SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
American Water Works Company, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- ---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- ---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ---------------------------------------------------------------------------
(5) Total fee paid:
- ---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- ---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- ---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ---------------------------------------------------------------------------
(3) Filing Party:
- ---------------------------------------------------------------------------
(4) Date Filed:
- ---------------------------------------------------------------------------
<PAGE>
AMERICAN WATER WORKS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 1996
TO THE HOLDERS OF:
COMMON STOCK
CUMULATIVE PREFERRED STOCK, 5% SERIES
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
American Water Works Company, Inc. will be held at the office of the
Company, 1025 Laurel Oak Road, Voorhees, New Jersey, on Thursday, May 2,
1996, at 11:00 A.M., E.D.S.T., for the following purposes:
1. To elect 11 directors to hold office until the next annual
election of directors and until their successors are elected and
qualified;
2. To vote on a proposal to amend the Company's Restated
Certificate of Incorporation, as amended, to increase the number of
authorized shares of Common Stock from 100,000,000 to 300,000,000;
3. To vote to ratify or reject the appointment of independent
accountants made by the Board of Directors to audit the books and
accounts of the Company at the close of the current fiscal year; and
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only holders of voting stock of record at the close of business on
March 4, 1996 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
W. TIMOTHY POHL, GENERAL COUNSEL AND SECRETARY
Voorhees, New Jersey
March 25, 1996
YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES), WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU
ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
<PAGE> 1
AMERICAN WATER WORKS COMPANY, INC.
1025 LAUREL OAK ROAD
VOORHEES, NEW JERSEY 08043
609-346-8200
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 2, 1996
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of American Water Works Company, Inc.
(hereinafter called the "Company") to be used at the annual meeting of
stockholders of the Company on Thursday, May 2, 1996, and at any
adjournment thereof. Shares represented by properly executed proxies
received by the Company will be voted at the meeting. Where a choice is
specified by the stockholder, the proxy will be voted in accordance with
such choice. If no choice is specified, the proxy will be voted in
accordance with the recommendations of the Board of Directors. Any proxy
may be revoked at any time insofar as it has not been exercised.
Stockholders may revoke proxies by written notice to the Company, or by
delivery of a proxy bearing a later date, or by personally appearing at the
meeting and casting a vote. This notice of meeting and proxy statement and
the enclosed form of proxy are being mailed beginning March 25, 1996 to the
holders of all voting securities.
The presence in person or representation by proxy of stockholders
entitled to cast a majority of votes on a particular matter to be voted
upon shall constitute a quorum for the purpose of considering such matter.
In addition, where a separate vote by class of stock on a particular matter
is required, the presence in person or representation by proxy of
stockholders entitled to cast a majority of votes of such class of stock is
required to constitute a quorum for the purpose of that class of stock
considering the matter. A proxy marked "withheld" in the election of
directors or "abstain" on any other matter to be voted upon, will be
considered to be represented at the meeting. A proxy marked "withheld" in
the election of directors will be considered as not being voted and,
therefore, will have no effect inasmuch as directors are elected by a
plurality of votes cast in the election. A proxy marked "abstain" on any
other matter to be voted upon at the meeting and broker non-votes will have
the effect of an "against" vote inasmuch as the affirmative vote of a
majority of the votes entitled to be cast on the matter is necessary for
approval of the matter. In addition, where a separate vote by class of
stock on any such other matter is required, the affirmative vote by a
majority of the votes entitled to be cast by that class of stock is
necessary for approval of such other matter.
The close of business on March 4, 1996 has been fixed as the record
date for the determination of stockholders entitled to notice of and to
vote at the annual meeting and any adjournment thereof. On the record
date, there were outstanding and entitled to vote 34,260,095 shares of
Common Stock (one vote per share) and 101,777 shares of Cumulative
Preferred Stock, 5% Series (one-tenth of a vote per share).
<PAGE> 2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the annual meeting, 11 directors are to be elected to hold office
until the next annual election of directors or until their respective
successors are elected and qualified. It is the intention of the persons
named in the accompanying form of proxy to vote all shares they are
empowered to vote for the election of as many as possible of the persons
named in the following table, all of whom, with the exception of Horace
Wilkins, Jr., are now directors of the Company. William F. Hyland, who is
currently a director of the Company, has reached the mandatory retirement
age for directors under the Company's By-laws and is not standing for
reelection. Mr. Hyland has been a director of the Company for the past
twelve years. In case any nominee named in the table withdraws or is
otherwise unable to serve, which is not anticipated, the persons named in
the proxy may vote for another person of their choice.
Stockholders are entitled to cumulative voting rights in the election
of directors. Each holder of Common Stock is entitled to one vote per
share, and each holder of Cumulative Preferred Stock, 5% Series, is
entitled to one-tenth of a vote per share. Each stockholder may cast as
many votes as such stockholder's number of shares shall entitle him or her
to vote in the election of directors multiplied by the number of directors
to be elected, namely 11, and such stockholder may cast all of such votes
for a single director or distribute them among all of the directors to be
voted for, or any two or more of them. A stockholder wishing to exercise
his or her cumulative voting rights should give instructions on the
enclosed form of proxy as to how such stockholder's votes are to be
cumulated.
