land and cash. As part of the proposal that American be continued in existence the Plan contemplates that subsequent to the effective date of the Plan, American will apply to the Commission for a modification of the order for its dissolution. In this connection, however, the Plan recognizes and provides for the possibility that American may sell its holdings of the common stocks of Washington and Pacific prior to the effective date of the Plan. It is provided in the Plan that should such a sale occur before the effective date and should American and/or Bond and Share believe that the sales price requires a modification of the Plan to make it fair and equitable, then American and/or Bond and Share may separately or jointly amend the Plan by proposing adjustments which in their opinion may be necessary to make the Plan fair and equitable in the light of any such sale.'

No certificates for fractional shares of the distributable common stocks or for American's reclassified capital stock will be issued. Instead a surrendering stockholder may instruct the distribution agent to purchase for his account an additional fractional interest sufficient to entitle him to one additional share. In the absence of such instructions the distribution agent will sell for the holder's account any remaining fractional interests to which the holder is entitled.

A holder of American's scrip must first surrender sufficient $6 preferred or common scrip to entitle him to one full share of $6 preferred stock or of common stock. The shares to which he is then entitled will participate under the Plan on the same basis as every other share of $6 preferred stock and common stock.

Current dividends on the $6 and $5 preferred stocks will be paid to the effective date of the Plan. Cash equal to the dividends accrued, at the respective rates of $6 and $5 per annum, from the last quarterly dividend payment date to but not including the effective date of the Plan, will be paid concurrently with the stock distributions to the $6 and $5 preferred stocks. Stockholders of American to whom the common stocks are deliverable will be entitled to any dividends on such stocks declared payable to holders of record on or after the effective date of the Plan.

Portland filed an amended plan for the reclassification of its preferred and common stocks into a single class of common stock on September 19, 1949 (File No. 54-146). The amended plan superseded plans filed in 1947. Hearings have not yet been held with respect to such amended plan. The American Plan provides that within one year after consummation of a recapitalization plan under Section 11 of the Act for Portland (unless upon application we shall extend such time) American will dispose of its interest in Portland.

A similar provision for amendment to the Plan is provided in the event of a statutory change effecting an increase in the amounts of future Federal taxes payable by American or its subsidiaries which change substantially affects the net earnings of American or its subsidiaries.

Such dividends will be paid concurrently with distributions of the common stocks, less deduction for Federal income taxes, if any. The "effective date" of the Plan will be a date fixed in a written notice delivered by American to the Commission following the entry by a United States District Court of an order (for which we are requested to apply) approving and enforcing the Plan. Such date will be set as soon as practicable after entry of the order of enforcement. American, before the effective date, will designate a distribution agent which shall be a bank or trust company having an aggregate capital and surplus in excess of $10,000,000 and having its principal office in the City of New York. On and after the effective date of the Plan and subject to the time limitations hereinafter set forth, the holders of certificates representing shares of the present stocks of American will be entitled to receive the distributable common stocks, reclassified stock of American, and cash (in the case of the preferred stocks), upon the surrender of their present certificates to the distribution agent. The certificates are to be accompanied by a transmittal letter in the form prescribed by the distribution agent.

Under the Plan, shares of the present stock of American must be surrendered within two years from the effective date of the Plan in order to entitle the surrendering holder to shares of distributable common stocks of subsidiaries or the right to purchase additional shares of such distributable common stocks by reason of fractional interests. Upon the expiration of two years from the effective date, the distribution agent will sell all of the remaining shares of such distributable common stocks and hold the net proceeds for payment to holders of certificates of the present stocks of American. After expiration of five years following the effective date, the holders of certificates for shares, or scrip for shares of American's present stock, shall cease to have any right to receive any distribution or payment under the Plan, and the net proceeds from the sales referred to above will be delivered to American. Any remaining shares of the reclassified capital stock of American not claimed by the holders of American's present stocks will be cancelled at the expiration of five years from the effective date of the Plan.

(2) Claims Settlement.

The Plan provides for the compromise, settlement and discharge of various claims as between American and certain present and former subsidiaries of American on the one hand, and Bond and Share and Bond and Share's wholly-owned subsidiaries, and their

respective security holders, on the other, through the contribution by Bond and Share to American of $2,500,000 in cash. American has agreed with certain of its present subsidiaries that they will receive the following amounts in cash, out of the $2,500,000 proposed to be contributed to American by Bond and Share, in full settlement and complete discharge of any rights which such subsidiaries may have in respect of such claims:

American has petitioned us that if we approve the Plan and the proposed claims settlement, we approve the payment by American of not to exceed $194,135 to the plaintiffs in certain stockholders' actions, their attorneys, accountants and any other persons employed or retained by the plaintiffs in such stockholders' actions, in full settlement and satisfaction of all claims on account of services rendered or disbursements made in connection with the claims proposed to be compromised and settled as described above. The claims settlement will be carried out on the effective date of the Plan or as soon thereafter as practicable.

(3) General Provisions.

