Exhibit 10.1
To: Stephen J. Densberger, Bonalyn J. Hartley, Thomas C. Leonard, Roland E.
Olivier and Donald L. Ware
From: Duane C. Montopoli
Re: 2011 Officer Bonus Plan (COMPANY CONFIDENTIAL)
Date: January 27, 2011
I am very pleased to inform each of you that at its January 26, 2011 meeting,
the Pennichuck Corporation Board of Directors established an Executive Officer
Bonus Plan for calendar year 2011.
The Plan covers all qualifying Executive Officers of Pennichuck Corporation in
accordance with the provisions and conditions set forth in this memorandum.
However, because the Company has entered into an agreement to be acquired by the
City of Nashua, this year’s Plan will work differently depending on whether
closing of a sale to Nashua does or does not occur by March 15, 2012 (at
present, closing is expected to occur in the October — November 2011 time
frame).
The objectives of the 2011 Bonus Plan include the following:

  •  
Provide the qualifying participants with a cash bonus incentive tied to
maximizing the financial performance of the Company for 2011 in relation to the
approved budget for the year.

  •  
Reward the participants for achieving their respective goals and objectives for
the year.

  •  
Clearly communicate to the participants the importance of achieving certain key
metrics, in particular those related to customer service.

  •  
Establish appropriate financial incentives aligned with the plan to sell the
Company to the City of Nashua and to work toward closing such sale at the
earliest possible date.

Under the Plan and subject to certain adjustments as explained below, bonus
amounts are credited into a “pool” based on the amount of Company-wide (i.e.,
consolidated) pre-tax pre-bonus income (see precise definition on attached
schedule) achieved (or deemed achieved) for the year (hereinafter, “Company-Wide
Income”). The attached schedule indicates what amounts are credited into the
pool (subject to footnote 2 therein) at varying levels of Company-Wide Income
expressed as percentages of the Company’s operating budget for 2011 that was
approved at the January 26 Board meeting.

 

 

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I. If closing of a sale to Nashua does not occur by March 15, 2012:
Under this variant of the Plan (“Variant I”), the actual bonus pool amount will
be determined at the completion of the annual audit process after year-end
(around March 1, 2012). Once determined, the bonus pool amount under Variant I
shall be paid-out as cash awards as follows:

      % of Pool   How Awarded 30%  
Non-Discretionary: Pro-rata based on 2011 beginning base salaries as a % of
total covered compensation (i.e., the sum of such salaries for all qualifying
Plan participants).
   
 
Up To 30%  
Non-Discretionary: 5% of bonus pool is earned for each of six (6) customer
service/product reliability/environmental metrics achieved for the year (see
below). Amount earned (example: achieve 5 of 6 metrics = 25% of Pool) is
allocated pro-rata based on 2011 beginning base salaries as a % of total covered
compensation.
   
 
40%  
Discretionary: Allocated among participants by the pre-sale Compensation
Committee of the Board based on an assessment of each participant’s individual
performance for the year. An important factor in this regard will be the
accomplishment of your personal Goals & Objectives for the year, including your
contribution toward completing the sale of the Company to Nashua.

      Customer Service/Product Reliability/Environmental Metrics (Regulated
Water Customers):   Targets
1. Unresolved customer service complaint calls to NHPUC
  <30 calls per yr
2. Customer call abandonment rate (after one minute)
  <1% of total calls per yr
3. Est. (vs. actual) readings/billings (normal conditions)
  <1.5% of billings for 2011
4. Non-power outages due to equipment failure
  <100 incidents per yr
5. Unresolved pressure complaints per NHPUC Rules/Regs
  0 per year
6. NHDES non-compliance violations due to operational error
  0 incidents per year

If Company-Wide Income falls below 88% of budget for 2011, no cash bonuses will
be payable under Variant 1 of the Plan.
Bonus awards under Variant I will be paid out (net of tax withholding and other
required deductions) by March 15, 2012.

 