Unless a stockholder specifically exercises his or her cumulative
voting rights, such stockholder's votes may be distributed among the
nominees (other than those from whom the stockholder withholds his or her
vote) by the persons named in the proxy to elect as many as possible of the
nominees. Such persons may vote cumulatively for such of the nominees (in
some circumstances, less than all) as they in their discretion determine if
in their judgment such action is necessary to elect as many of the nominees
as possible.
Information as of March 4, 1996 concerning the nominees is set forth
below:
<TABLE>
<CAPTION>
DIRECTOR OF
NAME, AGE AND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE THE COMPANY
POSITION WITH COMPANY DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
---------------------- -------------------------------------------- -----------
<S> <C> <C>
WILLIAM O. ALBERTINI, 52 Executive Vice President and Chief Financial Officer since 1990
(2) (3) (5) February, 1995 and Vice President and Chief Financial Officer
from February, 1991 to February, 1995, Bell Atlantic
Corporation, provider of telecommunications; Chairman, President
and Chief Executive Officer from May, 1989 to February, 1991,
Bell Atlantic Enterprises Corporation, provider of cellular
communications, computer maintenance and financial services.
Director: Bell Atlantic Corporation, Grupo Iusacell, S.A. de
C.V., Compass Capital Fund.
</TABLE>
- ------------------
See footnotes on page 4
<PAGE> 3
<TABLE>
<CAPTION>
DIRECTOR OF
NAME, AGE AND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE THE COMPANY
POSITION WITH COMPANY DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
---------------------- -------------------------------------------- -----------
<S> <C> <C>
WILLIAM R. COBB, 62 Retired since May, 1991; Regional Vice President from March, 1993
(1) (2) (4) 1979 to May, 1991, American Water Works Service Company, Inc.,
service subsidiary of the Company.
ELIZABETH H. GEMMILL, 50 Vice President and Secretary, Tasty Baking Company. 1983
(1) (2) (3)
HENRY G. HAGER, 61 President, Insurance Federation of Pennsylvania, Inc. since 1986
(1) (4) January, 1985; Partner, Stradley, Ronon, Stevens & Young,
attorneys, since November, 1993; Senior Partner, Liebert, Short
& Hirshland, attorneys, from January, 1982 to November, 1993.
Director: American Travellers Corporation.
NELSON G. HARRIS, 69 Chairman of the Executive Committee since May, 1992 and 1985
Vice Chairman President and Chief Executive Officer prior thereto, Tasty
of the Board Baking Company. Director: CoreStates Financial Corp., PECO
(1) (2) (4) (5) Energy Company, Tasty Baking Company.
GEORGE W. JOHNSTONE, 57 President and Chief Executive Officer of the Company since 1991
President and Chief January, 1992 and Vice President of the Company from May, 1987
Executive Officer of to January, 1992; President since May, 1991 and Senior Vice
the Company President-Operating Services from February, 1984 to May,
(1) (5) 1991, American Water Works Service Company, Inc., service
subsidiary of the Company.
MARILYN WARE LEWIS, 52 Public relations consultant and financial advisor; President, 1982
Chairman of the Board and KLS Educational Systems, Inc., specialized education
Chairman of the Executive consultants, from March, 1987 to January, 1992. Director:
Committee CIGNA Corporation, South Jersey Industries, Inc.
(1) (2) (3) (4) (5)
NANCY W. WAINWRIGHT, 59 Retired since July, 1994; Vice President from August, 1984 to 1984
(3) (5) July, 1994, United Propane, Inc., gas distributor.
</TABLE>
- ------------------
See footnotes on page 4
<PAGE> 4
<TABLE>
<CAPTION>
DIRECTOR OF
NAME, AGE AND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE THE COMPANY
POSITION WITH COMPANY DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
---------------------- -------------------------------------------- -----------
<S> <C> <C>
PAUL W. WARE, 49 Chairman since June, 1990, Vice Chairman from June, 1987 to 1990(dagger)
(1) (2) June, 1990, President from June, 1989 to March, 1992 and
Executive Vice President from June, 1988 to June, 1989, Penn
Fuel Gas, Inc., gas distributor. Director: York Water Company.
ROSS A. WEBBER, 61 Professor of Management, The Wharton School, University of 1986
(3) (4) Pennsylvania; Private consultant, general management
development. Director: Heidemij, N.V.
HORACE WILKINS, JR., 45 President-Missouri since December, 1992, Southwestern Bell ----
Telephone Company, provider of telephone services; Vice
President-Government and Industry Affairs from July, 1989 to
December, 1992, SBC Communications Inc., provider of tele-
communications. Director: Commerce Bank, N.A.
</TABLE>
- -------------------
(dagger) Also Director of the Company from May, 1982 to May, 1986
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation and Management Development Committee
(4) Member of Nominating Committee
(5) Member of Finance Committee
Marilyn Ware Lewis and Paul W. Ware are the daughter and son of
John H. Ware, 3rd and Marian S. Ware, who beneficially own more than 5% of
the Company's Common Stock. William R. Cobb is the spouse of Rhoda W.
Cobb, who was a director of the Company. Rhoda W. Cobb and Nancy W.
Wainwright are sisters and are cousins of Marilyn Ware Lewis and Paul W.
Ware.
