<PAGE> 1
PHILADELPHIA SUBURBAN CORPORATION
762 W. Lancaster Avenue
Bryn Mawr, Pennsylvania 19010
------
Notice of Annual Meeting of Shareholders
To Be Held May 18, 1995
------
TO THE SHAREHOLDERS OF
PHILADELPHIA SUBURBAN CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of
PHILADELPHIA SUBURBAN CORPORATION will be held at the Company's principal
offices, 762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010, at 10:00 A.M.,
local time, on Thursday, May 18, 1995, for the following purposes:
1. To elect three directors;
2. To approve the adoption by the Board of Directors of Amendment
1994-1 to the Company's 1994 Equity Compensation Plan;
3. To consider and vote upon a shareholder proposal to elect all
directors annually, as described in the proxy statement; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 17, 1995 will
be entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments thereof.
By order of the Board of Directors,
PATRICIA M. MYCEK
Secretary
March 31, 1995
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REGARDLESS OF WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, SHAREHOLDERS ARE
URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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PHILADELPHIA SUBURBAN CORPORATION
762 W. Lancaster Avenue
Bryn Mawr, Pennsylvania 19010
------
PROXY STATEMENT
------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Philadelphia Suburban Corporation (the
"Company") to be used at the Annual Meeting of Shareholders to be held May 18,
1995 and at any adjournments thereof. This proxy statement and the enclosed
proxy are being mailed to shareholders on or about March 31, 1995.
The cost of soliciting proxies will be paid by the Company, which has
arranged for reimbursement, at the rate suggested by the New York Stock
Exchange, of brokerage houses, nominees, custodians and fiduciaries for the
forwarding of proxy materials to the beneficial owners of shares held of record.
In addition, the Company has retained the firm of Corporate Investor
Communications, Inc., to assist in the solicitation of proxies from (i) brokers,
bank nominees and other institutional holders, and (ii) individual holders of
record. The fee to Corporate Investor Communications, Inc. for normal proxy
solicitation is $4,000 plus expenses, which will be paid by the Company.
Directors, officers and regular employees of the Company may also solicit
proxies, although no additional compensation will be paid by the Company for
such efforts.
The Annual Report to Shareholders for the year ended December 31, 1994,
including financial statements and other information with respect to the Company
and its subsidiaries, was mailed with this proxy statement by combined first
class bulk mailing to shareholders of record as of March 17,1995. Additional
copies of the Annual Report may be obtained by writing to the Company. KPMG Peat
Marwick, the Company's independent certified public accountants, has been
selected by the Board of Directors to continue in such capacity for the current
year. Representatives of that firm are expected to be present at the meeting and
will be available to respond to appropriate questions.
PURPOSES OF THE MEETING
As the meeting is the Annual Meeting of Shareholders, the shareholders of the
Company will be requested to elect three directors to hold office as provided by
law and the Company's Bylaws. The shareholders will also be requested to approve
the adoption by the Board of Directors of Amendment 1994-1 to the Company's 1994
Equity Compensation Plan. Also, a shareholder proposal to elect all directors of
the Company annually must be voted upon, although the results of this vote will
not have the effect of changing the present system for electing directors. The
vote will simply express the wishes of the shareholders.
1
<PAGE> 3
VOTING AT THE MEETING
Holders of shares of the Company's common stock ("Common Stock") of record at
the close of business on March 17, 1995 are entitled to vote at the meeting. As
of that date, there were 11,759,961 shares of Common Stock outstanding and
entitled to be voted at the meeting. Each shareholder entitled to vote shall
have the right to one vote on each matter presented at the meeting for each
share of Common Stock outstanding in such shareholder's name. The presence in
person or by proxy of shareholders entitled to cast a majority of all votes
entitled to be cast will constitute a quorum at the meeting.
The holders of a majority of the shares entitled to vote, present in person
or represented by proxy, constitute a quorum. Directors are to be elected by a
plurality of the votes cast at the meeting. The affirmative vote of the holders
of a majority of the shares present in person or represented by proxy entitled
to vote at the meeting is required to approve Proposals 2 and 3 or to take
action with respect to any other matter that may properly be brought before the
meeting. Shares cannot be voted at the meeting unless the holder of record is
present in person or by proxy. The enclosed proxy is a means by which a
stockholder may authorize the voting of his or her shares at the meeting. The
shares of Common Stock represented by each properly executed proxy card will be
voted at the meeting in accordance with each Shareholder's direction.
Shareholders are urged to specify their choices by marking the appropriate boxes
on the enclosed proxy card; if no choice has been specified, the shares will be
voted as recommended by the Board of Directors. If any other matters are
properly presented to the meeting for action, the proxy holders will vote the
proxies (which confer discretionary authority to vote on such matters) in
accordance with their best judgment.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum. Abstentions may be specified on Proposals 2 and 3 (but not for the
election of directors). Abstentions will be considered present and entitled to
vote at the meeting, but will not be counted as votes cast in the affirmative.
Abstentions on Proposals 2 and 3 will have the effect of a negative vote because
this proposal requires the affirmative vote of a majority of the shares present
in person or represented by proxy at the meeting and entitled to vote. Brokers
that are member firms of the New York Stock Exchange (NYSE) and who hold shares
in street name for customers, but have not received instructions from a
beneficial owner, have the authority under the rules of the NYSE to vote those
shares with respect to the election of directors, but not with respect to
Proposals 2 and 3. A failure by brokers to vote those shares will have no effect
on the outcome of Proposals 2 and 3 because such shares will not be considered
shares present and entitled to vote with respect to such matter.
Execution of the accompanying proxy will not affect a shareholder's right to
attend the meeting and vote in person. Any shareholder giving a proxy has the
right to revoke it by giving written notice of revocation to the Secretary of
the Company at any time before the proxy is voted by executing a proxy bearing a
later date, which is voted, at the meeting, or by attending the meeting and
voting in person.
Your proxy vote is important. Accordingly, you are asked to complete, sign
and return the accompanying proxy card regardless of whether or not you plan to
attend the meeting.
2
<PAGE> 4
Employees will not receive a separate proxy for shares owned (subject to
vesting) under the Company's Thrift Plan, as the trustee for the Thrift Plan
will vote the shares of Common Stock held thereunder. Employees will receive a
separate proxy for the shares owned under the Company's Employee Stock Purchase
Plan.
(PROPOSAL NO. 1)
ELECTION OF DIRECTORS
VOTING ON PROPOSAL NO. 1
The Board of Directors is divided into three classes. One class is elected
each year to hold office for a three-year term and until successors of such
class are duly elected and qualified, except in the event of death, resignation
or removal. Therefore, only Messrs. Elia and Ladd and Mrs. Carroll, who are
current directors and whose terms expire in 1995, are being presented to
shareholders for election as directors at the Annual Meeting for terms expiring
in 1998.
Three directors are to be elected by a plurality of the votes cast at the
Annual Meeting, and six directors will continue to serve in accordance with
their prior election. At the meeting, proxies in the accompanying form, properly
executed, will be voted for the election of the three nominees listed below,
unless authority to do so has been withheld in the manner specified in the
instruction on the proxy card. Discretionary authority is reserved to cast votes
for the election of a substitute should any nominee be unable or unwilling to
serve as a director. Each nominee has stated his willingness to serve and the
Company believes that all of the nominees will be available to serve.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders vote FOR the
election of Messrs. Elia and Ladd and Mrs. Carroll as directors.
GENERAL INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held six meetings in 1994. The Company's Bylaws
provide that the Board of Directors, by resolution adopted by a majority of the
whole Board, may designate an Executive Committee and one or more other
committees, with each such committee to consist of two or more directors. The
Board of Directors annually elects from its members the Executive, Audit,
Executive Compensation and Employee Benefits, Nominating, and Pension
Committees. Each incumbent director, for the period served in 1994, attended at
least 75% of all meetings of the Board and the Committees on which he or she
served.
