<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
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PENNSYLVANIA GAS AND WATER COMPANY
(Name of Applicant)
WILKES-BARRE CENTER
39 PUBLIC SQUARE
WILKES-BARRE, PENNSYLVANIA 18711-0601
(Address of principal executive offices)
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SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
------------------ ----------
First Mortgage Bonds, issuable in series Not Applicable
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Not Applicable
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NAME AND ADDRESS OF AGENT FOR SERVICE: WITH A COPY TO:
Thomas J. Ward, Secretary Garett J. Albert, Esq.
Pennsylvania Gas and Water Company Hughes Hubbard & Reed
Wilkes-Barre Center One Battery Park Plaza
39 Public Square New York, New York 10004
Wilkes-Barre, Pennsylvania 18711-0601
The Applicant hereby amends this Application For Qualification on such date
or dates as may be necessary to delay its effectiveness until (i) the 20th day
after the filing of a further amendment which specifically states that it shall
supersede this amendment, or (ii) such date as the Commission, acting pursuant
to Section 307(c) of the Act, may determine upon the written request of the
Applicant.
<PAGE>
2
1. GENERAL INFORMATION.
(a) The applicant, Pennsylvania Gas and Water Company (the "Company"), is
a corporation.
(b) The Company was organized under the laws of the Commonwealth of
Pennsylvania.
2. SECURITIES ACT EXEMPTION.
Not applicable. The Company is not issuing any securities under its
Indenture of Mortgage and Deed of Trust, dated as of March 15, 1946, from the
Company to First Trust of New York, National Association, as trustee (the
"Mortgage Trustee"), as supplemented by twenty-nine supplemental indentures (the
"Original Indenture") and to be supplemented by a Thirtieth Supplemental
Indenture (the "Thirtieth Supplemental Indenture", and, collectively with the
Original Indenture, the "Mortgage Indenture"), to be qualified pursuant to this
Application.
3. AFFILIATIONS.
The following is a list of the Company's affiliates as of October 2, 1995:
(i) Pennsylvania Enterprises Inc., a Pennsylvania corporation
("PEI"), which owns 100% of the Company's voting securities.
(ii) Theta Land Corporation, a Pennsylvania corporation, 100% of the
voting securities of which are owned by PEI.
(iii) Pennsylvania Energy Resources, Inc., a Pennsylvania
corporation, 100% of the voting securities of which are owned by PEI.
(iv) Pennsylvania Energy Marketing Company, a Pennsylvania
corporation, 100% of the voting securities of which are owned by PEI.
(v) Penn Gas Development Co., a Pennsylvania corporation, 100% of
the voting securities of which are owned by the Company.
4. DIRECTORS AND EXECUTIVE OFFICERS.
The following table lists the names of all directors and executive officers
of the Company as of October 2, 1995, and all offices held with the Company by
each such person:
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3
NAME OFFICE
-------- -----------------------------------------------------
[S] [C]
Kenneth L. Pollock Chairman of the Board of Directors
William D. Davis Vice Chairman of the Board of Directors
Dean T. Casaday President, Chief Executive Officer and Director
Robert J. Keating Director
John D. McCarthy Director
Kenneth M. Pollock Director
James A. Ross Director
Ronald W. Simms Director
Vincent A. Bonaddio Vice President, Operations and Engineering
Harry E. Dowling Vice President, Human Resources and Customer Services
Thomas F. Karam Executive Vice President
David R. Kaufman Vice President, Water Resources
John F. Kell, Jr. Vice President, Finance
Joseph F. Perugino Vice President, Marketing and Gas Supply
Thomas J. Ward Vice President, Administration, and Secretary
Thomas J. Koval Controller and Assistant Treasurer
Richard N. Marshall Treasurer
The mailing address of each of the Company's directors and executive
officers listed above is c/o Pennsylvania Gas and Water Company, Wilkes-Barre
Center, 39 Public Square, Wilkes-Barre, Pennsylvania 18711-0601.
<PAGE>
4
5. PRINCIPAL OWNERS OF VOTING SECURITIES.
As of October 2, 1995, PEI owned 100% of the Company's common stock, no par
value, stated value $10 per share ("Common Stock"), which constitutes the
Company's only class of voting securities.
<TABLE>
<CAPTION>
PERCENTAGE OF
TITLE OF VOTING
NAME AND ADDRESS CLASS OWNED AMOUNT OWNED SECURITIES OWNED
- --------------------------- ------------- ---------------- -----------------
<S> <C> <C> <C>
Pennsylvania Enterprises, Common Stock, 5,593,318 shares 100%
Inc. no par value,
Wilkes-Barre Center stated value
39 Public Square $10.00 per
Wilkes-Barre, PA 18711-0601 share
</TABLE>
6. UNDERWRITERS.
(a) The following firms acted as underwriters with respect to the Company's
issuance of $30.0 million aggregate principal amount of its First
Mortgage Bonds 8.375% Series due 2002, the offer and sale of which was
consummated on December 14, 1992:
Legg Mason Wood Walker Incorporated
111 South Calvert Street
Baltimore, Maryland 21203-1476
Wheat First Butcher & Singer Capital Markets, a
Division of Wheat, First Securities Inc.
Two Logan Square
Philadelphia, Pennsylvania 19103
(b) Not applicable. No securities are proposed to be offered in connection
with this Application.
<PAGE>
5
7. CAPITALIZATION.
(a) Authorized Securities.
Capital Stock
As of October 2, 1995
---------------------
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF SHARES AUTHORIZED NUMBER OF SHARES OUTSTANDING
-------------- --------------------------- ----------------------------
<S> <C> <C>
Common Stock, no par value 10,000,000 5,593,318
Preferred Stock, par value $100 per 997,500 367,600
share ("Preferred Stock")
The Company's Preferred Stock is
composed of the following three
series:
4.10% Cumulative Preferred Stock 100,000 100,000
1966 Cumulative Preferred Stock 40,000 17,600
9% Cumulative Preferred Stock, as 250,000 250,000
evidenced by 1,000,000 Depositary
Preferred Shares, each
representing a 1/4 interest in a
share of 9% Cumulative Preferred
Stock
</TABLE>
Debt Securities
As of October 2, 1995
---------------------
The following series of the Company's first mortgage bonds listed below
(collectively, the "First Mortgage Bonds") were issued under the Original
Indenture:
<PAGE>
6
<TABLE>
<CAPTION>
DESIGNATION OF DEBT AMOUNT AUTHORIZED AMOUNT OUTSTANDING
------------------- ----------------- ------------------
<S> <C> <C>
First Mortgage Bonds 9.23% $10,000,000 $10,000,000
Series due 1999
First Mortgage Bonds 9.34% $15,000,000 $15,000,000
Series due 2019
First Mortgage Bonds 7.20% $50,000,000 $50,000,000
Series due 2017
First Mortgage Bonds 8.375% $30,000,000 $30,000,000
Series due 2002
First Mortgage Bonds 7.125% $30,000,000 $30,000,000
Series due 2022
First Mortgage Bonds 6.05% $19,000,000 $19,000,000
Series due 2019
First Mortgage Bonds 7% $30,000,000 $30,000,000
Series due 2017
First Mortgage Bonds 9.57% $50,000,000 $50,000,000
Series due 1996
</TABLE>
(b) Description of Voting Rights.
Common Stock: Holders of the Company's Common Stock have the right to
------------
cast one vote for each share held of record on all matters submitted to a vote
of holders of Common Stock. Holders of the Company's Common Stock are not
entitled to cumulative voting rights in the election of directors.
Preferred Stock: Holders of shares of the Company's Preferred Stock
---------------
have no ordinary voting rights. However, in the following instances each
outstanding share of Preferred Stock will be entitled to one vote.
Default in Dividends. In the event that dividends payable on all
outstanding shares of Preferred Stock shall be in default in an amount equal to
four full quarterly dividends, the record holders of shares of Preferred Stock,
voting separately as one class, shall be entitled to elect, at each meeting of
shareholders at which directors are to be elected, the smallest number of
directors necessary to constitute a majority of the full Board of Directors of
the Company until
<PAGE>
7
such time as all dividends then in default have been paid. Holders of Preferred
Stock have the right of cumulative voting in all elections of directors in which
they are entitled to vote.
Issuance of Additional Preferred or Other Stock. Without the approval of
the holders of at least two-thirds of the outstanding shares of Preferred Stock
of all series, voting separately as one class, no additional Preferred Stock
(other than in exchange for or to redeem or refund an equal number of
outstanding shares) or shares ranking on a parity in any respect with the
Preferred Stock shall be issued unless (i) the Company's Common Stock equity is
greater than or equal to the amount payable on the involuntary liquidation of
all shares of Preferred Stock, on a pro forma basis, outstanding after the issue
of such shares, and (ii) the gross income of the Company available for the
payment of interest charges for any period of 12 consecutive calendar months
within the 15 calendar months immediately preceding the issue of additional
shares of Preferred Stock is at least one and one-half times the annual interest
requirement (adjusted for amortization of debt discount and expense, or of
premium) on all funded indebtedness and the annual interest requirements on
notes maturing more than 12 months after the date of issue of such shares and
the annual dividend requirements on all Preferred Stock, on a pro forma basis,
outstanding after the issue of such shares.
In addition, approval of two-thirds of the outstanding shares of Preferred
Stock, voting separately as one class, is required to create, authorize, or
issue any stock ranking prior in any respect to the Preferred Stock or any
security convertible into shares of such stock.
Changes in Terms and Provisions of Preferred Stock. Approval of two-thirds
of the outstanding shares of Preferred Stock, voting separately as one class, is
required before any change may be made in the terms and provisions of the
Preferred Stock (including by amendment to the Company's Restated Articles of
Incorporation, as amended) which would adversely affect the rights, preferences
or privileges of the holders thereof. If, however, any such change will only
adversely affect the rights, preferences or privileges of the holders of one or
more, but less than all of the series of Preferred Stock at the time
outstanding, the vote or consent only of two-thirds of the series affected is
required.
Payments or Distributions out of Capital Surplus. Approval of two-thirds
of the outstanding shares of Preferred Stock, voting separately as one class, is
required to make any payment or distribution out of capital or capital surplus
(other than dividends payable in stock junior to the Preferred Stock) to any
holder of any stock ranking junior to the Preferred Stock.
Issuance of Additional Unsecured Indebtedness. So long as any shares of
Preferred Stock are outstanding, the Company may not, without the approval of a
majority of the outstanding shares of Preferred Stock, voting separately as one
class, issue or assume more than $12.0 million of unsecured debt maturing on
demand or within one year from issuance for any purpose other than the refunding
of an equal or lesser principal amount of debt or the retiring, by redemption or
otherwise, of an equal or lesser amount of Preferred Stock.
Issuance of Additional Secured Indebtedness. So long as any shares of
Preferred Stock are outstanding, the Company may not, without the approval of a
majority of the outstanding shares of Preferred Stock, voting separately as one
class, issue or assume any secured debt,
<PAGE>
8
except (i) additional first mortgage bonds pursuant to the Indenture, (ii)
purchase-money mortgages or other purchase-money liens or purchase-money
obligations in respect of property acquired after March 15, 1946, by the Company
or any subsidiary, (iii) indebtedness secured by mortgages or other liens
existing on after-acquired property, (iv) the extension, renewal or refunding of
any funded debt given, created, issued or assumed as permitted under this
provision, and (v) secured debt which, if unsecured, would be permitted.
Consolidation, Merger, Share Exchange, Division or Sale of Assets. So long
as any shares of Preferred Stock are outstanding, the Company may not, without
the approval of a majority of the then outstanding shares of Preferred Stock,
voting separately as one class, merge or consolidate with any other corporation
(other than a wholly-owned subsidiary) or permit a subsidiary to do so, or to
effect a share exchange or divide or sell all or substantially all of its
assets.
Sale and Issuance of Subsidiary Stock. So long as any shares of Preferred
Stock are outstanding, the Company may not, without the approval of a majority
of the outstanding shares of Preferred Stock, voting separately as one class,
(i) permit any subsidiary to issue (except to the Company and/or one of its
wholly-owned subsidiaries) any shares of stock, or securities convertible into
stock, ranking prior to the stock owned directly or indirectly by the Company,
or to issue shares of stock of any other class unless effective provisions are
made that such additional stock (or such part thereof as shall be proportionate
to the part of the entire stock of such class owned by the Company, directly or
indirectly, immediately prior to the issue of such stock) shall forthwith upon
the issuance thereof be acquired by the Company and/or one of its wholly-owned
subsidiaries; or (ii) sell, transfer or dispose of any stock whatsoever issued
by any subsidiary or permit any subsidiary to take such action, except to the
Company and/or one of more of its wholly-owned subsidiaries and except such
number of shares as may be necessary to qualify persons to act as directors of
any such subsidiary, unless prior thereto or at the same time all stock and all
other securities and obligations of such subsidiary owned directly or indirectly
by the Company and its subsidiaries are sold, transferred or disposed of.
Depositary Preferred Shares: Each record holder of the Company's
---------------------------
Depositary Preferred Shares is entitled to instruct Chemical Bank (who acts as
the Depositary with respect to the Depositary Preferred Shares) in writing as to
the exercise of the voting rights pertaining to the number of shares of the
Company's 9% Cumulative Preferred Stock represented by such Depositary Preferred
Shares.
First Mortgage Bonds: The Original Indenture provides that the
--------------------
Original Indenture, the rights and obligations of the Company and the rights of
the first mortgage bondholders may be modified by the Company only with the
consent of the holders of 60% in principal amount of the first mortgage bonds or
(if less than all of the series are affected) of not less than 60% in principal
amount of each series affected. With certain exceptions, no modifications of
the terms of payment of principal of or interest on first mortgage bonds and no
modification affecting the lien with respect to the security for first mortgage
bonds (including the creation of a lien ranking prior to or on a parity with the
lien of the Original Indenture) or reducing the percentage required for
modification of the Original Indenture will be effective
<PAGE>
9
against any holder of first mortgage bonds without his consent. The Thirtieth
Supplemental Indenture would not make any changes with respect to the voting
rights provisions contained in the Original Indenture.
8. ANALYSIS OF INDENTURE PROVISIONS.
A. Events of Default. The following events constitute defaults under the
-----------------
Original Indenture: (a) failure to pay interest on any of the first mortgage
bonds for 60 days; (b) failure to pay the principal of, or premium, if any, on,
any of the first mortgage bonds when due; (c) failure to pay interest upon or
principal due on any outstanding prior lien bonds; (d) failure to pay any
installment on any sinking fund or purchase fund for any of the first mortgage
bonds for 60 days; (e) certain events of bankruptcy, insolvency or
reorganization; and (f) after written notice to the Company by the Mortgage
Trustee or the holders of 15% in principal amount of outstanding first mortgage
bonds, failure of the Company to perform any other covenant or agreement in the
Original Indenture for 90 days. The Original Indenture provides for annual
certification by Company to the Mortgage Trustee of compliance with certain
covenants of the Original Indenture, including the Company's covenant not to
suffer or permit any default to occur under the Original Indenture. The
Thirtieth Supplemental Indenture would not make any changes with respect to
events of default but to the extent that it changes covenants contained in the
Original Indenture, the Thirtieth Supplemental Indenture would require the
Company to comply with such covenants, as amended, and to certify to the
Mortgage Trustee as to compliance which such covenants, as amended.
Withholding of Notice to the Indenture Security Holders of a Default.
---------------------------------------------------------------------
The Mortgage Trustee shall, within ninety (90) days after the occurrence
thereof, mail to the bondholders, as the names and addresses of such holders
appear upon the registration books to the Company, notice of all defaults known
to the Mortgage Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" in this circumstance does not include
any periods of grace with respect to the occurrence of the events specified in
(a), (b), (c), (d) and (e) of the preceding paragraph provided for by the
Original Indenture); provided that, except in the case of default in the payment
of the principal, or premium, if any, of or interest on any of the first
mortgage bonds, or in the payment of any purchase or sinking fund installments
in respect of first mortgage bonds of any series, the Mortgage Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or responsible
officers, of the Mortgage Trustee in good faith determines that the withholding
of such notice is in the interests of the first mortgage bondholders. The
Thirtieth Supplemental Indenture would not make any changes with respect to this
provision.
B. Authentication and Delivery of the Indenture Securities and the
---------------------------------------------------------------
Application of Proceeds Thereof. Subject to certain conditions and
- --------------------------------
restrictions, additional first mortgage bonds may be delivered and authenticated
under the Original Indenture on the basis of and in a principal amount equal to
(a) 60% of net property additions; (b) 100% of the aggregate principal amount of
outstanding first mortgage bonds paid, retired or redeemed and not theretofore
made the basis for the issuance of first mortgage bonds, the withdrawal of cash
or the taking of a credit
<PAGE>
10
and not retired out of the proceeds of any funded property; or (c) 100% of the
amount of cash deposited with the Mortgage Trustee for the purpose of issuing
additional first mortgage bonds. The Thirtieth Supplemental Indenture would
restrict the Company's ability to issue additional first mortgage bonds on the
basis of the amount of outstanding first mortgage bonds paid, retired or
redeemed and not theretofore made the basis for the issuance of first mortgage
bonds, the withdrawal of cash or the taking of a credit and not retired out of
the proceeds of any funded property to apply to first mortgage bonds paid,
retired or redeemed prior to the date of the consummation of the sale of the
Company's regulated water utility operations and certain related assets to
Pennsylvania-American Water Company ("PAWC") pursuant to an Asset Purchase
Agreement dated as of April 26, 1995 among the Company, PEI, PAWC and American
Water Works Company, Inc. (the "Sale of the Water Business"). The Original
Indenture does not contain any provision with respect to the application of the
proceeds by the Company from the issuance of any first mortgage bonds. The
Thirtieth Supplemental Indenture would not add any such provisions to the
Original Indenture.
C. Release of Property Subject to the Lien of the Mortgage Indenture. The
-----------------------------------------------------------------
Company has the right at any time and from time to time unless to the knowledge
of the Mortgage Trustee a default under the Original Indenture shall have
happened and be continuing, to sell or exchange any part of the mortgaged
property which shall no longer be advantageous in the judicious management and
maintenance of the mortgaged property or in the conduct of the business of the
Company. The Original Indenture provides that the Mortgage Trustee shall from
time to time release such property so sold or exchanged from the operation and
lien of the Mortgage Indenture upon receipt of certain certificates and opinions
of counsel. In addition, in the event of (a) any taking of any part of the
mortgaged property by the exercise of the power of eminent domain or the sale or
conveyance by the Company in lieu of such taking and in reasonable anticipation
thereof, where proceedings therefor might lawfully be taken to vest such
property in the grantee for the same purposes or (b) the exercise by any
municipality or other governmental subdivision or agency of any right which it
may have or may acquire to purchase any part of the mortgaged property, the
Original Indenture provides that the Mortgage Trustee shall execute and deliver
a deed of release of the mortgaged property so taken, sold, purchased or
otherwise disposed of upon receipt of certain certificates and opinions of
counsel. The Thirtieth Supplemental Indenture would not make any changes with
respect to these provisions, except as described below in connection with the
Company obtaining a one-time release from the lien of the Original Indenture of
all of its non-gas utility properties.
It is a condition to the consummation of the Sale of the Water Business
that the Company obtain a release from the lien of the Original Indenture of all
property which is to be sold to PAWC as well as certain property of the Company
which PAWC will have the right to utilize after the consummation of the Sale of
the Water Business pursuant to an operating and maintenance easement agreement.
The Thirtieth Supplemental Indenture would permit the Company to obtain a
release from the lien of the Original Indenture of all property not used
exclusively in connection with its remaining gas utility operations and would
simplify the procedures the Company would normally be obligated to follow with
respect to obtaining such release. On September 16, 1995, the Company filed
with the Securities and Exchange Commission an "Application For An Order For
Exemption From One Or More Provisions Of
<PAGE>
11
The Trust Indenture Act Of 1939, As Amended, Pursuant To Rule 4d-7 Of The
General Rules And Regulations Promulgated Thereunder" (the "Exemption
Application") seeking exemptive relief from the provisions of Section 314(d) of
the Trust Indenture Act of 1939, as amended, with respect to the simplified
release procedures the Company proposes to include in its Thirtieth Supplemental
Indenture. The Exemption Application is attached hereto as Exhibit T3C-2 and is
incorporated herein by reference.
D. Satisfaction and Discharge of the Indenture. The Company may satisfy
-------------------------------------------
and discharge the Original Indenture if it pays and discharges the entire
indebtedness on all first mortgage bonds outstanding under the Original
Indenture in any one or more of the following ways: (i) by paying the principal
of (including redemption premium, if any) and interest on first mortgage bonds
outstanding under the Original Indenture, as and when the same becomes due and
payable; (ii) by depositing with the Mortgage Trustee, in trust, at or before
maturity, cash sufficient to pay or redeem the first mortgage bonds outstanding
under the Original Indenture, with irrevocable directions so to apply the same;
provided, however, that in the case of redemption the notice requisite to the
validity of such redemption shall have been given or irrevocable authority shall
have been given by the Company to the Mortgage Trustee to give such notice,
under arrangements satisfactory to the Mortgage Trustee; and/or (iii) by
delivering to the Mortgage Trustee, for cancellation by it, all the first
mortgage bonds outstanding under the Original Indenture, together with all
unpaid coupons thereto. Upon the discharge of the Original Indenture, the
Mortgage Trustee is required, upon demand of the Company, to execute and deliver
appropriate instruments of satisfaction and discharge of the Original Indenture.
The Thirtieth Supplemental Indenture would not make any changes with respect to
these provisions.
E. Statement as to Compliance. The Company is required to deliver to the
--------------------------
Mortgage Trustee on or before December 31 in each calendar year (or on or before
such other date as the Company and the Mortgage Trustee may determine) a
certificate of the Company with respect to compliance by the Company with
certain of its obligations under the Original Indenture. Such certificate shall
include (i) a statement that the person making such certificate or giving such
opinion has read such covenant or condition; (ii) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based; (iii) a
statement that, in the opinion of such person, he has made such examination as
is necessary to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and (iv) a statement as to
whether or not such condition or covenant has been complied with. Such
certificate shall also state that all conditions precedent provided for in the
Original Indenture relating to the action to be taken by the Mortgage Trustee
have been complied with. The Thirtieth Supplemental Indenture would not make
any changes with respect to this requirement but to the extent that it changes
covenants and conditions contained in the Original Indenture, the Thirtieth
Supplemental Indenture would require the Company to certify to the Mortgage
Trustee that it has complied with such covenants and conditions, as amended.
<PAGE>
12
9. OTHER OBLIGORS.
No person other than the Company is an obligor with respect to any First
Mortgage Bonds issued under the Original Indenture. The Thirtieth Supplemental
Indenture would not provide for the addition of any other obligors with respect
to any of the First Mortgage Bonds or other series of first mortgage bonds which
may be issued by the Company in the future.
10. CONTENTS OF APPLICATION FOR QUALIFICATION..
(a) Pages numbered 1 through 13 consecutively.
(b) A statement of eligibility and qualification of the Mortgage Trustee
on Form T-1.
(c) The following exhibits are in addition to those to be filed as part
of the statement of eligibility and qualification of the Mortgage
Trustee.
T3A Restated Articles of Incorporation, as amended, filed as Exhibit 3-1 to
Pennsylvania Gas and Water Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1992, incorporated herein by reference to
Exhibit T3A, File No. 1-3490.
T3B By-laws of Pennsylvania Gas and Water Company, as amended and restated on
January 18, 1995, filed as Exhibit 3-2 to Pennsylvania Gas and Water
Company's Annual Report on Form 10-K for the year ended December 31,
1994, incorporated herein by reference to Exhibit T3B, File No.1-3490.
T3C-1 Form of Thirtieth Supplemental Indenture to the Original Indenture
T3C-2 Application dated September 14, 1995 For an Order For Exemption From One
or More Provisions of the Trust Indenture Act of 1939, As Amended,
Pursuant to Rule 4d-7 of the General Rules and Regulations Promulgated
Thereunder.
T3D Not Applicable.
T3E Form of Consent Solicitation Statement to be Sent to Holders of the First
Mortgage Bonds in connection with the approval of the Thirtieth
Supplemental Indenture, draft dated October 2, 1995.
T3F Cross Reference Sheet showing the location in the Mortgage Indenture of
the provisions inserted therein pursuant to Section 310 through 318(a)
inclusive of the Trust Indenture Act of 1939, as amended.
<PAGE>
13
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the applicant, Pennsylvania Gas and Water Company, a corporation
organized and existing under the laws of the Commonwealth of Pennsylvania, has
duly caused this Application to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed, and attested,
all in the City of Wilkes-Barre, Commonwealth of Pennsylvania, on this 2nd day
of October 1995.
PENNSYLVANIA GAS AND WATER COMPANY
(seal)
By: /s/ John F. Kell, Jr.
---------------------------------------
Name: John F. Kell, Jr.
Title: Vice President, Finance
Attest: By: /s/ Thomas J.Ward
---------------------------------------
Name: Thomas J. Ward
Title: Vice President of Administration
and Secretary
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) __________
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
13-3781471
(I.R.S. Employer
Identification No.)
100 Wall Street, New York, NY 10005
(Address of principal executive offices) (Zip Code)
--------------------------
FOR INFORMATION, CONTACT:
Terry L. Roberts, President
First Trust of New York, National Association
100 Wall Street, 16th Floor
New York, NY 10005
Telephone: (212) 361-2500
--------------------------
PENNSYLVANIA GAS AND WATER COMPANY
(Exact name of obligor as specified in its charter)
Pennsylvania 24-0717235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Wilkes-Barre Center
39 Public Square
Wilkes-Barre, Pennsylvania
(717) 829-8843 18711-0601
(Address of principal executive offices) (Zip Code)
--------------------------
FIRST MORTGAGE BONDS
<PAGE>
Item 1. GENERAL INFORMATION.
Furnish the following information as to the trustee - -
(a) Name and address of each examining or supervising authority
to which it is subject.
Name Address
---- -------
Comptroller of the Currency Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. LIST OF EXHIBITS.
Exhibit 1. Articles of Association of First Trust of New York, National
Association, incorporated herein by reference to Exhibit 1 of
Form T-1, Registration No. 33-83774.
Exhibit 2. Certificate of Authority to Commence Business for First Trust
of New York, National Association, incorporated herein by
reference to Exhibit 2 of Form T-1, Registration No. 33-83774.
