Document:

Secondment Contract between RWE Solutions AG and Dietrich Firnhaber

 Exhibit 10.19 
 DIETRICH FIRNHABER 
 CONTRACT INFORMATION 

 

 
 Secondment Contract 
 The following secondment contract is concluded 
  

			
	between	  	RWE Solutions AG,
		  	Guiollettstraße 44 – 48
		  	60325 Frankfurt am Main
		
	and	  	Herrn Dietrich Firnhaber
		  	Jahnstraße 23
		  	69120 Heidelberg

 Preamble 
 At the instigation of RWE AG you will be seconded to work at American Water Works Corporation, Inc. (herinafter referred to as AWW) in Vorhees/USA for a limited period of time. AWW will conclude a separate employment
contract with you. During the duration of this contract, your employment contract with us dated 2 February 1999 shall be dormant. Your temporary secondment shall be subject to the Regulations of the Framework Guidelines for Foreign Secondments
within the RWE Group valid at the time (herinafter also referred to as Secondment Guidelines) provided in the following references are being made to the Secondment Guidelines. In addition, the following shall be agreed: 

 Section 1—Scope of Duties 
  

	(1)	As Member of the Board at AWW, you shall be responsible for strategy, planning, M&A and investment appraisal. 

  

	(2)	You shall report to Bill Alexander, CEO of AWW, and be subject to his instructions. 

 Section 2—Ongoing Commitment to RWE Solutions AG 
  

	(1)	Your point of contact shall be the organisational unit Staff Policy/Organisation (MSL). 

  

	(2)	If required, you shall report to RWE AG on your activities at AWW. 

 Section 3—Duration of the Temporary Secondment 
 After an initial integration programme at Thames Water, Reading (from
1 November 2002 to 31 December 2002), your secondment is expected to start on 1 January 2003. From today’s perspective, it shall run until 31 October 2006. RWE AG reserves the right to extend the agreed duration of the
foreign secondment subject to an agreement with you and in consultation with AWW. In this event, an agreement shall be reached at least 3 months prior to the expiration of the foreign assignment. 
 Section 4—Package 
  

	(1)	During your temporary secondment, you shall receive an annual basic salary of € 125,000 gross payable in equal parts at the end of each month. During your assignment abroad,
this basic salary shall be continued as a ‘shadow salary’ to provide a financial basis for computing your pension provision, setting up accruals and fixing your remuneration for the period following your return. Salary reviews shall be
performed by AWW in consultation with us. The current remuneration package is enclosed in this contract. 

  

	(2)	

  

	(3)	During the temporary secondment, you shall receive an annual allowance of € 70,000 (gross) for your raised responsibility as Member of the Board. 

  

	(4)	In addition, you shall receive a monthly foreign allowance of € 2,500 (net) during the duration of the temporary secondment. 

  

	(5)	During the temporary secondment, you shall receive a performance-related bonus according to AWW regulations to a maximum amount of 50% of your basic salary according to
(1) plus your Board Member allowance according to (2). The amount payable depends on the degree of performance achievement. In addition, you shall be entitled to the long-term bonus of AWW, details of which shall be subject to the agreement to
be concluded with AWW. 

  

 2 

	(6)	All payments shall be made in Euros to your usual salary account unless you provide us with details of an alternative account in the USA and the part amount to be credited at least
six weeks prior to the next due payment. All transfer costs shall be borne by us. 

 Section 5—Taxation

  

	(1)	During the temporary secondment, you shall bear the costs of taxation on your gross basic salary, the variable bonus and the Board Member Allowance to the amount that corresponds
with German income tax (inclusive of solidarity tax contribution) (hypothetical income tax). The hypothetical tax shall be calculated according to the regulations of the Secondment Guidelines taking into consideration personal circumstances (family
status, number of children) as well as the personal tax allowance to the amount of 5% of the above mentioned gross salary and deducted monthly. 

  

	(2)	AWW shall bear the actual taxes at home and abroad on the RWE income. All taxes payable in relation to private income shall be borne by you. 

  

	(3)	If you do not receive any child benefit payments during your assignment abroad, appropriate tax exemption for dependent children shall be granted when calculating the hypothetical
income tax. 

  

	(4)	With respect to the entitlement to tax consultancy services and your obligation to bear part of the costs, the regulations of the Secondment Guidelines shall apply.

  

	(5)	You must advise us of any changes in address and family status without delay. 

  

	(6)	Compensation for the progression disadvantage due to the payment of secondment- related allowances shall be in accordance with the regulations of the Secondment Guidelines.

 Section 6—Social Insurance 
  

	(1)	During the foreign secondment, you shall remain within the German social insurance system, national and/or supranational and international legal provisions permitting. All necessary
application procedures shall be arranged by us prior to you taking up work in Vorhees/USA. 