Executive Committee. The Company's Bylaws provide that the Executive
Committee shall have and exercise all of the authority of the Board in the
management of the business and affairs of the Company, with certain exceptions.
The Executive Committee is intended to serve in the event that action by the
Board of Directors is necessary or desirable between regular meetings of the
Board, or at a time when convening a meeting of the
3
<PAGE> 5
entire Board is not practical, and to make recommendations to the entire Board
with respect to various matters. The Executive Committee met once in 1994. The
Executive Committee currently has six members, and the Chairman of the Company
serves as Chairman of the Executive Committee.
Audit Committee. The Audit Committee is composed of three directors who are
not employees of the Company or any of its subsidiaries. It meets periodically
with the Company's financial officers and independent certified public
accountants to review the scope of auditing procedures and the policies relating
to the Company's accounting procedures and controls. The Committee also provides
general oversight with respect to the accounting principles employed in the
Company's financial reporting. The Audit Committee held two meetings in 1994.
Executive Compensation and Employee Benefits Committee. The Executive
Compensation and Employee Benefits Committee is composed of three members of the
Board who are not employees of the Company or any of its subsidiaries. The
Executive Compensation and Employee Benefits Committee has the power to
administer the 1982 and 1988 Stock Option Plans and to administer and make
awards of stock options, dividend equivalents and restricted stock under the
1994 Equity Compensation Plan. In addition, the Executive Compensation and
Employee Benefits Committee reviews the recommendations of the Company's Chief
Executive Officer as to appropriate compensation of the Company's officers and
key personnel and recommends to the Board the compensation of such officers and
the Company's Chief Executive Officer for the ensuing year. The Executive
Compensation and Employee Benefits Committee held seven meetings in 1994.
Nominating Committee. The Nominating Committee reviews and makes
recommendations to the Board of Directors with respect to candidates for
director of the Company. The Nominating Committee has three members and held one
meeting during 1994. It is the present policy of the Nominating Committee to
consider nominees who are recommended by shareholders as additional members of
the Board or to fill vacancies on the Board. Shareholders desiring to submit the
names of, and any pertinent data with respect to, such nominees should send this
information in writing to the Chairman of the Nominating Committee in care of
the Company.
Pension Committee. The Pension Committee serves as the Plan Administrator for
the Company's qualified benefit plans. The Committee reviews and recommends to
the Board any actions to be taken by the Board in the discharge of the Board's
fiduciary responsibilities under the Company's qualified benefit plans and meets
periodically with the Company's financial, legal, actuarial, and investment
advisors. The Committee consists of three members and met once in 1994.
The current members of the Committees of the Board of Directors are as
follows:
<TABLE>
<CAPTION>
Executive Compensation and Audit
Executive Committee Employee Benefits Committee Committee
-------------------------- ------------------------------- ------------------------
<S> <C> <C>
Nicholas DeBenedictis* John F. McCaughan* John H. Austin, Jr.*
John H. Austin, Jr. G. Fred DiBona, Jr. John W. Boyer, Jr.
John W. Boyer, Jr. Joseph C. Ladd Harvey J. Wilson
G. Fred DiBona, Jr.
Joseph C. Ladd
John F. McCaughan
</TABLE>
4
<PAGE> 6
Pension Committee Nominating Committee
----------------- ----------------------
Joseph C. Ladd* G. Fred DiBona, Jr.*
John W. Boyer, Jr. Mary C. Carroll
Nicholas DeBenedictis Nicholas DeBenedictis
------
*Chairman
REQUIREMENTS FOR ADVANCE NOTIFICATION OF NOMINATIONS
Nominations for election of directors may be made at the Annual Meeting by
any shareholder entitled to vote for the election of directors, provided that
written notice (the "Notice") of the shareholder's intent to nominate a director
at the meeting is filed with the Secretary of the Company prior to the Annual
Meeting in accordance with provisions of the Company's Amended and Restated
Articles of Incorporation and Bylaws.
Section 4.13 of the Company's Bylaws requires the Notice to be received by
the Secretary of the Company not less than 14 days nor more than 50 days prior
to any meeting of the shareholders called for the election of directors, with
certain exceptions. These notice requirements do not apply to nominations for
which proxies are solicited under applicable regulations of the Securities and
Exchange Commission ("SEC"). The Notice must contain or be accompanied by the
following information:
(1) the name and residence of the shareholder who intends to make the
nomination;
(2) a representation that the shareholder is a holder of record of voting
stock and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the Notice;
(3) such information regarding each nominee as would have been required
to be included in a proxy statement filed pursuant to the SEC's proxy rules
had each nominee been nominated, or intended to be nominated, by the
management or the Board of Directors of the Company;
(4) a description of all arrangements or understandings among the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; and
(5) the consent of each nominee to serve as a director of the Company
if so elected.
Pursuant to the above requirements, appropriate Notices in respect of
nominations for directors must be received by the Secretary of the Company no
later than May 4, 1995.
INFORMATION REGARDING NOMINEES AND DIRECTORS
For the three nominees for election as directors at the 1995 Annual Meeting
and the six directors whose terms of office expire either at the 1996 Annual
Meeting or the 1997 Annual Meeting, there follows information as to the
positions and offices with the Company held by each, the principal occupation of
each during the past five years, and certain directorships of public companies
and other organizations held by each.
5
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NOMINEES FOR ELECTION AT ANNUAL MEETING
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Mary C. Carroll............ Mrs. Carroll is a consultant, a community volunteer and an advisor to nonprofit corporations,
Bryn Mawr, PA businesses and government agencies. Between 1992 and 1993 she served as President of Hospitality
Director since 1981 Philadelphia Style. She is Vice Chairman of Ft. Mifflin on the Delaware and is a founder, director
or trustee of various civic and charitable organizations, including Preservation Action, the
National Parks Mid-Atlantic Council, the Friends of Independence National Historical Park, the Urban
Affairs Coalition and the Metropolitan YMCA. Age: 54.
Claudio Elia............... Mr. Elia has served since June 1994 as Chairman and CEO of Air & Water Technologies Corp., an
Greenwich, CT environmental services company, and since September, 1988 as President and Chief Executive Officer
Director since 1992 of Anjou International Company, the U.S. holding company of Compagnie Generale des Eaux, a
diversified international service company providing a broad range of water, power, heating and urban
maintenance services. He has also served as President and Chief Executive Officer of Limbach
Holdings, a construction and service company, and President of Montenay International Co., a
waste-to-energy company, both of which are affiliates of Compagnie Generale des Eaux. Mr. Elia is
also a director of Air & Water Technologies Corporation, Consumers Water Company, Anjou International
Company, Limbach Holdings and Montenay International Co. Age: 52.
Joseph C. Ladd............. Mr. Ladd is the retired Chairman, President and Chief Executive Officer of The Fidelity Mutual Life
Rosemont, PA Insurance Company, serving in those capacities from July, 1971 to January, 1992. He is currently a
Director since 1983 director of PECO Energy Company. Age: 68.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 1996
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
John W. Boyer, Jr.......... Mr. Boyer retired as Chairman of the Company on May 20, 1993, having served in that
St. Davids, PA capacity since the restructuring of the Company on July 1, 1981. Mr. Boyer also
Director since 1981 served as the Company's Chief Executive Officer from July 1, 1981 to July 1, 1992.
Mr. Boyer is a director of Betz Laboratories, Inc., Gilbert Associates, Inc. and
Rittenhouse Trust Company. Age: 66.
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
Nicholas DeBenedictis...... Mr. DeBenedictis has served as Chairman of the Company since May 20, 1993. Mr. DeBenedictis also
Havertown, PA continues to serve as the Company's Chief Executive Officer and President, the positions he has held
Director since 1992 since joining the Company in July 1992. He also serves as Chairman, Chief Executive Officer and
President of the Company's principal subsidiary, Philadelphia Suburban Water Company. Between April
1989 and June 1992, he served as Senior Vice President for Corporate Affairs of Philadelphia
Electric Company (now known as PECO Energy Company). From December 1986 to April 1989, he served as
President of the Greater Philadelphia Chamber of Commerce and from 1983 to 1986 he served as the
Secretary of the Pennsylvania Department of Environmental Resources. Mr. DeBenedictis is a director
of Provident Mutual Life Insurance Company of Philadelphia, Air & Water Technologies Corporation and
a member of the PNC Bank, N.A. Philadelphia Advisory Board. Age: 49.
