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EXHIBIT 10.11
PHILADELPHIA SUBURBAN CORPORATION
PHILADELPHIA SUBURBAN WATER COMPANY
1995 INCENTIVE COMPENSATION PLAN
--------------------------------
BACKGROUND
- - ----------
-- During the first quarter of 1989, the Company and its
compensation consultant conducted a feasibility study
to determine whether the Company should implement an
incentive compensation plan. The study was prompted by
the positive experience of other investor-owned water
companies and PSC's experience with incentive
compensation.
-- The study included interviews with PSWC and PSC
executives and an analysis of competitive compensation
levels. Based on the results, the compensation
consultant recommended that the Company's objectives
and competitive practice supported the adoption of an
annual incentive plan.
-- The program has two components - a Management Incentive
Plan and an Employee Recognition Plan.
-- The Plan is designed to provide an appropriate
incentive to the officers and managers of the Company
in the form of proprietary interest in the Company. The
1995 Management Incentive Plan will cover all officers
and managers of Philadelphia Suburban Corporation, and
its subsidiaries, except Utility & Municipal Services,
Inc., which is covered by a separate incentive bonus
arrangement based on the profitability of that
subsidiary.
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MANAGEMENT INCENTIVE PLAN
- - -------------------------
-- Performance Measures
-- Annual incentive bonus awards are calculated by
multiplying an individual's Target Bonus by a
Company Rating factor based on the Company's
performance and an Individual Rating factor based
on the individual employee's performance.
The benefit of having a plan tied to the Company's
income performance to shareholders is appropriate
as the participants' assume some of the same risks
and rewards as the shareholders. Ratepayers,
however, also benefit as improvements in
performance is accomplished by controlling costs,
improving efficiencies, and customer service. For
these reasons, rate requests should be reduced and
less frequent, which directly benefits the
ratepayer and the shareholder.
-- The Company's actual after-tax net income from
continuing operations relative to the annual
budget will be the primary measure for the
Company's performance. Each year a "Target Net
Income" level will be established. For purposes of
the Plan, the Target Net Income may differ from
the budgeted net income level. For 1995, the
Target Net Income will exclude the impact of
adverse PUC or court rulings on FAS 106, the
effect of any unbudgeted extraordinary gains or
losses, changes in accounting principles, changes
in tax rates and any gains or losses related to
the discontinued operations.
-- Based on a review of historic performance, the
minimum or threshold level of performance is set
at 90 percent of the Target Net Income. That is,
no bonus awards will be made if actual net income
is less than 90 percent of the Target Net Income
for the year. No additional bonus will be earned
for results exceeding 110 percent of the Target
Net Income.
-- Each individual's performance and achievement of
his or her objectives will also be evaluated and
factored into the bonus calculation.
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-- Participation
-- Participation in the Plan will be determined each
year. Each participant will be assigned a "Target
Bonus Percentage" ranging from 5 to 40 percent of
salary depending on duties and responsibilities.
-- Actual bonuses may range from 0, if the Company's
financial results fall below threshold or the
participant's performance rating is below
expectations, (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.
-- Exhibit 1 shows the recommended participants and
the Target Bonus Percentages for the current year.
-- Company Performance
-- Company performance will be measured on the following
schedule:
Percent of Company
1995 Plan Rating
---------- -------
Threshold.............. 90% 50%
92 65
95 80
96 85
97 90
98 94
99 97
Plan................... 100 100
105 110
>110 125
-- Exhibit 2 shows the recommended Company
Performance Schedule for the current year.
-- Regardless of the Company rating resulting from
this Schedule, the Executive Development and
Compensation and Employee Benefits Committee
retains the authority to determine the final
Company Rating for purposes of
this Plan.
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-- Individual Performance
-- Individual performance will be measured on the
following scale:
Performance Measure Individual
Points Rating
------------------- ----------
0 - 69 0%
70 70%
80 80%
90 90%
100 100%
110 110%
120 120%
130 130%
-- In addition, up to 20 additional points may be awarded
to a participant at the discretion of the Chief
Executive Officer.
-- Estimated Cost
-- Exhibit 3 shows the estimated cost of the 1995
plan year assuming a 100 percent Company Rating
and all individuals receive a 100 percent
Individual Rating.
