Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

      This Agreement, made and entered into as of the 24th day of October, 2006
by and between Duane C. Montopoli (the "Executive") of North Andover,
Massachusetts, and Pennichuck Corporation (the "Corporation"), a New Hampshire
corporation with principal offices in Merrimack, New Hampshire.

 

      For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and in consideration of the mutual covenants and
promises set forth in this Agreement, the parties agree as follows:

 

ARTICLE I
EMPLOYMENT

 

      1.1.    The Corporation hereby employs the Executive and the Executive
hereby accepts employment with the Corporation effective as of August 21, 2006
for the Term (as defined in Section 3.1 below) of the Agreement, in the position
and with the duties and responsibilities set forth in Article II below and upon
the other terms and subject to the conditions hereinafter set forth.

 

ARTICLE II
POSITION, DUTIES AND RESPONSIBILITIES

 

      2.1.    Position and Duties. During the Term of this Agreement, the
Executive shall serve as the President, Chief Executive Officer and a director
of the Corporation. Subject only to the supervision, control and guidance of the
Chairman of the Board and the Board of Directors of the Corporation (the
"Board"), the Executive shall have all of the duties, responsibilities and
authorities typically enjoyed by a President and Chief Executive Officer of a
publicly-traded corporation to control the day-to-day operations of the
Corporation, including, by example but not by way of limitation, the
responsibility for the overall operations of the Corporation, the supervision
over the property, business and affairs of the Corporation and the power to hire
and dismiss other employees. The parties acknowledge that the Executive may be
listed as an employee of one of the Corporation's subsidiaries for payroll and
other appropriate purposes. The Executive will also serve as a director and
officer of one or more of the Corporation's subsidiaries, as directed by the
Board.

 

      2.2.    Outside Activities. The Executive shall devote substantially all
of his business time and attention to the business and affairs of the
Corporation consistent with his executive position with the Corporation, except
for vacations permitted pursuant to Section 5.4 and Disability (as defined in
Section 7.5). Nothing in this Agreement, however, shall preclude the Executive
from engaging in charitable activities, community affairs and corporate boards,
or giving attention to his investments provided that such activities do not
unreasonably interfere with the performance of his duties and responsibilities
enumerated within this Agreement as determined by the Board.

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ARTICLE III
TERM

 

      3.1.    The term of employment under this Agreement ("Term") shall be for
the period commencing on August 21, 2006 ("Effective Date") and shall end upon
termination pursuant to Article VII below.

 

ARTICLE IV
COMPENSATION

 

      4.1.    Base Salary. The Executive shall be paid a base salary (the "Base
Salary") equal to two hundred and fifty thousand dollars ($250,000.00) per annum
for the Term. The Base Salary shall be payable to the Executive in installments,
less state and federal income tax withholdings and other normal employee
deductions, on the date on which the Corporation's other executive officers are
paid, but in no event less frequently than monthly. The Base Salary shall be
reviewed by the Board each year (on or about the first business day of each
calendar year) and shall be subject to upward adjustment only, in the absolute
discretion of the Board taking into account, but not limited to additional
responsibilities, if any, which may have been assigned to him, corporate and
individual performance and general business conditions.

 

      4.2.    Incentive Compensation. During the Term, the Executive shall
generally be entitled to participate in any bonus and incentive compensation
plans, as amended from time to time, that are made available to executive
officers of the Corporation. The Executive shall have the opportunity to earn an
annual target cash bonus of 40% of his then Base Salary as determined by the
Compensation and Benefits Committee of the Board based on the Corporation's
financial performance and the Executive's overall performance. Any such bonus
shall be paid at the same time as such payments are ordinarily made to the
executive officers of the Corporation.

