Evening journal., 1910-01-21

was made that perhaps the various
questions now presented for deter
mination might be best solved through
a permanent lease of the Delaware
Road to the Philadelphia, Baltimore
and Washington Railroad Company,
upon a satisfactory basis as to rental.
Mr.. McCrea's reply, as president of the
Philadelphia. Baltimore and Washing
ton Railroad. was practically TO the
following effect:
First. that, unless some permanent
arrangements were concluded, the Phil
adelphia, Baltimore and Washington
Railroad Company. which, together
with the Pennsylvania Railroad Com
pany. furnishes moro than two-thirds
of the traffic now enjoyed by the Del
aware Railroad. would not be justified
in continuing to build up the Delaware
Railroad, largely for the benefit Of the
outside holders of its stock; nor in con-
tinuing to assume the burden of in
vestments like that in the Delaware,
Maryland and Virginia Railroad. for
the benefit Of the Delaware Railroad,
unless IL had a return therefor beyond
its dividends on the Delaware Railroad
stock; but that, If a basis could be
reached Cor a permanent lease, which
would assure the shareholders Of the
Delaware Railroad regular dividends,
free from the effect Of business revul-
sions or competition of other lines, the
Philadelphia. Baltimore and Washing
ton Railroad Company would agree to
continue the present traffic relations
and as this agreement would insure
to the Delaware Railroad entire Sc
curity for the future. and fully pro-
tect an increased issue of its stock, the
Philadelphia, Baltimore and Washing
ton Railroad Company would be will
ing to Join in a fair distribution to the
shareholders, to represent the expendi-
lures heretofore made out of income.
AS bearing upon the latter question.
your committee report that, in order
to ascertain what authority the Della
ware Railroad Company has to issue
stock, il requested the opinion of Mr..
George " Massey, the general counsel
Of the company. whose long familiarity
with the property and high profess
sional standing give his conclusions
especial value, and a copy of his opn-
ion is attached hereto.
Railroad Has Power.
This opinion states that he present
empowered TO issue. being the amount
authorized by the charters Of its con-
stitutent companies at the time OF con-
solidation. S41O2, 1926 OF capital stock. Of
which S2,9S7,225 is now outstanding,
leaving a balance unissued of Sl,1l5,-
100: but that. as the charter Of the
original Delaware Railroad Company
provided that that company 'shall at
a. -. Vaaa
power to increase its capital stock by
additional subscriptions, to an amount,
or amounts sufficient to effectuate the
objects OF this act, and construct the
railroads contemplated by It." Mr..
Massey adds that the power thus con-
feTred devolves upon the consolidated
company. and may be exercised by 1t in
relation TO the expenditures heretofore
made and which have not been capt.
talzed. or expenditures hereafter made
upon and in connection with the con-
struction and maintenance Of any por-
tion or portions Of the original Della
ware Railroad. which comprises the
line between Delmar and Rodney.
After further careful consideration by
the committee of foregoing facts. and
also OF the statement showing the
amount appropriated for extraordinary
expenditures. and also of the revenues
and expenses Of the company since the
date OF the present lease I'm 1897, your
committee reached tho conclusion that,
as a long term lease would dispose Of
all questions and particularly those as
to the wisdom Of now making the
further expenditures referred TO for the
Improvement of the line. the continu-
alton Of the present traffic relations
with the Philadelphia, Baltimore and
Washington Railroad Company and a
fair return to the later company upon
its investment in the Delaware, Mary
land and Virginia Railroad Company
which was made for the protection Of
the Delaware Railroad Company. and
has been unremunerative, It should
ascertain upon what terms thef Phila-
deIphla, Baltimore and Washington
Railroad Company would be willing TO
make such a lease. In making this
inquiry the fact was not overlooked
that the Delaware. Maryland and Vir-
ginia Railroad Company will be unable
to meet its fixed charges. and that the
Philadelphia. Baltimore and Washing
ton Railroad Company will be COM
pelled 10 make further advances to
that company to pay the interest on
the mortgage to the state Of Della
ware, as well as on other obligatory
payments The reply Of the Phila-
delphia, Baltimore and Washington
Railroad Company, defining the gem
! eral basis of such lease, is hereto at
| tached and your committee recon-
mend its approval by the Board OF
Directors. and the prompt submission
thereof for the action Of tho share
! holders.