PNNW Pennichuck Corp. (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

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:

þ		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2) )
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material under Rule14a-12

PENNICHUCK CORPORATION

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

o		No fee required
þ		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:
			Common Stock, par value $1.00 per share (and Preferred Stock Purchase Rights associated therewith)_
	(2)		Aggregate number of securities to which transaction applies:
			4,941,337 shares of Pennichuck common stock, consisting of (i) 4,681,427 of Pennichuck common stock outstanding as of the date of this filing and (ii) 259,910 shares of Pennichuck common stock issuable upon the exercise of options outstanding as of the date of this filing.
	(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):
			The filing fee was determined based upon the sum of (a) the product of 4,681,427 shares of common stock and the total cash merger consideration of $29.00 per share; and (b) the difference between (i) the product of $29.00 and the 259,910 shares of common stock issuable upon the exercise of outstanding options; and (ii) the product of the weighted average exercise price per share of such stock options and the number of such options.
	(4)		Proposed maximum aggregate value of transaction: $138,108,928
	(5)		Total fee paid:
			$16,034.45

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 SPECIAL MEETING OF SHAREHOLDERS

Wednesday, June [__], 2011

To Our Shareholders:

     You are cordially invited to attend a Special Meeting of the Shareholders of Pennichuck Corporation (hereinafter sometimes referred to as “Pennichuck” or the “Company”) which will be held at 10:00 AM (Eastern Time) on Wednesday, June [__], 2011, at the Company’s headquarters, 25 Manchester Street, Merrimack, New Hampshire 03054, for the following purposes:

	(1)		To consider and vote on a proposal to approve the Agreement and Plan of Merger effective as of November 11, 2010 (the “Merger Agreement”) between the Company and the City of Nashua, New Hampshire (sometimes referred to as the “City” or “Nashua”), whereby the City has agreed to acquire all of the outstanding shares of Pennichuck Corporation common stock for $29.00 per share in cash. A copy of the Merger Agreement is attached as Annex A to the Proxy Statement accompanying this notice; and
	(2)		To consider and vote on a proposal to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of approving the Merger Agreement.

          At the Special Meeting, you will be asked to vote in favor of approving the Merger Agreement. If the Merger contemplated by the Merger Agreement (the “Merger”) is completed, you will be entitled to receive $29.00 in cash, without interest and less any applicable withholding taxes, for each share of common stock of Pennichuck Corporation that you own. We cannot complete the Merger unless all of the conditions to closing are satisfied, including the approval of the Merger Agreement by an affirmative vote of the holders of at least two-thirds of all of the outstanding common shares of the Company.

          The Board of Directors has fixed the close of business on Friday, April XX, 2011 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Special 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 Special Meeting or any adjournment thereof. Your attention is directed to the attached Proxy Statement.

     The Board of Directors of the Company, which is comprised of 10 independent directors plus the Company’s President and Chief Executive Officer, reviewed and considered the terms and conditions of the Merger Agreement and a related Settlement Agreement, which resolves the City’s eminent domain proceeding against the Company. The Board thereafter unanimously determined that the Merger, the Merger Agreement, the Settlement Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of the Company and our shareholders, approved the Merger Agreement

and recommended that our shareholders adopt the Merger Agreement. In considering the recommendation of our Board of Directors that you approve the Merger Agreement, you should be aware that there are provisions in the Merger Agreement and aspects of the Merger that will result in certain benefits to our executive officers and directors that are different from, or in addition to, the benefits received by our shareholders generally.

     At the Special Meeting, we will also ask you to expressly grant the authority to vote your shares to adjourn the Special Meeting, if necessary, to permit further solicitations of proxies if there are not sufficient votes at the time of the Special Meeting to approve the Merger Agreement.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE:

•

“FOR” THE APPROVAL OF THE MERGER AGREEMENT; AND

•

“FOR” THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES TO VOTE IN FAVOR OF APPROVING THE MERGER AGREEMENT.

YOUR VOTE IS VERY IMPORTANT

     In the materials accompanying this Notice of Special Meeting of Shareholders, you will find a Proxy Statement relating to the actions to be taken by our shareholders at the Special Meeting and a proxy card. The Proxy Statement includes important information about the Merger Agreement, the Merger and other matters to be considered at the Special Meeting. We encourage you to carefully read the entire Proxy Statement, including its annexes.

     All of Pennichuck’s shareholders are cordially invited to attend the Special Meeting in person. Whether or not you plan to attend the Special Meeting, we urge you to submit your proxy over the Internet or by telephone. These are quick and cost effective ways for you to submit your proxy. If you would prefer to vote by mail, please sign, date and return the enclosed proxy card in the postage-paid envelope provided. Please review the instructions on the proxy card for each of the voting options. If you prefer to vote by telephone, please call the toll-free telephone number provided in the Proxy Statement for Georgeson, Inc., our proxy solicitation firm, to cast your vote. If you return an executed proxy or cast your vote by telephone, and then attend the Special Meeting, you may revoke your proxy and vote in person. Attendance at the Special Meeting will not by itself revoke a proxy.

     No person has been authorized to give any information or to make any representations other than those set forth in the Proxy Statement in connection with the solicitation of proxies made hereby, and, if given or made, such information must not be relied upon as having been authorized by the Company or any other person.

     Shareholders are or may be entitled to assert dissenters’ rights under Section 293-A:13.01, et. seq. of the New Hampshire Business Corporation Act. A copy of the applicable sections of the New Hampshire Business Corporation Act have been attached to this Proxy Statement as Annex C .

By Order of the Board of Directors,

Roland E. Olivier
Secretary

Merrimack, New Hampshire
April [___], 2011

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE XX, 2011:

The Company’s Proxy Statement for the Special Meeting of Shareholders relating to vote on the approval of the proposed Merger with Nashua, the Proxy Statement for the May 5, 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 MERGER AGREEMENT WITHOUT INSTRUCTIONS FROM THE BENEFICIAL OWNER. THEREFORE, IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER OR BANK, MAKING SURE YOUR VOTE IS CAST IS ESPECIALLY IMPORTANT. ACCORDINGLY, WE ENCOURAGE YOU TO VOTE PROMPTLY BY MAIL OR THE INTERNET, AS PROVIDED BY THE ENCLOSED PROXY CARD, OR BY TELEPHONE EVEN IF YOU INTEND TO ATTEND THE SPECIAL 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

INTRODUCTION			6
SUMMARY TERM SHEET			7
QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING			13
THE SPECIAL MEETING			19
PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT			22
THE MERGER			23
The Parties to the Merger			23
Background of the Merger			23
Consideration of Strategic Alternatives			31
Reasons for the Merger and Determination of Pennichuck’s Board of Directors			33
Pennichuck Projections and Information			37
Opinion of Financial Advisor			38
Delisting and Deregistration of Pennichuck Common Stock			45
Accounting			45
Effects on Pennichuck if the Merger is Not Completed			45
Interests of Our Executive Officers and Directors in the Merger			46
Other Considerations			50
Dissenters’ Rights			50
Material U.S. Federal Income Tax Consequences of the Merger			52
Regulatory Matters			56
Certain Relationships			57
Litigation Related to the Merger			57
THE MERGER AGREEMENT			57
Effective Time of the Merger			58
Structure of the Merger			58
Treatment of Company Securities in the Merger			58
Dissenting Shares			59
Exchange and Payment Procedures			59
Representations and Warranties			60
Conduct of Our Business Pending the Merger			62
No Solicitation of Transactions			65
Access to Information			67
Eminent Domain Settlement Agreement			67
Parties’ Cooperation to Complete the Merger			68
Shareholders’ Meeting			69
Employee Benefit Matters			69
Indemnification and Insurance			69
Conditions to the Merger			69
Financing			71
Termination			71
Termination Fees and Expenses			72
Amendment and Waiver			73
Market Price and Dividend Data			74
Security Ownership of Certain Beneficial Owners and Management			75
PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING			79
OTHER MATTERS			79
Shareholder Proposals			79
Where You Can Find More Information			80

Annex A: Agreement and Plan of Merger dated November 11, 2010 among Pennichuck Corporation, City of Nashua, New Hampshire, and Merger Sub			A
Annex B: Opinion of Boenning & Scattergood, Inc.			B
Annex C: Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act			C

PENNICHUCK CORPORATION
25 Manchester Street
Merrimack, New Hampshire 03054

PROXY STATEMENT
for
SPECIAL MEETING OF SHAREHOLDERS
to be held on June [__], 2011

INTRODUCTION

This proxy statement (“Proxy Statement”) is furnished by and on behalf of the Board of Directors (the “Board”) of Pennichuck Corporation, a New Hampshire corporation (“Pennichuck,” the “Company,” “we,” “us,” or “our”), in connection with its solicitation of proxies to be voted at the Special Meeting to be held on June [__], 2011 (the “Special Meeting”), beginning at 10:00 a.m., Eastern Time, at the Company’s headquarters, 25 Manchester Street, Merrimack, New Hampshire for the purposes set forth in the accompanying Notice of Special Meeting of Shareholders. This Proxy Statement and enclosed proxy card is first being mailed on or about April [__], 2011 to the Company’s shareholders of record as of April [__], 2011 (the “Record Date”). As of the Record Date, [4,681,427] shares of our common stock were outstanding and entitled to one vote with respect to the proposals to be voted on at the Special Meeting.

The “ Summary Term Sheet ” and the “ Questions and Answers About the Merger and Special Meeting ” that follow summarize the material information in this Proxy Statement. We encourage you to carefully read this entire Proxy Statement, and the other documents to which this Proxy Statement refers you, for a more complete understanding of the matters being considered at the Special Meeting.

In addition, you may obtain additional business and financial information about the Company by following the instructions in “ Other Matters — Where You Can Find More Information ” beginning on page 80. All information contained in this Proxy Statement was prepared and supplied by Pennichuck, including the descriptions of the City of Nashua, New Hampshire and the newly-formed wholly-owned subsidiary of Nashua formed to effect the Merger (“Merger Sub”) under the heading “ Summary Term Sheet —The Parties to the Merger .”

This Proxy Statement contains “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Proxy Statement that are not clearly historical in nature are forward-looking, including statements regarding whether and when the Merger is expected to close, whether conditions to the Merger will be satisfied, the effect of the Merger on our business and operating results, and all other statements regarding our intent, plans, beliefs, expectations or those of our directors or officers. Words such as “anticipate,” “believe,” “belief,” “expect,” “estimate,” “project,” “plan,” “intend,” “continue,” “predict,” “may,” “will,” “should,” “strategy,” “will likely result,” “will likely continue,” and similar expressions are generally intended to

identify Forward-Looking Statements. However, not all Forward-Looking Statements contain such identifying words.

Forward-Looking Statements are based on our current expectations and are subject to a number of risks, uncertainties and assumptions, including those pertaining to the Merger, which could cause actual events and developments to differ materially from those described in the Forward-Looking Statements. The risks, uncertainties and assumptions that could cause actual events and developments to differ from the Forward-Looking Statements include the risks detailed elsewhere in this Proxy Statement and in our periodic reports filed with the Securities and Exchange Commission (“SEC”), including in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2010 and any subsequent Current Reports on Form 8-K or Quarterly Reports on Form 10-Q. See “ Other Matters—Where You Can Find More Information ” at page 80.

Forward-Looking Statements are only predictions, and we can give no assurance that they will prove to be correct. You should not place undue reliance on Forward-Looking Statements. In light of the significant uncertainties inherent in the Forward-Looking Statements included in this Proxy Statement, you should not consider the inclusion of such information as a representation by us or anyone else that we will achieve such results or developments. The statements made in this Proxy Statement represent our views as of the date of the Proxy Statement, and it should not be assumed that these statements will remain accurate as of any future date. We undertake no obligation to update any Forward-Looking Statement, whether as a result of new information, future events or otherwise.

SUMMARY TERM SHEET

           The following summary, together with the “QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING” immediately following this summary, are intended only to highlight certain information contained elsewhere in this Proxy Statement. This summary and the following question and answer section may not contain all the information that is important to you and the other shareholders. To more fully understand the proposed Merger and the terms of the Merger Agreement, you should carefully read this entire Proxy Statement, all of its Annexes and the documents referenced in this Proxy Statement before voting. For instructions on obtaining more information, see the section entitled “OTHER MATTERS — WHERE YOU CAN FIND MORE INFORMATION.” The Company has included page number references in this summary to direct you to a more complete description of the topics presented in this summary.

The Parties to the Merger Agreement (See Page 23)

Pennichuck Corporation, a New Hampshire corporation, (the “Company”), is the holding company of four subsidiaries, Pennichuck Water Works, Inc. (“Pennichuck Water”), Pennichuck East Utility, Inc. (“Pennichuck East”), Pittsfield Aqueduct Company, Inc. (Pittsfield Aqueduct”), Pennichuck Water Service Corporation (“Service Corporation”) and The Southwood Corporation (“Southwood”). The company is engaged in the collection, storage, treatment and distribution of potable water to approximately 33,000 customers in 39 New Hampshire communities through its three regulated water utilities: Pennichuck Water, Pennichuck East and Pittsfield Aqueduct. Through the Service Corporation, the Company provides contract operation and maintenance services, including monitoring water quality, testing, maintenance and compliance reporting on a non-regulated basis for water systems for various towns, businesses and residential communities primarily in southern and central New Hampshire and the

Towns of Salisbury and Amesbury, Massachusetts. Southwood owns about 450 acres of non-utility undeveloped land adjacent to the watershed in Nashua and Merrimack, New Hampshire and is in the business of environmentally-responsible real estate commercialization.

The City of Nashua (“Nashua” or the “City”) is a New Hampshire municipal corporation. Nashua is the second most populous city in New Hampshire.

The Company and Nashua contemplate a direct or indirect wholly owned corporate subsidiary of Nashua (the “Merger Sub”) will subsequently join the Merger Agreement as an additional party.

The Merger (See Page 23)

You are being asked to approve the Merger Agreement. Pursuant to the Merger Agreement, the Merger Sub will merge with and into the Company (the “Merger”). After the Merger, the Company will continue as the surviving corporation and be wholly owned by Nashua.

Following and as a result of the Merger, Company shareholders will no longer have any interest in, and will no longer be shareholders of, the Company, and will not participate in any of the Company’s future earnings or growth. Shares of our common stock will no longer be traded on the NASDAQ Global Select Market, price quotations with respect to shares of our common stock will no longer be available, and the registration of shares of our common stock under the Securities Exchange Act of 1934 will be terminated.

Merger Consideration

Company Common Stock

At the effective time of the Merger, each share of Pennichuck common stock issued and outstanding immediately prior to the effective time of the Merger will automatically be canceled and converted into the right to receive $29.00 in cash, without interest and less applicable withholding taxes (the “Merger Consideration”) (except for shares for which statutory dissenters’ rights are properly demanded and perfected in compliance with all of the procedures under the New Hampshire Business Corporation Act).

Company Stock Options

At the effective time of the Merger, each outstanding employee stock option, whether or not vested or exercisable, to acquire Company common stock will become fully vested and thereafter will represent the right to receive an amount in cash, without interest and less applicable withholding taxes, equal to the product of the number of shares of our common stock subject to each option as of the effective time of the Merger, multiplied by the excess of $29.00 over the per share exercise price of such option. None of our outstanding options has an exercise price per share equal to or in excess of $29.00.

Required Vote (See Page 20)

The approval of the Merger Agreement requires the affirmative vote of the holders of not less than two-thirds of the outstanding shares of Pennichuck common stock that are entitled to vote at the Special Meeting. Each outstanding share of our common stock on the record date entitles the holder to one vote at the Special Meeting. A failure to vote your shares or an abstention will have the same effect as a vote against approval of the Merger Agreement.

The approval of the motion to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of the approval of the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Pennichuck common stock, present in person or by proxy at the Special Meeting and entitled to vote on the matter. Failure to vote your shares of our

common stock will have no effect on the approval of the proposal to adjourn the Special Meeting but an abstention will have the same effect as a vote against the proposal to adjourn the Special Meeting.

Recommendation of Our Board (See Page 19)

Our Board, taking into consideration, among other factors, the advice of our financial adviser, Boenning & Scattergood, Inc. (“Boening”), has unanimously determined that the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of the Company and our shareholders, and recommends that our shareholders vote “FOR” the approval of the Merger Agreement, and “FOR” the adjournment of the Special Meeting, if necessary, to solicit additional proxies to vote in favor of approval of the Merger Agreement.

Recommendation of Boenning & Scattergood, Inc. (See Page 38)

On January 26, 2011, Boenning rendered its opinion to our Board of Directors that, as of that date and subject to the factors and assumptions set forth therein, the Merger Consideration of $29.00 per share to be received in cash by the holders of Pennichuck common stock in the Merger pursuant to the Merger Agreement is fair, from a financial point of view, to such holders. This opinion was requested by our Board only after Nashua’s Board of Aldermen had taken the necessary vote to legally bind the City to the Merger Agreement. The full text of Boenning’s written opinion is included as Annex B to this Proxy Statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Boenning in preparing its opinion. We encourage our shareholders to carefully read the full text of the Boenning written opinion. For more information about Boenning’s written opinion, see also “ The Merger — Opinion of Financial Advisor ” starting on page 38.

Interests of our Executive Officers and Directors in the Merger (See Page 46)

In considering the recommendation of our Board that you approve the Merger Agreement, you should be aware that the completion of the Merger will result in certain benefits being conveyed to one or more of our executive officers and/or directors that may be different from, or in addition to, the benefits that would be received by our shareholders generally upon completion of the Merger. These interests include, among others:

•

accelerated vesting of stock options and other equity awards;

•

continued indemnification and directors’ and officers’ liability insurance applicable to the period prior to completion of the merger; and

•

severance payments and benefits if a qualifying termination of employment were to occur following the completion of the merger.

Our Board was aware of these interests and considered them, among other matters, prior to making their determination to recommend the approval of the Merger Agreement to our shareholders.

Regulatory Matters (See Page 56)

The Merger is subject to regulatory approval in New Hampshire where the Company operates its regulated business. Specifically, New Hampshire law requires prior application and approval by the New Hampshire Public Utilities Commission (“NHPUC”) prior to the closing of the Merger. The necessary regulatory applications have been submitted to the respective state agencies and the parties to the Merger Agreement are seeking approval of the applications in due course.

Tax Consequences (See Page 52)

If you are a U.S. holder of our common stock, the merger will be a taxable transaction to you. For U.S. federal income tax purposes, your receipt of cash in exchange for your shares of the Company’s common stock generally will cause you to recognize a gain or loss measured by the difference, if any, between the cash you receive as Merger Consideration and your adjusted tax basis in your shares. If you are a non-U.S. holder of our common stock, the Merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States. Backup withholding may also apply with respect to cash you receive in the Merger, unless you provide proof of an applicable exemption or a correct taxpayer identification number and otherwise comply with the applicable requirements of the backup withholding rules.

You should consult your own tax advisor for a full understanding of how the Merger will affect your taxes, including whether you should seek to defer recognition of some or all of the taxable gain by following the non-binding position taken by the Internal Revenue Service in a Private Letter Ruling discussed in more detail below.

Conditions to the Merger (See Page 69)

Each party’s obligation to effect the Merger is subject to the satisfaction or waiver, to the extent applicable, of the following conditions:

•

our shareholders approve the Merger Agreement;

•

all necessary regulatory approvals, authorizations and consents have been obtained and become final, including the regulatory approval from the NHPUC; and

•

no governmental authority will have taken action to make the Merger illegal or otherwise restrict, prevent or prohibit the Merger.

Nashua’s and Merger Sub’s obligation to effect the Merger are subject to the satisfaction or waiver, to the extent applicable, of the following conditions:

•

the accuracy of the Company’s representations and warranties to the extent required under the Merger Agreement as described under “ The Merger Agreement — Conditions to the Merger ”;

•

the performance, in all material respects, by the Company of its obligations under the Merger Agreement required to be performed at or prior to the closing date;

•

the absence of any material adverse effect on the Company;

•

the absence of any governmental action that Nashua reasonably determines would be expected to have a material adverse effect on the Company or materially adversely affect the economic benefits to Nashua of the transactions contemplated by the Merger Agreement;

•

Nashua shall have made financing arrangements necessary to finance the transactions contemplated by the Merger Agreement; and

•

the holders of no greater than 15% of our common stock have exercised and not subsequently waived their statutory dissenter’s rights.

The Company’s obligation to effect the Merger is subject to the satisfaction or waiver, to the extent applicable, of the following conditions:

•

the accuracy of Nashua’s and Merger Sub’s representations and warranties to the extent required under the Merger Agreement as described under “ The Merger Agreement — Conditions to the Merger ”;

•

the performance, in all material respects, by Nashua and Merger Sub of their respective obligations under the Merger Agreement required to be performed at or prior to the closing date; and

•

the approval and execution of the Merger Agreement by the Merger Sub.

Financing (See Page 71)

The completion of the Merger is subject to Nashua securing financing to fund the cost of closing the Merger, including the payment of the Merger Consideration.

Termination (See Page 71)

Subject to certain exceptions, the Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the effective time of the Merger as a result of any of the following:

•

by mutual written consent of the Company and Nashua;

•

by the Company in the event Nashua fails to obtain the requisite financing within 90 days after all of the conditions precedent specified in the Merger Agreement have been satisfied or waived;

•

by either the Company or Nashua if (i) our shareholders do not approve the Merger Agreement, (ii) 45 days after any governmental authority issues a non appealable order that permanently restrains, enjoins or otherwise prohibits the consummation of the Merger, (iii) 45 days after any governmental regulatory authority has denied any request or application for the approval of the Merger, or said request or application has been withdrawn at the request or recommendation of said governmental regulatory authority, unless 45 days following said denial or withdrawal a petition for rehearing or an amended application has been filed with said governmental regulatory authority, (iv) Nashua delivers to the Company a notice that a governmental regulatory authority has imposed one or more burdensome conditions with respect to its approval of the Merger; or (v) the Merger has not been consummated by December 31, 2011;

•

by the Company or Nashua in the event of certain breaches by the other party of representations, warranties or covenants in the Merger Agreement, subject in certain cases to a 30-day cure period;

•

by Nashua, if (i) our Board changes its recommendation that our shareholders approve the Merger Agreement and/or recommends a competing transaction, (ii) our Board, in the case of a tender or exchange offer by another party, recommends that our shareholders tender their shares in such tender or exchange offer or fails to recommend against such tender or exchange offer and reaffirm the Merger Agreement, (iii) we enter into a letter of intent or Agreement relating to a competing transaction, or (iv) we or our Board publicly announce an intention to do any of the foregoing; or

•

by the Company, if, prior to the shareholders approving the Merger Agreement at the Special Meeting, our Board changes its recommendation and/or recommends a competing transaction that is or is reasonably likely to lead to a superior proposal, provided that we have complied with the non-solicitation provisions in the Merger Agreement and given Nashua the opportunity to make an offer to us so that the superior proposal no longer constitutes a superior proposal, provided, however, that the Company concurrently pays Nashua a termination fee of $5,500,000.

Termination Fees and Expenses (See Page 72)

The Merger Agreement provides, in general, that each party will pay its own expenses if the Merger is not consummated. The Merger Agreement requires that, if a party terminates the Merger Agreement under one of the following circumstances, the other party shall be liable to pay the following amount(s) for such termination:

•

in the event of a termination of the Merger Agreement due to fraud, or a knowing and intentional breach by the other party, the aggrieved party may either seek all rights and remedies that may be available at law or equity, or claim the following liquidated damages, as appropriate:

i.

with some exceptions, if either the Company or Nashua terminates the Merger Agreement due to breach by the other of any representations, warranty, covenant or other agreement specified in the Merger Agreement, the breaching party shall pay the aggrieved party $1.5 million; and

ii.

if Nashua terminates the Merger Agreement due to the Company’s failure to obtain shareholder approval for the Merger Agreement, the Company shall pay Nashua $250,000.

The Merger Agreement further requires that the Company pay Nashua a termination fee of up to, but not exceeding, $5,500,000 (less any damages or other amounts paid to Nashua by the Company pursuant to the termination fees described in the paragraph above), if the Merger Agreement is terminated:

•

by the Company, in order to enter into any agreement, understanding or arrangement providing for a superior proposal;

•

by either the Company or Nashua, under specified circumstances, if a competing superior transaction is received by the Company, publicly announced and not withdrawn prior to the Special Meeting, and the shareholders vote not to approve the Merger Agreement, or within 12 months following such termination of the Merger Agreement, the Company signs a definitive agreement or consummates a competing transaction with a third party;

•

by Nashua, because our Board withholds, withdraws or modifies its recommendation that our shareholders approve the Merger Agreement and a superior proposal had been made by a third party and not withdrawn; and

•

by Nashua, as a result of a breach by the Company of any representation, warranty, covenant, obligation or agreement under the Merger Agreement due to the Company’s willful conduct or gross negligence and at the time of such breach a competing superior transaction has been communicated to the Company, publicly announced and not withdrawn, and prior to or within 12 months following termination of the Merger Agreement the Company signs a definitive agreement or consummates a said competing transaction with a third party.

No Solicitation of Transaction (See Page 65)

Subject to the exceptions discussed in the section entitled “ The Merger Agreement — No Solicitation of Transactions ” the Company has agreed that neither it nor its subsidiaries will:

•

solicit, initiate, or knowingly encourage any inquiries or the making of any proposals or offers that constitute or may reasonably be expected to lead to any Company acquisition proposal;

•

enter into or engage in any negotiations or discussions concerning an acquisition proposal;

•

withdraw, modify or propose publicly to withdraw or modify the Company’s recommendation to our shareholders to approve the Merger Agreement;

•

agree to or recommend any Company Alternative Proposal; or

•

enter into any letter of intent or similar agreement providing for any Company Alternative Proposal.

Market Price of Our Common Stock (See Page 74)

Pennichuck common stock is listed on the NASDAQ Global Select Market under the ticker symbol “PNNW.” It’s closing price on November 11, 2010, the last full trading day prior to the announcement of the Merger Agreement, was $24.40 per share.