Sample Calculations
- - -------------------
-- Example 1
Salary $70,000
Target Bonus 10 percent ($7,000)
Company Rating 100 percent
Individual Rating 90 percent
Calculation:
Company Individual
Target Bonus x Rating x Rating = Bonus Earned
------------ ------- ---------- ------------
$7,000 x 100% x 90% = $6,300
======
-- Example 2
-- Using the same salary and target bonus, but
assuming Company performance was less than 90
percent of Target Net Income, there would be no
bonus earned.
Calculation:
$7,000 x 0 x 90% = 0
-- Example 3
-- Similarly, if individual Performance is rated
Below Expectations, no bonus would be earned
regardless of the Company Rating.
Calculation:
$7,000 x 100% x 0 = 0
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EMPLOYEE RECOGNITION PLAN
- - -------------------------
-- In addition to the Management Incentive Plan, Company
maintains an Individual Recognition Plan to reward
employees not eligible for the management plan for
superior performance or a special action or project
that positively impacts the financial results or image
of the Company.
-- Awards will be made from an annual pool, not to exceed
$65,000 (which represents approximately .8% of the base
payroll for the non-union employees who do not
participate in the Management Incentive Plan),
established at the beginning of the year. Unused funds
would not be carried over to the next year.
-- Awards will be made throughout the year and through the
first quarter of the following year with payment as
close to the timing of the event being rewarded as
possible.
-- Department Heads may nominate individuals in their unit
to the applicable Vice President and document the
reasons for the recommendations. The applicable Vice
President will review the nominations and forward their
recommendations to the Chief Executive Officer.
-- The Chief Executive Officer will determine the
individuals to actually receive a bonus and the
amount.
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EXHIBIT 1
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PHILADELPHIA SUBURBAN CORPORATION
---------------------------------
Recommended 1995 Participants
-----------------------------
TARGET BONUS
NAME TITLE PERCENTAGE
- - ---- ----- -----------
OFFICERS
- - --------
N. DeBenedictis Chief Executive Officer 40%
M. Graham Sr. V.P. Finance and Treasurer 25
R. Riegler Sr. V.P. Operations 25
R. Stahl Sr. V.P. Law & Administration 25
M. Coulter V.P. Production 20
H. Coleman V.P. Customer Service 20
R. Hugus V.P. Corporate Development 25
W. McIntyre V.P. Maintenance & Construction 15
D. Smeltzer V.P. Rates/Regulatory Affairs 15
L. Chain Controller 15
MANAGERS
- - --------
P. Mycek Corporate Secretary 5
Y. Snyder Mgr., Finance and Budget 5
L. Doyle Mgr. Meter Operations 5
J. Delzingaro AMR Project Manger 5
G. Harmon Mgr., Customer Service 5
R. Griffin Mgr., Rates & Revenues 5
D. Mahoney Mgr., Drafting/Records 5
A. Fernandes Mgr., Eng. Design/Construction 5
S. Draper Mgr., MIS 5
S. Broussard Mgr., Human Resources 5
R. Rubin Assist.Controller 5
G. Smith Mgr., Facilities 5
D. Bruce Mgr., Transportation 5
R. Dollfus Mgr., Great Valley Division 10
C. Hertz Mgr., Laboratory Tech. Services 10
J. Grantland Mgr., Distribution 10
J. Dennin Mgr., Eastern Division 10
D. Gorbey Mgr., Southern & Western Division 10
R. Germon Mgr., Mech./Elect. 10
P. Luitweiler Mgr., Res./Env. Affairs/Grndwater 10
J. Ritter Mgr., Treatment/Quality Control 10
T. Kiely Chief Engineer 10
T. Yohe Sr. Mgr., Water Quality Group 10
R. Robinson Sr. Mgr., Special Services 10
M. Kropilak Corporate Counsel 10
R. Linneman Sr. Mgr., Information Services 10
C. Franklin Sr. Mgr., Corp. & Public Affairs 10
M. Broderick Financial Information System Spec. 10
D. Donatoni Sr. Mgr., Marketing & Corp. Devel. 10
R. Cocco Sr. Mgr., Admin. Support Services 10
UMS
- - ---
R. Harlan Mgr., IS Customer Service 5
W. Barrett Mgr., IS Technical Services 5