be applied by the new company to the making of the contingent sinking-fund payment provided in the first mortgage.

(2) Any then remaining available net income for such year, to the extent of $250,000, will, on April 1 in such following year, be credited by the new company to the capital-fund account provided for in the first mortgage.

(3) Any then remaining available net income for such year is to be considered available income and applied by the new company on May 1 in such following year to the payment of interest on the then outstanding second-mortgage bonds.

(4) Any then remaining available income for such year, exclusive of that reserved because of the nonpayment of the full amount of interest on the second-mortgage bonds, may be applied to any proper corporate purpose of the new company, including the payment of dividends on capital stock and the making of loans to the new corporation for the purposes specified, but no such loans may be made until provision has been made for the payment of interest on the first-mortgage bonds for the then current interest period.

If no first-mortgage bonds are outstanding, and if second-mortgage bonds are, available income will be determined by deducting from available net income either $250,000 or the amount of the aggregate expenditures made by the new company during such year for capital investment other than equipment, whichever amount is the lesser, such available income to be applied (a) on May 1 of the following year to the payment of interest on the then outstanding bonds, and (b) to any proper corporate purpose of the new company, including the payment of dividends on capital stock and the making of loans to the new corporation.

Loans may be made by the new company to the new corporation only as specified heretofore and only for the purpose of enabling the new corporation to pay for necessary additions and betterments, or to meet its operating expenses, taxes, rentals, and other expenses chargeable against income before net income.

So long as first-mortgage bonds are outstanding, the new company will pay to the corporate trustee of the first mortgage, to be set apart and held in trust by it as part of the capital-fund account and to be applied by it as provided in the first mortgage, sums credited to the capital-fund account and not expended by the new company for capital investments within the respective periods provided in the first mortgage.

The new company may, with the consent of the holders of any series of the second-mortgage bonds and by resolution of its board of directors, defer the payment of interest on all such bonds of

such series which would otherwise become due and payable from available income on any interest-payment date or dates to a subsequent interest-payment date or dates as may be specified in such written consent by such vote, and the deferred interest must be paid regardless of whether there then is available income sufficient for the purpose. Interest, the payment of which is deferred, is not to be included in the 3-year limitation upon cumulative interest, and is not to be taken into consideration in determining the amount of other interest payable on any subsequent date or in determining when the 3-year limitation upon cumulative interest has been reached. The new company may, at its option, pay any interest so deferred on any interest-payment date prior to the date to which the payment of interest was deferred.

Interest is to accrue and become due and payable on all secondmortgage bonds as follows:

(1) To the extent of applicable moneys, at the rate of 4 percent per annum on all series A bonds for the month of December 1941, within 60 days after the execution of the mortgage.

(2) To the extent of the applicable moneys, interest on all secondmortgage bonds for each calendar year is to become due and payable on May 1 of the following year except in cases of redemption, maturity, or otherwise, when it will forthwith become due and payable in an amount equal to (a) all deferred interest thereon on such date, (b) all accumulated interest thereon, (c) interest thereon at the full rate therein provided for from the last preceding first day of January to the date of maturity, and (d) if the date of maturity be on or before May 1 in any year, interest accrued thereon for the preceding calendar year which remains unpaid after the application of the available income for the preceding year to the payment of interest on all the outstanding second-mortgage bonds to the extent and the manner provided therein, not in excess of an amount which, when added to the cumulative interest, will equal three times the annual interest on the bond.

(3) All interest payable on second-mortgage bonds on any interestpayment date prior to or at the maturity thereof is to be payable only upon surrender of the respective coupons maturing on such date, irrespective of the period for which such interest is paid.

(4) Interest on all second-mortgage bonds shall, except as to interest payable thereon for the month of December 1941, and on the maturity thereof, be payable on any date only to the extent of the largest multiple of a sum equal to one-fourth of 1 percent of the principal amount of outstanding second-mortgage bonds available on such date for the payment of such interest. Any moneys not applied on any interest-payment date to the payment of interest on second

mortgage bonds because of these provisions will be carried forward and applied to the payment of such interest on the next succeeding interest date.

"Accumulated interest" or "cumulative interest" is defined in reference to second-mortgage bonds to mean interest for all calendar years between the date of the mortgage and any particular date, less deferred interest and less interest that has become noncumulative, which remains unpaid after the application of available income, if any, for the preceding year to the payment of interest on second-mortgage bonds, but limited to and never exceeding at any one time an amount equal to three times the annual interest at the rate borne by the bond. Any unpaid interest, exclusive of deferred interest, after the application of available income in any year to the payment of interest, in excess of three times the annual interest at the rate borne by the bond, will from and after May 1 of such year become noncumulative, will be canceled, and will not thereafter become payable. The existence of accumulations of interest will not constitute a default under the indenture. Unpaid interest for any year is to become cumulative or noncumulative from and after the next succeeding May 1.