  

	(2)	In the absence of a decision by the competent authority at the time of commencing your secondment in Vorhees/USA, the provisional assumption regarding the payment of German social
insurance contributions shall be that you will remain within the German social insurance system. 

  

 3 

	(3)	For the duration of the secondment period in Vorhees/USA, we will provide private health care cover for you and your accompanying family members within the scope of existing group
contracts. Any incidental tax costs shall be borne by us. 

  

	(4)	You undertake to change your voluntary or private health insurance policy into an underlying insurance policy within the scope of the statutory framework. The contributions to this
underlying insurance policy shall be borne by you. Prior to commencing your secondment in Voorhees/USA, you shall provide evidence that an appropriate application has been filed. 

 Section 7—Working Conditions 
  

	(1)	For the duration of the foreign secondment period in Voorhees/USA, the AWW regulations regarding working time and leave entitlement shall apply. 

  

	(2)	Full payment of your remuneration in case of sickness shall be according to the provisions of your agreement with AWW. As a minimum, you shall be entitled to six months fully paid
sick leave. 

  

	(3)	The length of paid leave shall be according to the agreement with AWW. 

 Section 8—Family 
 The school, preschool and/or kindergarten fees of your children shall be reimbursed up
to an amount of approx. US$ 7,600 per child upon production of receipts according to the provisions of the Secondment Guidelines. This amount shall be reviewed with AWW and adjusted annually in accordance with the level of education of each
child. Before making final arrangements with any of the above-mentioned institutions, you shall consult AWW about your choice. The criteria for choosing an educational institution shall be its proximity to your place of residence and its quality
while endeavouring to be as cost-effective as possible. Cost previously incurred in Germany shall be included. 
 § 9 Accommodation

  

	(1)	AWW shall support you in finding rented living space in proximity to the office and bear the rental costs for appropriate accommodation. Unless you maintain your home residence,
your rental contribution shall be US$ 1.000. Prior to entering a rental agreement, you shall obtain the approval of AWW. 

  

	(2)	If no accommodation can be rented according to section 9 (1), AWW shall bear the costs of purchasing appropriate living space . The provision of section 9 (1) sentence 2
applies. 

  

	(3)	For all further regulations and the provision of temporary accommodation at home and abroad please refer to the regulations of the Secondment Guidelines. 

 

 4 

	(4)	If you abandon your domicile, you shall be entitled to a compensation balance in the amount of € 9,000 net p.a. for home visits in reference to sub-clause 7.2 of the Secondment
Guidelines. 

  

	(5)	It shall be included in the first salary payment within a year in which this entitlement exists. 

 Section 10—Relocation and Travel Cost 
  

	(1)	Relocation and travel cost shall be borne according to the regulations of the Secondment Guidelines. Storage costs in Germany shall be borne by us after prior agreement.

  

	(2)	The annual budget for homeward journeys for you and your family is currently € 18,200. It shall be paid with the first salary payment within a year in which this
entitlement exists. 

 Section 11—Business Trips 
 Any expenses for business travel required in the course of the secondment shall be paid in line with AWW business travel regulations. Details shall be agreed in your separate contract with AWW. Homeward journeys
according to section 10 (2) of this agreement are not regarded as business travel. 
 Section 12 Company Car / Private Car 

  

	(1)	AWW shall provide you with a company car. Details of this arrangement shall be in accordance with the foreign secondment contract with AWW. 

  

	(2)	We will compensate you for any cost disadvantage arising from the sale of your private vehicle at short notice or the cancellation of a private car leasing agreement in accordance
with the provisions of the guidelines. Any incidental tax shall be borne by you. 

 Section 13—Miscellaneous 

  

	(1)	You shall be granted a maximum of five days intercultural training for you and your ac companying wife, which will be organised by us or AWW. The associated cost and any incidental
tax shall be borne by AWW. 

  

	(2)	We will bear the costs as well as any incidental tax for language training for yourself, your wife and children at pre-school and/or school age according to individual requirements
and needs: Business English for yourself, conversational English for your wife and elementary and supporting training for your children at pre-school and/or school age. AWW or we will agree with you the extent, location and schedule of language
tuition. 

  

 5 

	(3)	Your Rhenas insurance policies (accident insurance, direct insurance and legal expenses insurance) shall be continued during your temporary secondment, the conditions of insurance
of the insurer permitting. 

  

	(4)	You shall continue to be entitled to an IAS check-up (Classic) on the current terms. This offer can be utilised during a home visit. 

  

	(5)	You shall continue to have the use of your current company car until your family moves to the USA. This does not apply to the petrol card we have issued you with, which you shall
return to us upon taking up work at AWW. 

