Exhibit 4.2
FIRST AMENDMENT TO THE
RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO THE RIGHTS AGREEMENT (this "Amendment"),
dated as of June 1, 2000, is made by and between American Water Works
Company, Inc., a Delaware corporation (the "Company"), and Fleet National
Bank (formerly known as BankBoston N.A.), a national banking association,
as Rights Agent (the "Rights Agent"). The Company and the Rights Agent
may be individually referred to herein as a "Party" and, collectively, as
the "Parties".
Background
A. The Parties entered into a Rights Agreement, dated as of
February 18, 1999 (the "Agreement"). Capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the
Agreement.
B. The Agreement generally defines an "Acquiring Person" as a Person
who becomes the Beneficial Owner of 25% or more of the Common Shares.
C. The Agreement provides that, in the event that a Person or a
group of affiliated or associated Persons becomes the Beneficial Owner of
35% or more of the Common Shares (the "Flip-In Percentage"), each holder
of a Right (other than the Acquiring Person and the Acquiring Person's
Associates and Affiliates) will thereafter have the right to receive, upon
exercise, Common Shares (or in certain circumstances, cash, property or
other securities of the Company) having a value equal to two times the
Purchase Price of the Right.
D. The Board of Directors of the Company, after due inquiry and
consideration, has determined that it is in the Company's best interest to
amend the Agreement to: (i) provide that an "Acquiring Person" shall,
subject to certain limited exceptions, be any Person who becomes the
Beneficial Owner of 10% or more of the Common Shares, and (ii) lower the
Flip-In Percentage from 35% to 10%.
E. Pursuant to Section 27 of the Agreement, the Company has directed
the Rights Agent to join in this Amendment.
Terms
In consideration of the mutual covenants contained herein and in the
Agreement and intending to be legally bound hereby, the Parties agree as
follows:
1. Amendment of Section 1(a). Section 1(a) of the Agreement is
hereby deleted in its entirety and replaced with the following:
"(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of 10% or
more of the Common Shares then outstanding (after
giving effect to any issuance of Common Shares in
connection with such Person becoming the Beneficial
Owner of 10% or more of Common Shares), but shall not
include:
(i) any Exempt Person (as hereinafter defined);
or
(ii) any John H. Ware, 3rd Family Member (as
such term is hereinafter defined);
(iii) any Willard M. Ware Family Member (as such
term is hereinafter defined); or
(iv) any Ware Family Voting Trust (as such term
is hereinafter defined) which may hereafter be formed;
provided, however, that
(A) all John H. Ware, 3rd Family Members,
taken together, shall become an Acquiring Person at
such time (if any) as the aggregate percentage of the
outstanding Common Shares beneficially owned by them
(excluding (1) Common Shares acquired upon exercise of
the Rights, (2) Common Shares hereafter acquired from
a Willard M. Ware Family Member, and (3) any Common
Shares beneficially owned by any Willard M. Ware
Family Member which may be deemed to be beneficially
owned by a John H. Ware, 3rd Family Member by virtue
of Section 1(d)(ii) hereof) shall be more than 25% of
the Common Shares then outstanding; and
(B) all Willard M. Ware Family Members,
taken together, shall become an Acquiring Person at
such time (if any) as the aggregate percentage of the
outstanding Common Shares beneficially owned by them
(excluding (1) Common Shares acquired upon exercise of
the Rights, (2) Common Shares hereafter acquired from
a John H. Ware, 3rd Family Member, and (3) any Common
Shares beneficially owned by a John H. Ware, 3rd
Family Member which may be deemed to be beneficially
owned by a Willard M. Ware Family Member by virtue of
Section 1(d)(ii) hereof) shall be more than 25% of the
Common Shares then outstanding; and
(C) the Ware Family Voting Trust shall
become an Acquiring Person at such time (if any) as
the aggregate percentage of the outstanding Common
Shares beneficially owned by the Ware Family Voting
Trust (excluding Common Shares acquired upon exercise
of the Rights) shall be more than 50% of the Common
Shares then outstanding.
Notwithstanding the foregoing:
(A) no Person shall become an Acquiring
Person as the result of an acquisition of Common
Shares by the Company that, by reducing the number of
Common Shares (or securities convertible into or
exchangeable for Common Shares) outstanding, increases
the percentage of Common Shares beneficially owned by
such Person (together with all Affiliates and
Associates of such Person) to 10% or more (25% or more
in the case of a John H. Ware, 3rd Family Member or a
Willard M. Ware Family Member and 50% in the case of
the Ware Family Trust) of the Common Shares then
outstanding; provided, however, that if any Person
(other than an Exempt Person) shall become the
Beneficial Owner of 10% or more (25% or more in the
case of a John H. Ware, 3rd Family Member or a Willard
M. Ware Family Member and 50% in the case of the Ware
Family Trust) of the Common Shares then outstanding by
reason of share purchases by the Company and shall,
after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of
the Company (other than due to another share purchase
by the Company), then such Person shall be an
Acquiring Person;
(B) if the Board of Directors of the
Company determines in good faith that a Person who
would otherwise be an Acquiring Person as defined
pursuant to the first sentence of this paragraph (a),
has become such inadvertently, and such Person divests
as promptly as practicable a sufficient number of
Common Shares so that such Person would no longer be
an Acquiring Person, as defined pursuant to the
foregoing provisions of this paragraph (a), then such
Person shall not, solely as a result of such
inadvertent acquisition, be deemed to be an Acquiring
Person for any purpose of this Agreement; and
(C) no Person shall become an Acquiring
Person to the extent that the Board of Directors
approves in advance of the transaction or series of
transactions which but for the operation of this
sentence would have caused such a Person to become an
Acquiring Person; provided however that such Person
shall become an Acquiring Person immediately upon
becoming the Beneficial Owner of any Common Stock
other than pursuant to the transaction or series of
transactions approved by the Board of Directors
pursuant to this sentence."
