Registration No. 333-______
As filed with the Securities and Exchange Commission on April 5, 1996
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
American Water Works Company, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 51-0063696
(State of Incorporation) (I.R.S. Employer Identification Number)
1025 Laurel Oak Road
Voorhees, New Jersey 08043
(609) 346-8200
-----------------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
-----------------------
W. Timothy Pohl, Esquire, Secretary
American Water Works Company, Inc.
1025 Laurel Oak Road
Voorhees, New Jersey 08043
(609) 346-8200
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
-----------------------
Copies to:
George W. Patrick, Esquire Jonathan A. Koff, Esquire
Dechert Price & Rhoads Chapman and Cutler
4000 Bell Atlantic Tower 111 W. Monroe Street
1717 Arch Street Chicago, Illinois 60603-4080
Philadelphia, Pennsylvania 19103-2793 (312) 845-2978
(215) 994-2631
-----------------------
Approximate date of commencement of the proposed sale to the public:
As soon as practicable on or after the effective date of this
Registration Statement.
-----------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act of 1933 registration statement
number of the earlier effective registration statement for the same
offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act of 1933, please check the following box: [ ]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Proposed
Maximum Proposed Maximum
Title of each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered(1) Per Unit(2) Offering Price(2) Registration Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.25 par value
per share. . . . . . . . . . 4,746,465 $38.375 $182,145,595 $62,809
==============================================================================================================
</TABLE>
(1) Includes 546,465 shares issuable upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based upon
the average high and low prices reported on the New York Stock
Exchange on March 29, 1996.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
===========================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 5, 1996
PROSPECTUS
4,200,000 Shares
[American Water Works Company, Inc. Logo]
Common Stock
----------------------
All of the shares of Common Stock offered hereby (the "Shares") are
being sold by American Water Works Company, Inc. Certain members of
families that are existing large holders of Common Stock (the "Ware Family
Buyers") have proposed to purchase Shares directly from the Company. Of
the 4,200,000 Shares offered hereby, the Company has reserved up to 556,900
Shares for sale directly to the Ware Family Buyers at the Price to Public
less underwriting discounts and commissions. See "Recent Developments-Ware
Family Buyers."
The Common Stock of the Company is traded on the New York Stock
Exchange under the symbol "AWK". The last reported sale price of the Common
Stock on the New York Stock Exchange on March 29, 1996 was $38.50 per
share. See "Price Range of Common Stock and Dividends."
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==================================================================
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
- ------------------------------------------------------------------
Per Share $ $ $
- ------------------------------------------------------------------
Total(4) $ $ $
==================================================================
(1) The total Price to Public includes the proceeds to be received by the
Underwriters upon resale of the 3,643,100 Shares purchased by the
Underwriters and proceeds to the Company from the sale of 556,900
Shares to the Ware Family Buyers at the Price to Public less
underwriting discounts and commissions. The per share proceeds to the
Company on the sale of Shares to the Ware Family Buyers will be the
same as the per share proceeds to the Company on the sale of Shares to
the public.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting."
(3) Before deducting expenses payable by the Company estimated at
$[_________].
(4) The Company has granted the Underwriters a 30-day option to purchase
up to 546,465 additional Shares solely to cover over-allotments, if
any. See "Underwriting." If such option is exercised in full, the
Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $_____, $_____ and $_____, respectively. The
number of additional shares of Common Stock available to cover
over-allotments is subject to adjustment should the Company authorize
the proposed two-for-one stock split. See "Recent Developments-
Proposed Stock Split" and "Underwriting."
----------------------
The Shares of Common Stock are offered by the several Underwriters
named herein, subject to prior sale, when, as and if delivered to and
accepted by them and subject to certain conditions. It is expected that
certificates for the Common Stock offered hereby will be available for
delivery on or about ______, 1996 at the office of Smith Barney Inc., 333
West 34th Street, New York, New York 10001.
----------------------
Smith Barney Inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Edward Jones
_____________, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied
at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Common Stock of the Company is listed
on the New York Stock Exchange and such reports, proxy statements and other
information may be inspected at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form
S-3 (herein, together with all exhibits thereto, referred to as the
"Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to the securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the
securities offered hereby. Copies of the Registration Statement and the
exhibits thereto are on file at the offices of the Commission and may be
obtained upon payment of the prescribed fee or may be examined without
charge at the public reference facilities of the Commission described
above. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable
document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
2. The Company's Current Report on Form 8-K filed on March 1, 1996.
3. The Company's Current Report on Form 8-K/A filed on April 3, 1996.
In addition, all documents filed by the Company with the Commission
after the date of this Prospectus pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act and prior to the termination of the offering
made hereby shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which is
incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
Certain information incorporated by reference herein contains
forward-looking statements as such term is defined in Section 27A of
2
<PAGE>
the Securities Act and Section 21E of the Exchange Act. Certain factors as
discussed therein could cause actual results to differ materially from
those in the forward-looking statements.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of any
such person, a copy of any or all of the foregoing documents incorporated
by reference herein, including exhibits specifically incorporated by
reference in such documents but excluding all other exhibits to such
documents. Requests should be made to: Office of the Secretary, American
Water Works Company, Inc., 1025 Laurel Oak Road, P.O. Box 1770, Voorhees,
New Jersey 08043, telephone number (609) 346-8290.
[ID: MAP OF THE UNITED STATES OF AMERICA SHOWING THE 21 STATES IN WHICH
AMERICAN WATER WORKS COMPANY'S 22 WATER UTILITY SUBSIDIARIES OPERATE]
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus and in the
documents incorporated herein by reference. Unless otherwise indicated, (i)
all references in this Prospectus to the Company shall mean American Water
Works Company, Inc. and its subsidiaries on a consolidated basis, (ii)
references to "American Water Works" shall mean American Water Works
Company, Inc., excluding its subsidiaries and (iii) the information in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised.
THE COMPANY
American Water Works Company, Inc. is the largest investor-owned and
most geographically diverse water utility business in the United States.
The Company, through its 22 regulated subsidiaries, is primarily engaged in
the collection, treatment, distribution and sale of water. The Company
currently serves more than 800 communities with a total population of
approximately 7 million in 21 states from Pennsylvania, New Jersey,
Kentucky and Tennessee in the East and Southeast to Indiana, Missouri,
California and New Mexico in the Midwest and West.
As the largest investor-owned water utility business in the nation,
the Company believes it is well positioned to benefit from the
consolidation of water utilities into larger, more financially capable
operations. The Company has the size, geographical diversity, technical
capability and financial and management resources to acquire large and
small water systems, develop regional water supplies and participate with
the public sector in creating and improving water systems.
On February 16, 1996, Pennsylvania-American Water Company
("Pennsylvania-American"), a subsidiary of American Water Works, purchased
the water utility operations of Pennsylvania Gas and Water Company (now
known as PG Energy, Inc.) for approximately $414 million (the
"Acquisition"). The acquired operations, which include 10 water treatment
plants and 36 reservoirs, serve approximately 400,000 people in
northeastern Pennsylvania and generated revenues of approximately $66.3
million in calendar year 1995. See "Recent Developments-Acquisition" and
"Unaudited Pro Forma Condensed Consolidated Statement of Income Data."
American Water Works can trace its history back to 1886. The
Company's general mailing address is 1025 Laurel Oak Road, P.O. Box 1770,
Voorhees, NJ 08043, and its telephone number is (609) 346-8200.
4
<PAGE>
THE OFFERING
Common Stock offered:
Shares to be Sold to the Public . . . . . . . . 3,643,100 shares (1)
Shares to be Sold to the Ware Family Buyers . . 556,900 shares
Total . . . . . . . . . . . . . . . . . . . . 4,200,000 shares
Common Stock to be outstanding
after the offering. . . . . . . . . . . . . . . 38,617,603 shares(1)(2)
Price Range of Common Stock
(January 1, 1996 through March 29, 1996). . . . $40 1/2 to $36 1/2
Closing price on March 29, 1996. . . . . . . . . . $38 1/2 per share
Indicated annual dividend. . . . . . . . . . . . . $1.40 per share (3)
Use of Proceeds. . . . . . . . . . . . . . . . . . To invest in the common
equity of Pennsylvania-
American, which, in
turn, will repay certain
indebtedness incurred to
finance the Acquisition.
See "Recent Developments
-Acquisition" and "Use
of Proceeds."
New York Stock Exchange Symbol . . . . . . . . . . AWK
- ---------------
(1) Assuming Underwriters' over-allotment option is not exercised. See
"Underwriting."
(2) Common Stock to be outstanding after the offering is based on
34,417,603 shares of Common Stock outstanding as of March 27, 1996 and
does not include shares issued pursuant to American Water Works'
Dividend Reinvestment and Stock Purchase Plan, Employee Stock
Ownership Plan and 401(k) Savings Plan since such date.
(3) Based upon quarterly dividend of $.35 per share payable on May 15,
1996 to stockholders of record on April 26, 1996.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31,
-------------------------------------
1993 1994 1995
-------- -------- --------
Statement of Income Data:
Operating revenues $717,537 $770,241 $802,820
Operating expenses 497,206 537,516 558,547
Operating income 220,331 232,725 244,273
Net income 75,387 78,652 92,061(1)
Net income to common stock 71,391 74,668 88,077(1)
Per Share Data:
Earnings per common share $2.29 $2.34 $2.64(1)
Average number of common
shares outstanding
(thousands) 31,139 31,918 33,382
Dividends per common share $1.00 $1.08 $1.28
Other Data:
Number of customers at
year end (thousands) 1,685 1,706 1,720
Water sales (billions of
gallons) 221 237 240
Annual water revenue
per customer $416 $440 $453
As of December 31, 1995
-----------------------
Actual Percentage
---------- -----------
Capitalization:
Long-term debt $1,384,649 60.1%
Preferred stock of
subsidiaries 48,614 2.1
Preferred stocks 51,673 2.2
Common stockholders'
equity 818,939 35.6
----------- -----------
Total capitalization $ 2,303,875 100.0%
=========== ===========
Other Balance Sheet Data:
Net utility plant $ 2,884,681
Total assets 3,403,141
- ----------------
(1) Includes a net of tax gain of $3.9 million, or $.12 per share, as a
result of the conclusion of litigation concerning compensation for the
sale of certain water utility assets to the Grafton Massachusetts
Water District.
6
<PAGE>
RECENT DEVELOPMENTS
Acquisition. On February 16, 1996, Pennsylvania-American, a wholly
owned subsidiary of American Water Works, purchased the water utility
operations of Pennsylvania Gas & Water Company (now known as PG Energy,
Inc. ("PG&W")) for approximately $414 million (subject to certain
adjustments) (the "Acquisition"). The acquired operations include 10 water
treatment plants and 36 reservoirs and serve approximately 400,000 people
in northeastern Pennsylvania. The operations acquired generated revenues
of $66.3 million in calendar year 1995. The Company is accounting for the
Acquisition as a purchase. The purchase price is subject to adjustment
based upon the actual value of the net assets of the acquired operations as
of the date of consummation of the Acquisition as compared to the estimated
value of the net assets as of December 31, 1995. See "Unaudited Pro Forma
Condensed Consolidated Statement of Income Data."
The Acquisition is an important component of the Company's long-term
strategy of growth through selective acquisitions. See "The Company-Corporate
Strategy."
Proposed Stock Split. American Water Works' Board of Directors plans
to authorize a two-for-one Common Stock split, subject to stockholder
approval of an increase in the number of shares of Common Stock American
Water Works is authorized to issue. Stockholders of American Water Works
will be asked to approve the proposed increase in the number of shares of
Common Stock American Water Works is authorized to issue from 100,000,000
shares to 300,000,000 shares at American Water Works' Annual Meeting of
Stockholders to be held on May 2, 1996. If the increase in authorized
shares is approved, the stock split will be paid in the form of a 100%
stock dividend whereby each holder of shares of Common Stock will receive
one additional share of Common Stock for each share owned. It is
anticipated that the record date for the stock dividend will follow the
completion of the offering. Upon effecting the stock dividend, American
Water Work's dividend will be adjusted accordingly.
Ware Family Buyers. Certain members of families that are existing
large holders of Common Stock (the "Ware Family Buyers") have proposed to
purchase shares directly from the Company. Of the 4,200,000 Shares offered
hereby, the Company has reserved up to 556,900 Shares for sale directly to
the Ware Family Buyers at the Price to Public less underwriting discounts
and commissions.
The Ware Family Buyers include a special purpose company of which
Marilyn Ware Lewis is Manager, which was established by three trusts for
the benefit of the children of John H. Ware 3rd and his wife Marian S. Ware
and which has proposed to purchase 450,000 of the 556,900 Shares reserved
by the Company. The Ware Family Buyers also include Rhoda C. Ware and
certain members of her family who have proposed to purchase a total of
106,900 of the 556,900 Shares reserved by the Company (including 10,000
Shares for William R. Cobb).
Marilyn Ware Lewis, the Chairman of the Board of American Water Works,
and Paul W. Ware, a director of American Water Works, are the daughter and
son of John H. Ware, 3rd and Marian S. Ware. Nancy W. Wainwright and
William R. Cobb are directors of American Water Works and the daughter and
son-in-law, respectively, of Rhoda C. Ware.
As of March 27, 1996, members of the Ware Family, and trusts for their
benefit, beneficially owned approximately 9,200,000 (or approximately 27%)
of the outstanding shares of Common Stock.