Dissenters’ Rights (See Pages 50 and 59)

Our shares of common stock that are outstanding immediately prior to the effective time of the Merger and that are held by shareholders who have neither voted in favor of the approval of the Merger Agreement nor consented thereto in writing and who have properly demanded in writing to exercise their dissenters’ rights for such shares before the taking of the vote on the approval of the Merger Agreement at the Special Meeting in accordance with the New Hampshire Business Corporation Act, will not be converted into, or represent the right to receive, $29.00 per share in cash without interest and less any applicable withholding taxes. Instead, the holders of these shares will be entitled to receive the fair value of such dissenting shares held by them, as determined by a New Hampshire court, as long as such holders have not failed to perfect or have not effectively withdrawn or lost their dissenters’ rights pursuant to the New Hampshire Business Corporation Act. The fair value of such shares of common stock as determined in accordance with the New Hampshire Business Corporation Act may be more or less than, or the same as, the Merger Consideration of $29.00 in cash for each share to be paid to shareholders who do not exercise dissenters’ rights. Annex C to this Proxy Statement contains a copy of RSA 293-A:13.01 through RSA 293-A:13.31, the subsections of the New Hampshire Business Corporation Act relating to shareholders’ dissenters’ rights.

QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING

Special Meeting

      Why have I received these materials?

     This Proxy Statement and the accompanying proxy are being mailed to shareholders of record on April XX, 2011. The proxy is being solicited by the Board of Directors (the “Board”) of Pennichuck Corporation (referred to throughout this Proxy Statement as “Pennichuck” or the “Company” or “we” or “our”) in connection with our Special Meeting of Shareholders that will take place on Wednesday, June XX, 2011, at 10:00 AM (Eastern Time) at Pennichuck’s headquarters, 25 Manchester Street, Merrimack, New Hampshire, 03054, and at any adjournment thereof. You are cordially invited to attend the Special Meeting and are requested to vote on the Merger and acquisition proposal described in this Proxy Statement.

     Pennichuck’s Proxy Statement for the Special Meeting was mailed to you. Copies of this Proxy Statement for the Special Meeting, as well as our Annual Report on Form 10-K for the year ended December 31, 2010 and Proxy Statement for our Annual Meeting on May 5, 2011 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?

     Yes. As described in more detail in this Proxy Statement, effective as of November 11, 2010, the Company entered into a Merger Agreement (the “Merger Agreement”) with 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”). 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 the Merger Agreement. By means of this Proxy Statement, the Company’s Directors are soliciting your vote for that required shareholder vote. The Company’s Directors urge you to examine the information in this Proxy Statement carefully when you receive it and to vote in favor of the Merger Agreement.

      Who is entitled to vote at the Special Meeting?

     Holders of shares of common stock of Pennichuck as of the close of business on Friday, April XX, 2011, the record date for the Special Meeting, will be entitled to receive notice of and to vote at the Special Meeting. As of the record date, [4 , 681,427] 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 Special Meeting.

      How do I vote my shares at the Special 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 Special Meeting and vote in person. Shareholders of record may also vote via the Internet or over the phone through the Company’s proxy solicitor, Georgeson, Inc. (“Georgeson”). Internet and telephone voting information is provided on the proxy card. If you vote via the Internet, please do not return a signed proxy card. If you desire to vote by phone or if you have any questions, or require assistance in voting your proxy, please call:

199 Water Street, 26 ^th Floor
New York, NY 10038
Banks and Brokers call 212.440.9800
All others call Toll-Free 1.866.357.4029

     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 Select Market (“NASDAQ”) where Pennichuck’s stock is traded, if you do not give instructions to your brokerage firm, it will not be allowed to vote your shares with respect to the Merger resolution. If your shares are held in “street name” and you do not instruct your broker how to vote your shares with respect to the Merger proposal, your votes will be counted as “broker non-votes,” which means your votes will neither be cast nor counted with respect to the Merger resolution.

     If your shares are held in street name and you wish to attend the Special 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, April XX, 2011) in order to be admitted to the Special Meeting on June XX, 2011. To be able to vote your shares held in street name at the Special Meeting, you will need to obtain a proxy card from the holder of record (e.g. your brokerage firm) for your shares.

      Who is Georgeson?

     The Company has engaged the firm Georgeson to implement a shareholder outreach program for the purpose of soliciting proxies from our shareholders regarding the approval of the Merger Agreement. Georgeson is headquartered in New York City, NY and is a leading provider of strategic proxy and corporate advisory services. For more information about Georgeson and the services it provides, please visit the Georgeson website at www.georgeson.com.

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

     For “record” shareholders of common stock, yes. 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 Special Meeting, by voting again prior to the time at which our voting facilities close, or by attending the Special 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.

      Will the Merger be taxable to me?

     Generally, yes. For U.S. federal income tax purposes, Pennichuck shareholders will generally recognize a taxable gain or loss as a result of the Merger measured by the difference between $29.00 for each of their shares cancelled in the Merger and their aggregate adjusted tax basis in those shares. This gain or loss will be a federal long-term capital gain or loss if the shares have been held for more than one year as of the effective time of the Merger. For a discussion of tax-related implications, see “ The Merger-Material U.S. Federal Income Tax Consequences of the Merger ” beginning on page 52.

     This Proxy Statement is not intended to provide shareholders with tax advice, and the Company makes no representation as to the tax consequences of a cancellation of Pennichuck shares in the Merger. Shareholders are encouraged to consult with their own tax advisor prior to the effective time of the Merger to determine the particular tax consequences to them of the Merger and to consider whether to seek to defer recognition of some or all of the taxable gain by following the non-binding position by the Internal Revenue Service in a Private Letter Ruling discussed in more detail below.

      What constitutes a quorum for purposes of the Special Meeting?

     The presence at the Special Meeting, in person or by proxy, of holders of a majority of the outstanding shares of Pennichuck 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 therefore barred from voting on behalf of the customer on that matter. Brokers may not vote on non-discretionary matters such as the resolution to approve the Merger Agreement (Proposal 1) without receiving instructions from their customers.

      What vote is required to approve the Merger proposal at the Special Meeting?

     Under the Company’s bylaws, approval by the shareholders for the Merger Agreement requires the affirmative vote of the holders of at least a two-thirds majority of the shares of the Company entitled to vote on the Merger Agreement proposal at the Special Meeting, by shares represented in person or by proxy. Votes that are withheld and “broker non-votes” will have no effect on the outcome of the approval for the Merger.

      What will happen to Pennichuck as a result of the Merger?

     Upon completion of the Merger, Pennichuck will cease to be a publicly-traded company and will become wholly-owned by Nashua. Following completion of the Merger, the registration of our common stock and our reporting obligations with respect to our common stock under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated. In addition, upon completion of the Merger, shares of our common stock will no longer be listed on any stock exchange, including the NASDAQ Global Select Market or quotation system.

      What will happen to my shares of Pennichuck common stock after the Merger?

     Upon completion of the Merger, each outstanding share of Pennichuck common stock, other than shares held by Nashua or the Merger Sub, and shares held by shareholders who perfect their dissenters’ rights, will automatically be canceled and will be converted into a right to receive the Merger Consideration of $29.00 per share in cash, without interest and less any applicable withholding taxes.

      Will I own any shares of Pennichuck common stock after the Merger?

     No. You will be paid cash for your shares of Pennichuck common stock. Our shareholders will not have the option to receive shares of the Merger Sub or the surviving company in exchange for their shares instead of cash.

      What happens to Pennichuck stock options in the Merger?

     Upon the consummation of the Merger, all outstanding stock options to acquire Pennichuck common stock will become fully vested and thereafter will represent the right to receive an amount equal to the number of shares of Pennichuck common stock underlying the option multiplied by the amount (if any) by which $29.00 exceeds the exercise price for each share of Pennichuck common stock underlying the option, without interest and less any applicable withholding taxes.

      When do you expect the Merger to be completed?

     We are working toward completing the Merger as quickly as possible, but we cannot predict the exact timing of when the Merger will be completed. We currently expect the Merger to be completed in the fourth quarter of 2011. In addition to obtaining shareholder approval, all other closing conditions must be satisfied or waived, including regulatory approval by the New Hampshire Public Utilities Commission (the “NHPUC”) and financing acceptable to Nashua in accordance with the provisions of the Merger Agreement. However, we cannot assure you that all conditions to the Merger will be satisfied or,

if satisfied, when the closing will occur.

      When will I receive the Merger Consideration for my shares of Pennichuck common stock?

     Shortly after the completion of the Merger, the shareholders of record will receive written instructions, including a letter of transmittal (the “Letter of Transmittal”), which will explain how to exchange their shares for the Merger Consideration of $29.00 in cash, without interest and less any applicable withholding taxes, for each share of Pennichuck common stock that they own. When such shareholders properly complete and return the required documentation described in the written instructions to the Letter of Transmittal, they will promptly receive from the paying agent a payment of the Merger Consideration for their shares. If your shares are held in a brokerage account or by a bank or other nominee, unless you properly demand and perfect your statutory dissenters’ rights, your account will be automatically credited with the Merger Consideration in exchange for your shares, and it will not be necessary for you to submit any documentation.

      Should I send in my stock certificates now?

     No. The Letter of Transmittal described in this Proxy Statement will provide instructions to you about when and where to send your stock certificates.

      Am I entitled to dissenters’ rights?

     Yes. Under New Hampshire law, you have the right to exercise dissenters’ rights to seek appraisal of the fair value of your shares as determined by a New Hampshire court if the Merger is completed, but only if (i) you so notify the Company in writing before the date of the Special Meeting, (ii) you do not vote in favor of approving the Merger Agreement and (iii) you comply with the other New Hampshire law dissenters’ rights procedures, which are set forth in Annex C to this Proxy Statement

      What happens if I sell my shares of Pennichuck common stock before the Special Meeting or the effective time of the Merger?

     The Record Date for shareholders entitled to vote on the approval of the Merger Agreement is earlier than the date of the Special Meeting and the expected effective time of the Merger. If you transfer your shares of Pennichuck common stock after the Record Date but before the Special Meeting or the effective time of the Merger, you will, unless special arrangements are made, retain your right to vote at the Special Meeting but you no longer will have the right to receive the Merger Consideration. In addition, if you sell your shares prior to the Special Meeting or prior to the effective time of the Merger, you will not be eligible to exercise your dissenters’ rights in respect of the Merger. For a more detailed discussion of your dissenters’ rights and the requirements for perfecting your dissenters’ rights, see “ The Merger — Dissenters’ Rights ” section of this Proxy Statement.

      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 recommendations of the Board of Directors’ are presented, together with a description of the reasons for the Merger, in this Proxy Statement on pages starting at 19 and 33. In summary, the Board of Directors recommends a vote:

•

“FOR” THE APPROVAL OF THE MERGER AGREEMENT; AND

“FOR” THE ADJOURNMENT THE SPECIAL MEETING, IF NECESSARY, FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES TO VOTE IN FAVOR OF APPROVING THE MERGER AGREEMENT

     With respect to any other matter that properly comes before the Special 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 the Company. 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 Special Meeting.

      Where can I find the voting results?

     Pennichuck will report the voting results in a Form 8-K filed with the SEC within four business days after the end of the Special Meeting.

      Who will bear the expense of soliciting proxies?

     Pennichuck will bear the cost of soliciting proxies in the form enclosed. In addition to solicitation by mail, proxies may be solicited personally or by telephone, facsimile or electronic transmission by our directors, officers, employees and Georgeson. 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.

      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 to shareholders. This means that only one copy of our Proxy Statement 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.

      Who can answer my questions?

     If you would like additional copies, without charge, of this Proxy Statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact us or our proxy solicitor, Georgeson, as follows:

Pennichuck Corporation		Georgeson, Inc.
Chief Financial Officer		199 Water Street, 26 th Floor
25 Manchester Street		New York, NY 10038
P.O. Box 1947		Banks and Brokers call 212-440-9800
Merrimack, NH 03054		All others call Toll-Free 1-866-357-4029
Telephone: (603) 882-5191

      Contacting the Board of Directors

     Any shareholder who desires to contact Pennichuck’s Chairman, or the other members of the Board of Directors, about the Merger or any other matters 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 the Merger are received, they will be forwarded to the Chairman of the Board of Pennichuck Corporation and/or the Chairman of a committee of the Board, as appropriate, for review.

THE SPECIAL MEETING

We are furnishing this proxy statement to you, as a shareholder of Pennichuck as part of the solicitation of proxies by our board for use at the Special Meeting of shareholders.

Date, Time and Place of the Special Meeting

The Special Meeting will be held at our corporate headquarters at 25 Manchester Street, Merrimack, New Hampshire, 03054, on June XX, 2011, at 9:00 AM, local time.

Purpose of the Special Meeting

At the Special Meeting, you will be asked to consider and vote on the following proposals:

•

to approve the Merger Agreement, a copy of which is attached as Annex A to this proxy statement; and

•

to approve one or more adjournments of the Special Meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting, or at any adjournment of that meeting, to approve the Merger Agreement.

Recommendation of Our Board

Our Board has unanimously determined that the Merger Agreement and the Merger are advisable and in the best interest of our shareholders, and has adopted the Merger Agreement and approved the Merger. Our Board unanimously recommends that our shareholders vote “FOR” approval of the Merger Agreement.

Even though a quorum may be present at the Special Meeting, it is possible that we may not have received sufficient votes to approve the Merger Agreement by the time of the Special Meeting. To allow the proxies that have been received by us at the time of the Special Meeting to be voted for one or more adjournments of the Special Meeting for purposes of soliciting additional proxies to obtain the requisite shareholder vote, we are submitting a proposal to approve one or more adjournments to you for consideration. Our Board recommends that you vote “FOR” the adjournment proposal so that proxies may be used for that purpose only, should it become necessary. Properly executed proxies will be voted “FOR” the adjournment proposal, unless otherwise indicated on the proxies. If the

Special Meeting is adjourned for 30 days or less, we are not required to give notice of the time and place of the adjourned meeting (other than by announcement at the Special Meeting) unless our Board fixes a new record date for the Special Meeting.

Record Date and Voting Power

Pennichuck has fixed the close of business on April XX, 2011 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Special Meeting. At the close of business on the record date, [4,681,427] shares of our common stock were outstanding and entitled to receive notice of, and vote at, the Special Meeting. On the record date, our shares were held of record by approximately X,XXX,XXX shareholders. Common stock is our only outstanding class of stock. Shareholders of record on the record date will be entitled to one vote per share of our common stock on any matter that properly comes before the Special Meeting and any adjournment or postponement of that meeting.

Quorum

Our charter and bylaws and New Hampshire law require the presence, in person or by duly executed proxy, of the holders of a majority of the voting power of shares of our common stock outstanding and entitled to vote at the Special Meeting to constitute a quorum. Withheld votes, abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present. If a quorum is not present and if the adjournment proposal has the necessary majority, we expect to adjourn the Special Meeting to solicit additional proxies and intend to vote any proxies we have received at the time of the Special Meeting in favor of an adjournment.

Vote Required

The affirmative vote of holders of not less than two-thirds of the shares of our common stock outstanding and entitled to vote at the Special Meeting is required in order to approve the Merger Agreement. The proposal to approve one or more adjournments of the Special Meeting requires the affirmative vote of holders of a majority of the shares of our common stock voting on the proposal.

Abstentions and Broker Non-Votes

For purposes only of determining the presence or absence of a quorum for the transaction of business at the Special Meeting, we intend to count abstentions and broker “non-votes” as present at the Special Meeting. Abstentions and broker “non-votes” are not, however, counted as favorable votes and, therefore, have the same effect as a vote against approval of the Merger Agreement. If you fail to vote or abstain from voting, it will have the effect of a vote against the proposal to approve the Merger Agreement.

Broker “non-votes” are shares held by brokers or nominees as to which (1) voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares, and (2) the broker or nominee does not have discretionary voting power. The proposal to approve the Merger Agreement is not an item on which brokerage firms may vote in their discretion on behalf of their clients. We urge you to return the enclosed proxy card marked to indicate your vote, to vote your shares through the Internet or by telephone or to give your broker proper voting instructions.

To approve the adjournment proposal, a majority of the outstanding shares of our common stock present or represented at the Special Meeting and voting on such adjournment must vote in favor of the proposal. Broker “non-votes” and abstentions will have no effect on the outcome of this proposal.

Proxies and Voting

Shareholders may vote their shares by attending the Special Meeting and voting their shares in person or by completing, signing and dating the enclosed proxy card and promptly returning it to us as soon as possible. If you prefer, you can vote by telephone or via the Internet by following the relevant instructions described on the enclosed proxy card or voting instruction form received from any broker, bank or other nominee that may hold shares of our common stock on your behalf. If you sign and send in your proxy card and do not mark it to show how you want to vote, or if you submit a proxy by telephone or via the Internet without providing instructions, we will count your proxy as a vote in favor of the approval of the Merger Agreement and in favor of any proposal to adjourn the Special Meeting to solicit additional proxies.

Shareholders who have questions or requests for assistance in completing and submitting proxy cards should contact Georgeson, Inc., our proxy solicitor, at 199 Water Street, 26 ^th Floor, New York, New York 10038 or (866)357-4029.

Shareholders who hold their shares of Pennichuck common stock in “street name,” meaning in the name of a bank, broker or other person who is the record holder, must either direct the record holder of their shares of our common stock how to vote their shares or obtain a proxy from the record holder to vote their shares at the Special Meeting.

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that if a household participates in the householding program, it will receive an envelope containing one set of proxy materials and a separate proxy card for each shareholder account in the household. Please vote all proxy cards enclosed in such a package. Pennichuck will promptly deliver a separate copy of the proxy statement or proxy card to you if you contact it at the following address or telephone number: Investor Relations, Pennichuck Corporation, 25 Manchester Street, Merrimack, New Hampshire, 03054; telephone (603) 882-5191. If you want to receive separate copies of proxy statements in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker, or other nominee record holder, or you may contact Pennichuck at the address or telephone number above.

Participation in householding will not affect or apply to any of your other shareholder mailings such as dividend checks, Forms 1099, or account statements. Householding saves money by reducing printing and postage costs and it is environmentally friendly. It also creates less paper for participating shareholders to manage. If you are a beneficial holder, you can request information about householding from your broker, bank or other nominee.

Revocability of Proxies

If you have not submitted a proxy through your broker or other nominee, you may revoke your proxy at any time before it is voted at the Special Meeting by:

•

delivering to our Secretary at the address listed below a written notice of revocation bearing a later date than the proxy;

•

duly completing, signing, dating and delivering to our Secretary at the address listed below, a new proxy card, dated later than the first proxy card, which will automatically replace any earlier dated proxy card that you returned;

•

properly casting a new vote through the Internet or by telephone at any time before the closure of the Internet voting facilities and the telephone voting facilities; or

•

attending the Special Meeting and voting in person.

Attendance at the Special Meeting will not, in and of itself, constitute revocation of a proxy.

If your shares are held in “street name,” you should follow the voter instruction form provided by your broker or other nominee regarding revocation of proxies. If the holder of record of your shares is your broker, bank or other nominee and you wish to vote at the Special Meeting, you must bring a legal proxy from your broker, bank or other nominee authorizing you to vote those shares.

You should send any notice of revocation of your proxy card to:

Pennichuck Corporation
25 Manchester Street
Merrimack, New Hampshire, 03054
Attention: Roland E. Olivier, Secretary

Solicitation of Proxies and Expenses

In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. These people will not receive any additional compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners of shares of our common stock and in obtaining voting instructions from those owners. We will pay all expenses of filing, printing and mailing this proxy statement.

We have retained Georgeson, Inc., 199 Water Street, 26 ^th Floor, New York, New York 10038 or (866)357-4029, to assist in the solicitation of proxies by mail, telephone or other electronic means, or in person, for a fee of approximately $12,000 plus reasonable out-of-pocket expenses relating to the solicitation. All costs of soliciting proxies will be borne by Pennichuck.

Other Business

We are not currently aware of any business to be acted upon at the Special Meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the Special Meeting is limited to matters set forth in the notice of Special Meeting, which is provided at the beginning of this proxy statement, unless otherwise provided by law. If other matters do properly come before the Special Meeting, or at any adjournment of the Special Meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted by and at the discretion of the persons named as proxies on the proxy card. The grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on other matters that are properly presented at the Special Meeting.

PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT

At the Special Meeting you are being asked to vote to approve the Merger Agreement. The proposed transaction is the acquisition of Pennichuck Corporation by Nashua through Merger Sub, a New Hampshire corporation wholly-owned by Nashua, pursuant to the Merger Agreement among the

Company, Nashua and Merger Sub. Upon completion of the Merger Sub with and into the Company, the Company will be the surviving corporation in the Merger and will become wholly-owned by Nashua. Upon completion of the Merger, you will receive $29.00 in cash (the “Merger Consideration”), without interest and less any applicable withholding taxes, for each share of Pennichuck common stock that you own (unless you properly demand and perfect statutory dissenters’ rights in compliance with all of the procedures under New Hampshire law).

     The Board of Directors recommends a vote FOR the approval of the Merger Agreement with Nashua and the sale of all of the Company’s stock to Nashua for the Merger Consideration of $29.00 per share.

THE MERGER

The Parties to the Merger

The Company, the City of Nashua, New Hampshire (the “City”) and a direct or indirect wholly owned subsidiary of the City to be named are parties to the Agreement and Plan of Merger dated as of November 11, 2010. Under the terms of the Merger Agreement, the City has the right to assign the Merger Agreement to a board or department of the City.

Background of the Merger

Introduction

The sale of the Company to the City for $29.00 per share, or approximately $138 million, in cash pursuant to the Merger Agreement that we announced on November 12, 2010 would represent the culmination of a process that began over eight years ago, when the City initiated an eminent domain proceeding to take the assets of our Company in response to a previously announced acquisition of the Company by an out-of-state water company. During that period, the Company and the City have been engaged in near continuous adversarial proceedings related to the City’s eminent domain initiative, in which the Company opposed any taking of the Company’s assets that failed to (i) protect the customers of Pennichuck East and Pittsfield Aqueduct, (ii) recognize the underlying value of the Company, or (iii) mitigate the potential adverse tax consequences for the Company and its shareholders that would result from an eminent domain taking. The Company and the City also engaged in several attempts during that period to reach a negotiated settlement in which the City would acquire all of the Company’s stock or assets. The Company and the City intend that the Merger Agreement be in full settlement of their eminent domain dispute.

In April 2002, the Company announced that it had agreed to merge in a stock for stock transaction with Aqua America, Inc. (then, Philadelphia Suburban Corporation), a publicly traded water company based in eastern Pennsylvania. Shortly after the announcement of that agreement, the City began its effort to acquire all or a significant portion of our regulated water subsidiaries’ assets through an eminent domain proceeding. The Company’s interaction with the City since April 2002 largely has been shaped by the course of that eminent domain proceeding.

This “ Background of the Merger ” describes the eminent domain process under New Hampshire law and sets forth in chronological fashion the key events since 2002 that have led to the proposed

Merger now being presented to our shareholders for approval. While this information does cover various strategic alternatives considered by the Company’s Board from time to time since the commencement of the eminent domain proceedings, for ease of reference a more detailed discussion of strategic alternatives appears later in this Proxy Statement in the section titled “ The Merger - Consideration of Strategic Alternatives ” beginning on page 31.

Eminent domain process under New Hampshire law

Under New Hampshire law, the eminent domain process for the City to take all or any portion of the Company’s utility properties includes the following required elements:

•

Initial approval of the eminent domain initiative by the City’s Board of Aldermen;

•

Approval of the taking in concept by the City’s voters;

•

Determination by the New Hampshire Public Utilities Commission (the “NHPUC”) that the taking is in the public interest, and if it is, the price to be paid for the assets if the parties are unable to reach agreement on the price to be paid; and

•

Within 90 days after the final determination of the price to be paid for the assets in the eminent domain taking, approval by a two-thirds vote of the Board of Aldermen, after two public hearings, of the bond financing necessary to fund the taking.

In November 2002, the City’s Board of Aldermen adopted a formal resolution to hold a City-wide referendum to approve the initiation of an eminent domain proceeding or other acquisition of all or a portion of our regulated water system serving the residents of the City and others. The City’s residents approved that referendum in January 2003.

The City made a proposal in November 2003 to purchase all the Company’s assets for a purchase price of $121 million, subject to a successful bond financing by the City. Under the terms of the City’s proposal, the City would not have assumed any of the Company’s $27.2 million of long-term debt then outstanding. In making the proposal, the City stated that in the event the offer was not accepted, the City intended to pursue an eminent domain taking. In December 2003, our Board of Directors rejected that offer, publicly stating that the offer failed to recognize both the underlying value of the Company’s assets and the potential tax liabilities that would result from the City’s proposed transaction.

In March 2004, the City filed a petition with the NHPUC seeking approval to acquire by eminent domain all of our water utility assets, whether or not related to our Nashua service area. In January 2005, the NHPUC ruled that the City could not use the eminent domain procedure to acquire any of the assets of our Pennichuck East or Pittsfield Aqueduct water subsidiaries which do not provide service in the Nashua service area, and that, with regard to the assets of Pennichuck Water that are not used to provide service in the Nashua service area, the question of which assets, if any, could be taken by the City was dependent on a determination to be made after a hearing as to what was in the public interest.

In August 2006, Duane Montopoli joined Pennichuck as President, CEO and a director. Shortly thereafter, he advised the City that, although he supported engaging in alternative settlement discussions with the City, he believed that any negotiated settlement between the parties should be structured as a sale of all of the stock of Pennichuck Corporation rather than as a sale of the assets of Pennichuck Water. From Pennichuck’s perspective, a negotiated sale of Pennichuck Water’s assets to the City would pose material adverse tax, economic and strategic risks. For information regarding those risks, see “—Consideration of Strategic Alternatives,” beginning on page 31.

