(c) Income bonds shall not be issued on the basis of additional property or additions and betterments acquired to the extent that such additional property or additions and betterments are acquired by the use of the additions and betterments fund, except as herein otherwise provided. (d) No income bonds (except additional series A income bonds, or income bonds of any series, issued for emergency purposes as hereinafter permitted) shall be issued with interest ranking prior to interest on series A income bonds issued at reorganization and no income bonds (except additional series A income bonds, or income bonds of any series, issued for emergency purposes or to cover the cost of equipment as herein permitted) shall be issued with a sinking fund if no sinking fund exists for the series A income bonds issued at reorganization or with a sinking fund ranking prior to any sinking fund for the series A income bonds issued at reorganization. No interest shall be mandatorily payable on income bonds of any Series (except at maturity, or upon redemption, as hereinabove in this article provided) except that of available net income. (e) Upon the authorization of the Commission, income bonds may be issued from time to time, up to a principal amount of $500,000 at any one time outstanding, without regard to the restrictions on the issue of additional income bonds hereinbefore stated, if the reorganized company shall have contracted forthwith to sell or pledge such bonds and the board of directors of the reorganized company by resolution adopted by two-thirds of the entire number of directors, shall have determined that an emergency, which term may be defined in the income mortgage, exists requiring such issue. The fact that income bonds shall theretofore have been issued for emergency purposes and thereafter canceled shall not at any given time affect the right of the reorganized company then to issue income bonds for emergency purposes, up to the afore-mentioned maximum principal amount of $500,000 at any one time outstanding. Income bonds may be issued for emergency purposes on such other terms and conditions as may be determined by the reorganization managers and set forth in the income mortgage. The new general mortgage shall contain provisions, in such form and substance as may be determined by the reorganization managers with the approval of the court, that, notwithstanding any other provision of the mortgage, the mortgage may at any time with the approval of the Commission or such other regulatory body as may at the time have jurisdiction in the premises, be modified by the concurrent action of the reorganized company and of the holders of not less than 75 percent in principal amount of all bonds of the mortgage outstanding at the time of such vote, so as to postpone the time or times of payment of any accumulations of contingent interest, either before or after the interest is due, or the principal of any or all series of bonds of the mortgage either before or after maturity, which at such time may be outstanding, provided that the payment of the principal of the bonds may not be postponed for a longer period than 20 years from the maturity date designated in the bonds and that the maturity of interest on the bonds may not be postponed for a longer period than 5 years but in no event beyond the maturity date of the principal of the bonds designated in the bonds unless such maturity be postponed, in which event the maturity of interest on the bonds may not be postponed beyond the extended maturity date of the principal. IX. ADDITIONS AND BETTERMENTS FUND The mortgages shall contain appropriate provisions to require the board of directors of the reorganized company, on or before May 1 of each year beginning with 1945, to set aside and segregate from other funds an additions and betterments fund in an amoount which shall be equal to 2 percent of total railway operating revenues (as defined by the Commission's classification of income, profit and loss, and general balance sheet accounts for steam roads, account No. 501, or such substituted account or accounts of the Commission as at the time may be in effect) of the reorganized company in such preceding calendar year, or $85,000 whichever shall be greater, plus through May 1, 1950, $45,000 per annum. The additions and betterments fund shall be derived from (1) funds resulting from charges for depreciation of roadway and structures and credited to the depreciation reserve during the preceding calendar year to the extent that such funds are earned and are adequate therefor and (2) funds from available net income (as defined in article X hereof) of the preceding calendar year, prior to interest on the general-mortgage income bonds and prior to sinkingfund payments, to the extent the funds resulting from charges for depreciation of roadway and structures are inadequate to make up the required amount of the fund. If and to the extent that the available net income of any calendar year shall not be sufficient to set aside for the additions and betterments fund in respect of such year the amount provided above, the amount of such deficiency shall be made up out