New Jersey-American Regulatory Decision. On March 13, 1996 the New
Jersey Board of Public Utilities approved a $39.5 million per annum rate
increase for New Jersey-American Water Company ("New Jersey-American"),
including an estimated $13.5 million in annual revenues from potential
wholesale customers. The increase reflects the completion of the Tri-County
Water Supply Project that takes water from the Delaware River to a new
treatment plant and then delivers it throughout the southern New Jersey
area by way of a 29 mile pipeline. This regional project was designed
partly as a supply source for certain water resellers who have been
mandated by the state to reduce their intake from an aquifer that is
suffering from declining water levels. The
7
<PAGE>
actual revenues that New Jersey-American receives will depend on many
factors, including the number of potential wholesale customers that
ultimately enter into contracts to use water from the project as their
alternative source of supply and the volume of water sold. The applicable
New Jersey statute provides for a 45 day appeal period from the date of the
order. Rates, however, may be placed in effect, subject to refund, prior
to the end of the appeal period.
8
<PAGE>
THE COMPANY
OVERVIEW
American Water Works is the largest investor-owned and most
geographically diverse water utility business in the United States. The
Company, through its 22 regulated subsidiaries, is primarily engaged in the
collection, treatment, distribution and sale of water. As of December 31,
1995, the Company's total water system production capacity was
approximately 1.3 billion gallons a day. The Company currently serves more
than 800 communities with a total population of approximately 7 million in
21 states from Pennsylvania, New Jersey, Kentucky and Tennessee in the East
and Southeast to Indiana, Missouri, California and New Mexico in the
Midwest and West.
In fiscal year 1995, the Company had consolidated operating revenue
of $803 million, consolidated operating income of $244 million and net
income to common stock of $88 million (including a net of tax gain of $3.9
million, as a result of the conclusion of litigation concerning
compensation for the sale of certain water utility assets to the Grafton
Massachusetts Water District). See "Selected Historical Consolidated
Statement of Income Data." American Water Works has experienced 5-year
compound annual growth rates of 9.9% in dividends per common share, 9.5% in
American Water Works' investment in its subsidiaries, 7.4% in earnings per
common share, 7.2% in book value per common share and 7.0% in consolidated
operating revenues. Several important attributes contributed to the
Company's growth and profitability over the past five years and will
continue to serve as a basis for future growth, including: (i) its
dedication to providing safe, reliable water service at affordable cost;
(ii) the size and geographic diversity of its operations; (iii) its ability
to grow through the continued investment in existing operations and through
complementary and strategic acquisitions; (iv) its financial strength; (v)
its operating experience and technical expertise; and (vi) its
understanding of the unique regulatory requirements of the industry.
The Company conducts its operations through its regulated utility
subsidiaries and a service company. American Water Works can trace its
history back to 1886.
SELECTED INFORMATION OF REGULATED COMPANIES BY STATE
(DOLLARS IN THOUSANDS)
Net
Utility 1995
Customers at Plant at Water and
December 31, December 31, Wastewater
State 1995 1995(1) Percent Revenues(1) Percent
- ------------- ------------ ------------ ------- ----------- -------
New Jersey 314,430 $769,731 26.7% $184,931 23.2%
Pennsylvania 392,147 707,531 24.5 180,948 22.7
Indiana 162,428 227,213 7.9 57,215 7.2
West Virginia 130,956 204,538 7.1 57,743 7.2
Illinois 144,440 177,150 6.1 59,480 7.5
Kentucky 85,180 147,111 5.1 32,087 4.0
California 101,928 135,388 4.7 57,687 7.2
Missouri 88,744 88,551 3.1 23,404 2.9
Virginia 46,075 81,942 2.8 27,697 3.5
Tennessee 67,715 81,934 2.8 28,287 3.6
Connecticut 26,213 63,569 2.2 18,232 2.3
Massachusetts 19,461 53,679 1.9 7,514 0.9
Iowa 54,353 50,953 1.8 17,662 2.2
Ohio 40,220 33,940 1.2 19,831 2.5
New York 11,455 18,055 0.6 9,140 1.2
New Mexico 13,775 16,060 0.6 5,876 0.7
New Hampshire 7,700 12,357 0.4 3,187 0.4
Arizona 4,407 6,808 0.2 2,915 0.4
Maryland 4,520 6,307 0.2 2,290 0.3
Michigan 3,752 1,321 0.1 818 0.1
------------ ------------ ------- ----------- -------
1,719,899 $2,884,138 100.0% $796,944 100.0%
============ ============ ======= =========== =======
(1) Amounts do not reflect consolidating adjustments.
9
<PAGE>
The Regulated Companies. The 22 regulated subsidiary companies
provide water service to approximately 7 million people in over 800
communities in 21 states. From year-end 1990 to 1995, the number of
customers served by the Company has increased from 1.5 million to 1.7
million, representing an increase of approximately 14%. As public
utilities, the rates charged by the regulated companies must be approved by
state regulatory commissions. Further, each regulated company is subject to
the rules of both federal and state environmental protection agencies,
particularly with respect to the quality of the water they distribute.
The Service Company. American Water Works Service Company, a
subsidiary, provides professional and staff services as required to
affiliated companies. These services include accounting, engineering,
operations, finance, water quality, information systems, personnel
administration and training, purchasing, insurance, safety, and community
relations. In addition, the service company operates a laboratory in
Belleville, Illinois that is nationally recognized for its work in water
treatment and quality improvements. The laboratory provides research and
environmental testing for the regulated companies.
Joint Venture. In addition to its water supply business, the Company
owns a 50% interest in a joint venture that provides management services to
11 water and sewer authorities in four states. The joint venture offers
its technical expertise and financing resources to communities throughout
the United States to operate and upgrade their water and wastewater
systems. These services produced revenues of approximately $8 million in
1995.
INDUSTRY
The Company believes that access to strong financial resources and
technical expertise will be necessary to continue to provide safe, reliable
water service at an affordable price and to meet increasingly stringent,
federally mandated water quality regulations. As such, continuous capital
investment will be necessary to address the industry's need to:
(i) invest in new technology to meet water quality standards;
(ii) expand to respond to growth and community development; and
(iii) replace aging water supply infrastructure.
As a result of the capital intensity required in the industry, small
water utilities are under increasing pressure to consolidate, or in the
case of some municipally-owned water utilities, to privatize. The Company
believes that, in a consolidating industry, the larger and more financially
viable operators of water systems will have access to lower-cost capital,
greater resources for the efficient planning and development of water
systems and the ability to spread costs, including the cost of new
technology required by the Safe Drinking Water Act and other environmental
laws, over a wider customer base. This is particularly significant because
it is estimated that approximately 75% of the total cost of providing water
service does not change with the amount of water delivered to customers.
As a result, the Company believes that water system consolidation will
provide economic efficiencies to acquiring companies and customers.
As the largest investor-owned water utility business in the nation,
the Company believes it is well positioned to benefit from the
consolidation of water utilities into larger, more financially capable
operations. The Company has the size, geographical diversity, technical
capability and financial and management resources to acquire large and
small water systems, develop regional water supplies and participate with
the public sector in creating and improving water systems.
CORPORATE STRATEGY
American Water Works is committed to enhancing stockholder value
through the ownership of and investment in water utility operations. The
Company employs two complementary strategies to accomplish this goal:
(i) ongoing investment in subsidiary water companies; and
10
<PAGE>
(ii) acquisition of additional water systems which complement or
expand the existing business.
Ongoing Investment in Subsidiaries. American Water Works' investment
in its subsidiaries enables the Company to provide safe, reliable and
affordable water service. In addition, when recognized in regulatory
decisions, such investment provides a basis for revenue and income growth.
American Water Works' investment in its subsidiaries increased from
$636.6 million at year-end 1990 to $1.0 billion at year-end 1995 and
enabled its subsidiaries to undertake construction programs totalling
approximately $1.2 billion during the same five-year period. This
investment growth was accomplished by the retention of earnings by the
subsidiaries for the five-year period of $104.9 million in the aggregate
and cumulative investment by American Water Works in its subsidiaries
during this period of $261.5 million.
Expenditures by the regulated companies for new facilities in 1995
totaled $331 million, which was 24% above 1994 construction expenditures of
$266 million. Investment in treatment and pumping facilities accounted for
38% of the 1995 construction expenditures. Construction was nearly
completed on a 30 million gallons-per-day capacity treatment plant on the
Delaware River in New Jersey as part of the Tri-County Water Supply Project
that will supplement community water supplies in three counties of southern
New Jersey in the Philadelphia metropolitan area. During 1995, significant
production facility improvements were also completed in Pennsylvania, Ohio,
Kentucky, Tennessee, West Virginia and New Jersey. Significant progress
was made toward completion of a new 7 million gallons-per-day facility to
treat the existing surface and ground water supplies in Hingham,
Massachusetts. Additionally, construction was initiated on a 5 million
gallons-per-day treatment plant which will serve the Mercer and Summers
County regions of West Virginia.
Investment in new transmission and distribution facilities accounted
for 33% of 1995 construction expenditures. The most significant project
involved the completion of 29 miles of 24-inch through 54-inch transmission
mains which deliver water from New Jersey-American's new Tri-County Water
Supply Project treatment plant to residents in Burlington, Camden and
Gloucester Counties. The project also included construction of 13
interconnections to deliver supply to surrounding water systems. Other
significant projects in 1995 involving new transmission and distribution
facilities included major main extension programs in Pennsylvania and New
Jersey to provide service to residents that previously had inadequate well
supplies. Also, booster stations and storage tanks were completed at a
number of operating systems during the year.
Supply improvements accounted for approximately 5% of 1995
construction expenditures. Significant projects included the construction
or re-drilling of ground water sources in the systems serving California,
Indiana, Maryland, New Jersey, New Mexico and Ohio. In addition,
substantial projects involving new intake, pumping and/or piping facilities
were completed in Pennsylvania and Connecticut for the purpose of enhancing
the source of supply capabilities in those systems.
Expenditures recorded in any given year are influenced by many
factors, including the economy, regulation, material delivery and weather
conditions. The Company estimates that construction expenditures for 1996
will be $312 million. In addition, the Company anticipates that
approximately $1.0 billion of additional funds will be invested in new
facilities through the end of the year 2000. These expenditures will
support ongoing programs to comply with regulations promulgated to ensure
water quality and protect the environment, to keep pace with the
development of service territories and to replace plant as necessary.
Acquisition of Water Systems. The Company believes acquisitions will
continue to be an important element of growth and continually seeks
opportunities, large and small, municipally-owned and private, to acquire
water systems where it believes that its ownership and operations will
enhance stockholder value. The Company believes there are numerous
potential acquisition candidates because the water utility industry is
highly fragmented. A significant characteristic in determining the
attractiveness of an acquisition candidate is often the potential growth of
the customer service area. The Company's geographic diversity and position
of leadership in the industry allow it to pursue acquisitions both adjacent
to existing customer service areas and in other strategic customer service
areas. There can be no assurance, however, that the Company will identify
attractive
11
<PAGE>
acquisition candidates in the future, that the Company will be able to
acquire such businesses on economically acceptable terms or that any
acquisitions will not be dilutive to earnings.
On February 16, 1996, Pennsylvania-American purchased the water
utility operations of PG&W, a subsidiary of Pennsylvania Enterprises, Inc.
("PEI") for approximately $414 million (subject to post-closing balance
sheet adjustments). Pennsylvania-American funded the purchase through
short-term borrowings and the assumption of $140 million of long-term debt
and $7 million of other liabilities. The short-term debt will be refunded
through the issuance of long-term debt and an equity infusion into
Pennsylvania-American from the proceeds of this offering. The acquired
operations, which include 10 water treatment plants and 36 reservoirs,
serve approximately 400,000 people in northeastern Pennsylvania. With
Pennsylvania-American's current service territory primarily in the western
and central-southeastern parts of the commonwealth, the addition of this
large northeastern operation will increase this subsidiary's geographical
diversity and provide opportunity for greater operational synergy. The
operations acquired generated revenues of $66.3 million in calendar year
1995.
On November 7, 1995, voters in Howell Township, New Jersey, approved a
referendum providing for the sale of the community's water system to New
Jersey-American, pending regulatory approval, for $35.1 million. The
system, which serves a population of approximately 16,000, is located
between the Shrewsbury and Lakewood operating centers of New
Jersey-American, and a portion of its supply and treatment capacity will be
used to help serve those two service territories.
In 1993, subsidiaries of the Company acquired four water utilities in
Indiana, Missouri, Ohio and Michigan, for a purchase price of $62 million.
These midwestern utilities currently serve a population of approximately
355,000 in 17 communities. As part of the transaction, American Water
Works' subsidiaries assumed liabilities, deferred credits and preferred
stock of approximately $109 million and acquired assets with a value of
approximately $171 million. The acquired utilities in Indiana and Missouri
were merged with the Company's existing subsidiaries in those states
effective January 1, 1995. On September 29, 1995, under the threat of
condemnation, the portion of these assets in Ohio which serve a population
of approximately 54,000 were sold to the City of Huber Heights in
accordance with a condemnation agreement which provided for the Company's
total recovery of the investment that it had made only two years earlier.
Accordingly, there was no gain or loss from the sale of these assets for
$14.4 million.
In addition, the Company has made 14 other smaller acquisitions since
January 1, 1994 which led to an aggregate increase in customers of
approximately 14,000. The Company presently has no commitments or
agreements and is not currently negotiating with respect to any material
acquisitions, with the exception of Howell Township, discussed above.
