Exhibit 10.69

PERFORMANCE-BASED SHARE UNIT GRANT

February 27, 2013

Dear:

Pursuant to the terms and conditions of the Aqua America Inc. 2009 Omnibus
Equity Compensation Plan, as amended and restated (the “Plan”), you have been
granted performance-based share units as outlined below and in the attached
Performance-Based Share Unit Grant Terms and Conditions.

 

Granted To:    Grant Date:    February 27, 2013 Target Award:   
                    shares Vesting Date:    February 27, 2016 Performance
Period:    Period beginning on January 1, 2013 and ending on December 31, 2015
Vesting Schedule and    Performance Goals:    The Target Award is subject to
vesting based on continued service and achievement of performance goals, as set
forth in the Performance-Based Share Unit Grant Terms and Conditions, including
Schedule A attached thereto.

By my signature below, I hereby acknowledge and accept the award of this
Performance-Based Share Unit Grant and the Performance-Based Share Unit Grant
Terms and Conditions attached hereto and incorporated herein, and I agree to be
bound by the terms of the Performance-Based Share Unit Grant, the
Performance-Based Share Unit Grant Terms and Conditions and the Plan. I hereby
agree that all decisions and determinations of the Committee (as defined in the
Plan) with respect to the performance-based share units shall be final and
binding.

 

Signature:                  Date:       

Note: If there are any discrepancies in the name or address shown above, please
make the appropriate corrections on this form.

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AQUA AMERICA, INC.

2009 OMNIBUS EQUITY COMPENSATION PLAN

PERFORMANCE-BASED SHARE UNIT GRANT

TERMS AND CONDITIONS

1. Grant of Performance Units.

These Performance-Based Share Unit Grant Terms and Conditions (the “Grant
Conditions”) shall apply and be part of the grant made by Aqua America, Inc., a
Pennsylvania corporation (the “Company”), to the Grantee named in the
Performance-Based Share Unit Grant (the “Performance-Based Unit Grant”) to which
these Grant Conditions are attached (the “Grantee”), under the terms and
provisions of the Aqua America, Inc. 2009 Omnibus Equity Compensation Plan, as
amended and restated (the “Plan”). The applicable provisions of the Plan are
incorporated into the Grant Conditions by reference, including the definitions
of terms contained in the Plan (unless such terms are otherwise defined herein).
The Grantee is an employee of the Company, its subsidiaries or its Affiliates
(collectively, the “Employer”).

Subject to the terms and vesting conditions hereinafter set forth, the Company,
with the approval and at the direction of the Executive Compensation Committee
(the “Committee”) of the Company’s Board of Directors (the “Board”), has granted
to the Grantee a target award (the “Target Award”) of performance-based share
units as specified in the Performance-Based Share Unit Grant (the “Performance
Units”). The Performance Units are contingently awarded and shall be earned,
vested and payable if and to the extent that the total shareholder return and
earnings per share performance goals described on Schedule A (the “Performance
Goals”), employment conditions and other conditions of these Grant Conditions
are met. The Performance Units are granted with Dividend Equivalents (as defined
in Section 7).

2. Vesting.

(a) Except as otherwise set forth in these Grant Conditions, the Grantee shall
earn and vest in a number of Performance Units based on the attainment of the
Performance Goals as of the end of the Performance Period, provided that the
Grantee continues to be employed by the Employer through the Vesting Date stated
on the Performance-Based Share Unit Grant (the “Vesting Date”). The “Performance
Period” is the performance period beginning and ending on the applicable dates
stated on the Performance-Based Share Unit Grant. The “Vesting Period” is the
period beginning on the Grant Date and ending on the Vesting Date.

(b) Except as otherwise set forth in these Grant Conditions, at the end of the
Performance Period, the Committee will determine whether and to what extent the
Performance Goals have been met and the amount earned with respect to the
Performance Units. The Grantee can earn up to two hundred percent (200%) of the
Target Award based on the attainment of the Performance Goals.

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(c) Except as described in Section 3 below, the Grantee must continue to be
employed by the Employer throughout the Vesting Period in order for the Grantee
to vest and receive payment with respect to the earned Performance Units.

(d) Except as specifically provided below, no Performance Units shall vest prior
to the Vesting Date, and if the Performance Goals are not attained at the end of
the Performance Period, the Performance Units shall be immediately forfeited and
shall cease to be outstanding.

3. Termination of Employment on Account of Retirement, Death, or Disability.

(a) Except as described below, if the Grantee ceases to be employed by the
Employer prior to the Vesting Date, the Performance Units shall be forfeited as
of the termination date and shall cease to be outstanding.

(b) If the Grantee ceases to be employed by the Employer during the Vesting
Period on account of the Grantee’s death or Disability, the Grantee’s
outstanding Performance Units shall remain outstanding through the Vesting
Period and the Grantee shall earn Performance Units based on the attainment of
the Performance Goals described on Schedule A, as determined following the end
of the Performance Period (or as described in Section 4, if applicable). The
earned Performance Units shall be paid as described in Section 6.

(c) If the Grantee ceases to be employed by the Employer during the Vesting
Period on account of Retirement (defined below), the Grantee shall earn a
pro-rata portion of the outstanding Performance Units based on attainment of the
Performance Goals described on Schedule A, as determined following the end of
the Performance Period (or as described in Section 4, if applicable). The
pro-rated portion shall be determined based on the number of Performance Units
earned based on the attainment of the Performance Goals during the Performance
Period, multiplied by a fraction, the numerator of which is the number of
completed full months following the Grant Date and prior to the Retirement Date
in which the Grantee was employed by the Employer and the denominator of which
is thirty-six (36). The pro-rated earned Performance Units shall be paid as
described in Section 6.

4. Change in Control.

(a) If a Change in Control occurs during the Vesting Period, the Grantee shall
earn outstanding Performance Units as of the date of the Change in Control (the
“Change in Control Date”) as follows:

(i) If the Change in Control occurs more than one (1) year after the Grant Date
and before the end of the Performance Period, the Grantee shall earn the greater
of (x) the number of Performance Units earned based on the attainment of the
Performance Goals from the beginning of the Performance Period to the Change in
Control Date, or (y) the Target Award.

(ii) If a Change in Control occurs within one year after the Grant Date, the
Grantee shall earn a pro-rata portion of the outstanding Performance Units. The
pro-rated portion shall be determined based on the greater of (x) the number of
Performance Units earned based on the attainment of the Performance Goals from
the beginning of the Performance Period to the Change in Control Date, or
(y) the Target Award, multiplied by a fraction, the numerator of which is the
number of completed full months following the Grant Date until the Change in
Control Date and the denominator of which is thirty-six (36).

(iii) If a Change in Control occurs after the end of the Performance Period but
before the Vesting Date, the Grantee shall earn Performance Units based on the
attainment of the Performance Goals as of the end of the Performance Period.

 

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Performance Units earned as of the Change in Control Date, as described above in
subsection (a)(i), (ii) or (iii), are referred to as the “CIC Earned Units.” All
reference in this Agreement to “Performance Units” includes CIC Earned Units on
and after a Change in Control.

(b) The Grantee shall vest in the CIC Earned Units on the Vesting Date if the
Grantee continues to be employed by the Employer through the Vesting Date.
Except as described below, the CIC Earned Units shall only vest if the Grantee
continues to be employed by the Employer through the Vesting Date.

(c) If prior to the Vesting Date, a Change in Control occurs and the Grantee
ceases to be employed by the Employer upon or following a Change in Control on
account of (i) the Grantee’s Retirement, (ii) the Grantee’s termination by the
Company without Cause, (iii) the Grantee’s termination for Good Reason (defined
below), or (iv) the Grantee’s Disability or death, the CIC Earned Units shall
vest as of the termination date.

(d) If the Grantee ceases to be employed by the Employer for any other reason
before the Vesting Date, the Grantee shall forfeit the CIC Earned Units as of
the date of termination.

