SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ............................]
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PHILADELPHIA SUBURBAN CORPORATION
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Roy H. Stahl
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form Schedule or Registration Statement No.:__________________________
3) Filing Party:_________________________________________________________
4) Date Filed:___________________________________________________________
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION
762 W. Lancaster Avenue
Bryn Mawr, Pennsylvania 19010
----------------------
Notice of Annual Meeting of Shareholders
To Be Held May 16, 1996
----------------------
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 16, 1996, for the following purposes:
1. To elect three directors;
2. To approve the adoption by the Board of Directors of Amendment
1994-2 to the Company's 1994 Equity Compensation Plan;
3. To approve the amendment to the Company's Amended and Restated
Articles of Incorporation to increase the number of shares of the
Company's Common Stock authorized for issuance from 20,000,000 to
40,000,000; 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 18, 1996
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
April 1, 1996
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
<PAGE>
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
16, 1996 and at any adjournments thereof. This proxy statement and the
enclosed proxy are being mailed to shareholders on or about April 1, 1996.
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, 1995,
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 18,
1996. 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
1994-2 to the 1994 Equity Compensation Plan and to approve the amendment to
the Company's Amended and Restated Articles of Incorporation, which would
increase the number of shares of the Company's common stock ("Common Stock")
authorized for issuance from 20,000,000 to 40,000,000.
1
<PAGE>
VOTING AT THE MEETING
Holders of shares of the Company's Common Stock of record at the close of
business on March 18, 1996 are entitled to vote at the meeting. As of that
date, there were xxxxxxxxxx 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 card is
a means by which a shareholder 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 considered a vote cast on Proposals 2
and 3 and, therefore, will have no effect on the vote on such Proposals.
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. Such shares which are not voted by brokers will
be considered present and entitled to vote at the meeting, but will not be
considered a vote cast on Proposals 2 and 3 and, therefore, will have no
effect on the vote on such Proposals.
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.
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.
2
<PAGE>
(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. Boyer, DeBenedictis and
DiBona, who are current directors and whose terms expire in 1996, are being
nominated for election as directors at the Annual Meeting for terms expiring
in 1999.
Three directors are to be elected by a plurality of the votes cast at the
Annual Meeting, and seven 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. Boyer, DeBenedictis and DiBona as directors.
GENERAL INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held six meetings in 1995. 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 1995, attended
at least 75% of the aggregate of all meetings of the Board and the Committees
on which he or she served, with the exception of Mr. Elia.
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 entire
Board is not practical, and to make recommendations to the entire Board with
respect to various matters. The Executive Committee did not meet in 1995. The
Executive Committee currently has six members, and the Chairman of the
Company serves as Chairman of the Executive Committee.
3
<PAGE>
Audit Committee. The Audit Committee is composed of four directors who are
not officers 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 1995.
Executive Compensation and Employee Benefits Committee. The Executive
Compensation and Employee Benefits Committee is composed of three members of
the Board who are not officers of the Company or any of its subsidiaries. The
Executive Compensation and Employee Benefits Committee has the power to
administer the Company's 1982 and 1988 Stock Option Plans and to administer
and make awards of stock options, dividend equivalents and restricted stock
under the Company's 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 (other than the Chief Executive Officer) 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 three meetings in 1995.
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
two meetings during 1995. 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. See
"Requirements for Advance Notifications of Nominations."
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 four members
and met four times in 1995.
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 Richard H. Glanton, Esq
G. Fred DiBona, Jr. Harvey J. Wilson
Joseph C. Ladd
John F. McCaughan
</TABLE>
4
<PAGE>
Pension Committee Nominating Committee
------------------------- -------------------------
Joseph C. Ladd* G. Fred DiBona, Jr.*
John W. Boyer, Jr. Mary C. Carroll
Nicholas DeBenedictis Nicholas DeBenedictis
Claudio Elia
- ----------
*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 2, 1996.
INFORMATION REGARDING NOMINEES AND DIRECTORS
For the three nominees for election as directors at the 1996 Annual
Meeting and the seven directors whose terms of office expire either at the
1997 Annual Meeting or the 1998 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
<PAGE>
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NOMINEES FOR ELECTION AT ANNUAL MEETING
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
John W. Boyer, Jr........ Mr. Boyer retired as Chairman of the Company on May 20, 1993, having served in that capacity
St. Davids, PA since the restructuring of the Company on July 1, 1981. Mr. Boyer also served as the
Director since 1981 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: 67.
