving all transactions involving the Company in which any related person has a direct or indirect interest, regardless of amount. The Audit Committee’s policy regarding the review, approval and monitoring of transactions involving the Company and any related persons is unwritten, however, it intends to approve only those related party transactions that are on terms no less favorable to the Company than could be obtained from independent third parties and are otherwise in, or are not inconsistent with, the best interest of the Company and its shareholders. Any such process would be documented in the Audit Committee minutes. Ultimately, as a general practice, it is our preference to avoid related party transactions.

In addition, the Company’s Board of Directors has adopted a Code of Conduct applicable to directors, officers and employees, which generally requires the reporting to management of transactions or opportunities that constitute conflicts of interest so that they may be avoided. Our Code of Conduct is available on our website under Investor Relations, and its subdirectory for Corporate Governance.

Ms. McCarthy served as the Company’s interim President and CEO from April 16, 2006 until August 21, 2006, and was paid $84,923 by the Company for her services. Mr. Kreick served as interim Chief Executive Officer of the Company for a portion of fiscal year 2003. Neither Ms. McCarthy nor Mr. Kreick has served as an officer of the Company in any capacity since August 2006 and fiscal year 2003, respectively.

Effective March 18, 2009 the Company entered into the Gabelli Agreement with GAMCO and its affiliated entities (collectively “Gabelli Group”) pursuant to which (a) the Gabelli Group is allowed, subject to certain terms and conditions, to increase its beneficial ownership in the Company up to but not reaching 20% under the Company’s Rights Agreement (the “Rights Plan”), (b) the Company increased the size of its Board of Directors from nine (9) to eleven (11) effective as of May 6, 2009, the date of the 2009 Annual Meeting, and (c) the Board of Directors nominated two candidates recommended by the Gabelli Group to fill these additional seats.

The Gabelli Group, in turn, and with respect to the 2009 Annual Meeting, withdrew its Notice of Intent to nominate candidates for election to the Board of Directors and its shareholder proposal requesting the Board of Directors to redeem the Rights Plan. The Company previously reported in a Form 8-K filing with the Securities and Exchange Commission that it had amended its Rights Plan to give the Board of Directors the right, in its sole discretion, to determine if any Person (as defined in the Rights Plan) should be exempted from the general 15% beneficial ownership limitation specified therein and, if so, pursuant to what terms and conditions.

The Gabelli Agreement is described in the Company’s March 19, 2009 press release, which is attached as Exhibit 99.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 19, 2009 and incorporated herein by reference. The description of the Gabelli Agreement is qualified in its entirety by reference to the Letter Agreement that is filed as Exhibit 4.1 to said Form 8-K and is incorporated by reference into this Proxy Statement.

As noted above and in conjunction with the Gabelli Agreement, in 2009 the Board of Directors of the Company nominated Clarence A. Davis and Michael I. German for election to three-year terms expiring at the Annual Meeting of Shareholders in 2012. Both of these individuals were elected by the shareholders as directors of Pennichuck at the 2009 Annual Meeting for the specified term. If either Mr. Davis or Mr. German is unable or unwilling to serve at any point prior to the 2012 annual meeting, and, so long as GAMCO continues to own at least 5% of the shares of Company common stock then outstanding until the 2012 Annual Meeting, GAMCO may nominate a candidate for election as a replacement director, subject to the approval of the Board of Directors of the Company, whose approval shall not be unreasonably withheld, in accordance with the Board’s published Corporate Governance and Nominating policies and procedures.

The Board of Directors voted unanimously to extend the expiration date of the Rights Plan from April 19, 2010 to November 1, 2010; and, effective November 1, 2010 to extend the Rights Plan to May 5, 2011, the date of the 2011 Annual Meeting of the Company’s shareholders. The Company originally adopted the Rights Plan in April 2000. In general, the reasons for instituting and maintaining a Rights Plan include providing shareholders with adequate time to properly assess the merits of any proposed tender offer or similar transaction; encouraging the development of alternative transactions or competing take-over bids under such circumstances; giving the directors adequate time to fully consider any such tender offer and any alternative transaction or competing take-over bid or other strategy to maximize shareholder value; and enhancing the leverage the directors have in negotiations with any potential acquirer. The Company amended the Rights Plan on November 11, 2010 in connection with the Merger Agreement with the City of Nashua. Pursuant to that amendment, the execution and delivery of the Merger Agreement, the consummation of the Merger, and the consummation of any other transaction contemplated in the Merger Agreement will not be deemed to result in events that authorize the exercise of the rights under the Rights Plan.