Attendance at meetings of the Board of Directors and committees of the
Board by directors averaged 96% during 1995. All nominees attended 81% or
more of the meetings of the Board of Directors and committees of the Board
on which he or she served. There were ten meetings of the Board of
Directors and eight meetings of the Board's Executive Committee during
1995.
The Board of Directors also has an Audit Committee, a Compensation and
Management Development Committee, a Nominating Committee and a Finance
Committee (formerly the Business Development Committee).
The Audit Committee recommends to the Board of Directors the
independent accountants to audit the books and accounts of the Company.
The Audit Committee met with the Company's independent accountants and the
Company's officers three times during 1995 to review the scope of the audit
to be performed and to approve, subject to review by the Board of
Directors, the fee to be paid for the audit and to review the results of
the audit of the financial statements included in the Annual Report and the
adequacy of internal accounting controls and accounting practices.
<PAGE> 5
The Compensation and Management Development Committee met five times
during 1995 to evaluate and report to the Board of Directors concerning the
Company's compensation practices and benefit programs and to evaluate and
set, subject to the concurrence of the Board of Directors, the annual
salary to be paid to the President and Chief Executive Officer.
The Nominating Committee met six times during 1995. The Nominating
Committee recommends to the Board of Directors the slate of director-
nominees to stand for election each year at the annual meeting of
stockholders and in the event of interim vacancies, candidates to fill such
vacancies on the Board of Directors. The Nominating Committee will
consider nominees for the Board of Directors suggested by stockholders.
Such suggestions must be in writing and delivered to the General Counsel
and Secretary of the Company.
The Finance Committee met three times during 1995 to assist management
and the Board of Directors in evaluating matters such as acquisitions,
divestitures, joint ventures and partnerships, to advise management and
make recommendations to the Board of Directors relative to the various
financial policies and programs of the Company and to review and monitor
the funding, asset allocation and investment performance of the Company's
group benefit and retirement plan assets.
STOCK OWNERSHIP INFORMATION
The following table sets forth information as of March 4, 1996 with
respect to beneficial ownership of Common Stock of the Company by: (i) the
nominees, (ii) the five most highly compensated executive officers and
(iii) all nominees and executive officers of the Company as a group. If a
nominee owns less than one percent of the Company's Common Stock, no
percentage is shown under the heading "Percent of Class." Information for
the table was obtained from the nominees and executive officers. For
purposes of the table, a person is a "beneficial owner" of the Company's
Common Stock if that person, directly or indirectly, has or shares with
others (i) the power to vote or direct the voting of the Common Stock or
(ii) investment power with respect to the Common Stock, which includes the
power to dispose or direct the disposition of the Common Stock.
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
-------------------------------
SOLE VOTING SHARED VOTING SHARES OWNED
NAME OF INDIVIDUAL OR OR INVESTMENT OR INVESTMENT BY SPOUSE AND PERCENT
NUMBER OF PERSONS IN GROUP POWER(1) POWER(2) MINOR CHILDREN(2) TOTAL OF CLASS
-------------------------- ------------- ------------- ----------------- ------------ --------
<S> <C> <C> <C> <C> <C>
William O. Albertini...................... 2,218 2,218
William R. Cobb........................... 2,911 3,670 6,581
Elizabeth H. Gemmill...................... 16,516 90,000 15,600 122,116
Henry G. Hager............................ 2,000 6,910 8,910
Nelson G. Harris.......................... 4,076 4,076
George W. Johnstone....................... 35,320 523 35,843
Marilyn Ware Lewis........................ 10,200 517,594 527,794 1.54%
Nancy W. Wainwright....................... 3,462 802,808 806,270 2.35%
Paul W. Ware.............................. 10,200 464,228 474,428 1.38%
Ross A. Webber............................ 1,351 1,351
Horace Wilkins, Jr........................ 100 100
J. James Barr............................. 371,340 7,768 379,108 1.11%
Edward W. Limbach......................... 19,152 19,152
W. Timothy Pohl........................... 7,848 7,848
Gerald C. Smith........................... 20,142 20,142
All nominees and executive
officers as a group (15 persons)........ 506,836 1,556,042 34,471 2,097,349 6.12%
</TABLE>
- ------------------
(1) Does not include shares of the Company's Common Stock to be
credited during 1996 to the accounts of the executive officers
pursuant to the Company's Employees' Stock Ownership Plan and
Savings Plan for Employees.
(2) Ware Foundation, a charitable trust of which Nancy W. Wainwright
is trustee, owns 802,808 shares (2.34%) of the Common Stock of
the Company. Oxford Foundation, Inc., a non-profit corporation
of which Marilyn Ware Lewis and Paul W. Ware are directors, owns
318,588 shares of the Common Stock of the Company. Warwick
Foundation, a charitable foundation of which Elizabeth H. Gemmill
is a trustee, owns 90,000 shares of the Common Stock of the
Company. As the trustees or directors of these non-profit
organizations have voting and investment power, the shares of the
Company's Common Stock held by such non-profit organizations are
shown opposite the name of each such trustee or director, but
such shares are reported only once in the total for nominees and
officers as a group. The nominees deny beneficial ownership of
such shares. The nominees also deny beneficial ownership of
shares owned by their spouses and minor children.