Exhibit 3. Authorization of the Trustee to exercise corporate trust powers
for First Trust of New York, National Association, incoporated
herein by reference to Exhibit 3 of of Form T-1, Registration
No. 33-83774.
Exhibit 4. By-Laws of First Trust of New York, National Association,
incorporated herein by reference to Exhibit 4 of of Form T-1,
Registration No. 33-55851.
Exhibit 5. Not applicable.
Exhibit 6. Consent of First Trust of New York, National Association,
required by Section 321(b) of th eAct, incorporated herein by
reference to Exhibit 6 of of Form T-1, Registration No.
33-83774.
<PAGE>
Exhibit 7. Report of Condition of First Trust of New York, National
Association, as of the close of business on June 30, 1995,
published pursuant to law or the requirements of its
supervising or examining authority.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Trust of New York, National Association, a national
banking association organized and existing under the laws of the United States,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 28th day of September, 1995.
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ David K. Leverich
-----------------------------
David K. Leverich
Vice President
<PAGE>
Exhibit 7
---------
FIRST TRUST OF NEW YORK, N.A.
STATEMENT OF FINANCIAL CONDITION
AS OF 6/30/95
($000'S)
<TABLE>
<CAPTION>
6/30/95
----------
<S> <C>
ASSETS
Cash and Due From Depository $ 25,060
Institutions
Federal Reserve Stock 3,150
Fixed Assets 828
Intangible Assets 69,700
Other Assets 6,623
----------
TOTAL ASSETS $105,361
==========
LIABILITIES
Other Liabilities 1,096
----------
TOTAL LIABILITIES 1,096
EQUITY
Common and Preferred Stock 1,000
Surplus 104,000
Undivided Profits (735)
----------
TOTAL EQUITY CAPITAL 104,265
TOTAL LIABILITIES AND EQUITY CAPITAL 105,361
==========
</TABLE>
===============================================================================
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
First Trust of New York, N.A.
By: /s/ David K. Leverich
-------------------------
Vice President
Date: September 29, 1995
<PAGE>
EXHIBIT T3C-1
================================================================================
THIRTIETH SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 1, 1995
(SUPPLEMENTAL TO INDENTURE DATED AS OF MARCH 15, 1946)
------------------
PENNSYLVANIA GAS AND WATER COMPANY
(FORMERLY SCRANTON-SPRING BROOK WATER SERVICE COMPANY)
TO
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
TRUSTEE
------------------
================================================================================
<PAGE>
THIRTIETH SUPPLEMENTAL INDENTURE, dated as of the first day of
December 1995, made by and between PENNSYLVANIA GAS AND WATER COMPANY (formerly
Scranton-Spring Brook Water Service Company), a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania (hereinafter
sometimes called the "Company"), and FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States, and having its principal place of business at No. 100
Wall Street, Suite 1600, in The City of New York, New York, as Trustee
(hereinafter sometimes called the "Trustee").
WHEREAS, the Company executed and delivered its Indenture (hereinafter
called the "Original Indenture") dated as of March 15, 1946, to Morgan Guaranty
Trust Company of New York ("Morgan") (formerly Guaranty Trust Company of New
York), to secure its First Mortgage Bonds and has executed and delivered twenty-
nine indentures supplemental thereto dated respectively as of February 15, 1951;
as of September 15, 1951; as of January 15, 1952; as of March 15, 1952; as of
June 15, 1952; as of December 1, 1954; as of April 15, 1956; as of November 15,
1956; as of March 15, 1957; as of September 1, 1958; as of April 15, 1959; as of
July 15, 1960; as of October 31, 1961; as of December 15, 1961; as of December
15, 1963; as of June 15, 1966; as of October 15, 1967; as of May 1, 1970; as of
June 1, 1972; as of March 1, 1976; as of December 1, 1976; as of August 15,
1989; as of August 15, 1989; as of September 1, 1991; as of September 1, 1992;
as of December 1, 1992; as of December 1, 1992; as of December 1, 1993; and as
of November 1, 1994 (the Original Indenture as heretofore supplemented and to be
supplemented by this Thirtieth Supplemental Indenture, and as the same may be
further supplemented by additional indentures supplemental thereto, being
hereinafter collectively called the "Indenture"); and
WHEREAS, the Company, Morgan and the Trustee executed and delivered
the Resignation, Successor Appointment and Acceptance Agreement dated as of
September 2, 1994, pursuant to which the Trustee became successor trustee under
the Indenture; and
WHEREAS, the Company at November 30, 1995 (i) had retired all of the
original issue of $24,500,000 principal amount of bonds of a series designated
First Mortgage Bonds 2 7/8% Series due 1976 (hereinafter called "bonds of the
First Series"), all of the original issue of $4,000,000 principal amount of
bonds of a series designated First Mortgage Bonds 3 1/2% Series due 1982, all of
the original issue of $1,000,000 principal amount of bonds of a series
designated First Mortgage Bonds 4 7/8% Series due 1987, all of the original
issue of $2,000,000 principal amount of bonds of a series designated First
Mortgage Bonds 4 3/4% Series due 1983, all of the original issue of $3,000,000
principal amount of bonds of a series designated First Mortgage Bonds 5 1/2%
Series due 1985, all of the original issue of $3,000,000 principal amount of
bonds of a series designated First Mortgage Bonds 5% Series due 1986, all of the
original issue of $5,000,000 principal amount of bonds of a series designated
First Mortgage Bonds 4 5/8% Series due 1988, all of the original issue of
$4,000,000 principal amount of bonds of a series designated First Mortgage Bonds
5 7/8% Series due 1991, all of the original issue of $15,000,000 principal
amount of bonds of a series designated First Mortgage Bonds 9% Series due 1991,
all of the original issue of $10,000,000 principal amount of bonds of a series
designated First Mortgage
<PAGE>
2
Bonds 6 7/8% Series due 1992, all of the original issue of $12,000,000 principal
amount of bonds of a series designated First Mortgage Bonds 10% Series due 1995,
all of the original issue of $20,000,000 principal amount of bonds of a series
designated First Mortgage Bonds 9 1/4% Series due 1996, all of the original
issue of $7,000,000 principal amount of bonds of a series designated First
Mortgage Bonds 8% Series due 1997 and all of the original issue of $50,000,000
principal amount of bonds of a series designated First Mortgage Bonds 9.57%
Series due 1996 and (ii) had outstanding and secured by the Original Indenture,
as so supplemented to the date hereof, $10,000,000 (of an original issue of
$10,000,000) principal amount of bonds of a series designated First Mortgage
Bonds 9.23% Series due 1999, $15,000,000 (of an original issue of $15,000,000)
principal amount of bonds of a series designated First Mortgage Bonds 9.34%
Series due 2019, $50,000,000 (of an original issue of $50,000,000) principal
amount of bonds of a series designated First Mortgage Bonds 7.20% Series due
2017, $30,000,000 (of an original issue of $30,000,000) principal amount of
bonds of a series designated First Mortgage Bonds 8.375% Series due 2002,
$30,000,000 (of an original issue of $30,000,000) principal amount of bonds of a
series designated First Mortgage Bonds 7.125% Series due 2022, $19,000,000 (of
an original issue of $19,000,000) principal amount of bonds of a series
designated First Mortgage Bonds 6.05% Series due 2019 and $30,000,000 (of an
original issue of $30,000,000) principal amount of bonds of a series designated
First Mortgage Bonds 7% Series due 2017; and
WHEREAS, Section 14.01 of the Original Indenture provides, among other
things, that the Company, when authorized by a resolution of its Board of
Directors, and the Trustee from time to time may enter into an indenture or
indentures supplemental thereto and which thereafter shall form a part thereof
for the purpose of modifying any provisions of the Indenture provided that such
modifications have been approved in accordance with Article 15 of the Original
Indenture by the holders of bonds issued and outstanding under the Indenture;
and
WHEREAS, Section 14.02 of the Original Indenture provides that the
Trustee is authorized to join with the Company in the execution of any such
supplemental indenture; and
WHEREAS, all requirements of law and of the restated articles of
incorporation, as amended, and by-laws of the Company, including all requisite
action on the part of its directors and officers, relating to the execution of
this Thirtieth Supplemental Indenture have been complied with and observed, all
approvals of holders of bonds issued and outstanding under the Indenture
required pursuant to Article 15 of the Original Indenture in connection with
this Thirtieth Supplemental Indenture have been obtained, and all things
necessary to make this Thirtieth Supplemental Indenture a valid and legally
binding instrument in accordance with its terms for the security of all bonds
from time to time issued under the Indenture have happened, been done and been
performed;
NOW THEREFORE, IT IS HEREBY COVENANTED, DECLARED AND AGREED by and
between the Company and the Trustee, for the benefit of those who hold bonds
issued and to be issued under the Indenture as follows:
<PAGE>
3
ARTICLE 1.
MISCELLANEOUS
(S) 1.01 The WITNESSETH granting clause of the Original Indenture is
hereby amended by:
(i) deleting the words "impounding, storing, transporting and
selling: in the eighth line of the third paragraph thereof;
(ii) deleting the words "water, or in its business of" in the
ninth line of the third paragraph thereof;
(iii) deleting the words "all buildings, improvements,
standpipes, towers" in the first line of the fourth
paragraph thereof;
(iv) deleting the second through sixth lines of the fourth
paragraph thereof;
(v) deleting the words "ing, transmission or distribution of
water;" in the seventh line of the fourth paragraph
thereof;
(vi) deleting the words "water or" in the fourteenth line of the
fourth paragraph thereof;
(vii) deleting the sixth paragraph thereof.
(S) 1.02 Section 1.02(m) of the Original Indenture is hereby amended by
deleting the words "water or" in the first and eighth lines thereof.
(S) 1.03 Section 1.05 of the Original Indenture is hereby amended by
deleting the words "water or" in the seventh and thirteenth lines thereof.
(S) 1.04 Section 1.05(a)(2) of the Original Indenture is hereby amended
by deleting the words "water or" in the fifth line thereof.
(S) 1.05 Section 1.05(b)(4) of the Original Indenture is hereby amended
by deleting the words "water or" in the fifth line thereof.
(S) 1.06 Section 1.06(A)(1) of the Original Indenture is hereby amended
by (i) deleting the words "water and gas businesses" in the second line thereof
and (ii) substituting therefor the words "the gas business."
(S) 1.07 Section 1.06(A)(2) of the Original Indenture is hereby amended
by (i) deleting the word "businesses" in the second line thereof and
substituting therefor the word "business" and (ii) deleting the words "the sum
of twelve and one-half per centum (12 1/2%) of the gross water operating
revenues and" in the fifteenth, sixteenth and seventeenth lines thereof.
<PAGE>
4
(S) 1.08 Section 1.06(A)(4) of the Original Indenture is hereby amended
by deleting the words "water and gas businesses" in the second and third lines
thereof and substituting therefor the words "gas business."
(S) 1.09 The proviso in Section 1.06 of the Original Indenture is
hereby amended by deleting the words "water and gas businesses" and substituting
therefor the words "gas business" in the second line of clause (b) thereof.
(S) 1.10 Section 3.06(3)(B)(h) of the Original Indenture is hereby
amended by deleting the words "water or" in the second, fifth, and tenth lines
thereof.
(S) 1.11 Section 3.06(4) of the Original Indenture is hereby amended by
deleting the words "water or" in the third and thirtieth lines thereof.
(S) 1.12 Section 3.07 of the Original Indenture is hereby amended by
adding the words "after the date of the consummation of the sale by Pennsylvania
Enterprises, Inc. ("PEI") and the Company of the Company's regulated water
utility operations and certain related assets (the "Sale of the Water Business")
to Pennsylvania-American Water Company ("PAWC") pursuant to an Asset Purchase
Agreement dated as of April 26, 1995 ( the "Asset Purchase Agreement") among
PEI, the Company, PAWC and American Water Works Company, Inc." immediately after
the word "cancellation" in the eighth line thereof.
(S) 1.13 Section 3.07(2) of the Original Indenture is hereby amended by
adding the words "after the date of the consummation of the Sale of the Water
Business" immediately after the word "cancellation" in the tenth line thereof.
(S) 1.14 Section 4.07 of the Original Indenture is hereby amended by
deleting the words "water and" in the eighth line thereof.
(S) 1.15 Section 4.10 of the Original Indenture is hereby amended by:
(i) deleting the words "a sum equal to twelve and one-half per
centum (12 1/2%) of the gross water operating revenues (as
hereinafter defined) and" in the ninth, tenth and eleventh
lines of the first paragraph thereof;
(ii) by adding the words "after the date of the consummation of
the Sale of the Water Business" immediately after the word
"cancelled" in the fourth line of subdivision (3) of the
first paragraph thereof;
(iii) adding the words "; provided, further, that with respect
to the calendar year in which the Sale of the Water
Business is consummated, there shall be deemed to be two
accounting periods for purposes of the calculations set
forth in this Section, the first of which (the "Pre-Sale
Period") shall commence on January 1 of that
<PAGE>
5
year and shall continue until the date immediately
preceding the date of the consummation of the Sale of the
Water Business and the second of which (the "Post-Sale
Period") shall commence immediately following the
consummation of the Sale of the Water Business and end on
December 31 of that year; and provided, further, that all
calculations made under this (S)4.10 (x) with respect to
the Pre-Sale Period shall be made in accordance with the
provisions of this Section as in effect on the date prior
to the date of the consummation of the Sale of the Water
Business and (y) with respect to the Post-Sale Period
shall be made in accordance with the provisions of this
Section as in effect immediately following the
consummation of the Sale of the Water Business." at the
end of the first paragraph thereof;
(iv) deleting the words "the amount of the gross water
operating revenues of the mortgaged property during such
accounting period; (b)" in the third, fourth and fifth
lines of the second paragraph thereof;
(v) deleting "(c)" in the seventh and fifteenth lines of the
second paragraph thereof and substituting therefor "(b)";
(vi) deleting "(d)" in the eighth and sixteenth lines of the
second paragraph thereof and substituting therefor "(c)";
(vii) deleting "(e)" in the eleventh and sixteenth lines of the
second paragraph thereof and substituting therefor "(d)";
(viii) adding the words "; provided, however, that as of the
date of the consummation of the Sale of the Water
Business, the cumulative excess credit balance shown by
the last preceding certificate of the Company (the
certificate for the Pre-Sale Period) shall be deemed to be
zero and the Company's calculation of excess credits for
the Post-Sale Period and all subsequent periods shall
include only the amount of excess credits after the date
of the consummation of the Sale of the Water Business"
immediately after the word "hereunder" in the thirteenth
line of the second paragraph thereof;
(ix) deleting "(f)" in the fourteenth line of the second
paragraph thereof and the fourth line of the third
paragraph thereof and substituting therefor "(e)";
(x) by deleting the word "If" in the first line of the sixth
paragraph thereof and substituting therefor the words
"Except as otherwise provided in this Section, if";
<PAGE>
6
(xi) deleting the words "terms "gross water operating revenues"
and" in the first line of the seventh paragraph thereof
and substituting therefor the word "term";
(xii) deleting the word "are" in the third line of the seventh
paragraph thereof and substituting therefor the word "is";
(xiii) deleting the words "water or" in the fourth, sixth,
seventh and eleventh lines of the seventh paragraph
thereof;
(xiv) deleting the words "(as the case may be)" in the fourth,
fifth, sixth, eighth, eleventh and twelfth lines thereof;
and
(xv) deleting the words "water or" in the sixth line of the
eighth paragraph thereof.
(S) 1.16 Section 4.11 of the Original Indenture is hereby amended by
(i) deleting the words "water and" in the sixteenth line thereof and (ii) adding
the following proviso at the end thereof: "; provided, however, that the
foregoing shall not restrict the Company from paying to PEI following the
consummation of the Sale of the Water Business (i) an amount not to exceed $85
million to enable the Company to repurchase shares of its common stock, which
funds would, in turn, be utilized by PEI to repurchase shares of PEI common
stock and (ii) a one-time special dividend of a $30 million note to reduce by
$30 million the Company's common shareholder's investment in the Company, and
that such payment and dividend shall not reduce the amount of the earned surplus
of the Company for purposes of any determination thereof under this (S) 4.11."
(S) 1.17 Section 8.03 of the Original Indenture is hereby amended by
(i) deleting the words "water and" in the first and second lines of the second
paragraph thereof and (ii) adding the following proviso at the end thereof:
"Notwithstanding the foregoing, nothing in this Indenture shall prevent the
Company from obtaining releases from the lien of this Indenture of (a) all real
and personal property of the Company which are not used exclusively in the
Company's gas utility operations and (b) all real property of the Company which
is the subject of the operating and maintenance easement agreement to be
executed by the Company and PAWC in connection with the Sale of the Water
Business (the releases referenced in clauses (a) and (b) of this proviso are
hereby collectively referred to herein as the "Special Release"); and provided,
further, that notwithstanding anything set forth in (S)8.03, the Company shall
not be required to comply with the conditions set forth in paragraphs (C), (D),
(E), (F), (G)(2), (G)(4), or (G)(5) of (S)8.03 or lines six through twelve
(other than the word "requested" in line six) of (paragraph G)(1) in connection
with obtaining the Special Release and the Trustee shall execute and deliver the
Special Releases to the Company without receipt of items set forth in paragraphs
(C), (D), (E), (F), (G)(2), (G)(4), or (G)(5) of (S)8.03 and lines six through
twelve (except for the word "requested" in line six of paragraph (G)(1). In
connection with obtaining the Special Release, the Company shall deliver to the
Trustee (x) a certificate of the Company stating the book value of the remaining
property viz: all real and personal property of the Company which are used
exclusively in connection with the Company's gas utility operations, following
the release of the
<PAGE>
7
real and personal property which are the subject of the Special Release and (y)
a certificate of an independent engineer stating that based upon the results of
an appraisal performed by such independent engineer, the aggregate fair value of
the remaining property following the release of the real and personal property
which are the subject of the Special Releases will be equal to no less than 166
2/3% of the aggregate principal amount of the bonds issued under this Indenture
which will be outstanding immediately following the consummation of the Sale of
the Water Business."
(S) 1.18 Section 8.11 of the Original Indenture is hereby amended by
adding the following paragraph at the end thereof. "The provisions set forth in
this (S)8.11 shall not apply to any consideration to be received by the Company
in connection with the properties which are the subject of the Special Releases,
the Company shall not be required to pay any of such consideration to the
Trustee and no part of any such consideration shall be deemed to be "trust
moneys" for purposes of this Indenture."
(S) 1.19 The amendments to the Original Indenture set forth in (S)
1.01-(S) 1.19 hereof shall take effect on the date of the consummation of the
Sale of the Water Business.
(S) 1.20 The Trustee accepts the trusts hereby declared and provided
and agrees to perform the same upon the terms and conditions in the Original
Indenture and in this Thirtieth Supplemental Indenture set forth. The Trustee
shall not be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Thirtieth Supplemental Indenture or the due
execution hereof by the Company, or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely.
The Original Indenture as heretofore supplemented by twenty-nine
supplemental indentures and as supplemented by this Thirtieth Supplemental
Indenture is in all respects ratified and confirmed, and the Original Indenture,
together with the thirty indentures supplemental thereto, shall be read, taken
and construed as one and the same indenture.
(S) 1.21 This Thirtieth Supplemental Indenture may be executed in any
number of counterparts, and all said counterparts executed and delivered, each
as an original, shall constitute but one and the same instrument.
Pennsylvania Gas and Water Company does hereby constitute and appoint
Thomas J. Ward to be its attorney for it, and in its name and as and for its
corporate act and deed to acknowledge this Thirtieth Supplemental Indenture
before any person having authority by the laws of the Commonwealth of
Pennsylvania to take such acknowledgment, to the intent that the same may be
duly recorded, and First Trust of New York, National Association does hereby
constitute and appoint [Catherine F. Donohue] to be its attorney for it, and in
its name and as and for its corporate act and deed to acknowledge this Thirtieth
Supplemental Indenture before any person having authority by the laws of the
State of New York to take such acknowledgment, to the intent that the same may
be duly recorded.
IN WITNESS WHEREOF, said Pennsylvania Gas and Water Company and said
First Trust of New York, National Association have caused this Supplemental
Indenture to be
<PAGE>
8
signed in their respective corporate names, and their respective corporate seals
to be hereunto affixed and attested by their respective officers thereunto duly
authorized, all as of the day and year first above written.
PENNSYLVANIA GAS AND
WATER COMPANY
By: _______________________________
Name: John F. Kell, Jr.
Title: Vice President, Finance
[Corporate Seal]
Attest:
______________________________
Secretary
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: _______________________________
Name:
Title:
[Corporate Seal]
Attest:
______________________________
Assistant Secretary
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF LUZERNE )
BE IT REMEMBERED that on the ___th day of December, A.D. 1995, before
the undersigned Notary Public in and for said County and said Commonwealth,
commissioned for and residing in the County of Luzerne, personally came Thomas
J. Ward, who, being duly sworn according to law, doth depose and say that he was
personally present and did see the common or corporate seal of the above-named
PENNSYLVANIA GAS AND WATER COMPANY affixed to the foregoing Supplemental
Indenture; that the seal so affixed is the common or corporate seal of said
PENNSYLVANIA GAS AND WATER COMPANY and was so affixed by authority of said
corporation as the act and deed thereof; that the above-named John F. Kell, Jr.
is the Vice President, Finance of said corporation and did sign the said
Supplemental Indenture as such in the presence of this deponent; that this
deponent is the Secretary of the said corporation and that the name of this
deponent, above signed in attestation of the due execution of the said
supplemental Indenture, is in this deponent's own proper handwriting.
---------------------------------
Thomas J. Ward
[Notarial Seal]
Sworn and subscribed before me
the day and year aforesaid.
- ------------------------------
Notary Public
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF LUZERNE )
I HEREBY CERTIFY that on this ___th day of December, A.D. 1995, before
me, a Notary Public in and for said County and said Commonwealth, commissioned
for and residing in the County of Luzerne, personally appeared Thomas J. Ward,
the attorney named in the foregoing Supplemental Indenture, and he, by virtue
and in pursuance of the authority therein conferred upon him, acknowledged said
Supplemental Indenture to be the act and deed of the said PENNSYLVANIA GAS AND
WATER COMPANY.
Witness my hand and notarial seal the day and year aforesaid.
---------------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on the ___th day of December, A.D. 1995, before
the undersigned Notary Public in and for said County and State, commissioned for
the County of New York, personally came [Catherine F. Donohue] who, being duly
sworn according to law, doth depose and say that she was personally present and
did see the corporate seal of the above-named FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, affixed to the foregoing Supplemental Indenture; that the seal so
affixed is the corporate seal of said FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, and was so affixed by authority of said corporation as the act and
deed thereof; that the above-named ___________________________ is a Vice
President of said corporation and did sign the said Supplemental Indenture as
such in the presence of this deponent; that this deponent is an Assistant
Secretary of said corporation and that the name of this deponent, above signed
in attestation of the due execution of the said supplemental Indenture, is in
this deponent's own proper handwriting.
---------------------------------
Catherine F. Donohue
Sworn and subscribed before me
the day and year aforesaid. [Notarial Seal]
- ------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I HEREBY CERTIFY that on this ___th day of December, A.D. 1995, before
me, a Notary Public in and for said County and State, commissioned for the
County of New York, personally appeared [Catherine F. Donohue], the attorney
named in the foregoing Supplemental Indenture, and she, by virtue and in
pursuance of the authority therein conferred upon her, acknowledged said
Supplemental Indenture to be the act and deed of the said FIRST TRUST OF NEW
YORK, NATIONAL ASSOCIATION.
Witness my hand and notarial seal the day and year aforesaid.
---------------------------------
Notary Public
[Notarial Seal]
CERTIFICATE OF RESIDENCE
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION hereby certifies that
its precise name and address as Trustee hereunder are: FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, 100 WALL STREET, SUITE 1600, NEW YORK, NEW YORK 10005.
By: ________________________________
Name:
Title: Vice President
<PAGE>
EXHIBIT T3C-2
As filed with the Securities and Exchange Commission on October 16, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
APPLICATION FOR AN ORDER FOR EXEMPTION FROM ONE OR MORE PROVISIONS OF
THE TRUST INDENTURE ACT OF 1939, AS AMENDED, PURSUANT TO RULE 4D-7 OF
THE GENERAL RULES AND REGULATIONS PROMULGATED THEREUNDER
---------------------
PENNSYLVANIA GAS AND WATER COMPANY
(Name of Applicant)
WILKES-BARRE CENTER
39 PUBLIC SQUARE
WILKES-BARRE, PENNSYLVANIA 18711-0601
(717) 829-8843
(Address and Telephone Number of Applicant)
---------------------
GARETT J. ALBERT, ESQ.
HUGHES HUBBARD & REED
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10005
(212) 837-6000
(Name, Address and Telephone Number of Person to Whom
Correspondence Regarding the Application Is To Be Directed)
---------------------
INDENTURE OF MORTGAGE AND DEED OF TRUST DATED AS OF MARCH 15, 1946,
BETWEEN PENNSYLVANIA GAS AND WATER COMPANY AND FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, AS TRUSTEE, AS SUPPLEMENTED BY TWENTY-NINE
SUPPLEMENTAL INDENTURES AND TO BE SUPPLEMENTED BY A THIRTIETH
SUPPLEMENTAL INDENTURE DATED AS OF DECEMBER 1, 1995, RELATING TO FIRST
MORTGAGE BONDS 9.23% SERIES DUE 1999, 9.34% SERIES DUE 2019, 7.20%
SERIES DUE 2017, 8.375% SERIES DUE 2002, 7.125% SERIES DUE 2022, 6.05%
SERIES DUE 2019 AND 7% SERIES DUE 2017.
(Indenture for which Exemption is Sought)
<PAGE>
1. INTRODUCTION
On April 26, 1995, Pennsylvania Gas and Water Company ("PG&W") and its
parent, Pennsylvania Enterprises, Inc. ("PEI"), entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement ") with Pennsylvania-American Water
Company ("PAWC") and its parent, American Water Works Company, Inc., pursuant to
which PG&W agreed to sell to PAWC (the "Sale of the Water Business") its
regulated water utility operations and certain related assets (the "Water
Business") for an aggregate consideration equal to approximately $409 million
(including debt assumed), subject to adjustment. On September 7, 1995, PG&W and
PEI filed definitive proxy materials, including the Joint Proxy Statement of
PG&W and PEI dated September 1, 1995 ( the "Joint Proxy Statement "), with the
Securities and Exchange Commission (the "Commission") with respect to Special
Meetings of the common shareholders of PEI and the preferred shareholders of
PG&W, which were each held on October 11, 1995. At these meetings, the Asset
Purchase Agreement was approved by the PEI common shareholders and the PG&W
preferred shareholders. A full description of the Asset Purchase Agreement and
the Sale of the Water Business is contained in the Joint Proxy Statement.