G. Fred DiBona, Jr......... Mr. DiBona has served since 1990 as President and Chief Executive Officer of Independence Blue
Bryn Mawr, PA Cross, the Delaware Valley region's largest health insurer. He also serves as Chairman of
Director since 1993 Independence Blue Cross' subsidiaries and affiliates. Between 1986 and 1990, Mr. DiBona served as
President and Chief Executive Officer for Pennsylvania Blue Shield's holding company, Keystone
Ventures, Inc. Mr. DiBona is also a director of Independence Blue Cross and its subsidiaries, as
well as various civic and charitable organizations. Age: 44.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 1997
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
John H. Austin, Jr......... Mr. Austin retired as President of Philadelphia Electric Company (now known as PECO Energy Company),
Berwyn, PA a public utility, in 1988. Mr. Austin served as President of PECO Energy Company from 1982 to 1988.
Director since 1981 He is also a director of Selas Corporation of America. Age: 66.
John F. McCaughan.......... Mr. McCaughan is Chairman of Betz Laboratories, Inc., which provides engineered chemical treatment
Doylestown, PA of water, wastewater and process systems. Mr. McCaughan was Chairman and Chief Executive Officer of
Director since 1984 Betz Laboratories from 1990 to 1994. He is also a director of Betz Laboratories, Inc. and Penn
Mutual Life Insurance Company. Age: 59.
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
Harvey J. Williams......... Mr. Wilson has been a self-employed Delray Beach, FL businessman and investor since mid-1983. Mr.
Delray Beach, FL Wilson served as President of Shared Medical Systems Corporation, of which he was a co-founder,
Director since 1983 until June 1983 and as Vice Chairman until May 1984. He is a director of Legent Corporation, Shared
Medical Systems, FPA Medical Management, RMSC of West Palm Beach, Inc. and Enterprise Application
Systems, Inc. Age: 56.
</TABLE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 31, 1995,
with respect to shares of Common Stock of the Company beneficially owned by each
director and executive officer and by all directors and executive officers of
the Company as a group. This information has been provided by each of the
directors and officers at the request of the Company. Beneficial ownership of
securities as shown below has been determined in accordance with applicable
guidelines issued by the SEC and includes the possession, directly or
indirectly, through any formal or informal arrangement, either individually or
in a group, of voting power (which includes the power to vote, or to direct the
voting of, such security) and/or investment power (which includes the power to
dispose of, or to direct the disposition of, such security).
<TABLE>
<CAPTION>
Shared voting
Sole voting and/or shared Total and
and/or sole investment percent of class
Beneficial Owner investment power power(1)(2) outstanding(3)
------------------------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C>
John H. Austin, Jr. ................ 1,000 -- 1,000
John W. Boyer, Jr. ................. 58,503 -- 58,503
Mary C. Carroll .................... 1,000 419 1,419
Nicholas DeBenedictis .............. 35,630 7,385(4) 43,015
G. Fred DiBona, Jr. ................ 300 -- 300
Claudio Elia (5) ................... 200(6) -- 200
Michael P. Graham .................. 10,000 6,814 16,814
Joseph C. Ladd ..................... 2,451 -- 2,451
Robert A. Luksa .................... 10,600 33,186 43,786
John F. McCaughan .................. 3,000 -- 3,000
Richard R. Riegler ................. 13,627 572 14,199
Roy H. Stahl ....................... 20,382 2,099 22,481
Harvey J. Wilson ................... 6,500 -- 6,500
All directors and executive officers
as a group (13 persons) ........... 163,193(7) 50,475(8) 213,668(1.82%)
</TABLE>
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<PAGE> 10
------
(1) The shareholdings indicated include 825 shares held in the Company's
Dividend Reinvestment Program.
(2) Under the Company's Thrift Plan, participants do not have any present voting
power with respect to shares allocated to their accounts. Such shares have
been included in this column.
(3) Percentages for each person or group are based on the aggregate of the
shares of Common Stock outstanding as of January 31, 1995 (11,722,754
shares) and all shares issuable to such person or group upon the exercise of
outstanding stock options exercisable within 60 days of that date.
Percentage ownership of less than 1% of the class then outstanding as of
January 31, 1995 has not been shown.
(4) The shareholdings indicated include 400 shares owned of record by Mr.
DeBenedictis' wife and 3,372 shares owned of record by Mr. DeBenedictis'
son. Mr. DeBenedictis disclaims beneficial ownership as to such shares.
(5) As Chief Executive Officer of Anjou International Company, Mr. Elia oversees
Compagnie Generale des Eaux's interests in the United States, including its
share ownership in Philadelphia Suburban Corporation. Consequently, he may
be deemed to share voting and dispositive power for the shares held by
Compagnie Generale des Eaux.
(6) The shares owned by Mr. Elia were purchased as of February 10, 1995.
(7) The shareholdings indicated include 64,715 shares exercisable under the 1982
Stock Option Plan and the 1988 Stock Option Plan on or before April 1, 1995.
(8) The shareholdings indicated include 38,566 shares (i) held in joint
ownership with spouses, (ii) held as custodian for minor children or (iii)
owned by family members.
The following table sets forth certain information as of February 28, 1995,
except as otherwise indicated, with respect to the ownership of shares of Common
Stock of the Company by certain beneficial owners of 5% or more of the Company's
total outstanding shares.
<TABLE>
<CAPTION>
Percent of
Amount and Nature Outstanding
Beneficial Owner of Beneficial Ownership Shares
--------------------------- ------------------------------- -------------
<S> <C> <C>
Compagnie Generale des Eaux Sole voting and dispositive 14.8%
52 Rue D'Anjou 75008 power over 1,710,600 shares (1)
Paris, France
</TABLE>
------
(1) Based on the Form 4 of Compagnie General des Eaux dated September 7, 1994.
9
<PAGE> 11
EXECUTIVE COMPENSATION
REPORT OF THE EXECUTIVE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
OVERALL OBJECTIVES
Philadelphia Suburban Corporation's executive compensation program is
designed to motivate its senior executives to achieve the Company's goals of
providing its customers with cost-effective, reliable water services and
providing the Company's shareholders with a market-based return on their
investment.
Toward that end, the program:
o Provides compensation levels that are competitive with those provided by
companies with which the Company may compete for executive talent.
o Motivates key senior executives to achieve strategic business initiatives
and rewards them for their achievement.
o Creates a strong link between stockholder and financial performance and the
compensation of the Company's senior executives.
In administering the executive compensation program, the Executive
Compensation and Employee Benefits Committee (the "Committee") attempts to
strike an appropriate balance among the above-mentioned objectives, each of
which is discussed in greater detail below.
At present, the executive compensation program is comprised of three
components: base salary, annual cash incentive opportunities and equity
incentive opportunities. In determining the relative weighting of compensation
components and the target level of compensation for the Company's executives,
the Committee considers compensation programs of a peer group of companies.
Because of the limited number of investor-owned water utilities from which
comparable compensation data is available, the Committee utilizes survey data
from a composite market ("Composite Market") compiled by a nationally-recognized
compensation consulting firm in assessing the competitiveness of the components
of the Company's compensation program. The Composite Market for the base salary
and annual cash incentive elements of the program consists of 50% water
utilities, 25% other utilities and 25% general industrial businesses. There are
fourteen water utilities in the Composite Market, eleven of which are included
in the Edward D. Jones & Co. Water Utility Index used for the stock performance
chart contained herein. Competitive compensation levels are targeted at the
median of the third quartile range of compensation levels in the Composite
Market, except for equity incentives, which are targeted at the 50th percentile
of the compensation consulting firm's data base of general industrial
organizations, including utilities, that have long-term incentive programs.