2008 NHPUC eminent domain ruling

The NHPUC eminent domain hearings on the merits of the proposed taking of the assets of our Pennichuck Water subsidiary began in January 2007 but were subsequently suspended by agreement of the City and the Company through mid-July 2007 to allow the parties to engage in settlement discussions. These settlement discussions were unsuccessful, and the merit hearings resumed and concluded in September 2007. At the hearings, the Company argued that an eminent domain taking would not be in the public interest because Pennichuck Water was an integrated water system and the taking of the Pennichuck Water assets would create significant inefficiencies, increasing the cost of service and therefore the rates charged to Pennichuck East and Pittsfield Aqueduct customers. The Company also testified that the fair value of its assets was approximately $273 million, while the City testified that it believed the fair value of those assets to be approximately $139 million. The City’s proposal to operate the Pennichuck Water assets assumed that the City would outsource those operations to a third-party operator, which the Company argued would be more costly since the third party charges to operate the system necessarily would include a profit margin component that would be in addition to the actual operating costs otherwise reflected in water rates charged to the utility’s customers.

On July 25, 2008, the NHPUC, by a vote of 2-1, issued an order that the City could proceed with the eminent domain taking of all of the assets of Pennichuck Water, provided that City paid $203 million to Pennichuck Water for its assets (determined as of December 31, 2008) and provided that it met certain other conditions. These conditions included a requirement that the City pay an additional $40 million into a mitigation fund to protect the interests of the customers of Pennichuck East and Pittsfield Aqueduct. Additionally, and although not part of the NHPUC order, since the $203 million was determined as of December 31, 2008, it has been the Company’s view that the $203 million would have to be increased to reflect the net capital additions made by Pennichuck Water from the end of 2008 to the actual closing date of the taking (the “Make-Whole Adjustment”). Thus, the total amount to be paid by the City would be $243 million plus the amount of the Make-Whole Adjustment.

In November 2008, the City announced that it was engaging the services of Downer & Co. (“Downer”), a Boston based investment banking firm, to assist the City in exploring all possible ways that it might acquire Pennichuck Water by means other than eminent domain. In February 2009, we engaged the services of Boenning, an investment banking firm with expertise in the water industry, to advise us regarding a possible comprehensive settlement of our eminent domain dispute with Nashua.

Appeal to the New Hampshire Supreme Court and related 2009 Settlement Discussions

Both the Company and the City filed motions for rehearing or reconsideration before the NHPUC which were denied in March 2009. Later in 2009, both the Company and the City appealed the NHPUC order to the New Hampshire Supreme Court (the “NH Supreme Court” or “Court”), which scheduled hearings for January 2010. The Company’s appeal focused primarily on legal issues relating to the NHPUC’s “public interest” determination. The City’s appeal principally related to the compensation amount for Pennichuck Water’s assets, arguing that the $151 million proposed by the dissenting NHPUC Commissioner was the appropriate amount of compensation for those assets versus the $203 million set in the majority ruling (both determined as of December 31, 2008). The City also argued the $40 million mitigation reserve should be substantially reduced.

Downer and Boenning met numerous times during 2009 and discussed various valuation methodologies and transaction structures. Periodically, members of the Company’s management and City officials also participated in the discussions regarding valuation and structure. Ultimately, the Company and the City were unable to agree on a negotiated settlement at that time. On December 8, 2009, the City announced publicly that it had notified its advisors to cease any work on behalf of the City in connection with a

possible negotiated settlement and that it would continue to vigorously pursue its pending Supreme Court appeal. The City also stated that although it was not closing the possibility of further discussions, it was not prepared to pursue a transaction at a value in excess of the City’s view of the Company’s fair market value under the circumstances. At that time, the City also stated that, in the view of its advisers and based upon publicly available information, it believed the fair market value of Pennichuck Corporation common stock in an acquisition transaction to be “about $25 per share.”

In late November and early December 2009, expecting that the City might be less inclined to negotiate a settlement as the Supreme Court decision drew near, the Company made plans to issue common stock primarily to fund the repayment of a portion of its debt that was due in 2010. Following the City’s December 8 announcement that it was formally suspending discussions regarding a possible negotiated settlement, the Company announced on December 9, 2009 the sale of 350,000 shares of common stock at a price of $21 per share (ultimately 387,000 shares were sold including the underwriter’s overallotment option). Of the proceeds from that offering, $5.0 million was used to fund the repayment of a note due March 4, 2010, and $1.5 million was used to reduce borrowings of the Company under a short term line of credit. While our Board considered the potential dilutive impact of the offering that could result if the Company and the City ultimately negotiated a settlement transaction, it determined that given the course of negotiations with the City and the inherently uncertain prospects for such a negotiated settlement, a reduction of the Company’s debt-to-equity ratio that would result from the repayment of a portion of the Company’s debt with the proceeds of the offering was in the Company’s best interests at that time.

On March 25, 2010, the NH Supreme Court issued its decision unanimously affirming the NHPUC’s order in its entirety. More specifically, the Court affirmed the NHPUC’s ruling that a taking of the operating assets of our Pennichuck Water regulated utility subsidiary is in the public interest and that the amount to be paid to the Company for such assets is $203 million (determined as of December 31, 2008). The Court also affirmed the NHPUC’s establishment of its conditions, including that the City must pay an additional $40 million into a mitigation fund to protect the interests of the customers of our other two regulated utilities. Also, and while not specifically addressed by the Court, no aspect of the decision diminished the Company’s view that the $243 million amount would have to be increased by the amount of the Make-Whole Adjustment.

2010 Settlement discussions and preliminary merger consideration negotiations

On April 2, 2010, in response to a request from Downer, Mr. Montopoli met with Downer to discuss a possible negotiated settlement of the eminent domain dispute involving the City’s acquisition of all of our outstanding common stock. During the ensuing two weeks, a number of meetings and telephone calls were held involving representatives of Downer and Boenning and, periodically, Mr. Montopoli, who updated our directors from time to time on these negotiations. On April 16, 2010, the City’s Mayor, Donnalee Lozeau, and a representative of Downer met with our Chairman of the Board, John R. Kreick, and our Chief Financial Officer, Thomas C. Leonard, while Brian McCarthy, the President of the City’s Board of Aldermen, and a second Downer representative met separately with Mr. Montopoli and Donald Ware, the Company’s Senior Vice President, Operations. During these meetings, the principals from the City and the Company expressed their views regarding the valuation of the Company in a negotiated settlement and the potential structure of such a settlement.

At a meeting of our Board on April 21, 2010, Mr. Montopoli and other members of Pennichuck’s management updated the directors on recent developments related to the eminent domain dispute, in general, and the NH Supreme Court decision, in particular. The Board considered that if the City were now to proceed with an eminent domain taking of Pennichuck Water’s assets in accordance with the NHPUC order, the City, in addition to paying the $203 million purchase price for Pennichuck Water’s assets (determined as of December 31, 2008), would have to pay for the establishment of a $40 million

mitigation fund and likely also for certain capital asset additions made by the Company from December 31, 2008 through that actual closing date. During the course of the meeting, it was noted that these amounts in the aggregate significantly exceed what the City has publicly disclosed it believes it should have to pay. The Board also focused on management’s estimate that the Company would likely incur an income tax liability in the range of $45 — $50 million because a condemnation taking of assets by the City would be treated as a sale of assets for tax purposes and because, under the circumstances, there was substantial uncertainty as to whether the Company would be able to defer any such tax by prudently reinvesting all or a substantial portion of the sales proceeds into qualifying replacement property within the limited time period set by law. Our Board also expressed concern about the potential long-term implications of the NH Supreme Court ruling that an eminent domain taking of the operating assets of Pennichuck Water by the City of Nashua is in the public interest. Even if the City were to walk away currently, such a precedent could have negative implications for the Company should the City initiate a new eminent domain proceeding at some point in the future. Based on these factors, the Board reached a consensus that a negotiated sale of the stock of the Company to the City of Nashua at a fair price, and in full settlement of the eminent domain dispute, might achieve the best results for all stakeholders.

Mr. Montopoli also reported on the discussions that had occurred between the parties since the Court’s decision and his view that while the discussions were constructive, the City and the Company remained materially apart on share price. At the April 21 Board meeting, representatives of Boenning reviewed the City’s approach to valuation, observing that, when Boenning updated Downer’s own valuation models to reflect improving performance within the water sector, as well as a gradually improving economy, the City’s own valuation model suggested a Company share price, including change of control premium, of between $28.61 and $31.64. On the other hand, Boenning also noted that the universe of potential buyers was limited, which would likely have some effect on what the City might be willing to pay for the stock of the Company. In that regard, Boenning and management explained that pursuant to negotiations with the City over the course of 2009, they had varying levels of contact with a number of the large publicly — traded water utilities and, based on those contacts, they perceived little interest in third party acquisition discussions with the Company so long as the eminent domain dispute remained unsettled on a long term basis. The Board ultimately reached a consensus that negotiations should be continued with a view toward getting a higher price per share than previously had been suggested by the City, especially considering the valuation information presented by Boenning.

Mr. Montopoli met with representatives of Downer on April 30, 2010 and indicated to Downer that he would personally support before the Pennichuck Board, a price of $29.50 per share. During the course of the meeting, Downer indicated that the City was leaning against outsourcing the operations of the Company’s utilities to a third-party, and instead was inclined to maintain the Company’s corporate structure and to seek to retain Mr. Ware to continue to manage the utilities.

Mayor Lozeau met with Mr. Montopoli on May 4, 2010 and proposed to purchase all the common shares for $28.50 per share. Mr. Montopoli advised her that he would bring the proposal to the Pennichuck Board at its meeting on May 5, 2010.

The Board discussed the proposal at its May 5, 2011 meeting, noting that it, in the aggregate, it was substantially higher than the valuation that Mayor Lozeau indicated in December 2009 she was willing to support. The Board also viewed the potential new operating structure favorably, anticipating that it would both minimize adverse effects on the Company’s workforce other than at the officer level and could result in a more expedited review of the proposed transaction by the NHPUC. However, the Board’s consensus view was that the price per share was insufficient for a number of reasons including specifically the updated Downer valuation model which supported the Company’s contention that water sector valuations had been depressed during the recession, as well as recent market information suggesting that values for the Company’s 450 acres of undeveloped land were higher than the value that Downer attributed to those

assets. The Board advised Mr. Montopoli that it could likely support a stock sale at $29.50 or a special dividend of $.50 coupled with a stock sale at $29.00 per share.

Mr. Montopoli communicated the Board’s counterproposal to Downer following the Board meeting, and on May 11, 2010, Mayor Lozeau reviewed the Board’s proposal with the City’s Board of Aldermen. Mayor Lozeau and Mr. Montopoli met again on May 21, 2010 at which time the Mayor proposed $29.00 per share for all the outstanding common shares of the Company. On May 25, 2010, Mr. Montopoli presented to the Board the City’s revised proposal and Boenning made a presentation regarding the $29.00 price, noting that this share price would result in transaction multiples that were in line with the multiples paid by investor-owned acquirers in historical acquisitions, even at the height of the water sector acquisition boom. Boenning further noted that, relative to municipal buyers, the City’s revised proposal would produce valuation multiples within the range of other negotiated settlements reached in lieu of eminent domain takings over the past decade. At the conclusion of the meeting, our directors unanimously authorized Mr. Montopoli to proceed with the negotiation of a definitive Merger Agreement at a price of $29.00 per share.

Negotiation of the Merger Agreement and Settlement Agreement

Negotiations regarding the terms of the Merger Agreement began in early June 2010 and continued through mid-September 2010. The City’s negotiating team consisted of the City’s Corporation Counsel, an external business consultant, and the City’s outside legal counsel. The Company’s negotiating team consisted of Mr. Leonard, Mr. Ware, and Roland Olivier, the Company’s General Counsel & Corporate Secretary. During the course of negotiations, the parties identified and resolved a variety of issues, a number of which reflected the complexities inherent in the City’s proposal to acquire a publicly traded company in the context of a settlement of an eminent domain proceeding. Said principal issues were:

Timing of the City’s Due Diligence : The City informed the Company that given the complexities of the potential transaction and the prior history of unsuccessful negotiations, the City was unwilling to commit to the expenditures necessary to complete appropriate due diligence until the City was reasonably confident that a definitive Merger Agreement could be negotiated. The Company and the City ultimately agreed that the City would defer its detailed financial, operational and environmental due diligence until the Company and the City negotiated the material terms of a Merger Agreement.

Timing of Board of Aldermen Approval and Ratification : By operation of New Hampshire law, the City cannot be legally bound by the terms of a Merger Agreement, even if fully executed, until such time as related public hearings are held and an affirmative public vote of at least two-thirds of the Board of Aldermen is obtained within a ninety (90) day period which approves and ratifies the Merger Agreement and the related financing. As a related matter, it was also the City’s position that it would not proceed with the public hearings unless the Company first executed and delivered the Merger Agreement. Consequently, the Company was faced with the prospect of announcing an executed Merger Agreement at a time when the City would not yet be bound by its terms. The City ultimately agreed that its Board of Aldermen would take a vote in executive session to approve the Merger Agreement and authorize the Mayor to sign the Merger Agreement, and so notify the Company of the results of such vote prior to the vote of our Board of Directors to approve the Merger Agreement. The Merger Agreement also included conditions providing that the City hold public

hearings and the required two-thirds votes of the Board of Aldermen before the Agreement was binding on the City.

Circumstances triggering a Termination Fee : It was the City’s position that it was unwilling and unable to agree to any penalties or termination fees payable in connection with the termination of the Merger Agreement before the City held the appropriate public hearings and then obtained the required two-thirds vote of the Board of Aldermen. The City also was unwilling to agree to significant termination fees in the event the City terminated the Merger Agreement after the Merger Agreement became binding on the City. The Company and the City ultimately agreed that material termination fees would be payable by each party under various scenarios. See “ The Merger Agreement — Termination Fees and Expenses ” beginning on page 72.

Settlement of Eminent Domain Dispute : The terms and conditions of the Settlement Agreement which was to be signed concurrently with the Merger Agreement and, unlike the Merger Agreement, was binding on the City when signed, provided for the termination of the eminent domain proceeding in the event the Merger is not completed, including as a result of the City not obtaining either a timely positive two-thirds vote of its Board of Alderman or the financing required for the Merger. The Settlement Agreement also contained a commitment by the City to vote to ratify the Merger Agreement and bond the required financing effect the closing of the Merger within 90 days after the effective date of the Merger Agreement.

Financing Contingency : The City initially proposed that termination of the Merger Agreement due to inability to complete financing for the Merger should be allowable without any penalty fee being charged to it. The Company’s position, on the other hand, has been that the City should be obligated to pay a termination fee if the City opted out to accept financing terms that generally were not materially more disadvantageous to the City than those prevailing as of the effective date of the Merger Agreement. The Company and the City ultimately agreed that the City shall be deemed to have waived its financing out of the Merger if it could have obtained debt financing having prescribed terms and conditions. The financing-related provisions of the Merger Agreement are discussed elsewhere in this Proxy Statement. See “ The Merger Agreement — Financing ” beginning on page 71.

At Pennichuck Board meetings on June 28, 2010, August 4, 2010, and September 10, 2010, Mr. Montopoli and Mr. Leonard updated the Board on the progress of the negotiations. During this same June to September 2010 time period, the City and the Company filed a series of motions with the NHPUC (separately and, in certain cases, jointly) in order to, among other things, establish a process by which the NHPUC would update the eminent domain valuation of the plant and property of Pennichuck Water and make a final determination of the price to be paid for such property.

Final negotiation of Merger Agreement terms; Approval by our Board and the City’s Board of Aldermen

On September 16, 2010, the City commenced its detailed financial, operational and environmental due diligence review. While the City was engaged in that review, the Company and its legal and financial advisors discussed with the City and its advisors, including bond counsel, various financial, legal and tax considerations relevant to the City’s ability to issue general obligation bonds to finance the Merger.

On October 19, 2010, the City’s business consultant contacted Mr. Leonard to inform him that the City’s due diligence teams had reported their findings to the City, and to identify various questions or concerns that would require further information and/or negotiation. On October 28, 2010, Mr. Montopoli and Mr. Leonard advised the Board on the status of the City’s due diligence review and the Company’s planned responses to the issues identified by the City.

On October 29, 2010, representatives from Downer met with Messrs. Kreick, Montopoli, Leonard and Ware and reviewed the results of the City’s due diligence review. Downer informed the Company that, based on the results of the City’s due diligence review, the City was only willing to pay $27.50 per share for all Pennichuck shares. On October 30, 2010, a telephonic meeting was held which included Messrs. Kreick, Montopoli, Leonard and Ware, along with representatives from Downer and Boenning. During that call, the Company and Boenning responded to the issues raised by Downer at the October 29 meeting, and provided additional information to Downer. The Company also raised certain issues regarding its due diligence review of the City’s ability to finance the transaction as contemplated.

On November 7, 2010, the negotiating teams for the City and the Company, as well as Mayor Lozeau and Messrs. Kreick, and Montopoli and representatives from Downer and Boenning, all met to discuss the status of due diligence, the City’s revised share price proposal and various terms of the draft Merger Agreement. During those discussions, the parties agreed to various non-economic changes to the Merger Agreement to reflect matters identified by the City during its due diligence process. One of the principal changes was an undertaking by the Company to conduct certain environmental tests after the Merger Agreement was signed, and depending on the results of such testing, to take certain remediation actions. (The environmental testing done thereafter indicated no remediation was necessary.) The other principal change related to the regulatory approval condition, allowing the City to terminate the Merger Agreement with no penalty if the NHPUC did not approve rates sufficient to cover all of the operating cash flow obligations of each of the utilities and to allow the City to make all of its payments on the bonds issued to finance the Merger.

On November 9, 2010, negotiations continued among the City’s and the Company’s negotiating teams, as well as Mayor Lozeau and Messrs. Kreick, and Montopoli and representatives from Downer and Boenning, during which the terms of the Merger Agreement were finalized. The City withdrew its objection to paying $29.00 per share price. In exchange, the Company agreed that the City would have the right to terminate the Merger Agreement without penalty if the best available taxable interest rate on general obligation bonds exceeded 6.5%, down from the 7.0% level reflected in the draft Merger Agreement at the time the City commenced its due diligence review. A revised draft of the Merger Agreement was circulated for final review by the City and the Company. That evening, the City’s Board of Aldermen unanimously authorized the Mayor to sign the Merger Agreement on behalf of the City, and the results of that vote were communicated to the Company.

At a Company Board meeting on November 10, 2010, representatives of Boenning informed our Board that they were confident Boenning would be able to issue an opinion that the Merger Consideration of $29.00 per share was fair from a financial point of view to the holders of Pennichuck common stock, subject to normal due diligence. However, considering the fee that Boenning would be entitled to receive barring any change in market conditions and under its engagement letter with the Company upon delivery of the opinion and that the City would not be legally bound by the Merger Agreement unless and until the two-thirds majority vote requirement of the City’s Board of Aldermen was met, our Board determined that the fairness opinion should be delivered shortly after obtaining such vote. At the end of that meeting, our directors unanimously adopted the Merger Agreement and authorized Mr. Montopoli to sign the Merger Agreement on behalf of the Company.

On November 11, 2010, Mayor Lozeau and Mr. Montopoli executed the Merger Agreement on behalf of their respective organizations. The Company announced the signing of the Merger Agreement prior to the opening of the stock market on November 12, 2010.

On January 11, 2011, the City’s Board of Aldermen, by a vote of 14-1, approved both the Merger Agreement and the issuance of bonds necessary to finance the acquisition of the Company in accordance with the Merger Agreement. On January 26, 2011, Boenning delivered its opinion to our Board that the $29.00 share price is fair to Pennichuck shareholders from a financial point of view. See “ The Merger — Opinion of Financial Advisor ” beginning on page 38.

Closing of the Merger remains subject to approval by the NHPUC and the holders of not less than two-thirds of the outstanding shares of Pennichuck common stock, as well as the City’s ability to obtain appropriate financing after all conditions precedent have been met. The Company is unable to predict whether all the approvals, contingencies and other conditions precedent to a closing of the Merger will be obtained, resolved or satisfied, as applicable. In any event, the Company does not expect a closing to occur prior to the fourth quarter of 2011.

Consideration of Strategic Alternatives

From time to time since the commencement of the eminent domain proceeding, and especially since the 2010 NH Supreme Court decision affirming the 2008 NHPUC order, our Board has considered and evaluated the principal strategic alternatives available to the Company.

Sale of Pennichuck Water assets to the City

Our Board has opposed the July 2008 NHPUC eminent domain order since its issuance. We believe the dollar amount the City would have had to pay to Pennichuck Water pursuant to the NHPUC order to be inadequate principally because such a condemnation taking of assets by the City would be treated as a sale of assets for tax purposes that would trigger, absent tax deferral, an income tax liability in the range of $50 million, which would substantially erode the proceeds from the sale to the detriment of our shareholders. Similar economics would apply in the case of a negotiated sale of Pennichuck Water’s assets to Nashua.

We have considered deferral of this corporate-level tax by reinvesting the proceeds in like-kind property pursuant to certain provisions of the Internal Revenue Code. However, considering the geographic concentration of our operations, the two-year period within which reinvestment must occur, and the large dollar amount that would have to be reinvested, it would likely be difficult to find suitable replacement property that is fairly priced and makes good business sense to purchase. Therefore, we do not believe reinvestment in like-kind property is a feasible solution to this corporate-level tax issue.

Also, since Pennichuck Water comprises the substantial majority of our consolidated assets and revenues, a sale of its assets to Nashua would likely result in a winding up and liquidation of our entire business. This would require us to pay off all outstanding debt of approximately $60 million and sell off the Company’s remaining non-cash assets pursuant to the liquidation. Under the circumstances, it could prove difficult to obtain prices for these assets that fairly reflect their long-term value. Also, as part of a liquidation, the Company would likely incur substantial costs including costs associated with the termination and/or funding of its health and retirement plans, certain debt redemption premiums, severance costs and professional fees.

For the reasons stated above, a sale of the assets of Pennichuck Water to Nashua for a price materially similar to the $203 million set in the 2008 NHPUC order plus any Make-Whole Adjustment, whether on

a forced or negotiated basis, compares unfavorably to the currently proposed Merger considering that the $203 million, adjusted for any Make-Whole Adjustment and for the net-of-tax amount realizable upon the sale of our then remaining assets, would be reduced by the amounts required to repay all of our then outstanding debt, the resultant income tax liabilities and the liquidation costs described above.

Furthermore, the Board also noted that since it is the City’s publicly stated position that the amounts specified in the NHPUC order are too much to pay for the assets of Pennichuck Water, there was little point to pursuing negotiations with the City centered around such an asset sale. In other words, since both the Company and the City find the economic terms of the 2008 NHPUC order and related Pennichuck Water asset sale to be unattractive, a negotiated sale of the assets of Pennichuck Water to Nashua on mutually agreeable terms is not likely to be achievable.

Continue on as an independent investor-owned utility executing established strategy

The elements of our established strategy are: (i) continue to prudently invest in our regulated utilities, (ii) acquire additional small and mid-size water systems in New Hampshire and other contiguous states, (iii) seek larger water utility acquisitions to expand into new geographic territories in the northeastern United States, (iv) grow our non-regulated water services business, and (v) commercialize our remaining undeveloped land portfolio in an environmentally responsible manner. Of course, concurrent with the execution of this strategy, the Company would be receptive to any acquisition proposal made by another investor owned utility that our Board determines is in the best interests of our shareholders.

Our Board, while being confident in management’s ability to execute this strategy over the long term, was aware at the time it approved the Merger Agreement, that the longstanding public knowledge of a possible acquisition of our business by Nashua in settlement of our eminent domain dispute, likely had a material effect on our share price prior to the announcement of the proposed Merger. In Boenning’s estimation, Pennichuck common stock could reasonably have been expected to trade at approximately $20 per share in 2010 if investors believed that acquisition of our business by Nashua in settlement of our eminent domain dispute would not occur for the foreseeable future. In evaluating the Merger Consideration, our Board considered, among other things, the advice of Boenning that it would likely take a significant period of time for Pennichuck common stock to trade at $29 per share absent inclusion of an acquisition premium and the various risks inherent in the Company actually achieving such a price.

The regulated return model under which our utilities operate, features not only relatively low risk, but also relatively slow growth. Although our Board was aware that acquisitions could possibly accelerate our growth rate, it was mindful that the Company’s ability to complete acquisitions could be adversely affected by (a) the limited availability of target companies of appropriate size and price, (b) the fact that most acquisition candidates are geographically remote from Pennichuck’s New Hampshire base, and (c) the relatively illiquid trading market for Pennichuck common stock that would make stock-for-stock acquisitions relatively unattractive to the owners of potential acquisition targets.

Our Board was also aware that Nashua could initiate another eminent domain proceeding in the future while the above-described business plan is being executed. The current proceeding is not the first by Nashua against the Company and, under state law, the City could initiate another attempt in as little as two years after termination of the current proceeding. Next time, however, it would be doing so following a NH Supreme Court decision in which the Court affirmed a NHPUC order that an eminent domain taking of the operating assets of Pennichuck Water by the City of Nashua is in the public interest. Such a precedent could have significant negative ramifications for the Company depending on future facts and circumstances.

Seek to be acquired by another investor-owned utility in the near term future

As acquisitions are one of the few ways that a regulated investor owned utility can accelerate its growth, our Board was aware that one or more of the other publicly traded investor owned utilities active in the water industry would generally be interested in acquiring our business if the proposed Merger with Nashua were not consummated. Our Board was also of the view, however, that such interest would likely be tempered by concern that Nashua may be more inclined than other municipalities to initiate another eminent domain proceeding against our business for the reasons stated above.