The Board decided to extend the Rights Plan on November 1, 2010 to the date of the 2011 Annual Meeting and not extend it further unless put to a vote by shareholders. At the regular meeting of the Board of Directors on March 3, 2011, the Board decided not to propose a resolution in this Proxy for a vote by the shareholders that the Rights Plan be extended beyond the date of the 2011 Annual Meeting of the shareholders. Accordingly, the Rights Plan will expire effective as of May 5, 2011.

Code of Ethics for Financial Professionals

The Company has adopted a Code of Ethics for Financial Professionals applicable to the principal executive officer and all persons serving in a finance, accounting, treasury, tax or investor relations role. The Code of Ethics sets forth standards designed to deter wrongdoing and to promote honest and ethical conduct by such persons, including the avoidance of conflicts of interest, protection of confidential information, and compliance with applicable laws and regulations. A copy of the Code of Ethics for Financial Professionals is available at the Company’s website, www.pennichuck.com/investor/corporate_governance.php. The Company intends to satisfy the SEC disclosure requirement regarding amendments to, or waivers from, certain provisions of its Code of Ethics for Financial Professionals by posting such information on the Company’s website. The Company will provide to any person without charge, upon request, a copy of the Code of Ethics is available from our Investor Relations department at Pennichuck Corporation, 25 Manchester Street, Merrimack, New Hampshire 03054, Attention: Investor Relations; Telephone No. (603) 882-5191.

Equity Compensation Plan Information

The following table summarizes information, as of December 31, 2010, relating to the equity compensation plans of the Company pursuant to which equity securities of the Company are authorized for issuance.

Number of Securities

Number of Securities

Remaining Available for

to be Issued Upon

Weighted Average

Future Issuance Under

Exercise of

Exercise Price of

Equity Compensation

Outstanding Options,

Outstanding Options,

Plans (Excluding Securities

Plan Category

Warrants and Rights

Warrants and Rights

Reflected in Column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders 

268,409

$

19.84

111,934

Equity compensation plans not approved by security holders ‚

—

—

No express number set by plan ‚

Total

268,409

$

19.84

111,934

Proposal Two — Ratification of Independent Registered Public Accountants

Our Audit Committee has selected the firm of ParenteBeard LLC (“ParenteBeard”), an independent registered public accounting firm, as our accountants for the fiscal year ending December 31, 2011. Although shareholder approval of the selection of ParenteBeard is not required by law, our Board of Directors believes that it is advisable to give shareholders an opportunity to ratify this selection. If this proposal is not approved by our shareholders at the 2011 annual meeting, our Audit Committee will reconsider its selection of ParenteBeard.

The Board of Directors recommends a vote FOR the ratification of ParenteBeard as the Company’s independent registered public accountants for the fiscal year ending December 31, 2011.

Relationship with Independent Accountants

On October 1, 2009, the Company was notified that its independent accountant, Beard Miller Company LLP (“Beard”), an independent registered public accounting firm, had merged with Parente Randolph LLC (“Parente”) and formed a new entity, ParenteBeard LLC (“ParenteBeard”). On October 1, 2009, Beard resigned as the auditors of the Company and, with the approval of the Audit Committee of the Company’s Board of Directors, ParenteBeard was engaged as its independent registered public accounting firm.

ParenteBeard LLC was formed in connection with the merger of Parente and Beard on October 1, 2009. Prior to engaging ParenteBeard, the Company had used Beard as its independent accountant and did not consult with Parente regarding the application of accounting principles to a specified transaction, either completed or proposed, or regarding the type of audit opinion that might be rendered on the Company’s financial statements, and Parente did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.

The report of Beard regarding the Company’s financial statements for the fiscal years ended December 31, 2008 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the year ended December 31, 2008 and during the interim period from January 1, 2009 through October 1, 2009, the date of Beard’s resignation, there were no disagreements with Beard on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Beard, would have caused it to make reference to such disagreement in its reports.

Fees Paid to Independent Accountants

The following table sets forth the aggregate fees billed, or to be billed, by ParenteBeard, the Company’s independent accountants, and by Beard, the Company’s former independent accountants, for professional services rendered in connection with the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2010 and December 31, 2009, and fees billed for audit-related services, tax services and all other services rendered during those periods.