5. Definitions.

(a) For purposes of these Grant Conditions, “Good Reason” shall have the meaning
given that term in the Grantee’s existing Change in Control Agreement with the
Company as in effect on the Grant Date.

(b) For purposes of these Grant Conditions, “Retirement” shall mean the
Grantee’s voluntary termination of employment after the Grantee has attained age
fifty-five (55) and has a combination of age and full years of service with the
Employer that is equal to or greater than seventy (70).

6. Payment with Respect to Performance Units.

(a) Except as otherwise set forth in Section 4, if the Committee certifies that
the Performance Goals and other conditions to payment of the Performance Units
have been met, shares of Company Stock equal to the vested earned Performance
Units shall be issued to the Grantee on the Vesting Date, subject to applicable
tax withholding and Section 19 below.

(b) If, prior to the Vesting Date, a Change in Control occurs and the Grantee
continues to be employed by the Employer through the Vesting Date, shares of
Company Stock (or other consideration, as described below) equal to the vested
CIC Earned Units shall be issued to the Grantee on the Vesting Date, subject to
applicable tax withholding and Section 19 below.

 

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(c) If, prior to the Vesting Date, a Change in Control occurs and the Grantee
ceases to be employed by the Employer on or after the Change in Control on
account of (i) the Grantee’s Retirement, (ii) the Grantee’s termination by the
Employer without Cause, (iii) the Grantee’s termination for Good Reason, or
(iv) the Grantee’s Disability or death, shares of Company Stock (or other
consideration, as described below) equal to the vested CIC Earned Units shall be
issued to the Grantee within sixty (60) days following the Grantee’s date of
termination, subject to applicable tax withholding and Section 19 below.

(d) If the Grantee terminates employment on account of Retirement before a
Change in Control, any outstanding pro-rated Performance Units under
Section 3(c) may be earned as CIC Earned Units pursuant to Section 4(a), but in
all cases prorated by applying the fraction in Section 3(c), and such CIC Earned
Units shall vest on the date of the Change in Control. Shares of Company Stock
(or such other consideration, as described below) equal to the vested CIC Earned
Units shall be issued to the Grantee within sixty (60) days after the Change in
Control, subject to applicable tax withholding and Section 19 below.

(e) If, in connection with a Change in Control, shares of Company Stock are
converted into the right to receive a cash payment or other form of
consideration, the vested CIC Earned Units shall be payable in such form of
consideration, as determined by the Committee.

(f) Any fractional shares with respect to vested earned Performance Units shall
be paid to the Grantee in cash.

7. Dividend Equivalents with Respect to Performance Units.

(a) Dividend Equivalents shall accrue with respect to Performance Units and
shall be payable subject to the same vesting terms and other conditions as the
Performance Units to which they relate. Dividend Equivalents shall be credited
when dividends are declared on shares of Company Stock from the Grant Date until
payment date for the vested earned Performance Units. If, and to the extent that
the underlying Performance Units are forfeited, all related Dividend Equivalents
shall also be forfeited.

(b) While the Performance Units are outstanding, the Company will keep records
in a bookkeeping account for the Grantee. On each date on which a dividend is
declared by the Company on Company Stock, the Company shall credit to the
Grantee’s account an amount equal to the Dividend Equivalents associated with
the Performance Units held by the Grantee on the record date for the dividend.
No interest will be credited to any such account.

(c) Dividend Equivalents shall be paid in cash at the same time as the
underlying vested earned Performance Units are paid.

(d) Notwithstanding the foregoing, if shares of Company Stock are converted to
cash as described in Section 6(e) above in connection with a Change in Control,
Dividend Equivalents shall cease to be credited with respect to the Performance
Units.

 

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8. Non-Competition.

(a) In consideration for the grant of Performance Units made to the Grantee
under the terms of these Grant Conditions, the Grantee agrees that while the
Grantee is employed by the Employer and for a twelve (12) month period beginning
on the date that the Grantee ceases to be employed by the Employer for any
reason (the “Restriction Period”), the Grantee shall not, directly or
indirectly, (i) accept employment with, (ii) own, manage, operate, join,
control, solicit, finance, or participate in the ownership, management,
operation, acquisition, control or financing of, (iii) be connected as a
partner, principal, agent, representative, consultant or otherwise with, or
(iv) use or permit the Grantee’s name to be used in connection with, any
business or enterprise engaged directly or indirectly in any business or
enterprise engaged in a geographic area within fifty (50) miles of any location
from which the Employer is operating on the termination date (the “Geographic
Area”), in any business that is competitive to a business from which the
Employer, taken as a whole from all geographic areas, derived at least ten
percent (10%) of its respective annual gross revenues for the twelve (12) months
preceding the termination date.

(b) In consideration for the grant of Performance Units under these Grant
Conditions, the Grantee agrees that during the Restriction Period, the Grantee
shall not:

(i) directly or indirectly solicit, entice, broker or induce an agreement with
any person or entity that had a contractual agreement with the Employer during
the term of the Grantee’s employment to enter into an agreement or arrangement
with the Grantee or any third party that would preclude the person or entity,
either contractually or practically, from working with the Employer; or

(ii) directly or indirectly solicit, recruit or hire any employee (full-time or
part-time) of the Employer to work for a third party other than the Employer.

(c) The Grantee acknowledges, agrees and represents that the type and periods of
restrictions imposed in these Grant Conditions are fair and reasonable, and that
such restrictions are intended solely to protect the legitimate interests of the
Employer, rather than to prevent the Grantee from earning a livelihood. The
Grantee recognizes that the Employer competes or may compete in the Geographic
Area and that the Grantee’s access to confidential information makes it
necessary for the Employer to restrict the Grantee’s post-employment activities
in the Geographic Area. The Grantee further represents that: (i) the Grantee is
familiar with the covenants not to compete and not to solicit set forth in these
Grant Conditions, (ii) the Grantee is fully aware of his or her obligations
hereunder, including, without limitation, the length of time, scope and
geographic coverage of these covenants, (iii) the Grantee finds the length of
time, scope and geographic coverage of these covenants to be reasonable, and
(iv) the Grantee is receiving valuable and sufficient consideration for the
Grantee’s covenants not to compete and not to solicit.

 

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(d) The parties to these Grant Conditions acknowledge and agree that any breach
by the Grantee of any of the covenants or agreements contained in this Section 8
will result in irreparable injury to the Employer for which money damages could
not adequately compensate the Employer and therefore, in the event of any such
breach, the Employer shall be entitled (in addition to any other rights and
remedies which it may have at law or in equity) to have an injunction issued by
any competent court enjoining and restraining the Grantee and any other person
involved therein from continuing such breach without posting a bond. The
existence of any claim or cause of action which the Grantee may have against the
Employer or any other person shall not constitute a defense or bar to the
enforcement of such covenants. If any portion of the covenants or agreements
contained in this Section 8 is construed to be invalid or unenforceable, the
other portions of such covenants or agreements shall not be affected and shall
be given full force and effect without regard to the invalid or unenforceable
portion to the fullest extent possible. If any covenant or agreement in this
Section 8 is held to be unenforceable because of the duration or scope thereof,
then the court making such determination shall have the power to reduce the
duration and limit the scope thereof, and the covenant or agreement shall then
be enforceable in its reduced form. In addition to other actions that may be
taken by the Employer, if the Grantee breaches any of the covenants or
agreements contained in this Section 8, the Grantee shall forfeit all
outstanding Performance Units, and all outstanding Performance Units (whether or
not vested) shall immediately terminate.

9. Certain Corporate Changes.

If any change is made to the Company Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all the Performance Units, the Committee
shall adjust, in an equitable manner and as provided in the Plan, the number and
class of shares underlying the Performance Units to reflect the effect of such
event or change in the Company’s capital structure in such a way as to preserve
the value of the Performance Units, and the Committee shall adjust the
Performance Goals as necessary to reflect the effect of such event or change in
the Company’s capital structure. Any adjustment that occurs under the terms of
this Section 9 or the Plan will not change the timing or form of payment with
respect to any Performance Units.