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Consistent with recent prior years, I am not a participant in Variant I of the
Plan. Rather, if closing of a sale to Nashua does not occur by March 15, 2012,
my bonus for 2011 will be at the discretion of the Pennichuck Board and in
accordance with the terms of my employment agreement.
Exceptional Circumstances Provision: If, prior to the actual payment date for
Variant I bonuses, unforeseen or unusual circumstances arise which have serious
negative financial consequences and which would render the payment of any
Variant I awards imprudent in light of the then current financial or operating
condition of the Company, Pennichuck reserves the right to delay or cancel such
awards by giving notice to participants prior to the regular payment date.
Furthermore, since Variant I bonus awards are intended to be based on and paid
out of operating earnings, the Company reserves the right, at its discretion, to
modify or eliminate the effects on calculated bonus pool amounts of,
(1) extraordinary gains or other non-operating income amounts (e.g., the sale of
non-operating assets), and (2) unusual non-cash charges other than as described
in the attached schedule.
II. If closing of a sale to Nashua occurs on or before March 15, 2012:
Under this variant of the Plan (“Variant II”), year-to-date Company-Wide Income
shall be determined through the earlier to occur of: (a) the latest month-end in
2011 which pre-dates the Closing Date (as defined in the Merger Agreement) by at
least 25 days, or (b) November 30, 2011, and must be at least 88% of budgeted
Company-Wide Income through the same month-end. If the result is less than 88%,
then no bonuses shall be paid under this Variant II of the Plan.
However, if the result is equal to or greater than 88% (said actual percentage,
the “Achieved Percentage”), then Company-Wide Income under this Variant II of
the Plan shall be deemed to be equal to the Achieved Percentage of the Company’s
approved budget for the year.
Once Company-Wide Income is determined in accordance with the preceding
paragraph, the bonus pool amount for the non-CEO Plan participants under this
Variant II shall be the preliminary amount indicated on the attached schedule
(subject to adjustment under footnote 2 therein) but further adjusted based on
the number of full months in 2011 which elapsed prior to the Effective Time of
the sale of the Company (as defined in the Merger Agreement). For example, if
the Effective Time occurs on October 18, 2011, and Company-Wide Income is deemed
to be 100% of approved budget in accordance with the preceding paragraph, then
the amount credited into the bonus pool shall be $104,220 ($138,960 X 9 months /
12 months).
Once determined, the final bonus pool amount under Variant II shall be paid out
as cash awards to qualifying non-CEO Plan participants at least one business day
prior to the Closing Date. 60% of the final bonus pool amount shall be paid
pro-rata based on 2011 beginning base salaries as a % of total covered
compensation (i.e., the sum of such salaries) and 40% shall be paid on a
discretionary basis by the pre-sale Compensation Committee of the Board of
Directors based on an absolute and relative assessment of each participant’s
individual performance for the year.

 

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I too am a participant in this Variant II of the 2011 Plan for the purpose of
establishing a bonus guideline for this year 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 my separate bonus pool
amount (which is not reflected in the attached schedule) shall be that amount
equal to my 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 $138,960 bonus pool for the
non-CEO Plan participants (i.e., an Achieved Percentage of 100%) equates to 18%
of their beginning base salaries, my separate bonus pool would be 23.4% of my
beginning base salary. Once determined, an amount up to the total of my bonus
pool amount may be awarded to me (i.e., paid to me at least one business day
prior to the Closing Date) at the discretion of the pre-sale Compensation
Committee of the Board and otherwise subject to the terms of my employment
agreement,
* * * *
In order to be eligible for any bonus award under Variant I or Variant II of the
2011 Plan, an otherwise qualifying Executive Officer must be an employee of
Pennichuck Corporation or one of its subsidiaries on the actual payment date.
Let’s work hard, and work together, to make 2011 a year of solid performance
and, in so doing, create well-earned cash bonuses. If you have any questions
about the workings of this Plan, please let me know.

 

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PENNICHUCK
OFFICER BONUS PLAN
2011 NON-CEO BONUS POOL AMOUNTS
(CONFIDENTIAL)

                              Non-CEO Pool   Company Wide     Available     % of
  Income (1)     Bonus     Covered   % of Approved Budget     Pool(3)    
Comp.(2)     112 %+   $ 169,860       22.0 %   108 %     159,560       20.7 %  
104 %     149,260       19.3 %   100 %     138,960       18.0 %   96 %    
128,660       16.7 %   92 %     118,360       15.3 %   88 %     108,060      
14.0 %

     
Footnotes:
  (1)  
Defined as full year (i.e., 12 months) consolidated income for calendar 2011
before, (a) eminent domain and merger-related costs, (b) income from the sale of
real estate, (c) rate case recovery of and return on the Company’s eminent
domain costs, (d) all cash bonuses, and (e) income taxes. For the avoidance of
doubt, it is intended that “eminent domain and merger-related costs” include all
additional cash costs related to or associated with the transaction and also any
non-cash costs, expenses and/or amortization related to recording the purchase
transaction.
  (2)  
Based on beginning of year base salaries. Calculated bonus pool amounts will be
adjusted to these percentages in the event of a reduction in Plan participants
prior to payout.
  (3)  
Performance between indicated income levels will be pro-rated to create a bonus
pool proportional to such performance.

 

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