SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File
number 1-6659
PHILADELPHIA SUBURBAN CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1702594
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
762 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
- --------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (610)-527-8000
------------------
Securities registered pursuant to Section
12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- --------------------------
Common stock, par value $.50 per share New York Stock Exchange, Inc.
Philadelphia Stock Exchange Inc.
Securities registered pursuant to Section
12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes x No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 3, 1997. $328,672,705
For purposes of determining this amount only, registrant has defined
affiliates as including (a) the executive officers named in Part I of
this 10-K report, (b) all directors of registrant, and (c) each
shareholder that has informed registrant by March 3, 1997, that it has
sole or shared voting power of 5% or more of the outstanding common
stock of registrant.
The number of shares outstanding of each of the registrant's classes of common
stock as of March 3, 1997. 19,242,350
Documents incorporated by reference
(1) Portions of registrant's 1996 Annual Report to Shareholders have
been incorporated by reference into Parts I and II of this Form 10-K
Report.
(2) Portions of the Proxy Statement, relative to the May 15, 1997
annual meeting of shareholders of registrant, to be filed within 120
days after the end of the fiscal year covered by this Form 10-K Report,
have been incorporated by reference into Part III of this Form 10-K
Report.
PART I
Item 1. Business
Philadelphia Suburban Corporation ("PSC" or the "Registrant"), a
Pennsylvania corporation, was incorporated in 1968. The information appearing in
"Management's Discussion and Analysis" from the portions of PSC's 1996 Annual
Report to Shareholders filed as Exhibit 13.4 to this Form 10-K Report is
incorporated by reference herein.
The business of PSC is conducted almost entirely through its subsidiary
Philadelphia Suburban Water Company ("PSW"), a regulated public utility. PSW
supplies water to 284,141 residential, commercial, industrial and public
customers. PSW's service territory is approximately 463 square miles, comprising
a large portion of the suburban area west and north of the City of Philadelphia.
This territory is primarily residential in nature and is completely metered for
water service, except for fire hydrant service. Based on the 1990 census, PSW
estimates that the total number of persons currently served is approximately
900,000. Excluding the customers that were added at the time of acquisitions in
the last three years, customer accounts have grown at an average rate of
approximately .9% per annum for the last three years.
Operating revenues during the twelve months ended December 31, 1996 were
derived approximately as follows:
65.7% from residential customers
22.0% from commercial customers
4.0% from industrial customers
1.1% from public customers
6.8% from fire protection services
0.4% from sales to other water utilities and
miscellaneous customers
-------
100.0%
=======
In October 1996, PSW purchased the franchise rights and the water
utility assets of Hatboro Borough Authority. The Hatboro system covers a one and
one-half square mile service area in Montgomery County and is contiguous to
PSW's service territory. In November 1996, PSW acquired the water systems of the
Utility Group Services Corporation ("UGS") in a purchase transaction. The UGS
system consisted of three water utilities, with a 49 square mile service
territory, and one wastewater utility with a one square mile territory, all in
Chester County and in close proximity to PSW's existing territory. On December
31, 1996, PSW purchased the franchise rights and the water utility assets of
Bristol Borough Water and Sewer Authority serving the entire Borough and parts
of Bensalem and Bristol Townships in Bucks County. The Bristol system covers a
12 square mile service area in close proximity to PSW's existing territory. In
addition, PSW purchased the franchise rights and the water utility assets of
three smaller water systems during 1996 with a combined service territory of one
and one-half square miles. PSW continues to hold acquisition discussions with
several water systems that are near or adjacent to it's service territory.
The total purchase price for the eight water systems and wastewater
system acquired in 1996 was $47,889,000, including the issuance of $3,220,000 of
PSC's preferred stock and the assumption of $2,547,000 in liabilities. The
annual revenues from these systems approximates $6,000,000, and revenues
included in the consolidated financial statements during the period owned by PSW
were $466,000.
PSW has completed 18 water system acquisitions and one wastewater
system acquisition in the last five years. In May 1995, PSW purchased the
franchise rights and the water utility assets of Media Borough ("Media"). In
addition, PSW purchased the franchise rights and the water utility assets of
four smaller water systems in 1995. In December 1994, PSW acquired the franchise
rights and the water utility assets of two privately owned water companies. In
December 1993, PSW acquired the water utility assets and franchise rights of the
Borough of Malvern. In December 1992, PSW acquired the water utility assets of
the West Whiteland Township and the Uwchlan Township Municipal Authority water
systems. Combined, the ten systems acquired before 1996 added 70 square miles of
service territory adjacent to or in close proximity to PSW's existing service
territory and had revenues of approximately $7,750,000 in 1996.
2
Item 1, Continued
Selected operating statistics. Set forth below is a table showing certain
selected operating statistics for PSW for the past three years.
Revenues from water sales (000's omitted) 1996 1995 1994
-----------------------------------------
Residential $ 79,056 $ 78,082 $ 69,545
Commercial 26,504 24,473 23,453
Industrial 4,823 4,533 4,742
Public 1,373 1,252 1,257
Fire protection 8,140 7,421 7,054
Other 438 617 848
Tax Surcharge (credit) (1) (505) (97)
------------------------------------------
Total $ 120,333 $ 115,873 $ 106,802
==========================================
Water sales (million gallons)
Residential 17,228 17,610 16,577
Commercial 8,236 7,983 7,804
Industrial 1,768 1,919 2,085
Public 354 335 324
Fire protection - metered 84 51 55
Other 25 124 261
------------------------------------------
Total 27,695 28,022 27,106
==========================================
System delivery by source (million gallons)
Surface (including Upper Merion
reservoir) 27,287 26,904 25,386
Wells 5,136 4,830 5,037
Purchased 2,046 2,077 2,356
------------------------------------------
Total 34,469 33,811 32,779
==========================================
Number of metered customers (end of year)
Residential 265,765 248,500 234,624
Commercial 13,449 12,019 11,071
Industrial 753 554 539
Public 785 775 688
Fire protection 3,378 3,006 2,596
Other 11 11 15
------------------------------------------
Total 284,141 264,865 249,533
==========================================
Average consumption per
customer in gallons 103,206 109,084 109,001
==========================================
3
Item 1, Continued
Water supplies and usage. PSW derives its principal supply of water from
the Schuylkill River, Delaware River, seven rural streams which are tributaries
of the Schuylkill and Delaware Rivers, and the Upper Merion Reservoir, a former
quarry now impounding groundwater. All of these are either within or adjacent to
PSW's service territory. PSW acquired the right to remove water from these
sources, and in connection with such rights, PSW has secured the necessary
regulatory approvals. PSW has five impounding reservoirs and has six treatment
and pumping facilities to provide storage and purification of these surface
water supplies.
The Pennsylvania Department of Environmental Protection ("DEP") has
regulatory power with respect to sources of supply and the construction,
operation and safety practices for certain dams and other water containment
structures under the Pennsylvania Dam Safety and Encroachments Act of 1979.
PSW's dams are in compliance with these requirements in all material respects.
PSW's surface supplies are supplemented by 60 wells. PSW also has
interconnections with: the Chester Water Authority, which permits PSW to
withdraw up to 6.4 million gallons per day ("mgd"); the Bucks County Water and
Sewer Authority, which provides for a supply of up to 7.0 mgd; and the West
Chester Area Municipal Authority, which provides up to a maximum of 1.0 mgd.
Agreements regarding the first two interconnections require PSW to purchase
certain minimum amounts of water. PSW believes it possesses all the necessary
permits to obtain its supply of water from the sources indicated above.
The minimum safe yield of all sources of supply described above, based on
low stream flows of record with respect to surface supplies, is as follows:
Surface supplies 104.8 mgd
Upper Merion 7.2
Reservoir
Wells 22.3
Purchased supplies 8.2
--------
Total 142.5 mgd
========
During periods of normal precipitation, the safe yield is more than the
minimum shown above. Under normal operating conditions, PSW can deliver a
maximum of 162 mgd to its distribution system for short periods of time. The
average daily sendout for 1996, 1995 and 1994 was 94.2, 92.6 and 89.8 mgd,
respectively.
The maximum demand ever placed upon PSW's facilities for one month
occurred during August 1995, when sendout averaged 109.3 mgd. The peak day of
record occurred during July 1995 when water use reached 121.8 mgd.
Actual water usage (as measured by the water meters installed at each
service location) is less than the amount of water delivered into the system due
to leaks, PSW's operational use of water, fire hydrant usage and other similar
uses. Water consumption per customer is affected by local weather conditions
during the year. In general, during the late spring and summer, an increase in
rainfall reduces water consumption, while extended periods of dry weather
increases consumption. Also, an increase in the average temperature generally
causes an increase in water consumption.
Energy supplies. PSW does all of its pumping using electric power
purchased from PECO Energy Company. Energy supplies have been sufficient to meet
customer demand.
Water shortages. The Delaware River Basin, which is the drainage area of
the Delaware River from New York State to Delaware, periodically experiences
water shortages, particularly during the summer months. To the extent that the
reservoirs in the upper part of the Basin are affected by a lack of
precipitation, the Delaware River Basin Commission (the "DRBC") may impose
either voluntary or mandatory water use restrictions on portions or all of the
Basin. The Commonwealth of Pennsylvania (the "Commonwealth") also has the
authority to impose similar restrictions on a county-by-county basis.
PSW's raw water supplies have been adequate to meet customer demand for
the past five years principally because of its five impounding reservoirs.
However, PSW's customers may be required to comply with the Commonwealth and
DRBC water use restrictions, even if PSW's supplies are adequate.
4
Item 1, Continued
In September 1995, the Governor of the Commonwealth declared a drought
emergency in the counties served by PSW. The drought emergency imposed a
mandatory ban on all nonessential water usage by PSW's customers. Because the
order was issued toward the end of the summer months, when nonessential and
recreational use of water has traditionally declined, the restriction did not
have a significant impact on PSW revenues. The drought emergency was lifted by
the end of 1995. Throughout the drought emergency, PSW maintained adequate
storage levels of treated water and had sufficient quantities of raw water. No
other drought restrictions were imposed by the Commonwealth or DRBC in 1996 or
in the five years preceding 1995.
Regulation by the Pennsylvania Public Utility Commission. PSW is subject
to regulation by the Pennsylvania Public Utility Commission ("PUC") which has
jurisdiction with respect to rates, service, accounting procedures, issuance of
securities, acquisitions and other matters.
Under applicable Pennsylvania statutes, PSW has rights granted under its
Articles of Incorporation and by certificates of public convenience from the PUC
authorizing it to conduct its present operations in the manner in which such
operations are now conducted and in the territory in which it now renders
service, to exercise the right of eminent domain and to maintain its mains in
the streets and highways of such territory. Such rights are generally
nonexclusive, although it has been the practice of the PUC to allow only one
water company to actually provide service to a given area. Consequently, PSW is
subject to competition only with respect to potential customers who also may
have access to the service of another water supplier, or where other water
service opportunities exist (including non-utility companies with riparian
rights or access to an adequate supply from a neighboring facility).
In 1993, the PUC initiated a rulemaking procedure intended to facilitate
the development of practical standards by which water mains should be extended
to "bona fide service applicants", typically existing homes or businesses in
need of a reliable public water supply. In December 1995, the PUC issued a final
rulemaking, reflecting the position that the primary costs of such extensions
should be justified by anticipated revenues. Generally, construction costs
beyond those justified by anticipated revenues must be borne by the applicant.
Under the proposal, PSW is required to invest approximately $4,000 per customer
in a main extension prior to requiring any customer contribution. The PUC
selected this threshold because revenues from an average customer offset the
interest, depreciation and incremental operating expense associated with the
investment.
In August 1996, the PUC approved the Company's request for a
"Distribution System Improvement Charge" or "DSIC". The DSIC will enable PSW to
add a surcharge to customer bills beginning January 1, 1997 reflecting the
capital costs and depreciation related to certain distribution system
improvement projects completed and placed into service during the period
September 1 through November 30, 1996. PSW is permitted to request adjustments
to the DSIC quarterly to reflect subsequent capital expenditures and the
surcharge is reset to zero when new base rates that reflect the costs of those
additions become effective. The maximum DSIC that can be in effect at any time
is 5%. The initial charge effective January 1, 1997 is .5% (one half of one
percent).
Water Quality & Environmental Issues. PSW is subject to regulation of
water quality by the U.S. Environmental Protection Agency ("EPA") under the
Federal Safe Drinking Water Act (the "SDWA") and by the Pennsylvania Department
of Environmental Protection ("DEP") under the Pennsylvania Safe Drinking Water
Act. The SDWA provides for the establishment of minimum water quality standards,
as well as governmental authority to specify the type of treatment process to be
used for public drinking water. PSW is presently in compliance with all
standards and treatment requirements promulgated to date.
The EPA has an ongoing directive to issue additional regulations under
the SDWA. The directive was clarified in 1986 when Congress amended the SDWA to
require, among other revisions, disinfection of all drinking water, additional
maximum contaminant level ("MCL") specifications, and filtration of all surface
water supplies. PSW has already installed the necessary equipment to provide for
the disinfection of the drinking water throughout the system and is monitoring
for the additional specified contaminants. PSW's surface water supplies are
filtered.
5
Item 1, Continued
On August 6, 1996, the President signed into law the reauthorization of
the SDWA. The new Act places a greater emphasis on the cost/benefit of
regulating additional substances, by requiring definitive research on the impact
of such regulations. The reauthorized SDWA focuses regulations on contaminants
known to be of public health concern based on occurrence, health risks and cost
benefit considerations. The new Act eliminated the previous requirement of the
1986 SDWA Amendments that had required the EPA to promulgate MCLs for many
chemicals not previously regulated and mandated further MCLs every three years.
The new Act also specifies that the EPA shall study radon, arsenic and sulfates
and propose respective rulemakings in 1999, 2000 and 2001 if these chemicals are
deemed to be a threat to public health. The reauthorized SDWA is not expected to
have a material impact on PSW's operations or financial condition. PSW may, in
the future, have to change its method of treating drinking water at certain of
its sources of supply if additional regulations become effective.
In 1991, EPA promulgated final regulations for lead and copper (the "Lead
and Copper Rule"). Under the Lead and Copper Rule, large water utilities are
required to conduct corrosion control studies and to sample certain high-risk
customer homes to determine the extent of treatment techniques that may be
required. PSW conducted the two required rounds of sampling in 1992 and did not
exceed the EPA action levels for either lead or copper. Additional sampling will
be required in the future. PSW has developed a corrosion control program for its
surface sources of supply and does not foresee the need to make any major
additional treatment changes or capital expenditures as a result of the Lead and
Copper Rule.
On January 1, 1993, new federal regulations ("Phase II") became effective
for certain volatile organics, herbicides, pesticides and inorganic parameters.
All required Phase II monitoring was completed in 1995. In the few cases where
Phase II contaminants were detected, concentrations were below MCLs. Future
monitoring will be required, but no major treatment modifications are
anticipated as a result of these regulations.
In May 1996, the EPA issued the first rule of a three rule package
addressing Disinfection By-Products ("DBP") and monitoring of disease-causing
micro-organisms. DBP's are chemicals formed during the drinking water
purification process. The first rule is an Information Collection Rule ("ICR")
designed to collect data to be used in developing further rules. The start of
the ICR has been postponed until mid-1997 and will also include studies of
advanced treatment techniques. The ICR phase is expected to be completed by
December 1998. Studies on the data collected may result in new treatment
standards and processes.
PSW is also subject to other environmental statutes administered by the
EPA and DEP. These include the Federal Clean Water Act ("FCWA") and the Resource
Conservation and Recovery Act ("RCRA"). Under the FCWA, the Company must obtain
National Pollutant Discharge Elimination System ("NPDES") permits for discharges
from its treatment stations. PSW currently maintains five NPDES permits relating
to its water treatment plants, which are subject to renewal every five years.
During the past five years, PSW has installed the required waste water treatment
facilities and presently meets all NPDES requirements. Although management
recognizes that permit renewal may become more difficult if more stringent
guidelines are imposed, no significant obstacles to permit renewal are presently
foreseen.
Under RCRA, PSW is subject to specific regulations regarding the solid
waste generated from the water treatment process. The DEP promulgated a "Final
Rulemaking" for solid waste (Residual Waste Management) in July 1992. PSW has
retained engineering consultants to assist with the extensive monitoring, record
keeping and reporting required under these regulations. A preliminary
application for permitting has been filed, and formal permitting of these
facilities should be issued in 1997 in accordance with regulatory requirements.
In 1996, PSW acquired the Little Washington Wastewater Company ("LWW"), a
317 customer wastewater system located within the service territory of PSW. LWW
is subject to regulation by the EPA and DEP, and is also subject to
environmental statutes, including FCWA and RCRA. LWW currently maintains a NPDES
permit for its wastewater treatment station in accordance with FCWA. LWW is
presently in compliance with all standards and treatment requirements
promulgated to date.
6
Item 1, Continued
Where PSW is required to make certain capital investments in order to
maintain its compliance with any of the various regulations discussed above, it
is management's belief that all such expenditures would be fully recoverable in
PSW's rates. However, under current law, the capital investments of these types,
would have to be financed prior to their inclusion in PSW's rate structure, and
the resulting rate increases would not necessarily be timely.
Employee Relations
As of December 31, 1996, the Registrant employed a total of 540 persons.
Hourly employees of PSW are represented by the International Brotherhood of
Firemen and Oilers, Local No. 473. The contract with the union expires on
December 1, 1997. Management considers its employee relations to be
satisfactory.
Item 2. Properties.
The Registrant believes that the facilities used in the operation of its
business is generally in excellent condition in terms of suitability, adequacy
and utilization.
The property of PSW consists of a waterworks system devoted to the
collection, storage, treatment and distribution of water in its service
territory. Management considers that its properties are maintained in good
operating condition and in accordance with current standards of good waterworks
practice. The following table summarizes the principal physical properties owned
by PSW:
No. of Square Feet
Location Buildings Description Floor Area
- ------------------------------------------------------------------------------
Pennsylvania 6 Office & warehouse 174,185
Pennsylvania 17 Pumping stations and
treatment buildings 180,000
Pennsylvania 23 Well stations App. 600 ea.
Pennsylvania 37 Well stations App. 150 ea.
Pennsylvania 49 Booster stations App. 1,100 ea.
In addition, PSW also owns 66 storage facilities for treated water
throughout its service territory with a combined capacity of 160.25 million
gallons and five surface water impounding reservoirs. The water utility also
owns approximately 3,437 miles of transmission and distribution mains, has
284,141 active metered services and 13,322 fire hydrants.
PSW's properties referred to herein, with certain minor exceptions
which do not materially interfere with their use, are owned and are subject to
the lien of an Indenture of Mortgage dated as of January 1, 1941, as
supplemented. In the case of properties acquired through the exercise of the
power of eminent domain and certain properties acquired through purchase, it has
title only for water supply purposes.
The Registrant's corporate offices are leased from PSW and located in
Bryn Mawr, Pennsylvania.
Item 3. Legal Proceedings
There are various legal proceedings in which the Company is involved.
Although the results of legal proceedings cannot be predicted with certainty,
there are no pending legal proceedings to which the Registrant or any of its
subsidiaries is a party or to which any of their properties is the subject that
present a reasonable likelihood of a material adverse impact on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
Information with respect to the executive officers of the Company is
contained in Item 10 hereof and is hereby incorporated by reference herein.
7
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The Company's common stock is traded on the New York Stock Exchange
and the Philadelphia Stock Exchange. As of March 3, 1997, there were
approximately 13,799 holders of record of the Company's common stock.
The following selected quarterly financial data of the Company is in
thousands of dollars, except for per share amounts:
Total
First Second Third Fourth Year
-------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------------------------------
Earned revenues $ 29,290 $ 30,683 $ 30,831 $ 31,699 $ 122,503
Operating expenses 13,070 12,614 11,757 14,174 51,615
Income, continuing operations 3,968 5,281 5,847 4,661 19,757
Income per share, continuing
operations 0.21 0.28 0.31 0.24 1.04
Income, discontinued operations - - 365 600 965
Income per share, discontinued
operations - - 0.02 0.03 0.05
Net income available to common
stock 3,968 5,281 6,212 5,261 20,722
Net income per common share 0.21 0.28 0.33 0.27 1.09
Dividend paid per common share 0.193 0.193 0.2025 0.2025 0.791
Price range of common stock
- high 15.42 16.75 17.25 19.88 19.88
- low 13.67 15.00 15.50 16.50 13.67
1995
- -------------------------------------------------------------------------------------------------------
Earned revenues $ 25,712 $ 28,827 $ 32,355 $ 30,150 $ 117,044
Operating expenses 11,766 12,357 13,793 13,786 51,702
Income, continuing operations 3,315 4,659 5,732 4,324 18,030
Income per share, continuing
operations 0.19 0.26 0.32 0.23 1.00
Income, discontinued operations - - - 370 370
Income per share, discontinued
operations - - - 0.02 0.02
Net income available to common
stock 3,315 4,659 5,732 4,694 18,400
Net income per common share 0.19 0.26 0.32 0.25 1.02
Dividend paid per common share 0.186 0.186 0.193 0.193 0.758
Price range of common stock
- high 12.17 12.50 12.42 14.33 14.33
- low 11.59 11.75 11.75 12.00 11.59
All per share data as presented has been adjusted for the 1996 common
stock split effected in the form of a stock distribution. High and low prices of
the Company's common stock are as traded on the New York Stock Exchange.
8
Item 5, Continued
Following is a recent history of income from continuing operations and
common dividends of the Company:
- -----------------------------------------------------------------------------
Income per
share from
Cash dividend continuing Payout
per common share operations ratio
- -----------------------------------------------------------------------------
1992 $ 0.69 $ 0.82 84%
1993 0.71 0.85 84%
1994 0.73 0.90 81%
1995 0.76 1.00 76%
1996 0.79 1.04 76%
- -----------------------------------------------------------------------------
Dividends have averaged approximately 80% of income from continuing
operations during this period. In August 1996, the annual dividend increased by
4.7% to $.81 beginning with the September 1996 dividend.
Recent Sales of Unregistered Securities
On November 22, 1996, the Company sold 32,200 shares of its Series B
Preferred Stock for an aggregate amount of approximately $3,220,000. Such shares
were issued to the owners of a business acquired by the Company for an aggregate
price of $45,342,000, the balance of which was paid by the Company in cash. Such
shares were sold by the Company to accredited investors without registration
under the Securities Act of 1933, as amended, pursuant to Rule 506 promulgated
under such Rule.
Item 6. Selected Financial Data
The information appearing in the section captioned "Summary of Selected
Financial Data" from the portions of the Company's 1996 Annual Report to
Shareholders filed as Exhibit 13.4 to this Form 10-K Report is incorporated by
reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information appearing in the section captioned "Management's
Discussion and Analysis" from the portions of the Company's 1996 Annual Report
to Shareholders filed as Exhibit 13.4 to this Form 10-K Report is incorporated
by reference herein.
Item 8. Financial Statements and Supplementary Data
Information appearing under the captions "Consolidated Statements of
Income", "Consolidated Balance Sheets", "Consolidated Cash Flow Statements"
"Consolidated Statements of Capitalization" and "Notes to Consolidated Financial
Statements" from the portions of the Company's 1996 Annual Report to
Shareholders filed as Exhibit 13.4 to this Form 10-K Report is incorporated by
reference herein. Also, the information appearing in the section captioned
"Reports on Financial Statements" from the portions of the Company's 1996 Annual
Report to Shareholders filed as Exhibit 13.4 to this Form 10-K Report is
incorporated by reference herein.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
9
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Registrant
The information appearing in the section captioned "Information
Regarding Nominees and Directors" of the Proxy Statement relating to the May 15,
1997, annual meeting of shareholders of the Company, to be filed within 120 days
after the end of the fiscal year covered by this Form 10-K Report, is
incorporated by reference herein.
Executive Officers of the Registrant
The following table and the notes thereto set forth information with
respect to the executive officers of the Registrant, including their names,
ages, positions with the Registrant and business experience during the last five
years:
Position with the Registrant
Name Age and date of election (1)
- ---- -- ------------------------------
Nicholas DeBenedictis 51 President and Chairman (May 1993 to present); President and Chief
Executive Officer (July 1992 to May 1993); Chairman
and Chief Executive Officer, Philadelphia Suburban Water
Company (July 1992 to Present); President, Philadelphia
Suburban Water Company (February 1995 to present) (2)
Richard R. Riegler 50 Senior Vice President - Operations, Philadelphia
Suburban Water Company (April 1989 to present) (3)
Roy H. Stahl 44 Senior Vice President and General Counsel (April 1991 to
present) (4)
Michael P. Graham 48 Senior Vice President - Finance and Treasurer (March
1993 to present) (5)
Morrison Coulter 60 Senior Vice President - Production, Philadelphia Suburban Water Company
(February 1996 to present); Vice President - Production, Philadelphia Suburban Water
Company (April 1989 to February 1996) (6)
(1) In addition to the capacities indicated, the individuals named in the above
table hold other offices or directorships with subsidiaries of the Registrant.
Officers serve at the discretion of the Board of Directors.
(2) Mr. DeBenedictis was Secretary of the Pennsylvania Department of
Environmental Resources from 1983 to 1986. From December 1986 to April 1989, he
was President of the Greater Philadelphia Chamber of Commerce. Mr. DeBenedictis
was Senior Vice President for Corporate and Public Affairs of Philadelphia
Electric Company from April 1989 to June 1992.
(3) Mr. Riegler was Chief Engineer of Philadelphia Suburban Water Company from
1982 to 1984. He then served as Vice President and Chief Engineer from 1984 to
1986 and Vice President of Operations from 1986 to 1989.
(4) From January 1984 to August 1985, Mr. Stahl was Corporate Counsel, from
August 1985 to May 1988 he was Vice President - Administration and Corporate
Counsel of the Registrant, and from May 1988 to April 1991 he was Vice President
and General Counsel of the Registrant.
10
Item 10, Continued
(5) Mr. Graham was Controller of the Company from 1984 to September 1990, and
from September 1990 to May 1991 he was Chief Financial Officer and Treasurer.
From May 1991 to March 1993, Mr. Graham was Vice President - Finance and
Treasurer.
(6) Mr. Coulter was Superintendent of Pumping Facilities from 1971 to 1982. From
1982 to 1987 he served as Manager - Electrical/Mechanical Department and from
1987 to 1989 he was Assistant Vice President - Production.
Item 11. Management Remuneration
The information appearing in the sections captioned "Compensation of
Directors and Executive Officers" of the Proxy Statement relating to the May 15,
1997, annual meeting of shareholders of the Company, to be filed within 120 days
after the end of the fiscal year covered by this Form 10-K Report, is
incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information appearing in the sections captioned "Ownership of
Common Stock" of the Proxy Statement relating to the May 15, 1997, annual
meeting of shareholders of the Company, to be filed within 120 days after the
end of the fiscal year covered by this Form 10-K Report, is incorporated by
reference herein.
Item 13. Certain Relationships and Related Transactions
The information appearing in the sections captioned "Other Remuneration
and Certain Transactions" of the Proxy Statement relating to the May 15, 1997,
annual meeting of shareholders of the Company, to be filed within 120 days after
the end of the fiscal year covered by this Form 10-K Report, is incorporated by
reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements. The following is a list of the consolidated financial
statements of the Company and its subsidiaries and supplementary data
incorporated by reference in Item 8 hereof:
Management's Report
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - 1996, 1995 and 1994
Consolidated Statements of Cash Flow - 1996, 1995, and 1994
Consolidated Statements of Capitalization - December 31, 1996 and 1995
Notes to Consolidated Financial Statements
Financial Statement Schedules. The financial statement schedules, or
supplemental schedules, filed as part of this annual report on Form 10-K are
omitted because they are not applicable or not required, or because the required
information is included in the consolidated financial statements or notes
thereto.
Reports on Form 8-K. The Company filed no report on Form 8-K during the quarter
ended December 31, 1996.
Exhibits, Including Those Incorporated by Reference. The following is a list of
exhibits filed as part of this annual report on Form 10-K. Where so indicated by
footnote, exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the
previous filing is indicated in parenthesis. The page numbers listed refer to
page number where such exhibits are located using the sequential numbering
system specified by Rules 0-3 and 403.
11
EXHIBIT INDEX
Exhibit No. Page No.
- ----------- --------
3.1 Amended and Restated Articles of Incorporation, as -
amended (1) (Exhibit 3.1)
3.2 By-Laws, as amended (1) (Exhibit 3.2) -
3.3 Amendment to Amended and Restated Articles of 19
Incorporation, as amended, to increase the number of
authorized shares to 41,770,819 and to provide that 40,000,000
of such shares be shares of Common Stock
3.4 Amendment to Amended and Restated Articles of 20
Incorporation, as amended, designating the
Series B Preferred Stock
4.1 Indenture of Mortgage dated as of January 1, 1941 -
between Philadelphia Suburban Water Company and The
Pennsylvania Company for Insurance on Lives and Granting
Annuities(now First Pennsylvania Bank, N.A.), as Trustee, with
supplements thereto through the Twentieth Supplemental Indenture
dated as of August 1, 1983 (2) (Exhibits 4.1 through 4.16)
4.2 Revolving Credit Agreement between Philadelphia Suburban -
Water Company and Mellon Bank (East) National Association
dated as of February 16, 1990 (3) (Exhibit 4.3)
4.3 First Amendment to Revolving Credit Agreement between -
Philadelphia Suburban Water Company and Mellon Bank
N.A. dated as of September 1, 1992 (1) (Exhibit 4.3)
4.4 Preferred Stock Agreement between Philadelphia Suburban -
Water Company and Provident Life and Accident Insurance
Company dated as of January 1, 1991 (3) (Exhibit 4.4)
4.5 Indenture dated as of July 1, 1988 between Philadelphia -
Suburban Corporation and the Philadelphia National
Bank, as Trustee. (4) (Exhibit 4)
4.6 Form of Rights Agreement, dated as of February 19, 1988, -
between Philadelphia Suburban Corporation and
Mellon Bank (East) National Association, as amended
by Amendment No. 1. (5) (Exhibit 1)
4.7 Agreement to furnish copies of other long-term debt -
instruments (1) (Exhibit 4.7)
4.8 Twenty-first Supplemental Indenture dated as of August 1, -
1985 (6) (Exhibit 4.2)
4.9 Twenty-second Supplemental Indenture dated as of April 1, -
1986 (7) (Exhibit 4.3)
4.10 Twenty-third Supplemental Indenture dated as of April 1, -
1987 (8) (Exhibit 4.4)
4.11 Twenty-fourth Supplemental Indenture dated as of June 1, -
1988 (9) (Exhibit 4.5)
4.12 Twenty-fifth Supplemental Indenture dated as of -
January 1, 1990 (10)(Exhibit 4.6)
12
EXHIBIT INDEX, Continued
Exhibit No. Page No.
- ----------- --------
4.13 Twenty-sixth Supplemental Indenture dated as of November -
1, 1991 (11) (Exhibit 4.12)
4.14 Twenty-seventh Supplemental Indenture dated as of June 1, -
1992 (1) (Exhibit 4.14)
4.15 Twenty-eighth Supplemental Indenture dated as of April 1, -
1993 (12) (Exhibit 4.15)
4.16 Revolving Credit Agreement between Philadelphia -
Suburban Water Company and Mellon Bank, N.A., PNC Bank
National Association, First Union National Bank, N.A.
and CoreStates Bank, N.A. dated as of March 17, 1994
(12) (Exhibit 4.16)
4.17 Twenty-Ninth Supplemental Indenture dated as of March 30, -
1995 (14) (Exhibit 4.17)
4.18 Thirtieth Supplemental Indenture dated as of August 15, -
1995 (15) (Exhibit 4.18)
4.19 First Amendment to Revolving Credit Agreement dated as of May 27
22, 1995, between Philadelphia Suburban Water Company and
Mellon Bank, N.A., PNC Bank National Association, First Fidelity
National Bank, N.A. Meridian Bank, N.A. dated as of March 17,
1994
4.20 Second Amendment to Revolving Credit Agreement dated as of July 43
21, 1995, between Philadelphia Suburban Water Company and
Mellon Bank, N.A., PNC Bank National Association, First Fidelity
National Bank, N.A. Bank, N.A. dated as of March 17, 1994
4.21 Third Amendment to Revolving Credit Agreement dated as of December 55
20, 1996, between Philadelphia Suburban Water Company and
Mellon Bank, N.A., PNC Bank National Association, First Union
National Bank, N.A. CoreStates Bank, N.A. dated as of March 17,
1994
10.1 1982 Stock Option Plan, as amended and restated effective -
May 21, 1992* (1) (Exhibit 10.1)
10.2 1988 Stock Option Plan, as amended and restated effective -
May 21, 1992* (1) (Exhibit 10.2)
10.3 Executive Incentive Award Plan, as amended March 21, -
1989 and February 6, 1990* (10) (Exhibit 10.3)
10.4 Excess Benefit Plan for Salaried Employees, effective -
December 1, 1989* (10) (Exhibit 10.4)
10.5 Supplemental Executive Retirement Plan, effective -
December 1, 1989* (10) (Exhibit 10.5)
10.6 Supplemental Executive Retirement Plan, effective March -
15, 1992* (1) (Exhibit 10.6)
10.7 1993 Incentive Compensation Plan* (1) (Exhibit 10.7) -
10.8 Employment letter agreement with Mr. Nicholas -
DeBenedictis* (1) (Exhibit 10.8)
10.9 1994 Incentive Compensation Program* (12) (Exhibit 10.9) -
13
EXHIBIT INDEX, Continued
Exhibit No. Page No.
- ----------- --------
10.10 1994 Equity Compensation Plan, as amended by Amendment -
1994-1* (16) (Exhibit 10.10)
10.11 1995 Incentive Compensation Plan* (13) (Exhibit 10.11) -
10.12 Placement Agency Agreement between Philadelphia -
Suburban Water Company and PaineWebber Incorporated
dated as of March 30, 1995 (14) (Exhibit 10.12)
10.13 Bond Purchase Agreement among the Delaware County -
Industrial Development Authority, Philadelphia
Suburban Water Company and Legg Mason Wood Walker,
Incorporated dated August 24, 1995 (15) (Exhibit 10.13)
10.14 Construction and Financing Agreement between the -
Delaware County Industrial Development Authority and
Philadelphia Suburban Water Company dated as of August
15, 1995 (15) (Exhibit 10.14)
10.15 1996 Annual Cash Incentive Compensation Plan* (16) -
(Exhibit 13.4)
10.16 Amendment 1994-2 to 1994 Equity Compensation 71
Plan, as amended*
10.17 1997 Annual Cash Incentive Compensation Plan* 72
10.18 Agreement among Philadelphia Suburban Corporation, 78
Philadelphia Suburban Water Company and Nicholas
DeBenedictis, dated as of January 1, 1997*
10.19 Agreement among Philadelphia Suburban Corporation, 97
Philadelphia Suburban Water Company and Roy H.
Stahl, dated as of January 1, 1997*
10.20 Agreement among Philadelphia Suburban Corporation, 113
Philadelphia Suburban Water Company and Michael P.
Graham, dated as of January 1, 1997*
10.21 Agreement among Philadelphia Suburban Corporation, 129
Philadelphia Suburban Water Company and Richard R.
Riegler, dated as of January 1, 1997*
10.22 Agreement among Philadelphia Suburban Corporation, 145
Philadelphia Suburban Water Company and Morrison
Coulter, dated as of January 1, 1997*
10.23 Philadelphia Suburban Corporation Amended and 161
Restated Executive Deferral Plan*
10.24 Philadelphia Suburban Corporation Deferred 170
Compensation Plan Master Trust Agreement
with PNC Bank, National Association, dated
as of December 31, 1996*
10.25 First Amendment to Supplemental Executive Retirement 184
Plan*
14
EXHIBIT INDEX, Continued
Exhibit No. Page No.