None of the nominees has any material interest in any other stock of
the Company or its subsidiaries.
<PAGE> 7
Based upon information available to the Company as of March 4, 1996,
the following persons beneficially own more than 5% of the Company's Common
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
------------------------------
SOLE VOTING SHARED VOTING
NAME AND ADDRESS OR INVESTMENT OR INVESTMENT PERCENT
OF BENEFICIAL OWNER POWER POWER OF CLASS
------------------- ------------- ------------- --------
<S> <C> <C> <C>
John H. Ware, 3rd and.............................. 3,388,178 33,160 9.99%
his wife Marian S. Ware
550-A Bunker Hill Road
Strasburg, PA 17579
John H. Ware, 3rd.................................. 2,101 12,600
550-A Bunker Hill Road
Strasburg, PA 17579
Marian S. Ware..................................... 47,726 318,588 1.07%
550-A Bunker Hill Road
Strasburg, PA 17579
Northern Trust Corporation......................... 1,998,690 109,625 6.15%
50 South LaSalle Street
Chicago, IL 60675
The Bessemer Group, Incorporated................... 903,867 1,017,384 5.61%
630 Fifth Avenue
New York, NY 10111
</TABLE>
Based upon filings with the Securities and Exchange Commission, as of
March 4, 1996 there are no persons who own beneficially more than 5% of the
outstanding shares of the Company's Cumulative Preferred Stock, 5% Series.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and persons who own
more than ten percent of the Company's stock to file initial reports of
ownership and reports of changes in ownership of the Company's stock with
the Securities and Exchange Commission and the New York Stock Exchange and
to provide copies of all such reports to the Company. Based solely on a
review of the copies of such reports provided to the Company, the Company
believes that during calendar year 1995 all Section 16(a) filing
requirements applicable to its directors, officers and greater-than-ten-
percent owners were complied with.
<PAGE> 8
MANAGEMENT REMUNERATION
The following table sets forth the annual compensation paid to each of
the Company's five most highly compensated executive officers for services
to the Company and its subsidiaries in all capacities for each of the last
three calendar years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION(1)
-------------------------
AWARDS PAYOUTS
------ -------
ANNUAL COMPENSATION RESTRICTED
NAME OF EXECUTIVE OFFICER ------------------- STOCK LTIP ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY AWARDS(2) PAYOUTS COMPENSATION(3)
------------------------- ---- -------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C>
George W. Johnstone...................................... 1995 $446,083 $943,710 $189,720 $5,554
President and Chief Executive Officer of the Company 1994 416,250 0 0 6,834
1993 377,500 0 0 6,098
J. James Barr............................................ 1995 265,833 399,540 80,325 5,554
Vice President and Treasurer of the Company 1994 255,833 0 0 6,846
1993 245,833 0 0 6,098
Edward W. Limbach........................................ 1995 265,833 399,540 80,325 5,554
Vice President of the Company 1994 255,833 0 0 6,846
1993 245,833 0 0 6,098
Gerald C. Smith.......................................... 1995 265,833 399,540 80,325 5,554
Vice President of the Company 1994 255,833 0 0 6,846
1993 245,833 0 0 6,098
W. Timothy Pohl.......................................... 1995 153,500 206,637 41,541 5,480
General Counsel and Secretary of the Company 1994 147,083 0 0 4,698
1993 139,667 0 0 3,524
</TABLE>
- ------------------
(1) The long term compensation reported results from the completion of the
initial performance cycle that began January 1, 1993 and ended
December 31, 1995 under the Company's Long-Term Performance-Based
Incentive Plan, which was approved by stockholders at their 1994
annual meeting. The long term compensation earned for this initial
performance cycle represents cumulative performance-based compensation
for the three years from the effective date of the plan and is a
function of exceeding the maximum level of 120% for both the Earnings
Per Share Growth and Total Return to Stockholders Performance Cycle
Goals.
(2) Dollar values of restricted shares of Common Stock awards are based on
market price at the time of grant. The values listed in the above
table represent the initial awards of restricted shares of Common
Stock made under the Company's Long-Term Performance-Based Incentive
Plan. Messrs. Johnstone, Barr, Limbach, Smith and Pohl have
restricted Common Stock holdings of 25,082; 10,619; 10,619; 10,619;
and 5,492; respectively, as of March 8, 1996, the date of the initial
grant under the Long-Term Performance-Based Incentive Plan.
<PAGE> 9
Dividends are paid on the restricted shares of Common Stock at the
same time and rate as dividends are paid to holders of unrestricted
shares of Common Stock.
(3) Dollar values of the shares of the Company's Common Stock purchased
with Company contributions and credited to the account of the named
executive officer under the Employees' Stock Ownership Plan and
Savings Plan for Employees.
The Company has maintained since 1976 an Employees' Stock Ownership
Plan (the "ESOP") which has been amended from time to time, primarily to
reflect changes in federal tax law. All employees of the Company and its
subsidiaries who are not included in a bargaining unit and have more than
one year of service with the Company may participate in the ESOP. The
Company also maintains a Savings Plan for Employees. The Savings Plan was
established in 1993. All employees of the Company and its subsidiaries who
have completed six months of service may participate in the Savings Plan.
