came equal beneficiaries in a dividend fund, sufficient to pay upon them, and upon an equally large new capital, in the meantime, put upon the road, the extraordinary rate of twelve per cent. per annum, payable quarter-yearly, free of all taxes, and this after providing for bonded interest of every kind-and in perpetuity. It will be observed, that although the present stock is a guaranteed seven per cent. stock, the dividend fund provided in the lease to the Pennsylvania Railroad Company was equivalent to twelve per cent. on the whole capital then outstanding; but the stockholders themselves, considering a seven per cent. stock more convenient and saleable, reduced this rate to seven per cent. by increasing the volume of stock upon which the fixed dividend fund of $1,380,000, annually, was distributable. By this means, each holder of the stock existing at the date of the lease became entitled to exchange every one hundred shares held by him for one hundred and seventy-one shares of the stock now outstanding-an arrangement which is believed to have proved very acceptable and beneficial to all.

Having indicated the results which have been achieved, a brief reference to the principal measures adopted by those in charge of the interests of the stockholders and creditors will not be inappropriate.

In the Autumn of 1860, the affairs of the Company being in the disastrous condition before referred to, soine of the principal holders of the various classes of bonds, and particularly the First and Second Mortgage bondholders, held frequent conferences at the office of WINSLOW, LANIER & Co., with a view of devising some means by which the undertaking might be rescued.

One of the first steps to the union and harmonization of the conflicting interests was, to place the whole line in the hands of Hon WM. B. OGDEN, of Chicago, as Receiver; and the road was operated by him, to the satisfaction of all parties, during the foreclosure proceedings.

About the 20th of October, in that year, these gentlemen agreed upon A PLAN OF REORGANIZATION which was equitable in its provisions, and so thoroughly digested and worked up that it speedily met with general acceptance.

This Plan contemplated the appointment of five gentlemen, to purchase in, under decrees of foreclosure necessary to be obtained in the Courts of four different States, whose decisions it was indispensable to have in harmony, the whole railroad, with

1

its equipments and appurtenances, and invested them with plenary powers in regard to the organization of a new company, to be controlled by the Mortgage Creditors; and, generally, to take such measures for the interest of the creditors as they might deem advisable. The five gentlemen appointed to the trust, and who thereupon became known as the Purchasing Committee, were JAMES F. D. LANIER, SAMUEL J. TILDEN and LEWIS H. MEYER, of New York City, SAMUEL HANNA, of Fort Wayne, Indiana, and J. EDGAR THOMSON, of Philadelphia. Of these Mr. HANNA de ceased several years since, and Mr. THOMSON within the current year. The three gentlemen first named now constitute the Committee. They also constitute a majority of the Executive Committee of the Board of Directors, and have served upon that Board from the organization of the Company in 1862 to the present time.

The cardinal idea of the Plan of Reorganization was, to put the road in the hands of the mortgage creditors, and to secure a permanent control to them, but at the same time to sacrifice no bona fide interest of any kind. It was based upon a faith in the property and its future, and was conceived in that spirit of liberality and enlightened self-interest which perceives that in regard to all great public undertakings of this character, the harsh and literal enforcement of legal rights is, considering the complicated nature of the equities, not only unjust, but unwise. The framers of the Plan of Reorganization perceived that by a policy which sought to preserve and develop, and not to destroy, general cooperation would be secured, and existing priorities saved and even strengthened. They sought to drive no interest to the !factious opposition of despair. The results of this policy we see; and the documents set forth in this book are worthy of serious consideration by all who may be called upon to aid in resuscitating undertakings of intrinsic merit which may be suffering from the present or any future financial revulsion and depression.

The Committee desire to call attention not only to the original Plan adopted in 1860, but to the modification of that Plan adopted in 1864. The reader of the mortgage securities will observe the extraordinary care taken in them on behalf of the bondholders. In the first place, the mortgage deeds themselves were executed by the purchasers at the foreclosure sale, and not by the new Railway Company, and that road was only conveyed to the new Company with the liens of these mortgages securely

fastened upon them. But in Article Eighth of the First and Second Mortgages respectively, the precaution was taken to prohibit the issue of capital stock by the Railway Company beyond the aggregate amount of six millions and five hundred thousand dollars without the consent of the bondholders, so that the bondholders possessing the voting power could never be deprived of the absolute control. But this restriction was intended only to be precautionary, and the machinery was provided by which all classes interested might reap the benefits of the future development of business. The bondholders were permanently organized as a distinct body, capable of readjusting their relative rights and the rights of the stockholders as events might suggest. In Article Sixth, which created a sinking fund, a power of future treaty with the stockholders was reserved, and this power, taken in conjunction with Article Eighth, afforded a sufficient consideration to the two interests for any future modification of their relations.

