1894. They comprised three proposals:

(1) To exclude from the reorganization certain unprofitable properties which had previously been included. Certain alterations had already been made toward this end in the exclusion of the Erlanger line, the Memphis & Charleston, and the Mobile & Birmingham. Further modification was to exclude the Northeastern Railroad of Georgia, the Macon & Northern, and five other subsidiary lines. (2) To fund for a year or two the coupons on new bonds given for certain securities, and to provide in other cases that the new bonds should not bear interest till 1895 or 1896. (3) To lighten the assessment on Richmond Terminal and East Tennessee common stock, and to allow to all assessed securities one-quarter of their assessment in bonds and three-quarters in preferred stock instead of all in preferred stock. At the same time a few other modifications allowed to some bonds a more liberal grant of new securities than they had obtained in May. It was hoped by these means to raise the average earning ability of the system, while reducing the new securities to be issued.[386] The temporary funding of coupons further lightened fixed charges until business should have had time to revive. “Under the plan as now modified,” stated Drexel, Morgan & Co., “and assuming that one-half of the new bonds to be sold are used in 1894 and the other half in 1895, the fixed charges are estimated at about $4,100,000 in 1894, 4,700,000 in 1895, 5,400,000 in 1896.[387] “The depression in the South began in 1890–91. There would appear to be no reason why in a comparatively short time these properties should not very easily earn, _gross_, as much as and more than they earned in that fiscal year, viz., over $21,000,000. Operated at 70 per cent ... there would remain, say $6,600,000 net against an interest charge of $5,400,000.”[387] The reduction in assessments was made possible by the decrease in mileage. Although the floating debt had increased $2,600,000 from January 1, 1893, and the equipment notes recorded were greater by $1,048,000,[388] yet the debt to be provided for by the modified plan of 1894 was estimated at only $12,200,000. Besides this the cash to be reserved for new construction was reduced $3,000,000, and the surplus for expenses and contingencies $1,380,000. Assessments were therefore set at $10 a share on Richmond Terminal common instead of $12.50; $7.20 on East Tennessee common instead of $9; and $3 and $6 on East Tennessee first and second preferred as before. The new securities to be sold were reduced correspondingly to $8,000,000 of bonds and $25,000,000 of common stock. Finally, the bonds to provide for new construction, betterments, and additions were reduced from $35,383,000 to about $19,000,000, of which not over $2,000,000 (instead of $2,500,000) were to be used in any calendar year. Other provisions of the earlier plan were to remain unchanged. It was this modified plan which was carried to a successful conclusion. In principle it did not mend the weak spot in its predecessor of May. That plan had contemplated a surplus of $211,000 over fixed charges for 1893. This estimated charges at $4,100,000 for 1894 and net earnings at $4,250,000 on a somewhat reduced mileage. There was not to be more left for dividends and improvements than there had been before, while the cash and bond provisions for improvements were notably reduced. The concession of bonds to stockholders for one-quarter of their assessments was unsound financiering, as was, on the whole, the funding of coupons on the new mortgage bonds. The success which the modification had, nevertheless, in restoring the company to solvency, was due to the improvement in earnings which soon took place. The original plan had based its calculations on the first year of depression; the amended plan kept charges down till three years had elapsed. By that time business had begun to mend, and all danger of bankruptcy was past. Other points in either plan leave little to criticise. The modifications to the original plan were issued on February 20,