<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1996
REGISTRATION NO. 333-02279
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
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) (IRS EMPLOYER IDENTIFICATION NO.)
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:
<TABLE>
<S> <C>
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
</TABLE>
------------------------
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 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: /x/
------------------------
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 17, 1996
P R O S P E C T U S
3,643,100 SHARES
[AMERICAN WATER WORKS LOGO]
COMMON STOCK
------------------------
All of the shares of Common Stock offered hereby are being sold by American
Water Works Company, Inc. 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 April 16, 1996 was $38.25 per
share. See 'Price Range of Common Stock and Dividends.'
Concurrently with and conditioned upon the completion of this offering,
certain members of families that are existing large holders of Common Stock (the
'Ware Family Buyers') have agreed to purchase from the Company and the Company
has agreed to sell to the Ware Family Buyers 556,900 shares of Common Stock at
the Price to Public less underwriting discounts and commissions in a private
offering. See 'Recent Developments--Ware Family Buyers.'
------------------------
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.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
'Underwriting.'
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) 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 total 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>
[GRAPHIC SEE DESCRIPTION IN APPENDIX A]
<PAGE>
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: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1995; (ii) the Company's
Current Report on Form 8-K filed on March 1, 1996; and (iii) 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 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 THE COMPANY AT ITS GENERAL MAILING ADDRESS: 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.
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.
2
<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. American Water Works can trace its history back to 1886.
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,' 'Unaudited Pro Forma Condensed Consolidated
Statement of Income Data' and 'Capitalization.'
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.................................. 3,643,100 shares (1)
Common Stock to be outstanding
after the offering.................................. 38,617,603 shares (1)(2)
Price Range of Common Stock
(January 1, 1996 through April 16, 1996)............ $36 1/2 to $40 1/2
Closing price on April 16, 1996....................... $38 1/4 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 reduce certain
indebtedness incurred to finance the Acquisition. See
'Recent Developments--Acquisition' and 'Use of
Proceeds.'
New York Stock Exchange Symbol........................ AWK
</TABLE>
- ------------------
(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, includes 556,900
shares of Common Stock to be sold to the Ware Family Buyers concurrently
with this offering and does not include shares issued pursuant to American
Water Works' Dividend Reinvestment and Stock Purchase Plan, Employee Stock
Ownership Plan, Long-Term Performance-Based Incentive Plan and 401(k)
Savings Plan since such date.
(3) Based upon the quarterly dividend of $.35 per share payable on May 15, 1996
to stockholders of record on April 26, 1996. The shares of Common Stock
offered hereby will not be entitled to the May 15, 1996 dividend.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
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 revenues per customer............................ $ 416 $ 440 $ 453
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
--------------------------
ACTUAL PERCENTAGE
------------- -----------
<S> <C> <C>
CAPITALIZATION:
Long-term debt............................................................ $ 1,384,649 60.1%
Preferred stocks 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
</TABLE>
- ------------------
(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.
4
<PAGE>
RECENT DEVELOPMENTS
ACQUISITION
On February 16, 1996, Pennsylvania-American, a subsidiary of American Water
Works, purchased the water utility operations of Pennsylvania Gas & Water
Company ('PG&W,' now known as PG Energy, Inc.) 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' and 'Capitalization.'
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
Works' dividend will be adjusted accordingly.
WARE FAMILY BUYERS
Concurrently with and conditioned upon the completion of this offering,
certain members of families that are existing large holders of Common Stock (the
'Ware Family Buyers') have agreed to purchase from the Company and the Company
has agreed to sell to the Ware Family Buyers 556,900 shares of Common Stock at
the Price to Public less underwriting discounts and commissions in a private
offering.
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
agreed to purchase 450,000 of the 556,900 shares to be sold to the Ware Family
Buyers. The Ware Family Buyers also include Rhoda C. Ware (through a limited
partnership controlled by her) and certain members of her family who have agreed
to purchase a total of 106,900 of the 556,900 shares to be sold to the Ware
Family Buyers (including 10,000 shares to be purchased by 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 charitible
foundations set up by such members, beneficially owned approximately 9.2 million
(or approximately 27%) of the outstanding shares of Common Stock.
5
<PAGE>
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 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.
6
<PAGE>
THE COMPANY
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 revenues 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 investment in 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.
SELECTED INFORMATION OF REGULATED COMPANIES BY STATE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET UTILITY PLANT
AT
CUSTOMERS AT DECEMBER 31, 1995 WATER AND
STATE DECEMBER 31, 1995 1995(1) PERCENT WASTEWATER REVENUES(1) PERCENT
- ------------------------------ ----------------- ------------------- ----------- ---------------------- -----------
<S> <C> <C> <C> <C> <C>
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%
========== ============= ===== ============ =====
</TABLE>
- ------------------
(1) Amounts do not reflect consolidating adjustments.
