Payments from funds Salvage, etc. Investments Power of sale Records Upon expiration or termination If necessary to divide funds Existing income to Lessee 6% upon contribution and cost of equipment, etc. due either to wear and tear or to obsolescence, inadequacy or age, and also any excess in the cost of maintenance as provided in paragraph 4 of this Article, shall be paid from the appropriate fund. When any principal part of the Railroad or Equipment or of the Existing Railroads is retired or withdrawn from service, an amount equal to its cost shall be withdrawn from the appropriate fund and expended on new construction or new equipment. Any salvage or proceeds on parts so retired or withdrawn shall (subject to the provisions of any now existing mortgage or mortgages covering the parts so retired or withdrawn) be paid into the appropriate fund. Any amounts in such funds not currently needed for the purposes herein specified shall be securely invested and reinvested by the Depreciation Fund Board and all interest and profits accruing thereon shall be returned to the revenue. The Depreciation Fund Board shall have the right to sell investments to meet current needs and for purposes of reinvestment. A permanent record of the depreciation of each class of construction and equipment of the Railroad and the Existing Railroads (as such classes are from time to time defined or specified by the Commission) shall be kept by the Lessee in the form prescribed from time to time by the Commission. At the expiration of the term of the Lease, or upon earlier termination as hereinafter provided, any amount in the Depreciation Fund for the Railroad and Equipment shall be paid to the City or to a new lessee as may be directed by the Commission and any amounts in the Depreciation Fund for the Plant and Property of Extensions and Additional Tracks and in the Depreciation Fund for Existing Railroads shall be paid to the Lessee. In case the City shall terminate the contract as to a specified portion or portions of the Railroad as hereinafter provided, the Commission and the Lessee shall determine what proportion of the first of such funds shall then be paid over to the City or to a new lessee on account of depreciation of the specified portion (including the Equipment thereof) as to which the contract is so terminated and in case of their failure to agree upon such amount the same shall be determined by arbitration or by the court. 6. One-quarter (4) of the sum of three million five hundred thousand dollars ($3,500,000) to be retained by the Lessee for each quarter year of the term of the Lease as representing the average annual income from the operation of the Existing Railroads during the two years prior to the date of the beginning of initial operation, out of which the Lessee shall pay interest charges on obligations representing capital investment (preceding the date of this contract) in the Existing Railroads. 7. One-quarter (4) of an amount equal to six per centum (6%) of (1) the Lessee's contribution toward the cost of construction of the Railroad, (2) the cost of equipment of the Railroad for initial operation, (3) the actual cost of the plant and property of the extensions and additional tracks authorized by the Commission by said certificates, and (4) the cost of Reconstruction of the Existing Railroads for Initial Operation, for each quarter year of the term of the Lease, out of which the Lessee shall set aside amounts sufficient, with interest and accretions thereon, to amortize within the term of the Lease such contribution and such costs. Such payments (subject to the reduction of the cost of construction as hereinafter provided) shall continue to be made to the Lessee for each quarter year In event of operation before com pletion Reduction of cost of construction by Lessee apportioned of the term of the Lease irrespective of whether any part of the cost has been amortized or the bonds issued therefor retired. In the event of the temporary operation of the Railroad or the commencement of the term of the Lease prior to the completion of the Railroad, such one-quarter of six per centum (% of 6%) shall be computed upon the basis of the portion of the Lessee's contribution toward the cost of construction of the Railroad, of the portion of the cost of equipment of the Railroad for inital operation, of the portion of the actual cost of the plant and property of such extensions and additional tracks and of the cost of Reconstruction of the Existing Railroads for Initial Operation then in operation. The Lessee shall, however, reduce the cost of construction borne by it and the cost of equipment by the sum of One Million Three Hundred and Thirty Thousand Dollars ($1,330,000). Such reductions shall be apportioned among (a) the Lessee's contribution toward the cost of construction of How the Railroad, (b) the cost of equipment of the Railroad for initial operation, (c) the cost of Reconstruction of the Existing Railroads for Initial Operation and (d) the actual cost of the plant and property of the extensions and additional tracks (exclusive of additions) authorized by said certificates in the proportion that the cost of each thereof bears to the cost to the Lessee of the whole. Such reduction shall bear interest in the Interest same amount as is paid thereon from and after the beginning of initial operation under the provisions of this paragraph and the amount of such interest when paid shall be paid into the revenue. Such reduction (together with the said interest thereon) shall be accomplished by the Lessee applying thereto the first sums coming to it under the provisions of Article L on account of its fifty per centum (50%) of the income, earnings and profits of the Railroad and the Existing Railroads, provided, however, that the Lessee shall not be required to pay from its share of such income, earnings and profits in any one year an amount in excess of one-fifteenth thereof. How accomplished To Lessee on Additional on Additions to Existing Railroads 8. When