exv10w24



 




EXHIBIT 10.24




AQUA AMERICA, INC.

and SUBSIDIARIES

2007 ANNUAL CASH INCENTIVE COMPENSATION PLAN




BACKGROUND





In 1989, the Company and its compensation consultant conducted a
feasibility study to determine whether the Company should implement an
incentive compensation plan. The study was prompted by the positive
experience of other investor-owned water companies with incentive
compensation.




The study included interviews with executives and an analysis of
competitive compensation levels. Based on the results, the
compensation consultant recommended that the Company’s objectives and
competitive practice supported the adoption of an annual incentive
plan (the “Plan”). The Company has had a cash incentive compensation
plan in place since 1990 and management and the Board of Directors
believe it has had a positive effect on the Company’s operations,
aiding employees, shareholders (higher earnings) and customers (better
service and controlling expenses).




The Plan has two components — a Management Incentive Program and an
Employee Recognition (“Chairman’s Award”) Program.




The Plan is designed to provide an appropriate incentive to the
officers, managers and certain other key employees of the Company.
The 2007 Management Incentive Program will cover officers, managers
and certain key employees of Aqua America, Inc., and its subsidiaries.




All incentive awards under the Plan shall be paid by March 15 of the
calendar year following the calendar year in which such awards are
earned, or as soon as administratively practicable thereafter.



MANAGEMENT INCENTIVE PROGRAM




Performance Measures




	 	•	 	Annual incentive bonus awards are calculated by multiplying an individual’s
Target Bonus by a Company Factor based on the applicable company’s performance and an
Individual Factor based on the individual employee’s performance.




 


 









 






	 	 	 	The approach of having a plan tied to the applicable company’s income performance is
appropriate as the participants’ assume some of the same risks and rewards as the
shareholders who are investing in the company and making its capital construction
and acquisition programs possible. Customers also benefit from the participants’
individual objectives being met, as improvements in performance are accomplished by
controlling costs, improving efficiencies and enhancing customer service. For these
reasons, future rate relief should be lessened and less frequent, which directly
benefits all customers.
	 
	 	•	 	The applicable company’s actual after-tax net income from continuing operations
or earnings before interest, taxes and depreciation (“EBITD”) relative to its annual
budget will be the primary measure for the company’s performance. The measurement to
be used as the Company Factor (financial factor, thresholds and weighting by applicable
business unit) for each participant will be established by the Chairman of the Company
and, for the senior executives of the Company, approved individually by the Executive
Compensation and Employee Benefits Committee. Each year a “Target Net Income or
EBITD” level will be established. Portions of the Company Rating Factor may be tied to
the financial targets of more than one company for some participants whose
responsibilities involve more than one company. For purposes of the Plan, the Target
Net Income or EBITD may differ from the budgeted net income or EBITD level. For 2007,
the Target Net Income or EBITD will exclude the impact of any unbudgeted extraordinary
gains or losses as a result of changes in accounting principles.
	 
	 	•	 	Based on a review of historic performance, the minimum or threshold level of
performance is set at 90 percent of the Target Net Income or EBITD. That is, no bonus
awards will be made if actual net income is less than 90 percent of the Target Net
Income or EBITD for the year. No additional bonus will be earned for results exceeding
110 percent of the Target Net Income or EBITD.
	 
	 	•	 	Each individual’s performance and achievement of his or her objectives will
also be evaluated and factored into the bonus calculation (the “Individual Factor”).
Performance objectives for each participant are established each year and are primarily
directed toward customer growth, improving customer service, controlling costs and
improving efficiencies and productivity. Each objective has specific performance
measures that are used to determine the level of achievement for each objective. A
participant’s target Individual Factor should be no more than 90 points, with the
possibility of additional points up to 110 points being awarded for measurable
performance above the participant’s targeted performance level. Participants must
achieve at least 70 points for their Individual Factor to be eligible for a bonus award
under the Plan.