10
<PAGE> 12
COMPENSATION COMPONENTS
BASE SALARY
To ensure that its pay levels are competitive, the Company regularly compares
its executive compensation levels with those of other companies and sets its
salary structure in line with competitive data from the Composite Market.
Individual salaries are considered for adjustment annually and any adjustments
are based on general movement in external salary levels, individual performance,
and changes in individual duties and responsibilities.
CASH INCENTIVE AWARDS
The annual cash incentive plan is based on target incentive awards for each
executive, which are stated as a percentage of their base salaries that were
evaluated for competitiveness by the Company's compensation consulting firm
against the Composite Market. Annual incentive awards for executive officers are
calculated by a formula that multiplies the executive's target incentive
percentage times a Company rating factor based on the Company's overall
financial performance and an individual rating factor based on the executive's
performance against established objectives. These factors can range from 0% to
125% for the Company rating factor and 0% to 150% for the individual rating
factor. Each of these percentages are established by the Committee each year.
Regardless of the Company's financial performance, the Committee retains the
authority to determine the final Company rating factor, and the actual payment
and amount of any bonus is always subject to the discretion of the Committee.
EQUITY INCENTIVES
As part of its review of the total compensation package for the Company's
officers in 1994, the Committee, with the assistance of a nationally-recognized
compensation consulting firm, reviewed the Company's equity incentive
compensation program. Given the importance of dividends to a utility investor,
the consultant recommended using a combination of stock options with dividend
equivalents to best link executive long-term incentives to corporate performance
and shareholder interests.
After reviewing the consultant's recommendations, the Committee approved the
proposed Equity Compensation Plan, which was subsequently approved by the
shareholders at the 1994 Annual Meeting. Under the terms of the Plan, the
Committee and the Board of Directors may grant stock options, dividend
equivalents and restricted stock to officers and key employees, and stock
options to key consultants of the Company and its subsidiaries who are in a
position to contribute materially to the successful operation of the business of
the Company. The purpose of the Plan is to help align executive compensation
with shareholder interests by providing the participants with a long-term equity
interest in the Company. The Plan also provides a means through which the
Company can attract and retain employees of significant abilities.
11
<PAGE> 13
SUMMARY OF ACTIONS TAKEN BY COMMITTEE
SALARY INCREASE
Under the Company's salary program, the base salary budget is based on salary
levels for comparable positions in the Composite Market. The projected overall
annual increase is based on annual salary budget increase data reported by
published surveys. Under these guidelines, actual salary increases are
determined based on a combination of an assessment of the individual's
performance and the individual's salary compared to the market. In the case of
executive officers named in this Proxy Statement, the determination of salary
levels is made by the Committee, subject to approval by the Board of Directors.
Mr. DeBenedictis' salary for 1994 was consistent with the target level for
the CEO position within the Composite Market. Mr. DeBenedictis' salary for 1995,
which was approved by the Board of Directors on March 7, 1995 and effective on
April 1, 1995, is consistent with published salary survey information on salary
levels and projected annual salary increases for 1995 and is based on the
Committee's favorable assessment of his and the Company's performance.
ANNUAL INCENTIVE AWARD
At its February 7, 1995 meeting, the Committee determined the annual cash
incentive awards to be made to the participants in the annual incentive plan.
The awards were based on the Company's performance compared to its financial
goal for 1994 as well as the participants' achievement of their individual
objectives. The incentive awards to the Company's officers were approved by the
Board of Directors on March 7,1995. Mr. DeBenedictis earned $157,697 in annual
incentive compensation for 1994, based on the Company's earnings and the
Committee's assessment of Mr. DeBenedictis' individual performance. Mr.
DeBenedictis' achievements in 1994 included increasing net income significantly
over 1993 levels, reducing controllable operating expenses and interest costs,
increasing customer growth through acquisitions and implementing other
management initiatives intended to control costs and enhance customer
satisfaction. It was the Committee's assessment that Mr. DeBenedictis met or
exceeded all of his 1994 objectives.
EQUITY INCENTIVES
At its May 19, 1994 meeting, the Committee approved the grant of incentive
stock options and dividend equivalents under the Company's 1994 Equity
Compensation Plan to its executive officers at the fair market value on the date
of grant for such stock options of $17.9375. For 1995, the Committee also
granted qualified stock options and dividend equivalents to its executive
officers under the 1994 Equity Compensation Plan at the fair market value on
March 6, 1995 of $17.8125 per share for such stock options. The options are
exercisable in installments of one-third each year starting on the first
anniversary of the date of grant and expire at the end of 10 years from the date
of grant. The dividend equivalents will accumulate dividends over a period of
four years. Mr. DeBenedictis received a grant of 15,000 options and dividend
equivalents on May 19, 1994 and 20,000 options and dividend equivalents on March
6, 1995 at the grant prices stated above. On May 19, 1994, the Committee also
granted Mr. DeBenedictis 10,000 shares of restricted stock under the 1994 Equity
Compensation Plan. This grant was based on the recommendation of the Company's
compensation consultant as being an appropriate means, consistent with the
Company's past practice, to reward the CEO for past performance, to
12
<PAGE> 14
serve as a retention incentive and to increase the CEO's stock ownership. Under
the terms of the restricted stock grant, one-third of the shares will become
free of restrictions each year starting on the first anniversary of the date of
grant. Mr. DeBenedictis is entitled to receive dividends on the shares prior to
their release from restictions, but may not sell or otherwise dispose of the
shares until the end of the restricted periods.
Respectfully submitted,
John F. McCaughan
G. Fred DiBona, Jr.
Joseph C. Ladd
The foregoing report of the Executive Compensation and Employee Benefits
Committee shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during the years 1994, 1993 and 1992, or for the
year in which the individual was an executive officer, if shorter, for the
Company's Chief Executive Officer and the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
------------------------ -------------------------- ------------
Securities
Other Restricted Under- All Other
Annual Stock lying LTIP Compen-
Name and Compen- Award(s) Options/ Payouts sation
Principal Position Year Salary ($)(1) Bonus($)(2) sation($)(3) ($)(4) SAR's (#) ($) ($)(5)
--------------------- ------ ------------- --------- ------------ ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N. DeBenedictis (6) . 1994 241,027 157,697 4,620 174,375 15,000 -- 26,910
CEO 1993 231,751 145,454 2,698 -- 9,000 -- 17,713
1992 112,500 50,220 -- -- 50,000 -- 17,769
R. Luksa ............ 1994 201,414 59,020 4,620 -- 5,000 -- 2,800
President -- PSWC 1993 196,526 66,078 4,497 -- 6,500 -- --
1992 188,107 51,001 3,500 -- 5,000 -- --
R. Stahl ............ 1994 151,775 57,682 4,453 -- 3,500 -- 1,960
Senior V.P. 1993 144,200 54,545 4,326 -- 5,000 -- --
1992 138,000 42,500 3,050 -- 5,000 -- --
M. Graham ........... 1994 122,554 43,812 3,677 -- 3,500 -- 1,960
Senior V.P. -- Finance 1993 112,651 43,157 3,379 -- 5,000 -- --
1992 102,504 34,177 2,580 -- 5,000 -- --
R. Riegler (7) ...... 1994 135,624 36,973 2,910 -- 3,500 -- 1,960
Sr. V.P. -- Operations
</TABLE>
13
<PAGE> 15
------
(1) Salary deferred at the discretion of the executive and contributed to the
Company's Thrift Plan is included in this Column.
(2) Includes cash bonuses for services rendered during the specified year,
regardless of when paid.
(3) Company matching contributions pursuant to the Company's Thrift Plan are
included in this column.