the Lessee shall provide Additional Equipment for the Railroad (that is, Equipment in addition to that provided for initial operation as indicated by the schedules filed as provided in Article XL, except Additional Equipment belonging to the Extensions, unless the Extensions to which such Additional Equipment belongs shall become a part of the Railroad, as provided in Article LXXII, in which event the sinking funds provided for such Additional Equipment shall be combined with the funds provided for in this paragraph but the said sinking funds may continue to be separately identified on the books of the Lessee), or Additions to the Existing Railroads, then an amount to be retained by the Lessee equal to one-quarter (4) of the annual interest payable by the Lessee (or, in the event that the Lessee should not borrow money for such purpose, then an amount equal to one-quarter (4) of the interest at the average annual rate payable by the Lessee on long-term securities issued by it for the purpose of carrying out its obligations under this contract) upon the cost of each additional unit (as the words "additional unit" are defined in Article LXIX), together with a sum equal to one-quarter of one per centum (14 of 1%) of the cost of each additional unit, which latter amount shall be paid into a separate sinking fund which with interest and accretions shall be promptly and securely invested and reinvested by it for the Sinking funds When payments to cease To City on cost of construction To continue irrespective of amortization To City on amortization of the cost of such additional unit. Upon the completion of the amortization of the cost of any additional unit the payments provided for in this paragraph in respect of such additional unit shall cease and any balance in the sinking fund of any amounts, or interest or accretions thereon, set aside for the amortization of the cost of such additional unit shall be paid into the revenue. 9. An amount to be paid to the City for each quarter year of the term of the Lease equal to one-quarter (4) of the annual interest payable by the City (or, in the event that any portion of the cost of construction borne by the City should be met other than by the issuance of corporate stock or other long term interest bearing securities, then an amount equal to one-quarter (4) of the interest at the annual rate specified in the last then preceding sale by the City of corporate stock or other long term interest bearing securities) upon its share of the cost of construction of the Railroad (exclusive of Additions) together with an amount equal to one-quarter of one per centum (4 of 1%) of the City's share of the cost of construction of the Railroad (exclusive of Additions). Such payments shall continue to be made to the City for each quarter year of the term of the Lease irrespective of whether any part of such share of the cost of construction has been amortized or the bonds issued therefor retired. 10. An amount to be paid to the City equal to one-quarter (4) of the annual interest actually payable by the City (or, in the event that any portion of the cost of construction borne by the City should be met other than by the issuance of corporate stock or other long term interest bearing securities, then an amount equal to one-quarter (4) of the interest at the annual rate specified in the last then preceding sale by the City of corporate stock or other long term interest bearing securities) upon the cost of construction of each additional unit of Additions to the Railroad, together with an amount equal to one-quarter of one per centum (4 of 1%) of the cost of construction of each additional unit of Additions to the Railroad to furnish a sinking fund for the amortization of the cost of construction of such additional unit. Upon the completion of the amortizaments to cease tion of the cost of any additional unit the payments provided for in this paragraph in respect of such additional unit shall cease and any balance in the sinking fund of any amounts, or interest or accretions thereon, set aside for the amortization of the cost of construction of such additional unit shall be paid into the revenue. When pay Contingent reserve fund Purpose 11. One per centum (1%) of the revenue, which shall be paid into a separate fund to be in the charge and under the direction and control of the Depreciation Fund Board and which with interest and accretions shall be securely invested and reinvested by it to provide a contingent reserve fund. When any such fund with interest and accretions shall equal one (1%) per centum of the cost of construction and the cost of equipment of the Railroad or of the portion thereof remaining in operation, payments to such fund shall be suspended and interest thereon shall be paid into the revenue. If thereafter such fund shall fall below such one (1%) per centum, payments at the rate aforesaid shall be resumed until the fund with interest and accretions again equals such one (1%) per centum. Such fund shall be used to meet deficits in operation and the payment of the various obligations and deductions hereinbefore in this Article referred to and for such other purposes as may from time to time be approved by the Commission. At the end of the term, or sooner termination thereof, any balance in this fund, after the payment of any claims against the Lessee arising out of operation, shall be paid into the revenue. 