 Section 14—Entry Regulations 
  

	(1)	We will arrange for any entry visa and work permits required in the country of your secondment and bear the costs incurred. You undertake to submit all necessary documents in time
and make sure that all passports and travel documents are valid before and during the time of your temporary secondment. 

 In
addition, we will apply for all necessary residence permits for your accompanying family members at our cost. 
  

	(2)	Prior to the temporary secondment, you and your family shall undergo a medical examination at the expense of the company. For further details see the Secondment Guidelines.

  

	(3)	The agreement is subject to the required official permits and/or the medical certificate that you are medically fit for the temporary secondment. 

 Section 15—Termination of the Foreign Secondment 
  

	(1)	For terminations during the term of your secondment, the provisions of sub-clause 2.5 of the Secondment Guidelines shall apply. 

  

	(2)	If you give cause for the termination of the secondment, you shall not be entitled to any payment with respect to your return according to section 10 of this agreement.

  

	(3)	We reserve the right to recall you at the instruction of RWE AG at any time giving 3 months notice. Any costs incurred due to the early termination of the secondment contract shall
be reimbursed upon production of receipts if operational requirements demand an early return. A shorter notice period for your recall may apply in case of important reasons that you are accountable for. Under special circumstances such as epidemics,
political turmoil, natural disasters, etc. you shall return immediately. This also applies in case of important reasons that you are accountable for. 

  

	(1)	(4) Upon termination of the foreign secondment, you shall be given a position that corresponds to the position you held prior to your secondment in terms of scope of
responsibility, remuneration package and requirements and in this respect the inland employment contract applies. The group shall be involved in planning your return. 

  

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	(3)	The raised responsibility of your role in the USA does not entitle you to a comparable position upon your return to Germany. 

 We shall discuss your return with you at least 9 months prior to the expiration of your secondment in consultation with the group. 
 Section 16—Duration of Contract 
 The
contract shall take effect on 1 January 2003 and terminate on 31 October 2006 with no notice required, unless the contract is terminated prematurely according to section 15 of this contract. 
 Section 17—Status 
 During the period of the
secondment, you shall remain employed with RWE Solutions AG. The duration of the foreign secondment shall be included in your period of service with our company. 
 Section 18—Stipulation requiring Written Form, Severability Clause 
  

	(1)	Should any provision of the contract be or become void, this shall not affect the validity of all remaining provisions of the contract. Any invalid provision or loophole shall be
replaced by such provisions that best reflect the objectives of the contractual parties. 

  

	(2)	Amendments and changes to the contract must be in writing. This also applies to the abolition of the written form requirement. Subsidiary oral agreements shall not be effective.

  

	(3)	German jurisdiction applies. 

 Enclosure: Remuneration Package
(4.1)
  

							
	                    ,          2003	 		  		  	
				
	  
	 		  	 /s/ Dietrich Firnhaber
	  	
	(RWE Solutions AG)	 		  	    (Dietrich Firnhaber)	  	

  

 7 

 Side Letter 
 With reference to your remaining leave entitlement for 2002, we agree the following: 
 To compensate you for any leave not
taken during 2002, you will be issued with a credit note to the appropriate value. The credit can be utilised for specific purposes during your reintegration in Germany in form of personal development measures. 
 The value of the credit note shall be calculated as follows: daily rate based on your basic salary at RWE Solutions in 2002 X remaining leave. The credit can be drawn on
for a limited period of 12 months after your return and is available upon your return. 
 In order to calculate the amount of the credit, you will advise RWE
Solutions AG of your remaining leave entitlement for 2002 by 30 June 2003. 
  

							
	                    ,          2003	 		  		  	
				
	  
	 		  	 /s/ Dietrich Firnhaber
	  	
	(RWE Solutions AG)	 		  	    (Dietrich Firnhaber)	  	

  

 82007 American Water Senior Management Annual Incentive Plan

 Exhibit 10.20 
 

 

 The 2007 American Water Annual Incentive Plan 
 The 2007 American Water Annual Incentive Plan (AIP) recognizes the opportunity and the accountability we share for achieving our goals. Your accomplishments have helped to build American Water’s success to this
point, and the AIP will reward you for the contribution you make to the achievement of our 2007 goals. 
 Who Is Eligible for the 2007 AIP 

 All full-time employees in Management Levels ML1 – ML4 in American Water are eligible to participate in the 2007 AIP. 
 Eligible employees who join American Water on or before September 30 of a plan year (January 1 – December 31) are also eligible to participate in the plan on a
prorated basis. 
 Eligible employees seconded from RWE will participate in the plan for the duration of their secondment. Target levels for assignees
seconded from Germany are aligned with incentive opportunities for German based employees to maintain the “home country terms and conditions” approach adopted for assignees. 
 Individuals who do not meet their individual performance expectations will not be eligible to receive an incentive award. The American Water Board, or its designee for these purposes, reserves the right to determine
whether incentives are payable to any individual or group of individuals. The Board may withhold all incentive payments in certain circumstances. 
 Your Award Opportunity 
 Your award opportunity is based on your role. Your manager will confirm your award opportunity to you in
writing. Any award you earn is based on your salary as of December 31,2007. 
 If you are promoted during the plan year to a position with a higher
target level, your bonus plan will be prorated to reflect participation at each award level. Similarly, if you are reclassified to a position with a lower AIP award level, your bonus plan will be prorated to reflect your participation at each award
level. 
  