On any interest-payment date, 75 percent of available income for the preceding year, or so much thereof as may be sufficient to pay interest for the preceding year in full and all accumulated interest, if any, whichever is the lesser, is to be applied to the payment of interest for the preceding year and accumulated interest, if any. In the event interest on the second-mortgage bonds for the preceding year and accumulated interest, if any, is not paid in full, either a sum equal to 25 percent of such available income, or a sum equal to the unpaid balance of such interest for the preceding year plus accumulated interest, if any, whichever is lesser, is to be carried forward and will be applied on the next-succeeding interest-payment date to the payment of interest and accumulated interest.

On or before the first day of April in each year beginning with the year 1943, and for the year 1941, within 60 days after the execution of the second mortgage, the board of directors (a) must determine the available income for the preceding calendar year, and (b) declare to be due and payable on the next succeeding May 1 as interest on the then outstanding second-mortgage bonds out of moneys carried forward from the preceding year and out of available income for the preceding year, either (i) all accumulated interest on such bonds at the end of the preceding year and interest for the preceding year, or (ii) so much thereof as such funds are sufficient to pay, whichever is the lesser. It may also in its discretion direct that all or any part of the interest on such bonds on any such date be paid out of surplus funds of the new company and declare the

same payable accordingly, but the aggregate amount of interest payable on such bonds on any interest-payment date must never exceed the accumulated interest thereon at the end of the preceeding calendar year plus any deferred interest which may become due and payable on such date plus interest for the preceding calendar year. The new company covenants and agrees that, if first-mortgage bonds are no longer outstanding, and for so long as any fixed-interestbearing bonds, including bonds of any series, the interest upon which may have become fixed, are outstanding, it will pay to the corporate trustee as and for a sinking fund for the fixed-interest-bearing bonds, annually, on the first day of April of the year next succeeding the year in which interest becomes fixed, and on April 1 in each year thereafter, so long as any of the fixed-interest-bearing bonds are outstanding and unpaid, a sum equal to one-half of 1 percent of the aggregate principal amount of all fixed-interest-bearing bonds theretofore authenticated by the corporate trustee and issued by the new company.

Sinking-fund moneys will be applied by the corporate trustee, as soon as reasonably practicable, in proportion to the unpaid principal of fixed-interest-bearing bonds of each series at the time outstanding, to the purchase of fixed interest-bearing bonds outstanding thereunder, with all unmatured coupons attached, at public or private sale, at the best price obtainable by the corporate trustee, but not exceeding the current redemption price. If, on June 15 in any year, the corporate trustee shall not have been able to purchase outstanding fixed-interest-bearing bonds of the respective series at a price not exceeding the current redemption price, to an amount sufficient to exhaust the sinking-fund moneys, such sinking-fund moneys not so applied will, if sufficient, be applied by the corporate trustee to the redemption by lot of fixed-interest-bearing bonds outstanding on August 1 next following at the price, in the manner, and on notice by publication as provided in the indenture for the partial redemption of bonds, such moneys to be allocated to the redemption of bonds of the various series as stated, but not less than $5,000 will be drawn for redemption unless the new company instructs otherwise. The new company will pay to the corporate trustee upon its request all brokerage commissions payable with respect to any fixed-interest-bearing bonds so purchased by the corporate trustee and the premium, if any, and accrued interest upon fixed-interestbearing bonds called for redemption.

We find that the modification of our report and order of March 4, 1941, and the issue by The Minneapolis & St. Louis Railway Company of not exceeding $4,000,000 of first-mortgage 4-percent bonds, $2,015,000 of second-mortgage income bonds, series A, and 150,000

shares of common capital stock without par value, all for the purposes described in this supplemental report, as aforesaid, (a) are for lawful objects within its corporate purposes, and compatible with the public interest, which are necessary and appropriate for and consistent with the proper performance by it of service to the public as a common carrier, and which will not impair its ability to perform that service, and (b) are reasonably necessary and appropriate for such purposes.

An appropriate supplemental order will be entered.

COMMISSIONER PATTERSON dissents.

FINANCE DOCKET No. 13235

WABASH RAILROAD COMPANY CONTROL

Submitted April 9, 1942. Decided April 28, 1942

1. On compliance with conditions precedent in previous report, 247 I. C. C. 365, acquisition by the Pennsylvania Railroad Company and the Pennsylvania Company of control of the Wabash Railroad Company through ownership of its capital stock, and indirect control thereby of certain subsidiary railroad companies of the Wabash Railroad Company, approved and authorized. Condition prescribed.

2. Ordered that, unless and until otherwise ordered, and effective as indicated, the Pennsylvania Company shall be considered as a carrier subject to the provisions of section 20 (1) to (10), inclusive, and section 20a (2) to (11), inclusive, of the Interstate Commerce Act to the same extent that those provisions are applicable to the Pennsylvania Railroad Company and the Wabash Railroad Company.

Appearances as in previous report.

SUPPLEMENTAL REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER

BY DIVISION 4:

The record in this proceeding is again before us on a supplemental application filed herein on March 30, 1942, jointly by The Pennsylvania Railroad Company, hereinafter sometimes called the Pennsylvania, and the Pennsylvania Company. As in our previous report herein, 247 I. C. C. 365, these parties will be referred to collectively as the applicants; and The New York, New Haven and Hartford Railroad Company and the Lehigh Valley Railroad Company will be designated as the New Haven and the Lehigh Valley, respectively.