Fee Category		Fiscal 2010				Fiscal 2009
Audit Fees 		$	242,722			$	258,310
Audit-Related Fees ‚			9,800				9,000
Tax Fees ƒ			17,000				13,200
All Other Fees „			—				—
Total Fees		$	269,522			$	280,510

The Audit Committee’s Charter provides that the Audit Committee must pre-approve all audit services and non-audit services to be provided to the Company by independent registered public accounting firms. All audit services, audit-related services, tax services and other services for fiscal 2010 were pre-approved by the Audit Committee, which concluded that the provision of such services by ParenteBeard was compatible with the maintenance of that firm’s independence in the conduct of its auditing function. During March 2011, the Audit Committee pre-approved ParenteBeard for audit services to be provided to the Company for fiscal 2011.

Proposal Three — Advisory (non-binding) vote on the approval of the compensation of the Company’s Named Executive Officers (“Say on Pay”)

In accordance with recent legislation, the Company is providing shareholders with an advisory (non-binding) vote on compensation programs for our Named Executive Officers (sometimes referred to as “Say on Pay”). Accordingly, you may vote on the following resolution at the 2011 annual meeting:

“Resolved, that the shareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure in this Proxy Statement.”

This vote is non-binding. The Board and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.

As described in detail under the “Compensation Discussion and Analysis” section of this Proxy, our compensation programs are designed to motivate our executives to build a successful company. If fully earned based on the achievement of performance targets, equity compensation in the form of restricted stock units that are subject to further time-based vesting is the largest component of executive compensation. We believe that our compensation program, with its balance of short-term incentives (including cash bonus awards and performance conditions for awards of restricted stock units) and long-term incentives (including equity awards that vest over up to five years) and share ownership guidelines reward sustained performance that is aligned with long-term shareholder interests. Shareholders are encouraged to read the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure.

The Board of Directors unanimously recommends that you vote FOR the approval, on an advisory basis, of the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure.

Proposal Four — Advisory (non-binding) vote on the desired frequency on which shareholders should have an advisory (non-binding) vote on the approval of the compensation of the Company’s Named Executive Officers (“Say When on Pay”)

In addition to providing shareholders with the opportunity to cast an advisory vote on Named Executive Officer compensation, the Company this year is providing shareholders with an advisory vote on whether the advisory vote on Named Executive officer compensation should be held every one, two or three years (sometimes referred to as “Say When on Pay”). Accordingly, you may vote on the following resolutions at the 2011 annual meeting:

“Resolved, that the shareholders wish the Company to include an advisory vote on the compensation of the Company’s Named Executive Officers every:

•

year

•

two years;

•

three years; or

•

abstain.”

This vote is non-binding. The Board believes that a frequency of “every year” for the advisory vote on Named Executive Officer compensation is the optimal interval for conducting and responding to a Say When on Pay vote. Shareholders who have concerns about executive compensation during the interval between Say on Pay votes are welcome to bring their specific concerns to the attention of the Board. Please refer to “Shareholder Communications to the Board” in this Proxy Statement for information about communicating with the Board.

The proxy card provides shareholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining) and, therefore, shareholders will not be voting to approve or disapprove the Board’s recommendation.

Although this advisory vote on the frequency of the Say When on Pay vote is non-binding, the Board and the Compensation Committee will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.

The Board of Directors unanimously recommends that you vote for the option of “every year” for future advisory votes on Named Executive Officer compensation.

Annual Report on Form 10-K

The Company’s Annual Report on Form 10-K is available without charge upon request from our Investor Relations department at Pennichuck Corporation, 25 Manchester Street, Merrimack, New Hampshire 03054, Attention: Investor Relations; Telephone No. (603) 882-5191. The Company’s Annual Report on Form 10-K is also available at www.pennichuck.com/investor/proxy-materials.php.

Other Matters

The Board of Directors knows of no business that will be presented for consideration at the Annual Meeting other than those items set forth in this 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.

