The Film Daily (1930)

THE Friday, February 21, 1930 s^E^ DAILV William Fox Lays His Side of Case Before Stockholders (Continued /; Fox and prevent a receivership, follows in part; In your own interest I ask that you carefully read this lengthy letter to the end and that you give it your earnest consideration. Out of respect to the Court and acting upon the advice of my Counsel, I have until now impatiently refrained from publicly answering, and defending myself (except in the affidavits filed in Court) against the malicious falsehoods that are being widely circulated in the effort to destroy my lifework and reputation that have been built up as the result of thirty years of unremitting labor and fair dealing. S( w tlint you aic being called upon to detide '>el.\'.een hopeless and inevitable receivership, on the one hand, and acceptance by you, 0(1 the o'her hard, of the Plan of financing by which $59,150,000 of cash is to be raised to take the companies out of their financial stress, I feel free to address you in answer to this stream of propaganda by which it is sought to poison your minds against the man who has built the companies from their small beginnings with a cash capital uf $1,600 to a present business of $108,128,313 for the past year. In the Plan submitted for your approval 1 am making every personal sacrifice in my power to safeguard our investment. For at least five years, if the new securities are fully repaid within that time, and perhaps for as long as ten years, I am placing my entire control and voting power in the hands of three Voting Trustees selected by the three eminent banking firms who are supplyirig this new money. These Voting Trustees, in whose selection I have asked no voice, will select seven of the twelve Directors of the Film Corporation and all the Directors of the Theaters Corporation. The other five Directors of the Film Corporation will be elected by the Class "A" stockholders of that Company. I have surrendered all the control and voting rights of my stock, as above indicated. 1 am willing, if so desired by the new managements, and am anxious, to devote the rest of my life to the further npii'ilding and expansion of these great businesses, which I know can be accomplished. but have not reserved to myself any contract for services and am placing my fate in the hands of the new managements until the .■JSQ, 1 50,000 has been fully repaid. Halsey, Stuart & Co., whose notes are now selling on the market at 70 per cent of their face value, will be paid in full with interest under the Plan and they will therefore have no further legitimate or apparent interest in the companies. Let me briefly rehearse the reason why these highly prosperous companies are in their present plight: Messrs. Halsey, Stuart & Co. have been, but are no longer, their bankers. They hold contracts which they claim to be good for 15 years, under which they contend that the companies are precluded from looking elsewhere for their financial needs without giving them preference. That, in practical effect, would mean that the Companies could not borrow money elsewhere but would be tied hand and foot to them for this long term of years. I am advised that these contracts are invalid and unenforceable and that they were violated by Halsey, Stuart & Co. when they went into Court and demanded receivers for the companies that they were under a duty to protect. Early in 1929 an exceptional opportunity presented itself to purchase a large block of stock of the Loew Company — some 400,000 shares out of the 1,364,000 outstanding share capital. The Loew Company owns, among other valuable assets, the Metro-GoldwynMayer Co. I felt that if we could get control and consolidate the Loew Company with our companies we could save about $17,000,000 per year and increase the Loew Company earnings to that extent just by e'iminating duplications and overhead, and thus add. at least that amount, to our large present earnings. At that time our companies were practically out of debt except that there were the usual, fully-secured, long-term underlying mortgages on certain of the subsid'ary theater properties. I was not only encouraged but urged by Messrs. Halsey, Stuart & Co. and by Electrical liesearch Products. Inc. (a 100 per cent owned subsidiary of the American Telephone and Tclegranh Co.) to make this Loew purchase. Halsey, Stuart issued $12,000,000 of notes f which become due on April 1) towards paying for the Loew stock,^ but for which they have already brought suit before rom Page 1) their due date and are demanding judgment. Ihe Electrical Company gave me the same aavice in favor ot the purchase of the Loew shares, and leaned for that purpose a further $15,000,000. Acting upon this advice, I bought the 400,000 share block of Loew stock in the name of the Theaters Corporation and I also bought 260,900 additional shares in the open market. These additional purchases were made lor the account of the Theaters Company, but in large part in my own name and in the names of members of my family for the sole reason that the Government objected to the Company acquiring more than the 400,OOO share block ; but we fe.t confident that the Government would not object to an eventual consolidation of the Loew Co. with our companies by the outright purchase of the Loew assets. In buying these 260,900 additional shares of Loew stock, which gives the Theaters Corporation over 660,900 of the 1,364,000 Loew shares outstanding, 1 was not only repeatedly assured by Halsey, Stuart, and relied upon these assurances, that the purchases would be financed, but that a comprehensive plat of consolidation was then being worked out, for which they are now clamoring to be paid $1,000,000 by the Theaters Corporation. In July, 1929, a half-interest in a chain of theaters in Great Britain was purchased for the Film Corporation for about $19,700,000 upon like advice of Halsey, Stuart, and in like reliance on their assurance of financing. And yet, strange to say, it is because of that purchase that Halsey, Stuart are now claiming tliat there has been a default which matured their notes three months before their due dates and have brought suit and are demanding a receivership. Accompanying is a copy of a letter that Halsey. Stuart exacted from me at the time they were promising to do the necessary financing : "Aug 30, 1929. Halsey, Stuart & Co., iS Wall Street, New York City, N. Y. Dear Sirs : Referring to our agreement heretofore made to pay you compensation in addition to the compensation which you may have derived from the discounts on securities which you have purchased and marketed, for your financial studies and financial assistance in the form of loans from time to time to this Corporation, or for its benefit, and for your investigations of the property of Fox Theaters Cori oration and its several subsidiary companies, and for the advice and services of your organization in studying the financial requirements and devising plans for financing the development of the business of Fox Theaters Corporation and its subsidiary and ffiliated companies, and referring further to iur understanding that the amount of this compensation was left open to be agreed upon by you and ourselves, we beg to confirm our understanding as to the amount of this compensation which was arrived at, to-wit ; that the compensation shall be one million dollars ($1,000,000), and shall be paid by us to you as soon as the proposed consolidation of the business and properties of Fox Theaters Corporation, and possibly its subsidiaries, with Fox Film Corporation and Loew's Incorporated, whether by sale, purchase or consolidation or otherwise, has been authorized and fully consummated, but in any event shall he paid to you in cash before the 1st day nf September. 