SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHILADELPHIA SUBURBAN CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/_/ $125 per Exchange Act Rule 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(1)(3).
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
/X/ No Fee Required.
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:
_____________________________________________________________________________
/_/ 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 No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
PHILADELPHIA SUBURBAN CORPORATION
762 W. LANCASTER AVENUE
BRYN MAWR, PENNSYLVANIA 19010
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1999
------------------------------
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 DOUBLETREE GUEST
SUITES-PLYMOUTH MEETING, 640 WEST GERMANTOWN PIKE, PLYMOUTH MEETING,
PENNSYLVANIA 19462, at 10:00 A.M., local time, on Thursday, May 20, 1999, for
the following purposes:
1. To elect four directors to the class of directors for terms
expiring at the 2002 Annual Meeting; and
2. 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 24, 1999 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 9, 1999
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 20,
1999 and at any adjournments thereof. This proxy statement and the enclosed
proxy are being mailed to shareholders on or about April 9, 1999.
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, 1998,
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 24, 1999. Additional
copies of the Annual Report may be obtained by writing to the Company. KPMG LLP,
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.
PURPOSE OF THE MEETING
As the meeting is the Annual Meeting of Shareholders, the shareholders of
the Company will be requested to elect four directors to hold office as provided
by law and the Company's Bylaws.
1
<PAGE>
VOTING AT THE MEETING
Holders of shares of the Company's Common Stock of record at the close of
business on March 24, 1999 are entitled to vote at the meeting. As of that date,
there were 40,788,000 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 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 a majority
of the votes cast by those shareholders present in person or represented by
proxy at the meeting is required 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. 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 any other matters. Such shares which are not voted by brokers
will be considered present and entitled to vote at the meeting.
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>
(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. The Company is required by its Articles of Incorporation and Bylaws
to maintain the size of its classes of directors as nearly equal in number as
possible.
In early 1998, the Board of Directors approved the retention of John H.
Austin, Jr. and John W. Boyer, Jr. until the end of 1998 even though Mr. Austin
and Mr. Boyer would reach the Board's mandatory retirement age of 70 during
1998. Messrs. Austin and Boyer then retired from the Board at the end of 1998.
Under the terms of the Amended and Restated Agreement and Plan of Merger,
dated as of August 5, 1998, by and among Philadelphia Suburban Corporation,
Consumers Water Company and Consumers Acquisition Company (the "Consumers Merger
Agreement"), which was approved by the Shareholders of Philadelphia Suburban
Corporation and Consumers Water Company at their respective special meetings of
shareholders on November 16, 1998, the Company agreed to use its best efforts to
increase the authorized number of directors to permit the appointment of four
directors of Consumers to serve as directors of PSC effective as of the
completion of the merger. The terms of the Consumers Merger Agreement provided
that one such director be appointed to serve until the Company's 1999 Annual
Meeting, one such director be appointed to serve until the Company's 2000 Annual
Meeting and two such directors be appointed to serve until the Company's 2001
Annual Meeting. The Consumers Merger Agreement also required the Company to
include one of the Consumers directors on the list of nominees for directors for
election at the 1999 Annual Meeting. The retirements of Messrs. Austin and Boyer
and the appointment of the four directors from Consumers Water Company pursuant
to the provisions of the Consumers Merger Agreement would have resulted in the
Company having three directors in the class of directors with term expiring at
the 1999 Annual Meeting, four directors with terms expiring at the 2000 Annual
Meeting and five directors with terms expiring at the 2001 Annual Meeting.
