Document:

Exhibit 4.40

Exhibit 4.40

TWELFTH AMENDMENT TO CREDIT AGREEMENT

THIS TWELFTH AMENDMENT TO CREDIT AGREEMENT is made as of this 2nd day of December,
2009, by and among AQUA PENNSYLVANIA, INC., a Pennsylvania corporation (formerly known as
Pennsylvania Suburban Water Company, successor by merger to Philadelphia Suburban Water Company)
(“Borrower”), the several banks which are parties to this Agreement (each a “Bank” and
collectively, “Banks”) and PNC BANK, NATIONAL ASSOCIATION in its capacity as agent for Banks (in
such capacity, “Agent”).

BACKGROUND

A. Borrower, Agent and Banks are parties to a Credit Agreement, dated as of December 22, 1999,
as amended by a First Amendment to Credit Agreement dated as of November 28, 2000, a Second
Amendment to Credit Agreement dated as of December 18, 2001, a Third Amendment to Credit Agreement
dated as of December 16, 2002, a Fourth Amendment dated as of December 24, 2002, a Fifth Amendment
to Credit Agreement dated as of December 14, 2003, a Sixth Amendment to Credit Agreement dated as
of December 12, 2004, a Seventh Amendment to Credit Agreement dated as of December 6, 2005, an
Eighth Amendment to Credit Agreement dated as of December 1, 2006, a Ninth Amendment to Credit
Agreement dated as of February 28, 2007, a Tenth Amendment to Credit Agreement dated as of December
6, 2007 and an Eleventh Amendment to Credit Agreement dated as of December 4, 2008 (as so amended,
the “Credit Agreement”), pursuant to which Banks agreed to make revolving credit loans to Borrower
in an aggregate outstanding amount of up to $70,000,000 (the “Loans”). The Loans are evidenced by
Borrower’s Revolving Credit Notes in the aggregate principal face amount of $70,000,000.

B. Borrower, Agent and Banks desire to extend the Termination Date and modify certain interest
rate and fee provisions of the facility, all on the terms and subject to the conditions herein set
forth.

NOW THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

AGREEMENT

1. Terms. Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to such terms in the Credit Agreement.

 

 

 

2. Amendments to Credit Agreement. Effective on December 2, 2009 (the “Effective
Date”) the Credit Agreement is hereby amended as follows:

(a) The definitions of “Base Rate” and “Termination Date” in Section 1.1 are hereby amended
and restated to read in full as follows:

““Base Rate”: for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/100th of 1%) equal to the highest of (a) the Prime
Rate in effect on such day, (b) the Federal Funds Open Rate in effect on
such day plus one half of one percent (0.5%) and (c) the Daily LIBOR Rate
plus one hundred twenty five basis points (1.25%). If for any reason the
Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Open Rate
for any reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the definition of such term, the
Base Rate shall be determined without regard to clause (b) of the first
sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate due to a change in
the Prime Rate, the Federal Funds Open Rate or the Daily LIBOR Rate shall be
effective on the effective date of such change in the Prime Rate, the
Federal Funds Open Rate or the Daily LIBOR Rate, as the case may be.

““Termination Date”: the earlier of (a) November 30, 2010 or any
later date to which the Termination Date shall have been extended pursuant
to subsection 2.8(d) hereof and (b) the date the Commitments are terminated
as provided herein.”

(b) Section 2.6(b) is hereby amended by deleting “seventy five basis points (.75%)” and
substituting therefor “one hundred twenty five basis points (1.25%).”

(c) Section 3.10(b) of the Credit Agreement is hereby amended and restated to read in full as
follows:

“(b) The aggregate present value of accrued benefit liabilities
under the retirement income Plans maintained by the Borrower and
other Commonly Controlled Entities using the long-term assumptions
under the FAS 35 calculations prepared for plan audit purposes do
not exceed the asset values for these Plans as of the latest
valuation date of January 1, 2009 by more than $18,000,000.”

