Buyout bonus for utility CEO raises questions
NASHUA – The contract for the head of Pennichuck Corp. includes a $500,000 bonus that appears much more likely to be paid if the utility is sold to anybody other than the city of Nashua, according to documents filed by the company.
The difference between potential severance payments in the Aug. 4 contract for Pennichuck CEO Donald Correll is not cut and dried. It appears possible that the bonus of two years’ salary could be paid even if Nashua buys the utility, and might not be paid even if somebody else buys Pennichuck.
The payment, however, seems far more likely if the utility is sold to a private firm.
“For them to hire someone and promise him a huge bonus to sell to anybody else but the city is a strange way to do business,” said Mayor Bernie Streeter, a vocal advocate of Nashua taking over the utility. “I couldn’t believe it, but then it was confirmed today. I find it extremely strange.”
John Krieck, chairman of Pennichuck’s board of directors, cautioned against interpreting the contract as an incentive to avoid sale to Nashua.
“I don’t think that’s a fair assessment,” he said when contacted at home Monday night.
Krieck noted that any private company would be likely to buy all of Pennichuck’s assets, including its hefty real estate holdings, while Nashua could take over just the water utility portions, leaving behind a viable company. As a result, he said, Nashua’s takeover had to be considered separately.
The city and Pennichuck have been involved in a debate over the future of the utility for almost two years. Last week, Nashua offered to buy Pennichuck for $121 million. Correll said Friday that the company would give the offer “full and fair consideration.”
Details for Correll’s contract, which runs for three years, are included in a company report issued by the Securities and Exchange Commission earlier this month.
According to the filing, the contract says if Correll is terminated within 12 months of a “change of control,” defined as a sale of the company, he will receive two years’ salary and _Correll’s salary is $250,000 a year.
Such provisions are not uncommon in executive contracts in these days of mergers and takeovers, Krieck said.
However, the contract also includes this provision:
“The sale, whether voluntary or pursuant to the exercise of the power of eminent domain, of one or more of the corporations’ water utility subsidiaries . . . arising from . . . municipalization efforts of the city of Nashua and/or affected New Hampshire municipalities, shall not constitute the occurrence of a change of control.”
If a “change of control” has not happened, then Correll could be terminated and get no bonus – nothing other than “accrued but unpaid salary.”
Under the contract, such a scenario can only happen if Nashua is involved in the takeover.
The contract was signed on Aug. 4 and it runs for three years. It also shows that Correll gets a company automobile, is eligible for four weeks annual vacation, and that Pennichuck bought him a membership at the Nashua Country Club “for business use.”
Last year, Philadelphia Suburban Corp., one of the country’s largest water companies, offered to buy Pennichuck. The companies called off the merger weeks after residents voted overwhelmingly in January for the city to proceed with a public acquisition.
Talks between the city and the company did not move forward, despite a series of negotiations over the summer.
The city’s offer to convert the investor-owned company into a public water utility was structured to include $106 million, which matches the deal reached between Pennichuck and Philadelphia Suburban, plus $15 million to cover shareholders’ tax liabilities.