In light of these circumstances and in keeping with the requirements of the
Company's Articles of Incorporation and Bylaws, the Board of Directors, at its
February 2, 1999 and March 2, 1999 meetings, upon the recommendation of the
Corporate Governance Committee (the "Governance Committee") initially (i)
decreased the size of the Board of Directors from ten to nine, (ii) decreased
the size of the class of directors with terms expiring at the 2000 Annual
Meeting from four to three and (iii) nominated Nicholas DeBenedictis, G. Fred
DiBona and John E. Menario for election to the class of directors at the 1999
Annual Meeting. Messrs. DeBenedictis and DiBona are current directors whose
terms expire at the 1999 Annual Meeting and Mr. Menario is the former Chairman
of Consumers Water Company. The nomination of Mr. Menario was contingent on the
completion of the merger with
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<PAGE>
Consumers Water Company. The Board of Directors, upon the recommendation of the
Governance Committee, then took the following actions effective as of the
effective date of the Consumers merger: (i) increased the size of the Board of
Directors from nine to twelve; (ii) elected John E. Menario to the class of
directors with terms expiring at the 1999 Annual Meeting; (iii) increased the
size of the class of directors with terms expiring at the 1999 Annual Meeting
from three to four and elected Mary C. Carroll, whose term was to expire at the
2001 Annual Meeting, to this class of directors; (iv) increased the size of the
class of directors with terms expiring at the 2000 Annual Meeting from three to
four and elected John E. Palmer, Jr. to this class of directors; and (v)
increased the size of the class of directors with terms expiring at the 2001
Annual Meeting from three to four and elected Mr. Robert O. Viets and Mr. Michel
Avenas to this class of directors. Messrs. Palmer, Viets and Avenas are also
former directors of Consumers Water Company who were proposed for election to
the Company's Board of Directors in accordance with the terms of the Consumers
Merger Agreement.
Therefore, four directors, Messrs. DeBenedictis, DiBona and Menario and
Mrs. Carroll, are to be elected by a plurality of the votes cast at the Annual
Meeting and eight directors will continue to serve in accordance with their
prior election, including the three directors in addition to Mr. Menario elected
by the Board effective as of the effective date of the Consumers merger pursuant
to the terms of the Consumers Merger Agreement. At the meeting, proxies in the
accompanying form, properly executed, will be voted for the election of the four
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 or her
willingness to serve and the Company believes that all of the nominees will be
available to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF MESSRS. DEBENEDICTIS, DIBONA AND MENARIO AND MRS. CARROLL AS
DIRECTORS.
GENERAL INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held eight meetings in 1998. 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, Corporate Governance (formerly the
Nominating Committee), and Pension Committees. Each incumbent director, except
for Mr. Wilson , for the period served in 1998, attended at least 75% of the
aggregate 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
4
<PAGE>
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 1998. The Executive Committee currently has
five 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 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
1998.
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 1988 Stock Option Plan 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 four meetings in 1998.
Corporate Governance Committee. The Board of Directors reorganized the
Nominating Committee into a Corporate Governance Committee in 1998. In addition
to identifying qualified nominees for directors, the Corporate Governance
Committee is responsible for developing and periodically reviewing the Corporate
Governance Guidelines by which the Board of Directors will organize and execute
its responsibilities. The Corporate Governance Committee has three members and
held two meeting during 1998. It is the present policy of the Corporate
Governance 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
Corporate Governance Committee in care of the Company. See "Requirements for
Advance Notification 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 three members and met three times
in 1998.
5
<PAGE>
The current members of the Committees of the Board of Directors are as
follows:
<TABLE>
<CAPTION>
EXECUTIVE
COMPENSATION AND
EXECUTIVE EMPLOYEE BENEFITS AUDIT
COMMITTEE COMMITTEE COMMITTEE
--------- ----------------- ---------
<S> <C> <C>
Nicholas DeBenedictis* John F. McCaughan* Richard L. Smoot*
G. Fred DiBona, Jr. G. Fred DiBona, Richard H. Glanton, Esq.
Richard H. Glanton, Esq. Jr. Harvey J. Wilson
John F. McCaughan Alan R. Hirsig
Richard L. Smoot
</TABLE>
<TABLE>
<CAPTION>
PENSION CORPORATE GOVERNANCE
COMMITTEE COMMITTEE
--------- --------------------
<S> <C>
Richard H. Glanton, Esq.* G. Fred DiBona, Jr.*
Mary C. Carroll Nicholas DeBenedictis
Nicholas DeBenedictis Mary C. Carroll
</TABLE>
- - ------------------
* 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;
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<PAGE>
(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 6, 1999.
INFORMATION REGARDING NOMINEES AND DIRECTORS
For the four nominees for election as directors at the 1999 Annual Meeting
and the eight directors in the classes of directors whose terms of office expire
either at the 2000 Annual Meeting or the 2001 Annual Meeting, including the
directors elected to the Board pursuant to the Consumers Merger Agreement, 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.