(d) Schedule 3.13 to the Credit Agreement is hereby amended and replaced with Schedule 3.13
attached hereto.

3. Amendment to Working Cash Rider to Credit Agreement. The first sentence of Section
2 of the Working Cash, Line of Credit, Investment Sweep Rider dated as of May 11, 2001 between the
Borrower and the Agent, which constitutes a Cash Management Agreement under Section 2.2 (k) of the
Credit Agreement, is hereby amended and restated to read in full as follows:

“Effective as of the date hereof, Bank has agreed that Loans made by
Bank under the Line of Credit shall bear interest at a variable rate
per annum equal to the sum of (A) the Index plus (B) one hundred
twenty five basis points (1.25%).”

 

2

 

4. Loan Documents. Except where the context clearly requires otherwise, all
references to the Credit Agreement in any of the Loan Documents or any other document delivered to
Banks or Agent in connection therewith shall be to the Credit Agreement as amended by this
Agreement.

5. Borrower’s Ratification. Borrower agrees that it has no defenses or set-offs
against Banks or Agent or their respective officers, directors, employees, agents or attorneys,
with respect to the Loan Documents, all of which are in full force and effect, and that all of the
terms and conditions of the Loan Documents not inconsistent herewith shall remain in full force and
effect unless and until modified or amended in writing in accordance with their terms. Borrower
hereby ratifies and confirms its obligations under the Loan Documents as amended hereby and agrees
that the execution and delivery of this Agreement does not in any way diminish or invalidate any of
its obligations thereunder.

6. Representations and Warranties. Borrower hereby represents and warrants to Agent
and Banks that:

(a) The representations and warranties made in the Credit Agreement, as the Credit Agreement
is amended by this Agreement, are true and correct in all material respects as of the date hereof;

(b) No Default or Event of Default under the Credit Agreement exists on the date hereof; and

(c) This Agreement has been duly authorized, executed and delivered so as to constitute the
legal, valid and binding obligation of Borrower, enforceable in accordance with its terms.

All of the above representations and warranties shall survive the making of this Agreement.

7. Conditions Precedent. The effectiveness of the amendments set forth herein is
subject to the fulfillment, to the satisfaction of Agent and its counsel, of the following
conditions precedent:

(a) Borrower shall have delivered to Agent, with copies or counterparts for each Bank as
appropriate, the following, all of which shall be in form and substance satisfactory to Agent and
shall be duly completed and executed:

(i) This Agreement;

(ii) Copies, certified by the Secretary or an Assistant Secretary of Borrower of resolutions
of the board of directors of Borrower in effect on the date hereof authorizing the execution,
delivery and performance of this Agreement and the other documents and transactions contemplated
hereby;

(iii) Copies, certified by its corporate secretary of the articles of incorporation,
certificate of formation, and by-laws of Borrower as in effect, or a certificate
stating that there have been no changes to any such documents since the most recent date, true
and correct copies thereof were delivered to Agent; and

(iv) Such additional documents, certificates and information as Agent or Banks may require
pursuant to the terms hereof or otherwise reasonably request.

 

3

 

(b) The representations and warranties set forth in the Credit Agreement, as amended by this
Agreement, shall be true and correct in all material respects on and as of the date hereof.

(c) No Default or Event of Default shall have occurred and be continuing as of the date
hereof.

(d) Borrower shall have paid to Agent for the benefit of Banks an additional fee of $175,000
to be distributed to Banks pro rata in accordance with their Commitments.

8. Miscellaneous.

(a) All terms, conditions, provisions and covenants in the Loan Documents and all other
documents delivered to Agent and Banks in connection therewith shall remain unaltered and in full
force and effect except as modified or amended hereby. To the extent that any term or provision of
this Agreement is or may be deemed expressly inconsistent with any term or provision in any Loan
Document or any other document executed in connection therewith, the terms and provisions hereof
shall control.