- ----------- --------
13.1 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1993 incorporated
by reference in Annual Report on Form 10-K for
the year ended December 31, 1993 (12) (Exhibit 13.1)
13.2 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1994 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1994 (13) (Exhibit 13.2)
13.3 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1995 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1995 (16) (Exhibit 13.3)
13.4 Selected portions of Annual Report to Shareholders 187
for the year ended December 31, 1996 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1996
21. Subsidiaries of Philadelphia Suburban Corporation 222
23. Consent of Independent Auditors 223
24. Power of Attorney (set forth as a part of this report) 17
27. Financial Data Schedule 224
15
- Notes -
Documents Incorporated by Reference
(1) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1992
(2) Indenture of Mortgage dated as of January 1, 1941 with supplements
thereto through the Twentieth Supplemental Indenture dated as of August
1, 1983 were filed as an Exhibit to Annual Report on Form 10-K for the
year ended December 31, 1983.
(3) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1990.
(4) Filed as Exhibit 4 to the Registration Statement on Form S-3 filed with
the Securities and Exchange Commission on June 14, 1988.
(5) Filed as Exhibit 1 to the Registration Statement on Form 8-A filed with
the Securities and Exchange Commission on March 1, 1988, with respect to
the New York Stock Exchange, and on November 9, 1988, with respect to
the Philadelphia Stock Exchange.
(6) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1985.
(7) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1986.
(8) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1987.
(9) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1988.
(10) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1989.
(11) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1991.
(12) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1993.
(13) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1994.
(14) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
(15) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
(16) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1995.
* Indicates management contract or compensatory plan or arrangement.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHILADELPHIA SUBURBAN CORPORATION
By Nicholas DeBenedictis
---------------------------------
Nicholas DeBenedictis
President and Chairman
Date: March 24, 1997
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Each person in so signing also makes, constitutes and appoints Nicholas
DeBenedictis, President and Chairman of Philadelphia Suburban Corporation,
Michael P. Graham, Senior Vice President - Finance and Treasurer of Philadelphia
Suburban Corporation, and each of them, his or her true and lawful
attorneys-in-fact, in his or her name, place and stead to execute and cause to
be filed with the Securities and Exchange Commission any and all amendments to
this report.
17
John H. Austin, Jr. John W. Boyer, Jr.
- ---------------------------------------- ----------------------------------
John H. Austin, Jr. John W. Boyer, Jr.
Director Director
Mary C. Carroll Nicholas DeBenedictis
- ---------------------------------------- ----------------------------------
Mary C. Carroll Nicholas DeBenedictis
Director President and Chairman
(principal executive officer)
and Director
G. Fred DiBona, Jr. Richard H. Glanton
- ---------------------------------------- ----------------------------------
G. Fred DiBona, Jr. Richard H. Glanton
Director Director
Michael P. Graham Joseph C. Ladd
- ---------------------------------------- ----------------------------------
Michael P. Graham Joseph C. Ladd
Senior Vice President-Finance and Director
Treasurer (principal financial and
accounting officer)
John F. McCaughan Harvey J. Wilson
- ---------------------------------------- ----------------------------------
John F. McCaughan Harvey J. Wilson
Director Director
18
Exhibit 3.3
PHILADELPHIA SUBURBAN CORPORATION
PROPOSED RESOLUTION TO INCREASE THE CORPORATION'S
AUTHORIZED SHARES OF COMMON STOCK
--------------------------------------------------------------
RESOLVED, that the Corporation's Amended and
Restated Articles of Incorporation, be, subject to the
requisite shareholder approval, amended to increase the
number of authorized 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 "Amendment").
FURTHER RESOLVED, that the Board of Directors of
the Corporation hereby finds and declares that the
adoption of the Amendment is in the best interests of
the Corporation.
FURTHER RESOLVED, that the Amendment be submitted
to the shareholders of the Corporation for their approval.
Exhibit 3.4
STATEMENT OF DESIGNATION
SERIES B PREFERRED STOCK
OF
PHILADELPHIA SUBURBAN CORPORATION
Philadelphia Suburban Corporation, a Pennsylvania corporation (the
"Corporation"), DOES HEREBY CERTIFY:
A. That, pursuant to authority conferred upon the Board of Directors by
the Articles of Incorporation and in accordance with the provisions of Section
1522 of the Pennsylvania Business Corporation Law of 1988, as amended, the Board
of Directors of the Corporation adopted the following resolution at a duly
called and noticed meeting held on the 5th day of March, 1996:
BE IT RESOLVED, that pursuant to the authority expressly vested in the
Board of Directors by the Corporation's Articles of Incorporation, the Board of
Directors deems it advisable to, and hereby does, designate a new series of
preferred stock of the Corporation, par value one dollar ($1.00) per share, to
be known as the "Series B Preferred Stock." The voting rights, preferences,
limitations and special rights of the Series B Preferred Stock are as follows:
1. Designation. The shares of such series of Preferred
Stock shall be designated as "Series B Preferred Stock."
2. Authorized Number. The number of shares constituting
the Series B Preferred Stock shall be 32,200 shares.
3. Dividends. Beginning on March 1, 1997, and on each
June 1, September 1, December 1 and March 1 thereafter, the holders of shares of
Series B Preferred Stock shall be entitled to receive a quarterly dividend in
arrears equal to $1.5125 per share of Series B Preferred Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares) out of
funds legally available for such purchase. Such dividends shall be payable only
when, as and if declared by the Board of Directors, provided that quarterly
dividends that are not so paid shall be cumulative, and accumulations of
dividends shall bear interest at the rate of 6.05% per annum. No dividend or
other distribution shall be declared or paid (other than dividends payable in
shares of common stock of the Corporation, par value $.50 per share (the "Common
Stock") or options to purchase or rights to subscribe for Common Stock, or
securities by their terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, provided that such securities rank junior to the Series B Preferred
Stock with respect to the payment of dividends and liquidation proceeds) on any
shares of the Corporation's capital stock ranking junior to the Series B
Preferred Stock as to payment of dividends unless all dividends on the Series B
Preferred Stock accrued for all past quarterly dividend periods shall have been
paid and the full dividend thereon for the current dividend period shall be paid
or declared and set apart for payment. The Corporation's Series B Preferred
Stock shall rank senior to its Series A Preferred Stock and its Common Stock
with respect to the right to receive dividends and other distributions.
4. Rights on Liquidation, Dissolution, Winding-Up.
(a) In the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation (collectively, a "Liquidation"),
whether voluntary or involuntary, before any payment of cash or distribution of
other property is made to the holders of the Common Stock or any other class or
series of shares ranking on Liquidation junior to the Series B Preferred Stock,
the holders of Series B Preferred Stock shall be entitled to receive out of the
assets of the Corporation legally available for distribution to its
shareholders, an amount per share (rounded to the nearest $0.01 equal to the
Liquidation Preference (as defined below), plus an amount equal to any accrued
but unpaid cumulative dividends and any interest accrued thereon. The
Liquidation Preference shall be equal to $100.00 per share (as adjusted for any
stock dividends, combinations or splits with respect to such shares).
(b) If upon the occurrence of any Liquidation, whether
voluntary or involuntary, the assets and funds to be distributed among holders
of Series B Preferred Stock and any other class or series of stock ranking equal
to the Series B Preferred Stock as to distribution of assets upon Liquidation
shall be insufficient to permit the payment to the holders of the preferential
amounts described in Section 4(a), then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among holders of Series B Preferred Stock and any other class or series of stock
ranking equal to the Series B Preferred Stock as to distribution of assets upon
Liquidation in accordance with the sums that would be payable on such
distribution if all sums payable thereon to holders of all shares of such
classes or series were paid in full.
(c) If upon the occurrence of any liquidation, the assets
and funds thus distributed among holders of Series B Preferred Stock shall be
sufficient to permit the payment to such holders of the preferential amounts
described in Section 4(a), then the holders of shares of Series B Preferred
Stock shall be entitled to no further participation in the distribution of the
assets of the Corporation and any remaining net assets of the Corporation may be
distributed to the holders of Common Stock and any other class or series of
stock ranking junior to the Series B Preferred Stock as to the distribution of
assets upon Liquidation in accordance with their relative liquidation
preferences. Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the Liquidation payments and the place
where said Liquidation payments shall be payable, shall be given by mail,
postage prepaid, not less than 30 days prior to the payment date stated therein,
to the holders of record of Series B Preferred Stock, such notice to be
addressed to each such holder at his post office address as shown by the records
of the Corporation.
-2-
Except as provided in Section 5, a consolidation or
merger of the Corporation into or with any other corporation or corporations
shall not be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meanings of the provisions of this section 4.
The Company's Series B Preferred Stock shall rank senior to
its Series A Preferred Stock with respect to the right to the distribution of
the Company's assets upon liquidation.
5. Merger, Consolidation, etc. The Corporation shall
give notice to each holder of Series B Preferred Stock at least 20 days prior to
the effective date of (i) any consolidation or merger of the Corporation with or
into any other corporation or corporations (other than a merger or consolidation
in which the holders of Series B Preferred Stock receive securities of the
surviving corporation having substantially similar rights to the Series B
Preferred Stock and in which the shareholders of the Corporation immediately
prior to the transaction will be the holders of at least a majority of the
voting securities of the surviving corporation immediately after the
transaction); (ii) a sale, conveyance or disposition of all or substantially all
of the assets of the Corporation; or (iii) the effectuation by the Corporation
of a transaction or series of related transactions in which more than 50% of the
voting power of the Corporation is disposed of. The holders of a majority of the
Series B Preferred Stock shall be entitled, by electing prior to the effective
date of any of the foregoing types of transactions, to require the Corporation
to treat any such transaction as if it were a Liquidation and to cause the
proceeds of such transaction, or any property deliverable from such transaction
to be distributed among the shareholders as if such transaction were a
Liquidation.
6. Protective Provisions. So long as any shares of
Series B Preferred Stock shall remain outstanding, the Corporation shall not,
without the affirmative vote of the holders of at least a majority of the shares
of Series B Preferred Stock at the time outstanding adopt any amendment to its
Articles of Incorporation which would adversely affect in any material respect
the rights or preferences of shares of the Series B Preferred Stock as set forth
in this Statement of Designation.
7. Conversion. The Series B Preferred Stock shall not
be convertible into any other class or series of capital stock of the
Corporation.
8. Redemption.
(a) The Series B Preferred Stock shall not be redeemable
by the Corporation prior to November 30, 2001. Thereafter, up to 20% of the
number of the number of shares of Series B Preferred Stock originally issued may
be called for redemption by the Corporation, in whole or in part, each year
starting on December 1, 2001 (the "Redemption Date"), upon 30 days' prior
written notice, by the payment therefor of an amount per share (rounded to the
nearest $0.01) equal to the sum of (i) the Liquidation Preference and (ii) all
accumulations of accrued and unpaid dividends on such outstanding shares of
Series B Preferred Stock (together with any accrued interest thereon) through
the date of redemption (such amount, the "Redemption Price"). The Corporation's
right to redeem shall be cumulative, such that any shares the Corporation has a
right to redeem in one year that are not so redeemed, may be
-3-
redeemed by the Corporation in a subsequent year. At the election of the holders
of the Series B Preferred Stock called for redemption by the Corporation, the
Redemption Price may be paid in cash or by the delivery of a promissory note of
the Corporation in substantially the form attached hereto as Exhibit "A" (the
"Note"). The election by the holders of the shares being redeemed shall be made
by written notice to the Corporation no less than 15 days prior to the
Redemption Date, otherwise the Corporation may elect to pay the Redemption Price
in cash.
(b) The Series B Preferred Stock shall not be called for
redemption by the holders prior to December 1, 1998. Thereafter, the Series B
Preferred Stock may be called for redemption, in whole or in part, by such
holders, and thereupon shall be redeemed for cash by the Corporation, upon 30
days' prior written notice, from such holders at a per share price equal to the
Redemption Price.
(c) Shares of Series B Preferred Stock are not subject to
or entitled to the benefit of a sinking fund.
(d) Shares of Series B Preferred Stock that are redeemed
shall be canceled and shall not be reissuable by the Corporation and the
Articles of Incorporation of the Corporation shall be appropriately amended to
effect a corresponding reduction in the Corporation's authorized capital stock.
(e) If notice of redemption as provided in Section
(a) above shall have been duly given or if the Corporation shall have given to
the bank or trust company hereinafter referred to irrevocable authorization
promptly to give such notice, and if on or before the Redemption Date specified
therein the Corporation shall have either deposited the funds necessary for such
redemption with, or delivered a Note in the amount of the applicable Redemption
to, such bank or trust company in trust for the benefit of the holders of the
shares called for redemption, then, notwithstanding that any certificates for
shares so called for redemption shall not have been surrendered for
cancellation, from and after the Redemption Date, all shares so called for
redemption shall no longer be deemed to be outstanding and all rights with
respect to such shares shall forthwith cease and terminate, except only the
right of the holders thereof to receive from such bank or trust company at any
time after the time of such deposit the funds so deposited, without interest.
Any interest accrued on such funds shall be paid to the Corporation from time to
time. The aforesaid bank or trust company shall be organized and in good
standing under the laws of the United States of America, or the Commonwealth of
Pennsylvania, shall be doing business in Pennsylvania, and shall be identified
in the notice of redemption. Any funds so set aside or deposited, as the case
may be, and unclaimed at the end of two years from such Redemption Date shall,
to the extent permitted by law, be released or repaid to the Corporation, after
which repayment the holders of the shares so called for redemption shall look
only to the Corporation for payment thereof.
-4-
B. The aggregate number of shares of Series B Preferred Stock
established by the foregoing resolutions, all prior statements, if any, filed
under Section 1522 of the Pennsylvania Business Law of 1988, as amended, or
corresponding provisions of prior law with respect thereto, and any other
provisions of the Corporation's Articles of Incorporation shall be 32,200
shares.
IN WITNESS WHEREOF, the undersigned has executed this
Statement this 22nd day of November, 1996.
PHILADELPHIA SUBURBAN CORPORATION
By: /s/ Nicholas DeBenedictis
----------------------------------
-5-
EXHIBIT A
PROMISSORY NOTE
$______________________ _______________________
FOR VALUE RECEIVED, the undersigned, PHILADELPHIA SUBURBAN CORPORATION,
a Pennsylvania, corporation ("Borrower"), HEREBY IRREVOCABLY PROMISES TO PAY to
______________________________________________ ("Payee"), the principal sum of
______________ AND 00/100 DOLLARS ($______________), together with interest on
the principal balance hereof from time to time unpaid at the rates provided
below until payment in full thereof.
Interest shall accrue on the principal balance from time to time
outstanding hereunder at a rate per annum equal to 6.05% per annum. The
principal amount of this note shall be due within sixty (60) days of Borrower's
receipt of written demand from the Payee, but no later than [insert date 5 years
after the applicable date of redemption]. All accrued and unpaid interest shall
be due and payable quarterly, in arrears, on [insert interest payment dates].
If any payment of interest or principal hereunder becomes due and
payable on a day other than a business day, the maturity thereof shall be
extended to the next succeeding business day and, with respect to payments or
principal, interest thereon at the then applicable rate and for the period of
such extension shall be payable on such next succeeding business day. The term
"business day" means any day other than a Saturday, a Sunday or a day on which
banking institutions in Philadelphia, Pennsylvania are not required to be open.
Both principal and interest hereunder are payable in lawful money of
the United States of America via first class United States mail to [insert
payee's address].
Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity,
and notice of dishonor are hereby waived by Borrower.
If Borrower shall make a general assignment for the benefit of
creditors or any proceeding shall be instituted by or against Borrower seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or for any
substantial part of its assets, or if Borrower shall take any corporate action
to authorize any of the actions set forth above in this paragraph, then all of
the obligations evidenced by this Promissory Note shall automatically, without
notice or demand by Payee, be immediately due and payable. If Borrower shall
fail to make payment of principal or interest when due hereunder and if Borrower
has not made such payment within ten business days of receipt of notice by
Payee, the obligations evidenced by this Promissory Note shall, at the option of
Payee, be due in payable in full.
Whenever possible each provision of this Promissory Note shall be
interpreted in such manner as to be effective and valued under applicable law,
but if any provision of this Promissory Note shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Promissory Note.
THIS PROMISSORY NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL
LAWS AND DECISIONS, AND NOT THE CONFLICTS OF LAW PROVISIONS, OF THE COMMONWEALTH
OF PENNSYLVANIA.
PHILADELPHIA SUBURBAN CORPORATION
By: __________________________________
Name: ________________________________
Title: _______________________________
Exhibit 4.19
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
FIRST AMENDMENT to Revolving Credit Agreement ("First Amendment"),
dated as of May 22, 1995, among Philadelphia Suburban Water Company, a
Pennsylvania corporation (the "Borrower"), the Banks signatory hereto (the
"Banks"), and Mellon Bank, N.A., in its capacity as agent for the Banks
hereunder (hereafter the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower, the Agent and the Banks are parties to a
Revolving Credit Agreement dated as of March 17, 1994, (as amended, modified
and/or extended, the "Loan Agreement"), pursuant to which the Banks agreed to
make available to the Borrower certain credit facilities in the aggregate amount
of $30,000,000 upon the terms and conditions specified in the Loan Agreement;
WHEREAS, the parties wish to amend certain terms and conditions of the
Loan Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto, intending to be legally bound hereby,
agree to amend the Loan Agreement as herein stated.
1. Effect of Prior Agreements.
This First Amendment is intended to amend the Loan Agreement, as
it has been in effect to the date hereof and as it shall be amended on and after
the date hereof. All capitalized terms used herein as defined terms shall have
the meanings ascribed to them in the Loan Agreement unless herein provided to
the contrary.
2. Amendments.
(a) Section 2.01 of the Loan Agreement is hereby amended in
its entirety to read as follows:
2.01 The Revolving Credit Commitment. The maximum aggregate
amount the Banks shall be obligated to lend to the Borrower at any given time
under this Agreement shall be Forty Million Dollars ($40,000,000) from May 22,
1995 through and including July 21, 1995, and Thirty Million Dollars
($30,000,000) thereafter until the Revolving Credit Commitment Termination Date,
as such amounts may have been reduced under Section 2.03 hereof (the "Revolving
Credit Commitment").
(b) Schedule 1.01(a) is hereby replaced with Replacement
Schedule 1.01(a) attached hereto and made a part hereof. Any and all references
to Schedule 1.01(a) shall be deemed to refer to Replacement Schedule 1.01(a).
3. Conditions. To induce the Agent and Banks to enter into
this First Amendment and to extend the Loans contemplated herein, the Borrower
shall perform the following conditions to the Agent's and the Banks'
satisfaction prior to the Banks' acting in reliance hereon:
(a) The Borrower shall execute and deliver to the Banks
this First Amendment, the First Allonges to Revolving Credit Notes (the "First
Allonges") and all other documents as the Banks may require; and
(b) The Borrower shall deliver all other documents
and certificates reasonably requested by the Agent.
4. Representations and Warranties. Borrower hereby represents and
warrants that:
(a) The representations and warranties contained in the
Loan Agreement and in each certificate, document or financial statement
furnished by the Borrower delivered therewith or in connection with any other
Loan Document are true and correct in all material respects on and as of the
date hereof as though made on and as of the date hereof.
(b) No Event of Default, and to the Borrower's knowledge
no event which with the passage of time or the giving of notice or both could
become an Event of Default, exists on the date hereof, and no offsets or
defenses exist against their obligations under the Loan Agreement or the
documents delivered in connection therewith.
(c) This First Amendment and the First Allonges have been
duly authorized, executed and delivered so as to constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general principles of equity.
(d) The execution, delivery and performance of this
First Amendment and the First Allonges will not violate any applicable provision
of law or judgment, order or regulation of any court or of any public or
governmental agency or authority nor conflict with or constitute a breach of or
a default under any instrument to which the Borrower is a party or by which the
Borrower or the Borrower's properties are bound nor result in the creation of
any lien, charge or encumbrance upon any assets of the Borrower.
(e) No approval, consent or authorization of, or
registration, declaration or filing with, any governmental or public body or
authority is required in connection with the valid execution, delivery and
performance by the Borrower of this First Amendment and the First Allonges.
5. Reaffirmation. The Borrower hereby affirms and reaffirms to the
Agent and the Banks all of the covenants contained in the Loan Agreement
including, without limitation, those contained in Article VI of the Loan
Agreement and agrees to abide thereby until all of the obligations to the Bank
are satisfied and/or discharged in their entirety.
6. Miscellaneous.
(a) All terms, conditions, provisions and covenants in
the Loan Agreement, the Notes as amended by the First Allonges, and all other
Loan Documents delivered to the Agent and the Banks in connection therewith
shall remain unaltered and in full force and effect except as modified or
amended hereby and are hereby ratified and confirmed.
(b) This First Amendment shall be governed and construed
according to the laws of the Commonwealth of Pennsylvania.
(c) This First Amendment shall inure to the benefit of,
and be binding upon, the parties hereto and their respective successors and
permitted assigns.
(d) This First Amendment may be executed in one or more
counterparts, and by different parties on different counterparts, each of which
shall be deemed an original, all of which together shall constitute one and the
same instrument, and in making proof of this First Amendment it shall be
necessary only to produce one counterpart.
(e) This First Amendment shall have effect as of its date.
(f) To the extent an Event of Default exists on the date
hereof, any and all undertakings of the Agent and the Banks under or pursuant to
this First Amendment shall not be deemed a waiver by the Agent or the Banks of
any such Event of Default or any of the Agent's or the Banks' rights and
remedies under the Loan Agreement and/or applicable law; and the Bank hereby
reserves any and all such rights and remedies.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the day and year first above written.
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
By: By: Michael P. Graham
----------------------- ------------------------------------
Name: Name: Michael P. Graham
Title: Title: Senior Vice President
- Finance & Treasurer
Address: 762 Lancaster Avenue
Bryn Mawr, PA 19010
Tel. No: (610) 645-1087
Telecopy: (610) 645-1061
MELLON BANK, N.A.
By: Frank P. Mohapp
------------------------------------
Name: Frank P. Mohapp
Title: Vice President
Address: Plymouth Meeting
Executive Campus
610 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Tel. No: (610) 941-4188
Telecopy: (610) 941-4136
PNC BANK, NATIONAL ASSOCIATION
By: Julie P. Rokke
------------------------------------
Name: Julie P. Rokke
Title: Banking Officer
Address: Valley Forge Regional Banking Center
Suite 200
1000 Westlakes Drive
Berwyn, PA 19312
Tel. No: (610) 640-4900
Telecopy: (610) 640-4914
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION
By: Thomas J. Saunders
------------------------------------
Name: Thomas J. Saunders
Title: Vice President
Address: 123 South Broad Street
PMB010
Philadelphia, PA 19109-1199
Tel. No: (215) 985-3575
Telecopy: (215) 985-3719
MERIDIAN BANK
By: Patrick B. Trainor
------------------------------------
Name: Patrick B. Trainor
Title: Assistant Vice President
Address: Corporate Banking Department
One Liberty Place, Suite 3600
Philadelphia, PA 19103
Mailing
Address: Corporate Banking Department
OL3620
P.O. Box 7588
Philadelphia, PA 19103
Tel. No: (215) 854-3778
Telecopy: (215) 854-3774
STATE OF : Pennsylvania
ss.
COUNTY OF : Montgomery
On the 19th day of May, 1995, before me, the subscriber, a
Notary Public in and for the State and County aforesaid, personally appeared
Michael P. Graham, who acknowledged himself to be the Senior Vice President -
Finance and Treasurer of Philadelphia Suburban Water Company, a Pennsylvania
corporation, and that he as such officer being authorized to do so, executed and
delivered the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
------------------------------------
Notary Public
(NOTARIAL SEAL)
My Commission expires:
July 26, 1997
- ----------------------
REPLACEMENT SCHEDULE 1.01(a)
Amount of Amount of
Commitment For Commitment for
Revolving Credit Revolving Credit
Name and Address Loans From Loans From
of Bank 05/22/95 through 07/22/95 07/22/95 Percentages
- ---------------- ------------------------- ------------------ -----------
1. Mellon Bank, N.A. $25,333,333.34 $19,000,000 63 1/3%
Plymouth Meeting
Executive Campus
610 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Attn: Frank P. Mohapp
Vice President
Tel: (610) 941-4188
Fax: (610) 941-4136
Mellon Bank, N.A.
Attn: Loan Administration,
Flossie Bowers
Mellon Independence Center
199-5220
701 Market Street
Philadelphia, PA 19106
Tel: (215) 553-3414
Fax: (215) 553-4789 or
(215) 553-1016
2. PNC Bank, National
Association $ 5,333,333.33 $4,000,000 13 1/3%
Valley Forge Regional
Banking Center
Suite 200
1000 Westlakes Drive
Berwyn, PA 19312
3. First Fidelity Bank,
National Association $ 5,333,333.33 $4,000,000 13 1/3%
123 South Broad Street
PMB010
Philadelphia, PA 19101-1199
4. Meridian Bank
Corporate Banking Department $ 4,000,000.00 $3,000,000 10%
OL3620
P.O. Box 7588
Philadelphia, PA 19101 -------------- ---------- ------
TOTAL REVOLVING
CREDIT COMMITMENTS: $40,000,000 $30,000,000 100%
============== ===========
FIRST ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: Mellon Bank, N.A.
DATE: March 17, 1994
PRINCIPAL AMOUNT: $19,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to
and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby amended by
temporarily increasing the maximum principal amount permitted to be borrowed
thereunder by $6,333,333.33 from $19,000,000 to $25,333,333.34 from May 22, 1995
to July 21, 1995. On July 21, 1995 the maximum principal amount shall
automatically reduce to $19,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this First Allonge to be executed by its duly authorized officer as of
the 22nd day of May, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
------------------------ ---------------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 19th day of May, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- ----------------------
FIRST ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: First Fidelity Bank, National Association
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to
and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby amended by
temporarily increasing the maximum principal amount permitted to be borrowed
thereunder by $1,333,333.33 from $4,000,000 to $5,333,333.34 from May 22, 1995
to July 21, 1995. On July 22, 1995 the maximum principal amount shall
automatically reduce to $4,000,000.
IN WITNESS WHEREOF, the undersigned, intending
to be legally bound, has caused this First Allonge to be executed by its duly
authorized officer as of the 22nd day of May, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
---------------------- ------------------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 19th day of May, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
---------------------------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- ----------------------
FIRST ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: Meridian Bank
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to
and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby amended by
temporarily increasing the maximum principal amount permitted to be borrowed
thereunder by $1,000,000 from $3,000,000 to $4,000,000 from July 21, 1995 to
August 31, 1995. On July 21, 1995 the maximum principal amount shall
automatically reduce to $3,000,000.
IN WITNESS WHEREOF, the undersigned, intending
to be legally bound, has caused this First Allonge to be executed by its duly
authorized officer as of the 22nd day of May, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
--------------------- ------------------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 19th day of May, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- ----------------------
FIRST ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: PNC Bank, National Association
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to
and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby amended by
temporarily increasing the maximum principal amount permitted to be borrowed
thereunder by $1,333,333.33 from $4,000,000 to $5,333,333.33 from May 22, 1995
to July 21, 1995. On July 22, 1995 the maximum principal amount shall
automatically reduce to $4,000,000.
IN WITNESS WHEREOF, the undersigned,
intending to be legally bound, has caused this First Allonge to be executed by
its duly authorized officer as of the 22nd day of May, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
------------------------ ---------------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 19th day of May, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- ----------------------
PHILADELPHIA SUBURBAN WATER COMPANY
OFFICER'S CERTIFICATE
The undersigned officer of Philadelphia Suburban Water Company (the
"Borrower"), hereby certifies that:
1. The Articles and Certificate of Incorporation, as amended, and
the By-laws delivered on March 17, 1994 to the Bank have not been amended,
modified or rescinded and remain in full force and effect;
2. The Borrower is and remains in Good Standing in the
Commonwealth of Pennsylvania and all other jurisdictions where it is required to
remain in Good Standing.
3. The Resolutions adopted by the Board of Directors of the
Borrower at a regular meeting held on February 1, 1994 have not been amended,
modified or revoked, are in full force and effect, and authorize the appropriate
officers to execute the First Amendment to the Revolving Credit Agreement dated
the date hereof and applicable Allonges.
IN WITNESS WHEREOF, the undersigned hereby executed this Certificate
this 23rd day of May, 1995.
Michael P. Graham
----------------------------------------------
Name: Michael P. Graham
Title: Senior Vice President
- Finance and Treasurer
Exhibit 4.20
MELLON BANK, N..A
Plymouth Meeting Executive Campus
610 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
July 21, 1995
Philadelphia Suburban Water Company
762 Lancaster Avenue
Bryn Mawr, PA 19010
Attn: Mr. Michael P. Graham
Senior Vice President
Gentlemen:
Reference is hereby made to that certain Revolving Credit Agreement dated
as of March 17, 1994, as amended by the First Amendment to Revolving Credit
Agreement dated May 22, 1995 (as amended, modified and/or extended, the "Loan
Agreement") among Mellon Bank, N.A., in its capacity as Agent for the Banks
referenced in the Loan Agreement, the Banks (the "Banks ") and Philadelphia
Suburban Water Company (the "Borrower"). All capitalized terms used herein as
defined terms shall have the meanings ascribed to them in the Loan Agreement
unless herein provided to the contrary.
The Agent, Banks and Borrower each hereby agree that Section 2.01 of the
Loan Agreement is hereby amended and restated to read as follows:
Section 2.01 The Revolving Credit Commitment. The
maximum aggregate amount the Banks shall be obligated to lend to the
Borrower at any time under this Loan Agreement shall be Forty Million
Dollars ($40,000,000) from May 22, 1995 through and including August
31, 1995, and Thirty Million Dollars ($30,000,000) thereafter until
the Revolving Credit Commitment Termination Date, as such amounts may
have been reduced under Section 2.03 hereof.
The Borrower hereby represents and warrants that no Event of Default, and
to the Borrower's knowledge, no event which with the passage of time or giving
of notice or both would constitute an Event of Default exists on the date hereof
and no offsets or defenses exist against its obligations under the Loan
Agreement, the Notes or the Loan Documents delivered in connection therewith.
The Borrower also represents and warrants that this letter agreement and
the allonges to the Notes executed herewith have been duly authorized, executed
and delivered so as to constitute the legal, valid, and binding obligations of
the Borrower, enforceable in accordance with their respective terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors rights generally, and
general principles of equity. To the extent an Event of Default exists on the
date hereof, any and all undertakings of the Agent and the Banks under or
pursuant to this letter agreement shall not be deemed a waiver by the Agent or
the Banks of any such Event of Default or any of the Agent's or Banks' rights
and remedies under the Loan Agreement and/or applicable law; and the Banks
hereby reserve all such rights and remedies.
All terms, conditions, provisions and covenants under the Loan Agreement,
the Notes as amended, and all other Loan Documents delivered to the Agent and
the Banks in connection therewith shall remain unaltered and in force and effect
except as modified and/or amended hereby and are hereby ratified and confirmed.
This letter agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania. This letter agreement may be executed
in one or more counterparts, and by different parties on different counterparts,
each of which shall be deemed an original, all of which together shall
constitute one and the same instrument, and making proof of this letter
agreement it shall be necessary to produce only one counterpart. This letter
agreement shall have effect as of July 21, 1995.
Sincerely,
MELLON BANK, N.A., in its individual
capacity as a Bank and in its
capacity as Agent for the Banks
By: Frank P. Mohapp
-----------------------------------
Name: Frank P. Mohapp
Title: Vice President
Address: Plymouth Meeting
Executive Campus
610 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Tel. No: (610) 941-4188
Telecopy:(610) 941-4136
PNC BANK, NATIONAL ASSOCIATION
By: Julie P. Rokke
-----------------------------------
Name: Julie P. Rokke
Title: Banking Officer
Address: Valley Forge Regional
Banking Center
Suite 200
1000 Westlakes Drive
Berwyn, PA 19312
Tel. No: (610) 640-4900
Telecopy:(610) 640-4914
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION
By: Thomas J. Saunders
-----------------------------------
Name: Thomas J. Saunders
Title: Vice President
Address: 123 South Broad Street
PMB010
Philadelphia, PA 19109-1199
Tel. No: (215) 985-3575
Telecopy:(215) 985-3719
MERIDIAN BANK
By: Patrick B. Trainor
-----------------------------------
Name: Patrick B. Trainor
Title: Assistant Vice President
Address: Corporate Banking Department
One Liberty Place, Suite 3600
Philadelphia, PA 19103
Mailing
Address: Corporate Banking Department
OL3620
P.O. Box 7588
Philadelphia, PA 19103
Tel. No: (215) 854-3778
Telecopy:(215) 854-3774
SECOND ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: Mellon Bank, N.A.
DATE: March 17, 1994
PRINCIPAL AMOUNT: $19,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached
to and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby
amended by temporarily increasing the maximum principal amount permitted to be
borrowed thereunder by $6,333,333.33 from $19,000,000 to $25,333,333.34 from May
22, 1995 to August 31, 1995. On September 1, 1995 the maximum principal amount
shall automatically reduce to $19,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Second Allonge to be executed by its duly authorized officer as of
the 21st day of July, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
--------------------------------- ---------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 21st day of July, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
-------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- -----------------------
SECOND ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: First Fidelity Bank, National Association
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached
to and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby
amended by temporarily increasing the maximum principal amount permitted to be
borrowed thereunder by $1,333,333.33 from $4,000,000 to $5,333,333.34 from May
22, 1995 to August 31, 1995. On September 1, 1995 the maximum principal amount
shall automatically reduce to $4,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Second Allonge to be executed by its duly authorized officer as of
the 21st day of July, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
--------------------------------- ---------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 21st day of July, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
-------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- -----------------------
SECOND ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: Meridian Bank
DATE: March 17, 1994
PRINCIPAL AMOUNT: $3,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached
to and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby
amended by temporarily increasing the maximum principal amount permitted to be
borrowed thereunder by $1,000,000 from $3,000,000 to $4,000,000 from May 22,
1995 to August 31, 1995. On September 1, 1995 the maximum principal amount shall
automatically reduce to $3,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Second Allonge to be executed by its duly authorized officer as of
the 21st day of July, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
--------------------------------- ---------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 21st day of July, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
-------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- -----------------------
SECOND ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: PNC Bank, National Association
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached
to and shall constitute an integral part of the above-described Revolving Credit
Note from and after the date hereof.
The Revolving Credit Note is hereby
amended by temporarily increasing the maximum principal amount permitted to be
borrowed thereunder by $1,333,333.33 from $4,000,000 to $5,333,333.33 from May
22, 1995 to August 31, 1995. On September 1, 1995 the maximum principal amount
shall automatically reduce to $4,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Second Allonge to be executed by its duly authorized officer as of
the 21st day of July, 1995.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: Patricia M. Mycek By: Michael P. Graham
--------------------------------- ---------------------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 21st day of July, 1995, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
-------------------------
Notary Public
Notarial Seal
My Commission expires:
July 26, 1997
- -----------------------
PHILADELPHIA SUBURBAN WATER COMPANY
OFFICER'S CERTIFICATE
The undersigned officer of Philadelphia Suburban Water Company (the
"Borrower"), hereby certifies that:
1. The Articles and Certificate of Incorporation, as amended, and the
By-laws delivered on March 17, 1994 to the Bank have not been amended, modified
or rescinded and remain in full force and effect;
2. The Borrower is and remains in Good Standing in the Commonwealth of
Pennsylvania and all other jurisdictions where it is required to remain in Good
Standing.