(4) Mr. DeBenedictis was awarded a grant of 10,000 shares of restricted stock
under the Company's 1994 Equity Compensation Plan on May 19, 1994 at a fair
market value on the date of grant of $17.9375 per share, less the $.50 par
value per share paid by Mr. DeBenedictis. One-third of the restricted stock
under this grant will be released to Mr. DeBenedictis each year starting on
May 19, 1995 and he is entitled to receive the dividends on the restricted
shares pending their release. At year-end 1994, the value of the 10,000
shares still subject to restrictions was $181,250 based on a closing price
for the stock of $18.125.
(5) Includes: (a) the dollar value, on a term loan approach, of the benefit of
the whole-life portion of the premiums for a split dollar life insurance
policy on Mr. DeBenedictis maintained by the Company, projected on an
actuarial basis ($9,999); (b) Company payments on behalf of Mr. DeBenedictis
to cover the premiums attributable to the term life insurance portion of the
split dollar life insurance policy ($8,511); and (c) the amounts accrued for
the named executives' accounts in 1994 in connection with the dividend
equivalent awards made on May 19, 1994 (Messrs. DeBenedictis $8,400; Luksa
$3,200; Stahl $1,960; Graham $1,960 and Reigler $1,960). The Company will be
reimbursed for the amount of the premiums paid under the split dollar
program for Mr. DeBenedictis upon his death or repaid such premiums by Mr.
DeBenedictis if he leaves the Company.
(6) Mr. DeBenedictis was elected Chief Executive Officer effective July 1, 1992
and was not employed by the Company or any of its subsidiaries prior
thereto. Therefore, his salary and bonus payments for 1992 are based on his
employment with the Company for six months of 1992. Under the terms of an
employment agreement entered into during 1992, Mr. DeBenedictis serves as
Chief Executive Officer of the Company at a base salary of not less than
$225,000 per year, plus annual and long-term incentives.
(7) Mr. Riegler is Senior Vice President of the registrant's principal
subsidiary and was designated as an executive officer of the registrant in
1994 by the Board of Directors.
14
<PAGE> 16
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five years with the weighted average
cumulative total return of a peer group of companies represented by the Edward
D. Jones & Co. ("EDJ") Water Utility Industry Index (adjusted for total market
capitalization) and the cumulative total return on the S&P 500 over the same
period, assuming a $100 investment on January 1, 1989 and the reinvestment of
all dividends. The Edward D. Jones & Co. Water Utility Industry Index consists
of the following companies: American Water Works Company, Inc.; Aquarion
Company; California Water Service Company; Connecticut Water Service Company;
Consumers Water Company; Dominguez Services Corporation; E'town Corporation; IWC
Resources Corporation; Middlesex Water Company; SJW Corporation; Southern
California Water Company; United Water Resources, Inc.; Philadelphia Suburban
Corporation; and Southwest Water Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG PSC, S&P 500, AND EDJ WATER UTILITY AVERAGE
DOLLARS
200 ------------------------------------------------------------------------
------------------------------------------------------------------------
---------------------------------------------------------------------$--
------------------------------------------------------------------------
175 -----------------------------------------------------$------------------
------------------------------------------------------------------------
-----------------------------------------------------*------------------
---------------------------------------------------------------------*--
150 -----------------------------------------------------#---------------#--
----------------------------------------*$------------------------------
-----------------------------------------#------------------------------
---------------------------*$-------------------------------------------
125 ----------------------------#-------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
100 *#$---------------------------------------------------------------------
------------------------------------------------------------------------
-------------#----------------------------------------------------------
75 -------------*$---------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
YEAR 1989 1990 1991 1992 1993 1994
-----------------------------------------------------------------------------
EDJ WEIGHTED AVG $100.00 $92.82 $132.54 $146.79 $167.25 $155.81
S&P 500 $100.00 $96.89 $126.29 $135.90 $149.53 $151.56
PSC $100.00 $94.40 $131.59 $143.11 $174.25 $182.35
-------------------------------------------------------------------------
* = EDJ Weighted Avg # = S&P 500 $ = PSC
-------------------------------------------------------------------------
15
<PAGE> 17
The foregoing comparative stock performance graph shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
STOCK OPTION GRANTS IN 1994
The following table sets forth information concerning individual grants of
stock options under the Company's 1994 Equity Compensation Plan during 1994 to
each executive officer identified in the Summary Compensation Table who received
options during the period.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
------------------------------------------------------------------------------- ------------
Number of % of Total
Securities Options/SAR's Exercise
Underlying Granted to or Base Grant Date
Options/SAR's Employees Price Expiration Present
Name Granted (#) (1) in Fiscal Year ($/Sh)(2) Date Value ($)(3)
--------------- --------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
DeBenedictis .. 15,000 13.0% 17.9375 5/19/04 36,320
Luksa ......... 5,000 4.3% 17.9375 5/19/04 12,110
Stahl ......... 3,500 3.0% 17.9375 5/19/04 8,480
Graham ........ 3,500 3.0% 17.9375 5/19/04 8,480
Riegler ....... 3,500 3.0% 17.9375 5/19/04 8,480
</TABLE>
------
(1) The options listed in this column are qualified stock options granted at an
exercise price equal to the fair market value of the Company's common stock
on the date of grant under the Company's 1994 Equity Compensation Plan.
Grants become exercisable in installments of 1/3 per year commencing on the
first anniversary of the grant date. An equal number of dividend
equivalents, with a four-year accumulation period, were awarded to the named
individuals under the 1994 Equity Compensation Plan, the accrued value of
which for 1994 is shown on the Summary Compensation Table.
(2) The exercise price for options granted is equal to the mean of the high and
low sale prices of the Company's common stock on the New York Stock Exchange
composite tape on the date the option is granted.
(3) The values in this column were determined using the Black-Scholes Option
Pricing Model. The actual value of stock options, if any, that may be
realized will depend on the difference between the exercise price and the
market price on the date of exercise. The estimated values under the
Black-Scholes model are based on assumptions as to such variables as
interest rates, stock price volatility and dividend yield. The key
assumptions used in the Black-Scholes model valuation of the stock options
are (i) an assumed dividend yield of 6.1%, (ii) a risk free rate of return
of 7.4%, (iii) a beta coefficient of 1, (iv) an exercise date of 10 years
from the date of grant, and (v) no reduction in values to reflect
non-transferability or other restrictions on the options. These assumptions
are not a forecast of future dividend yield, stock performance or
volatility.
16
<PAGE> 18
STOCK OPTION EXERCISES IN 1994 AND VALUE OF OPTIONS AT YEAR-END 1994
The following table sets forth information concerning the number of stock
options exercised under the Company's 1982 and 1988 Stock Option Plans and the
1994 Equity Compensation Plan during 1994 by each executive officer listed below
and the number and value of unexercised options as of December 31, 1994,
indicating in each case the number and value of those options that were
exercisable and unexercisable as of that date.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SAR's at Options/SAR's at
Shares Fiscal Year-End (#) Fiscal Year-End ($)(1)
Acquired Value -------------------------------- --------------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
--------------- -------------- ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
DeBenedictis .. -- -- 21,800 52,200 76,800 122,513
Luksa ......... -- -- 8,300 13,200 19,550 14,763
Stahl ......... 3,000 15,938 8,000 10,500 19,250 13,281
Graham ........ 4,000 23,501 7,000 13,500 24,000 27,469
Riegler ....... 2,285 12,264 8,115 10,100 32,334 13,281
</TABLE>
------
(1) Based on the closing price on the New York Stock Exchange-Composite
Transactions of the Company's Common Stock on December 30, 1994 ($18.125)
CERTAIN COMPENSATION PLANS
RETIREMENT PLAN
The Retirement Plan for Employees of the Company (the "Retirement Plan") is a
defined benefit pension plan. In general, participants are eligible for normal
pension benefits upon retirement at age 65 and are eligible for early retirement
benefits upon retirement at age 55 with ten years of credited service. Under the
terms of the Retirement Plan, a participant becomes fully vested in his or her
accrued pension benefit after five years of credited service. Benefits payable
to employees under the Retirement Plan are based upon "final average
compensation", which is defined as the average cash compensation through the
five highest consecutive years of the last ten full years preceding retirement.
