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<SEC-DOCUMENT>0000950116-01-000616.txt : 20010410
<SEC-HEADER>0000950116-01-000616.hdr.sgml : 20010410
ACCESSION NUMBER:		0000950116-01-000616
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010517
FILED AS OF DATE:		20010406

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PHILADELPHIA SUBURBAN CORP
		CENTRAL INDEX KEY:			0000078128
		STANDARD INDUSTRIAL CLASSIFICATION:	WATER SUPPLY [4941]
		IRS NUMBER:				231702594
		STATE OF INCORPORATION:			PA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		
		SEC FILE NUMBER:	001-06659
		FILM NUMBER:		1596627

	BUSINESS ADDRESS:	
		STREET 1:		762 LANCASTER AVE
		CITY:			BRYN MAWR
		STATE:			PA
		ZIP:			19010
		BUSINESS PHONE:		2155278000

	MAIL ADDRESS:	
		STREET 1:		762 LANCASTER AVE
		CITY:			BRYN MAWR
		STATE:			PA
		ZIP:			19010
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>DEF 14A
<TEXT>

<PAGE>

                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                         Securities Exchange Act of 1934

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
    (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12


                        PHILADELPHIA SUBURBAN CORPORATION
- -----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

    1) Title of each class of securities to which transaction applies:


       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:


       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
       filing fee is calculated and state how it was determined):


       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:


       ----------------------------------------------------------------------

    5) Total fee paid:


       ----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the form or schedule and the date of its filing.

    1) Amount Previously Paid:

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:

    ___________________________________________________________________________


<PAGE>

                       PHILADELPHIA SUBURBAN CORPORATION
                            762 W. Lancaster Avenue
                         Bryn Mawr, Pennsylvania 19010


                             ---------------------
                   Notice of Annual Meeting of Shareholders
                            To Be Held May 17, 2001
                            ---------------------
TO THE SHAREHOLDERS OF
PHILADELPHIA SUBURBAN CORPORATION:

     Notice is hereby given that the Annual Meeting of Shareholders of
PHILADELPHIA SUBURBAN CORPORATION will be held at the Springfield Country Club,
400 West Sproul Road, Springfield, Pennsylvania 19064, at 10:00 A.M., local
time, on Thursday, May 17, 2001, for the following purposes:

       1. To elect three directors to the class of directors for terms expiring
at the 2004 Annual Meeting;

       2. Approval and adoption of the Amended and Restated 2001 Employee Stock
   Purchase Plan, which amends and restates the 1994 Employee Stock Purchase
   Plan; and

       3. To transact such other business as may properly come before the
   meeting or any adjournments thereof.

     Only shareholders of record at the close of business on March 26, 2001
will be entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments thereof.


                                        By order of the Board of Directors,




                                        PATRICIA M. MYCEK
                                        Secretary

April 9, 2001

- --------------------------------------------------------------------------------
 REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, AS A SHAREHOLDER
 YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
 ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES,
 OR VOTE ELECTRONICALLY, THROUGH THE INTERNET, BY FOLLOWING THE INSTRUCTIONS
 SET OUT ON THE PROXY CARD.
- --------------------------------------------------------------------------------


<PAGE>

                       PHILADELPHIA SUBURBAN CORPORATION
                            762 W. Lancaster Avenue
                         Bryn Mawr, Pennsylvania 19010

                             ---------------------
                                PROXY STATEMENT
                            ---------------------
     This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Philadelphia Suburban Corporation (the
"Company") to be used at the Annual Meeting of Shareholders to be held
Thursday, May 17, 2001 and at any adjournments thereof. This proxy statement
and the enclosed proxy are being mailed to shareholders on or about April 9,
2001.

     The cost of soliciting proxies will be paid by the Company, which has
arranged for reimbursement, at the rate suggested by the New York Stock
Exchange, of brokerage houses, nominees, custodians and fiduciaries for the
forwarding of proxy materials to the beneficial owners of shares held of
record. In addition, the Company has retained the firm of Corporate Investor
Communications, Inc., to assist in the solicitation of proxies from (i)
brokers, bank nominees and other institutional holders, and (ii) individual
holders of record. The fee to Corporate Investor Communications, Inc. for
normal proxy solicitation is $4,000 plus expenses, which will be paid by the
Company. Directors, officers and regular employees of the Company may also
solicit proxies, although no additional compensation will be paid by the
Company for such efforts.

     The Annual Report to Shareholders for the year ended December 31, 2000,
including financial statements and other information with respect to the
Company and its subsidiaries, is being mailed with this proxy statement by
combined first class bulk mailing to shareholders of record as of March 26,
2001. Additional copies of the Annual Report may be obtained by writing to the
Company.


                            PURPOSE OF THE MEETING

     As the meeting is the Annual Meeting of Shareholders, the shareholders of
the Company will be requested to elect three directors to hold office as
provided by law and the Company's Bylaws. Shareholders will also be asked to
approve and adopt the Amended and Restated 2001 Employee Stock Purchase Plan,
as more fully described in Proposal No. 2.


                             VOTING AT THE MEETING

     Holders of shares of the Company's Common Stock of record at the close of
business on March 26, 2001 are entitled to vote at the meeting. As of that
date, there were 54,107,921 shares of Common Stock outstanding and entitled to
be voted at the meeting. Each shareholder entitled to vote shall have the right
to one vote on each matter presented at the meeting for each share of Common
Stock outstanding in such shareholder's name.

     The holders of a majority of the shares entitled to vote, present in
person or represented by proxy at the meeting, constitute a quorum. Directors
are to be elected by a plurality of the votes cast at the meeting. The


                                       1
<PAGE>

affirmative vote of a majority of the votes cast by those shareholders present
in person or represented by proxy at the meeting is required to approve
Proposal No. 2 or to take action with respect to any other matter that may
properly be brought before the meeting. Shares cannot be voted at the meeting
unless the holder of record is present in person or by proxy. The enclosed
proxy card is a means by which a shareholder may authorize the voting of his or
her shares at the meeting if they are unable to attend in person.
Alternatively, under the Pennsylvania Business Corporation Law and the
Pennsylvania Electronic Transaction Act, you may vote electronically, over the
Internet, following the instructions set out on the proxy card. The shares of
Common Stock represented by each properly executed proxy card or electronic
proxy will be voted at the meeting in accordance with each shareholder's
direction. Shareholders are urged to specify their choices by marking the
appropriate boxes on the enclosed proxy card or electronic proxy; if the proxy
card or electronic proxy is signed, but no choice has been specified, the
shares will be voted as recommended by the Board of Directors. If any other
matters are properly presented to the meeting for action, the proxy holders
will vote the proxies (which confer discretionary authority to vote on such
matters) in accordance with their best judgment.

     With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum. Abstentions may be specified for Proposal No. 2, but not for the
election of directors. Abstentions will be considered present and entitled to
vote at the meeting, but will not be considered a vote cast for Proposal No. 2
and, therefore, will have no effect on the vote on such Proposal. Brokers that
are member firms of the New York Stock Exchange ("NYSE") and who hold shares in
street name for customers, but have not received instructions from a beneficial
owner, have the authority under the rules of the NYSE to vote those shares with
respect to the election of directors, but not with respect to Proposal No. 2.
Proxies received from brokers with respect to shares held in street name, even
if such shares are not voted by brokers, will be considered present and
entitled to vote at the meeting, but will not be considered a vote cast on
Proposal No. 2 and, therefore, will have no effect on such Proposal.

     Execution of the accompanying proxy or voting electronically will not
affect a shareholder's right to attend the meeting and vote in person. Any
shareholder giving a proxy or voting electronically has the right to revoke the
proxy or the electronic vote by giving written notice of revocation to the
Secretary of the Company at any time before the proxy is voted by executing a
proxy bearing a later date, which is voted at the meeting, or by attending the
meeting and voting in person.

     Your proxy vote is important. Accordingly, you are asked to complete, sign
and return the accompanying proxy card or vote electronically regardless of
whether or not you plan to attend the meeting.

                               (Proposal No. 1)

                             ELECTION OF DIRECTORS
Voting on Proposal No. 1

     The Board of Directors is divided into three classes. One class is elected
each year to hold office for a three-year term and until successors of such
class are duly elected and qualified, except in the event of death, resignation
or removal. The Company is required by its Articles of Incorporation and Bylaws
to maintain the size of its classes of directors as nearly equal in number as
possible.


                                       2
<PAGE>

     The Chairman of the Corporate Governance Committee held discussions with
each of the directors in the class of directors with terms expiring at the 2001
Annual Meeting regarding their nomination for re-election. Mr. John E. Palmer
and Mr. Robert O. Viets, who were elected to the Board of Directors in
accordance with the terms of the 1998 merger agreement between the Company and
Consumers Water Company and whose terms expire at the 2001 Annual Meeting, have
indicated that they will not be standing for re-election. Mr. Richard J.
Hechmann and Mr. Andrew D. Seidel, who were appointed to the Board of Directors
in August 2000 and whose terms expire at the 2001 Annual Meeting, both agreed
to stand for election by the shareholders for a full term at the Annual
Meeting. After a thorough review of the existing board members and other
candidates, and in line with the requirements of the Articles of Incorporation
to maintain the size of the classes of directors as nearly equal as possible,
the Corporate Governance Committee recommended and the full Board approved (i)
the nomination of Mr. Richard J. Heckmann and Mr. Andrew D. Seidel, whose terms
are to expire at the 2001 Annual Meeting, for election to the class of
directors to be elected at the 2001 Annual Meeting; (ii) the nomination of Mr.
Nicholas DeBenedictis, whose term was to expire at the 2002 Annual Meeting, for
election to the class of directors to be elected at the 2001 Annual Meeting;
and (iii) effective as of the Annual Meeting and election of directors as set
forth herein, the reduction of the size of the Board of Directors from twelve
to ten and the reduction of the size of the class of directors with terms
expiring at the 2002 and 2004 Annual Meetings from four to three.

     Therefore, three directors, Messrs. DeBenedictis, Heckmann and Seidel, are
to be elected by a plurality of the votes cast at the Annual Meeting and seven
directors will continue to serve until either the 2002 or 2003 Annual Meetings,
depending on the period remaining in their terms. At the meeting, proxies in
the accompanying form, properly executed, will be voted for the election of the
three nominees listed below, unless authority to do so has been withheld in the
manner specified in the instructions on the proxy card. Discretionary authority
is reserved to cast votes for the election of a substitute should any nominee
be unable or unwilling to serve as a director. Each nominee has stated his
willingness to serve and the Company believes that all nominees will be
available to serve.

     The Board of Directors recommends that the shareholders vote FOR the
election of Messrs. DeBenedictis, Heckmann and Seidel as directors. For
detailed information on each nominee, see pages 6 and 7.

General Information Regarding the Board of Directors and its Committees

     The Board of Directors held eight meetings in 2000. The Company's Bylaws
provide that the Board of Directors, by resolution adopted by a majority of the
whole Board, may designate an Executive Committee and one or more other
committees, with each such committee to consist of two or more directors. The
Board of Directors annually elects from its members the Executive, Audit,
Executive Compensation and Employee Benefits, Corporate Governance, and Pension
Committees. Each director except Messrs. Heckmann and Seidel and Mrs. Carroll
attended at least 75% of the aggregate of all meetings of the Board and the
Committees on which they served in 2000.

     Executive Committee. The Company's Bylaws provide that the Executive
Committee shall have and exercise all of the authority of the Board in the
management of the business and affairs of the Company, with certain exceptions.
The Executive Committee is intended to serve in the event that action by the
Board of Directors


                                       3
<PAGE>

is necessary or desirable between regular meetings of the Board, or at a time
when convening a meeting of the entire Board is not practical, and to make
recommendations to the entire Board with respect to various matters. The
Executive Committee met once in 2000. The Executive Committee currently has
five members, and the Chairman of the Company serves as Chairman of the
Executive Committee.

     Audit Committee. The Audit Committee is composed of three directors who
are not officers of the Company or any of its subsidiaries. The Audit Committee
is required to meet at least twice each year and met three times during 2000.
The Committee operates pursuant to a written charter, which is attached as
Appendix A to this Proxy Statement. The primary responsibilities of the Audit
Committee are to monitor the integrity of the Company's financial reporting
process and systems of internal controls, including the review of the Company's
annual audited financial statements, and to monitor the independence of the
Company's independent accountants. The Audit Committee has concurrent authority
with the Board of Directors to select, evaluate and, where appropriate, replace
the Company's independent accountants.

     Two members of the Committee are "independent" as defined by the rules of
the New York Stock Exchange. The Board of Directors has determined, in its
business judgment, that in the case of Mr. Smoot, who has been an executive
officer of a bank with whom the Company has banking relationships, these
relationships do not interfere with the exercise of his independent judgment.

     The Audit Committee has considered the extent and scope of non-audit
services provided to the Company by its outside accountants and has determined
that such services are compatible with maintaining the independence of the
outside accountants.

