8-KLeadership ChangesExhibits & Filings

American Water Works Company, Inc. 8-K Report, Executive Changes (Mar 30, 2012)

Filed March 30, 2012For Securities:AWK

Summary

This Form 8-K filing from American Water Works Company, Inc. (AWK), dated March 30, 2012, primarily details an updated employment agreement for its President and Chief Executive Officer, Jeffry E. Sterba, effective March 26, 2012. The agreement introduces several changes to Mr. Sterba's compensation structure, including an increase in his base salary and enhanced long-term incentive opportunities, signaling confidence in his leadership and a commitment to retaining him. Key adjustments include an elevated base salary, a higher target award for the annual incentive plan, and significantly increased target payouts for the Long-Term Incentive Plan (LTIP) for the years 2012-2014. The agreement also outlines specific vesting schedules for stock options and performance stock units (PSUs) with provisions for accelerated vesting under certain termination conditions. Additionally, severance provisions are detailed in the event of termination without "Cause" or for "Good Reason." These changes suggest a strategic move by the company to align executive compensation with performance and retention goals.

Key Highlights

  • 1New employment agreement for CEO Jeffry E. Sterba effective March 26, 2012, superseding prior agreements.
  • 2CEO's annual base salary increased to $750,000, effective March 19, 2012.
  • 3Target award under the annual incentive plan remains 100% of base salary.
  • 4Target payout under the Long-Term Incentive Plan (LTIP) increased to 250% of base salary for 2012, 2013, and 2014.
  • 5Specific time-vesting schedules outlined for 2012, 2013, and 2014 PSU and option grants, with provisions for accelerated vesting.
  • 6Severance package for termination without "Cause" or for "Good Reason" includes 18 months of base salary and continued health benefits.
  • 7The filing includes the Amended Employment Letter Agreement as an exhibit.

Frequently Asked Questions

The main purpose of this 8-K filing is to announce and provide details on the new employment agreement between American Water Works Company, Inc. and its President and CEO, Jeffry E. Sterba, which was entered into on March 26, 2012. This includes changes to his compensation and terms of employment.

Mr. Sterba's annual base salary has been increased to $750,000. His target award for the annual incentive plan remains 100% of his base salary. Significantly, his target payout for the Long-Term Incentive Plan (LTIP) has been increased to 250% of his annual base salary for the years 2012, 2013, and 2014.

The agreement details specific time-vesting schedules for PSU and option grants made in 2012, 2013, and 2014, with vesting occurring over several years. Importantly, these awards will time-vest immediately if Mr. Sterba's employment is terminated by the company without "Cause," or if he resigns for "Good Reason," or in the event of his death or disability. PSU grants are also subject to performance-vesting criteria.

If Mr. Sterba's employment is terminated by the Company without "Cause" or if he terminates his employment for "Good Reason," he is entitled to receive severance payments equivalent to eighteen months of his base salary, payable in installments. He will also receive continued health, dental, and vision coverage as per the Company's Executive Severance Policy.