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new NH&I for the purpose, among any other, of concession sales, it is assumed and will be required herein that those improvements shall revert back to the new NH&I at the termination of the 10-year lease period at no cost to the reorganized railroad. This action would be in accord with Starer's testimony stating that the railroad would have first claim through the lease on all the assets of the Corporation either acquired as part of the reorganization or acquired in the future, which shall be needed by the NH&I for rail operations.
The Commission has not been presented with an agreement showing the terms of the transaction which would detail rights of the parties with respect to the property to be transferred to the Corporation and thereafter leased back by the railroad. However, whatever method of conveyance shall be agree upon shall insure in the reorganizated railroad the right to repurchase the tangible rail operating assets transferred and thereafter acquired by the Corporation. To that end we believe that any conveyance of the tangile assets of the NH&l to the Corporation should contain an option granting the NH&I the right to repurchase the rail assets of the Corporation after 10 years from the date of execution of the conveyance at a nominal sum not in excess of $100.
The Starer plan of reorganization contains several areas of potential abuse and undesirable consequences resultant from dual corporate operations. The potential exists for transactions in which private interests take precedence over the public interest in viable railroad operations. These may include (a) usage of the Corporation's credit worthiness in a manner that may divert capital from needed transportation expenses and investments to nontransportation activities; (b) divestment or liquidation of needed rail assets; (c) burdensome charges for nominal services or assets from the Corporation to NH&I; (d) declaration of excessive dividends to be paid by the NH&l; and (e) an unwarranted increase in the Corporation's lease rental charge to the NH&I.
To insure that the reorganized debtor is given every opportunity to continue a necessary service, approval herein will be conditioned to provide that, without the express approval of the Commission, (a) the NH&I shall not pay any dividend in cash or otherwise; (b) the NH&I shall not make any advances, loans, or transfers of property, except as herein authorized, to the Corporation; (c) the NH&I shall not pay in excess of $35,000 annually of lease rental charge to the Corporation; (d) the Corporation shall not lease, sell, liquidate, or any way encumber, except as herein or as may hereinafter be
authorized, any of its property, or the property of any of its parent, subsidiary, or affiliated companies for noncarrier purposes; and (e) that the Corporation shall be a wholly owned subsidiary of the NH&I.
the er. e in rail
Subject to the above-mentioned modification and conditions, we find and conclude that the plan of reorganization proposed by Robert L. Starer, modified as described above and as approved by our order herein, will meet the requirements of subsection (b) of section 77 of the Bankruptcy Act; will be fair and equitable; will afford due recognition to the rights of each class of creditors and stockholders; will not discriminate unfairly in favor of any class of creditors or stockholders; will conform to the requirements of the law of the land regarding participation of the various classes of creditors and stockholders; will otherwise meet the requirements of subsection (e) of section 77 of the Bankruptcy Act, and will be compatible with the public interest. The plan so modified is hereby approved and will be certified to the United States District Court for approval.
All requested findings, provisions, and modification not specifically discussed or upon which no specific finding, conclusion, or decision is made herein, have been given consideration and found not justified to the extent that they have not been incorporated or reflected in this report and in the plan herein approved.
This is not a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environmental Policy Act of 1969.
An appropriate order will be entered.
At a Session of the INTERSTATE COMMERCE, Division 3, held at its office in
Washington, D.C., on the 27th day of August 1973.
FINANCE DOCKET No. 26223'
SI per be enti the reo shall in debtor make at claims working acquirir
IV. T in full = the clai 10 and
NEW HOPE AND IVYLAND RAILROAD COMPANY, DEBTOR
(PLAN OF REORGANIZATION)
ROBERT L. STARER
Investigation of the matters and things involved in these proceedings having been made, including the report and recommended order of the Administrative Law Judge, served September 18, 1973, and the exceptions filed by the Philadelphia Electric Co., and by Robert L. Starer, and the replies filed thereto by the New Hope and Ivyland Railroad Company, hereinafter called debtor, and jointly by the Commonwealth of Pennsylvania and the Pennsylvania Public Utility Commission; and the said division, on the date hereof, having made and filed a report herein containing its findings of fact and conclusions thereon, which report is hereby made a part hereof:
It appearing, And the said division so finds, that this decision is not a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environmental Policy Act of 1969;
It is ordered, That the following plan of reorganization of the debtor, under the provisions of section 77 of the Bankruptcy Act, hereinafter referred to as section 77, be, and it is hereby, approved:
Trustee. in the adverse
PLAN OF REORGANIZATION
recogri adjuste sectio made
1. Effective date.-The effective date of the plan shall be the first day of the month preceding the month in which falls the consummation date fixed by the court.