(b) The execution, delivery and effectiveness of this Agreement shall neither operate as a
waiver of any right, power or remedy of Agent or Banks under any of the Loan Documents nor
constitute a waiver of any Default or Event of Default or default thereunder.

(c) In consideration of Agent’s and Banks’ agreement to amend the existing credit facility,
Borrower hereby waives and releases Agent and Banks and their respective officers, attorneys,
agents and employees from any liability, suit, damage, claim, loss or expense of any kind or
failure whatsoever and howsoever arising that it ever had up until, or has as of, the date of this
Agreement.

(d) This Agreement constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous understandings and agreements.

(e) In the event any provisions of this Agreement shall be held invalid or unenforceable by
any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.

(f) This Agreement shall be governed by and construed according to the laws of the
Commonwealth of Pennsylvania.

(g) This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and
their respective successors and assigns and may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

(h) The headings used in this Agreement are for convenience of reference only, do not form a
part of this Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.

 

4

 

IN WITNESS WHEREOF, Borrower, Agent and Banks have caused this Agreement to be executed by
their duly authorized officers as of the date first above written.

	 	 	 	 	 
	 	AQUA PENNSYLVANIA, INC.

 	 
	 	By:  	/s/
David Smeltzer
 	 
	 	 	Title: Chief Financial Officer 	 
	 
	 	PNC BANK, NATIONAL ASSOCIATION, 
as a Bank and
as Agent

 	 
	 	By:  	/s/ Meredith L. Jermann
 	 
	 	 	Title: Vice President 	 
	 
	 	TD BANK, N.A.

 	 
	 	By:  	/s/ Thomas M. McGrory
 	 
	 	 	Title: Vice President 	 

 

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Schedule 3.13

Environmental Matters

A. Little Washington Wastewater Company entered into a Consent Order and Agreement dated September
11, 2008 with the Pennsylvania Department of Environmental Protection (DEP) for the Media
wastewater system. The agreement requires the company to take certain actions to avoid sanitary
sewer overflows at two lift stations. The agreement arose from conditions that pre-existed
ownership of the system by LWWC and the company has already taken substantial measures to address
these conditions. LWWC is in compliance with the terms and conditions of the agreement.

B. Borrower acquired the Honesdale water system by merger on October 1, 2008. The system owners
had been presented with a Consent Order and Agreement by Pennsylvania Department of Environment
Protection (DEP) to treat or abandon the Quarry Well that from time to time had tested above the
Maximum Contaminant Level for arsenic. The Consent Order and Agreement was never fully executed.
Borrower has received a permit to construct treatment at the well. Construction is underway and
due to be complete at the end of 2009.

C. Borrower acquired the assets of the Emlenton water system in 2008. DEP had issued orders to
the former owners of the system. Prior to the acquisition, Borrower entered into a Consent Order
and Agreement with DEP to bring this system into compliance. Borrower has made substantial
improvements to the system, has designed and bid a project for a new treatment plant, and is in
compliance with the terms of the COA.

D. In 2009, Borrower was designated by DEP and the Pennsylvania Public Utilities Commission as the
owner of assets of Washington Park water and wastewater systems. Borrower entered into a Consent
Order and Agreement with DEP to bring these systems into compliance. Borrower has already made
improvements to the system and is in compliance with the COA.

E. In its water treatment process, Borrower uses chemicals, including chlorine and caustic soda,
which are listed as hazardous substances. These chemicals are, in all material respects, stored
and used at Borrower’s plants and facilities in accordance with the environmental laws.

F. Borrower operates a central laboratory at its Bryn Mawr facility for analysis of drinking water
samples. To perform required analyses, Borrower maintains small quantities of solvents, reagents
and chemical standards, some of which are listed as hazardous substances. These materials, in all
material respects, are stored and used in compliance with the environmental laws.Exhibit 10.24

Exhibit 10.24

AQUA AMERICA, INC.

and SUBSIDIARIES

2010 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 Management Incentive Program covers 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.