RATES AND REGULATORY MATTERS
Twenty state commissions regulate American Water Works' utility
subsidiaries. They have broad authority to establish rates for service,
prescribe service standards, review and approve rules and regulations and,
in most instances, they must approve long-term financing programs prior to
their completion. The jurisdiction exercised by each commission is
prescribed by state legislation and therefore varies from state to state.
American Water Works' regulated subsidiaries continually evaluate the
rates charged for service and seek appropriate rate adjustments to reflect
the cost of providing service.
The regulated subsidiaries aggressively pursue various methods of
limiting the adverse financial impact of the lag between the time costs are
incurred and the reflection of these costs in rates for service. Several
subsidiaries now recover in rates a return on plant before it is in service
instead of capitalizing an allowance for funds used during construction.
Certain subsidiaries have also received rate orders allowing recovery of
interest and depreciation expense related to the period of time from when a
major construction project was placed in service until new rates went into
effect reflecting the cost of the project.
Rate authorizations adjusted the water service rates in effect for 11
regulated companies during 1995. These authorizations are expected to
increase annual revenues by $17.3 million. Operating revenues for 1995
included
12
<PAGE>
approximately $5.9 million which resulted from these rate orders. Four
rate adjustments have been authorized for regulated subsidiaries so far in
1996 which may generate approximately $46.7 million of additional annual
revenues. See "Recent Developments-New Jersey-American Regulatory
Decision." Eight applications are awaiting regulatory decisions. If
granted in full, they could produce additional annual revenues of $26.5
million. The amount of additional revenue actually received under any rate
increase is dependent upon the amount of water actually sold, which, in
turn, is dependent upon, among other things, the weather.
13
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME DATA
The unaudited pro forma condensed consolidated statement of income
data for the year ended December 31, 1995 give effect to (i) the
Acquisition and (ii) this offering and the application of the estimated net
proceeds therefrom. The Pro Forma for Acquisition data gives effect to the
Acquisition by combining the results of operations of the Company for the
year ended December 31, 1995 with the results of the operations of the
acquired operations for the year ended December 31, 1995 and the Pro Forma
for Acquisition and Offering data gives effect to each of the Acquisition
and the offering as if each of such events occurred as of January 1, 1995.
See "Recent Developments-Acquisition" and "Use of Proceeds." Such pro forma
financial data do not give effect to the contemplated two-for-one common
stock split.
The unaudited pro forma condensed consolidated statement of income
data do not purport to represent what the Company's results of operations
would actually have been had the transactions described above taken place
on January 1, 1995. In addition, the unaudited pro forma condensed
consolidated statement of income data do not purport to project the
Company's results of operations for any future period. The unaudited pro
forma condensed consolidated statement of income data should be read in
conjunction with the consolidated financial statements of the Company and
related notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, and Current Report on Form 8-K/A
filed on April 3, 1996, which are incorporated by reference herein.
<TABLE>
<CAPTION>
Year Ended December 31, 1995
(dollars in thousands, except per share data)
----------------------------------------------------------------------------------------
Pro Forma
Adjustment Pro Forma for
Acquired for for Adjustment Acquisition
Company Operations Acquisition Acquisition for Offering and Offering
------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Operating revenues $802,820 $66,306 $-- $869,126 $ -- $869,126
Operating expenses
Operation and maintenance 402,362 25,230 (2,941)(a) 424,651 -- 424,651
Depreciation and amortization 79,977 8,439 163 (b) 88,579 -- 88,579
General Taxes 76,208 5,368 -- 81,576 -- 81,576
-------- ------- ----------- -------- ------------ --------
558,547 39,037 (2,778) 594,806 -- 594,806
-------- ------- ----------- -------- ------------ --------
Operating income 244,273 27,269 2,778 274,320 -- 274,320
Other income, net 22,476 312 -- 22,788 -- 22,788
Interest expense 117,042 12,946 11,562 (c) 141,550 (8,715)(d) 132,835
-------- ------- ----------- -------- ------------ --------
Income before income taxes 149,707 14,635 (8,784) 155,558 8,715 164,273
Provision for income taxes 57,646 5,889 (3,382)(e) 60,153 3,355 (e) 63,508
-------- ------- ----------- -------- ------------ --------
Net income 92,061 8,746 (5,402) 95,405 5,360 100,765
Dividends on preferred stocks 3,984 -- -- 3,984 -- 3,984
-------- ------- ----------- -------- ----------- --------
Net income to common stock $88,077 $8,746 $(5,402) $91,421 $5,360 $96,781
-------- ------- ----------- -------- ----------- --------
Per Share Data:
Earnings per common share $2.64 $2.74 $2.58
Average number of common shares
outstanding (thousands) 33,382 33,382 4,200 37,582
Dividends per common share $1.28 $1.28 $1.28
</TABLE>
(a) Represents a reduction in operation and maintenance expenses as a
result of employee reductions pursuant to the terms of the Asset
Purchase Agreement filed as an exhibit to the Company's Current Report
on Form 8-K filed on March 1, 1996. In accordance with the Asset
Purchase Agreement, the Company hired 297 employees of the acquired
business which it believes to be adequate to operate the business.
PG&W, prior to the Acquisition, was a gas and water company. PG&W
used allocations approved by the Pennsylvania Public Utility
Commission in preparing its statement of income. This adjustment
reflects the difference between the allocated labor costs of
14
<PAGE>
$12,050 and the labor costs of $9,109 for the 297 employees hired by the
Company. The table below provides detail regarding the headcount reductions
to be achieved by the Company.
Allocated Actual
--------- --------
Employees
Administrative and General 91 11
Commercial 91 73
Distribution 135 125
Production 103 88
--------------------------
420 297
==========================
(b) Represents the amortization, over a period of 40 years, of the utility
plant acquisition adjustment incurred in connection with the
Acquisition.
(c) Represents the interest expense on the debt incurred to finance the
Acquisition and the elimination of interest expense previously
allocated to the acquired operations from PG&W related to debt not
assumed in the Acquisition.
Debt incurred $266,670
Interest rate in effect at
commencement of bank facility 5.58%
--------
14,880
Interest allocated by PG&W (3,318)
--------
$11,562
========
(d) Represents the reduction of interest expense as a result of the
application of net proceeds (assuming a public offering price of
$38.50 per share) to reduce bank debt.
Net proceeds $156,187
Interest rate in effect at
commencement of bank facility 5.58%
--------
$ 8,715
========
(e) Represents the state and federal income tax effect on the pro forma
adjustments at the Company's effective tax rate of 38.5%.
15
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and consolidated
capitalization of the Company as of December 31, 1995 and as adjusted to
give effect to (i) the Acquisition and (ii) this offering and the
application of the estimated net proceeds therefrom. The pro forma data
gives effect to each of the Acquisition and the offering as if each of such
events occurred as of December 31, 1995. See "Recent Developments-Acquisition"
and "Use of Proceeds."
The data below does not purport to represent what the Company's short-term
debt and consolidated capitalization would actually have been had the
transactions described above taken place on December 31, 1995 and does not
purport to project the Company's financial condition for any future date.
The data below should be read in conjunction with the consolidated
financial statements of the Company and related notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1995, and Current Report on Form 8-K/A filed on April 3, 1996, which are
incorporated by reference herein. See also "Unaudited Pro Forma Condensed
Consolidated Statement of Income Data."
<TABLE>
<CAPTION>
Year Ended December 31, 1995
(dollars in thousands, except per share data)
-----------------------------------------------------------------------------------------
Pro Forma
Adjustment Pro Forma for
Acquired for for Adjustment Acquisition
Company Operations Acquisition Acquisition for Offering(b) and Offering
---------- ---------- ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bank debt $148,639 $-- $266,670(a) $415,309 $(156,187) $259,122
========== ======== =========== ========== ========== ==========
Current portion
of long-term debt $44,321 $677 $-- $44,998 $-- $44,998
========== ======== =========== ========== ========== ==========
Long-term debt $1,384,649 $140,420 $-- $1,525,069 $-- $1,525,069
Preferred stocks of
subsidiaries 48,614 -- -- 48,614 -- 48,614
Preferred stocks 51,673 -- -- 51,673 -- 51,673
Common stockholders'
equity 818,939 -- -- 818,939 156,187 975,126
---------- -------- ----------- ---------- ---------- ----------
Total capitalization $2,303,875 $140,420 $-- $2,444,295 $156,187 $2,600,482
========== ======== =========== ========== ========== ==========
</TABLE>
(a) Represents bank debt incurred to finance the Acquisition.
(b) Represents the use of offering proceeds (assuming a public offering
price of $38.50 per share), net of issuance costs, to reduce bank debt
and the recording of Common Stock and paid-in-capital.
16
<PAGE>
SELECTED HISTORICAL CONSOLIDATED STATEMENT OF INCOME DATA
The table below sets forth selected historical consolidated statement
of income data for each of the three years in the period ended December 31,
1995, which data have been derived from the consolidated statement of
income that has been audited by Price Waterhouse LLP, independent
accountants. The following data should be read in conjunction with the
consolidated financial statements of the Company and related notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, which is incorporated by reference herein. A pro forma
income statement of the Company is also presented elsewhere in this
Prospectus. See "Unaudited Pro Forma Condensed Consolidated Statement of
Income Data."
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands, except per share amounts)
--------------------------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Operating revenues $717,537 $770,241 $802,820
-------- -------- --------
Operating expenses
Operation and maintenance 362,451 391,539 402,362
Depreciation and amortization 66,838 72,892 79,977
General taxes 67,917 73,085 76,208
-------- -------- --------
497,206 537,516 558,547
-------- -------- --------
Operating income 220,331 232,725 244,273
Allowance for other funds
used during construction 3,757 5,890 11,771
Gain from eminent
domain litigation -- -- 6,600 (1)
Other income 1,609 2,383 1,844
-------- -------- --------
225,697 240,998 264,488
-------- -------- --------
Income deductions
Interest expense 97,235 110,088 117,042
Allowance for borrowed funds
used during construction (3,087) (4,570) (9,573)
Amortization of debt expense 1,563 1,229 1,273
Preferred dividends
of subsidiaries 4,361 3,814 3,698
Other deductions 2,374 1,873 2,341
-------- -------- --------
102,446 112,434 114,781
-------- -------- --------
Income before income taxes 123,251 128,564 149,707
Provision for income taxes 47,864 49,912 57,646
-------- -------- --------
Net income 75,387 78,652 92,061
Dividends on preferred
stocks 3,996 3,984 3,984
-------- -------- --------
Net income to common stock $71,391 $74,668 $88,077(1)
======== ======== ========
Average shares of common stock
outstanding (thousands) 31,139 31,918 33,382
Earnings per common share on
average shares outstanding $2.29 $2.34 $2.64(1)
======== ======== =========
</TABLE>
- ---------------
(1) Includes a gain of $6.6 million ($3.9 million net of tax, or $.12 per
share), as a result of the conclusion of litigation concerning
compensation for the sale of certain water utility assets to the
Grafton Massachusetts Water District.
17
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 4,200,000 Shares of Common Stock
offered hereby are estimated to be $156,187,000 ($176,574,000 if the
Underwriters' over-allotment option is exercised in full), after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by the Company. American Water Works intends to invest such
proceeds in Pennsylvania-American which will, in turn, reduce indebtedness
incurred under a $275 million credit facility (the "Facility"). As of
March 29, 1996, $275 million was outstanding under the Facility. Of such
amount, approximately $267 million was used by Pennsylvania-American to
finance the Acquisition and the remainder was used for general corporate
purposes. The Company expects to retire the remainder of the Facility with
proceeds obtained by Pennsylvania-American in a debt offering. The Facility
matures on February 14, 1997 and has an interest rate equal to 25 basis
points (.25%) over the average of the rates offered to major money center
banks in the London interbank market (LIBOR).
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the New York Stock Exchange under the
symbol "AWK." The following table shows the high and low sale prices per
share of Common Stock, as published in The Wall Street Journal report of
New York Stock Exchange composite transactions, and dividends declared per
share, for the periods indicated:
Price Range
-----------------------
Dividends
Year High Low Declared
- ---- --------- --------- ---------
1994 First Quarter $32 1/4 $27 5/8 $.27
Second Quarter 29 5/8 26 3/8 .27
Third Quarter 28 1/4 26 .27
Fourth Quarter 27 1/2 25 1/4 .27
1995 First Quarter $29 1/2 $26 3/4 $.32
Second Quarter 32 28 1/2 .32
Third Quarter 32 3/4 29 1/8 .32
Fourth Quarter 39 1/4 30 1/2 .32
1996 First Quarter $40 1/2 $36 1/2 $.35
Second Quarter 39 1/4 38 1/4 .35
(through April 1, 1996)
As of March 27, 1996, the Company had approximately 35,000 Common
Stock holders of record. For a recent closing sale price of the Common
Stock, see the cover page of this Prospectus.
The Company has paid dividends annually on its Common Stock since
1948, and has increased its dividend for 21 consecutive years. Compound
annual Common Stock dividend growth for the past five years has been 9.9%.
Future cash dividends will necessarily be dependent upon the policies of
the Board of Directors and the
18
<PAGE>
Company's earnings, financial condition, capital requirements and other
factors. There can be no assurance however that the dividend or the
dividend growth rate will continue.