II. Reorganized company. -As hereinafter used, the term “reorganized company” means the debtor as reorganized and the term "Corporation" means the New Hope and Ivyland Corporation, the entity which after the reorganized company shall have paid the debts and expenses of the debtor, shall take title to all the transportation properties of the reorganized company necessary to rail operations and lease them back to the reorganized company. The contract between the reorganized company and the Corporation shall provide that at the end of 10 years from the date of execution of the conveyance agreement following the satisfactory performance of debtor's lease obligations thereunder, title to all assets acquired from the debtor and those acquired subsequent to the initial agreement may be reacquired by the reorganized company by its exercise of its option to reacquire the rail properties at a price not to exceed $100.
III. New capitalization.—The articles of incorporation of the reorganized company shall authorize the issuance of 1 million shares of common stock having a par value of
This report also embraces Finance Docket No. 26943, Robert W. Guthrie, Trustee, New Hope and Ivyland Railroad Company-Abandonment of Entire Line; and Finance Docket No. 27034, Robert L. Starer-Acquisition and Operation–New Hope and Ivyland Railroad Company.
$1 per share. Holders of the issued and outstanding shares of such common stock shall be entitled to one vote per share of such stock owned or held. The capitalization of the reorganized company, upon consummation of the plan as of the effective date, shall include: (1) issuance or sale of sufficient shares of common stock to enable the debtor with its other assets to pay alll costs of administration incurred by the debtor, make all payments required under the approved plan of reorganization other than the claims of the Fund, and provide the reorganized company with a minimum of $25,000 working capital; and (2) the Corporation may incur indebtedness for the purpose of acquiring such funds as may be necessary as provided in detail in the report herein.
IV. Treatment of existing securities, claims and contracts.-The Fund shall receive in full settlement of its secured debt, the cash equivalent of the principal amount of the claim outstanding on the date of bankruptcy, plus interest accrued and unpaid up to and including the effective date of the reorganization plan.
Claims, if any, of the United States for taxes or customs duties, class 2, or other creditors whose claims have priority over claims secured by the mortgage, class 3, and the expenses of reorganization, as allowed by the court subject to the provisions of section 77 shall be paid in cash or assumed by the reorganized company; provided, however, that claims in class 2 and class 3 shall be subject to applicable statutes of limitations and the liability of the reorganized company for any taxes which are the subject of litigation on the date of confirmation of the plan, or which may become the subject of litigation on any date thereafter and prior to the expiration of the applicable statutes of limitations, shall be determined pursuant to law; and provided, further, that this provision shall not be deemed to reclude the debtor, the bankruptcy trustee, or the reorganized company from contesting the merits of any such tax claim in the manner provided by law. The interests of the holders of such claims will not be adversely and materially affected by the plan.
All contracts made by the bankruptcy trustee, and not fully performed, and all executory contracts made by the debtor and not disaffirmed by the bankruptcy trustee prior to the consummation date, shall be assumed by the reorganized company. The interests of the other parties to such contracts will not be adversely and materially affected by the plan. The reorganized company, in connection with any settlements of transportation
between it or the debtor and the United States, shall be required to recognize and pay or allow for any and all sums, determined through audit, adjustment, compromise, or litigation as due the latter by virtue of the provisions of section 322 of the Transportation Act of 1940, 54 Stat. L., 955, for overpayments made prior to the date of confirmation of the plan reorganization, without requiring proof thereof in this reorganization proceeding and without prejudice by reason of such sums not having been proved herein, with the same relative priority as they now have with respect to other obligations of the debtor. The interests of the United States as the holder of such claims will not be adversely and materially affected by the plan.
V. Board of directors.--The initial board of directors of the reorganized company shall consist of Robert L. Starer and four persons nominated by him.
VI. Effect of acceptance of the plan.-Acceptance of the plan shall include acceptance of all instruments necessary and appropriate to the carrying out of the plan, other than the orders of the court and this Commission, to the same effect as though the terms of such instruments were set forth in full herein.
VII. Transfer of property and disposition of existing securities.-The debtor's trustee and the trustee under the first mortgage shall execute and deliver all such deeds, instruments of conveyances, releases, assignments, and other documents as
Chicago, Milwaukee, St. Paul and Pacific Railroad Company finance and accounting department
Revenue passengers carried
Office of Chief Statistician Chicago, May 1, 1973.