The Employee Retirement Income Security Act of 1974, as amended, ("ERISA")
imposes maximum limitations on the annual amount of pension benefits that may be
paid under, and the amount of compensation that may be taken into account in
calculating benefits under, a qualified, funded defined benefit pension plan
such as the Retirement Plan. The Retirement Plan complies with these ERISA
limitations. Effective December 1, 1989, the Board of Directors adopted an
Excess Benefits Plan for Salaried Employees (the "Excess Plan"). The Excess Plan
is a nonqualified, unfunded pension benefit plan that is intended to provide an
additional pension benefit to participants in the Retirement Plan and their
17
<PAGE> 19
beneficiaries whose benefits under the Retirement Plan are adversely affected by
these ERISA limitations. The benefit under the Excess Plan is equal to the
difference between (i) the amount of the benefit the participant would have been
entitled to under the Retirement Plan absent such ERISA limitations, and (ii)
the amount of the benefit actually payable under the Retirement Plan.
The following tabulation shows the estimated annual pension payable pursuant
to the Retirement Plan and the Excess Plan to employees, including employees who
are directors or officers of the Company, upon retirement after selected periods
of service. This table is provided for illustrative purposes only and does not
reflect pension benefits presently due under the Retirement Plan or Excess Plan.
PENSION TABLE
<TABLE>
<CAPTION>
Average Salary Estimated Annual Pension Based on Service of
During Five Years ---------------------------------------------------------------
Preceding Retirement 15 Years 20 Years 25 Years 30 Years 35 Years
-------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$100,000 ........... $ 25,400 $ 33,800 $ 42,300 $ 44,800 $ 47,300
125,000 ........... 32,100 42,800 53,500 56,600 59,800
150,000 ........... 38,900 51,800 64,800 68,500 72,300
175,000 ........... 45,600 60,800 76,000 80,400 84,800
200,000 ........... 52,400 69,800 87,300 92,300 97,300
225,000 ........... 59,100 78,800 98,500 104,100 109,800
250,000 ........... 65,900 87,800 109,800 116,000 122,300
300,000 ........... 79,400 105,800 132,300 139,800 147,300
350,000 ........... 92,900 123,800 154,800 163,500 172,300
400,000 ........... 106,400 141,800 177,300 187,300 197,300
450,000 ........... 119,900 159,800 199,800 211,000 222,300
500,000 ........... 133,400 177,800 222,300 234,800 247,300
</TABLE>
The Company's contributions to the Retirement Plan are computed on the basis
of straight life annuities. The following executive officers listed in Summary
Compensation Table have the indicated number of completed years of service under
the Retirement Plan, and would, upon retirement at age 65 on March 31, 1995, be
entitled to a pension based on the remuneration level listed in the following
table:
Completed
Covered Years of
Name Remuneration Credited Service
---------------------- -------------- ----------------
Nicholas DeBenedictis $260,317 3
Robert A. Luksa ...... $220,278 39
Roy H. Stahl ......... $166,025 13
Michael P. Graham .... $126,482 18
Richard R. Riegler ... $140,388 25
18
<PAGE> 20
A Supplemental Executive Retirement Plan or SERP has been established for Mr.
DeBenedictis. This Plan, which is nonqualified and unfunded, was approved by the
Board of Directors and is intended to provide Mr. DeBenedictis with a total
retirement benefit, in combination with the Retirement Plan and Excess Plan,
that is commensurate with the retirement benefits for the chief executive
officers of other companies. Under the terms of the SERP, Mr. DeBenedictis will
be eligible to receive a benefit at normal retirement equal to the difference
between (i) the benefit to which he would otherwise be entitled under the
Retirement Plan assuming he had 25 years of service and absent the ERISA
limitations referred to above, and (ii) the benefit payable to him under the
Retirement Plan and the Excess Plan. Under the terms of Mr. DeBenedictis' SERP,
if his employment is terminated for any reason prior to age 65, he is entitled
to receive a supplemental retirement benefit equal to the difference between (i)
the benefit to which he would otherwise be entitled under the Retirement Plan
assuming he was credited with two years of service for each of his first seven
years of credited service and (ii) the benefit payable to him under the
Retirement Plan and the Excess Plan. If Mr. DeBenedictis retires from the
Company at age 65, the SERP is projected to provide an annual benefit of
$66,000.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Under the terms of Mr. DeBenedictis' employment arrangement, if his
employment is terminated by the Company for any reason other than his
disability, death or for cause, he will be entitled to receive a severance
payment equal to twelve months of his base compensation paid in twelve equal
monthly installments without offset. Under the terms of the 1994 Equity
Compensation Plan approved by the shareholders, outstanding stock options will
become immediately exercisable, dividend equivalents will become immediately
payable and the restrictions on restricted stock grants shall immediately lapse
upon certain change of control events.
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company do not receive a
retainer or fees for service on the Board of Directors or Committees of the
Board. In 1994, members of the Board of Directors who were not full- time
employees of the Company or any of its subsidiaries (outside directors) received
an annual retainer fee of $12,000 plus a fee of $750 for attendance at each
meeting of the Board of Directors of the Company and meeting fees of $750 for
attendance at each Committee meeting of the Board. In addition, each Committee
Chairman, who is an outside director, received an annual retainer fee of $2,000.
All directors are reimbursed for reasonable expenses incurred in connection with
attendance at Board or Committee meetings.
After reviewing the compensation arrangements for outside directors at other
investor-owned water utilities and other comparable companies, the Executive
Compensation and Employee Benefits Committee recommended an increase to the
retainers paid to the Company's outside directors to the Board of Directors. In
keeping with the trend at other companies to tie a portion of the directors'
compensation to corporate performance and shareholder interest, the Committee's
recommendation was that the increase to the retainer be paid in the form of an
annual stock grant of 200 shares of the Company's Common Stock. In accordance
with the Executive Compensation and Employee Benefits Committee's
recommendation, the Board of Directors approved Amendment 1994-1 to the
Company's 1994 Equity Compensation Plan to provide for this annual stock grant
to outside directors, subject to the approval of the Company's shareholders as
set forth in Proposal No. 2 on pages 20 to 22 of this Proxy Statement.
19
<PAGE> 21
(PROPOSAL NO. 2)
PROPOSAL TO APPROVE AMENDMENT 1994-1 TO THE
PHILADELPHIA SUBURBAN CORPORATION
1994 EQUITY COMPENSATION PLAN
THE PROPOSAL
At the Annual Meeting, there will be presented to the shareholders a proposal
to approve and ratify Amendment 1994-1 (the "Amendment") to the 1994
Philadelphia Suburban Corporation Equity Compensation Plan (the "Plan"). Under
the proposal, the Plan will be amended to provide for annual non-discretionary
stock grants to members of the Board of Directors who are not employed in any
capacity by the Company (hereinafter referred to as "Non-employee Directors") of
200 shares of the Company's Common Stock as part of the Non-employee Directors'
annual retainer. On December 6, 1994, the Board of Directors adopted the
Amendment, subject to shareholder approval at the Annual Meeting. The Amendment
will not be effective unless or until shareholder approval is obtained.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT
The proposal to approve the Amendment requires the affirmative vote of a
majority of shares present in person or represented by proxy at the Annual
Meeting for its approval. Abstentions may be specified on the proposal and will
be considered present at the Annual Meeting, but will not be counted as
affirmative votes. Abstentions, therefore, will have the practical effect of
voting against the proposal because the affirmative vote of a majority of the
shares present at the Annual Meeting is required to approve the proposal. Broker
non-votes are considered not present at the Annual Meeting and, therefore, will
not be voted or have any effect on the proposal.
The Board of Directors recommends that all shareholders vote FOR the approval
of Amendment 1994-1 to the 1994 Equity Compensation Plan.