3. The Resolutions adopted by the Board of Directors of the Borrower at
a regular meeting held on February 1, 1994 have not been amended, modified or
revoked, are in full force and effect, and authorize the appropriate officers to
execute the letter agreement relating to the Revolving Credit Agreement dated
the date hereof and applicable Allonges.
IN WITNESS WHEREOF, the undersigned hereby executed this Certificate
this 21st day of July, 1995.
Michael P. Graham
---------------------------------
Name: Michael P. Graham
Title: Senior Vice President
- Finance and Treasurer
Exhibit 4.21
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIRD AMENDMENT to Revolving Credit Agreement ("Third Amendment"),
dated as of December 20, 1996, among Philadelphia Suburban Water Company, a
Pennsylvania corporation (the "Borrower"), the Banks signatory hereto (the
"Banks"), and Mellon Bank, N.A., in its capacity as agent for the Banks
hereunder (hereafter the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower, the Agent and the Banks are parties to a
Revolving Credit Agreement dated as of March 17, 1994, as amended by a First
Amendment to Revolving Credit Agreement dated as of May 22, 1995, and as further
amended by a letter agreement dated July 21, 1995 (as amended, modified and/or
extended, the "Loan Agreement"), pursuant to which the Banks agreed to make
available to the Borrower certain credit facilities in the aggregate amount of
$30,000,000 upon the terms and conditions specified in the Loan Agreement;
WHEREAS, pursuant to an Assignment and Assumption Agreement dated
December 20, 1996, between First Union National Bank f/k/a First Fidelity Bank,
N.A. ("First Union") and First Union National Bank of North Carolina ("First
Union-NC"), First Union has sold and assigned to First Union-NC all of First
Union's interest in and to First Union's rights and obligations under the Loan
Agreement as of the date hereof; and
WHEREAS, the parties wish to amend certain terms and conditions of the
Loan Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto, intending to be legally bound hereby,
agree to amend the Loan Agreement as herein stated.
1. Effect of Prior Agreements.
This Third Amendment is intended to amend the Loan Agreement, as it
has been in effect to the date hereof and as it shall be amended on and after
the date hereof. All capitalized terms used herein as defined terms shall have
the meanings ascribed to them in the Loan Agreement unless herein provided to
the contrary.
2. Amendments.
(a) Section 2.01 of the Loan Agreement is hereby amended in its
entirety to read as follows:
2.01 The Revolving Credit Commitment. The maximum aggregate
amount the Banks shall be obligated to lend to the Borrower at any given time
under this Agreement shall be Fifty Million Dollars ($50,000,000) from December
20, 1996 through and including December 31, 1997, and Thirty Million Dollars
($30,000,000) thereafter until the Revolving Credit Commitment Termination Date,
as such amounts may have been reduced under Section 2.03 hereof (the "Revolving
Credit Commitment").
(b) Schedule 1.01(a) is hereby replaced with Second
Replacement Schedule 1.01(a) attached hereto and made a part hereof. Any and all
references to Schedule 1.01(a) shall be deemed to refer to Second Replacement
Schedule 1.01(a).
3. Conditions. To induce the Agent and Banks to enter into this Third
Amendment and to extend the Loans contemplated herein, the Borrower shall
perform the following conditions to the Agent's and the Banks' satisfaction
prior to the Banks' acting in reliance hereon:
(a) The Borrower shall execute and deliver to the Banks this Third
Amendment, the Third Allonges to Revolving Credit Notes (the "Third Allonges")
and all other documents as the Banks may require; and
(b) The Borrower shall deliver all other documents and certificates
reasonably requested by the Agent.
4. Representations and Warranties. Borrower hereby represents and
warrants that:
(a) The representations and warranties contained in the Loan
Agreement and in each certificate, document or financial statement furnished by
the Borrower delivered therewith or in connection with any other Loan Document
are true and correct in all material respects on and as of the date hereof as
though made on and as of the date hereof.
(b) No Event of Default, and to the Borrower's knowledge no event
which with the passage of time or the giving of notice or both could become an
Event of Default, exists on the date hereof, and no offsets or defenses exist
against the Borrower's obligations under the Loan Agreement or the documents
delivered in connection therewith.
(c) This Third Amendment and the Third Allonges have been duly
authorized, executed and delivered so as to constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general principles of equity.
(d) The execution, delivery and performance of this Third Amendment
and the Third Allonges will not violate any applicable provision of law or
judgment, order or regulation of any court or of any public or governmental
agency or authority nor conflict with or constitute a breach of or a default
under any instrument to which the Borrower is a party or by which the Borrower
or the Borrower's properties are bound nor result in the creation of any lien,
charge or encumbrance upon any assets of the Borrower.
(e) No approval, consent or authorization of, or registration,
declaration or filing with, any governmental or public body or authority is
required in connection with the valid execution, delivery and performance by the
Borrower of this Third Amendment and the Third Allonges.
5. Reaffirmation. The Borrower hereby affirms and reaffirms to the
Agent and the Banks all of the terms, covenants, and conditions contained in the
Loan Agreement including, without limitation, those contained in Article VI of
the Loan Agreement and agrees to abide thereby until all of the obligations to
the Banks are satisfied and/or discharged in their entirety.
6. Miscellaneous.
(a) All terms, conditions, provisions and covenants in the Loan
Agreement, the Notes as amended by the Third Allonges, and all other Loan
Documents delivered to the Agent and the Banks in connection therewith shall
remain unaltered and in full force and effect except as modified or amended
hereby and are hereby ratified and confirmed.
(b) This Third Amendment shall be governed by and construed
according to the laws of the Commonwealth of Pennsylvania.
(c) This Third Amendment shall inure to the benefit of, and be
binding upon, the parties hereto and their respective successors and permitted
assigns.
(d) This Third Amendment may be executed in one or more
counterparts, and by different parties on different counterparts, each of which
shall be deemed an original, all of which together shall constitute one and the
same instrument, and in making proof of this Third Amendment it shall be
necessary only to produce one counterpart.
(e) This Third Amendment shall have effect as of its date.
(f) To the extent an Event of Default exists on the date hereof, any
and all undertakings of the Agent and the Banks under or pursuant to this Third
Amendment shall not be deemed a waiver by the Agent or the Banks of any such
Event of Default or any of the Agent's or the Banks' rights and remedies under
the Loan Agreement and/or applicable law; and the Banks hereby reserve any and
all such rights and remedies.
IN WITNESS WHEREOF, the parties hereto have executed this
Third Amendment as of the day and year first above written.
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
By: By: Michael P. Graham
- ------------------------ -------------------------------
Name: Name: Michael P. Graham
Title: Title: Senior Vice President
- Finance & Treasurer
Address: 762 Lancaster Avenue
Bryn Mawr, PA 19010
Tel. No: (610) 645-1087
Telecopy: (610) 645-1061
MELLON BANK, N.A.
By: Anthony R. Caringi
-----------------------------
Name: Anthony R. Caringi
Title: Assistant Vice President
Address: Plymouth Meeting
Executive Campus
610 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Tel. No: (610) 941-4182
Telecopy: (610) 941-4136
PNC BANK, NATIONAL ASSOCIATION
By: Kevin D. Wheatley
---------------------------------
Name: Kevin D. Wheatley
Title: Vice President
Address: 630 Dresher Road
Horsham, PA 19312
Tel. No: (215) 773-5254
Telecopy: (215) 773-5270
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA (successor to First Fidelity Bank,
National Association)
By: Michael J. Kolosowsky
------------------------------
Name: Michael J. Kolosowsky
Title: Vice President
Address: 123 South Broad Street
PA1219
Philadelphia, PA 19109
Tel. No: (215) 985-7556
Telecopy: (215) 985-3555
Notices to: Carl E. Goelz
CORESTATES BANK, N.A. (successor to Meridian Bank)
By: Anthony D. Braxton
-----------------------------------
Name: Anthony D. Braxton
Title: Vice President
Address: FC 1-8-11-28
1339 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19101-7618
Tel. No: (215) 786-4353
Telecopy: (215) 786-7721
STATE OF : Pennsylvania
ss.
COUNTY OF : Montgomery
On the 20th day of December, 1996, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham, who acknowledged himself to be the Senior Vice President Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------
Notary Public
(NOTARIAL SEAL)
My Commission expires:
July 26, 1997
- ------------------------
SECOND REPLACEMENT SCHEDULE 1.01(a)
-----------------------------------
Amount of Amount of
Commitment For Commitment for
Revolving Credit Revolving Credit
Name and Address Loans From Loans From
of Bank 12/20/96 through 12/31/97 01/01/98 Percentages
------------------------- -------- -----------
1. Mellon Bank, N.A. $31,666,666.67 $19,000,000 63 1/3%
Plymouth Meeting
Executive Campus
610 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Attn: Anthony R. Caringi
Assistant Vice President
Tel: (610) 941-4182
Fax: (610) 941-4136
Mellon Bank, N.A.
Attn: Loan Administration,
Flossie Bowers
Mellon Independence Center
199-5220
701 Market Street
Philadelphia, PA 19106
Tel: (215) 553-3414
Fax: (215) 553-4789 or
(215) 553-1016
2. PNC Bank, National
Association $ 6,666,666.67 $4,000,000 13 1/3%
630 Dresher Road
Horsham, PA 19044
3. First Union National Bank of
North Carolina (successor to
First Fidelity Bank,
National Association) $ 6,666,666.66 $4,000,000 13 1/3%
123 South Broad Street
PA1219
Philadelphia, PA 19109
4. CoreStates Bank, N.A.
(successor to Meridian Bank) $ 5,000,000.00 $3,000,000 10%
FC 1-8-10-73
1339 Chestnut Street
P.O. Box 7815
Philadelphia, PA 19101-7618 ---------------- ----------- -----
-
TOTAL REVOLVING
CREDIT COMMITMENTS: $50,000,000 $30,000,000 100%
=========== =========== ===
THIRD ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: Mellon Bank, N.A.
DATE: March 17, 1994
PRINCIPAL AMOUNT: $19,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to and shall
constitute an integral part of the above-described Revolving Credit Note from
and after the date hereof.
The Revolving Credit Note is hereby amended by temporarily
increasing the maximum principal amount permitted to be borrowed thereunder by
$12,666,666.67 from $19,000,000 to $31,666,666.67 from December 20, 1996 to
December 31, 1997. On January 1, 1998 the maximum principal amount shall
automatically reduce to $19,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has caused this Third Allonge to be executed by its duly authorized
officer as of the 20th day of December, 1996.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: By: Michael P. Graham
------------------------- -----------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 20th day of December, 1996, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------
Notary Public
(NOTARIAL SEAL)
My Commission expires:
July 26, 1997
- ------------------------
THIRD ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: First Union National Bank of North Carolina
(successor to First Fidelity Bank, National
Association)
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to and shall
constitute an integral part of the above-described Revolving Credit Note from
and after the date hereof.
The Revolving Credit Note is hereby amended by temporarily
increasing the maximum principal amount permitted to be borrowed thereunder by
$2,666,666.67 from $4,000,000 to $6,666,666.67 from December 20, 1996 to
December 31, 1997. On January 1, 1998 the maximum principal amount shall
automatically reduce to $4,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has caused this Third Allonge to be executed by its duly authorized
officer as of the 20th day of December, 1996.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: By: Michael P. Graham
------------------------- -----------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 20th day of December, 1996, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------
Notary Public
(NOTARIAL SEAL)
My Commission expires:
July 26, 1997
- ------------------------
THIRD ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: CoreStates Bank, N.A. (successor to Meridian Bank)
DATE: March 17, 1994
PRINCIPAL AMOUNT: $3,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to and shall
constitute an integral part of the above-described Revolving Credit Note from
and after the date hereof.
The Revolving Credit Note is hereby amended by temporarily
increasing the maximum principal amount permitted to be borrowed thereunder by
$2,000,000 from $3,000,000 to $5,000,000 from December 20, 1996 to December 31,
1997. On January 1, 1998 the maximum principal amount shall automatically reduce
to $3,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has caused this Third Allonge to be executed by its duly authorized
officer as of the 20th day of December, 1996.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: By: Michael P. Graham
------------------------- -----------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 20th day of December, 1996, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------
Notary Public
(NOTARIAL SEAL)
My Commission expires:
July 26, 1997
- ------------------------
THIRD ALLONGE TO REVOLVING CREDIT NOTE
ENDORSEMENT SEPARATE FROM INSTRUMENT
BORROWER: Philadelphia Suburban Water Company
PAYEE: PNC Bank, National Association
DATE: March 17, 1994
PRINCIPAL AMOUNT: $4,000,000
DUE DATE: March 1, 1998
This Allonge shall be and remain attached to and shall
constitute an integral part of the above-described Revolving Credit Note from
and after the date hereof.
The Revolving Credit Note is hereby amended by temporarily
increasing the maximum principal amount permitted to be borrowed thereunder by
$2,666,666.66 from $4,000,000 to $6,666,666.66 from December 20, 1996 to
December 31, 1997. On January 1, 1998 the maximum principal amount shall
automatically reduce to $4,000,000.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has caused this Third Allonge to be executed by its duly authorized
officer as of the 20th day of December, 1996.
Attest: PHILADELPHIA SUBURBAN WATER COMPANY
By: By: Michael P. Graham
------------------------- -----------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
STATE OF PENNSYLVANIA :
ss.
COUNTY OF MONTGOMERY :
On the 20th day of December, 1996, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared Michael P.
Graham who acknowledged himself to be the Senior Vice President - Finance and
Treasurer of Philadelphia Suburban Water Company, a Pennsylvania corporation,
and that he as such officer being authorized to do so, executed and delivered
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Suzanne Falcone
----------------------
Notary Public
(NOTARIAL SEAL)
My Commission expires:
July 26, 1997
- ------------------------
PHILADELPHIA SUBURBAN WATER COMPANY
OFFICER'S CERTIFICATE
The undersigned officer of Philadelphia Suburban Water Company (the
"Borrower"), hereby certifies that:
1. The Articles and Certificate of Incorporation of the Borrower, as
amended, and the By-laws of the Borrower delivered to Mellon Bank, N.A. on March
17, 1994 have not been amended, modified or rescinded and remain in full force
and effect;
2. The Borrower is and remains in Good Standing in the Commonwealth of
Pennsylvania and all other jurisdictions where it is required to remain in Good
Standing.
3. The Resolutions adopted by the Board of Directors of the Borrower at
a regular meeting held on February 1, 1994 have not been amended, modified or
revoked, are in full force and effect, and authorize the appropriate officers of
the Borrower to execute the Third Amendment to the Revolving Credit Agreement
dated the date hereof and applicable Allonges.
IN WITNESS WHEREOF, the undersigned hereby executed this Certificate
this 20th day of December, 1996.
Michael P. Graham
-----------------------
Name: Michael P. Graham
Title: Senior Vice President -
Finance and Treasurer
Exhibit 10.16
AMENDMENT 1994-2
TO THE 1994 PHILADELPHIA SUBURBAN CORPORATION
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."
Exhibit 10.17
PHILADELPHIA SUBURBAN CORPORATION
PHILADELPHIA SUBURBAN WATER COMPANY
1997 ANNUAL CASH INCENTIVE COMPENSATION PLAN
BACKGROUND
o During the first quarter of 1989, the Company and its compensation
consultant conducted a feasibility study to determine whether the
Company should implement an incentive compensation plan. The study was
prompted by the positive experience of other investor-owned water
companies and PSC's experience with incentive compensation.
o The study included interviews with PSWC and PSC executives and an
analysis of competitive compensation levels. Based on the results, the
compensation consultant recommended that the Company's objectives and
competitive practice supported the adoption of an annual incentive plan
(the "Plan). The Company has had a cash incentive compensation plan in
place since 1990 and management and the Board of Directors feel it has
had a positive effect on the Company's operations, aiding employees,
shareholders (higher earnings) and customers (better service and
controlling expenses).
o The Plan has two components - a Management Incentive Program and an
Employee Recognition ("Chairman's Award") Program.
o The Plan is designed to provide an appropriate incentive to the
officers and managers of the Company. The 1996 Management Incentive
Program will cover all officers and managers of Philadelphia Suburban
Corporation, and its subsidiaries.
MANAGEMENT INCENTIVE PROGRAM
o Performance Measures
-- Annual incentive bonus awards are calculated by multiplying an
individual's Target Bonus by a Company Rating factor based on
the Company's performance and an Individual Rating factor
based on the individual employee's performance.
The approach of having a plan tied to the Company's income
performance is appropriate as the participants' assume some of
the same risks and rewards as the shareholders who are
investing in the Company and making its capital construction
program possible. Customers also benefit from the Company's
employees' objectives being met as improvements in performance
are accomplished by controlling costs, improving efficiencies
and enhancing customer service. For these reasons, future rate
relief should be lessened and less frequent, which directly
benefits all customers.
-- The Company's actual after-tax net income from continuing
operations relative to the annual budget will be the primary
measure for the Company's performance. Each year a "Target Net
Income" level will be established. For purposes of the Plan,
the Target Net Income may differ from the budgeted net income
level. For 1997, the Target Net Income will exclude the impact
of adverse PUC or court rulings on FAS 106, the effect of any
unbudgeted extraordinary gains or losses, changes in
accounting principles, changes in tax rates and any gains or
losses related to the discontinued operations.
-- Based on a review of historic performance, the minimum or
threshold level of performance is set at 90 percent of the
Target Net Income. That is, no bonus awards will be made if
actual net income is less than 90 percent of the Target Net
Income for the year. No additional bonus will be earned for
results exceeding 110 percent of the Target Net Income.
-- Each individual's performance and achievement of his or her
objectives will also be evaluated and factored into the bonus
calculation. Performance objectives for each participant are
established at the beginning of the year and are primarily
directed toward controlling costs, improving efficiencies and
productivity and enhancing customer service. Each objective
has specific performance measures that are used to determine
the level of achievement for each objective.
2
o Participation
-- Participation in the Management Incentive Program will be
determined each year. Each participant will be assigned a
"Target Bonus Percentage" ranging from 5 to 50 percent of
salary depending on duties and responsibilities.
-- Actual bonuses may range from 0, if the Company's financial
results fall below the minimum threshold or the participant
does not make sufficient progress toward achieving his or her
objectives (i.e. performance measure points totaling less than
70 points), to 187.5 percent if performance -- both Company
and individual -- is rated at the maximum.
o Company Performance
-- Company performance will be measured on the following
schedule:
Percent of Company
1996 Plan Rating
---------- -------
Threshold............. +90% 0%
90 50
92 65
95 80
96 85
97 90
98 94
99 97
Plan................... 100 100
105 110
+-110 125
-- The actual Company Rating should be calculated by
interpolation between the points shown in the table above.
-- Regardless of the Company rating resulting from this Schedule,
the Executive Compensation and Employee Benefits Committee
retains the authority to determine the final Company Rating
for purposes of this Plan.
3
o Individual Performance
-- Individual performance will be measured on the following scale:
Performance Measure Individual
Points Rating
------------------- ----------
0 - 69 0%
70 70%
80 80%
90 90%
100 100%
110 110%
-- In addition, up to 40 additional points and additional
percentage points may be awarded to a participant at the
discretion of the Chief Executive Officer for exemplary
performance. Individual Performance points for the Chief
Executive Officer are determined by the Executive Compensation
and Employee Benefits Committee.
Sample Calculations
o Example 1
Salary $70,000
Target Bonus 10 percent ($7,000)
Company Rating 100 percent
Individual Rating 90 percent
Calculation:
Company Individual
Target Bonus x Rating x Rating = Bonus Earned
------------ ------- ---------- ------------
$7,000 x 100% x 90% = $6,300
======
4
o Example 2
-- Using the same salary and target bonus, but assuming Company
performance was less than 90 percent of Target Net Income,
there would be no bonus earned.
Calculation:
$7,000 x 0 x 90% = 0
o Example 3
-- Similarly, if individual Performance is rated below 70 points,
no bonus would be earned regardless of the Company Rating.
Calculation:
$7,000 x 100% x 0 = 0
EMPLOYEE RECOGNITION PROGRAM
o In addition to the Management Incentive Program, the Company maintains
an Employee Recognition Program known as the Chairman's Award program
to reward employees not eligible for the management bonus plan for
superior performance or a special action, or heroic deed, or for a
project that positively impacts the performance or image of the
Company.
o Awards will be made from an annual pool, not to exceed $125,000 (which
represents approximately less than 1.5% of the base payroll for the
non-union employees who do not participate in the Management Incentive
Program), established at the beginning of the year. Unused funds will
not be carried over to the next year. If financial performance
warrants, management may request permission from the Executive
Compensation and Employee Benefits Committee for special awards under
the program.
o Awards will be made throughout the year and through the first quarter
of the following year with payment as close to the timing of the event
being rewarded as possible.
5
o Department Heads may nominate individuals in their unit to the
applicable Vice President and document the reasons for the
recommendations. The applicable Vice President will review the
nominations and forward their recommendations to the Chief Executive
Officer.
o The Chief Executive Officer will determine the individuals to actually
receive a bonus and the amount.
6
Exhibit 10.18
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and
among Philadelphia Suburban Water Company, a Pennsylvania corporation (the
"Company"), Philadelphia Suburban Corporation, a Pennsylvania corporation
("PSC"), and Nicholas DeBenedictis (the "Executive").
WHEREAS, the Executive is presently employed by the Company,
as its Chairman, Chief Executive Officer and President; and
WHEREAS, the Company considers it essential to foster the
employment of well-qualified, key management personnel, and, in this regard, the
boards of directors of the Company and PSC recognize that, as is the case with
many publicly-held corporations such as PSC, the possibility of a change of
control of PSC may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have
determined that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of key members of the Company's management to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the
employ of the Company, the Company and PSC, for which certain of the employees
of the Company, such as the Executive, provide key executive services, agree
that the Executive shall receive the compensation set forth in this Agreement in
the event his employment with the Company is terminated subsequent to a "Change
of Control" (as defined in Section 1 hereof) of PSC as a
cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is
paid to the Executive in light of his role in the management of the affairs of
PSC or its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) "Base Compensation" shall mean the average of the
total cash base salary, annual bonus and dividend equivalents (paid under the
Company's Equity compensation Plan) received by the Executive in all capacities
with the Company, and its Subsidiaries or Affiliates, as reported for Federal
income tax purposes on Form W-2, together with any amounts the payment of which
has been deferred by the Executive under any deferred compensation plan of the
Company, and its Subsidiaries or Affiliates, or otherwise, and any and all
salary reduction authorized amounts under any of the benefit plans or programs
of the Company, and its Subsidiaries or Affiliates, but excluding any amounts
attributable to the exercise of stock options or the receipt of Restricted Stock
granted to the Executive under the Company's Equity Compensation Plan and its
predecessors or successors, for the three calendar years (or such number of
actual full calendar years of employment, if
-2-
less than three) immediately preceding the calendar year in which occurs a
Change of Control or the Executive's Termination Date, whichever period produces
the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of
any securities: (i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange; (ii) that such Person
or any of such Person's Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
-3-
Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC.
(e) "Change of Control" shall mean:
(i) any Person (including any individual, firm,
corporation, partnership or other entity except PSC or the Company or any
employee benefit plan of the PSC or the Company or of any Affiliate or
Associate, any Person or entity organized, appointed or established by PSC or
the Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the Common Stock of PSC then
outstanding;
(ii) during any twenty-four month period, individuals who at
the beginning of such period constitute the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by PSC's shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by
a vote of at least seventy-five percent of the directors in office at the time
of such election or nomination who were directors at the beginning of such
period; or
(iii) there occurs a sale of substantially all of the assets
of PSC or its liquidation is approved by a majority of its shareholders or PSC
is merged into or is merged with an
-4-
unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity.
Notwithstanding anything in this Section 1(e) to the contrary,
a Change of Control shall not be deemed to have taken place under clause (e)(i)
above if (a) such Person becomes the beneficial owner in the aggregate of 20% or
more of the Common Stock of the Company then outstanding as a result of an
inadvertent acquisition by such Person if such Person, as soon as practicable,
divests itself of a sufficient amount of its Common Stock so that it no longer
owns 20% or more of the Common Stock then outstanding, as determined by the
Board of Directors of the Company, or (ii) the shares of Common Stock required
to be counted in order to meet the 20% minimum threshold described under such
clause (i) include any of the shares described in subsections (i) through (iv)
of section 2543(b) of the Pennsylvania Business Corporation Law of 1988 (15
Pa.C.S.A. Section 2543(b)) as in effect on the date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds,
2) habitual insobriety or substance abuse, 3) conviction of a crime involving
moral turpitude, or 4) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of
Employment initiated by the Executive upon one or more of the following
occurrences:
(i) any failure of the Company to comply with
and satisfy any of the terms of this the Agreement;
-5-
(ii) any significant involuntary reduction of the
authority, duties, responsibilities or reporting relationships
held by the Executive immediately prior to the Change of
Control;
(iii) any involuntary removal of the Executive
from the employment grade, compensation level or officer
positions which the Executive holds with the Company or, if
the Executive is employed by a Subsidiary, with a Subsidiary,
held by him immediately prior to the Change of Control, except
in connection with promotions to higher office;
(iv) any involuntary reduction in the Executive's
target level of annual and long-term compensation as in effect
immediately prior to the Change of Control;
(v) any transfer of the Executive, without his
express written consent, to a location which is outside the
Bryn Mawr, Pennsylvania area by more than 50 miles, other than
on a temporary basis (less than 6 months);
(vi) the Executive being required to undertake
business travel to an extent substantially greater than the
Executive's business travel obligations immediately prior to
the Change of Control; or
(vii) the Executive determines within 12 months of
the Change of Control, that circumstance have so changed with
respect to the Company or PSC, that he is no longer able to
effectively perform his duties and responsibilities to the
Company.
(h) "Normal Retirement Date" shall mean the first day
of the calendar month coincident with or next following the Executive's 65th
birthday.
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(i) "Subsidiary" shall mean any corporation in which the
Company, directly or indirectly, owns at least a 50% interest or an
unincorporated entity of which the Company, directly or indirectly, owns at
least 50% of the profits or capital interests.
(j) "Termination Date" shall mean the date of receipt of
the Notice of Termination described in Section 2 hereof or any later date
specified therein, as the case may be.
(k) "Termination of Employment" shall mean the
termination of the Executive's actual employment relationship with the Company
and any of it Subsidiaries that actually employs the Executive.
2. Notice of Termination. Any Termination of Employment
following a Change of Control shall be communicated by a Notice of Termination
to the other party hereto given in accordance with Section 14 hereof. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific provision in this Agreement relied upon, (ii)
briefly summarizes the facts and circumstances deemed to provide a basis for the
Executive's Termination of Employment under the provision so indicated, and
(iii) if the Termination Date is other than the date of receipt of such notice,
specifies the Termination Date (which date shall not be more than 15 days after
the giving of such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in
the event of the Executive's involuntary Termination of Employment for any
reason other than Cause or in the event of a Good Reason Termination, in either
event within two years after a Change of Control, the Company shall pay to the
Executive, upon the execution of a release in the form required by the Company
of its terminating executives prior to the Change of Control, within
-7-
15 days after the Termination Date (or as soon as possible thereafter in the
event that the procedures set forth in Section 11(b) hereof cannot be completed
within 15 days), an amount in cash equal to 2.5 times the Executive's Base
Compensation, subject to required employment taxes and deductions. PSC hereby
guarantees the obligations of the Company and, in the event that the Company
does not satisfy its obligation hereunder within the required time period, PSC
shall pay or cause to be paid all compensation, benefits and other amounts
remaining due to the Executive upon prompt written notice to PSC that the
Company has not satisfied its obligation (or a portion thereof) to the
Executive.
(b) In the event the Executive's Normal Retirement Date
would occur prior to 12 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments.
(a) The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Executive
under any other plan, policy or program of the Company, and its Subsidiaries or
Affiliates. In addition, the Executive shall be entitled to a continuation of
health, dental, life and welfare benefits, excluding disability benefits,
otherwise provided to senior level executives or employees generally, as the
same may be amended for all such individuals from time to time, for the period
of three (3) years.
(b) The Executive will also receive a payment equal to .5
times his Base Compensation and the Company will transfer to him without
requiring a cash payment any life
-8-
insurance policy maintained by it on his life pursuant to a split dollar life
insurance agreement. In exchange, for a period of 9 months after the Termination
Date, the Executive agrees that he will not, unless acting pursuant with the
prior written consent of the Board, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise
with or use or permit his name to be used in connection with, any business or
enterprise engaged in a geographic area in which the Company or any of its
Subsidiaries is operating on the Termination Date (the "Geographic Area"), in
any business that is competitive to a business from which the Company or any of
its Subsidiaries derived at least five percent of its respective annual gross
revenues for the twelve (12) months preceding the Termination Date. It is
recognized by the Executive that the business of the Company and its
Subsidiaries and the Executive's connection therewith is or will be involved in
activity throughout the Geographic Area, and that more limited geographical
limitations on this non-competition covenant are therefore not appropriate. The
foregoing restriction shall not be construed to prohibit the ownership by the
Executive of less than one percent of any class of securities of any corporation
which is engaged in any of the foregoing businesses having a class of securities
registered pursuant to the Securities Exchange Act of 1934, provided that such
ownership represents a passive investment and that neither the Executive nor any
group of persons including the Executive in any way, either directly or
indirectly, manages or exercises control of any such corporation, guarantees any
of its financial obligations, otherwise takes any part in its business, other
than exercising his rights as a shareholder, or seeks to do any of the
foregoing.
-9-
(c) The Executive acknowledges that the restrictions
contained in paragraph (b) are reasonable and necessary to protect the
legitimate interests of the Company and its Subsidiaries and Affiliates, that
the Company would not have made the payments specified in that paragraph in the
absence of such restrictions, and that any violation of those provisions will
result in irreparable injury to the Company. The Executive represents that his
experience and capabilities are such that the restrictions contained in
paragraph (b) will not prevent the Executive from obtaining employment or
otherwise earning a living at the same general level of economic benefit as is
the case as of the date hereof. The Executive agrees that the Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, which right shall be cumulative and in addition to
any other rights or remedies to which the Company may be entitled. In the event
that any of the provisions of paragraph (b) should ever be adjudicated to exceed
the time, geographic, service, or other limitations permitted by applicable law
in any jurisdiction, then such provisions shall be deemed reformed in such
jurisdiction to the maximum time, geographic, service, or other limitations
permitted by applicable law.
5. Trust Fund. PSC sponsors an irrevocable trust fund
pursuant to a trust agreement to hold assets to satisfy its obligations to the
Executive under this Agreement. Funding of such trust fund shall be subject to
the discretion of PSC's President, as set forth in the agreement pursuant to
which the fund has been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as
appropriate) shall fail or refuse to make payment of any amounts due the
Executive under Sections 3 and 4 hereof
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within the respective time periods provided therein, the Company shall pay to
the Executive, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid from the
date payment is required under Section 3 or 4, as appropriate, until paid to the
Executive, at the rate from time to time announced by PNC Bank as its "prime
rate" plus 1%, each change in such rate to take effect on the effective date of
the change in such prime rate.
(b) It is the intent of the parties that the Executive
not be required to incur any expenses associated with the enforcement of his
rights under this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, the
Company shall pay the Executive on demand the amount necessary to reimburse the
Executive in full for all reasonable expenses (including all attorneys' fees and
legal expenses) incurred by the Executive in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Executive shall not be required
to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in or
rights under any benefit, bonus, incentive or other plan or program provided by
the Company, or any of its Subsidiaries or Affiliates, and for which the
Executive may qualify.
-11-
9. No Set-Off. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.
10. Taxes. Any payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to this Agreement
(such payments or distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the loss of deduction under Section 280G of
the Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
-12-
(b) All determinations to be made under this Section 11
shall be made by the Company's independent public accountant immediately prior
to the Change of Control (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations both to the Company and the
Executive within 10 days of the Termination Date. Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. The
Executive shall then have the right to determine which of the Agreement Payments
shall be eliminated or reduced in order to produce the Reduced Amount in
accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. Within two years after the
Termination of Employment, the Accounting Firm shall review the determination
made by it pursuant to the preceding paragraph and the Company shall cooperate
and provide all information necessary for such review. In the event that the
Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to the Company together with interest
-13-
from the date of payment under this Agreement at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Executive to the Company if and
to the extent such payment would not reduce the limit on the amount that is
deductible under Section 280G of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest from the date of payment under this Agreement at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm
in performing the determinations referred to in subsections (b) and (c) above
shall be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall
be indefinite until the Company notifies the Executive in writing that this
Agreement will not be renewed at least sixty days prior to the proposed
termination; provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied or have expired, and (ii)
this Agreement shall terminate if, prior to a Change of Control, the employment
of the Executive with the Company or any of its Subsidiaries, as the case may
be, shall terminate for any reason; provided, however, that if a Change of
Control occurs within 6 months after the Executive's Termination of Employment
other than for Cause, the Executive shall be entitled to all of the
-14-
terms and conditions of this Agreement as if the Termination Date had occurred
on the date of the Change of Control.
13. Successor Company. PSC shall require any successor or
successors (whether direct or indirect, by purchase, merger or otherwise) to all
or substantially all of the business and/or assets of PSC or the Company, or of
any of their Subsidiaries that actually employ the Executive, by agreement in
form and substance satisfactory to the Executive, to acknowledge expressly that
this Agreement is binding upon and enforceable against the successor or
successors, in accordance with the terms hereof, and to become jointly and
severally obligated with PSC and the Company to perform this Agreement in the
same manner and to the same extent that PSC and the Company would be required to
perform if no such succession or successions had taken place. Failure of PSC or
the Company to notify the Executive in writing as to such successorship, to
provide the Executive the opportunity to review and agree to the successor's
assumption of this Agreement or to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement. As
used in this Agreement, PSC and the Company shall mean PSC and the Company,
respectively, and their Subsidiaries as hereinbefore defined and any such
successor or successors to their business and/or assets, jointly and severally.
14. Notice. All notices and other communications
required or permitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall be delivered personally or mailed by
registered or certified mail, return receipt requested, or by overnight express
courier service, as follows:
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If to PSC or to the Company, to:
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Attention: Chairman, Executive Compensation
and Employee Benefits Committee
If to the Executive, to:
Mr. Nicholas DeBenedictis
231 Golf View Road
Ardmore, PA 19003
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 13 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
15 Governing Law. This Agreement shall be governed by
and interpreted under the laws of the Commonwealth of Pennsylvania without
giving effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This
Agreement supersedes all prior agreements, sets forth the entire understanding
between the parties hereto with respect to the subject matter hereof and cannot
be changed, modified, extended or terminated except upon written amendment
executed by the Executive and the Company's
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Chairman of the Company's Executive Compensation and Employee Benefits
Committee, or its successor. The provisions of this Agreement may require a
variance from the terms and conditions of certain compensation or bonus plans
under circumstances where such plans would not provide for payment thereof in
order to obtain the maximum benefits for the Executive. It is the specific
intention of the parties that the provisions of this Agreement shall supersede
any provisions to the contrary in such plans, and such plans shall be deemed to
have been amended to correspond with this Agreement without further action by
the Company or the Board.
17. No Right to Continued Employment. Nothing in this
Agreement shall be construed as giving the Executive any right to be retained in
the employ of the Company.
18. Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
PSC and the Company hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred
upon the Executive by this Agreement is intended to be exclusive of any other
right or remedy, and each
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and every such right or remedy shall be cumulative and shall be in addition to
any other right or remedy given hereunder or now or hereafter existing at law or
in equity. No delay or omission by the Executive in exercising any right, remedy
or power hereunder or existing at law or in equity shall be construed as a
waiver thereof.
21. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
22. Arbitration. In the event of any dispute under the
provisions of this Agreement other than a dispute in which the sole relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by arbitration in
Bryn Mawr, Pennsylvania, in accordance with the National Rules for the
Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
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23. Sole Agreement. In the event of a Termination of
Employment following a Change of Control, a portion of the payment made to the
Executive under Section 3 above, equal to one year of the Executive's base
salary, shall be in lieu of the payment due to the Executive in the event his
employment were actually or constructively terminated by the Company under, and
this Agreement shall thereafter supersede, the next to the last paragraph of the
Letter Agreement dated May 20, 1992, between PSC and the Executive with respect
to the severance payment due to the Executive upon termination.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- ------------------------ ----------------------------------------
Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- ------------------------ ----------------------------------------
Secretary
/s/ Lynn M. Templeton /s/ Nicholas DeBenedictis
- ------------------------ ----------------------------------------
Witness Executive
-19-
Exhibit 10.19
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and among
Philadelphia Suburban Water Company, a Pennsylvania corporation (the "Company"),
Philadelphia Suburban Corporation, a Pennsylvania corporation ("PSC"), and Roy
H. Stahl (the "Executive").
WHEREAS, the Executive is presently employed by the Company, as its
Senior Vice President - Law & Administration; and
WHEREAS, the Company considers it essential to foster the employment of
well-qualified, key management personnel, and, in this regard, the boards of
directors of the Company and PSC recognize that, as is the case with many
publicly-held corporations such as PSC, the possibility of a change of control
of PSC may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, the Company and PSC, for which certain of the employees of the
Company, such as the Executive, provide key executive services, agree that the
Executive shall receive the compensation set forth in this Agreement in the
event his employment with the Company is terminated subsequent to a "Change of
Control" (as defined in Section 1 hereof) of PSC as a
cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is paid to
the Executive in light of his role in the management of the affairs of PSC or
its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) "Base Compensation" shall mean the average of the
total cash base salary, annual bonus and dividend equivalents (paid under the
Company's Equity Compensation Plan) received by the Executive in all capacities
with the Company, and its Subsidiaries or Affiliates, as reported for Federal
income tax purposes on Form W-2, together with any amounts the payment of which
has been deferred by the Executive under any deferred compensation plan of the
Company, and its Subsidiaries or Affiliates, or otherwise, and any and all
salary reduction authorized amounts under any of the benefit plans or programs
of the Company, and its Subsidiaries or Affiliates, but excluding any amounts
attributable to the exercise of stock options or the receipt of Restricted Stock
granted to the Executive under the Company's Equity Compensation Plan and its
predecessors or successors, for the three calendar years (or such number of
actual full calendar years of employment, if less than three)
-2-
immediately preceding the calendar year in which occurs a Change of Control or
the Executive's Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of
any securities: (i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange; (ii) that such Person
or any of such Person's Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
-3-
Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC.
(e) "Change of Control" shall mean:
(i) any Person (including any individual, firm,
corporation, partnership or other entity except PSC or the Company or any
employee benefit plan of the PSC or the Company or of any Affiliate or
Associate, any Person or entity organized, appointed or established by PSC or
the Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the Common Stock of PSC then
outstanding;
(ii) during any twenty-four month period, individuals who
at the beginning of such period constitute the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by PSC's shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by
a vote of at least seventy-five percent of the directors in office at the time
of such election or nomination who were directors at the beginning of such
period; or
(iii) there occurs a sale of substantially all of the
assets of PSC or its liquidation is approved by a majority of its shareholders
or PSC is merged into or is merged with an
-4-
unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity.
Notwithstanding anything in this Section 1(e) to the contrary,
a Change of Control shall not be deemed to have taken place under clause (e)(i)
above if (a) such Person becomes the beneficial owner in the aggregate of 20% or
more of the Common Stock of the Company then outstanding as a result of an
inadvertent acquisition by such Person if such Person, as soon as practicable,
divests itself of a sufficient amount of its Common Stock so that it no longer
owns 20% or more of the Common Stock then outstanding, as determined by the
Board of Directors of the Company, or (ii) the shares of Common Stock required
to be counted in order to meet the 20% minimum threshold described under such
clause (i) include any of the shares described in subsections (i) through (iv)
of section 2543(b) of the Pennsylvania Business Corporation Law of 1988 (15
Pa.C.S.A. ss.2543(b)) as in effect on the date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds,
2) habitual insobriety or substance abuse, 3) conviction of a crime involving
moral turpitude, or 4) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of
Employment initiated by the Executive upon one or more of the following
occurrences:
(i) any failure of the Company to comply with
and satisfy any of the terms of this the Agreement;
(ii) any significant involuntary reduction of
the authority, duties or responsibilities held by the Executive
immediately prior to the Change of Control;
-5-
(iii) any involuntary removal of the Executive
from the employment grade, compensation level or officer
positions which the Executive holds with the Company or, if the
Executive is employed by a Subsidiary, with a Subsidiary, held
by him immediately prior to the Change of Control, except in
connection with promotions to higher office;
(iv) any involuntary reduction in the
Executive's target level of annual and long-term compensation
as in effect immediately prior to the Change of Control;
(v) any transfer of the Executive, without his
express written consent, to a location which is outside the
Bryn Mawr, Pennsylvania area by more than 50 miles, other than
on a temporary basis (less than 6 months); or
(vi) the Executive being required to undertake
business travel to an extent substantially greater than the
Executive's business travel obligations immediately prior to
the Change of Control.
(h) "Normal Retirement Date" shall mean the first day of
the calendar month coincident with or next following the Executive's 65th
birthday.
(i) "Subsidiary" shall mean any corporation in which the
Company, directly or indirectly, owns at least a 50% interest or an
unincorporated entity of which the Company, directly or indirectly, owns at
least 50% of the profits or capital interests.
(j) "Termination Date" shall mean the date of receipt of
the Notice of Termination described in Section 2 hereof or any later date
specified therein, as the case may be.
(k) "Termination of Employment" shall mean the
termination of the Executive's actual employment relationship with the Company
and any of it Subsidiaries that actually employs the Executive.
-6-
2. Notice of Termination. Any Termination of Employment
following a Change of Control shall be communicated by a Notice of Termination
to the other party hereto given in accordance with Section 14 hereof. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific provision in this Agreement relied upon, (ii)
briefly summarizes the facts and circumstances deemed to provide a basis for the
Executive's Termination of Employment under the provision so indicated, and
(iii) if the Termination Date is other than the date of receipt of such notice,
specifies the Termination Date (which date shall not be more than 15 days after
the giving of such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in
the event of the Executive's involuntary Termination of Employment for any
reason other than Cause or in the event of a Good Reason Termination, in either
event within two years after a Change of Control, the Company shall pay to the
Executive, upon the execution of a release in the form required by the Company
of its terminating executives prior to the Change of Control, within 15 days
after the Termination Date (or as soon as possible thereafter in the event that
the procedures set forth in Section 11(b) hereof cannot be completed within 15
days), an amount in cash equal to two (2) times the Executive's Base
Compensation, subject to required employment taxes and deductions. PSC hereby
guarantees the obligations of the Company and, in the event that the Company
does not satisfy its obligation hereunder within the required time period, PSC
shall pay or cause to be paid all compensation, benefits and other amounts
remaining due to the Executive upon prompt written notice to PSC that the
Company has not satisfied its obligation (or a portion thereof) to the
Executive.
-7-
(b) In the event the Executive's Normal Retirement Date
would occur prior to 12 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments. The payment due under Section 3
hereof shall be in addition to and not in lieu of any payments or benefits due
to the Executive under any other plan, policy or program of the Company, and its
Subsidiaries or Affiliates. In addition, the Executive shall be entitled to a
continuation of health, dental, life and welfare benefits, excluding disability
benefits, otherwise provided to senior level executives or employees generally,
as the same may be amended for all such individuals from time to time, for the
period of two (2) years.
5. Trust Fund. PSC sponsors an irrevocable trust fund
pursuant to a trust agreement to hold assets to satisfy its obligations to the
Executive under this Agreement. Funding of such trust fund shall be subject to
the discretion of PSC's President, as set forth in the agreement pursuant to
which the fund has been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as
appropriate) shall fail or refuse to make payment of any amounts due the
Executive under Sections 3 and 4 hereof within the respective time periods
provided therein, the Company shall pay to the Executive, in addition to the
payment of any other sums provided in this Agreement, interest, compounded
daily, on any amount remaining unpaid from the date payment is required under
Section 3 or 4, as
-8-
appropriate, until paid to the Executive, at the rate from time to time
announced by PNC Bank as its "prime rate" plus 1%, each change in such rate to
take effect on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Executive
not be required to incur any expenses associated with the enforcement of his
rights under this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, the
Company shall pay the Executive on demand the amount necessary to reimburse the
Executive in full for all reasonable expenses (including all attorneys' fees and
legal expenses) incurred by the Executive in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Executive shall not be required
to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in or
rights under any benefit, bonus, incentive or other plan or program provided by
the Company, or any of its Subsidiaries or Affiliates, and for which the
Executive may qualify.
9. No Set-Off. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.
-9-
10. Taxes. Any payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to this Agreement
(such payments or distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the loss of deduction under Section 280G of
the Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11
shall be made by the Company's independent public accountant immediately prior
to the Change of Control (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations both to the Company and the
Executive within 10 days of the Termination Date. Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. The
Executive shall then have the right to determine which of the Agreement
-10-
Payments shall be eliminated or reduced in order to produce the Reduced Amount
in accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. Within two years after the
Termination of Employment, the Accounting Firm shall review the determination
made by it pursuant to the preceding paragraph and the Company shall cooperate
and provide all information necessary for such review. In the event that the
Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to the Company together with interest from the date of
payment under this Agreement at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no
amount shall be payable by the Executive to the Company if and to the extent
such payment would not reduce the limit on the amount that is deductible under
Section 280G of the Code. In the event that the Accounting Firm determines that
an Underpayment has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive together with interest from
the date of payment under this Agreement at the Federal Rate.
-11-
(d) All of the fees and expenses of the Accounting Firm
in performing the determinations referred to in subsections (b) and (c) above
shall be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall
be indefinite until the Company notifies the Executive in writing that this
Agreement will not be renewed at least sixty days prior to the proposed
termination; provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied or have expired, and (ii)
this Agreement shall terminate if, prior to a Change of Control, the employment
of the Executive with the Company or any of its Subsidiaries, as the case may
be, shall terminate for any reason; provided, however, that if a Change of
Control occurs within 6 months after the Executive's Termination of Employment
other than for Cause, the Executive shall be entitled to all of the terms and
conditions of this Agreement as if the Termination Date had occurred on the date
of the Change of Control.
13. Successor Company. PSC shall require any successor or
successors (whether direct or indirect, by purchase, merger or otherwise) to all
or substantially all of the business and/or assets of PSC or the Company, or of
any of their Subsidiaries that actually employ the Executive, by agreement in
form and substance satisfactory to the Executive, to acknowledge expressly that
this Agreement is binding upon and enforceable against the successor or
successors, in accordance with the terms hereof, and to become jointly and
severally obligated
-12-
with PSC and the Company to perform this Agreement in the same manner and to the
same extent that PSC and the Company would be required to perform if no such
succession or successions had taken place. Failure of PSC or the Company to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
PSC and the Company shall mean PSC and the Company, respectively, and their
Subsidiaries as hereinbefore defined and any such successor or successors to
their business and/or assets, jointly and severally.
14. Notice. All notices and other communications
required or permitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall be delivered personally or mailed by
registered or certified mail, return receipt requested, or by overnight express
courier service, as follows:
If to PSC or to the Company, to:
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Attention: President
If to the Executive, to:
Roy H. Stahl, Esq.
1884 Black Rock Lane
Paoli, PA 19301
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of
-13-
Control, notice at the last address of the Company or to any successor pursuant
to Section 13 hereof shall be deemed sufficient for the purposes hereof. Any
such notice shall be deemed delivered and effective when received in the case of
personal delivery, five days after deposit, postage prepaid, with the U.S.
Postal Service in the case of registered or certified mail, or on the next
business day in the case of overnight express courier service.
15 Governing Law. This Agreement shall be governed by
and interpreted under the laws of the Commonwealth of Pennsylvania without
giving effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This
Agreement supersedes all prior agreements, sets forth the entire understanding
between the parties hereto with respect to the subject matter hereof and cannot
be changed, modified, extended or terminated except upon written amendment
executed by the Executive and the Company's Chairman of the Company's Executive
Compensation and Employee Benefits Committee, or its successor. The provisions
of this Agreement may require a variance from the terms and conditions of
certain compensation or bonus plans under circumstances where such plans would
not provide for payment thereof in order to obtain the maximum benefits for the
Executive. It is the specific intention of the parties that the provisions of
this Agreement shall supersede any provisions to the contrary in such plans, and
such plans shall be deemed to have been amended to correspond with this
Agreement without further action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this
Agreement shall be construed as giving the Executive any right to be retained in
the employ of the Company.
-14-
18. Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
PSC and the Company hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred
upon the Executive by this Agreement is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission by the Executive in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
22. Arbitration. In the event of any dispute under the
provisions of this Agreement other than a dispute in which the sole relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by arbitration in
Bryn Mawr, Pennsylvania, in accordance with the National Rules for the
-15-
Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Patricia M. Mycek By: Nicholas DeBenedictis
- ------------------------ -----------------------------------
Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Patricia M. Mycek By: /s/ Nicholas DeBenedictis
- ------------------------ -------------------------------
Secretary
/s/ Lynn M. Templeton /s/ Roy H. Stahl
- ------------------------ -----------------------------------
Witness Executive
-16-
Exhibit 10.20
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and among
Philadelphia Suburban Water Company, a Pennsylvania corporation (the "Company"),
Philadelphia Suburban Corporation, a Pennsylvania corporation ("PSC"), and
Michael P. Graham (the "Executive").
WHEREAS, the Executive is presently employed by the Company, as its
Senior Vice President - Finance & Treasurer; and
WHEREAS, the Company considers it essential to foster the employment of
well-qualified, key management personnel, and, in this regard, the boards of
directors of the Company and PSC recognize that, as is the case with many
publicly-held corporations such as PSC, the possibility of a change of control
of PSC may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, the Company and PSC, for which certain of the employees of the
Company, such as the Executive, provide key executive services, agree that the
Executive shall receive the compensation set forth in this Agreement in the
event his employment with the Company is terminated subsequent to a "Change of
Control" (as defined in Section 1 hereof) of PSC as a
cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is paid to
the Executive in light of his role in the management of the affairs of PSC or
its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the average of the total cash base
salary, annual bonus and dividend equivalents (paid under the Company's Equity
Compensation Plan) received by the Executive in all capacities with the Company,
and its Subsidiaries or Affiliates, as reported for Federal income tax purposes
on Form W-2, together with any amounts the payment of which has been deferred by
the Executive under any deferred compensation plan of the Company, and its
Subsidiaries or Affiliates, or otherwise, and any and all salary reduction
authorized amounts under any of the benefit plans or programs of the Company,
and its Subsidiaries or Affiliates, but excluding any amounts attributable to
the exercise of stock options or the receipt of Restricted Stock granted to the
Executive under the Company's Equity Compensation Plan and its predecessors or
successors, for the three calendar years (or such number of actual full calendar
years of employment, if less than three)
-2-
immediately preceding the calendar year in which occurs a Change of Control or
the Executive's Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of any securities:
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange; (ii) that such Person or any of
such Person's Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
-3-
Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC. (e) "Change of
Control" shall mean:
(i) any Person (including any individual, firm, corporation,
partnership or other entity except PSC or the Company or any employee benefit
plan of the PSC or the Company or of any Affiliate or Associate, any Person or
entity organized, appointed or established by PSC or the Company for or pursuant
to the terms of any such employee benefit plan), together with all Affiliates
and Associates of such Person, shall become the Beneficial Owner in the
aggregate of 20% or more of the Common Stock of PSC then outstanding;
(ii) during any twenty-four month period, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority thereof, unless the election, or the nomination for election by PSC's
shareholders, of at least seventy-five percent of the directors who were not
directors at the beginning of such period was approved by a vote of at least
seventy-five percent of the directors in office at the time of such election or
nomination who were directors at the beginning of such period; or
(iii) there occurs a sale of substantially all of the assets of PSC or
its liquidation is approved by a majority of its shareholders or PSC is merged
into or is merged with an
-4-
unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity.
Notwithstanding anything in this Section 1(e) to the contrary,
a Change of Control shall not be deemed to have taken place under clause (e)(i)
above if (a) such Person becomes the beneficial owner in the aggregate of 20% or
more of the Common Stock of the Company then outstanding as a result of an
inadvertent acquisition by such Person if such Person, as soon as practicable,
divests itself of a sufficient amount of its Common Stock so that it no longer
owns 20% or more of the Common Stock then outstanding, as determined by the
Board of Directors of the Company, or (ii) the shares of Common Stock required
to be counted in order to meet the 20% minimum threshold described under such
clause (i) include any of the shares described in subsections (i) through (iv)
of section 2543(b) of the Pennsylvania Business Corporation Law of 1988 (15
Pa.C.S.A. Section 2543(b)) as in effect on the date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, or 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of Employment
initiated by the Executive upon one or more of the following occurrences:
(i) any failure of the Company to comply with and satisfy any
of the terms of this the Agreement;
(ii) any significant involuntary reduction of the authority,
duties or responsibilities held by the Executive immediately prior to
the Change of Control;
-5-
(iii) any involuntary removal of the Executive from the
employment grade, compensation level or officer positions which the
Executive holds with the Company or, if the Executive is employed by a
Subsidiary, with a Subsidiary, held by him immediately prior to the
Change of Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the Executive's target level
of annual and long-term compensation as in effect immediately prior to
the Change of Control;
(v) any transfer of the Executive, without his express written
consent, to a location which is outside the Bryn Mawr, Pennsylvania
area by more than 50 miles, other than on a temporary basis (less than
6 months); or
(vi) the Executive being required to undertake business travel
to an extent substantially greater than the Executive's business travel
obligations immediately prior to the Change of Control.
(h) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Executive's 65th birthday.
(i) "Subsidiary" shall mean any corporation in which the Company,
directly or indirectly, owns at least a 50% interest or an unincorporated entity
of which the Company, directly or indirectly, owns at least 50% of the profits
or capital interests.
(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(k) "Termination of Employment" shall mean the termination of the
Executive's actual employment relationship with the Company and any of it
Subsidiaries that actually employs the Executive.
-6-
2. Notice of Termination. Any Termination of Employment following a
Change of Control shall be communicated by a Notice of Termination to the other
party hereto given in accordance with Section 14 hereof. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific provision in this Agreement relied upon, (ii) briefly summarizes
the facts and circumstances deemed to provide a basis for the Executive's
Termination of Employment under the provision so indicated, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in the event of the
Executive's involuntary Termination of Employment for any reason other than
Cause or in the event of a Good Reason Termination, in either event within two
years after a Change of Control, the Company shall pay to the Executive, upon
the execution of a release in the form required by the Company of its
terminating executives prior to the Change of Control, within 15 days after the
Termination Date (or as soon as possible thereafter in the event that the
procedures set forth in Section 11(b) hereof cannot be completed within 15
days), an amount in cash equal to two times the Executive's Base Compensation,
subject to required employment taxes and deductions. PSC hereby guarantees the
obligations of the Company and, in the event that the Company does not satisfy
its obligation hereunder within the required time period, PSC shall pay or cause
to be paid all compensation, benefits and other amounts remaining due to the
Executive upon prompt written notice to PSC that the Company has not satisfied
its obligation (or a portion thereof) to the Executive.
-7-
(b) In the event the Executive's Normal Retirement Date would occur
prior to 12 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Executive
under any other plan, policy or program of the Company, and its Subsidiaries or
Affiliates. In addition, the Executive shall be entitled to a continuation of
health, dental, life and welfare benefits, excluding disability benefits,
otherwise provided to senior level executives or employees generally, as the
same may be amended for all such individuals from time to time, for the period
of two (2) years.
5. Trust Fund. PSC sponsors an irrevocable trust fund pursuant to a
trust agreement to hold assets to satisfy its obligations to the Executive under
this Agreement. Funding of such trust fund shall be subject to the discretion of
PSC's President, as set forth in the agreement pursuant to which the fund has
been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as appropriate) shall fail
or refuse to make payment of any amounts due the Executive under Sections 3 and
4 hereof within the respective time periods provided therein, the Company shall
pay to the Executive, in addition to the payment of any other sums provided in
this Agreement, interest, compounded daily, on any amount remaining unpaid from
the date payment is required under Section 3 or 4, as
-8-
appropriate, until paid to the Executive, at the rate from time to time
announced by PNC Bank as its "prime rate" plus 1%, each change in such rate to
take effect on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Executive not be required
to incur any expenses associated with the enforcement of his rights under this
Agreement by arbitration, litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, the Company shall pay the
Executive on demand the amount necessary to reimburse the Executive in full for
all reasonable expenses (including all attorneys' fees and legal expenses)
incurred by the Executive in enforcing any of the obligations of the Company
under this Agreement.
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company,
or any of its Subsidiaries or Affiliates, and for which the Executive may
qualify.
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others.
-9-
10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the loss of deduction under Section 280G of the Code.
For purposes of this Section 11, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. The Executive shall then
have the right to determine which of the Agreement
-10-
Payments shall be eliminated or reduced in order to produce the Reduced Amount
in accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph and the Company shall cooperate and provide
all information necessary for such review. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company together with interest from the date of payment under this
Agreement at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the limit on the amount that is deductible under Section 280G of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive together with interest from the date of payment
under this Agreement at the Federal Rate.
-11-
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall be indefinite
until the Company notifies the Executive in writing that this Agreement will not
be renewed at least sixty days prior to the proposed termination; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Executive with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason; provided, however, that if a Change of Control occurs within 6
months after the Executive's Termination of Employment other than for Cause, the
Executive shall be entitled to all of the terms and conditions of this Agreement
as if the Termination Date had occurred on the date of the Change of Control.
13. Successor Company. PSC shall require any successor or successors
(whether direct or indirect, by purchase, merger or otherwise) to all or
substantially all of the business and/or assets of PSC or the Company, or of any
of their Subsidiaries that actually employ the Executive, by agreement in form
and substance satisfactory to the Executive, to acknowledge expressly that this
Agreement is binding upon and enforceable against the successor or successors,
in accordance with the terms hereof, and to become jointly and severally
obligated
-12-
with PSC and the Company to perform this Agreement in the same manner and to the
same extent that PSC and the Company would be required to perform if no such
succession or successions had taken place. Failure of PSC or the Company to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
PSC and the Company shall mean PSC and the Company, respectively, and their
Subsidiaries as hereinbefore defined and any such successor or successors to
their business and/or assets, jointly and severally.
14. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to PSC or to the Company, to:
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Attention: President
If to the Executive, to:
Mr. Michael P. Graham
1002 Dunning Drive
West Chester, PA 19382
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of
-13-
Control, notice at the last address of the Company or to any successor pursuant
to Section 13 hereof shall be deemed sufficient for the purposes hereof. Any
such notice shall be deemed delivered and effective when received in the case of
personal delivery, five days after deposit, postage prepaid, with the U.S.
Postal Service in the case of registered or certified mail, or on the next
business day in the case of overnight express courier service.
15 Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This Agreement
supersedes all prior agreements, sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment executed by the
Executive and the Company's Chairman of the Company's Executive Compensation and
Employee Benefits Committee, or its successor. The provisions of this Agreement
may require a variance from the terms and conditions of certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof in order to obtain the maximum benefits for the Executive. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this Agreement shall
be construed as giving the Executive any right to be retained in the employ of
the Company.
-14-
18. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of PSC and the Company
hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred upon the
Executive by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Executive in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
22. Arbitration. In the event of any dispute under the provisions of
this Agreement other than a dispute in which the sole relief sought is an
equitable remedy such as an injunction, the parties shall be required to have
the dispute, controversy or claim settled by arbitration in Bryn Mawr,
Pennsylvania, in accordance with the National Rules for the
-15-
Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- --------------------------------- -------------------------------
Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- --------------------------------- -------------------------------
Secretary
/s/ Leon K. Chain /s/ Michael P. Graham
- --------------------------------- -----------------------------------
Witness Executive
-16-
Exhibit 10.21
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and among
Philadelphia Suburban Water Company, a Pennsylvania corporation (the "Company"),
Philadelphia Suburban Corporation, a Pennsylvania corporation ("PSC"), and
Richard R. Riegler (the "Executive").
WHEREAS, the Executive is presently employed by the Company, as its
Senior Vice President - Operations; and
WHEREAS, the Company considers it essential to foster the employment of
well-qualified, key management personnel, and, in this regard, the boards of
directors of the Company and PSC recognize that, as is the case with many
publicly-held corporations such as PSC, the possibility of a change of control
of PSC may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, the Company and PSC, for which certain of the employees of the
Company, such as the Executive, provide key executive services, agree that the
Executive shall receive the compensation set forth in this Agreement in the
event his employment with the Company is terminated subsequent to a "Change of
Control" (as defined in Section 1 hereof) of PSC as a
-1-
cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is paid to
the Executive in light of his role in the management of the affairs of PSC or
its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the average of the total cash base
salary, annual bonus and dividend equivalents (paid under the Company's Equity
Compensation Plan) received by the Executive in all capacities with the Company,
and its Subsidiaries or Affiliates, as reported for Federal income tax purposes
on Form W-2, together with any amounts the payment of which has been deferred by
the Executive under any deferred compensation plan of the Company, and its
Subsidiaries or Affiliates, or otherwise, and any and all salary reduction
authorized amounts under any of the benefit plans or programs of the Company,
and its Subsidiaries or Affiliates, but excluding any amounts attributable to
the exercise of stock options or the receipt of Restricted Stock granted to the
Executive under the Company's Equity Compensation Plan and its predecessors or
successors, for the three calendar years (or such number of actual full calendar
years of employment, if less than three)
-2-
immediately preceding the calendar year in which occurs a Change of Control or
the Executive's Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of any securities:
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange; (ii) that such Person or any of
such Person's Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
-3-
Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC. (e) "Change of
Control" shall mean:
(i) any Person (including any individual, firm, corporation,
partnership or other entity except PSC or the Company or any employee benefit
plan of the PSC or the Company or of any Affiliate or Associate, any Person or
entity organized, appointed or established by PSC or the Company for or pursuant
to the terms of any such employee benefit plan), together with all Affiliates
and Associates of such Person, shall become the Beneficial Owner in the
aggregate of 20% or more of the Common Stock of PSC then outstanding;
(ii) during any twenty-four month period, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority thereof, unless the election, or the nomination for election by PSC's
shareholders, of at least seventy-five percent of the directors who were not
directors at the beginning of such period was approved by a vote of at least
seventy-five percent of the directors in office at the time of such election or
nomination who were directors at the beginning of such period; or
(iii) there occurs a sale of substantially all of the assets of PSC or
its liquidation is approved by a majority of its shareholders or PSC is merged
into or is merged with an
-4-
unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity.
Notwithstanding anything in this Section 1(e) to the contrary, a Change of
Control shall not be deemed to have taken place under clause (e)(i) above if (a)
such Person becomes the beneficial owner in the aggregate of 20% or more of the
Common Stock of the Company then outstanding as a result of an inadvertent
acquisition by such Person if such Person, as soon as practicable, divests
itself of a sufficient amount of its Common Stock so that it no longer owns 20%
or more of the Common Stock then outstanding, as determined by the Board of
Directors of the Company, or (ii) the shares of Common Stock required to be
counted in order to meet the 20% minimum threshold described under such clause
(i) include any of the shares described in subsections (i) through (iv) of
section 2543(b) of the Pennsylvania Business Corporation Law of 1988 (15
Pa.C.S.A. ss.2543(b)) as in effect on the date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, or 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of Employment
initiated by the Executive upon one or more of the following occurrences:
(i) any failure of the Company to comply with and satisfy any of
the terms of this the Agreement;
(ii) any significant involuntary reduction of the authority, duties
or responsibilities held by the Executive immediately prior to the
Change of Control;
-5-
(iii) any involuntary removal of the Executive from the employment
grade, compensation level or officer positions which the Executive
holds with the Company or, if the Executive is employed by a
Subsidiary, with a Subsidiary, held by him immediately prior to the
Change of Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the Executive's target level of
annual and long-term compensation as in effect immediately prior to the
Change of Control;
(v) any transfer of the Executive, without his express written
consent, to a location which is outside the Bryn Mawr, Pennsylvania
area by more than 50 miles, other than on a temporary basis (less than
6 months); or
(vi) the Executive being required to undertake business travel to
an extent substantially greater than the Executive's business travel
obligations immediately prior to the Change of Control.
(h) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Executive's 65th birthday.
(i) "Subsidiary" shall mean any corporation in which the Company,
directly or indirectly, owns at least a 50% interest or an unincorporated entity
of which the Company, directly or indirectly, owns at least 50% of the profits
or capital interests.
(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(k) "Termination of Employment" shall mean the termination of the
Executive's actual employment relationship with the Company and any of it
Subsidiaries that actually employs the Executive.
-6-
2. Notice of Termination. Any Termination of Employment following a
Change of Control shall be communicated by a Notice of Termination to the other
party hereto given in accordance with Section 14 hereof. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific provision in this Agreement relied upon, (ii) briefly summarizes
the facts and circumstances deemed to provide a basis for the Executive's
Termination of Employment under the provision so indicated, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in the event of the
Executive's involuntary Termination of Employment for any reason other than
Cause or in the event of a Good Reason Termination, in either event within two
years after a Change of Control, the Company shall pay to the Executive, upon
the execution of a release in the form required by the Company of its
terminating executives prior to the Change of Control, within 15 days after the
Termination Date (or as soon as possible thereafter in the event that the
procedures set forth in Section 11(b) hereof cannot be completed within 15
days), an amount in cash equal to two times the Executive's Base Compensation,
subject to required employment taxes and deductions. PSC hereby guarantees the
obligations of the Company and, in the event that the Company does not satisfy
its obligation hereunder within the required time period, PSC shall pay or cause
to be paid all compensation, benefits and other amounts remaining due to the
Executive upon prompt written notice to PSC that the Company has not satisfied
its obligation (or a portion thereof) to the Executive.
-7-
(b) In the event the Executive's Normal Retirement Date would occur
prior to 12 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Executive
under any other plan, policy or program of the Company, and its Subsidiaries or
Affiliates. In addition, the Executive shall be entitled to a continuation of
health, dental, life and welfare benefits, excluding disability benefits,
otherwise provided to senior level executives or employees generally, as the
same may be amended for all such individuals from time to time, for the period
of two (2) years.
5. Trust Fund. PSC sponsors an irrevocable trust fund pursuant to a
trust agreement to hold assets to satisfy its obligations to the Executive under
this Agreement. Funding of such trust fund shall be subject to the discretion of
PSC's President, as set forth in the agreement pursuant to which the fund has
been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as appropriate) shall fail
or refuse to make payment of any amounts due the Executive under Sections 3 and
4 hereof within the respective time periods provided therein, the Company shall
pay to the Executive, in addition to the payment of any other sums provided in
this Agreement, interest, compounded daily, on any amount remaining unpaid from
the date payment is required under Section 3 or 4, as
-8-
appropriate, until paid to the Executive, at the rate from time to time
announced by PNC Bank as its "prime rate" plus 1%, each change in such rate to
take effect on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Executive not be required
to incur any expenses associated with the enforcement of his rights under this
Agreement by arbitration, litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, the Company shall pay the
Executive on demand the amount necessary to reimburse the Executive in full for
all reasonable expenses (including all attorneys' fees and legal expenses)
incurred by the Executive in enforcing any of the obligations of the Company
under this Agreement.
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company,
or any of its Subsidiaries or Affiliates, and for which the Executive may
qualify.
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others.
-9-
10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the loss of deduction under Section 280G of the Code.
For purposes of this Section 11, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. The Executive shall then
have the right to determine which of the Agreement
-10-
Payments shall be eliminated or reduced in order to produce the Reduced Amount
in accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph and the Company shall cooperate and provide
all information necessary for such review. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company together with interest from the date of payment under this
Agreement at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the limit on the amount that is deductible under Section 280G of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive together with interest from the date of payment
under this Agreement at the Federal Rate.
-11-
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall be indefinite
until the Company notifies the Executive in writing that this Agreement will not
be renewed at least sixty days prior to the proposed termination; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Executive with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason; provided, however, that if a Change of Control occurs within 6
months after the Executive's Termination of Employment other than for Cause, the
Executive shall be entitled to all of the terms and conditions of this Agreement
as if the Termination Date had occurred on the date of the Change of Control.
13. Successor Company. PSC shall require any successor or successors
(whether direct or indirect, by purchase, merger or otherwise) to all or
substantially all of the business and/or assets of PSC or the Company, or of any
of their Subsidiaries that actually employ the Executive, by agreement in form
and substance satisfactory to the Executive, to acknowledge expressly that this
Agreement is binding upon and enforceable against the successor or successors,
in accordance with the terms hereof, and to become jointly and severally
obligated
-12-
with PSC and the Company to perform this Agreement in the same manner and to the
same extent that PSC and the Company would be required to perform if no such
succession or successions had taken place. Failure of PSC or the Company to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
PSC and the Company shall mean PSC and the Company, respectively, and their
Subsidiaries as hereinbefore defined and any such successor or successors to
their business and/or assets, jointly and severally.
14. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to PSC or to the Company, to:
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Attention: President
If to the Executive, to:
Mr. Richard R. Riegler
2592 Sibel Circle
Lansdale, PA 19446
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of
-13-
Control, notice at the last address of the Company or to any successor pursuant
to Section 13 hereof shall be deemed sufficient for the purposes hereof. Any
such notice shall be deemed delivered and effective when received in the case of
personal delivery, five days after deposit, postage prepaid, with the U.S.
Postal Service in the case of registered or certified mail, or on the next
business day in the case of overnight express courier service.
15 Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This Agreement
supersedes all prior agreements, sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment executed by the
Executive and the Company's Chairman of the Company's Executive Compensation and
Employee Benefits Committee, or its successor. The provisions of this Agreement
may require a variance from the terms and conditions of certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof in order to obtain the maximum benefits for the Executive. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this Agreement shall
be construed as giving the Executive any right to be retained in the employ of
the Company.
-14-
18. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of PSC and the Company
hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred upon the
Executive by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Executive in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
22. Arbitration. In the event of any dispute under the provisions of
this Agreement other than a dispute in which the sole relief sought is an
equitable remedy such as an injunction, the parties shall be required to have
the dispute, controversy or claim settled by arbitration in Bryn Mawr,
Pennsylvania, in accordance with the National Rules for the
-15-
Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- --------------------------------- ---------------------------------
Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- --------------------------------- ---------------------------------
Secretary
/s/ Harriet A. Beeson /s/ Richard R. Riegler
- --------------------------------- ------------------------------------
Witness Executive
-16-
Exhibit 10.22
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and among
Philadelphia Suburban Water Company, a Pennsylvania corporation (the "Company"),
Philadelphia Suburban Corporation, a Pennsylvania corporation ("PSC"), and
Morrison Coulter (the
"Executive").