7
<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
water distributed.
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.
The 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:
<TABLE>
<S> <C>
(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.
</TABLE>
As a result of the capital intensity of 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, geographic 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
8
<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 totaling 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 approximately 24% above 1994 construction expenditures
of $266 million. Investment in treatment and pumping facilities accounted for
approximately 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 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
approximately 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
9
<PAGE>
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 acquisition candidates in the future, that the
Company will be able to acquire such businesses on economically acceptable terms
or that any such 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 certain 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 and the proceeds of the sale of Common Stock to the
Ware Family Buyers. 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 geographic
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, the Company's 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 the Howell Township system, 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, 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
10
<PAGE>
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
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
revenues 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.
11
<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 sale of shares of Common Stock to the Ware Family Buyers
(the 'Private 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 operations of the acquired operations for the year
ended December 31, 1995 and the Pro Forma for Acquisition, Offering and Private
Offering data gives effect to each of the Acquisition, this offering and the
Private Offering as if each of such events occurred as of January 1, 1995. See
'Recent Developments--Acquisition,' 'Recent Developments--Ware Family Buyers'
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 AMOUNTS)
-----------------------------------------------------------------------------
PRO FORMA
FOR
ADJUSTMENT ACQUISITION,
ADJUSTMENT PRO FORMA FOR OFFERING OFFERING
ACQUIRED FOR FOR AND PRIVATE AND PRIVATE
COMPANY OPERATIONS ACQUISITION ACQUISITION OFFERING 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 16 (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 (8,658)(d) 132,892
--------- ----------- ----------- ----------- ------------- ------------
Income before income taxes......... 149,707 14,635 (8,784) 155,558 8,658 164,216
Provision for income taxes......... 57,646 5,889 (3,382)(e) 60,153 3,333 (e) 63,486
--------- ----------- ----------- ----------- ------------- ------------
Net income......................... 92,061 8,746 (5,402) 95,405 5,325 100,730
Dividends on preferred stocks...... 3,984 -- -- 3,984 -- 3,984
--------- ----------- ----------- ----------- ------------- ------------
Net income to common stock......... $ 88,077 $ 8,746 $ (5,402) $ 91,421 $ 5,325 $ 96,746
--------- ----------- ----------- ----------- ------------- ------------
PER SHARE DATA:
Earnings per common share.......... $ 2.64 $ 2.74 $ 2.57
Average number of common shares
outstanding (thousands).......... 33,382 33,382 4,200 37,582
</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
12
<PAGE>
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 $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 achieved by the Company.
<TABLE>
<CAPTION>
ALLOCATED ACTUAL
------------- -----------
<S> <C> <C>
Employees
Administrative and general.................................. 91 11
Commercial.................................................. 91 73
Distribution................................................ 135 125
Production.................................................. 103 88
--- ---
420 297
=== ===
</TABLE>
(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.
<TABLE>
<S> <C>
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
=========
</TABLE>
(d) Represents the reduction of interest expense as a result of the application
of net proceeds from this offering and the Private Offering (assuming a
public offering price of $38.25 per share), to reduce bank debt.
<TABLE>
<S> <C>
Net proceeds................................................... $ 155,170
Interest rate in effect at commencement of bank facility....... 5.58%
---------
$ 8,658
=========
</TABLE>
(e) Represents the state and federal income tax effect on the pro forma
adjustments at the Company's effective tax rate of 38.5%.
13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
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 Private Offering
and the application of the estimated net proceeds therefrom. The pro forma data
gives effect to each of the Acquisition, this offering and the Private Offering
as if each of such events occurred as of December 31, 1995. See 'Recent
Developments--Acquisition,' 'Recent Developments--Ware Family Buyers' and 'Use
of Proceeds.'
The data below does not purport to represent what the Company's
consolidated short-term debt and 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>
AS OF DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------
PRO FORMA
ADJUSTMENT FOR
FOR ACQUISITION,
ADJUSTMENT PRO FORMA OFFERING OFFERING
ACQUIRED FOR FOR AND PRIVATE AND PRIVATE
COMPANY OPERATIONS ACQUISITION ACQUISITION OFFERING (b) OFFERING
----------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bank debt....................... $ 148,639 $ -- $ 266,670(a) $ 415,309 $ (155,170) $ 260,139
=========== =========== =========== =========== ============= ============
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 -- -- 818,939 155,170 974,109
----------- ----------- ----------- ----------- ------------- ------------
Total capitalization.......... $ 2,303,875 $ 140,420 $ -- $ 2,444,295 $ 155,170 $2,599,465
=========== =========== =========== =========== ============= ============
</TABLE>
(a) Represents bank debt incurred to finance the Acquisition.