 

      4.3.    Non-Qualified Stock Options. During the Term, the Executive shall
generally be entitled to participate in any stock option plan or plans which may
be made available by the Corporation; provided that, on the Effective Date, the
Executive shall be granted forty thousand (40,000) non-qualified options to
acquire common shares of the Corporation pursuant to the Corporation's existing
stock option plans, with an exercise price for such 40,000 options being equal
to the closing price of the Corporation's common stock as reported by NASDAQ on
the trading day immediately preceding the Effective Date; said options will vest
over a three year period, with one third or thirteen thousand, three hundred and
thirty four options vesting at the end of calendar year 2006 and an additional
one third or thirteen thousand, three hundred and thirty three options vesting
at the end of each calendar year thereafter; and provided further, all of said
options shall vest immediately in the event of a "Change of Control" (as that
term is defined in section 7.4). The Executive may receive additional stock
option grant awards at the discretion of the Board on or about the month of
March of each calendar year during the Term.

 

      4.4.    Eminent Domain Case Grant. In the event of a final settlement,
adjudication, or resolution of the current proceedings, docket number DW 04-048,
brought by the City of Nashua to acquire the assets of one or more of the
Corporation's water utility subsidiaries (the "Eminent Domain Case"), the Board
shall grant to the Executive an additional thirty thousand (30,000)

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non-qualified options to acquire common shares of the Corporation, immediately
exercisable at an exercise price equal to the closing price of such shares as of
the trading day prior to the earlier to occur of either the date of any such
event or the public announcement of any such event. Such number of options shall
be adjusted for stock splits and/or recapitalizations.

 

      4.5.    Tax Withholdings. Federal, state, and local withholding, social
security, and other appropriate taxes shall be deducted from all compensation
paid to, or provided by the Corporation for, Executive as and to the extent
required by law.

 

ARTICLE V
FRINGE BENEFIT PLANS

 

      5.1.    Employee Benefit Programs. The Executive shall be entitled to (A)
receive health and dental insurance coverage, to the extent provided by the
Corporation to its executive officers; provided that the Corporation shall also
reimburse the Executive for the cost of continuing his current health and dental
coverage during the initial 90-day waiting period imposed by the Corporation's
health and dental insurance plans up to the amount the Corporation would have
paid for Executive's coverage if there had been no waiting period; (B) receive
group life and disability coverage, to the extent provided by the Corporation to
its executive officers; (C) receive insurance on the life of the Executive in
the amount of one million dollars ($1,000,000) pursuant to a life insurance
policy owned by the Executive, and (D) participate in (1) all of the
Corporation's current pension and other retirement plans and profit-sharing
plans, and any successor plans, if any, that may hereafter be adopted and
maintained by the Corporation, with at least the same opportunity to participate
therein as shall be applicable to other executive officers of the Corporation
and (2) all of the Corporation's other benefit plans which may be in effect from
time to time. Further, the Corporation shall provide the Executive with (a)
short term disability coverage encompassing up to sixty percent (60%) of his
then Base Salary for a period of up to twenty six (26) weeks and (b) long term
disability coverage (at the Executive's option) encompassing up to sixty percent
(60%) of his then Base Salary up to a maximum benefit of six thousand dollars
($6,000) per month. The Corporation acknowledges that the Executive currently
meets the eligibility criteria for participation in all of the Corporation's
present employee benefit programs, subject to any waiting periods contained in
the plan documents.

 

      5.2.    Reimbursement of Expenses. It is contemplated that in connection
with the Executive's employment hereunder, the Executive may be required to
incur business, entertainment and travel expenses. The Corporation agrees to
promptly reimburse the Executive in full for all reasonable out-of-pocket
business, entertainment and other related expenses (including all expenses of
travel and living expenses while away from home on business at the request of,
and in the service of, the Corporation) incurred or expended by the Executive
incident to the performance of his duties hereunder; provided, that the
Executive properly accounts for such expenses in accordance with the policies
and procedures established by the Board and applicable to the executive officers
of the Corporation.

 

      5.3.   Automobile. The Executive shall be provided the use of an
automobile. The Corporation shall pay all gas, upkeep, insurance coverage, and
maintenance on said vehicle;

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provided, however, that the value of any personal use thereof shall be included
in the Executive's taxable wages reported by the Corporation as and to the
extent required by applicable law.

