Document:

2010 Annual Incentive Plan Highlights Brochure

 EXHIBIT 10.2 

 

 

 2010 Annual Incentive Plan 

Highlights Brochure 
  

  
  

			
	 Table of Contents
	  	
		
	 THE 2010 AMERICAN WATER ANNUAL INCENTIVE PLAN
	  	1
		
	 Your Performance — Your Award
	  	1
		
	 Eligibility
	  	2
		
	 DETERMINING AIP AWARDS
	  	4
		
	 Step 1: Establish initial award pool based on overall corporate performance
	  	4
		
	 Step 2: Allocate overall corporate funding to organizational groups/ functional areas, and adjust specific organizational
group/functional area funding to reflect results
	  	6
		
	 Step 3: Determine individual AIP award based on (a) individual performance, and (b) available organizational
group/functional area funding; awards are paid from available organizational group/functional area award pool
	  	7
		
	 WHAT THE 2010 AIP MEANS FOR YOU
	  	8
		
	 Performance Ratings
	  	8
		
	 Award Payout Examples
	  	9
		
	 Receiving Your AIP Award
	  	11
		
	 FREQUENTLY ASKED QUESTIONS
	  	12

			
	American Water	 	1

  

 

 THE 2010 AMERICAN WATER ANNUAL INCENTIVE PLAN 

Your Performance — Your Award 
 At
American Water, your performance counts. We rely on our employees’ knowledge and skills to help the Company achieve its business objectives. 

The American Water 2010 Annual Incentive Plan (AIP) is designed to give eligible exempt employees an annual opportunity to earn a cash award that
recognizes and rewards their contributions to the Company’s success. We continue to make adjustments to the AIP design to reinforce the link between Company and individual performance and award payouts. This means that Company and individual
performance are both taken into account to determine cash awards under the plan. Keeping up our momentum in 2010: 
  

	•	 	 We are continuing the funding approach that was used in 2009, which directly ties the amount of available cash for AIP payouts to Company performance
against specific metrics. AIP funding for all eligible, exempt employees will depend on the Company’s achieving its financial and non-financial goals. 

 

	•	 	 Your individual performance continues to play a large role in determining the amount of your payout. Employees who exceed their performance
targets could receive higher payouts. Conversely, employees who under-perform and do not meet their performance targets could receive lower payouts or no payout at all. In short, your performance directly impacts the amount of your
award. 

 The 2010 AIP is designed to challenge and motivate you to perform at your highest level, and promote the creation of
value to the customer and shareholder. Read this brochure to learn about how the 2010 plan works and what it means for you. 

			
	American Water	 	2

  

 

			
	The 2010 AIP
	
	Elements of the Program
		
	 •  AIP award pool funding is based on overall corporate performance against
specific financial and non-financial goals (represented by the Corporate Multiplier), then allocated across organizational groups/functional areas—at senior management’s discretion—depending on organizational group/functional area
results.
  
 •  AIP
funding for all eligible exempt employees depends on the Company achieving its financial as well as non-financial goals.
  

•  A pre-determined financial threshold for Company performance must be met in order for funding
and any award to be provided under the AIP.
  

•  Individual award payouts will be based on individual performance against specific goals
(represented by the Individual Performance Factor) and paid from available organizational group/functional area funding.
  

•  For 2010, the Individual Performance Factor range is 0%-150%. Individual payouts will be
capped at 150% of AIP target award.
	    	 •  Award opportunity (Target Award) is expressed as a percentage of base salary.
(See Attachment B).
  

•  Actual payout may be lower or higher than target depending on Company and individual
performance against specific goals.
  

•  Individual performance is assessed by your manager and measured against your pre-determined
performance goals.
  

•  Your AIP will be distributed as a cash award in March.

 
 •  You must be actively
employed with American Water on the date awards are made to receive your 2010 AIP payout.
  

•  If you are disabled, retire, or die, you or your beneficiary may be eligible to receive an
award prorated to reflect your service during the plan year.
  

•  If actual Company performance differs from forecasted Company performance, the American Water
Board or its Designee has the right to adjust the award determination(s) and/or award payouts(s) prior to final approval.

Eligibility 
  

	•	 	 You are eligible for an AIP award opportunity if you are a regular, full-time exempt employee of American Water. 

 

	 	•	 	 Regular, full-time exempt employees who join American Water on or before September 30, 2010 are also eligible to participate in the AIP on a
prorated basis. 

  

	 	•	 	 Employees transferred from nonexempt to exempt status on or after
September 30th are not eligible in the current plan
year. 