(b) Represents the use of proceeds from this offering and the Private Offering
(assuming a public offering price of $38.25 per share), net of issuance
costs, to reduce bank debt and the recording of Common Stock and
paid-in-capital.
14
<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(1)
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.
15
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 3,643,100 shares of Common Stock
offered hereby and the 556,900 shares of Common Stock to be sold to the Ware
Family Buyers are estimated to be $155.2 million ($175.4 million 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
$275.0 million credit facility (the 'Facility'). As of March 29, 1996, $275.0
million was outstanding under the Facility. Of such amount, approximately $266.7
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 to be 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:
<TABLE>
<CAPTION>
PRICE RANGE
----------------------
DIVIDENDS
YEAR HIGH LOW DECLARED
--------- ----- --------- -----------
<S> <C> <C> <C>
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 3/4 37 1/8 .35
(through April 16, 1996)
</TABLE>
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 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 American
Water Works' Employee Stock Ownership Plan and 401(k) 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
16
<PAGE>
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 Cumulative Preferred Stock, 750,000
shares of Cumulative 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, 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.
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
17
<PAGE>
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 the 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 of 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 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
18
<PAGE>
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 offered hereby, 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.
The 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.
19
<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:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- -----------
<S> <C>
Smith Barney Inc..............................................................
A.G. Edwards & Sons, Inc......................................................
PaineWebber Incorporated......................................................
Edward Jones..................................................................
-----------
Total.................................................................... 3,643,100
-----------
-----------
</TABLE>
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,
including the consummation of the sale of shares of Common Stock to the Ware
Family Buyers. 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 plan.
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.
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.
20
<PAGE>
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.
21
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS 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 REPRESENTATIONS
MUST NOT BE RELIED UPON AS 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 SUCH
OFFER OR SOLICITATION IS NOT 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 DELIVERY OF THIS PROSPECTUS NOR
ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
---------
Available Information.................................. 2
Incorporation of Certain Documents by Reference........ 2
Prospectus Summary..................................... 3
Recent Developments.................................... 5
The Company............................................ 7
Unaudited Pro Forma Condensed
Consolidated Statement of Income Data................ 12
Capitalization......................................... 14
Selected Historical Consolidated Statement of
Income Data.......................................... 15
Use of Proceeds........................................ 16
Price Range of Common Stock
and Dividends........................................ 16
Description of Capital Stock........................... 17
Underwriting........................................... 20
Legal Matters.......................................... 21
Experts................................................ 21
</TABLE>
3,643,100 SHARES
[AMERICAN WATER WORKS LOGO]
COMMON STOCK
------------
PROSPECTUS
, 1996
------------
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
EDWARD JONES
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
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
===========
</TABLE>
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.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ------------- -------------------
<S> <C>
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.
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.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ------------- -------------------
<S> <C>
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.
</TABLE>
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.
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-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in Voorhees, New Jersey, on the
17th day of April, 1996.
AMERICAN WATER WORKS COMPANY, INC.
By: /S/ W. TIMOTHY POHL
---------------------------------
W. Timothy Pohl
Secretary
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- --------------------------------------------- -------------------
<S> <C> <C>
* President, Chief Executive Officer and April 17, 1996
- ----------------------------- Director
George W. Johnstone
* Vice President and Treasurer (Chief Financial April 17, 1996
- ----------------------------- Officer)
J. James Barr
* Comptroller (Chief Accounting Officer) April 17, 1996
- -----------------------------
Robert D. Sievers
* Chairman of the Board of Directors April 17, 1996
- -----------------------------
Marilyn W. Lewis
* Director April 17, 1996
- -----------------------------
William O. Albertini
* Director April 17, 1996
- -----------------------------
William R. Cobb
* Director April 17, 1996
- -----------------------------
Elizabeth H. Gemmill
* Director April 17, 1996
- -----------------------------
Henry G. Hager
* Director April 17, 1996
- -----------------------------
Nelson G. Harris
* Director April 17, 1996
- -----------------------------
Nancy W. Wainwright
* Director April 17, 1996
- -----------------------------
Paul W. Ware
* Director April 17, 1996
- -----------------------------
Ross A. Webber
*By: /S/ W. TIMOTHY POHL
-------------------------
W. Timothy Pohl
Attorney-in-fact
April 17, 1996
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit Numbers are in accordance with the Exhibit Table in Item 601 of
Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
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.................................... *
</TABLE>
- ------------------
* Not applicable.
+ Previously filed.
II-4
<PAGE>
APPENDIX A
In the printed document, a color map of the United States of America
appears, showing the 21 states in which American Water Works Company's 22
Water Utility Subsidiaries operate.
