Note 296 — Chapter V · THE SOUTHERN

The Memphis & Charleston stockholders agreed to the lease in order to avoid bankruptcy. At a meeting in May, 1877, it was pointed out to them that the net earnings of the road had not been enough to pay the interest on its bonds, and that a large amount was due to the state of Tennessee which the company had no present means of paying. Either an assessment on the stock or a lease to the East Tennessee was declared to be necessary. Accordingly, a lease was concluded. The East Tennessee agreed so to discharge the principal of the company’s indebtedness to the state as to reduce the annual interest account from $360,000 to $310,000 as a maximum, and upon the fulfilment of this and of certain other minor conditions took over the operation of the road. Two years later the lease was extended for twenty years at a definite rental amounting to 7 per cent on $4,225,000 or a yearly payment of $295,750. See R. R. Gaz. 9:421, 1877, and Ibid. 11:672, 1879.