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                                                                     EXHIBIT 10C





















                       AMERICAN WATER WORKS COMPANY, INC.

                           DEFERRED COMPENSATION PLAN

               (As amended and restated effective January 1, 2001)




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                                TABLE OF CONTENTS

                                                                            PAGE


      ARTICLE I   INTRODUCTION.......................................   1
      1.1.  Name  ...................................................   1
      1.2.  Effective Date...........................................   1
      1.3.  Employers ...............................................   1
      1.4.  Purpose .................................................   1

      ARTICLE II  DEFINITIONS........................................   1
      2.1.  "Administrator" .........................................   1
      2.2.  "Annual Incentive Plan" .................................   1
      2.3.  "Beneficiary" ...........................................   1
      2.4.  "Board"..................................................   2
      2.5.  "Change in Control" .....................................   2
      2.6.  "Committee" .............................................   2
      2.7.  "Deferred Compensation Account" .........................   2
      2.8.  "Deferred Compensation Agreement" .......................   2
      2.9.  "Disability".............................................   2
      2.10  "Elective Deferred Compensation".........................   2
      2.11. "Eligible Employee" .....................................   2
      2.12. "Participant" ...........................................   2
      2.13. "Plan Year"..............................................   3
      2.14. "Retirement".............................................   3
      2.15. "Stock"..................................................   3
      2.16. "Stock Equivalent Unit"..................................   3

      ARTICLE III PARTICIPATION BY ELIGIBLE EMPLOYEES ...............   3
      3.1.  Participation ...........................................   3
      3.2.  Continuity of Participation .............................   3
      3.3.  Immediate Cash-Out of Ineligible Employee ...............   3

      ARTICLE IV  DEFERRALS AND DEFERRED COMPENSATION ACCOUNTS ......   4
      4.1.  Compensation Eligible for Deferral.......................   4
      4.2.  Irrevocability of Deferral Elections.....................   4
      4.3.  Date of Election ........................................   4
      4.4.  Establishment of Deferred Compensation Accounts..........   5
      4.5.  Hypothetical Investment Vehicles.........................   5
      4.6.  Allocation and Reallocation of Hypothetical Investments..   5
      4.7.  Dividend Equivalents.....................................   6
      4.8.  Restrictions on Participant Direction....................   6


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                                TABLE OF CONTENTS

                                                                            PAGE

      ARTICLE V   DISTRIBUTIONS .....................................    7
      5.1.  Election of Distribution Date ...........................    7
      5.2.  Distribution of Mandatory Deferrals Not Elected To Be
            Extended.................................................    7
      5.3.  Method of Payment .......................................    7
      5.4.  Special Election for Early Distribution .................    7
      5.5.  Distributions on Death. .................................    8
      5.6.  Valuation of Cash Distributions..........................    8
      5.7.  Financial Emergency and Other Payments...................    8

      ARTICLE VI  FUNDING AND PARTICIPANT"S INTEREST.................    8
      6.1.  Deferred Compensation Plan Unfunded .....................    8
      6.2.  Participant's Interest in Plan ..........................    9


      ARTICLE VII ADMINISTRATION AND INTERPRETATION .................    9
      7.1.  Administration. .........................................    9
      7.2.  Interpretation...........................................    9
      7.3.  Records and Reports .....................................   10
      7.4.  Payment of Expenses .....................................   10
      7.5.  Indemnification for Liability............................   11
      7.6.  Claims Procedure.........................................   11
      7.7.  Review Procedure.........................................   11

      ARTICLE VIII AMENDMENT AND TERMINATION.........................   12
      8.1.  Amendment and Termination ...............................   12

      ARTICLE IX  MISCELLANEOUS PROVISIONS...........................   12
      9.1.  Right of Employers to Take Employment Actions ...........   12
      9.2.  Alienation or Assignment of Benefits.....................   13
      9.3.  Right to Withhold .......................................   13
      9.4.  Construction.............................................   13
      9.5.  Headings.................................................   13
      9.6.  Number and Gender .......................................   13




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                                    ARTICLE I

                                  INTRODUCTION

      1.1.  NAME. The name of this plan is the American Water Works Company,
Inc. Deferred Compensation Plan ("Deferred Compensation Plan").