The map is entitled, "The American Water Works Company" and the
following text appears above the upper right portion of the map:
American Water's Regulated Water Business
- -----------------------------------------
22 water utilities
4,000 employees
Operations in 21 states
Approximately 800 communities provided water service
7.0 million population
312 water production
240 billion gallons of water produced and sold in 1995
4,189,565 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 3,643,100 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 546,465 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
<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 546,465 Additional Shares; provided, however, that should the
Company declare a distribution on its Common Stock or effect a stock split of
shares of Common Stock with a record date occurring after the Closing Date but
prior to the Underwriters' exercise of the over-allotment option, the number of
Additional Shares and the per share purchase price therefor shall be adjusted
accordingly. 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. 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
<PAGE>
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.
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 Stateme 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 informati (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
<PAGE>
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 filed with the Commission and of
each amendment thereto, including financial statements and all exhibits to the
registration statement (or, to the extent a sign 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 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 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
<PAGE>
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 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 ma 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 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
<PAGE>
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 (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) 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 pri the Common Stock to facilitate the
sale or resale of the Shares.
<PAGE>
(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.
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 theret 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
<PAGE>
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 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 cont 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 Registratio 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
<PAGE>
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 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 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.
<PAGE>
(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,
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
<PAGE>
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 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,
<PAGE>
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws.
(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
<PAGE>
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 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 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.
<PAGE>
(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 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) To the Company's knowledge, all material 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 desc in the Registration
Statement and Prospectus) have been obtained.
(x) The shares of Common Stock to be sold by the Company to the Ware Family
Buyers (as defined in the Registration Statement and Prospectus) have been duly
authorized and, when issued and delivered to the Ware Family Buyers against
payment therefore, will be validly issued, full 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).
(y) The offer and sale of shares of Common Stock by the Company to the Ware
family Buyers does not require registration under the Act.
<PAGE>
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 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
<PAGE>
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
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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
(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 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;
<PAGE>
(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 based solely
upon such counsel's review of the minute books of the Company, are validly
issued, fully paid and nonassessable, and nothing has come to counsel's
attention which would lead them to believe that such capital stock are not
validly issued, 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 to the best knowledge
of such counsel after reasonable inquiry, free 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) that entitle or will entitle any person to acquire any Shares upon the
issuance thereof by the Company;
(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
telephone inquiry of the Commission, 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 performan 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 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 to the best knowledge of such
counsel after due inquiry, 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 to be 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
<PAGE>
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
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 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 Subsidiaries taken as a
whole;
(xvi) Except for statements relating to regulatory orders and regulatory
law, the statements in the Registration
<PAGE>
Statement, Prospectus, and the Incorporated Documents, under the headings,
"Prospectus Summary," "Recent Developments," "The Company," "Use of Proceeds,"
"Description o 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) 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 except
for the Company's Dividend Reinvestment and Stock Purchase Plan, Employees'
Stock Ownership Plan, 401(k) Savings Plan and Long-Term Performance-Based
Incentive Plan;
(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 Registration Statement, to require
registration under the Act of any shares of Common Stock or other securities of
the Company;
(xix) Based solely upon the written opinion of the general counsel of
Pennsylvania-American Water Company, all consents, approvals, authorizations
and/or orders of the Pennsylvania Public Utilities Commission required for the
consummation of the Acquisition (as defined and described in the Prospectus)
have been obtained;
(xx) The shares of Common Stock to be sold by the Company to the Ware
Family Buyers have been duly authorized and, when issued and delivered to the
Ware Family Buyers against payment therefor, will be validly issued, fully paid
and nonassessable and to the best knowledge of such counsel after reasonable
inquiry, 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
<PAGE>
the Company is a party) that entitle or will entitle any person to acquire
any such shares upon the issuance thereof by the Company; and
(xxi) The offer and sale of shares of Common Stock by the Company to the
Ware Family Buyers does not require registration under the Act.
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 certain of 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.
(d) You shall have received on the Closing Date an opinion of Chapman
and Cutler, counsel for the Underwriters, dated the
<PAGE>
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 Closing Date, and you shall have received a
certificate, dated the Closing Date and
<PAGE>
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.
(k) The offering of shares of Common Stock by the Company to the Ware
Family Buyers as contemplated by the Prospectus shall have been completed as of
the Closing Date.
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
<PAGE>
Commission of the registration statement (including financial statements
and exhibits thereto), each Prepricing Prospectus, the 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
<PAGE>
Representatives of the several Underwriters, by notifying the Company.
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.
<PAGE>
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without 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
<PAGE>
provided herein, and no other person shall acquire or have any right under
or by virtue of this Agreement. Neither the term "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.
<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
<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 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 16, 1996
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 23,
1996 included in American Water Works Company, Inc.'s Current Report on Form
8-K/A filed on April 3, 1996, and to all references to our firm in this
registration statement filed on or about April 17, 1996.
ARTHUR ANDERSEN LLP
New York, New York
April 16, 1996