The interest that another investor owned utility would have in our Company also would reflect the inability of an acquiring utility to earn a rate of return on the premium paid for another utility company. In general, state utility commissions throughout the U.S. and including the NHPUC, do not normally allow acquirer’s to earn a profit return on any premium paid for an acquired utility above book value. This has a negative effect on purchase offers since the acquirer cannot expect to earn a profit return on any such premium.

From the date of the Merger Agreement until its approval by our shareholders, our Board can furnish information and enter into discussions with a third party that has made an unsolicited acquisition proposal that constitutes a competing superior proposal or could reasonably be expected to result in a competing superior proposal. However, from the date of the Merger Agreement through the date of this Proxy Statement, no one has sought access to non-public information from the Company, nor sought to engage in other discussions with the Company or its advisors, nor made or indicated an intention to make an alternative acquisition proposal.

Our Board compared and contrasted the above-stated strategic alternatives to the currently proposed Merger and has determined that the proposed Merger is superior.

Reasons for the Merger and Determination of Pennichuck’s Board of Directors

The Board of Directors, acting with the advice and assistance of Company management and independent legal and financial advisors, evaluated the Merger proposal, including the terms and conditions of the Merger Agreement. If consummated, the Merger will enable our shareholders to realize a cash value of $29.00 for each of their shares of Pennichuck Corporation common stock.

The Board determined that the Merger, the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of our shareholders, and approved submission of the Merger and Merger Agreement to our shareholders for approval. In the course of reaching this determination, the Board considered the following substantive factors and potential benefits of the Merger, each of which the Board believes supported its decision (but which are not listed here in any relative order of importance):

•

The proposed Merger with the City at this time is preferable to the other strategic alternatives considered by the Board. See “ The Merger - Consideration of Strategic Alternatives ” above;

•

$29.00 per share in Merger Consideration represents an approximate 46% premium over a $19.85 implied trading price (i.e., without acquisition premium) for Pennichuck common shares as determined by our financial advisor, Boenning. Longstanding public knowledge of a possible acquisition in settlement of the eminent domain dispute between Pennichuck and Nashua has influenced Pennichuck’s share price and $19.85 represents Boenning’s estimate of a current trading price for Pennichuck shares that is implied by the application of the median

price to earnings multiple for Pennichuck’s publicly-traded peers to Pennichuck’s last four quarters diluted earnings per share measured from September 30, 2010 and adjusted for non-operating eminent domain-related costs. For more information on the implied current trading price, see “ The Merger - Opinion of Financial Advisor ” which begins at page 38;

•

$29.00 per share in Merger Consideration represents an approximate 38% premium over the $21.00 per share price at which the Company sold approximately $7.8 million of our common stock in December 2009, less than one year before the announcement of the Merger Agreement;

•

$29.00 per share in Merger Consideration is 2.4 times the book value of Pennichuck stock as of September 30, 2010, the most recent quarter-end preceding the November 11, 2010 effective date of the Merger Agreement;

•

$29.00 per share is 34 times the Company’s trailing four (4) quarters diluted earnings per share measured from September 30, 2010 and adjusted for non-operating eminent domain-related costs;

•

the price to our shareholders of the proposed Merger at $29.00 per share compare favorably to what the price likely would have been had Nashua elected to take by eminent domain, pursuant to the 2008 order of the NHPUC as affirmed by the NH Supreme Court in 2010, the assets of our Pennichuck Water subsidiary. This is principally because (a) the $40 million mitigation fund required to be established by Nashua in the eminent domain proceeding would not have gone to our shareholders and (b) the required form of a condemnation taking (i.e., a corporate asset sale) would have triggered, absent tax deferral which we believe would not be feasible, a substantial income tax liability to Pennichuck Water that would have substantially eroded the proceeds from the sale;

•

the consummation of the proposed Merger between the Company and the City will eliminate outcome risk to our shareholders of another eminent domain proceeding against us at some point in the future. The current proceeding is not the first by Nashua against the Company and, under state law, the City could initiate another attempt in as little as two years after termination of the current proceeding. Any subsequent eminent domain proceeding, however, would be done following a NH Supreme Court decision in which the Court affirmed a NHPUC order that an eminent domain taking of the operating assets of Pennichuck Water by the City of Nashua is in the public interest. Such a precedent could have significant negative ramifications for the Company depending on future facts and circumstances;

•

the financial analyses of Boenning presented to the Pennichuck Board indicating that the Merger Consideration is fair from a financial point of view to the holders of Pennichuck common stock;

The full text of Boenning’s written opinion, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Boenning, is attached as Annex B and is incorporated by reference into this Proxy Statement. In addition, the opinion is discussed in more detail below under the caption “ The Merger - Opinion of

Financial Advisor ” beginning on page 38. Pennichuck shareholders are urged to read the opinion of Boenning carefully in its entirety.

•

the efforts made by management, the Board and our legal advisors to negotiate and execute a Merger Agreement favorable to the Company and our shareholders;

•

the ability to recover from Nashua a termination fee of approximately $1,500,000 in monetary damages if it fails to consummate the Merger under certain circumstances; and

•

the Merger Consideration is payable in cash such that the Merger will allow our shareholders to realize a fixed amount of cash for their investment without the potential risks and uncertainty of non-cash Merger Consideration.

The Board of Directors also considered a number of factors relating to the procedural safeguards involved in the negotiation of the Merger Agreement, including those discussed below, each of which it believed supported its decision and provided assurance of the fairness of the Merger to our shareholders (which are not listed in any relative order of importance):

•

negotiations on behalf of the Company were conducted by an experienced negotiations team comprised of three of our senior executives (the “Negotiations Team”) under the oversight of our President and CEO and the full Board;

•

the Board received advice and assistance in evaluating and negotiating the Merger Consideration and the legal and financial terms of the Merger Agreement from its own independent legal and financial advisors;

•

the terms and conditions of the Merger Agreement were the product of arm’s-length negotiations conducted by the Company’s Negotiations Team, its Board and our independent financial and legal advisors, on the one hand, and Nashua’s negotiating team, its mayor and their financial and legal advisors, on the other hand;

•

the Merger Agreement must be adopted by the holders of at least two thirds of the aggregate outstanding common shares of Pennichuck;

•

the ability of our Board under certain circumstances prior to the approval of the Merger Agreement by our shareholder’s, to respond to unsolicited proposals or offers relating or reasonably likely to lead to a competing superior acquisition proposal and transaction (as defined below and in the Merger Agreement) and, upon payment of a termination fee, to change its recommendation and terminate the Merger Agreement in order to accept the competing acquisition proposal; and

•

the availability of dissenters’ rights to holders of our common stock who comply with all of the required procedures under the New Hampshire Business Corporation Act, which allows such holders to demand that we purchase their shares for fair value (see “ The Merger — Dissenters’ Rights ”).

The Board also considered a variety of risks and other potentially negative factors concerning the Merger, including the following (which are not listed in any relative order of importance):

•

the disruption and potential harm to the Company’s relationships with its employees, vendors and customers caused by announcement of the execution of a Merger Agreement and the resulting uncertainty prior to consummation of the Merger;

•

the risks and costs to the Company if the Merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential effect on our business;

•

the restrictions on the conduct of the Company’s business prior to completion of the Merger, requiring us to conduct our business only in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the Merger;

•

the restriction on the Company’s ability to pay dividends in excess of the dividend rate currently in effect;

•

U.S. persons who receive Merger Consideration will generally be subject to U.S. federal income tax;

•

the prohibition on soliciting, initiating or taking action to facilitate inquiries, proposals or offers that may lead to a competing superior proposal and/or transaction;

•

the requirement that, if the Merger Agreement is terminated under specified circumstances, we must pay a termination fee of between $250,000 and $5.5 million;

•

any recovery from Nashua if it fails to consummate the Merger under certain circumstances is limited to a termination fee of $1.5 million in monetary damages;

•

even if the Merger is not completed, the Company will be required to pay its legal and accounting fees and other miscellaneous fees and expenses;

•

the lack of assurance that all conditions to the parties’ obligations to consummate the Merger, including regulatory approvals and clearances and financing by Nashua, will be satisfied or that the Merger will be consummated, although the Board and the Company expect it to be consummated; and

•

the fact that under New Hampshire law, upon the execution of a Merger Agreement, the City would be required to release to the public certain theretofore confidential information regarding negotiations and other dealings between the parties, including the transcripts of executive sessions of the Board of Aldermen held since the beginning of the eminent domain dispute in 2002.

The foregoing discussion summarizes the material factors considered by the Board in its review of the Merger, but is not meant to be an exhaustive description of the information and factors considered by the Board. After considering these factors, the Board concluded that the positive factors relating to the Merger and the Merger Agreement outweighed the potential negative factors and unanimously determined that the Merger, the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of the Company and our shareholders. In view of the wide variety of factors considered by the Board, and the complexity of these matters, the Board did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of the Board may have assigned different weights to various factors. The Board’s

decision to approve the Merger Agreement was based upon the totality of the information presented to and considered by it.

Our Board, at a Meeting on November 10, 2010, having received frequent reports and updates from management and our Negotiating Team, as well as recommendations from our independent legal and financial advisors described above, determined that the Merger, the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of the Company and our shareholders; approved the Merger Agreement; and recommended that our shareholders approve the Merger Agreement. Our Board believes that the Merger offers our shareholders the greatest value for their shares in light of all relevant considerations as set forth in this Proxy Statement. However, in considering the recommendation of our Board for you to approve the Merger Agreement, you should be aware that there are provisions in the Merger Agreement and aspects of the Merger that will result in certain benefits to our executive officers and directors that are different from, or in addition to, the benefits received by our shareholders generally (see the section entitled “ The Merger—Interests of Our Executive Officers and Directors in the Merger ” beginning on page 46).

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” THE APPROVAL OF THE MERGER AGREEMENT

In considering the Board’s recommendation with respect to the Merger Agreement, the holders of our common stock should note that members of our management and directors of the Company may have interests in the Merger that may differ from or be in addition to those of our shareholders, and that members of the Board received fees for their services in attending special board meetings to periodically review and oversee the progress of the negotiations of the Merger Agreement by management. The Board was aware of these potential interests as they considered the Merger and the Merger Agreement. For more information, see “ The Merger -Interests of Our Executive Officers and Directors in the Merger ” beginning on page 46.

Pennichuck Projections and Information

In connection with the due diligence review of the Company by Nashua and its legal and financial advisors, and in the course of the negotiations with them, we provided certain non-public business and financial information. This information included detailed financial projections for the remainder of fiscal year 2010. Our actual results reported in our 2010 Form 10-K filed with the SEC and also available on our website at http://www.pennichuck.com/investor/proxy-materials.php were substantially consistent with the financial projection provided to Nashua and its legal and financial advisors. We also provided Nashua and its advisors with information regarding our general approach to rate case filings and timing of possible future rate filings and detailed information about costs that could potentially be eliminated if we were no longer a public entity.

The Company does not, as a matter of course, publicly disclose projections of future revenues, earnings or other results. We also provided our financial advisor, Boenning, with the projected and actual results for 2010 and our projected results for 2011 in connection with the preparation of its opinion to the Board as to the fairness, from a financial point of view, of the consideration to be received by the holders of the common stock in the Merger pursuant to the Merger Agreement.

Since we prepared these projections in 2010, we filed our Annual Report on Form 10-K that discussed the trends and other factors that have affected our past financial performance and that are likely to affect our future operating results. As reflected in that filing, the state of the economy in our service area and the effects of conservation efforts has reduced the demand for our water, which is a major driver of our operating results. However, the weather is the single biggest factor that results in increasing or decreasing

the demand for our water. For example the cooler and wetter summer months of 2008 and 2009 significantly reduced the demand for water while the drier and hotter summer of 2010 resulted in a significant increase in water demand by our customers during 2010.

Opinion of Financial Advisor

The Board retained Boenning to act as its financial advisor in connection with its consideration of a potential transaction involving the Company. In connection with this engagement, the Board requested that Boenning provide its opinion as to the fairness, from a financial point of view, of the consideration to be received by holders of the common stock. In selecting Boenning as its financial advisor, the Board considered, among other things, the fact that Boenning is a well-established investment banking firm with substantial experience advising companies in the water utility industry and has substantial experience providing financial advisory services in similar transactions. Boenning, as part of its investment banking business, is continuously engaged in the evaluation of businesses and equity securities in connection with mergers and acquisitions, underwritings, private placements and other securities offerings, and general corporate advisory services.

On January 26, 2011, at a Meeting of the Board held to evaluate the Merger, Boenning delivered to the Board its oral opinion, which was confirmed in writing as of that same date, to the effect that, as of January 26, 2011, and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken by Boenning in connection with the opinion, the experience of its investment bankers and other factors it deemed relevant, the consideration to be received by holders of the common stock pursuant to the Merger Agreement is fair, from a financial point of view, to such holders. The issuance of the opinion of Boenning was approved by an authorized committee of Boenning. Boenning consented to the reference of its opinion and to the inclusion of its opinion in this Proxy Statement, in each case in accordance with the terms of Boenning’s written opinion, dated January 26, 2011.

The full text of Boenning’s written opinion to the Board, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex B to this Proxy Statement and is incorporated by reference in its entirety into this Proxy Statement. The following summary is qualified in its entirety by reference to the full text of the opinion. Boenning provided its opinion for the information and use of the Board in connection with its consideration of the Merger. Boenning’s opinion does not address, and should not be construed to address, any other aspect of the Merger, the relative merits of the Merger or the decision by the Company to enter into the Merger Agreement or any related transaction and does not constitute a communication or a recommendation to any holder of the common stock as to how or whether such holder should vote or act on any matters relating to the Merger or any other matters.

In arriving at its opinion, Boenning, among other things:

•

Reviewed the historical financial performance and current financial position of the Company;

•

Reviewed certain internal information relating to the business, furnished to Boenning by the Company, including financial forecasts, relating to the business, earnings, capital expenditures, cash flow, assets and prospects of the Company;

•

Conducted discussions with management of the Company concerning its business and prospects, regulatory environment, as well as other matters that Boenning believed were relevant to its inquiry;

•

Reviewed the historical market prices and trading activity for the Company’s shares and compared them to that of certain publicly traded water companies deemed to be reasonably similar to the Company;

•

Compared the results of operations of the Company with that of certain public companies deemed to be reasonably similar to the Company;

•

Compared the proposed purchase price and financial terms of the Merger with the purchase price and financial terms of certain other mergers and acquisitions deemed to be relevant;

•

Analyzed the valuation of the Company’s common shares using various methodologies deemed appropriate;

•

Reviewed the final version of the Merger Agreement dated November 11, 2010; and

•

Reviewed such other financial information and analyses and performed such other investigations and took into account such other matters that Boenning deemed appropriate, including its assessment of general economic, market, monetary and other conditions as they existed on the date of its opinion.

In connection with its review, Boenning assumed and relied upon the accuracy and completeness of the foregoing financial and other information, including all information, analyses and assumptions relating to accounting, legal, regulatory and tax matters, whether publicly available or otherwise provided to, reviewed by or discussed with it. Boenning has not assumed any responsibility for, nor independently verified any such information or physically inspected any of the Company’s facilities or assets. Boenning relied upon the assurances of the management of the Company that they are not aware of any facts or circumstances that would make such information about the Company inaccurate or misleading. Boenning relied upon financial forecasts regarding the Company that were furnished to it by the management of the Company, and that it was instructed to use, by the management of the Company and the Board, and Boenning was advised by the management of the Company and assumed that such financial forecasts, as well as the estimates, judgments, allocations and assumptions upon which such financial forecasts are based, had been reasonably formulated and reflected the best currently available estimates, judgments, allocations and assumptions of the management of the Company regarding the future financial performance of the Company. Boenning assumed no responsibility for, and expressed no view as to, any such financial forecasts or the estimates, judgments, allocations or assumptions upon which they are based. In arriving at its opinion, Boenning has not prepared, obtained or been provided with any independent evaluations or appraisals of the assets or liabilities of the Company, including any contingent liabilities. Boenning also assumed that there had been no material changes in the condition (financial or otherwise), results of operations, business or prospects of the Company since the date of the last financial statements provided to it.

Boenning’s opinion did not address, nor should it be construed to address, the relative merits of the Merger, or any alternative business strategies or transactions that may be, or have been, available to, or

considered by, the Company, its Board or any committee thereof. Furthermore, Boenning’s opinion does not address Nashua’s ability to consummate the Merger. Boenning relied on management of the Company, the advice of counsel and independent accountants to the Company as to all legal, regulatory and financial reporting matters with respect to the Company, the Merger and the Merger Agreement. Boenning was not requested to, and did not express any opinion regarding the tax effect of the Merger on the Company or the holders of common stock.

In rendering its opinion, Boenning assumed that the Merger would be consummated on the terms set forth in the Merger Agreement, without amendments or waivers of any terms or conditions in any manner material to its analysis, without any adjustment to the consideration to be paid to the holders of the common stock in the Merger (through offset, reduction, indemnity claims or otherwise) and that in the course of obtaining any legal, regulatory or other consents and/or approvals, no restrictions will be imposed or other actions taken that will adversely affect the Merger or the Company in any manner material to its analysis. The opinion of Boenning is necessarily based upon economic, market, financial and other conditions and information available to it as of the date of its opinion. Although subsequent developments may affect its opinion, Boenning does not have any obligation to update, revise or reaffirm its opinion. However, Company management has indicated that no material changes in the Company’s operations, performance or in any of the assumptions upon which Boenning based its opinion are expected to occur or have occurred since the date of Boenning’s opinion. The opinion of Boenning only addresses the fairness, as of January 26, 2011, from a financial point of view to the holders of the common stock of the consideration to be received by such holders in the Merger pursuant to the Merger Agreement and does not address any other terms of the Merger or any other Agreements, arrangements or understandings entered into in connection with the Merger or otherwise. In rendering its opinion, Boenning expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of Company or any of its affiliates, or any class of such persons, relative to the consideration to be received by the holders of the common stock in the Merger or with respect to the fairness of any such compensation.

In addition, Boenning did not consider, and Boenning expressed no opinion with respect to, the price at which the common stock might trade following the announcement of the Merger. Except as described above, the Board imposed no other instructions or limitations on Boenning with respect to the investigations made or the procedures followed by it in rendering its opinion. The issuance of Boenning’s opinion was approved by an authorized committee of Boenning.

The summary set forth below does not purport to be a complete description of the analyses performed by Boenning, but describes, in summary form, the material analyses performed by Boenning in connection with Boenning’s opinion. The preparation of an opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Boenning made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. Accordingly, the analyses reflected in the tables and described below must be considered as a whole, and considering any portion of the analyses, without considering all analyses together, could create a misleading or incomplete view of the processes underlying Boenning’s analyses and opinion.

Company Financial Analyses

Comparable Public Companies Analysis . Boenning reviewed and compared certain financial information and financial multiples relating to the Company and to comparable publicly-traded water utility companies. Boenning selected these companies based upon its views as to the comparability of the financial and operating characteristics of these companies to Pennichuck.

The companies included in the comparable companies’ analysis were:

•

American Water Works Company, Inc.

•

Aqua America, Inc.

•

California Water Service Group

•

American States Water Company

•

SJW Corp.

•

Middlesex Water Company

•

Connecticut Water Service, Inc.

•

The York Water Company

•

Artesian Resources Corporation

Boenning calculated the financial multiples for the Company based on public filings, equity research, and the closing price of the common stock of $27.99 per share on January 24, 2011. With respect to the Company and each of the selected companies, Boenning calculated:

•

enterprise value, which is equal to the market value of common equity plus the book value of debt, less cash, as a multiple of the last twelve months’ (“LTM”) revenue as of 9/30 and estimated 2010 revenue;

•

enterprise value as a multiple of LTM 9/30 earnings before interest, taxes, depreciation and amortization, or EBITDA, and estimated 2010 EBITDA;

	•		price as a multiple of 9/30 book value per share; and
	•		price as a multiple of LTM 9/30 earnings per share, or EPS.

The following table presents the results of these analyses

		Selected				Selected
		Companies				Companies
		Range				Median
EV / LTM Revenue			2.56x – 7.47x				4.22x
EV / 2010E Revenue			2.52 – 7.41x				4.15x
EV / LTM EBITDA			8.5x – 12.9x				10.9x
EV / 2010E EBITDA			8.4x – 14.3x				10.3x
P / 9/30 Book Value Per Share			1.10x – 2.81x				1.79x
P / 9/30 LTM EPS			17.14x – 26.31x				23.10x

Boenning applied a blended change of control premium of 40% to the selected company multiples in the above analysis. The blended premium is based upon historical control premiums for transactions within the water utility sector and the median of transactions announced within the last twelve months across all sectors. Boenning also considered separately the value of the owned land of the Company. The land was valued at $6.1 million based on assumed annual land sales of $400,000. Applying the control premium to the range of selected company mean multiples above and adding the value of the land produces implied values for the Company’s diluted common stock of $26.97 — $33.52. Boenning evaluated these multiples based on its experience in the water utility sector and its professional judgment, taking into account the nature of the transaction and the Company’s business as compared to the selected companies. Boenning noted that the per share Merger Consideration to be paid in connection with the merger is $29.00.

Selected Transactions Analysis . Boenning reviewed the financial terms, to the extent publically available, of 25 selected transactions involving water utility companies since December 1996. Although none of the companies involved in the selected transactions are identical to the Company, nor are any of the selected transactions identical to the merger, Boenning chose the transactions in the selected transactions analysis because the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of the Company’s results, market size or operations.

These transactions were (listed as target/acquirer):

•

Southwest Water Co. / Various

•

Eastern Connecticut Regional / The Connecticut Water Company

•

Aquarion Water Co. of NY / United Water Resources, Inc.

•

New York Water Service Co. / Aqua New York, Inc.

•

Aquarion Company / Macquarie

•

Utilities, Inc. / AIG Highstar Capital II, L.P

•

Monarch Utilities Inc. / Southwest Water Co.

•

Fairbanks Sewer & Water, Inc. / Terasen Water & Utility Services

•

Florida Water Services Co. / Florida Water Services Corp.

•

AquaSource, Inc. / Philadelphia Suburban Corp. (nka: Aqua America, Inc.)

•

Pennichuck Corporation / Philadelphia Suburban Corp. (nka: Aqua America, Inc.)

•

American Water Works Co. / Thames Water Ltd.

•

American Water New England / Aquarion Company

•

Utilities, Inc. / Nuon NV (nka: Alliander N.V.)

•

Chaparral City Water Company / American States Water Company

•

City Of Coatesville Authority / Pennsylvania-American Water Co.

•

E’Town Corporation / Thames Water Ltd.

•

SJW Corp. / American Water Works Co.

•

Citizens Communications Co. / American Water Works Co.

•

United Water Resources, Inc. / Suez Lyonnaise des Eaux

•

Aquarion Company / Yorkshire Water plc

•

Dominguez Services Corp. / California Water Service Group

•

National Enterprises Inc. / American Water Works Co.

•

Consumers Water Company / Philadelphia Suburban Corp. (nka: Aqua America, Inc.)

•

IWC Resources / Nipsco Industries, Inc.

For each of the selected transactions, Boenning calculated, to the extent information was available, the transaction enterprise value as a multiple of LTM Revenue, EBITDA and Customers, based on public filings and other publicly available information available at the time of the announcement of the selected transaction. Boenning also calculated the transaction price as a multiple of book value. Boenning then derived the implied transaction multiple ranges summarized below:

		Selected Transactions
Enterprise Value as a Multiple of:		Range				Median
LTM Revenue			2.01x – 6.25	x			5.27	x
LTM EBITDA			10.4x – 38.2	x			13.9	x
Per Customer		$	1,133 - $4,812			$	2,852
Price as a Multiple of :
Book Value			2.36x – 3.45	x			2.78	x

Applying a range of median multiples derived from the comparable transactions analysis to corresponding financial data for the Company, Boenning calculated a range of implied equity value per diluted share of the Company’s common stock of $26.69 to $31.23. Boenning did not separately add the calculated value for the company’s land, as the implied multiples from the selected transactions account for this type of land sale activity as normal course of business for a water utility. Boenning noted that the per share Merger Consideration to be paid in connection with the merger is $29.00 and the per customer transaction value was $5,964.

Premiums Paid Analysis . Boenning reviewed the historical trading characteristics of Pennichuck’s common stock over the seven year period ended January 24, 2011 (two trading days prior to the Meeting of the Board when Boenning delivered its fairness opinion). Due to the public nature of events relating to this Transaction affecting the share price for a significant period of time prior to the public announcements of the Agreement, Boenning derived two surrogates for the fair and uninfluenced market value per share of Pennichuck common stock. The methodologies Boenning employed are as follows:

•

Recent Issue Price: The gross issue price of Pennichuck’s last common stock issuance, which occurred in December 2009 at a price of $21.00 per share.

•

Implied Current Market Price: The price per share implied by the application of the median price to earnings multiple of Pennichuck’s publicly-traded peers to the Company’s last twelve months earnings per share, adjusted for eminent domain costs over the same period. The implied uninfluenced stock price is $19.85.

Boenning analyzed five discrete samples of premiums data refined by metrics such as transaction announcement date, operating industry and total enterprise value.

The following table presents the results of this analysis:

		Median
		Premium
		At 30-Days
Transactions across all industries announced within the last twelve months			40.80	%
Transactions across all industries announced within the last twelve months, refined by enterprise values of $150 - $250 million			43.19	%
All announced water utility transactions since 1996, refined by enterprise values of $150 - $250 million.			32.00	%
All announced water utility transactions since 1996			42.92	%

Boenning measured each transaction price per share relative to each target’s closing price per share 30 days prior to the announcement of the selected transactions.

Boenning calculated ranges of implied equity values per diluted share of Pennichuck common stock of

$27.72 — $31.38 and $26.20 to $29.67 using base prices of $21.00 and $19.85, respectively. The Merger Consideration of $29.00 compares favorably to the results of this analysis.

Illustrative Present Value of Future Share Price Analysis . Boenning employed a discounted dividend analysis to derive an indication of the theoretical present value per share of the Company’s common equity if the Company were to continue as a going concern.