of the available net income of subsequent years before any of such available net income shall be applied to the payment of any contingent or accumulated contingent interest or of any sinking-fund installments or of any dividends, provided, however, that the total of such deficiencies to be made up on May 1 of any year, exclusive of such deficiencies made up in previous years and exclusive of the amount to be set aside for the additions and betterments fund in respect of the preceding calendar year, shall never exceed $150,000, and provided further, that no deficiency shall be made up on any May 1 which was incurred more than 28 months prior thereto. Sums in the additions and betterments fund shall be applied, as from time to time shall be determined by the board of directors of the reorganized company, either to provide for, or to reimburse the treasury of the reorganized company for, all or any part of the cost in any calendar year of capital investments, as hereinafter defined. Such capital investments shall be as defined by the Commission's classification of income profit and loss and general balance sheet accounts for steam roads, accounts Nos. 701, investment in road and equipment, 702, improvements on leased property, and 705, miscellaneous physical property, or advances to subsidiaries for expenditures which, if made directly by the reorganized company in respect of its owned and leased property, would be charged to said accounts, or such substituted accounts of the Commission as may at the time be in effect. To the extent that capital investments are provided for or reimbursed out of the fund, the reorganized company shall not thereafter have the right to issue any bonds or other evidences of indebtedness to capitalize or to reimburse it for any such investments; provided, however, that such investments, if for purposes for which first and consolidated bonds or income bonds may be issued, may be used, within such limits, if any, as may be specified in the first and consolidated mortgage or the income mortgage, to supply in whole or in part the excess of capital expenditures required to be certified under either of such mortgages over the principal amount of the bonds that may be issued under the terms thereof. To the extent that the additions and betterments fund is not, in the discretion of the board of directors of the reorganized company, required for such capital investments, the fund or any part thereof may be applied by said board of directors, in its discretion, to the payment of interest on fixed interest debt of the reorganized company. To the extent that the fund is so applied it shall be reim SIELT peerved, as they are required to share with the seconds I sings of the preferred stock only to a comparatively small exTEM, LIČ TE STV Ares to them under the new capital strucBICE MIT ZLAT compensate for that slight disadvantage. In these LUCCIES ZEN is suficien preferred stock to satisfy approximately 2. percent to the clan of the seccords, including those pledged. Comna sai mỤ S STELLE to satisfy the remaining 80 percent of ther cam and that of the generals not satisfied through the preferred stack and other common stock allocable to them with respect the pieced sens The semi-marig trustee, while conceding that a separate issue lf securities at give recognition to the lien position of the seconds WAUŻ DA JE JOstfel, noorends that the plan should provide sufficient PETAČ Kai or that the bolders of the seconds, including those zuedged, rotiž be fired 50 percent of their claim in such stock. In ZE LIINIGTE, it suggested a somewhat involved method of determag the distributor to the seconds and the generals of the common SAK THE WILd be available for them. We need not describe the sugrested mathad. for the reason that we are not persuaded of its soundress and the distribution to the seconds which we find proper is solevan morce favorable to the seconds than would result from the spebombon of this trustee's method, as we understand it, to the amount LË DALIBOR, Stack available for the seconds and the generals under The Lion which we here approve. X COLIE Sock were allotted to the seconds at the rate of 11.5 shares for each $1.000 bond, they would receive 1 share for approxMateix each 8013468 of the 80 percent of their claim not satisfied by the preferred stock allotted to them, or about 1.092 shares for each $10 of such remaining claim. The total amount thus distributable with respect to the outstanding and pledged seconds would be $1,152001 On common-stock dividends of $2.75 and $3.75 a share, respectively, the seconds would receive about $3.00 and $4.09 with respect to each $100 of claim represented by such stock. As may be computed from appendix B hereto, common-stock dividends of $2.73 a share could initially be paid at an earnings level of approximately $787.123 after setting aside an amount equal to 20 percent of the dividend for the security-retirement fund. This is within the range of probable earnings which we find may be expected in a normal future year and is about $58,000 greater than the estimate of the debtor's trustee of earnings in a normal future year, made before the purchase of the additional eight Diesel locomotives was authorized. The trustee's estimate of the operating savings from that purchase has been stated herein. 