WHEREAS, the Executive is presently employed by the Company, as its
Senior Vice President - Production; and
WHEREAS, the Company considers it essential to foster the employment of
well-qualified, key management personnel, and, in this regard, the boards of
directors of the Company and PSC recognize that, as is the case with many
publicly-held corporations such as PSC, the possibility of a change of control
of PSC may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, the Company and PSC, for which certain of the employees of the
Company, such as the Executive, provide key executive services, agree that the
Executive shall receive the compensation set forth in this Agreement in the
event his employment with the Company is terminated subsequent to a "Change of
Control" (as defined in Section 1 hereof) of PSC as a
-1-
cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is paid to
the Executive in light of his role in the management of the affairs of PSC or
its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the average of the total cash base
salary, annual bonus and dividend equivalents (paid under the Company's Equity
Compensation Plan) received by the Executive in all capacities with the Company,
and its Subsidiaries or Affiliates, as reported for Federal income tax purposes
on Form W-2, together with any amounts the payment of which has been deferred by
the Executive under any deferred compensation plan of the Company, and its
Subsidiaries or Affiliates, or otherwise, and any and all salary reduction
authorized amounts under any of the benefit plans or programs of the Company,
and its Subsidiaries or Affiliates, but excluding any amounts attributable to
the exercise of stock options or the receipt of Restricted Stock granted to the
Executive under the Company's Equity Compensation Plan and its predecessors or
successors, for the three calendar years (or such number of actual full calendar
years of employment, if less than three)
-2-
immediately preceding the calendar year in which occurs a Change of Control or
the Executive's Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of any securities:
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange; (ii) that such Person or any of
such Person's Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
-3-
Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC. (e) "Change of
Control" shall mean:
(i) any Person (including any individual, firm, corporation,
partnership or other entity except PSC or the Company or any employee benefit
plan of the PSC or the Company or of any Affiliate or Associate, any Person or
entity organized, appointed or established by PSC or the Company for or pursuant
to the terms of any such employee benefit plan), together with all Affiliates
and Associates of such Person, shall become the Beneficial Owner in the
aggregate of 20% or more of the Common Stock of PSC then outstanding;
(ii) during any twenty-four month period, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority thereof, unless the election, or the nomination for election by PSC's
shareholders, of at least seventy-five percent of the directors who were not
directors at the beginning of such period was approved by a vote of at least
seventy-five percent of the directors in office at the time of such election or
nomination who were directors at the beginning of such period; or
(iii) there occurs a sale of substantially all of the assets of PSC or
its liquidation is approved by a majority of its shareholders or PSC is merged
into or is merged with an
-4-
unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity. Notwithstanding anything in
this Section 1(e) to the contrary, a Change of Control shall not be deemed to
have taken place under clause (e)(i) above if (a) such Person becomes the
beneficial owner in the aggregate of 20% or more of the Common Stock of the
Company then outstanding as a result of an inadvertent acquisition by such
Person if such Person, as soon as practicable, divests itself of a sufficient
amount of its Common Stock so that it no longer owns 20% or more of the Common
Stock then outstanding, as determined by the Board of Directors of the Company,
or (ii) the shares of Common Stock required to be counted in order to meet the
20% minimum threshold described under such clause (i) include any of the shares
described in subsections (i) through (iv) of section 2543(b) of the Pennsylvania
Business Corporation Law of 1988 (15 Pa.C.S.A. ss.2543(b)) as in effect on the
date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, or 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of Employment
initiated by the Executive upon one or more of the following occurrences:
(i) any failure of the Company to comply with and satisfy any
of the terms of this the Agreement;
(ii) any significant involuntary reduction of the authority,
duties or responsibilities held by the Executive immediately prior to
the Change of Control;
-5-
(iii) any involuntary removal of the Executive from the
employment grade, compensation level or officer positions which the
Executive holds with the Company or, if the Executive is employed by a
Subsidiary, with a Subsidiary, held by him immediately prior to the
Change of Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the Executive's target level
of annual and long-term compensation as in effect immediately prior to
the Change of Control;
(v) any transfer of the Executive, without his express written
consent, to a location which is outside the Bryn Mawr, Pennsylvania
area by more than 50 miles, other than on a temporary basis (less than
6 months); or
(vi) the Executive being required to undertake business travel
to an extent substantially greater than the Executive's business travel
obligations immediately prior to the Change of Control. (h) "Normal
Retirement Date" shall mean the first day of the calendar month
coincident with or next following the Executive's 65th birthday.
(i) "Subsidiary" shall mean any corporation in which the Company,
directly or indirectly, owns at least a 50% interest or an unincorporated entity
of which the Company, directly or indirectly, owns at least 50% of the profits
or capital interests.
(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(k) "Termination of Employment" shall mean the termination of the
Executive's actual employment relationship with the Company and any of it
Subsidiaries that actually employs the Executive.
-6-
2. Notice of Termination. Any Termination of Employment following a
Change of Control shall be communicated by a Notice of Termination to the other
party hereto given in accordance with Section 14 hereof. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific provision in this Agreement relied upon, (ii) briefly summarizes
the facts and circumstances deemed to provide a basis for the Executive's
Termination of Employment under the provision so indicated, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in the event of the
Executive's involuntary Termination of Employment for any reason other than
Cause or in the event of a Good Reason Termination, in either event within two
years after a Change of Control, the Company shall pay to the Executive, upon
the execution of a release in the form required by the Company of its
terminating executives prior to the Change of Control, within 15 days after the
Termination Date (or as soon as possible thereafter in the event that the
procedures set forth in Section 11(b) hereof cannot be completed within 15
days), an amount in cash equal to two times the Executive's Base Compensation,
subject to required employment taxes and deductions. PSC hereby guarantees the
obligations of the Company and, in the event that the Company does not satisfy
its obligation hereunder within the required time period, PSC shall pay or cause
to be paid all compensation, benefits and other amounts remaining due to the
Executive upon prompt written notice to PSC that the Company has not satisfied
its obligation (or a portion thereof) to the Executive.
-7-
(b) In the event the Executive's Normal Retirement Date would occur
prior to 12 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Executive
under any other plan, policy or program of the Company, and its Subsidiaries or
Affiliates. In addition, the Executive shall be entitled to a continuation of
health, dental, life and welfare benefits, excluding disability benefits,
otherwise provided to senior level executives or employees generally, as the
same may be amended for all such individuals from time to time, for the period
of two (2) years.
5. Trust Fund. PSC sponsors an irrevocable trust fund pursuant to a
trust agreement to hold assets to satisfy its obligations to the Executive under
this Agreement. Funding of such trust fund shall be subject to the discretion of
PSC's President, as set forth in the agreement pursuant to which the fund has
been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as appropriate) shall fail
or refuse to make payment of any amounts due the Executive under Sections 3 and
4 hereof within the respective time periods provided therein, the Company shall
pay to the Executive, in addition to the payment of any other sums provided in
this Agreement, interest, compounded daily, on any amount remaining unpaid from
the date payment is required under Section 3 or 4, as
-8-
appropriate, until paid to the Executive, at the rate from time to time
announced by PNC Bank as its "prime rate" plus 1%, each change in such rate to
take effect on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Executive not be required
to incur any expenses associated with the enforcement of his rights under this
Agreement by arbitration, litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, the Company shall pay the
Executive on demand the amount necessary to reimburse the Executive in full for
all reasonable expenses (including all attorneys' fees and legal expenses)
incurred by the Executive in enforcing any of the obligations of the Company
under this Agreement.
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company,
or any of its Subsidiaries or Affiliates, and for which the Executive may
qualify.
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others.
-9-
10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the loss of deduction under Section 280G of the Code.
For purposes of this Section 11, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. The Executive shall then
have the right to determine which of the Agreement
-10-
Payments shall be eliminated or reduced in order to produce the Reduced Amount
in accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph and the Company shall cooperate and provide
all information necessary for such review. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company together with interest from the date of payment under this
Agreement at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the limit on the amount that is deductible under Section 280G of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive together with interest from the date of payment
under this Agreement at the Federal Rate.
-11-
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall be indefinite
until the Company notifies the Executive in writing that this Agreement will not
be renewed at least sixty days prior to the proposed termination; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Executive with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason; provided, however, that if a Change of Control occurs within 6
months after the Executive's Termination of Employment other than for Cause, the
Executive shall be entitled to all of the terms and conditions of this Agreement
as if the Termination Date had occurred on the date of the Change of Control.
13. Successor Company. PSC shall require any successor or successors
(whether direct or indirect, by purchase, merger or otherwise) to all or
substantially all of the business and/or assets of PSC or the Company, or of any
of their Subsidiaries that actually employ the Executive, by agreement in form
and substance satisfactory to the Executive, to acknowledge expressly that this
Agreement is binding upon and enforceable against the successor or successors,
in accordance with the terms hereof, and to become jointly and severally
obligated
-12-
with PSC and the Company to perform this Agreement in the same manner and to the
same extent that PSC and the Company would be required to perform if no such
succession or successions had taken place. Failure of PSC or the Company to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
PSC and the Company shall mean PSC and the Company, respectively, and their
Subsidiaries as hereinbefore defined and any such successor or successors to
their business and/or assets, jointly and severally.
14. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to PSC or to the Company, to:
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Attention: President
If to the Executive, to:
Mr. Morrison Coulter
P.O. Box 294
Paoli, PA 19301
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of
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Control, notice at the last address of the Company or to any successor pursuant
to Section 13 hereof shall be deemed sufficient for the purposes hereof. Any
such notice shall be deemed delivered and effective when received in the case of
personal delivery, five days after deposit, postage prepaid, with the U.S.
Postal Service in the case of registered or certified mail, or on the next
business day in the case of overnight express courier service.
15 Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This Agreement
supersedes all prior agreements, sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment executed by the
Executive and the Company's Chairman of the Company's Executive Compensation and
Employee Benefits Committee, or its successor. The provisions of this Agreement
may require a variance from the terms and conditions of certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof in order to obtain the maximum benefits for the Executive. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this Agreement shall
be construed as giving the Executive any right to be retained in the employ of
the Company.
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18. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of PSC and the Company
hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred upon the
Executive by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Executive in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
22. Arbitration. In the event of any dispute under the provisions of
this Agreement other than a dispute in which the sole relief sought is an
equitable remedy such as an injunction, the parties shall be required to have
the dispute, controversy or claim settled by arbitration in Bryn Mawr,
Pennsylvania, in accordance with the National Rules for the
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Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- --------------------------------- --------------------------------
Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- --------------------------------- --------------------------------
Secretary
/s/ Gerry Kelly /s/ Morrison Coulter
- --------------------------------- --------------------------------
Witness Executive
-16-
Exhibit 10.23
PHILADELPHIA SUBURBAN CORPORATION
AMENDED AND RESTATED
EXECUTIVE DEFERRAL PLAN
In recognition of the services provided by certain key employees, the
Board of Directors of Philadelphia Suburban Corporation adopted the Plan to make
additional retirement benefits available to those individuals. Pursuant to its
authority in Article 10, the Committee hereby amends and restates the Plan,
effective January 1, 1995, as follows:
ARTICLE 1
Definitions
1.1 "Account" means a bookkeeping account established pursuant to Section
3.1 which reflects the amount standing to the credit of the Participant
under the Plan.
1.2 "Affiliated Company" means any affiliate or subsidiary of the Company.
1.3 "Base Salary" means the annual amount of base salary and wages paid by
the Employer to an Employee for any calendar year of employment, but
excluding all Employer contributions to benefit plans and all other
forms of compensation.
1.4 "Beneficiary" means the person(s) designated by a Participant to
receive any benefits payable under this Plan subsequent to the
Participant's death. The Committee shall provide a form for this
purpose. In the event a Participant has not filed a Beneficiary
designation with the Company, the Beneficiary shall be the
Participant's estate.
1.5 "Board" means the Board of Directors of the Company.
1.6 "Bonus" shall mean bonus compensation due to the Employee, if any,
under the Company's Incentive Compensation Plan.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Committee" means the Compensation Committee of the Board which shall
act for the Company in making decisions and performing specified duties
with respect to the Plan.
1.9 "Company" means Philadelphia Suburban Corporation and its successors.
1.10 "Effective Date" means January 1, 1995.
1.11 "Employee" means any individual employed by the Employer as an officer,
senior manager or other highly compensated employee, as designated by
the Committee,
- 1 -
on a regular, full-time basis (in accordance with the personnel
policies and practices of the Employer).
1.12 "Employer" means the Company and/or any Participating Employer, either
collectively or individually, as the context requires.
1.13 "Participant" means any Employee who satisfies the eligibility
requirements set forth in Article 2. In the event of the death or
incompetency of a Participant, the term shall mean his personal
representative or guardian. An individual shall remain a Participant
until that individual has received full distribution of any amount
credited to the Participant's Account.
1.14 "Participating Employer" means any Affiliated Company which is
designated by the Board as a Participating Employer under the Plan and
whose designation as such has become effective upon acceptance of such
status by the board of directors of the Affiliated Company. A
Participating Employer may revoke its acceptance of such designation at
any time, but until such acceptance has been revoked, all the
provisions of the Plan and amendments thereto shall apply to the
Employees of the Participating Employer. In the event the designation
as a Participating Employer is revoked by the board of directors of an
Affiliated Company, the Plan shall be deemed terminated only with
respect to such Participating Employer.
1.15 "Plan" means the Philadelphia Suburban Corporation Amended and Restated
Executive Deferral Plan as the same is set forth herein, and as it may
be amended from time to time.
1.16 "Plan Year" means the calendar year.
1.17 "Separates from Employment" means the Employee's termination of
employment from the Employer for any reason. Except as otherwise
provided herein, a Separation from Employment shall be deemed to have
occurred on the last day of the Employee's service to the Employer and
shall be determined without reference to any compensation continuation
arrangement or severance benefit arrangement that may be applicable.
1.18 "Thrift Plan" means the Philadelphia Suburban Corporation Thrift Plan,
as it may be amended from time to time.
ARTICLE 2
Eligibility
2.1 Each Employee shall be eligible to participate in the Plan on such date
as is specified by the Committee. A list of the individuals
participating in the Plan on the Effective Date is attached hereto as
Exhibit A; such list may be modified from time to time by the
Committee.
- 2 -
ARTICLE 3
Benefits
3.1 The Employer shall create and maintain on its books an Account for each
Participant to which it shall credit amounts contributed to the Plan
pursuant to this Article 3. The Employer shall also credit each
Participant's Account with deemed earnings for each Plan Year in
accordance with the provisions of Article 8 hereof.
3.2 Prior to the end of the first quarter of any Plan Year, or within 30
days after first being eligible to participate hereunder, a Participant
may elect to have the Employer credit to the Participant's Account (as
a result of payroll reduction) an amount equal to any whole percentage
or dollar amount of the Participant's Bonus, if any, to be earned for
such Plan Year. Prior to the first day of any calendar month in a Plan
Year, a Participant may also elect to have the Employer contribute to
the Participant's Account (as a result of payroll reduction) an amount
equal to any whole percentage or dollar amount of the Participant's
Base Salary for services to be rendered during the balance of such Plan
Year. If an election is made to have a contribution credited to the
Participant's Account for a Plan Year, the credit shall be made at the
time that such amount would otherwise have been paid and shall reduce
the Participant's Bonus or Base Salary, as applicable with respect to
that Plan Year by a corresponding amount. The Committee may establish
minimum or maximum amounts that may be deferred under this Section and
may change such standards from time to time. Any such limits shall be
communicated by the Committee to the Participants prior to the
commencement of a Plan Year.
3.3 Any elections under this Article shall be made in writing on such form
and at such time as the Committee shall specify consistent with the
provisions of Section 3.2. Any election by a Participant pursuant to
this Section 3.3 shall be irrevocable as to any credits made to a
Participant's Account in a Plan Year and may not be modified in any
respect.
3.4 For each Plan Year, the Employer shall also credit to the Participant's
Account an amount equal to the excess of the contribution that would
have been made by the Employer under the Thrift Plan on behalf of the
Participant if it were not for the limitations imposed by the Code over
the amount actually contributed by the Employer to the Thrift Plan on
behalf of the Participant. In addition, the Employer may make an
additional credit to each Participant's Account for any Plan Year in
such amount as shall be approved by the Committee. Such credits shall
be deemed to have occurred at the time such amounts would otherwise
have been contributed to the Thrift Plan or at such other time as is
specified by the Employer.
- 3 -
ARTICLE 4
Distributions to Participants
4.1 A Participant's benefit under the Plan shall be distributed in one lump
sum, or, if at least $25,000 is credited to a Participant's Account, in
12 annual installments (with the balance to be distributed continuing
to be credited with deemed earnings for each subsequent Plan Year in
accordance with the provisions of Article 8 hereof) equal to 1\12,
1\11, 1\10\, 1\9, 1\8, 1\7, 1\6, 1\5, 1\4, 1\3, 1\2, and 1\1 of the
balance then credited to the Participant's Account, and shall be paid,
or commence, as soon as practicable following the completion of the
valuation of the Participant's Account for the last day of the month in
which the Participant Separates from Employment; provided however, that
each Participant shall make an election, in the form and manner
specified by the Committee, as to the form of payment on or before the
end of the year preceding the year of payment. If no such election has
been made by the first day of the year in which the Participant
Separates from Employment then distribution shall be delayed and shall
be made, or commence, as soon as practicable after the first day of the
year following the year in which the Participant Separates from
Employment. Notwithstanding anything herein to the contrary, in the
event that such a Participant fails to make an election, distribution
shall be in the form of one lump sum payment paid as soon as
practicable after the first day of the year following the date the
Participant Separates from Employment.
4.2 In the event that a Participant incurs a "significant financial
hardship" while employed by the Employer, as determined by the
Committee, the Participant may apply, in writing, for a withdrawal of
all or a portion of the balance credited to the Participant's Account
in the form of a lump sum in cash. All determinations by the Committee
regarding the existence of a financial hardship shall be made in
accordance with the provisions of the Company's Thrift Plan dealing
with whether a financial hardship exists for purposes of permitting
withdrawals thereunder. The Committee shall determine whether to permit
such a withdrawal and, based upon the Participant's application, the
amount necessary to satisfy that hardship, which shall be distributed
in a single sum as soon as practicable after the Committee's
determination.
ARTICLE 5
Death Benefit
5.1 In the event of the death of a Participant prior to the payment of the
full benefit due pursuant to Article 4, the Participant's Beneficiary
shall receive a lump sum distribution equal to the balance of the
Participant's Account on the date of death. The benefit payment to the
Beneficiary will be made as soon as practicable following the
completion of the valuation of the deceased Participant's Account. In
the event of the death of a Participant after payment of a benefit has
- 4 -
commenced in installments, pursuant to Section 4.1 hereof, the
Participant's Beneficiary shall receive the payments due following the
Participant's death; provided, however, that prior to receiving the
next annual installment, the Beneficiary may elect to receive, on the
next payment date, in full satisfaction of the Beneficiary's
entitlement under the Plan, a lump sum distribution equal to the
remaining balance then credited to the Participant's Account.
ARTICLE 6
Vesting
6.1 The balance credited to a Participant's Account attributable to Section
3.2 shall be fully vested at all times. Credits attributable to Section
3.4 shall vest at the same time as the Participant's accrued benefit
under the terms of the Retirement Plan for Employees of Philadelphia
Suburban Corporation and Subsidiaries.
ARTICLE 7
Funding
7.1 The Board may, but shall not be required to, authorize the
establishment of a trust by the Employer to serve as the funding
vehicle for the benefits described in Article 3 hereof. In any event,
the Employer's obligation hereunder shall constitute a general,
unsecured obligation, payable solely out of its general assets, and no
Participant shall have any right to any specific assets of the
Employer. In addition, it is the intention of the Employer that the
Plan be unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
ARTICLE 8
Investments
8.1 Except as provided otherwise below, the balance credited to a
Participant's Account shall be deemed to be invested in an interest
bearing instrument which shall provide for interest to be credited and
compounded monthly at an effective rate equal to 50 basis points in
excess of the prime commercial lending rate established by Mellon Bank
N.A., or such other bank determined by the Committee to be the
Company's primary bank as of the beginning of any Plan Year, as in
effect on the 15th day of each month (or if such day is a non-business
day, on the first business day thereafter) during which there is a
positive balance in a Participant's Account. Interest shall be applied
to the average balance of each Participant's Account during the prior
30-day period. For any Plan Year, the
- 5 -
Committee may determine to make available, and announce to the
Participants the procedure to elect, other deemed forms of
investment for the amounts credited to the Accounts.
Notwithstanding anything herein to the contrary, the Company may,
but shall not be required to, actually invest any funds in the
forms of investment made available hereunder and, in any event, any
such investments shall at all times remain the property of the
Company. Any such other deemed forms of investment shall be
described on Exhibit A hereto, as in effect and amended from time
to time, and shall be incorporated herein by reference.
ARTICLE 9
Administration
9.1 The Committee shall have full power and authority to interpret the
Plan, to prescribe, amend and rescind any rules, forms and procedures
as it deems necessary or appropriate for the proper administration of
the Plan and to make any other determinations and to take any other
such actions as it deems necessary or advisable in carrying out its
duties under the Plan. All action taken by the Committee arising out of
or in connection with, the administration of the Plan or any rules
adopted thereunder, shall in each case, lie within its sole discretion,
and shall be final, conclusive and binding upon the Employer, the
Board, all Employees, all beneficiaries of Employees and all persons
and entities having an interest therein.
9.2 Members of the Committee shall serve without compensation for their
services unless otherwise determined by the Board.All expenses of
administering the Plan shall be paid by the Employer.
9.3 The Company shall indemnify and hold harmless each member of the
Committee from any and all claims, losses, damages, expenses (including
counsel fees) and liability (including any amounts paid in settlement
of any claim or any other matter with the consent of the Board) arising
from any act or omission of such member, except when the same is due to
gross negligence or willful misconduct.
9.4 Any decisions, actions or interpretations to be made under the Plan by
the Company, Employer or the Committee (other than in the
administration of the Plan) shall be made in its sole discretion, not
in any fiduciary capacity and need not be uniformly applied to
similarly situated individuals and shall be final, binding and
conclusive on all persons interested in the Plan.
ARTICLE 10
Amendment
10.1 The Plan may be amended by the Committee at any time and from time to
time all without prior notice to any person or entity; provided,
however, that no such
- 6 -
amendment shall have the effect of divesting a Participant of the
benefit which the Participant would otherwise receive hereunder at the
time the amendment is adopted.
ARTICLE 11
Termination
11.1 Continuance of the Plan is completely voluntary and is not assumed as a
contractual obligation of the Employer. The Committee, acting on behalf
of the Employer, shall have the right to terminate the Plan in whole or
in part at any time all without prior notice to any person or entity;
provided, however, that such termination shall not have the effect of
divesting a Participant of the benefit which the Participant would
otherwise receive hereunder at the time of the termination.
ARTICLE 12
Miscellaneous
12.1 Nothing contained herein (a) shall be deemed to exclude a Participant
from any compensation, bonus, pension, insurance, severance pay or
other benefit to which he otherwise is or might become entitled as an
Employee or (b) shall be construed as conferring upon an Employee the
right to continue in the employ of the Employer.
12.2 Any amounts payable hereunder shall not be deemed salary or other
compensation to a Participant for the purposes of computing benefits to
which the Participant may be entitled under any other arrangement
established by the Employer for the benefit of its employees.
12.3 The rights and obligations created hereunder shall be binding on a
Participant's heirs, executors and administrators and on the successors
and assigns of the Employer.
12.4 The masculine pronoun whenever used shall include the feminine and the
singular shall be construed as the plural, where applicable.
12.5 The provisions of the Plan shall be construed and applied under the
laws of the Commonwealth of Pennsylvania.
12.6 The rights of any Participant under this Plan are personal and may not
be assigned, transferred, pledged or encumbered. Any attempt to do so
shall be void. In addition, a Participant's rights hereunder are not
subject, in any manner, to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors
of the Participant or the Participant's Beneficiary.
- 7 -
12.7 If any provision of the Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not effect any other
provisions hereof and the Plan shall be construed and enforced as if
such provisions had not been included.
12.8 The headings and captions herein are provided for convenience only, and
shall not be construed as part of the Plan, and shall not be employed
in the construction of the Plan.
12.9 Any benefit payable to or for the benefit of a payee who is a minor, an
incompetent person, or is otherwise incapable of receipting therefore
shall be deemed paid when paid to such person's guardian or to the
party providing, or a reasonably appearing to provide, the care for
such person, and such payment shall fully discharge the Employer, the
Committee, the Board and all other parties with respect thereto.
- 8 -
EXHIBIT A
Effective February 1, 1995, the following additional deemed investments may be
elected by a Participant:
1. Company Stock - A Participant may elect, at the time and in the
manner specified by the Committee, to direct that any portion or all of the
amounts elected to be deferred under Section 3.2 of the Plan be deemed invested
in common shares of Philadelphia Suburban Corporation. The purchase price for
shares deemed purchased or sold under the Plan shall, except as otherwise
provided in the next sentence, be the sum of (a) 95% of the average of the high
and the low price for common shares of the Company as reported on the New York
Stock Exchange for the date an amount to be invested in such shares is credited
to the Participant's Account under Article 3 (or, if no such price is reported
for that date, as of the next preceding date) or deemed sold from the Account
for purposes of the distribution to be made under Article 4 or Article 5, as
applicable and (b) any transfer, excise or similar tax that would be imposed on
the transaction pursuant to which a share would be purchased or sold. The
purchase price for shares deemed purchased with dividends credited to shares
shall be an amount equal to 95% of the average of the high and low sales price
for such shares as reported in the NYSE-Composite Transactions for each of the
five trading days immediately preceding the date that an amount to be invested
in such shares is credited to the Participant's Account under Article 3 .
2. Life Insurance - A Participant (who is insurable) may elect, at
the time and in the manner specified by the Committee, to direct that any
portion or all of the amounts elected to be deferred under Section 3.2 of the
Plan be deemed invested in a life insurance contract on the Participant's life
with the amount of the death benefit determined by the Committee (taking into
account, among other things the Participant's insurability) and permitting the
Participant to direct the investment of any funds deemed invested under the
insurance contract in excess of that necessary to keep the death benefit in
force. Upon a distribution event under Article 4, and notwithstanding anything
in the Plan to the contrary, the Committee may determine to distribute an
insurance contract to the Participant in the event that the Company had
determined to purchase such a life insurance contract in light of the
Participant's election hereunder. If the Company determines to purchase a
contract hereunder, it may permit the Participant to designate a beneficiary
under the contract to receive the death benefit in the event of the
Participant's death prior to a distribution event under Article 4, which shall
be taken into account in determining whether any additional sums are owed under
Article 5.
- 9 -
Exhibit 10.24
PHILADELPHIA SUBURBAN CORPORATION
DEFERRED COMPENSATION PLAN MASTER TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into as of this 31st
day of December, 1996 by and between Philadelphia Suburban Corporation, a
corporation organized and existing under the laws of the Commonwealth of
Pennsylvania (the "Company"), and PNC Bank, National Association, a banking
association organized and existing under the laws of the Commonwealth of
Pennsylvania (the "Trustee").
WITNESSETH:
WHEREAS, the Company and each Affiliated Company which is
designated by the Board of Directors as a Participating Employer have
established or may hereafter establish certain non-qualified employee benefit
plans and programs (hereinafter referred to collectively as the "Plans"), listed
on Exhibit A attached hereto as of the date hereof or, thereafter, added if
designated by the President of the Company (the "President"); and
WHEREAS, the Plans provide for the Company to pay all benefits
from its general revenues and assets;
WHEREAS, the Company wishes to establish separate irrevocable
trust funds (individually, a "Trust" and collectively, the "Trusts") with
respect to designated participants in the Plans, though, prior to a Change of
Control, as defined in Section 16.3 hereof, any such Trust may not necessarily
hold sufficient assets to satisfy all of the benefits to be provided under the
Plans;
WHEREAS, the Company also wishes to establish a Trust fund to
provide a source for payment of any fees, including legal fees, incurred by the
Trustee in the administration of the Trusts or by participants in enforcing
their rights hereunder (the "Fee Trust") and a Trust fund to provide a source of
payment of any benefits under a Plan to the extent that the assets of an
individual Trust established for a Participant are insufficient to provide all
benefits due (the "Shortfall Trust");
WHEREAS, the Company wishes to contribute to the Trusts
assets, either on the date hereof or thereafter as determined by the President,
that shall be held therein, to serve as a source of funds to assist it in
meeting its liabilities under the Plans, subject to the claims of Company's
creditors in the event of Company's Insolvency, as herein defined, until paid to
Plan participants and their beneficiaries in such manner and at such times as
specified hereunder or in the Plans;
WHEREAS, contributions to the Trusts shall be held by the
Trustee and invested, reinvested and distributed in accordance with the
provisions of this Trust Agreement;
WHEREAS, each Trust established by this Trust Agreement is
intended to be a "grantor trust" with the result that the corpus and income of
the Trusts are treated as assets and income of the Company pursuant to Sections
671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Company has appointed the Pension Committee of
the Board of Directors (the "Committee"), to administer the Trusts established
hereunder and otherwise to act on behalf of the Company in a non-fiduciary
capacity.
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NOW, THEREFORE, the parties do hereby establish the Trusts and
agree that the Trusts shall be comprised, held and disposed of as follows:
ARTICLE I
ESTABLISHMENT
1.1 The Company hereby establishes with the Trustee a separate, and
subject to Section 16.2 hereof, irrevocable Trust on behalf of each participant
in the Plans designated by the Committee (the "Participant") pursuant to a
separate agreement or agreements that shall be expressly incorporated in and
made a part of this Trust Agreement (each such agreement to be attached hereto
as part of Exhibit B) as well as the Shortfall Trust. Each separate Trust shall
be governed by the terms of this Trust Agreement. Each Trust is intended to be
exempt from substantially all of the provisions of the Employee Retirement
Income Security Act of 1974, as amended, ("ERISA") by reason of the provisions
of Sections 201(2), 301(3) and 401(1) thereof, as applicable, and the Company
shall immediately notify the Trustee should such exempt status change for any
reason.
1.2 The Trust shall consist of such sums of money and other property
acceptable to the Trustee as shall be paid or delivered to the Trustee by the
Company immediately following the date hereof or from time to time in the
future, as determined by the President. The Fee Trust and the Shortfall Trust
shall be irrevocable and each other Trust, subject to the provisions of Section
16.2 hereof, shall be irrevocable for the Participant for which it is
established. Except as provided in Sections 4.2, 4.3 and 16.2 hereof, the
Company shall have no right to direct the Trustee to return or divert any Trust
assets before the payment of all benefits under the Plans to the Participant.
All such money and other property, all in vestments and reinvestment made
therewith or proceeds thereof and all earnings and profits (less losses)
thereon, less all payments and charges as authorized herein, for each of the
Trusts are hereinafter referred to as the "Trust Fund". The Trust Fund shall be
held by the Trustee and shall be dealt with in accordance with the provisions of
this Trust Agreement. All Trust Funds created hereunder shall be treated as a
single trust fund for purposes of investing the assets of each Trust Fund (the
"Fund") but the Trustee shall maintain, or cause to be maintained records
sufficient to determine the interest of each Trust Fund in the Fund.
1.3 Within 90 days of the date hereof, the Company shall fund each
Trust Fund (other than the Fee Trust) with sufficient assets to provide the
benefits due, through December 31, 1995, to the Participant for whose benefit
the Trust Fund has been established. Thereafter, and subject to the provisions
of Article XVI, the Company may contribute such sums of money or property to the
Trust Fund, from time to time, as the President determines appropriate, in the
President's sole discretion, without any requirement that the amount of such
contributions be sufficient to meet the minimum funding standards imposed by
ERISA which are not applicable to contributions under the Plans.
1.4 The principal of each Trust Fund and the Fund, and any earnings
thereon shall be held separate and apart from other funds of Company and shall
be used exclusively for the uses and purposes of Participants and general
creditors as herein set forth. Participants and their beneficiaries shall have
no preferred claim on, or any beneficial ownership interest in, any assets of
the Trust Fund. Any rights created under the Plans and this Trust Agreement
shall be mere unsecured contractual rights of Participants and their
beneficiaries against the Company. Any assets held by the Fund will be subject
to the claims of the Company's general creditors under federal and state law in
the event of Insolvency, as defined in Section 4.2 herein.
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ARTICLE II
TRUSTEE ACCEPTANCE
2.1 The Trustee accepts each Trust established under this Trust
Agreement on the terms and subject to the provisions set forth herein, and it
agrees to discharge and perform fully and faithfully all of the duties and
obligations imposed upon it under this Trust Agreement.
2.2 The Trustee shall not be responsible for the proper operation of
the Plans.
ARTICLE III
PLANS IN RELATION TO TRUST AGREEMENT
3.1 A copy of each of the Plans is attached hereto as Exhibit C. All
defined terms used herein and not defined shall have the respective meanings set
forth in the Plans unless specifically provided to the contrary herein. The
Company will promptly deliver to the Trustee copies of all amendments to the
Plans and copies of any additional plans to be covered by this Agreement after
the date first above written.
3.2 The terms of each of the Plans shall govern the amount, form and
timing of benefit payments under each Plan to which a Participant is entitled.
3.3 The provisions of this Trust Agreement shall not cause the Plans to
become irrevocable under the provisions of Section 1.2 of this Trust Agreement.
3.4 The Trustee shall not be a party to the Plans, nor shall the
Trustee have any right or obligations with respect to any of the provisions of
the Plans relating to the funding of benefits or the funding of the Fee Trust or
the Shortfall Trust.
ARTICLE IV
TRUST FUND
4.1 It is intended that each Trust constitute a grantor trust under
Code Sections 671 through 679, with the assets of the Fund being treated as
assets of the Company for purposes of Federal, state and local income tax laws.
The creation of the Trusts shall not cause the Plans to be treated as funded
plans for purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended from time to time.
4.2. The assets of the Fund shall at all times be subject to the claims
of the general creditors of the Company under Federal and state law. The Trustee
shall suspend payments to the Participants from the Fund if the Trustee receives
timely written notification from the Company's Board of Directors and its Chief
Executive Officer that the Company is Insolvent. For purposes of this Article
IV, the term "Insolvent" means (a) the inability of the Company to pay its debts
when they mature or (b) the Company is subject as a debtor to a pending
proceeding under the Federal Bankruptcy Code. It shall be the duty of the
Company's Board of Directors and its Chief Executive Officer to provide the
Trustee with timely written notification of such events. Under any such
circumstance, the Trustee shall suspend payments from the Fund to the
Participants and shall pay the assets held in the Fund only as a court of
competent jurisdiction shall direct to satisfy claims of general creditors of
the Company. It is intended that the rights of the general creditors of the
Company to enforce the provisions of this Article in the event of the Company's
Insolvency be enforceable with respect to the Fund at the time of Insolvency
under both Federal and state law. It is also intended that no provision of this
Trust Agreement shall in any way affect the Participants' rights as general
creditors of the Company.
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4.3 If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, in
accordance with Section 4.4, the Trustee shall discontinue payment of benefits
to Participants or beneficiaries.
4.4 Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's Insolvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's Insolvency.
4.5 The Trustee shall resume the payment of benefits to the
Participants or beneficiaries in accordance with Article VII of this Trust
Agreement only after the Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent) based on such evidence as the Trustee
determines to be sufficient for such purpose such as a report from the Company's
independent auditors, if the Company is not subject to a bankruptcy proceeding
or otherwise an order from a court of competent jurisdiction.