Nicholas DeBenedictis.... Mr. DeBenedictis has served as Chairman of the Company since May 20, 1993. Mr. DeBenedictis
Ardmore, PA also continues to serve as the Company's Chief Executive Officer and President, the positions
Director since 1992 he has held 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 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 P.H. Glatfelter Company, and a member of the
PNC Bank, N.A. Philadelphia Advisory Board. Age: 50.
G. Fred DiBona, Jr. .... Mr. DiBona has served since 1990 as President and Chief Executive Officer of Independence
Bryn Mawr, PA Blue Cross, the Delaware Valley region's largest health insurer. He also serves as Chairman
Director since 1993 of Independence Blue Cross' subsidiaries and affiliates. Between 1987 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, Pennsylvania Savings Bank, Charter Medical Corporation, and various
civic and charitable organizations. Age: 45.
</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
Berwyn, PA Energy Company), a public utility, in 1988. Mr. Austin served as President of PECO
Director since 1981 Energy Company from 1982 to 1988. He is also a director of Selas Corporation of America.
Age: 67.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
John F. McCaughan....... Mr. McCaughan is Chairman of Betz Laboratories, Inc., which provides engineered chemical
Doylestown, PA treatment of water, wastewater and process systems. Mr. McCaughan was Chairman and
Director since 1984 Chief Executive Officer of Betz Laboratories from 1982 to 1994. He is also a director
of Betz Laboratories, Inc. and Penn Mutual Life Insurance Company. Age: 60.
Harvey J. Wilson....... Mr. Wilson is President and CEO of Integrated Healthcare Solutions, a healthcare
Delray Beach, FL information systems company. Mr. Wilson was a co-founder of Shared Medical Systems
Director since 1983 Corporation. He is a director of FPA Medical Management, RMSC of West Palm Beach,
and Enterprise Application Systems, Inc. Age: 57.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 1998
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Mary C. Carroll.......... Ms. 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: 55.
Claudio Elia............. Mr. Elia has served since June 1994 as Chairman and CEO of Air & Water Technologies Corporation,
Greenwich, CT an environmental services company, and since September, 1988 as President and Chief Executive
Director since 1992 Officer 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: 53.
Joseph C. Ladd .......... Mr. Ladd is the retired Chairman, President and Chief Executive Officer of The Fidelity
Rosemont, PA Mutual Life Insurance Company, serving in those capacities from July, 1971 to January,
Director since 1983 1992. He is currently a director of PECO Energy Company. Age: 69.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Richard H. Glanton, Esq... Mr. Glanton has been a partner in the law firm of Reed, Smith, Shaw & McClay in Philadelphia
Philadelphia, PA since 1986. Mr. Glanton is a director of General Accident Insurance Company of North America,
Director since 1995 PECO Energy Company and numerous civic and charitable organizations. Age: 49
</TABLE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 31, 1996,
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 Securities and Exchange Commission
("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>
Sole voting Shared voting Total and
and/or sole and/or shared percent of class
Beneficial Owner investment power investment power(1)(2) outstanding(3)
----------------------- ---------------- ---------------------- -----------------
<S> <C> <C> <C>
John H. Austin, Jr. ........................... 1,200 -- 1,200
John W. Boyer, Jr. ............................ 58,703 -- 58,703
Mary C. Carroll ............................... 1,200 447 1,647
Morrison Coulter .............................. 20,099 6,403(4) 26,502
Nicholas DeBenedictis ......................... 60,202 8,638(5) 68,840
G. Fred DiBona, Jr. ........................... 1,000 -- 1,000
Claudio Elia (6) .............................. 400 -- 400
Richard H. Glanton, Esq. ...................... 772 -- 772
Michael P. Graham ............................. 8,999 9,829 18,828
Joseph C. Ladd ................................ 2,651 -- 2,651
John F. McCaughan ............................. 3,200 -- 3,200
Richard R. Riegler ............................ 17,158 931 18,089
Roy H. Stahl .................................. 14,499 12,995 27,494
Harvey J. Wilson .............................. 6,700 -- 6,700
All directors and executive officers as a group
(14 persons) ................................. 196,783(7) 39,243(8) 236,026(1.93%)
</TABLE>
- ------
(1) The shareholdings indicated include 1,452 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.
8
<PAGE>
(3) Percentages for each person or group are based on the aggregate of the
shares of Common Stock outstanding as of January 31, 1996 (12,200,647
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, 1996 has not been shown.