Holders of record of the Common Stock (including participants in the
American Water Works Employee Stock Ownership Plan and Savings Plan) and of
American Water Works' Cumulative Preferred Stock, par value $25 per share
("Preferred Stock") and Cumulative Preference Stock, par value $25 per
share ("Preference Stock") are eligible to participate in the American
Water Works Dividend Reinvestment and Stock Purchase Plan (the "DRP").
Customers of the Company are also eligible to participate in the DRP. At
the option of participants, all or part of the dividends received by
participants in the DRP are automatically reinvested in Common Stock.
Participants are also eligible to purchase up to an additional $5,000 of
Common Stock per month. Common Stock issued pursuant to reinvested
dividends and optional purchases are sold directly by the Company. The
purchase price for Common Stock sold pursuant to reinvested dividends is
the average of the high and the low sales prices for Common Stock for each
of the last five days on which the Common Stock was traded prior to the
dividend payment date. The purchase price for Common Stock sold pursuant
to optional purchases is the average of the high and the low sales prices
for Common Stock for each of the last five days on which the Common Stock
was traded prior to the monthly investment date (the 15th of each month or
the next following business day if the 15th is not a business day). As of
March 4, 1996, approximately 3,900,000 shares of Common Stock were
reserved for issuance pursuant to the DRP.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company's Certificate of Incorporation ("Certificate") provides
that the Company may issue 1,789,200 shares of Preferred Stock, 750,000
shares of Preference Stock, 3,000,000 shares of Cumulative Preferential
Stock, par value $35 per share ("Preferential Stock") and 100,000,000
shares of Common Stock. The Preferred Stock, the Preference Stock and the
Preferential Stock (collectively, the "Senior Stock" and individually, each
a "Class" of Senior Stock) are each issuable in one or more series.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders and do not
have preemptive rights. Holders of Common Stock are entitled to cumulate
their votes in the election of directors. Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Company's Board of Directors (the "Board") out of
legally available funds therefore, subject to the prior payment of all
cumulative dividends payable on the Senior Stock. All outstanding shares
of Common Stock are, and the Shares will be, when issued and paid for,
fully-paid and nonassessable. In the event of any liquidation, dissolution
or winding up of the affairs of the Company, holders of Common Stock will
be entitled to share ratably in the assets of the Company remaining after
payment or provision for payment of all of the Company's debts and
obligations and liquidation payments to holders of any outstanding shares
of Senior Stock.
SENIOR STOCK
The Board, without further stockholder authorization, is authorized to
issue shares of Senior Stock in one or more series within each Class, and
to determine and fix the rights, preferences and privileges of each series,
including dividend rights and preferences over dividends on other series
within the same Class, conversion rights, voting rights (in addition to
those provided by law), redemption rights and the terms of any sinking fund
therefore, and rights upon liquidation, dissolution or winding up,
including preferences over other series within the same Class. All series
of Preference Stock have preference as to dividends and rights upon
liquidation, dissolution or winding up over all series of Preferential
Stock. All series of Preferred Stock have preference as to dividends and
rights upon liquidation, dissolution or winding up over all series of
Preference Stock.
19
<PAGE>
As of the date of this Prospectus, the outstanding series of Senior
Stock consist of 1,600,000 shares of 8.50% series Preferred Stock
(redeemable at par value on December 1, 2000), 101,777 shares of 5% series
Preferred Stock and 365,158 shares of 5% series Preference Stock. Holders
of 5% series Preferred Stock have the general power to vote in the election
of directors and for all other purposes on the basis of one-tenth of a vote
per share.
Although the Company has no present plans to issue any additional
shares of Senior Stock, the issuance of shares of Senior Stock, or the
issuance of rights to purchase Senior Stock, may have the effect of
delaying, deferring or preventing a change in control of the Company or an
unsolicited acquisition proposal.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND DELAWARE LAW
Consideration by Board of Fundamental Transactions. The Company's
Certificate provides that when the Board shall evaluate any proposal from
another party relating to: (i) a tender offer for any securities of the
Company; (ii) a merger or consolidation of the Company with or into another
person; (iii) the sale of all or any substantial part of the assets of the
Company to another person; (iv) the issuance or transfer by the Company of
voting securities or securities convertible into or exchangeable for voting
securities; or (v) any other similar transaction, the Board, in its
exercise of its judgment in determining the best interests of the Company
and its stockholders, must give due consideration to the following: (a) the
character, integrity, business philosophy and financial status of the other
parties to the transaction; (b) the consideration to be received by the
Company or its stockholders as compared to: (1) the current market price or
value of the Company's properties or securities, (2) the estimated future
value of the Company, its properties or securities and (3) such other
values of the Company, its properties or securities as the Board may deem
appropriate; (c) the projected social, legal and economic effects of the
proposed transaction upon the Company, its employees, suppliers, regulatory
agencies and customers and the communities in which the Company does
business; (d) the general desirability of the continuance of the Company as
an independent entity; and (e) such other factors as the Board deems
relevant.
Removal of Directors. Under the Delaware General Corporate Law
("DGCL"), absent a provision in a corporation's certificate of
incorporation to the contrary, a director of a corporation with cumulative
voting may be removed as a director without cause by a majority the shares
then entitled to vote at an election of directors unless the votes cast
against removal would be sufficient to elect the director if such shares
were cumulatively voted at an election of the entire board of directors.
However, the Company's Certificate provides that no director of the Company
may be removed except for cause, and a majority of the outstanding shares
of all classes of stock entitled to vote generally in the election of
directors, voting as a single class, shall be required to remove a director
for cause. Cause for removal is deemed to exist only if the director
proposed to be removed has been convicted in a court of competent
jurisdiction of a felony or has been adjudged by a court of competent
jurisdiction to be liable for gross negligence or misconduct in the
performance of such director's duty to the Company, and such conviction or
adjudication has become final and non-appealable.
Amendment of Certain Provisions. Under the DGCL, absent a provision
in a corporation's certificate of incorporation to the contrary, a
corporation's certificate of incorporation may be amended by the
affirmative vote of a majority of shares entitled to vote thereon and a
corporation's bylaws may be amended either by its board of directors or by
the affirmative vote of a majority of shares entitled to vote thereon.
However, the Company's Certificate provides that the provisions of
Company's Certificate described in "Consideration by Board of Fundamental
Transactions" and "Removal of Directors" above and the provisions of the
Certificate described in this paragraph, as well as the provisions in the
Company's bylaws relating to the number of directors and the amendment of
the bylaws may be amended by the stockholders of the Company only by the
affirmative vote of 80% or more of all classes of stock entitled to vote
generally in the election of directors, voting as a single class. The
ability of the Board to amend the bylaws is the same as under the DGCL.
Delaware Takeover Statute. The Company is subject to Section 203 of
the DGCL, which provides, with certain exceptions, that a Delaware
corporation may not engage in certain business combinations with a person
or affiliate or associate of such person who is an "interested stockholder"
for a period of three years from the date such person became an interested
stockholder unless: (i) the transaction resulting in the acquiring
person's
20
<PAGE>
becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person
becomes an interested stockholder; (ii) the interested stockholder acquires
at least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned (a) by persons who are directors
and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's
board of directors and by the holders of at least 66-2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. An "interested
stockholder" is defined as any person that is (x) the owner of 15% or more
of the outstanding voting stock of the corporation or (y) an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock at any time within the three year period
immediately prior to the date on which it sought to be determined whether
such person is an interested stockholder.
Effect of Provisions. Each of the above described provisions of the
Company's Certificate and of the DGCL may have the effect of delaying,
deferring or preventing a change in control of the Company or an
unsolicited acquisition proposal.
STOCKHOLDER RIGHTS PLAN
Each share of Common Stock, including the Shares, has one Flip-Over
Right and one Flip-In Right (collectively, the "Rights") attached thereto.
The Rights are not exercisable until such time as a person or group other
than certain significant stockholders (including the Ware Family Buyers and
their descendants) at the time the Rights were established (an "Acquiring
Person") acquires or announces an offer to acquire 25% or more of the
Common Stock. Thereafter, each Right will then entitle the holder thereof
to buy from the Company one-half share of Common Stock for $40. Rights
will be attached to all shares of Common Stock issued by the Company until
the Rights become exercisable. Rights expire upon the earlier of March 2,
1999 and the redemption thereof, as provided below.
After the Rights become exercisable, if the Company is acquired in a
merger or business combination in which the Company does not survive or, if
50% or more of the Company's assets or earning power are sold or
transferred, each Flip-Over Right will become the right to buy, at twice
its then current exercise price, that number of shares of the acquiring
person's common stock which at that time has a market value of four times
the then current exercise right of the Flip-Over Right. If, after the
Rights become exercisable, an Acquiring Person (i) acquires beneficial
ownership of 35% or more of the Common Stock, (ii) acquires the Company in
a merger or business combination transaction in which the Company survives
and its stock is not changed, or (iii) engages in certain self-dealing
transactions (a "Flip-In Trigger Event"), then each Flip-In Right not owned
by the Acquiring Person will become the right to buy, at twice its then
current exercise price, that number of shares of the Common Stock which at
the time has a market value of four times the then current exercise price
of the Flip-In Right.
The Rights will be evidenced by the Common Stock certificates issued
by the Company until the Rights become exercisable, at which time the
Company will distribute Rights certificates. Thereafter, the Rights
certificates alone shall represent the Rights.
Rights are redeemable, in whole but not in part, by the Company
pursuant to the affirmative vote of the Board at a price of $.0005 per
Right (i) in the case of Flip-Over Rights, until 10 days following the
first public announcement that an Acquiring Person has acquired beneficial
ownership of 25% or more of Common Stock and (ii) in the case of Flip-In
Rights, until a Flip-In Trigger Event. In certain circumstances, the
Company's right to redeem Flip-Over Rights can be reinstated.
The Rights do not have any voting or dividend rights and, until they
become exercisable, have no dilutive effect on the earnings per share of
the Company.
21
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the
Underwriting Agreement dated the date hereof, each Underwriter named below
has severally agreed to purchase, and the Company has agreed to sell to
such Underwriter, the number of shares of Common Stock set forth opposite
the name of such Underwriter below:
Number
Underwriter Of Shares
----------- ---------
Smith Barney Inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Edward Jones ---------
Total 3,643,100
=========
The Underwriting Agreement provides that the obligations of the
several Underwriters to pay for and accept delivery of the shares are
subject to approval of certain legal matters by counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all
shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., A.G. Edwards & Sons,
Inc., PaineWebber Incorporated and Edward Jones, are acting as the
Representatives, propose to offer part of the shares directly to the public
at the public offering price set forth on the cover page of this Prospectus
and part of the shares to certain dealers at a price which represents a
concession not in excess of $___ per share under the public offering price.
The Underwriters may allow and such dealers may reallow, a concession not
in excess of $___ per share to certain other dealers. After the initial
offering of the Common Stock, the public offering price and other terms may
be changed by the Underwriters.
The Company, its executive officers and directors, and the Ware Family
Buyers have agreed that, for a period of ninety (90) days from the date of
this Prospectus, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any
shares of Common Stock of the Company or any securities convertible into,
or exercisable or exchangeable for, Common Stock of the Company, except, in
the case of the Company, pursuant to any existing employee benefit plans.
The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to 546,465
additional shares of Common Stock at the price to public set forth on the
cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the
purpose of covering over-allotments, if any, in connection with the
offering of the shares offered hereby. To the extent such option is
exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such
additional shares as the number of shares set forth opposite each
Underwriter's name in the preceding table bears to the total number of
shares listed in such table. The number of additional shares of Common
Stock available to cover over-allotments is subject to adjustment should
the Company authorize the proposed two-for-one stock split. See "Recent
Developments-Proposed Stock Split").
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities
Act.
22
<PAGE>
Smith Barney Inc. has provided and is currently retained to provide
certain investment banking services to the Company for which it has
received and is entitled to receive advisory or transaction fees, as
applicable, plus out-of-pocket expenses, of the nature and in amounts
customary in the industry for such services.
LEGAL MATTERS
Legal matters in connection with the authorization and issuance of the
shares of Common Stock offered hereby have been passed upon by Dechert
Price & Rhoads, Philadelphia, Pennsylvania. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by
Chapman and Cutler, Chicago, Illinois.
EXPERTS
The financial statements of the Company incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of American Water
Works for the year ended December 31, 1995, have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of the water business of PG Energy, Inc.
(formerly known as "Pennsylvania Gas & Water Company") included on pages
9-22 of American Water Works Form 8-K/A filed on April 3, 1996 have been
audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference in reliance upon the report of said firm as experts in auditing
and accounting in giving said report.
23
<PAGE>
======================================= ================================
No dealer, salesperson or any other
person has been authorized to give any
information or to make any represen-
tations other than those contained or
incorporated by reference in this
Prospectus in connection with the offer
made by this Prospectus and, if given
or made, such information or represen-
tations must not be relied upon as 4,200,000 Shares
having been authorized by the Company
or any Underwriter. This Prospectus
does not constitute an offer to sell
or solicitation of an offer to buy by
anyone in any jurisdiction in which [American Water Works
such offer or solicitation is not Company Logo]
authorized or in which the person
making such offer or solicitation is
not qualified to do so or to any
person to whom it is unlawful to make
such solicitation. Neither the Common Stock
delivery of this Prospectus nor any
sale hereunder shall, under any circum- ------------
stances, create any implication that
there has been no change in the affairs PROSPECTUS
of the Company since the dates as of
which information is given in this -----, 1996
Prospectus.
