Redemption Subject to the limitations referred to below, the Debentures may be redeemed at the option of the Company in whole or in part at any time, on not less than 30 days' notice, nor more than 60 days' notice, at the following redemption prices for the periods indicated (expressed in percentages of the principal amount): Price % together, in each case, with accrued interest thereon to the date fixed for redemption; provided, however, that prior to June 1, 1980, no such redemption may be made, directly or indirectly, as a part of, out of the proceeds of, or in anticipation of, any refunding operation involving the incurring of indebtedness having an interest cost (computed in accordance with generally accepted financial practice) of less than % per annum. The Debentures are also redeemable, on like notice, for the sinking fund referred to below, on June 1, 1976 and on each June 1 thereafter to and including June 1, 1994, at the principal amount thereof, together with accrued interest to the date fixed for redemption. Sinking Fund The Indenture provides that prior to June 1, in each year, commencing in 1976, the Company will pay to the Trustee as a mandatory sinking fund a sum sufficient to redeem a principal amount of Debentures equal to 5% of the aggregate principal amount of Debentures outstanding (including Debentures held uncancelled by the Company) at the close of business on June 1, 1975. At its option the Company may make an additional sinking fund payment on or before the date of any mandatory sinking fund payment in an amount which does not exceed the amount of the mandatory sinking fund payment applicable to such year. The option to make such an additional sinking fund payment is not cumulative and to the extent not exercised shall terminate. At its option the Company may credit against any mandatory sinking fund payment the principal amount of Debentures redeemed or acquired by it other than pursuant to the sinking fund, but may not credit the principal amount of Debentures which matured on June 1, 1975 or which were cancelled prior to such date. Events of Default, Notice and Waiver The Indenture provides that, if an event of default specified therein shall have happened and be continuing, either the Trustee or the holders of 25% in principal amount of the Debentures then outstanding may declare the principal of all Debentures to be due and payable. Events of default are defined in the Indenture as being: default for 30 days in payment of any interest or sinking fund instalment when due, and default in payment of principal and premium, if any, when due ; default for 90 days after written notice to the Company by the Trustee or by the holders of 25% in principal amount of the outstanding Debentures in performance of any covenant in the Indenture; default resulting in acceleration of any indebtedness of the Company which acceleration has not been rescinded or annulled within ten days after written notice shall have been given by the Trustee or by the holders of 25% in principal amount of the then outstanding Debentures; and certain events of bankruptcy, insolvency and reorganization. The Indenture provides that the Trustee shall, within 90 days after the occurrence of a default. give to the Debentureholders notice of all uncured defaults known to it; provided that, except in the case of default in the payment of principal and premium, if any, or interest on any of the Debentures or the making of any sinking fund payment, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of the Debentureholders. The term default for the purpose of this provision only shall mean the happening of any of the events of default specified above except that any grace period shall be eliminated. The Indenture contains a provision entitling the Trustee, subject to the duty of the Trustee during default to act with the required standard of care, to be indemnified by the holders of the Debentures before proceeding to exercise any right or power under the Indenture at the request of Debentureholders. The Indenture provides that the holders of a majority in principal amount of the outstanding Debentures may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee. The Indenture includes a covenant that the Company will file annually with the Trustee a certificate of no default, or specifying any default that exists, and a certificate as to defaults on funded debt of Railroad. In certain cases, the holders of a majority in principal amount of the outstanding Debentures may on behalf of the holders of all Debentures waive any past default or event of default except, unless theretofore cured, a default in payment of the principal and premium, if any, or interest on any of the Debentures. Modification of the Indenture The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of 66% in principal amount of the outstanding Debentures, to execute supplemental indentures adding any provisions to or changing or eliminating any of the provisions of the Indenture or modifying the rights of the holders of Debentures, except that no such supplemental indenture may (i) extend the fixed maturity of any Debentures, impair the right of a holder to elect maturity at June 1, 1975, reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, without the consent of the