This analysis was based upon certain assumptions including the Company’s 2011 earnings estimate (adjusted to exclude eminent domain costs of $0.5 million) as well as discussions held with management of the Company regarding their view on the Company’s growth prospects. Boenning utilized discount rates ranging from 6.0% to 8.0%, which were selected based upon the capital structure and trading characteristics of Pennichuck’s publicly-traded peers. Additionally, Boenning utilized terminal multiples of LTM earnings ranging from 22.0x to 24.0x. This range of multiples represents the range in which public companies similar to Pennichuck are currently trading.

Utilizing this methodology, the implied value per share of Pennichuck common stock ranged from $20.65 to $22.39 per diluted share.

Discounted Dividend Analysis. Boenning also employed a discounted dividend analysis to derive an indication of value for the Company’s common equity under a change-in-control scenario.

This analysis was based upon certain assumptions including the Company’s 2011 earnings estimate (adjusted to exclude eminent domain costs of $500,000) as well as discussions held with Pennichuck’s management regarding their view on the Company’s growth prospects. Boenning utilized discount rates ranging from 6.0% to 8.0%, which were selected based upon the capital structure and trading characteristics of Pennichuck’s publicly-traded peers. Additionally, Boenning utilized terminal multiples of LTM earnings ranging from 31.5 times to 33.5 times. This range of “take-out” multiples was derived from the median price to LTM earnings multiple of Pennichuck’s publicly-traded peers, and adjusted to represent a change-in-control transaction via a 41% control premium. The control premium of 41% is representative of the median control premium across all industries over the twelve months preceding this opinion.

Utilizing this methodology, the implied value of Pennichuck’s common equity ranged from $27.93 to $30.01 per diluted share.

Other Considerations

Boenning prepared the analyses described above for purposes of providing its opinion to the Board as to the fairness, from a financial point of view as of January 26, 2011, of the Merger Consideration to be received by the holders of the common stock in the Merger pursuant to the Merger Agreement. The analyses do not purport to be appraisals or to reflect the prices at which a Company or business might actually be sold or the prices at which any securities have traded or may trade at any time in the future. The analyses described above that are based upon forecasts of future results are not necessarily indicative of actual results in the future, which may be significantly more or less favorable than suggested by these analyses. These analyses are based upon numerous factors or events beyond the control of the parties or their respective advisors, and therefore are inherently subject to uncertainty. None of the Company, Boenning or any other person assumes responsibility if future results are materially different from those forecast. The type and amount of consideration payable in the Merger were determined through negotiations between Nashua and its advisors, on the one hand, and the Board and its advisors on the other hand. Boenning did not recommend any specific consideration to the Board or state that any given consideration constituted the only appropriate consideration for the Merger. The decision to enter into the Merger agreement was solely that of the Board. As described above, Boenning’s opinion and analyses

were only one of many factors taken into consideration by the Board in evaluating the Merger. Boenning’s analyses summarized above should not be viewed as determinative of the views of the Board or management of the Company with respect to the Merger or the consideration to be received in the Merger. Boenning has been engaged to act as financial advisor to the Board in connection with the Merger and has received a fee of $250,000 upon delivery of its fairness opinion. Boenning also will receive an additional fee for such financial advisory services, a substantial portion of which is payable only upon the consummation of the Merger. In addition, the Company has agreed to reimburse certain of Boenning’s expenses and indemnify it against certain liabilities that may arise out of its engagement. Boenning and its affiliates have not received any other fees in the past two years in connection with investment banking advice and services provided to the Company.

Boenning and its affiliates provide full-service securities trading and brokerage services and a full range of investment banking advice and services, including financial advisory services, securities underwritings and placements. In the ordinary course of its business, Boenning and its affiliates may trade or otherwise effect transactions in the securities of the Company for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

Delisting and Deregistration of Pennichuck Common Stock

If the Merger is completed, our common stock will be delisted from the NASDAQ Global Select Market and deregistered under the Exchange Act. Therefore, the provisions of the Exchange Act would no longer apply to Pennichuck, including the requirement that we furnish a proxy or information statement to our shareholders in connection with meetings of our shareholders. We will also no longer be required to file periodic reports with the SEC.

Accounting

For financial reporting purposes, the Merger will be accounted for by Nashua under a purchase price allocation where the assets and liabilities will be presented at their fair value.

Effects on Pennichuck if the Merger is Not Completed

If Pennichuck shareholders do not approve the Merger Agreement, or if the Merger is not completed for any other reason, our shareholders will not receive any payment for their shares in connection with the Merger. Instead, we will remain an independent public company and our common stock will continue to be listed and traded on the NASDAQ Global Select Market. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, the nature of the water industry on which our business largely depends, and general industry, economic, regulatory and market conditions. Accordingly, if the Merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares. From time to time, our Board will evaluate and review, among other things, the business operations, properties, dividend policy and capitalization of the Company and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If our shareholders do not approve the Merger Agreement, or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to the Company will be offered, or that our business, prospects or results of operations will not be adversely impacted. We may be required to pay Nashua’s expenses and certain termination fees as described in “The Merger Agreement—Termination Fees and Expenses.”

Interests of Our Executive Officers and Directors in the Merger

In considering the recommendation of our Board with respect to the Merger, you should be aware that the completion of the Merger will result in certain benefits being conveyed to one or more of our executive officers and/or directors that are different from or in addition to, the benefits that would be received by our shareholders generally upon completion of the Merger. Such benefits may include cash severance payments upon a change of control of the Company and termination of employment by the Company without “cause” or resignation by the executive for “good reason” (as such terms are defined in applicable employee agreements with the Company). Such benefits may also include: (a) cash bonus awards to executive officers under the 2011 Officer Bonus Plan that may be accelerated as to timing in the event of consummation of a Merger with Nashua, (b) post-employment lump sum reimbursement for part or all of the cost of certain employee benefits (e.g., healthcare insurance premiums), (c) tail liability insurance coverage for directors and officers, (d) indemnification and other insurance arrangements for directors and officers, and (e) accelerated vesting of employee stock options.

Severance and Change of Control Benefits

We have entered into Employment or Change of Control Agreements with all six of our executive officers (five of whom are Named Executive Officers) which generally provide that in the event of both a Change of Control of the Company (such as the completion of the proposed Merger with Nashua) and a termination of the executive officer’s employment by the Company without “cause” or resignation for “good reason” each as defined in their applicable agreements, such executive officer would receive a lump sum severance payment equal to two (2) times his/her annual base salary plus 18 to 24 months of the cost of continuing certain employee benefits (e.g., medical insurance premiums). In addition, the Company’s CEO would also receive an amount equal to two (2) times his annual target cash bonus of 40% of his then current annual base salary, as set forth in his employment agreement with the Company. In the event that the excise tax imposed by Section 4999 of the Internal Revenue Code applies to any payment otherwise required to be made to the CEO pursuant to the terms of his employment agreement, an additional amount shall be paid to him such that the aggregate after-tax amount that he shall receive, shall have a present value equal to the aggregate after-tax amount that he would have received had such excise or penalty tax not applied.

With respect to a Merger with Nashua, the aggregate amount that could become payable to our six executive officers under these severance agreements would be approximately $2.6 million. Details regarding the severance amounts, as of April XX, 2011, for each of our named executive officers, including definitions of the terms used in the column headings, are shown below.

										Change of
										Control Followed
										by Termination
		Resignation				Termination				Without Cause or
		for Good				without				Resignation for
		Reason (1)				Cause (2)				Good Reason (3)
Name		($)				($)				($)
Duane C. Montopoli			288,589				288,589				793,178
Thomas C. Leonard			—				95,827				379,120
Donald L. Ware			—				214,116				419,791
Stephen J. Densberger			—				—				335,588
Roland E. Olivier			—				80,499				326,204
Bonalyn J. Hartley			—				—				315,527

Treatment of Stock Options

As of the Record Date, [198,636] shares of our common stock were subject to stock options granted under our equity incentive plans to our executive officers, all of which have exercise prices less than $29.00 per share. (No directors have been granted stock options.) Upon the consummation of the Merger, all outstanding options to acquire common stock held by our executive officers, like all other stock options held by our other employees, will vest in full and will then be canceled. In consideration for the cancelation of the options, the holder of any such option outstanding immediately prior to the effective

time of the Merger will receive an amount equal to the number of shares of common stock underlying the option multiplied by the amount by which $29.00 exceeds the exercise price for each share of common stock underlying the options, without interest and less applicable withholding taxes. None of our outstanding options has an exercise price per share equal to or in excess of $29.00.

The aggregate cash payment that will be made to these executives in connection with the cancelation of their options upon consummation of the Merger will be approximately $268,000.

Details on the fair value associated with the acceleration of the stock options to each of our executive officers computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation—Stock Compensation” is shown below.

		Accelerated Stock Option
		Values Following Change
		of Control 
Name		($)
Duane C. Montopoli			77,707
Thomas C. Leonard			37,594
Donald L. Ware			48,567
Stephen J. Densberger			34,105
Roland E. Olivier			30,889
Bonalyn J. Hartley			38,853

2011 Officer Bonus Plan

     The 2011 Officer Bonus Plan contains specific provisions designed in recognition of the objective of closing a Merger with Nashua as quickly as possible and, in any event, December 31, 2011 or as soon thereafter as possible, and that a number of the Company’s officers 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 contingency 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 the closing of the Merger.

     The same bonus pool schedule applies to both Variant I and Variant II of the 2011 Officer Bonus Plan, although the potential bonus pool payout under Variant II is likely to be smaller because of a

required scale-back adjustment if the Merger closing occurs before the end of the calendar year. It should also be noted that if “Company Wide Income” (as defined in the 2011 Plan) is less than 88% of budgeted income as of the applicable measurement date, no cash bonuses shall be payable under the 2011 Plan.

     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 shortly prior to the Merger closing date. Of the final bonus pool amount, 60% shall be paid pro-rata to the non-CEO Plan participants based on their 2011 beginning base salaries and 40% shall be awarded on a discretionary basis among the same persons by the 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 the 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 aggregate beginning base salaries, the CEO’s separate bonus pool amount would 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 based on an assessment of his performance and otherwise subject to the terms of his employment agreement.

     The table below shows the range of bonus amounts under Variant II of the 2011 Officer Bonus Plan assuming actual Company Wide Income is either 88% or 112% of budgeted income (the level associated with the maximum bonus) and assuming the Merger closes in December 2011.

		Minimum				Maximum
		Pro-rated				pro-rated
		Bonus 				Bonus
Name		($)				($)
Duane C. Montopoli			45,045				70,785
Thomas C. Leonard			21,047				33,073
Donald L. Ware			22,138				34,788
Stephen J. Densberger			19,378				30,452
Roland E. Olivier			18,993				29,847
Bonalyn J. Hartley			17,518				27,528

Indemnification of Directors and Officers; Insurance

If the proposed Merger is consummated, each of our Company’s pre-Merger directors and officers will be indemnified and held harmless during the six-year period following the effective time of the Merger to the full extent permitted by law from any claims arising by virtue of his or her service as a director or officer, including in connection with the negotiation, execution and performance of the Merger Agreement. Each of these indemnified persons will be entitled to the advancement of expenses in defense of any claim, provided that such expenses shall be repaid if a court should determine in a final and non-appealable order that indemnification was prohibited by law. Nashua will be required to obtain directors and officers liability insurance providing coverage for such six year period, provided the annual premium for such coverage does not exceed 200% of the last annual premium paid before the effective time of the Merger.

Other Considerations

If the proposed Merger is consummated, we expect that none of the Company’s current directors will become directors of the surviving corporation after the Merger is completed. Neither the Company nor Nashua has made any loans to our current directors and executive officers.

Dissenters’ Rights

In connection with the Merger, our shareholders are entitled to dissenters’ rights under Sections 293-A:13.01 through 293-A:13.31 of the New Hampshire Business Corporation Act, provided that they comply with the conditions established by such Sections (the “Dissenters’ Rights Provisions”).

The discussion below is not a complete summary regarding each shareholder’s dissenters’ rights under New Hampshire law and is qualified in its entirety by reference to the text of the relevant provisions of New Hampshire law, which are attached to this Proxy Statement as Annex C. Shareholders intending to exercise dissenters’ rights should carefully review Annex C . Failure to follow precisely any of the statutory procedures set forth in Annex C may result in a termination or waiver of these rights.

A record holder of shares of our common stock who makes the demand described below with respect to such shares, who continuously is the record holder of such shares through the effective time of the Merger, who otherwise complies with the statutory requirements of the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act and who neither votes in favor of the Merger nor consents thereto in writing will be entitled to an appraisal by the New Hampshire Superior Court, Hillsborough South District (the “New Hampshire Court”), of the fair value of his, her or its shares of our common stock in lieu of the consideration that such shareholder would otherwise be entitled to receive pursuant to the Merger Agreement. All references in this summary of dissenters’ rights to a “shareholder” or “holders of shares of our common stock” are to the record holder or holders of shares of our common stock. Except as set forth herein, our shareholders will not be entitled to dissenters’ rights in connection with the Merger.

Under the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act, where a Merger is to be submitted for approval at a Meeting of shareholders, such as our Special Meeting, prior to the Special Meeting, a constituent corporation must notify each of the holders of its stock for whom dissenters’ rights are available that such dissenters’ rights are available and include in each such notice a copy of the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act. This Proxy Statement is the required notice to the record holders of our common stock.

Shareholders who desire to exercise their dissenters’ rights must satisfy all of the conditions of the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act. Those conditions include the following:

•

Shareholders electing to exercise dissenters’ rights must not vote “for” the approval of the Merger Agreement. Voting “for” the approval of the Merger Agreement will

			result in the waiver of dissenters’ rights. Also, because a submitted proxy not marked “against” or “abstain” will be voted “for” the proposal to approve the Merger Agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of dissenters’ rights.
	•		A written demand to exercise dissenters’ rights and appraisal of shares must be filed with us before the taking of the vote on the Merger Agreement at the Special Meeting. The written demand to exercise dissenters’ rights should specify the shareholder’s name and mailing address, and that the shareholder is thereby demanding appraisal of his or her shares of our common stock. The written demand to exercise dissenters’ rights is in addition to and separate from a vote against the Merger Agreement or an abstention from such vote. That is, failure to return your proxy, voting against, or abstaining from voting on, the approval of the Merger Agreement will not satisfy your obligation to make a written demand to exercise dissenters’ rights.
	•		A demand to exercise dissenters’ rights must be executed by or for the shareholder of record, fully and correctly, as such shareholder’s name appears on the stock certificate. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the fiduciary. If the shares are owned by or for more than one person, as in a joint tenancy or tenancy in common, such demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand to exercise dissenters’ rights for a shareholder of record. However, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he or she is acting as agent for the record owner. A person having a beneficial interest in shares of our common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below in a timely manner to perfect whatever dissenters’ rights the beneficial owners may have.

A shareholder who elects to exercise dissenters’ rights should mail or deliver his, her or its written demand to Pennichuck Corporation, 25 Manchester Street, P.O. Box 1947, Merrimack, NH 03054-1947, Attention: Corporate Secretary.

Within ten (10) days after the effective time of the Merger, we must provide notice of the effective time of the Merger to all of our shareholders who have complied with the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act, and have not voted in favor of the approval of the Merger Agreement, supplying a form for demanding payment and setting a date by which the Company shall receive a payment demand from said dissenting shareholders, which demand date shall be no fewer than 30 days nor more than 60 days after the date the notice is delivered by the Company.

Upon receipt of a payment demand, the Company shall pay each dissenter, who has complied with Section 293-A:13.23 of the New Hampshire Business Corporation Act, the amount the Company estimates to be the fair value of his or her shares, plus accrued interest. The payment shall be accompanied by various financial information specified in Section 293-A:13.25 of the New Hampshire Business Corporation Act A dissenter may notify the Company in writing of his or her own estimate of the fair value of his or her shares and amount of interest due, and demand payment of his estimate, less any payment made by the Company. A dissenter waives his or her right to demand payment under Section 293-A:13.28 of the New Hampshire Business Corporation Act unless he or she notifies the Company of his or her demand in writing within 30 days after the Company made or offered payment for his or her shares. If a dissenter’s demand for payment under Section 293-A:13.28 remains unsettled, the

Company shall commence a proceeding within 60 days after receiving the payment demand and petition in the New Hampshire Court demanding a determination of the fair value of the shares of all dissenting shareholders, and accrued interest. We do not think its in the best interests of the Company and/or our shareholders to file an appraisal petition and shareholders seeking to exercise dissenters’ rights should not assume that we will initiate any negotiations with respect to the fair value of such shares.

Although our Board believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the New Hampshire Court and shareholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration they would receive pursuant to the Merger Agreement. Moreover, we do not anticipate offering more than the Merger Consideration to any shareholder exercising dissenters’ rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act, the “fair value” of a share of our common stock is less than the Merger Consideration. In determining “fair value,” the New Hampshire Court is required to take into account all relevant factors. The cost of the appraisal proceeding, which does not include attorneys’ or experts’ fees, may be determined by the New Hampshire Court and assessed against the Company, except that the Court may assess costs against all or some of the dissenters, in amounts the Court finds equitable, to the extent the Court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment from the Company. The Court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the Court finds equitable in the circumstances, against the Company or the dissenting shareholders in accordance with the provisions of Section 293-A:13.31 of the New Hampshire Business Corporation Act.

Any shareholder who has duly demanded his or her right to exercise dissenters’ rights in compliance with the Dissenters’ Rights Provisions of the New Hampshire Business Corporation Act will not, after the effective time of the Merger, be entitled to vote for any purpose any shares subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to shareholders of record at a date prior to the effective time of the Merger.

At any time within 60 days after the effective time of the Merger, any shareholder who has made a written demand for payment will have the right to withdraw his, her or its demand for payment and to accept the terms offered in the Merger Agreement. After this period, a shareholder may withdraw his, her or its demand for payment and receive payment for his, her or its shares only with our written consent. Any shareholder may withdraw such shareholder’s demand for payment by delivering to us a written withdrawal of his, her or its demand for payment and acceptance of the Merger Consideration, except (i) that any such attempt to withdraw made more than 60 days after the effective time of the Merger will require our written approval and (i) that no appraisal proceeding in the New Hampshire Court shall be dismissed as to any shareholder without the approval of the New Hampshire Court, and such approval may be conditioned upon such terms as the New Hampshire Court deems just.

Failure by any of our shareholders to comply fully with the procedures described above and set forth in Annex C to this Proxy Statement may result in termination of such shareholder’s dissenters’ rights. In view of the complexity of exercising dissenters’ rights under New Hampshire law, any of our shareholders considering exercising these rights should consult with legal counsel.

Material U.S. Federal Income Tax Consequences of the Merger

The following summary is a general discussion of the material U.S. federal income tax consequences to our shareholders, other than Nashua, whose common stock is converted into cash in the Merger. This summary is based on the current provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable Treasury Regulations, judicial authority and administrative rulings, all of which are

subject to change, possibly with retroactive fact or different interpretations. Any such change could alter the tax consequences to our shareholders as described herein. As a result, we cannot assure you that the tax consequences described herein will not be challenged by the Internal Revenue Service, or the IRS, or will be sustained by a court if challenged by the IRS. No ruling from the IRS has been or will be sought with respect to any aspect of the transactions described herein. This summary is for the general information of our shareholders, other than Nashua, only and does not purport to be a complete analysis of all potential tax effects of the Merger. For example, it does not consider the effect of any applicable state, local, foreign, estate or gift tax laws, or of any non-income tax laws. In addition, this discussion does not address the tax consequences of transactions effectuated prior to or after the Merger (whether or not such transactions occur in connection with the Merger), including, without limitation, any exercise of a stock option or the Acquisition or disposition of Pennichuck shares other than pursuant to the Merger. In addition, it does not address all aspects of U.S. federal income taxation that may affect shareholders in light of their particular circumstances, including:

	•		shareholders that are insurance companies;
	•		shareholders that are tax-exempt organizations;
	•		shareholders that are financial institutions, regulated investment companies, or brokers or dealers in securities;
	•		shareholders who hold their common stock as part of a hedge, straddle or conversion transaction;
	•		shareholders that hold common stock which constitutes qualified small business stock for purposes of Section 1202 of the Code or “section 1244 stock” for purposes of Section 1244 of the Code;
	•		shareholders who are liable for the U.S. federal alternative minimum tax;
	•		shareholders who are partnerships or any other entity classified as a partnership for U.S. federal income tax purposes;
	•		shareholders who acquired their common stock pursuant to the exercise of a stock option or otherwise as compensation; and
	•		shareholders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar.

The following summary also does not address the tax consequences for the holders of stock options. The following summary assumes that shareholders hold their common stock as a “capital asset” under Section 1221 of the Code (generally, property held for investment). For purposes of this discussion, a U.S. person is defined as a beneficial owner of Pennichuck common stock that is:

	•		a citizen or resident of the United States for U.S. federal income tax purposes;
	•		a corporation, including any entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
	•		an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

•

a trust, if its administration is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all substantial decisions of the trust, or if it has made a valid election under applicable Treasury Regulations to be treated as a U.S. person.

For purposes of this discussion, a “non-U.S. person” is a beneficial owner of Pennichuck common stock that is not a U.S. person or a partnership (or an entity treated as a partnership for U.S. federal income tax purposes). Partners of partnerships or other pass-through entities holding our capital stock are encouraged to consult their own tax advisors.

PENNICHUCK SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES, AND AS TO ANY TAX REPORTING REQUIREMENTS OF THE MERGER AND RELATED TRANSACTIONS IN LIGHT OF THEIR OWN RESPECTIVE TAX SITUATIONS.

Treatment of Holders of Common Stock

The conversion of Pennichuck common stock into the right to receive cash in the Merger will be a taxable transaction to U.S. persons. Generally, this means that a shareholder, other than Nashua, that is a U.S. person, will recognize a capital gain or loss equal to the difference between (1) the amount of cash the shareholder receives in the Merger and (2) the shareholder’s adjusted tax basis in the common stock surrendered therefore. This gain or loss will be long-term if the holder has held Pennichuck common stock for more than one year as of the date of the Merger. Under current law, any long-term capital gain recognized by a non-corporate shareholder that is a U.S. person will be subject to U.S. federal income tax at a maximum rate of 15%. Generally, capital losses are deductible only against capital gains and are not available to offset ordinary income; however, individuals are allowed to offset a limited amount of net capital losses against ordinary income.

Given the actions taken by the City in commencing and prosecuting the eminent domain proceeding against our subsidiary Pennichuck Water, as well as the 2008 ruling by the NHPUC, as affirmed by the 2010 NH Supreme Court decision, confirming the City’s right to take Pennichuck Water’s assets by eminent domain, Pennichuck shareholders may be entitled to take the position that the Merger qualifies as an “Involuntary Conversion,” within the meaning of Section 1033 of the Code. The assets of Pennichuck Water represent substantially all of the assets of the Company on a consolidated basis. The IRS has ruled in a Private Letter Ruling (PLR 2001180) that in a similar factual situation, the cash consideration received by a shareholder in a merger did qualify as eligible property for purposes of Section 1033 and therefore that such shareholder was able to elect to defer recognition of the gain on that transaction by investing in qualified replacement property within two years from the effective date of that merger. In that Private Letter Ruling, qualified replacement property included equity securities of utility companies and interests in mutual funds that invested solely in equity securities of utility companies. Pennichuck shareholders should note that such Private Letter Ruling is not binding on the IRS with respect to any other taxpayer. We encourage each Pennichuck shareholder to consult with their own tax advisors prior to the effective time of the Merger to determine the particular tax consequences to them of the Merger and to consider whether to seek to defer recognition of some or all of the taxable gain by following the non-binding position taken by the IRS in the Private Letter Ruling referenced above.

Treatment of Holders of Holders of Common Stock exercising their Dissenters’ Rights

Under specified circumstances, a shareholder may be entitled to dissenters’ rights in connection with the Merger. If a shareholder that is a U.S. person receives cash pursuant to the exercise of dissenters’ rights, such shareholder generally will recognize gain or loss, measured by the difference between the cash received and such shareholder’s tax basis in such common stock. Interest, if any, awarded in an appraisal proceeding by a court would be included in such shareholder’s income as ordinary income for U.S. federal income tax purposes. Shareholders who may exercise dissenters’ rights are urged to consult their own tax advisors.

Non-U.S. Persons

Any gain recognized by a non-U.S. person that is a shareholder upon the receipt of cash in the Merger or pursuant to the exercise of dissenters’ rights generally will not be subject to U.S. federal income tax unless: (1) the gain is effectively connected with a trade or business of the non-U.S. person in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. person); (2) the non-U.S. person is an individual who is present in the United States for 183 days or more in the taxable year of the Merger, and certain other conditions are met; or (3) the non-U.S. person owned (actually or constructively) more than 5% of Pennichuck common stock at any time during the five-year period preceding the Merger, and the Company is or has been a “United States real property holding corporation” for U.S. federal income tax purposes. The Company does not believe that it is currently a United States real property holding corporation and does not believe that it has been a United States real property holding corporation at any time during the past five years.

An individual non-U.S. person whose gain is effectively connected with the conduct of a trade or business in the United States (as described above in clause (1)) will be subject to tax on such gain in the same manner as a U.S. person, as described above. In addition, a non-U.S. person that is a corporation may be subject to a U.S. corporate-level tax of 35%, as well as a branch profits tax equal to 30% (or lesser rate under an applicable income tax treaty) on such effectively connected gain. An individual non-U.S. person described in clause (2) above generally will be subject to a flat 30% tax on any gain, which may be offset by U.S.-source capital losses.