12. The amount remaining after making all such deductions shall be deemed to be the income, earnings and profits of the Railroad and the Existing Railroads. Division of ARTICLE L. Of the income, earnings and profits of the Railroad and the Existing Railroads fifty (50%) per centum shall be paid to the City and the remaining fifty (50%) per centum shall be retained by the Lessee. profits income, earnings and cumulative ARTICLE LI. If in any quarter year the revenue shall be insufficient Deficits to meet the various obligations and deductions referred to in Article XLIX, the deficits shall be cumulative and payments of such deficits shall be thereafter made in full before deducting the amounts required in the paragraph of such article, succeeding the paragraph providing for the payment of the obligations or deductions as to which there has been such deficit. ARTICLE LII. When and as the Commission shall declare parts of the Railroad to be ready for equipment the Lessee shall forthwith equip the same and when declared by the Commission to be ready for operation the Lessee shall forthwith commence the operation of such part or parts in connection with the Existing Railroads, including such part or parts of the extensions and additional tracks authorized by said certificates as may have been completed and may be ready for operation. The earnings of such part or parts shall be combined with those of the Existing Railroads and the revenue shall be distributed as provided in Articles XLIX, L and LI, except that the deductions provided for in paragraphs 7 and 9 of Article XLIX, shall be computed on the basis of the cost of construction and the cost of equipment of such part or parts of the Railroad and such part or parts of the plant and property of the extensions and additional tracks authorized by said certificates and such part or parts of the Reconstruction of the Existing Railroads for Initial Operation as are placed in operation and except further that any deficit in the payments required to be made to the City instead of being cumulative shall be added to the cost of construction of the Railroad. Equipment and operation Railroad of parts of Pooling of earnings Cost of parts in operation Deficits in payments to City If delay in beginning of Provided, however, that if the term of the Lease shall not begin on the first day of January, 1917, as provided in Article XLVIII the Lessee shall term have the right upon giving thirty (30) days' notice in writing to the Commission to terminate the arrangement hereinbefore in this article provided in respect of temporary rental. In case of such notice being given the arrangement hereinbefore in this article provided for in respect of temporary rental shall on the expiration of such thirty (30) days cease and Readjustthe City shall thereafter receive as compensation for the use of such part or parts of the Railroad and such part or parts of the said extensions and rental additional tracks as shall have been declared completed and ready for operation under the provisions of this article either a specified sum of money or a specified part or proportion of income, earnings or profits of VOL. IV-8 ment of temporary How determined Depreciation How organized Vacancies, how filled Duties of Expenses of Payments to City, when to be made Readjustments Statement of receipts and such part or parts of the Railroad and such part or parts of the said extensions and additional tracks or both a sum of money and a part or proportion of the income, earnings or profits of said part or parts of the Railroad and such part or parts of the said extensions and additional tracks as shall be agreed upon by the Commission (with the approval of the Board of Estimate) and the Lessee, or if the Commission (with such approval) and the Lessee are unable to agree thereon within thirty (30) days after such notice takes effect as hereinbefore provided such compensation shall be determined by arbitration or by the court. ARTICLE LIII. The funds provided for in paragraphs 5 and 11 of Article XLIX and the depreciation funds provided for in paragraph 1 of Article LXX shall be in the charge of and under the control and direction of a Board to be known as the Depreciation Fund Board and to be organized and constituted as follows: Before the beginning of operation of any part of the Railroad the Commission and the Lessee shall each name an individual to be a member of such board. Within thirty (30) days thereafter the Commission and the Lessee shall agree upon the third member of such board or in the event of their failure to so agree within such time, the third member upon the application either of the Commission or of the Lessee shall be nominated by the Chief Judge of the Court of Appeals of the State of New York; or if within fifteen (15) days after being requested by either the Commission or the Lessee to make such nomination, the said Chief Judge shall decline or fail to make a nomination, then the third member shall be nominated upon the request of either the Commission or the Lessee and within a period of fifteen (15) days by any Associate Judge of the said Court of Appeals in the order of seniority. In the event of a vacancy in the office of any of the members of the Board the successor shall be chosen in the same manner as above provided in case of the original nomination. Such Depreciation Fund Board shall administer the funds provided for in the paragraphs of Articles XLIX and LXX referred to and the members thereof shall receive as compensation for their services such amount and shall be appointed for such period as may from time to time be agreed upon by the Commission and the Lessee and such amount shall be included as a part of the operating expenses referred to in paragraph 3 of Article XLIX. The Lessee shall also pay and include as part of such operating expenses the actual and necessary expenses of such Depreciation Fund Board including clerical and office ex penses. ARTICLE LIV. All payments to be made to the City under the provisions of this contract shall be made on or before the thirtieth days of January, April, July and October in each year during the term of this contract. Receipts and interest and accruals shall be pro-rated and if necessary adjusted in the payments for the quarter succeeding the quarter in which they are actually paid. Any other readjustment of payments or deductions that is necessary shall be made (for the whole of the year preceding) as of the end of the fiscal year. ARTICLE LV. The amounts payable to the City under Articles XLIX, disbursements L, LXX and LXXI shall be paid to the Comptroller at the times specified |