 

      5.4.    Vacation. The Executive shall be entitled, in each year during the
Term, to the number of paid vacation days determined by the Corporation from
time to time to be appropriate for its executive officers, but in no event less
than two (2) weeks for calendar year 2006, and no less than four (4) weeks in
any full calendar years, and pro-rated for any other partial calendar years
during the Term. The Executive may take his allotted vacation days at such times
as are mutually convenient for the Corporation and the Executive, consistent
with respect to its executive officers. The Executive shall also be entitled to
all paid holidays given by the Corporation to its executive officers.

 

      5.5 .    Membership. The Corporation will provide a membership for
Executive at the Nashua Country Club for business use. The Corporation will
reimburse Executive for all reasonable out-of-pocket expenses incurred by
Executive in connection with his business duties on behalf of the Corporation.

 

      5.6.    Legal Assistance. The Corporation will reimburse the Executive for
the cost of attorney's fees to have Executive's personal attorney review this
Employment Agreement. The amount of such reimbursement will not exceed two
thousand, five hundred dollars ($2,500.00).

 

ARTICLE VI
INDEMNIFICATION

 

      6.1.    The Executive shall be entitled, at all times, to the benefit of
the maximum indemnification and advancement of expenses available from time to
time under the Corporation's Articles of Incorporation and Bylaws, and under the
laws of the State of New Hampshire. Such indemnification shall survive the
termination of this Agreement unless such termination is for "Cause" (as that
term is defined in Section 7.4). In addition, the Corporation shall have and
maintain in full force and effect an officers' liability insurance policy
providing such coverages, exclusions and deductibles as the Corporation and the
Executive shall reasonably agree and as is available on a reasonable premium
basis.

 

ARTICLE VII
TERMINATION

 

      7.1.    Termination by the Executive Without a Change of Control. The
Executive may terminate his employment hereunder for any reason at any time upon
at least thirty (30) days prior written notice to the Corporation. In the event
the Executive terminates his employment, the Executive shall receive accrued but
unpaid salary, unused vacation, bonus (if any) and benefits through the last day
of employment only. Notwithstanding the foregoing, in the event the Executive
terminates his employment for "Good Reason", the Corporation shall provide the
Executive with the severance benefits and welfare benefits as described in
Section 7.2 below.

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      7.2.    Termination by the Corporation Without a Change of Control. The
Corporation may terminate Executive's employment hereunder at any time upon
thirty (30) days prior written notice to the Executive, with or without Cause,
with no liability whatsoever, other than the obligation to pay or cause to be
paid accrued but unpaid salary, unused vacation, and bonus, if any, as provided
in Section 7.1 above for a resignation for other than Good Reason; provided,
however, that if the Corporation terminates the Executive other than for Cause,
the Corporation shall provide the Executive with severance benefits payable as a
lump sum, equal to the Executive's then current salary and any accrued bonus for
which he may be entitled for a period of twelve (12) months from the date of
termination. The Corporation will also continue to provide the Executive with
the welfare benefits provided under Section 5.1 above (with the exception of
participation in the retirement plans) for a period of twelve (12) months from
the date of termination, in accordance with the applicable benefit plans in
effect at the time of such termination and applicable law; provided that if
coverage is not permissible under the terms of any such plan or applicable law,
then in lieu of coverage under such plan, the Corporation shall pay to the
Executive an amount equal to the premium costs that would otherwise have been
incurred by the Corporation for such coverage; provided further that if the
Executive becomes reemployed with another employer and is eligible to receive
coverage under a welfare benefit plan from such employer that is comparable to
the Corporation's welfare plan, then the Corporation shall no longer be required
to provide those particular benefits to the Executive or to pay the Executive
the cost thereof. Notwithstanding the foregoing, if the Executive's employment
is terminated for Cause, the Corporation shall after the date of such
termination have no further obligations under this Agreement, except as provided
herein.