 2 

 What the Plan Measures 
 The AIP is designed to reward participants for the performance results they and the Company attain during the plan year. There are three performance components: ‘Financial’ (Corporate, Regional), ‘Operational’ and
‘Individual’. 
  

	•	 	 The Financial component is based on Operating Income. The performance level will be determined at the Corporate and Regional levels. For 2007, more than 80%
of the Operating Income target for the entire Company must be achieved before any payment will be made on the corporate financial component of the Plan (although a payment could be made on the regional financial component if the regional
operating income exceeds 80% of target). In addition, more than 70% of the Operating Income target must be achieved before any payment will be made on any component of the Plan for the entire Company (including regional financial, operational
and individual components). 

 Operating Income – is defined as earnings before interest, taxes and other
non-operating expenses. 
 See Attachment A for the 2007 Target Level Achievement Schedule. 
 Your AIP letter will provide you with your Company component targets. 
  

	•	 	 The Operational component includes performance measures tied to the American Water business objectives through which customer satisfaction, customer service
quality, service level, environmental, health & safety, and quality measures and compliance goals are the key performance indicators. If you are an employee of the Business Center or the Belleville Lab, you will not have an operational
component. See Attachments B and C for the 2007 operational components. 

 The Customer Satisfaction Study measures
overall satisfaction with the services offered by American Water that directly benefits the customer. This study is conducted annually in the fourth calendar quarter and surveys approximately 1,100 American Water regulated water or sewer customers.

 The Customer Service Quality Study measures customer satisfaction levels as a result of field and Customer Service contacts. This
study is conducted throughout the year and surveys approximately 900 American Water regulated water or sewer customers each quarter. 
 Service Level (Customer Service Centers): Measures the percentage of customer calls answered within a specified period of time. 
 Notices of Violation (NOV): The number of times that an official notice is issued by a primacy agency for failure to comply with a federal, state, or local environmental statute or regulation that is covered by the Environmental
Management Plan (EMP). 
 Lost Work Day Case Rate (LWCR): The number of total OSHA recordable injuries and/or illness cases with lost
workday(s) per 200,000 hours worked. 
  

 3 

 Quality Measures (Shared Services Center—SSC): 
  

	 	•	 	 SSC Error Rate—Number of Financial Statements errors (Annual). 

  

	 	•	 	 Reconciliations—Calendar Year Average of accounts beyond policy. 

  

	 	•	 	 Timeliness of Processes—Annual percentage of process conducted according to schedule -Tax Filings, Financial Statements available for consolidation, External
Audit information submissions, days to image and process invoices, and Orcom rate changes. 

 Compliance (Shared
Services Center—SSC): 
  

	 	•	 	 External Audit Findings—Number of unrecorded differences and topside entries. 

  

	 	•	 	 Internal Audit Findings—Number of instances of deviations from policy/procedures during SOX testing. 

  

	 	•	 	 External Filing Requirements—Annual Reports and Commission Reports completed by established deadlines for SSC. 

  

	•	 	 The Individual component includes Performance Targets as agreed by you and your manager within the companywide standard performance management process.

 How Your Award Is Weighted 
 Your award opportunity is based on two or four performance components (see pages 3 and 4), depending on your role. However, you could earn part of your award based on individual, operational and regional financial components if Company
Operating Income is more than 70%. If Company Operating Income is 70% or less, no award will be paid on any component. 
 The portion of your award
opportunity you can earn for each component is reflected in weightings assigned to each, based on your role in the organization, as the following charts show. The award has a target and a maximum opportunity. 
  