------- ------------
Table of Contents
Page Smith Barney Inc.
Available Information. . . . . . . 2 A.G. Edwards & Sons, Inc.
Incorporation of Certain Documents
by Reference. . . . . . . . . . 2 PaineWebber Incorporated
Prospectus Summary . . . . . . . . 4
Recent Developments. . . . . . . . 7 Edward Jones
The Company. . . . . . . . . . . . 9
Unaudited Pro Forma Condensed
Consolidated Statement of
Income Data . . . . . . . . . . 14
Capitalization . . . . . . . . . . 16
Selected Historical Consolidated
Statement of Income Data. . . . 17
Use of Proceeds. . . . . . . . . . 18
Price Range of Common Stock
and Dividends . . . . . . . . . 18
Description of Capital Stock . . . 19
Underwriting . . . . . . . . . . . 22
Legal Matters. . . . . . . . . . . 23
Experts. . . . . . . . . . . . . . 23
======================================= ===============================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC Registration Fee. . . . . . . . . . . . . . . . $ 62,809
NASD Filing Fee . . . . . . . . . . . . . . . . . . 18,715
Legal Fees and Expenses . . . . . . . . . . . . . . 150,000
Accounting Fees and Expenses. . . . . . . . . . . . 80,000
Printing and certificate engraving. . . . . . . . . 125,000
Stock Exchange Listing Fees . . . . . . . . . . . . 50,000
Miscellaneous (including Blue Sky fees and expenses) 13,476
--------
Total . . . . . . . . . . . . . . . . . . . . . . . $500,000
========
Each amount set forth above, except for the SEC registration fee, is
estimated.
Item 15. Indemnification of Directors and Officers.
As authorized by Section 145 of the Delaware General Corporation Law,
Section 8 of Article II of the Company's Bylaws provides that the Company
shall indemnify any person who is a party to any suit or proceeding,
whether civil, criminal or administrative, because such person is or was a
director, officer or employee of the Company or is or was serving at the
request of the Company as a director, officer or employee of another
corporation or enterprise, including an employee benefit plan, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such suit or proceeding to the extent that such person is not
otherwise indemnified and such indemnification is not prohibited by
applicable law; and the Board of Directors of the Company may, and on
request of any such person is required to, determine in each case whether
or not the standards in any applicable statute have been met, or such
determination may be made by independent legal counsel if the Board so
directs or if the Board is not empowered by statute to make such
determination.
The Company maintains and pays all premiums on directors and officers
liability insurance policies with a primary liability limit of $25,000,000
and excess liability limit of $10,000,000.
Item 16. Exhibits.
Exhibit No. Exhibit Description
- ----------- ------------------------------------------------------------
1(a) Underwriting Agreement.
2(a) Asset Purchase Agreement dated as of April 26, 1995 among
the Registrant, Pennsylvania American Water Company,
Pennsylvania Gas and Water Company and Pennsylvania
Enterprises, Inc. incorporated herein by reference to
Exhibit 2.1 to Form 8-K of Registrant filed on March 1,
1996.
II-1
<PAGE>
Exhibit No. Exhibit Description
- ----------- ------------------------------------------------------------
4(a) Dividend Reinvestment and Stock Purchase Plan, incorporated
herein by reference to Exhibit 2 to the Registrant's
Registration Statement on Form S-3, Registration No.
33-59059.
4(b) Indenture dated as of November 1, 1977 between Registrant
and The Fidelity Bank (name later changed to First Union
National Bank), Trustee, incorporated herein by
reference to Exhibit E to Form 10-K report of Registrant for
1977.
4(c) First Supplemental Indenture dated as of December
1, 1989 between the Registrant and The Fidelity Bank,
National Association (name later changed to First Union
National Bank), as Trustee, incorporated herein
by reference to Exhibit 4(i) to Form 10-K report of the
Registrant for 1989.
4(d) Second Supplemental Indenture dated as of February 1, 1993
between the Registrant and The Fidelity Bank, National
Association (name later changed to First Union National
Bank), as Trustee, incorporated herein by reference to
Exhibit 4(c) to Form 10-K report of the Registrant for 1992.
4(e) Flip-Over Rights Agreement dated as of March 2, 1989 between
Registrant and Bank of Delaware (name later changed to PNC
Bank), as Rights Agent, incorporated herein by reference to
Exhibit 1 to Form 8-A Registration Statement of Registrant,
No. 1-3437-2.
4(f) Flip-In Rights Agreement dated as of March 2, 1989 between
Registrant and Bank of Delaware (name later changed to PNC
Bank), as Rights Agent, incorporated herein by reference to
Exhibit 1 to Form 8-A Registration Statement of Registrant,
No. 1-3437-2.
5 Opinion of Dechert Price & Rhoads.
23(a) Consent of Price Waterhouse LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Dechert Price & Rhoads (included in Exhibit 5
hereto).
24 Power of Attorney of Directors and Officers of the Company
(see Page II-4 hereof).
Item 17. Undertakings.
A. Undertaking required by Item 512(b) of Regulation S-K.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
B. Undertaking required by Item 512(h) of Regulation S-K.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C. Undertaking required by Item 512(i) of Regulation S-K.
The Company hereby undertakes that:
(1) For purposes of determining the liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Voorhees, New Jersey, on the 7th day of
March, 1996.
AMERICAN WATER WORKS COMPANY, INC.
By: George W. Johnstone, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints W. Timothy Pohl such person's true
and lawful attorney-in-fact and agent, with full power of substitution and
revocation, for such person and in such person's name, place and stead, in
any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to file the
same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Name Title Date Signature
- ------------------- ---------------- ------------- -------------------
George W. Johnstone President, Chief March 7, 1996 George W. Johnstone
Executive Officer
and Director
J. James Barr Vice President March 7, 1996 J. James Barr
and Treasurer
(Chief Financial
Officer)
Robert D. Sievers Comptroller March 7, 1996 Robert D. Sievers
(Chief
Accounting
Officer)
Marilyn W. Lewis Chairman of the March 7, 1996 Marilyn W. Lewis
Board of
Directors
II-4
<PAGE>
Name Title Date Signature
- ------------------- --------------- ------------- -------------------
William O. Albertini Director March 7, 1996 William O. Albertini
William R. Cobb Director March 7, 1996 William R. Cobb
Elizabeth H. Gemmill Director March 7, 1996 Elizabeth H. Gemmill
Henry G. Hager Director March 7, 1996 Henry G. Hager
Nelson G. Harris Director March 7, 1996 Nelson G. Harris
William F. Hyland Director
Nancy W. Wainwright Director March 7, 1996 Nancy W. Wainwright
Paul W. Ware Director March 7, 1996 Paul W. Ware
Ross A. Webber Director March 7, 1996 Ross A. Webber
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Numbers are in accordance with the Exhibit Table in Item 601 of
Regulation S-K:
Exhibit No. Exhibit Description Page
- ----------- ------------------------------------------------ ----
1(a) Underwriting Agreement. . . . . . . . . . . . . . .
2(a) Asset Purchase Agreement dated as of April 26,
1995 among the Registrant, Pennsylvania American
Water Company, Pennsylvania Gas and Water Company
and Pennsylvania Enterprises, Inc. incorporated
herein by reference to Exhibit 2.1 to Form 8-K
of Registration filed on March 1, 1996. . . . . . . *
4(a) Dividend Reinvestment and Stock Purchase Plan
incorporated herein by reference to Exhibit 2 to
the Registrant's Registration Statement on Form
S-3, Registration No. 33-59059. . . . . . . . . . . *
4(b) Indenture dated as of November 1, 1977 between
Registrant and The Fidelity Bank (name later
changed to First Union National Bank), Trustee,
incorporated herein by reference to Exhibit E to
Form 10-K report of Registrant for 1977 . . . . . . *
4(c) First Supplemental Indenture dated as of
December 1, 1989 between the Registrant and The
Fidelity Bank, National Association (name later
changed to First Union National Bank), as
Trustee, incorporated herein by reference to
Exhibit 4(i) to Form 10-K report of the Registrant
for 1989. . . . . . . . . . . . . . . . . . . . . . *
4(d) Second Supplemental Indenture dated as of
February 1, 1993 between the Registrant and The
Fidelity Bank, National Association (name later
changed to First Union National Bank), as Trustee,
incorporated herein by reference to Exhibit 4(c) to
Form 10-K report of the Registrant for 1992 . . . . *
4(e) Flip-Over Rights Agreement dated as of March 2,
1989 between Registrant and Bank of Delaware
(name later changed to PNC Bank), as Rights Agent,
incorporated herein by reference to Exhibit 1 to
Form 8-A Registration Statement of Registrant,
No. 1-3437-2. . . . . . . . . . . . . . . . . . . . *
4(f) Flip-In Rights Agreement dated as of March 2,
1989 between Registrant and Bank of Delaware
(name later changed to PNC Bank), as Rights Agent,
incorporated herein by reference to Exhibit 1 to
Form 8-A Registration Statement of Registrant,
No. 1-3437-2. . . . . . . . . . . . . . . . . . . . *
5 Opinion of Dechert Price & Rhoads . . . . . . . . .
23(a) Consent of Price Waterhouse LLP . . . . . . . . . .
23(b) Consent of Arthur Andersen LLP. . . . . . . . . . .
23(c) Consent of Dechert Price & Rhoads (included in
Exhibit 5 hereto) . . . . . . . . . . . . . . . . . *
24 Power of Attorney of Directors and Officers
of the Company (see Page II-4 of Registration
Statement). . . . . . . . . . . . . . . . . . . . . *
* Not applicable.
II-6
<PAGE> EXHIBIT 1(a)
__________ Shares
AMERICAN WATER WORKS COMPANY, INC.
Common Stock
UNDERWRITING AGREEMENT
______________, 1996
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
EDWARD JONES
As Representatives of the Several Underwriters
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
American Water Works Company, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell an aggregate of _________
shares (the "Firm Shares") of its common stock, $1.25 par value
per share (the "Common Stock"), to the several Underwriters named
in Schedule I hereto (the "Underwriters"). The Company also
proposes to sell to the Underwriters, upon the terms and
conditions set forth in Section 2 hereof, up to an additional
________ shares (the "Additional Shares") of Common Stock. The
Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares".
The Company wishes to confirm as follows its agreement with you
(the "Representatives") and the other several Underwriters on
whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission
(the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "Act"), a
registration statement on Form S-3 under the Act (the
"registration statement"), including a prospectus subject to
<PAGE>
completion relating to the Shares. The term "Registration
Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, or, if the registration
statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of
this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared
effective before the offering of the Shares may commence, the
term "Registration Statement" as used in this Agreement means the
registration statement as amended by said post-effective
amendment. Any registration statement (including any amendment
or supplement thereto or information which is deemed part
thereof) filed by the Company under Rule 462(b) ("Rule 462(b)
Registration Statement") shall be deemed to be part of the
"Registration Statement" as defined herein, and any prospectus
(including any amendment or supplement thereto or information
which is deemed part thereof) included in such registration
statement shall be deemed to be part of the "Prospectus," as
defined herein, as appropriate. The term "Prospectus" as used in
this Agreement means the prospectus in the form included in the
Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A
under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act,
the term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information
contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Prepricing Prospectus" as used in this
Agreement means the prospectus subject to completion in the form
included in the registration statement at the time of the initial
filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior
to the date of the Prospectus. Any reference in this Agreement
to the registration statement, the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of
the registration statement, the Registration Statement, such
Prepricing Prospectus or the Prospectus, as the case may be, and
any reference to any amendment or supplement to the registration
statement, the Registration Statement, any Prepricing Prospectus
or the Prospectus shall be deemed to refer to and include any
documents filed after such date under the Securities Exchange Act
of 1934, as amended (the
-2-
<PAGE>
"Exchange Act") which, upon filing, are incorporated by reference therein,
as required by paragraph (b) of Item 12 of Form S-3. As used herein, the
term "Incorporated Documents" means the documents which at the time are
incorporated by reference in the registration statement, the Registration
Statement, any Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.
2. Agreements to Sell and Purchase. The Company hereby
agrees, subject to all the terms and conditions set forth herein,
to issue and sell to each Underwriter and, upon the basis of the
representations, warranties and agreements of the Company herein
contained and subject to all the terms and conditions set forth
herein, each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per
Share (the "purchase price per share"), the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I
hereto (or such number of Firm Shares increased as set forth in
Section 10 hereof).
The Company also agrees, subject to all the terms and conditions
set forth herein, to sell to the Underwriters, and, upon the
basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and
conditions set forth herein, the Underwriters shall have the
right to purchase from the Company, at the purchase price per
share, pursuant to an option (the "over-allotment option") which
may be exercised at any time and from time to time (but in any
event not more than twice) prior to 9:00 P.M., New York City
time, on the 30th day after the date of the Prospectus (or, if
such 30th day shall be a Saturday or Sunday or a holiday, on the
next business day thereafter when the New York Stock Exchange is
open for trading), up to an aggregate of _______ Additional
Shares. Additional Shares may be purchased only for the purpose
of covering over-allotments made in connection with the offering
of the Firm Shares. Upon any exercise of the over-allotment
option, each Underwriter, severally and not jointly, agrees to
purchase from the Company the number of Additional Shares
(subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the
number of Additional Shares to be purchased by the Underwriters
as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 10 hereof) bears to the
aggregate number of Firm Shares.