4.6 Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Fund pursuant to this Article and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Participants or beneficiaries under the terms of the Plans for the period of
such discontinuance, less the aggregate amount of any payments made to the
Participants or beneficiaries by the Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
ARTICLE V
DUTIES OF THE TRUSTEE
WITH RESPECT TO INVESTMENTS AND DIRECTIONS
5.1 The Trustee shall invest and reinvest the principal and income of
the Trust Fund as directed by the Committee in writing, which directions may be
changed from time to time. Following the receipt of notice of a Change of
Control pursuant to Section 16.1 hereof, the Trustee shall invest and reinvest
the principal and income of the Trust Fund as it shall determine in its sole
discretion subject to the overall objective of the Fund which is the
preservation of capital. In such event, the Trustee shall keep the Trust Fund
invested, without distinction between principal and income, in any property,
whether real, personal or mixed, and wherever situated and whether or not
productive of income, including without limitation, capital, common and
preferred stocks, and personal, corporate and governmental or other obligations,
whether secured or unsecured, and including any collective part interest
therein; trust and participation certificates or other evidences of ownership,
part ownership or part interest; all without being limited or restricted to
investments of a character authorized for trustees or other fiduciaries under
any present or future laws and, except as otherwise required by Federal law
without regard to the proportion any such property may bear to the entire amount
of the Trust Fund. Specifically, but not by way of limitation, the Trustee is
authorized and empowered to invest all or any part of the Trust Fund in any
common or collective trust fund or pooled investment fund presently or hereafter
maintained by the Trustee as the same may be amended from time to time; and the
declaration of trust establishing such common or collective fund is hereby made
a part hereof as if set forth at length herein, the assets of the fund invested
in said common or collective trusts shall be held and administered by the
Trustee strictly in accordance with the terms of the instrument, and the
combining of assets of the Trust Fund with assets of other trusts in such common
or collective trust fund is specifically authorized hereby.
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5.2 The Trustee shall not be liable for any loss or any breach which
arises from the Committee's exercise or non-exercise of rights under this
Article 5, unless it was clear on their face that the actions to be taken under
the Committee's directions were contrary to the terms of this Agreement.
5.3 Whenever the President or the Committee provides a direction to the
Trustee, the Trustee shall not be liable for any loss, or by reason of any
breach, arising from the direction (i) if the direction is contained in a
writing (or is oral and immediately confirmed in a writing) signed by any
individual whose name and signature have been submitted (and not withdrawn) in
writing to the Trustee by the President and (ii) if the Trustee reasonably
believes the signature of the individual to be genuine, unless it is clear on
the directions face that the actions to be taken under the direction would be
contrary to the terms of this Agreement or applicable law.
5.4 The Company shall indemnify the Trustee against, and hold the
Trustee harmless from, any and all loss, damage, penalty, liability, cost and
expense, including without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by, imposed upon, or asserted against the
Trustee by (i) reason of any claim, regulatory proceeding, or litigation arising
from any act done or omitted to be done by any individual or person with respect
to any Plan or the Trust, (ii) any action incident to a good faith determination
concerning the Company's Insolvency or (iii) following the advice of counsel in
good faith, excepting, in any such case, only any and all loss, etc., arising
solely from the Trustee's negligence, bad faith or breach of applicable law or
the terms of this Agreement. Notwithstanding the foregoing, the Company shall
not indemnify the Trustee, unless the Trustee gives reasonably prompt written
notice to the Company of any such claim, regulatory proceeding or litigation and
offers the Company the right to defend against any such action unless the
positions of the Company and the Trustee are in conflict and in any event the
Trustee shall have the right to consult as to the defense.
5.5 The provisions of this Article V shall survive the termination of
this Agreement.
ARTICLE VI
ADDITIONAL POWERS AND DUTIES OF THE TRUSTEE
6.1 Subject to the provisions of Article V hereof, the Trustee shall
have the following powers and authority with respect to all property
constituting part of the Fund:
(a) To sell, exchange, convey or transfer any property at
public or private sale for cash or on credit and grant options for the purchase
or exchange thereof; provided, however, that in no event may the Trustee invest
in securities (including stock or rights to acquire stock unless such stock is
the Company's principal class of common stock) or obligations issued by the
Company, other than a de minimis amount held in common investment vehicles in
which the Trustee invests. No person dealing with the Trustee shall be bound to
see to the application of the purchase money or other property delivered to the
Trustee or to inquire into the validity, expedience or propriety of any such
sale or other disposition.
(b) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan relating
to any such property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale or other action by
any corporation or other entity.
(c) To deposit any such property with any protective,
reorganization or similar committee; to delegate discretionary power to any such
committee; and to pay part of the expenses and compensation of any such
committee and any assessments levied with respect to any property so deposited.
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(d) To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to consent to the
reorganization, consolidation, merger or readjustment of the finances of any
corporation, company or association, or to the sale, mortgage, pledge or lease
of the property of any corporation, company or association any of the securities
of which may at any time be held in the Fund and to do any act with reference
thereto, including the exercise of options, the making of agreements or
subscriptions and the payment of expenses, assessments or subscriptions, which
may be deemed necessary or advisable in connection therewith, and to hold and
retain any securities or other property which it may so acquire.
(e) To commence or defend suits or legal proceedings and to
represent the Fund in all suits or legal proceedings; to settle, compromise or
submit to arbitration any claims, debts or damages due or owing to or from the
Fund; and to pay all reasonable expenses arising from any such action from the
Fee Trust if not paid by the Company.
(f) To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any securities
or other such property.
(g) If the President consents, to borrow money from any lender
in such amounts and upon such terms and conditions as shall be deemed advisable
or proper to carry out the purposes of the Trusts and to pledge any securities
or other property for the repayment of any such loan.
(h) To engage any legal counsel, including outside counsel to
the Company or the Trustee, or any other suitable accounting, clerical or other
agents, to consult with such counsel or agents with respect to the construction
of this Trust Agreement, the duties of the Trustee hereunder, the transactions
contemplated by this Trust Agreement or any act which the Trustee proposes to
take or omit, to rely upon the advice of such counsel or agents, and to pay the
reasonable fees, expenses and compensation from the Fee Trust if not paid by the
Company. The Trustee shall have no liability for any action or failure to act in
reasonable reliance upon the advice of such legal counsel.
(i) To register any securities held by it in its own name or
in the name of any custodian of such property or of its nominee, including the
nominee of any system for the central handling of securities, with or without
the addition of words indicating that such securities are held in a fiduciary
capacity, to deposit or arrange for the deposit of any such securities with such
a system and to hold any securities in bearer form; provided, that the books and
records of the Trustee shall show that all such investments are part of the
Fund.
(j) To make, execute and deliver, as the Trustee, any and all
deeds, leases, notes, bonds, guarantees, mortgages, conveyances, contracts,
waivers, releases or other instruments in writing necessary or proper for the
accomplishment of any of the foregoing powers.
(k) To keep that portion of the Fund in cash or cash balances
as may be deemed to be in the best interest of the Fund.
(l) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly provided otherwise
herein.
(m) Notwithstanding any powers granted to the Trustee pursuant
to this Trust Agreement or applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Internal Revenue
Code.
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(n) To invest all or any part of the Fund in any portfolios of
The PNC Fund, as to the which the Company has received a Disclosure Statement,
accompanied by Prospectuses describing each of the investment portfolios (the
"Portfolios") established pursuant to a Declaration of Trust under the name of
"The PNC Fund". The Company acknowledges that it is independent of PNC Bank
Corp. and its affiliates ("PNC"), The PNC Fund and its affiliates, and that the
Company will not receive direct or indirect compensation for its personal
account in connection with any such investment.
(o) To do all other acts although not specifically mentioned
herein, as the Trustee may deem necessary to carry out any of the foregoing
powers and the purposes of this Trust Agreement.
ARTICLE VII
PAYMENTS BY THE TRUSTEE
7.1 If a Participant or beneficiary does not receive a payment(s) from
the Company to which the individual claims entitlement under any of the Plans,
the individual shall notify the Company, or, in the case of a Change of Control,
the Trustee, in writing of such entitlement.
7.2 The Trustee shall make payments to a Participant or beneficiary in
accordance with written instructions given at the time of payment or in advance
of such payment to the Trustee from the President as to the manner and timing of
payments hereunder and the Trustee shall have no responsibility to determine the
amount of such payments. Any such instructions in effect on the date of this
Trust Agreement shall be attached hereto as Exhibit D, as the same may be
changed from time to time prior to a Change of Control. The Company may not
change such instructions on or after notification or knowledge of a Change of
Control of the Company with respect to benefits accrued to date.
7.3 Nothing in this Trust Agreement shall be deemed to limit the rights
of a Participant (or beneficiary) under the Plans, including the right to
contest the denial of benefit payment(s) and, following a Change of Control, to
have all reasonable legal fees and expenses incurred in contesting a denial paid
from the Fee Trust.
7.4 The Trustee shall withhold from each payment any Federal
withholding taxes or charges which the Trustee is properly instructed to deduct
by the President or, following a Change of Control, by any compensation
consultant engaged by the Company as to which the Trustee is notified in the
instructions referred to in Section 7.2 hereof, and remit the amount withheld to
the Company for deposit and reporting of such amounts to the appropriate
authorities.
7.5 The insufficiency of assets in the Trust Fund shall not relieve the
Company of its obligations or liabilities to make benefit payments otherwise due
to a Participant or beneficiary under the terms of the Plans.
7.6 If any portion of the Trust Fund has been invested in a life
insurance contract, the Trustee shall be precluded from payment of any benefits
it has received pursuant to that contract to the Company unless the Participant
(or beneficiary) has received all benefit payments due and payable under the
terms of the applicable Plan.
7.7 The Company may make payment of benefits directly to Participants
or their beneficiaries as they become due under the terms of the Plans. The
Company shall notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to Participants or their
beneficiaries. In addition, if the principal of the Trust Fund is not sufficient
to make payments of benefits in accordance with the terms of the Plans, the
Trustee shall use assets of the Shortfall Trust to make
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payments due but if not sufficient, the Company shall make the balance of each
such payment as it falls due. The Trustee shall notify the Company where
principal and earnings of the Trust and the Shortfall Trust are not sufficient.
ARTICLE VIII
TAXES, EXPENSES AND COMPENSATION
8.1 The Company shall from time to time pay taxes of any and all kinds
which are lawfully levied or assessed upon or become payable in respect of the
Trust Fund, the income or any property forming a part thereof, or any security
transaction pertaining thereto. To the extent that any taxes lawfully levied or
assessed upon the Trust Fund are not paid by the Company, the Trustee shall pay
such taxes out of the Fee Trust, or, to the extent that the Fee Trust is
insufficient, on a pro rata basis from the other Trust Funds. The Trustee shall
at the expense and direction of the Company contest the validity of any taxes in
any manner deemed appropriate by the Company or its counsel or the Company may
itself contest the validity of any such taxes. All reasonable expenses incurred
by the Trustee in the performance of its duties under this Trust Agreement,
including but not limited to legal fees and brokerage commissions, shall be
charged against and paid from the Fee Trust to the extent that the Company does
not pay such expenses, or, to the extent that the Fee Trust is insufficient, on
a pro rata basis from the other Trust Funds.
8.2 The Company will pay the Trustee such reasonable compensation for
its services indicated in Fee Schedule attached hereto as Exhibit E and as may
thereafter be agreed upon in writing from time to time by the Company and the
Trustee. Such compensation shall be paid directly by the Company. In the event
such compensation is not paid by the Company, it shall be charged against the
Fee Trust.
ARTICLE IX
ADMINISTRATION AND RECORDS
9.1 The Trustee shall keep or cause to be kept accurate and detailed
accounts of any investments, receipts, disbursements and other transactions
hereunder, and all accounts, books and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books and records shall be preserved (in original
form, or on microfilm, magnetic tape or any other similar process) for such
period as the Trustee may determine, but the Trustee may only destroy such
accounts, books and records after first notifying the Company in writing of its
inten tion to do so and transferring to the Company any of such accounts, books
and records requested.
9.2 Within 60 days after the close of each calendar year, and within 60
days after the removal or resignation of the Trustee or of the termination of
the Trust, the Trustee shall file with the Company (and provide a copy thereof
to the Participants, upon a written request) a written accounting setting forth
all investments, receipts, disbursements and other transactions effected by it
during the preceding calendar year and, if applicable, during the current
calendar year to the date of such removal, resignation or termination, including
a description of all investments and securities purchased and sold with the cost
or net proceeds of such purchases or sales and showing all cash, securities and
other property held at the end of such calendar year or other period and the
fair market value thereof. To the extent permitted by applicable law, upon the
expiration of 180 days from the date of filing such annual or other accounting,
the Trustee shall be released and discharged from all liability and
accountability with respect to the propriety of its acts and transactions shown
in such accounting, except with respect to any such acts or transactions as to
which the Company shall within such 180 day period file with the Trustee written
objections.
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9.3 Nothing contained in this Trust Agreement shall be construed as
depriving the Trustee or the Company of the right to have a judicial settlement
of the Trustee's accounts, and upon any proceeding for a judicial settlement of
the Trustee's accounts or for instructions, the only necessary party thereto in
addition to the Trustee shall be the Company.
9.4 In the event of the removal or resignation of the Trustee, the
Trustee shall deliver to the successor trustee all records which shall be
required by the successor trustee to enable it to carry out the provisions of
this Trust Agreement.
9.5 In addition to any returns required of the Trustee by law, the
Trustee shall prepare and file such tax reports and other returns as the Company
and the Trustee may from time to time agree upon in writing.
ARTICLE X
REMOVAL OR RESIGNATION OF THE TRUSTEE
AND DESIGNATION OF SUCCESSOR TRUSTEE
10.1 The Company may remove the Trustee with or without cause, upon at
least 60 days' notice in writing to the Trustee; provided, however, that
following a Change of Control of the Company, as defined in Article XVI hereof,
the Trustee may be removed only for cause.
10.2 The Trustee may resign at any time upon at least 60 days' notice
in writing to the Company.
10.3 In the event of such removal or resignation, the Trustee shall
duly file with the Company a written accounting as provided in Section 9.2
hereof for the period since the last previous annual accounting, listing the
investments of the Trust and any uninvested cash balance thereof, and setting
forth all receipts, disbursements, distributions and other transactions
respecting the Trust not included in any previous accounting, and if written
objections to such accounting are not filed as provided in Section 9.2 hereof,
the Trustee shall to the maximum extent permitted by applicable law be forever
released and discharged from all liability and accountability with respect to
the propriety of its acts and transactions shown in such accounting.
10.4 Within 60 days after any notice of removal or resignation of the
Trustee, the Company shall designate a successor trustee qualified to act
hereunder; provided, however that in no event may the Company, an affiliate of
the Company or of any Participant serve as the successor trustee.
Notwithstanding the foregoing, the Trustee may not be removed or resign
following a Change of Control of the Company unless the Trustee or the Company
has obtained the agreement of, or a court of competent jurisdiction has
appointed, a bank with assets in excess of $1 billion and net worth in excess of
$50 million (a "Replacement Trustee") to replace the Trustee as trustee under
the terms of this Trust Agreement. In any event, the Trustee shall continue to
be custodian of the Fund's assets until the new trustee is in place, and the
Trustee shall be entitled to expenses and fees through the end of its
custodianship of the Fund. Each such successor trustee, during such period as it
shall act as such, shall be bound by all of the provisions hereof as well as any
instructions provided by the Company pursuant to the provisions hereof, shall
have the powers and duties herein conferred upon an individual trustee, and the
word "Trustee" wherever used herein, except where the context otherwise
requires, shall be deemed to include any successor trustee.
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10.5 Upon designation of a successor trustee and delivery to the
resigned or removed Trustee of written acceptance by the successor trustee of
such designation, such resigned or removed trustee shall promptly assign,
transfer, deliver and pay over to such successor trustee, in conformity with the
re quirements of applicable law, the funds and properties in its control or
possession then constituting the Trust Fund. If, by the termination date, the
Company has not notified the Trustee in writing as to whom the assets and cash
are to be transferred and delivered, the Trustee may bring an appropriate action
or proceeding for leave to deposit the assets and cash in a court of competent
jurisdiction. The Trustee shall be reimbursed by the Fee Trust for all costs and
expenses of the action or proceeding including, without limitation, reasonable
attorneys' fees and disbursements if not paid directly by the Company or, to the
extent that the Fee Trust is insufficient, on a pro rata basis from the other
trust funds.
ARTICLE XI
ENFORCEMENT OF TRUST AGREEMENT
11.1 The Company shall have the right to enforce any provisions of this
Trust Agreement. In any action or proceedings affecting the Fund the only
necessary parties shall be the Company and the Trustee and, except as provided
in Section 12.1 hereof or as otherwise required by applicable law, no other
person shall be entitled to any notice or service of process. Any judgment
entered in such an action or proceeding shall be binding and conclusive on all
persons having or claiming to have any interest in the Fund.
ARTICLE XII
AMENDMENTS
12.1 Subject to the provisions of Section 12.3 hereof, the Committee
may by written instrument, from time to time, amend or modify, in whole or in
part, any or all of the provisions of this Trust Agreement, except to make it
revocable or to increase the duties of the Trustee without its written consent.
The Committee may delegate its authority to the President to the extent provided
in any delegation instrument. The Trustee and the Participants under the Trusts
shall receive written notice of any such amendment including any amendment under
Section 12.3 hereof.
12.2 The Committee and the Trustee shall execute any mutually agreeable
supplements to, or amendments of, this Trust Agreement as shall be necessary to
give effect to any such amendment or modification.
12.3 Notwithstanding anything herein to the contrary, to the extent
that the terms hereof are inconsistent with the terms of the Plans, the latter
shall control as if the terms hereof had been amended accordingly; provided,
that the terms of the Plans may not increase the duties of the Trustee as set
forth in this Agreement without the Trustee's written consent. Further, upon a
Change of Control of the Company, the Committee shall be precluded from amending
this Agreement in any manner that adversely affects the entitlement of the
Participants and beneficiaries that had accrued on or prior to the Change of
Control or is funded pursuant to the provisions of Article XVI hereof but has
not been completely distributed to the Par ticipants or beneficiaries, unless,
in any such event, the Participant or beneficiary, as applicable, consents, in
writing, to such amendment. Upon a Change of Control of the Company, this
Section 12.3 shall be deemed to supersede any provision of the Plans which
permits amendments of such Plans inconsistent with the terms hereof and this
Section 12.3 shall constitute an amendment to such Plans.
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ARTICLE XIII
TERMINATION OF TRUST
13.1 Except as provided in Sections 4.2 or 16.2 hereof, no part of the
corpus or income of the Fund shall be paid to the Company or be used for any
purpose other than for the exclusive purpose of providing benefits to the
Participants or beneficiaries prior to the satisfaction of all liabilities under
the Plans; provided, however, that nothing in this Article shall be deemed to
limit or otherwise prevent the payment from the Fund of expenses and other
charges as provided in Article VIII hereof. The Trust may be prospectively
discontinued by written instrument of the Committee at any time, but each Trust
Fund may not be liquidated until the payment of all amounts accrued for the
Participant (or beneficiary) under the terms of the Plans as of the date of such
termination whether or not then due. In no event shall the discontinuance of the
Trust accelerate the payment of a Participant's benefit under any of the Plans
unless the Committee determines otherwise in its sole discretion.
13.2 Upon the liquidation of the Fund or any individual Trust Fund,
after all payments required by Section 13.1 have been made to the Participant(s)
(or beneficiary(ies)), any and all funds remaining in the Trust Fund or the Fund
shall be paid to the Company and the Trustee shall promptly take such action as
shall be necessary to transfer such assets to the Company or to add to the
Shortfall Trust, as directed by the President in accordance with the funding
policy established in accordance with Section 1.3 hereof.
ARTICLE XIV
NON-ALIENATION
14.1 Except to the extent otherwise required by law, (i) no amount
payable to or in respect of the Participant at any time under the Trust Fund and
no interest that the Participant has in the Trust Fund shall be subject in any
manner to alienation by anticipation, sale, transfer, assignment, bankruptcy,
pledge, attachment, charge or encumbrance of any kind, and any attempt to so
alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber
any such amount, whether presently or thereafter payable, shall be void; and
(ii) the Trust Fund shall in no manner be liable for or subject to the debts or
liabilities of the Participant.
14.2 No provision of this Trust Agreement shall be interpreted as
conferring upon the Participant any rights in any Trust Fund established
hereunder other than those of a general creditor of the Company.
ARTICLE XV
COMMUNICATIONS
15.1 Communications to the Company shall be addressed to it at
Philadelphia Suburban Corporation, 762 Lancaster Avenue, Bryn Mawr, PA 19010,
Attention: President, with a required copy to Morgan, Lewis & Bockius, 2000 One
Logan Square, Philadelphia, PA 19103-6993, Attention: Robert J. Lichtenstein,
Esq.; provided however, that upon the Company's written request, such
communications shall be sent to such other address as the Company may specify.
15.2 Communications to the Trustee shall be addressed to it at
Retirement and Investment Services Group, 1700 Market Street, Suite 1412,
Philadelphia, PA 19103, Attention: Joseph Petz; provided,
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however, that upon the Trustee's written request, such communications shall be
sent to such other address as the Trustee may specify.
15.3 Any action of the Company, the President (or his authorized
representative) or Committee pursuant to this Trust Agreement, including all
orders, requests, directions, instructions, approvals and objections to the
Trustee, shall be in writing signed on behalf of the Company by any duly
authorized officer of the Company, by the President or by any duly authorized
member of the Committee. The Trustee may rely on, and will be fully protected
with respect to any such action taken or omitted in good faith in reliance on,
any information, order, request, direction, instruction, approval, objection and
list delivered to the Trustee consistent with the terms of this Trust Agreement.
ARTICLE XVI
CHANGE OF CONTROL
16.1 Upon a Change of Control of the Company, the President (or his
authorized representa tive), shall immediately notify the Trustee of such event
and cause the Company to remit to the Trustee as a contribution to the
applicable Trust Fund established or to be established hereunder for the benefit
of each Participant in the Plans the amount, if any, accrued for the Participant
(including any interest or earnings due on such accrual) for the current year or
for any prior year to the extent not theretofore already contributed or that may
be accrued for the Participant for any future year under the Plans and not yet
contributed to the Trustee as well as an amount to the Fee Trust estimated to be
sufficient to pay all fees and expenses that may thereafter become due. Such
contribution shall also include any life insurance policy(ies) purchased by the
Company to be used in assisting the Company to provide benefits under any of the
Plans and the Company shall cause the ownership of such policy(ies) to be
transferred to the Trustee in its capacity as trustee under this Trust
Agreement. The Trustee shall be under no duty to determine the sufficiency, or
to enforce the making, of such contributions.
16.2 In the event that the President (or his authorized representative)
determines that, for purposes of this Trust Agreement, a Change of Control of
the Company is imminent, the President shall cause the Company to make the
payments to the Trustee specified in Section 16.1. If a Change of Control of the
Company shall not have occurred within six months of the contributions made
pursuant to this Section 16.2 and the Company's Board of Directors adopts a
resolution to the effect that, for purposes of this Trust Agreement, a Change of
Control of the Company is not imminent, any amounts added to an applicable Trust
pursuant to this Section 16.2, together with any earnings thereon, shall be paid
by the Trustee to the Company, if so directed by the Board of Directors.
16.3 A Change of Control of the Company shall be deemed to have taken
place if (i) any Person (including any individual, firm, corporation,
partnership or other entity except the Company or any employee benefit plan of
the Company or of any Affiliate or Associate, both as defined in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, any Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such employee benefit plan), together with
all Affiliates and Associates of such Person, shall become the bene ficial owner
in the aggregate of 20% or more of the votes that all shareholders would be
entitled to cast in an election of Directors of the Company; (ii) at any time
within any period of two consecutive years, individuals who (A) at the beginning
of such period constitute the Board of Directors, or (B) become Directors after
the beginning of such period and whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least 75% of the
Directors then still in office who were directors at the beginning of the
period, cease for any reason to constitute at least a majority of such Board of
Directors; provided that any individual who ceases to be a Director by reason or
death or disability shall be excluded from the numerator and the denominator in
all calculations hereunder; or (iii) the
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President (or his appointee), determines, in his sole discretion, that even
though none of the events described in (i) or (ii) have occurred, the
surrounding facts and circumstances indicate that a Change of Control of the
Company has effectively taken place. Notwithstanding the foregoing, a Change of
Control shall not be deemed to have taken place under clause (i) of the
immediately preceding sentence if (a) such Person becomes the beneficial owner
in the aggregate of 20% or more of the Common Stock of the Company then
outstanding as a result of an inadvertent acquisition by such Person if such
Person, as soon as practicable, divests itself of a sufficient amount of its
Common Stock so that it no longer owns 20% or more of the Common Stock then
outstanding, as determined by the Board of Directors of the Company, or (ii) the
shares of Common Stock required to be counted in order to meet the 20% minimum
threshold described under such clause (i) include any of the shares described in
subsections (i) through (iv) of section 2543(b) of the Pennsylvania Business
Corporation Law of 1988 (15 Pa.C.S.A. ss.2543(b)) as in effect on the date of
adoption of the Plan.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 This Trust Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed therein. It shall be binding upon and inure
to the benefit of the Company and the Trustee and their respective successors
and assigns.
17.2 All titles and Article headings herein have been inserted for
convenience of reference only and shall in no way modify, restrict or affect the
meaning or interpretation of any of the terms or provisions of this Trust
Agreement.
17.3 This Trust Agreement is intended as a complete and exclusive
statement of the agreement of the parties hereto, and supersedes all previous
agreements or understandings among them.
17.4 The term "Trustee" shall include any successor trustee. Any
corporation resulting from any merger, consolidation or conversion to which the
Trustee may be a party, or any corporation otherwise succeeding generally to all
or substantially all of the assets or business of the Trustee, shall be the
successor to it as Trustee hereunder without the execution of any instrument or
any further action on the part of any party hereto or the Participant hereunder;
provided, however, that, except as provided in the preceding clause, any
successor to the original Trustee must be a Replacement Trustee.
17.5 If any provision of this Trust Agreement shall be invalid and
unenforceable, the remaining provisions hereof shall continue to be effective.
17.6 Any reference hereunder to the Participant shall expressly be
deemed to include, where relevant, a beneficiary of such Participant duly
designated under the terms of any of the Plans. The Participant shall cease to
have such status once any and all amounts due under the Plans have been
satisfied.
17.7 Whenever used herein, and to the extent appropriate, the
masculine, feminine or neuter gender shall include the other two genders, the
singular shall include the plural and the plural shall include the singular.
17.8 This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be the original, and said
counterparts shall constitute but one and the same instrument.
-13-
17.9 Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
IN WITNESS WHEREOF, this Trust Agreement has been duly executed by the
parties hereto as of the day and year first above written.
PHILADELPHIA SUBURBAN CORPORATION
Attest:
/s/ Patricia M. Mycek By: /s/ Roy H. Stahl
- ---------------------------- --------------------------------
PNC BANK
(as Trustee)
Attest:
/s/ Astrid M. Frederickson By: /s/ Joseph L. Petz
- ---------------------------- --------------------------------
Vice President
-14-
Exhibit 10.25
FIRST AMENDMENT TO
PHILADELPHIA SUBURBAN WATER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR NICHOLAS DEBENEDICTIS
(Effective March 15, 1993)
WHEREAS, Philadelphia Suburban Water Company (the "Company")
established the Philadelphia Suburban Water Company Supplemental Executive
Retirement Plan for Nicholas DeBenedictis to provide for the payment of a
supplemental retirement benefit to Mr. DeBenedictis; and
WHEREAS, the Company reserved the right to amend the Plan; and
WHEREAS, the Company desires to amend the Plan to calculate
the benefit under this Plan as if Mr. DeBenedictis had not deferred any
compensation under the Philadelphia Suburban Corporation Executive Deferral
Plan;
NOW, THEREFORE, effective January 1, 1995, the Plan is hereby
amended to read as follows:
1. Section 2.1 is hereby amended to read as follows:
2.1 Calculation of Benefit.
(a) Retirement. The Supplemental Benefit payable to the
Participant under this Plan upon his retirement from the Company on or after age
65 shall be equal to (i) the benefit that would be payable under the Retirement
Plan if the Participant were fully vested in his benefit under the Retirement
Plan, calculated as if the Participant had 25 Years of Service under the
Retirement Plan on the date of retirement and had not deferred any compensation
under the Philadelphia Suburban Corporation Executive Deferral Plan, and without
taking into account the limitations of sections 401(a)(17) and 415 of the
Internal Revenue Code of 1986, less (ii) the benefit payable to the Participant
under the Retirement Plan and the Excess Benefit payable to the Participant
under the Excess Plan. All of the adjustments provided in the Retirement Plan
shall be taken into account when computing the Supplemental Benefit.
-1-
(b) Termination of Employment Prior to Retirement. The
Supplemental Benefit payable to the Participant under this Plan upon his
termination of employment from the Company for any reason prior to age 65 shall
be equal to (i) the benefit that would be payable under the Retirement Plan if
the Participant were fully vested in his benefit under the Retirement Plan,
calculated as if the Participant were credited with two years of benefit service
for each of the first seven years of his actual service with the Company, plus
one year of benefit service for each year of actual service after the seventh
year of service and had not deferred any compensation under the Philadelphia
Suburban Corporation Executive Deferral Plan, and without taking into account
the limitations of sections 401(a)(17) and 415 of the Internal Revenue Code of
1986, less (ii) the benefit payable to the Participant under the Retirement Plan
and the Excess Benefit payable to the Participant under the Excess Plan. All of
the adjustments provided in the Retirement Plan shall be taken into account when
computing the Supplemental Benefit.
2. Section 2.2 is hereby amended to read as follows:
2.2 Surviving Spouse Benefit. If the Participant dies prior
to commencement of payment of his Supplemental Benefit, then a Surviving Spouse
Benefit is payable to his Surviving Spouse as provided herein. If the
Participant is entitled, or would be entitled except for the fact that he has
not retired from the Company, to a Supplemental Benefit under Section 2.1(a),
the Surviving Spouse Benefit shall be equal to (i) the Retirement Plan Surviving
Spouse Benefit that would be paid to the Participant's Surviving Spouse if the
Participant were fully vested in his benefit under the Retirement Plan,
calculated as if the Participant had 25 Years of Service under the Retirement
Plan and had not deferred any compensation under the Philadelphia Suburban
Corporation Executive Deferral Plan, and without taking into account the
limitations of sections 401(a)(17) and 415 of the Internal Revenue Code of 1986,
less (ii) the Retirement Plan Surviving Spouse Benefit and the Excess Surviving
Spouse Benefit payable to the Surviving Spouse under the Excess Plan. In all
other cases, the Surviving Spouse Benefit shall be equal to (i) the Retirement
Plan Surviving Spouse Benefit that would be paid to the Participant's Surviving
Spouse if the Participant were fully vested in his benefit under the Retirement
Plan, calculated as if the Participant were credited with two years of benefit
service for each of the first seven years of his actual service with the
Company, plus one year
-2-
of benefit service for each year of actual service after the seventh year of
service and had not deferred any compensation under the Philadelphia Suburban
Corporation Executive Deferral Plan, and without taking into account the
limitations of sections 401(a)(17) and 415 of the Internal Revenue Code of 1986,
less (ii) the Retirement Plan Surviving Spouse Benefit and the Excess Surviving
Spouse Benefit payable to the Surviving Spouse under the Excess Plan. All of the
adjustments specified in the Retirement Plan shall be taken into account in
computing the Surviving Spouse Benefit.
IN WITNESS WHEREOF, Philadelphia Suburban Water Company has
caused these presents to be duly executed, under seal, as of this 5th day of
November, 1996.
Philadelphia Suburban Water
Company
/s/ Patricia M. Mycek By:/s/ Roy H. Stahl
- ------------------------ ------------------------
Corporate Secretary
[Corporate Seal]
-3-
EXHIBIT 13.4
SELECTED PORTION OF ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
This Report contains, in addition to historical information
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include statements regarding the Company's
development, growth and expansion plans and the sufficiency of the Company's
liquidity and capital. Such statements are based on management's current
expectations and are subject to a number of uncertainties and risks that could
cause actual results to differ materially from those described in the
forward-looking statements.
Following are selected five-year financial statistics for the Company:
Years ended December 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
Earned revenues $ 122,503 $ 117,044 $ 108,636 $ 101,244 $ 93,307
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes $ 33,749 $ 30,931 $ 27,209 $ 24,261 $ 18,661
- ------------------------------------------------------------------------------------------------------------------------
Operating Statistics
Earned revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Operating expenses 42.1 % 44.2 % 46.3 % 45.4 % 46.1 %
Depreciation and amortization 10.9 % 9.9 % 9.5 % 10.8 % 10.1 %
Taxes other than income taxes 6.8 % 6.6 % 6.6 % 6.8 % 7.0 %
Interest expense* 12.9 % 13.2 % 12.7 % 13.8 % 17.1 %
Allowance for funds used during
construction (0.2)% (0.3)% (0.1)% (0.8)% (0.3)%
- ------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 72.5 % 73.6 % 75.0 % 76.0 % 80.0 %
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 27.5 % 26.4 % 25.0 % 24.0 % 20.0 %
========================================================================================================================
Effective tax rates 41.4 % 41.7 % 42.5 % 43.0 % 43.1 %
========================================================================================================================
Income from continuing operations
as a percentage of average
stockholders' equity 11.7 % 12.0 % 11.2 % 11.4 % 11.0 %
========================================================================================================================
*Includes dividends on preferred stock of PSW with mandatory redemption
requirements.
Following are selected five-year operating and sales statistics for PSW:
Years ended December 31, 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Daily sendout
(Million gallons Maximum 109.5 121.8 110.4 120.7 101.3
per day) Average 94.2 92.6 89.8 89.1 85.4
========================================================================================
Metered Residential 265,765 248,500 234,624 232,684 230,740
customers Commercial 13,449 12,019 11,071 11,014 10,841
Industrial 753 554 539 538 543
Other 4,174 3,792 3,299 2,959 2,664
----------------------------------------------------------------------------------------
Total 284,141 264,865 249,533 247,195 244,788
========================================================================================
Consumption
per customer
in gallons Average 103,206 109,084 109,001 110,368 108,258
========================================================================================
Revenues from Residential $ 79,056 $ 77,744 $ 69,483 $ 66,656 $ 60,239
water sales Commercial 26,504 24,368 23,431 20,506 19,600
Industrial 4,823 4,512 4,737 4,207 4,135
Other 9,950 9,249 9,151 8,092 7,577
----------------------------------------------------------------------------------------
Total $ 120,333 $ 115,873 $ 106,802 $ 99,461 $ 91,551
========================================================================================
General Information
Philadelphia Suburban Corporation ("PSC" or the "Company"), a
Pennsylvania corporation, is the holding Company of Philadelphia Suburban Water
Company ("PSW"), a regulated water utility. PSW provides water to approximately
284,000 customers in 93 municipalities within its 463 square mile service
territory. PSW's service territory is located in Pennsylvania, north and west of
the City of Philadelphia.
Results of Operations
Income from continuing operations of the Company has grown at an annual
compound rate of approximately 14.2% during the five-year period ended December
31, 1996. During this same period, revenues and total expenses, other than
income taxes, have grown at compound rates of 6.7% and 4.5%, respectively.
Earned Revenues
The growth in revenues over the past five years is a result of
increases in the customer base and in water rates. The number of customers
increased at an annual compound rate of 3.8% in the past five years primarily as
a result of acquisitions of local water systems. In the past three years,
acquisitions have provided water revenues of approximately $8,210, $5,550 and
$2,480 in 1996, 1995 and 1994, respectively. Excluding the effect of
acquisitions, the customer base increased at a five-year annual compound rate of
.8%. This increase represents normal growth in the number of households and
businesses within PSW's 463 square mile service territory. Water rates have
increased at an annual compound growth rate of 4.3% over the five-year period.