     Executive Compensation and Employee Benefits Committee. The Executive
Compensation and Employee Benefits Committee is composed of three members of
the Board who are not officers of the Company or any of its subsidiaries. The
Executive Compensation and Employee Benefits Committee has the power to
administer the Company's 1988 Stock Option Plan and to administer and make
awards of stock options, dividend equivalents and restricted stock under the
Company's 1994 Equity Compensation Plan. In addition, the Executive
Compensation and Employee Benefits Committee reviews the recommendations of the
Company's Chief Executive Officer as to appropriate compensation of the
Company's officers (other than the Chief Executive Officer) and key personnel
and recommends to the Board the compensation of such officers and the Company's
Chief Executive Officer for the ensuing year. The Executive Compensation and
Employee Benefits Committee held four meetings in 2000.

     Corporate Governance Committee. The Corporate Governance Committee is
responsible for identifying qualified nominees for directors and developing and
periodically reviewing the Corporate Governance Guidelines by which the Board
of Directors is organized and executes its responsibilities. The Corporate
Governance Committee has three members and held two meetings during 2000.

     It is the present policy of the Corporate Governance Committee to consider
nominees who are recommended by shareholders as additional members of the Board
or to fill vacancies on the Board. Shareholders desiring to submit the names
of, and any pertinent data with respect to, such nominees should send this
information in writing to the Chairman of the Corporate Governance Committee in
care of the Company. See "Requirements for Advance Notification of
Nominations."


                                       4
<PAGE>

     Pension Committee. The Pension Committee serves as the Plan Administrator
for the Company's qualified benefit plans. The Committee reviews and recommends
to the Board any actions to be taken by the Board in the discharge of the
Board's fiduciary responsibilities under the Company's qualified benefit plans
and meets periodically with the Company's investment advisors. The Committee
consists of four members and met two times in 2000.


     The current members of the Committees of the Board of Directors are as
follows:



<TABLE>
<CAPTION>
                           Executive Compensation and
Executive Committee        Employee Benefits Committee     Audit Committee
- ------------------------   -----------------------------   ------------------
<S>                        <C>                             <C>
Nicholas DeBenedictis*     John F. McCaughan*              Richard L. Smoot*
G. Fred DiBona, Jr.        G. Fred DiBona, Jr.             John E. Menario
John F. McCaughan          Alan R. Hirsig                  Robert O. Viets
Richard L. Smoot
Richard H. Glanton, Esq
</TABLE>


                              Corporate Governance
Pension Committee             Committee
- ---------------------------   -----------------------
Richard H. Glanton, Esq.*     G. Fred DiBona, Jr.*
Mary C. Carroll               Nicholas DeBenedictis
Nicholas DeBenedictis         Mary C. Carroll
John E. Palmer

- ------------
*Chairman


Requirements for Advance Notification of Nominations


     Nominations for election of directors may be made at the Annual Meeting by
any shareholder entitled to vote for the election of directors, provided that
written notice (the "Notice") of the shareholder's intent to nominate a
director at the meeting is filed with the Secretary of the Company prior to the
Annual Meeting in accordance with provisions of the Company's Amended and
Restated Articles of Incorporation and Bylaws.


     Section 4.13 of the Company's Bylaws requires the Notice to be received by
the Secretary of the Company not less than 14 days nor more than 50 days prior
to any meeting of the shareholders called for the election of directors, with
certain exceptions. These notice requirements do not apply to nominations for
which proxies are solicited under applicable regulations of the Securities and
Exchange Commission ("SEC"). The Notice must contain or be accompanied by the
following information:


       (1) the name and residence of the shareholder who intends to make the
nomination;


       (2) a representation that the shareholder is a holder of record of
   voting stock and intends to appear in person or by proxy at the meeting to
   nominate the person or persons specified in the Notice;


                                       5
<PAGE>

       (3) such information regarding each nominee as would have been required
   to be included in a proxy statement filed pursuant to the SEC's proxy rules
   had each nominee been nominated, or intended to be nominated, by the
   management or the Board of Directors of the Company;

       (4) a description of all arrangements or understandings among the
   shareholder and each nominee and any other person or persons (naming such
   person or persons) pursuant to which the nomination or nominations are to
   be made by the shareholder; and

       (5) the consent of each nominee to serve as a director of the Company if
so elected.

     Pursuant to the above requirements, appropriate Notices in respect of
nominations for directors must be received by the Secretary of the Company no
later than May 3, 2001.


Information Regarding Nominees and Directors

     For each of the three nominees for election as directors at the 2001
Annual Meeting and the seven directors in the classes of directors whose terms
of office are to expire either at the 2002 Annual Meeting or the 2003 Annual
Meeting, as set forth herein, there follows information as to the positions and
offices with the Company held by each, the principal occupation of each during
the past five years, and certain directorships of public companies and other
organizations held by each.

- --------------------------------------------------------------------------------
                    NOMINEES FOR ELECTION AT ANNUAL MEETING
- --------------------------------------------------------------------------------


<TABLE>
<S>                               <C>
Nicholas DeBenedictis .........   Mr. DeBenedictis has served as Chief Executive Officer of the Company since
Ardmore, PA                       July 1992 and Chairman of the Board since May 1993. He also serves as Chair-
Director since 1992               man and Chief Executive Officer of the Company's principal subsidiaries, Phila-
                                  delphia Suburban Water Company and Consumers Water Company. Between
                                  April 1989 and June 1992, he served as Senior Vice President for Corporate
                                  Affairs of PECO Energy Company (now known as Exelon). From December
                                  1986 to April 1989, he served as President of the Greater Philadelphia Chamber
                                  of Commerce and from 1983 to 1986 he served as the Secretary of the Penn-
                                  sylvania Department of Environmental Resources. Mr. DeBenedictis is a direc-
                                  tor of Provident Mutual Life Insurance Company, PNC Bank Advisory Board,
                                  P.H. Glatfelter Company and Met-Pro Corporation. He also serves as Chairman
                                  of the Greater Philadelphia Chamber of Commerce and the Pennsylvania Busi-
                                  ness Roundtable, and is a member of the Board of Trustees of Drexel Univer-
                                  sity and Hahnemann/MCP University. Age: 55.
</TABLE>

                                       6
<PAGE>


<TABLE>
<S>                             <C>
Richard J. Heckmann .........   Mr. Heckmann is Chairman of Vivendi Water, S.A., a global provider of water
Palm Desert, CA                 and wastewater systems and services. Mr. Heckmann founded and served as
Director since 2000             Chairman of the Board of Directors, Chief Executive Officer and President of
                                US Filter Corporation until its acquisition by Vivendi Water in April 1999.
                                Before forming US Filter, Mr. Heckmann was a Senior Vice President at
                                Prudential-Bache Securities in Rancho Mirage, California from January 1982 to
                                August 1990. He is also a director of Vivendi Environmental Inc., Station Casi-
                                nos, Inc., United Rentals, Inc. and K2, Inc. Age: 57.

Andrew D. Seidel ............   Mr. Seidel is President and Chief Operating Officer of Vivendi Water, S.A., a
Palm Desert, CA                 global provider of water and wastewater systems and services. Mr. Seidel was
Director since 2000             President and Chief Operating Officer of the Water and Wastewater Group of
                                US Filter Corporation from February 1998 until the acquisition of US Filter by
                                Vivendi Water in April 1999. He previously served as Executive Vice President
                                of US Filter's Wastewater Group from July 1995 to February 1998 and as
                                Senior Vice President --Wastewater Group and General Manger of US Filter,
                                Inc., in Warrendale, Pennsylvania, from September 1993 to July 1995. Previ-
                                ously, he had served as Vice President of Membralox Group from December
                                1992. Mr. Seidel is also a member of the Management Board of Vivendi Envi-
                                ronmental, Inc. and a director of Automation Solutions, International, LLC.
                                Age: 38.
</TABLE>

- --------------------------------------------------------------------------------
          DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 2002
- --------------------------------------------------------------------------------

<TABLE>
<S>                             <C>
G. Fred DiBona, Jr. .........   Mr. DiBona has served since 1990 as President and Chief Executive Officer of
Bryn Mawr, PA                   Independence Blue Cross, the Delaware Valley region's largest health insurer.
Director since 1993             He also serves as Chairman, President and Chief Executive Officer of most of
                                Independence Blue Cross' subsidiaries and affiliates. Between 1987 and 1990,
                                Mr. DiBona served as President and Chief Executive Officer for Pennsylvania
                                Blue Shield's holding company, Keystone Ventures, Inc. Mr. DiBona is also a
                                director of Independence Blue Cross and its subsidiaries, Magellan Health Ser-
                                vices, Inc., Exelon Corporation, Tasty Baking Company, CorCell, Inc., Eclipsys
                                Corporation, FireKey, Inc. and various civic and charitable organizations. Age:
                                50.
</TABLE>

                                       7
<PAGE>


<TABLE>
<S>                         <C>
Mary C. Carroll .........   Ms. Carroll is a consultant, and an advisor to nonprofit corporations, businesses
Bryn Mawr, PA               and government agencies and is a well-recognized civic volunteer. She is a
Director since 1981         founder, director or trustee of various civic and charitable organizations, includ-
                            ing the Metropolitan YMCA, the National Parks Mid-Atlantic Council and the
                            Girl Scouts of Southeastern Pennsylvania. Age: 60.

John E. Menario .........   Mr. Menario has served as Special Assistant to the President of BankNorth
Portland, ME                Group, Inc., a multi-bank holding company, since 1996. He served as Senior
Director since 1999         Executive Vice President and Chief Operating Officer of Peoples Heritage
                            Financial Group, Inc., from 1990 to 1996. Mr. Menario is also a director of
                            Morse, Payson & Noyes Insurance, Bank of New Hampshire and Stratevest,
                            Inc. Age: 65.
</TABLE>

- --------------------------------------------------------------------------------
          DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 2003
- --------------------------------------------------------------------------------

<TABLE>
<S>                                  <C>
Richard H. Glanton, Esq. .........   Mr. Glanton has been a partner in the law firm of Reed Smith LLP in Philadel-
Philadelphia, PA                     phia since 1986. Mr. Glanton is Chairman of the Board of Philadelphia Televi-
Director since 1995                  sion Network, Inc. and a director of CGU Corporation of North America,
                                     Exelon Corporation and Wackenhut Corrections Corporation. Age: 54.

Alan R. Hirsig ...................   Mr. Hirsig retired as President and Chief Executive Officer of ARCO Chemical
Haverford, PA                        Company in 1998, a position he held since 1991. From 1984 to 1990, Mr. Hir-
Director since 1997                  sig was President of ARCO Chemical European Operations. Mr. Hirsig is a
                                     director of Celanese, A.G., Checkpoint Systems, Inc. and Hercules, Inc., as well
                                     as a trustee of Bryn Mawr College, the YMCA of Philadelphia and Vicinity, the
                                     Rosenbach Museum and Library and the Curtis Institute of Music. Age: 61.

John F. McCaughan ................   In 1998, Mr. McCaughan retired as President of the BetzDearborn, Inc. Foun-
Doylestown, PA                       dation, having served in that capacity since 1995. From 1995 to 1996, Mr.
Director since 1984                  McCaughan was Chairman of Betz Laboratories, Inc., which provides engi-
                                     neered chemical treatment of water, wastewater and process systems. Mr.
                                     McCaughan was Chairman and Chief Executive Officer of Betz Laboratories
                                     from 1982 to 1994. He is also a director of Penn Mutual Life Insurance Com-
                                     pany, Petroferm, Inc. and numerous charitable organizations. Age: 65.
</TABLE>

                                       8
<PAGE>


<TABLE>
<S>                          <C>
Richard L. Smoot .........   Mr. Smoot is Regional Chairman of PNC Bank in Philadelphia and Southern
Radnor, PA                   New Jersey. From 1991 through 2000, Mr. Smoot served as President and Chief
Director since 1997          Executive Officer of PNC Bank in Philadelphia and Southern New Jersey, and
                             its predecessor, Provident National Bank. He also served as Executive Vice
                             President responsible for Operations and Data Processing for the Bank from
                             1987 to 1991. Before joining PNC Bank in 1987, Mr. Smoot served 10 years as
                             First Vice President and Chief Operating Officer of the Federal Reserve Bank
                             of Philadelphia. Mr. Smoot is Chairman of The Philadelphia Orchestra and The
                             Settlement Music School. Mr. Smoot is also a director of P.H. Glatfelter Com-
                             pany and Southco Inc. Age: 60.
</TABLE>



                                       9
<PAGE>

                           OWNERSHIP OF COMMON STOCK

     The following table sets forth certain information as of January 31, 2001
with respect to shares of Common Stock of the Company beneficially owned by
each director, nominee for director and executive officer and by all directors,
nominees and executive officers of the Company as a group. This information has
been provided by each of the directors and officers at the request of the
Company. Beneficial ownership of securities as shown below has been determined
in accordance with applicable guidelines issued by the Securities and Exchange
Commission ("SEC"). Beneficial ownership includes the possession, directly or
indirectly, through any formal or informal arrangement, either individually or
in a group, of voting power (which includes the power to vote, or to direct the
voting of, such security) and/or investment power (which includes the power to
dispose of, or to direct the disposition of, such security). The shareholdings
reflect the Company's 5-for-4 stock split effected in the form of a stock
dividend distributed on December 1, 2000 to shareholders of record on November
15, 2000.