-3-
<PAGE>
3. Terms of Public Offering. The Company has been advised
by you that the Underwriters propose to make a public offering of
their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective
as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery
to the Underwriters of and payment for the Firm Shares shall be
made at the office of Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, at 10:00 A.M., New York City time, on
____________, 1996 (the "Closing Date"). The place of closing
for the Firm Shares and the Closing Date may be varied by
agreement among you and the Company.
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at the
aforementioned office of Smith Barney Inc. at such time on such
date (the "Option Closing Date"), which may be the same as the
Closing Date but shall in no event be earlier than the Closing
Date nor earlier than three nor later than ten business days
after the giving of the notice hereinafter referred to, as shall
be specified in a written notice from you on behalf of the
Underwriters to the Company of the Underwriters' determination to
purchase a number, specified in such notice, of Additional
Shares. The place of closing for any Additional Shares and the
Option Closing Date for such Shares may be varied by agreement
among you and the Company.
Certificates for the Firm Shares and for any Additional Shares to
be purchased hereunder shall be registered in such names and in
such denominations as you shall request prior to 9:30 A.M., New
York City time, on the second business day preceding the Closing
Date or any Option Closing Date, as the case may be. Such
certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or the
Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment
of the purchase price therefor by certified or official bank
check or checks payable in New York Clearing House (next day)
funds to the order of the Company.
-4-
<PAGE>
5. Agreements of the Company. The Company agrees with the
several Underwriters as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a
post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such
post-effective amendment to become effective as soon as possible
and will advise you promptly and, if requested by you, will
confirm such advice in writing, when the Registration Statement
or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if
requested by you, will confirm such advice in writing: (i) of any
request by the Commission for an amendment of or a supplement to
the Registration Statement, any Prepricing Prospectus or the
Prospectus or for additional information; (ii) of its intention
to file or prepare any Rule 462(b) Registration Statement and
will furnish you copies of such document a reasonable amount of
time prior to such proposed filing and will not file such Rule
462(b) Registration Statement to which you shall reasonably
object; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of
the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iv) within the period of time referred to in
the first sentence in subsection (f) below, of any change in the
Company's condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the
happening of any event, which makes any statement of a material
fact made in the Registration Statement or the Prospectus (as
then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or
the Prospectus (as then amended or supplemented) in order to
state a material fact required by the Act to be stated therein or
necessary in order to make the statements therein not misleading,
or of the necessity to amend or supplement the Prospectus (as
then amended or supplemented) to comply with the Act or any other
law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the
Company will make every reasonable effort to obtain the
withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge
(i) five signed copies of the registration statement as
originally
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<PAGE>
filed with the Commission and of each amendment thereto, including
financial statements and all exhibits to the registration statement (or, to
the extent a signed copy is not available, a true, correct and complete
copy, as certified by an officer of the Company, of a signed copy), (ii)
such number of conformed copies of the registration statement as originally
filed and of each amendment thereto, but without exhibits, as you
may request, (iii) such number of copies of the Incorporated Documents,
without exhibits, as you may request, and (iv) five copies of the exhibits
to the Incorporated Documents.
(d) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the
Prospectus, including filing an Incorporated Document prior to
the end of the period of time referred to in the first sentence
in subsection (f) below, of which you shall not previously have
been advised or to which, after you shall have received a copy of
the document proposed to be filed, you shall reasonably object
(it being understood that, if the Company is legally required to
amend or supplement the Registration Statement or Prospectus,
then you shall not be entitled to object thereto).
(e) Prior to the execution and delivery of this
Agreement, the Company has delivered to you, without charge, in
such quantities as you have requested, copies of each form of the
Prepricing Prospectus. The Company consents to the use, in
accordance with the provisions of the Act and with the securities
or Blue Sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, prior to the
date of the Prospectus, of each Prepricing Prospectus so
furnished by the Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such
period as in the opinion of counsel for the Underwriters a
prospectus is required by the Act to be delivered in connection
with sales by any Underwriter or dealer, the Company will deliver
to each Underwriter and each dealer, as soon as practicable and
without charge, as many copies of the Prospectus (and of any
amendment or supplement thereto) as you may reasonably request.
The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the
provisions of the Act and with the securities or Blue Sky laws of
the jurisdictions in which the Shares are offered by the several
Underwriters and by all dealers to whom Shares may be sold, both
in connection with the offering and sale of the Shares and for
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<PAGE>
such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any
Underwriter or dealer. If during such period of time any event
shall occur that in the judgment of the Company or in the opinion
of counsel for the Underwriters is required to be set forth in
the Prospectus (as then amended or supplemented) or should be set
forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the
Prospectus (or to file under the Exchange Act any document which,
upon filing, becomes an Incorporated Document) in order to comply
with the Act or any other law, the Company will forthwith prepare
and, subject to the provisions of paragraph (d) above, file with
the Commission an appropriate supplement or amendment thereto (or
to such document), and will expeditiously furnish to the
Underwriters and dealers a reasonable number of copies thereof.
(g) The Company will cooperate with you and with
counsel for the Underwriters in connection with the registration
or qualification of the Shares for offering and sale by the
several Underwriters and by dealers under the securities or Blue
Sky laws of such jurisdictions as you may designate and will file
such consents to service of process or other documents necessary
or appropriate in order to effect such registration or
qualification; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject
it to service of process in suits or taxation, other than those
arising out of the offering or sale of the Shares, in any
jurisdiction where it is not now so subject.
(h) The Company will make generally available to its
security holders a consolidated earnings statement, which need
not be audited, covering a twelve-month period commencing after
the effective date of the Registration Statement and ending not
later than 15 months thereafter, as soon as practicable after the
end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(i) During the period ending five years after the date
hereof, the Company will furnish to you as soon as available, a
copy of each report of the Company mailed to stockholders or
filed with the Commission.
(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof
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<PAGE>
(otherwise than pursuant to the second paragraph of Section 10
hereof or by notice given by you terminating this Agreement
pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or
refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Representatives for all out-of-pocket
expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the
sale of the Shares in accordance with the description in "Use of
Proceeds" set forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company
will timely file the Prospectus pursuant to Rule 424(b) under the
Act and will advise you of the time and manner of such filing.
(m) Except pursuant to the Company's Dividend
Reinvestment and Stock Purchase Plan, Employees' Stock Ownership
Plan, the 401(k) Savings Plan and Long-Term Performance Based
Incentive Plan and as provided in this Agreement, the Company
will not sell, contract to sell or otherwise dispose of any
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or grant any options or warrants
to purchase Common Stock, for a period of 90 days after the date
of the Prospectus, without the prior written consent of Smith
Barney Inc.
(n) The Company has furnished or will furnish to you
"lock-up" letters, in form and substance satisfactory to you,
signed by each of its current officers, directors and
stockholders previously designated by you in writing.
(o) Except as stated in this Agreement and in the
Prepricing Prospectus and Prospectus, the Company has not taken,
nor will it take, directly or indirectly, any action designed to
or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the
shares of Common Stock which it agrees to sell under this
Agreement listed, subject to notice of issuance, on the New York
Stock Exchange on or before the Closing Date.
-8-
<PAGE>
6. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any
amendment or supplement thereto, or filed pursuant to Rule 424
under the Act, complied when so filed in all material respects
with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing
Prospectus.
(b) The Company and the transactions contemplated by
this Agreement meet the requirements for using Form S-3 under the
Act. The registration statement in the form in which it became
or becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the
Prospectus and any supplement or amendment thereto when filed
with the Commission under Rule 424(b) under the Act, and any Rule
462(b) Registration Statement when filed with the Commission,
complied or will comply in all material respects with the
provisions of the Act and did not and will not at any such times
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except that this
representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made
in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on
behalf of any Underwriter through you expressly for use therein.
(c) The Incorporated Documents heretofore filed, when
they were filed (or, if any amendment with respect to any such
document was filed, when such amendment was filed, as amended),
conformed in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, any
further Incorporated Documents so filed will, when they are
filed, conform in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder; no
such document when it was filed (or, if an amendment with respect
to any such document was filed, when such amendment was filed, as
amended), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading;
and no such further document, when it is filed, will contain an
untrue statement of a material fact or will omit to state a
material fact required to be
-9-
<PAGE>
stated therein or necessary in order to make the statements therein not
misleading.
(d) All the outstanding shares of Common Stock of the
Company have been duly authorized and validly issued, are fully
paid and nonassessable and are free of any preemptive or similar
rights (in any instance, only including statutory rights or
rights issued by the Company or contained in any contract or
agreement to which the Company is a party); the Shares have been
duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the
terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights (in
any instance, only including statutory rights or rights issued by
the Company or contained in any contract or agreement to which
the Company is a party); and the capital stock of the Company
conforms to the description thereof in the Registration Statement
and the Prospectus in all material respects.
(e) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of
Delaware with full corporate power and corporate authority to
own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus,
and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires
such registration or qualification, except where the failure so
to register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net
worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole.
(f) All the Company's subsidiaries (collectively, the
"Subsidiaries") are listed in an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 which is
incorporated by reference into the Registration Statement. Each
Subsidiary is a corporation duly incorporated, validly existing
and in good standing in the jurisdiction of its incorporation,
with full corporate power and corporate authority to own, lease
and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus, and
is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to
-10-
<PAGE>
register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net
worth or results of operations of such Subsidiary; all the
outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
nonassessable, and, solely with respect to common stock, are
owned by the Company directly, or indirectly through one of the
other Subsidiaries, free and clear of any lien, adverse claim,
security interest, equity, or other encumbrance.
(g) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened, against
the Company or any of the Subsidiaries, or to which the Company
or any of the Subsidiaries, or to which any of their respective
properties is subject, that are required to be described in the
Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in
the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement or any Incorporated
Document that are not described, filed or incorporated by
reference as required by the Act or the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries is
in violation of its certificate or articles of incorporation or
by-laws, or other organizational documents, or, in any material
respect, of any law, ordinance, administrative or governmental
rule or regulation applicable to the Company or any of the
Subsidiaries or, in any material respect, of any decree of any
court or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries, or in default in any material
respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries
is a party or by which any of them or any of their respective
properties may be bound, which such defaults, either individually
or in the aggregate, would have a material adverse effect on the
condition (financial or other), business, properties, net worth
or results of operations of the Company and the Subsidiaries
taken as a whole.
(i) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the transactions
contemplated hereby (i) requires any consent, approval,
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<PAGE>
authorization or other order of or registration or filing with,
any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be
required for the registration of the Shares under the Act and
compliance with the securities or Blue Sky laws of various
jurisdictions, all of which have been or will be effected in
accordance with this Agreement) or conflicts or will conflict
with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or bylaws, or
other organizational documents, of the Company or any of the
Subsidiaries or (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under,
any agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties may be bound, or
violates or will violate any statute, law, regulation or filing
or judgment, injunction, order or decree applicable to the
Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of the property or
assets of any of them is subject, which such breach, default,
violation, lien, charge or encumbrance would result in a material
adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and
the Subsidiaries taken as a whole or which would result in any
adverse effect on the validity of the issuance of the Shares or
the ability of the Underwriters to take title thereof (assuming
the Underwriters perform all of their obligations hereunder).
(j) The accountants, Price Waterhouse LLP and Arthur
Andersen LLP, as applicable, who have certified or shall certify
the financial statements included or incorporated by reference in
the Registration Statement and the Prospectus (or any amendment
or supplement thereto) are independent public accountants as
required by the Act.
(k) (i) The financial statements, together with
related schedules and notes, included or incorporated by
reference in the Registration Statement and the Prospectus,
present fairly the financial position, results of operations and
cash flows of the Company and the Company and the Subsidiaries,
as applicable, on the basis stated in the Registration Statement
at the respective dates or for the respective periods to which
they apply; such
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<PAGE>
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data included or incorporated by
reference in the Registration Statement and the Prospectus, including the
information set forth under "Summary Consolidated Financial Data and
Operating Information" in the Prospectus, are accurate in all material
respects and prepared on a basis consistent with such financial statements
and the books and records of the Company and the Subsidiaries.
(ii) The financial statements, together with
related notes, included or incorporated by reference in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), present fairly the financial position,
results of operations and cash flows of the regulated water
operations of Pennsylvania Gas & Water Company on the basis
stated in the Registration Statement at the respective dates or
for the respective periods to which they apply; such statements
and related notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein.
(iii) The pro forma financial statements and
other pro forma information included or incorporated by reference
in the Prospectus present fairly the information shown therein,
have been prepared in accordance with generally accepted
accounting principles and the Commission's rules and guidelines
with respect to pro forma financial statements and other pro
forma information, have been properly compiled on the pro forma
basis described therein, and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate under the
transactions and circumstances described therein.
(l) The execution and delivery of, and the performance
by the Company of its obligations under, this Agreement have been
duly and validly authorized by the Company, and this Agreement
has been duly executed and delivered by the Company and
constitutes the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except as rights to indemnity and contribution hereunder
may be limited by federal or state securities laws.