1930. This agreement shall benefit you and your successors and assigns and shall be binding upon Fox Theaters Corporation, its successors and assigns, including, but not limited to, any company which may acquire its assets or business, or a greater part thereof. Very truly yours, (signed) Fox Theaters Corp., By William Fox, President. Attest: C. S. Levin, Secretary." These gentlemen had been generously paid for all the services they had performed for the companies and for the security issues they had made (in th^ course of which they had made and had been paid for the investigations referred to in the letter) ; and I submit to you that there was no justification for trying to saddle that $1,000,000 charge on the companies, especially as their plans had wholly miscarried. When coui-sel for Messrs. Halsey, Stuart & Co. were pressed to the wall to explain to the Court how the placing of $36,000,000 new money into the Theaters Company behind their old unmatured mortgage loans could do aught but add to the security of those loans and how a receivership would help them, and was unable to say a word to support these assertions, counsel for the American Telephone and Telegraph Co. came promptly to the rescue with the claim that its subsidiary (the Electrical Co.) had a 15-year contract with the companies for licensing them to exhibit talking pictures and that this contract might be injured by putting this $59,150,000 of new money into the companies. In point of fact there is no such contract, but if there were, surjdy the contract could not be helped by a receivership that would destroy it ! It would take too long to explain the real plans and purjioses that lie beneath the unaccountable anxiety of creditors whose claims are to be paid in full with interest under this Plan, and the mere handful of stockholders working with them and against the interest of the body of stockholders to destroy the value of the stock. In due time those molives will reveal themselves aud you will then realize why i refused to go on with the Trustee arrangements under which I was one of the Trustees and into which I entered in tlie best of faith. I did this although this Trusteeing of my controlling stock involved no money commitment whatever on their part either to extend their loans or to furnish i'.ny of the money so urgently needed by the companies and that is now being furnished under this Plan under the guidance and sponsorship of three of the greatest banking houses in the country (Messrs. BancamericaBlair Corporation, Lehman Brothers and Dillon. Read & Co.). To these gentlemen and to voting trustees selected by them and into their keeping I have ■gladly surrendered the entire voting power of my stock in these companies because I have faith in them and that they will protect the stockholders, which is my sole aim, and in that belief and confidence 1 shall stand by them to the end. After the banking syndicate had been for months studying this situation with the aid of counsel, accountants and experts, and have jvolved the Plan now before you, and after this Plan nad been advertised throughout the country and had for more than three weeks been public property, and after the Directors had approved it and the Bankers were proceeding to underwrite its heavy cash requirements, Messrs. Halsey, Stuart &. Co., on Monday of this week submitted to the Directors another plan, in which they copied many of the features of the Bankers' Plan but to which they added a number of impossible conditions. Their Plan: (1) Deprives the "A" stockolders of the voting power in the Company that has just been granted them, entitling them to elect five of the Directors, and in certain instances a majority of the Board, and requir'is them to put their stock into a voting trust designated by Halsey, Stuart & Co. (2) Gives to Messrs. Halsey, Stuart & Co. and their associates an option on 500,000 shares of Class "A" stock for five years at S20 per share, which is likely to l>e worth anywhere from $25,000,000 to $50,000,000. (3) Forces the surrender to voting trustees named by Messrs. Halsey, Stuart & Co. of all the "B" stodk, of which I hold a bare majority, and strips it of all voting control, md requires the "B" stockholders to take in exchange for each share of "B'' stock one and one-half shares of "A" stock. Such action would require unanimous consent, and there is not a single owner of "B" stock who would give such consent, quite apart from myself. The so-called Plan is, in point of fact, a mere gesture for the purpose of forcing these properties into receivership because these gentlemen find themselves unable to control it. I am unwilling to desert my stockholders by turning over the companies to these gentlemen at any price. I am enclosing a form of proxy in my favor to be signed by tho.se of you who have watched my career and have faith in me notwithstanding the slanders that have reached you. There are two other forms of proxies in favor of the Plan beign mailed to you — one by the Company and the other by the Committee of **A" stockholders of which Mr. Morton F. Stern is Chairmam It is immaterial which of these proxies favoring this Plan you may elect to sign, but if you want to save your stock, which in my judgment will within two years be selling for more than three times its present market value when this temporary embarrassment is oyer, you should put your active support behind this F'lan. That is what the large stockholders are doing. Very truly yours, WILLIAM FOX. COLUMBIA PICTURES announces Two Important Events: 1 — It has in the course of production "THE MIRACLE WOMAN" Adapted from the great stag-e triumph by John Meehan and R. R. Riskind All Rights Reserved 2 — The purchase of a story read by millions in McCALL'S MAGAZINE "LOVER GOME BACK" by Helen Topping Miller All Rights Reserved PROSPER WITH COLUMBIA