			
	American Water	 	3

  

 

	•	 	 You must be an active employee with American Water on the date the payout is made in order to receive the award. In certain circumstances, such as
disability, retirement or death, an award may be made — prorated to reflect your service during the plan year. 

  

	•	 	 If you are promoted during the plan year to a position with a higher AIP target level, or if you are reclassified/transferred to a position with
a lower AIP target level, your award payout will be based on your new target level as of December 13, 2010. 

  

	•	 	 If you transfer from exempt status to nonexempt status during the current plan year or your job was reclassified to nonexempt status, you are not
eligible for a 2010 AIP award. 

  

	•	 	 If your performance rating is “Unacceptable” or “Too Soon to Rate,” you will not receive a payout. 

Why Is the Plan Based on Individual Performance? 

Since the value (as reflected in our share price and our return to shareholders) and success of our business depend on the achievement of annual Company
and individual performance goals, American Water recognizes the need to differentiate and reward the performance of employees who enable us to reach these goals. The 2010 AIP is designed to ensure that award payouts are directly tied to measurable
contributions — both Company and individual — to American Water’s success. 

			
	American Water	 	4

  

 

 DETERMINING AIP AWARDS 

AIP award payouts depend on individual performance; they also depend on overall corporate performance and organizational group/functional area results
(which determine award pool funding). 
 AIP awards will be determined according to the following three-step process: 

 

			
	Step 1:	  	Establish initial award pool based on overall corporate performance
		
	Step 2:	  	Allocate overall corporate funding to organizational groups/functional areas, and adjust specific organizational group/functional area funding to reflect
results
		
	Step 3:	  	Determine AIP award based on individual performance; awards are paid from available organizational group/functional area funding

 

			
	Step 1: Establish initial award pool based on overall corporate performance
		
	Each year, American Water establishes funding for the AIP award pool. In 2010, the funding will be directly tied to Company performance and represented by the Corporate Multiplier.
The Corporate Multiplier can range from 0% to 150% depending on how well the Company performed against the financial and non-financial goals described below. Note that a predetermined threshold for Company performance - 2010 Diluted
Earnings Per Share (EPS) must be at least 85% of target - must be met in order for funding and any award to be provided under the AIP for Operating Cash Flow (20%) and Non-Financial Performance Factors (30%). 2010 Diluted Earnings Per Share
(EPS) must be at least 90% of target for any EPS funding (50%) and award to be provided under the AIP.	  	

			
	American Water	 	5

  

 

	•	 	 Financial Metrics (Weighted 70%) (See Attachment A) 

 

	 	•	 	 Diluted Earnings Per Share (50%) is a widely tracked measure of financial performance/profitability, and is calculated as follows:

 Net Income to Common Stockholders 

÷ 
 Average
Outstanding Shares (including dilutive securities such as 
 stock options) 

= 
 Diluted
Earnings per Share 
  

	 	•	 	 Operating Cash Flow (GAAP) (20%) reflects the amount of cash generated from our operations and is used as an additional measure of
profitability. Operating cash flow is calculated as follows: 

 Net Income 

+ 
 Depreciation
and Amortization 
 - 

Deferred Expenses 

+/- 
 Changes in
Payables and Receivables 
 = 

Operating Cash Flow 
  

	•	 	 Non-Financial Metrics (Weighted 30%)* 

  

	 	•	 	 Environmental Compliance Notices of Violation (NOVs) (7.5%) 

 

	 	•	 	 Safety Performance (7.5%) 

  

	 	•	 	 Customer Satisfaction Survey (7.5%) 

  

	 	•	 	 Customer Service Quality Survey (7.5%) 

  

	*	These outcomes are based on a combination of surveys, end-of-year results, data and other annual reports (see Attachment A at the back of this brochure).

 Please note that AIP funding for all employees will depend on how well the Company achieves its financial goals as well as
non-financial goals. A predetermined financial threshold for Company performance must be met in order for funding and any award to be provided under the AIP. 

			
	American Water	 	6

  

 

 The financial and non-financial metrics are added together to determine the Corporate Multiplier. So,
even if certain metrics are not achieved, the funding may be reduced, but not eliminated altogether. However, if the Company’s financial performance does not meet the threshold, the Corporate Multiplier will be reduced to zero, which would
eliminate your award payout (as indicated in the examples on page 10). The Corporate Multiplier (and thus funding for payouts) may be adjusted to take into account “uncontrollable events” including — but not limited to — severe
weather conditions that significantly impact financial results (i.e., hurricanes), impairment charges, dissolution or acquisition of businesses or costs related to public offerings. 