10. No Stockholder Rights.

No shares of Company Stock shall be issued to the Grantee at the time the grant
is made, and the Grantee shall not be, nor have any of the rights or privileges
of, a shareholder of the Company with respect to any Performance Units recorded
in the account, including no voting rights and no rights to receive dividends
(other than Dividend Equivalents).

11. No Right to Continued Employment.

Neither the award of Performance Units, nor any other action taken with respect
to the Performance Units, shall confer upon the Grantee any right to continue to
be employed by the Employer or shall interfere in any way with the right of the
Employer to terminate the Grantee’s employment at any time.

12. Termination or Amendment.

These Grant Conditions and the award made hereunder may be terminated or amended
by the Committee, in whole or in part, in accordance with the applicable terms
of the Plan.

 

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13. Notice.

Any notice to the Company provided for in these Grant Conditions shall be
addressed to it in care of the Company’s Vice President for Human Resources, and
any notice to the Grantee shall be addressed to the Grantee at the current
address shown on the payroll system of the Company, or to such other address as
the Grantee may designate to the Company in writing. Any notice provided for
hereunder shall be delivered by hand, sent by telecopy or electronic mail or
enclosed in a properly sealed envelope addressed as stated above, registered and
deposited, postage and registry fee prepaid in the United States mail or other
mail delivery service. Notice to the Company shall be deemed effective upon
receipt. By receipt of these Grant Conditions, the Grantee hereby consents to
the delivery of information (including without limitation, information required
to be delivered to the Grantee pursuant to the applicable securities laws)
regarding the Company, the Plan, and the Performance Units via the Company’s
electronic mail system or other electronic delivery system.

14. Incorporation of Plan by Reference.

The Performance-Based Share Unit Grant and these Grant Conditions are made
pursuant to the terms of the Plan, the terms of which are incorporated herein by
reference, and shall in all respects be interpreted in accordance therewith. The
decisions of the Committee shall be conclusive upon any question arising
hereunder. The Grantee’s receipt of the Performance Units constitutes such the
Grantee’s acknowledgment that all decisions and determinations of the Committee
with respect to the Plan, these Grant Conditions, and/or the Performance Units
shall be final and binding on the Grantee, his or her beneficiaries and any
other person having or claiming an interest in the Performance Units. The
settlement of any award with respect to the Performance Units is subject to the
provisions of the Plan and to interpretations, regulations and determinations
concerning the Plan as established from time to time by the Committee in
accordance with the provisions of the Plan. A copy of the Plan will be furnished
to each Grantee upon request.

15. Income Taxes; Withholding Taxes.

The Grantee is solely responsible for the satisfaction of all taxes and
penalties that may arise in connection with the award or settlement of
Performance Units pursuant to these Grant Conditions. At the time of taxation,
the Employer shall have the right to deduct from other compensation, or to
withhold shares of Company Stock, in an amount equal to the federal (including
FICA), state, local and foreign taxes and other amounts as may be required by
law to be withheld with respect to the Performance Units, provided that any
share withholding shall not exceed the Grantee’s minimum applicable withholding
tax rate for federal (including FICA), state, local and foreign tax liabilities.

16. Company Policies.

This Performance-Based Unit Grant and all shares issued pursuant to this grant
shall be subject to any applicable recoupment or clawback policies and other
policies implemented by the Board, as in effect from time to time.

 

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17. Governing Law.

The validity, construction, interpretation and effect of the Performance-Based
Share Unit Grant and these Grant Conditions shall exclusively be governed by,
and determined in accordance with, the applicable laws of the Commonwealth of
Pennsylvania, excluding any conflicts or choice of law rule or principle.

18. Assignment.

The Performance-Based Share Unit Grant and these Grant Conditions shall bind and
inure to the benefit of the successors and assignees of the Company. The Grantee
may not sell, assign, transfer, pledge or otherwise dispose of the Performance
Units, except to a successor grantee in the event of the Grantee’s death.

19. Section 409A.

The Performance-Based Share Unit Grant and these Grant Conditions are intended
to comply with Code Section 409A or an exemption, and payments may only be made
under these Grant Conditions upon an event and in a manner permitted by Code
Section 409A, to the extent applicable. Notwithstanding anything in these Grant
Conditions to the contrary, if required by Code Section 409A, if the Grantee is
considered a “specified employee” for purposes of Code Section 409A and if any
payment under these Grant Conditions is required to be delayed for a period of
six (6) months after separation from service pursuant to Code Section 409A, such
payment shall be delayed as required by Code Section 409A, and the accumulated
payment amounts shall be paid in a lump sum payment within ten (10) days after
the end of the six (6)-month period. If the Grantee dies during the postponement
period prior to payment, the amounts withheld on account of Code Section 409A
shall be paid to the personal representative of the Grantee’s estate within
sixty (60) days after the date of the Grantee’s death. Notwithstanding anything
in these Grant Conditions to the contrary, if the Performance Units are subject
to Code Section 409A and if required by Code Section 409A, any payments to be
made upon a termination of employment under these Grant Conditions may only be
made upon a “separation from service” under Code Section 409A. In no event may
the Grantee, directly or indirectly, designate the calendar year of a payment,
except in accordance with Code Section 409A. Notwithstanding anything in these
Grant Conditions to the contrary, if required by Code Section 409A, if CIC
Earned Units are subject to Code Section 409A, and if a Change in Control is not
a “change in control event” under Code Section 409A or the payment event does
not occur upon or within two years following a “change in control event” under
Code Section 409A, any vested CIC Earned Units shall be paid to the Grantee upon
the Vesting Date and not on account of an earlier termination of employment.

*        *        *

 

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Schedule A

Performance Goals

1. Performance Goals.

The Performance Units shall be earned based on Aqua America’s (the Company’s)
achievement of four Performance Goals, as follows:

 

  • 30% of the Target Award shall be earned based on the Company’s TSR (as
defined below) as compared to the TSR of the companies in the peer group
described in Section 3 below.

 

  • 30% of the Target Award shall be earned based on the Company’s TSR as
compared to the TSR of the reference companies in described in Section 4 below.

 

  • 20% of the Target Award shall be earned based on maintaining an average
ratio of operations and maintenance expenses as a percentage of revenues at Aqua
Pennsylvania, as described in Section 5 below.

 

  • 20% of the Target Award will be earned based on earning a cumulative total
earnings before taxes for the Company’s operations other than Aqua Pennsylvania,
as described in Section 6 below.

2. Calculation of TSR.

(a) Relative total shareholder return (“TSR”) means the Company’s TSR relative
to the TSR of each Peer Company in the Peer Group (as defined below) or each
Reference Company (as defined below), as applicable. At the end of the
Performance Period, the TSR for the Company, each Peer Company in the Peer Group
and each Reference Company shall be calculated by dividing the Closing Average
Share Value (as defined below) by the Opening Average Share Value (as defined
below).

(b) The term “Closing Average Share Value” means the average value of the common
stock for the trading days during the two calendar months ending on the last
trading day of the Performance Period, which shall be calculated as follows:
(i) determine the closing price of the common stock on each trading date during
the two-month period, (ii) multiply each closing price as of that trading date
by the applicable share number described below, and (iii) average the amounts so
determined for the two-month period. The Closing Average Share Value shall take
into account any dividends on the common stock for which the ex-dividend date
occurred during the Performance Period, as if the dividend amount had been
reinvested in common stock at the closing price on the ex-dividend date. The
share number in clause (ii) above, for a given trading day, is the sum of one
share plus the cumulative number of shares deemed purchased with such dividends.
Notwithstanding the foregoing, if the Closing Average Share Value is calculated
as of a Change in Control, then the Closing Average Share Value shall be based
on the two-month period ending immediately prior to the Change in Control.