<TABLE>
<CAPTION>
                                                      Sole voting          Shared voting              Total and
                                                      and/or sole          and/or shared          percent of class
                Beneficial Owner                   investment power     investment power(1)        outstanding(2)
- -----------------------------------------------   ------------------   ---------------------   ----------------------
<S>                                               <C>                  <C>                     <C>
Mary C. Carroll ...............................           5,083                 1,351(3)                 6,434
Morrison Coulter ..............................          60,578                21,220(4)                81,798
Nicholas DeBenedictis .........................         411,143                91,960(5)               503,103
G. Fred DiBona, Jr. ...........................           5,000                    --                    5,000
Richard H. Glanton, Esq. ......................           3,512                    --                    3,512
Richard Heckmann(6) ...........................              --                    --                       --
Alan R. Hirsig ................................           5,332                    --                    5,332
John F. McCaughan .............................          10,498                    --                   10,498
John E. Menario ...............................           3,102                 2,672(7)                 5,774
John E. Palmer ................................          10,770                    --                   10,770
Richard R. Riegler ............................          66,620                 4,728                   71,348
Andrew D. Seidel(6) ...........................              --                    --                       --
David P. Smeltzer .............................          34,187                 7,398                   41,585
Richard L. Smoot(8) ...........................           2,750                    --                    2,750
Roy H. Stahl ..................................          58,746                44,615                  103,361
Robert O. Viets ...............................          17,631                    --                   17,631
All directors and executive officers as a group
 (16 persons) .................................         694,952(9)            173,944(10)              868,896(1.6%)
</TABLE>

- ------------
 (1) Under the Company's Thrift Plan, participants do not have any present
     voting power with respect to shares allocated to their accounts. Such
     shares have been included in this column.

 (2) Percentages for each person or group are based on the aggregate of the
     shares of Common Stock outstanding as of March 1, 2001 (54,048,355 shares)
     and all shares issuable to such person or group upon the exercise of
     outstanding stock options exercisable within 60 days of that date.
     Percentage ownership of less than 1% of the class then outstanding as of
     March 1, 2001 has not been shown.


                                       10
<PAGE>

 (3) The shareholdings indicated are owned of record by Mrs. Carroll's husband.
     Mrs. Carroll disclaims beneficial ownership of those shares.


 (4) The shareholdings indicated include 4,075 shares owned of record by Mr.
     Coulter's wife. Mr. Coulter disclaims beneficial ownership of those
     shares.


 (5) The shareholdings indicated include 1,162 shares owned of record by Mr.
     DeBenedictis' wife and 11,864 shares owned of record by Mr. DeBenedictis'
     son. Mr. DeBenedictis disclaims beneficial ownership of those shares.


 (6) Mr. Heckmann is Chairman and Mr. Seidel is President and Chief Operating
     Officer of Vivendi Water S.A., which owns 8,267,377 shares of the Company
     and which is a wholly-owned subsidiary of Vivendi North America Company,
     which through its affiliates owns an additional 940,733 shares of the
     Company. Consequently, Mr. Heckmann and Mr. Seidel may be deemed to share
     voting power for the shares held by Vivendi Water S.A. and its affiliates.



 (7) The shareholdings indicated include 62 shares held by Mr. Menario's wife.
     Mr. Menario disclaims beneficial ownership of those shares.


 (8) The shareholdings indicated do not include approximately 563,997 shares as
     to which PNC Bank, National Association, or its affiliates have sole
     voting power as trustee of the Philadelphia Suburban Corporation Thrift
     Plan and Philadelphia Suburban Water Company Personal Savings Plan for
     Local 473 Employees. During 2000, Mr. Smoot was the President and Chief
     Executive Officer of PNC Bank in Philadelphia and Southern New Jersey. Mr.
     Smoot disclaims beneficial ownership of those shares.


 (9) The shareholdings indicated include 464,757 shares exercisable under the
     1988 Stock Option Plan and the 1994 Equity Compensation Plan on or before
     April 1, 2001.


(10) The shareholdings indicated include 134,208 shares (i) held in joint
     ownership with spouses, (ii) held as custodian for minor children or (iii)
     owned by family members.


     The following table sets forth certain information as of March 1, 2001,
except as otherwise indicated, with respect to the ownership of shares of
Common Stock of the Company by certain beneficial owners of 5% or more of the
Company's total outstanding shares.



<TABLE>
<CAPTION>
                                                                     Percent of
                                         Amount and Nature           Outstanding
       Beneficial Owner               of Beneficial Ownership          Shares
- ------------------------------   --------------------------------   ------------
<S>                              <C>                                <C>
Vivendi S.A.                     Sole voting and dispositive             16.9%
42 Avenue de Friedland 75380     power over 9,208,110 shares (1)
Paris, Cedex 08 France
</TABLE>

- ------------
(1) Based on the Schedule 13D of Vivendi dated August 7, 2000. The shares held
    have been adjusted for the 5-for-4 stock split in the form of a stock
    distribution effective December 1, 2000.


                                       11
<PAGE>

                         REPORT OF THE AUDIT COMMITTEE

     The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. Management has primary
responsibility for the Company's financial statements and the reporting
process, including the system of internal controls. The Audit Committee
fulfills its oversight responsibilities as set forth in its charter by, among
other things: reviewing the Company's audited financial statements prior to
submission to the public, including discussions with management and the
independent auditors of any significant issues regarding accounting principles,
practices and judgments; reviewing the integrity of the Company's financial
reporting processes and controls; selecting and evaluating the independent
accountants; and reviewing all relationships between the independent
accountants and the Company. In carrying out its responsibilities, the Audit
Committee has: reviewed and discussed the Company's audited financial
statements with management; discussed with the outside accountants the matters
required to be discussed by Statements on Auditing Standards No. 61; discussed
the written disclosures and the letter from the outside auditors required by
Independence Standards Board Standard No. 1; and has discussed with the outside
accountants the outside accountants' independence.

     Based on these reviews and discussions, the Audit Committee recommended to
the Board of Directors, and the Board of Directors has approved, that the
Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000. The Committee also
recommended, and the Board of Directors has approved, the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants for 2001.

                                          Respectfully submitted,




                                          Richard L. Smoot
                                          John E. Menario
                                          Robert O. Viets

                                       12
<PAGE>

                            EXECUTIVE COMPENSATION


REPORT OF THE EXECUTIVE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE Overall
Objectives


     Philadelphia Suburban Corporation's executive compensation program is
designed to motivate its senior executives to achieve the Company's goals of
providing its customers with high quality, cost-effective, reliable water
services and providing the Company's shareholders with a market-based return on
their investment.

     Toward that end, the program:

   o Provides compensation levels that are competitive with those provided by
     companies with which the Company may compete for executive talent.


   o Motivates key senior executives to achieve strategic business initiatives
     and rewards them for their achievement.


   o Creates a strong link between stockholder and financial performance and
     the compensation of the Company's senior executives.


     In administering the executive compensation program, the Executive
Compensation and Employee Benefits Committee (the "Committee") attempts to
strike an appropriate balance among the above-mentioned objectives, each of
which is discussed in greater detail below.


     At present, the executive compensation program is comprised of three
components: base salary, annual cash incentive opportunities and equity
incentive opportunities. In determining the relative weighting of compensation
components and the target level of compensation for the Company's executives,
the Committee considers compensation programs of a peer group of companies.
Because of the limited number of investor-owned water utilities from which
comparable compensation data is available, the Committee utilizes survey data
from a composite market ("Composite Market") compiled by a nationally
recognized compensation consulting firm in assessing the competitiveness of the
components of the Company's compensation program. The Composite Market for the
base salary and annual cash incentive elements of the program consists of 50%
water utilities, 25% other utilities and 25% general industrial businesses.
There are thirteen water utilities in the Composite Market. Due to continued
consolidation in the investor-owned water utility industry, only three of the
companies in the Composite Market are publicly traded companies of comparable
size to the Company. Consequently, as of the proxy statement filed in 2000, the
Company began using the Dow Jones Utility Index instead of the Edward Jones
Water Utility Index as the peer group for the stock performance chart in the
Company's proxy. None of the water utilities in the Composite Market are in the
Dow Jones Utility Index.


     Competitive compensation levels are targeted at the median of the third
quartile range of compensation levels in the Composite Market, except for
equity incentives, which are targeted at the 50th percentile of the
compensation consulting firm's data base of general industrial organizations,
including utilities, that have long-term incentive programs.


                                       13
<PAGE>

Compensation Components

Base Salary

     To ensure that its pay levels are competitive, the Company, with the
assistance of its compensation consultant, regularly compares its executive
compensation levels with those of other companies and sets its salary structure
in line with competitive data from the Composite Market. Individual salaries
are considered for adjustment annually and any adjustments are based on general
movement in external salary levels, individual performance, and changes in
individual duties and responsibilities.

Cash Incentive Awards

     The annual cash incentive plan is based on target incentive awards for
each executive, which are stated as a percentage of their base salaries. Annual
incentive awards for executive officers are calculated by a formula that
multiplies the executive's target incentive percentage times a Company rating
factor based on the Company's overall financial performance and an individual
rating factor based on the executive's performance against established
objectives. These factors can range from 0% to 125% for the Company rating
factor and 0% to 150% for the individual rating factor. Each of these
percentages are correlated with defined objectives. Regardless of the Company's
financial performance, the Committee retains the authority to determine the
final Company rating factor, and the actual payment and amount of any bonus is
always subject to the discretion of the Committee.

Equity Incentives

     As part of its review of the total compensation package for the Company's
officers, the Committee, with the assistance of a nationally-recognized
compensation consulting firm, reviewed the Company's equity incentive
compensation program. Given the importance of dividends to a utility investor,
the consultant recommended using a combination of stock options with dividend
equivalents to best link executive long-term incentives to corporate
performance and shareholder interests.

     Under the terms of the Company's 1994 Equity Compensation Plan, which was
approved by the shareholders at the 1994 Annual Meeting, the Committee and the
Board of Directors may grant stock options, dividend equivalents and restricted
stock to officers, directors and key employees, and stock options to key
consultants of the Company and its subsidiaries who are in a position to
contribute materially to the successful operation of the business of the
Company. The purpose of the Plan is to help align executive compensation with
shareholder interests by providing the participants with a long-term equity
interest in the Company. The Plan, we believe, provides the Company the ability
to attract and retain employees of significant abilities.


Summary of Actions Taken by the Committee

Salary Increase

     Under the Company's salary program, the base salary budget is based on
salary levels for comparable positions in the Composite Market. The projected
overall annual increase is based on annual salary budget increase data reported
by published surveys. Under these guidelines, actual salary increases are
determined based on a


                                       14
<PAGE>

combination of an assessment of the individual's performance and the
individual's salary compared to the market. In the case of executive officers
named in this Proxy Statement, the determination of salary levels is made by
the Committee, subject to approval by the Board of Directors.

     Mr. DeBenedictis' salary for 2000 was consistent with the target level for
the CEO position within the Composite Market. Mr. DeBenedictis' salary for
2001, which was approved by the Board of Directors on February 6 and effective
on April 1, 2001, is consistent with published salary survey information on
salary levels and projected annual salary increases for 2001 and is based on
the Committee's favorable assessment of his and the Company's performance.

Annual Incentive Award

     At its February 5, 2001 meeting, the Committee determined the annual cash
incentive awards to be made to the participants in the annual incentive plan.
The awards were based on the Company's performance compared to its financial
goal for 2000 as well as the participants' achievement of their individual
objectives. The incentive awards to the Company's officers were approved by the
Board of Directors on February 6, 2001. Mr. DeBenedictis' annual incentive
compensation for 2000 was based on the Company's earnings and the Committee's
assessment of Mr. DeBenedictis' individual performance. Mr. DeBenedictis'
achievements in 2000 included growing revenues 7% by increasing the customer
base through 18 acquisitions and growth ventures, obtaining necessary rate
relief with rate cases in 2000 in Illinois, Maine, Ohio and Pennsylvania and
managing the operations efficiently (operating expense to revenue ratio dropped
to 36.9%, one of the lowest in the water industry) and effectively (the company
continues to be a leader in investing in and achieving improved water quality).
Mr. DeBenedictis also was instrumental in the Company's capital formation
efforts, successfully completing the largest secondary public offering of
equity in the Company's history.