Step 2: Allocate overall corporate funding to organizational groups/ functional areas, and adjust specific organizational group/functional area
funding to reflect results 
 Once the overall corporate funding is determined as described under Step 1, senior management will allocate
the Corporate funding to American Water’s organizational groups and functional areas. The funding for each organizational group/functional area may be increased or decreased, at senior management’s discretion, to reflect specific
organizational group/functional area results. 
 Corporate funding is allocated to organizational groups/ functional areas;
then organizational 
 group/functional area funding is adjusted, at senior management’s discretion, based on
results 
  

 

 

			
	American Water	 	7

  

 

 Step 3: Determine individual AIP award based on (a) individual performance, and
(b) available organizational group/functional area funding; awards are paid from available organizational group/functional area award pool 

Your AIP target award (i.e., your award opportunity) is based on your job with the Company and is expressed as a percentage of your base salary.
Your actual award payout may be higher or lower than target depending on whether individual and Company performance goals have been met, and your organizational group’s/functional area’s results. Contact your manager for information on
your individual AIP Target Award. 
 Your individual performance factor is based on (a) your performance against specific
targets, and 
 (b) the amount of organizational group/functional area funding available 

 

 

 The sum of individual awards for a specific organizational group/functional area must not exceed 

the funding allocated to that organizational group/functional area 

The Individual Performance Factor represents how well you achieve your annual individual performance goals. Your Individual Performance Factor
(IPF) can range from 0% to 150%, depending on your performance for the plan year and the amount of organizational group/functional area funding available. This performance factor will then be multiplied by your Target Award to determine your 2010
AIP award payout. Individual payouts will be capped at 150% of AIP target award. 
 Individual AIP awards are then paid from the available
organizational group/functional area award funding, which may impact the original (IPF%) determination. The sum of all individual awards within a given organizational group/functional area must not exceed its allocated pool of dollars. 

			
	American Water	 	8

  

 

 WHAT THE 2010 AIP MEANS FOR YOU 

Performance Ratings 
 Most people are
motivated to do their best; therefore the better you perform, the greater your potential award will be under the Plan. It is your responsibility to maximize your award opportunity by achieving or exceeding your goals. 

Each year, you and your manager identify four to six high priority and challenging performance targets, which represent where you can directly impact the
Company’s success. These performance targets and their weightings should be specific, measurable and aligned with the Company’s performance targets. During your year-end performance review, you and your manager will discuss how well you
performed against the established targets, and rate your performance using one of the following performance ratings: 
  

			
	2010 Performance Rating Scale
		
	 Rating
	  	 Description

		
	Exceptional	  	Contributions are widely recognized as extraordinary. Results far exceed all defined expectations, producing important and substantial impact on the Company, Division, Operating
Company, Line of Business or Function.
		
	Significant	  	Contributions are widely recognized as distinguished. Results exceed all or most expectations, producing a tangible and material impact on the Company, Division, Operating
Company, Line of Business or Function.
		
	Commendable	  	Contributions are widely recognized as meaningful. Results meet, and in some cases exceed expectations, producing a positive and desirable impact on the Company, Division,
Operating Company, Line of Business or Function.
		
	Adequate	  	Contributions are widely recognized as limited. Results generally meet but in some cases fall slightly short of expectations, producing inconsistent and marginal impact on the
Company, Division, Operating Company, Line of Business or Function.
		
	Unacceptable	  	Contributions are widely recognized as unsatisfactory. Results fall considerably short of expectations, producing negligible or no impact on the Company, Division, Operating
Company, Line of Business or Function.
		
	Too Soon to Rate	  	Contributions cannot be measured at this time because more time is needed to see a result.

			
	American Water	 	9

  

 

 Later, during the AIP process, your manager will use your rating to determine your Individual
Performance Factor. Depending on how you performed during the year, you could potentially earn a higher payout than in previous years — or you could earn a lower payout or no payout at all (as the examples on the following page demonstrate). In
other words, the AIP design gives you more power to impact the size of your award. It also means that you are more accountable for meeting your goals. 

Award Payout Examples 
 Let’s
calculate possible award payouts for a sample AIP participant, under four possible scenarios: 
 AIP Participant Assumptions

  

					
	 Salary Level
	  	 	L07	  
	 Annual Base Salary
	  	$	90,000	  
	 Individual AIP Target
	  	$	13,500 	(15% of Base Salary) 
	 Total AIP Funding *
	  	$	20,000,000	  
	 Total AIP Funding for Organizational Group*
	  	$	2,000,000	  

  

	*	The total is the sum of the target awards for the eligible employees. 