DESCRIPTION OF THE PLAN
The Amendment is set forth as Exhibit A to this Proxy Statement, and the
description of the Plan contained herein is qualified in its entirety by
reference to the Plan document.
General. In May 1994, the shareholders of the Company approved the Plan. The
Plan provides for the grant to officers and other key employees of, and key
consultants to, the Company and its subsidiaries of incentive compensation in
the form of incentive stock options, nonqualified stock options, restricted
stock grants and dividend equivalents. The Plan permits restricted stock grants
of up to 25,000 shares, 10,000 shares of which previously have been granted. The
Plan permits the grant of incentive stock options ("ISOs") and non-qualified
stock options ("NQSOs") with respect to an aggregate of 450,000 options (less
the number of restricted stock grants), of which options with respect to 236,000
shares previously have been granted.
20
<PAGE> 22
A Board committee (the "Committee") or the entire Board may select the
persons to receive grants under the Plan (the "Grantees") from among the persons
who may participate in the Plan and, subject to the terms of the Plan, may
determine the number of shares of Common Stock subject to a particular grant and
the terms of each grant. As of March 6, 1995, there are approximately 65 key
employees and no consultants anticipated to be eligible to participate in the
Plan.
The exercise price of Common Stock subject to an ISO or NQSO is the fair
market value of such stock on the date the stock option is granted. The exercise
period for an ISO may not exceed ten years from the date of grant and the
exercise period for an NQSO may not exceed ten years and one day from the date
of grant. Each dividend equivalent represents the right to receive an amount
equal to the dividend payable on a share of Common Stock of the Company during
an accumulation period established for each grant by the Committee. The Company
will credit to an account maintained for the Grantee on its books and records an
amount that is generally equal to the dividend equivalents subject to the grant
during the accumulation period designated by the Committee. The dividend
equvalents will generally be paid at the end of a performance period which may
depend in part on performance criteria for the Grantee established by the
Committee.
Proposed Amendment. The Board of Directors has amended the Plan, subject to
shareholder approval, to provide that Non-employee Directors may participate in
the Plan with respect to annual restricted grants of Common Stock. The Plan, as
amended, provides that, effective January 1, 1995, as of the first day of the
month following the Company's annual meeting of shareholders, each Non-employee
Director shall receive a grant of 200 shares of Common Stock. Such shares shall
not be sold for 6 months following the date of the grant. No other restrictions
shall apply to such shares. Notwithstanding any other provision of the Plan,
this provision may not be amended more than once every 12 months, except for
amendments necessary to conform the Plan to changes of the provisions of, or the
regulations relating to, the Internal Revenue Code of 1986, as amended (the
"Code").
Share grants under the Plan, as amended, to Non-employee Directors will
generally constitute taxable ordinary income to the Director equal to the fair
market value of the shares on the date of grant and the Company will be entitled
to a tax deduction in the same amount. Any gain or loss recognized by the
Director upon subsequent disposition of the shares is a capital gain or loss and
a long-term capital gain or loss if the Director has satisfied the applicable
holding periods for the shares under the Code.
NON-EMPLOYEE DIRECTOR GRANTS
The table below summarizes the number of shares of Common Stock that will be
granted to Non-employee Directors under the proposed Amendment 1994-1 to the
1994 Equity Compensation Plan assuming shareholder approval. The table sets
forth the information with respect to all current directors who are not
executive officers as a group.
21
<PAGE> 23
NEW PLAN BENEFITS
1994 EQUITY COMPENSATION PLAN AS AMENDED BY AMENDMENT 1994-1
<TABLE>
<CAPTION>
Name and Position(1) Dollar Value ($) Number of Units
---------------------------------------- ------------------ -------------------
<S> <C> <C>
N. DeBenedictis ........................ -- --
CEO
R. Luksa ............................... -- --
President - PSWC
R. Stahl ............................... -- --
Senior V.P.
M. Graham .............................. -- --
Senior V.P.- Finance
R. Riegler ............................. -- --
Senior V.P.- Operations
Executive Group ........................ -- --
Non-Executive Director Group ........... (2) 1,600
Non-Executive Officer Employee Group ... -- --
</TABLE>
------
(1) Since only Non-Executive Directors are eligible for stock grants under
Amendment 1994-1 to the 1994 Equity Compensation Plan, information with respect
to only the Non-Executive Director Group is provided in this table. Other
benefits under the Plan, as amended, are not determinable at this time, as
awards are made from time to time in the discretion of a Committee of the Board
of Directors.
(2) The dollar value of the stock grants under Amendment 1994-1 to the 1994
Equity Compensation Plan is dependent on the fair market value of the Company's
Common Stock at the time of grant and, therefore, cannot be determined at this
time.
22
<PAGE> 24
(PROPOSAL NO. 3)
SHAREHOLDER PROPOSAL
Messrs. George R. Yake and Samuel J. Yake, of 45 Chestnut Road, Paoli,
Pennsylvania 19301-1502, who were the holders of record of 221 shares of Common
Stock as of July 25, 1994, have submitted the following shareholder proposal:
RESOLVED: That the stockholders of Philadelphia Suburban Corporation,
assembled in annual meeting in person and by proxy, hereby request that the
Board of Directors take the steps necessary to provide that ALL directors be
elected annually and not by classes, as is now provided.
REASONS
In 1994, 2,229,321 shares were cast in favor of our similar resolution.
Stockholders should be able to elect ALL directors EACH year.
The majority of New York Stock Exchange listed companies elect all of their
directors annually. So should Philadelphia Suburban.
Lewis D. Gilbert, dean of corporate shareholder activists, says: "The stagger
system is a frank device to lessen the control of stockholders and to perpetuate
management continuity and domination regardless of shareholder wishes."
If you agree, please mark your proxy FOR this resolution; otherwise, it is
automatically cast against it, unless you have marked to abstain.
STATEMENT OF THE BOARD OF DIRECTORS IN OPPOSITION TO SHAREHOLDER PROPOSAL
The Board of Directors believes that the present method of electing directors
of the Company, under which directors are elected for overlapping, staggered
terms is beneficial to the Company and should not be changed.
Under the system currently used by the Company, one-third of the directors
are elected every year. This permits the Company to change the composition of
its Board of Directors in an orderly fashion, while also providing an important
continuity of management which enhances the ability of the Company to carry out
its long range plans for its benefit and that of its shareholders.
Notwithstanding the statement of Messrs. Yake regarding other New York Stock
Exchange companies, the Company believes that a classified board of directors is
used by many major public corporations and is certainly not unusual, as Messrs.
Yake suggest.
Since it would ordinarily be necessary for two annual meetings to be held
before a shareholder controlling a majority of the shares voting at a meeting
could elect a majority of the members of the Board of Directors, the present
method of electing directors may discourage takeover proposals for the Company.
The Board of Directors believes, however, that simply changing from the current
arrangement of staggered terms to a system under which the entire Board of
Directors is elected each year will not have a material effect on the likelihood
that a takeover proposal would be made for the Company.
23
<PAGE> 25
In order to be approved, the Shareholder Proposal must be approved by the
affirmative vote of the shareholders present at the annual meeting, in person or
by proxy, who are entitled to cast a majority of the votes which all
shareholders present are entitled to cast thereon. Approval of the Shareholder
Proposal will not have the effect of changing the present system for electing
directors by classes, but will represent simply an expression of the wishes of
the shareholders on that subject. The Board of Directors would still be required
by statute to decide whether it would be in the best interests of the Company to
change the present system and could decide in the exercise of its business
judgment to retain the present system unchanged.
The Board of Directors recommends that shareholders vote AGAINST the
Shareholder Proposal. Proxies solicited by the Board of Directors will be so
voted unless shareholders specify otherwise on their proxy cards.