As of March 4, 1996, the ESOP and Savings Plan together held 3.75% of the
Company's Common Stock.
PENSION PLAN
The following table shows the approximate annual retirement benefits
which will be payable under the Company's Pension Plan, Supplemental
Executive Retirement Plan and Supplemental Retirement Plan at the normal
retirement age of 65 (assuming continuation of the plans) for specified
years of service and levels of average remuneration.
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
- ------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$150,000 46,375 61,834 77,292 82,542 87,792 93,042
200,000 62,875 83,834 104,792 111,792 118,792 125,792
250,000 79,375 105,834 132,292 141,042 149,792 158,542
300,000 95,875 127,834 159,792 170,292 180,792 191,292
350,000 112,375 149,834 187,292 199,542 211,792 224,042
400,000 128,875 171,834 214,792 228,792 242,792 256,792
450,000 145,375 193,834 242,292 258,042 273,792 289,542
</TABLE>
The Company and its subsidiaries have a defined benefit, non-
contributory Pension Plan which covers substantially all employees,
including the executive officers shown above. Annual amounts which are
contributed to the plan and charged to expense during the year are computed
on an aggregate actuarial basis and cannot be individually allocated. The
remuneration covered under the plan includes salaries and annual cash
bonuses, but not directors fees, paid to plan participants. Directors who
are not also employees do not participate in the plan. Benefits under the
plan are calculated as a percentage of the highest average remuneration
during 60 consecutive months of employment, which percentage depends on the
employee's total number of years of service. Benefits are not subject to
reduction for Social Security or other benefits, but are restricted under
federal tax law to a maximum of $120,000 per year. As of March 4, 1996,
Messrs. Johnstone, Barr, Limbach, Smith and Pohl have been credited with
29, 34, 31, 43 and 11 years of service, respectively, under the plan.
<PAGE> 10
In 1985, the Company established a Supplemental Executive Retirement
Plan under which it has agreed to provide additional retirement benefits to
certain employees of the Company and its subsidiaries, designated from time
to time by the Board of Directors. Messrs. Johnstone, Barr, Limbach and
Smith have been so designated. Benefits under the Supplemental Executive
Retirement Plan are intended to (i) provide the additional retirement
benefits that would be payable under the Company's Pension Plan if federal
tax law did not restrict such benefits as described in the preceding
paragraph, (ii) compute the benefits payable on the basis of the highest
average remuneration during 36 consecutive months rather than the final 60
consecutive months of employment and (iii) provide additional years of
service to those covered employees hired in mid-career.
In 1989, recognizing that the federal tax law restrictions on benefits
payable under the Pension Plan had begun to affect employees who were not
eligible for the Supplemental Executive Retirement Plan, the Company
adopted the Supplemental Retirement Plan (the "SRP"). The SRP is designed
to provide benefits to employees above certain salary grades, or otherwise
designated by the Board of Directors, equal to those that would be provided
under the Pension Plan's benefit formula if it were unaffected by the
federal tax law restrictions on benefits. Benefits payable under the SRP
are reduced by any benefit payable to the same individual under the
Supplemental Executive Retirement Plan.
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") is comprised entirely of the following
independent non-employee directors: William O. Albertini, Elizabeth H.
Gemmill, William F. Hyland, Marilyn Ware Lewis, Nancy W. Wainwright and
Ross A. Webber. The Committee establishes, subject to the concurrence of
the Board of Directors, the Company's compensation policy and is
responsible for administering the compensation program for the Company's
executive officers.
The Committee endeavors to ensure that compensation and benefits are
at levels which enable the Company to attract and retain the high-quality
employees it needs. Consistent with this objective, it is the policy of
the Committee that the total compensation paid to executive officers should
be competitive with the median remuneration received by those in positions
of similar responsibilities in other utilities. To this end, an
independent compensation expert is retained to assist the Committee by
periodically studying the Company's compensation program for executive
officers, reporting its findings and making recommendations consistent with
the compensation policy. The Committee then establishes the appropriate
salary range or band for each officer position based on the findings of the
independent compensation expert. The current salary ranges for the
executive officers were established in 1995 based on a study prepared by
the independent compensation expert that year. The utility surveys for the
study included many of the water utilities comprising the Dow Jones Water
Utilities Index, the published industry index shown in the performance
graph.
<PAGE> 11
The President and Chief Executive Officer, with the concurrence of the
Committee, annually sets the salary within the designated salary band for
each executive officer other than himself based on his personal assessment
of the performance of each such officer. The Committee, with the
concurrence of the Board of Directors, sets a salary within the designated
salary band for the President and Chief Executive Officer on the basis of
merit. This evaluation of merit involves an analysis of (i) the Company's
financial performance within the limitations imposed by state utility
regulators and fluctuating and varying weather conditions and (ii) the
performance of the President and Chief Executive Officer in maintaining the
Company as a leader in the water service industry and in expanding the
Company's water service operations consistent with the Company's commitment
to quality water service to customers of its utility subsidiaries.
Inasmuch as water service operations are the Company's principal
business, evaluating the Company's financial performance requires an
understanding of (i) the prevailing regulatory practice in each of the
states in which the Company's utility subsidiaries operate and (ii) the
effect varying weather conditions have on revenues and expenses.