7
<PAGE>
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NOMINEES FOR ELECTION AT ANNUAL MEETING
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Nicholas DeBenedictis ............... Mr. DeBenedictis has served as Chairman of the Company
Ardmore, PA since May 20, 1993. Mr. DeBenedictis also continues to
Director since 1992 serve as the Company's Chief Executive Officer and
President, the positions he has held since joining the
Company in July 1992. He also serves as Chairman and
Chief Executive Officer 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, P.H.
Glatfelter Company and Met-Pro Corporation and a member
of the Board of Trustees of Drexel University. Age: 53.
G. Fred DiBona, Jr. ................. Mr. DiBona has served since 1990 as President and Chief
Bryn Mawr, PA Executive Officer of Independence Blue Cross,the
Director since 1993 Delaware Valley region's largest health insurer. He
also serves as Chairman 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,
Magellan Health Services, Inc., PECO Energy Company,
Tasty Baking Company, CorCell, Inc., Eclipsys
Corporation, MedMax, Inc. and various civic and
charitable organizations. Age: 48.
Mary C. Carroll ..................... Ms. Carroll is a consultant, a community volunteer and
Bryn Mawr, PA an advisor to nonprofit corporations, businesses and
Director since 1981 government agencies. Presently, she serves as Chair of
the National Parks Mid-Atlantic Council. She is Vice
Chair of Ft. Mifflin on the Delaware and is a founder,
director or trustee of various civic and charitable
organizations, including the Metropolitan YMCA, the
Urban Affairs Coalition, Philadelphia Hospitality,
Inc., International House, and Preservation Action.
Age: 58.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
John E. Menario ..................... Special Assistant to the President of Peoples Heritage
Portland, ME Financial Group, Inc., a multi-bank holding company
Director since 1999 since 1996. Senior Executive Vice President and Chief
Operating Officer of Peoples Heritage Financial Group,
Inc., from 1990 to 1996. Age: 63
</TABLE>
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 2000
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. McCaughan ................... In 1998, Mr. McCaughan retired as President of the
Doylestown, PA BetzDearborn, Inc. Foundation, having served in that
Director since 1984 capacity since 1995. From 1995 to 1996, Mr. McCaughan
was Chairman of Betz Laboratories, Inc., which provides
engineered chemical treatment of water, wastewater and
process systems. Mr. McCaughan was Chairman and Chief
Executive Officer of Betz Laboratories from 1982 to
1994. He is also a director of Penn Mutual Life
Insurance Company Petroferm, Inc. and numerous
charitable organizations. Age: 63.
Harvey J. Wilson .................... Mr. Wilson is Chairman and CEO of Eclipsys Corporation,
Delray Beach, FL a healthcare information systems company. Mr. Wilson
Director since 1983 was a co- founder of Shared Medical Systems
Corporation. He is also a director of Eclipsys
Corporation and RMSC of West Palm Beach. Age: 60
Alan R. Hirsig ...................... Mr. Hirsig retired as President and Chief Executive
Haverford, PA Officer of ARCO Chemical Company in 1998, a position he
Director since 1997 held since 1991. From 1984 to 1990, Mr. Hirsig was
President of ARCO Chemical European Operations. Mr.
Hirsig is a director of Checkpoint Systems, Inc. and
Hercules, Inc., as well as a trustee of Bryn Mawr
College, the YMCA of Philadelphia and Vicinity, the
Rosenbach Museum and Library and the Curtis Institute
of Music. He also is Chairman of the Advisory Board of
PRIME, Inc. Age: 59.
John E. Palmer, Jr. ................. Chairman of the Board of Down-East Concepts, Inc., a
Portland, ME manufacturer and wholesaler of stationery and
Director since 1999 handcrafted gifts. Age: 62.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 2001
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Richard H. Glanton, Esq. ............ Mr. Glanton has been a partner in the law firm of Reed
Philadelphia, PA Smith Shaw & McClay in Philadelphia since 1986. Mr.