2. Amendment to Section 3(a). Section 3(a) of the Agreement is
hereby deleted in its entirety and replaced by the following:
"(a) Until the earlier of (i) the Close of Business
on the tenth calendar day after the Shares Acquisition
Date or (ii) the Close of Business on the tenth
Business Day after the date that a tender or exchange
offer by any Person (other than an Exempt Person) is
first published or sent or given within the meaning of
Rule 14d-4(a) of the General Rules and Regulations
under the Exchange Act, the consummation of which
would result in beneficial ownership by a Person
(other than an Exempt Person) of 10% or more of the
outstanding Common Shares (including any such date
that is after the date of this Agreement and prior to
the issuance of the Rights) (the earlier of (i) and
(ii) being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to
the provisions of paragraph (b) of this Section 3) by
the certificates for Common Shares registered in the
names of the holders thereof (which certificates shall
also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only
in connection with the transfer of Common Shares. As
soon as practicable after the Distribution Date, the
Rights Agent will send, by first-class, insured,
postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution
Date, or, with respect to Common Shares so issued on
or after the Distribution Date (unless otherwise
provided with respect thereto as aforesaid), to the
record holder of such Common Shares on the date of
issuance, at the address of such holder shown on the
records of the Company, a Right Certificate, in
substantially the form of Exhibit A, evidencing one
Right for each Common Share so held, subject to
adjustments as provided herein. In the event that an
adjustment in the number of Rights per Common Share
has been made pursuant to Section 11(i) hereof, at the
time of distribution of the Right Certificates, the
Company may make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a)
hereof) so that Right Certificates representing only
whole numbers of Rights are distributed and cash is
paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced
solely by such Right Certificates."
3. Amendment to Section 11(a)(ii). Section 11(a)(ii) of the
Agreement is hereby deleted in its entirety and replaced with the
following:
"(ii) In the event any Person (other than an Exempt
Person), at any time after the date of this Agreement,
together with all Affiliates and Associates of such
Person shall become the Beneficial Owner of 10% or
more of the Common Shares then outstanding (after
giving effect to any issuance of Common Shares in
connection with such Person becoming the Beneficiary
Owner of 10% or more of Common Shares) and such
Person, after giving effect to such Beneficial
Ownership, shall be an Acquiring Person, then,
promptly following the occurrence of such Section
11(a)(ii) Event, proper provision shall be made so
that each holder of a Right, except as provided in
Section 7(e), shall thereafter have a right to
receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of Common Shares for
which a Right was theretofore exercisable, such number
of Common Shares as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the
number of Common Shares for which a Right was
exercisable immediately prior to the first occurrence
of the Section 11(a)(ii) Event and (y) dividing that
product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by
50% of the current per share market price of the
Common Shares (determined pursuant to Section 11(d))
on the date of the occurrence of the Section 11(a)(ii)
Event (such number of shares is herein called the
"Adjustment Shares"); provided, however, that the
Purchase Price and number of Adjustment Shares shall
be further adjusted as provided in this Agreement to
reflect any event occurring after the date of such
first occurrence."
4. Other Provisions Unaffected. Except as expressly modified
herein, all arrangements, agreements, terms, conditions and provisions of
the Agreement remain in full force and effect, and this Amendment and the
Agreement, as hereby modified, shall constitute one and the same
instrument.
5. Miscellaneous.
a. Counterparts. This Amendment may be executed in any
number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
b. Governing Law. This Amendment, the Agreement, each
Right and each Right Certificate issued hereunder or thereunder shall be
deemed to be a contract made under the laws of the State of Delaware and
for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and performed
entirely within such State.
c. Further Assurances. Each Party shall cooperate and take
such action as may be reasonably requested by another Party in order to
carry out the provisions and purposes of this Amendment, the Agreement,
generally, and the transactions contemplated hereunder and/or thereunder.
d. Descriptive Headings. Descriptive headings of the
several Sections of this Amendment and the Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof or thereof.
e. Entire Agreement. This Amendment and the Agreement, and
all of the provisions hereof and/or thereof, shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns and executors, administrators and heirs. This
Amendment, together with the Agreement, sets forth the entire agreement
and understanding among the Parties as to the subject matter hereof and
merges with and supercedes all prior discussions and understandings of any
and every nature among them.
IN WITNESS WHEREOF, the Parties have executed this First Amendment to
the Rights Agreement as the date first set forth above.
AMERICAN WATER WORKS COMPANY, INC.
By: J. James Barr
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Name: J. James Barr
Title: President and Chief Executive Officer
FLEET NATIONAL BANK
By: Joshua P. McGinn
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Name: Joshua P. McGinn
Title: Senior Account Manager