Most of the assets constituting PG&W's Water Business (as well as most of
the assets constituting PG&W's gas utility operations) are subject to the lien
of the Indenture of Mortgage and Deed of Trust dated as of March 15, 1946, from
PG&W to First Trust of New York, National Association (the "Mortgage Trustee"),
as supplemented by twenty-nine supplemental indentures (collectively, the "First
Mortgage Indenture"). It is a condition of the Sale of the Water Business that
PG&W obtain a release from the lien of the First Mortgage Indenture of all
property which constitutes PG&W's Water Business, as well as certain PG&W
property which PAWC will have the right to utilize after the consummation of the
Sale of the Water Business pursuant to an operating and maintenance easement
agreement to be executed by PG&W and PAWC (the "Easement Agreement"). In order
to satisfy this condition, PG&W will seek the consent of the holders of its
First Mortgage Bonds 9.23% Series due 1999, 9.34% Series due
<PAGE>
2
2019, 7.20% Series due 2017, 8.375% Series due 2002, 7.125% Series due 2022,
6.05% Series due 2019 and 7% Series due 2017 (collectively, the "First Mortgage
Bonds"), which represent all series of First Mortgage Bonds outstanding under
the First Mortgage Indenture, to amend the First Mortgage Indenture by means of
the execution and delivery of a Thirtieth Supplemental Indenture dated as of
December 1, 1995 (the "Thirtieth Supplemental Indenture"). Pursuant to the
Thirtieth Supplemental Indenture, the First Mortgage Indenture will be amended
to, among other things, (i) permit the release (the "Special Release") from the
lien of the First Mortgage Indenture of all PG&W property not used in connection
with PG&W's gas utility operations and certain PG&W property which will be the
subject of the Easement Agreement and (ii) simplify the procedures currently set
forth in the First Mortgage Indenture with respect to obtaining the Special
Release. The consent of no less than (a) 60% of the aggregate principal amount
of PG&W's First Mortgage Bonds and (b) 60% of the aggregate principal amount of
PG&W's First Mortgage Bonds 9.23% Series due 1999, 9.34% Series due 2019 and
8.375% Series due 2002, voting as one class, will be required to approve the
proposed amendments to the First Mortgage Indenture set forth in the Thirtieth
Supplemental Indenture.
Pursuant to this Application, PG&W is seeking exemptive relief from the
provisions of Section 314(d)(1) of the Trust Indenture Act of 1939, as amended
(the "TIA"), with respect to the simplified release procedures which PG&W
proposes to include in the Thirtieth Supplemental Indenture. As set forth in
the Thirtieth Supplemental Indenture, a copy of which is attached to this
Application as Exhibit A, the exemptive relief sought by PG&W would apply only
to the procedures set forth in the First Mortgage Indenture in connection with
obtaining the Special Release. PG&W would continue to follow the provisions
currently set forth in Section 8.03 of the First Mortgage Indenture (which
comply with Section 314(d)(1) of the TIA), in connection with obtaining all
other future property releases. A copy of Section 8.03 of the First Mortgage
Indenture is attached to this Application as Exhibit B. In addition, as set
forth in the Thirtieth Supplemental Indenture, PG&W proposes to substitute for
the Section 314(d)(1) procedure currently set forth in Section 8.03 of the First
Mortgage Indenture, an alternative
<PAGE>
3
procedure with respect to obtaining the Special Release, which PG&W believes
will satisfy the purposes and intents of Section 314(d) of the TIA.
A description of the alternative procedure which PG&W proposes to include
in the Thirtieth Supplemental Indenture as a substitute for the Section
314(d)(1) procedure currently set forth in Section 8.03 of the First Mortgage
Indenture, as well as a discussion of PG&W's reasons for seeking exemptive
relief from Section 314(d)(1) of the TIA with respect to obtaining the Special
Release, are described below. An Application on Form T-3 has been filed with
the Commission to qualify the First Mortgage Indenture, as supplemented by the
Thirtieth Supplemental Indenture.
2. DESCRIPTION OF PG&W'S BUSINESS
PG&W, a wholly-owned subsidiary of PEI, is currently engaged in both gas
and water utility operations in northeastern Pennsylvania. PG&W's gas and water
operations are regulated by the Pennsylvania Public Utility Commission. PEI is
an exempt public holding company within the meaning of the Public Utility
Holding Company Act of 1935, as amended. PG&W and PEI are each incorporated in
Pennsylvania, with headquarters at Wilkes-Barre Center, 39 Public Square,
Wilkes-Barre, Pennsylvania 18711-06011.
3. DESCRIPTION OF SPECIAL RELEASE PROVISIONS AND
DISCUSSION OF REASONS FOR EXEMPTION REQUEST
Unless PG&W receives an exemption order from the Securities and Exchange
Commission, Section 314(d)(1) of the TIA would require, in connection with
obtaining the Special Release, that PG&W provide the Mortgage Trustee with a
certificate or opinion of an independent engineer or appraiser as to the fair
value of the property which is to be the subject of the Special Release. The
tracts of property which are to be the subject of the Special Release are,
however, numerous, disparate in location and potential value, and in many cases
remote and subject to easements. It is currently PG&W's intent to close the
Sale of the Water Business prior to December 31, 1995. PG&W believes that the
time required for an independent engineer to perform an appraisal of the
property which is to be the subject of the Special Release could
<PAGE>
4
substantially delay the closing of the Sale of the Water Business and that the
cost of such an appraisal would be significant and would not justify the
resulting theoretical negligible benefit to the First Mortgage Bondholders.
PG&W recognizes that Section 314(d)(1) of the TIA was adopted to protect
purchasers of publicly offered debt securities from having the security afforded
to them, pursuant to the indentures under which their debt securities were
issued, reduced, substituted or eliminated entirely as a result of releases of
property from the lien of such indentures without an independent assessment of
the value of such property. The First Mortgage Indenture currently requires
that PG&W maintain as security for its outstanding first mortgage bonds, an
amount of property subject to the lien of the First Mortgage Indenture having a
fair value equal to no less than 166 2/3% of the aggregate principal amount of
such outstanding first mortgage bonds/1/. It is the view of PG&W that the
proposed amendments to Section 8.03 of the First Mortgage Indenture set forth in
the Thirtieth Supplemental Indenture will not permit abuses of the nature that
Section 314(d)(1) of the TIA was designed to prevent and will ensure that the
security afforded to the holders of its First Mortgage Bonds will not be
impaired by the Special Release for the following reason. The Thirtieth
Supplemental Indenture would require PG&W, in connection with obtaining the
Special Release (i) to obtain an appraisal performed by an independent engineer
as to the value of its gas properties, which would remain subject to the lien of
the First Mortgage Indenture following the Special Release and (ii) to provide
the Mortgage Trustee with a certificate of such independent engineer stating
that based upon the results of the appraisal, following the consummation of the
Sale of the Water Business and the Special Release, the aggregate fair value of
the property which would remain subject to the lien of the
- ----------
1. As of October 13, 1995, PG&W had $184 million aggregate principal amount
of First Mortgage Bonds outstanding which were secured by approximately $667
million of property (equal to approximately 362% of the aggregate principal
amount of such First Mortgage Bonds) subject to the lien of the First
Mortgage Indenture.
<PAGE>
5
First Mortgage Indenture will be equal to no less than 166 2/3% of the aggregate
principal amount of the outstanding First Mortgage Bonds./2/
PG&W is proposing an independent appraisal of its gas utility properties
which would remain subject to the lien of the First Mortgage Indenture rather
than the properties which are to be the subject of the Special Release because
(i) PG&W believes that it is the remaining gas utility properties that are
important to the First Mortgage Bondholders because, following the consummation
of the Sale of the Water Business, these will be the properties which will
provide the security for the then outstanding First Mortgage Bonds and (ii)
these remaining gas utility properties consist of fewer and less complicated
tracts of land, for which an appraisal could be performed expeditiously and at a
reasonable cost. PG&W would place no restrictions on the scope of the
examination of such independent engineer performing this appraisal. PG&W
believes that an appraisal of the gas utility properties which would remain
subject to the lien of the First Mortgage Indenture following the Special
Release would provide more appropriate protection to the holders of its First
Mortgage Bonds than that afforded to them under Section 314(d)(1) of the TIA
while sparing PG&W the costs and delays associated with the performance of an
independent appraisal of the properties which are the subject of the Special
Release.
- ----------
2. Following the consummation of the Sale of the Water Business, PG&W will
have $55 million aggregate principal amount of First Mortgage Bonds
outstanding due to the cancellation in connection with the Sale of the Water
Business of $129 million aggregate principal amount of PG&W's First Mortgage
Bonds 7.20% Series due 2017, 7.125% Series due 2022, 6.05% Series due 2019
and 7% Series due 2017 following the assumption by PAWC of certain
obligations previously secured by these bonds. PG&W estimates that as of
December 31, 1995 (the projected date of the consummation of the Sale of the
Water Business) this $55 million aggregate principal amount of First
Mortgage Bonds would be secured by PG&W gas utility properties having a book
value of approximately $283 million (equal to 514% of the aggregate
principal amount of such outstanding First Mortgage Bonds).
<PAGE>
6
4. EXHIBITS
Exhibit A Form of Thirtieth Supplemental Indenture to be dated as of
---------
December 1, 1995 between PG&W and the Mortgage Trustee
Exhibit B Section 8.03 of the First Mortgage Indenture
---------
5. CONCLUSION
For the reasons discussed above, PG&W requests that the Commission issue an
order under Section 304(d) of the TIA exempting the First Mortgage Indenture, as
amended by the Thirtieth Supplemental Indenture, from the requirements of
Section 314(d)(1) of the TIA to the extent described above. PG&W believes that
the exemption it is requesting pursuant to this Application is necessary and
appropriate in the public interest and consistent with the protection of
investors and the purposes fairly intended by the TIA.
As required by Rule 4d-7 under the TIA, one manually signed original and
two conformed copies of this Application are included herewith. PG&W currently
intends to commence soliciting consents from the holders of its outstanding
First Mortgage Bonds to approve the amendments to the First Mortgage Indenture
set forth in the Thirtieth Supplemental Indenture no later than the third week
of October. Accordingly, PG&W respectfully requests the Commission's approval
of this Application and the issuance of an order under Section 304(d) of the TIA
no later than October 16, 1995.
<PAGE>
7
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Applicant, Pennsylvania Gas and Water Company, a corporation
organized and existing under the laws of the Commonwealth of Pennsylvania, has
duly caused this APPLICATION FOR AN ORDER FOR EXEMPTION FROM ONE OR MORE
PROVISIONS OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED, PURSUANT TO RULE 4d-7
OF THE GENERAL RULES AND REGULATIONS PROMULGATED THEREUNDER to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Wilkes-
Barre, Commonwealth of Pennsylvania, on the 13th day of October, 1995.
PENNSYLVANIA GAS AND WATER COMPANY
By: /s/ John F. Kell, Jr.
-----------------------------
John F. Kell, Jr.
Vice President, Finance
<PAGE>
EXHIBIT A TO APPLICATION
================================================================================
THIRTIETH SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 1, 1995
(SUPPLEMENTAL TO INDENTURE DATED AS OF MARCH 15, 1946)
-------------------
PENNSYLVANIA GAS AND WATER COMPANY
(FORMERLY SCRANTON-SPRING BROOK WATER SERVICE COMPANY)
TO
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
TRUSTEE
-------------------
================================================================================
<PAGE>
THIRTIETH SUPPLEMENTAL INDENTURE, dated as of the first day of
December 1995, made by and between PENNSYLVANIA GAS AND WATER COMPANY (formerly
Scranton-Spring Brook Water Service Company), a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania (hereinafter
sometimes called the "Company"), and FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States, and having its principal place of business at No. 100
Wall Street, Suite 1600, in The City of New York, New York, as Trustee
(hereinafter sometimes called the "Trustee").
WHEREAS, the Company executed and delivered its Indenture (hereinafter
called the "Original Indenture") dated as of March 15, 1946, to Morgan Guaranty
Trust Company of New York ("Morgan") (formerly Guaranty Trust Company of New
York), to secure its First Mortgage Bonds and has executed and delivered twenty-
nine indentures supplemental thereto dated respectively as of February 15, 1951;
as of September 15, 1951; as of January 15, 1952; as of March 15, 1952; as of
June 15, 1952; as of December 1, 1954; as of April 15, 1956; as of November 15,
1956; as of March 15, 1957; as of September 1, 1958; as of April 15, 1959; as of
July 15, 1960; as of October 31, 1961; as of December 15, 1961; as of December
15, 1963; as of June 15, 1966; as of October 15, 1967; as of May 1, 1970; as of
June 1, 1972; as of March 1, 1976; as of December 1, 1976; as of August 15,
1989; as of August 15, 1989; as of September 1, 1991; as of September 1, 1992;
as of December 1, 1992; as of December 1, 1992; as of December 1, 1993; and as
of November 1, 1994 (the Original Indenture as heretofore supplemented and to be
supplemented by this Thirtieth Supplemental Indenture, and as the same may be
further supplemented by additional indentures supplemental thereto, being
hereinafter collectively called the "Indenture"); and
WHEREAS, the Company, Morgan and the Trustee executed and delivered
the Resignation, Successor Appointment and Acceptance Agreement dated as of
September 2, 1994, pursuant to which the Trustee became successor trustee under
the Indenture; and
WHEREAS, the Company at November 30, 1995 (i) had retired all of the
original issue of $24,500,000 principal amount of bonds of a series designated
First Mortgage Bonds 2 7/8% Series due 1976 (hereinafter called "bonds of the
First Series"), all of the original issue of $4,000,000 principal amount of
bonds of a series designated First Mortgage Bonds 3 1/2% Series due 1982, all of
the original issue of $1,000,000 principal amount of bonds of a series
designated First Mortgage Bonds 4 7/8% Series due 1987, all of the original
issue of $2,000,000 principal amount of bonds of a series designated First
Mortgage Bonds 4 3/4% Series due 1983, all of the original issue of $3,000,000
principal amount of bonds of a series designated First Mortgage Bonds 5 1/2%
Series due 1985, all of the original issue of $3,000,000 principal amount of
bonds of a series designated First Mortgage Bonds 5% Series due 1986, all of the
original issue of $5,000,000 principal amount of bonds of a series designated
First Mortgage Bonds 4 5/8% Series due 1988, all of the original issue of
$4,000,000 principal amount of bonds of a series designated First Mortgage Bonds
5 7/8% Series due 1991, all of the original issue of $15,000,000 principal
amount of bonds of a series designated First Mortgage Bonds 9% Series due 1991,
all of the original issue of $10,000,000 principal amount of bonds of a series
designated First Mortgage
<PAGE>
2
Bonds 6 7/8% Series due 1992, all of the original issue of $12,000,000 principal
amount of bonds of a series designated First Mortgage Bonds 10% Series due 1995,
all of the original issue of $20,000,000 principal amount of bonds of a series
designated First Mortgage Bonds 9 1/4% Series due 1996, all of the original
issue of $7,000,000 principal amount of bonds of a series designated First
Mortgage Bonds 8% Series due 1997 and all of the original issue of $50,000,000
principal amount of bonds of a series designated First Mortgage Bonds 9.57%
Series due 1996 and (ii) had outstanding and secured by the Original Indenture,
as so supplemented to the date hereof, $10,000,000 (of an original issue of
$10,000,000) principal amount of bonds of a series designated First Mortgage
Bonds 9.23% Series due 1999, $15,000,000 (of an original issue of $15,000,000)
principal amount of bonds of a series designated First Mortgage Bonds 9.34%
Series due 2019, $50,000,000 (of an original issue of $50,000,000) principal
amount of bonds of a series designated First Mortgage Bonds 7.20% Series due
2017, $30,000,000 (of an original issue of $30,000,000) principal amount of
bonds of a series designated First Mortgage Bonds 8.375% Series due 2002,
$30,000,000 (of an original issue of $30,000,000) principal amount of bonds of a
series designated First Mortgage Bonds 7.125% Series due 2022, $19,000,000 (of
an original issue of $19,000,000) principal amount of bonds of a series
designated First Mortgage Bonds 6.05% Series due 2019 and $30,000,000 (of an
original issue of $30,000,000) principal amount of bonds of a series designated
First Mortgage Bonds 7% Series due 2017; and
WHEREAS, Section 14.01 of the Original Indenture provides, among other
things, that the Company, when authorized by a resolution of its Board of
Directors, and the Trustee from time to time may enter into an indenture or
indentures supplemental thereto and which thereafter shall form a part thereof
for the purpose of modifying any provisions of the Indenture provided that such
modifications have been approved in accordance with Article 15 of the Original
Indenture by the holders of bonds issued and outstanding under the Indenture;
and
WHEREAS, Section 14.02 of the Original Indenture provides that the
Trustee is authorized to join with the Company in the execution of any such
supplemental indenture; and
WHEREAS, all requirements of law and of the restated articles of
incorporation, as amended, and by-laws of the Company, including all requisite
action on the part of its directors and officers, relating to the execution of
this Thirtieth Supplemental Indenture have been complied with and observed, all
approvals of holders of bonds issued and outstanding under the Indenture
required pursuant to Article 15 of the Original Indenture in connection with
this Thirtieth Supplemental Indenture have been obtained, and all things
necessary to make this Thirtieth Supplemental Indenture a valid and legally
binding instrument in accordance with its terms for the security of all bonds
from time to time issued under the Indenture have happened, been done and been
performed;
NOW THEREFORE, IT IS HEREBY COVENANTED, DECLARED AND AGREED by and
between the Company and the Trustee, for the benefit of those who hold bonds
issued and to be issued under the Indenture as follows:
<PAGE>
3
ARTICLE 1.
MISCELLANEOUS
(S) 1.01 The WITNESSETH granting clause of the Original Indenture is
hereby amended by:
(i) deleting the words "impounding, storing, transporting and
selling: in the eighth line of the third paragraph thereof;
(ii) deleting the words "water, or in its business of" in the
ninth line of the third paragraph thereof;
(iii) deleting the words "all buildings, improvements,
standpipes, towers" in the first line of the fourth
paragraph thereof;
(iv) deleting the second through sixth lines of the fourth
paragraph thereof;
(v) deleting the words "ing, transmission or distribution of
water;" in the seventh line of the fourth paragraph
thereof;
(vi) deleting the words "water or" in the fourteenth line of the
fourth paragraph thereof;
(vii) deleting the sixth paragraph thereof.
(S) 1.02 Section 1.02(m) of the Original Indenture is hereby amended by
deleting the words "water or" in the first and eighth lines thereof.
(S) 1.03 Section 1.05 of the Original Indenture is hereby amended by
deleting the words "water or" in the seventh and thirteenth lines thereof.
(S) 1.04 Section 1.05(a)(2) of the Original Indenture is hereby amended
by deleting the words "water or" in the fifth line thereof.
(S) 1.05 Section 1.05(b)(4) of the Original Indenture is hereby amended
by deleting the words "water or" in the fifth line thereof.
(S) 1.06 Section 1.06(A)(1) of the Original Indenture is hereby amended
by (i) deleting the words "water and gas businesses" in the second line thereof
and (ii) substituting therefor the words "the gas business."
(S) 1.07 Section 1.06(A)(2) of the Original Indenture is hereby amended
by (i) deleting the word "businesses" in the second line thereof and
substituting therefor the word "business" and (ii) deleting the words "the sum
of twelve and one-half per centum (12 1/2%) of the gross water operating
revenues and" in the fifteenth, sixteenth and seventeenth lines thereof.
<PAGE>
4
(S) 1.08 Section 1.06(A)(4) of the Original Indenture is hereby amended
by deleting the words "water and gas businesses" in the second and third lines
thereof and substituting therefor the words "gas business."
(S) 1.09 The proviso in Section 1.06 of the Original Indenture is
hereby amended by deleting the words "water and gas businesses" and substituting
therefor the words "gas business" in the second line of clause (b) thereof.
(S) 1.10 Section 3.06(3)(B)(h) of the Original Indenture is hereby
amended by deleting the words "water or" in the second, fifth, and tenth lines
thereof.
(S) 1.11 Section 3.06(4) of the Original Indenture is hereby amended by
deleting the words "water or" in the third and thirtieth lines thereof.
(S) 1.12 Section 3.07 of the Original Indenture is hereby amended by
adding the words "after the date of the consummation of the sale by Pennsylvania
Enterprises, Inc. ("PEI") and the Company of the Company's regulated water
utility operations and certain related assets (the "Sale of the Water Business")
to Pennsylvania-American Water Company ("PAWC") pursuant to an Asset Purchase
Agreement dated as of April 26, 1995 ( the "Asset Purchase Agreement") among
PEI, the Company, PAWC and American Water Works Company, Inc." immediately after
the word "cancellation" in the eighth line thereof.
(S) 1.13 Section 3.07(2) of the Original Indenture is hereby amended by
adding the words "after the date of the consummation of the Sale of the Water
Business" immediately after the word "cancellation" in the tenth line thereof.
(S) 1.14 Section 4.07 of the Original Indenture is hereby amended by
deleting the words "water and" in the eighth line thereof.
(S) 1.15 Section 4.10 of the Original Indenture is hereby amended by:
(i) deleting the words "a sum equal to twelve and one-half per
centum (12 1/2%) of the gross water operating revenues (as
hereinafter defined) and" in the ninth, tenth and eleventh
lines of the first paragraph thereof;
(ii) by adding the words "after the date of the consummation of
the Sale of the Water Business" immediately after the word
"cancelled" in the fourth line of subdivision (3) of the
first paragraph thereof;
(iii) adding the words "; provided, further, that with respect
to the calendar year in which the Sale of the Water
Business is consummated, there shall be deemed to be two
accounting periods for purposes of the calculations set
forth in this Section, the first of which (the "Pre-Sale
Period") shall commence on January 1 of that
<PAGE>
5
year and shall continue until the date immediately
preceding the date of the consummation of the Sale of the
Water Business and the second of which (the "Post-Sale
Period") shall commence immediately following the
consummation of the Sale of the Water Business and end on
December 31 of that year; and provided, further, that all
calculations made under this (S)4.10 (x) with respect to
the Pre-Sale Period shall be made in accordance with the
provisions of this Section as in effect on the date prior
to the date of the consummation of the Sale of the Water
Business and (y) with respect to the Post-Sale Period
shall be made in accordance with the provisions of this
Section as in effect immediately following the
consummation of the Sale of the Water Business." at the
end of the first paragraph thereof;
(iv) deleting the words "the amount of the gross water
operating revenues of the mortgaged property during such
accounting period; (b)" in the third, fourth and fifth
lines of the second paragraph thereof;
(v) deleting "(c)" in the seventh and fifteenth lines of the
second paragraph thereof and substituting therefor "(b)";
(vi) deleting "(d)" in the eighth and sixteenth lines of the
second paragraph thereof and substituting therefor "(c)";
(vii) deleting "(e)" in the eleventh and sixteenth lines of the
second paragraph thereof and substituting therefor "(d)";
(viii) adding the words "; provided, however, that as of the
date of the consummation of the Sale of the Water
Business, the cumulative excess credit balance shown by
the last preceding certificate of the Company (the
certificate for the Pre-Sale Period) shall be deemed to be
zero and the Company's calculation of excess credits for
the Post-Sale Period and all subsequent periods shall
include only the amount of excess credits after the date
of the consummation of the Sale of the Water Business"
immediately after the word "hereunder" in the thirteenth
line of the second paragraph thereof;
(ix) deleting "(f)" in the fourteenth line of the second
paragraph thereof and the fourth line of the third
paragraph thereof and substituting therefor "(e)";
(x) by deleting the word "If" in the first line of the sixth
paragraph thereof and substituting therefor the words
"Except as otherwise provided in this Section, if";
<PAGE>
6
(xi) deleting the words "terms "gross water operating revenues"
and" in the first line of the seventh paragraph thereof
and substituting therefor the word "term";
(xii) deleting the word "are" in the third line of the seventh
paragraph thereof and substituting therefor the word "is";
(xiii) deleting the words "water or" in the fourth, sixth,
seventh and eleventh lines of the seventh paragraph
thereof;
(xiv) deleting the words "(as the case may be)" in the fourth,
fifth, sixth, eighth, eleventh and twelfth lines thereof;
and
(xv) deleting the words "water or" in the sixth line of the
eighth paragraph thereof.
(S) 1.16 Section 4.11 of the Original Indenture is hereby amended by
(i) deleting the words "water and" in the sixteenth line thereof and (ii) adding
the following proviso at the end thereof: "; provided, however, that the
foregoing shall not restrict the Company from paying to PEI following the
consummation of the Sale of the Water Business (i) an amount not to exceed $85
million to enable the Company to repurchase shares of its common stock, which
funds would, in turn, be utilized by PEI to repurchase shares of PEI common
stock and (ii) a one-time special dividend of a $30 million note to reduce by
$30 million the Company's common shareholder's investment in the Company, and
that such payment and dividend shall not reduce the amount of the earned surplus
of the Company for purposes of any determination thereof under this (S) 4.11."
(S) 1.17 Section 8.03 of the Original Indenture is hereby amended by
(i) deleting the words "water and" in the first and second lines of the second
paragraph thereof and (ii) adding the following proviso at the end thereof:
"Notwithstanding the foregoing, nothing in this Indenture shall prevent the
Company from obtaining releases from the lien of this Indenture of (a) all real
and personal property of the Company which are not used exclusively in the
Company's gas utility operations and (b) all real property of the Company which
is the subject of the operating and maintenance easement agreement to be
executed by the Company and PAWC in connection with the Sale of the Water
Business (the releases referenced in clauses (a) and (b) of this proviso are
hereby collectively referred to herein as the "Special Release"); and provided,
further, that notwithstanding anything set forth in (S)8.03, the Company shall
not be required to comply with the conditions set forth in paragraphs (C), (D),
(E), (F), (G)(2), (G)(4), or (G)(5) of (S)8.03 or lines six through twelve
(other than the word "requested" in line six) of (paragraph G)(1) in connection
with obtaining the Special Release and the Trustee shall execute and deliver the
Special Releases to the Company without receipt of items set forth in paragraphs
(C), (D), (E), (F), (G)(2), (G)(4), or (G)(5) of (S)8.03 and lines six through
twelve (except for the word "requested" in line six of paragraph (G)(1). In
connection with obtaining the Special Release, the Company shall deliver to the
Trustee (x) a certificate of the Company stating the book value of the remaining
property viz: all real and personal property of the Company which are used
exclusively in connection with the Company's gas utility operations, following
the release of the
<PAGE>
7
real and personal property which are the subject of the Special Release and (y)
a certificate of an independent engineer stating that based upon the results of
an appraisal performed by such independent engineer, the aggregate fair value of
the remaining property following the release of the real and personal property
which are the subject of the Special Releases will be equal to no less than 166
2/3% of the aggregate principal amount of the bonds issued under this Indenture
which will be outstanding immediately following the consummation of the Sale of
the Water Business."