-13-
<PAGE>
(m) Except as disclosed in the Registration Statement
and the Prospectus (or any amendment or supplement thereto),
subsequent to the respective dates as of which such information
is given in the Registration Statement and the Prospectus (or any
amendment or supplement thereto), neither the Company nor any of
the Subsidiaries has incurred any liability or obligation, direct
or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and
the Subsidiaries taken as a whole, and there has not been any
change in the capital stock, or material increase in the
short-term debt or long-term debt, of the Company or any of the
Subsidiaries, or any material adverse change, or any development
involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial
or other), business, net worth or results of operations of the
Company and the Subsidiaries taken as a whole.
(n) Each of the Company and the Subsidiaries has good
and marketable title to all property (real and personal)
described in the Prospectus as being owned by it, free and clear
of all liens, claims, security interests or other encumbrances
except such as are described in the Registration Statement and
the Prospectus or in a document filed as an exhibit to the
Registration Statement or such that, either individually or in
the aggregate, would not create a material adverse effect on the
condition (financial or other), business, properties, net worth
or results of operations of the Company and the Subsidiaries
taken as a whole; and all the property described in the
Prospectus as being held under lease by each of the Company and
the Subsidiaries is held by it under valid, subsisting and
enforceable leases.
(o) The Company has not distributed and, prior to the
later to occur of (i) the Closing Date and (ii) completion of the
distribution of the Shares, will not distribute any offering
material in connection with the offering and sale of the Shares
other than the Registration Statement, the Prepricing Prospectus,
the Prospectus or other materials, if any, permitted by the Act
or the Exchange Act.
(p) The Company and each of the Subsidiaries has such
permits, licenses, franchises and authorizations of governmental
or regulatory authorities ("permits") as are necessary to own its
respective properties and to conduct its business in the manner
described in the Prospectus, subject to such qualifications as
may be set forth in the Prospectus, except where the failure to
have any such permit would not have a material adverse effect on
the
-14-
<PAGE>
condition (financial or other), business, properties, net
worth or results of operations of the Company and the
Subsidiaries taken as a whole; the Company and each of the
Subsidiaries has fulfilled and performed all its material
obligations with respect to such permits and no event has
occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such
permit, subject in each case to such qualification as may be set
forth in the Prospectus, except where any such failure to perform
or where any such event occurring, either individually or in the
aggregate, would not have a material adverse effect on the
condition (financial or other), business, properties, net worth
or results of operations of the Company and the Subsidiaries
taken as a whole.
(q) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(r) To the Company's knowledge, neither the Company
nor any of its Subsidiaries nor any employee or agent of the
Company or any Subsidiary has made any payment of funds of the
Company or any Subsidiary or received or retained any funds in
violation of any law, rule or regulation, which payment, receipt
or retention of funds is of a character required to be disclosed
in the Prospectus.
(s) The Company and each of the Subsidiaries have
filed all tax returns required to be filed, which returns are
complete and correct in all material respects, and neither the
Company nor any Subsidiary is in default in the payment of any
taxes which were payable pursuant to said returns or any
assessments with respect thereto which are not being contested in
good faith.
(t) No holder of any security of the Company has any
right to require registration of shares of Common Stock or any
other security of the Company because of the filing of the
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<PAGE>
registration statement or consummation of the transactions
contemplated by this Agreement.
(u) The Company and the Subsidiaries own or possess
all patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights ("Intellectual Property")
described in the Prospectus as being owned by them or any of them
or necessary for the conduct of their respective businesses
(except for such Intellectual Property, the loss of which, either
individually or in the aggregate, would not result in a material
adverse effect on the condition (financial or offer), business,
properties, net worth or results of operations of the Company and
the Subsidiaries taken as a whole), and the Company is not aware
of any claim to the contrary or any challenge by any other person
to the rights of the Company and the Subsidiaries with respect to
the foregoing.
(v) The Company has complied with all provisions of
Florida Statutes, '517.075, relating to issuers doing business
with Cuba.
(w) All consents, approvals, authorizations or orders
of any court of governmental authority of the United States, the
State of Delaware or the Commonwealth of Pennsylvania required
for the consummation of the Acquisition (as defined and described
in the Registration Statement and Prospectus) have been obtained.
7. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each of you and each other
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation except for those costs related to the Underwriters'
initial due diligence investigation) arising out of or based upon
any untrue statement or alleged untrue statement of a material
fact contained in any Prepricing Prospectus or in the
Registration Statement or the Prospectus or in any amendment or
supplement thereto, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission
which has been made therein or omitted therefrom in reliance upon
-16-
<PAGE>
and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained
in this paragraph (a) with respect to any Prepricing Prospectus
shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) on account of
any such loss, claim, damage, liability or expense arising from
the sale of the Shares by such Underwriter to any person if a
copy of the Prospectus shall not have been delivered or sent to
such person within the time required by the Act, and the untrue
statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Prepricing
Prospectus was corrected in the Prospectus, provided that the
Company has delivered the Prospectus to the several Underwriters
as provided by Section 5(f) herein. The foregoing indemnity
agreement shall be in addition to any liability which the Company
may otherwise have.
(b) If any action, suit or proceeding shall be brought
against any Underwriter or any person controlling any Underwriter
in respect of which indemnity may be sought against the Company,
such Underwriter or such controlling person shall promptly notify
the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel and payment of all
fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any
such action, suit or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at
the expense of such Underwriter or such controlling person unless
(i) the Company has agreed in writing to pay such fees and
expenses, (ii) the Company has failed to assume the defense and
employ counsel, or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both
such Underwriter or such controlling person and the Company and
such Underwriter or such controlling person shall have been
advised in writing by its counsel that representation of such
indemnified party and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct
due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood,
however, that the Company shall, in connection with any one such
action, suit or proceeding or separate but substantially similar
or related actions, suits or proceedings in the same jurisdiction
arising out of the same
-17-
general allegations or circumstances, be liable for the reasonable fees and
expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters and controlling persons,
which firm shall be designated in writing by Smith Barney Inc., and that
all such fees and expenses shall be reimbursed as they are incurred.
The Company shall not be liable for any settlement of any such
action, suit or proceeding effected without its written consent,
but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the
Company agrees to indemnify and hold harmless any Underwriter, to the
extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of
such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement, and any person who
controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but
only with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter through
you expressly for use in the Registration Statement, the
Prospectus or any Prepricing Prospectus, or any amendment or
supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such
officer, or any such controlling person based on the Registration
Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which
indemnity may be sought against any Underwriter pursuant to this
paragraph (c), such Underwriter shall have the rights and duties
given to the Company by paragraph (b) above (except that if the
Company shall have assumed the defense thereof such Underwriter
shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense),
and the Company, its directors, any such officer, and any such
controlling person shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity
agreement shall be in addition to any liability which the
Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7
is unavailable to an indemnified party under paragraphs (a) or
(c) hereof in respect of any losses, claims, damages, liabilities
or
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expenses referred to therein, then an indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares,
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the
statements or omissions that resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or
by the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this
Section 7 were determined by a pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating any claim (except for costs related to the
Underwriters' initial due diligence investigation) or defending
any such action, suit or proceeding. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total
price of the Shares underwritten
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by it and distributed to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
The Underwriters' obligations to contribute pursuant to this Section 7 are
several in proportion to the respective numbers of Firm Shares set forth
opposite their names in Schedule I hereto (or such numbers of Firm Shares
increased as set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any
pending or threatened action, suit or proceeding in respect of
which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are
the subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or
contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses,
claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Company set forth
in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter, the
Company, its directors or officers, or any person controlling the
Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter or any person controlling any
Underwriter, or to the Company, its directors or officers, or any
person controlling the Company, shall be entitled to the benefits
of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares
hereunder are subject to the following conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the registration statement or a
post-effective
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amendment thereto to be declared effective before the offering of the
Shares may commence, the registration statement or such post-effective
amendment shall have become effective not later than 5:30 P.M., New York
City time, on the date hereof, or at such later date and time as shall be
consented to in writing by you, and all filings, if any, required by Rules
424 and 430A under the Act shall have been timely made; no stop
order suspending the effectiveness of the registration statement
shall have been issued and no proceeding for that purpose shall
have been instituted or, to the knowledge of the Company or any
Underwriter, threatened by the Commission, and any request of the
Commission for additional information (to be included in the
registration statement or the prospectus or otherwise) shall have
been complied with to your satisfaction. If a Rule 462
Registration Statement is required, such Registration Statement
shall have been transmitted to the Commission for filing and
become effective within the prescribed time period and, prior to
the Closing Date, the Company shall have provided evidence of
such filing and effectiveness in accordance with Rule 462(b).
(b) Subsequent to the effective date of this Agreement,
there shall not have occurred any material adverse change or
development in the condition (financial or other), business,
properties, net worth, or results of operations of the Company
and the Subsidiaries, taken as a whole, and not contemplated by
the Prospectus.
(c) You shall have received on the Closing Date, an opinion
of Dechert Price & Rhoads, counsel for the Company, dated the
Closing Date and addressed to you, as Representatives of the
several Underwriters, to the effect that:
(i) The Company is a corporation validly existing in
good standing under the laws of the State of Delaware with full
corporate power and corporate authority to own, lease and operate
its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto) and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction
listed in such opinion;
(ii) Each of New Jersey-American Water Company,
Pennsylvania-American Water Company, Indiana-American Water Company, West
Virginia-American Water Company and Illinois-American Water Company
(collectively, the "Material Subsidiaries") is a corporation duly organized
and validly existing in good
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standing under the laws of the jurisdiction of its organization with full
corporate power and corporate authority to own, lease, and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction listed in
such opinion; and all the outstanding shares of capital stock of
each of the Material Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and, solely
with respect to the common stock, are owned by the Company
directly or indirectly and, to the best knowledge of such counsel
after reasonable inquiry, free and clear of any perfected
security interest, or, any other security interest, lien, adverse
claim, equity or other encumbrance;
(iii) The Company and each of the Material Subsidiaries has full
corporate power and corporate authority, and all necessary governmental
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental regulatory officials and bodies
(except where the failure so to have any such authorizations,
approvals, orders, licenses, certificates, franchises or permits,
individually or in the aggregate, would not have a material
adverse effect on the business, properties, operations or
financial condition of the Company and the Subsidiaries taken as
a whole), to own their respective properties and to conduct their
respective businesses as now being conducted, as described in the
Prospectus;
(iv) The authorized and outstanding capital stock of the Company
is as set forth in the Prospectus; and the authorized capital stock of the
Company conforms in all material respects as to legal matters to the
description thereof contained in the Prospectus under the caption
"Description of Capital Stock";
(v) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly
authorized and validly issued, and are fully paid and
nonassessable;
(vi) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance with
the terms hereof, will be validly issued, fully paid and nonassessable and
free of any preemptive, or, to the best knowledge of such counsel after
reasonable inquiry, similar rights that entitle or will entitle
any person to acquire any Shares upon the issuance thereof by the
Company;
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<PAGE>
(vii) The form of certificates for the Shares conforms to the
requirements of the Delaware General Corporation Law;
(viii) Based solely upon telephonic confirmation from the
Commission, the Registration Statement, including all post-effective
amendments, if any, have become effective under the Act and, to the best
knowledge of such counsel after reasonable inquiry, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose are pending before or
contemplated by the Commission; and any required filing of the
Prospectus pursuant to Rule 424(b) has been made in accordance
with Rule 424(b);
(ix) The Company has corporate power and corporate authority to
enter into this Agreement and to issue, sell and deliver the Shares to the
Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company and is a valid, legal and
binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as enforcement of rights to
indemnity and contribution hereunder may be limited by Federal or
state securities laws or principles of public policy and subject
to the qualification that the enforceability of the Company's
obligations hereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights generally, and by
general equitable principles;
(x) Neither the Company nor any of the Material
Subsidiaries is in violation of its respective certificate or
articles of incorporation or bylaws, or other organizational
documents, or to the best knowledge of such counsel after
reasonable inquiry, is in default in the performance of any
material obligation, agreement or condition contained in any
bond, debenture, note or other evidence of indebtedness, except
as may be disclosed in the Prospectus;
(xi) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance by the
Company with the provisions hereof nor consummation by the Company of the
transactions contemplated hereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under,
the certificate or articles of incorporation or bylaws, or other
organizational documents, of the Company or any of the Material
Subsidiaries or any agreement, indenture, lease or other
instrument to which the
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<PAGE>
Company or any of the Material Subsidiaries is a party or by which any of
them or any of their respective properties is bound that is an exhibit to
the Registration Statement or to any Incorporated Document, or is
known to such counsel after reasonable inquiry, or will result in
the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Material
Subsidiaries, nor will any such action result in any violation of
any existing law, regulation, ruling (assuming compliance with
all applicable state securities and Blue Sky laws), judgment,
injunction, order or decree known to such counsel after
reasonable inquiry, applicable to the Company, the Material
Subsidiaries or any of their respective properties;
(xii) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the
part of the Company (except as have been obtained under the Act or such
as may be required under state securities or Blue Sky laws
governing the purchase and distribution of the Shares) for the
valid issuance and sale of the Shares to the Underwriters as
contemplated by this Agreement;
(xiii) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and
the notes thereto and the schedules and other financial and statistical
data included therein, as to which such counsel need not express any
opinion) comply as to form in all material respects with the requirements
of the Act; and each of the Incorporated Documents (except for
the financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as to
which counsel need not express any opinion) complies as to form
in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder;
(xiv) To the best knowledge of such counsel after reasonable
inquiry, (A) other than as described or contemplated in the Prospectus (or
any supplement thereto), there are no legal or governmental proceedings
pending or threatened against the Company or any of the Subsidiaries, or to
which the Company or any of the Subsidiaries, or any of their property, is
subject, which are required to be described in the Registration
Statement or Prospectus (or any amendment or supplement thereto)
and (B) there are no agreements, contracts, indentures, leases or
other instruments, that are required to be described in the
Registration Statement or the Prospectus (or any amendment or
supplement
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<PAGE>
thereto) or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed or incorporated by
reference as required, as the case may be;
(xv) To the best knowledge of such counsel after reasonable
inquiry, neither the Company nor any of the Material Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Material Subsidiaries or
of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Material Subsidiaries, except
where any such violation would not have a material adverse effect
on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Material
Subsidiaries taken as a whole;
(xvi) Except for statements relating to regulatory orders and
regulatory law, the statements in the Registration Statement, Prospectus,
and the Incorporated Documents, under the headings, "Prospectus Summary,"
"Recent Developments," "The Company," "Use of Proceeds," "Description of
Capital Stock," "Management's Discussion and Analysis," and
"Management Remuneration," insofar as they are descriptions of
contracts, agreements or other legal documents, or refer to
statements of law or legal conclusions, are accurate and present
fairly the information required to be shown;
(xvii) Except as described in the Prospectus and to the best
knowledge of such counsel, there are no outstanding options, warrants or
other rights calling for the issuance of, and such counsel does not know of
any commitment, plan or arrangement to issue any shares of capital stock of
the Company or any security convertible into or exchangeable or
exercisable for capital stock of the Company, except as described
in the Registration Statement, the Prospectus and the
Incorporated Documents; and
(xviii) Except as described in the Prospectus, to the best
knowledge of such counsel after reasonable inquiry, there is no holder of
any security of the Company or any other person who has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue
to them, or to permit them to underwrite the sale of, the Shares or
the right to have any Common Stock or other securities of the
Company included in the registration statement or the right, as a
result of the filing of the
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<PAGE>
registration statement, to require registration under the Act of any shares
of Common Stock or other securities of the Company.