SHAREHOLDER SUGGESTIONS AND PROPOSALS FOR 1996 ANNUAL MEETING
Consideration of certain matters is required at the Annual Meeting of
Shareholders, such as the election of directors. In addition, pursuant to
applicable regulations of the Securities and Exchange Commission, shareholders
may present resolutions, which are proper subjects for inclusion in the proxy
statement and for consideration at the Annual Meeting, by submitting their
proposals to the Company on a timely basis. In order to be included for the 1996
Annual Meeting, resolutions must be received by December 2, 1995.
The Company receives many shareholder suggestions which are not in the form
of resolutions. All are given careful consideration. We welcome and encourage
your comments and suggestions. Your correspondence should be addressed as
follows:
Patricia M. Mycek
Secretary
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010
ADDITIONAL INFORMATION
The Company will provide without charge, upon written request, a copy of the
Company's Annual Report on Form 10-K for 1994. Please direct your requests to
Patricia M. Mycek, Secretary, Philadelphia Suburban Corporation, 762 W.
Lancaster Avenue, Bryn Mawr, PA 19010.
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<PAGE> 26
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the meeting. However, if any further business should properly come before
the meeting, the persons named in the enclosed proxy will vote upon such
business in accordance with their judgment.
By Order of the Board of Directors,
PATRICIA M. MYCEK
Secretary
March 31, 1995
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EXHIBIT A
AMENDMENT 1994-1
TO THE PHILADELPHIA SUBURBAN CORPORATION
1994 EQUITY COMPENSATION PLAN
1. Section 1 of the Plan is amended to read, in its entirety, as follows:
"The purpose of this plan (the "Plan") is to provide an incentive, in the form
of a proprietary interest in Philadelphia Suburban Corporation (the
"Corporation"), to officers, other key employees and Non-employee Directors,
as defined below, of the Corporation and its subsidiaries and key consultants
who are in a position to contribute materially to the successful operation of
the business of the Corporation, to increase their interest in the
Corporation's welfare, and to provide a means through which the Corporation
can attract and retain officers, other key employees and Non-employee
Directors and key consultants of significant abilities."
2. The second sentence of the first paragraph of Section 2 is amended to read,
in its entirety, as follows:
"The Committee shall consist of three or more of those members of the Board of
Directors who are not eligible, and for at least one year prior to their
appointment were not eligible, to receive discretionary grants under the Plan
or any other plan of the Corporation or any of its affiliates entitling the
participants therein to acquire stock, stock options, stock appreciation
rights or dividend equivalents of the Corporation or any of its affiliates;
provided, however, that such members shall be eligible for stock grants
pursuant to the provisions of Section 7(f)."
3. Paragraph two of Section 2 is amended by adding a new second sentence to
read, in its entirety, as follows:
"Non-employee Directors, as defined below, may only receive stock grants
pursuant to the provisions of Section 7(f)."
4. Section 3 is amended to read, in its entirety, as follows:
"Pursuant to the terms of the Plan, the Committee shall have the authority to
grant stock options to officers and other key employees and key consultants
and restricted stock and dividend equivalents to officers and other key
employees; provided, however, that Non-employee Directors, as defined below,
may receive stock grants in accordance with Section 7(f) (hereinafter
collectively referred to as the "Grants"). All Grants shall be subject to the
terms and conditions set forth herein and to those other terms and conditions
consistent with this Plan as the Committee deems appropriate and as are
specified in writing by the Committee in the agreement described in Section 9
of the Plan (the "Agreement"). Grants under a particular Section of the Plan
need not be uniform as among the grantees and Grants under two or more
Sections of the Plan may be combined in one instrument."
26
<PAGE> 28
5. The first sentence of Section 5 is amended to read, in its entirety, as
follows:
"Only officers, key employees, members of the Board of Directors who are not
employed in any capacity by the Corporation (hereinafter referred to as
'Non-employee Directors') and key consultants of the Corporation and its
subsidiaries shall be eligible for Grants under the Plan; provided, however,
that Grants to Non-employee Directors shall be made only in accordance with
Section 7(f)."
6. Section 7 is amended by adding at the end thereof a new subsection (f)
to read, in its entirety, as follows:
"(f) Stock grants to Non-employee Directors. Effective January 1, 1995, as of
the first day of the month following the Corporation's annual meeting of
shareholders, each Non-employee Director shall receive a grant of 200 shares
of Common Stock. Such shares shall not be sold for 6 months following the date
of grant. No other restrictions shall apply to such shares. Notwithstanding
any other provision of the Plan, this Section 7(f) may not be amended more
than once every 12 months, except for amendments necessary to conform the Plan
to changes of the provisions of, or the regulations relating to, the Code."
7. Section 12 is amended to read, in its entirety, as follows:
"Nothing in this Plan shall entitle any grantee or other person to any claim
or right to receive a Grant under this Plan. Neither this Plan nor any action
taken hereunder shall be construed as giving any grantee any rights to be
retained in the employ of the Corporation, to be retained as a consultant by
the Corporation or to be retained as a Non-employee Director by the
Corporation."
8. This Amendment 1994-1 shall be effective as of January 1, 1995,
conditioned upon the approval of this Amendment 1994-1 by the Corporation's
shareholders.
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<PAGE> 29
PROXY
PHILADELPHIA SUBURBAN CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PHILADELPHIA SUBURBAN CORPORATION
Proxy for Annual Meeting of Shareholders, May 18, 1995
The undersigned hereby appoints Nicholas DeBenedictis, Roy H. Stahl
and Patricia M. Mycek, or a majority of them or any one of them acting
singly in the absence of the others, with full power of substitution, the proxy
or proxies of the undersigned, to attend the Annual Meeting of Shareholders
of Philadelphia Suburban Corporation, to be held at 762 W. Lancaster Avenue,
Bryn Mawr, Pennsylvania, 19010, at 10:00 a.m. on Thursday, May 18, 1995 and
any adjournments thereof, and, with all powers the undersigned would
possess if present, to vote all shares of Common Stock of the undersigned in
Philadelphia Suburban Corporation including any shares held in the
Dividend Reinvestment Plan of Philadelphia Suburban Corporation, as designated
on the reverse side.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If the proxy is signed, but no vote is specified,
this proxy will be voted FOR the nominees listed in item 1 on the reverse
side; FOR the approval of Amendment 1994-1 to the 1994 Equity Compensation
Plan as set forth in item 2; AGAINST the Shareholder Proposal set forth in
item 3; and in accordance with the proxies' best judgment upon other
matters properly coming before the meeting and any adjournments thereof.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
(continued on reverse side)
FOLD AND DETACH HERE
PSC
Dear Shareholder:
Enclosed are materials relating to Philadelphia Suburban Corporation's
1995 Annual Meeting of Shareholders. The Notice of the Meeting and Proxy
Statement describe the formal business to be transacted at the meeting.
Your vote is important to us. Please complete, sign and return the
attached proxy card in the accompanying postage-paid envelope whether or not
you expect to attend the meeting.
Nicholas DeBenedictis
Chairman & President
<PAGE> 30
1. Election of Directors. The Board of Directors recommends that you vote FOR
all nominees: Mary C. Carroll, Claudio Ella, Joseph C. Ladd.
VOTE FOR all nominees listed WITHHOLD AUTHORITY
(except as named to the contrary) / / to vote for all nominees / /
To withhold authority to vote for any individual nominee while voting for
the remainder, write that nominee's name in the space provided below:
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2. Adoption of Amendment 1994-1 to the 1994 Equity Compensation Plan. The
Board of Directors recommends that you vote FOR approval of the adoption
of Amendment 1994-1.
FOR / / AGAINST / / ABSTAIN / /
3. Shareholder Proposal. The Board of Directors recommends that you vote
AGAINST the Shareholder Proposal to elect all nominees annually.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: , 1995
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Signature
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Signature (if held jointly)
THIS PROXY MUST BE SIGNED EXACTLY AS
NAME APPEARS HEREIN. Executors,
Administrators, trustees, etc. should
give full title as such. If the signer
is a corporation, please sign full
corporate name by duly authorized
officer.
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"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
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FOLD AND DETACH HERE