(S) 1.18 Section 8.11 of the Original Indenture is hereby amended by
adding the following paragraph at the end thereof. "The provisions set forth in
this (S)8.11 shall not apply to any consideration to be received by the Company
in connection with the properties which are the subject of the Special Releases,
the Company shall not be required to pay any of such consideration to the
Trustee and no part of any such consideration shall be deemed to be "trust
moneys" for purposes of this Indenture."
(S) 1.19 The amendments to the Original Indenture set forth in (S)
1.01-(S) 1.19 hereof shall take effect on the date of the consummation of the
Sale of the Water Business.
(S) 1.20 The Trustee accepts the trusts hereby declared and provided
and agrees to perform the same upon the terms and conditions in the Original
Indenture and in this Thirtieth Supplemental Indenture set forth. The Trustee
shall not be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Thirtieth Supplemental Indenture or the due
execution hereof by the Company, or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely.
The Original Indenture as heretofore supplemented by twenty-nine
supplemental indentures and as supplemented by this Thirtieth Supplemental
Indenture is in all respects ratified and confirmed, and the Original Indenture,
together with the thirty indentures supplemental thereto, shall be read, taken
and construed as one and the same indenture.
(S) 1.21 This Thirtieth Supplemental Indenture may be executed in any
number of counterparts, and all said counterparts executed and delivered, each
as an original, shall constitute but one and the same instrument.
Pennsylvania Gas and Water Company does hereby constitute and appoint
Thomas J. Ward to be its attorney for it, and in its name and as and for its
corporate act and deed to acknowledge this Thirtieth Supplemental Indenture
before any person having authority by the laws of the Commonwealth of
Pennsylvania to take such acknowledgment, to the intent that the same may be
duly recorded, and First Trust of New York, National Association does hereby
constitute and appoint [Catherine F. Donohue] to be its attorney for it, and in
its name and as and for its corporate act and deed to acknowledge this Thirtieth
Supplemental Indenture before any person having authority by the laws of the
State of New York to take such acknowledgment, to the intent that the same may
be duly recorded.
IN WITNESS WHEREOF, said Pennsylvania Gas and Water Company and said
First Trust of New York, National Association have caused this Supplemental
Indenture to be
<PAGE>
8
signed in their respective corporate names, and their respective corporate seals
to be hereunto affixed and attested by their respective officers thereunto duly
authorized, all as of the day and year first above written.
PENNSYLVANIA GAS AND
WATER COMPANY
By: __________________________________
Name: John F. Kell, Jr.
Title: Vice President, Finance
[Corporate Seal]
Attest:
- -----------------------------
Secretary
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION
By: __________________________________
Name:
Title:
[Corporate Seal]
Attest:
_____________________________
Assistant Secretary
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF LUZERNE )
BE IT REMEMBERED that on the ___th day of December, A.D. 1995, before
the undersigned Notary Public in and for said County and said Commonwealth,
commissioned for and residing in the County of Luzerne, personally came Thomas
J. Ward, who, being duly sworn according to law, doth depose and say that he was
personally present and did see the common or corporate seal of the above-named
PENNSYLVANIA GAS AND WATER COMPANY affixed to the foregoing Supplemental
Indenture; that the seal so affixed is the common or corporate seal of said
PENNSYLVANIA GAS AND WATER COMPANY and was so affixed by authority of said
corporation as the act and deed thereof; that the above-named John F. Kell, Jr.
is the Vice President, Finance of said corporation and did sign the said
Supplemental Indenture as such in the presence of this deponent; that this
deponent is the Secretary of the said corporation and that the name of this
deponent, above signed in attestation of the due execution of the said
supplemental Indenture, is in this deponent's own proper handwriting.
---------------------------------
Thomas J. Ward
[Notarial Seal]
Sworn and subscribed before me
the day and year aforesaid.
- ------------------------------
Notary Public
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF LUZERNE )
I HEREBY CERTIFY that on this ___th day of December, A.D. 1995, before
me, a Notary Public in and for said County and said Commonwealth, commissioned
for and residing in the County of Luzerne, personally appeared Thomas J. Ward,
the attorney named in the foregoing Supplemental Indenture, and he, by virtue
and in pursuance of the authority therein conferred upon him, acknowledged said
Supplemental Indenture to be the act and deed of the said PENNSYLVANIA GAS AND
WATER COMPANY.
Witness my hand and notarial seal the day and year aforesaid.
---------------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on the ___th day of December, A.D. 1995, before
the undersigned Notary Public in and for said County and State, commissioned for
the County of New York, personally came [Catherine F. Donohue] who, being duly
sworn according to law, doth depose and say that she was personally present and
did see the corporate seal of the above-named FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, affixed to the foregoing Supplemental Indenture; that the seal so
affixed is the corporate seal of said FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, and was so affixed by authority of said corporation as the act and
deed thereof; that the above-named ___________________________ is a Vice
President of said corporation and did sign the said Supplemental Indenture as
such in the presence of this deponent; that this deponent is an Assistant
Secretary of said corporation and that the name of this deponent, above signed
in attestation of the due execution of the said supplemental Indenture, is in
this deponent's own proper handwriting.
---------------------------------
Catherine F. Donohue
Sworn and subscribed before me
the day and year aforesaid. [Notarial Seal]
- ------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I HEREBY CERTIFY that on this ___th day of December, A.D. 1995, before
me, a Notary Public in and for said County and State, commissioned for the
County of New York, personally appeared [Catherine F. Donohue], the attorney
named in the foregoing Supplemental Indenture, and she, by virtue and in
pursuance of the authority therein conferred upon her, acknowledged said
Supplemental Indenture to be the act and deed of the said FIRST TRUST OF NEW
YORK, NATIONAL ASSOCIATION.
Witness my hand and notarial seal the day and year aforesaid.
---------------------------------
Notary Public
[Notarial Seal]
CERTIFICATE OF RESIDENCE
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION hereby certifies that
its precise name and address as Trustee hereunder are: FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, 100 WALL STREET, SUITE 1600, NEW YORK, NEW YORK 10005.
By: ______________________________
Name:
Title: Vice President
<PAGE>
EXHIBIT B
SECTION 8.03
- ------------
(S) 8.03. The Company shall have the right at any time and from time
to time, unless, to the knowledge of the Trustee, a default as defined in (S)
9.01 shall have happened and shall be continuing, to sell or exchange any part
of the mortgaged property (except any cash or prior lien bonds held by the
Trustee) which shall no longer be advantageous in the judicious management and
maintenance of the mortgaged property or in the conduct of the business of the
Company. The consideration received for such property so sold or exchanged may
be (i) cash, and/or (ii) obligations secured by purchase money mortgage on such
property, but such obligations shall not exceed in aggregate principal amount
sixty per centum (60%) of the then fair value of the property to be released (as
established either by the engineer's certificate referred to in sub-paragraph
(C) below or the independent engineer's certificate referred to in sub-paragraph
(D) below, whichever shall be the higher), and the aggregate principal amount of
such obligations at any time held as a part of the mortgaged property shall not
exceed ten per centum (10%) of the aggregate principal amount of bonds at the
time outstanding under this Indenture, and/or (iii) any additional property of
such character as would be included in the definition of property additions
contained in (S) 1.05. The Trustee shall, from time to time, release such
property so sold or exchanged from the operation and lien of this Indenture, but
only upon receipt of:
(A) A written request of the Company, evidenced by a certified
resolution of the Board, requesting such release and describing the property so
to be released;
(B) A certificate of the Company stating that no default as defined in
(S) 9.01 has happened and is continuing;
(C) An engineer's certificate, made and dated not more than sixty (60)
days prior to the date of such application, setting forth in substance as
follows:
(1) that the Company has sold or exchanged or has contracted to
sell or exchange the property so to be released for a consideration
described, in reasonable detail, in said certificate, and that such sale or
exchange is desirable in the conduct of the business of the Company, and
that the property to be released is no longer advantageous in the judicious
management and maintenance of the mortgaged property or in the conduct of
the business of the Company;
(2) the then fair value, in the opinion of the signers, of the
property to be released;
(3) in case the consideration for the property to be released
consists, in whole or in part, of additional property, stating that all
such additional property is of such character as would be included in the
definition of property additions contained in (S) 1.05, and setting forth
the then fair value to the Company, in the opinion of
<PAGE>
2
the signers, of all such additional property; and if such additional
property is subject to a prior lien, showing that the application satisfies
the requirements of (S) 4.16 and (S) 4.18;
(4) that the consideration described in said certificate has a
then fair value at least equal to the then fair value of the property to be
released, in each case after deducting the principal amount of any
indebtedness secured by prior liens on such property (if an independent
engineer's certificate as provided for in the following sub-paragraph (D)
is required, either with respect to the property to be released or
additional property included in the consideration therefor, the then fair
value of the property to be released and/or of any such additional property
shall be as stated in such engineer's certificate or in such independent
engineer's certificate, whichever shall be the higher); and
(5) that such release is, in the opinion of the signer, desirable
in the conduct of the business of the Company and will not impair the
security under this Indenture in contravention of the provisions hereof.
(D) In case, as shown by said engineer's certificate, the fair value
of the property to be released and of all other property or securities released
since the commencement of the then current calendar year, as set forth in the
certificate required pursuant to sub-paragraph (C), and any similar certificates
pursuant to sub-paragraph (C) and any other sections of this Article 8, is ten
per centum (10%) or more of the aggregate principal amount of bonds at the time
outstanding, unless the fair value of the property to be released, as set forth
in the certificate, is less than $25,000 or less than one per centum (1%) of the
aggregate principal amount of bonds at the time outstanding, an independent
engineer's certificate, made and dated not more than sixty (60) days prior to
the date of such application, stating that the signer has examined the written
request furnished to the Trustee; stating as to such property the then fair
value thereof in the opinion of the signer, together with the signer's report
thereon which shall contain a brief statement of the conditions governing the
signer's determination of such fair value; stating that such release, in the
opinion of the signer, will not impair the security under this Indenture in
contravention of the provisions hereof; and in case, as shown by said engineer's
certificate, the consideration for the property to be released includes
additional property of a fair value to the Company not less than $25,000 and not
less than one per centum (1%) of the aggregate principal amount of the bonds at
the time outstanding, and if such property has, within six months prior to the
date of acquisition thereof by the Company, been used or operated by a person or
persons other than the Company in a business similar to that in which it has
been or is to be used or operated by the Company, a similar independent
engineer's certificate with respect to the then fair value to the Company of
such additional property shall also be furnished to the Trustee;
(E) Any and all money and obligations stated in said engineer's
certificate to be consideration for the property so to be released; provided,
however, that if the property to be released shall be subject to any prior lien,
the cash or obligations otherwise deliverable to the Trustee in accordance with
the provisions of this Section in respect of the release of such property shall,
to the extent required by reason of the existence of such prior lien,
<PAGE>
3
as shall be stated in the opinion of counsel referred to in sub-paragraph (G)
below, be paid or delivered to the trustee or other holder of such prior lien,
and, in such event, there shall be delivered to the Trustee hereunder, in lieu
of such cash or obligations, a certificate or receipt of such trustee or other
holder that such cash or obligations have been paid or delivered to it or them.
(F) The mortgages, deeds, conveyances, assignments, transfers and
instruments of further assurance, if any, specified in clause (4) of the opinion
of counsel referred to in the following sub-paragraph (G);
(G) An opinion of counsel:
(1) stating that the instruments which have been or are therewith
delivered to the Trustee conform to the requirements of this Indenture and
constitute sufficient authority under this Indenture for the Trustee to
execute and deliver the release requested, and that, upon the basis of the
consideration described in the engineer's certificate delivered to the
Trustee pursuant to sub-paragraph (C) of this Section, the property so sold
or exchanged may be released from the operation of the lien of this
Indenture pursuant to the provisions of this Section;
(2) stating that any obligations included in the consideration
for such release are valid obligations and are duly secured by a valid
purchase money mortgage constituting a direct lien upon the property so to
be released, subject to no lien prior thereto except such liens, if any, as
shall have existed thereon just prior to such release as liens prior to the
lien of this Indenture; and, in case any such prior lien shall have so
existed on such property, stating the extent, if any, to which the trustee
or other holder of such prior lien is entitled to the money and obligations
stated in said engineer's certificate to be consideration for such
property;
(3) stating, in case the Trustee is requested to release any
franchise, that such release will not impair the right of the Company to
operate any of its remaining properties;
(4) in case the consideration for the property to be released
consists, in whole or in part, of additional property, specifying the
mortgages, deeds, conveyances, assignments, transfers and instruments of
further assurance which will be sufficient to subject to the direct lien of
this Indenture the additional property described in the above-mentioned
engineer's certificate, or stating that said additional property is then
subject to the direct lien of this Indenture and that no such mortgage,
deed, conveyance, assignment, transfer or instrument of further assurance
is necessary for such purpose; and
(5) in case the consideration for the property to be released
consists, in whole or in part, of additional property, stating that the
Company has acquired a good and valid legal title to such additional
property, and that the same and every part thereof is free and clear of all
liens, charges or encumbrances prior to the lien of this Indenture, except
specified prior liens, prepaid liens and permitted encumbrances;
<PAGE>
4
and stating also that the Company has lawful power to acquire, own and use
said additional property in its business;
(H) A certificate of the Company and an opinion of counsel as to
compliance with conditions precedent.
The fact that the mortgaged property consists of water and gas
properties shall not be deemed to prevent the Company from selling or otherwise
disposing of its gas properties although the effect of such sale or other
disposition is to divest the Company of all interest in the gas business.
<PAGE>
EXHIBIT T3E
[LOGO]
PG&W PENNSYLVANIA
GAS AND WATER
COMPANY
WILKES-BARRE CENTER
39 PUBLIC SQUARE, WILKES-BARRE, PENNSYLVANIA 18711-0601
October 19, 1995
Dear PG&W First Mortgage Bondholder:
Pennsylvania Gas and Water Company ("PG&W") is soliciting the consent of the
holders of its First Mortgage Bonds to approve certain amendments to the
Indenture of Mortgage and Deed of Trust (under which the First Mortgage Bonds
were issued). The consent solicitation will expire at 5:00 p.m., New York City
time on November 20, 1995, unless otherwise extended, as described in the
attached Consent Solicitation Statement. These amendments to the Indenture of
Mortgage and Deed of Trust are being proposed in connection with the sale by
PG&W and Pennsylvania Enterprises, Inc., the parent of PG&W ("PEI"), of PG&W's
regulated water operations and certain related assets (the "Sale of the Water
Business") to Pennsylvania-American Water Company ("PAWC"), a wholly-owned
subsidiary of American Water Works Company, Inc., for approximately $409
million (including debt assumed), subject to adjustment. Following the Sale of
the Water Business, PG&W would continue to conduct its gas utility operations.
The PG&W Board of Directors believes that, in addition to divesting an
underperforming asset, the Sale of the Water Business will eliminate the need
to fund (possibly by the issuance of additional First Mortgage Bonds) the
large capital expenditures that are required for the water operations, give
management more time and capital to focus on the growth of the gas operations
and potentially reduce operating expenses. Also, the PG&W Board believes that
the recapitalizations being considered in connection with the Sale of the
Water Business and more fully discussed in the attached Consent Solicitation
Statement will have a positive effect on PG&W's financial and capital ratios
and credit rating.
We are asking holders of First Mortgage Bonds to approve certain amendments
to the Indenture of Mortgage and Deed of Trust that will permit PG&W and PEI
to consummate the Sale of the Water Business and certain proposed
recapitalizations, principally using the proceeds from such sale. In
particular, the amendments would permit, and simplify the procedures for, the
release from the lien of the Indenture of Mortgage and Deed of Trust of
property not used exclusively in connection with PG&W's gas utility operations
and certain other property PAWC will have the right to utilize after such
sale. The amendments would also modify certain requirements of the Indenture
to make them more appropriate for a company that will, following the Sale of
the Water Business, be primarily a gas utility.
These amendments to the Indenture of Mortgage and Deed of Trust, which are
more fully described in the attached Consent Solicitation Statement, must be
approved by the written consent of the holders of 60% of the aggregate
principal amount of PG&W's outstanding First Mortgage Bonds and by the written
consent of the holders of 60% of the aggregate principal amount of PG&W's
First Mortgage Bonds 9.23% Series due 1999, 9.34% Series due 2019 and 8.375%
Series due 2002, voting as one class.
PG&W RECOMMENDS THAT YOU CONSENT TO THESE AMENDMENTS.
Important information regarding PG&W, the proposed amendments and the
proposed Sale of the Water Business is included in the attached Consent
Solicitation Statement and the Joint Proxy Statement of PG&W and PEI dated
September 1, 1995 with respect to the Sale of the Water Business, which is
enclosed with the attached Consent Solicitation Statement. You are urged to
read the Consent Solicitation Statement and the Joint Proxy Statement
carefully.
<PAGE>
PG&W has retained the services of D.F. King & Co. Inc. to assist with the
solicitation of consents. If you have any questions regarding the proposed
amendments to the Indenture of Mortgage, please call D.F. King at (212) 269-
5550.
YOUR CONSENT IS IMPORTANT. Please complete, sign and date the enclosed form
of consent and return it in the enclosed envelope as soon as possible to
ensure receipt on or prior to 5:00 p.m. New York City time on November 20,
1995.
Sincerely,
/s/ Dean T. Casaday
Dean T. Casaday
President and Chief Executive Officer
2
<PAGE>
PENNSYLVANIA GAS AND WATER COMPANY
WILKES-BARRE CENTER
39 PUBLIC SQUARE
WILKES-BARRE, PENNSYLVANIA 18711-0601
TELEPHONE: (717) 829-8843
NOTICE OF SOLICITATION OF CONSENTS TO AMEND
THE INDENTURE WITH RESPECT TO PG&W'S FIRST MORTGAGE BONDS
Pennsylvania Gas and Water Company ("PG&W") is soliciting (the
"Solicitation") the consents (the "Consents") of registered holders of its
First Mortgage Bonds 9.23% Series due 1999, 9.34% Series due 2019, 8.375%
Series due 2002, 7.20% Series due 2017, 7.125% Series due 2022, 6.05% Series
due 2019 and 7% Series due 2017 (collectively, the "First Mortgage Bonds") to
a proposal (the "Proposal") to approve certain amendments, set forth in Annex
A to this Consent Solicitation Statement, to the Indenture of Mortgage and
Deed of Trust dated as of March 15, 1946 from PG&W to First Trust of New York,
National Association, as trustee (the "Mortgage Trustee"), as supplemented by
twenty-nine supplemental indentures (the "First Mortgage Indenture"). Approval
of the Proposal is required to enable PG&W and Pennsylvania Enterprises, Inc.,
the parent of PG&W ("PEI"), to consummate the sale of PG&W's regulated water
operations and certain related assets (the "Sale of the Water Business") to
Pennsylvania-American Water Company ("PAWC"), a wholly-owned subsidiary of
American Water Works Company, Inc. ("AWWC"), for approximately $409 million
(including debt assumed), subject to adjustment.
Pursuant to the Proposal, the First Mortgage Indenture will be amended to:
(1) permit the release (the "Special Release") from the lien of the First
Mortgage Indenture of all PG&W property not used exclusively in connection
with PG&W's gas utility operations and certain PG&W property which PAWC
will have the right to utilize after the consummation of the Sale of the
Water Business pursuant to an operating and maintenance easement agreement
to be executed by PG&W and PAWC (the "Easement Agreement");
(2) simplify the procedures currently set forth in the First Mortgage
Indenture with respect to obtaining the Special Release from the Mortgage
Trustee;
(3) eliminate the requirements currently set forth in the First Mortgage
Indenture with respect to the deposit and withdrawal of trust moneys
associated with the PG&W property that is the subject of the Special
Release;
(4) permit PG&W, following the consummation of the Sale of the Water
Business, to (a) pay to PEI, the sole holder of PG&W's common stock, no par
value, stated value $10 per share ("PG&W Common Stock"), a portion (not to
exceed $85 million) of the proceeds of the Sale of the Water Business to
repurchase from PEI shares of PG&W Common Stock, which funds would, in
turn, be used by PEI to repurchase from the public shares of common stock,
no par value, stated value $10 per share of PEI ("PEI Common Stock")
(currently estimated to be approximately 2,200,000 shares) and (b) issue to
PEI a $30 million 10.125% promissory note due June 15, 1999, to further
reduce PEI's common shareholder's investment in PG&W;
(5) adjust PG&W's annual maintenance and replacement funding requirements
with respect to its properties to reflect PG&W's ongoing operating
requirements as primarily a gas utility following the Sale of the Water
Business;
(6) eliminate PG&W's ability to issue additional first mortgage bonds
based upon the amount of first mortgage bonds previously authenticated and
delivered under the First Mortgage Indenture which were redeemed, retired
or repaid on or prior to the date of the consummation of the Sale of the
Water Business; and
<PAGE>
(7) make such other changes as may be appropriate following the Sale of
the Water Business to remove from the First Mortgage Indenture all
references to non-gas utility properties and operations of PG&W.
This Consent Solicitation Statement is being furnished to holders of First
Mortgage Bonds as of October 16, 1995 (the "Record Date"). The Solicitation is
being made upon the terms and is subject to the conditions in this Consent
Solicitation Statement and the accompanying form of Consent. See "The
Solicitation--Conditions of the Solicitation". Approval of the Proposal
requires the Consents of the record holders of at least (collectively, the
"Requisite Consents") (a) 60% in aggregate outstanding principal amount of the
First Mortgage Bonds and (b) 60% in aggregate outstanding principal amount of
PG&W's First Mortgage Bonds 9.23% Series due 1999, 9.34% Series due 2019 and
8.375% Series due 2002 (collectively, the "Private Series"), voting as one
class.
If PG&W delivers the Requisite Consents approving the Proposal to the
Mortgage Trustee, PG&W and the Mortgage Trustee will execute a supplemental
indenture (the "Thirtieth Supplemental Indenture") adopting the amendments set
forth in the Proposal (the "Proposed Amendments"). The Proposed Amendments
will become effective and binding upon each holder of First Mortgage Bonds as
of the date of the consummation of the Sale of the Water Business, whether or
not such holder delivered a Consent. In the event that the Sale of the Water
Business is not consummated, the Proposed Amendments will not become
effective. See "The Solicitation--General".
THE SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON NOVEMBER
20, 1995, UNLESS EXTENDED AT THE OPTION OF PG&W FOR A SPECIFIED PERIOD OR ON A
DAILY BASIS UNTIL THE REQUISITE CONSENTS HAVE BEEN RECEIVED (THE "EXPIRATION
DATE"). FIRST MORTGAGE BONDHOLDERS MAY REVOKE THEIR CONSENTS AT ANY TIME UP TO
THE EXPIRATION DATE AT WHICH TIME, SUCH CONSENTS WILL BECOME IRREVOCABLE.
The Mortgage Trustee is not responsible for the contents of the Consent
Solicitation Statement or any of the other accompanying materials and takes no
position with respect to the Proposal.
Enclosed with this Consent Solicitation Statement is the Joint Proxy
Statement dated September 1, 1995 of PEI and PG&W (the "Joint Proxy
Statement"), which PEI sent to holders of PEI Common Stock and PG&W sent to
holders of its preferred stock, par value $100 per share ("PG&W Preferred
Stock"), and its depositary preferred shares, each representing a 1/4 interest
in shares of its 9% cumulative preferred stock, in order to seek approval of
the Sale of the Water Business. At meetings held on October 11, 1995, holders
of PEI Common Stock and PG&W Preferred Stock approved the Sale of the Water
Business. This Consent Solicitation Statement is not intended to be complete
by itself, and is qualified in its entirety by reference to the more detailed
information set forth in the Joint Proxy Statement, including information as
to the Sale of the Water Business, PEI's and PG&W's current and proposed
capital structures and the related recapitalizations, PEI's and PG&W's
management and PEI's and PG&W's financial statements and management's
discussion and analysis. Each holder of First Mortgage Bonds is urged to read
the Joint Proxy Statement in its entirety.
The Solicitation is not being made to holders of First Mortgage Bonds in any
jurisdiction in which the Solicitation would not be in compliance with the
securities or blue sky laws of such jurisdiction. PG&W has not retained any
representative to act on behalf of holders of First Mortgage Bonds in
connection with the Solicitation or to prepare any report as to the fairness
of the Solicitation's terms.
The date of this Consent Solicitation Statement is October 19, 1995. This
Consent Solicitation Statement is first being mailed to holders of PG&W's
First Mortgage Bonds on or about October 19, 1995.
2
<PAGE>
THE SOLICITATION
GENERAL
Subject to the satisfaction of certain conditions, see "--Conditions of the
Solicitation", but in no event prior to the Expiration Date, promptly after
the receipt of the Requisite Consents, the Mortgage Trustee and PG&W will
execute the Thirtieth Supplemental Indenture adopting the Proposed Amendments
(the "Effective Time"). The Proposed Amendments will become effective and
binding upon each holder of First Mortgage Bonds as of the date of the
consummation of the Sale of the Water Business, whether or not such holder
delivered a Consent. In the event that the Sale of the Water Business is not
consummated, the Proposed Amendments will not become effective.
The Consents are being solicited by PG&W. PG&W recommends that holders of
its First Mortgage Bonds consent to the Proposed Amendments. All costs of the
Solicitation, including the costs of preparing, printing and mailing this
Consent Solicitation Statement, will be paid by PG&W. In addition to the use
of the mail, Consents may be solicited by directors, officers and other
employees of PG&W without additional remuneration, in person, or by telephone,
telegraph or facsimile transmission. PG&W has also retained D.F. King & Co.,
Inc. (the "Information Agent") to aid in the solicitation of Consents with
respect to the Proposal, to respond to inquiries of holders of First Mortgage
Bonds and to perform other related services at a fee estimated to be in the
range of $5,000, plus reimbursement for reasonable and customary out-of-pocket
expenses.