 

      7.3.    Termination Following a Change of Control.

 

      (a)    Notwithstanding the foregoing, if the Corporation terminates
Executive's employment without Cause, or if the Executive terminates his
employment with Good Reason, within 24 months following a Change of Control, the
Corporation shall provide the Executive with (i) severance benefits equal to 2
times the sum of (A) the Executive's then current salary, and (B) 100% of the
Executive's aggregate target bonuses of 40% under Section 4.2 above and any
other cash bonus plans of the Corporation for the bonus plan year during which
the employment termination occurs, all paid as a lump sum, and (ii) continuation
of the welfare benefits provided under Section 5.1 above (with the exception of
participation in the retirement plans) for the 24 months following such
termination, in accordance with the applicable benefit plans in effect at the
time of such termination and applicable law; provided that if coverage is not
permissible under the terms of any such plan or applicable law, then in lieu of
coverage under such plan, the Corporation shall pay to the Executive an amount
equal to the premium costs that would otherwise have been incurred by the
Corporation for such coverage; provided further that if the Executive becomes
reemployed with another employer and is eligible to receive coverage under a
welfare benefit plan from such employer that is comparable to the Corporation's
welfare plan, then the Corporation shall no longer be required to provide those
particular benefits to the Executive or to pay the Executive the cost thereof.

 

      (b)    In the event that the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") applies to any payment
otherwise required to be made to the Executive pursuant to the terms of this
Agreement, an additional amount shall be paid to the

<PAGE>

Executive such that the aggregate after-tax amount that he shall receive under
this Agreement, including this Section 7.3(b), 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 to him.

 

      7.4.    Definitions.

 

      (a)    For purposes hereof, "Cause" shall be deemed to exist if the
Executive is a subject of a finding by the Corporation's Board of Directors
that:

   

      (i)    as to the Executive's actions or omission to act concerning the
Corporation, or any subsidiary or affiliate thereof, and/or its or their
affairs, he has been personally dishonest as to any material matter, engaged in
willful misconduct or fraud, breached any of his fiduciary duties, or willfully
violated any law, rule, regulation or cease and desist order, or

     

      (ii)    the Executive has intentionally violated or breached any of his
material covenants or agreements contained in this Agreement;

     

      (iii)    the Executive has illegally used drugs or abused alcohol in a
manner that materially and adversely affects the Executive's performance of his
duties hereunder;

     

      (iv)    the Executive has intentionally engaged in any act that materially
injures the Corporation or any subsidiary or affiliate thereof;

     

      (v)    the Executive has intentionally engaged in any act that violates
any of the Corporation's material rules, policies, or codes of ethics, as
amended from time to time;

     

      (vi)    the Executive has failed to reasonably cooperate in any
investigation by the Corporation or any subsidiary or affiliate thereof; or

     

      (vii)    the Executive has intentionally failed to perform the material
duties reasonably assigned to him by the Bylaws of the Corporation or by the
Corporation's Board of Directors.

   

      For purposes of paragraphs (ii), (iv), (v), (vi) and (vii) above, such
finding of Cause shall be made after the Executive has been provided written
notice of the conduct that constitutes such Cause, and the Executive has not
cured such conduct within thirty (30) days of receipt of such notice to cure.

 

      (b)    For purposes hereof, a "Change of Control" shall be deemed to have
occurred if any of the following have occurred:

   

      (i)    any individual, corporation (other than the Corporation),
partnership, trust, association, pool, syndicate, or any other entity or any
group of persons acting in concert becomes the beneficial owner, as that concept
is defined in Rule 13d-3 promulgated by the Securities Exchange Commission under
the Securities Exchange Act of 1934, as a result of any one or more securities
transactions (including gifts and stock repurchases but excluding transactions
described in subdivision (ii) following) of securities of the Corporation
possessing

<PAGE>

 

fifty-one percent (51%) or more of the voting power for the election of
directors of the Corporation;

     

      (ii)    there shall be consummated any consolidation, merger or
stock-for-stock exchange involving securities of the Corporation in which the
holders of voting securities of the Corporation immediately prior to such
consummation own, as a group, immediately after such consummation, voting
securities of the surviving or resulting corporation or other entity having less
than fifty percent (50%) of the total voting power in an election of directors
or officers of such surviving or resulting corporation or other entity;