      1.2.  EFFECTIVE DATE. The effective date of this Deferred Compensation
Plan is January 1, 1996.

      1.3.  EMPLOYERS. American Water Works Company, Inc. ("American Water
Works"), and each subsidiary or affiliate of American Water Works that employs
one or more Eligible Employees who have become Participants in accordance with
Article III, shall each be an "Employer" under this Deferred Compensation Plan.

      1.4.  PURPOSE. This Deferred Compensation Plan is established effective
January 1, 1996 by American Water Works for the purpose of providing deferred
compensation benefits for a select group of management or highly compensated
employees of the Employers.


                                   ARTICLE II

                                   DEFINITIONS

      Whenever the following initially capitalized words and phrases are used in
this Deferred Compensation Plan, they shall have the meanings specified below
unless the context clearly indicates to the contrary:

      2.1.  "ADMINISTRATOR" shall mean the Retirement Committee of American
Water Works Company, Inc., or its delegate.

      2.2.  "ANNUAL INCENTIVE PLAN" shall mean American Water Works Company,
Inc.'s Annual Incentive Plan, effective January 1, 1996.

      2.3. "BENEFICIARY" shall mean such person or legal entity as may be
designated by a Participant under Section 5.5 to receive benefits hereunder
after such Participant's death.

      2.4.  "BOARD" shall mean the Board of Directors of American Water Works
Company, Inc.


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      2.5.  "CHANGE IN CONTROL" shall have the meaning given to such term in the
American Water Works Company, Inc. 2000 Stock Award and Incentive Plan.

      2.6.  "COMMITTEE" shall mean the Compensation and Management Development
Committee of the Board.

      2.7.  "DEFERRED COMPENSATION ACCOUNT" shall mean the account or subaccount
established and maintained by the Administrator for specified deferrals by a
Participant, as described in Article IV of this Deferred Compensation Plan.
Deferred Compensation Accounts shall be maintained solely as bookkeeping entries
to evidence unfunded obligations of American Water Works.

      2.8. "DEFERRED COMPENSATION AGREEMENT" shall mean a document (or
documents) as made available from time to time by the Administrator, whereby an
Eligible Employee enrolls as a Participant and elects to defer compensation
pursuant to Article IV of this Deferred Compensation Plan.

      2.9.  "DISABILITY" shall mean a physical or mental impairment of
sufficient severity such that a Participant is eligible for benefits under the
long-term disability provisions of his Employer"s benefit plans.

      2.10. "ELECTIVE DEFERRED COMPENSATION" shall mean that portion of the
Participant's Compensation which the Participant elects to defer pursuant to
Article IV of this Deferred Compensation Plan in accordance with the Deferred
Compensation Agreement.

      2.11. "ELIGIBLE EMPLOYEE" shall mean an individual employed by an Employer
who is a member of a select group of management or highly compensated employees
participating in the Annual Incentive Plan.

      2.12. "PARTICIPANT" shall mean an Eligible Employee who has amounts
standing to his credit under a Deferred Compensation Account.

      2.13. "PLAN YEAR" shall mean the calendar year.


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      2.14. "RETIREMENT" shall mean a Participant"s voluntary termination of
employment at or after the date on which he is eligible promptly thereafter to
commence receipt of retirement benefits under the Pension Plan for Employees of
American Water Works Company, Inc. and Its Designated Subsidiaries or any
supplemental retirement plan maintained by American Water Works or any successor
plan thereto.

      2.15. "STOCK" shall mean American Water Works Company, Inc. common stock,
or any other equity securities of American Water Works designated by the
Administrator.

      2.16. "STOCK EQUIVALENT UNIT" shall mean a bookkeeping entry representing
a hypothetical investment in Stock.


                                   ARTICLE III

                       PARTICIPATION BY ELIGIBLE EMPLOYEES

      3.1.  PARTICIPATION. Participation in this Deferred Compensation Plan is
limited to Eligible Employees. An Eligible Employee shall participate in this
Deferred Compensation Plan as determined by the Administrator in its sole
discretion; provided, however, that all executive officers of American Water
Works shall automatically be considered Eligible Employees.

      3.2.  CONTINUITY OF PARTICIPATION. A Participant who separates from
service with all of the Employers will cease active participation hereunder.
However, the separation from service of an Eligible Employee with one Employer
will not interrupt the continuity of his active participation if, concurrently
with or immediately after such separation, he is employed by one or more of the
other Employers.