Backup Withholding and Information Reporting

A Pennichuck shareholder may be subject to “backup withholding” with respect to certain “reportable payments” including taxable proceeds received in exchange for the shareholder’s common stock in the Merger. The current backup withholding rate for 2011 is 25%, but this rate could change at any time. Backup withholding will generally not apply, however, to a shareholder who is a U.S. person and who furnishes the paying agent with a correct taxpayer identification number on IRS Form W-9 (and who does not subsequently become subject to backup withholding) or who is otherwise exempt from backup withholding, such as a corporation. Shareholders who fail to provide their correct taxpayer identification numbers may be subject to penalties imposed by the IRS. In addition, certain non-U.S. persons such as certain nonresident aliens may establish an exemption from backup withholding by delivering the proper version of IRS Form W-8 certifyin ^g their non-U.S. status. Each shareholder and, if applicable, each other payee, should complete and sign the IRS Form W-9 included with the letter of transmittal (or other applicable form such as an IRS Form W-8) in order to provide the information and certification necessary to avoid the imposition of backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent. Any amounts withheld from payments to a shareholder under the backup withholding rules are generally not an additional tax and may be refunded or allowed as a credit against the shareholder’s U.S. federal income tax liability, provided that the shareholder furnishes the required information to the IRS in a timely manner.

Cash received in the Merger will also be subject to information reporting unless an exemption applies.

THE FOREGOING DISCUSSION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IS FOR OUR SHAREHOLDERS’ GENERAL INFORMATION ONLY. ACCORDINGLY, OUR SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.

Regulatory Matters

The Merger Agreement requires the Company and Nashua cooperate to take all actions that are necessary, proper and advisable to consummate and make effective the Merger, including using reasonable best efforts to obtain all actions, waivers, consents, approvals, orders and authorizations from all governmental authorities including, without limitation, the approval by the NHPUC. On February 4, 2011, the Company and Nashua filed with the NHPUC a Joint Petition for Approval of the Acquisition of Pennichuck Corporation by the City of Nashua (“Joint Petition”) along with a Motion to Consolidate the eminent domain proceeding between the parties (Docket No. DW 04-48) with the Joint Petition. On February 9, 2011, the NHPUC issued an Order of Notice accepting the Joint Petition, assigning it a Docket Number (DW 11-026), and ordering that a Prehearing Conference for DW 11-026, and a Procedural Conference for DW 04-048, be held on February 24, 2011. The Conferences were held on February 24, 2011 at which time the Company, Nashua and various interested parties (“Interveners”) provided their preliminary statements of their positions regarding the Joint Petition and Motion to Consolidate. Immediately following, all parties who attended the Prehearing Conference participated in a Technical Session to review the Joint Petition and establish a recommended Procedural Schedule for Docket No. DW 11-026. On March 3, 2011, the NHPUC finalized the Procedural Schedule for the Joint Petition. According to the Procedural Schedule, a hearing on the merits of the Joint Petition will be held before the NHPUC Commissioners on July 27-29, 2011 following the normal and customary due diligence by the NHPUC staff and the Interveners in accordance with the Procedural Schedule. The Company anticipates, but cannot guarantee, that an order will be issued by the NHPUC with respect to the Joint Petition by the end of the third quarter of 2011.

Notwithstanding the execution of the Merger Agreement with Nashua as of November 10, 2010, or the Joint Petition filed by the Company and the City requesting NHPUC approval of the proposed Merger with Nashua, a finding that (i) the March 2010 NH Supreme Court decision affirming the NHPUC’s July 2008 order in its entirety, or some other event prior to the November 11, 2010 effective date of the Merger Agreement with Nashua, constituted the “final determination of the price to be paid for the plant and property” in accordance with New Hampshire utility municipalization statute RSA 38, Section 38:13, and that (ii) no affirmative ratifying vote of Nashua’s Board of Aldermen was obtained within the 90 day period thereafter as prescribed by law, it could be argued that the current eminent domain proceeding has been terminated and that, accordingly, a two (2) year waiting period has been triggered with respect to any consensual settlement process between the Company and the City. The Company and the City do not adhere to this view. It is our position that prior to November 11, 2010 there was no “final determination of the price to be paid” by Nashua because the price determined by the NHPUC was for assets owned by Pennichuck Water as of December 31, 2008, not the assets owned thereafter by Pennichuck Water that would be subject to condemnation taking by the City. Furthermore, it is the position of the Company and the City that with respect to the November 11, 2010 effective date of the Merger Agreement, the requisite affirmative ratifying vote of the Board of Aldermen was obtained on January 11, 2011, which was within the required 90-day period.

State Regulatory Matters

Additionally, the Merger is subject to regulatory approval or, in certain instances, advance notification in New Hampshire where the Company operates its regulated business. As noted above, those regulatory

applications have been submitted to the respective state agencies and the parties to the Merger Agreement contemplate approval of the applications in due course. New Hampshire requires prior application and approval by the NHPUC before the Merger can be completed.

Other

U.S. federal and state laws and regulations may require that the Company or Nashua obtain approvals or certificates of need from, file new license and/or permit applications with, and/or provide notice to, other governmental authorities in connection with the Merger.

The parties to the Merger Agreement have agreed to cooperate with each other in connection with the foregoing and to notify each other promptly following the receipt of any comments from any governmental authority. In particular, the parties to the Merger Agreement have agreed to cooperate to promptly develop a mutually acceptable plan to obtain all consents, approvals, orders and authorizations from all state public utility commissions, state public service commissions, departments of public health, departments of health, and similar state regulatory bodies as expeditiously as reasonably practicable and without undue expense. We have also agreed to consult with Nashua prior to making some filings and to consider in good faith Nashua’s comments with respect to such filings.

Certain Relationships

There are no material relationships between Nashua and Merger Sub or any of their respective affiliates, on the one hand, and Pennichuck or any of our affiliates, on the other hand, other than in respect of the Merger Agreement.

Litigation Related to the Merger

As of the date of this Proxy Statement, we are not aware of any class action lawsuits, or other lawsuits, claims or demands of any kind related to the proposed Merger filed against the Company, any of our directors, Nashua, and/or Merger Sub.

THE MERGER AGREEMENT

The following summarizes material provisions of the Merger Agreement, a copy of which is attached to this Proxy Statement as Annex A. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read carefully the Merger Agreement in its entirety because the rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this Proxy Statement.

The description of the Merger Agreement in this Proxy Statement has been included to provide you with information regarding its terms. The Merger Agreement contains representations and warranties made by and to the Company and Nashua as of specific dates. The statements embodied in those representations and warranties were made for purposes of the Agreement between the parties and are subject to qualifications and limitations agreed by the parties in connection with negotiating the terms of the Agreement, including qualifications set forth on the disclosure schedules to the Merger Agreement. In addition, certain representations and warranties were made as of a specified date, may be subject to contractual standards of materiality different from those generally applicable to shareholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts.

Any specific material facts of which we are currently aware that materially qualify or contradict the representations and warranties in the Merger Agreement have been disclosed in this Proxy Statement or the Company’s Annual Report on Form 10-K, which are available on the Company’s web site.

Effective Time of the Merger

The closing of the Merger will take place as soon as practicable, but in no event later than five business days after the satisfaction or waiver of all conditions to completion of the Merger. As part of the closing, Nashua will file a certificate of merger with the Secretary of State of the State of New Hampshire, and the effective time of the Merger will occur at such time as the certificate of merger is so filed (or such later time as provided in the certificate of merger).

Structure of the Merger

At the effective time of the Merger, Merger Sub will merge with and into the Company. The Company will survive the Merger, as the “surviving corporation,” and continue to exist after the Merger as a wholly-owned subsidiary of Nashua. Following completion of the Merger, Merger Sub’s certificate of incorporation and bylaws will be the certificate of incorporation and bylaws of the surviving corporation. At the closing of the Merger, Nashua shall designate the directors and officers of the surviving corporation.

Treatment of Company Securities in the Merger

Company Common Stock

At the effective time of the Merger, each share of our common stock issued and outstanding immediately prior to the effective time of the Merger will automatically be canceled and will cease to exist and will be converted into the right to receive the Merger Consideration, subject to adjustment for any stock split, stock dividend or combination of stock that may occur prior to the Effective Time of the Merger, without interest and less any applicable withholding taxes, other than shares of Company common stock that are:

	•		held in the treasury of the Company or owned by Nashua, Merger Sub or any direct or indirect subsidiary of Nashua or of the Company immediately prior to the effective time of the Merger, which shares will be canceled without conversion or consideration;
	•		held by any of our wholly-owned subsidiaries, which shares will remain outstanding but without any right to the consideration payable in the Merger; and
	•		held by a shareholder who properly demands statutory dissenters’ rights in accordance with applicable law.

After the effective time of the Merger, each of our outstanding stock certificates or book-entry shares representing shares of common stock converted in the Merger will represent only the right to receive the Merger Consideration without any interest. The Merger Consideration paid upon surrender of each certificate will be paid in full satisfaction of all rights pertaining to the shares of our common stock represented by that certificate or book-entry share.

Company Stock Options

On the fifth business day prior to the scheduled effective time, each outstanding option to acquire our common stock, whether or not vested or exercisable, will become fully vested and exercisable. Any option exercised by the holder thereof prior to the effective time shall be entitled to receive the Merger Consideration, subject to any required withholdings and less any amount owed pursuant to the exercise thereof, in accordance with the Merger Agreement. Upon the effective time, any option not exercised will be canceled and will cease to represent a right to purchase shares of our common stock, and thereafter represent the right to receive an amount in cash, without interest and less applicable withholding taxes, equal to the product of:

	•		the number of shares of our common stock subject to each option as of the effective time of the Merger, multiplied by
	•		the excess, if any, of the Merger Consideration over the exercise price per share of such option.

Dissenting Shares

Our shares of common stock that are outstanding immediately prior to the effective time of the Merger and that are held by holders who have properly demanded in writing to exercise dissenters’ rights for such shares in accordance with the New Hampshire Business Corporation Act (the “NHBCA” and such shares, the “dissenting shares”) will not be converted into, or represent the right to receive, the Merger Consideration per share in cash, without interest and less any applicable withholding taxes. Instead, the holders of the dissenting shares will be entitled to receive, after the effective time, payment of the fair value of the dissenting shares held by them, as determined in accordance with the NHBCA. All dissenting shares held by holders who have failed to perfect or who effectively have withdrawn or lost their rights to exercise dissenters’ rights of such dissenting shares will then cease to be dissenting shares and be deemed to have been converted into, as of the effective time, the right to receive the Merger Consideration per share in cash, without interest and less any applicable withholding taxes. See also Dissenters’ Rights on page 50 above.

Exchange and Payment Procedures

At or prior to the effective time of the Merger, Merger Sub will deposit with a U.S. bank or trust company reasonably acceptable to the Company (the “paying agent”) an amount of cash sufficient to pay the Merger Consideration in respect of each share of common stock converted into the right to receive cash pursuant to the Merger Agreement. Promptly after the effective time of the Merger (but in no event later than five business days after the effective time), the surviving corporation will cause to be mailed a letter of transmittal and instructions to each holder of record of our common stock (each such holder is a shareholder that holds stock in its own name as of the effective time of the Merger and is referred as the “registered shareholder”). The letter of transmittal and instructions will tell the registered shareholder, among other things, how to surrender their stock certificates or book-entry shares in exchange for the Merger Consideration. (If your shares are held in “street name” by your broker, you will not receive a letter of transmittal and will automatically receive the Merger Consideration in exchange for your shares of stock through your broker, unless you have properly demanded and perfected your statutory dissenters’ rights in accordance with the NHBCA.)

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

Registered shareholders will not be entitled to receive the Merger Consideration until they surrender or transfer their stock certificates or book-entry shares, as applicable, to the paying agent, together with a duly completed and executed letter of transmittal and any other documents as may be required by the letter of transmittal. The Merger Consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is properly endorsed or is otherwise in the proper form for transfer. In addition, the person who surrenders such certificate must either pay any transfer or other applicable taxes or establish to the satisfaction of the surviving corporation that such taxes have been paid or are not applicable.

No interest will be paid or will accrue on the cash payable upon surrender of the certificates or book-entry shares. Nashua and the surviving corporation will be entitled to deduct and withhold, and pay to the appropriate taxing authorities, any applicable taxes from the Merger Consideration. Any sum that is withheld will be deemed to have been paid to the person with regard to whom it is withheld.

At the effective time of the Merger, our stock transfer books will be closed, and there will be no further registration of transfers of outstanding shares of our common stock. If, after the effective time of the Merger, certificates are presented to the surviving corporation for transfer, they will be canceled and exchanged for the Merger Consideration.

Neither the paying agent nor the surviving corporation will be liable to any person for any cash delivered to a public official pursuant to any abandoned property, escheat or other similar law. If any certificate has not been surrendered prior to five years after the effective time (or immediately prior to such date on which the Merger Consideration in respect of such certificate would otherwise escheat or become the property of any governmental entity), such shares, cash, dividends, or distributions in respect of such certificate shall become the property of the surviving corporation, free and clear of all claims or interest of any person previously entitled thereto.

If you have lost a certificate, or if it has been stolen, mutilated or destroyed, then before you will be entitled to receive the Merger Consideration, you will have to comply with the replacement requirements established by the surviving corporation, including, if necessary, the posting of a bond in an amount reasonably satisfactory to the surviving corporation to protect the surviving corporation against any claim that may be made against it with respect to that certificate.

Representations and Warranties

We make various representations and warranties in the Merger Agreement to Nashua and Merger Sub, which may be subject to important limitations and qualifications set forth in the Merger Agreement and the disclosure schedules thereto. You should be aware that it may not be appropriate to judge the accuracy of such representations and warranties as of the date of this Proxy Statement. Our representations and warranties in the Merger Agreement relate to, among other things:

	•		our and our subsidiaries’ organization, good standing and qualification to do business;
	•		our and our subsidiaries’ certificate of incorporation and Bylaws (as defined in this Proxy Statement) and equivalent organizational documents;
	•		our capitalization, including the number of shares of our common stock, preferred stock, stock held in treasury, stock-based awards and stock options;
	•		our corporate power and authority to enter into the Merger Agreement and to consummate the transactions contemplated by the Merger Agreement (including that our Board, in accordance with the NHBCA, has approved and declared advisable the

			Merger Agreement, the Merger and the transactions contemplated thereby and determined that the Merger Agreement and the transactions contemplated thereby are fair to and in the best interests of the Company and our shareholders);
	•		the absence of violations of or conflicts with our and our subsidiaries’ governing documents, applicable law or material agreements with third parties as a result of entering into the Merger Agreement and performing our obligations under the Merger Agreement;
	•		the required consents and approvals of governmental entities in connection with the transactions contemplated by the Merger Agreement;
	•		possession of permits, franchises, licenses, orders, approvals, consents and other similar authorizations necessary to operate our business in compliance with applicable legal requirements;
	•		our SEC filings since December 31, 2009, including the financial statements contained therein;
	•		compliance with the Sarbanes-Oxley Act of 2002;
	•		the absence of a Company Material Adverse Effect (as defined below), undisclosed liabilities, and certain other changes, events, circumstances or developments related to the Company or our subsidiaries since December 31, 2009;
	•		legal proceedings and governmental orders;
	•		employment matters, employment agreements, labor matters affecting the Company or our subsidiaries, and the Company’s and our subsidiaries’ employee benefit plans and stock option plans;
	•		title to real and personal property;
	•		the quality, quantity, and safety of water supplied by us with respect to applicable standards;
	•		the regulation of our subsidiaries as public utilities in New Hampshire and the regulation of the Company and/or our subsidiaries in other states;
	•		tax, intellectual property, environmental, and insurance matters; and
	•		capital budget and pending capital projects.
As used in the Merger Agreement, the term “Company Material Adverse Effect” means any change, effect, event, occurrence, state of facts or development that has a ‘Company Material Adverse Effect” on the business, assets, financial condition, or past or future operations of the Company and our subsidiaries, taken as a whole, except for the following:

i.

facts, circumstances, events or changes (a) generally affecting the industry in which the Company operates, (b) generally affecting the economy or the financial, debt, credit or securities markets, in the United States or elsewhere, (c) resulting from any political conditions or developments in general, (d) reflecting or resulting from changes or proposed changes in law

			(including rules and regulations) or interpretations thereof or GAAP, or (e) resulting from actions of the Company or any of our subsidiaries which Nashua has expressly requested or consented to in writing;
	ii.		any change in the price of the Company common stock on the NASDAQ stock exchange or any failure to meet internal or published projections, forecasts or revenue or earnings predictions for any period (provided that the underlying causes of such change or failure may, to the extent applicable, be considered in determining whether there is a “Company Material Adverse Effect”); or
	iii.		any facts, circumstances, events or changes resulting from the announcement or the existence of, or compliance (other than the obligation of the Company to comply with its obligations to operate in the ordinary course of business) with, the Merger Agreement and the transactions contemplated hereby; provided, however, that this shall not diminish the effect of, and shall be disregarded for purposes of, the representations and warranties relating to required consents, approvals, change in control provisions or similar rights of acceleration, termination, modification or waiver based upon the entering into the Merger Agreement and the consummation of the Merger.

The Merger Agreement also contains various representations and warranties made by Nashua and Merger Sub to us which may be subject to important limitations and qualifications set forth in the Merger Agreement. You should be aware that it may not be appropriate to judge the accuracy of such representations and warranties as of the date of this Proxy Statement. These representations and warranties relate to, among other things:

	•		their organization, valid existence and good standing;
	•		their corporate power and authority to enter into the Merger Agreement and to consummate the transactions contemplated by the Merger Agreement;
	•		the absence of any violation of or conflict with their governing documents, applicable law or certain agreements as a result of entering into the Merger Agreement and consummating the Merger;
	•		the required consents and approvals of governmental entities in connection with the transactions contemplated by the Merger Agreement; and
	•		the accuracy of information supplied for inclusion in this Proxy Statement.

The representations and warranties of each of the parties to the Merger Agreement will expire upon the effective time of the Merger.

Conduct of Our Business Pending the Merger

For the period between November 10, 2010 and the effective time of the Merger, we and our subsidiaries have agreed:

•

to conduct our business in all material respects in the ordinary course of business

			consistent with past practice; and
	•		to use reasonable commercial efforts to: (a) preserve intact our business organization, (b) preserve our current relationships with governmental entities, customers, suppliers and other persons with whom we have business dealings; (c) retain the services of our current officers and employees, (d) preserve our material assets, rights, and properties in good condition, and (e) suspend the future issuance of shares the Company’s common stock under the Company’s stock purchase plan.

By way of amplification and not limitation of the foregoing, under the Merger Agreement, we and our subsidiaries have also agreed not to take any of the following actions until the effective time of the Merger unless Nashua gives its prior written consent thereto or such action is expressly permitted by the Merger Agreement:

	•		adjust, split, combine, subdivide or reclassify any of our capital stock or other equity interests, or otherwise amend, modify or waive any term of any of our outstanding capital stock or equity interests;
	•		make, declare or pay any dividend or other distribution on our capital stock or other equity interests, or redeem, purchase or otherwise acquire any of our capital stock or other equity interests, except that we can continue to pay cash dividends consistent with past practices on our common stock (but not in excess of $0.185 per share per quarter);
	•		issue, sell, transfer or grant to any person any right to acquire any shares of our capital stock or equity interests, except in the ordinary course of business consistent with past practice pursuant to the exercise of outstanding Company stock options;
	•		enter into any Agreement with respect to the voting of our capital stock or other equity interests;
	•		amend our articles of incorporation or By-laws or other comparable charter or organizational documents;
	•		except as substantially consistent with the Company’s past practices, and except for purchases of property, plant, equipment, inventory and supplies in the ordinary course of business substantially consistent with such past practice, acquire or agree to acquire (a) a substantial equity interest in or portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof, (b) any assets that are material, individually or in the aggregate, to the Company and our subsidiaries taken as a whole, or (c) any water system;
	•		except as disclosed in the disclosure schedules, (a) grant to any current or former director or executive officer of the Company or any of our subsidiaries any material increase in compensation, except in the ordinary course of business and generally consistent with past practices, (b) grant to any current or former director or executive officer of the Company or any of our subsidiaries any increase in severance or termination pay, except to the extent required under any agreement in effect as of December 31, 2009, (c) enter into or amend any employment, consulting, indemnification, severance or termination agreement with any such director or executive officer or enter into or amend any other transaction that would be or is subject to proxy statement disclosure pursuant to SEC regulations,

			(d) establish, adopt, enter into or amend in any material respect the Company’s labor contract or any other collective bargaining agreement, (e) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with prior practice, under the Company’s labor contract or any other collective bargaining agreement, or (f) forgive any indebtedness of any employee of the Company or any of our subsidiaries in excess of $25,000 in the aggregate;
	•		make any change that, individually or in the aggregate, is material to the Company’s information systems or any accounting methods, principles or practices affecting the reported consolidated assets, liabilities or results of operations of the Company and our subsidiaries except insofar as may have been required by a change in GAAP;
	•		sell, transfer, mortgage, license, cancel, abandon, lease, pledge, encumber, divest or otherwise dispose or restrict the use of any properties, rights, assets or lines of business having a value in a single transaction of less than $50,000 or less than $150,000, except in the ordinary course of business;
	•		except as disclosed in the disclosure schedule or consistent with the Company’s past practice, (a) incur any indebtedness for borrowed money or guarantee any such indebtedness of any person, (b) issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any Company Subsidiary, (c) guarantee any debt securities of any person, or (d) make any loans to, or investments in, any person, other than loans to or investments in the Company or any direct or indirect wholly-owned subsidiary of the Company;
	•		make or agree to make any capital expenditures in excess of $300,000 except the applicable capital expenditure amounts set forth in the disclosure schedules or our capital budget forecast for 2011;
	•		pay, discharge or satisfy any claims, liabilities or obligations in excess of $50,000 individually or $100,000 in the aggregate, other than the payment, discharge or satisfaction, in the ordinary course of business substantially consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in reports filed with the SEC or incurred in the ordinary course of business substantially consistent with past practice, (b) cancel any indebtedness owed to it in excess of $50,000 individually or in the aggregate or waive any claims or rights of substantial value, or (c) waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any of our subsidiaries is a party;
	•		enter into, renew, extend, amend, modify, waive any material provision of, or terminate any lease or similar commitment, in any case providing for payments in excess of $100,000 over the term of such lease or commitment (or until the date on which such lease or commitment may be terminated by the Company or any of our subsidiaries without penalty);
	•		except as required by their terms, enter into, terminate or breach in any material respect (or take or fail to take any action, that, with or without notice or lapse of

			time or both, would become a material breach) or materially amend any material contract, other than as disclosed in the disclosure schedule;
	•		except with respect to the eminent domain dispute between the Company and Nashua, commence any litigation or arbitration other than in accordance with past practice or settle any other litigation or arbitration for money damages or other relief in excess of $100,000, or if as part of such settlement the Company or any of the Company’s subsidiaries would agree to any restrictions on its operations, or which relates to the Merger Agreement or the transactions contemplated hereby;
	•		elect or appoint any director or officer of the Company or any Company subsidiary, except as necessary to replace in the ordinary course of business any director or officer who ceases to be a director or officer of the Company or any Company subsidiary;
	•		take any action that would reasonably be expected to result in the inability to satisfy the conditions to closing set forth in the Merger Agreement;
	•		liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction of the Company and/or any Company subsidiary;
	•		make any material election with respect to Taxes (in the ordinary course of business substantially consistent with recent past practice) or settle or compromise any material Tax liability or refund; or
	•		invest funds in debt securities or other investments maturing more than 60 days after the date of investment, except as disclosed in the disclosure schedule; or
	•		enter into any contract with respect to, or otherwise authorize, agree or commit to do any of the foregoing actions .

No Solicitation of Transactions

We have agreed that we, our subsidiaries and our respective directors, officers and employees will not, and we are required to use our reasonable best efforts to cause our accountants, auditors, attorneys, consultants, legal counsel, agents, investment bankers, financial advisors and other representatives not to, directly or indirectly:

	•		solicit, initiate or knowingly encourage, or take any other action knowingly to facilitate, any inquiry with respect to, or the making, submission or announcement of, any proposal or offer that constitutes, or may reasonable be expected to constitute, a Company Alternative Proposal (as defined below);
	•		enter into, maintain, participate in or continue any discussions or negotiations regarding, or furnish to any person any nonpublic information with respect to, any proposal that constitutes, or may reasonably be expected to constitute, a Company Alternative Proposal, or in response to any inquiries or proposals that may reasonably be expected to lead to any Company Alternative Proposal, except to notify such person as to the existence of the “no solicitation” provisions of the Merger Agreement;

	•		withdraw, modify or propose publicly to withdraw or modify, in a manner adverse to Nashua, the Company’s recommendation to our shareholders to approve the Merger and approve the Merger Agreement;
	•		agree to, approve, endorse or recommend any Company Alternative Proposal;
	•		authorize or permit any of the Company’s subsidiaries’ representatives to take any such action; or
	•		enter into any letter of intent or similar document or any agreement or commitment providing for any Company Alternative Proposal.

In the Merger Agreement, a “Company Alternative Proposal” is generally defined as any unsolicited, bona fide, written proposal or any unsolicited bona fide, written offer made by any third party (other than a proposal or offer by Nashua) relating to:

	•		any merger, amalgamation, consolidation, share exchange, recapitalization, liquidation, dissolution or other business combination transaction, or a “merger of equals,” in each case involving the Company;
	•		the acquisition by any third party or group of third parties, directly or indirectly, of twenty percent (20%) or more of the consolidated assets of the Company and its subsidiaries;
	•		the acquisition by any third party or group of third parties of twenty percent (20%) or more of any class of equity securities of the Company; or
	•		any tender offer or exchange offer that, if consummated, would result in any third party or group of third parties beneficially owning twenty percent (20%) or more of any class of equity securities of the Company.

Despite the foregoing restrictions, at any time prior to our shareholders’ approval of the Merger Agreement, our Board can furnish information to, and enter into discussions and negotiations with, a third party that has made an unsolicited Company Alternative Proposal (that did not arise or result from a breach the Company’s obligations described above with respect to a Company Alternative Proposal) that constitutes a competing Company Superior Proposal (as defined below), or that the Board has concluded, in its good faith, after consulting with its financial advisors and outside legal counsel, that such Company Alternative Proposal could reasonably be expected to result in a Company Superior Proposal.