     

      (iii)    "approved directors" shall constitute less than a majority of the
entire Board of Directors of the Corporation, with "approved directors" defined
to mean the members of the Board of Directors of the Corporation as of the date
of this Agreement and any subsequently elected members of the Board of Directors
of the Corporation who shall be nominated or approved by a majority of the
approved directors on the Board of Directors of the Corporation prior to such
election; or

     

      (iv)    there shall be consummated any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions, excluding any
transaction described in subdivision (ii) above), of all, or substantially all,
of the assets of the Corporation or its subsidiaries to a party which is not
controlled by or under common control with the Corporation.

   

      (c)    For purposes hereof, "Good Reason" means:

     

      (i)    the assignment to the Executive of any duties or responsibilities
inconsistent with the position and office held by the Executive immediately
prior to such assignment;

     

      (ii)    the material reduction in or loss of authority and responsibility,
which authority and responsibility the Executive was empowered with immediately
prior to such reduction or loss; or

     

      (iii)    the requirement that the Executive be assigned to or based at,
without his consent, any office or location other than one within a 30-mile
radius of the Corporation's Merrimack, New Hampshire headquarters.

   

      7.5.    Disability of the Executive. In the event the Executive shall be
prevented from rendering the essential functions of his position, with or
without reasonable accommodation, unless such accommodation would cause the
Corporation undue hardship, by reason of Disability, the Corporation shall have
the right to declare upon two (2) weeks prior written notice rendered to the
Executive, a Disability termination, whereupon the Executive shall receive the
Disability compensation provided by the Corporation's disability insurance
coverage. The Corporation may, in its sole discretion, accelerate the payment of
any amount payable under this Section 7.5. For purposes hereof, the term
"Disability" means a condition caused by mental or physical illness or injury
which (i) prevents the Executive from performing his normal duties for an
aggregate of at least six months out of any twelve-month period and (ii) a
doctor reasonably satisfactory to both the Executive and the Corporation
certifies at the end of such six-month

<PAGE>

period that the Executive will continue to be prevented from performing his
duties as a result of his disability due to mental or physical illness or
injury.

 

      7.6.    Death of the Executive. In the event the Executive dies during the
Term, this Agreement shall automatically terminate without notice on the date of
his death, and the Corporation shall have no further obligations hereunder
except that the Corporation shall pay or cause to be paid to the Executive's
designated beneficiary, or, failing such designation, his estate, any salary,
bonus and benefits due to the Executive in the amounts and to the extent such
payments are provided by the Corporation.

 

ARTICLE VIII
NOTICES

 

      8.1 .    Any notice or other communication ("Notice") pursuant to this
Agreement shall be in writing and shall be deemed to have been given or made
when personally delivered, or when mailed by registered or certified mail,
postage prepaid, return receipt requested, to the other party. In the case of
the Corporation, any such notice shall be delivered or mailed to its principal
office. In the case of the Executive, any such notice shall be delivered in
person or mailed to his last known address as reflected in the records of the
Corporation.

 

ARTICLE IX
ASSIGNMENT AND SUCCESSORSHIP

 

      9.1.    The Executive acknowledges that the services to be rendered by him
are unique and personal. Accordingly, the Executive may not assign any of his
rights or delegate any of his duties or obligations under this Agreement or
otherwise assign this Agreement. The rights and obligations of the Corporation
under this Agreement shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Corporation. In the event there is a Change of
Control, the Corporation will require any successor or assign to all or
substantially all of the business or assets of the Corporation and its
subsidiaries, on a consolidated basis, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession or assignment had taken
place.

 

ARTICLE X
ARBITRATION

 

      10.1.    Any dispute, controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration conducted in Merrimack, New
Hampshire or other mutually agreeable location. The matter will be heard
promptly by a single arbitrator selected by mutual agreement by the Corporation
and the Executive. Should the Corporation and the Executive be unable to agree
upon an arbitrator within a 30 day period, an arbitrator will be selected in
accordance with the commercial arbitration rules of the American Arbitration
Association. Unless the parties mutually agree otherwise, once appointed, the
arbitrator will make all rulings on procedural and evidentiary matters and will
determine the date, time and place of any hearings. The arbitrator will issue a
written decision within 30 days of the hearing or submission

<PAGE>

to him. The arbitrator's decision will be final and binding on all parties. Any
arbitration conducted hereunder is subject to the provisions of RSA 542.

