PHILADELPHIA SUBURBAN CORP
EXHIBIT 10.41
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<DESCRIPTION>EXHIBIT 10.41
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                                                                   EXHIBIT 10.41

                        PHILADELPHIA SUBURBAN CORPORATION
                       PENNSYLVANIA SUBURBAN WATER COMPANY
                             CONSUMERS WATER COMPANY
                  2002 ANNUAL CASH INCENTIVE COMPENSATION PLAN


BACKGROUND

o        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.

o        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).

o        The Plan has two components - a Management Incentive Program and an
         Employee Recognition ("Chairman's Award") Program.

o        The Plan is designed to provide an appropriate incentive to the
         officers, managers and certain other key employees of the Company. The
         2002 Management Incentive Program will cover officers, managers and
         certain key employees of Philadelphia Suburban Corporation, and its
         subsidiaries.

o        The plan is periodically reviewed by the Company's outside compensation
         consultant and the target bonus percentages are reviewed and approved
         each year as part of the compensation consultant's annual review of the
         Company's total compensation plan.


                                       1
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MANAGEMENT INCENTIVE PROGRAM

o         Performance Measures

         --       Annual incentive bonus awards are calculated by multiplying an
                  individual's Target Bonus by a Company Rating Factor based on
                  the applicable company's performance and an Individual Rating
                  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 relative to its annual budget will be
                  the primary measure for the company's performance. Each year a
                  "Target Net Income" level will be established. Starting in
                  2000, portions of the Company Rating Factor may be tied to the
                  net income targets of more than one company for some
                  participants. For purposes of the Plan, the Target Net Income
                  may differ from the budgeted net income level. For 2002, the
                  Target Net Income 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. 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 (the "Individual Factor"). Performance objectives
                  for each participant are established at the beginning of the
                  year and are primarily directed toward controlling costs,
                  improving efficiencies and productivity, enhancing customer
                  service and growing the company's customer base. Each
                  objective has specific performance measures that are used to
                  determine the level of achievement for each objective.

                                       2
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o         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 50 percent
                  depending on duties and responsibilities.

         --       For each company, the Target Bonus Percentage for all the
                  participants within that company will be applied to either
                  their base salary or their salary grade midpoint as designated
                  by the company's chairman, subject to the approval of the
                  Executive Compensation and Employee Benefits Committee.

         --       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, involuntarily or as a result
                  of retirement, 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 Rating Factor, but pro-rated for the number of full
                  calendar months the employee completed before his or her
                  death.

                                       3
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o         Company Performance

         -- Company performance will be measured on the following schedule:

                                             Percent of            Company
                                          Target Net Income         Rating
                                          -----------------        --------
               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 Rating for purposes of this Plan.

o         Individual Performance

         -- Individual performance will be measured on the following scale:

                     Performance Measure               Individual
                           Points                    Rating 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.

                                       4
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Sample Calculations

o        Example 1

                  Salary or midpoint                 $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
                                                                ======

o        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

o        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




                                       5
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o                 Example 4

         --       If the Company Rating Factor is allocated between two
                  companies, the bonus will be calculated separately based on
                  the allocation.

                  Calculation:

                     Company         Company     Individual
     Target Bonus x  Rating  x     Allocation x     Rating       = 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


o                 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     Rating x     Allocation x     Rating      = 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

                                       6
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EMPLOYEE RECOGNITION ("CHAIRMAN'S AWARD") PROGRAM

o        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 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.

o        Awards will be made from an annual pool designated by the Chairman of
         PSC 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
         permission from the Executive Compensation and Employee Benefits
         Committee for special awards under the program.

o        In general, Chairman's Awards will not be made to employees of a
         company that does not achieve at least 90% of its net income objective
         for the year.

o        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 net income for the year is determined.

o        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 PSC.

o        The Chairman will determine the individuals to actually receive a bonus
         and the amount.



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