														
	 BUSINESS CENTER -
2007

	 Management Level
	  	Company
Financial	 	 	Individual (1)	 	 	Target
Opportunity	 	 	Management Positions
	ML1	  	 	 	 	 	 	 	 	 	 	 
	Financial	    	 Individual
	  	56	%	 	24	%	 	80	%	 	CEO
	     70%
	    	     30%
	  			 			 			 	
	ML2	  	 	 	 	 	 	 	 	 	 	 
	 Financial
	    	 Individual
	  	25	%	 	25	%	 	50	%	 	COO, CFO
	     50%
	    	     50%
	  			 			 			 	
	ML3	  	 	 	 	 	 	 	 	 	 	 
	 Financial
	    	 Individual
	  	16	%	 	24	%	 	40	%	 	Senior Management
	     40%
	    	     60%
	  			 			 			 	
	ML4	  	 	 	 	 	 	 	 	 	 	 
	 Financial
	    	 Individual
	  	10	%	 	15	%	 	25	%	 	Directors
	     40%
	    	     60%
	  			 			 			 	

	(1)	This component is defined as Target Agreement or Performance Targets. 

  

 4 

																	
	 SHARED SERVICES CENTER / CUSTOMER
SERVICE CENTER - 2007

	 Management
Level
	 	 Company
Financial
 (40%)
	 	 	 Individual (1)
 (30%)
	 	 	Operational (2)
(30%)	 	 	Target
Opportunity	 	 	Management
Position
	ML4	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Financial
	  	Individual/
Operational	 			 			 			 			 	
		  		 	10	%	 	7.5	%	 	7.5	%	 	25	%	 	Vice President
	     40%
	  	      60%	 			 			 			 			 	Director

	(1)	This component is defined as Target Agreement or Performance Targets. 

	(2)	This component is defined by Customer Service Center as: 34% Customer Satisfaction; 33% Customer Service Quality; 33% Service Level. 

  

																				
	 REGION -
2007

	 Management
Level
	 	 Company
Financial
 (40%)
	 	 	 Regional
Financial
 (20%)
	 	 	Individual (1)
(20%)	 	 	Operational (2)
(20%)	 	 	Target
Opportunity	 	 	Management
Positions
	ML3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Financial
	  	Individual/
 Operational/

 Regional

 Financial
	 	16	%	 	8	%	 	8	%	 	8	%	 	40	%	 	Regional
 Presidents

	     40%
	  	    60%	 	 	 	 	 	 
	ML4	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Financial
	  	Individual/
 Operational/

 Regional

 Financial
	 	10	%	 	5	%	 	5	%	 	5	%	 	25	%	 	State
 Presidents,

 Directors

	     40%
	  	    60%	 	 	 	 	 	 

	(3)	This component is defined as Target Agreement or Performance Targets. 

	(4)	50% of the Operational component is allocated to Customer Satisfaction/Customer Service Quality. 

  

 5 

 How the Weightings Come Together 
 Here is an example of how the three/four performance components and their weightings come together. As you can see, the measures within each component are also weighted. 
 EXAMPLE 
 

 
  

 6 

 Operational 
 Regional Operational components are performance measures tied to the American Water objectives. Customer Service Quality is 25% of this component and is measured on a state-by-state basis. Customer Satisfaction (25%), Environmental Notice
of Violations (NOVs) (25%) and Lost Workday Health and Safety Case Rate (LWCR) (25%) (Attachments B & C). Shared Services and Customer Service operational components are described in Attachments B & C. 
 Operational components are evaluated on a range from 0 to 120%. 
 Performance You Can Impact 
 We believe it is essential that you are accountable for, measured on and rewarded for performance that
you can directly impact or influence. 
 You and your manager have agreed on your individual performance targets. These targets should relate back to the
performance scorecard for your business unit or region and should directly reflect your role. 
 Individual Performance 
 Individual performance will be assessed using American Water’s Performance Management and Development Review (PDR) process. The first section of the PDR form
contains a scorecard in which your individual Performance Targets will be documented. You and your supervisor will jointly identify and agree to your individual Performance Targets and relative weightings to be achieved during the year. 

In overview, the PDR requires each individual to have 5 Performance Targets. The Performance Targets should be specific and measurable and aligned with the Company
performance targets. Each target needs to be evaluated on a range of 0 to 120% according to its importance relative to other targets. In this way excelling at your highest priority target, which has the heaviest weighting, will drive a bigger award.
At least one of the targets should be linked to a personal development objective. At the beginning of 2008, a structured performance review will be conducted to determine how well you performed against your targets in 2007. It will be the
Performance Scorecard Summary Rating for these 5 Performance Targets and NOT the “overall” performance rating that will be used for AIP award purposes (see below). 
  