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 portion of the calculation of the annual incentive bonus
tied to the applicable company’s financial 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 after-tax net income from continuing operations or earnings before
interest, taxes and depreciation (“EBITD”) for the applicable company or business unit
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 Executive Compensation Committee for those participants whose annual
incentive compensation is determined by the Committee and by the Chairman of the
Company for all other participants. Each year a “Target Net Income” or “Target EBITD”
level will be established for the applicable company or business unit. Portions of the
Company Factor may be tied to the financial targets of more than one company or
business unit for some participants whose responsibilities involve more than one
company or business unit. For purposes of the Plan, the Target Net Income or EBITD may
differ from the budgeted net income or EBITD level. The applicable company’s or
business unit’s final net income or EBITD may exclude the impact of any unbudgeted
extraordinary gains or losses as a result of changes in accounting principles and the
financial results may be adjusted for other factors as deemed appropriate by the
Executive Compensation Committee for those participants whose annual incentive
compensation is determined by the Committee, and by the Chairman of the Company for the
other participants.
	 
	 	•	 	The threshold level of performance is set at 75 percent of the Target Net
Income or Target EBITD. If the final net income or EBITD for the applicable company or
business unit for the year is less than 75 percent of the Target Net Income or Target
EBITD, the Company Factor for that company or business unit will be set at 0%. 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.

 

2

 

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 Committee
will approve the Target Bonus Percentage for the CEO and the senior officers 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 fall below
the minimum threshold or the participant does not make sufficient progress toward
achieving his or her objectives (i.e. performance measure points totaling less than 70
points), to 187.5 percent if performance — both Company and individual — is rated at
the maximum.
	 
	 	•	 	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 (other
than for retirement), or involuntarily, 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% Company Factor and 100% Individual Factor, but pro-rated for the number
of full calendar months the employee completed before his or her death.
	 
	 	•	 	If an employee who would otherwise be eligible to participate in this
Management Incentive Plan retires from the Company within the first ten (10) months of
the Company’s fiscal year, the employee will receive payment of the bonus calculated
under the terms of this Plan that the employee would otherwise have been entitled to
assuming a 100% Company Factor and 100% Individual Factor, but pro-rated for the number
of full calendar months the employee completed before his or her retirement. If an
employee who would otherwise be eligible to participate in this Management Incentive
Plan retires from the Company after completion of the
first ten (10) months of the Company’s fiscal year, the employee will receive
payment of the bonus calculated under the terms of this Plan, but pro-rated for the
number of full calendar months the employee completed before his or her retirement.

 

3

 

Compliance

	 	•	 	The Management Incentive Program is intended to comply with the short-term
deferral rule set forth in the regulations under section 409A of the Code, in order to
avoid application of section 409A to the Management Incentive Program. If and to the
extent that any payment under this Management Incentive Program is deemed to be
deferred compensation subject to the requirements of section 409A, this Management
Incentive Program shall be administered so that such payments are made in accordance
with the requirements of section 409A.

	•	 	Recovery of Incentive Compensation

	 	•	 	In the event of a significant restatement of our financial results caused by
fraud or willful misconduct, the Company reserves the right to review the incentive
compensation received by the participant with respect to the period to which the
restatement relates, recalculate the Company’s results for the period to which the
restatement relates and seek reimbursement of that portion of the incentive
compensation that was based on the misstated financial results from the participant
whose fraud or willful misconduct was the cause of the restatement.

Company Factor

	 	•	 	Company performance will be measured on the following schedule:

	 	 	 	 	 	 	 	 	 
	 	 	Percent of	 	 	Company	 
	 	 	Target	 	 	Factor	 
	 
	 	 	 	 	 	 	 	 
	Threshold
	 	 	<75	%	 	 	0	%
	 
	 	 	75	 	 	 	35	 
	 
	 	 	80	 	 	 	40	 
	 
	 	 	85	 	 	 	45	 
	 
	 	 	89.9	 	 	 	50	 
	 
	 	 	90	 	 	 	60	 
	 
	 	 	95	 	 	 	80	 
	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 Committee retains the authority to determine the final Company
Factor for participants whose annual incentive compensation is determined by the
Committee and by the Chairman of the Company for the other participants under the
Plan.