  

									
	 	  	Performance
	 	  	Scenario 1	  	Scenario 2	  	Scenario 3	  	Scenario 4
	 •Company
	  	Above Target	  	Target	  	Threshold	  	Below Threshold
					
	 — Financial
	  	1.39	  	0.94	  	0.50	  	0.00
	 Performance Factor
	  		  		  		  	
	 — Non-Financial
	  	0.77	  	1.12	  	0.50	  	0.00
	 Performance Factor
	  		  		  		  	
					
	 •Individual
	  	Adequate	  	Exceptional	  	Significant	  	Commendable
	 — Individual
	  	0.25	  	1.50	  	1.05	  	.90
	 Performance Factor
	  		  		  		  	

			
	American Water	 	10

  

 

									
	 	 	Scenario 1	 	Scenario 2	 	Scenario 3	 	Scenario 4
	STEP 1: Establish corporate funding based on overall corporate performance
					
	 Total of AIP Targets (A)
	 	$20,000,000	 	$20,000,000	 	$20,000,000	 	$20,000,000
					
	 Financial Performance Factor (i) (70% weight)
	 	1.39 x 0.70 =
 0.97
	 	0.94 x 0.70 =
 0.66
	 	0.50 x 0.70 =
 0.35
	 	0.00 x 0.70 =

0.00

					
	 Non-Financial Performance Factor (ii) (30% weight)
	 	0.77 x 0.30 =
 0.23
	 	1.12 x 0.30 =
 0.34
	 	0.50 x 0.30 =
 0.15
	 	0.00 x 0.30 =

0.00

					
	 i + ii = Corporate Multiplier (B)
	 	1.20	 	1.00	 	0.50	 	0.00
					
	 A x B = Corporate Funding
	 	$20,000,000 x 1.20
 = $24,000,000

	 	$20,000,000 x 1.00
 = $20,000,000

	 	$20,000,000 x 0.50
 = $10,000,000

	 	$20,000,000 x 0.00
 = $0

	
	STEP 2: Allocate overall corporate funding to organizational groups/functional areas; adjust specific organizational group/functional area funding to reflect
results
					
	 Organizational Group Pool (C) (Allocated from corporate funding)
	 	$2,400,000	 	$2,000,000	 	$1,000,000	 	$0
					
	 Organizational Group Adjustment (D)
	 	1.00
 (Target)
	 	.80
 (Below Target)
	 	1.20
 (Above Target)
	 	1.00
 (Target)

					
	 C x D = Organizational Group Pool (adjusted based on results)
	 	$2,400,000 x 1.00

= $2,400,000
	 	$2,000,000 x 0.80

= $1,600,000
	 	$1,000,000 x 1.20

= $1,200,000
	 	$0 x 1.00

= $0

	
	STEP 3: Determine individual award based on individual performance and available organizational group/functional area funding; awards are paid from available
organizational group/functional area award pool
					
	 Individual AIP Target (E)
	 	$13,500	 	$13,500	 	$13,500	 	$13,500
					
	 Individual Performance Factor (F) (Range of 0 - 1.50)
	 	0.25
 (Adequate)
	 	1.50
 (Exceptional)
	 	1.05
 (Significant)
	 	.90
 (Commendable)

					
	 ExF = Individual Award
	 	13,500 x 0.25 =
 $3,375 

(25% of AIP

target)
	 	13,500 x 1.50 =
$20,250
(150% of AIP

target)
	 	13,500 x 1.05 =
$14,175 (105% of
AIP
 target)
	 	13,500 x .90 = $12,150

However, payout will

be $0, since award
pool = $0

As you can see, both Company and individual performance can significantly impact your final payout. Also, remember that the sum of individual
awards for a specific organizational group/functional area must equal the funding allocated to that organizational group/functional area. 

Note: If actual Company performance differs from forecasted Company performance, the American Water Board or its Designee has the right to adjust
the award determination(s) and/or award payout(s) prior to final approval. 

			
	American Water	 	11

  

 

 Please discuss the AIP with your manager to ensure you clearly understand how the formula works and how
your performance impacts your potential award payout. 
 Receiving Your AIP Award 

Awards will be paid in cash in March of the year following the year in which they are earned. If you’re eligible for an award payout, please keep in
mind that: 
  

	•	 	 The payout will be based on your annual base salary as of December 13, 2010 and subject to all federal, state and local income tax withholdings.

  

	•	 	 The American Water Board, or its Designee, reserves the right to determine whether awards are payable to any individual or group of individuals; the
Board may withhold all award payouts in certain circumstances. 

 Remember, it’s your performance — and your
award: The contributions you make to American Water’s success throughout the year ultimately impact the size of your payout. Be sure to carefully review this brochure; then speak with your manager about the AIP and about what you can do to
improve your performance and share the financial rewards of American Water’s success. 