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 Performance Category 
 Each participant in the AIP plan should have 5 performance targets. An assessment should be made of performance against each target. Once evaluated, each individual performance target rating will be added and averaged to determine an
overall rating. 
 Example #1 
  

														
	 Performance Target Rating (PT)
	  	 AIP Performance Rating
	  	Percentage
Amount	  	Weighting	  	Subtotal
	 PT#1 (Meets Expectation)
	  	Target fully achieved	  	100	  	x	  	20	%	 	=	  	20
	 PT#2 (Meets Expectations)
	  	Target largely achieved	  	85	  	x	  	20	%	 	=	  	17
	 PT#3 (Does Not Meet Expectation)
	  	Target not achieved	  	0	  	x	  	20	%	 	=	  	0
	 PT #4 (Progressing)
	  	Target partially achieved	  	60	  	x	  	20	%	 	=	  	12
	 PT #5 (Exceeds Expectation)
	  	Target exceeds expectations	  	120	  	x	  	20	%	 	=	  	24

 Take each performance target percentage amount and multiply it by its assigned weight. Add the subtotal numbers =
73 (Individual Weighting Factor) 73% would be used as the INDIVIDUAL weighting factor in the AIP plan. 
 Example #2 
  

														
	 Performance Target Rating (PT)
	  	 AIP Performance Rating
	  	Percentage
Amount	  	Weighting	  	Subtotal
	 PT#1 (Exceeds Expectation)
	  	Target exceeds expectations	  	120	  	x	  	10	%	 	=	  	12
	 PT#2 (Meets Expectations)
	  	Target largely achieved	  	90	  	x	  	20	%	 	=	  	18
	 PT#3 (Does Not Meet Expectation)
	  	Target not achieved	  	0	  	x	  	10	%	 	=	  	0
	 PT #4 (Progressing)
	  	Target partially achieved	  	55	  	x	  	20	%	 	=	  	11
	 PT #5 (Meets Expectation)
	  	Target fully achieved	  	100	  	x	  	40	%	 	=	  	40

 81 would be the subtotal and 81% would be used as the INDIVIDUAL weighting factor in the AIP plan. 
  

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	 2007 Target Rating
Scale
	 
	 Rating
	  	Scale	 
	 Exceeds Expectations
	  	101 – 120	%
		
	 Meets Expectations
	  		
	 -   Target Fully Achieved
	  	100	%
	 -   Target Largely Achieved
	  	75 – 99	%
		
	 Progressing
	  		
	 -   Target Partially Achieved
	  	25 – 74	%
		
	 Does Not Meet Expectations
	  	0	%
	 -   Not Achieved
	  		
		
	 Too Soon to Rate
	  	0	%

 Performance ratings can range from 0% - 120%. The degree of percentage given will be based on the
supervisor’s assessment of performance on the performance target. The maximum payment you can receive under the Individual component is 120%. This would only be awarded if an individual exceeded all 5 performance targets. This should be used
only in cases of exceptional and outstanding performance against a target. If an individual received a “too soon to rate” or “does not meet expectations” on their performance scorecard they would not be eligible for an AIP award.

 How Your Payout Is Determined 
 At the end of
the year, the amount for each component is based on performance against each goal within the component and its relative weighting. Here is a simplified way to think of it. 
 

 
 (See example on page 10.) 
  

 9 

 2007 AIP Payout Example  
 ML4 EXAMPLE: 
 Target Opportunity is 25% with 40% Company Operating Income 20% Regional Operating Income, 20%
Operational and 20% Individual Components 
 Financial Performance 
 Company Operating Income 
 Achievement against financial target = 103.000% x 10.000% (Target) = 10.300% 
 Regional Operating Income 
 Achievement against financial target = 100.000% x
5.000% (Target) =5.000% 
 Operational Performance 
 Achievement
against operational targets = 96.50% x 5.000% (Target) =4.825% 
 Individual Performance 
 Achievement against 5 Performance targets = 97.50% x 5.000% (Target) = 4.875% 
 Total AIP payable is 10.300% (Company
Operating Income) + 5.000% (Regional Operating Income) + 4.825% (Operational) + 4.875% (Individual) is 25.00% of annual base salary of $150,000 or $37,500 
  

											
	 Salary
	  	 x
	  	 AIP
 Target
	  	 equals
	  	 Target
 Payout
	  	 Maximum
 Payout

	$150,000	  		  	25%	  		  	$37,500	  	$51,750
						
	 Operating
 Income
 (40%)
	  		  		  		  		  	
						
	 Corporate
 Operating
 Income
 =10%

	  		  	 Regional
 Operating
 Income
 =5%

	  		  	 Operational
 Results
 =5%
	  	 Individual
 Performance
 Targets
 =5%

						
	Target	  		  	Target	  		  	Target	  	Target
	$15,000	  		  	$7,500	  		  	$7,500	  	$7,500
						
	Actual	  		  	Actual	  		  	Actual	  	Actual
	$15,450	  		  	$7,500	  		  	$7,238	  	$7,313
						
	 Maximum =
 150%
	  		  	 Maximum =
 150%
	  		  	 Maximum =
 120%
	  	 Maximum =
 120%

