Page:Federal Reporter, 1st Series, Volume 7.djvu/400

 388 FEDERAL REPORTER. �three months thereafter, and four dollars flve montlis thereafter, with tho right to pay up in full at any time under 6 per cent, per annum discount. Scrip transferable to bearer will be issued if desired on the payment of the flrst instalment. Bach stockholder is to have an option of taking a ffiro rata share of these obligations, and all not thus taken are to be awarded to an association or syndicate of the promoters of the plan, by whom its success is to be guarantied by the deposit of the sum of $2,058,- 000. * * * * The Company is to pay tho guarantors a commission of 5 per cent, on the proceeds of the issue of deferred income bonds, and the net proceeds of the issue are to be applied to the payment of the floating debt." �The petition prayed that the court would approve of the issue of de- ferred income bonds of the character above stated, and that the money realized therefrom should be paid to the receivers and applied to the pay- ment of the floating debt. This petition was accompanied by the report of one of the special masters, acting alone, in the necessary absence of the other, and approving the proposed soheme. On November 18, 1880, the court entered a decree granting the prayer of the petition, and authoriz- ing and empowering the railroad company to issue the said bonds. �On December 7, 1880, the board of managers of the railroad company authorized the president to issue the said deferred income bonds. At the same time they approved and adopted a plan laid before them by the pres- ident to issue, in addition to the income bonds, a new Consolidated 5 per cent, funding mortgage, to secure bonds to the amount of $150,000,000, which were to be used for retiring all the outstanding obligations of the company. These bonds were to be divided into two classes — A and B. Class A were to be either perpetuai or 50-year obligations, with provision for renewal at the end of 50 years. They were to have priority over elass B, and were to be used in retiring the earlier obligations of the company. The interest on them was to be cumulative, and subject to be collected by legal proceedings upon any default. Class B were to be perpetuai obliga- tions, and were to be used in retiring the later obligations of the company. The interest on them was to be cumulative, but no suit could be brought to recover such interest until three years after default. On the same day the receivers of the company approved this plan, and authorized the pres- ident of the company to carry it into eft'ect. In pursuance of this author- ity, subscriptions were invited for the deferred income bonds, and were received from varions parties. In the prospectus inviting these subscrip- tiens it was stated that the plan was simply a method of obtaining a voluntary contribution from the shareholders, by oflering them a rever- sionary interest in the earnings, and that the bonds would be irredeem- able. Subsequently certain mortgage bondholders of the company, who were also stockholders, flled a petition for the revocation of the order of November 18, 1880, and also, as stockholders, flled a bill in equity, and moved for an injunction restraining the issue of the income bonds and the execution of the $150,000,000 mortgage. At a preliminary hearing, on Pebruary 14, 1881, upon these motions, the court modified the order of November 18, 1880, so that it should read as follows : �"And now, February, 14, 1881, this motion having been f ully argued by counsel and duly considered by the court, it is now ordered that ^uch part of the said order of November 18, 1880, as purports to confer authority by ��� �