Equity Incentives

     Effective March 6, 2001, the Committee approved the grant of incentive
stock options and dividend equivalents under the Company's 1994 Equity
Compensation Plan to its executive officers at the fair market value on the
date of grant for such stock options of $24.88. The options are exercisable in
installments of one-third each year starting on the first anniversary of the
date of grant and expire at the end of 10 years from the date of grant. The
dividend equivalents will accumulate dividends over a period of four years. Mr.
DeBenedictis received a grant of 50,000 options and dividend equivalents on
March 6, 2001 at the grant price stated above. At its meeting, the Committee
also approved management's recommendation to reduce the performance period for
the dividend equivalents granted in 1999 and 2000 by one year based on the
Company's performance against the 2000 measurement criteria established by the
Committee for this purpose at its March 6, 2000 meeting. The measurement
criteria involve targets for earnings per share, dividends, total return to
shareholders over a five-year period and customer growth.

                                       15
<PAGE>

     Section 162(m) of the Internal Revenue Code generally precludes the
deduction for federal income tax purposes of more than $1 million in
compensation paid to the Chief Executive Officer and the other officers named
in the Summary Compensation Table in any one year, subject to certain specified
exceptions. Given the nature of the stock option grants and the level of other
compensation paid to the Chief Executive Officer and the other executive
officers named in the Summary Compensation Table, the deduction limitation is
presently inapplicable to the Company. The Committee will address this
limitation if and when it becomes applicable to the Company's compensation
program.

                                          Respectfully submitted,




                                          John F. McCaughan
                                          G. Fred DiBona, Jr.
                                          Alan R. Hirsig

     The foregoing report of the Executive Compensation and Employee Benefits
Committee shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.


                                       16
<PAGE>

SUMMARY COMPENSATION TABLE

     The following Summary Compensation Table shows compensation paid by the
Company for services rendered during the years 2000, 1999 and 1998 for the
Company's Chief Executive Officer and the other four most highly compensated
executive officers of the Company.


                          SUMMARY COMPENSATION TABLE



<TABLE>
<CAPTION>
                                                Annual Compensation
                                   ----------------------------------------------
                                                                        Other
                                                                       Annual
         Name and                                                      Compen-
    Principal Position      Year    Salary ($)(1)    Bonus($)(2)    sation($)(3)
- -------------------------  ------  ---------------  -------------  --------------
<S>                        <C>     <C>              <C>            <C>
N. DeBenedictis .........  2000        311,904         271,440         5,250
CEO                        1999        295,048         258,750         4,800
                           1998        282,296         267,188         4,800
M. Coulter ..............  2000        171,467          66,626         5,100
Pres.-PSW                  1999        155,641          65,950         4,669
                           1998        144,581          57,156         4,155
R. Stahl ................  2000        183,480          60,517         5,250
Ex. V.P. & Gen. Cnsl.      1999        170,594          60,861         4,800
                           1998        167,921          66,151         4,863
D. Smeltzer .............  2000        148,467          55,687         4,454
Sr. V.P.-Finance           1999        130,516          45,619         3,915
 & CFO                     1998        106,626          32,604         3,199
R. Riegler ..............  2000        165,427          51,737         4,963
Sr. V.P.-Eng. &            1999        158,049          49,797         4,741
 Environ. Aff.             1998        155,084          54,252         4,491



<CAPTION>
                                   Long Term Compensation
                           ---------------------------------------
                                      Awards              Payouts
                           ----------------------------  ---------
                                           Securities
                            Restricted       Under-                  All Other
                               Stock          lying         LTIP      Compen-
         Name and            Award(s)       Options/      Payouts     sation
    Principal Position        ($)(4)      SAR's (#)(5)      ($)       ($)(6)
- -------------------------  ------------  --------------  ---------  ----------
<S>                        <C>           <C>             <C>        <C>
N. DeBenedictis .........     468,800        50,000         --       167,067
CEO                                --        50,000         --       153,439
                              436,250        50,000         --       113,910
M. Coulter ..............          --        15,000         --        30,954
Pres.-PSW                          --        15,000         --        24,508
                                   --        10,000         --        21,593
R. Stahl ................          --        10,000         --        24,679
Ex. V.P. & Gen. Cnsl.              --        10,000         --        23,378
                                   --        10,000         --        19,442
D. Smeltzer .............          --        10,000         --        15,720
Sr. V.P.-Finance                   --         7,500         --        12,524
 & CFO                             --         5,000         --         9,451
R. Riegler ..............          --        10,000         --        24,256
Sr. V.P.-Eng. &                    --        10,000         --        23,148
 Environ. Aff.                     --        10,000         --        19,734
</TABLE>

- ------------
(1) Salary deferred at the discretion of the executive and contributed to the
    Company's Thrift Plan or Executive Deferral Plan is included in this
    column.

(2) Includes cash bonuses for services rendered during the specified year,
    regardless of when paid.

(3) Company matching contributions under the Company's Thrift Plan and
    Executive Deferral Plan are included in this column.

(4) Mr. DeBenedictis was awarded a grant of 25,000 shares of restricted stock
    on May 15, 2000 under the Company's 1994 Equity Compensation Plan. The
    fair market value of the shares awarded on May 15, 2000


                                       17
<PAGE>

    was $18.752 per share based on the average of the opening and closing prices
    on the New York Stock Exchange on that date. One-third of the restricted
    stock grant will be released to Mr. DeBenedictis each year on the
    anniversary of the grant and he is entitled to receive the dividends on the
    restricted shares pending their release. At year-end 2000, the value of the
    25,000 shares was $612,500 based on the closing price for the stock on
    December 31, 2000 of $24.50.

(5) Option award numbers have been restated to reflect the December 2000
    5-for-4 stock split in the form of a stock distribution.

(6) Includes: (a) the dollar value, on a term loan approach, of the benefit of
    the whole-life portion of the premiums for a split dollar life insurance
    policy on Mr. DeBenedictis maintained by the Company, projected on an
    actuarial basis ($13,787); (b) Company payments on behalf of Mr.
    DeBenedictis to cover the premium attributable to the term life insurance
    portion of the split dollar life insurance policy ($1,606); (c) the
    amounts accrued for the named executive's accounts in 2000 in connection
    with the dividend equivalent awards made from 1996 through 2000 (Messrs.
    DeBenedictis $117,400, Stahl $23,480, Smeltzer $15,423, Riegler $23,480,
    and Coulter $28,630); (d) the value of group term life insurance
    maintained by the Company on the named executives (Messrs. DeBenedictis
    $2,931, Stahl $552, Smeltzer $297, Riegler $776 and Coulter $2,324); and
    (e) reportable earnings in 2000 on amounts deferred under the Company's
    Executive Deferral Plan (DeBenedictis $6,173 and Stahl $647). The Company
    will be reimbursed for the amount of the premiums paid under the split
    dollar program for Mr. DeBenedictis upon his death or repaid such premiums
    by Mr. DeBenedictis if he leaves the Company.


                         COMPARATIVE STOCK PERFORMANCE

     The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five years with the average cumulative
total return of a peer group of companies and the cumulative total return on
the S&P 500 over the same period, assuming a $100 investment on January 1, 1995
and the reinvestment of all dividends. In the past, the Company had used the
Edward Jones Water Utility Index for its peer group comparison. However, in
1999 and 2000, several of the companies in the Edward Jones Water Utility Index
were acquired, merged or announced that they had entered into definitive
agreements to be acquired or merged. As a result of the consequent impact of
these acquisitions and mergers on the Index and the withdrawal from trading of
several stocks, we decided in 2000 to use the Dow Jones Utility Index for our
peer group comparison. For comparison purposes, we have included both the
Edward Jones Water Utility Index and the Dow Jones Utility Index in the graph
below. The Dow Jones Utility Index consists of the following companies:
American Electric Power Company; Consolidated Edison, Inc.; NiSource Inc.;
Exelon Corporation; TXU Corporation; Edison International; Public Service
Enterprise Group Incorporated; Dominion Resources, Inc; Enron Corporation;
Reliant Energy, Incorporated; Williams Companies, Inc.; Duke Energy
Corporation; PG&E Corporation; AES Corporation; and The Southern Company. The
Edward Jones Water Utility Index consists of the following companies: American
Water Works Company, Inc.; American States Water Company; Artesian Resources
Corporation; California Water Service Company; Connecticut Water Service, Inc.;
E'town Corporation; Middlesex Water Company; Pennichuck Corporation;
Philadelphia Suburban Corporation; SJW Corporation; Southwest Water Company and
York Water Company.


                                       18
<PAGE>
                        FIVE YEAR GROWTH -- TOTAL RETURN


                                 E Jones            S&P 500         Dow Jones
                  PSC              Water           Composite        Utilities
                  ---              -----           ---------        ---------
1995            100.00            100.00            100.00            100.00
1996            150.70            127.40            122.95            109.10
1997            231.93            174.16            163.96            134.19
1998            319.68            212.12            210.81            159.52
1999            230.76            271.30            255.16            149.91
2000            353.00            294.09            231.96            226.01


     The foregoing comparative stock performance graph shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.


                                       19
<PAGE>

                          STOCK OPTION GRANTS IN 2000


     The following table sets forth information concerning individual grants of
stock options under the Company's 1994 Equity Compensation Plan during 2000 to
each executive officer identified in the Summary Compensation Table who
received options during the period.


                       OPTION GRANTS IN LAST FISCAL YEAR



<TABLE>
<CAPTION>
                                                                                            Grant Date
                                                Individual Grant                               Value
                         ---------------------------------------------------------------   ------------
                                                 % of
                            Number of            Total
                            Securities       Options/SAR's      Exercise
                            Underlying        Granted to        or Base                     Grant Date
                          Options/SAR's        Employees         Price       Expiration       Present
         Name             Granted(#)(1)     in Fiscal Year     ($/Sh)(2)        Date        Value($)(3)
- ----------------------   ---------------   ----------------   -----------   ------------   ------------
<S>                            <C>               <C>              <C>            <C>            <C>
DeBenedictis .........       50,000              11.2%          14.6750       03/06/2010       176,000
Coulter ..............       15,000               3.3%          14.6750       03/06/2010        52,800
Stahl ................       10,000               2.2%          14.6750       03/06/2010        35,200
Smeltzer .............       10,000               2.2%          14.6750       03/06/2010        35,200
Riegler ..............       10,000               2.2%          14.6750       03/06/2010        35,200
</TABLE>

- ------------
(1) The options listed in this column are qualified stock options granted at an
    exercise price equal to the fair market value of the Company's common
    stock on the date of grant under the Company's 1994 Equity Compensation
    Plan. Grants become exercisable in installments of one-third per year
    commencing on the first anniversary of the grant date. An equal number of
    dividend equivalents, with a four-year accumulation period, were awarded
    to the named individuals under the 1994 Equity Compensation Plan. The
    accrued value of the dividend equivalent awards for 1996 through 2000 is
    shown on the Summary Compensation Table.


(2) The exercise price for options granted is equal to the mean of the high and
    low sale prices of the Company's common stock on the New York Stock
    Exchange composite tape on the date the option is granted.


(3) The values in this column were determined using Black-Scholes Option
    Pricing Model. The actual value of stock options, if any, that may be
    realized will depend on the difference between the exercise price and the
    market price on the date of exercise. The estimated values under the
    Black-Scholes model are based on assumptions as to such variables as
    interest rates, stock price volatility and dividend yield. The key
    assumptions used in the Black-Scholes model valuation of the stock options
    are (i) an assumed dividend yield of 3.9%, (ii) a risk free rate of return
    of 6.4%, (iii) volatility of 21.1%, (iv) an exercise date of 10 years from
    the date of grant, and (v) no reduction in values to reflect
    non-transferability or other restrictions on the options. These
    assumptions are not a forecast of future dividend yield, stock performance
    or volatility.


                                       20
<PAGE>

     Stock Option Exercises in 2000 and Value of Options at Year-End 2000

     The following table sets forth information concerning the number of stock
options exercised under the Company's 1988 Stock Option Plan and the 1994
Equity Compensation Plan during 2000 by each executive officer listed below and
the number and value of unexercised options as of December 31, 2000, indicating
in each case the number and value of those options that were exercisable and
unexercisable as of that date.


              AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                        AND YEAR-END OPTION/SAR VALUES



<TABLE>
<CAPTION>
                                                                 Number of Securities              Value of Unexercised
                                                                Underlying Unexercised                 In-the-Money
                                                                   Options/SAR's at                  Options/SAR's at
                              Shares                              Fiscal Year-End (#)             Fiscal Year-End ($)(1)
                             Acquired           Value       -------------------------------   ------------------------------
         Name             on Exercise(#)     Realized($)     Exercisable     Unexercisable     Exercisable     Unexercisable
- ----------------------   ----------------   -------------   -------------   ---------------   -------------   --------------
<S>                      <C>                <C>             <C>             <C>               <C>             <C>
DeBenedictis .........        19,426           211,619         304,442          99,999          4,491,679         794,157
Coulter ..............        18,750           254,158          31,663          28,333            343,742         227,849
Stahl ................             0                 0          61,246          20,000            860,776         158,831
Smeltzer .............         3,500            59,872          20,833          16,666            255,946         137,076
Riegler ..............         4,629            34,511          30,741          20,000            344,873         158,831
</TABLE>

- ------------
(1) Based on the average of the high and low price on the New York Stock
    Exchange-Composite Transactions of the Company's Common Stock on December
    31, 2000 ($23.975).


