Compensation Committee Meeting - 162(m) AIP Plan

Exhibit 10.19

AMERICAN WATER WORKS COMPANY, INC.

 

 

 

ANNUAL INCENTIVE PLAN

 

 

 

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Compensation Committee Meeting - 162(m) AIP Plan

AMERICAN WATER WORKS COMPANY, INC.

ANNUAL INCENTIVE PLAN

1.

Purpose

The purpose of the Plan is to give eligible full-time exempt employees an annual
opportunity to earn a cash award that recognizes and rewards their contributions
to the Company's success. To this end, the Plan provides a means of annually
rewarding participants based on the performance of the Company, as a whole or
through a subsidiary, and, where appropriate, on a Participant's personal
performance. The Plan also provides the Committee with the ability to make
Awards designated as "qualified performance-based compensation" under Code
section 162(m). All capitalized terms are as defined in Section 2.

2.

Definitions

(a) ''Award" shall mean the actual amount of the incentive award earned by a
Participant under the Plan for any Performance Period.

(b) "Base Salary" shall mean the amount of base salary earned by a Participant
during the Performance Period. Base Salary does not include Awards under this
Plan or any other short-term or long-term incentive plan; imputed income from
such programs as group-term life insurance; or non-recurring earnings, such as
moving expenses, but is based on salary earnings before reductions for such
items as deferrals under Employer-sponsored deferred compensation plans,
contributions under Code section 401(k) and contributions to flexible spending
accounts under Code section 125.

(c) "Board" shall mean the Company's Board of Directors as constituted from time
to time.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended or any
successor statute thereto and the regulations promulgated thereunder.

(e) "Committee" shall mean the Compensation Committee of the Board. With respect
to the administration of Awards designated as "qualified performance-based
compensation," the Committee shall consist of two or more persons appointed by
the Board, all of whom shall be "outside directors" as defined under Code
section 162(m). With respect to Awards not designated as "qualified
performance-based compensation," the Committee may delegate its responsibilities
for administering the Plan to an award committee or an Executive Officer as it
deems appropriate; provided that it may not delegate its responsibilities under
the Plan relating to Executive Officers or its authority to amend or terminate
the Plan. The CEO retains authority, and may delegate that authority, to
administer awards to Participants other than Executive Officers.

(f) "Company" shall mean American Water Works Company, Inc. or any successor
corporation.

(g) "Effective Date" shall mean              , 201_.

(h) "Employee" shall mean an employee of the Employer (including officers), but
excluding any individual (i) employed in a casual or temporary capacity (i.e.,
those hired for a specific job of limited duration), (ii) characterized as
"part-time" by the Employer, (iii) classified as a ''non-exempt" employee
eligible for overtime compensation under the Fair Labor Standards Act of 1938,
(iv) whose terms of employment are governed by a collective bargaining agreement
that does not provide for participation in this Plan, (v) characterized as a
"leased employee" within the meaning of Code section 414, or (vi) classified by
the Employer as a "contractor'' or "consultant," no matter how characterized by
the Internal Revenue Service, other governmental agency or a court. Any change
of characterization or classification of an individual by any court, government
agency (including, but not limited to, the Internal Revenue Service or U.S.
Department of Labor), or arbitrator shall have no effect upon the
characterization or classification of an individual as an Employee for purposes
of this Plan, unless the Committee determines otherwise. "Employer" shall mean
American Water Works Company, Inc. and each of its subsidiaries.

(i) "Executive Officer" shall mean the executive officers of the Company as
defined in the Securities Exchange Act of 1934, as amended, and as determined by
the Committee in its sole discretion.

(j) "Participant" for any Performance Period, shall mean an Employee designated
by the Committee to participate in the Plan.

(k) "Performance Goals" for any Performance Period, shall mean: (i) For Target
Awards designated as "qualified performance-based compensation" pursuant to
Section 5, the performance goals of the Company, as specified by the Committee,

