Section 89-F. Approval of issues of stock, bonds and other forms of indebtedness

A water-works  corporation  organized  or  existing,  or
  hereafter  incorporated,  under or by virtue of the laws of the state of
  New  York,  may  issue  stocks,  bonds,  notes  or  other  evidences  of
  indebtedness  payable  at  periods  of more than twelve months after the
  date thereof, or a receiver of such a corporation, if duly authorized by
  law,  may  issue  receiver's  certificates,  when  necessary   for   the
  acquisition  of  property,  the  construction,  completion, extension or
  improvement of its water system, or for the improvement  or  maintenance
  of  its  service  or  for  the  discharge  or  lawful  refunding  of its
  obligations or for the reimbursement of moneys  actually  expended  from
  income  or  from any other moneys in the treasury of the corporation not
  secured or obtained from the issue of  stocks,  bonds,  notes  or  other
  evidences  of  indebtedness  of such corporation, within five years next
  prior to the filing of  an  application  with  the  commission  for  the
  required  authorization,  for  any  of  the  aforesaid  purposes  except
  maintenance of service  and  except  replacements  in  cases  where  the
  applicant  shall have kept its accounts and vouchers of such expenditure
  in such manner as to enable the commission to ascertain  the  amount  of
  moneys so expended and the purposes for which such expenditure was made;
  provided  and  not otherwise that there shall have been secured from the
  commission an order authorizing such issue, and the amount thereof,  and
  stating  the  purposes  to which the issue or proceeds thereof are to be
  applied, and that, in the opinion of the commission, the money, property
  or labor to be procured or paid for by the issue of such  stock,  bonds,
  notes  or  other  evidences  of  indebtedness  is or has been reasonably
  required for the purposes specified in the order,  and  that  except  as
  otherwise  permitted  in the order in the case of bonds, notes and other
  evidences of indebtedness, such purposes are not in  whole  or  in  part
  reasonably  chargeable to operating expenses or to income.  Stock may be
  issued to stockholders as a stock dividend  provided  that  there  shall
  have  been  secured  from the commission an order authorizing such issue
  and a transfer of surplus to capital in an amount equal to  the  par  or
  stated  value of the stock so authorized and stating that a sum equal to
  the amount to be so transferred was expended for the purposes enumerated
  in this section. Stock may be issued to an employee  or  director  of  a
  waterworks  corporation under a stock option plan pursuant to which such
  corporation grants options to its employees  or  directors  to  purchase
  shares  of  stock, such options to be exercisable for a stated period of
  time to purchase shares of stock at the market value of the stock at the
  time of issuance of the option, provided  that  there  shall  have  been
  secured from the commission an order authorizing such issue and that the
  proceeds  from  the  exercise of the stock options are needed for one of
  the purposes enumerated in this section. The issue of stocks,  bonds  or
  other  evidences  of  indebtedness,  within the meaning of this section,
  shall include the sale hereafter by any such corporation of its  stocks,
  bonds   or   other  evidences  of  indebtedness  previously  issued  and
  reacquired, whether originally issued at, before or after the time  this
  section  takes  effect,  provided,  however,  for  good  cause shown the
  commission may exempt from the restriction hereof stocks, bonds or other
  evidences of indebtedness. For the purpose of enabling it  to  determine
  whether  it  should  issue such an order, the commission shall make such
  inquiry or investigation, hold such hearings and examine such witnesses,
  books, papers, documents or contracts as it may deem  of  importance  in
  enabling it to reach a determination. Such corporation shall not without
  the  consent  of the commission apply said issue or any proceeds thereof
  to any purpose not specified in such order. Such corporation  may  issue
  notes,  for  proper  corporate  purposes  and  not  in  violation of any

  provision of this or of any other act, payable at periods  of  not  more
  than  twelve  months  without  such consent; but no such notes shall, in
  whole or in part, directly or indirectly be refunded  by  any  issue  of
  stock or bonds or by any evidences of indebtedness running for more than
  twelve  months  without  the  consent  of the commission. The commission
  shall have power to require every such  corporation  to  file  with  the
  commission after the issuance of stocks, bonds, notes or other evidences
  of  indebtedness,  issued with or without the approval of the commission
  as herein provided, a notice of such transaction in  such  form  as  the
  commission  may prescribe.  Provided, however, that the commission shall
  have no power to authorize the capitalization of any franchise to  be  a
  corporation  nor to authorize the capitalization of any franchise or the
  right to own, operate or enjoy any franchise whatsoever in excess of the
  amount (exclusive of any tax or annual  charge)  actually  paid  to  the
  state  or  to any political subdivision thereof as the consideration for
  the grant of such franchise or right, nor to authorize the  issuance  of
  any  stocks  or  other  securities  for  any  purposes  other than those
  enumerated in this section. Nor shall the capital stock of a corporation
  formed by the merger or consolidation of two or more other corporations,
  exceed  the  sum  of  the  capital  stock  of   the   corporations,   so
  consolidated,  at  the par value thereof, or such sum and any additional
  sum actually paid in cash; nor shall any contract for  consolidation  or
  lease be capitalized in the stock of any corporation whatever; nor shall
  any  corporation hereafter issue any bonds against or as a lien upon any
  contract for consolidation or merger.