                                       21
<PAGE>

CERTAIN COMPENSATION PLANS

Retirement Plan

     The Retirement Plan for Employees of the Company (the "Retirement Plan")
is a defined benefit pension plan. In general, participants are eligible for
normal pension benefits upon retirement at age 65 and are eligible for early
retirement benefits upon retirement at age 55 with ten years of credited
service. Under the terms of the Retirement Plan, a participant becomes fully
vested in his or her accrued pension benefit after five years of credited
service. Benefits payable to employees under the Retirement Plan are based upon
"final average compensation", which is defined as the average cash compensation
through the five highest consecutive years of the last ten full years preceding
retirement.

     The Employee Retirement Income Security Act of 1974, as amended, ("ERISA")
imposes maximum limitations on the annual amount of pension benefits that may
be paid under, and the amount of compensation that may be taken into account in
calculating benefits under, a qualified, funded defined benefit pension plan
such as the Retirement Plan. The Retirement Plan complies with these ERISA
limitations. Effective December 1, 1989, the Board of Directors adopted an
Excess Benefits Plan for Salaried Employees (the "Excess Plan"). The Excess
Plan is a nonqualified, unfunded pension benefit plan that is intended to
provide an additional pension benefit to participants in the Retirement Plan
and their beneficiaries whose benefits under the Retirement Plan are adversely
affected by these ERISA limitations. The benefit under the Excess Plan is equal
to the difference between (i) the amount of the benefit the participant would
have been entitled to under the Retirement Plan absent such ERISA limitations,
and (ii) the amount of the benefit actually payable under the Retirement Plan.

     The following tabulation shows the estimated annual pension payable
pursuant to the Retirement Plan and the Excess Plan to employees, including
employees who are directors or officers of the Company, upon retirement after
selected periods of service. This table is provided for illustrative purposes
only and does not reflect pension benefits presently due under the Retirement
Plan or Excess Plan.


                                 PENSION TABLE


<TABLE>
<CAPTION>
    Average Salary
                                  Estimated Annual Pension Based on Service of
   During Five Years     --------------------------------------------------------------
 Preceding Retirement     15 Years     20 Years     25 Years     30 Years     35 Years
- ----------------------   ----------   ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>          <C>          <C>
      $100,000            $ 24,600     $ 32,800     $ 41,100     $ 43,600     $ 46,100
       125,000              31,400       41,800       52,300       55,400       58,600
       150,000              38,100       50,800       63,600       67,300       71,100
       175,000              44,900       59,800       75,800       79,200       83,600
       200,000              51,600       68,800       86,100       91,100       96,100
       225,000              58,400       77,800       97,300      102,900      108,600
       250,000              65,100       86,800      108,600      114,800      121,100
       300,000              78,600      104,800      131,100      138,600      146,100
       350,000              92,100      122,800      153,600      162,300      171,100
       400,000             105,600      140,800      176,100      186,100      196,100
       450,000             119,100      158,800      198,600      209,800      221,100
       500,000             132,600      176,800      221,100      233,600      246,100
</TABLE>

                                       22
<PAGE>

     The Company's contributions to the Retirement Plan are computed on the
basis of straight life annuities. The following executive officers listed in
Summary Compensation Table have the indicated number of completed years of
service under the Retirement Plan, and would, upon retirement at age 65 on
March 31, 2000, be entitled to a pension based on the remuneration level listed
in the following table:


                                                            Completed
                                           Covered           Years of
                Name                    Remuneration     Credited Service
- ------------------------------------   --------------   -----------------
     Nicholas DeBenedictis .........      $526,214               9
     Morrison Coulter ..............      $198,356              40
     Roy H. Stahl ..................      $226,751              19
     Richard R. Riegler ............      $204,250              31
     David P. Smeltzer .............      $148,830              14

     A Supplemental Executive Retirement Plan or SERP has been established for
Mr. DeBenedictis. This Plan, which is nonqualified and unfunded, was approved
by the Board of Directors in 1992 and is intended to provide Mr. DeBenedictis
with a total retirement benefit, in combination with the Retirement Plan and
Excess Plan, that is commensurate with the retirement benefits for the chief
executive officers of other companies. Under the terms of the SERP, Mr.
DeBenedictis will be eligible to receive a benefit at normal retirement equal
to the difference between (i) the benefit to which he would otherwise be
entitled under the Retirement Plan assuming he had 25 years of service and
absent the ERISA limitations referred to above, and (ii) the benefit payable to
him under the Retirement Plan and the Excess Plan. Under the terms of Mr.
DeBenedictis' SERP, if his employment is terminated for any reason prior to age
65, he is entitled to receive a supplemental retirement benefit equal to the
difference between (i) the benefit to which he would otherwise be entitled
under the Retirement Plan assuming he was credited with two years of service
for each of his first seven years of credited service and (ii) the benefit
payable to him under the Retirement Plan and the Excess Plan. If Mr.
DeBenedictis retires from the Company at age 65, the SERP is projected to
provide an annual benefit of $128,532.


                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Employment Contracts and Termination of Employment and Change of Control
Arrangements

     Under the terms of Mr. DeBenedictis' employment arrangement, if his
employment is terminated by the Company for any reason other than his
disability, death or for cause, he will be entitled to receive a severance
payment equal to twelve months of his base compensation paid in twelve equal
monthly installments without offset. In the event that the employment of any of
the executive officers named in the Summary Compensation Table set forth above
is terminated, actually or constructively, within two years following a change
of control of the Company, the executive officers will be entitled to certain
payments under agreements with the Company. Under the terms of these
agreements, the Chief Executive Officer will be entitled to two and one-half
times his average annual cash compensation and the other executive officers
will be entitled to two times their average annual cash compensation, plus
continuation of their normal fringe benefits for a period of three years for
the Chief Executive Officer and two years for the other executive officers. The
agreement with the Chief Executive Officer also provides that, in exchange for
a non-competition agreement, he will be entitled to receive one-half of his
average annual cash compensation and the transfer to him of a split dollar life
insurance policy maintained


                                       23
<PAGE>

by the Company on his life. Under the terms of the 1994 Equity Compensation
Plan approved by the shareholders, outstanding stock options will become
immediately exercisable, accrued dividend equivalents will become immediately
payable and the restrictions on restricted stock grants shall immediately lapse
upon certain change of control events.


Compensation of Directors


     Directors who are full-time employees of the Company do not receive a
retainer or fees for service on the Board of Directors or Committees of the
Board. Members of the Board of Directors who are not full-time employees of the
Company or any of its subsidiaries ("Non-employee Directors") receive an annual
retainer fee of $12,000, plus an annual grant of shares of the Company's Common
Stock. As part of its annual review of the competitiveness of the directors
compensation, the Executive Compensation and Employee Benefits Committee in
2000 recommended and the Board of Directors approved an increase in the annual
grant of shares of the Company's Common Stock from 500 shares (as adjusted for
the December 1, 2000 5-for-4 stock split in the form of a stock distribution)
to 700 shares starting with the grant in 2001. Directors also receive a fee of
$1,000 for attendance at each meeting of the Board of Directors of the Company,
including Committee meetings. In addition, each Committee Chairman who is a
Non-employee Director receives an annual retainer fee of $2,500. All directors
are reimbursed for reasonable expenses incurred in connection with attendance
at Board or Committee meetings. Directors are eligible to defer part or all of
their fees under the Company's Director Deferral Plan. Amounts deferred accrue
interest at the prime interest rate plus 0.5% or may be deemed invested in the
Company's Common Stock at a 5% discount. Amounts deferred are not funded. In
2000, Mr. Viets deferred $20,000 of his fees which accrued earnings of $462 in
2000.


Certain Transactions


     Richard H. Glanton, a director, is a partner in the law firm of Reed
Smith, LLP, which firm has provided legal services to the Company in 2000.


                               (PROPOSAL NO. 2)
                   ADOPTION OF THE AMENDED AND RESTATED 2001
                         EMPLOYEE STOCK PURCHASE PLAN


     The Board of Directors is submitting to the shareholders for their
approval the Company's Amended and Restated 2001 Employee Stock Purchase Plan
(the "2001 ESPP"). The 2001 ESPP was adopted, subject to shareholder approval
by the Board of Directors on March 6, 2001.


     The 1994 Employee Stock Purchase Plan (the "1994 ESPP") was originally
adopted by the Board of Directors on March 15, 1994, and approved by the
shareholders at the Company's annual meeting on May 19, 1994. The Board of
Directors believes it is appropriate now to amend and restate the 1994 ESPP.
Approval of this proposal to adopt the 2001 ESPP requires the affirmative vote
of a majority of shares, present in person or represented by proxy, or
electronic vote at the Annual Meeting.


                                       24
<PAGE>

     The 2001 ESPP:

       1. Allows the committee appointed by the Board of Directors to
administer the plan (see point 4 below) and to set the discount for stock
purchases at up to 15%. In connection with its adoption of the 2001 ESPP, the
Board of Directors has set the current discount at 10%.

       2. Allows the Board of Directors to amend the plan for any reason not
specifically reserved to shareholders under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code").

       3. Entitles eligible employees to join the plan as soon as they become
employees of the Company or its subsidiaries, without having to wait six
months.

       4. Charges the Board of Directors with appointing a committee to
administer the plan.

     There were 300,000 shares initially authorized for issuance under the 1994
ESPP. As a result of the 3-for-2 stock split in 1996, the 4-for-3 stock split
in 1997 and the 5-for-4 stock split in 2000, and offset by the sales of stock
under the 1994 ESPP, 599,169 shares are available for purchase under the 2001
ESPP. The original 300,000 shares were registered on Form S-8 on March 8, 1994
(File No. 33-52557).

     The text of the 2001 ESPP in the form submitted to the shareholders for
approval is set forth in full as Appendix B to this proxy statement, and the
summary of amendments and description of the 2001 ESPP contained herein is
qualified throughout by reference to Appendix B. All capitalized terms in the
description have the meaning set forth in the 2001 ESPP. A description of the
Company's other compensation plans established for the benefit of executive
officers and other employees appears under the caption "Executive Compensation"
in this proxy statement.

     The Company believes that adoption of the 2001 ESPP will serve to further
align our employees' interests more closely to those of our shareholders,
provide an additional incentive for our employees to continue to contribute to
the prosperity of the Company and bring our employee stock purchase plan into
line with current industry plans and practices.

     THE BOARD OF DIRECTORS RECOMMENDS THAT ALL SHAREHOLDERS VOTE FOR APPROVAL
OF THE AMENDED AND RESTATED 2001 EMPLOYEE STOCK PURCHASE PLAN.


DESCRIPTION OF THE 2001 ESPP


     The 2001 ESPP provides Eligible Employees of the Company and its
subsidiaries with the opportunity to purchase shares of the Company's Common
Stock (the "Stock") at a discount of up to 15% from the prevailing market
price. Purchases can be made through regular payroll deductions or voluntary
cash deposits. The minimum payroll deduction for weekly paid employees is five
dollars ($5.00) per week, and ten dollars ($10.00) per payroll period for
employees paid bi-weekly or semi-monthly. The maximum payroll deduction cannot
exceed ten percent (10%) of an employee's Compensation. The total Market Value
of a Participants' stock purchases through both payroll deductions and
voluntary deposits is limited to twenty-five thousand dollars ($25,000), for
each calendar year.


                                       25
<PAGE>

     The 2001 ESPP is open to all active full-time and part-time employees of
the Company and employees who are not so classified, if their customary
employment is for more than twenty (20) hours per week and for more than five
(5) months per year. No minimum period of service is required before an
employee can join the plan. As of March 26, 2001 there were approximately 1,025
employees eligible to participate in the 2001 ESPP, of whom 334 were
Participants.


     A total of 599,169 shares of the Company's Stock are available for
purchase under the 2001 ESPP. The shares may be newly issued shares, treasury
stock or may be purchased by the Company on the open market. As of March 20,
2001, the closing price of the Common Stock on the New York Stock Exchange was
$23.07.


     The purchase price of the shares of stock purchased under the 2001 ESPP is
the lower of the average of the high and low trading prices reported, on the
New York Stock Exchange, for the Company's common stock on either the first or
last business day of each month, less the discount. The Company pays all the
administrative costs and brokerage fees associated with maintaining the 2001
ESPP and purchasing shares for the Participants' accounts. The full amounts in
the Participants' stock purchase accounts on the last business day of each
month are used to buy full and fractional shares for each Participant. The
Stock is held in the Participant's Employee Stock Purchase Plan Account (the
"Employee Account") until directed otherwise by the Participant.