      3.3.  IMMEDIATE CASH-OUT OF INELIGIBLE EMPLOYEE. This Deferred
Compensation Plan is intended to be an unfunded "top-hat" plan, maintained
primarily for the purposes of providing deferred compensation for a select group
of management or highly compensated employees. Accordingly, if the Administrator
determines that any Participant does not qualify as a member of the select
group, one hundred percent (100%) of such Participant's Deferred Compensation
Account shall be paid to the Participant immediately.


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                                   ARTICLE IV

                  DEFERRALS AND DEFERRED COMPENSATION ACCOUNTS

      4.1.  COMPENSATION ELIGIBLE FOR DEFERRAL. To the extent authorized by the
Committee, a Participant may elect to defer compensation or awards which may be
in the form of cash, Stock, Stock-denominated awards or other property to be
received from an Employer, including salary, annual bonus awards, long-term
awards, shares issuable on stock option exercise and compensation payable under
other plans and programs, employment agreements or other arrangements, or
otherwise, as may be provided under the terms of such plans, programs and
arrangements or as designated by the Administrator. The Committee may impose
limitations on the amounts permitted to be deferred and other terms and
conditions on deferrals under the Deferred Compensation Plan. Any such
limitations, and other terms and conditions of deferral, shall be set forth in
the rules relating to the Deferred Compensation Plan or election forms, other
forms, or instructions published by or at the direction of the Administrator.
The Committee may permit awards and other amounts to be treated as deferrals
under the Deferred Compensation Plan, including deferrals that may be mandatory
as determined by the Committee in its sole discretion or under the terms of
another plan or arrangement of an Employer, for administrative convenience or
otherwise to serve the purposes of the Deferred Compensation Plan and such other
plan or arrangement.

      4.2.  IRREVOCABILITY OF DEFERRAL ELECTIONS. Once a Deferred Compensation
Agreement, properly completed, is received by the Administrator, the elections
of the Participant shall be irrevocable; provided, however, that the
Administrator may, in its discretion, permit a Participant to elect a further
deferral of amounts credited to a Deferred Compensation Account by filing a
later election form; provided, further, that, unless otherwise approved by the
Administrator, any election to further defer amounts credited to a Deferred
Compensation Account must be made at least six months prior to the date such
amounts would otherwise be payable.

      4.3.  DATE OF ELECTION. An election to defer compensation or awards
hereunder must be received by the Administrator prior to the date specified by
the Administrator. Under no circumstances may a Participant defer compensation
or awards if the Participant has, at the time of deferral, a legally enforceable
right to current receipt of such compensation or awards.

      4.4.  ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS. One or more
Deferred Compensation Accounts will be established for each Participant, as
determined by the Administrator. The amount of compensation or awards deferred
with respect to each Deferred Compensation Account will be credited to such
Account as of the date on which such amounts


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would have been paid to the Participant but for the Participant's election to
defer receipt hereunder, unless otherwise determined by the Administrator. With
respect to any fractional shares of Stock or Stock-denominated awards, the
Administrator, in its sole discretion, shall pay such fractional shares to the
Participant in cash, credit the Deferred Compensation Account with cash in lieu
of depositing fractional shares into the Deferred Compensation Account, or
credit the Deferred Compensation Account with a fraction of a share calculated
to at least three decimal places. Unless otherwise determined by the
Administrator, amounts credited to a Deferred Compensation Account shall be
deemed invested in a hypothetical investment as of the date of deferral. The
amounts of hypothetical income and appreciation and depreciation in the value of
such Account will be credited and debited to, or otherwise reflected in, such
Account from time to time.

      4.5.  HYPOTHETICAL INVESTMENT VEHICLES. Subject to the provisions of
Sections 4.6 and 4.8, amounts credited to a Deferred Compensation Account shall
be deemed to be invested, at the Participant's direction, in one or more
investment vehicles as may be specified from time to time by the Administrator.
The Administrator may change or discontinue any hypothetical investment vehicle
available under the Deferred Compensation Plan in its discretion; provided,
however, that each affected Participant shall be given the opportunity, without
limiting or otherwise impairing any other right of such Participant regarding
changes in investment directions, to redirect the allocation of his Deferred
Compensation Account deemed invested in the discontinued investment vehicle
among the other hypothetical investment vehicles, including any replacement
vehicle.