 

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(c) The term “Opening Average Share Value” means the average value of the common
stock for the trading days during the two calendar months ending on the last
trading day prior to the beginning of the Performance Period, which shall be
calculated as follows: (i) determine the closing price of the common stock on
each trading date during the two-month period, (ii) multiply each closing price
as of that trading date by the applicable share number described below, and
(iii) average the amounts so determined for the two-month period. The Opening
Average Share Value shall take into account any dividends on the common stock
for which the ex-dividend date occurred during the two-month period, as if the
dividend amount had been reinvested in common stock at the closing price on the
ex-dividend date. The share number in clause (ii) above, for a given trading
day, is the sum of one share plus the cumulative number of shares deemed
purchased with such dividends.

3. Performance Units Earned Based on Comparative TSR to the Peer Group. Thirty
percent of the Target Award of Performance Units (the “Peer Group Portion”)
shall be earned based on the Company’s TSR as compared to the TSR of the
companies in the Peer Group for the Performance Period, in accordance with the
following:

(a) The Peer Group for this purpose consists of American Water Works Company
(AWK), American States Water Company (AWR), Aqua America, Inc. (WTR),
Connecticut Water Service, Inc. (CTWS), California Water Service Group (CWT),
Middlesex Water Company (MSEX) and SJW Corporation (SJW) (each a “Peer Company”
and collectively, the “Peer Group”).

(b) The Peer Group shall be subject to change as follows:

(i) In the event of a merger, acquisition or business combination transaction of
a Peer Company in which the Peer Company is the surviving entity and remains
publicly traded, the surviving entity shall remain a Peer Company.

(ii) In the event of a merger, acquisition or business combination transaction
of a Peer Company, a “going private” transaction or similar event involving a
Peer Company or the liquidation of a Peer Company, in each case where the Peer
Company is not the surviving entity or is no longer publicly traded, the company
shall no longer be a Peer Company.

 

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(c) The Peer Group Portion shall be earned based on how the Company’s TSR ranks
in comparison to the TSRs of the Peer Group in accordance with the following
schedule, depending on how many companies remain in the Peer Group at the end of
the Performance Period:

 

Ordinal Ranking of the
Company (including the

Company) Versus

Peer Group

 

Payout as a % of
Target Award

(7 Peer Companies)

 

Payout as a % of

Target Award

(6 Peer Companies)

 

Payout as a % of

Target Award

(5 Peer Companies)

 

Payout as a % of

Target Award

(4 Peer Companies)

 

Payout as a % of

Target Award

(1, 2 or 3 Peer
Companies)

1st

  200%   200%   200%   200%   200%

2nd

  170%   160%   150%   125%   100%

3rd

  130%   125%   100%   50%   0%

4th

  100%   75%   50%   0%   N/A

5th

  50%   25%   0%   N/A   N/A

6th

  0%   0%   N/A   N/A   N/A

7th

  0%   N/A   N/A   N/A   N/A

4. Performance Units Earned Based on Comparative TSR to the S&P MidCap Utilities
Index. Thirty percent of the Target Award of the Performance Units (the “S&P
Index Portion”) shall be earned based on the Company’s TSR as compared to the
TSR of the companies in the S&P MidCap Utilities Index, in accordance with the
following:

(a) The S&P Index Portion shall be earned based on how the Company’s TSR ranks
compares to the TSRs of the Reference Companies in the S&P MidCap Utilities
Index, according to the following schedule:

 

Percentile Ranking of the Company Versus

Reference Companies                                

   Payout as a % of Target Award  

90th or above

     200 % 

50th

     100 % 

30th

     50 % 

Below 30th

     0 % 

If the Company’s TSR rank is above the 30th percentile and falls between the
measuring points on the foregoing schedule, the percentage vesting will be based
on linear interpolation between the applicable measuring points.

(b) The companies in the S&P MidCap Utilities Index will be determined on the
first day of the Performance Period for purposes of the TSR calculation and will
be changed only in accordance with Section 4(c) below. No company shall be added
to the S&P MidCap Utilities Index during the Performance Period for purposes of
the TSR calculation.

(c) The term “Reference Company” means a company in the S&P MidCap Utilities
Index as of the first day of the Performance Period and will be subject to
change as follows:

(i) In the event of a merger, acquisition or business combination transaction of
a Reference Company in which the Reference Company is the surviving entity and
remains publicly traded, the surviving entity shall remain a Reference Company.

(ii) In the event of a merger, acquisition or business combination transaction
of a Reference Company, a “going private” transaction or similar event involving
a Reference Company or the liquidation of a Reference Company, in each case
where the Reference Company is not the surviving entity or is no longer publicly
traded, the company shall no longer be a Reference Company.

 

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5. Performance Units Earned Based on the Aqua Pennsylvania O&M Ratio. Twenty
percent of the Target Award of the Performance Units (the “O&M Ratio Portion”)
shall be earned based on maintaining an average of the annual ratios of the
consolidated operations and maintenance expenses to revenue for Aqua
Pennsylvania and its subsidiaries over the three-year Performance Period. The
O&M Ratio Portion shall be calculated according to the following schedule:

 

O&M RATIO METRIC

 

Aqua PA

O&M Ratio

3 YR Annual

Avg. Attainment

   RATING
(%  of
20%
PSU’s
Earned)  

31.41%

     50   

31.21%

     60   

31.01%

     70   

30.81%

     80   

30.61%

     90   

30.41%

     100   

30.21%

     110   

30.01%

     120   

29.81%

     130   

29.61%

     140   

29.41%

     150   

29.21%

     160   

29.01%

     170   

28.81%

     180   

28.61%

     190   

28.41%

     200   

If Aqua Pennsylvania’s ratio of operations and maintenance expense to revenues
is below the 31.41% level and falls between the measuring points on the
foregoing schedule, the percentage vesting will be based on linear interpolation
between the applicable measuring points.

 

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6. Performance Units Earned Based on the Earnings Before Taxes for the Company’s
operations other than Aqua Pennsylvania (Non-PA EBT). Twenty percent of the
Target Award of the Performance Units (the “Non-PA EBT”) shall be earned based
on the Company’s total cumulative income from continuing operations before
income taxes plus the Company’s income from discontinued operations before
income taxes, less the corresponding amounts from Aqua Pennsylvania, over the
three-year Performance Period. The Non-PA EBT Portion shall be calculated
according to the following schedule:

 

NON - PA Earnings Before Tax

 

Non PA

EBT

3 YR Combined

Attainment

$ 000’s Omitted

   RATING
%  of
20%
PSU’s
Earned  

$ 218,454

     50.0  

$ 223,309

     60.0  

$ 228,163

     70.0  

$ 233,018

     80.0  

$ 237,872

     90.0  

$ 242,727

     100.0  

$ 245,154

     110.0  

$ 247,582

     120.0  

$ 250,009

     130.0  

$ 252,436

     140.0  

$ 254,863

     150.0  

$ 257,291

     160.0  

$ 259,718

     170.0  

$ 262,145

     180.0  

$ 264,572

     190.0  

$ 267,000

     200.0  

If the Company’s Non-PA EBT as defined is above $218,454 and falls between the
measuring points on the foregoing schedule, the percentage vesting will be based
on linear interpolation between the applicable measuring points.

7. General Terms. Any portion of the Performance Units that is not earned as of
the end of the Performance Period shall be forfeited as of the end of the
Performance Period (or as provided above upon an earlier Change in Control). In
no event shall the maximum number of Performance Units that may be payable
pursuant to these Grant Conditions exceed 200% of the Target Award.

 

 

5

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PERFORMANCE-BASED SHARE UNIT GRANT

February 27, 2013

Dear:

Pursuant to the terms and conditions of the Aqua America Inc. 2009 Omnibus
Equity Compensation Plan, as amended and restated (the “Plan”), you have been
granted performance-based share units as outlined below and in the attached
Performance-Based Share Unit Grant Terms and Conditions.