In April, 1864, it became evident that important advantages could be secured to all classes by relaxing the restrictions which the growth of business had made no longer necessary, upon conditions looking to the permanent security of all. The bondholders were duly convened, to consider the altered circumstances. The railroad had originally been built in sections, by separ ate companies, and with inadequate capital. It could hardly be called a completed road, when the present Company was first organized, and although, under the judicious and economical management of the bondholding interest, its condition had been greatly improved, by the use of such earngings as were from time to time available for purposes of renewal and constructions, it was still in 1864 wholly inadequate, both in condition and equipment, to the traffic then offering and constantly increasing. It was determined, therefore, to remove the restrictions on the stock, provided the proceeds of the first new issues were expended upon the road itself and upon other conditions.

The Committee call attention to the fact that under the new programme a provision was incorporated in the First and Second Mortgages by which the Company were required to pay annually and unconditionally fixed sums sufficient in themselves to extinguish these classes of bonded indebtedness long before maturity. This circumstance, taken in connection with the fact that by the organic laws relating to the Company no new indebtedness to

an amount exceeding five per cent. of the capital stock can be created without the consent of the shareholders, will indicate upon how secure a basis all interests in the undertaking now

rest.

The circumstances relating to the lease of the railroad, to the Pennsylvania Railroad Company, in June, 1869, and the objects accomplished by that lease are fully treated of in the body of the book, and need not be further adverted to here.

In conclusion, the Committee congratulate the stock and bond holders upon the future now secured to this great road.

The Committee have seen it in its darkest days; they have given it their best services for years, and have every reason to be gratified with the result. The Committee take pleasure in stating that in every measure looking to the benefit of those concerned in the property they have had the faithful co-operation of their associates in the Board of Directors, and particularly the efficient and hearty co-operation of Gen'l GEO. W. CASS, who has so long and worthily filled the position of President.

Nothing remains now, but for the future managers to see that the terms of the lease are faithfully adhered to which they no doubt will be by the lessee. The lease itself contains every provision which suggested itself to experienced counsel for the due protection and enforcement of the rights of the stockholders, and all others who have or may invest in the property.

The present compilation has been made up under the direction of the Chairman of the Committee by the law firm of Sinnott & Meyer, of New York, who had peculiar facilities for making it complete, owing to Mr. Sinnott's personal familiarity with the history of the Company, through his long continued relations to Hon. S. J. Tilden.

JAMES F. D. LANIER,

Chairman.

December 8, 1874.

STATEMENT

OF THE

PURCHASING COMMITTEE.

(Published in October, 1862.)

The undersigned, the Trustees and Agents who were charged with the duty of re-organizing the various interests represented by them in the Pittsburgh, Fort Wayne and Chicago Railroad, having completed the distribution of the newly-issued securities and stock, to the parties entitled to them, under the Agreement of October 20th, 1860, and having delivered the road to the newly-organized Company, submit a brief statement of their acts by which these objects have been accomplished.

The railway now known as the Pittsburgh, Fort Wayne and Chicago Railway forms a continuous line of 467 miles, from Pittsburgh to Chicago, and is owned by one Company, organized under several corporate franchises, granted by States within which portions of the work are situate. Prior to the re-organization it had become one line, owned by one Company, formed August 1, 1856, by the consolidation of three distinct lines, owned by three distinct companies, to wit: the Ohio and Pennsylvania, extending from Pittsburgh, in the State of Pennsylvania, to Crestline, in the State of Ohio, 188 miles, of which 47 are in Pennsylvania, and 141 are in Ohio; the Ohio and Indiana, extending from Crestline to Fort Wayne, in the State of Indiana, 131 miles, of which 112 are in Ohio, and 19 are in Indiana; and the Fort Wayne and Chicago, extending from Fort Wayne to Chicago, in the State of Illinois, 148 miles, of which about 126 are in Indiana, and about 22 in Illinois.

At the time of the consolidation, the Ohio and Pennsylvania, and the Ohio and Indiana portions of the road had been com