     Dividends are paid on all full and fractional shares held in a
Participant's Employee Account. Unless otherwise directed by a Participant, all
dividends paid on such shares are automatically reinvested under the Company's
Dividend Reinvestment and Direct Stock Purchase Plan (the "DRP"). In accordance
with the terms of the DRP, reinvested dividends will be used to purchase
additional shares of stock at a five percent (5%) discount from the prevailing
market price. Participants may elect to receive the dividends on all of their
full and fractional shares in cash.


     Participants may sell the shares in the Employee Account at any time, and
are responsible for any applicable federal, state or local taxes, if any, that
the Company is required to withhold with respect to the purchase or sale of
shares, and brokers' commissions resulting from the sale of shares.


     The 2001 ESPP is administered by a committee appointed by the Board of
Directors. The committee has delegated certain of its administrative
responsibilities to the Company's Human Resource Department and the Company's
transfer agent, Fleet National Bank N.A. and its affiliate EquiServe, L.P. The
2001 ESPP is not subject to either the Employee Retirement Income Security Act
of 1974 or Section 401(a) of the Code. The 2001 ESPP is intended to constitute
an "employee stock purchase plan" within the meaning of Section 423 of the
Code.


     The 2001 ESPP will continue through March 6, 2011 ten years from the date
adopted by the board unless terminated prior thereto pursuant to its provisions
or pursuant to action by the Board of Directors, which has the right to
terminate the 2001 ESPP at any time without prior notice to any Participant.
The Board of Directors may, at any time and from time to time, amend the 2001
ESPP in any respect except for those matters specifically reserved by Section
423 of the Code for shareholder approval.


                                       26
<PAGE>

FEDERAL TAX CONSEQUENCES

     The 2001 ESPP is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code. The federal tax
consequences of the 2001 ESPP are outlined below.

     Under the Internal Revenue Code as currently in effect, a Participant in
the 2001 ESPP will not be deemed to have recognized income, nor will the
Company be entitled to a deduction, upon the Participant's acquisition of stock
pursuant to the 2001 ESPP. A Participant who acquires shares under the 2001
ESPP will recognize income when he or she sells or otherwise disposes of such
shares.

     If a Participant sells shares more than two years after the date on which
the option to purchase the shares was granted and more than one year after the
purchase of the shares (the holding period), a portion of the Participant's
gain will be ordinary income and a portion will be capital gain. The
Participant will be taxed at ordinary income tax rates on the excess of the
value of the shares when the option was granted over the purchase price (i.e.,
the discount), or, if less, the entire gain on the sale. The Participant will
have additional capital gain or loss equal to the difference, if any, between
the proceeds of the sale and the Participant's basis in the shares (the
purchase price plus any ordinary income realized). The capital gain rate will
depend on how long the stock is held by the Participant. The Company will not
be entitled to any tax deduction with respect to a sale by a Participant after
the holding period.

     If a Participant sells shares before the expiration of the holding period,
the Participant generally will be taxed at ordinary income tax rates to the
extent that the value of the shares when the shares were purchased exceeded the
purchase price. The Company will be entitled to a corresponding deduction. The
Participant will have additional capital gain or loss on the difference between
the proceeds of the sale and the participant's basis in the shares (the
purchase price plus any ordinary income realized). The capital gain rate will
depend on how long the stock is held by the Participant.

     The estate of a Participant who dies while holding shares acquired under
the 2001 ESPP will recognize ordinary income in the year of the Participant's
death equal to the excess of the value of the shares when the option was
granted over the purchase price, or, if less, the amount by which the fair
market value of the shares at the date of death exceeds the purchase price.

                            INDEPENDENT ACCOUNTANTS

     On October 3, 2000 the Board of Directors, upon the recommendation of the
Audit Committee, dismissed KPMG LLP as the Company's independent accountants.
As stated by the Company in its Form 8-K filing relative to this action, the
audit report of KPMG LLP on the consolidated balance sheet and statement of
capitalization of the Company and its subsidiaries as of December 31, 1999, and
the related consolidated statements of income and comprehensive income and cash
flow for each of the years in the two-year period ended December 31, 1999, did
not contain any adverse opinion or disclaimer of opinion, nor was it qualified
or modified as to uncertainty, audit scope, or accounting principles. In
connection with its audits as of December 31, 1999 and for each of the years in
the two-year period ended December 31, 1999 and through October 3, 2000, there
had been no disagreements with KPMG LLP on any matter of accounting principles
or practice, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of KPMG LLP would have
resulted in a reportable event as defined in Regulation S-K Item 304 (a) (1)
(v).


                                       27
<PAGE>

     Also on October 3, 2000, the Board of Directors, upon the recommendation
of the Audit Committee, engaged PricewaterhouseCoopers LLP as our new
independent accountants for fiscal year 2000. During the two most recent fiscal
years and through October 3, 2000, we have not consulted with
PricewaterhouseCoopers LLP regarding:

   o the application of accounting principles to a specified transaction, either
     completed or proposed;

   o the type of audit opinion that might be rendered on our financial
     statements, and in no case was a written report provided to us nor was
     oral advice provided that the Company concluded was an important factor in
     reaching a decision as to an accounting, auditing or financial reporting
     issue; or

   o any matter that was either the subject of a disagreement, as that term is
     defined in Item 304 (a) (1) (iv) of Regulation S-K and the related
     instructions to Item 304 (a) (1) (iv) of Regulation S-K, or a reportable
     event, as that term is defined in Item 304 (a) (1) (v) of Regulation S-K.

     Total fees for the 2000 fiscal year from KPMG LLP, the Company's former
independent accountants, were $381,827 for audit fees and $284,257 for all
other non-audit services, including tax services. There were no fees billed by
KPMG LLP for financial system design and implementation services. Total fees
for the 2000 fiscal year from PricewaterhouseCoopers LLP, the Company's current
independent accountants, were $126,732 for audit fees. There were no fees
billed by PricewaterhouseCoopers LLP during 2000 for other non-audit services
or for financial system design and implementation services.

     Representatives of PricewaterhouseCoopers are expected to be present at
the meeting and will be available to respond to appropriate questions.


         SHAREHOLDER SUGGESTIONS AND PROPOSALS FOR 2002 ANNUAL MEETING

     Consideration of certain matters is required at the Annual Meeting of
Shareholders, such as the election of directors. In addition, pursuant to
applicable regulations of the Securities and Exchange Commission, shareholders
may present resolutions, which are proper subjects for inclusion in the proxy
statement and for consideration at the Annual Meeting, by submitting their
proposals to the Company on a timely basis. In order to be included for the
2002 Annual Meeting, resolutions must be received by December 10, 2001.

     The Company receives many shareholder suggestions which are not in the
form of resolutions. All are given careful consideration. We welcome and
encourage your comments and suggestions. Your correspondence should be
addressed as follows:

       Patricia M. Mycek
       Secretary
       Philadelphia Suburban Corporation
       762 W. Lancaster Avenue
       Bryn Mawr, PA 19010


                                       28
<PAGE>

                            ADDITIONAL INFORMATION

     The Company will provide without charge, upon written request, a copy of
the Company's Annual Report on Form 10-K for 2000. Please direct your requests
to Patricia M. Mycek, Secretary, Philadelphia Suburban Corporation, 762 W.
Lancaster Avenue, Bryn Mawr, PA 19010.


               COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Section 16(a) of the Securities Exchange Act of 1934 (the "Act") requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities (a 10% Shareholder), to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors and 10% Shareholders are
required by the SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.

     Based solely on its review of the copies of such forms received by it, or
a written representation from certain reporting persons that no Form 5's were
required for those persons, the Company believes that, during the period
January 1, 2000 through December 31, 2000, all filing requirements applicable
to its officers and directors have been complied with.


                                 OTHER MATTERS

     The Board of Directors is not aware of any other matters which may come
before the meeting. However, if any further business should properly come
before the meeting, the persons named in the enclosed proxy will vote upon such
business in accordance with their judgment.

                                        By Order of the Board of Directors,




                                        PATRICIA M. MYCEK
                                        Secretary

April 9, 2001

                                       29

<PAGE>

                                                                     Appendix A


                       PHILADELPHIA SUBURBAN CORPORATION
                            AUDIT COMMITTEE CHARTER
                     ------------------------------------
PURPOSE
- --------
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:

       o Monitor the integrity of the Company's financial reporting process and
         systems of internal controls regarding finance, accounting, and legal
         compliance.

       o Monitor the independence and performance of the Company's independent
         auditors and internal auditing department.

       o Provide an avenue of communication among the independent auditors,
         management, the internal auditing department, and the Board of
         Directors.

The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or
other consultants or experts it deems necessary in the performance of its
duties.


COMPOSITION AND MEETINGS
- ---------------------------
Audit Committee members shall meet the requirements of the New York Stock
Exchange. The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent non-management
directors. All members of the Committee shall have a basic understanding of
finance and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise.

If an Audit Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee membership.

The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. The Committee should conduct separate
private meetings in executive session at least annually with management, the
director of the internal auditing department, the independent auditors, and as
a committee to discuss any matters that the Committee or each of these groups
believe should be discussed.


                                      A-1
<PAGE>

RESPONSIBILITIES
- ----------------
The responsibilities of the Audit Committee shall include:

    1. Under concurrent authority with the Board of Directors, the Audit
       Committee is responsible for the selection, evaluation and, when
       appropriate, replacement of the Company's independent auditor.

    2. Review the scope of the independent auditor's annual audit, including
       estimated audit fees.

    3. Review the performance of the Company's independent auditor's on an
       annual basis.

    4. Review the independent auditor's reports and recommendations.

    5. Review all the relationships of the independent auditor, with the Company
       and discuss any such relationships that may impact the objectivity and
       independence of the independent auditor.

    6. Review action taken by management in response to the independent
       auditor's recommendations.

    7. Review Company policies relating to compliance with laws and regulations,
       ethics, conflicts of interest and the investigation of misconduct or
       fraud.

    8. Review the Company's annual audited financial statements prior to its
       submission to the public, including auditor's opinions, management
       letters and management's discussion and analysis. This review should
       include discussion with management and independent auditors of
       significant issues regarding accounting principles, practices and
       judgements.

    9. Arrange for periodic reports from management and the independent auditor
       assessing the impact of significant regulatory changes, of accounting or
       reporting developments proposed by the FASB or SEC, or of any other
       significant financial matters that may affect the Company.

   10. Obtain from management a notification of issues and responses whenever a
       second opinion is sought from an independent auditor.

   11. Review material current and pending litigation or regulatory proceedings
       in which the Company is a party bearing on corporate governance or that
       may have a significant financial impact on the Company.

   12. Review significant cases of employee conflict of interest, misconduct or
       fraud.

   13. Direct special investigations into significant matters brought to the
       Audit Committee's attention within the scope of its duties.

   14. Review the Audit Committee Charter annually and propose to the Board any
       recommended changes. Have the Charter filed every three years in
       accordance with SEC regulations.

   15. In consultation with the management, the independent auditors, and the
       internal auditors, consider the integrity of the Company's financial
       reporting processes and controls. Discuss significant financial risk
       exposures and the steps management has taken to monitor, control and
       report such exposures. Review significant findings prepared by the
       independent auditors and the internal auditing department together with
       management's responses.

   16. Discuss any significant changes to the Company's accounting principles
       and any items required to be communicated by the independent auditors in
       accordance with SAS 61. The Chair of the Committee may represent the
       entire Audit Committee for purposes of this review.


                                      A-2
<PAGE>

                                                                     Appendix B


                       PHILADELPHIA SUBURBAN CORPORATION
             AMENDED AND RESTATED 2001 EMPLOYEE STOCK PURCHASE PLAN

                  ------------------------------------------

The purpose of the Philadelphia Suburban Corporation Amended and Restated 2001
Employee Stock Purchase Plan is to provide eligible employees of the
Philadelphia Suburban Corporation (the "Company") and its subsidiaries an
opportunity to purchase the common stock of the Company. The Board of Directors
of the Company believes that employee participation in stock ownership will be
to the mutual benefit of the employees and the Company. The Plan must be
approved by the stockholders of the Company within 12 months after the date on
which the Plan is adopted. The Plan amends and restates the Philadelphia
Suburban Corporation 1994 Employee Stock Purchase Plan.


                                   ARTICLE I
                                  Definitions


     Sec. 1.01 "Board of Directors" means the Board of Directors of the
Company.

     Sec. 1.02 "Code" means the Internal Revenue Code of 1986, as amended.
References to specific sections of the Code shall be taken to be references to
corresponding sections of any successor statute.

     Sec. 1.03 "Committee" means the committee appointed by the Board of
Directors to administer the Plan, as provided in Section 5.04.