Consequently, the Committee has not adopted a formula relationship between
changes in the Company's financial performance and changes in the level of
salary compensation for the President and Chief Executive Officer.
Similarly, because of the varied subjective considerations involved, the
Committee does not evaluate on a formula basis the performance of the
President and Chief Executive Officer in maintaining the Company as a
leader in the water service industry or in expanding the Company's water
service operations.
The salary being paid to George W. Johnstone, the Company's President
and Chief Executive Officer, was reviewed at the April, 1995 meeting of the
Committee, the meeting during each calendar year at which the compensation
paid to executive officers and others is evaluated. Based on the analysis
described above, Mr. Johnstone's annual salary was increased to $454,000,
effective June 1, 1995.
At their 1994 annual meeting, stockholders of the Company adopted the
Long-Term Performance-Based Incentive Plan for executive officers and other
key employees of the Company and its subsidiaries. Participants in the
Long-Term Performance-Based Incentive Plan receive awards only if the
Company achieves at least 80% of both the Earnings Per Share Growth and
Total Return to Stockholders Performance Cycle Goals. Under the
administrative guidelines adopted by the Committee, Messrs. Johnstone,
Barr, Limbach, Smith and Pohl have target incentive awards for the
performance cycle beginning January 1, 1996 of $173,200, $73,320, $73,320,
$73,320 and $22,755, respectively. Awards under the Plan, if any, are paid
in restricted shares of Common Stock and in cash. The exact amount of an
award depends on the performance of the Company and of the participant.
Under the guidelines adopted by the Committee, the award percentage of the
target may vary from 50% to 150% as a function of achieving between 80% to
120% of both the Earnings Per Share Growth and Total Return to Stockholders
Performance Cycle Goals.
Awards made to the executive officers of the Company under the Long-
Term Performance-Based Incentive Plan for the initial performance cycle
that began January 1, 1993 and concluded December 31, 1995 are shown in the
Summary Compensation Table of this Proxy Statement. These awards represent
cumulative performance-based incentive compensation from the effective
<PAGE> 12
date of the Long-Term Performance-Based Incentive Plan and are a function
of exceeding the maximum level of 120% for both the Earnings Per Share
Growth and Total Return to Stockholders Performance Cycle Goals.
Consistent with the Company's compensation policy, the Board of
Directors, acting on the Committee's recommendation, has adopted an annual
cash incentive plan. The plan complements the Long-Term Performance-Based
Incentive Plan by providing the opportunity for the executive officers and
other key employees of the Company and its subsidiaries to earn an annual
cash incentive award for achieving financial, customer service and
operational goals. The plan continues the realignment of the Company's
compensation program to relate a greater portion of total compensation to
the Company's performance. The total compensation opportunity consisting
of salary, annual incentive and long-term incentive is designed to equal
the median compensation levels in other utilities.
Section 162(m) of the Internal Revenue Code generally precludes the
deduction of more than $1 million in compensation paid to the Chief
Executive Officer and any of the four other most highly compensated
executives in any one year, subject to certain specified exceptions. One
of these exceptions is for "qualified performance based compensation."
Inasmuch as the Company's Long-Term Performance-Based Incentive Plan which
was approved by stockholders in 1994 meets the requirement for "qualified
performance based compensation," all compensation earned by these executive
officers in 1995 will be deductible.
AS SUBMITTED BY THE MEMBERS OF THE COMPENSATION
AND MANAGEMENT DEVELOPMENT COMMITTEE:
William O. Albertini Marilyn Ware Lewis
Elizabeth H. Gemmill Nancy W. Wainwright
William F. Hyland Ross A. Webber
Dated: January 4, 1996
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the changes over the last five years in
the value of $100 invested in (i) the Company's Common Stock ("American"),
(ii) the Standard & Poor's 500 Stock Index ("S&P 500") and (iii) the Dow
Jones Water Utilities Index ("DJ Water Utils").
The year-end values of each investment are based on share price
appreciation and the reinvestment of all dividends. The calculations
exclude trading commissions and taxes. Total stockholder returns from each
investment, whether measured in dollars or percent, can be calculated from
the year-end investment values shown beneath the graph.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1990
[ID: Graphic -- Performance Graph]
<TABLE>
<CAPTION>
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C>
American $100 $172 $185 $210 $196 $295
S&P 500 $100 $130 $140 $155 $157 $215
DJ Water Utils $100 $152 $163 $184 $173 $223
</TABLE>
<PAGE> 14
DIRECTOR REMUNERATION
The amounts paid to directors who are not employees of the Company or
one of its subsidiaries for their services as such and for their
participation on committees of the Board are as follows: (i) each director
receives a retainer of $15,500 per year plus a fee of $1,200 for each Board
meeting attended, (ii) each member of the Executive Committee receives an
additional retainer of $13,000 per year plus a fee of $1,000 for each
Executive Committee meeting attended and (iii) the Chairmen of the Audit
Committee, Compensation and Management Development Committee, Nominating
Committee and Finance Committee each receive an additional retainer of
$1,500 per year, and each member of such committees receives a fee of
$1,000 for each meeting attended. The Chairman of the Board and Executive
Committee and Vice Chairman of the Board receive additional annual
retainers of $85,000 and $20,000, respectively. Directors who are
employees of the Company or one of its subsidiaries do not receive
retainers or attendance fees.