 

4

 

	•	 	Individual Factor

	 	•	 	Individual performance will be measured on the following scale:

	 	 	 	 	 
	 	 	Individual	 
	Performance Measure 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 Chairman for exemplary performance,
subject to approval by the Executive Compensation Committee for those participants
whose annual incentive compensation is determined by the Committee. Individual
performance points for the Chief Executive Officer are determined by the Executive
Compensation 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
	 
	 	 
	 	 
	 	 

 

5

 

Example 2

	 	 	 	 	 
	Salary or
	 	 	$70,000	 
	Target Bonus
	 	10 percent ($7,000	)
	Company Factor
	 	70 percent	 
	Individual Factor
	 	90 percent	 

Calculation:

	 	 	 	 	 	 	 
	Target Bonus

	x	Individual

Factor
	x	Company

Factor
	=	Individual

Bonus Earned
	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 
	$7,000
	x	90%
	x	70%
	=	$4,410
	 
	 	 
	 	 
	 	 

Example 3

	 	•	 	If the Individual Factor is rated below 70 points, no bonus would be earned
regardless of the Company Factor.

Calculation:

	 	 	 	 	 	 	 
	Individual 

Target Bonus
	x	Company

Factor
	x	Individual

Factor
	=	Bonus Earned
	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 
	$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:

	 	 	 	 	 	 	 	 	 	 	 
	Target Bonus

	x	Company Factor
	x	Company

Allocation
	x	Individual

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
	 

	 	 	 	 	 	 	 	 	 	 

 

6

 

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. Awards are entirely discretionary and may or may not
be awarded to any individual employee. The availability of Awards is also contingent upon the
Company’s meeting certain metrics of successful performance.
	 
	2.	 	Awards may be made from an annual pool designated by the Chairman of Aqua America with the
approval of the Executive Compensation Committee. Unused funds will not be carried over to
the next year. If financial performance warrants, management may request special Awards under
the program. The individual Award calculation and the distribution of Chairman’s Awards to
non-management employees are solely at the discretion of the officer to whom the employee
reports and the Chairman of Aqua America. No Chairman’s Award(s) granted to non-management
employees in prior years should be construed as a guaranty of future awards.
	 
	3.	 	In general, the company or business unit must achieve at least 90% of its EBITD objective for
the year to be eligible for the full amount of the pool created for Chairman’s Awards for that
company or business unit for the year. Chairman’s Awards will not be made to employees of a
company or business unit that does not achieve at least 75% of its EBITD objective for the
year, however, the Chairman may approve a pool of up to one-third of the annual pool that
would otherwise be available for that company or business unit for awards to the eligible
employees of that company or business unit if the company or business unit achieves between
75% and 89.9% of its EBITD target.
	 
	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. The applicable officer has complete discretion to choose to recommend an Award or
not, depending on factors and considerations deemed by the officer as relevant. Moreover, the
Chairman may exercise his own discretion to determine if any individual employee will receive
an Award.
	 
	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

 

	7.	 	An employee must be actively employed by the Company at the end of the fiscal year in order
to be eligible to be considered to receive a Chairman’s Award, unless the award is made to the
eligible employee during the year.
	 
	8.	 	All Chairman’s Awards under the Employee Recognition Program shall be paid by March 15 of the
calendar year following the calendar year in which such awards are earned.
	 
	9.	 	The Employee Recognition Program is intended to comply with the short-term deferral rule set
forth in the regulations under section 409A of the Code, in order to avoid application of
section 409A to the Plan. If and to the extent that any payment under this Employee
Recognition Program is deemed to be deferred compensation subject to the requirements of
section 409A, this Employee Recognition Program shall be administered so that such payments
are made in accordance with the requirements of section 409A.

 

8

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