      4.6.  ALLOCATION AND REALLOCATION OF HYPOTHETICAL INVESTMENTS. A
Participant may allocate amounts credited to his Deferred Compensation Account
to one or more of the hypothetical investment vehicles authorized under the
Deferred Compensation Plan. Subject to the rules established by the
Administrator, a Participant may reallocate amounts credited to his Deferred
Compensation Account to one or more of such hypothetical investment vehicles as
of the next day following the filing of the Participant's election to reallocate
amounts credited to his Deferred Compensation Account. The Administrator may, in
its discretion, restrict allocation into or reallocation by specified
Participants into or out of specified investment vehicles or specify minimum or
maximum amounts that may be allocated or reallocated by Participants.

      4.7.  DIVIDEND EQUIVALENTS. Dividend equivalents will be credited on Stock
Equivalent Units credited to a Participant's Deferred Compensation Account as
follows:

            (a) CASH AND NON-STOCK DIVIDENDS. If American Water Works declares
      and pays a dividend on Stock in the form of cash or property other than
      shares of Stock, then a


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      number of additional Stock Equivalent Units shall be credited to a
      Participant's Deferred Compensation Account as of the payment date for
      such dividend equal to (i) the number of Stock Equivalent Units credited
      to the Deferred Compensation Account as of the record date for such
      dividend, multiplied by (ii) the amount of cash plus the fair market value
      of any property other than shares actually paid as a dividend on each
      share at such payment date, divided by (iii) the closing market price of a
      share of Stock at such payment date as published in The Wall Street
      Journal report of New York Stock Exchange Composite Transactions.

            (b) STOCK DIVIDENDS AND SPLITS. If American Water Works declares and
      pays a dividend on Stock in the form of additional shares of Stock, or
      there occurs a forward split of Stock, then a number of additional Stock
      Equivalent Units shall be credited to the Participant's Deferred
      Compensation Account as of the payment date for such dividend or forward
      Stock split equal to (i) the number of Stock Equivalent Units credited to
      the Deferred Compensation Account as of the record date for such dividend
      or split, multiplied by (ii) the number of additional shares actually paid
      as a dividend or issued in such split in respect of each share of Stock.

      4.8.  RESTRICTIONS ON PARTICIPANT DIRECTION. The provisions of Sections
4.5 and 4.6 notwithstanding, the Administrator may restrict or prohibit
reallocations of amounts deemed invested in specified investment vehicles, and
subject such amounts to a risk of forfeiture and other restrictions, in order to
conform to restrictions applicable to Stock, a Stock-denominated award, or any
other award or amount deferred under the Deferred Compensation Plan and
resulting in such deemed investment, to comply with any applicable law or
regulation, or for such other purpose as the Administrator may determine is not
inconsistent with the Deferred Compensation Plan. Notwithstanding any other
provision of the Deferred Compensation Plan to the contrary, deferrals of all
Stock-denominated awards under the American Water Works Company, Inc. Long-Term
Performance-Based Incentive Plan shall be credited to the Participant"s Deferred
Compensation Account in the form of Stock Equivalent Units and may not be
reallocated or deemed reinvested in any other investment vehicle.


                                    ARTICLE V

                                  DISTRIBUTIONS


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      5.1.  ELECTION OF DISTRIBUTION DATE. At the time a Participant makes an
election to defer compensation under Article IV, such Participant shall also
specify in writing in the Deferred Compensation Agreement the date or event on
which the payment of the Participant's Deferred Compensation Account shall be
made. Payments in settlement of a Deferred Compensation Account shall be made as
soon as practicable after the date or dates (including upon the occurrence of
specified events), and in such number of installments, as may be directed by the
Participant in his election relating to such Deferred Compensation Account,
provided that, in the event of termination of employment for reasons other than
Retirement or Disability, a single lump sum payment in settlement of any
Deferred Compensation Account (including an Account with respect to which one or
more installment payments have previously been made) shall be made as promptly
as practicable thereafter, unless otherwise determined by the Administrator.

      5.2.  DISTRIBUTION OF MANDATORY DEFERRALS NOT ELECTED TO BE EXTENDED. If
the Participant has not made an election to extend the deferral period of any
mandatory deferral of a portion of his annual incentive award to be earned under
the Annual Incentive Plan for any Plan Year, a payment of the cash value of the
Stock Equivalent Units credited to his Deferred Compensation Account
attributable to such mandatory deferral, including additional units credited as
a result of dividends as provided under Section 4.7, shall be made on the date
the period of mandatory deferral ends.