In the Merger Agreement, a “Company Superior Proposal” is generally defined as a Company Alternative Proposal that:

	•		relates to (i) the acquisition by any third party or group of third parties, directly or indirectly, of fifty percent (50%) or more of the consolidated assets of the Company and its subsidiaries, (ii) the acquisition by any third party or group of third parties of fifty percent (50%) or more of any class of equity securities of the Company, or (iii) any tender offer or exchange offer that, if consummated, would result in any third party or group of third parties beneficially owning fifty percent (50%) or more of any class of equity securities of the Company; and
	•		the Board determines in good faith, after consultation with the Company’s financial advisors and outside legal counsel and after taking into account relevant financial, legal, regulatory, estimated timing of consummation and other aspects of such

proposal and the person or group making such proposal, is more favorable to the Company and its stockholders than the Merger.

We must notify Nashua orally and then in writing within 24 hours after we receive a Company Alternative Proposal. This notice must specify the material terms and conditions of such Company Alternative Proposal and identify the third party making Company Alternative Proposal.

In connection with a Company Alternative Proposal that constitutes or is reasonably likely to lead to a Company Superior Proposal, our Board may make a change in its recommendation or recommend the Company Superior Proposal and it may then terminate the Merger Agreement and enter into a definitive agreement to effect the Company Alternative Proposal competing transaction, provided:

	•		the Company has provided written notice to Nashua in writing within 24 hours advising it that our Board has received a Company Superior Proposal, specifying the material terms and conditions of such Company Alternative Proposal, identifying the third party making the Company Alternative Proposal and indicating that our Board intends to change its recommendation to our shareholders and/or recommend the Company Superior Proposal; and
	•		Nashua does not, prior to five business days after its receipt of the notice of the Company Superior Proposal, make a matching offer, amend the terms of the Merger Agreement and/or increase the Merger Consideration, that leads our Board to determine, in its good faith judgment (taking into account any changes or amendments to the terms of the Merger Agreement proposed in writing by Nashua to us) that the proposal giving rise to the written notice to Nashua does not continue to constitute a Company Superior Proposal.

Access to Information

From the date of the Merger Agreement until the effective time of the Merger, but subject to legal, governmental order and other restrictions, we have agreed to (and to cause our subsidiaries to): (a) provide to Nashua and its representatives reasonable access, during normal business hours and upon reasonable notice by Nashua, to the officers, employees, agents, properties, offices and other facilities of the Company and its subsidiaries and to their books and records, (b) furnish to Nashua and its representatives such financial and operating data and other information as Nashua or its representatives may reasonably request, and (c) furnish to Nashua such information concerning our and our subsidiaries’ business, properties, contracts, assets, liabilities, personnel and other aspects as Nashua or its representatives may reasonably request.

Each party to the Merger Agreement has agreed to comply with the Confidentiality Agreement between the Company and Nashua, which is incorporated into Annex A to this Proxy Statement.

Eminent Domain Settlement Agreement

Concurrently with the signing of the Merger Agreement, the Company and Nashua entered into a Settlement Agreement whereby the Company and Nashua have agreed to settle all claims, controversies and disputes between the parties in NHPUC eminent domain proceeding (“Docket No. DW 04-048”). The Company and Nashua have agreed that the petition filed by Nashua in Docket No. 04-048 should be dismissed with prejudice in the event the Merger Agreement is terminated for any reason, except to the extent necessary for the NHPUC to approve the Merger and the transactions contemplated by the Merger Agreement. The Company and Nashua have executed a Joint Notice of Withdrawal and Motion for Dismissal with Prejudice and deposited such Withdrawal Notice and Motion for Dismissal with an

escrow agent. Upon termination of the Merger Agreement, the Company has the right, upon providing five (5) days prior written notice to the escrow agent and Nashua to direct the escrow agent to release the Withdrawal Notice and Motion for Dismissal to the Company’s attorneys. Promptly after the escrow agent disburses the Withdrawal Notice and Motion for Dismissal, the Company shall cause its attorneys to file the Withdrawal Notice and Motion for Dismissal with the NHPUC. A copy of the Settlement Agreement, and the related Escrow Agreement, is set forth as Exhibit C to the Merger Agreement in Annex A .

Parties’ Cooperation to Complete the Merger

Each of the parties to the Merger Agreement agrees to cooperate with one another and take all actions that are necessary, proper and advisable to complete the Merger, and to accomplish the following as promptly as reasonably practicable following the date of the Merger Agreement:

	•		taking all actions to satisfy the conditions to completion of the Merger, as set forth in the Merger Agreement;
	•		obtaining all necessary actions, waivers, consents, approvals, orders and authorizations from governmental authorities, and making all necessary registrations, declarations, notifications and filings to obtain all approvals or waivers from governmental authorities; and
	•		obtaining all necessary consents, approvals or waivers from third parties.

The parties to the Merger Agreement have further agreed to notify each other promptly following the receipt of any comments from any governmental authority. In particular, the parties to the Merger Agreement have agreed to cooperate to promptly develop a mutually acceptable plan to obtain all consents, approvals, orders and authorizations from the New Hampshire Public Utility Commission (NHPUC), the New Hampshire Department of Environmental Services and other similar state agencies and regulatory bodies as expeditiously as reasonably practicable and without undue expense.

On February 4, 2011, the Company and Nashua filed with the NHPUC a Joint Petition for Approval of the Acquisition of Pennichuck Corporation by the City of Nashua (“Joint Petition”) along with a Motion to Consolidate the eminent domain proceeding between the parties (Docket No. DW 04-48) with the Joint Petition. On February 9, 2011, the NHPUC issued an Order of Notice accepting the Joint Petition, assigning it a Docket Number (DW 11-026), and ordering that a Prehearing Conference for DW 11-026, and a Procedural Conference for DW 04-048, be held on February 24, 2011. The Conferences were held on February 24, 2011, at which time the Company, Nashua and various interested parties (“Interveners”) provided their preliminary statements of their positions regarding the Joint Petition and Motion to Consolidate. Immediately following, all parties who attended the Prehearing Conference participated in a Technical Session to review the Joint Petition and establish a recommended Procedural Schedule for Docket No. DW 11-026. On March 3, 2011, the NHPUC finalized the Procedural Schedule for the Joint Petition. According to the Procedural Schedule, a hearing on the merits of the Joint Petition will be held before the NHPUC Commissioners on July 27-29, 2011 following the normal & customary due diligence by the NHPUC staff and the Interveners in accordance with the Procedural Schedule. The Company anticipates, but cannot guarantee, that an order will be issued by the NHPUC with respect to the Joint Petition by the end of September 2011.

Shareholders’ Meeting

In the Merger Agreement, we have agreed:

	•		to duly call, give notice of, convene and hold a Meeting of our shareholders as promptly as practicable for the purpose of considering and taking action on the Merger Agreement and the Merger; and
	•		except as permitted by the Merger Agreement, to include in this Proxy Statement, and not subsequently withhold, withdraw or modify in any manner adverse to Merger Sub or Nashua, the recommendation of our Board that our shareholders approve the Merger Agreement, and to take all action that is both reasonably necessary and advisable to obtain such approval.

Employee Benefits Matters

Following the effective time, Nashua shall cause the surviving corporation to honor and perform all obligations of the Company under each Company Employee Plan (as defined below); provided, however, nothing in the Merger Agreement shall limit any reserved right in any Company Employee Plan to amend, modify, suspend, revoke or terminate any such plan as to non-vested benefits.

For the purposes of the Merger Agreement, the term “Company Employee Plans” means, with respect to the Company and each Company subsidiary, all employee pension plans, all employee welfare plans, all other employment, executive compensation, consulting or severance agreements between the Company or any of the Company subsidiaries and any individual who is an employee of or consultant to the Company or any of the Company subsidiaries where the aggregate amount of expense during the last fiscal year or the aggregate amount of payments in any future one year period exceeds $25,000, and all other pension, excess benefit, bonus, incentive or deferred compensation arrangements with employees, as well as certain other plans described in the Merger Agreement.

Indemnification and Insurance

Each of our directors and officers is indemnified and held harmless during the six-year period following the effective time of the Merger to the full extent permitted by law from any claims arising by virtue of his or her service as a director or officer or in connection with the negotiation, execution and performance of the Merger Agreement. Each of these indemnified parties is entitled to the advancement of expenses in defense of any claim, provided that such expenses will be repaid if it is adjudicated that such individual was not entitled thereto. Nashua is required to obtain directors and officers liability insurance or a “tail insurance policy” providing coverage for a period of six years following the effective time of the Merger, provided the annual premium therefore does not exceed 200% of the annual premium paid by the Company for such insurance for the year ended December 31, 2009.

Conditions to the Merger

Conditions to Each Party’s Obligation to Effect the Merger

The obligations of each of the parties to complete the Merger are subject to the satisfaction or waiver (if permissible) of the following conditions:

	•		our shareholders must have approved the Merger Agreement;
	•		within 90 days following November 11, 2010, Nashua’s Board of Alderman must have voted to ratify the Merger Agreement, to bond the funds needed to pay Merger

			Consideration and the costs of closing the Merger, and to make the public interest findings required under the special legislation passed by the New Hampshire Legislature in 2007, as amended further in 2010, which gives Nashua the right to consummate the Merger and the transactions contemplated by the Merger Agreement;
	•		all necessary regulatory approvals, authorizations and consents, required to consummate the Merger and the transactions contemplated by the Merger Agreement, shall have been obtained and become final from all government authorities, including without limitation the NHPUC, and shall remain in full force and effect and all applicable statutory waiting periods in respect thereof shall have expired; and
	•		no governmental authority will have taken action that seeks to make the Merger illegal or otherwise restricts, prevents or prohibits the consummation of the Merger.

Conditions to Obligations of Nashua and Merger Sub

The obligations of Nashua and Merger Sub to effect the Merger are subject to the satisfaction or waiver (if permissible) by Nashua of the following additional conditions:

	•		the Company’s representations and warranties set forth in the Merger Agreement must be true and correct in all respects (or in all material respects in some cases) as of the date of the Merger Agreement and the effective date of the Merger, in each case, except where the failure of such representations and warranties to be true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;
	•		the Company must have performed in all material respects all of its obligations under the Merger Agreement;
	•		There shall not have occurred any change in the business, assets, prospects, financial condition or results of operations of the Company or any of our subsidiaries that has had or is reasonably likely to have, individually or in the aggregate, a material adverse effect;
	•		None of the government authorities shall have imposed any term, condition, obligation or restriction upon Nashua, Merger Sub, the Company or any of our subsidiaries that Nashua reasonably determines would, individually or in the aggregate (i) be expected to have a Company Material Adverse Effect, (ii) constitute a burdensome condition, or (iii) so fundamentally and materially adversely affect the economic benefits to Nashua of the transactions contemplated by this Agreement, taken as a whole, as to render inadvisable the consummation of the Merger;
	•		Nashua shall have made financing arrangements to provide the funds required to satisfy the cash payment obligations of Nashua under this Agreement on terms that Nashua reasonably determines are acceptable to Nashua; provided, however, that Nashua shall be deemed to have waived this condition if, at the end of the 90-day period beginning on the date on which all of the other conditions precedent set forth in the Merger Agreement shall have been satisfied, Acquirer reasonably could have obtained debt financing having the following terms and conditions: (i) general obligations of Nashua; (ii) a total principal amount of $160,000,000; (iii) repayment of principal over a term of 30 years with a level payment structure; (iv) subject to

			optional redemption at par by the City at any time ten years after issuance; (v) a true interest cost of no greater than 6.50%; and (vi) interest on the obligations includable in gross income for federal income tax purposes; and provided further that Nashua shall be deemed to have waived this condition precedent if Nashua shall have failed to use its commercial best efforts to obtain such financing arrangements within 90 days after the date on which all of the other conditions precedent set forth in the Merger Agreement shall have been satisfied; and
	•		The holders of no greater than fifteen percent (15%) of the Company’s common stock shall have exercised their statutory dissenters’ rights and shall not have waived or abandoned those rights as of the effective time of the Merger.

Conditions to Obligations of the Company

Our obligation to effect the Merger is subject to the satisfaction or waiver (if applicable) by us of the following additional conditions:

	•		the representations and warranties of Nashua and Merger Sub set forth in the Merger Agreement must be true and correct in all respects (or in all material respects in some cases) as of the date of the Merger Agreement and the effective date of the Merger, in each case, except where the failure of such representations and warranties to be true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse impact on Nashua (which means a failure that prevents or materially delays or materially impairs the ability of Nashua or Merger Sub to timely consummate the Merger and the other transactions contemplated by the Merger Agreement);
	•		Nashua and Merger Sub must have performed in all material respects all of their respective obligations under the Merger Agreement; and
	•		Merger Sub shall have approved and executed this Agreement.

Financing

Under the terms of the Merger Agreement, the completion of the Merger is subject to Nashua securing financing to fund the cost of closing the Merger, including the payment of the Merger Consideration. For a description of Nashua’s financing conditions, see “ The Merger Agreement - Conditions to Obligations of Nashua and Merger Sub ” above.

Termination

Subject to certain exceptions, the Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the effective time of the Merger in any of the following ways:

	•		by mutual written consent of the Company and Nashua;
	•		by the Company in the event Nashua fails to obtain the requisite financing within 90 days after all of the conditions precedent specified in the Merger Agreement have been satisfied or waived (and assuming the Company is not in material breach of its obligations under the Merger Agreement at such time);

	•		by either the Company or Nashua if (i) our shareholders do not approve the Merger Agreement, (ii) 45 days after any governmental authority issues a non appealable order that permanently restrains, enjoins or otherwise prohibits the consummation of the Merger, (iii) 45 days after any governmental regulatory authority has denied any request or application for the approval of the Merger, or said request or application has been withdrawn at the request or recommendation of said governmental regulatory authority, unless 45 days following said denial or withdrawal a petition for rehearing or an amended application has been filed with said governmental regulatory authority; or (iv) Nashua delivers to the Company a notice that a governmental regulatory authority has imposed a burdensome condition as a condition for Nashua closing the Merger; and (v) the merger has not been consummated by December 31, 2011; provided, however, in each of (i), (ii) (iii) and (iv), no party may terminate the Merger Agreement on such basis in the event such party’s failure to preserve or observe any agreements in the Merger Agreement is the reason for the circumstance described therein;
	•		by the Company or Nashua in the event of certain breaches by the other party of representations, warranties or covenants in the Merger Agreement, subject in certain cases to a 30-day cure period;
	•		by Nashua, if (i) our Board changes its recommendation that our shareholders approve the Merger Agreement and/or recommends a competing transaction, (ii) our Board, in the case of a tender or exchange offer by another party, recommends that our shareholders tender their shares in such tender or exchange offer or fails to recommend against such tender or exchange offer and reaffirm the Merger Agreement, iii) we enter into a letter of intent or Agreement relating to a competing transaction, or (iv) we or our Board publicly announce an intention to do any of the foregoing; or
	•		by the Company, at any time prior to the shareholders approving the Merger Agreement at the Special Meeting, in order to enter into a Company Superior Proposal in accordance with the terms of the Merger Agreement.

Termination Fees and Expenses

The Merger Agreement provides, in general, that each party will pay its own expenses if the Merger is not consummated. The Merger Agreement requires that, if a party terminates the Merger Agreement under one of the following circumstances, the other party shall be liable to pay the following amount(s) for such termination:

•

in the event of a termination of the Merger Agreement due to fraud, or a knowing and intentional breach by the other party, the aggrieved party may either (i) seek all rights and remedies that may be available at law or equity, or claim the following liquidated damages, as appropriate:

i.

with some exceptions, if either the Company or Nashua terminates the Merger Agreement for a breach by the other of any representations, warranty, covenant or other agreement specified in the Merger Agreement, the breaching party shall pay the aggrieved party $1.5 million; and

ii.

if Nashua terminates the Merger Agreement due to the Company’s failure to obtain shareholder approval for the Merger Agreement, the Company shall pay Nashua $250,000.

The Merger Agreement further requires that the Company pay Nashua a termination fee of up to, but not exceeding, $5,500,000 (less any damages or other amounts paid to Nashua by the Company pursuant to the termination fees described in the paragraph above), if:

	•		the Merger Agreement is terminated by the Company, at any time prior to obtaining the approval of the Company’s shareholders, in order to enter into any agreement, understanding or arrangement providing for a Company Superior Proposal;
	•		any bona fide Company Alternative Proposal shall have been publicly announced and not withdrawn prior to the meeting of our shareholders and the Merger Agreement is terminated by Nashua or the Company as a result thereof, and concurrently with or within twelve months after such termination, any definitive agreement providing for a Company Alternative Proposal has been entered into by the Company or a transaction contemplated by any Company Alternative Proposal has been consummated;
	•		Nashua has terminated the Merger Agreement because the Company is in material breach of its representations or obligations under the Merger Agreement due to a change in the Company’s recommendation to its shareholders with respect to approval of the Merger Agreement, and, at the time of such change, a Company Alternative Proposal had been made and not withdrawn; or
	•		(i) Nashua has terminated the Merger Agreement because the Company is in material breach of its representations or obligations under the Merger Agreement, (ii) such breach was caused by the willful conduct or gross negligence of the Company, (iii) at the time of such breach, a bona fide Company Alternative Proposal had been publicly announced and not withdrawn, and (iv) concurrently with or within twelve (12) months after such termination, any definitive agreement providing for a Company Alternative Proposal has been entered into by the Company with any person or entity other than Nashua or an affiliate thereof or a transaction contemplated by any Company Alternative Proposal has been consummated.

Amendment and Waiver

The Merger Agreement may be amended by the parties thereto in writing at any time before or after approval of the Merger Agreement by our shareholders, but, after approval, no amendment will be made that by law requires further approval by our shareholders without obtaining such approval.

Until the effective time of the Merger, the parties may, to the extent legally allowed:

	•		extend the time for the performance of any of the obligations or other acts of the other parties in the Merger Agreement;
	•		waive any inaccuracies in the representations and warranties contained in the Merger Agreement; and
	•		waive compliance with any of the Agreement or conditions contained in the Merger Agreement

MARKET PRICE AND DIVIDEND DATA

Our common stock is listed on the NASDAQ Global Select Market under the ticker symbol “PNNW” This table shows, for the periods indicated, the high and low sales price per share for our common stock as reported by the NASDAQ Global Select Market (or its predecessor, the NASDAQ National Market) .

		Common Stock
		High				Low
Year Ended December 31, 2010
Fourth Quarter		$	28.39			$	22.81
Third Quarter			23.89				21.56
Second Quarter			24.41				20.77
First Quarter			23.51				19.00
Year Ended December 31, 2009
Fourth Quarter		$	24.50			$	20.44
Third Quarter			24.80				21.01
Second Quarter			23.24				19.69
First Quarter			21.90				16.56
Year Ended December 31, 2008
Fourth Quarter		$	23.45			$	14.75
Third Quarter			23.79				19.25
Second Quarter			24.61				21.05
First Quarter			28.48				20.89

The closing price per share of our common stock on November 10, 2010 (the last trading day before announcement of the Merger Agreement) was $24.08. The high and low sales prices per share for our common stock as reported by the NASDAQ Global Select Market on April [29], 2010, the latest practicable trading day before the filing of this Proxy Statement were $xx and $xx, respectively.

As of April XX, 2010, our common stock was held of record by X,XXX,XXX shareholders.

Following the completion of the Merger, our common stock will not be traded on any public market.

Dividend Policy

Our practice has been to pay common stock cash dividends quarterly. The amount and timing of future dividends depends on our growth, results of operations, profitability and financial condition, as well as other factors deemed relevant by our Board. In 2009, we paid dividends of $0.70 per share of common stock. In 2010, we paid dividends of $0.725 per share of common stock. Since the fourth quarter of 2010, our quarterly dividend rate has been $0.185 per share of common stock. Under U.S. federal income tax law, dividends to holders of our common stock are taxable to the extent they are paid out of current or accumulated earnings and profits. Generally, the amount of the dividend treated as a return of capital should reduce the tax basis to the holders of our common stock in such stock. Through and until the completion of the Merger, we are permitted under the terms of the Merger Agreement to pay cash dividends consistent with our past practices on our common stock (but not in excess of $0.185 per share per quarter).

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables present certain information regarding the ownership of our common stock as of February 18, 2010, by:

	•		all those known by us to be beneficial owners of more than five percent of our common stock;
	•		each director;
	•		our named executive officers; and
	•		all of our executive officers and directors as a group.

We calculate beneficial ownership by including shares owned in each Director’s or named executive officer’s name (or by any member of his or her immediate family). also, in calculating the percentage ownership, we count securities which the director or named executive officer could purchase within 60 days of June XX, 2011, (such as exercisable stock options that are listed in a separate column as outstanding securities). No director or named executive officer owns shares of our preferred stock. Except as otherwise noted, to our knowledge, the named individual or their family members have sole voting and investment power with respect to the securities beneficially owned by the shareholder. Unless otherwise indicated, the business address for each listed shareholder is 25 Manchester Street, P.O. Box 1947, Merrimack, NH 03054-1947.

[NOTE: These Tables will be updated prior to publishing this Proxy Statement]

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

Percent of Class

Title of Class

Beneficial Owner

Ownership

(1)

Common Stock

GAMCO Investors, Inc.

One Corporate Center

Rye, New York 10580-1435 (3)

737,975

15.8

%

Common Stock

Thomson Horstmann &

Bryant, Inc.

501 Merritt 7

Norwalk, CT 06851 (2)

263,392

5.6

%

Security Ownership of Directors and Officers

     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

%

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	ƒ			—				17.64				01/28/2019
			—				5,000	ƒ			—				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	ƒ			—				17.64				01/28/2019
			—				5,000	ƒ			—				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

PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

We are submitting a proposal for consideration at the Special Meeting to authorize the named proxies to approve one or more adjournments of the Special Meeting if there are not sufficient votes to approve the Merger Agreement at the time of the Special Meeting. Even though a quorum may be present at the Special Meeting, it is possible that we may not have received sufficient votes to approve the Merger Agreement by the time of the Special Meeting. In that event, we would need to adjourn the Special Meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the Special Meeting for purposes of soliciting additional proxies to obtain the requisite shareholders approval to approve the Merger Agreement. Any other adjournment of the Special Meeting (e.g., an adjournment required because of the absence of a quorum) would be voted upon pursuant to the discretionary authority granted by the proxy.

The proposal to approve one or more adjournments of the Special Meeting requires the affirmative vote of holders of a majority of the shares of Pennichuck common stock voting on the proposal.

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES TO VOTE IN FAVOR OF APPROVING THE MERGER AGREEMENT.

If the Special Meeting is adjourned to a different date, time, or place, we are not required to give notice of the new date, time, or place if this information is announced at the Special Meeting before adjournment or unless our board fixes a new record date for the Special Meeting. Our board is required to fix a new record date only if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

The adjournment proposal relates only to an adjournment of the Special Meeting occurring for purposes of soliciting additional proxies for approval of the Merger Agreement proposal in the event that there are insufficient votes to approve that proposal. Our board retains full authority to the extent set forth in our bylaws and New Hampshire law to postpone the Special Meeting before it is convened, without the consent of any of our shareholders.

OTHER MATTERS

Shareholder Proposals

We will hold an annual meeting of Pennichuck shareholders in 2012 only if the Merger is not completed within the time period that we expect. Proposals of shareholders that are intended to be presented at the 2012 Annual Meeting must have been received at our executive offices in Merrimack, NH no later than February 9, 2012 to be included in the Proxy Statement and proxy card related to such Meeting

Under our Bylaws, no business may be brought before an annual Meeting or a Special Meeting unless it is specified in the notice of the Meeting or is otherwise brought before the Meeting by a shareholder entitled to vote who has delivered notice to the Company (containing certain information specified in the Bylaws) not less than 90 days prior to the scheduled Annual Meeting. If the notice is not received by such date, it will be considered untimely under the Company’s Bylaws, and the Company will have discretionary voting authority under proxies solicited for the 2012 Annual Meeting (if any) with respect to such proposal, if presented at the 2012 Annual Meeting. These requirements are separate from and in addition to the SEC’s requirements that the shareholder must meet in order to have a shareholder proposal included in the Company’s proxy Statement. All proposals should be submitted in writing to the Company’s Secretary at Pennichuck Corporation, 25 Manchester Street, P.O. Box 1947, Merrimack, NH 03054-1947.

Where You Can Find More Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file with the SEC at the SEC public reference room at the following location: Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov . Reports, proxy statements and other information concerning us may also be inspected at the offices of the NASDAQ Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.

As of the date of this Proxy Statement, the Board does not know of any mater that will be presented for consideration at the Special Meeting other than as described in this Proxy Statement.

Whether or not you plan to attend the Special Meeting, please vote over the Internet, by telephone or by marking, signing, dating and promptly returning the enclosed proxy in the envelope provided.

* * *

You should rely only on the information contained in this Proxy Statement. We have not authorized anyone to provide you with information that is different from what is contained in this Proxy Statement. This Proxy Statement is dated April [__], 2011. You should not assume that the information contained in this Proxy Statement is accurate as of any date other than that date.