A retiring director receives, as a retirement benefit, an annual
amount equal to the retainer for service as a director in effect at the
time of retirement. This payment continues for a period equal to the
period the director served as a member of the Board, exclusive of any
period when the director was also a salaried employee of the Company or any
of its subsidiaries. In the event the director dies prior to the
expiration of such period of time, the annual benefit will continue to be
paid to the person selected by the director to receive the benefit for the
remainder of said period of time or the death of said selected person,
whichever occurs first.
PROPOSAL NO. 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted a resolution proposing an amendment
to the Company's Restated Certificate of Incorporation, as amended, to
increase the number of authorized shares of Common Stock from 100,000,000
to 300,000,000. The authorized capital stock of the Company presently
consists of 100,000,000 shares of Common Stock, $1.25 par value per share,
1,770,000 shares of Cumulative Preferred Stock, $25 par value per share,
750,000 shares of Cumulative Preference Stock, $25 par value per share, and
3,000,000 shares of Cumulative Preferential Stock, $35 par value per share.
On March 4, 1996, there were 34,260,095 shares of Common Stock, 1,701,777
shares of Cumulative Preferred Stock, and 365,158 shares of Cumulative
Preference Stock outstanding. In addition, as of that date, 30,461,581
shares of Common Stock were reserved for issuance pursuant to the Company's
Share Purchase Rights Plan, 3,965,260 shares of Common Stock were reserved
for issuance pursuant to the Company's Dividend Reinvestment and Stock
Purchase Plan, 534,849 shares of Common Stock were reserved for issuance
pursuant to the Company's Employees' Stock Ownership Plan, and 276,377
shares of Common Stock were reserved for issuance pursuant to the Company's
Savings Plan for Employees and 229,215 shares of Common Stock were reserved
for issuance pursuant to the Company's Long-Term Performance-Based
Incentive Plan.
If the proposed amendment is approved by the stockholders, the Company
will have 230,272,623 shares of authorized and unissued Common Stock
uncommitted for any purpose.
<PAGE> 15
These shares will be available for issuance from time to time to such
persons and for such consideration and upon such terms as the Board of
Directors may determine without further action by the stockholders except
as may be required under Delaware law or applicable rules of the New York
Stock Exchange.
If the amendment is approved by the stockholders, the Board of
Directors intends to declare a 100% stock dividend later in 1996, payable
to stockholders of record at the close of business on the date to be
specified by the Board of Directors when it formally declares the stock
dividend. It is anticipated that the Board of Directors will specify
July 12, 1996 as the record date for the stock dividend.
The anticipated record date is planned to follow the completion of the
Company's proposed underwritten public offering of 4.2 million shares of
Common Stock (the "Offering") during the second quarter of 1996. The
number of shares constituting the Offering is subject to further review.
The net proceeds of the Offering will be invested in Pennsylvania-American
Water Company, a subsidiary of the Company ("Pennsylvania-American"), to
partially retire a $275 million credit facility incurred by Pennsylvania-
American to finance its acquisition of all of the water utility operations
of Pennsylvania Gas and Water Company, which was completed on February 16,
1996. The Offering shall be made only by means of a prospectus. The
Company has no other present plans for the use of the Company's unissued
and unreserved shares of Common Stock.
The affirmative vote of a majority of the votes entitled to be cast by
all outstanding stock of the Company having general voting rights,
including a majority of the Common Stock, is necessary to adopt the
proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION, AS
AMENDED, AS SET FORTH IN APPENDIX A. THE PERSONS NAMED IN THE ENCLOSED
PROXY INTEND TO VOTE "FOR" ADOPTION OF THE AMENDMENT UNLESS OTHERWISE
DIRECTED.
PROPOSAL NO. 3
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by stockholders, the Board of Directors,
acting upon the recommendation of the Audit Committee, has appointed Price
Waterhouse LLP as independent accountants to audit the books and accounts
of the Company at the close of the current fiscal year. Price Waterhouse
LLP acted as independent accountants for the Company during 1995. It is
intended that, in the absence of contrary direction, the proxies will be
voted for the ratification of Price Waterhouse LLP as independent
accountants, and the Board of Directors recommends that the stockholders
vote to ratify the appointment of Price Waterhouse LLP as independent
accountants. In the event the appointment of Price Waterhouse LLP is
ratified, it is expected that Price Waterhouse LLP will also audit the
books and accounts of certain subsidiaries of the Company at the close of
their current fiscal years. A representative of Price Waterhouse LLP,
whose report on the Company's financial statements appears in the 1995
Annual Report, will be
<PAGE> 16
present at the annual meeting and will have the opportunity to make a
statement, if he desires to do so, and to respond to appropriate questions
from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the meeting. However, if any other matters properly come
before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy in accordance with their
judgment on such matters.
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies. Proxies
may be solicited by mail, telephone, telegram, facsimile, or in person.
The Company may pay banks, brokers or other nominees who hold stock in
their names for their expenses in sending soliciting material to their
principals. Corporate Investor Communications, Inc. has been retained to
assist in the solicitation of proxies at a fee of $5,000, plus reasonable
out-of-pocket expenses.