      5.3.  METHOD OF PAYMENT. All distributions under this Deferred
Compensation Plan shall be in the form of a cash payment; provided, however,
that all deferrals of Stock-denominated awards under the American Water Works
Company, Inc. Long-Term Performance-Based Incentive Plan shall be paid by
delivery of shares of Stock reserved under such Plan.

      5.4.  SPECIAL ELECTION FOR EARLY DISTRIBUTION. A Participant may apply to
the Administrator for early distribution of all or any part of his Deferred
Compensation Account excluding any amounts attributable to mandatory deferrals
that have not been credited to his Deferred Compensation Account for the minimum
period of mandatory deferral. Such early distribution shall be made in a single
lump sum, provided that 10% of the amount withdrawn in such early distribution
shall be forfeited to the Participant's Employer prior to payment of the
remainder to the Participant. In the event a Participant's early distribution
election is submitted within one year after a Change in Control, the forfeiture
penalty shall be reduced to 5%.

      5.5.  DISTRIBUTIONS ON DEATH. In the event of a Participant's death before
his Deferred Compensation Account has been distributed, distribution of his
entire account (including mandatory deferrals) shall be made to the Beneficiary
selected by the Participant in a single lump sum


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payment within 30 days after the date of death (or, if later, after the proper
Beneficiary has been identified). A Participant may from time to time change his
designated Beneficiary without the consent of such Beneficiary by filing a new
designation in writing with the Administrator. If no Beneficiary designation is
in effect at the time of the Participant's death, or if the designated
Beneficiary is missing or has predeceased the Participant, distribution shall be
made to the Participant's estate.

      5.6.  VALUATION OF CASH DISTRIBUTIONS. All cash distributions under this
Deferred Compensation Plan shall be based upon the cash value of the investment
credited to a Participant's Deferred Compensation Account as of the date
immediately preceding the date of the distribution. It is understood that
administrative requirements may lead to a delay between such valuation date and
the date of distribution, not to exceed 30 days.

      5.7.  FINANCIAL EMERGENCY AND OTHER PAYMENTS. Other provisions of this
Deferred Compensation Plan notwithstanding, if, upon the written application of
a Participant, the Administrator determines that the Participant has a financial
emergency of such a substantial nature and beyond the individual's control that
payment of amounts previously deferred under this Deferred Compensation Plan is
warranted, the Administrator may direct the payment to the Participant of all or
a portion of the balance of his Deferred Compensation Account and the time and
manner of such payment.

                                   ARTICLE VI

                       FUNDING AND PARTICIPANT'S INTEREST

      6.1.  DEFERRED COMPENSATION PLAN UNFUNDED. This Deferred Compensation Plan
shall be unfunded and no trust shall be created by this Deferred Compensation
Plan. The crediting to each Participant's Deferred Compensation Account shall be
made through record keeping entries. No actual funds shall be set aside;
provided, however, that nothing herein shall prevent the Employers from
establishing one or more grantor trusts from which benefits due under this
Deferred Compensation Plan may be paid in certain instances. All distributions
shall be paid by the Employer from its general assets and a Participant (or his
Beneficiary) shall have the rights of a general, unsecured creditor against the
Employer for any distributions due hereunder. This Deferred Compensation Plan
constitutes a mere promise by the Employers to make benefit payments in the
future.


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      6.2.  PARTICIPANT'S INTEREST IN PLAN. A Participant has an interest in the
cash value of amounts credited to his Deferred Compensation Account. A
Participant has no rights or interests in Stock or dividends and has no right to
elect delivery of shares of Stock except as provided in Section 5.3.


                                   ARTICLE VII

                        ADMINISTRATION AND INTERPRETATION

      7.1.  ADMINISTRATION. Except where certain duties are delegated to the
Administrator, the Committee shall be in charge of the operation and
administration of this Deferred Compensation Plan. The Committee has, to the
extent appropriate and in addition to the powers described elsewhere in this
Deferred Compensation Plan, full discretionary authority to construe and
interpret the terms and provisions of this Deferred Compensation Plan; to adopt,
alter and repeal administrative rules, guidelines and practices governing this
Deferred Compensation Plan; to perform all acts, including the delegation of its
administrative responsibilities to advisors or other persons who may or may not
be employees of the Employers; and to rely upon the information or opinions of
legal counsel or experts selected to render advice with respect to this Deferred
Compensation Plan, as it shall deem advisable, with respect to the
administration of this Deferred Compensation Plan.