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Compensation Committee Meeting - 162(m) AIP Plan

based on one or more of the following objective criteria: [(A) diluted earnings
per share, (B) environmental compliance, (C) safety performance, (D) service
quality, (E) customer satisfaction], (F) stock price, (G) earnings per share,
(H) price-earnings multiples, (I) net earnings, (J) operating earnings, (K)
revenue, (L) number of days sales outstanding in accounts receivable, (M)
productivity, (N) margin, (0) EBITDA (earnings before interest, taxes,
depreciation and amortization), (P) net capital employed, (Q) return on assets,
(R) stockholder return, (S) return on equity, (T) return on capital employed,
(U) net income to shares of Company stock, (V) growth in assets, (X) unit
volume, (Y) sales, (Z) cash flow, (AA) market share, (BB) relative performance
to a comparison group designated by the Committee, and/or (CC) strategic
business criteria consisting of one or more objectives based on meeting
specified revenue goals, market penetration goals, customer growth, geographic
business expansion goals, cost targets or goals relating to acquisitions or
divestitures. Any criteria used may be measured, as applicable, (I) in absolute
terms, (II) in relative terms (including but not limited to, the passage of time
and/or against other companies or financial metrics), (III) on a per share
and/or share per capita basis, (IV) against the performance of the Company as a
whole or against particular entities, segments, operating units or products of
the Company and /or (V) on a pre-tax or after-tax basis, or (ii) For Target
Awards not designated as "qualified performance-based compensation" pursuant to
Section 5, the performance goals may be based on one or more of the objective
criteria set forth in clause (i) above and/or may take into account any other
factors deemed appropriate by the Committee in its sole discretion.

(I) "Performance Period" shall mean the fiscal year of the Company or any other
period designated by the Committee with respect to which an Award may be earned.

(m) "Plan" shall mean this American Water Works Company, Inc. Annual Incentive
Plan, as from time to time amended and in effect.

(n) “Target Award Percentage" shall mean the applicable Target Award Percentage
set forth on Schedule B; provided, that, if a Participant (other than
Participants eligible to receive an Award designated as "qualified
performance-based compensation") held more than one position during the
Performance Period, then the Committee may designate different Target Award
Percentages with respect to each position and the Award will be pro-rated to
reflect (to the nearest bi-weekly increment) the period during which such
Participant had each Target Award Percentage.

(o) "Target Award" for any Participant with respect to any Performance Period,
shall mean the dollar amount based on the Participant's Target Award Percentage
that the Participant would be eligible to earn as an Award for that Performance
Period.

3.

Eligibility

Subject to the limitations contained in this Section 3, all Employees of the
Employer are eligible to participate in the Plan. The Committee shall designate
which Employees shall participate in the Plan for each Performance Period. To be
eligible to receive an Award with respect to any Performance Period, an Employee
must be actively employed by the Employer on the day on which the Award payout
for a Performance Period is made (except as provided in Section 8). Newly hired
Employees or Employees promoted/transferred to an eligible/higher class shall be
eligible to receive a prorated Award for a Performance Period, provided that
their date of hire (or promotion/transfer) occurs on or before September 30, or
such other date as the Committee may specify.

4.

Administration

The administration of the Plan shall be consistent with the purpose and the
terms of the Plan. The Plan shall be administered by the Committee. The
Committee shall have full authority to establish the rules and regulations
relating to the Plan, to interpret the Plan and those rules and regulations, to
select Participants in the Plan, to determine each Participant's Target Award
Percentage, to approve all of the Awards, to decide the facts in any case
arising under the Plan and to make all other determinations, including factual
determinations, and to take all other actions necessary or appropriate for the
proper administration of the Plan, including the delegation of such authority or
power, where appropriate; provided, however, that the Committee shall not be
authorized to increase the amount of the Award payable to a Participant that
would otherwise be payable pursuant to the terms of the Plan to the extent the
Award is designated as "qualified performance-based compensation." All powers of
the Committee shall be executed in its sole discretion, in the best interest of
the Company, not as a fiduciary, and in keeping with the objectives of the Plan
and need not be uniform as to similarly situated individuals.

All Awards shall be made conditional upon the Participant's acknowledgement, in
writing or by acceptance of the Award, that all decisions and determination of
the Committee shall be final and binding on the Participant, his or her
beneficiaries and any other person having or claiming an interest under such
Award. Awards need not be uniform as among Participants. The Committee's
administration of the Plan, including all such rules and regulations,
interpretations, selections, determinations,

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Compensation Committee Meeting - 162(m) AIP Plan

approvals, decisions, delegations, amendments, terminations and other actions,
shall be final and binding on the Employer and all employees of the Employer,
including, the Participants and their respective beneficiaries.

5.

Determination of Awards

(a) Setting Target Awards and Performance Goals.

(i) To the extent Awards are designated as "qualified performance-based
compensation," Performance Goals must be pre-established by the Committee. A
Performance Goal is considered pre-established if it is established in writing
not later than 90 days after the commencement of the period of service to which
the Performance Goal relates. In no event will a Performance Goal be considered
pre-established if it is established after 25% of the period of service (as
scheduled in good faith at the time the Performance Goal is established) has
elapsed. To the extent Awards are not designated as "qualified performance-based
compensation," the Committee may establish Performance Goals and Target Award
Percentages for Participants at such time or times as the Committee determines
in its sole discretion.  Subject to the requirements of this Section 5(a)(i),
the Performance Goals established by the Committee may be (but need not be)
different for each Performance Period and different Performance Goals may be
applicable to different Participants.