(4) The shareholdings indicated include 1,280 shares owned of record by Mr.
Coulter's wife. Mr. Coulter disclaims beneficial ownership as to such
shares.
(5) The shareholdings indicated include 400 shares owned of record by Mr.
DeBenedictis' wife and 3,595 shares owned of record by Mr. DeBenedictis'
son. Mr. DeBenedictis disclaims beneficial ownership as to such shares.
(6) 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.
(7) The shareholdings indicated include 105,277 shares exercisable under the
1988 Stock Option Plan and the 1994 Equity Compensation Plan on or before
April 1, 1996.
(8) The shareholdings indicated include 24,734 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 29,
1996, 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.
Percent of
Amount and Nature Outstanding
Beneficial Owner of Beneficial Ownership Shares
--------------------------- -------------------------------- -------------
Compagnie Generale des Eaux Sole voting and dispositive power
52 Rue D'Anjou 75384 over 1,750,600 shares (1)
Paris, France 14.3%
- ---------
(1) Based on the Form 4 of Compagnie General des Eaux dated December 8, 1995.
9
<PAGE>
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 seventeen water utilities in the
Composite Market, twelve of which are included in the Edward Jones 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.
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
10
<PAGE>
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.
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 correlated with defined objectives and approved 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, 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.
Under the terms of the Company's Equity Compensation Plan, which was
approved by the shareholders at the 1994 Annual Meeting, 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.
SUMMARY OF ACTIONS TAKEN BY THE 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.
11
<PAGE>
Mr. DeBenedictis' salary for 1995 was consistent with the target level for
the CEO position within the Composite Market. Mr. DeBenedictis' salary for
1996, which was approved by the Board of Directors on February 6, 1996 and
effective on April 1, 1996, is consistent with published salary survey
information on salary levels and projected annual salary increases for 1996
and is based on the Committee's favorable assessment of his and the Company's
performance.
ANNUAL INCENTIVE AWARD
At its February 5, 1996 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 1995 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 February 6, 1996. Mr. DeBenedictis' annual
incentive compensation for 1995, was based on the Company's earnings and the
Committee's assessment of Mr. DeBenedictis' individual performance. Mr.
DeBenedictis' achievements in 1995 included increasing revenues and net
income to record levels, reducing controllable operating expenses and
interest costs, increasing customer growth through acquisitions, improving
return on equity and implementing other management initiatives intended to
control costs, enhance customer satisfaction and increase shareholder value.
It was the Committee's assessment that Mr. DeBenedictis met or exceeded all
of his 1995 objectives.
EQUITY INCENTIVES
At its March 4, 1996 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 $22.375. 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 20,000 options and
dividend equivalents on March 4, 1996 at the grant price stated above. In
addition, at its February 5, 1996 meeting, the Committee considered and
approved a recommendation from management to increase the number of shares
available for issuance under the 1994 Equity Compensation Plan. The Committee
reviewed the number of stock option awards being made annually under the
Plan, which it felt was reasonable and effective in providing the recipients,
both executive officers and other employees, with a long-term interest in the
Company. The Committee recommended to the Board of Directors that the number
of shares available under the Plan be increased by 500,000 and the Board
approved this increase at its meeting on February 6, 1996, subject to
approval by the shareholders at the Annual Meeting as set forth in Proposal
No. 2 on pages 20 to 21 of this Proxy Statement.
Respectfully submitted,
John F. McCaughan
G. Fred DiBona, Jr.
Joseph C. Ladd
12
<PAGE>
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 1995, 1994 and 1993, 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 Salary Compen- Award(s) Options/ Payouts sation
Principal Position Year ($)(1) Bonus ($)(2) sation($)(3) ($)(4) SAR's (#) ($) ($)(5)
- ------------------ ------ ----------- -------------- ------------ ----------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N. DeBenedictis ..... 1995 252,372 229,281 4,666 -- 20,000 -- 55,505
CEO 1994 241,027 157,697 4,620 174,375 15,000 -- 30,240
1993 231,751 145,454 2,698 -- 9,000 -- 21,840
R. Stahl ............ 1995 155,766 62,330 4,620 -- 4,000 -- 7,958
Sr. V.P. & Gen. Cnsl. 1994 151,775 57,682 4,453 -- 3,500 -- 1,960
1993 144,200 54,545 4,326 -- 5,000 -- --
R. Riegler (6) ...... 1995 140,548 47,389 4,216 -- 4,000 -- 8,234
Sr. V.P.-Operations 1994 135,624 36,973 2,910 -- 3,500 -- 1,960
M. Graham ........... 1995 129,501 52,078 3,885 -- 4,000 -- 8,157
Sr. V.P.-Finance 1994 122,554 43,812 3,677 -- 3,500 -- 1,960
1993 112,651 43,157 3,379 -- 5,000 -- --
M. Coulter (7) ...... 1995 125,818 34,925 3,468 -- 4,000 -- 9,245
Sr. V.P.-Production
</TABLE>
- ------
(1) Salary deferred at the discretion of the executive and contributed to the
Company's Thrift Plan or Executive Deferral 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 and
Executive Deferral Plan are included in this column.