By Order of the Board of Directors,

Roland E. Olivier
Secretary

Appendix A

AUDIT COMMITTEE CHARTER
of
PENNICHUCK CORPORATION

The Audit Committee of Pennichuck Corporation (the “Company”) is a standing committee of the Board of Directors (the “Board”). The Committee shall be comprised of at least three directors, each of whom:

1.

is “independent” in the judgment of the Board of Directors under the rules of the Nasdaq Stock Market, Inc., except as permitted by Nasdaq rule and other applicable laws and regulations (including the Sarbanes-Oxley Act of 2002);

2.

does not accept any consulting, advisory or other compensatory fee from the Company other than in his or her capacity as a member of the Board or any committee of the Board; and

3.

is not an “affiliate” of the Company or any subsidiary of the Company, as such term is defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

All members of the Committee must be able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement, and cash flow statement, and the Committee shall have at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the member’s financial sophistication.

Members shall be appointed by the Board based on nominations recommended by the Company’s Nominating Committee and shall serve at the pleasure of the Board and for such term or terms as the Board may determine.

Committee Purposes

The principal purposes of the Audit Committee are to:

1.

assist the Board in fulfilling its oversight responsibility relating to (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of the independent auditors; and

2.

prepare an audit committee report as required by the Securities and Exchange Commission (the “SEC”) for inclusion in the Company’s annual proxy statements.

The management of the Company is responsible for the preparation, presentation and integrity of the Company’s financial statements and for the effectiveness of internal control over financial reporting. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulation. The independent auditors are responsible for planning and carrying out a proper audit of the Company’s annual financial statements, reviews of the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, annually auditing management’s assessment of the effectiveness of internal control over financial reporting commencing in the fiscal year beginning on or after January 1, 2005, as the case may be, and other procedures. In fulfilling their responsibilities hereunder, it is recognized that members of the Audit Committee are not fulltime employees of the Company and are not, and do not represent themselves to be, performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards.

The independent auditors shall submit to the Audit Committee annually a formal written statement of the fees billed in each of the last two (2) fiscal years for each of the following categories of services rendered by the independent auditors:

1.

the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements;

2.

assurance and related services not included in clause 1. that are reasonably related to the performance of the audit or review of the Company’s financial statements, in the aggregate and by each service;

3.

tax compliance, tax-advice and tax planning services, in the aggregate and by each service; and

4.

all other products and services rendered by the independent auditors, in the aggregate and by each service.

Committee Duties and Responsibilities

To carry out its purposes, the Audit Committee shall have the following duties and responsibilities:

1.

with respect to the independent auditors,

(i)

to be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors (including the resolution of disagreements between management and the independent auditors regarding financial reporting), who shall report directly to the Audit Committee;

(ii)

to be directly responsible for the appointment, compensation, retention and oversight of the work of any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or to perform audit, review or attestation services, which firm shall also report directly to the Audit Committee;

(iii)

to pre-approve, or to adopt appropriate procedures to pre-approve, all audit and non audit services to be provided by the independent auditors;

(iv)

to discuss with the independent auditors any relationships between the independent auditors and the Company that may impact the quality of audit services or the objectivity and independence of the Company’s independent auditors;

(v)

to obtain from the independent auditors in connection with any audit a timely report relating to the Company’s annual audited financial statements which would include all alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and any material written communications between the independent auditors and management, such as any “management” letter or schedule of unadjusted differences;

(vi)

to review and evaluate the qualifications, performance and independence of the lead partner of the independent auditors;

(vii)

to discuss with management the timing and process for implementing the rotation of the lead audit partner, the concurring partner and any other active audit engagement team partner and consider whether there should be a regular rotation of the audit firm itself;

(viii)

to review and approve all related party transactions of the Company; and

(ix)

to take into account the opinions of management in assessing the independent auditor’s qualifications, performance and independence;

2.

with respect to accounting principles and policies, financial reporting and audit control over financial reporting,

(i)

to advise management and the independent auditors that they are expected to provide to the Audit Committee a timely analysis of significant issues and practices relating to accounting principles and policies, financial reporting and internal control over financial reporting;

(ii)

to consider any reports or communications (and management’s responses thereto) submitted to the Audit Committee by the independent auditors required by or referred to in Statement on Auditing Standards No. 61 (“SAS 61”) (as codified by AU Section 380), as it may be modified or supplemented or other professional standards including reports and communications related to:

•

deficiencies, including significant deficiencies or material weaknesses, in internal control identified during the audit or other matters relating to internal control over financial reporting;

•

consideration of fraud in a financial statement audit;

•

detection of illegal acts;

•

the independent auditor’s responsibility under generally accepted auditing standards;

•

any restriction on audit scope;

•

significant accounting policies;

•

significant issues discussed with the national office respecting auditing or accounting issues presented by the engagement;