      7.2.  INTERPRETATION. The Committee may take any action, correct any
defect, supply any omission or reconcile any inconsistency in this Deferred
Compensation Plan, or in any election hereunder, in the manner and to the extent
it shall deem necessary to carry this Deferred Compensation Plan into effect or
to carry out the Board's purposes in adopting the Plan. Any decision,
interpretation or other action made or taken in good faith by or at the
direction of the Employers, the Board, the board of directors of any Employer,
the Committee, or the Administrator arising out of or in connection with this
Deferred Compensation Plan, shall be within the absolute discretion of all and
each of them, as the case may be, and shall be final, binding and conclusive on
the Employers and all Participants and Beneficiaries and their respective heirs,
executors, administrators, successors and assigns. The Committee's or
Administrator"s determinations hereunder need not be uniform, and may be made
selectively among Eligible Employees, whether or not they are similarly
situated. Any actions to be taken by the Committee or Administrator will require
majority vote of the Committee or the Administrator. If a member of the
Committee or the Administrator is a Participant in this Deferred Compensation
Plan, such member may not decide or


                                      -12-
<PAGE>

determine any matter or question concerning his benefits under this Deferred
Compensation Plan that such member would not have the right to decide or
determine if he were not a member.

      7.3.  RECORDS AND REPORTS. The Administrator shall keep a record of
proceedings and actions and shall maintain or cause to be maintained all such
books of account, records, and other data as shall be necessary for the proper
administration of this Deferred Compensation Plan. Such records shall contain
all relevant data pertaining to Participants and their rights under this
Deferred Compensation Plan. The Administrator shall have the duty to carry into
effect all rights or benefits provided hereunder to the extent assets of the
Employers are properly available.

      7.4.  PAYMENT OF EXPENSES. The Employers, in such proportions as the
Committee determines, shall bear all expenses incurred by them and by the
Committee in administering this Deferred Compensation Plan. If a claim or
dispute arises concerning the rights of a Participant or Beneficiary to amounts
deferred under this Deferred Compensation Plan, regardless of the party by whom
such claim or dispute is initiated, the Employers shall (in such proportions as
between the Employers as the Committee determines), and upon presentation of
appropriate vouchers, pay all legal expenses, including reasonable attorneys'
fees, court costs, and ordinary and necessary out-of-pocket costs of attorneys,
billed to and payable by the Participant or by anyone claiming under or through
the Participant (such person being hereinafter referred to as the "Participant's
Claimant"), in connection with the bringing, prosecuting, defending, litigating,
negotiating, or settling of such claim or dispute; provided, that:

      (a)   The Participant or the Participant's Claimant shall repay to his
Employer any such expenses theretofore paid or advanced by his Employer if and
to the extent that the party disputing the Participant's rights obtains a
judgment in its favor from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has expired or otherwise,
and it is determined by the court that such expenses were not incurred by the
Participant or the Participant's Claimant while acting in good faith; provided,
further, that

      (b)   In the case of any claim or dispute initiated by a Participant or
the Participant's Claimant, such claim shall be made, or notice of such dispute
given, with specific reference to the provisions of this Deferred Compensation
Plan, to the Committee within two years (three years, in the event of a Change
in Control) after the occurrence of the event giving rise to such claim or
dispute.


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<PAGE>

      7.5.  INDEMNIFICATION FOR LIABILITY. The Employers shall indemnify the
Administrator, the members of the Committee, and the employees of any Employer
to whom the Administrator delegates duties under this Deferred Compensation
Plan, against any and all claims, losses, damages, expenses and liabilities
arising from their responsibilities in connection with this Deferred
Compensation Plan, unless the same is determined to be due to gross negligence
or willful misconduct.

      7.6.  CLAIMS PROCEDURE. If a claim for benefits or for participation under
this Deferred Compensation Plan is denied in whole or in part, a Participant
will receive written notification. The notification will include specific
reasons for the denial, specific reference to pertinent provisions of this
Deferred Compensation Plan, a description of any additional material or
information necessary to process the claim and why such material or information
is necessary, and an explanation of the claims review procedure. If the
Committee fails to respond within 90 days, the claim is treated as denied.