			
	American Water	 	12

  

 

 FREQUENTLY ASKED QUESTIONS 

 

			
	 Question
	  	 Answer

	How does the plan reward performance?	  	The AIP allows us to differentiate and reward the performance of employees who contribute to the achievement of the Company’s goals. The 2010 AIP directly ties award payouts to
measurable contributions (Company, organizational group/ functional area and individual) to American Water’s success.
		
	Who is eligible for the AIP?	  	All regular, full-time exempt employees are eligible to participate. If you join American Water on or before September 30, 2010, you are also eligible to participate in the plan on
a prorated basis.
		
	What do I have to do to receive an AIP award?	  	 Any payout will depend largely on your performance, as well as on Company, organizational group/ functional area performance (including
financial and non-financial), which determines funding.
  
 If your
performance is rated “Adequate” or higher, you may receive an award payout—but only if threshold Company performance metrics have been met. If your performance rating is “Unacceptable” or “Too Soon to Rate,” you
will not receive a payout. To maximize your award opportunity, it’s important to meet with your manager to establish meaningful performance goals, then work hard throughout the year to achieve those goals.

 
 If actual Company performance differs from forecasted Company performance, the
American Water Board or its Designee has the right to adjust the award determination(s) and/or award payout(s) prior to final approval.

		
	How is my AIP target award opportunity determined? How can I find out what it is?	  	Your AIP target award opportunity is based on your job and expressed as a percentage of your base salary. Please see your manager to learn more about your target award opportunity
for 2010.

			
	American Water	 	13

  

 

			
	 Question
	  	 Answer

	How will my AIP award payout be calculated?	  	 The size of the pool which funds your award is determined based on overall corporate performance and adjusted to reflect specific
organizational group/functional area results. AIP funding for all eligible employees, will depend on the Company and/or organizational group/functional area achieving its non-financial as well as financial goals. Once individual awards are
calculated, they are paid from the organizational group/functional area funding.
  

If actual Company performance differs from forecasted Company performance, the American Water Board or its Designee has the right to adjust the award
determination(s) and/or award payout(s) prior to final approval.

		
	What is the minimum and maximum that could be paid under the plan (as a percent of target)?	  	AIP award payouts can range from zero, to a maximum of an Individual Performance Factor of 150%. Payouts are capped at 150% of AIP target award.
		
	Will I receive an award payout if I meet my individual performance goals but the Company does not achieve minimum (threshold)
performance?	  	No. A pre-determined financial threshold for Company performance must be met in order for funding and any award to be provided under the AIP.
		
	What happens if I leave American Water before I receive my award payout?	  	To receive the award payout, you must be actively employed with American Water on the date the payment is to be made. If you are disabled, retire, or die during the plan
year, you or your beneficiary may be eligible to receive an award, prorated to reflect your service during the year.
		
	What happens if I change job positions within American Water during the plan year?	  	Your award payout will be based on your base salary and target level percentage as of December 13, 2010.

This brochure is the 2010 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.American Water Works Company, Inc 2007 Omnibus Equity Compensation Plan 2010

 EXHIBIT 10.3 

FORM FOR 

NON-EMPLOYEE DIRECTORS – 

2010 GRANT 

AMERICAN WATER WORKS COMPANY, INC. 

2007 OMNIBUS EQUITY COMPENSATION PLAN 

STOCK UNIT GRANT 

This STOCK UNIT GRANT, dated as of May 7, 2010 (the “Date of Grant”), is delivered by American Water Works Company,
Inc. (the “Company”) to                      (the “Participant”). 

RECITALS 

WHEREAS, the Committee (as defined in the American Water Works Company, Inc. 2007 Omnibus Equity Compensation Plan) has determined to
grant each non-employee member of the Board of Directors of the Company (the “Board”) who is a non-employee director of the Company immediately following the Company’s 2010 Annual Stockholder meeting a stock unit grant that
will be converted to shares of common stock of the Company, par value $0.01 per share, (the “Company Stock”) at a later date; 

WHEREAS, the Participant is a non-employee director on the Board; and 

WHEREAS, the Committee has determined that the stock unit grant granted to the Participant shall be issued under the American Water Works
Company, Inc. 2007 Omnibus Equity Compensation Plan (the “Plan”) and the terms and conditions of such stock unit shall be memorialized in this grant (the “Grant”). 