261 I. C. C. As may also be computed from appendix B. after the rei, t. e beginning in 1951 by $10 of the at java.e frmava a net income into the addit to and determ sating the seconds in respect of them. The requirements prior to d.. further reduced as income bords retirement fund. The retirement of £ nection with a dividend of $3.5 would reduce the prior charges about .. na mag Under the existing tal structure, interest would be of $734.12% at at der the might be paid oz amount. assumed det 1951. all new 261 1.C.C. 139 but only way and the addi. t aside to ed in the reimburse sed for the applied to 'I and VII n the event or othewise › applied to funds which consolidated pplied to the ing the last ereon. De applied to ng funds for the board of lends on the no dividends until amounts side, and paid .nd, to be used at of generalsuch bonds, to ST value of $100 e issued in the > have declared as provided in at the rate of dividends shall n stock. Such → cumulative to out shall not be I be deemed to by available net ts to be applied f), inclusive, of inized company ger, sale, lease, vo-thirds in par visions may be bursed out of the available net income of subsequent years before any of such available net income shall be applied to the payment of any contingent or accumulated contingent interest or of any sinking-fund installments or of any dividends. Whenever, prior to 1951, the amount of the additions and betterments fund shall exceed $165,000 or whenever, in 1951 or thereafter, such amount shall exceed $120,000, such excess over $165,000 or over $120,000, as the case may be, may be applied by the board of directors of the reorganized company, in its discretion, to the purchase or redemption, at public or private sale or upon calls for tenders of any new Terminal bonds and, after all of such bonds have been retired or converted, of first and consolidated bonds and income bonds, in the order named, at such time outstanding. Bonds so purchased or redeemed shall be canceled. All moneys in the additions and betterments fund which shall not be applied as above provided during the calendar year in which they are credited, shall be carried over in the fund to the next calendar year in addition to the regular annual credit to the fund. If, however, on May 1 in any year the amount in the fund is equal to or in excess of $200,000, no contribution shall be made to the fund in such year, and the "then remaining available net income" to which reference is made in article X subdivision 3 (c) hereof for the preceding year shall be deemed to be increased by the amount which would otherwise have been payable into the fund on said May 1. X. DETERMINATION AND APPLICATION OF AVAILABLE NET INCOME 1. Available net income, as that term is used herein, shall be "income after fixed charges," determined in accordance with the accounting rules of the Commission or, to the extent not governed by such accounting rules, in accordance with sound accounting practice, provided, however, that there shall be excluded from the computation of net income available for contingent interest and the additions and betterments fund and the sinking-fund requirements provided for in the plan, that part of the charges to operating expenses representing the service value (ledger value less value of salvage, if any) of nondepreciable roadway property retired and not replaced. 2. Available net income shall be determined for each calendar year within 4 months after the termination thereof, beginning with the calendar year 1944 and continuing thereafter so long as any funded debt remains outstanding, provided, however, that (1) if in any calendar year the reorganized company shall fail to earn its fixed charges, such deficit shall be added to the fixed charges in the next succeeding year or years, and (2) adjustments necessary to correct the income or expense accounts of any prior year (but not any year prior to 1944) shall be made by appropriate entries, either in the accounts of the current year, or (unless such adjustment would be in violation of applicable orders, rules, and regulations of the Commission), in the discretion of the board of directors of the reorganized company, in whole or in part in the accounts of any subsequent year or years. Any such adjusting entries made in the accounts of any year to adjust the income or expense accounts of prior years shall be treated, for the purpose of this article, as income for the year in which entered on the books, whether cleared through income or profit and loss accounts. 3. Available net income for each calendar year shall, subject to the following provisions and subject to such modifications thereof (including rearrangement of the priority of payment) as the reorganization managers may deem desirable in connection with the sinking funds created for bonds which may be issued to cover the cost of equipment or for emergency purposes, be applied during the next succeeding calendar year to the following purposes and in the following order: |