Director since 1995 Glanton is a director of GCU Corporation of North
America, PECO Energy Company, Wackenhut Corrections
Corporation, the Greater Philadelphia Chamber of
Commerce, the Philadelphia Industrial Development
Corporation and the Philadelphia Convention and
Visitors Bureau. Age: 52
Richard L. Smoot .................... Mr. Smoot has served as President and Chief Executive
Radnor, PA Officer of PNC Bank in Philadelphia and Southern New
Director since 1997 Jersey, and its predecessor, Provident National Bank,
since 1991. Prior to becoming President, he served as
Executive Vice President responsible for Operations and
Data Processing for PNC Bank Corp. Before joining PNC
Bank in 1987, Mr. Smoot spent 10 years as First Vice
President and Chief Operating Officer of the Federal
Reserve Bank of Philadelphia. Mr. Smoot is a director
of P.H. Glatfelter Company and Southco Inc. He also
serves as Chairman of the Board of Directors of Greater
Philadelphia First and the Philadelphia Award and is a
director of the Philadelphia Orchestra, the Settlement
Music School, the Philadelphia Urban Affairs Coalition
and Widener University. Age: 58.
Michel Avenas ....................... President of Vivendi North America, a subsidiary of,
New York, NY and holding company for, certain of the U.S.
Director since 1999 investments of Vivendi (formerly Compagnie Generale des
Eaux). Prior to this position, he served as Assistant
to the Chairman of Vivendi, a French conglomerate,
which provides various municipal services such as water
and wastewater treatment, from 1991 to 1997. Age: 43
Robert O. Viets ..................... President and Chief Executive Officer of CILCORP Inc.,
Peoria, IL a holding company for energy services businesses. In
Director since 1999 addition to being a director of CILCORP Inc., Mr. Viets
is also a director of RLI Corp. and Central Illinois
Light Company. Age: 55
</TABLE>
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<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 31, 1999,
or as of the effective date of the Consumers Water Company merger for Messrs.
Avenas, Menario, Palmer and Viets, with respect to shares of Common Stock of the
Company beneficially owned by each director, nominee for director and executive
officer and by all directors, nominees 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>
SHARED
SOLE VOTING
VOTING AND/OR TOTAL AND
AND/OR SOLE SHARED PERCENT OF
INVESTMENT INVESTMENT CLASS
BENEFICIAL OWNER POWER POWER(1)(2) OUTSTANDING(3)
- - ---------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Michel Avenas(4)............................. 143 -- 143
Mary C. Carroll.............................. 3,267 1,010 4,277
Morrison Coulter............................. 54,465 15,339(5) 68,804
Nicholas DeBenedictis........................ 252,761 63,524(6) 316,285
G. Fred DiBona, Jr........................... 3,200 -- 3,200
Richard H. Glanton, Esq...................... 1,797 127 1,924
Michael P. Graham............................ 24,665 35,637 60,302
Alan R. Hirsig............................... 3,466 -- 3,466
John F. McCaughan............................ 7,600 -- 7,600
John E. Menario.............................. 2,346 1,338(7) 3,684
John E. Palmer, Jr........................... 389 7,027 7,416
Richard R. Riegler........................... 47,619 2,961 50,580
Richard L. Smoot(8).......................... 1,400 -- 1,400
Roy H. Stahl................................. 40,999 34,702 75,701
Robert O. Viets.............................. 2,905 -- 2,905
Harvey J. Wilson............................. 14,600 -- 14,600
All directors and executive officers as a
group (16 persons)......................... 461,622(9) 161,665(10) 622,287(1.5%)
</TABLE>
- - ------------------
(1) The shareholdings indicated include 12,008 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 March 10, 1999 (40,809,596 shares)
and all shares issuable to such person or
11
<PAGE>
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 March 10, 1999 has not been shown.
(4) As President of Vivendi North America, Mr. Avenas oversees Vivendi'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 Vivendi.
(5) The shareholdings indicated include 3,054 shares owned of record by Mr.
Coulter's wife. Mr. Coulter disclaims beneficial ownership as to such
shares.
(6) The shareholdings indicated include 868 shares owned of record by Mr.
DeBenedictis' wife and 8,678 shares owned of record by Mr. DeBenedictis'
son. Mr. DeBenedictis disclaims beneficial ownership as to such shares.
(7) The shareholdings indicated include 50 shares held by Mr. Menario's wife.
Mr. Menario disclaims beneficial ownership as to such shares.