 

ARTICLE XI
CONFIDENTIAL INFORMATION

 

      11.1.    At all times during and after his employment with the
Corporation, the Executive shall treat as confidential and shall not divulge,
furnish or make known to or accessible to, or use for the benefit of anyone
other than the Corporation, any confidential information concerning the
Corporation obtained during the course of the Executive's employment.
Confidential information includes, but is not limited to: ideas, inventions,
discoveries, developments, processes, designs, formulas, patterns, devices,
programs, methods, techniques, compilations of scientific, technological or
business information, proprietary information, and trade secrets. The Executive
agrees that during the term of and following the termination of his employment
with the Corporation, he will not disclose to any person or use in any way any
such confidential information, other than (i) information that is generally
known, or becomes generally known other than by breach of the Executive's
obligations hereunder, in the Corporation's industry or acquired from public
sources, (ii) as required by any court, supervisory authority, administrative
agency or applicable law, (iii) with the prior written consent of the
Corporation, (iv) information that is disclosed to Executive by a source not
under any obligation of confidentiality to the Corporation, and Executive
reasonably believes that such information is generally known, or (v) information
that is independently developed by the Executive without resort to or use of the
Corporation's confidential information.

 

ARTICLE XII
NON-COMPETITION

 

      12.1.    The Executive agrees that during the Term and for a period of
twelve (12) months after the Term expires, he will not engage in any activity or
business endeavors which directly competes with the regulated water utility
business operations conducted by the Corporation within the New England region,
so called, encompassing the states of New Hampshire, Maine, Vermont,
Massachusetts, Rhode Island and Connecticut. The Executive agrees not to divert
or attempt to divert from the Corporation any of its existing regulated water
utility business within said New England region, and particularly not influence
or attempt to influence any of the Corporation's water utility customers to do
business with any other regulated water utility business; and further, he will
not solicit or attempt to solicit directly or indirectly any employee of the
Corporation to leave its employ to join any other regulated water utility
business. In addition to constituting a material breach of this Agreement,
failure to comply with the provisions of this Article XII in any material
respect will result in the Executive's forfeiting any payments to which he might
otherwise be entitled hereunder and/or the reimbursement to the Corporation upon
demand of any payments previously paid to Executive upon termination of
employment. The parties agree that the Corporation may pursue any remedy under
law or at equity, including specific performance and injunctive relief, to
protect its rights hereunder and that money damages alone will be inadequate.
This Article XII shall survive the termination of this Agreement.

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ARTICLE XIII
MISCELLANEOUS

 

      13.1.    Entire Agreement. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and replaces all prior
agreements relating to said subject matter.

 

      13.2.    Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Hampshire without reference to
its conflicts of law provisions.

 

      13.3.    Waivers and Modifications. This Agreement may not, in whole or in
part, be waived, changed, amended, discharged or terminated orally or by any
course of dealing between the parties, but only by an instrument in writing
signed by the parties hereto. No waiver by either party of any breach by the
other or any provision hereof shall be deemed to be a waiver of any later or
other breach hereof or as a waiver of any other provision of this Agreement.

 

      13.4.    Severability. In any case any one or more of the provisions
contained in this Agreement for any reason shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.

 

      13.5.    Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but which taken
together shall constitute one instrument.

 

      13.6.    Section Headings. The descriptive section headings herein have
been inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.

 

      IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.

 

WITNESS:

 

PENNICHUCK CORPORATION

     

/s/

By:

/s/ John R. Kreick

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Print Name:

 

John R. Kreick, Chairman

     

/s/

 

/s/ Duane C. Montopoli

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Print Name:

 

Duane C. Montopoli

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