 

Granted To:    Grant Date:    February 27, 2013 Target Award:   
                    shares Vesting Date:    February 27, 2016
Performance Period:    Period beginning on January 1, 2013 and ending on
December 31, 2015 Vesting Schedule and    Performance Goals:    The Target Award
is subject to vesting based on continued service and achievement of performance
goals, as set forth in the Performance-Based Share Unit Grant Terms and
Conditions, including Schedule A attached thereto.

By my signature below, I hereby acknowledge and accept the award of this
Performance-Based Share Unit Grant and the Performance-Based Share Unit Grant
Terms and Conditions attached hereto and incorporated herein, and I agree to be
bound by the terms of the Performance-Based Share Unit Grant, the
Performance-Based Share Unit Grant Terms and Conditions and the Plan. I hereby
agree that all decisions and determinations of the Committee (as defined in the
Plan) with respect to the performance-based share units shall be final and
binding.

 

Signature:                  Date:       

Note: If there are any discrepancies in the name or address shown above, please
make the appropriate corrections on this form.

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AQUA AMERICA, INC.

2009 OMNIBUS EQUITY COMPENSATION PLAN

PERFORMANCE-BASED SHARE UNIT GRANT

TERMS AND CONDITIONS

1. Grant of Performance Units.

These Performance-Based Share Unit Grant Terms and Conditions (the “Grant
Conditions”) shall apply and be part of the grant made by Aqua America, Inc., a
Pennsylvania corporation (the “Company”), to the Grantee named in the
Performance-Based Share Unit Grant (the “Performance-Based Unit Grant”) to which
these Grant Conditions are attached (the “Grantee”), under the terms and
provisions of the Aqua America, Inc. 2009 Omnibus Equity Compensation Plan, as
amended and restated (the “Plan”). The applicable provisions of the Plan are
incorporated into the Grant Conditions by reference, including the definitions
of terms contained in the Plan (unless such terms are otherwise defined herein).
The Grantee is an employee of the Company, its subsidiaries or its Affiliates
(collectively, the “Employer”).

Subject to the terms and vesting conditions hereinafter set forth, the Company,
with the approval and at the direction of the Executive Compensation Committee
(the “Committee”) of the Company’s Board of Directors (the “Board”), has granted
to the Grantee a target award (the “Target Award”) of performance-based share
units as specified in the Performance-Based Share Unit Grant (the “Performance
Units”). The Performance Units are contingently awarded and shall be earned,
vested and payable if and to the extent that the total shareholder return and
earnings per share performance goals described on Schedule A (the “Performance
Goals”), employment conditions and other conditions of these Grant Conditions
are met. The Performance Units are granted with Dividend Equivalents (as defined
in Section 7).

2. Vesting.

(a) Except as otherwise set forth in these Grant Conditions, the Grantee shall
earn and vest in a number of Performance Units based on the attainment of the
Performance Goals as of the end of the Performance Period, provided that the
Grantee continues to be employed by the Employer through the Vesting Date stated
on the Performance-Based Share Unit Grant (the “Vesting Date”). The “Performance
Period” is the performance period beginning and ending on the applicable dates
stated on the Performance-Based Share Unit Grant. The “Vesting Period” is the
period beginning on the Grant Date and ending on the Vesting Date.

(b) Except as otherwise set forth in these Grant Conditions, at the end of the
Performance Period, the Committee will determine whether and to what extent the
Performance Goals have been met and the amount earned with respect to the
Performance Units. The Grantee can earn up to two hundred percent (200%) of the
Target Award based on the attainment of the Performance Goals.

 

16

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(c) Except as described in Section 3 below, the Grantee must continue to be
employed by the Employer throughout the Vesting Period in order for the Grantee
to vest and receive payment with respect to the earned Performance Units.

(d) Except as specifically provided below, no Performance Units shall vest prior
to the Vesting Date, and if the Performance Goals are not attained at the end of
the Performance Period, the Performance Units shall be immediately forfeited and
shall cease to be outstanding.

3. Termination of Employment on Account of Retirement, Death, or Disability.

(a) Except as described below, if the Grantee ceases to be employed by the
Employer prior to the Vesting Date, the Performance Units shall be forfeited as
of the termination date and shall cease to be outstanding.

(b) If the Grantee ceases to be employed by the Employer during the Vesting
Period on account of the Grantee’s death or Disability, the Grantee’s
outstanding Performance Units shall remain outstanding through the Vesting
Period and the Grantee shall earn Performance Units based on the attainment of
the Performance Goals described on Schedule A, as determined following the end
of the Performance Period (or as described in Section 4, if applicable). The
earned Performance Units shall be paid as described in Section 6.

(c) If the Grantee ceases to be employed by the Employer during the Vesting
Period on account of Retirement (defined below), the Grantee shall earn a
pro-rata portion of the outstanding Performance Units based on attainment of the
Performance Goals described on Schedule A, as determined following the end of
the Performance Period (or as described in Section 4, if applicable). The
pro-rated portion shall be determined based on the number of Performance Units
earned based on the attainment of the Performance Goals during the Performance
Period, multiplied by a fraction, the numerator of which is the number of
completed full months following the Grant Date and prior to the Retirement Date
in which the Grantee was employed by the Employer and the denominator of which
is thirty-six (36). The pro-rated earned Performance Units shall be paid as
described in Section 6.

4. Change in Control.

(a) If a Change in Control occurs during the Vesting Period, the Grantee shall
earn outstanding Performance Units as of the date of the Change in Control (the
“Change in Control Date”) as follows:

(i) If the Change in Control occurs more than one (1) year after the Grant Date
and before the end of the Performance Period, the Grantee shall earn the greater
of (x) the number of Performance Units earned based on the attainment of the
Performance Goals from the beginning of the Performance Period to the Change in
Control Date, or (y) the Target Award.

(ii) If a Change in Control occurs within one year after the Grant Date, the
Grantee shall earn a pro-rata portion of the outstanding Performance Units. The
pro-rated portion shall be determined based on the greater of (x) the number of
Performance Units earned based on the attainment of the Performance Goals from
the beginning of the Performance Period to the Change in Control Date, or
(y) the Target Award, multiplied by a fraction, the numerator of which is the
number of completed full months following the Grant Date until the Change in
Control Date and the denominator of which is thirty-six (36).

(iii) If a Change in Control occurs after the end of the Performance Period but
before the Vesting Date, the Grantee shall earn Performance Units based on the
attainment of the Performance Goals as of the end of the Performance Period.

 

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Performance Units earned as of the Change in Control Date, as described above in
subsection (a)(i), (ii) or (iii), are referred to as the “CIC Earned Units.” All
reference in this Agreement to “Performance Units” includes CIC Earned Units on
and after a Change in Control.

(b) The Grantee shall vest in the CIC Earned Units on the Vesting Date if the
Grantee continues to be employed by the Employer through the Vesting Date.
Except as described below, the CIC Earned Units shall only vest if the Grantee
continues to be employed by the Employer through the Vesting Date.

(c) If prior to the Vesting Date, a Change in Control occurs and the Grantee
ceases to be employed by the Employer upon or following a Change in Control on
account of (i) the Grantee’s Retirement, (ii) the Grantee’s termination by the
Company without Cause, (iii) the Grantee’s termination for Good Reason (defined
below), or (iv) the Grantee’s Disability or death, the CIC Earned Units shall
vest as of the termination date.

(d) If the Grantee ceases to be employed by the Employer for any other reason
before the Vesting Date, the Grantee shall forfeit the CIC Earned Units as of
the date of termination.

5. Definitions.

(a) For purposes of these Grant Conditions, “Good Reason” shall mean:

(i) a material diminution in the Grantee’s base salary, which, for purposes of
this Agreement, means a reduction in base salary of ten (10) percent or more
that does not apply generally to all officers of the Employer; or

(ii) a material change in the geographic location at which the Grantee must
perform services for the Employer, which, for purposes of this Agreement, means
a requirement that the Grantee be based at any office or location which is
located more than fifty (50) miles from the Grantee’s primary place of
employment immediately prior to the Change in Control on other than on a
temporary basis (less than six (6) months).