     Sec. 1.04 "Company" means Philadelphia Suburban Corporation, a
Pennsylvania corporation, or any successor by merger or otherwise.

     Sec. 1.05 "Compensation" means a Participant's base wages, overtime pay,
commissions, cash bonuses, premium pay and shift differential, before giving
effect to any compensation reductions made in connection with plans described
in section 401(k) or 125 of the Code.

     Sec. 1.06 "Effective Date" shall mean the date the Plan is approved by the
Company's stockholders.

     Sec. 1.07 "Election Date" means the first business day of each calendar
month during which the Plan is in effect, or such other dates as the Committee
shall specify; provided that the first Election Date for the Plan shall be the
Effective Date.

     Sec. 1.08 "Eligible Employee" means each employee of the Employer:

       (i) Who is employed by the Employer and (a) who is classified by the
Employer as an "active regular or part-time non-union employee" or as an
"active full or part-time union employee" and (b) each person who is not so
classified, if such person's customary employment is for more than twenty (20)
hours per week and for more than five months per year, and

       (ii) Who is not deemed for purposes of section 423(b)(3) of the Code to
own stock possessing five percent or more of the total combined voting power or
value of all classes of stock of the Company or any subsidiary.


                                      B-1
<PAGE>

     Sec. 1.09 "Employer" means the Company and each Subsidiary.

     Sec. 1.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and as the same may hereafter be amended.

     Sec. 1.11 "Market Value" means the average of the high and low trading
prices for the Stock as reported on the principal market on which the Stock is
traded for the date of reference. If there was no such price reported for the
date of reference, "Market Value" means the average of the high and low trading
prices for the Stock on the day next preceding the date of reference for which
such price was reported or, if there was no such reported price, the fair
market value as determined by the Committee.

     Sec. 1.12 "Participant" means each Eligible Employee who elects to
participate in the Plan.

     Sec. 1.13 "Plan" means the Philadelphia Suburban Corporation Amended and
Restated 2001 Employee Stock Purchase Plan, as set forth herein and as
hereafter amended, which amends and restates the Philadelphia Suburban
Corporation 1994 Employee Stock Purchase Plan.

     Sec. 1.14 "Plan Year" means each calendar year during which the Plan is in
effect.

     Sec. 1.15 "Purchase Agreement" means the instrument prescribed by the
Committee pursuant to which an Eligible Employee may enroll as a Participant
and subscribe for the purchase of shares of Stock on the terms and conditions
offered by the Company. The Purchase Agreement is intended to evidence the
Company's offer of an option to the Eligible Employee to purchase Stock on the
terms and conditions set forth therein and herein.

     Sec. 1.16 "Purchase Date" means the last day of each Purchase Period.

     Sec. 1.17 "Purchase Period" means each one month period or other period
specified by the Committee, beginning on or after the Effective Date, during
which the Participant's Stock purchase is funded through payroll deduction
accumulations or a lump sum deposit under Section 3.05(b).

     Sec. 1.18 "Purchase Price" means the purchase price for shares of Stock
purchased under the Plan, determined as set forth in Section 3.03.

     Sec. 1.19 "Stock" means the common stock of the Company.

     Sec. 1.20 "Subsidiary" means any present or future corporation which (i)
constitutes a "subsidiary corporation" of the Company as that term is defined
in section 424 of the Code and (ii) is designated as a participating entity in
the Plan by the Committee. Unless the Committee specifically designates
otherwise, a Canadian or other foreign subsidiary shall not be considered a
Subsidiary for purposes of the Plan, and employees of such a subsidiary shall
not be Eligible Employees.


                                  ARTICLE II
                          Admission to Participation


     Sec. 2.01 Initial Participation. An Eligible Employee may elect to
participate in the Plan and may become a Participant effective as of any
Election Date, by executing and filing with the Committee a Purchase Agreement
at such time in advance of the Election Date as the Committee shall prescribe.
The Purchase Agreement shall remain in effect until it is modified through
discontinuance of participation under Section 2.02 or a change under Section
3.05.


                                      B-2
<PAGE>

   Sec. 2.02 Discontinuance of Participation.


       (a) A Participant may voluntarily cease his or her participation in the
Plan and stop payroll deductions at any time by filing a notice of cessation of
participation on such form and at such time in advance of the Purchase Date as
the Committee shall prescribe. A Participant who ceases contributions during a
Purchase Period may not make additional contributions to the Plan during the
Purchase Period. The Participant may again elect to participate in the Plan on
the next Election Date, if the Participant is then an Eligible Employee. A
Participant who ceases contributions during a Purchase Period may request
payment of any funds held in his or her account under the Plan. Any funds
remaining in the Participant's account on the Purchase Date shall be used to
purchase Stock pursuant to Section 3.04, if the Participant remains an Eligible
Employee.


       (b) If a Participant ceases to be an Eligible Employee, his or her
participation automatically shall cease, no further purchase of Stock shall be
made for the Participant, and the Participant shall receive payment of any
funds held in his or her account under the Plan.


     Sec. 2.03 Readmission to Participation. Any Eligible Employee who has
previously been a Participant, who has discontinued participation (whether by
cessation of eligibility or otherwise), and who wishes to be reinstated as a
Participant may again become a Participant by executing and filing with the
Committee a new Purchase Agreement. Reinstatement to Participant status shall
be effective as of any Election Date, provided the Participant files a new
Purchase Agreement with the Committee at such time in advance of the Election
Date as the Committee shall prescribe.


     Sec 2.04 Leave of Absence. A Participant who is on an approved leave of
absence may continue to participate in the Plan during the leave of absence by
making cash payments to the Company, at such times as the Committee determines,
equal to the payroll deductions that would have been made had the leave of
absence not occurred.


                                  ARTICLE III
                           Stock Purchase and Resale


     Sec. 3.01 Reservation of Shares. There shall be 300,000 shares of Stock
reserved for issuance or transfer under the Plan, subject to adjustment in
accordance with Section 4.02. Except as provided in Section 4.02, the aggregate
number of shares of Stock that may be purchased under the Plan shall not exceed
the number of shares of Stock reserved under the Plan. The shares of Stock may
be (a) Treasury or newly issued shares of the Company or (b) purchased by the
Company on the open market.


     Sec. 3.02 Limitation on Shares Available.


       (a) The maximum number of shares of Stock that may be purchased for each
Participant on a Purchase Date is the lesser of (i) the number of whole and
fractional shares of Stock that can be purchased by applying the full balance
of the Participant's withheld funds to the purchase of shares of Stock at the
Purchase Price, or (ii) the Participant's proportionate part of the maximum
number of shares of Stock available under the Plan, as stated in Section 3.01.


       (b) Notwithstanding the foregoing, if any person entitled to purchase
shares pursuant to any offering under the Plan would be deemed for purposes of
section 423(b)(3) of the Code to own stock (including any


                                      B-3
<PAGE>

number of shares of Stock that such person would be entitled to purchase under
the Plan) possessing five percent or more of the total combined voting power or
value of all classes of stock of Company, the maximum number of shares of Stock
that such person shall be entitled to purchase pursuant to the Plan shall be
reduced to that number which, when added to the number of shares of stock that
such person is deemed to own (excluding any number of shares of Stock that such
person would be entitled to purchase under the Plan), is one less than such
five percent. Any amounts withheld from a Participant's compensation that
cannot be applied to the purchase of Stock by reason of the foregoing
limitation shall be returned to the Participant as soon as practicable.

       (c) A Participant may not purchase shares of Stock having an aggregate
Market Value of more than $25,000, determined at the beginning of each Purchase
Period, for any calendar year in which one or more offerings under this Plan
are outstanding at any time, and a Participant may not purchase a share of
Stock under any offering after the expiration of the Purchase Period for the
offering.

     Sec. 3.03 Purchase Price of Shares.

     (a) Unless the Committee determines otherwise, the Purchase Price per
share of the Stock to be sold to Participants under the Plan shall be the lower
of:

       (i)  85% of the Market Value of such share on the first day of the
Purchase Period, or

       (ii) 85% of the Market Value of such share on the Purchase Date.

     (b) The Committee may determine that the Purchase Price shall be the
Market Value, or a percentage of the Market Value, on either of the first day
of the Purchase Period or the Purchase Date, or the lower of such values, so
long as the percentage shall not be lower than 85% of such Market Value.

     Sec. 3.04 Exercise of Purchase Privilege.

     (a) As of the first day of each Purchase Period, each Participant shall be
granted an option to purchase shares of Stock at the Purchase Price specified
in Section 3.03. The option shall continue in effect through the Purchase Date
for the Purchase Period. Subject to the provisions of Section 3.02 above, on
each Purchase Date, the Participant shall automatically be deemed to have
exercised his or her option to purchase shares of Stock, unless he or she
notifies the Committee, in such manner and at such time in advance of the
Purchase Date as the Committee shall prescribe, of his or her desire not to
make such purchase.

     (b) Subject to the provisions of Section 3.02, there shall be purchased
for the Participant on each Purchase Date, at the Purchase Price for the
Purchase Period, the largest number of whole shares of Stock and fractional
shares as can be purchased with the amounts withheld from the Participant's
Compensation or deposited by the Participant as described in Section 3.05(b)
during the Purchase Period. Each such purchase shall be deemed to have occurred
on the Purchase Date occurring at the close of the Purchase Period for which
the purchase was made. Any amounts that are withheld from a Participant's
Compensation in a Purchase Period and that remain after the purchase of whole
shares of Stock on a Purchase Date will be held in the Participant's account,
without interest, and applied on the Participant's behalf to purchase Stock on
the next Purchase Date.

     Sec. 3.05 Payroll Deductions and Deposits.

     (a) Each Participant shall authorize payroll deductions from his or her
Compensation for the purpose of funding the purchase of Stock pursuant to his
or her Purchase Agreement. In the Purchase Agreement, each Participant shall
authorize an after-tax payroll deduction from each payment of Compensation
during the Purchase


                                      B-4
<PAGE>

Period of an amount (i) not less than $5.00 per paycheck for a Participant who
is paid on a weekly payroll period basis or $10.00 per paycheck for a
Participant who is paid biweekly or semi-monthly payroll period basis, and (ii)
not more than ten percent (10%) of such Participant's Compensation, rounded to
the next highest whole dollar amount. A Participant may change the deduction to
any permissible level effective as of any Election Date. A change shall be made
by filing with the Committee a notice in such form and at such time in advance
of the Election Date on which the change is to be effective as the Committee
shall prescribe.


     (b) The Committee may allow Participants to deposit funds with the Company
to be used for the purpose of purchasing Stock pursuant to their Purchase
Agreements, instead of or in addition to payroll deductions pursuant to Section
3.05(a) subject to the following: (i) only one deposit as described in this
paragraph shall be accepted in Purchase Period, (ii) the minimum amount that a
Participant may contribute to the Plan pursuant to this paragraph shall be
twenty-five dollars ($25) per Purchase Period and (iii) the total amount that
the Participant may contribute to the Plan pursuant to this paragraph together
with all payroll deductions pursuant to paragraph (a) above may not exceed the
$25,000 limitation specified in paragraph (c) of Section 3.02 above. The
Committee shall designate the dates by which any such deposits must be made for
a Purchase Period.


     (c) Dividends will be paid on all whole and fractional shares purchased by
a Participant. Unless otherwise directed by the Participant, all dividends paid
with respect to shares purchased by each Participant will be automatically be
reinvested under the Philadelphia Suburban Corporation Dividend Reinvestment
and Direct Stock Purchase Plan.


     Sec. 3.06 Payment for Stock. The Purchase Price for all shares of Stock
purchased by a Participant under the Plan shall be paid out of the
Participant's authorized payroll deductions and any deposits made by a
Participant pursuant to Section 3.05(b). All funds received or held by the
Company under the Plan are general assets of the Company, shall be held free of
any trust or other restriction, and may be used for any corporate purpose.


     Sec. 3.07 Share Ownership; Issuance of Certificates.


     (a) The shares of Stock purchased by a Participant on a Purchase Date
shall, for all purposes, be deemed to have been issued or sold at the close of
business on the Purchase Date. Prior to that time, none of the rights or
privileges of a stockholder of the Company shall inure to the Participant with
respect to such shares of Stock. All the shares of Stock purchased under the
Plan shall be delivered by the Company in a manner as determined by the
Committee.


     (b) The Committee, in its sole discretion, may determine that shares of
Stock shall be delivered by (i) issuing and delivering to the Participant a
certificate for the number of shares of Stock purchased by the Participant,
(ii) issuing and delivering certificates for the number of shares of Stock
purchased to a firm which is a member of the National Association of Securities
Dealers, as selected by the Committee from time to time, which shares shall be
maintained by such firm in a separate brokerage account for each Participant,
or (iii) issuing and delivering certificates for the number of shares of Stock
purchased by Participants to a bank or trust company or affiliate thereof, as
selected by the Committee from time to time, which shares may be held by such
bank or trust company or affiliate in street name, but with a separate account
maintained by such entity for each Participant reflecting such Participant's
share interests in the Stock. Each certificate or account, as the case may be,
may be in the name of the Participant or, if he or she so designates on the
Participant's Purchase Agreement, in the Participant's name jointly with the
Participant's spouse, with right of survivorship, or in such other form as the
Committee may permit.


