While getting ready with the committee to solicit the support of the holders of the most important defaulting bond issue, the manage ment will at the same time endeavor to have a harmonious personnel on the committees to represent the holders of other issues of securities. There will be a committee for every issue of bonds, debentures, or notes in default, and for each stock issue. Some of the issues which are not in default, and in which defaults are not anticipated, also may have protective committees. This may prove ad visable because matters may come before the court in the receivership, particularly the question of placing the lien of receiver's cer tificates ahead of the lien of bonds not in default, which will affect their interests, and in which they will need to be heard. Of course, the holders of all securities prior to those in default have a lively interest in the processes of the receivership and the reorgani zation, and may need constant representa tion to see that their interests are protected. Though the interests of the holders of the various security issues are necessarily diver gent, there is a great difference between hav ing protective committees which will work together as harmoniously as their divergent interests will permit, and having committees which will clash more than their jeopardized interests make inevitable. So it will be part a the problem of the managethent endeavor ing to shape the general course of the re organization to have as attractive a personnel as possible appear to solicit the representa tion of holders of the various other issues of securities as well as of the holders of the prin cipal issue in default.
Leaving for the moment the consideration of these various other committees, let us trace through the procedure of the principal committee; that is, the one to represent the holders of the principal issue in default. The bondholders will signify their consent that the committee shall represent them according to the terms of the protective committee's agreement by depositing their bonds with some trust company designated as depository and accepting a depository receipt or certif icate for them.
It is important from the viewpoint of those expecting to guide the reorganization that this protective committee's depository agreement should give the committee broad powers. Such broad powers are probably in the interest of the depositing bondholders. To act effectively the committee needs au thority to meet emergencies and to choose its policy from the widest possible field. This depository agreement looks forward to a plan of reorganization. The committee must get the special consent of a depositing bondholder to the plan of reorganization, or permit him to withdraw his bonds so that he will not be come a bondholder assenting to the reorgani zation plan, and the protective committee's depository agreement will provide for such withdrawal. Showing how the protective committee's agreement anticipates the prep aration of the plan of reorganization, read the following quotations from one such agree ment: — The committee shall have power, if and when ever it deems such action advisable, to prepare and adopt a plan for the reorganization or read justment of the railroad company, its affairs and properties, including or excluding, as the com mittee shall determine, the affairs and properties of any one or more of the railroad company's subsidiary, controlled, affiliated, or allied com panies or interests, or may approve and adopt any plan for the reorganization or readjustment thereof, though not prepared by it. Such plan
may provide for the reorganization of the com pany or the adjustment of its affairs either alone or in conjunction with the reorganization of or adjustment of the affairs of any other corporation or corporations which, in the opinion of the com mittee, it is desirable should be included in such plan, and for the acquisition of any property deemed desirable for the purposes of such reor ganization or readjustment, and may provide for vesting in a single corporation, or in one or more corporations, whether the present railroad com pany or some other corporation or corporations, all or any of the properties of the railroad com pany and other properties and for the sale, lease or other disposition of any properties of the railroad company or other properties. Any such plan may recognize and make provision for any or all of the securities, obligations, and indebtedness of the railroad company and of any other corporation or corporations included in said plan, whatever may be their priority of lien, and also for any or all liens upon the properties of the railroad company or of such other corporation or corporations, or upon any other property acquired for the pur poses of reorganization, and prescribe the re spective terms and conditions on which the holders of each or either of the classes of stock or certificates deposited hereunder, or of others of the securities, obligations, indebtedness or liens aforesaid, may obtain such recognition and par ticipate in the benefits of the plan. Any such plan of reorganization or readjustment may be prepared or approved, and adopted by the com mittee, either before or after a sale, or a contract for the sale, of the franchises, properties, or assets of the railroad company or any part thereof, or of any subsidiary or allied corporation. Such plan may provide for the sale or exchange of the shares of stock or stock trust certificates deposited hereunder or either class thereof (preferred or common) or any of them, or for the sale or re sale of any property or any part thereof acquired by or on behalf of the committee hereunder, and may contain all such provisions as the com mittee shall deem advisable for the reorganiza tion of the company or the readjustment of its affairs either alone or in conjunction with the reorganization of any other corporation or cor porations, and for raising or obtaining all funds deemed necessary for the purposes of such reor ganization or adjustment.