13
<PAGE>
(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 $17.94 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 1995, the value
of the 6,667 shares still subject to restrictions was $138,340 based on a
closing price for the stock of $20.75.
(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 ($9,709); (b) Company payments on behalf of Mr.
DeBenedictis to cover the premium attributable to the term life insurance
portion of the split dollar life insurance policy ($8,897); and (c) the
amounts accrued for the named executive's accounts in 1995 in connection
with the dividend equivalent awards made in 1994 and 1995 (Messrs.
DeBenedictis $34,300; Stahl $7,430; Graham $7,430; Riegler $7,430; and
Coulter $7,430). 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. 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.
(7) Mr. Coulter is Senior Vice President of the registrant's principal
subsidiary and was designated as an executive officer of the registrant
in 1995 by the Board of Directors.
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 Jones ("EJ") 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, 1990 and the reinvestment of
all dividends. The EJ 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; Philadelphia Suburban Corporation; SJW
Corporation; Southern California Water Company; Southwest Water Company; and
United Water Resources, Inc.
14
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG PSC, S&P 500 AND EJ WATER UTILITY AVERAGE
250 |------------------------------------------------------------------|
| * |
| |
| |
225 |------------------------------------------------------------------|
| |
| |
| &# |
200 |------------------------------------------------------------------|
| * |
| * |
| & |
175 |------------------------------------------------------------------|
| & |
| & # |
| * # |
150 |------------------------------------------------------------------|
| & |
| * # |
| # |
125 |------------------------------------------------------------------|
| |
| |
| |
100 |---*&#------------------------------------------------------------|
| |
| |
| |
75 |----|----------|---------|-----------|-----------|-----------|----|
1990 1991 1992 1993 1994 1995
* = PSC & = EJ WEIGHTED AVG.
# = S&P 500
COMPARISON OF FIVE YEAR COUMULATIVE TOTAL RETURN
AMONG PSC, S&P 500 AND EJ WATER UTILITY AVERAGE
<TABLE>
<CAPTION>
Five Year Cumulative Return
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
PSC * 100.00 139.40 151.60 184.59 193.17 235.20
EJ WEIGHTED AVG & 100.00 142.79 158.14 180.18 167.86 211.18
S&P 500 # 100.00 130.34 140.26 154.33 156.43 214.99
</TABLE>
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, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
15
<PAGE>
STOCK OPTION GRANTS IN 1995
The following table sets forth information concerning individual grants of
stock options under the Company's 1994 Equity Compensation Plan during 1995
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
------------------------------------------------------------- ------------
% of
Number 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>
N. DeBenedictis .. 20,000 16.6% 17.8125 3/6/05 39,000
R. Stahl ........ 4,000 3.3% 17.8125 3/6/05 7,800
R. Riegler ...... 4,000 3.3% 17.8125 3/6/05 7,800
M. Graham ....... 4,000 3.3% 17.8125 3/6/05 7,800
M. Coulter ...... 4,000 3.3% 17.8125 3/6/05 7,800
</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 the dividend equivalent awards for 1994 and 1995 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 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 5.8%, (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 on the options.
These assumptions are not a forecast of future dividend yield, stock
performance or volatility.