2
Rates charged by PSW for water service are subject to the
approval of the Pennsylvania Public Utility Commission ("PUC"). PSW continuously
reviews the necessity of filing applications with the PUC for increases in rates
charged for water service. Among the factors considered by management in
determining the need to apply for increased rates are: the amount of utility
plant additions and replacements made since the previous rate decision; changes
in the cost of capital and the capital structure of PSW; and increases in
operating expenses (including wages, fringe benefits, electric and chemical
expenses), depreciation and taxes experienced since the previous rate decision.
Based on these assessments, PSW will periodically file a request with the PUC to
increase its rates. Typically, the PUC will suspend the rate request for up to
nine months during which time hearings on the merits of the request are held.
During these hearings, the views of PSW as well as the PUC staff, the Consumer
Advocate and other interested parties are presented and evaluated. In the five
years presented above, rates were increased 5.3%, 9.1% and 7.4% in 1995, 1994,
and 1993, respectively. In recent years, the most significant factor in
determining the need for a rate increase and the actual rate increases granted
has been the amount of utility plant additions that PSW has made and the costs
of the capital used to finance these additions.
The return allowed on PSW's common equity is a major factor in
the determination of rates and is also evaluated before applying for a rate
increase. The 1991 rate increase of 7.7%, in which a 12% return on common equity
was allowed, was the most recent decision in which the PUC specified a return on
common equity for PSW. The rate increases that were effective since 1991
resulted from settlements, with PUC approval, between the Company and the
opposing parties and, as such, no determination of the rate of return on common
equity was made by the PUC.
In addition to increases in base rates, the PUC has adjusted
rates by means of a surcharge or credit to reflect changes in the tax laws,
which were not reflected in the base rates approved by the PUC. These
adjustments are eliminated when the tax changes are reflected in base rates.
During 1995 and 1994, rates were reduced by various credits as a result of
reductions in Pennsylvania's taxes. These credits resulted in revenue reductions
of $504 in 1995 and $97 in 1994. During the period from August 1991 to May 1993,
various surcharges were in effect which increased revenues by $706 in 1993 and
$2,281 in 1992. The rate increase that became effective in October 1995
reflected the tax rates that are currently in effect and the rate credit of
1.04%, which was in effect just prior to the rate increase, was eliminated.
In August 1996, the PUC approved PSW's request to add a surcharge to its
water bills to offset the additional depreciation and capital costs associated
with certain non-revenue producing, non-expense reducing capital expenditures
related to replacing and rehabilitating its distribution system. In its
approval, the PUC indicated that it would allow PSW, as well as other water
utilities, to implement a "Distribution System Improvement Charge" or "DSIC"
starting in January 1997 for qualified capital additions placed in service from
September 1, 1996 to November 30, 1996. In January 1997, PSW began billing a
DSIC of .5%. PSW is permitted to request adjustments to the DSIC quarterly to
reflect subsequent capital expenditures and it is reset to zero when new base
rates that reflect the costs of those additions become effective. The maximum
DSIC that can be in effect at any time is 5%.
"Sendout" represents the quantity of treated water delivered to the
distribution system and is used by management as an indicator of customer
demand. Consumption per customer is the sendout that was used by metered
customers and is based on the actual bills rendered during the year adjusted for
the estimated unbilled customer usage. Water consumption tends to be impacted by
weather conditions, particularly during the late spring and summer months when
nonessential and recreational use of water is at its highest. Consequently, a
higher proportion of annual operating revenues is realized in the second and
third quarters. It is difficult to establish an exact correlation between the
weather and water consumption, since conservation and even day-to-day variations
in weather patterns can have an effect. Conservation efforts, construction codes
which require the use of low flow plumbing fixtures as well as mandated water
use restrictions in response to drought conditions have also had an effect on
water consumption.
3
Over the past five years, sendout has increased primarily as a result of
the growth in customers. The average annual consumption per customer declined by
5.4% in 1996 but has only varied slightly in the previous four years. The
decline in the average consumption per customer in 1996 is due to rainfalls,
that were well above average, and the cooler weather experienced during the
year.
Operating Expenses
Operating expenses for 1996, 1995 and 1994, totaled $51,615, $51,702 and
$50,296, respectively. All elements of cost are subject to the effects of
inflation, as well as the effects of changes in water consumption and the degree
of treatment required due to variations in the quality of the raw water. The
principal elements of operating costs are labor, electricity, chemicals and
maintenance expenses. Electricity and chemical expenses vary in relationship to
water consumption and raw water quality. Maintenance expenses are sensitive to
extreme cold weather, which can cause water mains to rupture.
Operating expenses decreased slightly in 1996 over 1995 primarily as a
result of reductions in pension, employee medical insurance premiums and general
liability insurance costs offset in part by the additional operating expenses
associated with the acquisitions made in the past two years. Pension expense
declined as a result of the investment returns in the past two years on the
pension assets. Medical insurance costs declined as a result of favorable claims
experience with the carriers and the movement of a majority of employees from
indemnity health plans to managed care plans.
Operating expenses increased in 1995 over 1994 by 2.8% reflecting
additional expenses associated with the acquisition of other water systems
completed during the year, increased wages and employee benefit costs and the
increased sendout, offset by a decline in maintenance expense. Expenses related
to the operations of the water systems acquired in 1995 were $1,445. Wage
increases reflect normal merit increases, while employee benefit costs increased
primarily as a result of $411 of additional costs for postretirement benefits
other than pensions computed under SFAS 106, which were recognized commencing in
June 1994 in conjunction with the rate settlement that became effective at that
time. Maintenance expenses declined compared to 1994 due to the less severe
winter.
For the past three years, corporate costs were less than 1% of the
Company's operating expenses. Such expenses include those unallocated general
and administrative expenses associated with maintaining a publicly-held company.
Depreciation and Amortization
Depreciation expense was $13,068, $11,572 and $10,468 in 1996,
1995 and 1994, respectively, and has increased principally as a result of the
significant capital expenditures made to expand and improve the water utility
facilities and to acquire water systems. Depreciation expense was approximately
2.4% of the average utility plant in service for all years. Amortization was a
charge of $265 as compared to a credit of $15 in 1995 and a credit of $138 in
1994. The change in 1996 is due to the amortization of the costs of the 1995
rate case as well as the amortization of debt issuance costs, including premiums
paid on the early retirement of certain First Mortgage Bonds. The change in
amortization in 1995 is primarily due to a reduction in the amortization of
acquisition adjustments offset by a decline in the amortization of rate case
costs.
Taxes Other than Income Taxes
Taxes other than income taxes increased by 8% in 1996 and by 7%
in 1995 over the previous year. The majority of the increase in both years was
associated with increases in the bases on which the Pennsylvania Public Utility
Realty Tax (PURTA) and the Capital Stock Tax are calculated. The increase in
taxable base for the PURTA is due to the increases to utility plant, including
increases associated with acquisitions completed in the last two years. The
increase in the Capital Stock Tax is due to the increases in the Company's
common equity over the past three years.
4
Interest Expense
Interest expense was $15,311, $14,852 and $12,896 in 1996, 1995
and 1994, respectively, and has increased in 1996 and 1995 primarily as a result
of higher levels of borrowing offset in part by a reduction in interest rates.
The level of debt increased in order to finance acquisitions and other capital
expenditures made since 1994.
Allowance for Funds Used During Construction
The allowance for funds used during construction ("AFUDC") was
$264, $305 and $126 in 1996, 1995 and 1994, respectively, and has varied over
the years as a result of changes in the average balance of utility plant
construction work in progress ("CWIP"), to which AFUDC is applied, and to
changes in the AFUDC rate.
The average balance of CWIP to which AFUDC is applied was $4,441,
$4,848 and $2,820 in 1996, 1995 and 1994, respectively. The increases in 1995 in
the average balance of CWIP were due to a $4,600 operations center that was
placed in service in December 1995. AFUDC is no longer applied to projects after
they are placed in service, but is applied to an ever-increasing base during the
period they are under construction.
The AFUDC rate has varied due to changes in the interest rate on PSW's
revolving credit facility. The average AFUDC rate was 6.1%, 6.3% and 4.6% in
1996, 1995 and 1994, respectively.
Income Taxes
The Company's effective income tax rate was 41.4% in 1996 as compared to
41.7% in 1995 and 42.5% in 1994. The decrease in the effective tax rate in 1996
is due to differences between tax deductible expenses and book expenses. The
decline in the effective tax rate in 1995 compared to 1994 was primarily due to
a 2% reduction in the Pennsylvania Corporate Net Income Tax.
Discontinued Operations
In 1993, the Company completed the sale of the last of the nonregulated
businesses that the Board of Directors authorized in 1990 and 1991. These
businesses are accounted for as discontinued operations. In connection with the
decision to sell these businesses, the Company established reserves to cover
future costs and contingencies that the Company could be required to pay.
In 1996 and 1995, the Company reversed $965 and $370, net of related
income taxes, of these reserves. The reversals were made as a result of the
receipt of contingent sales proceeds from two of the businesses that were sold;
the passage of time, which reduced certain potential lease obligations; and the
assessment of current information on asserted and unasserted legal claims
related to these businesses. The balance of the reserves for discontinued
operations of $1,003 at December 31, 1996 consists primarily of reserves for
future and contingent costs including potential lease, legal and insurance costs
associated with these businesses.
Summary
Operating income in 1996, 1995 and 1994 was $49,290, $46,109 and
$40,845, respectively, and income from continuing operations was $19,778,
$18,030 and $15,638, respectively, for the same periods. Net income available to
common stock was $20,722 in 1996 and $18,400 in 1995 and was higher than income
from continuing operations as a result of the reversals of reserves for
discontinued operations as described above. On a per share basis, income from
continuing operations in 1996, 1995 and 1994 was $1.04, $1.00 and $.90,
respectively. The increases in the per share income in 1996 and 1995 over the
previous years were due to the aforementioned improvements in profits offset in
part by a 5.7% and 3.9% increase in the average number of common shares
outstanding during 1996 and 1995, respectively.
5
Although the Company has experienced increased income in the recent
past, continued adequate rate increases reflecting increased operating costs and
new capital investments are important to the future realization of improved
profitability.
Fourth Quarter Results
Income from continuing operations for the fourth quarter of 1996
increased over the same period in 1995 by $358 to $4,682 primarily as a result
of a $1,549 increase in revenues offset in part by an increase in operating
expenses, depreciation, taxes, and interest expense. The increase in revenues
was a result of the acquisitions made during the past two years and the 5.3%
rate increase which took effect October 27, 1995. Operating expenses increased
due to costs associated with the acquisitions. Depreciation increased due to
utility plant additions made since the fourth quarter of 1995. Taxes other than
income taxes increased primarily because of the increase in the base on which
the PURTA and Capital Stock Tax are computed. Interest increased in the fourth
quarter primarily as a result of higher borrowing levels.
Effects of Inflation
The effects of inflation on the Company during the past several years
have not been significant. As a regulated enterprise, PSW's rates are
established to provide recovery of costs and a return on its investment.
Recovery of the effects of inflation through higher water rates is dependent
upon receiving adequate and timely rate increases. However, rate increases are
not retroactive and often lag increases in costs caused by inflation. During
periods of moderate to low inflation, as has been experienced for the past
several years, the effects of inflation on PSW's operating results are not
significant.
6
Financial Condition
Cash Flow and Capital Expenditures
Net operating cash flow, dividends paid on common stock and capital
expenditures, including allowances for funds used during construction, for the
five years ended December 31, 1996 are as follows:
- ---------------------------------------------------------------------------------------------------
Net Operating Common Capital
Cash Flow Dividends Expenditures
- ---------------------------------------------------------------------------------------------------
1992 $ 23,928 $ 8,866 $ 21,719
1993 27,049 11,629 27,958
1994 29,730 12,637 27,379
1995 32,954 13,546 33,182
1996 37,422 14,795 31,389
- ---------------------------------------------------------------------------------------------------
$ 151,083 $ 61,473 $ 141,627
===================================================================================================
Included in capital expenditures are: $17,865 for the construction of a
surface water treatment plant; $11,128 for the modernization of existing
treatment plants; $9,383 for new water mains; $24,720 for the rehabilitation of
existing water mains; $18,482 for water meters and $4,945 for the construction
of a divisional operations center. During this five year period, PSW received
$10,950 of advances and contributions in aid of construction to finance new
water mains. In addition to its capital program, PSW has made sinking fund
contributions aggregating $4,242, retired $63,100 of debt and $4,357 of
preferred stock, and has refunded $12,037 of customer advances for construction.
PSW has also expended $79,536 related to the acquisition of 18 water systems
since 1992.
Since net operating cash flow to PSW plus advances and contributions in
aid of construction have not been sufficient to fully fund its cash
requirements, PSW issued approximately $112,777 of First Mortgage Bonds, and
received $32,495 of equity investments from the Company during the past five
years.
7
The Company has funded its investment in PSW with the proceeds from the
sale of stock and the sale of its discontinued operations. In April 1993, the
Company sold 1,650,000 shares of common stock in a public offering for net
proceeds of $18,331. The Company has also sold 5,165,447 shares of common stock
for net proceeds of $59,047 since 1992 through three programs that allow
existing shareholders and customers of PSW to purchase shares of common stock
directly from the Company as described in the following table:
Customer Optional
Stock Dividend Stock
Purchase Reinvestment Purchase
Program Program Program Total
- -----------------------------------------------------------------------------------------------------------------
Net proceeds:
1992 $ 24,185 $ 742 $ 264 $ 25,191
1993 5,465 1,491 583 7,539
1994 3,541 2,047 603 6,191
1995 4,680 2,324 842 7,846
1996 7,953 3,111 1,216 12,280
- -----------------------------------------------------------------------------------------------------------------
$ 45,824 $ 9,715 $ 3,508 $ 59,047
=================================================================================================================
Shares issued:
1992 2,503,739 76,715 25,738 2,606,192
1993 448,410 130,056 47,786 626,252
1994 301,035 175,530 49,662 526,227
1995 383,183 199,365 68,503 651,051
1996 483,113 199,597 73,015 755,725
- -----------------------------------------------------------------------------------------------------------------
4,119,480 781,263 264,704 5,165,447
=================================================================================================================
Proceeds from the customer stock purchase program increased
dramatically in 1992 and, in order to better match future equity additions with
the need for additional capital, the Company amended this program in 1993 to
eliminate the 5% discount it previously offered to customers and limited future
stock sales under this program to approximately 100,000 shares in each of the
four subscription periods during the year. The dividend reinvestment program
("DRP") continues to offer a 5% discount on the purchase of Company Stock with
reinvested dividends. As of the December 1996 dividend payment, holders of 22%
of the common shares outstanding participated in the DRP.
PSW's 1997 capital program, exclusive of the costs of new mains
financed by advances and contributions in aid of construction, is estimated to
be $35,000, which is expected to be financed, along with $12,000 of debt
maturities, $444 of sinking fund obligations and $1,429 of preferred stock
redemptions through internally-generated funds, the revolving credit facility,
equity investments from the Company, and issuance of new long-term debt. In
addition, PSW continues to hold acquisition discussions with several water
systems that are near or adjacent to PSW's service territory. The cash needed
for acquisitions would be funded initially with short-term debt with subsequent
repayment from the proceeds of long-term debt or equity investments from the
Company. Equity investments from the Company will be financed primarily from the
issuance of its stock through the three programs discussed above or possibly
through an underwritten public offering.
8
Future utility construction in the period 1998 through 2001, including
recurring programs, such as the ongoing replacement of water meters, the
rehabilitation of water mains and additional transmission mains to meet customer
demands, exclusive of the costs of new mains financed by advances and
contributions in aid of construction, is estimated to require aggregate
expenditures of approximately $120,000. The Company anticipates that
approximately 50% of these expenditures will require external financing. The
estimates discussed above do not include any amounts for possible future
acquisitions of water systems or the financing necessary to support them.
PSW's ability to finance its future construction programs, as well as
its acquisition activities, depends on its ability to attract the necessary
external financing and maintain or increase internally-generated funds. Rate
orders permitting compensatory rates of return on invested capital and timely
rate adjustments will be required to allow PSW to achieve an adequate level of
earnings to enable it to secure the capital it will need and to maintain
satisfactory debt coverage ratios.
Operating cash flow from PSW, along with external financings, will
enable the Company to pursue its capital expenditure programs, pay dividends and
supply the working capital required by the Company in 1997. Management believes
that with continued regulatory support, it will be able to obtain the external
financing that it will need.
Capitalization
The following table summarizes PSC's capitalization during the past
five years:
December 31, 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
Long-term debt* 55.3% 53.5% 49.9% 50.7% 58.1%
Preferred stock * 2.1% 2.0% 3.3% 3.4% 3.6%
Common stockholders' equity 42.6% 44.5% 46.8% 45.9% 38.3%
- ----------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================================
*includes current portion.
The changes in the capitalization ratios result from the issuance of
common stock over the past five years, particularly in 1992 and 1993 and the
issuance of debt by PSW to finance its acquisitions and capital program. The
Company and PSW intend to maintain an equity ratio adequate to maintain PSW's
current Standard and Poors debt rating of "A" and may issue common stock in an
underwritten public offering during 1997 in order to increase its common equity
ratio.
9
Dividends on Common Stock
Following is a recent history, adjusted for the 1996 common stock split
of income from continuing operations and dividends of the Company:
---------------------------------------------------------------
Income per
share from
Cash dividend continuing Payout
per common share operations ratio
---------------------------------------------------------------
1992 $ 0.69 $ 0.82 84%
1993 0.71 0.85 84%
1994 0.73 0.90 81%
1995 0.76 1.00 76%
1996 0.79 1.04 76%
---------------------------------------------------------------
Dividends have averaged approximately 80% of income from continuing
operations during this period. In 1996, the annual dividend increased by 4.7% to
$.81 beginning with the September 1996 dividend.
10
MANAGEMENT'S REPORT
-------------------
The consolidated financial statements and related information for the
years ended December 31, 1996, 1995 and 1994 were prepared by management in
accordance with generally accepted accounting principles and include
management's best estimates and judgments, as required. Financial information
included in other sections of this annual report is consistent with that in the
consolidated financial statements.
The Company has an internal accounting control structure designed to
provide reasonable assurance that assets are safeguarded and that transactions
are properly authorized and recorded in accordance with established policies and
procedures. The internal control structure is supported by the selection and
training of qualified personnel, the delegation of management authority and
responsibility and dissemination of policies and procedures.
The Company's independent auditors, KPMG Peat Marwick LLP, provide an
independent review of management's reporting of results of operations and
financial condition. KPMG has audited the financial statements by conducting
tests as they deemed appropriate and their report follows.
The Board of Directors through the Audit Committee selects the
Company's independent auditors and reviews the scope and results of their
audits. The Audit Committee also reviews the adequacy of the Company's internal
control structure and other significant matters. The Audit Committee is
comprised of four outside Directors who meet periodically with management and
the independent auditors. The Audit Committee held two meetings in 1996.
Nicholas DeBenedictis Michael P. Graham
Chairman & Senior Vice President - Finance
President & Treasurer
INDEPENDENT AUDITORS' REPORT
----------------------------
The Stockholders and Board of Directors
Philadelphia Suburban Corporation:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of Philadelphia Suburban Corporation and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Philadelphia
Suburban Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 3, 1997
2
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years ended December 31, 1996, 1995 and 1994
===============================================================================
1996 1995 1994
-------------------------------------------------
Earned revenues $ 122,503 $ 117,044 $ 108,636
Costs and expenses:
Operating expenses 51,615 51,702 50,296
Depreciation 13,068 11,572 10,468
Amortization 265 (15) (138)
Taxes other than income taxes 8,265 7,676 7,165
-------------------------------------------------
73,213 70,935 67,791
Operating income 49,290 46,109 40,845
Interest expense 15,311 14,852 12,896
Dividends on preferred stock of subsidiary 494 631 866
Allowance for funds used during construction (264) (305) (126)
-------------------------------------------------
Income from continuing operations before income taxes 33,749 30,931 27,209
Provision for income taxes 13,971 12,901 11,571
-------------------------------------------------
Income from continuing operations 19,778 18,030 15,638
Reversal of reserve for discontinued operations, net of
income tax of $520 and $200, in 1996 and 1995 965 370 -
-------------------------------------------------
Net income 20,743 18,400 15,638
Dividends on preferred stock
21 - -
-------------------------------------------------
Net income available to common stock $ 20,722 $ 18,400 $ 15,638
=================================================
Net income per common share:
Continuing operations $ 1.04 $ 1.00 $ 0.90
Discontinued operations 0.05 0.02 -
-------------------------------------------------
Total $ 1.09 $ 1.02 $ 0.90
=================================================
Average common and common equivalent
shares outstanding during the period 19,053 18,024 17,346
=================================================
See accompanying notes to consolidated financial statements.
3
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except per share amounts)
December 31, 1996 and 1995
===============================================================================
1996 1995
--------------------------------
Assets
------
Property, plant and equipment, at cost $ 612,812 $ 529,364
Less accumulated depreciation 109,874 92,459
--------------------------------
Net property, plant and equipment 502,938 436,905
--------------------------------
Current assets:
Cash 1,518 2,387
Accounts receivable, net 21,914 22,112
Inventory, materials and supplies 1,943 1,878
Prepayments and other current assets 660 537
--------------------------------
Total current assets 26,035 26,914
--------------------------------
Regulatory assets 48,491 48,757
Deferred charges and other assets, net 5,480 5,475
--------------------------------
$ 582,944 $ 518,051
================================
Liabilities and Stockholders' Equity
------------------------------------
Stockholders' equity:
6.05% Series B cumulative preferred stock $ 3,220 $ -
Common stock at $.50 par value, authorized 40,000,000 shares,
outstanding 19,198,579 and 18,283,122 in 1996 and 1995 9,731 6,224
Capital in excess of par value 121,439 110,987
Retained earnings 49,272 43,345
Treasury stock, 262,230 and 259,125 shares in 1996 and 1995 (3,647) (3,580)
-------------------------------
Total stockholders' equity 180,015 156,976
--------------------------------
Preferred stock of subsidiary with mandatory
redemption requirements 4,214 5,643
Long-term debt, excluding current portion 217,518 175,395
Commitments
- -
Current liabilities:
Current portion of long-term debt and preferred stock of subsidiary 13,873 15,090
Loans payable 5,560 6,455
Accounts payable 9,659 9,785
Accrued interest 3,660 3,601
Accrued taxes 3,363 2,851
Other accrued liabilities 8,924 10,136
--------------------------------
Total current liabilities 45,039 47,918
--------------------------------
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits 75,949 70,980
Customers' advances for construction
23,524 25,880
Other
12,826 12,064
--------------------------------
Total deferred credits and other liabilities 112,299 108,924
--------------------------------
Contributions in aid of construction 23,859 23,195
--------------------------------
$ 582,944 $ 518,051
================================
See accompanying notes to consolidated financial statements.
4
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(In thousands of dollars, except per share amounts)
December 31, 1996 and 1995
===============================================================================
1996 1995
-------------------------------
Stockholders' equity:
6.05% Series B cumulative preferred stock $ 3,220 $ -
Common stock, $.50 par value 9,731 6,224
Capital in excess of par value 121,439 110,987
Retained earnings 49,272 43,345
Treasury stock (3,647) (3,580)
-------------------------------
Total stockholders' equity 180,015 156,976
-------------------------------
Preferred stock of subsidiary with mandatory
redemption requirements 5,643 7,143
Current portion of preferred stock of subsidiary 1,429 1,500
-------------------------------
4,214 5,643
-------------------------------
Long-term debt:
First Mortgage Bonds secured by utility plant:
5.500% Series, due 1996 - 4,000
7.875% Series, due 1997 - 5,000
8.440% Series, due 1997 12,000 12,000
8.400% Series, due 2002* - 4,150
5.950% Series, due 2002* 2,400 2,800
6.830% Series, due 2003 10,000 -
7.470% Series, due 2003 10,000 -
6.820% Series, due 2005 10,000 10,000
6.990% Series, due 2006 10,000 -
10.650% Series, due 2006* - 10,000
9.890% Series, due 2008 5,000 5,000
7.150% Series, due 2008* 22,000 22,000
9.120% Series, due 2010 20,000 20,000
6.500% Series, due 2010* 3,200 3,200
9.170% Series, due 2011 5,000 5,000
9.930% Series, due 2013 5,000 5,000
6.890% Series, due 2015 12,000 12,000
9.970% Series, due 2018 5,000 5,000
9.170% Series, due 2021* 8,000 8,000
6.350% Series, due 2025 22,000 22,000
7.720% Series, due 2025 15,000 15,000
9.290% Series, due 2026 12,000 12,000
-------------------------------
Total First Mortgage Bonds 188,600 182,150
Note payable to bank under revolving credit agreement, due March 1998 39,727 5,160
Installment note payable, 9%, due in equal annual payments through 2013 1,635 1,675
-------------------------------
229,962 188,985
Current portion of long-term debt 12,444 13,590
-------------------------------
Long-term debt, excluding current portion 217,518 175,395
-------------------------------
Total capitalization $ 401,747 $ 338,014
===============================
*Trust indentures relating to these First Mortgage Bonds require annual sinking
fund payments.
See accompanying notes to consolidated financial statements.
5
CONSOLIDATED CASH FLOW STATEMENTS
(In thousands of dollars)
Years ended December 31, 1996, 1995 and 1994
================================================================================
1996 1995 1994
------------------------------------------
Cash flows from operating activities:
Income from continuing operations $ 19,778 $ 18,030 $ 15,638
Adjustments to reconcile income from
continuing operations to net cash
flows from operating activities:
Depreciation and amortization 13,333 11,557 10,330
Deferred taxes, net of taxes on
customers' advances 2,628 2,573 2,693
Net increase in receivables,
inventory and prepayments (517) (2,037) (1,209)
Net increase in payables, accrued interest
and other accrued liabilities 1,748 4,604 2,144
Other 452 (1,773) 134
------------------------------------------
Net cash flows from operating activities 37,422 32,954 29,730
------------------------------------------
Cash flows from investing activities:
Property, plant and equipment additions,
including allowance for funds used during
construction of $264, $305 and $126 (31,389) (33,182) (27,379)
Acquisitions of water and wastewater systems (42,122) (26,351) (612)
Other 24 (91) (10)
-------------------------------------------
Net cash flows used in investing activities (73,487) (59,624) (28,001)
-------------------------------------------
Cash flows from financing activities:
Customers' advances and contributions in aid of
construction, net of income tax payments 470 1,600 3,149
Repayments of customers' advances (2,142) (2,104) (2,219)
Net proceeds (repayments) of short-term debt (895) 2,405 3,231
Proceeds from long-term debt 64,256 57,906 7,722
Repayments of long-term debt including
premium on early retirement (24,094) (23,585) (4,884)
Redemption of preferred stock of subsidiary (1,500) (2,857) -
Proceeds from issuing common stock 14,651 9,060 6,916
Repurchase of common stock (760) (733) (2,230)
Dividends paid on preferred stock
(4) - -
Dividends paid on common stock (14,795) (13,546) (12,637)
Other (167) (154) (45)
-------------------------------------------
Net cash flows from (used in) financing activities 35,020 27,992 (997)
-------------------------------------------
Net cash flows from (used in) discontinued operations 176 (178) 123
------------------------------------------
Net increase (decrease) in cash (869) 1,144 855
Cash balance beginning of year 2,387 1,243 388
------------------------------------------
Cash balance end of year $ 1,518 $ 2,387 $ 1,243
==========================================
See Acquisitions footnote for description of non-cash investing and financing
activities.
See accompanying notes to consolidated financial statements.
6
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
================================================================================
Summary of Significant Accounting Policies
Nature of Operations
The business of Philadelphia Suburban Corporation (the "Company") is
conducted through its subsidiary Philadelphia Suburban Water Company ("PSW").
PSW is a regulated public utility which supplies water to approximately 284,000
customers. The customers are residential, commercial and industrial in nature,
and no single customer accounted for more than one percent of PSW's sales. The
service territory of PSW covers a 463 square mile area located west and north of
the City of Philadelphia. PSW is subject to regulation by the Pennsylvania
Public Utility Commission ("PUC") which has jurisdiction with respect to rates,
service, accounting procedures, issuance of securities, acquisitions and other
matters.
Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. All material
intercompany accounts and transactions have been eliminated.
Recognition of Revenues
Revenues include amounts billed to customers on a cycle basis and
unbilled amounts based on estimated usage from the latest billing to the end of
the accounting period.
Property, Plant and Equipment and Depreciation
Property, plant and equipment consist primarily of utility plant. The
cost of additions includes contracted cost, direct labor and fringe benefits,
materials, overheads and, for certain utility plant, allowance for funds used
during construction. Water systems acquired are recorded at estimated original
cost of utility plant when first devoted to utility service and the applicable
depreciation is recorded to accumulated depreciation. The difference between the
estimated original cost, less applicable depreciation, and the purchase price is
recorded as an acquisition adjustment within utility plant. At December 31,
1996, utility plant includes a credit acquisition adjustment of $7,177 which is
being amortized over 20 years. Consistent with PSW's rate settlements, $526 was
amortized during 1996, $529 was amortized during 1995 and $822 was amortized
during 1994.
Utility expenditures for maintenance and repairs, including minor
renewals and betterments, are charged to operating expenses in accordance with
the Uniform System of Accounts prescribed by the PUC. The cost of new units of
property and betterments are capitalized. When units of utility property are
replaced, retired or abandoned, the recorded value thereof is credited to the
asset account and such value, together with the net cost of removal, is charged
to accumulated depreciation.
The straight-line remaining life method is used to compute depreciation
on utility plant. The straight-line method is used with respect to
transportation and mechanical equipment.
7
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
=============================================================================
In accordance with the requirements of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of", the long-lived
assets of the Company, which consist primarily of Utility Plant in Service, have
been reviewed for impairment. There has been no change in circumstances or
events that have occurred that require adjustments to the carrying values of
these assets.
Allowance for Funds Used During Construction
The allowance for funds used during construction ("AFUDC") represents
the estimated cost of funds used to finance the construction of utility plant.
AFUDC is applied to construction projects requiring more than one month to
complete. No AFUDC is applied to projects funded by customer advances for
construction or contributions in aid of construction. AFUDC includes the net
cost of borrowed funds and a rate of return on other funds when used, and is
recovered through water rates as the utility plant is depreciated. There was no
AFUDC related to equity funds in 1996, 1995 and 1994.
Deferred Charges and Other Assets
Deferred bond and preferred stock issuance expenses are amortized by
the straight-line method over the life of the related issues.
Call premiums related to the early redemption of long-term debt, along
with the unamortized balance of the related issuance expense, are deferred and
amortized over the life of the long-term debt used to fund the redemption.
Expenses associated with filing for rate increases are deferred and
amortized over the estimated period the rates will be in effect, approximately
one year. Other costs, for which PSW has received or expects to receive
prospective rate recovery, are deferred and amortized over the period of rate
recovery.
Income Taxes
The Company accounts for certain income and expense items in different
time periods for financial reporting than for tax reporting purposes. Deferred
income taxes are provided on the temporary differences between the tax bases of
the assets and liabilities and the amounts at which they are carried in the
financial statements. These deferred income taxes are based on the enacted tax
rates expected to be in effect when such temporary differences are projected to
reverse.
Customers' Advances for Construction
Water mains or, in some instances, cash advances to reimburse PSW its
costs to construct water mains, are contributed to PSW by customers, real estate
developers and builders in order to extend water service to their properties.
The value of these contributions is recorded as Customers' Advances for
Construction. PSW makes refunds on these advances over a specific period of time
based on operating revenues related to the main or as new customers are
connected to the main. After all refunds are made, any remaining balance is
transferred to Contributions in Aid of Construction.
8
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
================================================================================
Contributions in Aid of Construction
Contributions in aid of construction include direct contributions and
the portion of customers' advances for construction that become non-refundable.
Inventories, Materials and Supplies
Inventories are stated at cost, not in excess of market value.
Beginning in 1996, cost is determined using the first-in, first-out method.
Prior to 1996, cost was determined using the average cost method. The effect of
this change was not material to the results of operations.
Employee Stock Plans
In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", electing the provision of the statement allowing it to continue
its practice of not recognizing compensation expense related to granting of
stock options to the extent that the option price of the underlying stock was
equal to, or greater than, the market price on the date of option grant.
Disclosure of the impact on the results of operations, had the Company elected
to recognize compensation expense, is provided in the Employee Stock and
Incentive Plans footnote as required by the Statement.
Use of Estimates in Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform with
current year's presentation.
Acquisitions
In October 1996, PSW purchased the franchise rights and the water
utility assets of Hatboro Borough Authority. The Hatboro system covers a one and
one-half square mile service area in Montgomery County and is contiguous to
PSW's service territory. In November 1996, PSW acquired the water systems of
Utility Group Services Corporation ("UGS") in a purchase transaction. The UGS
system consisted of three water utilities, with a 49 square mile service
territory, and one wastewater utility with a one square mile territory, all in
Chester County and in close proximity to PSW's existing territory. In December
1996, PSW purchased the franchise rights and the water utility assets of Bristol
Borough Water and Sewer Authority serving the entire Borough and parts of
Bensalem and Bristol Townships in Bucks County. The Bristol system covers a 12
square mile service area in close proximity to PSW's existing territory. In
addition, PSW purchased the franchise rights and the water utility assets of
three smaller water systems in 1996 with a combined service territory of one and
one-half square miles.
9
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
The total purchase price for the eight water systems and wastewater
system acquired in 1996 was $47,889, including the issuance of $3,220 of the
Company's preferred stock and the assumption of $2,547 in liabilities. The
annual revenues from these systems approximates $6,000, and revenues included in
the consolidated financial statements during the period owned by PSW were $466.
PSW continues to hold acquisition discussions with several water systems that
are near or adjacent to it's service territory.
In May 1995, PSW purchased the franchise rights and the water utility
assets of Media Borough ("Media"). The Media system covers a 23 square mile
service area contiguous to PSW's service territory. In addition, PSW purchased
the franchise rights and the water utility assets of four smaller water systems
in 1995 that cover a combined service territory of four square miles. PSW paid
$26,351 for the water systems acquired in 1995. These systems serve customers
within or contiguous to the boundaries of PSW's existing service territory.
Revenues included in the consolidated financial statements related to the water
supply systems acquired in 1995 were $4,470 in 1996 and $2,820 in 1995.
In December 1994, PSW acquired the franchise rights and the water
utility assets of two privately-owned water companies. These water supply
systems cover a service territory of two square miles and are located adjacent
to PSW's existing service territory. Revenues included in the consolidated
financial statements related to the water supply systems acquired in 1994
amounted to approximately $93 and $95 in 1996 and 1995, respectively.