Termination of employment after any of the foregoing events shall constitute a
termination by the Grantee for Good Reason only if the Grantee provides written
notice to the Employer of the existence of such event within ninety (90) days
after the initial occurrence of such event, the Employer fails to remedy the
event within thirty (30) days following the receipt of such notice and the
Grantee terminates employment with the Employer for Good Reason within fifteen
(15) days after the expiration of the cure period.

(b) For purposes of these Grant Conditions, “Retirement” shall mean the
Grantee’s voluntary termination of employment after the Grantee has attained age
fifty-five (55) and has a combination of age and full years of service with the
Employer that is equal to or greater than seventy (70).

 

3

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6. Payment with Respect to Performance Units.

(a) Except as otherwise set forth in Section 4, if the Committee certifies that
the Performance Goals and other conditions to payment of the Performance Units
have been met, shares of Company Stock equal to the vested earned Performance
Units shall be issued to the Grantee on the Vesting Date, subject to applicable
tax withholding and Section 19 below.

(b) If, prior to the Vesting Date, a Change in Control occurs and the Grantee
continues to be employed by the Employer through the Vesting Date, shares of
Company Stock (or other consideration, as described below) equal to the vested
CIC Earned Units shall be issued to the Grantee on the Vesting Date, subject to
applicable tax withholding and Section 19 below.

(c) If, prior to the Vesting Date, a Change in Control occurs and the Grantee
ceases to be employed by the Employer on or after the Change in Control on
account of (i) the Grantee’s Retirement, (ii) the Grantee’s termination by the
Employer without Cause, (iii) the Grantee’s termination for Good Reason, or
(iv) the Grantee’s Disability or death, shares of Company Stock (or other
consideration, as described below) equal to the vested CIC Earned Units shall be
issued to the Grantee within sixty (60) days following the Grantee’s date of
termination, subject to applicable tax withholding and Section 19 below.

(d) If the Grantee terminates employment on account of Retirement before a
Change in Control, any outstanding pro-rated Performance Units under
Section 3(c) may be earned as CIC Earned Units pursuant to Section 4(a), but in
all cases prorated by applying the fraction in Section 3(c), and such CIC Earned
Units shall vest on the date of the Change in Control. Shares of Company Stock
(or such other consideration, as described below) equal to the vested CIC Earned
Units shall be issued to the Grantee within sixty (60) days after the Change in
Control, subject to applicable tax withholding and Section 19 below.

(e) If, in connection with a Change in Control, shares of Company Stock are
converted into the right to receive a cash payment or other form of
consideration, the vested CIC Earned Units shall be payable in such form of
consideration, as determined by the Committee.

(f) Any fractional shares with respect to vested earned Performance Units shall
be paid to the Grantee in cash.

7. Dividend Equivalents with Respect to Performance Units.

(a) Dividend Equivalents shall accrue with respect to Performance Units and
shall be payable subject to the same vesting terms and other conditions as the
Performance Units to which they relate. Dividend Equivalents shall be credited
when dividends are declared on shares of Company Stock from the Grant Date until
payment date for the vested earned Performance Units. If, and to the extent that
the underlying Performance Units are forfeited, all related Dividend Equivalents
shall also be forfeited.

 

4

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(b) While the Performance Units are outstanding, the Company will keep records
in a bookkeeping account for the Grantee. On each date on which a dividend is
declared by the Company on Company Stock, the Company shall credit to the
Grantee’s account an amount equal to the Dividend Equivalents associated with
the Performance Units held by the Grantee on the record date for the dividend.
No interest will be credited to any such account.

(c) Dividend Equivalents shall be paid in cash at the same time as the
underlying vested earned Performance Units are paid.

(d) Notwithstanding the foregoing, if shares of Company Stock are converted to
cash as described in Section 6(e) above in connection with a Change in Control,
Dividend Equivalents shall cease to be credited with respect to the Performance
Units.

8. Non-Competition.

(a) In consideration for the grant of Performance Units made to the Grantee
under the terms of these Grant Conditions, the Grantee agrees that while the
Grantee is employed by the Employer and for a twelve (12) month period beginning
on the date that the Grantee ceases to be employed by the Employer for any
reason (the “Restriction Period”), the Grantee shall not, directly or
indirectly, (i) accept employment with, (ii) own, manage, operate, join,
control, solicit, finance, or participate in the ownership, management,
operation, acquisition, control or financing of, (iii) be connected as a
partner, principal, agent, representative, consultant or otherwise with, or
(iv) use or permit the Grantee’s name to be used in connection with, any
business or enterprise engaged directly or indirectly in any business or
enterprise engaged in a geographic area within fifty (50) miles of any location
from which the Employer is operating on the termination date (the “Geographic
Area”), in any business that is competitive to a business from which the
Employer, taken as a whole from all geographic areas, derived at least ten
percent (10%) of its respective annual gross revenues for the twelve (12) months
preceding the termination date.

(b) In consideration for the grant of Performance Units under these Grant
Conditions, the Grantee agrees that during the Restriction Period, the Grantee
shall not:

(i) directly or indirectly solicit, entice, broker or induce an agreement with
any person or entity that had a contractual agreement with the Employer during
the term of the Grantee’s employment to enter into an agreement or arrangement
with the Grantee or any third party that would preclude the person or entity,
either contractually or practically, from working with the Employer; or

(ii) directly or indirectly solicit, recruit or hire any employee (full-time or
part-time) of the Employer to work for a third party other than the Employer.

 

5

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(c) The Grantee acknowledges, agrees and represents that the type and periods of
restrictions imposed in these Grant Conditions are fair and reasonable, and that
such restrictions are intended solely to protect the legitimate interests of the
Employer, rather than to prevent the Grantee from earning a livelihood. The
Grantee recognizes that the Employer competes or may compete in the Geographic
Area and that the Grantee’s access to confidential information makes it
necessary for the Employer to restrict the Grantee’s post-employment activities
in the Geographic Area. The Grantee further represents that: (i) the Grantee is
familiar with the covenants not to compete and not to solicit set forth in these
Grant Conditions, (ii) the Grantee is fully aware of his or her obligations
hereunder, including, without limitation, the length of time, scope and
geographic coverage of these covenants, (iii) the Grantee finds the length of
time, scope and geographic coverage of these covenants to be reasonable, and
(iv) the Grantee is receiving valuable and sufficient consideration for the
Grantee’s covenants not to compete and not to solicit.

(d) The parties to these Grant Conditions acknowledge and agree that any breach
by the Grantee of any of the covenants or agreements contained in this Section 8
will result in irreparable injury to the Employer for which money damages could
not adequately compensate the Employer and therefore, in the event of any such
breach, the Employer shall be entitled (in addition to any other rights and
remedies which it may have at law or in equity) to have an injunction issued by
any competent court enjoining and restraining the Grantee and any other person
involved therein from continuing such breach without posting a bond. The
existence of any claim or cause of action which the Grantee may have against the
Employer or any other person shall not constitute a defense or bar to the
enforcement of such covenants. If any portion of the covenants or agreements
contained in this Section 8 is construed to be invalid or unenforceable, the
other portions of such covenants or agreements shall not be affected and shall
be given full force and effect without regard to the invalid or unenforceable
portion to the fullest extent possible. If any covenant or agreement in this
Section 8 is held to be unenforceable because of the duration or scope thereof,
then the court making such determination shall have the power to reduce the
duration and limit the scope thereof, and the covenant or agreement shall then
be enforceable in its reduced form. In addition to other actions that may be
taken by the Employer, if the Grantee breaches any of the covenants or
agreements contained in this Section 8, the Grantee shall forfeit all
outstanding Performance Units, and all outstanding Performance Units (whether or
not vested) shall immediately terminate.