16
<PAGE>
STOCK OPTION EXERCISES IN 1995 AND VALUE OF OPTIONS AT YEAR-END 1995
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 1995 by each executive officer
listed below and the number and value of unexercised options as of December
31, 1995, 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>
N. DeBenedictis -- -- 38,600 55,400 218,363 233,950
R. Stahl ....... -- -- 11,166 11,334 52,654 40,189
R. Riegler ..... -- -- 11,681 10,534 69,390 35,789
M. Graham ...... 6,500 41,750 5,666 12,334 24,279 47,752
M.Coulter ...... -- -- 16,866 11,134 99,754 39,089
</TABLE>
- ------
(1) Based on the closing price on the New York Stock Exchange-Composite
Transactions of the Company's Common Stock on December 29, 1995 ($20.75)
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 beneficiaries whose benefits under the Retirement Plan are
17
<PAGE>
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 $ 25,300 $ 33,700 $ 42,100 $ 44,600 $ 47,100
125,000 32,000 42,700 53,300 56,500 59,600
150,000 38,800 51,700 64,600 68,300 72,100
175,000 45,500 60,700 75,800 80,200 84,600
200,000 52,300 69,700 87,100 92,100 97,100
225,000 59,000 78,700 98,300 104,000 109,600
250,000 65,800 87,700 109,600 115,800 122,100
300,000 79,300 105,700 132,100 139,600 147,100
350,000 92,800 123,700 154,600 163,300 172,100
400,000 106,300 141,700 177,100 187,100 197,100
450,000 119,800 159,700 199,600 210,800 222,100
500,000 133,300 177,700 222,100 234,600 247,100
</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 $297,310 4
Roy H. Stahl ......... $181,445 14
Richard R. Riegler ... $153,941 26
Michael P. Graham .... $143,788 19
Morrison Coulter ..... $134,834 35
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
18
<PAGE>
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
$87,000.
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 in 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 1995, 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 an annual grant of 200
shares of the Company s common stock pursuant to Amendment 1994-1 to the
Company's 1994 Equity Compensation Plan approved by the shareholders at the
1995 Annual Meeting. Directors also receive 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.
CERTAIN TRANSACTIONS
Richard H. Glanton, a director, is a partner in the law firm of Reed Smith
Shaw & McClay, which provided legal services to the Company in excess of
$60,000 in 1995 and is expected to continue to do so in the future.
19
<PAGE>
(PROPOSAL NO. 2)
PROPOSAL TO APPROVE AMENDMENT 1994-2 TO THE
1994 PHILADELPHIA SUBURBAN CORPORATION
EQUITY COMPENSATION PLAN
THE PROPOSAL
At the Annual Meeting, there will be presented to the shareholders a
proposal to approve and ratify Amendment 1994-2 (the "Amendment") to the 1994
Philadelphia Suburban Corporation Equity Compensation Plan (the "Plan").
Under the proposal, Section 4 of the Plan will be amended to increase the
number of shares of Common Stock available for issuance under the Plan by
500,000 shares to an aggregate of 950,000 shares. On February 6, 1996, 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 the votes cast by those shareholders 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 votes cast. Similarly, broker non-votes
will also be considered present at the Annual Meeting, but will not be
counted as votes cast. Accordingly, abstentions and broker non-votes will
have no effect on the vote on the approval of the Amendment.
The Board of Directors recommends that all shareholders vote FOR the
approval of Amendment 1994-2 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 and dividend equivalents. The Plan permits the
grant of incentive stock options ("ISOs") and nonqualified 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 362,000 shares
have been granted. The shareholders in 1995 approved an amendment to the Plan
to provide for annual grants of 200 shares of restricted stock to
Non-employee Directors on the first day of the month following the Company's
Annual Meeting of shareholders. The Plan permits restricted stock grants of
up to 25,000 shares, 11,800 shares of which have been granted.
20
<PAGE>
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 terms of each grant. As of March 5, 1996, there are
approximately 70 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 a 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 equal to the dividend equivalents
subject to the grant during the accumulation period designated by the
Committee. The dividend equivalents 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 increase the number of shares available for
issuance under the Plan by 500,000 shares to an aggregate of 950,000 shares.
SUMMARY OF BENEFITS UNDER THE 1994 EQUITY COMPENSATION PLAN.
The only change proposed by the Amendment is an increase in the number of
authorized shares under the Plan and the Amendment does not alter the
considerations of the Executive Compensation and Employee Benefits Committee
with respect to grants under the Plan. For information with respect to grants
to certain executive officers during the year ended December 31, 1995 under
the Plan, see the table captioned "Option Grants in Last Fiscal Year" on page
16 and for information with respect to grants to the Company's non-employee
directors, see page 19 above.