NOW, THEREFORE, the parties to this Grant, intending to be legally bound hereby, agree as follows: 

1. Grant of Stock Units. Subject to the terms and conditions set forth in this Grant and the Plan, the Company hereby grants to the Participant
units              (the “Stock Units”). Each Stock Unit shall be a phantom right and shall be equivalent to one share of Company Stock on the applicable distribution
date, as described in Paragraph 4 below. 
 2. Stock Unit Account. The Company shall establish and maintain a Stock Unit account as a
bookkeeping account on its records (the “Stock Unit Account”) for the Participant and shall record in such Stock Unit Account the number of Stock Units granted to the Participant. The Participant shall not have any interest in any
fund or specific assets of the Company by reason of this grant or the Stock Unit Account established for the Participant. 

 3. Vesting. The Participant shall be fully vested in the Stock Units credited to the
Participant’s Stock Unit Account pursuant to this Grant on the Date of Grant. 
 4. Distribution. The Stock Units shall be converted
to shares of Company Stock and distributed by the Company within thirty (30) days following the earlier of (i) August 12, 2011 (the “Specified Date”) (or, if applicable, the Deferred Date, as defined in Paragraph 5
below), (ii) the Participant’s separation from service (within the meaning of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) with the Company (the “Separation from Service
Date”), or (iii) the date of a Change of Control (as defined below) (the “Change of Control Date”). At the time of distribution, all Stock Units shall be converted to an equivalent number of shares of Company Stock,
and the Participant shall receive a single sum distribution of such shares of Company Stock, which shall be issued under the Plan. For purposes of this Grant, the term “Change of Control” shall have the same meaning as such term is defined
in the Plan, except that a Change of Control shall not be deemed to have occurred for purposes of this Grant unless the event constituting the Change of Control constitutes a change in ownership or effective control of the Company, or in the
ownership of a substantial portion of the assets of the Company, within the meaning of section 409A of the Code and its corresponding regulations. 

5. Deferrals. The Participant may make an irrevocable election to defer the Specified Date (or further defer the Deferred Date (as defined below),
if applicable) of all of the Stock Units, plus dividend equivalents earned on such Stock Units as described in Paragraph 6 below, to a later date, provided that (i) the election shall not take effect until at least twelve (12) months after
the date on which the election is made, (ii) the deferred Specified Date cannot be earlier than five (5) years from the original Specified Date under Paragraph 4 (or five (5) years from the applicable Deferred Date, if a subsequent
deferral of a Deferred Date is being made), and (iii) the election must be made no less than twelve (12) months prior to the date of the Specified Date (or twelve (12) months prior to the previously applicable Deferred Date, if a
subsequent deferral of a Deferred Date is being made). To defer the Specified Date, the Participant must elect to defer 100% of the Stock Units, including corresponding dividend equivalents, granted to the Participant under this Grant and complete
the deferral election form provided to the Participant by the Committee, in the form attached hereto as Exhibit A or as may subsequently modified in the discretion of the Committee. If the Participant desires to make a further deferral, the
Participant must make such election on a separate form provided by the Committee for such purpose. Any such election shall be made in accordance with section 409A of the Code and any corresponding guidance and regulations issued under section 409A
of the Code. Notwithstanding a Participant’s election pursuant to this Paragraph, if the Separation from Service Date or Change of Control Date occurs prior to the Deferred Date, the distribution of the Participant’s Stock Units, plus
corresponding dividend equivalents, will be made as a result of the occurrence of the Separation from Service Date or Change of Control Date, whichever is earlier. If a Specified Date is delayed one or more times pursuant to this Paragraph 5, the
new Specified Date shall be referred to as the “Deferred Date.” 
 6. Dividend Equivalents. Until the earlier of the Specified
Date (or the Deferred Date, if elected), Separation from Service Date or Change of Control Date, if any dividends are declared with respect to the shares of Company Stock, the Company shall credit to a dividend equivalent account (the
“Dividend Equivalent Account”) the value of the dividends that would have been distributed if the Stock Units credited to the Participant’s Stock Unit Account at the time of the

  