9. Certain Corporate Changes.

If any change is made to the Company Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all the Performance Units, the Committee
shall adjust, in an equitable manner and as provided in the Plan, the number and
class of shares underlying the Performance Units to reflect the effect of such
event or change in the Company’s capital structure in such a way as to preserve
the value of the Performance Units, and the Committee shall adjust the
Performance Goals as necessary to reflect the effect of such event or change in
the Company’s capital structure. Any adjustment that occurs under the terms of
this Section 9 or the Plan will not change the timing or form of payment with
respect to any Performance Units.

10. No Stockholder Rights.

No shares of Company Stock shall be issued to the Grantee at the time the grant
is made, and the Grantee shall not be, nor have any of the rights or privileges
of, a shareholder of the Company with respect to any Performance Units recorded
in the account, including no voting rights and no rights to receive dividends
(other than Dividend Equivalents).

 

6

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11. No Right to Continued Employment.

Neither the award of Performance Units, nor any other action taken with respect
to the Performance Units, shall confer upon the Grantee any right to continue to
be employed by the Employer or shall interfere in any way with the right of the
Employer to terminate the Grantee’s employment at any time.

12. Termination or Amendment.

These Grant Conditions and the award made hereunder may be terminated or amended
by the Committee, in whole or in part, in accordance with the applicable terms
of the Plan.

13. Notice.

Any notice to the Company provided for in these Grant Conditions shall be
addressed to it in care of the Company’s Vice President for Human Resources, and
any notice to the Grantee shall be addressed to the Grantee at the current
address shown on the payroll system of the Company, or to such other address as
the Grantee may designate to the Company in writing. Any notice provided for
hereunder shall be delivered by hand, sent by telecopy or electronic mail or
enclosed in a properly sealed envelope addressed as stated above, registered and
deposited, postage and registry fee prepaid in the United States mail or other
mail delivery service. Notice to the Company shall be deemed effective upon
receipt. By receipt of these Grant Conditions, the Grantee hereby consents to
the delivery of information (including without limitation, information required
to be delivered to the Grantee pursuant to the applicable securities laws)
regarding the Company, the Plan, and the Performance Units via the Company’s
electronic mail system or other electronic delivery system.

14. Incorporation of Plan by Reference.

The Performance-Based Share Unit Grant and these Grant Conditions are made
pursuant to the terms of the Plan, the terms of which are incorporated herein by
reference, and shall in all respects be interpreted in accordance therewith. The
decisions of the Committee shall be conclusive upon any question arising
hereunder. The Grantee’s receipt of the Performance Units constitutes such the
Grantee’s acknowledgment that all decisions and determinations of the Committee
with respect to the Plan, these Grant Conditions, and/or the Performance Units
shall be final and binding on the Grantee, his or her beneficiaries and any
other person having or claiming an interest in the Performance Units. The
settlement of any award with respect to the Performance Units is subject to the
provisions of the Plan and to interpretations, regulations and determinations
concerning the Plan as established from time to time by the Committee in
accordance with the provisions of the Plan. A copy of the Plan will be furnished
to each Grantee upon request.

 

7

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15. Income Taxes; Withholding Taxes.

The Grantee is solely responsible for the satisfaction of all taxes and
penalties that may arise in connection with the award or settlement of
Performance Units pursuant to these Grant Conditions. At the time of taxation,
the Employer shall have the right to deduct from other compensation, or to
withhold shares of Company Stock, in an amount equal to the federal (including
FICA), state, local and foreign taxes and other amounts as may be required by
law to be withheld with respect to the Performance Units, provided that any
share withholding shall not exceed the Grantee’s minimum applicable withholding
tax rate for federal (including FICA), state, local and foreign tax liabilities.

16. Company Policies.

This Performance-Based Unit Grant and all shares issued pursuant to this grant
shall be subject to any applicable recoupment or clawback policies and other
policies implemented by the Board, as in effect from time to time.

17. Governing Law.

The validity, construction, interpretation and effect of the Performance-Based
Share Unit Grant and these Grant Conditions shall exclusively be governed by,
and determined in accordance with, the applicable laws of the Commonwealth of
Pennsylvania, excluding any conflicts or choice of law rule or principle.

18. Assignment.

The Performance-Based Share Unit Grant and these Grant Conditions shall bind and
inure to the benefit of the successors and assignees of the Company. The Grantee
may not sell, assign, transfer, pledge or otherwise dispose of the Performance
Units, except to a successor grantee in the event of the Grantee’s death.

 

8

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19. Section 409A.

The Performance-Based Share Unit Grant and these Grant Conditions are intended
to comply with Code Section 409A or an exemption, and payments may only be made
under these Grant Conditions upon an event and in a manner permitted by Code
Section 409A, to the extent applicable. Notwithstanding anything in these Grant
Conditions to the contrary, if required by Code Section 409A, if the Grantee is
considered a “specified employee” for purposes of Code Section 409A and if any
payment under these Grant Conditions is required to be delayed for a period of
six (6) months after separation from service pursuant to Code Section 409A, such
payment shall be delayed as required by Code Section 409A, and the accumulated
payment amounts shall be paid in a lump sum payment within ten (10) days after
the end of the six (6)-month period. If the Grantee dies during the postponement
period prior to payment, the amounts withheld on account of Code Section 409A
shall be paid to the personal representative of the Grantee’s estate within
sixty (60) days after the date of the Grantee’s death. Notwithstanding anything
in these Grant Conditions to the contrary, if the Performance Units are subject
to Code Section 409A and if required by Code Section 409A, any payments to be
made upon a termination of employment under these Grant Conditions may only be
made upon a “separation from service” under Code Section 409A. In no event may
the Grantee, directly or indirectly, designate the calendar year of a payment,
except in accordance with Code Section 409A. Notwithstanding anything in these
Grant Conditions to the contrary, if required by Code Section 409A, if CIC
Earned Units are subject to Code Section 409A, and if a Change in Control is not
a “change in control event” under Code Section 409A or the payment event does
not occur upon or within two years following a “change in control event” under
Code Section 409A, any vested CIC Earned Units shall be paid to the Grantee upon
the Vesting Date and not on account of an earlier termination of employment.

*        *        *

 

9

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Schedule A

Performance Goals

1. Performance Goals.

The Performance Units shall be earned based on Aqua America’s (the Company’s)
achievement of four Performance Goals, as follows:

 

  • 30% of the Target Award shall be earned based on the Company’s TSR (as
defined below) as compared to the TSR of the companies in the peer group
described in Section 3 below.

 

  • 30% of the Target Award shall be earned based on the Company’s TSR as
compared to the TSR of the reference companies in described in Section 4 below.

 

  • 20% of the Target Award shall be earned based on maintaining an average
ratio of operations and maintenance expenses as a percentage of revenues at Aqua
Pennsylvania, as described in Section 5 below.

 

  • 20% of the Target Award will be earned based on earning a cumulative total
earnings before taxes for the Company’s operations other than Aqua Pennsylvania,
as described in Section 6 below.

2. Calculation of TSR.

(a) Relative total shareholder return (“TSR”) means the Company’s TSR relative
to the TSR of each Peer Company in the Peer Group (as defined below) or each
Reference Company (as defined below), as applicable. At the end of the
Performance Period, the TSR for the Company, each Peer Company in the Peer Group
and each Reference Company shall be calculated by dividing the Closing Average
Share Value (as defined below) by the Opening Average Share Value (as defined
below).

(b) The term “Closing Average Share Value” means the average value of the common
stock for the trading days during the two calendar months ending on the last
trading day of the Performance Period, which shall be calculated as follows:
(i) determine the closing price of the common stock on each trading date during
the two-month period, (ii) multiply each closing price as of that trading date
by the applicable share number described below, and (iii) average the amounts so
determined for the two-month period. The Closing Average Share Value shall take
into account any dividends on the common stock for which the ex-dividend date
occurred during the Performance Period, as if the dividend amount had been
reinvested in common stock at the closing price on the ex-dividend date. The
share number in clause (ii) above, for a given trading day, is the sum of one
share plus the cumulative number of shares deemed purchased with such dividends.
Notwithstanding the foregoing, if the Closing Average Share Value is calculated
as of a Change in Control, then the Closing Average Share Value shall be based
on the two-month period ending immediately prior to the Change in Control.