(ii) The Committee shall determine and shall reflect in its minutes: (A) the
Employees who shall be Participants during the Performance Period, (B) the
Performance Goal or Goals for the Performance Period (and how they are weighted,
if applicable) and (C) each Participant's Target Award Percentage, as well as
the minimum and maximum amount that can be paid to such Participant. The Company
shall notify each Participant of the Participant's Target Award Percentage and
the applicable Performance Goals for the Performance Period. Unless the
Committee determines otherwise for a Performance Period, the Target Award
Percentage for each Participant with respect to a Performance Period shall be
the percentage set forth on the attached Schedule B.

(b) Earning An Award. Generally, a Participant earns an Award for a Performance
Period based on the level of achievement of the Performance Goals established by
the Committee for that Performance Period. A Participant will receive no Award
if the level of achievement of all Performance Goals is below the minimum
required to earn an Award for the applicable Performance Period, as specified by
the Committee at the time the Performance Goals are established.

(c) Maximum Award Amount. The maximum Award payable to any Participant for any
fiscal year shall not exceed $3,000,000.

(d) Special Rules for Awards Designated As Qualified Performance-Based
Compensation. To the extent Awards are designated as "qualified
performance-based compensation", the Awards shall be based on Performance Goals
for each Performance Period that shall satisfy the requirements for "qualified
performance-based compensation" under Code section 162(m), including the
requirement that the achievement of the Performance Goals be substantially
uncertain at the time they are established and that the Performance Goals be
objective and established in such a way that a third party with knowledge of the
relevant facts could determine whether and to what extent the Performance Goals
have been met. To the extent that Awards designated as "qualified
performance-based compensation" under Code section 162(m) are made, no such
Award may be made as an alternative to any other award that is not designated as
"qualified performance-based compensation'' but instead must be separate and
apart from all other awards made. To the extent an Award is designated as
"qualified performance-based compensation," the Committee is authorized to
reduce the Award payable to the applicable Participant for any Performance
Period based upon its assessment of personal performance or other factors, but
not to increase the Award beyond the amount that is payable as a result of the
level of achievement of the Performance Goals for such Performance Period, as
certified by the Committee. Any reduction of an Award payable to a Participant
with respect to an Award designated as "qualified performance-based
compensation" shall not result in an increase in the Award payable to any other
Participant with respect to an Award designated as "qualified performance-based
compensation."

6.

Changes to the Target

Except with respect to Awards that are designated as "qualified
performance-based compensation", the Committee may at any time prior to the
final determination of Awards change the Target Award Percentage of any
Participant or assign a different Target Award Percentage to a Participant to
reflect any change in the Participant's responsibility level or position during
the course of the Performance Period.

7.

Payment of Awards

The Committee shall certify and announce the Awards that will be paid by the
Employer to each Participant as soon as practicable following the final
determination of the Company's financial results for the relevant Performance
Period. Subject to the provisions of Section 8, payment of the Awards certified
by the Committee shall normally be made, in a single lump sum cash payment as
soon as practicable following the Committee certification, but in any event,
such Bonus shall be paid on or after

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Compensation Committee Meeting - 162(m) AIP Plan

January 1 of the year following the year in which the Performance Period ends,
but no later than March 15 of the year following the year in which the
Performance Period ends.

8.

Limitations on Rights to Payment of Awards

(a) Employment. Unless the Committee determines otherwise, no Participant shall
have any right to receive payment of an Award under the Plan for a Performance
Period unless the Participant remains in the employ of the Employer through the
date that Award is paid by the Company.

(b) Accelerated Payment. In no event will payment be made to a Participant with
respect to an Award designated as "qualified performance-based compensation" or,
unless the Committee determines otherwise, to any other Participant with respect
to any other Award, prior to the end of the Performance Period to which it
relates.

9.

Amendment, Suspension or Termination of the Plan

The Committee may at any time amend (in whole or in part), suspend or terminate
this Plan; provided, however, that the Committee shall not amend or modify the
Plan without stockholder approval if such approval is required by Code section
162(m). No such amendment which adversely affects any Participant's rights to or
interest in an Award earned prior to the date of the amendment shall be
effective unless the Participant shall have agreed thereto. If Awards are
intended as "qualified performance-based compensation" under Section 162(m) of
the Code, the Plan must be reapproved by the Company's stockholders no later
than the first stockholders meeting that occurs in the fifth year following the
year in which the stockholders previously approved the material terms of the
performance goals under the Plan, if Awards after such stockholders meeting are
to be made as "qualified performance-based compensation" under Section 162(m) of
the Code and if required by Section 162(m) of the Code.