American will take steps to cause its present stocks to cease to be listed on the New York Stock Exchange on or about the effective date, and cause the single class of reclassified capital stock of American then to be listed in place thereof. The Plan contains no provision for the listing of the distributable common stocks and, according to the testimony, the management is opposed to any requirement that such stocks be immediately listed.

The Plan proposes that Bond and Share will, within one year after the effective date (unless we shall extend such time) dispose of all of its interests in American's present stocks, the distributable common stocks, and the single class of capital stock of American, such dispositions to be in a manner approved by this Commission.

American and Bond and Share have requested the Commission, pursuant to Section 11 (e) of the Act, to apply to an appropriate Court in accordance with the provisions of subsection (f) of Sec

tion 18 of the Act to enforce and carry out the terms and provisions of the Plan.

Position of the Participants.

As previously noted, Bond and Share and American initially took the position that, in the absence of agreement between them, they would propose, respectively, allocations of American's assets of 79% and 84% to American's preferred stocks, and 21% and 16% to the common stock. At the hearings the active participants, other than American, Bond and Share, and our Division of Public Utilities, were a group of $6 preferred stockholders, a group of $5 preferred stockholders, and a common stockholders committee. Each retained counsel and the preferred stockholders' groups and the common stockholders' committee represented, respectively, substantial holdings of American's publicly held preferred and common stocks.

At the commencement of the hearings the preferred stockholders' groups took the position that any plan that accorded the common stock as much as 16% of American's assets would be unfair. The common stockholders' committee took the position that any plan which failed to accord the common stock at least 30% of American's assets would be unfair. Counsel for both groups and for the committee were in continuous attendance at the hearings and took an active part in the examination of witnesses and the production of exhibits.

Howard L. Aller, president and chairman of the board of American, and Curtis E. Calder, chairman of the board of Bond and Share, testified that during the course of the negotiations counsel for each of the two groups and for the committee were frequently consulted and that each of them on behalf of their clients agreed to the proposed allocation of assets prior to the filing of the amendment on January 3, 1949. The record contains statements by counsel for the groups and for the committee as to their agreement with and acceptance of the proposed allocations. In their statements all counsel recognized the desirability of bringing these proceedings to an expeditious conclusion and indicated that their acceptance of the proposed allocations was motivated, in part, by a belief that the pending Plan gives reasonable assurance that such expedition could be realized. While our task is aided substantially by the agreement among the parties and participants, we must nevertheless independently examine the terms of the Plan and determine whether it conforms with applicable statutory standards.

APPLICABLE STATUTORY STANDARDS.

Before we can approve the proposed Plan under Section 11 (e) of the Act, we must find it necessary to effectuate the provisions of Section 11 (b) and fair and equitable to the persons affected by the Plan. In addition, we must find that the related transactions meet the standards of other applicable provisions of the Act. Necessity of Plan.

On May 9, 1940, we instituted proceedings by the entry of a notice of and order for hearing to determine what steps should be taken by Bond and Share and its subsidiaries, including American, to comply with Section 11 (b) (2) of the Act, and specifically whether it was necessary to discontinue the corporate existence of Bond and Share, American or any of the other respondents." On August 22, 1942, after hearing and on the basis of a comprehensive record, we issued our findings that the corporate structure and continued existence of American unduly and unnecessarily complicated the structure and unfairly and inequitably distributed voting power among the security holders of the Bond and Share system. Our order required that the existence of American be terminated and that the company be dissolved and further required American and/or Bond and Share to proceed with due diligence to submit a plan or plans for the dissolution of American. Appeals were taken and our order was affirmed by the United States Court of Appeals for the First Circuit on March 17, 1944 and by the United States Supreme Court on November 25, 1946.10 Our opinion, however, expressly recognized that a holding company might be an appropriate method for "holding together" an integrated public utility system as contemplated by Section 11 (b) (1) of the Act if such existed in the American system."1 We have since permitted American to organize Texas Utilities as a holding company over the Texas properties owned by Texas Electric, Texas Power, and Dallas.

Holding Company Act Release No. 2051.

By subsequent order, dated June 7, 1940, we specified that the hearing be confined initially to the sole issue of whether it was necessary to discontinue the existence of American and certain other then subholding companies of Bond and Share. 7 S. E. C. 391 (1940).

10 American Power & Light Company, et al., v. S. E. C., 141 F. 2d 606 (C. A. 1st, 1944), affd., 329 U. S. 90 (1946).

11 Our opinion also noted that any order under Section 11 was subject to modification. That our dissolution order would not preclude American from creating or maintaining a holding company was also recognized by the United States Court of Appeals for the First Circuit which upheld our dissolution order. American Power & Light Company, et al., v. S. E. C., 141 F. 2d 606, 620 (C. A. 1, 1944). See also, Electric Power & Light Corporation, 29 S. E. C. 52 (1949), approved and enforced April 22, 1949, U. S. D. C. (S. D. N. Y.), Civil Action No. 49-457; stay denied May 5, 1949 (C. A. 2); stay denied U. S.-(May 16, 1949); Enforcement order affd.-F. 2d—(C. A. 2, August 9, 1949).