      7.7.  REVIEW PROCEDURE. Within 60 days after the claim is denied or, if
the claim is deemed denied, within 150 days after the claim is filed, a
Participant (or his duly authorized representative) may file a written request
with the Committee for a review of his denied claim. The Participant may review
pertinent documents that were used in processing his claim, submit pertinent
documents, and address issues and comments in writing to the Committee. The
Committee will notify the Participant of its final decision in writing. In its
response, the Committee will explain the reason for the decision, with specific
references to pertinent Deferred Compensation Plan provisions on which the
decision was based. If the Committee fails to respond to the request for review
within 60 days, the review is treated as denied.


                                  ARTICLE VIII

                            AMENDMENT AND TERMINATION

      8.1.  AMENDMENT AND TERMINATION. The Committee shall have the right, at
any time, to amend or terminate this Deferred Compensation Plan, in whole or in
part, provided that such amendment or termination shall not adversely affect the
right of any Participant or Beneficiary to payment of Participant's Deferred
Compensation Account. The Administrator, upon review of the effectiveness of
this Deferred Compensation Plan, may at any time recommend amendments to, or
termination of, this Deferred Compensation Plan to the Committee. American Water
Works reserves the right, in its sole discretion, to discontinue deferrals
under, or completely terminate, this Deferred Compensation Plan at any time. If
this Deferred Compensation Plan is discontinued with


                                      -14-
<PAGE>

respect to future deferrals, Participants' Deferred Compensation Accounts shall
be distributed on the distribution dates elected in accordance with Section 5.1,
unless the Committee designates that distributions shall be made on an earlier
date. If the Committee designates such earlier date, each Participant shall
receive distribution of his entire Deferred Compensation Account as specified by
the Committee. If this Deferred Compensation Plan is completely terminated, each
Participant shall receive distribution of his entire Deferred Compensation
Account in one lump sum payment as of the date this Deferred Compensation Plan
terminates.




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<PAGE>



                                   ARTICLE IX

                            MISCELLANEOUS PROVISIONS

      9.1.  RIGHT OF EMPLOYERS TO TAKE EMPLOYMENT ACTIONS. The adoption and
maintenance of this Deferred Compensation Plan shall not be deemed to constitute
a contract between an Employer and any Eligible Employee, or to be a
consideration for, or an inducement or condition of, the employment of any
individual. Nothing herein contained, or any action taken hereunder, shall be
deemed to give any Eligible Employee the right to be retained in the employ of
an Employer or to interfere with the right of an Employer to discharge any
Eligible Employees at any time, nor shall it be deemed to give to an Employer
the right to require the Eligible Employee to remain in its employ, nor shall it
interfere with the Eligible Employee's right to terminate his employment at any
time. Nothing in this Deferred Compensation Plan shall prevent an Employer from
amending, modifying, or terminating any other benefit plan, including the Annual
Incentive Plan.

      9.2.  ALIENATION OR ASSIGNMENT OF BENEFITS. A Participant's rights and
interest under this Deferred Compensation Plan shall not be assigned or
transferred except as otherwise provided herein, and a Participant's rights to
benefit payments under this Deferred Compensation Plan shall not be subject to
alienation, pledge or garnishment by or on behalf of creditors (including heirs,
beneficiaries, or dependents) of the Participant or of a Beneficiary.

      9.3.  RIGHT TO WITHHOLD. To the extent required by law in effect at the
time a distribution is made from this Deferred Compensation Plan, the Employer
or its agents shall have the right to withhold or deduct from any distributions
or payments any taxes required to be withheld by federal, state or local
governments.

      9.4.  CONSTRUCTION. All legal questions pertaining to this Deferred
Compensation Plan shall be determined in accordance with the laws of the State
of New Jersey, to the extent such laws are not superseded by the Employee
Retirement Income Security Act of 1974, as amended, or any other federal law.

      9.5.  HEADINGS. The headings of the Articles and Sections of this Deferred
Compensation Plan are for reference only. In the event of a conflict between a
heading and the contents of an Article or Section, the contents of the Article
or Section shall control.

      9.6.  NUMBER AND GENDER. Whenever any words used herein are in the
singular form, they shall be construed as though they were also used in the
plural form in all cases where they


                                      -16-
<PAGE>

would so apply, and references to the male gender shall be construed as
applicable to the female gender where applicable, and vice versa.

   AMERICAN WATER WORKS COMPANY, INC.

   By: /s/ J. James Barr
       ----------------------------------------------------
       J. James Barr
       President and Chief Executive Officer


  Attest: /s/ W. Timothy Pohl
          -------------------------------------------------
          W. Timothy Pohl
          General Counsel and Secretary



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