鈥淭he floating debt should be 鏉窞妗戞嬁缃戣鍧?liquidated from the proceeds of an adequate amount of new 4 per cent bonds (and debentures if desirable), which shall be offered to the shareholders and bondholders at a price rather below than above the probable market value of the new securities, and under the guarantee of an 鏉窞瓒虫荡涓婇棬 underwriting syndicate.
鈥淧rovision should also be made to obtain the conversion on fair terms of the reorganization prior lien bonds into the new bonds, so that it shall become practicable to secure the new 4 per cent bonds at once by a lien second only to the 鈥楨rie first consolidated 7 per 鏉窞鍝佽尪qq缇?cent bonds鈥? the new 4 per cent bonds to be issued under a general mortgage to an amount sufficient to provide for future additions and improvements, and with adequate provision for the taking up of the underlying bonds, and the issue of 4 per cent bonds in their stead…鏉窞鎸夋懇淇濆仴鎶€甯? Any plan now adopted for the readjustment of the finances of your company should seek, as its first object, to reduce the permanent charges so well within the earning capacity of the property65 as to make another default in the future an improbability…. We trust this communication 鏉窞娲楁荡涓績鐖借 will be received in the spirit in which it is submitted.鈥?41
The directors refused to modify their plan, and the bankers, therefore, notified them of the election of a protective committee.142 On March 6 a meeting of stockholders approved the plan, and the same week Messrs. Drexel, 鏉窞鎸夋懇濂虫妧甯?Morgan 鏉窞姘寸枟spa鍏荤敓 & Co. gave notice that, having received deposits of a majority of each class of bonds, they had declared the plan operative as announced.143
Defeated in their appeal to the securityholders, the opposition turned to the courts. As a preliminary, they obtained an opinion 鏉窞spa璁哄潧 from the well-known firm of Messrs. Evarts, Choate & Beaman, which held, first, that the Erie could not legally pay interest on the new bonds proposed until it had paid the interest on every one of the old second mortgage bonds, regardless of whether the latter was deposited with 鏉窞娲楁荡鐖?the reorganization committee; second, that if the old second mortgage bonds which were deposited as security for the new issue should be kept alive as proposed, the company would be increasing its obligations beyond the legal limit;144 and third, that much of the stock voted at 鏉窞淇濆仴
鎸夋懇鐢佃瘽the special meeting at which the new mortgage had been authorized was not really owned by the persons who had issued the proxies thereon as the law provided.145 Following the opinion, suit was commenced by Mr. Harriman in April for an injunction against the recording of the new 鏉窞鍊惧煄浼氭墍 mortgage, on the ground that the Drexel & Morgan proxies did not represent the actual stockholders, and in June by one John J. Emery to prevent the execution of the mortgage. Judge Ingraham in the Supreme Court Chambers denied an injunction, using in his opinion the following language: 鈥滄澀宸為緳鍑ら榿璁哄潧 While it is clear,鈥?said he, 鈥渢hat there are certain obligations resting upon the majority to refrain from infringing the legal right of the minority, and that a court of equity will enforce and protect the rights of the minority, still, whe