 


 









 






Participation




	 	•	 	Eligible participants consist of officers, managers and certain key employees.
	 
	 	•	 	Participation in the Management Incentive Program will be determined each year.
Each participant will be assigned a “Target Bonus Percentage” ranging from 5 to 70
percent depending on duties and responsibilities. The Executive Compensation and
Employee Benefits Committee will approve the Target Bonus Percentage for the CEO and
the senior executives designated by the Committee each year.
	 
	 	•	 	The Target Bonus Percentage for each participant will be applied to their base
salary.
	 
	 	•	 	Actual bonuses may range from 0, if the company’s financial results falls below
the minimum threshold or the participant does not make sufficient progress toward
achieving his or her objectives (i.e. performance measure points totaling less than 70
points), to 187.5 percent if performance — both Company and individual — is rated at
the maximum.
	 
	 	•	 	New employees who are hired into a position that is eligible to participate in
the Management Incentive Plan, will normally be eligible to receive a portion of the
bonus calculated in accordance with this Plan that is pro-rated based on the number of
full calendar months between the new employee’s hire date and the end of the calendar
year.
	 
	 	•	 	Employees who would otherwise be eligible to participate in this Management
Incentive Plan, but who leave employment with the company, either voluntarily,
involuntarily or as a result of retirement, prior to the end of the Company’s fiscal
year will not receive a bonus for the year in which their employment terminates. If an
employee who would otherwise be eligible to participate in this Management Incentive
Plan dies, the company will pay the deceased employee’s estate a portion of the bonus
the deceased employee would otherwise have been entitled to assuming a 100% Individual
Factor, but pro-rated for the number of full calendar months the employee completed
before his or her death.




 


 









 






Company Factor




	 	•	 	Company performance will be measured on the following schedule:





	 	 	 	 	 	 	 	 	 
	 	 	Percent of	 	 	Company	 
	 	 	Target	 	 	Factor	 
	Threshold
	 	 	<90	%	 	 	0	%
	 
	 	 	90	 	 	 	50	 
	 
	 	 	92	 	 	 	65	 
	 
	 	 	95	 	 	 	80	 
	 
	 	 	96	 	 	 	85	 
	 
	 	 	97	 	 	 	90	 
	 
	 	 	98	 	 	 	94	 
	 
	 	 	99	 	 	 	97	 
	Plan
	 	 	100	 	 	 	100	 
	 
	 	 	105	 	 	 	110	 
	 
	 	 	>110	 	 	 	125	 







	 	•	 	The actual Company Factor should be calculated by interpolation between the
points shown in the table above.
	 
	 	•	 	Regardless of the Company rating resulting from this Schedule, the Executive
Compensation and Employee Benefits Committee retains the authority to determine the
final Company Factor for purposes of this Plan.






Individual Factor




	 	•	 	Individual performance will be measured on the following scale:





	 	 	 	 	 
	Performance Measure	 	Individual	 
	Points	 	Factor	 
	0 - 69
	 	 	0	%
	70
	 	 	70	%
	80
	 	 	80	%
	90
	 	 	90	%
	100
	 	 	100	%
	110
	 	 	110	%







	 	•	 	In addition, up to 40 additional points and additional percentage points may be
awarded to a participant at the discretion of the Chief Executive Officer for exemplary
performance. Individual performance points for the Chief Executive Officer are
determined by the Executive Compensation and Employee Benefits Committee.




 


 









 





Sample Calculations





	•	 	Example 1





	 	 	 	 	 
	 

	 	Salary or
	 	$70,000 
	 

	 	Target Bonus
	 	10 percent ($7,000)
	 

	 	Company Factor
	 	100 percent
	 

	 	Individual Factor
	 	90 percent







Calculation:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Individual
	 	 	 	Company
	 	 	 	Individual	 	 
	 

	 	Target Bonus
	 	x
	 	Factor
	 	x
	 	Factor
	 	=
	 	Bonus Earned	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	$	7,000	 	 	x
	 	 	100	%	 	x
	 	 	90	%	 	=
	 	$6,300 
	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







	•	 	Example 2






	 	•	 	Using the same salary and target bonus, but assuming Company performance was
less than 90 percent of Target EBITD, there would be no bonus earned.
	 
