Company: AWK
Filing Date: 2025-12-17
Form Type: S-4
Source: 0001193125-25-321389
Chunk: 178

Company: American Water Works Company, Inc.
Filing Date: 2025-12-17
Form: S-4
Chunk 178
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 and is therefore taxable for U.S. federal income tax purposes, then a U.S. holder of Essential common stock that exchanges such shares of Essential common stock for American Water common stock and cash in lieu of a fractional share will generally recognize gain or loss equal to the difference, if any, between (i) the sum of any cash received in lieu of a fractional share of American Water common stock and the fair market value of the American Water common stock actually received by such U.S. holder and (ii) such U.S. holder’s adjusted tax basis in the Essential common stock exchanged therefor. Gain or loss must be calculated separately for each block of Essential common stock exchanged by such U.S. holder if such blocks were acquired at different times or for different prices. Any gain or loss so recognized will be long-term capital gain or loss if the U.S. holder’s holding period in a particular block of Essential common stock exceeds one year at the effective 116

time of the merger. Long-term capital gain is taxed at reduced rates for non-corporate holders. The deductibility of capital losses is subject to
limitations. A U.S. holder’s aggregate tax basis in the American Water common stock received in the merger will equal the fair market value of such American Water common stock as of the effective time of the merger, and the holding period of
such American Water common stock will begin on the date after the merger.

THIS DISCUSSION OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, TAX ADVICE. ESSENTIAL SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND NON-U.S.INCOME AND OTHER TAX LAWS, IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Litigation Relating to the Merger

Shareholders may file lawsuits challenging the merger, which may name American Water, Essential, members of the American Water board, members of the Essential
board, or others as defendants. No assurance can be made as to the outcome of such lawsuits, including the amount of costs associated with defending claims or any other liabilities that may be incurred in connection with the litigation of any
claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the merger on the agreed-upon terms, such