(8) The shareholdings indicated do not include approximately 453,741 shares as
to which PNC Bank, National Association, or its affiliates have sole voting
power as trustee of the Philadelphia Suburban Corporation Thrift Plan and
Philadelphia Suburban Water Company Personal Savings Plan for Local 473
Employees. Mr. Smoot is the President and Chief Executive Officer of PNC
Bank in Philadelphia and Southern Jersey. Mr. Smoot disclaims beneficial
ownership of such shares.
(9) The shareholdings indicated include 353,430 shares exercisable under the
1988 Stock Option Plan and the 1994 Equity Compensation Plan on or before
April 1, 1999.
(10) The shareholdings indicated include 121,370 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 March 10, 1999,
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
OUTSTANDING
BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP SHARES
- - ---------------- ----------------------------------------- -----------
<S> <C> <C>
Vivendi Sole voting and dispositive 16.1%
42 Avenue power over 6,576,088
de Friedland 75380 shares (1)
Paris, Cedex 08 France
</TABLE>
- - ------------------
(1) Based on the Form 4 of Vivendi dated January 21, 1999, adjusted for the
merger of Consumers Water Company and the conversion of Vivendi's 2,040,658
shares of Consumers into shares of Philadelphia Suburban Corporation.
12
<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 high quality, 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, ten of which are included in
the Edward Jones Water Utility Industry 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.
13
<PAGE>
COMPENSATION COMPONENTS
Base Salary
To ensure that its pay levels are competitive, the Company, with the
assistance of its compensation consultant, 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. 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 1994 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.
14
<PAGE>
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.
Mr. DeBenedictis' salary for 1998 was consistent with the target level for
the CEO position within the Composite Market. Mr. DeBenedictis' salary for 1999,
which was approved by the Board of Directors on February 2, 1999 and effective
on April 1, 1999, is consistent with published salary survey information on
salary levels and projected annual salary increases for 1999 and is based on the
Committee's favorable assessment of his and the Company's performance as well as
Mr. DeBenedictis' increased responsibilities as a result of the Consumers Water
Company merger.
Annual Incentive Award
At its February 1, 1999 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 1998 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 2, 1999. Mr. DeBenedictis' annual incentive
compensation for 1998 was based on the Company's earnings and the Committee's
assessment of Mr. DeBenedictis' individual performance. Mr. DeBenedictis'
achievements in 1998 included increasing revenues and net income to record
levels, reducing controllable operating expenses and interest costs below
budget, 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 all his objectives and well
exceeded his objectives on earnings, growth and acquisitions.
Equity Incentives
At its March 1, 1999 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 $21.4063. 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 40,000 options and dividend equivalents on
March 1, 1999 at the grant price stated above. At its meeting, the Committee
also approved management's recommendation to reduce the performance period for
the dividend equivalents granted in 1997 and 1998 by one year based on the
Company's performance against the
15
<PAGE>
1998 measurement criteria established by the Committee for this purpose at its
March 2, 1998 meeting. The measurement criteria involve targets for earnings per
share, dividends, total return to shareholders and customer growth. In May,
1998, the Committee granted Mr. DeBenedictis 5,000 shares of restricted stock
under the 1994 Equity Compensation Plan. This grant was in line with the
recommendations of the Company's compensation consultant as being an appropriate
means to reward Mr. DeBenedictis for his performance in increasing shareholder
value and to serve as a retention incentive. 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
restrictions, but may not sell or otherwise dispose of the shares until the end
of the restricted period.
At a meeting of the Board of Directors on August 4, 1998, the Board,
subject to approval by the shareholders, adopted Amendment 1998-1 to the 1994
Equity Compensation Plan which enabled the Committee to issue stock options
under the Plan to holders of options to purchase Consumers Common Stock as
required by the Consumers Merger Agreement. The Amendment also increased the
number of shares of the Company's Common Stock that could be issued under the
Plan from 1,900,000 to 2,900,000. Amendment 1998-1 was approved by the
shareholders at a special meeting of shareholders on November 16, 1998 called to
approve, among other things, the Consumers Water Company merger.