	 	 	 	Calculation:






$7,000          x          0          x          90%          =          0




	•	 	Example 3






	 	•	 	Similarly, if the Individual Factor is rated below 70 points, no bonus would be
earned regardless of the Company Factor.
	 
	 	 	 	Calculation:






$7,000          x          100%          x          0          =          0


 


 









 






	•	 	Example 4






	 	•	 	If the Company Factor is allocated between two companies, the bonus will be
calculated separately based on the allocation.
	 
	 	 	 	Calculation:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Company
	 	 	 	Company
	 	 	 	Individual
	 	 	 	 	 	 	 	 
	Target Bonus

	 	x
	 	Factor
	 	x
	 	Allocation
	 	x
	 	Factor
	 	=
	 	Bonus Earned
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	$7,000

	 	x
	 	 	100	%	 	x
	 	 	20	%	 	x
	 	 	90	%	 	=
	 	$	1,260	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	$7,000

	 	x
	 	 	110	%	 	x
	 	 	80	%	 	x
	 	 	90	%	 	=
	 	 	$5,544	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Bonus

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	=
	 	$6,804 
	 	 







	•	 	Example 5






	 	•	 	It is also possible that one portion of the applicable Company Rating Factor is
zero, for which there would be no bonus, regardless of the participant’s Individual
Rating Factor.
	 
	 	 	 	Calculation:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Company
	 	 	 	Company
	 	 	 	Individual
	 	 	 	 	 	 	 	 
	Target Bonus

	 	x
	 	Factory
	 	x
	 	Allocation
	 	x
	 	Factor
	 	=
	 	Bonus Earned
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	$7,000

	 	x
	 	 	0	%	 	x
	 	 	20	%	 	x
	 	 	90	%	 	=
	 	$	0	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	$7,000

	 	x
	 	 	110	%	 	x
	 	 	80	%	 	x
	 	 	90	%	 	=
	 	 	$5,544	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Bonus

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	=
	 	$	5,544	 	 	 





 


 









 





EMPLOYEE RECOGNITION (“CHAIRMAN’S AWARD”) PROGRAM





	1.	 	In addition to the Management Incentive Program, the Company maintains an Employee
Recognition Program known as the Chairman’s Award program to reward non-union employees who
are not eligible for the management bonus plan for superior performance that contains costs,
improves efficiency and productivity of the workforce and better serves our customers. Awards
may also be made for a special action or heroic deed, or for a project that positively impacts
the performance or image of the Company.
	 
	2.	 	Awards will be made from an annual pool designated by the Chairman of Aqua America with the
approval of the Executive Compensation and Employee Benefits Committee. Unused funds will not
be carried over to the next year. If financial performance warrants, management may request
special awards under the program.
	 
	3.	 	In general, Chairman’s Awards will not be made to employees of a company that does not
achieve at least 90% of its EBITD objective for the year.
	 
	4.	 	Awards may be made throughout the year, however, no more than one-third of a company’s
Chairman’s Award pool may be awarded until the company’s final EBITD for the year is
determined.
	 
	5.	 	Nominations for employees to receive Chairman’s Awards will be made to the applicable officer
and should include documentation on the reasons for the recommendations. The applicable
officer will review the nominations and forward their recommendations to the Chairman of Aqua
America.
	 
	6.	 	The Chairman will determine the individuals to actually receive a bonus and the amount.
The maximum award to any one employee is $5,000.
	 
	7.	 	Employees who would otherwise be eligible to participate in the Chairman’s Award
program, but who leave employment with the company, either voluntarily, involuntarily or as
a result of retirement, prior to the end of the Company’s fiscal year will not receive a
Chairman’s Award for the year in which their employment terminates.