REQUISITE CONSENTS
Approval of the Proposal requires the receipt without revocation of the
Requisite Consents consisting of the Consents of at least (i) 60% in aggregate
outstanding principal amount of the First Mortgage Bonds and (ii) 60% in
aggregate outstanding principal amount of the Private Series, voting as one
class.
EXPIRATION DATE; EXTENSIONS
The term "Expiration Date" means 5:00 p.m., New York City time on November
20, 1995, unless PG&W, in its sole discretion, extends the period during which
the Solicitation is open, in which event the term "Expiration Date" means the
latest time and date to which the Consent Solicitation is so extended. PG&W
reserves the right to extend the Consent Solicitation at any time and from
time to time, by giving oral or written notice to the Mortgage Trustee no
later than 9:00 a.m., New York City time, on the next business day after the
previously announced Expiration Date. Any such extension will be followed as
promptly as practicable by notice thereof by press release or other public
announcement or by written notice to the registered holders of the First
Mortgage Bonds. Such announcement or notice may state that PG&W is extending
the Consent Solicitation for a specified period of time or on a daily basis
until 5:00 p.m., New York City time, on the date on which the Requisite
Consents have been received.
PG&W expressly reserves the right for any reason (i) to terminate the
Solicitation at any time prior to the execution of the Thirtieth Supplemental
Indenture (whether or not the Requisite Consents have been received) by giving
written notice of such termination to the Mortgage Trustee or (ii) not to
extend the Solicitation beyond 5:00 p.m. on November 20, 1995, whether or not
the Requisite Consents have been received by such date. Any such action by
PG&W will be followed as promptly as practicable by notice thereof by press
release or other public announcement or by written notice to the registered
holders of the First Mortgage Bonds.
TERMINATION OF THE SOLICITATION
If the Solicitation is terminated for any reason before the Effective Time,
the Consents will be voided and the Proposed Amendments will not be effected.
CONSENT PROCEDURES; REVOCATION OF CONSENTS
This Consent Solicitation Statement is being sent to all registered holders
of PG&W's First Mortgage Bonds as of the Record Date. Copies of this Consent
Solicitation Statement will also be furnished to fiduciaries,
3
<PAGE>
custodians and brokerage houses for forwarding to beneficial holders of First
Mortgage Bonds held in their names. Only those persons who are registered
holders of First Mortgage Bonds may execute and deliver a Consent. A
beneficial holder of First Mortgage Bonds who is not the registered holder of
such First Mortgage Bonds (such as a beneficial holder of First Mortgage Bonds
whose First Mortgage Bonds are registered in the name of a nominee, such as a
brokerage firm) must (i) arrange for the registered holder to execute a
Consent and deliver it to PG&W on such beneficial owner's behalf or (ii)
obtain a duly executed proxy from the registered holder authorizing the
beneficial holder to execute a consent and deliver to PG&W a Consent with
respect to the First Mortgage Bonds on behalf of such registered holder.
Holders of Luzerne County Industrial Development Authority Exempt Facilities
Revenue Refunding and Revenue Bonds (Pennsylvania Gas and Water Company
Project) ("IDB Bonds") are receiving this Consent Solicitation Statement and
being asked to instruct PNC Bank, National Association, the trustee for the
IDB Bonds, (the "IDA Trustee") as to how to vote the First Mortgage Bonds
which presently secure the IDB Bonds. Enclosed for such holders is a single
form of Consent (the colored card) that relates to the Proposed Amendments and
also to certain amendments relating only to the IDB Bonds.
If a person holds both IDB Bonds and First Mortgage Bonds, he or she should
execute both the white card relating to such First Mortgage Bonds and the
colored card relating to such IDB Bonds.
Holders of First Mortgage Bonds who wish to Consent should mail, hand
deliver or send by overnight courier their properly completed and executed
Consents in the enclosed envelope to D.F. King & Co. Inc., 77 Water Street,
20th Floor, New York, New York 10005, Attention: John Bibas. Holders of First
Mortgage Bonds who wish to revoke a Consent may do so by filing with the
Information Agent written notice of revocation bearing a later date than the
Consent or by duly executing a later-dated Consent relating to the same First
Mortgage Bonds. Any written notice revoking a Consent with respect to First
Mortgage Bonds must be sent by overnight courier or certified mail, for
receipt no later than the Expiration Date, to D.F. King & Co. Inc., 77 Water
Street, 20th Floor, New York, New York 10005, Attention : John Bibas.
All Consents that are properly completed, signed and delivered to the
Information Agent and not revoked prior to the Expiration Date will be given
effect in accordance with the instructions thereon. All executed but unmarked
Consents will be voted FOR approval of the Proposal.
All Consents must be executed in exactly the same name(s) as the registered
holder(s) appear(s) on the First Mortgage Bonds. If First Mortgage Bonds to
which a Consent relates are held of record by two or more joint holders, all
such holders must sign the Consent. If a Consent is signed by a trustee,
partner, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing and must submit with the Consent
form appropriate evidence of authority to execute the Consent.
The registered ownership of the First Mortgage Bonds shall be confirmed by
the Mortgage Trustee, as registrar of the First Mortgage Bonds. All questions
as to the validity, form, and revocation of Consents with respect to First
Mortgage Bonds shall be determined by PG&W in its sole discretion, which
determination will be conclusive and binding, subject to such final review as
may be prescribed by the Mortgage Trustee concerning proof of execution and
ownership. PG&W reserves the absolute right to reject any or all Consents that
are not in proper form or the acceptance of which could, in the opinion of
PG&W or its counsel, be unlawful. PG&W also reserves the right, subject to
such final review as the Mortgage Trustee prescribes for proof of execution
and ownership, to waive any defects or irregularities in connection with
deliveries of particular Consents. Deliveries of Consents will not be deemed
to have been made until any irregularities or defects therein have been cured
or waived. PG&W's interpretation of the terms and conditions of this
Solicitation shall be conclusive and binding.
CONDITIONS OF THE SOLICITATION
Consents will become irrevocable on the Expiration Date. Subject to the
satisfaction of certain conditions, promptly after the receipt of the
Requisite Consents, but in no event prior to the Expiration Date, the Mortgage
4
<PAGE>
Trustee and PG&W will execute the Thirtieth Supplemental Indenture. Execution
of the Thirtieth Supplemental Indenture is conditioned upon the absence of any
law or regulation, and the absence of any injunction or action or other
proceeding (pending or threatened) which (in the case of any action or
proceeding, if adversely determined) would make unlawful or invalid or enjoin
the implementation of the Proposed Amendments or the entering into of the
Thirtieth Supplemental Indenture. The Solicitation may be abandoned by PG&W at
any time prior to the execution of the Thirtieth Supplemental Indenture for
any reason, in which case all Consents will be voided.
The Proposed Amendments will not become effective unless the Sale of the
Water Business is consummated.
REGULATORY APPROVALS
The required approval of the Proposed Amendments by the Pennsylvania Public
Utility Commission was obtained on August 31, 1995.
ADDITIONAL INFORMATION
Requests for additional copies of this Consent Solicitation Statement, the
Joint Proxy Statement or the form of Consent should be directed to D.F. King &
Co. Inc., 77 Water Street, 20th Floor, New York, New York 10005, Attention:
John Bibas (telephone (212) 269-5550).
5
<PAGE>
BACKGROUND AND PURPOSES OF THE SOLICITATION
Pursuant to an Asset Purchase Agreement dated as of April 26, 1995 among
PG&W, PEI, PAWC and AWWC (the "Asset Purchase Agreement"), PEI and PG&W have
agreed to sell PG&W's regulated water operations and certain related assets
(the "Water Business") to PAWC for a purchase price equal to approximately
$409 million (including debt assumed), subject to adjustment. Most of the
assets constituting PG&W's Water Business are subject to the lien of the First
Mortgage Indenture. The Asset Purchase Agreement provides that it is a
condition to the consummation of the Sale of the Water Business that PG&W
obtain the Requisite Consents in order to, among other things, release from
the lien of the First Mortgage Indenture all property which constitutes PG&W's
Water Business, as well as certain PG&W property which will be the subject of
the Easement Agreement. Consummation of the Sale of the Water Business is also
subject to the satisfaction of certain other conditions contained in the Asset
Purchase Agreement. For a description of the Asset Purchase Agreement, see
"THE SALE OF THE WATER BUSINESS--Basic Terms of the Asset Purchase Agreement"
in the enclosed Joint Proxy Statement of PEI and PG&W. For a description of
the background of the Sale of the Water Business, see "SPECIAL FACTORS--
Background of and Reasons for the Sale of the Water Business" in the enclosed
Joint Proxy Statement of PEI and PG&W.
In addition, in connection with the Sale of the Water Business, PG&W is
seeking the approval of the holders of its First Mortgage Bonds to certain
amendments to the First Mortgage Indenture which will enable PG&W and PEI to
utilize the proceeds of the Sale of the Water Business to implement certain
recapitalizations of PEI and PG&W to adjust their respective capital
structures to levels more appropriate to the size and nature of their post-
sale operations. For a description of these proposed recapitalizations, see
"USE OF CERTAIN PROCEEDS OF THE SALE OF THE WATER BUSINESS," "PEI PRO FORMA
FINANCIAL INFORMATION" and "PG&W PRO FORMA FINANCIAL INFORMATION" in the
enclosed Joint Proxy Statement of PEI and PG&W. PG&W is also seeking the
approval of the holders of the First Mortgage Bonds of certain other
amendments to the First Mortgage Indenture which are designed to make the
First Mortgage Indenture consistent with PG&W's status following the
consummation of the Sale of the Water Business as a company primarily engaged
in gas utility operations. For a description of the Proposed Amendments, see
"DESCRIPTION OF THE PROPOSED AMENDMENTS" and Annex A to this Consent
Solicitation Statement.
At a meeting held on August 7, 1995, the Board of Directors of PG&W approved
the Proposed Amendments to the First Mortgage Indenture. At meetings held on
October 11, 1995, the PEI common shareholders and the PG&W preferred
shareholders approved and adopted the Asset Purchase Agreement and the
transactions contemplated thereby, including the Sale of the Water Business.
PG&W RECOMMENDS THAT YOU CONSENT TO THE PROPOSAL.
DESCRIPTION OF THE PROPOSED AMENDMENTS
Set forth below is a description of the material Proposed Amendments
contained in the Thirtieth Supplemental Indenture and the related provisions
of the First Mortgage Indenture. The full text of each of the applicable
provisions of the First Mortgage Indenture, marked to show the Proposed
Amendments to be made pursuant to the Thirtieth Supplemental Indenture, is
attached to this Consent Solicitation Statement as Annex A. The following
statements are subject to, and qualified in their entirety by reference to,
the applicable provisions of the First Mortgage Indenture and the Thirtieth
Supplemental Indenture, which are incorporated in this Consent Solicitation
Statement by reference. Copies of the First Mortgage Indenture and the
Thirtieth Supplemental Indenture will be furnished, without charge, to any
holder of First Mortgage Bonds who makes a written or oral request therefor to
D.F. King & Co. Inc., 77 Water Street, 20th Floor, New York, New York 10005,
Attention: John Bibas (telephone (212) 269-5550). In order to ensure timely
delivery of the documents, any such requests should be made by November 8,
1995. PG&W RESERVES THE RIGHT TO MAKE CHANGES IN THE TEXT OF THE THIRTIETH
SUPPLEMENTAL INDENTURE THAT DO NOT HAVE A MATERIAL ADVERSE EFFECT ON THE
HOLDERS OF ITS FIRST MORTGAGE BONDS.
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<PAGE>
(1) AMENDMENTS TO PERMIT RELEASE OF CERTAIN PG&W PROPERTY FROM THE LIEN OF
THE FIRST MORTGAGE INDENTURE
Currently, the granting clause of the First Mortgage Indenture subjects
substantially all of PG&W's properties to the lien of the First Mortgage
Indenture. The First Mortgage Indenture does not currently permit PG&W to sell
or dispose of its water properties and divest itself of its interest in its
Water Business. It is a condition to the consummation of the Sale of the Water
Business that PG&W obtain a release from the lien of the First Mortgage
Indenture of all properties that will be conveyed to PAWC, as well as certain
property which will be the subject of the Easement Agreement. PG&W is seeking
the Special Release to permit the release from the lien of the First Mortgage
Indenture of (a) all property of PG&W not used exclusively in connection with
PG&W's gas utility operations (including all property to be sold to PAWC
pursuant to the Asset Purchase Agreement and all other land except for several
hundred acres used exclusively in connection with PG&W's gas utility
operations) and (b) certain property of PG&W, which PAWC will have the right
to utilize after the consummation of the Sale of the Water Business pursuant
to the Easement Agreement. See Annex A hereto for the text of the proposed
amendments to the granting clause and Section 8.03 of the First Mortgage
Indenture.
The Special Release would not impair the security required for the First
Mortgage Bonds which will be outstanding after the consummation of the Sale of
the Water Business. The First Mortgage Indenture requires that PG&W maintain
as security for its outstanding first mortgage bonds an amount of property
subject to the lien of the First Mortgage Indenture having a fair value equal
to 166-2/3% of the principal amount of such outstanding first mortgage bonds.
As of October 19, 1995, PG&W had $184 million aggregate principal amount of
First Mortgage Bonds outstanding (composed of $55 million aggregate principal
amount of the Private Series and $129 million aggregate principal amount of
PG&W's First Mortgage Bonds 7.20% Series due 2017, 7.125% Series due 2022,
6.05% Series due 2019 and 7% Series due 2017, (collectively, the "IDB
Series")) against approximately $667 million of PG&W property subject to the
lien of the First Mortgage Indenture. This amount of PG&W property (equal to
362% of the aggregate principal amount of the outstanding First Mortgage
Bonds) is far in excess of the $306.6 million (or 166-2/3% of the aggregate
principal amount of the First Mortgage Bonds) of property required by the
First Mortgage Indenture to be held by PG&W. In connection with the
consummation of the Sale of the Water Business, the IDB Series will be
cancelled (due to the issuance by PAWC of its own general mortgage bonds in
substitution for the IDB Series, which general mortgage bonds will secure
obligations currently secured by the IDB Series), leaving only the Private
Series outstanding following the sale. Giving effect to the Special Release,
PG&W estimates that as of December 31, 1995 (the projected date of
consummation of the Sale of the Water Business), the $55 million aggregate
principal amount of the Private Series then outstanding would be secured by
property used exclusively in connection with PG&W's gas utility operations,
which will be subject to the lien of the First Mortgage Indenture, having a
book value equal to approximately $283 million. The book value of this PG&W
property (equal to 514% of the aggregate principal amount of the then
outstanding First Mortgage Bonds) will also be far in excess of the $91.7
million of PG&W property (or 166-2/3% of the aggregate principal amount of the
Private Series) required by the First Mortgage Indenture to be held by PG&W as
security for the Private Series. In fact, as described above, the security for
PG&W's outstanding First Mortgage Bonds represented by PG&W property will be
greater (as a percentage of outstanding bonds) after the Sale of the Water
Business than before. PG&W has agreed to provide to the Mortgage Trustee a
certificate of an independent engineer who will perform an appraisal of PG&W's
gas utility properties and certify that PG&W's gas utility properties, which
will remain subject to the lien of the First Mortgage Indenture, have a fair
value equal to not less than $91.7 million.
(2) AMENDMENTS TO SIMPLIFY FIRST MORTGAGE INDENTURE PROPERTY RELEASE
PROVISIONS
PG&W is seeking to simplify the procedures required by the First Mortgage
Indenture with respect to obtaining the Special Release from the Mortgage
Trustee. Based upon PG&W's prior experience, PG&W has
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<PAGE>
found that compliance with certain of the First Mortgage Indenture's
procedures is extremely cumbersome and expensive. PG&W and PAWC are seeking to
close the Sale of the Water Business by December 31, 1995. However, the
preparation of certain of the certificates currently required by the First
Mortgage Indenture could delay this projected closing by up to several months
and add considerable transaction costs without any corresponding benefit to
the holders of the First Mortgage Bonds. PG&W is seeking to simplify the
procedures currently set forth in the First Mortgage Indenture in order to put
itself in a position to close the Sale of the Water Business by December 31,
1995. See Annex A hereto for the text of the proposed amendments to Section
8.03 of the First Mortgage Indenture.
(3) AMENDMENT TO ELIMINATE REQUIREMENTS WITH RESPECT TO THE DEPOSIT AND
WITHDRAWAL OF TRUST MONEYS ASSOCIATED WITH PG&W PROPERTY WHICH IS THE SUBJECT
OF THE SPECIAL RELEASE
Currently, the First Mortgage Indenture provides that at the time that PG&W
applies to the Mortgage Trustee for a release of the lien of the First
Mortgage Indenture on any properties, PG&W must deposit with the Mortgage
Trustee, as trust moneys, any consideration received by PG&W with respect to
the sale or transfer of such properties. PG&W may withdraw such moneys which
have been deposited with the Mortgage Trustee upon application to the Mortgage
Trustee in accordance with the procedures set forth in the First Mortgage
Indenture. Based upon PG&W's prior experience, PG&W has found compliance with
certain of these procedures to be extremely cumbersome and expensive. In order
to obtain the benefits of certain proposed recapitalizations as soon as
possible after the consummation of the Sale of the Water Business, PG&W and
PEI plan to consummate these recapitalizations utilizing the proceeds of the
Sale of the Water Business as promptly as possible following the consummation
of such sale. See "USE OF CERTAIN PROCEEDS OF THE SALE OF THE WATER BUSINESS",
"PG&W PRO FORMA FINANCIAL INFORMATION" and "PEI PRO FORMA FINANCIAL
INFORMATION" in the enclosed Joint Proxy Statement for a description of these
recapitalizations and their effect on PG&W and PEI. However, the preparation
of certain of the certificates currently required by the First Mortgage
Indenture could require anywhere from several weeks to several months to
prepare, during which time PG&W would be unable to utilize any of the proceeds
(which will have been deposited with the Mortgage Trustee) of the Sale of the
Water Business. PG&W is seeking to eliminate the requirement that it deposit
such proceeds with the Mortgage Trustee and then apply for the withdrawal of
such proceeds in order to obtain immediate use of the proceeds of the Sale of
the Water Business and thus to be able to proceed promptly with its proposed
recapitalization and the proposed recapitalization of PEI. See Annex A hereto
for the text of the proposed amendments to Section 8.11 of the First Mortgage
Indenture.
(4) AMENDMENTS TO DIVIDEND, PAYMENT AND REPURCHASE RESTRICTIONS WITH RESPECT
TO PG&W COMMON STOCK
The First Mortgage Indenture restricts PG&W's ability to make dividend and
other payments with respect to PG&W Common Stock and to repurchase shares of
PG&W Common Stock in an amount in excess of a formula based on PG&W's
cumulative earned surplus. As of June 30, 1995, the most recent date for which
financial results of PG&W have been published, PG&W was restricted from making
dividend and other payments with respect to PG&W Common Stock or repurchase
shares of PG&W Common Stock in excess of $59.1 million. Pursuant to the terms
of the Asset Purchase Agreement, the purchase price with respect to the Sale
of the Water Business will be paid to PG&W. In order to proceed with its
proposed recapitalization and the proposed recapitalization of PEI, PG&W will
transfer to PEI a portion of the proceeds it will receive in the Sale of the
Water Business. PG&W is seeking a one-time exception to the dividend and other
payment and repurchase restrictions set forth in the Mortgage Indenture to
enable it, following the consummation of the Sale of the Water Business: (i)
to pay to PEI an amount not to exceed $85.0 million in order to repurchase
from PEI shares of PG&W Common Stock, which funds would be utilized, in turn,
by PEI to repurchase shares of PEI Common Stock from the public (currently
estimated to be approximately 2,200,000 shares), and (ii) to issue to PEI a
$30.0 million note as a dividend in order to further reduce PEI's common
shareholder's investment in PG&W. These common stock repurchases by both PEI
and PG&W and the dividend payment by PG&W will enable PEI and PG&W to adjust
their respective capital structures to levels more appropriate to the size and
nature of their post-sale operations. See "USE OF CERTAIN PROCEEDS OF THE SALE
OF THE WATER BUSINESS",
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<PAGE>
"PG&W PRO FORMA FINANCIAL INFORMATION" AND "PEI PRO FORMA FINANCIAL
INFORMATION" in the enclosed Joint Proxy Statement for a description of the
proposed recapitalizations of PEI and PG&W. See Annex A hereto for the text of
the proposed amendments to Section 4.11 of the First Mortgage Indenture.
(5) AMENDMENTS TO ADJUST PG&W'S ANNUAL MAINTENANCE AND REPLACEMENT FUNDING
REQUIREMENTS
Currently, the First Mortgage Indenture requires PG&W to pay to the Mortgage
Trustee an amount equal to 12 1/2% of its gross annual water operating
revenues and 15% of its gross gas operating revenues for the purpose of
funding PG&W's annual maintenance and replacement requirements with respect to
the properties which are subject to the lien of the First Mortgage Indenture.
PG&W is seeking to eliminate the requirement that PG&W pay to the Mortgage
Trustee 12 1/2% of its gross annual water operating revenues since following
the consummation of the Sale of the Water Business and the execution and
delivery of the Special Release, the only PG&W property subject to the lien of
the First Mortgage Indenture will be property used exclusively in connection
with PG&W's gas utility operations.
In addition, pursuant to Section 4.10 of the First Mortgage Indenture, PG&W
has been permitted to take certain credits toward its annual maintenance and
replacement funding requirements based upon, among other things, (i) the
amounts expended by PG&W for repairs to and maintenance of the property which
is subject to the lien of the First Mortgage Indenture and (ii) the amount of
net property additions which PG&W could have utilized as the basis for the
issuance of additional first mortgage bonds under the First Mortgage Indenture
but instead elected to utilize as the basis of a credit toward its annual
maintenance and replacement funding requirements. The First Mortgage Indenture
has permitted PG&W to carry forward from one year to the next any credits in
excess of those required to offset its payment obligations. On a cumulative
basis, since the initial series of bonds was issued under the First Mortgage
Indenture in 1946, PG&W has accumulated a significant credit balance. This
credit balance resulted principally from net property additions with respect
to both gas and water properties which were not utilized as the basis for the
issuance of additional first mortgage bonds under the First Mortgage
Indenture. Following the consummation of the Sale of the Water Business and
the execution of the Special Release, however, the only PG&W properties which
would remain subject to the lien of the First Mortgage Indenture are
properties used exclusively in connection with PG&W's gas utility operations.
PG&W believes that it would be inappropriate to carry forward against its
maintenance and replacement funding requirements for its gas properties, a
credit balance accumulated with respect to both its gas and water properties.
Assuming that the relevant data was even available, it would be extremely
burdensome for PG&W to attempt to segregate from its cumulative credit
balance, the amounts attributable solely to its gas properties expended over
the nearly 50 years during which first mortgage bonds have been issued under
the First Mortgage Indenture. PG&W is, therefore, also seeking to amend the
First Mortgage Indenture to reduce its maintenance and replacement funding
credit balance to zero immediately after the consummation of the Sale of the
Water Business so that PG&W would determine its future maintenance and
replacement funding requirements on a basis appropriate to a gas utility
business based only upon (i) the amounts expended by PG&W for repairs to and
maintenance of its gas utility properties, (ii) the amount of its net gas
property additions and (iii) its gross annual gas operating revenues, in each
case, from and after the date of the consummation of the Sale of the Water
Business. See Annex A hereto for the text of the proposed amendments to
Section 4.10 of the First Mortgage Indenture.
(6) AMENDMENTS TO RESTRICT PG&W'S ABILITY TO ISSUE ADDITIONAL FIRST MORTGAGE
BONDS BASED UPON THE AMOUNT OF FIRST MORTGAGE BONDS PREVIOUSLY AUTHENTICATED
AND DELIVERED UNDER THE FIRST MORTGAGE INDENTURE
The First Mortgage Indenture provides that PG&W may issue first mortgage
bonds in an amount equal to 60% of unapplied property additions. (This
requirement is the inverse of the requirement that PG&W maintain
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as security for its outstanding first mortgage bonds, an amount of property
subject to the lien of the First Mortgage Indenture equal to 166 2/3% of the
aggregate principal amount of such outstanding first mortgage bonds.) The
First Mortgage Indenture, however, also currently allows PG&W to issue
additional first mortgage bonds in an amount equal to 100% of the principal
amount of all first mortgage bonds previously authenticated and delivered
under the First Mortgage Indenture which have been paid, retired, redeemed or
cancelled and for which no other credit has been taken under the First
Mortgage Indenture. The effect of this provision has been to allow PG&W to, in
effect, "reuse" the same net property additions to issue new series of first
mortgage bonds, although PG&W has only issued one series of first mortgage
bonds based on this provision. PG&W is, however, seeking to amend Section 3.07
of the First Mortgage Indenture to eliminate its ability to issue additional
first mortgage bonds based upon the amount of first mortgage bonds previously
authenticated and delivered under the First Mortgage Indenture which have been
paid, retired, redeemed or cancelled on or prior to the date of the
consummation of the Sale of the Water Business. Immediately following the
consummation of the Sale of the Water Business (currently projected for
December 31, 1995) and the execution of the Special Release, PG&W estimates
the book value of net property additions with respect to PG&W's gas utility
operations which would remain subject to the lien of the First Mortgage
Indenture will be equal to approximately $283 million. Following the
consummation of the Sale of the Water Business, there will be $55 million
aggregate principal amount of First Mortgage Bonds (the Private Series)
outstanding under the First Mortgage Indenture. Using the 60% issuance ratio
based on net property additions, following the consummation of the Sale of the
Water Business, PG&W should only be able to issue an additional $114.8 million
of first mortgage bonds. However, Section 3.07, currently would also allow
PG&W to issue an additional $269.5 million of first mortgage bonds based upon
the cumulative amount of first mortgage bonds previously paid, retired,
redeemed or cancelled. PG&W believes this ability to issue additional first
mortgage bonds based on previously outstanding bonds would be disadvantageous
to the holders of its first mortgage bonds and detrimental to their security.