Section 162(m) of the Internal Revenue Code generally precludes the
deduction for federal income tax purposes of more than $1 million in
compensation paid to the Chief Executive Officer and the other officers named in
the Summary Compensation Table in any one year, subject to certain specified
exceptions. Given the nature of the stock option grants and the level of other
compensation paid to the Chief Executive Officer and the other executive
officers named in the Summary Compensation Table, the deduction limitation is
presently inapplicable to the Company. The Committee will address this
limitation if and when it becomes applicable to the Company's compensation
program.
Respectfully submitted,
John F. McCaughan
G. Fred DiBona, Jr.
Alan R. Hirsig
The foregoing report of the Executive Compensation and Employee Benefits
Committee shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
16
<PAGE>
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during the years 1998, 1997 and 1996 for the
Company's Chief Executive Officer and the other four most highly compensated
executive officers of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ----------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SAR'S PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) (#)(5) ($) ($)(6)
--------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N. DeBenedictis ............... 1998 282,296 267,188 4,800 436,250 40,000 -- 113,910
CEO 1997 268,902 245,775 4,750 -- 40,000 -- 116,691
1996 261,619 206,325 4,911 -- 40,000 -- 80,694
M. Coulter .................... 1998 144,581 57,156 4,155 -- 8,000 -- 21,593
President-PSW 1997 137,852 53,999 3,604 -- 8,000 -- 21,167
1996 132,756 37,455 3,589 -- 8,000 -- 15,494
R. Stahl ...................... 1998 167,921 66,151 4,863 -- 8,000 -- 19,309
Sr. V.P. & Gen. Cnsl. 1997 162,625 51,132 4,351 -- 8,000 -- 19,182
1996 158,852 49,808 4,911 -- 8,000 -- 13,042
M. Graham ..................... 1998 147,014 58,580 4,320 -- 8,000 -- 21,172
Sr. V.P.-Finance 1997 140,329 52,691 4,210 -- 8,000 -- 21,696
1996 134,934 45,763 4,048 -- 8,000 -- 13,261
R. Riegler .................... 1998 155,084 54,252 4,491 -- 8,000 -- 19,734
Sr. V.P.-Eng. & Environ. Aff. 1997 149,837 54,306 4,495 -- 8,000 -- 19,493
1996 144,944 42,158 4,348 -- 8,000 -- 13,878
</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 under the Company's Thrift Plan and Executive
Deferral Plan are included in this column.
(4) Mr. DeBenedictis was awarded a grant of 15,000 shares of restricted stock on
March 2, 1998 and 5,000 shares of restricted stock on May 21, 1998 under the
Company's 1994 Equity Compensation Plan. The fair market value of the shares
awarded on March 2, 1998 was $22.3125 per share and the fair market value of
the shares awarded on May 21, 1998 was $20.3125 per share based on the
closing prices on the New York Stock Exchange on those dates. One-third of
the restricted stock under each grant will be released to Mr. DeBenedictis
each year on the anniversary of each grant and he is entitled to receive the
dividends on the restricted shares pending their release. At year-end 1998,
the value of the 20,000 shares still subject to restrictions was $591,250
based on the closing price for the stock on December 31, 1998 of $29.5625.
(5) Option award numbers have been restated to reflect the December 1997 4-for-3
stock split in the form of a stock distribution.
(6) 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 ($13,880); (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 ($1,454); (c) the amounts
accrued for the named executive's accounts in 1998 in connection with the
dividend equivalent awards made from 1994 through 1998 (Messrs. DeBenedictis
$89,550, Stahl $18,235, Graham $18,235, Riegler $18,235, and Coulter
$18,235); (d) the value of group term life insurance maintained by the
Company on the named executives (Messrs. DeBenedictis $2,956, Stahl $995,
Graham $1,406, Riegler $1,499 and Coulter $3,358); and (e) earnings in 1998
on amounts deferred under the Company's Executive Deferral Plan
(DeBenedictis $6,070, Stahl $79, and Graham $1,531). 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.
17
<PAGE>
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 $100 investment on January 1, 1993 and the reinvestment of
all dividends. The EJ Water Utility Industry Index consists of the following
companies: American Water Works Company, Inc.; American States Water Company;
Aquarion Company; California Water Service Company; Connecticut Water Service
Company; Consumers Water Company; Dominguez Services Corporation; E'town
Corporation; Middlesex Water Company; Philadelphia Suburban Corporation; SJW
Corporation; Southwest Water Company; and United Water Resources, Inc.