(xix) To the best of such counsel's knowledge after reasonable
inquiry, all consents, approvals, authorizations or orders of any court of
governmental authority of the United States, the State of Delaware or the
Commonwealth of Pennsylvania required for the consummation of the
Acquisition (as defined and described in the Registration Statement and
Prospectus) have been obtained.
Dechert Price & Rhoads shall also deliver to you a letter dated
the Closing Date to the effect that it has participated in
conferences with officers and other representatives of the
Company and its Subsidiaries, representatives of the independent
public accountants of the Company and representatives of the
Underwriters, at which the contents of the Registration
Statement, the Prospectus, and the Incorporated Documents and
related matters, were discussed and, although such counsel is not
passing upon, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in
the Registration Statement, the Prospectus and the Incorporated
Documents and has not made any independent check or verification
thereof, on the basis of the foregoing (relying as to materiality
upon the statements of officers and other representatives of the
Company) no facts have come to the attention of such counsel that
has caused it to believe that the Registration Statement as of
its effective date or the Prospectus as of its date or the
Closing Date contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein
or necessary to make the statements therein not misleading (it
being understood that such counsel need not express any comment
or opinion with respect to the financial statements and schedules
and other financial and statistical data included in the
Registration Statement, Prospectus or Incorporated Documents).
In rendering their opinion as aforesaid, counsel may deliver a
separate opinion of a Material Subsidiary in-house counsel or
rely upon an opinion or opinions, each dated the Closing Date, of
other counsel retained by them provided that (1) each such local
counsel is acceptable to the Representatives, (2) such reliance
is expressly authorized by each opinion so relied upon and a copy
of each such opinion is delivered to the Representatives and is,
in form and substance satisfactory to them and their counsel, and
(3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon.
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<PAGE>
(d) You shall have received on the Closing Date an opinion
of Chapman and Cutler, counsel for the Underwriters, dated the
Closing Date and addressed to you, as Representatives of the
several Underwriters, with respect to the matters referred to in
clauses (vi), (viii), (ix) and (xiii) of the foregoing paragraph
(c) and with respect to the matters referred to in the paragraph
immediately following clause (xix) of the foregoing paragraph (c)
and such other related matters as you may request.
(e) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date
hereof and the Closing Date from Price Waterhouse LLP,
independent certified public accountants, substantially in the
forms heretofore approved by you.
(f) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date
hereof and the Closing Date from Arthur Andersen LLP, independent
certified public accountants, substantially in the forms
heretofore approved by you.
(g) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings
for that purpose shall have been taken or, to the knowledge of
the Company, shall be contemplated by the Commission at or prior
to the Closing Date; (ii) there shall not have been any change in
the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated
in the Registration Statement or the Prospectus (or any amendment
or supplement thereto); (iii) there shall not have been, since
the respective dates as of which information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or
supplement thereto), any material adverse change in the condition
(financial or other), business, prospects, properties, net worth
or results of operations of the Company and the Subsidiaries
taken as a whole; (iv) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are
material to the Company and the Subsidiaries, taken as a whole,
other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all
the representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of
the
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Closing Date, and you shall have received a certificate,
dated the Closing Date and signed on behalf of the Company by the
chief executive officer and the chief financial officer of the
Company (or such other officers as are acceptable to you), to the
effect set forth in this Section 8(g) and in Section 8(h) hereof.
(h) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or
complied with by it hereunder at or prior to the Closing Date.
(i) Prior to the Closing Date the Shares shall have been
listed, subject to notice of issuance, on the New York Stock
Exchange.
(j) The Company shall have furnished or caused to be
furnished to you such further certificates and documents as you
shall have reasonably requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to you and your
counsel.
Any certificate or document signed by any officer of the Company
and delivered to you, as Representatives of the Underwriters, or
to counsel for the Underwriters, shall be deemed a representation
and warranty by the Company to each Underwriter as to the
statements made therein.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on
and as of any Option Closing Date of the conditions set forth in
this Section 8, except that, if any Option Closing Date is other
than the Closing Date, the certificates, opinions and letters
referred to in paragraphs (c) through (g) shall be dated the
Option Closing Date in question and the opinions called for by
paragraphs (c) and (d) shall be revised to reflect the sale of
Additional Shares.
9. Expenses. The Company agrees to pay the following
costs and expenses and all other costs and expenses incident to
the performance by it of its obligations hereunder: (i) the
preparation, printing or reproduction, and filing with the
Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the
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Prospectus, and each amendment or supplement to any of them; (ii)
the printing (or reproduction) and delivery to the Underwriters
(including postage, air freight charges and charges for counting
and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated
Documents, and all amendments or supplements to any of them, as
may be reasonably requested for use in connection with the
offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the
Shares, including any stamp taxes in connection with the original
issuance and sale of the Shares; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection
with the offering of the Shares; (v) the listing of the Shares on
the New York Stock Exchange; (vi) the registration or
qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states as provided in
Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the
preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees and the
fees and expenses of counsel for the Underwriters in connection
with any filings required to be made with the National
Association of Securities Dealers, Inc.; (viii) the
transportation and other expenses incurred by or on behalf of
Company representatives in connection with presentations to
prospective purchasers of the Shares; and (ix) the fees and
expenses of the Company's accountants and the fees and expenses
of counsel (including local and special counsel) for the Company.
Except as otherwise provided herein, the Underwriters agree to
pay all of their costs and expenses incurred in connection with
the offering of the Shares, including, without limitation, legal
fees.
10. Effective Date of Agreement. This Agreement shall
become effective: (i) upon the execution and delivery hereof by
the parties hereto; or (ii) if, at the time this Agreement is
executed and delivered, it is legally necessary for the
registration statement or a post-effective amendment thereto to
be declared effective before the offering of the Shares may
commence, when notification of the effectiveness of the
registration statement or such post-effective amendment has been
released by the Commission. Until such time as this Agreement
shall have become effective, it may be terminated by the Company,
by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company.
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If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase
hereunder on the Closing Date, and the aggregate number of Shares
which such defaulting Underwriter or Underwriters are obligated
but fail or refuse to purchase is not more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated
to purchase on the Closing Date, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number
of Firm Shares set forth opposite its name in Schedule I hereto
bears to the aggregate number of Firm Shares set forth opposite
the names of all non-defaulting Underwriters or in such other
proportion as you may specify in accordance with Section 20 of
the Master Agreement Among Underwriters of Smith Barney Inc., to
purchase the Shares which such defaulting Underwriter or
Underwriters are obligated, but fail or refuse, to purchase. If
any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to
which such default occurs is more than one-tenth of the aggregate
number of Shares which the Underwriters are obligated to purchase
on the Closing Date and arrangements satisfactory to you and the
Company for the purchase of such Shares by one or more
non-defaulting Underwriters or other party or parties approved by
you and the Company are not made within 36 hours after such
default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or the Company. In any
such case which does not result in termination of this Agreement,
either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from
liability in respect of any such default of any such Underwriter
under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party
not listed in Schedule I hereto who, with your approval and the
approval of the Company, purchases Shares which a defaulting
Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 10 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by
letter.
11. Termination of Agreement. This Agreement shall be
subject to termination in your absolute discretion, without
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<PAGE>
liability on the part of any Underwriter to the Company by notice
to the Company, if prior to the Closing Date or any Option
Closing Date (if different from the Closing Date and then only as
to the Additional Shares), as the case may be, (i) trading in
securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been
suspended or materially limited, (ii) a general moratorium on
commercial banking activities in New York shall have been
declared by either federal or state authorities, or (iii) there
shall have occurred any outbreak or escalation of hostilities or
other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which
on the financial markets of the United States is such as to make
it, in your judgment, impracticable or inadvisable to commence or
continue the offering of the Shares at the offering price to the
public set forth on the cover page of the Prospectus or to
enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the
Company by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The
statements set forth in the last paragraph on the cover page, the
stabilization legend on the inside front cover, and the
statements in the first paragraph, including the table contained
therein, and the third paragraph under the caption "Underwriting"
in any Prepricing Prospectus and in the Prospectus, constitute
the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in
Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided in
Sections 5, 10 and 11 hereof, notice given pursuant to any
provision of this Agreement shall be in writing and shall be
delivered (i) if to the Company, at the office of the Company at
1025 Laurel Oak Road, Voorhees, New Jersey 08043, Attention: W.
Timothy Pohl, Esquire, Secretary; or (ii) if to you, as
Representatives of the several Underwriters, care of Smith Barney
Inc., 388 Greenwich Street, New York, New York 10013, Attention:
Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers,
and the other controlling persons referred to in Section 7 hereof
and their respective successors and assigns, to the extent
provided herein, and no other person shall acquire or have any
right under or by virtue of this Agreement. Neither the term
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<PAGE>
"successor" nor the term "successors and assigns" as used in this
Agreement shall include a purchaser from any Underwriter of any
of the Shares in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be
performed within the State of New York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in
counterparts, this Agreement shall not become effective unless at
least one counterpart hereof shall have been executed and
delivered on behalf of each party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.
Very truly yours,
AMERICAN WATER WORKS COMPANY, INC.
By George W. Johnstone
President and Chief Executive
Officer
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
EDWARD JONES
As Representatives of the Several Underwriters
BY SMITH BARNEY INC.
By
Managing Director
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<PAGE>
SCHEDULE I
AMERICAN WATER WORKS COMPANY, INC.
UNDERWRITER NUMBER OF FIRM SHARES
----------- ---------------------
Smith Barney Inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Edward Jones
EXHIBIT 5
April 5, 1996
American Water Works Company, Inc.
1025 Laurel Oak Road
Voorhees, New Jersey 08043
Dear Sirs:
American Water Works Company, Inc. (the "Company") is filing on the date
hereof a registration statement ("Registration Statement") on Form S-3 with
the Securities and Exchange Commission relating to an offering of 4,200,000
shares (the "Additional Shares") of its common stock, $1.25 par value per
share (the "Common Stock"). We are informed by the Company, and we have
assumed for the purposes of this opinion, that the Additional Shares will
be newly issued shares of Common Stock of the Company. The Company has
100,000,000 shares of Common Stock authorized, of which approximately
34,418,000 are now outstanding.
We have examined such corporate records of the Company and other documents
as we have deemed appropriate to give this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing under
the laws of the State of Delaware.
2. The Additional Shares have been duly authorized and, when issued and
sold as contemplated by the Registration Statement, and upon receipt by
the Company of the consideration therefor, will be validly issued,
fully paid and nonassessable.
3. No personal liability will attach to the ownership of the Additional
Shares under the laws of the State of Delaware.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
Dechert Price & Rhoads
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated January 30, 1996, except as to Note 13, which is as of February 16,
1996 which appears on page 35 of the 1995 Annual Report to Shareholders of
American Water Works Company, Inc., which is incorporated by reference in
American Water Works Company, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1995. We also consent to the incorporation by
reference of our report on the Financial Statements Schedule which appears
on page 11 of such Annual Report on Form 10-K. We also consent to the
references to us under the headings "Selected Historical Consolidated
Statement of Income Data" and "Experts" in such Prospectus. However, it
should be noted that Price Waterhouse LLP has not prepared or certified
such "Selected Historical Consolidated Statement of Income Data."
PRICE WATERHOUSE LLP
Philadelphia, PA
April 2, 1996
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in this registration statement filed on or about April 2,
1996.
ARTHUR ANDERSEN LLP
New York, New York
April 2, 1996
