The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1902-02-22

These numbered about $4,000, largely rep
resent1ng execut ors and administrators,
savings banks and all sorts of investors
who desired permanent and safe invest
ment. These $4,000 shareholders had for
many years entrusted the management
OF the road to the same set of men and
the results had established them firmly
in the confidence of the shareholders
therefore when the directors recommend
ed that Burlington shares be deposited
with the Standard Trust company about
all outstanding shares were deposited.
The Trust Agreement.
The trust agreement provides that for
every $500 share Of Burlington stock de-
posted, there should be issued 5000 worth
OF the joint bonds of the Northern Pa
clhc and Great Northern. These joint
bonds were secured, therefore, first by
the stock Of the Burlington deposited with
the trustee and second, by the property
of the Great Northern and Northern Pa
chic. The funded debt already outstand :
ing against the Great Northern and
Northern Pacific would. of course, be a
PRIOR lien; but the entire equity of the
shareholders Of Northern Pacific and
treat Northern was pledged under the
trust agreement to carry out it's terms.
The joint bonds issued in exchange for the
stock were to draw 4 per cent annually,
so that each share of Burlington was ex-
changed for two $500 per cent bonds,
thus being assured per cent annually.
In the best year in the history of the
Burlington system it has paid sharehold-
ers only per cent, or a total of a trifle
over 100000. The trust agreement
guarantees that in every year the Bur-
lington shall pay on the same stock
$S,S 600, or about so per cent more than
1t has heretofore paid in it's best years.
of tHn f,~,,c 3,
that in case of default for ninety days by
the guarantors Of the joint bonds the
trustee, at its option, assumes control
OF the shares deposited and shall, If it
sees fit, redistribute them to the original
holders, their heirs or assigns.
| For the purpose Of convenience in oper-
ating the Burlington as a part of the
merged system, 1T was necessary to lease
| i to new operating company, and to
this end the Chicago, Burlington &
Quincy Railway company was incorpor-
ated with capital of 100000 The rea-
son why it was necessary to organize
such new company was that practically
| all shares of the original Burlington were
deposited with the trust company in New
| York Under the trust agreement. The old
company was not permitted, under the
trust agreement, to issue additional cap
| ital which, when placed on the market
would have the effect of dividing the
equity in the property represented by
the deposited securities. Now, the COM
mon method of extending the lines of a
great system like the Burlington is to or
ganize subsidiary corporation to build
each particular extension and to have
I the parent company take it's stock and
guarantee it's bonds. The trust agree
| ment would not permit this to be done
so it was necessary to organize new
| company and carry forward the plans foI
extending the old Burlington system
through subsidiary corporations.
| Search for a Legal Home.
Accordingly 1t was decided to organize
| the Chicago, Burlington & Quincy Rail
way company and lease to it the property
of the Chicago, Burlington & Quincy
! Railroad company foi ninety-ninn years
| The new railway combaly would then be
| able to make extensions by organizing
subsidiary corporations whose bonds il
could guarantee and whose stocks 1t
would own. These plans having been de-
cided on, the next question was where the
| new company should be Incorporated
There was question in the minds of Hill
| and his advisers sto where this legal
home should be. The original Bur-
! lington railroad company was an
one feature Of the Illinois con-
stitution which did not adapt 1t 10 the
! purposes of the merger. This provision
lis that the combined stocks and bonds OF
| a railroad company shall not exceed the
| total cost of construction. Illinois rail-
J reads have always so kept their con-
| struction accounts they showed an
exact balance between construction cost
and the total of stocks and bonds. But
| the new railway company could not com
Fly with such requirements. Consequent
: ly it would be necessary either to secure