[GRAPHIC OMITTED]
In the printed document, a line graph appears, depicting the following plot
points:
PSC EJ WEIGHTED AVG. S&P 500
1993 100 100 100
1994 104.65 92.66 101.32
1995 127.42 117.58 139.37
1996 192.02 141.16 171.35
1997 295.53 192.79 228.5
1998 407.34 243.88 293.8
The foregoing comparative stock performance graph shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
18
<PAGE>
STOCK OPTION GRANTS IN 1998
The following table sets forth information concerning individual grants of
stock options under the Company's 1994 Equity Compensation Plan during 1998 to
each executive officer identified in the Summary Compensation Table who received
options during the period.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------ ----------------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SAR'S EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SAR'S EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE VALUE($)(3)
---- ------------- ------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
DeBenedictis................... 40,000 15.2% 21.1250 3/2/2008 212,800
Coulter........................ 8,000 3.0% 21.1250 3/2/2008 42,560
Stahl.......................... 8,000 3.0% 21.1250 3/2/2008 42,560
Graham......................... 8,000 3.0% 21.1250 3/2/2008 42,560
Riegler........................ 8,000 3.0% 21.1250 3/2/2008 42,560
</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 one-third 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 through 1998 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 2.9%, (ii) a risk free rate of return
of 5.6%, (iii) volatility of 16.9%, (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.
20
<PAGE>
STOCK OPTION EXERCISES IN 1998 AND VALUE OF OPTIONS AT YEAR-END 1998
The following table sets forth information concerning the number of stock
options exercised under the Company's 1988 Stock Option Plan and the 1994 Equity
Compensation Plan during 1998 by each executive officer listed below and the
number and value of unexercised options as of December 31, 1998, 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......... 22,679 393,959 179,097 80,000 5,294,555 2,365,000
Coulter.............. 32,998 16,002 975,503 473,059
Stahl................ 10,000 193,438 32,998 16,002 975,503 473,059
Graham............... 16,665 16,002 492,659 473,059
Riegler.............. 2,225 27,646 19,669 16,002 581,465 473,059
</TABLE>
- - ------------------------
(1) Based on the average of the high and low price on the New York Stock
Exchange-Composite Transactions of the Company's Common Stock on December
31, 1998 ($29.5625).
20
<PAGE>
<PAGE>
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 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.
21
<PAGE>
PENSION TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BASED ON SERVICE OF
AVERAGE SALARY DURING ----------------------------------------------------
FIVE YEARS PRECEDING RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000........................... $ 24,900 $ 33,200 $ 41,500 $ 44,000 $ 46,500
125,000........................... 31,600 42,200 52,700 55,900 59,000
150,000........................... 38,400 51,200 64,000 67,700 71,500
175,000........................... 45,100 60,200 75,200 79,600 84,000
200,000........................... 51,900 69,200 86,500 91,500 96,500
225,000........................... 58,600 78,200 97,700 103,400 109,000
250,000........................... 65,400 87,200 109,000 115,200 121,500
300,000........................... 78,900 105,200 131,500 139,000 146,500
350,000........................... 92,400 123,200 154,000 162,700 171,500
400,000........................... 105,900 141,200 176,500 186,500 196,500
450,000........................... 119,400 159,200 199,000 210,200 221,500
500,000........................... 132,900 177,200 221,500 234,000 246,500
</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, 1999, be entitled to a pension based on the remuneration level listed in the
following table:
<TABLE>
<CAPTION>
COMPLETED
COVERED YEARS OF
NAME REMUNERATION CREDITED SERVICE
---- ------------- ----------------
<S> <C> <C>
Nicholas DeBenedictis.............................. $458,590 7
Roy H. Stahl....................................... $208,663 17
Richard R. Riegler................................. $189,047 29
Michael P. Graham.................................. $182,366 22
Morrison Coulter................................... $168,844 38
</TABLE>
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
22
<PAGE>
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
$120,600.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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. In the event that the employment of any of
the executive officers named in the Summary Compensation Table set forth above
is terminated, actually or constructively, within two years following a change
of control of the Company, the executive officers will be entitled to certain
payments under agreements with the Company and its primary subsidiary,
Philadelphia Suburban Water Company. Under the terms of these agreements, the
Chief Executive Officer will be entitled to two and one-half times his average
annual base cash compensation and the other executive officers will be entitled
to two times their average annual base cash compensation, plus continuation of
their normal fringe benefits for a period of three years for the Chief Executive
Officer and two years for the other executive officers. The agreement with the
Chief Executive Officer also provides that, in exchange for a non-competition
agreement, he will be entitled to receive one-half of his average annual base
cash compensation and the transfer to him of a split dollar life insurance
policy maintained by the Company on his life. Under the terms of the 1994 Equity
Compensation Plan approved by the shareholders, outstanding stock options will
become immediately exercisable, accrued 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. Members of the Board of Directors who are not full-time employees of the
Company or any of its subsidiaries ("Non-employee Directors") receive an annual
retainer fee of $12,000, plus an annual grant of 400 shares of the Company's
Common Stock. Directors also receive a fee of $1,000 for attendance at each
meeting of the Board of Directors of the Company, including Committee meetings.