10.

Miscellaneous Provisions

(a) No Employment Right. This Plan is not a contract between the Employer and
the Employees or the Participants. Neither the establishment of this Plan, nor
any action taken hereunder, shall be construed as giving any Employee or any
Participant any right to be retained in the employ of the Employer. The Company
is under no obligation to continue the Plan. Nothing contained in the Plan shall
limit or affect in any manner or degree the normal and usual powers of
management, exercised by the officers and the Board or committees thereof, to
change the duties or the character of employment of any employee of the Employer
or to remove the individual from the employment of the Employer at any time, all
of which rights and powers are expressly reserved.

Section 409A of the Code. The Plan 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 of the Code to the Plan. If and to
the extent that any payment under this Plan is deemed to be deferred
compensation subject to the requirements of Section 409A of the Code, this Plan
shall be administered so that such payments are made in accordance with the
requirements of Section 409A of the Code. If an Award is subject to Section 409A
of the Code, (i) distributions shall only be made in a manner and upon an event
permitted under Section 409A of the Code, (ii) payments to be made upon a
termination of employment shall only be made upon a "separation from service"
under Section 409A of the Code, and (iii) in no event shall a Participant,
directly or indirectly, designate the calendar year in which a distribution is
made except in accordance with Section 409A of the Code. Any Award under the
Plan that is subject to Section 409A of the Code and that is to be distributed
to a key employee (as defined below) upon separation from service shall be
administered so that any distribution with respect to such Award shall be
postponed for six months following the date of the Participant's separation from
service, if required by Section 409A of the Code. If a distribution is delayed
pursuant to Section 409A of the Code, the distribution shall be paid within 30
days after the end of the six-month period. If the Participant dies during such
six-month period, any postponed amounts shall be paid within 90 days of the
Participant's death. The determination of key employees, including the number
and identity of persons considered key employees and the identification date,
shall be made by the Committee or its delegate each year in accordance with
Section 416(i) of the Code and the "specified employee" requirements of Section
409A of the Code. Notwithstanding anything in this Plan, each Participant shall
be solely responsible for the tax consequences of Awards under this Plan, and in
no event shall the Company have any responsibility or liability if any Award
does not meet the applicable requirements of Section 409A of the Code. Although
the Company intends to administer the Plan to prevent taxation under Section
409A of the Code, the Company does not represent or warrant that the Plan or any
Award complies with any provision of federal, state, local or other tax law.

(b) No Assignment. A Participant's right and interest under the Plan may not be
assigned or transferred and any attempted assignment or transfer shall be null
and void and shall extinguish, in the Company's sole discretion, the Employer's
obligation under the Plan to pay Awards with respect to the Participant.

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Compensation Committee Meeting - 162(m) AIP Plan

(c) Unfunded Plan. The Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund, or to make any other segregation of
assets, to assure payment of Awards.

(d) Company Policies. As a condition of participation in the Plan, each
Participant agrees to be subject to any compensation, clawback and recoupment
policies that may be applicable to the Participant as an Employee of the
Employer, as in effect from time to time and as approved by the Board or a duly
authorized committee thereof, whether or not approved before or after the
Effective Date.

(e) Stockholder Approval. Notwithstanding any provision of the Plan to the
contrary, Awards designated as "qualified performance-based compensation," if
made, will be made contingent upon, and subject to, stockholder approval of the
Plan at the March 27, 2015 stockholders' meeting.

(f) Withholding Taxes. The Employer shall have the right to deduct from Awards
paid any taxes or other amounts required by law to be withheld.

(g) Compliance with 162(m). It is the intent of the Company that the Plan and
Awards under the Plan designated as "qualified performance-based compensation"
comply with the applicable provisions of Code section 162(m). To the extent that
any legal requirement of Code section 162(m) as set forth in the Plan ceases to
be required under Code section 162(m), that Plan provision shall cease to apply.
Further, with respect to Awards intended to qualify as "qualified
performance-based compensation, terms used in the Plan shall be interpreted in a
manner consistent with Section 162(m) of the Code and regulations thereunder
(including Treasury Regulation Section 1.162-27).

(h) Governing Law. The validity, construction, interpretation and effect of the
Plan shall exclusively be governed by and determined in accordance with the law
of the State of Delaware.

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