PG&W is, therefore, seeking to amend the First Mortgage Indenture to eliminate
its ability to issue additional first mortgage bonds based on first mortgage
bonds which were paid, retired, redeemed or cancelled on or prior to the date
of the consummation of the Sale of the Water Business since these first
mortgage bonds were originally authenticated and delivered based in part on
properties which will, after giving effect to the Special Release, no longer
be subject to the lien of the First Mortgage Indenture. See Annex A hereto for
the text of the proposed amendments to Section 3.07 of the First Mortgage
Indenture.
(7) OTHER AMENDMENTS TO REFLECT PG&W'S STATUS AS PRIMARILY A GAS UTILITY
FOLLOWING THE CONSUMMATION OF THE SALE OF THE WATER BUSINESS
The First Mortgage Indenture currently contains numerous references to non-
gas utility properties and operations of PG&W. Following the consummation of
the Sale of the Water Business and the execution of the Special Release,
PG&W's principal business will be its gas utility operations and the only
properties which will remain subject to the lien of the First Mortgage
Indenture will be those properties used exclusively in connection with PG&W's
gas utility operations. PG&W is, therefore, seeking to amend the First
Mortgage Indenture to remove all references to non-gas utility properties and
operations of PG&W since such references will no longer be relevant following
the consummation of the Sale of the Water Business and the execution of the
Special Release. See Annex A hereto for the text of these proposed amendments
to Sections 1.02(m), 1.05, 1.06, 3.06 and 4.07 of the First Mortgage
Indenture. PG&W also seeks authorization to make additional amendments without
further consent of the holders of the First Mortgage Bonds in furtherance of
the foregoing amendments to correct omissions or ambiguities.
EFFECTIVE TIME OF THE PROPOSED AMENDMENTS
The Thirtieth Supplemental Indenture will provide that the Proposed
Amendments will not become effective until the date of the consummation of the
Sale of the Water Business. In the event that the Sale of the Water Business
is not consummated, the Proposed Amendments will not become effective.
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FEDERAL INCOME TAX CONSEQUENCES
The implementation of the Proposed Amendments will have no federal income
tax consequences to holders of First Mortgage Bonds.
RATIO OF EARNINGS TO FIXED CHARGES
As of June 30, 1995, PG&W's ratio of earnings to fixed charges was 2.94. On
a pro forma basis, giving effect to the consummation of the Sale of the Water
Business and the Special Release, as of June 30, 1995, PG&W's ratio of
earnings to fixed charges would be 3.14. For purposes of computing PG&W's
ratio of earnings to fixed charges, earnings are defined as the sum of pre-tax
income plus fixed charges. Fixed charges consist of all interest expense
(before allowance of borrowed funds used during construction and deferred
treatment plant interest), one-third of rent expense (which approximates the
interest component of such expense) and amortization of debt expense. See
"PG&W PRO FORMA FINANCIAL INFORMATION" and the PG&W Financial Statements in
the enclosed Joint Proxy Statement.
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OWNERSHIP AND TRADING OF PG&W'S FIRST MORTGAGE BONDS
As of October 10, 1995, PG&W's First Mortgage Bonds were held of record as
follows:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL NUMBER OF
AMOUNT OF RECORD
TITLE OF SERIES SERIES IDENTITY OF HOLDER(S) HOLDERS
--------------- --------- --------------------- ---------
<C> <S> <C> <C>
Private Series
--------------
First Mortgage Bonds $10,000,000 Allstate Life Insurance Company 2
9.23% Series due 1999 Allstate Life Insurance Company
of New York
First Mortgage Bonds $15,000,000 Allstate Life Insurance Company 2
9.34% Series due 2019 Allstate Life Insurance Company
of New York
First Mortgage Bonds $30,000,000 Public 80
8.375% Series due 2002
IDB Series
----------
First Mortgage Bonds $50,000,000 PNC Bank, National Association, 1
7.20% Series due 2017 as Trustee for the Luzerne
County Industrial Development
Authority
First Mortgage Bonds $30,000,000 PNC Bank, National Association, 1
7.125% Series due 2022 as Trustee for the Luzerne
County Industrial Development
Authority
First Mortgage Bonds $19,000,000 PNC Bank, National Association, 1
6.05% Series due 2019 as Trustee for the Luzerne
County Industrial Development
Authority
First Mortgage Bonds $30,000,000 PNC Bank, National Association, 1
7% Series due 2017 as Trustee for the Luzerne
County Industrial Development
Authority
</TABLE>
PG&W's First Mortgage Bonds 7.20% Series due 2017 secure PG&W's obligations
with respect to Luzerne County Industrial Development Authority Exempt
Facilities Revenue Refunding Bonds, 1992 Series A (Pennsylvania Gas and Water
Company Project) (the "1992 Series A Bonds") and will be voted by the IDA
Trustee in accordance with the instructions of the holders of the 1992 Series
A Bonds. PG&W's First Mortgage Bonds 7.125% Series due 2022 secure PG&W's
obligations with respect to Luzerne County Industrial Development Authority
Exempt Facilities Revenue Bonds, 1992 Series B (Pennsylvania Gas and Water
Company Project) (the "1992 Series B Bonds") and will be voted by the IDA
Trustee in accordance with the instructions of the holders of the 1992 Series
B Bonds. PG&W's First Mortgage Bonds 6.05% Series due 2019 secure PG&W's
obligations with respect to Luzerne County Industrial Development Authority
Exempt Facilities Revenue Refunding Bonds, 1993 Series A (Pennsylvania Gas and
Water Company Project) (the "1993 Series A Bonds") and will be voted by the
IDA Trustee in accordance with the instructions of the holders of the 1993
Series A Bonds. PG&W's First Mortgage Bonds 7% Series due 2017 secure PG&W's
obligations with respect to Luzerne County Industrial Development Authority
Exempt Facilities Revenue Refunding Bonds, 1994 Series A (Pennsylvania Gas and
Water Company Project) (the "1994 Series A Bonds") and will be voted by the
IDA Trustee in accordance with the instructions of the holders of the 1994
Series A Bonds.
No active trading market exists for any series of First Mortgage Bonds.
12
<PAGE>
Except as disclosed below, as of October 10, 1995, no director or officer of
PG&W owned beneficially or otherwise any First Mortgage Bonds or any 1992
Series A Bonds, 1992 Series B Bonds, 1993 Series A Bonds or 1994 Series A
Bonds:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL AGGREGATE PRINCIPAL PERCENT
TITLE OF SERIES OWNER AMOUNT OF BONDS OF CLASS
- --------------- ------------------ ------------------- --------
<S> <C> <C> <C>
1992 Series A Bonds....... Kenneth L. Pollock (1) $3,760,000 7.52%
Kenneth M. Pollock (2) 3,930,000 7.86%
Dean T. Casaday (3) 10,000 *
Thomas J. Koval (4) 10,000 *
Joseph F. Perugino (5) 5,000 *
1993 Series A Bonds....... Kenneth L. Pollock (6) 100,000 *
Kenneth M. Pollock (7) 350,000 1.94%
Ronald W. Simms (8) 100,000 *
Dean T. Casaday (9) 5,000 *
Thomas J. Koval (10) 5,000 *
Vincent A. Bonaddio (11) 10,000 *
</TABLE>
- --------
*Less than 1.0%.
(1) Held jointly with his son, Kenneth M. Pollock and his daughter, Connie
Rado.
(2) Includes $3,760,000 aggregate principal amount held jointly with his
father, Kenneth L. Pollock and his sister, Connie Rado, $30,000 aggregate
principal amount held by Mr. Pollock as custodian for his son, Kenneth L.
Pollock III, $70,000 aggregate principal amount held by Mr. Pollock as
custodian for his daughter, Whitney Pollock and $70,000 aggregate
principal amount held by Mr. Pollock as custodian for his daughter,
Stefanie Pollock.
(3) Held jointly with Mr. Casaday's wife.
(4) Held jointly with Mr. Koval's wife.
(5) Held jointly with Mr. Perugino's wife.
(6) Held by Mr. Pollock as custodian for his grandaughter, Tricia Rado.
(7) Includes $100,000 aggregate principal amount held by Mr. Pollock as
custodian for his son, Kenneth L. Pollock III, $100,000 aggregate
principal amount held by Mr. Pollock as custodian for his daughter,
Whitney Pollock, and $100,000 aggregate principal amount held by Mr.
Pollock as custodian for his daughter, Stefanie Pollock.
(8) Includes $50,000 aggregate principal amount held by Mr. Simms' wife.
(9) Held jointly with Mr. Casaday's wife.
(10) Held jointly with Mr. Koval's wife.
(11) Held jointly with Mr. Bonaddio's wife.
INFORMATION AGENT; FIRST MORTGAGE BONDHOLDER INQUIRIES
D.F. King & Co. Inc. has agreed to serve as Information Agent for the
Solicitation. All deliveries and correspondence to the Information Agent and
all requests for additional copies of this Consent Solicitation Statement, the
Joint Proxy Statement or the form of Consent should be directed to the
following address:
D.F. King & Co. Inc.
77 Water Street
20th Floor
New York, New York 10005
Attention: John Bibas
Telephone No: (212) 269-5550
Facsimile Copy No: (212) 809-8839
13
<PAGE>
ANNEX A
SECTIONS OF THE FIRST MORTGAGE INDENTURE PROPOSED TO BE AMENDED
GRANTING CLAUSE
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That Scranton-Spring Brook Water
Service Company, the Company herein named, in consideration of the premises
and of the mutual covenants herein contained and of the purchase and
acceptance by the holders thereof of the bonds at any time issued hereunder,
and of One Dollar ($1) to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is hereby
acknowledged, and in order to secure the payment of the principal of and
interest on all bonds from time to time outstanding hereunder, according to
the terms of said bonds and of the coupons attached thereto, and to secure the
performance and observance of all the covenants and conditions therein and
herein contained, and to declare the terms and conditions upon and subject to
which said bonds are and are to be issued and secured, hath granted,
bargained, sold, warranted, aliened, remised, released, conveyed, assigned,
transferred, mortgaged, pledged, set over and confirmed, and by these presents
doth grant, bargain, sell, warrant, alien, remise, release, convey, assign,
transfer, mortgage, pledge, set over and confirm unto GUARANTY TRUST COMPANY
OF NEW YORK, as Trustee, and its successor or successors in the trust and its
or their assigns forever, the following property--that is to say:
All property, real, personal and mixed, tangible and intangible, of the
Company whether now owned or hereafter acquired by it (except such property as
is hereinafter expressly excepted from the lien and the operation of this
Indenture).
All real estate and interests in or relating to real estate, plants,
properties and equipment, and all pumping and transmission systems and
facilities, together with all franchises, grants, easements, permits,
privileges, appurtenances, tenements and other rights and property thereunto,
belonging or appertaining, whether now owned by the Company or hereafter
acquired by it and used in its business of manufacturing, storing, transporting
and selling gas, at wholesale or retail, for domestic, commercial, industrial
and municipal use and consumption.
Also, all generators, conveyors, purifiers, holders, power plants, fixtures,
engines, boilers, pumps, meters, transmission and distribution mains, machinery
and equipment used or useful for the manufacture, transmission or distribution
of gas; and all and every character of apparatus whatsoever used or useful for
procuring, manufacturing, transmitting or distributing water or gas; whether the
same or any thereof are now owned by the Company or hereafter acquired by it.
Also, all real estate and interests in real estate acquired by sale or by
merger of subsidiary or constituent companies, now owned or as may be
subsequently acquired by the Company.
The property covered by the lien of this Indenture shall include particularly,
among other property, without prejudice to the generality of the language
hereinbefore or hereinafter contained, the following described property (except
such property as is hereinafter expressly excepted from the lien and operation
of this Indenture):
A-1
<PAGE>
[Property descriptions omitted from text of Annex A.]
Provided, however, that in addition to the reservations and exceptions
herein elsewhere contained, the following are not and are not intended to be
now or hereafter granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, set over or confirmed hereunder and are hereby
expressly excepted from the lien and operation of the Indenture, viz.: all
bills, notes and accounts receivable, cash on hand or in bank, judgments,
contracts, choses in action, operating agreements, existing leases in which
the Company is lessor and renewals thereof; all automobiles and other motor
vehicles; all shares of stock and other certificates or evidences of interest
therein, and all bonds, notes and other evidences of indebtedness or
certificates of interest therein and other securities now owned or hereafter
acquired or possessed by the Company (except securities or obligations
specifically subjected to the lien hereof or required to be pledged by the
terms of this Indenture); all goods, wares, merchandise, equipment, materials
or supplies held or acquired by the Company for the purpose of sale or resale
or leasing to its customers in the ordinary course and conduct of its business
or for the purpose of use or consumption in the operation of any of its
properties and all conditional sales contracts, chattel mortgages or other
contracts resulting from the disposition thereof; and all lands now or
hereafter used as roads, streets, lanes or alleys; provided further, however,
that such property and rights shall (to the extent permitted by law) cease to
be so excepted in the event and as of the date that the Trustee or a receiver
or trustee shall enter upon and take possession of the mortgaged property in
the manner provided in Article 9 hereof.
TO HAVE AND TO HOLD the same, unto the Trustee and its successors and
assigns forever;
SUBJECT, HOWEVER, to permitted encumbrances as hereinafter defined and, as
to any property hereafter acquired by the Company, to any lien thereon
existing, and to any liens for unpaid portions of the purchase money placed
thereon, at the time of such acquisition, and also subject to the provisions
of Article 12;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the
equal and proportionate benefit and security of all present and future holders
of the bonds and coupons, issued and to be issued under this Indenture,
without preference, priority or distinction as to lien (except as any sinking,
amortization, improvement or other fund established in accordance with the
provisions of this Indenture or any indenture supplemental thereto may afford
additional security for the bonds of any particular series) of any of said
bonds over any others thereof by reason of series, priority in the time of the
issue or negotiation thereof, or otherwise howsoever, except as provided in
(S)4.02, it being intended that the lien and security hereby created, of all
of the bonds and coupons, shall take effect from the date of the execution and
delivery hereof, whether all of the bonds shall actually be sold and disposed
of and issued at such date or at some later date, and that the lien and
security of this Indenture shall take effect from the date of the execution
and delivery hereof, as if all of said bonds were actually sold and delivered
to, and in the hands of, innocent holders for value, upon such date, and
shall, in no manner, be altered, impaired, or prejudiced by the creation of
subsequent deeds or mortgages by the Company, its successors or assigns, or by
judgments or liens of any form, in favor of creditors of the Company, whether
all of said bonds shall have been issued or not.
PROVIDED, HOWEVER, and these presents are upon the condition that if the
Company, its successors or assigns, shall pay or cause to be paid unto the
holders of said bonds the principal and interest, and premium, if any, due or
to become due in respect thereof at the times and in the manner stipulated
therein and herein and shall keep, perform and observe all and singular the
covenants and promises in said bonds and in this Indenture expressed to be
kept, performed and observed by or on the part of the Company, then this
Indenture and the estate and rights hereby granted shall cease, determine and
be void, otherwise to be and remain in full force and effect.
A-2
<PAGE>
SECTION 1.02
(S)1.02 (m). The term "gas utility system" shall mean a plant or system,
including any property used in connection therewith, not constructed or erected
by or for the Company, but which prior to the purchase or acquisition thereof by
the Company has been used or operated by others than the Company in the business
of producing, manufacturing, transporting, transmitting, distributing or
supplying gas.
SECTION 1.05
(S)1.05. The term "property additions" shall mean any new or additional
property (including separate and distinct units, plants, systems and
properties), located within the Commonwealth of Pennsylvania, and improvements,
extensions, additions or betterments to or about the plants or properties of the
Company in said Commonwealth--in every case properly chargeable to the gas
utility plant account of the Company, purchased, constructed or otherwise
acquired by the Company subsequent to March 15, 1946, and in every case used or
useful or to be used in the business of impounding, storing, transmitting,
producing, manufacturing, transporting, distributing or supplying gas for any
and all purposes; provided, however, that
(a) Property additions, as so defined, without limitation of the general
import of such term, shall include:
(1) Improvements, extensions, additions or betterments to or about
the properties of the Company in the process of construction or
erection, in so far as actually constructed or erected by the Company
subsequent to March 15, 1946;
(2) Property purchased, constructed or otherwise acquired by the
Company, to renew, replace or in substitution for old, worn out,
retired, discontinued or abandoned property, the retirement of which
has been credited to gas utility plant account of the Company;
(3) Property acquired by the Company subject to prior liens.
(b) Property additions, as so defined, shall not include:
(1) Any shares of stock, bonds, evidences of indebtedness, other
securities, contracts, leases or choses in action;
(2) Going concern value or good will acquired by the Company;
(3) Any plant or system in which the Company shall acquire only a
leasehold interest, or any improvements, extensions or additions upon
or to any plant or system in which the Company shall own only a
leasehold interest;
(4) Any property acquired, made or constructed by the Company in keeping
or maintaining the mortgaged property in good repair, working order and
condition, whose cost is not properly chargeable to gas utility plant
account;
(5) Any goods, wares, merchandise, equipment, materials or supplies
acquired for the purpose of sale or resale or lease in the usual course
of business or for the purpose of consumption in the operation of any
of the properties of the Company; and
(6) Any natural gas wells or natural gas leases or natural gas
transportation lines or other works or property used primarily and
principally in the production of natural gas or its transportation up to the
point of connection with any distribution system.
The term "net property additions" shall at any particular time mean the
aggregate of all property additions up to that time at the cost or fair value
thereof to the Company (whichever is less) after
(A) deducting (1) the aggregate amount of all property retirements, as
hereinafter defined, prior to the date of the particular computation, and
(2) a sum equal to one hundred sixty-six and two-thirds per centum
(166 2/3%) of the principal amount of any outstanding prior lien bonds secured
by a lien on such property
A-3
<PAGE>
additions, which prior lien bonds have not theretofore been deducted in
computing the amount of other net property additions which have been
funded; and
(B) adding to the balance so arrived at an amount equal to the aggregate
of
(a) the cash and the principal amount of any purchase money
obligations then held by the Trustee hereunder, or by the trustee or
other holder of a prior lien, and representing the proceeds of
insurance on or the release or sale of or the taking by eminent domain
of any property classified as retired prior to the date of the
particular computation, and
(b) the amount of any cash which shall have been so received by the
Trustee, to the extent that such cash shall theretofore have been used
by the Trustee for the purpose of purchasing and/or redeeming bonds in
accordance with the provisions of subdivisions (2) and (3) of (S)8.11
or of paying any bonds at maturity, and the amount of any cash so
received by the trustee or other holder of a prior lien and applied by
it for the purpose of paying, purchasing and/or redeeming indebtedness
secured by such prior lien;
provided, however, that the aggregate of the amounts added under Clause (B)
above shall in no event exceed the amounts deducted under Clause (A) above.
Anything herein contained to the contrary notwithstanding, any property
additions which shall have been certified to the Trustee at any time as a
basis for the authentication and delivery of bonds or for the withdrawal of
cash under any of the provisions of this Indenture, or the basis of a credit
taken under (S)4.10, or have been the subject of a waiver of the right to the
authentication and delivery of bonds under and to the extent provided in
(S)4.16, and having a cost or fair value, whichever shall be applicable under
the respective provisions of this Indenture, in excess of (1) the amount
thereof required by the provision of this Indenture as a basis for the
authentication and delivery of the bonds applied for, or for the withdrawal of
the cash applied for, under any of the provisions of the Indenture except
(S)4.10 or (S)8.11, or as the basis of a credit taken under (S)4.10, or (2)
one hundred sixty-six and two-thirds per centum (166 2/3%) of the principal
amount of bonds the authentication and delivery of which have been waived
pursuant to said (S)4.16, or (3) the amount which would be required by the
provisions of this Indenture as the basis for the withdrawal of cash under
(S)4.10 or (S)8.11 if net property additions were required to be shown under
said Sections as the basis for such withdrawal of cash, shall to the extent of
such excess be available upon any subsequent application as a basis for the
authentication and delivery of bonds or the withdrawal of cash under any of
the provisions of this Indenture, or the basis of a credit taken under
(S)4.10, or for an application for a waiver under said (S)4.16. The amount of
any such excess is hereinafter sometimes referred to as the "unapplied balance
of property additions". Whenever any unapplied balance of property additions
is included in any engineer's certificate or certificate of the Company
executed and delivered to the Trustee in connection with the authentication
and delivery of bonds hereunder or the withdrawal of cash under any provision
of this Indenture, or the taking of credit under (S)4.10, or a waiver under
(S)4.16, and if there are also included in such certificate other property
additions not embraced within the unapplied balance of property additions, the
amount of such unapplied balance of property additions shall be deemed to be
the amount first utilized for the purpose for which such certificate shall be
executed and delivered, before the amount of the other property additions
included in such certificate shall be deemed to be utilized for such purpose.
The term "property retirements" shall mean the cost of all mortgaged
property owned by the Company on March 15, 1946, the cost of all funded
property additions (except property additions the fair value of which at the
time the same became funded property was less then the cost, in which latter
case such fair value shall be used in lieu of cost) which, in either case,
shall prior to the date of the particular computation and subsequent to March
15, 1946 have been either retired or abandoned; but shall not include the cost
of property sold or taken by eminent domain which had not, prior to such sale
or taking, been classified as retired pursuant to the covenant contained in
the last paragraph of (S)4.10, except to the extent that the cost of such
property sold or taken exceeds the proceeds of such sale or taking.
A-4
<PAGE>
The term "cost" as used herein shall mean:
(a) As to any property owned by the Company on March 15, 1946, the book
value thereof as of that date (or the estimated book value as of that date
in the case of property the book value of which is not specifically shown
by the books of the Company), without deducting therefrom applicable
reserves for depreciation and/or retirements as of that date; provided,
however, that in the event any regulatory body having jurisdiction shall
require or approve a change in the book value of any such property as shall
not have, at or prior to the time of such change, permanently ceased to be
used or useful in the business of the Company, the value as so changed
shall be treated as the book value as of March 15, 1946, not less, however,
than the cash cost of such property to the person or corporation (or their
affiliates) first devoting such property to public use;
(b) As to any property acquired after March 15, 1946, the cost (estimated
if not separately ascertainable) to the Company which shall be deemed to be
the sum of (1) any cash forming a part of such cost, (2) an amount
equivalent to the fair value (being the fair market value, if any, as of
the date of delivery) of any securities or the fair value of any other
property delivered in payment or exchange therefor or for the acquisition
thereof, (3) whichever shall be the lesser of either (a) an amount
equivalent to the principal amount of any indebtedness (whether or not
assumed by the Company) secured by prior lien upon such property additions
outstanding at the time of, or reserved by the vendor or created by the
Company at the time of, the acquisition of such property or (b) the
aggregate of the amounts, if any expended by the Company (exclusive of
premium and accrued interest) to procure the satisfaction or discharge of
any such indebtedness or to cause the lien securing the same to become a
prepaid lien, and (4) the principal amount of any unsecured indebtedness
assumed by the Company as part of the consideration for the acquisition
thereof, or, if the amount be less, the amount actually expended by the
Company to secure the discharge thereof.
SECTION 1.06
(S)1.06. The term "net earnings certificate" shall mean a certificate signed
and verified by an accountant or an independent public accountant as provided
in subdivision (6) of (S) 3.06, stating (subject to the provisions of
(S)12.04):
(A) The net earnings of the Company for any period of twelve (12)
consecutive calendar months within the fifteen (15) calendar months
immediately preceding the first day of the month in which the application
in connection with which a net earning certificate is required under this
Indenture is made, showing how the same have been calculated, and to that
end specifying
(1) The aggregate of the gross operating revenues derived from the gas
business of the Company;
(2) The aggregate of the operating expenses of such business, including
therein (a) administration expenses other than those charged to capital
account or surplus, (b) taxes, other than income, profits and other taxes
measured by or dependent on net income for the determination of liability in
respect of which the amount payable by way of interest is a deductible item,
(c) assessments, rentals, license charges and insurance, and (d) in lieu of
the amount actually expended for current repairs and maintenance, and
provision for reserves for renewals, replacements, depreciation, depletion
or retirement of property, or provision for amortization of property, there
shall be included in such operating expenses an amount equal to fifteen per
centum (15%) of the gross gas operating revenues, being the Standard of
Expenditure, as said term is defined in (S)4.10; but excluding from such
operating expenses any expenses or provisions for interest on any
indebtedness of the Company or for any sinking or improvement or similar
fund for the retirement of any indebtedness or the amortization of debt
discount and expense;
(3) The net non-operating income of the Company; and
(4) The net operating revenue derived by the Company from all sources
other than the gas business of the Company.
A-5
<PAGE>
The net earnings of the Company shall be the sum obtained by deducting the
amount required to be stated in Clause (2) above from the amount stated in
Clause (1) and adding to the balance so obtained the sum of the amounts stated
in Clauses (3) and (4); provided, however, that profits or losses resulting from
the sale or disposal of capital assets or securities shall not be taken into
account in the calculation of net earnings; and provided further, that of the
net earnings of the Company not more than fifteen per centum (15%) in the
aggregate may consist of (a) net non-operating income, and (b) net operating
revenue from all sources other than the gas business of the Company; and in the
event that such income and revenue referred to in (a) and (b) shall in the
aggregate exceed fifteen per centum (15%) of such net earnings, then the amount
of any such excess shall be separately stated and shall, for the purposes of any
net earnings certificate under this Indenture, be excluded from the computation
of net earnings; and
(B) The annual interest requirements upon (1) all bonds outstanding
hereunder at the date of such certificate, except any bonds for the
payment, retirement or redemption of which the bonds then applied of are to
be issued, (2) bonds then applied for in the application in connection with
which such certificate is made and those applied for in any other pending
application, and (3) the principal amount of all other indebtedness (except
indebtedness secured by prepaid liens) outstanding on the date of such
certificate and secured by a prior lien, except any indebtedness for the
payment, retirement or redemption of which the bonds then applied for are
to be issued.
If any of the property of the Company owned by it at the time of the making
of any net earnings certificate shall consist of a plant or system (including
any property used in connection therewith) which shall have been acquired
during or after any period for which net earnings are to be computed, the
actual net earnings or net losses of such property (computed in the manner
specified in this Section for the computation of the net earnings of the
Company, but eliminating all intercompany items, if any) during such period or
such part of such period as shall have preceded the acquisition thereof, to
the extent that the same have not otherwise been included, and unless such
property shall have been acquired in exchange or substitution for property the
earnings of which have been included, shall be treated as net earning or net
losses of the Company for all purposes of this Indenture.