21
<PAGE>
(PROPOSAL NO. 3)
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED
AND RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF THE COMPANY'S COMMON STOCK
The Board of Directors has approved and recommended for submission to the
shareholders an amendment to the Company's Amended and Restated Articles of
Incorporation, which would increase the number of shares of the Company's
Common Stock authorized for issuance from 20,000,000 to 40,000,000. The
proposed amendment would change the first sentence of Article IV of the
Amended and Restated Articles of Incorporation to increase the total number
of shares which the Company is authorized to issue to 41,770,819 and to
provide 40,000,000 of such shares shall be shares of Common Stock.
The Board of Directors recommends the proposed increase in the number of
shares of authorized Common Stock to ensure that Common Stock will be
available as needed for issuance in connection with raising additional
capital, completing acquisitions and other corporate purposes, all of which
alternatives the Company continually evaluates.
If the recommended amendment to the Amended and Restated Articles of
Incorporation is approved, the Company's Board of Directors will have the
authority to issue the additional shares of authorized Common Stock or any
part thereof without further action by stockholders except as required by
applicable laws or regulations. The Company's Board of Directors believes
that the availability of the additional shares of Common Stock for the
purposes stated without delay or the necessity for a special stockholders
meeting would be beneficial to the Company.
The issuance of additional shares of Common Stock in certain transactions
and under certain circumstances could have the effect of discouraging an
unfriendly attempt to acquire control of the Company. For example, additional
shares of Common Stock could be sold to persons, groups or entities known to
be favorable toward the Company's vision and direction. The issuance of
additional shares of Common Stock, directly or as part of the Company's
Shareholders Rights Plan, could also be used to dilute the stock ownership of
a person or entity seeking to obtain control of the Company should the Board
of Directors consider the action of such person or entity not to be in the
best interest of the stockholders and the Company. The Company's Board of
Directors is not aware of any present effort by any person or entity to
accumulate the Company's securities or to obtain control of the Company.
Except as referred to above and as set forth below, the Company does not
now contemplate any such transaction, or have any commitments, arrangements
or understandings which would require the issuance of additional shares of
Common Stock. As of March 5, 1996, __________ shares of Common Stock were
issued and outstanding. An additional 622,311 shares of Common Stock have
been reserved for issuance pursuant to options outstanding at such date. The
stockholders are also being asked to approve at the Annual Meeting an
increase in the number of shares that may be issued upon exercise of options
granted under the 1994 Equity Compensation Plan. See "Amendments to 1994
Equity Compensation Plan."
22
<PAGE>
Each additional share of Common Stock authorized by the proposed amendment
will have the same rights and privileges as each share of Common Stock
currently authorized or outstanding. Stockholders will have no preemptive
rights to receive or purchase any of the Common Stock authorized by this
proposed amendment.
As soon as practicable after such affirmative vote has been taken, the
amendment will be filed with the Secretary of State of the Commonwealth of
Pennsylvania.
The board of directors unanimously recommends a vote FOR approval of the
amendment to the Restated Certificate of Incorporation.
SHAREHOLDER SUGGESTIONS AND PROPOSALS FOR 1997 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 1997 Annual Meeting, resolutions must be received by
December 2, 1996.
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 1995. Please direct your
requests to Patricia M. Mycek, Secretary, Philadelphia Suburban Corporation,
762 W. Lancaster Avenue, Bryn Mawr, PA 19010.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Act") requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities (a 10% Shareholder), to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors and 10% Shareholders are
required by the SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
a written representation from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period
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January 1, 1995 through December 31, 1995, all filing requirements applicable to
its officers, directors and 10% Shareholders have been complied with, except
that one transaction in May, 1995 by Mr. DiBona, a director, was filed late on
August 15, 1995.
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
April 1, 1996
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EXHIBIT A
AMENDMENT 1994-2
TO THE PHILADELPHIA SUBURBAN CORPORATION
1994 EQUITY COMPENSATION PLAN
1. Section 4 of the Plan is amended to read, in its entirety, as follows:
"Subject to adjustment as provided in Section 15, the maximum aggregate
number of shares of the Common Stock of the Corporation that may be issued or
transferred under the Plan shall be 950,000 shares. The maximum number of
shares of Common Stock that may be issued or transferred under the Plan
subject to restricted stock grants is 25,000 shares of Common Stock. Shares
deliverable under the Plan may be authorized and unissued shares or treasury
shares, as the Committee may from time to time determine. Shares of Common
Stock related to the unexercised or undistributed portion of any terminated,
expired or forfeited Grant for which no material benefit was received by a
grantee also may be made available for distribution in connection with future
Grants under the Plan."
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