•

management judgments and accounting estimates;

•

any accounting adjustments arising from the audit that were noted or proposed by the auditors but were passed (as immaterial or otherwise);

•

the responsibility of the independent auditors for other information in documents containing audited financial statements;

•

disagreements with management;

•

consultation by management with other accountants;

•

major issues discussed with management prior to retention of the independent auditors;

•

difficulties encountered with management in performing the audit;

•

the independent auditor’s judgments about the quality of the entity’s accounting principles; and

•

reviews of interim financial information conducted by the independent auditors;

(iii)

to meet with management and the independent auditors:

•

to discuss the scope of the annual audit;

•

to review and discuss the annual audited financial statements and quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K;

•

to discuss any significant matters arising from any audit, including any audit problems or difficulties, whether raised by management or the independent auditors, relating to the Company’s financial statements;

•

to discuss any difficulties the independent auditors encountered in the course of the audit, including any restrictions on their activities or access to requested information and any significant disagreements with management;

•

to discuss any “management” or “internal control” letter issued, or proposed to be issued, by the independent auditors to the Company;

•

to review the form of opinion the independent auditors propose to render to the Board of Directors and shareholders; and

•

to discuss, as appropriate: (a) any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company;

(iv)

to inquire of the Company’s chief executive officer and chief financial officer as to the existence of any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and as to the existence of any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting;

(v)

to discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company assess and manage the Company’s exposure to risk, and to discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures;

(vi)

to obtain from the independent auditors assurance that the audit was conducted in a manner consistent with Section 10A of the Securities Exchange Act of 1934, as amended, which sets forth certain procedures to be followed in any audit of financial statements required under the Securities Exchange Act of 1934;

(vii)

to discuss with the Company’s general or outside counsel any significant legal, compliance or regulatory matters that may have a material effect on the financial statements or the Company’s business, financial statements or compliance policies, including material notices to or inquiries received from governmental agencies;

(viii)

to discuss and review the type and presentation of information to be included in earnings press releases;

(ix)

to discuss the types of financial information and earnings guidance provided, and the types of presentations made, to analysts and rating agencies;

(x)

to establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters;

(xi)

to review and discuss any reports concerning material violations submitted to it by Company attorneys or outside counsel pursuant to the SEC attorney professional responsibility rules or otherwise; and

(xii)

to establish hiring policies for employees or former employees of the independent auditors;

3.

with respect to reporting and recommendations,

(i)

to prepare any report or other disclosures, including any recommendation of the Audit Committee, required by the rules of the SEC to be included in the Company’s annual proxy statement;

(ii)

to review and reassess the adequacy of this Charter at least annually and recommend any changes to the full Board of Directors;

(iii)

to report its activities to the full Board of Directors on a regular basis and to make such recommendations with respect to the above and other matters as the Audit Committee may deem necessary or appropriate; and

(iv)

to prepare and review with the Board an annual performance evaluation of the Audit Committee, which evaluation must compare the performance of the Audit Committee with the requirements of this charter. The performance evaluation by the Audit Committee shall be conducted in such manner as the Audit Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Audit Committee or any other member of the Audit Committee designated by the Audit Committee to make this report.

Committee Structure and Operations

The Board shall designate one member of the Committee as its chairperson. The Audit Committee shall meet once every fiscal quarter, or more frequently if circumstances dictate, to discuss with management the annual audited financial statements and quarterly financial statements, as applicable. The Audit Committee should meet separately on a periodic basis with management and the independent auditors to discuss any matters that the Audit Committee or any of these persons or firms believes should be discussed privately. The Committee shall meet in executive session at least twice a year. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee. Members of the Audit Committee may participate in a meeting of the Audit Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.

Delegation to Subcommittee

The Audit Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Audit Committee. The Audit Committee may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided that any such approvals are presented to the Audit Committee at its next scheduled meeting.

Resources and Authority of the Audit Committee

The Audit Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate, and approve the fees and other retention terms of special or independent counsel, accountants or other experts and advisors, as it deems necessary or appropriate, without seeking approval of the Board or management.

The Company shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board, for payment of:

1.

compensation to the independent auditors and any other public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;

2.

compensation of any advisors employed by the Audit Committee; and

3.

ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

TO VOTE, MARK BLOCKSBELOW IN BLUE OR BLACK INK AS FOLLOWS:
				KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.				DETACH AND RETURN THIS PORTION ONLY