The term "repairs" as used in this Section shall include all renewals which,
in the ordinary practice of companies carrying on a business similar to that
of the Company, are charged to current maintenance, repairs, or other
operating expense account.
SECTION 3.06
(S)3.06. No application by the Company to the Trustee for the authentication
and delivery of bonds hereunder upon the basis of property additions shall be
granted by the Trustee until the Trustee shall have received:
(1) A certified resolution of the Board of Directors requesting the
Trustee to authenticate and deliver bonds, (a) specifying the aggregate
principal amount of bonds applied for, the series and denominations
thereof, and any other matters with respect thereto required by this
Indenture, and (b) specifying the officer or officers of the Company to
whom, or upon whose written order, such bonds shall be delivered;
(2) A certificate of the Company stating that the Company is not to the
knowledge of the signers in default under any of the provisions of this
Indenture;
(3) An engineer's certificate made and dated not more than sixty (60)
prior to the date of such application;
(A) showing the amount, if any, of the unapplied balance of property
additions included in the most recent engineer's certificate, if any,
theretofore filed with the Trustee pursuant to this subdivision (3),
(S)4.10, (S)4.16 or (S)8.11; and stating the current fair value to the
Company, in the opinion of the signer, of such unapplied balance of
property additions, based upon a current redetermination by the signer
of the fair value to the Company, in his opinion, of all the property
additions involved in the determination of such unapplied balance of
property additions; and in the case of property additions of
A-6
<PAGE>
the nature described in subdivision (4) of this (S)3.06, there shall
also be furnished to the Trustee a certificate of an independent
engineer stating the fair value to the Company of such property
additions;
(B) specifying the property additions purchased, constructed or
otherwise acquired by the Company since the close of the period covered
by the most recent certificate, if any, referred to in the preceding
Clause (A) (or, if no such prior certificate has been filed, then since
March 15, 1946); and stating whether, and if so to what extent, such
property additions consist of funded property; and as to such property
additions:
(a) describing such property additions in reasonable detail and by
classified fixed capital accounts then in use by the Company;
stating the cost thereof; stating whether such property additions
include any additional tract or parcel of real estate; and stating
that all such property additions are property additions as defined
in (S)1.05;
(b) stating, except as to property additions acquired, made or
constructed wholly through the delivery of securities, or the
transfer of other property, that the amount of cash forming all or
part of the cost thereof was equal to or more than an amount to be
stated therein;
(c) briefly describing with respect to any such property additions
acquired, made or constructed in whole or in part through the
delivery of securities or the transfer of other property, the
securities or other property so delivered or transferred and stating
the date of such delivery or transfer;
(d) stating the principal amount of any unsecured indebtedness
assumed by the Company as part of the consideration for the
acquisition of any of such property additions, or, if the amount be
less, the amount actually expended by the Company to secure the
discharge thereof;
(e) specifying the nature and extent of all prior liens, and the
principal amount of all indebtedness secured thereby, existing upon any of
such property additions at the time of the acquisition thereof, and
stating (1) which, if any, of such prior liens have, at or prior to the
date of the certificate, become prepaid liens, or (2) whether any or all
of the indebtedness secured thereby has been satisfied or discharged, and
stating the aggregate of the amounts, if any, expended (excluding any sums
expended in respect of premium or accrued interest) by the Company to
procure the satisfaction or discharge of any such indebtedness, or to
cause the liens securing the same to become prepaid liens; and (3) if and
to the extent that bonds applied for are to be issued against property
additions subject to prior liens which have not become prepaid liens or
which have not been satisfied or discharged, then stating that the
engineer's certificate called for by (S) 4.16 has been filed with the
Trustee with respect thereto, and showing that the acquisition of such
property subject to a prior lien was permitted by the provisions of said
(S) 4.16 and of (S)4.18;
(f) stating that there is no outstanding indebtedness of the
Company or of others known, after due inquiry, to the Company, for
the purchase price or construction of, or for labor, wages or
materials in connection with the construction of, such property
additions, which could become the basis of a lien upon said property
additions, prior to the lien of this Indenture, which in the opinion
of the signers of said certificate might materially impair the
security hereof;
(g) stating, except as to such property additions in respect of
the fair value to the Company of which a statement is to be made in
an independent engineer's certificate as provided for in subdivision
(4) of this Section, the then fair value to the Company of such
property additions;
(h) stating what part if any of such property additions includes a
gas utility system or systems, and showing the cost and the then fair
value to the Company of such a gas utility system or systems and
whether such fair value is in excess of one per centum (1%) of the
aggregate principal amount of the bonds at the time outstanding
hereunder, and if any of such property additions includes a gas
utility system, the cost thereof may include all or part of the cost
of any rights and intangible property simultaneously acquired with
such utility system for which no separate or distinct consideration
shall have been paid or apportioned, and in such case the term
property additions, as defined herein, may include such rights and
intangible
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property (except going concern value or good will); and in
determining the fair value of such utility system it shall be proper
to include as an element of value thereof an amount deemed proper by
the signers of said certificate for such rights and intangible
property as aforesaid;
(C) stating the aggregate amount of all property retirements made up
to the close of the period covered by the engineer's certificate then
being made and since the close of the period covered by the most recent
certificate, if any, referred to in the preceding Clause (A) (or, if no
such prior certificate has been filed, then since March 15, 1946);
(D) stating the aggregate amount of (i) the cash plus the principal
amount of any purchase money obligations then held by the Trustee
hereunder, or by the trustee or other holder of a prior lien, and
representing the proceeds of insurance on or the release or sale of or
the taking by eminent domain of any property referred to in the
preceding Clause (C), and (ii) the amount of any such cash which shall
have been received by the Trustee and shall theretofore have been used
by it for the purpose of purchasing and/or redeeming bonds in
accordance with the provisions of subdivisions (2) and (3) of (S)8.11
or of paying any bonds at maturity, plus the amount of any such cash
received by the trustee or other holder of a prior lien and applied by
it for the purpose of paying, purchasing and/or redeeming indebtedness
secured by such prior lien;
(E) showing the amount of the net property additions available as a
basis for the authentication and delivery of bonds pursuant to (S)3.04,
by adding to the amount of the unapplied balance of property additions
shown by Clause (A) above the amount of the net property additions,
determined on the basis of the amounts shown by Clauses (B), (C) and
(D) above; and
(F) showing the unapplied balance, if any, of property additions
(remaining after giving effect to the particular application) and the
manner computing the same;
(4) In case any property additions certified pursuant to Clause (B) of
subdivision (3) above are shown by such engineer's certificate to include a
gas utility system and such certificate shows that the then fair value to the
Company of such system is not less than $25,000 and not less than one per
centum (1%) of the aggregate principal amount of the bonds at the time
outstanding hereunder, and that such system has within six months prior to the
date of acquisition thereof by the Company been used or operated by a person
or persons other than the Company in a business similar to that in which it
has been or is to be used or operated by the Company, an independent
engineer's certificate stating, as to such system, the then fair value thereof
to the Company in the opinion of signer, together with the signer's report
thereon which shall contain a brief statement of the conditions governing the
signer's determination of such fair value and a brief statement of the
condition, serviceability and location of such system, and such certificate
shall cover the fair value to the Company of any system (if there be any) so
used or operated, which has been subjected to the lien hereof as a basis for
the authentication and delivery of bonds, the withdrawal of cash, or the
release of property subject to lien hereof, since the commencement of the then
current calendar year, and as to which a certificate of an independent
engineer has not previously been furnished; and, in determining any such fair
value, it shall be proper in the case of any such gas utility system to
include as an element of the value thereof an amount deemed proper by said
engineer for any rights and intangible property (except going concern value or
good will) simultaneously acquired with such system for which no separate or
distinct consideration shall have been paid or apportioned;
(5) In case any property additions are shown by the engineer's
certificate provided or in subdivision (3) to have been acquired, made or
constructed in whole or in part through the delivery of securities or other
property, an engineer's certificate stating in the opinion of the signer
the fair value of such securities (being the fair market value, if any) and
other property at the time of delivery thereof in payment for or for the
acquisition of such property additions;
(6) A net earnings certificate by an accountant (who may be the chief
accounting officer of the Company), dated not more than ten (10) days prior
to the filing with the Trustee of such application, certifying the amount
of the net earnings of the Company to be as required by (S)3.05, and
showing the calculation of such net earnings in the manner set forth in
(S)1.06. Said certificate shall, subject to the
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provisions of subdivision (j) of (S)1.03, be made by an independent public
accountant (who may be the accountant or accountants otherwise employed by
the Company to audit its accounts), selected or approved by the Trustee in
the exercise of reasonable care, if the aggregate principal amount of bonds
then applied for plus the aggregate principal amount of bonds authenticated
and delivered since the commencement of the then current calendar year
(other than those with respect to which a certificate of an accountant is
not required or with respect to which a certificate of an independent
public accountant has previously been furnished) is ten per centum (10%) or
more of the aggregate principal amount of bonds at the time outstanding;
(7) An opinion of counsel stating
(a) that he has examined the application and other documents being
furnished in connection with the authentication and delivery of the
bonds applied for; that the instruments which have been or are
therewith delivered to the Trustee conform to the requirements of this
Indenture and constitute sufficient authority under this Indenture for
the Trustee to authenticate and deliver the bonds applied for; and
that, on the basis thereof, the bonds applied for any be lawfully
authenticated and delivered under this Article;
(b) that this Indenture has been duly recorded or filed, which
together with certain instruments of conveyance, assignment or
transfer, specified in such opinion, will be sufficient to subject to
the lien of this Indenture the property additions certified pursuant to
Clause (B) of subdivision (3) above, subject to no lien thereon prior
to the lien of this Indenture, except liens of prior liens or prepaid
liens (if any) described in the accompanying engineer's certificate,
and permitted encumbrances, or stating that no such instruments are
necessary for such purpose; and that, upon the recordation in the
manner stated in such opinion of the instruments so specified, if any,
or without such recordation, if none is so specified, and upon such
further recording or filing of this Indenture or any supplemental
indenture in the manner stated in such opinion, or without any such
further recordation or filing if such opinion shall so state, no
further recording or re-recording or filing or refiling of this
Indenture or any other instrument is required to maintain the lien of
this Indenture with respect to such property additions as against any
creditors or subsequent purchasers;
(c) that (except as to paving, grading and other improvements in or
upon any public street, road or highway, which are required to be made
by the Company in connection with the conduct of its business) the
Company had acquired good and valid legal title to such property
additions which are still owned and have not been retired by the
Company, and that the same and every part thereof are free and clear
all liens, charges and encumbrances prior to the lien of this
Indenture, except the prior liens or prepaid liens (if any) described
in the accompanying engineer's certificate, and permitted encumbrances;
(d) that (except as to paving, grading and other improvements in or
upon any public street, road or highway, which are required to be made
by the Company in connection with the conduct of its business), this
Indenture is, or upon the delivery of the instruments of conveyance,
assignment or transfer, if any, specified in said opinion will be, a
lien on all the property additions certified pursuant to Clause (B) of
subdivision (3) above which are still owned and have not been retired
by the Company, subject to no lien thereon prior to the lien of this
Indenture, except the prior liens or prepaid liens (if any) described
in the accompanying engineer's certificate, and permitted encumbrances;
(e) that the Company has corporate authority and all necessary
permission from governmental authorities to acquire, own, use and
operate such property additions;
(f) that the issue of the bonds, the authentication and delivery of
which are being applied for, has been duly authorized by any and all
governmental authorities the consent of which is requisite to the legal
issue of such bonds, specifying any duly certified documents by which
such consent is or may be evidenced, or that no such consent is
requisite, that the Company is duly authorized and entitled to issue
such bonds in accordance with the provisions of this Indenture and the
laws of the Commonwealth of Pennsylvania, and the applicable laws of
any other jurisdiction, that the issue of
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such bonds has been duly authorized by the Company, that upon the issue
of such bonds, such bonds will be the valid and binding obligations of
the Company, and that the aggregate principal amount of bonds then
outstanding under this Indenture will not exceed the amount at the time
permitted by law, and specifying the certificate or other evidence
which will be sufficient to show compliance with the requirements, if
any, of any mortgage recording tax law or other tax law applicable to
the issuance of such bonds, or stating that there are no such legal
requirements; and
(g) that the general nature and extent of prior liens and prepaid
liens and the principal amount of the then outstanding indebtedness
secured thereby, if any, mentioned in the accompanying engineer's
certificate, are correctly stated; and
(8) The instruments of conveyance, assignment and transfer, if any, and
the duly certified documents, if any, specified in the opinion of counsel
provided for in subdivision (7) above;
(9) An engineer's certificate, made and dated not more than ten (10) days
prior to the date of such application, stating that the signer has no
knowledge of and does not believe that there have been, since the close of
the period covered by the engineer's certificate specified in subdivision
(3) above, property retirements in an amount exceeding property additions
since the close of said period by more than the amount of the unapplied
balance of property additions calculated to be remaining upon the granting
of the application; and
(10) A certificate of the Company and an opinion of counsel as to
compliance with conditions precedent.
SECTION 3.07
(S)3.07. The Trustee shall from time to time upon request of the Company
authenticate and deliver bonds hereunder of an aggregate principal amount
equal to the aggregate principal amount of any bonds (except as otherwise
provided in this Section) theretofore authenticated and delivered under this
Indenture that shall have been paid, retired, redeemed or cancelled or
surrendered to the Trustee for cancellation after the date of the consummation
of the sale by Pennsylvania Enterprises, Inc. ("PEI") and the Company of the
Company's regulated water utility operations and certain related assets (the
"Sale of the Water Business") to Pennsylvania-American Water Company ("PAWC")
pursuant to an Asset Purchase Agreement dated as of April 26, 1995 (the "Asset
Purchase Agreement") among PEI, the Company, PAWC and American Water Works
Company, Inc., or for the payment, retirement or redemption of which moneys in
the necessary amount shall have been deposited with, or shall then be held by,
the Trustee (with irrevocable direction and authorization satisfactory to the
Trustee so to apply the same, and, as regards bonds to be redeemed, either
with proof satisfactory to the Trustee that notice of redemption has been duly
given or with irrevocable authorization to the Trustee to give such notice of
redemption), but only after the Trustee shall have received:
(1) a certified resolution such as is described in subdivision (1) of
(S)3.06;
(2) A certificate of the Company stating (a) that the Company is not to
the best of the knowledge and belief of the signers in default under any of
the provisions of this Indenture; and (b) that bonds theretofore
authenticated and delivered under this Indenture of a specified aggregate
principal amount (not less than the aggregate principal amount of bonds for
which such request for authentication and delivery is made under this
Section) have been paid, retired, redeemed or canceled or concurrently with
the authentication and delivery of the bonds requested will be surrendered
to the Trustee for cancellation after the date of the consummation of the
Sale of the Water Business (otherwise than upon exchanges or transfers of
bonds) and/or that moneys in the necessary amount for the payment,
retirement or redemption thereof are then held by or will be deposited with
the Trustee prior to or concurrently with the authentication and delivery
of the bonds so requested (with irrevocable direction and authorization
satisfactory to the Trustee so to apply the same, and, as regards bonds to
be redeemed, either with proof satisfactory to the Trustee so to apply the
same, and, as regards bonds to be redeemed, either with proof satisfactory
to the Trustee that notice of redemption has been duly given or with
irrevocable authorization to the Trustee to give such notice of
redemption), and further stating that no part of such aggregate principal
amount of bonds has been
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theretofore made the basis under any of the provisions of this Indenture
for the authentication and delivery of bonds or the withdrawal of cash or
the taking of a credit under subdivision (3) of (S)4.10, and that none of
such bonds has been retired by the use of the proceeds of any insurance on
any funded property or the proceeds of the release or other disposition of
any part of the funded property, or through the operation of any sinking,
improvement or other fund applicable to such retirement, except, as regards
any such fund, to the extent, if any, that the provisions establishing such
fund may expressly permit the issuance of bonds under this Section in
respect of bonds retired through the operation of such fund; and further
stating the interest rate or rates and the maturity date or dates borne by
all such bonds so cancelled or so to be surrendered for cancellation or
which are to be so paid, retired or redeemed or money for the retirement or
redemption of which is to be so deposited; and
(3) An opinion of counsel stating
(a) that he has examined the application and other documents being
furnished in connection with the authentication and delivery of the
bonds applied for; that the instruments which have been or are
therewith delivered to the Trustee conform to the requirements of this
Indenture and constitute sufficient authority under this indenture for
the Trustee to authenticate and deliver the bonds applied for; and
that, on the basis of the payment, retirement, redemption, cancellation
or surrender for cancellation of bonds or the deposit of moneys in
accordance with the certificate of the Company delivered to the Trustee
pursuant to subdivision (2) of this Section, the bonds applied for may
be lawfully authenticated and delivered under this Article; and
(b) that the issue of the bonds, the authentication and delivery of
which are being applied for, has been duly authorized by any and all
governmental authorities the consent of which is requisite to the legal
issue of such bonds, specifying any duly certified documents by which
such consent is or may be evidenced, or that no consent is requite,
that the Company is duly authorized and entitled to issue such bonds in
accordance with the provisions of this Indenture and the laws of the
Commonwealth of Pennsylvania, and the applicable laws of any other
jurisdiction, that the issue of such bonds has been duly authorized by
the Company, that upon the issue of such bonds, such bonds will be the
valid and binding obligations of the Company and that the aggregate
principal amount of bonds then outstanding under this Indenture will
not exceed the amount at the time permitted by law, and specifying the
certificate or other evidence which will be sufficient to show
compliance with the requirements, if any, of any mortgage recording tax
law or other tax law applicable to the issuance of the bonds applied
for, or stating that there are no such legal requirements;
(4) The duly certified documents, if any, specified in the opinion of
counsel provided for in subdivision (3) of this Section; and
(5) A certificate of the Company and an opinion of counsel as to
compliance with conditions precedent;
provided, however, that no additional bond shall be authenticated and
delivered pursuant to this Section more than two years prior to the stated
maturity of the bond (hereinafter called the retired bond) in respect of the
payment, retirement, redemption, cancellation or surrender for cancellation of
which the authentication and delivery of such additional bond is applied for,
unless such additional bond bears no greater rate of interest than such
retired bond, or, if such additional bond bears a greater rate of interest
than such retired bond, unless the Trustee shall have received a net earnings
certificate and unless such net earnings certificate shall show the net
earnings of the Company to be as required by (S)3.05; and provided further,
that no additional bond shall be authenticated and delivered pursuant to this
Section in respect of the payment, retirement, redemption, cancellation or
surrender for cancellation of any bond the interest charges on which have been
excluded from any net earnings certificate filed with the Trustee since the
payment, retirement, redemption, cancellation or surrender for cancellation of
such bond, unless the Trustee shall have received, in connection with the
authentication and delivery of such additional bond, a net earnings
certificate and unless such net earnings certificate shall show the net
earnings of the Company to be as required by (S)3.05.
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Any and all coupon bonds delivered to the Trustee pursuant to this Section
shall have attached thereto all unmatured coupons appertaining thereto.
SECTION 4.07
The Company hereby covenants as follows:
* * * *
(S)4.07. That it will, subject to the provisions of Article 12 hereof and of
this Section, at all times maintain its corporate existence and right to carry
on business and that its business will be continuously carried on and
conducted in an efficient manner; that it will in good faith use its best
efforts to preserve, maintain and renew all the rights, privileges and
franchises pertaining to the water and gas business to it granted and upon it
conferred and it will at all times maintain, preserve and keep the mortgaged
property with the appurtenances thereto and every part and parcel thereof, in
thorough repair, working order and condition, and from time to time make all
needful and proper repairs and renewals, so that its properties mortgaged or
intended to be mortgaged hereunder shall at all times be maintained as an
operating system or systems in good repair, working order and condition, and
so that at all times the value of the security for the bonds issued hereunder
and the efficiency of the plants and properties of the Company shall be fully
preserved and maintained.
Nothing in this Section contained shall be held to prevent the Company from
discontinuing the operation of any of its plants, works or properties, if, in
the judgment of the Board of Directors, it is no longer advisable to operate
the same, or if the Company intends to sell or dispose of the same and within
a reasonable time shall endeavor to effectuate such sale or disposition; nor
shall anything in this Section contained be considered to prevent the Company
from taking such action with respect to its plants, works and properties as is
proper under the circumstances, including the cessation or omission to
exercise rights, permits, licenses, privileges or franchises which, in the
judgment of the Board of Directors, can no longer be profitably exercised or
availed of.
SECTION 4.10
The Company hereby covenants as follows:
* * * *
(S)4.10. That, so long as any of the bonds of the 2 7/8% Series due 1976,
the 3 1/2% Series due 1982, the 4 7/8% Series due 1987, the 4 3/4% Series due
1983, the 5 1/2% Series due 1985, the 5% Series due 1986, the 4 5/8% Series due
1988, the 5 7/8% Series due 1991, the 9% Series due 1991, the 6 7/8% Series due
1992, the 10% Series due 1995, the 9 1/4% Series due 1996, the 8% Series due
1997, the 9.57% Series due 1996, the 9.23% Series due 1999, the 9.34% Series due
2019, the 7.20% Series due 2017, the 8.375% Series due 2002, the 7.125% Series
due 2002, the 6.05% Series due 2019 and the 7% Series due 2017 shall remain
outstanding, the Company will, for each calendar year, beginning January 1, 1946
(hereinafter sometimes called the "accounting period"), pay to the Trustee on or
before the 1st day of May next succeeding the close of each accounting period,
as a Maintenance and Replacement Fund, an amount in cash (hereinafter sometimes
called the "Standard of Expenditure") not less than fifteen per centum (15%) of
the gross gas operating revenues (as hereinafter defined) derived from the
mortgaged property during the accounting period, less, however, to the extent
that the Company desires to take the same, the following credits stated in the
certificate of the Company hereinafter in this Section provided for:
(1) All amounts expended during the accounting period for repairs and
maintenance of the mortgaged property;
(2) The cost of property additions (not theretofore funded) acquired,
made or constructed during the accounting period (less one hundred sixty-
six and two-thirds per centum (166 2/3%) of the principal amount of any
outstanding prior lien bonds which are secured by a lien on such property
additions and have not theretofore been deducted in computing the amount of
net property additions which have been funded) to renew or replace, or in
renewal, replacement or substitution for, or in lieu of any of the
mortgaged property retired or abandoned since March 15, 1946 up to the
close of the accounting period, and not renewed or replaced prior to the
beginning of the accounting period, and for this purpose any property
additions made, acquired or constructed during the accounting period shall
be deemed to be in renewal, replacement or substitution for or in lieu of
such property so retired or abandoned and not so renewed or replaced to an
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amount equivalent to the property retirements resulting from the retirement
or abandonment of such property (and for this purpose the certificate of
the Company hereinafter required shall set forth the amount of such
property retirements and the cost of such property additions deemed to be
in renewal, replacement, or substitution or in lieu of such property
retirements).
The taking of a credit under this subdivision (2), although the property
additions forming the basis of such credit thereby become funded, shall not
prevent or preclude the use of the amount of such credit as an offset or
reduction of property retirements for the purpose of the computation of net
property additions, such use being expressly granted hereby; or, stated
alternatively, the amount of the property additions forming the basis of
the credit under this subdivision (2), although such property additions
thereby become funded, are nevertheless additions from which retirements
are deducted in the computation of net property additions; for example, if
the Company should take a credit under this subdivision (2) in the amount
of $100,000 by reason of having expended $200,000 for property additions
and retired property having a cost of $100,000 the net property additions
would be $100,000.
(3) The principal amount of all bonds hereby secured and one hundred
sixty-six and two-thirds per centum (166 2/3%) of the principal amount of
all prior lien bonds, retired or redeemed and cancelled after the date of
the consummation of the Sale of the Water Business and for which no bonds
have been or will be issued or other credit taken or cash withdrawn under
any of the provisions of this Indenture; and
(4) Any net property additions which, under the provisions of Article 3
hereof, might otherwise be made the basis of the issue of bonds hereunder
and which the Company elects to make the basis of a credit under this
Section. In case credit under this (S)4.10 is taken in whole or in part
upon the basis of net property additions, the Company shall comply with all
provisions of this Indenture which would be applicable if such net property
additions were made the basis of an application for the authentication of
bonds (except that credit on the basis of net property additions shall be
to the extent of one hundred per centum (100%) thereof instead of sixty per
centum (60%) as provided in (S)3.04). In any such case the Company shall
file with the Trustee appropriate documents evidencing compliance with all
such applicable provisions, provided, however, that in no such case shall
the Company be required (a) to deliver to the Trustee any resolution or
documents such as are described in subdivisions (1), (2) and (6) of (S)3.06
or any opinions with respect to the authorization by governmental
authorities or by the Company of the issue of bonds or with respect to tax
laws applicable to the issue of bonds, or (b) to comply with any earnings
requirements; and provided, further, that with respect to the calendar year
in which the Sale of the Water Business is consummated, there shall be
deemed to be two accounting periods for purposes of the calculations set
forth in this Section, the first of which (the "Pre-Sale Period") shall
commence on January 1 of that year and shall continue until the date
immediately preceding the date of the consummation of the Sale of the Water
Business and the second of which (the "Post-Sale Period") shall commence
immediately following the consummation of the Sale of the Water Business
and end on December 31 of that year; and provided further, that all
calculations made under this (S)4.10 (x) with respect to the Pre-Sale
Period shall be made in accordance with the provisions of this Section as
in effect on the date prior to the date of the consummation of the Sale of
the Water Business and (y) with respect to the Post-Sale Period shall be
made in accordance with the provisions of this Section as in effect
immediately following the consummation of the Sale of the Water Business.
On or before the first day of May next succeeding each accounting period,
the Company shall file with the Trustee a certificate of the Company, stating
(a) the amount of the gross gas operating revenues of the mortgaged property
during such accounting period; (b) the Standard of Expenditure during such
accounting period; (c) to the extent that the Company desires to take the same,
the credits provided for under subdivisions (1), (2), (3) and (4) of this
Section separately stated; (d) the excess credit, if any, hereinafter in this
(S) 4.10 defined, shown by the last preceding certificate of the Company filed
hereunder, provided, however, that as of the date of the consummation of the
Sale of the Water Business, the cumulative excess credit balance shown by the
last preceding certificate of the Company (the certificate for the Pre-Sale
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Period) shall be deemed to be zero and the Company's calculation of excess
credits for the Post-Sale Period and all subsequent periods shall include only
the amount of excess credits after the date of the consummation of the Sale of
the Water Business, and (e) the amount of the balance, if any, of the amount set
forth under (b) remaining after deducting the credits set forth under (c) and
(d).