                                      B-5
<PAGE>

     (c) The Committee, in its sole discretion, may impose such restrictions or
limitations as it shall determine on the resale of Stock, the issuance of
individual stock certificates or the withdrawal from any stockholder accounts
established for a Participant.

     Sec. 3.08 Distribution of Shares or Resale of Stock.

     (a) In accordance with the procedures established by the Committee, a
Participant may request a distribution of shares of Stock purchased for the
Participant under the Plan or order the sale of such shares at any time by
making a request in such form and at such time as the Committee shall
prescribe.

     (b) If a Participant terminates his or her employment with the Employer or
otherwise ceases to be an Eligible Employee, the Participant shall receive a
distribution of his or her shares of Stock held in any stockholder account
established pursuant to Section 3.07(b), unless the Participant elects to have
the shares of Stock sold in accordance with such procedures as the Committee
shall prescribe.

     (c) If a Participant is to receive a distribution of shares of Stock, or
if shares are to be sold, the distribution or sale shall be made in whole
shares of Stock, with fractional shares paid in cash. Any brokerage commissions
resulting from a sale of Stock shall be deducted from amounts payable to the
Participant.


                                  ARTICLE IV
                              Special Adjustments

     Sec. 4.01 Shares Unavailable. If, on any Purchase Date, the aggregate
funds available for the purchase of Stock would purchase a number of shares in
excess of the number of shares of Stock then available for purchase under the
Plan, the following events shall occur:

     (a) The number of shares of Stock that would otherwise be purchased by
each Participant shall be proportionately reduced on the Purchase Date in order
to eliminate such excess;

     (b) The Plan shall automatically terminate immediately after the Purchase
Date as of which the supply of available shares is exhausted; and

     (c) Any amounts remaining shall be repaid the Participants.

     Sec. 4.02 Anti-Dilution Provisions. The aggregate number of shares of
Stock reserved for purchase under the Plan, as provided in Section 3.01, the
maximum number of shares that may be purchased by a Participant as provided in
Section 3.02(b), and the calculation of the Purchase Price per share may be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of issued shares of Stock resulting from a subdivision or
consolidation of shares or other capital adjustment, or the payment of a stock
dividend, or other increase or decrease in such shares, if effected without
receipt of consideration by the Company.

     Sec. 4.03 Effect of Certain Transactions. Subject to any required action
by the stockholders, if the Company shall be the surviving corporation in any
merger or consolidation, any offering hereunder shall pertain to and apply to
the shares of Stock of the Company. However, in the event of a dissolution or
liquidation of the Company, or of a merger or consolidation in which the
Company is not the surviving corporation, the Plan and any offering hereunder
shall terminate upon the effective date of such dissolution, liquidation,
merger or consolidation, unless the Board determines otherwise, and the balance
of any amounts withheld from a Participant's Compensation or deposited pursuant
to Section 3.05(b) which have not by such time been applied to the purchase of
Stock shall be returned to the Participant.


                                      B-6
<PAGE>

                                   ARTICLE V
                                 Miscellaneous


     Sec. 5.01 Non-Alienation. Except as set forth below, the right to purchase
shares of Stock under the Plan is personal to the Participant, is exercisable
only by the Participant during the Participant's lifetime and may not be
assigned or otherwise transferred by the Participant. If a Participant dies,
unless the executor, administrator or other personal representative of the
deceased Participant directs otherwise, any amounts previously withheld from
the Participant's Compensation or deposited pursuant to Section 3.05(b) before
the Participant's death during the Purchase Period in which the Participant
dies shall be used to purchase Stock on the Purchase Date for the Purchase
Period. After that Purchase Date, there shall be delivered to the executor,
administrator or other personal representative of the deceased Participant all
shares of Stock and such residual amounts as may remain to the Participant's
credit under the Plan.

     Sec. 5.02 Administrative Costs. The Company shall pay the administrative
expenses associated with the operation of the Plan (other than brokerage
commissions resulting from sales of Stock directed by Participants).

     Sec. 5.03 No Interest. No interest shall be payable with respect to
amounts withheld or deposited under the Plan.

     Sec. 5.04 Committee. The Board of Directors shall appoint the Committee,
which shall have the authority and power to administer the Plan and to make,
adopt, construe, and enforce rules and regulations not inconsistent with the
provisions of the Plan. The Committee shall adopt and prescribe the contents of
all forms required in connection with the administration of the Plan,
including, but not limited to, the Purchase Agreement, payroll withholding
authorizations, requests for distribution of shares, and all other notices
required hereunder. The Committee shall have the fullest discretion permissible
under law in the discharge of its duties, including, but not limited to, the
delegation of those duties. The Committee's interpretations and decisions with
respect to the Plan shall be final and conclusive.

     Sec. 5.05 Withholding of Taxes; Notification of Transfer.

     (a) All acquisitions and sales of Stock under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements if the Internal Revenue Service or other taxing authority requires
such withholding. The Company may require that Participants pay to the Company
(or make other arrangements satisfactory to the Company for the payment of) the
amount of any federal, state or local taxes that the Company is required to
withhold with respect to the purchase of Stock or the sale of Stock acquired
under the Plan, or the Company may deduct from the Participant's wages or other
compensation the amount of any withholding taxes due with respect to the
purchase of Stock or the sale of Stock acquired under the Plan.

     (b) A Participant shall be required to advise the Committee immediately if
the Participant transfers (by sale, gift or other manner) any shares of Stock
acquired under the Plan within two years after the beginning of the Purchase
Period in which the Stock is purchased.

     Sec. 5.06 Amendment of the Plan. The Board of Directors may, at any time
and from time to time, amend the Plan in any respect, except that any amendment
that is required to be approved by the stockholders under Section 423 of the
Code shall be submitted to the stockholders of the Company for approval.

     Sec. 5.07 Expiration and Termination of the Plan. The Plan shall continue
in effect for ten years from March 6, 2001, unless terminated prior to that
date pursuant to the provisions of the Plan or pursuant to action


                                      B-7
<PAGE>

by the Board of Directors. The Board of Directors shall have the right to
terminate the Plan at any time without prior notice to any Participant and
without liability to any Participant. Upon the expiration or termination of the
Plan, the balance, if any, then standing to the credit of each Participant from
amounts withheld from the Participant's Compensation or deposited by the
Participant which has not, by such time, been applied to the purchase of Stock
shall be refunded to the Participant.

     Sec. 5.08 No Employment Rights. Participation in the Plan shall not give
an employee any right to continue in the employment of an Employer, and shall
not affect the right of the Employer to terminate the employee's employment at
any time, with or without cause.

     Sec. 5.09 Repurchase of Stock. The Company shall not be required to
purchase or repurchase from any Participant any of the shares of Stock that the
Participant acquires under the Plan.

     Sec. 5.10 Notice. A Purchase Agreement and any notice that a Participant
files pursuant to the Plan shall be on the form prescribed by the Committee and
shall be effective only when received by the Committee. Delivery of such forms
may be made by hand or by certified mail, sent postage prepaid, to the
Company's corporate headquarters, or such other address as the Committee may
designate. Delivery by any other mechanism shall be deemed effective at the
option and discretion of the Committee.

     Sec. 5.11 Government Regulation. The Company's obligation to sell and to
deliver the Stock under the Plan is at all times subject to all approvals of
any governmental authority required in connection with the authorization,
issuance, sale or delivery of such Stock.

     Sec. 5.12 Internal Revenue Code and ERISA Considerations. The Plan is
intended to constitute an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended. The Plan is not
intended and shall not be construed as constituting an "employee benefit plan,"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended.

     Sec. 5.13 Headings, Captions, Gender. The headings and captions herein are
for convenience of reference only and shall not be considered as part of the
text. The masculine shall include the feminine, and vice versa.

     Sec. 5.14 Severability of Provisions, Prevailing Law. The provisions of
the Plan shall be deemed severable. In the event any such provision is
determined to be unlawful or unenforceable by a court of competent jurisdiction
or by reason of a change in an applicable statute, the Plan shall continue to
exist as though such provision had never been included therein (or, in the case
of a change in an applicable statute, had been deleted as of the date of such
change). The Plan shall be governed by the laws of the Commonwealth of
Pennsylvania to the extent such laws are not in conflict


                                      B-8
<PAGE>

                                                                      4959-PS-01
<PAGE>

Dear Shareholder:

     Enclosed are materials relating to Philadelphia Suburban Corporation's 2001
Annual Meeting of Shareholders. The Notice of the Meeting and Proxy Statement
describe the formal business to be transacted at the meeting.

     Your vote is important to us. Please complete, sign and return the attached
proxy card in the accompanying postage-paid envelope, or vote electronically
through the Internet by following the Instructions set out on the proxy card,
whether or not you expect to attend the meeting.


                                                     Nicholas DeBenedictis
                                                     Chairman & President

                                  DETACH HERE

                                      PROXY
                        PHILADELPHIA SUBURBAN CORPORATION

         THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
                       PHILADELPHIA SUBURBAN CORPORATION

             Proxy for Annual Meeting of Shareholders, May 17, 2001

     The undersigned hereby appoints David P. Smeltzer, Roy H. Stahl and
Patricia M. Mycek, or a majority of them or any one them acting singly in the
absence of the others, with full power of substitution, the proxy or proxies of
the undersigned, to attend the Annual Meeting of Shareholders of Philadelphia
Suburban Corporation, to be held at the Springfield Country Club, 40O West
Sproul Road, Springfield, PA 19064, at 10:00 a.m., on Thursday, May 17, 2001 and
any adjournments thereof, and, with all powers the undersigned would possess, if
present to vote all shares of Common Stock of the undersigned in Philadelphia
Suburban Corporation, including any shares held in the Dividend Reinvestment
Plan of Philadelphia Suburban Corporation, as designated on the reverse side.

     The proxy when properly executed will be voted in the manner directed
herein by the undersigned. If the proxy is signed, but no vote is specified,
this proxy will be voted: FOR the nominees listed in item 1 on the reverse side;
FOR approval of the Amended and Restated 2001 Employee Stock Purchase Plan as
set forth in item 2; and in accordance with the proxies' best judgment upon
other matters properly coming before the meeting and any adjournments thereof.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE, OR VOTE ELECTRONICALLY THROUGH THE INTERNET BY FOLLOWING THE
INSTRUCTIONS SET OUT ON THE PROXY CARD.

- -----------                                                        -----------
SEE REVERSE        CONTINUED AND TO BE SIGNED ON REVERSE SIDE      SEE REVERSE
   SIDE                                                               SIDE
- -----------                                                        -----------
<PAGE>


PHILADELPHIA SUBURBAN
CORPORATION
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398


                         ----------------
                         Vote by Internet
                         ----------------

                         It's fast, convenient, and your vote is immediately
                         confirmed and posted.

                         --------------------------------------------------
                         Follow these four easy steps:

                         1. Read the accompanying Proxy Statement and Proxy
                            Card.

                         2. Go to the Website
                            http://www.eproxyvote.com/psc

                         3. Enter your 14-digit Voter Control Number
                            located on your Proxy Card above your name.

                         4. Follow the Instructions provided.
                         --------------------------------------------------

                         Your vote is important!
                         Go to http://www.eproxyvote.com/psc anytime!

           Do not return your Proxy Card if you are voting by Internet


                                   DETACH HERE

/X/ Please mark
    votes as in
    this example.


The Board of Directors recommends that you vote FOR all nominees for Director
and FOR Proposal 2.
<TABLE>
<S>                                                  <C>                         <C>      <C>     <C>
                                                                                 FOR    AGAINST  ABSTAIN
1. Election of Directors.                    2. Adoption of an Amended and      /   /    /   /    /   /
   Nominees: (01) Nicholas DeBenedictis,        Restated 2001 Employee Stock
             (02) Richard J. Heckmann,          Purchase Plan.
              and (03) Andrew D. Seidel

FOR                          WITHHELD        3. In their discretion, the proxies are authorized to
ALL         /   /    /   /   FROM ALL           vote upon such other business as may properly come
NOMINEES                     NOMINEES           before the meeting.



/   / ________________________________________
      For all nominees except as written above

</TABLE>



                         MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT /   /

                         THIS PROXY MUST BE SIGNED EXACTLY AS NAME
                         APPEARS HEREIN.

                         Executors, Administrators, Trustees, etc. should give
                         full title as such. If the signer is a corporation,
                         please sign full corporate name by duly authorized
                         officer.

Signature:______________ Date:_________  Signature:______________ Date:_________


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