 2 

 
declaration of the dividend were shares of Company Stock. At the same time that the Stock Units are converted to shares of Company Stock and distributed to the Participant, the Company shall pay
to the Participant a lump sum cash payment equal to the value of the dividends credited to the Participant’s Dividend Equivalent Account. No interest shall accrue on any dividend equivalents credited to the Participant’s Dividend
Equivalent Account. 
 7. Change of Control. Except as set forth above, the provisions set forth in the Plan applicable to a Change of
Control (as defined in the Plan) shall apply to the Stock Units, and, in the event of a Change of Control, the Committee may take such actions as it deems appropriate pursuant to the Plan and is consistent with the requirements of section 409A of
the Code. 
 8. Acknowledgment by Participant. By accepting this Grant, the Participant acknowledges that with respect to any right to
distribution pursuant to this Grant, the Participant is and shall be an unsecured general creditor of the Company without any preference as against other unsecured general creditors of the Company, and the Participant hereby covenants for himself or
herself, and anyone at any time claiming through or under the Participant, not to claim any such preference, and hereby disclaims and waives any such preference which may at any time be at issue, to the fullest extent permitted by applicable law.
The Participant also hereby agrees to be bound by the terms and conditions of the Plan and this Grant. The Participant further agrees to be bound by the determinations and decisions of the Committee with respect to this Grant and the Plan and the
Participant’s rights to benefits under this Grant and the Plan, and agrees that all such determinations and decisions of the Committee shall be binding on the Participant, his or her beneficiaries and any other person having or claiming an
interest under this Grant and the Plan on behalf of the Participant. 
 9. Restrictions on Issuance or Transfer of Shares of Company
Stock. 
 (a) The obligation of the Company to deliver shares of Company Stock upon the distribution of the Stock Units
shall be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration or qualification of the shares of Company Stock upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of shares of Company Stock, the shares of Company Stock may not be issued in whole or in part unless such
listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. The issuance of shares of Company Stock and the payment of cash to the Participant pursuant to
this Grant is subject to any applicable taxes and other laws or regulations of the United States or of any state having jurisdiction thereof. 

(b) As a condition to receive any shares of Company Stock upon conversion of the Stock Units, the Participant agrees: 

(i) to be bound by the Company’s policies regarding the limitations on the transfer of such shares, and understands
that there may be certain times during the year that the Participant will be prohibited from selling, transferring, pledging, donating, assigning, mortgaging, hypothecating or otherwise encumbering the shares; and 

 

 3 

 (ii) that the shares of Company Stock obtained by the Participant upon the
distribution of the Stock Units shall not be tradeable until the Participant owns enough shares of Company Stock outright, as stock units convertible into shares of Company Stock, and time-based restricted Company Stock, to meet or exceed four
(4) times the Participant’s annual cash retainer, which ownership requirement must be satisfied by the later of February 2015, or the fifth anniversary of the Participant’s commencement of service as a director on the Board.

 10. Grant Subject to Plan Provisions. This Grant is made pursuant to the Plan, the terms of which are incorporated herein by
reference, and in all respects shall be interpreted in accordance with the Plan. In the event of any contradiction, distinction or difference between this Grant and the terms of the Plan, the terms of the Plan will control. Except as otherwise
defined in this Grant, capitalized terms used in this Grant shall have the meanings set forth in the Plan. This Grant is subject to the interpretations, regulations and determinations concerning the Plan established from time to time by the
Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the shares of
Company Stock, (iii) changes in capitalization of the Company, and (iv) other requirements of applicable law. The Committee shall have the authority to interpret and construe this Grant pursuant to the terms of the Plan, its decisions
shall be conclusive as to any questions arising hereunder and the Participant’s acceptance of this Grant is the Participant’s agreement to be bound by the interpretations and decisions of the Committee with respect to this Grant and the
Plan. 
 11. No Rights as Stockholder. The Participant shall not have any rights as a stockholder of the Company, including the right to
any cash dividends (except as provided in Paragraph 6), or the right to vote, with respect to any Stock Units. 
 12. No Rights to Continued
Employment or Service. This Grant shall not confer upon the Participant any right to be retained in the employment or service of the Employer (as defined in the Plan) and shall not interfere in any way with the right to terminate the
Participant’s employment or service at any time. The right to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved. 

13. Assignment and Transfers. No Stock Units or dividend equivalents awarded to the Participant under this Grant may be transferred, assigned,
pledged, or encumbered by the Participant and the Stock Units and dividend equivalents shall be distributed during the lifetime of the Participant only for the benefit of the Participant. Any attempt to transfer, assign, pledge, or encumber the
Stock Units or dividend equivalents under this Grant by the Participant shall be null, void and without effect. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company. This Grant may be assigned
by the Company without the Participant’s consent. 
 14. Withholding. To the extent required by applicable law, the Participant
shall be required to pay to the Company, or make other arrangements satisfactory to the Company to provide for the payment of, any federal, state, local or other taxes that the Company is required to withhold with respect to the Grant, vesting or
distribution of the Stock Units and dividend equivalents. 
  

 4 

 15. Effect on Other Benefits. The value of shares of Company Stock and dividend equivalents
distributed with respect to the Stock Units shall not be considered eligible earnings for purposes of any other plans maintained by the Employer. Neither shall such value be considered part of the Participant’s compensation for purposes of
determining or calculating other benefits that are based on compensation, such as life insurance. 
 16. Applicable Law. The validity,
construction, interpretation and effect of this Grant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. 

17. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the General Counsel at the
Company’s corporate headquarters, and any notice to the Participant shall be addressed to such Participant at the current address shown on the records of the Company, or to such other address as the Participant may designate to the Company in
writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal
Service. 
 18. Section 409A of the Code. 

(a) This Grant is intended to comply with the requirements of section 409A of the Code and shall be interpreted and administered to avoid
any penalty sanctions under section 409A of the Code. If any distribution cannot be provided or made at the time specified herein or as elected by the Participant, then such distribution shall be provided in full at the earliest time thereafter when
such sanctions cannot be imposed. Unless a valid election is made pursuant to Paragraph 5 above, in no event may the Participant designate the calendar year of distribution. 

(b) Notwithstanding any provision to the contrary in this Grant, if any of the distributions under this Grant are payable to the
Participant upon separation from service (within the meaning of section 409A of the Code) from the Employer, then if at the time of the Participant’s separation from service the Participant is a “specified employee” (as such term is
defined in section 409A(2)(B)(i) of the Code and its corresponding regulations) as determined by the Company (or any successor thereto) in its sole discretion in accordance with its specified employee determination policy, then all distributions to
the Participant pursuant to this Grant shall be postponed for a period of six (6) months following the Participant’s separation from service from the Employer. The postponed amounts shall be distributed to the Participant in a lump sum
within thirty (30) days after the date that is six (6) months following the Participant’s separation from service from the Employer. If the Participant dies during such six-month period and prior to the distribution of the postponed
amounts hereunder, the amounts delayed on account of section 409A of the Code shall be distributed to the personal representative of the Participant’s estate within sixty (60) days after the date of the Participant’s death, and any
amounts not delayed shall be distributed to the personal representative of the Participant’s estate in accordance with the terms of this Grant. 

[SIGNATURE PAGE FOLLOWS] 
  

 5 

 IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this
Grant, effective as of the Date of Grant. 
  

			
	AMERICAN WATER WORKS COMPANY, INC.
		
	 By:
	 	  

		
	 Its:
	 	  

 

 6 

 EXHIBIT A 

SUBSEQUENT DEFERRAL ELECTION FORM  

PART A. TIME OF DISTRIBUTION 
 I,
                    , (the “Participant”) hereby irrevocably elect to have all of the Stock Units, plus corresponding
dividend equivalents, (the “Deferred Units”) granted to me pursuant to the Stock Unit Grant, dated as of May 7, 2010, (the “Grant”) under the American Water Works Company, Inc. 2007 Omnibus Equity Compensation
Plan (the “Plan”) that would have been distributed by American Water Works Company, Inc. to me on the Specified Date (as defined in the Grant), instead be distributed to me on the deferred date designated below (the
“Deferred Date”), which date must be at least five (5) years later than the Specified Date, and this election is at least twelve (12) months prior to the Specified Date (to make this deferral election you must defer all of
the Stock Units, plus corresponding dividend equivalents, granted to you pursuant the Grant, meaning there is no partial deferral): 
  

					
	 Number of Stock

Units, and Dividend

Equivalents, to be

Further Deferred

(All Must Be

Deferred)
	 	Original Specified Date
(Election Must Be Made at
Least 12 Months 
Prior to the
Specified Date)	  	Deferred Date
(Must be a 
date that is at least
five years later than the
Original Specified Date)
	100%	 	August 12, 2011	  	

 PART B. ACKNOWLEDGMENT 

I understand and expressly agree that (i) the Deferred Date for the Deferred Units shall be the date I specified in Part A above (which is a date
that is at least five (5) years later than the original Specified Date), and (ii) I will not be entitled to receive distribution of the Deferred Units on an earlier date, except in the event that the Separation from Service Date (as
defined in the Grant) or the Change of Control Date (as defined in the Grant) occurs prior to the Deferred Date. I also understand and expressly agree that this deferral election is irrevocable, is being made at least twelve (12) months prior
to the original Specified Date, and shall not take effect until twelve (12) months after the date on which I make this election. I further understand and agree that the terms and conditions of the Grant and the Plan are hereby incorporated into
this form. Lastly, I understand and agree that this deferral election applies to 100% of the Stock Units, and corresponding dividend equivalents, granted to me pursuant to the Grant. 

 

									
	PARTICIPANT SIGNATURE
					
	Participant:	 	  
	 		 	Date:	 	  

				
	Receipt Acknowledged:	 		 		 	
					
	By:	 	  
	 		 		 	
					
	Title:	 	  
	 		 	Date:	 	  

  

 A-1

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