holder of each affected Debenture, or (ii) reduce the aforesaid percentage of Debentures, the consent of the holders of which is required for any such supplemental indenture, without the consent of the holders of all Debentures then outstanding. Concerning the Trustee Manufacturers Hanover Trust Company is trustee with respect to certain railroad bond issues and equipment financing agreements and has provided approximately $14.5 million of equipment financing to Railroad and its affiliates. It participates with other banks in a Credit Agreement with Railroad under which it has loaned $16.7 million out of a maximum commitment of $20 million. See "Introduction". In addition, it has participated in other loans to Railroad to the extent of $10.5 million, and has loaned $6 million to Pennco under a commitment for a total of $10 million which loan will be repaid upon the sale of the Debentures. See "Use of Proceeds". LEGAL OPINIONS Legal matters relating to the issuance of the Debentures will be passed upon for the Company by Edward A. Kaier, Esq., Edwin K. Taylor, Esq. or David L. Wilson, Esq., special counsel to the Company employed by the Railroad, and for the Underwriters by Messrs. Sullivan & Cromwell, New York, N. Y. Messrs. Sullivan & Cromwell have from time to time rendered legal advice and services to Pennco and its affiliates and are currently representing Pennco and Railroad in certain pending proceedings. EXPERTS The financial statements and schedule of investments and advances of Pennsylvania Company (company only) and the financial statements of Pennsylvania Company and consolidated subsidiaries, of Penn Central Company and consolidated subsidiaries, and of Penn Central Transportation Company (company only) have been examined by Peat, Marwick, Mitchell & Co., independent certified public accountants, for the respective periods indicated in their reports and are included herein in reliance upon such reports and upon the authority of said firm as experts. All narrative statements of interim results of operation for the first quarter of 1970 compared to the first quarter of 1969 include all adjustments (comprising only normal recurring accruals) necessary to a fair presentation of such results. INDEX TO FINANCIAL STATEMENTS Page Pennsylvania Company Comptroller's Certificate Opinion of Independent Certified Public Accountants Company Only Statements: Earnings-five years ended December 31, 1969.. Source and Application of Funds-three years ended December 31, 1969. Retained Earnings-five years ended December 31, 1969. Consolidated Statements: Balance sheet-December 31, 1969.... Earnings and Retained Earnings-five years ended December 31, 1969.. Schedule of Investments and Advances (Company Only)-December 31, 1969. Notes to Financial Statements..... Consolidated Earnings and Retained Earnings-five years ended December 31, 1969.. 40 42 Consolidated Source and Application of Funds-two years ended December 31, 1969.. 50 50-934 O-71-9 PENNSYLVANIA COMPANY (COMPANY ONLY) PENNSYLVANIA COMPANY AND CONSOLIDATED SUBSIDIARIES COMPTROLLER'S CERTIFICATE The undersigned hereby certifies that in his opinion the statements of earnings and retained earnings of Pennsylvania Company and of Pennsylvania Company and consolidated subsidiaries for the four years 1965 to 1968 present fairly the results of their operations in conformity with generally accepted accounting principles applied on a consistent basis except that with respect to Pennsylvania Company and consolidated subsidiaries no provision for deferred Federal income taxes has been made, and that the statement of source and application of funds of Pennsylvania Company for the years 1967, 1968 and 1969 presents fairly the information contained therein. Wilmington, Del. W. W. RILEY OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Pennsylvania Company: We have examined the balance sheets of Pennsylvania Company (an indirect subsidiary of Penn Central Company) and of Pennsylvania Company and consolidated subsidiaries as of December 31, 1969 and the related statements of earnings and retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financial statements present fairly the financial position of Pennsylvania Company at December 31, 1969 and the results of its operations for the year then ended, and, except that no recognition has been given to deferred income taxes as explained in note 5, the financial position of Pennsylvania Company and consolidated subsidiaries at December 31, 1969 and the results of their operations for the year then ended, all in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. The schedule of investments and advances of Pennsylvania Company (company only) at December 31, 1969 has been subjected to the same auditing procedures and, in our opinion, the data shown therein is stated fairly in all material respects when considered in conjunction with the basic financial statements taken as a whole. Philadelphia, Pennsylvania March 12, 1970, except as to note 11 which is as of March 31, 1970 PEAT, MARWICK, MITCHELL & CO. PENNSYLVANIA COMPANY (COMPANY ONLY) REAL ESTATE COMPANIES-PROPERTIES HELD For Development or Re- 173,468 INVESTMENT IN CONSOLIDATED Subsidiaries in ExCESS OF NET ASSETS EXCESS OF NET ASSETS ACQUIRED OF CONSOLIDATED SUBSIDIARIES OVER 45,962 |