In addition, each Committee Chairman who is a Non-employee Director receives an
annual retainer fee of $2,500. All directors are reimbursed for reasonable
expenses incurred in connection with attendance at Board or Committee meetings.
23
<PAGE>
CERTAIN TRANSACTIONS
Richard H. Glanton, a director, is a partner in the law firm of Reed Smith
Shaw & McClay, which firm has provided legal services to the Company in 1998.
SHAREHOLDER SUGGESTIONS AND PROPOSALS FOR 2000 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 2000
Annual Meeting, resolutions must be received by December 11, 1999.
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 1998. PLEASE DIRECT YOUR REQUESTS
TO PATRICIA M. MYCEK, SECRETARY, PHILADELPHIA SUBURBAN CORPORATION, 762 W.
LANCASTER AVENUE, BRYN MAWR, PA 19010.
24
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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 Form 5's were
required for those persons, the Company believes that, during the period January
1, 1998 through December 31, 1998, all filing requirements applicable to its
officers, directors and 10% Shareholders have been complied with, except that a
purchase of 2,000 shares by Vivendi in November 1998 was reported in January
1999.
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 9, 1999
25
<PAGE>
4959-PS-99
<PAGE>
[PSC LOGO]
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
Dear Shareholder:
Enclosed are materials relating to Philadelphia Suburban Corporation's
1999 Annual Meeting of Shareholders. The Notice of the Meeting and Proxy
Statement describe the formal business to be transacted at the meeting.
One of the concerns frequently expressed by shareholders at the Annual
Meeting (and throughout the year) is the cost of mailing duplicate annual
reports. In order to respond to this concern, starting this year we are mailing
only one annual report to each account. Therefore, if you have more than one
account in your name, you will only receive one annual report. You will,
however, receive a Proxy Statement for each account. Should you wish to receive
additional annual reports, you may do so by calling PSC at 610-527-8000.
Your vote is important to us. Please complete, sign and return your
attached proxy card in the accompanying postage-paid envelope whether or not you
expect to attend the meeting.
Nicholas DeBenedictis
Chairman & President
PSC ??? DETACH HERE
- - -------------------------------------------------------------------------------
|X| Please mark
votes as in
this example.
1. Election of Directors. The Board of Directors recommends that you vote FOR
all nominees: Mary C. Carroll, Nicholas DeBenedictis, G. Fred DiBona, Jr., John
Menano.
FOR WITHHELD
ALL FROM ALL
NOMINEES |_| NOMINEES |_|
|_|
-------------------------------------
For all nominees except as noted above
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING |_|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
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.
Signature: ____________________ Date: __________
Signature: ____________________ Date: __________
PSCO5B DETACH HERE
- - --------------------------------------------------------------------------------
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 20, 1999
The undersigned hereby appoints Michael P. Graham, 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 The Doubletree Guest Suites-Plymouth
Meeting, 640 West Germantown Pike, Plymouth Meeting, PA 19462, at 10:00 a.m.,
on Thursday, May 20, 1999 and any adjournments thereof, and, with all powers 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.
The 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 and the reverse side,
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.
SEE REVERSE SIDE SEE REVERSE SIDE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