 

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(c) The term “Opening Average Share Value” means the average value of the common
stock for the trading days during the two calendar months ending on the last
trading day prior to the beginning of the Performance Period, which shall be
calculated as follows: (i) determine the closing price of the common stock on
each trading date during the two-month period, (ii) multiply each closing price
as of that trading date by the applicable share number described below, and
(iii) average the amounts so determined for the two-month period. The Opening
Average Share Value shall take into account any dividends on the common stock
for which the ex-dividend date occurred during the two-month period, as if the
dividend amount had been reinvested in common stock at the closing price on the
ex-dividend date. The share number in clause (ii) above, for a given trading
day, is the sum of one share plus the cumulative number of shares deemed
purchased with such dividends.

3. Performance Units Earned Based on Comparative TSR to the Peer Group. Thirty
percent of the Target Award of Performance Units (the “Peer Group Portion”)
shall be earned based on the Company’s TSR as compared to the TSR of the
companies in the Peer Group for the Performance Period, in accordance with the
following:

(a) The Peer Group for this purpose consists of American Water Works Company
(AWK), American States Water Company (AWR), Aqua America, Inc. (WTR),
Connecticut Water Service, Inc. (CTWS), California Water Service Group (CWT),
Middlesex Water Company (MSEX) and SJW Corporation (SJW) (each a “Peer Company”
and collectively, the “Peer Group”).

(b) The Peer Group shall be subject to change as follows:

(i) In the event of a merger, acquisition or business combination transaction of
a Peer Company in which the Peer Company is the surviving entity and remains
publicly traded, the surviving entity shall remain a Peer Company.

(ii) In the event of a merger, acquisition or business combination transaction
of a Peer Company, a “going private” transaction or similar event involving a
Peer Company or the liquidation of a Peer Company, in each case where the Peer
Company is not the surviving entity or is no longer publicly traded, the company
shall no longer be a Peer Company.

 

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(c) The Peer Group Portion shall be earned based on how the Company’s TSR ranks
in comparison to the TSRs of the Peer Group in accordance with the following
schedule, depending on how many companies remain in the Peer Group at the end of
the Performance Period:

 

Ordinal Ranking of the
Company (including the
Company) Versus Peer
Group

 

Payout as a % of
Target Award

(7 Peer Companies)

 

Payout as a % of

Target Award

(6 Peer Companies)

 

Payout as a % of

Target Award

(5 Peer Companies)

 

Payout as a % of

Target Award

(4 Peer Companies)

 

Payout as a % of

Target Award

(1, 2 or 3 Peer
Companies)

1st

  200%   200%   200%   200%   200%

2nd

  170%   160%   150%   125%   100%

3rd

  130%   125%   100%   50%   0%

4th

  100%   75%   50%   0%   N/A

5th

  50%   25%   0%   N/A   N/A

6th

  0%   0%   N/A   N/A   N/A

7th

  0%   N/A   N/A   N/A   N/A

4. Performance Units Earned Based on Comparative TSR to the S&P MidCap Utilities
Index. Thirty percent of the Target Award of the Performance Units (the “S&P
Index Portion”) shall be earned based on the Company’s TSR as compared to the
TSR of the companies in the S&P MidCap Utilities Index, in accordance with the
following:

(a) The S&P Index Portion shall be earned based on how the Company’s TSR ranks
compares to the TSRs of the Reference Companies in the S&P MidCap Utilities
Index, according to the following schedule:

 

Percentile Ranking of the Company Versus

Reference Companies

   Payout as a % of Target Award  

90th or above

     200 % 

50th

     100 % 

30th

     50 % 

Below 30th

     0 % 

If the Company’s TSR rank is above the 30th percentile and falls between the
measuring points on the foregoing schedule, the percentage vesting will be based
on linear interpolation between the applicable measuring points.

(b) The companies in the S&P MidCap Utilities Index will be determined on the
first day of the Performance Period for purposes of the TSR calculation and will
be changed only in accordance with Section 4(c) below. No company shall be added
to the S&P MidCap Utilities Index during the Performance Period for purposes of
the TSR calculation.

(c) The term “Reference Company” means a company in the S&P MidCap Utilities
Index as of the first day of the Performance Period and will be subject to
change as follows:

(i) In the event of a merger, acquisition or business combination transaction of
a Reference Company in which the Reference Company is the surviving entity and
remains publicly traded, the surviving entity shall remain a Reference Company.

(ii) In the event of a merger, acquisition or business combination transaction
of a Reference Company, a “going private” transaction or similar event involving
a Reference Company or the liquidation of a Reference Company, in each case
where the Reference Company is not the surviving entity or is no longer publicly
traded, the company shall no longer be a Reference Company.

 

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5. Performance Units Earned Based on the Aqua Pennsylvania O&M Ratio. Twenty
percent of the Target Award of the Performance Units (the “O&M Ratio Portion”)
shall be earned based on maintaining an average of the annual ratios of the
consolidated operations and maintenance expenses to revenue for Aqua
Pennsylvania and its subsidiaries over the three-year Performance Period. The
O&M Ratio Portion shall be calculated according to the following schedule:

 

O&M RATIO METRIC

 

Aqua PA

O&M Ratio

3 YR Annual Avg.

Attainment

   RATING
(%  of
20%
PSU’s
Earned)  

31.41%

     50   

31.21%

     60   

31.01%

     70   

30.81%

     80   

30.61%

     90   

30.41%

     100   

30.21%

     110   

30.01%

     120   

29.81%

     130   

29.61%

     140   

29.41%

     150   

29.21%

     160   

29.01%

     170   

28.81%

     180   

28.61%

     190   

28.41%

     200   

If Aqua Pennsylvania’s ratio of operations and maintenance expense to revenues
is below the 31.41% level and falls between the measuring points on the
foregoing schedule, the percentage vesting will be based on linear interpolation
between the applicable measuring points.

 

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6. Performance Units Earned Based on the Earnings Before Taxes for the Company’s
operations other than Aqua Pennsylvania (Non-PA EBT). Twenty percent of the
Target Award of the Performance Units (the “Non-PA EBT”) shall be earned based
on the Company’s total cumulative income from continuing operations before
income taxes plus the Company’s income from discontinued operations before
income taxes, less the corresponding amounts from Aqua Pennsylvania, over the
three-year Performance Period. The Non-PA EBT Portion shall be calculated
according to the following schedule:

 

NON - PA Earnings Before Tax

 

Non PA

EBT

3 YR Combined

Attainment

$ 000’s Omitted

   RATING
%  of
20%
PSU’s
Earned  

$ 218,454

     50.0  

$ 223,309

     60.0  

$ 228,163

     70.0  

$ 233,018

     80.0  

$ 237,872

     90.0  

$ 242,727

     100.0  

$ 245,154

     110.0  

$ 247,582

     120.0  

$ 250,009

     130.0  

$ 252,436

     140.0  

$ 254,863

     150.0  

$ 257,291

     160.0  

$ 259,718

     170.0  

$ 262,145

     180.0  

$ 264,572

     190.0  

$ 267,000

     200.0  

If the Company’s Non-PA EBT as defined is above $218,454 and falls between the
measuring points on the foregoing schedule, the percentage vesting will be based
on linear interpolation between the applicable measuring points.

7. General Terms. Any portion of the Performance Units that is not earned as of
the end of the Performance Period shall be forfeited as of the end of the
Performance Period (or as provided above upon an earlier Change in Control). In
no event shall the maximum number of Performance Units that may be payable
pursuant to these Grant Conditions exceed 200% of the Target Award.

 

5