The Company shall at the time of delivery of such certificate of the Company
pay to the Trustee as additional security for the bonds issued and to be
issued hereunder the amount of the balance, if any, shown under (e) of such
certificate. The delivery by the Company to the Trustee of outstanding bonds,
either secured hereby or secured by a prior lien, in each case with their
appurtenant unmatured coupons if such bonds be coupon bonds, shall be deemed
equivalent under this Section to the payment of cash to an amount equal to the
aggregate principal amount of bonds so delivered in the case of bonds
outstanding hereunder, and to an amount equal to one hundred sixty-six and two-
thirds per centum (166 2/3%) of the aggregate principal amount of outstanding
prior lien bonds so delivered.
Any moneys constituting any part of the Maintenance and Replacement Fund, at
the option and upon the request of the Company, expressed by a certified
resolution, shall be applied by the Trustee to the purchase or redemption of
any bonds issued hereunder of such series as may be designated by the Company,
such purchase to be in the manner and as provided in (S)8.12 and such
redemption to be in the manner and as provided in Article 5 hereof. Any moneys
constituting any part of the Maintenance and Replacement Fund may be withdrawn
by the Company upon the delivery to the Trustee of bonds outstanding hereunder
or outstanding prior lien bonds, with their appurtenant unmatured coupons if
such bonds be coupon bonds, in an amount equal to the aggregate principal
amount of bonds outstanding hereunder, so delivered or one hundred sixty-six
and two-thirds per centum (166 2/3%) of the aggregate principal amount of
prior lien bonds so delivered. All bonds issued hereunder, purchased or
otherwise acquired by or delivered to the Trustee for the Maintenance and
Replacement Fund, shall forthwith be canceled, and the Trustee shall thereupon
deliver such bonds to or upon the order of the Company. Any bonds so canceled
shall not thereafter be made the basis for the issue of bonds or the
withdrawal of cash or the taking of a credit under any of the provisions of
this Indenture.
Any moneys constituting any part of the Maintenance and Replacement Fund may
be withdrawn from time to time by the Company to reimburse it for net property
additions acquired or constructed by the Company, which under the provisions
of (S)3.02, (S)3.03, (S)3.04, (S)3.05 and (S)3.06 might otherwise be made the
basis of the issue of bonds hereunder, except that such moneys shall be
withdrawn to the extent of one hundred per centum (100%) thereof instead of
sixty per centum (60%) as provided in (S)3.04, upon delivery to the Trustee of
the written request of the Company, expressed by a certified resolution, and
such certificates, opinions, instruments and other documents as would be
necessary to comply with all applicable provisions of this Indenture relating
to the authentication and delivery of bonds (with such omissions and
variations as may be appropriate by reason of the fact that the withdrawal of
cash under this Section rather than the authentication and delivery of bonds
is being applied for); provided, however, that in no such case shall the
Company be required to comply with any earnings requirements; and provided
further, that in no such case shall the Company be required to deliver to the
Trustee any such resolution or certificate as is described in subdivisions (1)
and (6) of (S)3.06 hereof, or any opinions with respect to the authorization
by governmental authorities or by the Company of the issue of bonds or with
respect to tax laws applicable to the issue of such bonds; and provided
further, that in the computation of such net property additions for the
purpose of withdrawal of cash under this Section (and irrespective of the
computation contained in the engineer's certificate hereinafter in this
paragraph referred to) (1) there shall not be deducted property retirements as
specified in paragraph (A)(1) of the definition of "net property additions"
contained in (S)1.05, and (2) there shall not be added the amount provided to
be added by paragraph (B) of said definition. Nevertheless, the engineer's
certificate described in subdivision (3) of (S)3.06, shall include, for the
purpose of determining the amount of unapplied balance of property additions
referred to in Clause (A) of said subdivision (3) to be carried forward into
any subsequent engineer's certificate, the statements called for by said
subdivision (3).
Except as otherwise provided in this Section, if the total amount of credits
specified in any certificate of the Company filed for such accounting period
shall exceed the Standard of Expenditure during such accounting
A-14
<PAGE>
period, the excess, if any, shall be available as a credit in any subsequent
certificate of the Company, or, at the option of the Company, if any property
additions have previously been used as a credit to, or if any property
additions have previously been used for the withdrawal of cash from, the
Maintenance and Replacement Fund, such property additions, to the amount of
such excess only, may thereafter be used, anything in this Indenture to the
contrary notwithstanding, for any purpose for which the same might have been
used hereunder, whereupon the amount of such excess available for any such use
shall be decreased accordingly.
The term "gross gas operating revenues" for the purposes of this Section and
of (S)4.11 is hereby defined as the amount received or accrued from the sale of
gas service after deducting an amount equal to the cost of gas purchased for
exchange or resale and rentals paid or incurred for gas properties leased, and
adding thereto the amounts received or accrued as rentals or fixed charges for
the use by others (or the use by the Company for the account of others) of gas
properties owned by the Company (with all interdepartmental items eliminated);
provided, however, that there shall be excluded from such operating revenues any
revenue derived from the sale or lease of goods, wares and merchandise,
equipment, materials or supplies acquired by the Company for the purpose of sale
or resale or leasing to its customers in the ordinary course and conduct of its
business; and further provided, that any such operating revenues which are in
controversy as a result of any litigation, or which have been impounded in such
litigation, shall be included in the gross operating revenues for the purpose of
this computation only after, and in the year in which, any such operating
revenues in controversy or impounded are recovered or, at the option of the
Company, after, and in the year in which, it shall have been finally determined
that such operating revenues belong to the Company.
The Company further covenants that it will promptly classify as retired for
the purpose of any computation of net property additions hereunder all
mortgaged property that (a) has permanently ceased to be used or useful in the
business of producing, manufacturing, transmitting, distributing or supplying
water or gas, or (b) has been abandoned.
SECTION 4.11
The Company hereby covenants as follows:
* * * *
(S)4.11. That, so long as any of the bonds of the 2 7/8% Series due 1976,
the 3 1/2% Series due 1982, the 4 7/8% Series due 1987, the 4 3/4% Series due
1983, the 5 1/2% Series due 1985, the 5% Series due 1986, the 4 5/8% Series
due 1988, the 5 7/8% Series due 1991, the 9% Series due 1991, the 6 7/8%
Series due 1992, the 10% Series due 1995, the 9 1/4% Series due 1996, the 8%
Series due 1997, the 9.57% Series due 1996, the 9.23% Series due 1999, the
9.34% Series due 2019, the 7.20% Series due 2017, the 8.375% Series due 2002,
the 7.125% Series due 2002, the 6.05% Series due 2019 and the 7% Series due
2017 shall be outstanding, the Company will not declare or pay any dividends
on its common stock (other than dividends payable in shares of its common
stock), or make any other distribution on any shares of its common stock, or
purchase any shares of its common stock if, as a result thereof, the amount of
such dividends, distributions and purchases exceeds the amount of the earned
surplus of the Company, determined in accordance with accepted accounting
practice; provided, however, that, for the purposes of this (S)4.11, in
determining at any time or from time to time the amount of earned surplus
there shall be included in operating expenses an amount for maintenance and
repairs to, and as provision for reserves for renewals and replacements,
retirements or depreciation of the Company's water and gas properties,
equivalent to the Standard of Expenditure, as said term is defined in (S)4.10;
provided, however, that the foregoing shall not restrict the Company from paying
to PEI following the consummation of the Sale of the Water Business (i) an
amount not to exceed $85 million to enable the Company to repurchase shares of
its common stock, which funds would, in turn, be utilized by PEI to repurchase
shares of PEI common stock and (ii) a one-time special dividend of a $30 million
promissory note to reduce by $30 million PEI's common shareholder's investment
in the Company, and that such payment and dividend shall not reduce the amount
of the earned surplus of the Company for purposes of any determination thereof
under this (S)4.11.
A-15
<PAGE>
SECTION 8.03
(S)8.03. The Company shall have the right at any time and from time to time,
unless, to the knowledge of the Trustee, a default as defined in (S)9.01 shall
have happened and shall be continuing, to sell or exchange any part of the
mortgaged property (except any cash or prior lien bonds held by the Trustee)
which shall no longer be advantageous in the judicious management and
maintenance of the mortgaged property or in the conduct of the business of the
Company. The consideration received for such property so sold or exchanged may
be (i) cash, and/or (ii) obligations secured by purchase money mortgage on
such property, but such obligations shall not exceed in aggregate principal
amount sixty per centum (60%) of the then fair value of the property to be
released (as established either by the engineer's certificate referred to in
sub-paragraph (C) below or the independent engineer's certificate referred to
in sub-paragraph (D) below, whichever shall be the higher), and the aggregate
principal amount of such obligations at any time held as a part of the
mortgaged property shall not exceed ten per centum (10%) of the aggregate
principal amount of bonds at the time outstanding under this Indenture, and/or
(iii) any additional property of such character as would be included in the
definition of property additions contained in (S)1.05. The Trustee shall, from
time to time, release such property so sold or exchanged from the operation
and lien of this Indenture, but only upon receipt of:
(A) A written request of the Company, evidenced by a certified resolution
of the Board, requesting such release and describing the property so to be
released;
(B) A certificate of the Company stating that no default as defined in
(S)9.01 has happened and is continuing;
(C) An engineer's certificate, made and dated not more than sixty (60)
days prior to the date of such application, setting forth in substance as
follows:
(1) that the Company has sold or exchanged or has contracted to sell
or exchange the property so to be released for a consideration
described, in reasonable detail, in said certificate, and that such
sale or exchange is desirable in the conduct of the business of the
Company, and that the property to be released is no longer advantageous
in the judicious management and maintenance of the mortgaged property
or in the conduct of the business of the Company;
(2) the then fair value, in the opinion of the signers, of the
property to be released;
(3) in case the consideration for the property to be released
consists, in whole or in part, of additional property, stating that all
such additional property is of such character as would be included in
the definition of property additions contained in (S)1.05, and setting
forth the then fair value to the Company, in the opinion of the
signers, of all such additional property; and if such additional
property is subject to a prior lien, showing that the application
satisfies the requirements of (S)4.16 and (S)4.18;
(4) that the consideration described in said certificate has a then
fair value at least equal to the then fair value of the property to be
released, in each case after deducting the principal amount of any
indebtedness secured by prior liens on such property (if an independent
engineer's certificate as provided for in the following sub-paragraph
(D) is required, either with respect to the property to be released or
additional property included in the consideration therefor, the then
fair value of the property to be released and/or of any such additional
property shall be as stated in such engineer's certificate or in such
independent engineer's certificate, whichever shall be the higher); and
(5) that such release is, in the opinion of the signer, desirable in
the conduct of the business of the Company and will not impair the
security under this Indenture in contravention of the provisions
hereof.
(D) In case, as shown by said engineer's certificate, the fair value of
the property to be released and of all other property or securities
released since the commencement of the then current calendar year, as set
forth in the certificate required pursuant to sub-paragraph (C), and any
similar certificates pursuant to sub-paragraph (C) and any other sections
of this Article 8, is ten per centum (10%) or more of the aggregate
principal amount of bonds at the time outstanding, unless the fair value of
the property to be released, as set forth in the certificate, is less than
$25,000 or less than one per centum (1%) of the aggregate principal amount
of bonds at the time outstanding, an independent engineer's certificate,
made and dated not more
A-16
<PAGE>
than sixty (60) days prior to the date of such application, stating that
the signer has examined the written request furnished to the Trustee;
stating as to such property the then fair value thereof in the opinion of
the signer, together with the signer's report thereon which shall contain a
brief statement of the conditions governing the signer's determination of
such fair value; stating that such release, in the opinion of the signer,
will not impair the security under this Indenture in contravention of the
provisions hereof; and in case, as shown by said engineer's certificate,
the consideration for the property to be released includes additional
property of a fair value to the Company not less than $25,000 and not less
than one per centum (1%) of the aggregate principal amount of the bonds at
the time outstanding, and if such property has, within six months prior to
the date of acquisition thereof by the Company, been used or operated by a
person or persons other than the Company in a business similar to that in
which it has been or is to be used or operated by the Company, a similar
independent engineer's certificate with respect to the then fair value to
the Company of such additional property shall also be furnished to the
Trustee;
(E) Any and all money and obligations stated in said engineer's
certificate to be consideration for the property so to be released;
provided, however, that if the property to be released shall be subject to
any prior lien, the cash or obligations otherwise deliverable to the
Trustee in accordance with the provisions of this Section in respect of the
release of such property shall, to the extent required by reason of the
existence of such prior lien, as shall be stated in the opinion of counsel
referred to in sub-paragraph (G) below, be paid or delivered to the trustee
or other holder of such prior lien, and, in such event, there shall be
delivered to the Trustee hereunder, in lieu of such cash or obligations, a
certificate or receipt of such trustee or other holder that such cash or
obligations have been paid or delivered to it or them.
(F) The mortgages, deeds, conveyances, assignments, transfers and
instruments of further assurance, if any, specified in clause (4) of the
opinion of counsel referred to in the following sub-paragraph (G);
(G) An opinion of counsel:
(1) stating that the instruments which have been or are therewith
delivered to the Trustee conform to the requirements of this Indenture
and constitute sufficient authority under this Indenture for the
Trustee to execute and deliver the release requested, and that, upon
the basis of the consideration described in the engineer's certificate
delivered to the Trustee pursuant to sub-paragraph (C) of this Section,
the property so sold or exchanged may be released from the operation of
the lien of this Indenture pursuant to the provisions of this Section;
(2) stating that any obligations included in the consideration for
such release are valid obligations and are duly secured by a valid
purchase money mortgage constituting a direct lien upon the property so
to be released, subject to no lien prior thereto except such liens, if
any, as shall have existed thereon just prior to such release as liens
prior to the lien of this Indenture; and, in case any such prior lien
shall have so existed on such property, stating the extent, if any, to
which the trustee or other holder of such prior lien is entitled to the
money and obligations stated in said engineer's certificate to be
consideration for such property;
(3) stating, in case the Trustee is requested to release any
franchise, that such release will not impair the right of the Company
to operate any of its remaining properties;
(4) in case the consideration for the property to be released
consists, in whole or in part, of additional property, specifying the
mortgages, deeds, conveyances, assignments, transfers and instruments
of further assurance which will be sufficient to subject to the direct
lien of this Indenture the additional property described in the above-
mentioned engineer's certificate, or stating that said additional
property is then subject to the direct lien of this Indenture and that
no such mortgage, deed, conveyance, assignment, transfer or instrument
of further assurance is necessary for such purpose; and
(5) in case the consideration for the property to be released
consists, in whole or in part, of additional property, stating that the
Company has acquired a good and valid legal title to such additional
property, and that the same and every part thereof is free and clear of
all liens, charges or encumbrances prior to the lien of this Indenture,
except specified prior liens, prepaid liens and
A-17
<PAGE>
permitted encumbrances; and stating also that the Company has lawful
power to acquire, own and use said additional property in its business;
(H) A certificate of the Company and an opinion of counsel as to
compliance with conditions precedent.
The fact that the mortgaged property consists of gas properties shall not be
deemed to prevent the Company from selling or otherwise disposing of its gas
properties although the effect of such sale or other disposition is to divest
the Company of all interest in the gas business. Notwithstanding the foregoing,
nothing in this Indenture shall prevent the Company from obtaining releases from
the lien of this Indenture of (a) all real and personal property of the Company
which are not used exclusively in the Company's gas utility operations and (b)
all real and personal property of the Company which is the subject of the
operating and maintenance easement agreement to be executed by the Company and
PAWC in connection with the Sale of the Water Business (the releases referenced
in clauses (a) and (b) of this sentence are hereby collectively referred to
herein as the "Special Release"). Notwithstanding anything set forth in (S)8.03,
the Company shall not be required to comply with the conditions set forth in
paragraphs (C), (D), (E), (F), (G)(2), (G)(4), or (G)(5) of (S)8.03 or lines six
through twelve (other than the word "requested" in line six) of paragraph (G)(1)
in connection with obtaining the Special Release and the Trustee shall execute
and deliver the Special Release to the Company without receipt of items set
forth in paragraphs (C), (D), (E), (F), (G)(2), (G)(4), or (G)(5) of (S)8.03 and
lines six through twelve (other than the word "requested" in line six of
paragraph (G)(1)) [As reprinted in this Annex, lines six through twelve of
(S)(G)(1) of the Original Indenture are contained in lines three through six of
(S)(G)(1) on the preceding page (except for the words "Trustee to execute and
deliver the release requested" contained in line 4 of the reprinted (S)(G)(1))].
In connection with obtaining the Special Release, the Company shall deliver to
the Trustee (x) a certificate of the Company stating the book value of the
remaining property viz: all real and personal property of the Company which are
used exclusively in connection with the Company's gas utility operations,
following the release of the real and personal property which are the subject of
the Special Release and (y) a certificate of an independent engineer stating
that based upon the results of an appraisal performed by such independent
engineer, the aggregate fair value of such remaining property following the
release of the real and personal property which is the subject of the Special
Release exceeds 166 2/3% of the aggregate principal amount of the bonds issued
under this Indenture which will be outstanding immediately following the
consummation of the Sale of the Water Business.
SECTION 8.11
(S)8.11. All moneys received by the Trustee in consideration of any release
by the Trustee under this Article, including payment on account of the
principal of any obligations secured by purchase money mortgage, and all
moneys elsewhere herein provided to be held and applied as in this Section
provided, and all moneys, if any, received by the Trustee the disposition of
which is not elsewhere herein specifically otherwise provided for,--(herein
sometimes referred to as "trust moneys"), shall be held by the Trustee as a
part of the mortgaged property, and, upon default in the payment of the
principal of any of the bonds when and as the same shall become due and
payable, whether by the terms thereof or by declaration or otherwise, as
herein provided, said moneys shall be forthwith applicable to the purposes
specified in, and in accordance with the provisions of, (S)9.09; but, unless a
default as defined in (S)9.01 shall have happened and shall be continuing, all
or any part of said trust moneys, at the request and election of the Company,
shall, subject to the provisions of this (S)8.11, and subject also to the
provisions of (S)8.13, be applied by the Trustee from time to time as follows:
(1) Trust moneys may be withdrawn from time to time by the Company (a) in
an amount equal to the cost of property additions (not theretofore funded)
acquired, made or constructed subsequent to or concurrently with the
receipt by the Trustee of the trust moneys then being withdrawn, and/or (b)
in an amount equal to one hundred sixty-six and two-thirds per centum (166
2/3%) of the principal amount of each bond or fraction of a bond to the
authentication and delivery of which the Company shall then be entitled
under the provisions of (S)3.02, (S)3.03, (S)3.04, (S)3.05 and (S)3.06,
and/or (c) in an amount equal to the principal amount of bonds to the
authentication and delivery of which the Company shall be entitled under
the provisions of (S)3.07, and (S)3.11, but only to the extent that the
right of the Company to such authentication
A-18
<PAGE>
and delivery of bonds under (S)3.07 and (S)3.11 is based upon the payment,
retirement or redemption of bonds or prior lien bonds which have
theretofore been outstanding as a result of a bona fide sale; and provided,
however, that if the application for such withdrawal of cash is based upon
the fact that the Company is entitled to the authentication and delivery of
bonds, such application shall operate as a waiver by the Company of such
right to the authentication and delivery of each such bond or fraction
thereof on the basis of which right such cash is withdrawn, and to such
extent no such bond or fraction thereof may thereafter be authenticated and
delivered hereunder; or
(2) Trust moneys may, upon the written request of the Company, delivered
to the Trustee, be applied by the Trustee to the purchase, in accordance
with the provisions of (S)8.12, of bonds issued hereunder; or
(3) Trust moneys may, upon the written request of the Company, delivered
to the Trustee, be applied by the Trustee to the redemption of any bonds
issued hereunder which by their terms are redeemable before maturity, of
such series as may be designated by the Company, such redemption to be in
the manner and as provided in Article 5 hereof, but in the case of any such
redemption, the Company shall at the time of the delivery of such request
to the Trustee (or at any later date satisfactory to the Trustee) pay to
the Trustee, to be held and applied as trust moneys in accordance with the
provisions of said Article 5, an amount in cash equal to the redemption
premium, if any, and accrued interest required to be paid upon redemption
of the bonds so to be redeemed, to the end that the trust moneys shall not
be diminished by the payment therefrom of redemption premium, if any, or
interest.
Trust moneys shall from time to time be paid out or used or applied by the
Trustee as aforesaid upon receipt by the Trustee of (a) the written request of
the Company; (b) a certificate of the Company and an opinion of counsel as to
compliance with conditions precedent. In case the withdrawal of trust moneys
is, in whole or in part, based upon the right to the authentication and
delivery of bonds (as permitted under subdivision (1) of this Section) the
Company, except as otherwise in this Section provided, shall comply with all
applicable provisions of this Indenture relating to such authentication and
delivery (with such omissions and variations as may be appropriate by reason
of the fact that the withdrawal of trust moneys under this Section rather than
the authentication and delivery of bonds is being applied for); provided,
however, that in no such case shall the Company be required to deliver to the
Trustee any such resolution or certificate as is described in subdivisions (1)
and (6) of (S)3.06, or the resolution described in subdivision (1) of (S)3.07,
or the net earnings certificate provided for in (S)3.07 or (S)3.11, or such
parts of the opinions described in subdivision (7) of (S)3.06 and in
subdivision (3) of (S)3.07 as relate solely to the authorization by
governmental authorities or by the Company of the issue of bonds and as relate
to tax laws applicable to the issue of bonds, or to comply with any earnings
requirements.
If the amount of the property additions specified in the engineer's
certificate filed pursuant to this Section as the basis for the application
for the withdrawal of trust moneys shall exceed the amount required for the
withdrawal of the trust moneys then being withdrawn, the excess, if any, may
thereafter be used, anything in this Indenture to the contrary
notwithstanding, for any purpose for which the same might have been used if
not included in the engineer's certificate filed in connection with the
withdrawal of trust moneys from the Trustee. In any case where the property
additions being certified include property which, within six months prior to
the date of acquisition thereof by the Company, have been used or operated by
a person or persons other than the Company in a business similar to that in
which it has been or is to be used or operated by the Company, and the fair
value to the Company of such property is not less than $25,000 and not less
than one per centum (1%) of the aggregate principal amount of the bonds at the
time outstanding, the Trustee shall also be furnished with an independent
engineer's certificate as to the fair value to the Company of such property.
All trust moneys amounting to $25,000 or more remaining in the hands of the
Trustee for a period of three years after the deposit thereof as trust moneys
and in respect of which no request pursuant to this Section shall have been
filed by the Company within said three-year period, shall be applied forthwith
by the Trustee to the purchase of bonds in the manner provided in subdivision
(2) of this Section or at the election of the Trustee to the redemption of
bonds in the manner provided in subdivision (3) of this Section, choosing for
such redemption bonds of the series designated by the Company; and the Company
in any such case, upon written notice from
A-19
<PAGE>
the Trustee, shall pay to the Trustee additional cash equal to all accrued
interest and premium payable upon any such purchase or redemption, as provided
in subdivision (3) of this Section with respect to the redemption of bonds and
as provided in (S)8.12 with respect to the purchase of bonds. In the event of
any election, as aforesaid, by the Trustee to redeem bonds, the Company shall,
upon written notice from the Trustee, give or cause to be given the notice
required in respect of the redemption of such bonds, and if the Company shall
fail to give such notice or cause such notice to be given the Trustee shall
have full power and authority to give such notice or cause such notice to be
given in the name and on behalf of the Company. The Company shall pay to the
Trustee all expenses incurred by the Trustee in connection with any purchase
or redemption of bonds pursuant to this Section.
Any bonds (together with any coupons thereto appurtenant) delivered to the
Trustee pursuant to the provisions of this (S)8.11, and any bonds purchased or
redeemed through the application of trust moneys pursuant to the provisions of
this (S)8.11, shall forthwith be cancelled by the Trustee, and shall
thereafter be cremated if in coupon form or delivered to the Company if in
fully registered form.
The provisions set forth in this (S) 8.11 shall not apply to any
consideration to be received by the Company in connection with the properties
which are the subject of the Special Release, the Company shall not be
required to pay any such consideration to the Trustee and no part of any such
consideration shall be deemed to be "trust moneys" for the purposes of this
Indenture.
A-20
<PAGE>
EXHIBIT T3F
PENNSYLVANIA GAS AND WATER COMPANY
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture of Mortgage and Deed of Trust dated as of March 15, 1946, and as
supplemented by twenty-nine supplemental indentures, and to be supplemented by a
Thirtieth Supplemental Indenture (collectively, the "Mortgage Indenture").
<TABLE>
<CAPTION>
Trust Indenture Act Section Mortgage Indenture Section
- --------------------------- --------------------------
<S> <C>
(S) 310(a)(1).....................................13.01, 4.08
(a)(2)...................................13.01, 4.08
(a)(3)...................................13.19
(a)(4)...................................Not Applicable
(a)(5)...................................13.14
(b)......................................13.14
(c)......................................Not Applicable
(S) 311(a)........................................13.15
(b)...........................................13.15
(c)...........................................Not Applicable
(S) 312(a)........................................6.01, 6.02(a)
(b)...........................................6.02(b)
(c)...........................................6.02(c)
(S) 313(a)........................................6.04(a)
(b)...........................................6.04(b)
(c)...........................................6.04(c)
(d)...........................................6.04(d)
(S) 314(a)........................................6.03
(b)...........................................4.13
(c)...........................................3.06, 3.07, 3.08, 3.11,
4.16, 8.03, 8.04, 8.05
8.06, 8.11, 8.14
(d)...........................................3.06, 8.03, 8.11, 1.03(i)
(e)...........................................1.03(f), 1.03
(f)...........................................Not Applicable
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Trust Indenture Act Section Mortgage Indenture Section
- --------------------------- --------------------------
<S> <C>
(S) 315(a)........................................13.02, 13.06
(b)...........................................9.02
(c)...........................................13.02
(d)...........................................13.03
(e)...........................................13.10
(S) 316(a)(1)(A)..................................9.16
(a)(1)(B).....................................9.21
(a)(2)........................................Not Applicable
(b)...........................................9.17
(c)...........................................Not Applicable
(S) 317(a)(1).....................................9.11
(a)(2)........................................9.11
(b)...........................................13.09
(S) 318(a)........................................17.05
</TABLE>
- -----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Mortgage Indenture.