It is important that proxies be returned promptly. Therefore,
stockholders are urged to complete, date, sign and return the enclosed
proxy in the accompanying envelope (to which no postage need be affixed if
mailed in the United States), whether or not they plan to attend the
meeting. Stockholders attending the meeting may vote their shares in
person.
STOCKHOLDER PROPOSALS
Any stockholder who desires to submit a proposal to be considered for
inclusion in the Company's proxy statement and form of proxy relating to
its annual meeting of stockholders in 1997 must submit such proposal in
writing to the Company by November 25, 1996. Such proposals should be
directed to the General Counsel and Secretary of the Company.
FORM 10-K REPORT
Upon the written request of any person who on the record date was a
record owner of stock of the Company, or who represents in good faith that
he or she was on such date a beneficial owner of such stock, the Company
will send to such person, without charge, a copy of its annual report on
Form 10-K for 1995, including financial statements and schedules, as filed
with the Securities and Exchange Commission. Requests for this report
should be directed to: W. Timothy Pohl, General Counsel and Secretary,
American Water Works Company, Inc., 1025 Laurel Oak Road, P. O. Box 1770,
Voorhees, New Jersey 08043.
By Order of the Board of Directors,
W. TIMOTHY POHL, GENERAL COUNSEL AND SECRETARY
Dated: March 25, 1996
<PAGE> 17
APPENDIX A
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
AMENDMENT TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The first paragraph of Article Fourth of the Restated Certificate of
Incorporation, as amended, shall be amended to read in its entirety as
follows:
"FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue shall be
305,520,000 of which (a) 1,770,000 shares shall be Cumulative
Preferred Stock, of the par value of $25 per share, issuable in
series, (b) 750,000 shares shall be Cumulative Preference Stock, of
the par value of $25 per share, issuable in series, (c) 3,000,000
shares shall be Cumulative Preferential Stock, of the par value of $35
per share, issuable in series, and (d) 300,000,000 shares shall be
Common Stock, of the par value of $1.25 per share."
<PAGE> Proxy Card
DETACH HERE
- ---------------------------------------------------------------------------
AMERICAN WATER WORKS COMPANY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
P FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 2, 1996
R The undersigned, hereby revoking any contrary proxy previously
given, hereby appoints George W. Johnstone and Marilyn W. Lewis, and
O each of them, attorneys and proxies, with full power of substitution
and revocation, to vote all of the shares of the undersigned in
X American Water Works Company, Inc. (the "Company") entitled to vote at
the annual meeting of stockholders of the Company on May 2, 1996, and
Y at any adjournment thereof, as indicated on the reverse side and in
accordance with the judgment of said attorneys and proxies on any
other business which may come before the meeting or any such
adjournment. Except as otherwise indicated on the reverse side, the
undersigned authorizes the proxies appointed hereby to vote
cumulatively for such of the nominees (in some circumstances, less
than all) as such proxies in their discretion determine if in their
judgment such action is necessary to elect as many of the nominees as
possible.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1, WITH DISCRETIONARY AUTHORITY DESCRIBED
ABOVE, AND FOR PROPOSALS 2 AND 3.
CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> Reverse Side of Proxy Card
[AMERICAN WATER WORKS COMPANY LOGO]
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
COMPANY HIGHLIGHTS DURING 1995
By every benchmark, 1995 stands out as a strong year for American Water
Works Company.
* Revenues increased 4% to $803 million while net income to common
stock, which included a $3.9 million gain due to the conclusion
of litigation, totaled $88 million.
* Earnings per share of $2.64 in 1995 were 13% above $2.34 in 1994.
The common dividend per share paid in 1995 of $1.28 was 18.5%
higher than the common dividend paid in 1994. In January 1996,
the Board of Directors increased the quarterly common dividend
rate 9.4% to $.35 a share.
* The total return to stockholders in 1995, including dividend
reinvestment, was 51%. Over the past five years, the annual
total return to stockholders was 24%.
DETACH HERE
- ---------------------------------------------------------------------------
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1. ELECTION OF DIRECTORS.
NOMINEES: William O. Albertini, William R. Cobb, Elizabeth H. Gemmill,
Henry G. Hager, Nelson G. Harris, George W. Johnstone, Marilyn Ware Lewis,
Nancy W. Wainwright, Paul W. Ware, Ross A. Webber, Horace Wilkins, Jr.
FOR WITHHELD
[ ] [ ]
___________________________________________________________________
Withhold vote from the nominees that I/We have written on the above
line, or cumulate votes as I/We have instructed on the above line
FOR AGAINST ABSTAIN
2. Amendment to the Company's Restated [ ] [ ] [ ]
Certificate of Incorporation
increasing the number of authorized
shares of Common Stock.
FOR AGAINST ABSTAIN
3. Ratification of the appointment of [ ] [ ] [ ]
Price Waterhouse LLP as independent
accountants.
4. In their discretion, upon other matters as may properly come before the
meeting.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please return your signed proxy at once in the enclosed envelope, which
requires no postage if mailed in the United States, even though you expect
to attend the meeting in person.
Please date and sign below. If joint account, each owner should sign.
When signing in a representative capacity, please give title. Please sign
here exactly as name is stenciled hereon.
Signature:______________Date:________Signature:_______________Date:________