	$22,500	  		  	$11,250	  		  	$9,000	  	$9,000

  

 10 

 Target Bonuses 
 You will have received a letter which states your target bonus opportunity. Target bonus is defined as the bonus paid at 100% for both financial and individual awards. This means business plan is achieved for the financial and
operational element, and the employee has met his/her objectives for the individual element. 
 The maximum bonus you can receive is 150% of your Financial
element (both corporate and regional), 120% of operational and 120% of your Individual element. 
 Adjustments for Uncontrollable Events

 The financial data included in the appendices has been prepared on the basis of the business plans agreed in 2007, using the assumptions set at
that time. As in previous years, the actual results used for assessment may be amended to reflect the impact of events that are not considered to be within the control of local management. Any such amendments will require the explicit approval of
the Chief Executive Officer and the Chief Financial Officer, and if material, the Board, whose decision will be final. The following items are those most likely to be considered for amendment: 
  

	 	•	 	 Weather conditions having a material impact on the financial results 

  

	 	•	 	 The impact of movements in foreign exchange rates 

  

	 	•	 	 Disposal/acquisition of businesses not anticipated in the business plan, but subsequently mandated by the Board of Directors 

  

	 	•	 	 Goodwill impairments 

  

	 	•	 	 Costs related to the public offering 

 A ward
Payments 
 To be eligible to receive an AIP award, you must be actively employed on the date the payment is made. However, in case of disability,
retirement, layoff or death during the plan year, a prorated award based on participation in the plan may be payable. Employees who resign or are terminated for cause at any time prior to payment are not eligible. 
 Awards are usually determined and paid in cash as soon as possible after the release of financial results. Awards are normally paid by April of the following year.
Awards are subject to all federal, state and local income tax withholdings. 
 If you become eligible to join the AIP during a plan year, any payout for that
year will be prorated to reflect your participation in the plan. 
 The American Water Board, or its designee for these purposes, reserves the right to
determine whether incentives are payable to any individual or group of individuals. The Board may withhold all incentive payments in certain circumstances, such as failing to reach minimum financial goals. Individuals who do not meet their
individual performance expectations will not be eligible to receive an incentive award. 
  

 11 

 Rewarding Achievement 
 Our AIP goals are challenging, but with your focus and contribution and effective teamwork, they can be achieved. Remember, your individual results do matter; our overall performance is the collective results of all AIP participants.

 It is important that you clearly understand your goals, how we are performing against the goals, and how the AIP works so you know how you personally
affect our performance. Be sure to talk to your manager or your local HR representative if you have questions. 
 This brochure describes the
2007 American Water Annual Incentive Plan. The American Water Board or its Designee, whose decisions will be final and binding, will determine interpretations of the Plan. The Company reserves the right to amend, modify, or discontinue the Plan
during the plan year or at any time in the future. Participation in the Plan does not convey any commitment to ongoing employment. If there are any differences between the information contained here and the Plan Document, the Plan Documents will
govern. 
  

 12 

 Attachment A 
 Company bonus 2007 for American Water will be based on Operating Income. If the Operating Income results are met, the award payout will be based on the following: 
  

			
	 Bonus payout curve: Range between 0%
and 150%

	 % of Operating
	  	%
	 Income Achieved
	  	Payout
	 125%
	  	150%
	 120%
	  	140%
	 115%
	  	130%
	 110%
	  	120%
	 105%
	  	110%
	    100% *
	  	100%
	 95%
	  	75%
	 90%
	  	50%
	 85%
	  	25%
	 80%
	  	0%
	 70%
	  	0%

	*	Business Plan Operating Income 

 Operating Income is defined as earnings
before interest, taxes and other non-operating expenses. 
  

 13 

 Attachment B 
 2007 AIP OPERATIONAL MEASURES & TARGETS 
  

																			
	 	  	Weighting	 	 	NE	 	 	SE	 	 	Central	 	 	West	 	 	AWE	 
	 Notices of Violation
 (NOV)**
	  	25	%	 	4	*	 	4	*	 	4	*	 	4	*	 	4	*
	 Lost Work Day Case Rate
 (LWCR) ***
	  	25	%	 	2.2	 	 	1.7	 	 	1.7	 	 	1.4	 	 	1.7	 
	 Customer Satisfaction Rating
 (Q23 of CSS)
	  	25	%	 	95	%	 	95	%	 	95	%	 	95	%	 	N/A	 
	 Customer Service
 Quality Rating
 (Q29 of SQS)
	  	25	%	 	80	%	 	80	%	 	80	%	 	80	%	 	N/A	 

	*	If total AW NOVs are less than or equal to the target of 21, everyone gets rewarded for the NOV component, regardless of their individual region result vs. target. If total AW NOVs
exceed 21 rewards will determined by region. The AW target for NOVs will be adjusted upward for any significant growth (add 1 NOV per 5% growth in customers served, rounded down). 