By Order of the Board of Directors,

Roland E. Olivier
Secretary

Annex A

AGREEMENT AND PLAN OF MERGER

Dated as of November 11, 2010

between

THE CITY OF NASHUA

and

PENNICHUCK CORPORATION

TABLE OF CONTENTS

		Page
Article I. The Merger			1
Section 1.01 The Merger			1
Section 1.02 Closing			2
Section 1.03 Effective Time			2
Section 1.04 Effects			2
Section 1.05 Articles of Incorporation and By-Laws			2
Section 1.06 Directors			3
Section 1.07 Officers			3
Article II. Effect on the Capital Stock of the Constituent Corporations; Exchange of Certificates			3
Section 2.01 Effect on Capital Stock			3
Section 2.02 Exchange of Certificates			5
Article III. Representations and Warranties of the Company			7
Section 3.01 Organization and Qualification; Subsidiaries			7
Section 3.02 Articles of Incorporation and By-Laws			8
Section 3.03 Capitalization			8
Section 3.04 Authority Relative to this Agreement			9
Section 3.05 No Conflict; Required Filings and Consents			9
Section 3.06 Compliance; Permits			11
Section 3.07 SEC Filings; Financial Statements			12
Section 3.08 Absence of Certain Changes or Events			14
Section 3.09 No Undisclosed Liabilities			15
Section 3.10 Absence of Litigation			15
Section 3.11 Employee Benefit Plans; Employment Agreements			15
Section 3.12 Employment and Labor Matters			17
Section 3.13 Title to Property			18
Section 3.14 Real and Personal Property			18
Section 3.15 Water Quality			19
Section 3.16 Regulation as a Utility			19
Section 3.17 Taxes			19
Section 3.18 Environmental Matters			20
Section 3.19 Intellectual Property			21
Section 3.20 Insurance			21
Section 3.21 Brokers			22
Section 3.22 Rights Agreement			22
Section 3.23 Capital Budget			22
Section 3.24 Stock Purchase Plan			22
Section 3.25 Information Supplied			23
Section 3.26 Authorized Powers			23
Article IV. Representations and Warranties of Acquirer			23
Section 4.01 Authority; Execution and Delivery; Enforceability			23
Section 4.02 No Conflicts; Consents			24
Section 4.03 Information Supplied			24

		Page
Section 4.04 Brokers			24
Article V. Covenants Relating to Conduct of Business			25
Section 5.01 Conduct of Business			25
Section 5.02 No Solicitation			29
Section 5.03 Company Stock Option Plans			32
Article VI. Additional Agreements			32
Section 6.01 Rights Agreement			32
Section 6.02 Eminent Domain Agreement			32
Section 6.03 Acquirer Governing Body Ratification Vote; Financing			33
Section 6.04 Regulatory Matters			33
Section 6.05 Preparation of Proxy Statement; Stockholders Meeting			34
Section 6.06 Access to Information; Confidentiality			35
Section 6.07 Reasonable Efforts; Notification			36
Section 6.08 Company Employee Plans			37
Section 6.09 Indemnification; D&O Insurance, etc.			37
Section 6.10 Public Announcements			39
Section 6.11 Stockholder Litigation			39
Section 6.12 Resignation of Directors			39
Section 6.13 Assignment of Agreement by Acquirer			39
Section 6.14 Acquisition Subsidiary			39
Section 6.15 No Inconsistent Actions			40
Section 6.16 Financial and Other Statements			40
Section 6.17 1033 Election by Shareholders and Stock Option Holders			40
Section 6.18 Pennichuck Water Services Corporation Contracts			41
Section 6.19 Environmental Confirmation			41
Article VII. Conditions Precedent			42
Section 7.01 Conditions to Each Party’s Obligation to Effect the Merger			42
Section 7.02 Conditions Precedent to Acquirer’s and Acquisition Subsidiary’s Obligations			43
Section 7.03 Conditions to Obligation of Company			45
Article VIII. Termination, Amendment and Waiver			45
Section 8.01 Ratification Required			45
Section 8.02 Termination			45
Section 8.03 Effect of Termination; Expenses and Liquidated Damages			47
Section 8.04 Amendment			49
Section 8.05 Extension; Waiver			49
Section 8.06 Procedure for Termination, Amendment, Extension or Waiver			49
Article IX. General Provisions			50
Section 9.01 Nonsurvival of Representations and Warranties			50
Section 9.02 Notices			50
Section 9.03 Definitions			51
Section 9.04 Definitions Cross Reference Table			53
Section 9.05 Interpretation			55
Section 9.06 Severability			55
Section 9.07 Counterparts; Facsimile Signatures			55
Section 9.08 Entire Agreement; No Third-Party Beneficiaries			55

		Page
Section 9.09 Governing Law			55
Section 9.10 Assignment			56
Section 9.11 Enforcement			56
Section 9.12 Consents			56
Section 9.13 Rules of Construction			57
Exhibit A—Articles of Incorporation of Surviving Corporation
Exhibit B—By-Laws of Surviving Corporation
Exhibit C—Form of Settlement Agreement
Exhibit D—Form of Confidentiality Agreement
Company Disclosure Schedule

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) dated as of November 11, 2010 (the “Effective Date”) among the City of Nashua, New Hampshire, a municipal corporation (the “ City ,” and, including a board or department of the City to which this Agreement is assigned pursuant to Section 6.13 hereof, “ Acquirer ”), and Pennichuck Corporation, a New Hampshire business corporation (the “ Company ”), to be subsequently joined in by a direct or indirect wholly owned corporate subsidiary of Acquirer (the “ Acquisition Subsidiary ”). Capitalized terms used in this Agreement are defined in the sections specified in Section 9.04 of this Agreement.

WHEREAS, the Acquirer Governing Body has approved the acquisition of the Company, pursuant to a comprehensive settlement of the eminent domain dispute between the parties pursuant to the provisions of Chapter 38 of New Hampshire Revised Statutes Annotated (“ NH RSA ”) and Chapter 347, Section 5 of 2007 N.H. Laws, as amended by Chapter 1, Section 118 of the Laws of the 2010 Special Session (the “ Special Legislative Authority ”), on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, prior to the Effective Time, Acquirer shall take such action as is appropriate to form Acquisition Subsidiary under the NHBCA and to cause Acquisition Subsidiary to become a party to this Agreement;

WHEREAS, the Company Board has approved the merger (the “ Merger ”) of Acquisition Subsidiary with and into the Company, on the terms and subject to the conditions set forth in this Agreement, whereby, subject to the exceptions set forth below, each issued share of common stock, par value $1.00 per share, of the Company (“ Company Common Stock ”) shall be converted into the right to receive cash consideration as specified below;

WHEREAS, as a condition and material inducement to the Company’s entry into this Agreement, the Acquirer and the Company are entering into that certain Settlement Agreement dated as of the date hereof relating to the eminent domain dispute between the City and the Company and the Company Subsidiaries, substantially in the form attached to this Agreement as Exhibit C (the “ Settlement Agreement ”); and

WHEREAS, Acquirer and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.

THE MERGER

Section 1.01 The Merger .

On the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the New Hampshire Business Corporation Act, NH RSA Chapter 293-A (the “ NHBCA ”), Acquisition Subsidiary shall be merged with and into the Company at the Effective Time (as defined in Section 1.03). At the Effective Time, the separate corporate existence of Acquisition Subsidiary shall cease and the Company shall continue as the surviving corporation (the “ Surviving Corporation ”). At the Effective Time, the Surviving Corporation shall be vested with title to all real estate and other property owned by the Company and Acquisition Subsidiary, and the Surviving Corporation shall by operation of law have all liabilities of the Company and Acquisition Subsidiary. The name of the Surviving Corporation shall be [Nashua Water Holding Corporation] and the purpose thereof shall be as set forth in Section 2 of the Articles of Incorporation of the Surviving Corporation as provided by Section 1.05(a).

Section 1.02 Closing .

The closing (the “ Closing ”) of the Merger shall take place at the offices of Rath, Young and Pignatelli, P.C., One Capital Plaza, Concord, New Hampshire 03301, at 10:00 a.m. on the fifth (5 ^th ) business day following the satisfaction (or, to the extent permitted by Law, waiver by the appropriate parties) of the conditions set forth in Article VII, or at such other place, time and date as shall be agreed in writing between Acquirer and the Company but in no event later than the Effective Time specified in Section 1.03. The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date .”

Section 1.03 Effective Time .

Prior to the Closing, Acquirer shall prepare and give the Company and its counsel the opportunity to review, and on the Closing Date or, with the Company’s consent, as soon as practicable thereafter Acquirer shall file with the Secretary of State of the State of New Hampshire, articles of merger or other appropriate documents (in any such case, the “ Articles of Merger ”) executed in accordance with the relevant provisions of the NHBCA and shall make all other filings or recordings required under the NHBCA to effect the Merger. The Merger shall become effective at such time as the Articles of Merger are duly filed with such Secretary of State, or at such other time as Acquirer and the Company shall agree and specify in the Articles of Merger (the time the Merger becomes effective being the “ Effective Time ”).

Section 1.04 Effects .

The Merger shall have the effects set forth in Section 11.06 of the NHBCA.

Section 1.05 Articles of Incorporation and By-Laws .

(a)  Articles of Incorporation. Subject to Section 6.09, the Company Charter shall be amended and restated at the Effective Time to read in the form of Exhibit A , and, as so amended, such Company Charter shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

(b)  By-Laws. Subject to Section 6.09, the Company By-Laws shall be amended and restated at the Effective Time to read in the form of Exhibit B , and, as so amended, such By-Laws shall be the By-Laws of the Surviving Corporation until thereafter changed or amended as provided therein, in the Articles of Incorporation of the Surviving Corporation or by applicable Law.

Section 1.06 Directors .

At the Closing, Acquirer shall designate the directors of the Surviving Corporation and such directors shall hold office commencing as of the Effective Time until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 1.07 Officers .

At the Closing, the directors of the Surviving Corporation shall designate the officers of the Surviving Corporation and such officers shall hold office commencing as of the Effective Time until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

ARTICLE II.

EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES

Section 2.01 Effect on Capital Stock .

At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Acquisition Subsidiary:

(a)  Capital Stock of Acquisition Subsidiary . Each issued and outstanding share of capital stock of Acquisition Subsidiary shall be converted into and become 100 fully paid and non-assessable shares of common stock, [no par value per share], of the Surviving Corporation.

(b)  Cancellation of Treasury Stock and Acquirer-Owned Stock . Each share of Company Common Stock that is owned directly by the Company, any Subsidiary of the Company, Acquirer or Acquisition Subsidiary shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and no other consideration shall be delivered or deliverable in exchange therefor.

(c)  Conversion of Company Common Stock . Subject to Sections 2.01(b) and 2.01(d), each share of Company Common Stock issued and outstanding at the Effective Time shall be converted into the right to receive an amount in cash equal to TWENTY-NINE DOLLARS ($29.00) (the “ Merger Consideration ”), subject to adjustment for any stock split, stock dividend or combination of stock that may occur from the date hereof and prior to the Effective Time. As of the Effective Time, all such shares of Company Common Stock shall no longer be deemed outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive Merger Consideration and any regular quarterly dividend declared in accordance with Section 5.01(b)(i)(A) but unpaid as of the Closing Date upon surrender of such certificate in accordance with Section 2.02, without interest.

(d)  Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, shares (“ Dissenters’ Shares ”) of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such Dissenters’ Shares pursuant to, and who complies in all respects with, Sections 293-A:13.01 through 293-A:13.31 of the NHBCA (the “ Dissenters’ Rights Provisions ”) shall not be converted into Merger Consideration as provided in Section 2.01(c), but rather, the holders of Dissenters’ Shares shall be entitled to payment of the fair value of such Dissenters’ Shares in accordance with the Dissenters’ Rights Provisions; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under the Dissenters’ Rights Provisions, then the right of such holder to be paid the fair value of such holder’s Dissenters’ Shares shall cease and such Dissenters’ Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, Merger Consideration as provided in Section 2.01(c), without interest, upon surrender of such certificate in accordance with the provisions of Section 2.02. The Company shall give the Acquirer (i) prompt notice of any demand for payment of fair value received by the Company, the withdrawal of any such demand, and any other instrument served pursuant to the Dissenters’ Rights Provisions and received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to any demand for payment of fair value under the Dissenters’ Rights Provisions. The Company shall not, except with the prior written consent of the Acquirer, make any payment with respect to any demand for payment of fair value or offer to settle or settle any such demand, or agree to do any of the foregoing.

(e)  Company Stock Options . The Acquirer and the Company agree that, in accordance with the provisions of the Company Stock Option Plans (as defined in Section 3.11(c)) and a resolution of the Company Board adopted under Section 10 thereof, each outstanding and unexercised option to purchase Company Common Stock under the Company Stock Option Plans shall be accelerated so that each such option outstanding and unexercised as of the fifth (5 ^th ) business day preceding the scheduled Effective Time shall become fully vested and exercisable from such date until the Effective Time. Any option to purchase Company Common Stock exercised by the holder thereof prior to the Effective Time shall be entitled to receive the Merger Consideration in accordance with Section 2.01(c), subject to any withholding of Taxes required by Law, and further reduced by any amount owed pursuant to any exercise of said option. Upon the Effective Time, each outstanding option to purchase Company Common Stock that has not previously been exercised shall be terminated and, in exchange therefor, each holder of each such option outstanding and unexercised shall receive from the Surviving Corporation not more than ten (10) business days after the Effective Time an amount in cash (less any withholding of taxes required by Law) equal to the product of (i) the number of shares of Company Common Stock previously subject to such option multiplied by (ii) the Merger Consideration less the exercise price per share of Company Common Stock previously subject to such option, if any. In the event and to the extent that the Company Stock Option Plans permit or require the Company Board (or any committee thereof) to exercise discretion with respect to outstanding stock options, the Company Board (or such committee, as the case may be) will not exercise any such discretion.

(f)  Declared but Unpaid Dividends . In addition to the Merger Consideration, Acquirer shall pay or cause to be paid together with the Merger Consideration any regular quarterly dividend declared in accordance with Section 5.01(b) but unpaid as of the Closing Date.

Section 2.02 Exchange of Certificates .

(a)  Paying Agent . Prior to the Effective Time, Acquirer shall select a bank or trust company in the United States, reasonably acceptable to the Company, to act as paying agent (the “ Paying Agent ”) for the payment of the Merger Consideration upon surrender of certificates representing Company Common Stock and Acquirer shall take all steps necessary to provide, or to enable and cause the Acquisition Subsidiary to provide, to the Paying Agent prior to the Effective Time any and all of the cash necessary to pay for the shares of Company Common Stock converted into the right to receive cash pursuant to Section 2.01(c) (such cash being hereinafter referred to as the “ Exchange Fund ”). The Exchange Fund shall not be used for any purpose except as expressly provided in this Agreement.

(b)  Exchange Procedures . Promptly after the Effective Time (but in no event later than five (5) business days following such date), the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of a certificate or certificates (the “ Certificates ”) that immediately prior to the Effective Time represented outstanding shares of Company Common Stock whose shares were converted into the right to receive Merger Consideration pursuant to Section 2.01, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Acquirer may reasonably specify), and (ii) instructions for use in effecting the surrender of the Certificates in exchange for Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash into which the shares of Company Common Stock theretofore represented by such Certificate shall have been converted pursuant to Section 2.01, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of Acquirer that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the shares of Company Common Stock theretofore represented by such Certificate have been converted pursuant to Section 2.01. If any holder of shares of Company Common Stock shall be unable to surrender such holder’s Certificates because such Certificates have been lost, mutilated or destroyed, such holder may deliver in lieu thereof an affidavit and indemnity bond in form and substance and with surety reasonably satisfactory to the Surviving Corporation. No interest shall be paid or accrue on the cash payable upon surrender of any Certificate.

(c)  No Further Ownership Rights in Company Common Stock . The Merger Consideration paid in accordance with the terms of this Article II upon conversion of any shares of Company Common Stock shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock, and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any certificates formerly representing shares of Company Common Stock are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article II.

(d)  Termination of Exchange Fund . Any portion of the Exchange Fund that remains undistributed to the holders of Company Common Stock for twelve months after the Effective Time shall be delivered to Acquirer, upon demand, and any holder of Company Common Stock who has not theretofore complied with this Article II shall thereafter look only to Acquirer for payment of its claim for Merger Consideration, without any interest thereon.

(e)  No Liability . None of Acquirer, Acquisition Subsidiary, the Company, the Surviving Corporation or the Paying Agent, nor any of their respective officers, directors, employees, agents or counsel, shall be liable to any Person in respect of any cash from the Exchange Fund delivered to a public official pursuant to any applicable unclaimed property, escheat or similar Law. If any Certificate has not been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity, any such shares, cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.

(f)  Investment of Exchange Fund . Acquirer shall cause the Paying Agent to invest any cash included in the Exchange Fund on a daily basis; provided that such investments shall be limited to (i) direct obligations of the United States, (ii) obligations for which the full faith and credit of the United States is pledged to provide for the payment of principal and interest, or (iii) certificates of deposit issued by a commercial bank the deposits of which are insured by the Federal Deposit Insurance Corporation and which is “well-capitalized” within the meaning of applicable regulations. Any interest and other income resulting from such investments shall be paid to Acquirer.

(g)  Withholdings . Acquirer shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Company Common Stock pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code (as defined in Section 3.11(a)), or under any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld by the Surviving Corporation or Acquirer, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by the Surviving Corporation or Acquirer, as the case may be.

(h)  Charges and Expenses . The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of cash for shares of Company Common Stock.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Acquirer that, except as disclosed in the applicable disclosure schedule furnished by Company to Acquirer prior to the execution of this Agreement (the “ Company Disclosure Schedule ”) corresponding to the Sections and subsections set forth below:

Section 3.01 Organization and Qualification; Subsidiaries .

The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. All of the Subsidiaries of the Company are set forth in Section 3.01 of the Company Disclosure Schedule (the “ Company Subsidiaries” ). Each Company Subsidiary is a corporation or a limited liability company duly organized, validly existing and in good standing under the respective Laws of the jurisdiction of its organization. The Company and each of the Company Subsidiaries has the requisite corporate or limited liability company power and authority, and are in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and Orders (the “ Approvals” ), necessary to own, lease and operate the properties it purports to own, lease or operate and to carry on its business as it is now being conducted, except where the failure to have such power, authority and Approvals would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company and each of the Company Subsidiaries is duly qualified or licensed as a foreign company to do business and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, individually or in the aggregate, have a Company Material Adverse Effect. A true and complete list of all of the Company Subsidiaries, together with the jurisdiction of organization of each Company Subsidiary and the percentage of each Company Subsidiary’s outstanding capital stock or membership interests owned by the Company, another Company Subsidiary or any third party along with a list of all Persons in which the Company or any Company Subsidiary holds any equity interest, is set forth in Section 3.01 of the Company Disclosure Schedule. No capital stock or other ownership interests of any Company Subsidiary is or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable or exercisable for, shares of any capital stock or other ownership interests of any Company Subsidiary, and there are no contracts, commitments, understandings or arrangements by which Company or any of Company Subsidiaries is or may be bound to issue, redeem, purchase or sell additional shares of capital stock or other ownership interests of any Company Subsidiary. The Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any Person, other than the Company Subsidiaries and other Persons set forth in Section 3.01 of the Company Disclosure Schedule.

Section 3.02 Articles of Incorporation and By-Laws .

The Company has heretofore furnished to Acquirer a true, complete and correct copy of the Company’s Articles of Incorporation (the “ Company Charter” ) and the Company’s By-Laws (the “ Company By-Laws ”), each as amended to date, and has furnished to Acquirer the articles of incorporation and by-laws (or equivalent organizational documents) of each of the Company Subsidiaries (the “ Subsidiary Documents ”). The Company Articles, the Company By-Laws and Subsidiary Documents are in full force and effect. Neither the Company nor any of the Company Subsidiaries is in violation of any of the provisions of the Company Charter or the Company By-Laws or the Subsidiary Documents.

Section 3.03 Capitalization .

The authorized capital stock of the Company consists of (i) 115,000 shares of preferred stock, no par value per share, none of which is issued and outstanding, none of which is held in treasury and 50,000 of which are currently designated Series A Junior Participating Preferred Stock, and (ii) 11,500,000 shares of Company Common Stock. As of November 8, 2010, (i) 4,662,477 shares of Company Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, and 1,202 shares of Company Common Stock were held in treasury, (ii) no shares of Company Common Stock were held by the Company Subsidiaries, and (iii) 282,765 shares of Company Common Stock were reserved for future issuance pursuant to outstanding Company Stock Options granted under the Company Stock Option Plans and zero shares of Company Common Stock were reserved for issuance pursuant to the Company Stock Purchase Plan. Section 3.03 of the Company Disclosure Schedule sets forth a true and complete list of all outstanding options under the Company Stock Option Plans (collectively, the “ Company Stock Options ”), the name of each holder thereof, the number of shares purchasable or acquirable thereunder or upon conversion or exchange thereof and (if any) the per share exercise or conversion price or exchange rate of each Company Stock Option. There are no options, warrants or other similar rights, convertible or exchangeable securities, “phantom stock” rights, stock appreciation rights, stock based performance units, agreements, arrangements, commitments or understandings to which the Company is a party, whether or not in writing, of any character relating to the issued or unissued capital stock or other securities of the Company or any of the Company Subsidiaries or obligating the Company or any of the Company Subsidiaries to issue (whether upon conversion, exchange or otherwise) or sell any share of capital stock of, or other equity interests in or other securities of, the Company or any of the Company Subsidiaries other than those listed in Section 3.03 of the Company Disclosure Schedule. All shares of Company Common Stock subject to issuance as set forth in this Section 3.03 or Section 3.03 of the Company Disclosure Schedule shall, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, be duly authorized, validly issued, fully paid and nonassessable. Other than those listed in Section 3.03 of the Company Disclosure Schedule, there are no obligations, contingent or otherwise, of the Company or any of the Company Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company Common Stock or capital stock of any Company Subsidiary or any other securities of the Company or any of the Company Subsidiaries or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any such Company Subsidiary or any other entity. All of the outstanding shares of capital stock of each of the Company Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights, and all such shares are owned by the Company or another Company Subsidiary free and clear of all security interests, liens, claims, pledges, taking actions, agreements, limitations in the Company’s voting rights, charges or other encumbrances of any nature whatsoever (collectively, “ Liens ”), except as set forth in Section 3.03 of the Company Disclosure Schedule.

Section 3.04 Authority Relative to this Agreement .

The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, other than the approval of this Agreement by the holders of not less than a two-thirds majority of the outstanding shares of Company Common Stock entitled to vote in accordance with the NHBCA and the Company Charter and the Company By-Laws (the “ Company Stockholder Approval ”). The Company Stockholder Approval is the only vote of the holders of any class or series of the Company’s capital stock necessary (under the Company Charter and the Company By-Laws, the NHBCA, other applicable law or otherwise) to approve this Agreement and the Merger. The Board of Directors of the Company (the “ Company Board ”) has adopted this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Acquirer and Acquisition Subsidiary, as applicable, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar Laws of general applicability relating to or affecting the enforcement of creditors’ rights and by the effect of the principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

Section 3.05 No Conflict; Required Filings and Consents .

(a) Section 3.05(a) of the Company Disclosure Schedule sets forth a list of all contracts, agreements, arrangements or understandings, whether or not in writing, to which the Company or any of the Company Subsidiaries is a party or by which any of them is bound as of the date hereof (i) that are required to be filed as “material contracts” with the SEC pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “ Exchange Act ”); (ii) under which, to the Knowledge of the Company, the consequences of a default, nonrenewal or termination would have a Company Material Adverse Effect; or (iii) pursuant to which payments might be required or acceleration of benefits may occur upon a change of control of the Company or the Company Subsidiaries (collectively, along with the Related Party Contracts, the “ Material Contracts ”). In addition, Section 3.05(a) of the Company Disclosure Schedule sets forth a list (and if any of the same is not in writing, a fair summary thereof) of all contracts, agreements, arrangements or understandings, whether or not in writing, between the Company or any Company Subsidiary on the one hand, and the Company or any other Company Subsidiary on the other hand (collectively the “ Related Party Contracts ”). Except as set forth in Section 3.05(a) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has received any written notice, or, To the Knowledge of the Company, any oral or other communication, reasonably indicating the intent of any Person to terminate any Material Contract.

(b) Except as set forth in Section 3.05(b) of the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Company Charter or the Company By-Laws or any Subsidiary Document, (ii) conflict with or violate any law, rule or regulation, whether federal, state, local or foreign (collectively, “ Laws ”), or any order, judgment or decree, whether federal, state, local or foreign (collectively, “ Orders ”), applicable to the Company or any of the Company Subsidiaries or by which its or any of their respective properties is bound or affected, or (iii) to the Knowledge of the Company, result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or result in a modification of any right or benefit under, or impair the Company’s or any of the Company Subsidiaries’ rights or alter the rights or obligations of any third party under, or give to others any right of termination, amendment, acceleration or cancellation of, or repayment, repurchase or increased payment under, any Material Contract, or result in the creation of a Lien on any of the properties or assets of the Company or any of the Company Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of the Company Subsidiaries is a party or by which the Company or any of the Company Subsidiaries or its or any of their respective properties is bound or affected, except in the case of (ii) or (iii) only for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Company Material Adverse Effect and subject to obtaining or making the Company Required Consents (as defined below). Except as set forth in Section 3.05(b) of the Company Disclosure Schedule, there is no default or state of facts which with notice or lapse of time or both would constitute a default on the part of the Company or any of the Company Subsidiaries (excluding Pennichuck Water Services Corporation) or To the Knowledge of the Company on the part of any other party under a Material Contract, and the Company has not received or given notice of any default or claimed default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party under a Material Contract.

(c) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any national, federal, state or local governmental, regulatory or administrative authority, agency, commission, court, tribunal, arbitral body or self-regulated entity, domestic or foreign (each a “ Governmental Entity ,” and, collectively, “ Governmental Entities ”), except for (i) applicable requirements of the Exchange Act, (ii) the filing and recordation of appropriate merger or other documents as required by the NHBCA, (iii) Laws, Orders and practices of any state public utility control or public service commissions or similar state regulatory bodies (“ PUCs ”), each of which is set forth in Section 3.05(c) of the Company Disclosure Schedule, (iv) Laws, Orders and practices of any state or local departments of public health or departments of health or similar state or local regulatory bodies or of any federal, state or local regulatory body having jurisdiction over environmental protection or environmental conservation or similar matters