Income Taxes
- ------------
Total income tax expense is allocated as follows:
Years Ended December 31,
----------------------------------------------
1996 1995 1994
----------------------------------------------
Income from continuing operations $ 13,971 $ 12,901 $ 11,571
Common stockholders' equity related
to stock option activity which
reduces taxable income (126) (44) (25)
Discontinued operations 520 200 -
----------------------------------------------
$ 14,365 $ 13,057 $ 11,546
==============================================
10
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
Income tax expense attributable to income from continuing operations
consists of:
Years Ended December 31,
------------------------------------------
1996 1995 1994
------------------------------------------
Current:
Federal $ 8,084 $ 7,688 $ 6,670
State 2,600 2,514 2,685
------------------------------------------
10,684 10,202 9,355
------------------------------------------
Deferred:
Federal 3,002 2,565 2,303
State 285 134 (87)
--------------------------------------------
3,287 2,699 2,216
------------------------------------------
Total tax expense $ 13,971 $ 12,901 $ 11,571
==========================================
The significant components of deferred income tax expense are as
follows:
Years Ended December 31,
-------------------------------------
1996 1995 1994
-------------------------------------
Excess of tax over financial
statement depreciation $ 2,458 $ 2,323 $ 2,791
Amortization of deferred investment
tax credits (115) (151) (151)
Current year investment tax credits
deferred 40 90 75
Differences in basis of fixed
assets due to variations in tax and
book accounting methods that reverse
through depreciation 770 819 902
Customers' advances for construction,
net 196 (443) (657)
Adjustment to deferred tax assets and
liabilities for enacted changes in
tax rates - - (4,220)
Adjustment to recognize future rate
recovery - - 4,220
Other, net (62) 61 (744)
--------------------------------------
Total deferred income tax expense $ 3,287 $ 2,699 $ 2,216
=====================================
The statutory Federal tax rate is 35% for all years presented. The
Pennsylvania Corporate Net Income Tax rate was 11.99% in 1994, and 9.99% in 1995
and 1996.
11
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
================================================================================
The reasons for the differences between amounts computed by applying
the statutory Federal income tax rate to income from continuing operations
before Federal tax and the actual Federal tax expense are as follows:
Years Ended December 31,
--------------------------------------
1996 1995 1994
--------------------------------------
Computed Federal tax expense at
statutory rate $ 10,795 $9,899 $8,614
Increase (decrease) in tax expense for
items to be recovered in future rates:
Depreciation expense 179 132 154
Losses on asset disposals (12) (35)
(10)
Amortization of deferred investment
tax credits (115) (151) (151)
Preferred stock dividend 180 221 303
Adjustment to deferred tax assets and
liabilities for enacted changes
in tax rates - - (4,220)
Adjustment to recognize future rate
recovery - - 4,220
Other, net 59 187 63
--------------------------------------
Actual Federal tax expense $11,086 $10,253 $8,973
======================================
The tax effects of temporary differences between book and tax
accounting that give rise to the deferred tax assets and deferred tax
liabilities are as follows:
December 31,
-----------------------------
1996 1995
-----------------------------
Deferred tax assets:
Customers' advances for construction $ 9,753 $ 9,950
Costs expensed for book not deducted
for tax, principally accrued expenses
and bad debt reserves 2,638 1,502
Other 389 363
-----------------------------
Total gross deferred tax assets 12,780 11,815
-----------------------------
Deferred tax liabilities:
Utility plant, principally due to
depreciation and differences in the basis
of fixed assets due to variation in tax
and book accounting 65,666 59,722
Deferred taxes associated with the gross-up
of revenues necessary to recover, in rates,
the effect of temporary differences 17,801 17,980
Deferred investment tax credit 4,288 4,363
Other 974 730
-----------------------------
Total gross deferred tax liabilities 88,729 82,795
-----------------------------
Net deferred tax liability $ 75,949 $ 70,980
=============================
12
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
The Company made income tax payments, which include amounts related to
discontinued operations, of $10,199, $9,730 and $8,818 in 1996, 1995 and 1994,
respectively. The Company's Federal income tax returns for all years through
1992 have been closed.
Property, Plant and Equipment
- -----------------------------
December 31,
-------------------------------
1996 1995
-------------------------------
Utility plant and equipment $ 604,298 $ 524,445
Utility construction work in progress 6,232 2,645
Non-utility plant and equipment 2,282 2,274
-------------------------------
Total property, plant and equipment $ 612,812 $ 529,364
===============================
Depreciation is computed based on estimated useful lives of 5 to 110
years for utility plant and 3 to 10 years for both utility transportation and
mechanical equipment and all non-utility plant and equipment.
Accounts Receivable
- -------------------
December 31,
---------------------------
1996 1995
---------------------------
Billed water revenue $ 9,760 $ 9,594
Unbilled water revenue 11,764 12,450
Other 690 368
---------------------------
22,214 22,412
Less allowance for doubtful accounts 300 300
---------------------------
Net accounts receivable $ 21,914 $ 22,112
===========================
All of the Company's customers are located in southeastern
Pennsylvania. No single customer accounted for more than one percent of the
Company's sales in 1996 or 1995 and no account receivable from any customer
exceeded one percent of the Company's total stockholders' equity.
Regulatory Asset
- ----------------
The regulatory asset represents costs which have been prudently
incurred and are expected to be fully recovered in future rates. The two
components of this asset are deferred income taxes and postretirement benefits
other than pensions. Items giving rise to deferred state income taxes, as well
as a portion of deferred Federal income taxes related to certain differences
between tax and book depreciation expense, are recognized in the rate setting
process on a cash or flow through basis and will be recovered as they reverse.
The portion of the asset related to postretirement benefits other than pensions
represents costs that were deferred during the period that the accrual method of
accounting for these benefits was adopted in 1993 and the recognition of the
accrual method in the Company's rates in 1994. Amortization of the amount
deferred for postretirement benefits other than pensions began in 1994 and is
currently being recovered in rates.
13
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
December 31,
----------------------------
1996 1995
----------------------------
Income taxes $ 46,381 $ 46,510
Postretirement benefits other than pensions 2,110 2,247
----------------------------
$ 48,491 $ 48,757
============================
Commitments
- -----------
PSW maintains agreements with the Chester Water Authority and the Bucks
County Water and Sewer Authority for the purchase of water to supplement its
water supply, particularly during periods of peak demand. The agreements
stipulate purchases of minimum quantities of water to the year 2017. The
estimated annual commitments related to such purchases total approximately
$2,852 through 2001. PSW purchased approximately $2,889, $2,839 and $3,322 of
water under these agreements during the years ended December 31, 1996, 1995 and
1994, respectively.
PSW leases motor vehicles and other equipment under operating leases
which are noncancelable and expire on various dates through 2001. During the
next five years, $2,258 of future minimum lease payments are due: $913 in 1997,
$699 in 1998, $504 in 1999, $129 in 2000 and $13 in 2001. PSW leases parcels of
land on which its Media treatment plant and other facilities are situated and
adjacent parcels that are used for watershed protection. The operating lease is
noncancelable, expires in 2045 and contains certain renewal provisions. The
lease is subject to an adjustment every five years based on changes in the
Consumer Price Index. During each of the next five years, $292 of lease payments
for land are due.
Rent expense was $1,332, $1,067 and $979 for the years ended December
31, 1996, 1995 and 1994, respectively.
Long-term Debt and Loans Payable
- --------------------------------
The Consolidated Statements of Capitalization provides a listing of
long-term debt and loans outstanding as of December 31, 1996 and 1995. The
supplemental indentures with respect to certain issues of the First Mortgage
Bonds restrict the ability of PSW to declare dividends, in cash or property, or
repurchase or otherwise acquire PSW's stock. As of December 31, 1996,
approximately $100,000 of retained earnings were free of these restrictions.
Certain supplemental indentures also prohibit PSW from making loans to or
purchasing the stock of the Company.
Excluding amounts due under PSW's revolving credit agreement, the
Company's sinking fund payments and debt maturities for the next five years are
as follows:
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Sinking fund payments $ 444 $ 2,448 $ 2,452 $ 2,457 $ 2,462
Maturities 12,000 - - - -
----------------------------------------------------------------
Total $ 12,444 $ 2,448 $ 2,452 $ 2,457 $ 2,462
================================================================
14
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
In March 1995, PSW established a two-year $100,000 medium-term note
program providing for the issuance of long-term debt with maturities ranging
between one and 30 years at fixed rates of interest, as determined at the time
of issuance. This program is expected to be replaced by a similar program in
1997. The notes issued under this program are secured by the Twenty-ninth
Supplement to the trust indenture relating to PSW's First Mortgage Bonds. During
1996, issuances through this program were as follows: $10,000 in April 1996,
6.99% Series due 2006; $10,000 in July 1996, 7.47% Series due 2003; and $10,000
in November 1996, 6.83% Series due 2003. During 1995, issuances were as follows:
$15,000 in May 1995, 7.72% Series due 2025; $10,000 in June 1995, 6.82% Series
due 2005; and $12,000 in December 1995, 6.89% Series due 2015. The proceeds from
these issuances were used to fund acquisitions, the retirement of the First
Mortgage Bonds noted below and PSW's ongoing capital program.
In August 1995, PSW issued $22,000 First Mortgage Bonds 6.35% Series
due 2025 as security for an equal amount of bonds issued by the Delaware County
Industrial Development Authority. The proceeds from these bonds were restricted
to funding the costs of certain capital projects. As of December 31, 1995, the
Trustee for this issue held $1.8 million in an interest bearing account pending
completion of the remainder of the projects financed with this issue. The amount
held by the Trustee was included in the balance sheet as cash. During 1996,
these projects were completed and all funds were released by the trustee.
In January 1996, PSW retired $5,000 of First Mortgage Bonds, 7.875%
Series due 1997, at a premium of .331% or $17 and $4,150 of First Mortgage
Bonds, 8.4% Series due 2002, at a premium of 2.1% or $87. In April 1996, PSW
retired $10,000 of First Mortgage Bonds, 10.65% Series due 2006, at a premium of
5.04% or $504. In August 1995, PSW retired $8,000 of First Mortgage Bonds, 13%
Series due 2005, at a premium of 6.1% or $488. The unamortized bond issuance
expenses related to the retirements in 1996 and 1995 were $25 and $35,
respectively. The premiums paid on the early retirement of debt, along with the
related unamortized bond issuance expense, are capitalized and amortized, in
accordance with the Uniform System of Accounts prescribed by the PUC, over the
life of the long-term debt used to fund the redemption.
In February 1994, PSW entered into a $30,000 revolving credit agreement
due March 1998 with four banks. The agreement was amended to temporarily
increase the available borrowings under this facility by $20,000 during a
one-year period beginning in December 1996 as interim financing for the Bristol
acquisition. The agreement had previously been increased by $10,000 during the
period May 1995 to August 1995 as interim financing for the Media acquisition.
Interest under this facility is based, at PSW's option, on the prime rate, an
adjusted federal funds rate, an adjusted certificate of deposit rate
corresponding to the interest period selected, an adjusted Euro-Rate
corresponding to the interest period selected or at rates offered by the banks.
This agreement restricts the total amount of short-term borrowings of PSW. A
commitment fee of 1/8 of 1% is charged on the unused portion of the loan. The
average cost of borrowing under this facility was 6.02% and 6.42%, and the
average borrowing was $14,326 and $22,755, during 1996 and 1995, respectively.
The maximum amount outstanding at the end of any one month was $39,727 in 1996
and $36,800 in 1995.
15
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
At December 31, 1996 and 1995, the Company and PSW had combined
short-term lines of credit of $10,000. Funds borrowed under these lines are
classified as loans payable and are used to provide working capital. The average
borrowing under the lines was $5,123 and $5,720 during 1996 and 1995,
respectively. The maximum amount outstanding at the end of any one month was
$6,820 in 1996 and $8,615 in 1995. Interest under the lines is based at the
Company's option, depending on the line, on the prime rate, an adjusted
Euro-Rate, an adjusted federal funds rate or at rates offered by the banks. The
average cost of borrowings under all lines during 1996 and 1995 was 6.1% and
6.8%, respectively.
The total amount of interest paid on all borrowings, net of amounts
capitalized, was $15,503, $14,923 and $13,729 in 1996, 1995 and 1994,
respectively. The proforma weighted cost of long-term debt at December 31, 1996
and 1995 was 7.7% and 8.0%, respectively.
Preferred Stock of Subsidiary with Mandatory Redemption Requirements
- --------------------------------------------------------------------
PSW is authorized to issue up to 1,000,000 shares of preferred stock,
with stated par value, in one or more series. In 1991, PSW issued 100,000 shares
of 8.66% Series 1 Cumulative Preferred Stock, at par value of $100 per share in
a private placement. Dividends on this issue are payable quarterly and are
cumulative. PSW may not pay dividends on its common stock unless provision has
been made for payment of the preferred dividends. As of December 31, 1996, all
preferred dividends have been provided for. These shares are subject to
mandatory annual redemption equal to the par value of 14,285 shares plus accrued
dividends. In addition, PSW has exercised its right to call 14,285 shares per
year starting in 1995, up to a maximum of 15,000 shares over the life of the
issue, at par. The balance may be called, beginning in 1998, at a specified
price above par.
In December 1996, PSW provided notice to the holder of the preferred
stock of its intention to call 14,285 shares at par in January 1997 as required
by the share purchase agreement and, therefore, $1,429 has been classified as
the current portion of preferred stock as of December 31, 1996. In January 1996,
PSW called 715 shares at par value in addition to the mandatory redemption of
14,285 shares required by the share purchase agreement.
Fair Value of Financial Instruments
- -----------------------------------
The carrying amount of current assets and liabilities that are
considered financial instruments approximates their fair value as of the dates
presented. The carrying amounts and estimated fair values of the Company's
long-term financial liabilities as of December 31, 1996 are as follows:
Estimated
Carrying fair
amount value
----------------------------------
Long-term debt $ 229,962 $ 241,074
Preferred stock of subsidiary
with mandatory redemption requirements $ 5,643 $ 5,762
16
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
The fair value of long-term debt and mandatorily redeemable preferred
stock has been determined by discounting their future cash flows using current
market interest or dividend rates for similar financial instruments of the same
duration. The Company's customers' advances for construction and related tax
deposits have carrying values of $23,524 and $6,426, respectively at December
31, 1996. Their relative fair values cannot be accurately estimated since future
refund payments depend on several variables, including new customer connections,
customer consumption levels and future rate increases. Portions of these
non-interest bearing instruments are payable annually through 2018 and amounts
not paid by the contract expiration dates become non-refundable. The fair value
of these amounts would, however, be less than their carrying value due to the
non-interest bearing feature.
Stockholders' Equity
- --------------------
At December 31, 1996, the Company had 1,770,819 shares of Series
Preferred Stock with a $1.00 par value authorized, of which 100,000 shares are
designated as Series A Preferred Stock. During 1996, the Company designated
32,200 shares as Series B Preferred Stock, $1.00 par value. The Series A
Preferred Stock, as well as the undesignated shares of Series Preferred Stock,
remains unissued. In November 1996, the Company issued all of the 6.05% Series B
Preferred Stock in connection with the acquisition of UGS. The Series B
Preferred Stock is recorded on the balance sheet at its liquidation value of
$100 per share. The dividends, payment of which commenced December 1, 1996, are
cumulative and payable quarterly. PSC may not pay dividends on Common Stock
unless provision has been made for payment of the preferred dividends. Under the
provisions of this issue, the holders may redeem the shares, in whole or in
part, at the liquidation value beginning December 1, 1998 and the Company may
redeem up to 20% of this issue each year beginning December 1, 2001 and, at the
holders' option, this redemption may be made in cash or through the issuance of
debt with a five year maturity at an interest rate of 6.05% . As of December 31,
1996, all dividends have been provided for.
In May 1996, the Company's shareholders approved an increase in the
number of shares of common stock authorized from 20,000,000 shares to 40,000,000
shares and the Company's Board of Directors declared a three-for-two common
stock split effected in the form of a 50% stock distribution for all common
shares outstanding, to shareholders of record on June 18, 1996. Common shares
outstanding do not include shares held by the Company in treasury. The new
shares were distributed on July 10, 1996. The Company's par value of $.50 per
share remained unchanged and $3,140 was transferred from Capital in Excess of
Par Value to Common Stock to record the split. All share and per share data for
all periods presented have been restated to give effect to the stock split.
Shares outstanding at December 31, 1996, 1995 and 1994 were 19,198,579,
18,283,122 and 17,576,985, respectively. Treasury shares held at December 31,
1996, 1995 and 1994 were 262,230, 259,125 and 240,737, respectively.
17
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
- -------------------------------------------------------------------------------
The following table summarizes the activity of common stockholders'
equity:
Capital in
Common Treasury excess of Retained
stock stock par value earnings Total
--------------------------------------------------------------------------------
Balance at December 31, 1993 $ 5,783 $ (1,257) $ 95,918 $ 35,490 $ 135,934
Net income - - 15,638 15,638
Dividends - - - (12,637) (12,637)
Sale of stock 175 248 6,022 6,445
Repurchase of stock - (2,230) - - (2,230)
Equity Compensation Plan 5 - 174 - 179
Exercise of stock options 16 - 450 - 466
--------------------------------------------------------------------------------
Balance at December 31, 1994 5,979 (3,239) 102,564 38,491 143,795
--------------------------------------------------------------------------------
Net income - - - 18,400 18,400
Dividends - - - (13,546) (13,546)
Sale of stock 217 392 7,621 - 8,230
Repurchase of stock - (733) - - (733)
Equity Compensation Plan 1 - 31 - 32
Exercise of stock options 27 - 771 - 798
--------------------------------------------------------------------------------
Balance at December 31, 1995 6,224 (3,580) 110,987 43,345 156,976
--------------------------------------------------------------------------------
Net income - - - 20,722 20,722
Dividends - - - (14,795) (14,795)
Stock split 3,140 - (3,140) - -
Sale of stock 298 693 11,546 - 12,537
Repurchase of stock - (760) - - (760)
Equity Compensation Plan 1 - 38 - 39
Exercise of stock options 68 - 2,008 - 2,076
--------------------------------------------------------------------------------
Balance at December 31, 1996 $ 9,731 $ (3,647) $ 121,439 $ 49,272 $ 176,795
================================================================================
The Company has a Customer Stock Purchase Program for PSW's customers,
and a Dividend Reinvestment and Optional Stock Purchase Program for existing
shareholders. Reinvested dividends can be used to purchase shares of common
stock at a five percent discount from the current market value under the
Dividend Reinvestment Program. Under these programs, 755,725, 651,051 and
526,227 shares of common stock were sold providing the Company with $12,280,
$7,846 and $6,191 of additional capital, after expenses, during 1996, 1995 and
1994, respectively.
In 1993, the Board of Directors approved a resolution authorizing the
Company to purchase, from time to time, up to 250,000 shares of its common stock
in the open market or through privately negotiated transactions. The remaining
number of shares authorized for purchase was adjusted as a result of the 1996
stock split so that the total number of shares originally authorized for
purchase is 277,615. The number of shares purchased by the Company, if any, is
limited to the number of shares sold under its employee stock option and stock
purchase plans, Customer Stock Purchase Program and
18
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
Dividend Reinvestment Program and Optional Stock Purchase Program. The purchase
of shares has been authorized in order to offset the dilutive effect on earnings
per share of issuances of additional shares under the programs described above.
Funding for any stock purchases is not expected to have a material impact on the
Company's financial position. During 1996, 1995 and 1994, 3,254, 59,184 and
178,301 shares have been purchased at a net cost of $52, $733 and $2,230,
respectively. For comparative purposes the number of shares purchased is
presented as if they were adjusted for the effect of the 1996 stock split. As of
December 31, 1996, 79,879 shares remain available for purchase by the Company.
Net Income per Common Share and Equity per Common Share
- -------------------------------------------------------
Net income per common share is based on the weighted average number of
common and dilutive common equivalent shares outstanding during the year. Common
equivalent shares arise from stock options. All share and per share data has
been adjusted to reflect the 1996 stock split described in the Stockholders'
Equity Footnote.
Equity per common share was $9.21 and $8.59 at December 31, 1996 and
1995, respectively. These amounts were computed by dividing common stockholders'
equity by the number of shares of common stock outstanding at the end of each
year.
Shareholder Rights Plan
- -----------------------
The Company has a Shareholder Rights Plan designed to protect the
Company's shareholders in the event of an unsolicited unfair offer to acquire
the Company. Each outstanding common share is entitled to one Right which is
evidenced by the common share certificate. In the event that any person acquires
25% or more of the outstanding common shares or commences a tender or exchange
offer which, if consummated, would result in a person or corporation owning at
least 30% of the outstanding common shares of the Company, the Rights will begin
to trade independently from the common shares and, if certain circumstances
occur, including the acquisition by a person of 25% or more of the outstanding
common shares, each Right would then entitle its holder to purchase a number of
common shares of the Company at a substantial discount. If the Company is
involved in a merger or other business combination at any time after the Rights
become exercisable, the Rights will entitle the holder to acquire a certain
number of shares of common stock of the acquiring company at a substantial
discount. The Rights are redeemable by the Company at a redemption price of $.02
per Right at any time before the Rights become exercisable. The Rights will
expire on March 1, 1998, unless previously redeemed.
Employee Stock and Incentive Plans
- ----------------------------------
Under the 1994 Equity Compensation Plan ("1994 Plan"), as amended, the
Company may grant qualified and non-qualified stock options to officers, key
employees and consultants. Officers and key employees may also be granted
dividend equivalents and restricted stock. Restricted stock may also be granted
to non-employee members of the Board of Directors. In May 1996, the Shareholders
authorized an increase to the number of shares from 675,000 shares to 1,425,000
shares of common stock for issuance under the 1994 plan, with the maximum number
of restricted stock grants limited to 37,500 shares. Awards under this plan are
made by the Board of Directors ("Board") or a committee of the Board.
19
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
Options under the 1994 plan, as well as the earlier 1988 Stock Option
Plan and 1982 Stock Option Plan for which 12,000 options are still outstanding,
were issued at the market price of the stock on the day of the grant. Options
are exercisable in installments ranging from 20% to 33% annually, starting one
year from the date of the grant and expire 10 years from the date of the grant.
The following table summarizes stock option transactions for the three
plans:
Years Ended December 31,
------------------------------------------
1996 1995 1994
------------------------------------------
Options granted 190,500 180,750 173,250
Options terminated (28,602) - (10,500)
Options exercised (180,151) (79,968) (48,704)
Net change (18,253) 100,782 114,046
==========================================
Balance of shares under option 773,026 791,279 690,497
==========================================
Options exercised during 1996 ranged in price from $8.63 per share to
$11.96 per share. The shares under option at December 31, 1996 are exercisable
at prices ranging from $8.63 to $16.37 per share. At December 31, 1996, 309,542
shares were exercisable, and 874,152 options under the 1994 Plan were still
available for grant.
In 1996, the Company adopted SFAS No.123, "Accounting for Stock-Based
Compensation" electing to continue to apply the provisions of APB Opinion No. 25
and to provide the proforma disclosure provisions of this statement.
Accordingly, no compensation cost has been recognized in the financial
statements for stock options that have been granted. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income available to common stock
and net income per share would have been reduced to the proforma amounts
indicated below:
Years Ended December 31,
----------------------------------
1996 1995
----------------------------------
Net income available to common stock:
As reported $ 20,722 $ 18,400
Proforma 20,337 18,048
Net income per share:
As reported $ 1.09 $ 1.02
Proforma 1.07 1.00
20
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
The per share weighted-average fair value at the date of grant for
stock options granted during 1996 and 1995 was $2.02 and $1.95 per option,
respectively. The fair value of options at the date of grant was estimated using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
1996 1995
-------------------------
Expected life (years) 10 10
Interest rate 6.4% 7.4%
Volatility 14.0% 12.5%
Dividend yield 5.2% 6.3%
Dividend equivalents provide the grantee with an amount equal to the
dividends paid on a share of common stock over a specified period of time, not
to exceed four years, multiplied by the number of dividend equivalents awarded.
Payments of these awards are deferred until the completion of certain objectives
during a performance period established by a Committee of the Board at the time
of grant. A performance period is generally four years but may be adjusted by
the Committee to as long as eight years or as short as two years depending on
the Company's success in completing the objectives. Dividend equivalents are
"compensatory" and, as such, are charged to operating expense over the
performance period. The effect of changes to the performance period are accrued
when known or projected. The Board granted 74,250, 68,250 and 65,250 dividend
equivalents in 1996, 1995 and 1994, respectively, and costs associated with
these awards were $234 in 1996, $197 in 1995 and $77 in 1994. During 1996,
payments under the 1994 award began and $124 was paid to recipients during the
year.
Restricted stock awards provide the grantee with the rights of a
shareholder, including the right to receive dividends and to vote such shares,
but not the right to sell or otherwise transfer the shares during the
restriction period. During 1996 and 1995, 2,400 and 2,700 shares of restricted
stock were granted with a restriction period of six months and during 1994,
15,000 shares of restricted stock were granted with restriction periods of one
to three years. The value of restricted stock awards, which are "compensatory",
is equal to the fair market value of the stock on the date of the grant less
payments made by the grantee and this amount is amortized ratably over the
restriction period.
Pension Plans and Other Postretirement Benefits
- -----------------------------------------------
The Company has defined benefit pension plans which cover its full-time
employees. Retirement benefits under the plans are generally based on the
employee's total years of service and compensation during the last five years of
employment. The Company's policy is to fund these plans annually at a level
which is deductible for income tax purposes and which provides assets sufficient
to meet its pension obligations. As a result of certain limitations imposed by
the Internal Revenue Code with respect to payments under qualified plans, the
Company, in 1989, adopted a non-qualified Excess Benefit Plan for Salaried
Employees in order to prevent certain employees from being penalized by these
limitations. The Company also has non-qualified Supplemental Executive
Retirement Plans for one current and one retired employee. The net pension costs
and obligations of the qualified and non-qualified plans are included in the
tables which follow.
21
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
The Company's pension expense includes the following components:
Years Ended December 31,
-------------------------------------
1996 1995 1994
-------------------------------------
Benefits earned during the year $ 1,373 $ 905 $ 1,183
Interest cost on projected benefit obligation 3,523 3,304 3,161
Actual return on plan assets (6,784) (9,256) 1,218
Net amortization and deferral 2,904 6,029 (4,679)
Capitalized costs (34) (133) (74)
Rate-regulated adjustment (707) (311) (386)
-------------------------------------
Net pension cost $ 275 $ 538 $ 423
====================================
The rate-regulated adjustment set forth above is required in order to
reflect pension expense for PSW in accordance with the method used in
establishing water rates.
The assets and obligations of the plans are as follows:
December 31,
---------------------------------
1996 1995
---------------------------------
Accumulated benefit obligation:
Vested $ 38,991 $ 38,096
Non-vested 2,210 2,312
---------------------------------
Total $ 41,201 $ 40,408
=================================
Projected benefit obligation $ 51,321 $ 50,585
Plan assets at fair value, primarily equity and fixed
income commingled funds 51,249 46,698
---------------------------------
Plan assets less than projected benefit obligation 72 3,887
Unrecognized net gain (loss) from past experience
different from that assumed and effects of
changes in assumptions 3,522 (1,151)
Unrecognized prior service cost (1,378) (1,465)
Rate-regulated adjustment (1,095) (388)
Unrecognized net obligation (453) (541)
---------------------------------
Accrued pension costs included in other
current liabilities $ 668 $ 342
=================================
The accumulated and projected benefit obligations were calculated using
the projected unit credit method and reflect the following assumptions: discount
rates of 7.25% for 1996, 7% for 1995 and 8.5% for 1994; increase in future
compensation levels of 5.5% for all years presented; and long-term rate of
return on assets of 9% for all years presented.
In addition to providing pension benefits, PSW offers certain
Postretirement Benefits other than Pensions ("PBOPs") to employees retiring with
at least 15 years of service. These PBOPs include continuation of medical and
prescription drug benefits for all eligible retirees and a life insurance policy
for eligible union retirees.
22
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
The Company's costs for postretirement benefits other than pensions
includes the following components:
Years Ended December 31,
--------------------------------------
1996 1995 1994
--------------------------------------
Benefits earned during the year $ 296 $ 208 $ 359
Interest cost 872 994 1,077
Return on plan assets (173) (101) -
Net amortization and deferral 567 655 743
Amortization of regulatory asset 136 136 74
--------------------------------------
Gross PBOP cost 1,698 1,892 2,253
Capitalized costs (79) (94) (45)
Adjustment to recognize future rate recovery - - (760)
--------------------------------------
Net PBOP cost $ 1,619 $ 1,798 $ 1,448
======================================
The assets and liabilities of the plans for postretirement benefits
other than pensions are as follows:
December 31,
-----------------------------
1996 1995
-----------------------------
Accumulated postretirement benefit obligation (APBO):
Retirees $ 6,246 $ 8,011
Fully eligible active employees 3,325 4,075
Other employees 3,045 2,699
-----------------------------
Total APBO 12,616 14,785
Fair value of plan assets 3,500 2,267
-----------------------------
APBO in excess of plan assets 9,116 12,518
Unrecognized net transition obligation (11,894) (12,638)
Unrecognized net gain 4,974 2,367
-----------------------------
Accrued PBOP cost included in other liabilities $ 2,196 $ 2,247
=============================
The APBO is calculated utilizing the following assumptions: discount
rate of 7.25%; medical inflation rates of 5% for those employees not eligible by
December 31, 1993, and 9%, reducing to 4.5% by 2002 for all others; a 9% return
on plan assets in 1996 and 1995, and, in 1994, no return on plan assets. The
effect of a 1% increase in the assumed medical inflation rates would be to
increase the APBO and the 1996 PBOP costs by $906 and $72, respectively. The
Company funds its gross PBOP cost through various trust accounts.
Water Rates
- -----------
PSW was permitted by the PUC to increase its base rates by 5.3% and
9.05% effective October 27, 1995 and June 17, 1994, respectively. These rate
increases were calculated to provide additional annual revenues of approximately
$6,150 and $9,050, respectively.
23
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
===============================================================================
In addition to its base rates, PSW has utilized a surcharge or credit
on its bills to reflect certain changes in Pennsylvania State taxes until such
time as the tax changes are incorporated into base rates. In October 1995, the
existing credit of 1.04% was eliminated with the adoption of new base rates. PSW
was required to initiate a revenue credit in 1994 in order to provide its
customers with the savings associated with Pennsylvania tax rate decreases. The
credit decreased revenues in 1995 and 1994 by $504 and $97, respectively.
In August 1996, the PUC approved PSW's request to add a "Distribution
System Improvement Charge" or "DSIC" to its water bills. The DSIC will enable
PSW to add a surcharge to customer bills beginning January 1, 1997 reflecting
the capital costs and depreciation related to certain distribution system
improvement projects completed and placed into service during the period
September 1 through November 30, 1996. PSW is permitted to request adjustments
to the DSIC quarterly to reflect subsequent capital expenditures and it is reset
to zero when new base rates that reflect the costs of those additions become
effective. The maximum DSIC that can be in effect at any time is 5%. The initial
charge effective January 1, 1997 is .5% (one half of one percent).
Discontinued Operations
- -----------------------
The Board of Directors had authorized the sale of substantially all of
the Company's non-regulated businesses and the last of these businesses was sold
in 1993. At the time the Board of Directors authorized the sale of these
businesses, the Company established reserves for: projected operating losses of
these businesses subsequent to their sale authorizations; estimated losses on
the sale transactions; and certain future costs, including administrative and
legal services related to the sales, contingent legal and lease obligations and
certain employee costs. These reserves were recorded on the balance sheet net of
related income tax benefits. During 1996 and 1995, $18 and $178 of payments
associated with discontinued operations were charged to the reserve and
contingent sale proceeds of $337 received in 1996 were credited to the reserve.
As a result of the continuing assessment of asserted and unasserted
legal claims related to these businesses, the passage of time, which reduced
certain lease contingencies, and the receipt of contingent sale proceeds, the
Company has determined that, the net reserves were in excess of estimates of
potential costs. In 1996 and 1995, the Company reversed $965 and $370 net of
related income taxes, of these reserves. At December 31, 1996 there remains a
balance in the reserve for discontinued operations of $1,003 which is included
in other accrued liabilities.
24
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts
===============================================================================
Selected Quarterly Financial Data (Unaudited)
- ---------------------------------------------
(in thousands of dollars, except per share amounts)
Total
First Second Third Fourth Year
-----------------------------------------------------------------------
1996
- ---------------------------------------------------------------------------------------------------------------------
Earned revenues $ 29,290 $ 30,683 $ 30,831 $ 31,699 $ 122,503
Operating expenses 13,070 12,614 11,757 14,174 51,615
Income, continuing operations 3,968 5,281 5,847 4,661 19,757
Income per share, continuing
operations 0.21 0.28 0.31 0.24 1.04
Income, discontinued operations - - 365 600 965
Income per share, discontinued
operations - - 0.02 0.03 0.05
Net income available to common
stock 3,968 5,281 6,212 5,261 20,722
Net income per common share 0.21 0.28 0.33 0.27 1.09
Dividend paid per common share 0.193 0.193 0.2025 0.2025 0.791
Price range of common stock
- high 15.42 16.75 17.25 19.88 19.88
- low 13.67 15.00 15.50 16.50 13.67
1995
- ---------------------------------------------------------------------------------------------------------------------
Earned revenues $ 25,712 $ 28,827 $ 32,355 $ 30,150 $ 117,044
Operating expenses 11,766 12,357 13,793 13,786 51,702
Income, continuing operations 3,315 4,659 5,732 4,324 18,030
Income per share, continuing
operations 0.19 0.26 0.32 0.23 1.00
Income, discontinued operations - - - 370 370
Income per share, discontinued
operations - - - 0.02 0.02
Net income available to common
stock 3,315 4,659 5,732 4,694 18,400
Net income per common share 0.19 0.26 0.32 0.25 1.02
Dividend paid per common share
0.186 0.186 0.193 0.193 0.758
Price range of common stock
- high 12.17 12.50 12.42 14.33 14.33
- low 11.59 11.75 11.75 12.00 11.59
All per share data as presented has been adjusted for the 1996 common
stock split effected in the form of a stock distribution. High and low prices of
the Company's common stock are as traded on the New York Stock Exchange.
25
Exhibit 21
(unaudited)
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
The following table lists all of the subsidiaries of the Company at December 31,
1996:
Philadelphia Suburban Water Company (Pa.)
Utility & Municipal Services, Inc. (Pa.)
PSC Services, Inc. (Del.)
Suburban Wastewater Company (Pa.)
Suburban Environmental Services, Inc. (Pa.)
Little Washington Wastewater Company (Pa.)
Spring Run Water Company, Inc. (Pa.)
Friendship Water Company (Pa.)
Bradford Glen Water Company (Pa.)
Drexel Hill Corporation (Pa.)
Pennsylvania Suburban Water Company (Pa.)
(formerly PSC Information Services)
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Philadelphia Suburban Corporation
We consent to incorporation by reference in the Registration Statements on Form
S-8 (1994 Equity Compensation Plan No. 033-53689), (1994 Employee Stock Purchase
Plan No. 033-52557), (1988 Stock Option Plan No. 33-27032), (1982 Stock Option
Plan No. 2-81757); on Form S-3D (Dividend Reinvestment and Optional Stock
Purchase Plan No. 33-64281); and on Form S-3 (Customer Stock Purchase Plan No.
33-64301) of Philadelphia Suburban Corporation of our report dated February 3,
1997, related to the consolidated balance sheets and the statements of
capitalization of Philadelphia Suburban Corporation and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of income and
cash flows for each of the years in the three-year period ended December 31,
1996, which report is incorporated by reference in the December 31, 1996 Annual
Report on Form 10-K of Philadelphia Suburban Corporation.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 24, 1997
UT
0000078128
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
12-MOS
DEC-31-1996
DEC-31-1996
PRO-FORMA
502,862
76
26,035
5,480
48,491
582,944
6,084
121,439
49,272
176,795
4,214
3,220
217,518
0
5,560
0
12,444
1,429
0
0
161,764
582,944
122,503
13,971
73,213
87,184
35,319
0
35,319
15,047
20,743
515
20,722
14,795
17,682
37,422
1.09
1.09