	**	Definition—Notices of Violation (NOV): Number of times that an official notice is issued by a primacy agency for failure to comply with a federal, state, or local environmental
statute or regulation that is covered by the Environmental Management Plan (EMP). For an acquisition in which the Company has entered into a consent agreement to correct known deficiencies, violations will not count towards the NOV target unless
they are due to issues not contemplated by the consent agreement or are related to a failure to comply with the consent agreement. 

	**	Lost Work Day Case Rate (LWCR) is the number of total OSHA recordable injuries and/or illness cases with lost workday(s) per 200,000 hours worked. LWCR x 5 = Injury Frequency Rate
(IFR) which is a similar measure only per 1,000,000 hours worked. LWCR is a more recognized and tracked US metric. 

  

 14 

 Attachment C 
 Operational Parameters for 2007 AIP – Payout Scale and Relative Weighting 
  

																							
	I. Relative Weighting	 
	25%	 	 	25%	 	 	25%	 	 	25%	 
	II. Payout Scales	 
	 CUSTOMER
 SATISFACTION
	 	 	SERVICE QUALITY	 	 	 Lost Workday Case
 Rate (LWCR)
	 	 	 ENVIRONMENTAL
 NOVs
	 
	% Achieved	 	 	Payout (%)	 	 	% Achieved	 	 	Payout (%)	 	 	% of Target	 	 	Payout (%)	 	 	% of Target	 	 	Payout (%)	 
	£    90	%	 	0	%	 	£    75	%	 	0	%	 	£      50	%	 	120	%	 	£      50	%	 	120	%
	91	%	 	10	%	 	76	%	 	10	%	 	75	%	 	110	%	 	75	%	 	110	%
	92	%	 	20	%	 	77	%	 	20	%	 	100	%	 	100	%	 	100	%	 	100	%
	93	%	 	40	%	 	78	%	 	40	%	 	110	%	 	70	%	 	110	%	 	70	%
	94	%	 	70	%	 	79	%	 	70	%	 	120	%	 	30	%	 	120	%	 	30	%
	95	%	 	100	%	 	80	%	 	100	%	 	3    130	%	 	0	%	 	3    130	%	 	0	%
	96	%	 	110	%	 	85	%	 	110	%	 			 			 			 		
	3     97	%	 	120	%	 	3    90	%	 	120	%	 			 			 			 		

 Operational Parameters for 2007 AIP – Payout Scale and Relative Weighting – Customer
Service Centers 
  

																
	I. Relative Weighting	 
	34%	 	 	33%	 	 	33%	 
	II. Payout Scales	 
	 CUSTOMER
 SATISFACTION
	 	 	SERVICE QUALITY	 	 	SERVICE LEVEL	 
	% Achieved	 	 	Payout (%)	 	 	% Achieved	 	 	Payout (%)	 	 	% Achieved	  	Payout (%)	 
	£    90	%	 	0	%	 	£    75	%	 	0	%	 	< 72%	  	0	%
	91	%	 	10	%	 	76	%	 	10	%	 	72% - < 80%	  	75	%
	92	%	 	20	%	 	77	%	 	20	%	 	80%	  	100	%
	93	%	 	40	%	 	78	%	 	40	%	 	> 80% - < 84%	  	105	%
	94	%	 	70	%	 	79	%	 	70	%	 	84% - < 86%	  	110	%
	95	%	 	100	%	 	80	%	 	100	%	 	86%	  	120	%
	96	%	 	110	%	 	85	%	 	110	%	 		  		
	3    97	%	 	120	%	 	3    90	%	 	120	%	 		  		

  

 15 

 Attachment C 
 Operational Parameters for 2007 AIP – Payout Scale and Relative Weighting – Shared Services Center 
  

											
	I. Relative Weighting	 
	55%	 	 	45%	 
	II. Payout Scales	 
	QUALITY	 	 	COMPLIANCE	 
	% Achieved *	 	 	Payout (%)	 	 	% Achieved *	 	 	Payout (%)	 
	<75	%	 	0	%	 	<75	%	 	0	%
	75	%	 	25	%	 	75	%	 	25	%
	80	%	 	50	%	 	80	%	 	50	%
	85	%	 	75	%	 	85	%	 	75	%
	90	%	 	100	%	 	90	%	 	100	%
	95	%	 	110	%	 	95	%	 	110	%
	100	%	 	120	%	 	100	%	 	120	%

	*	If the percentage achieved is between the range parameters of the scale, the payout percentage will be derived from the actual percentage achieved. For example, if the percentage
achieved is 88%, the payout percentage will be 90%. 

  

 16

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