Motion Picture News (Jan - Mar 1930)

Ftbriiarx 22 , 193 0 M 0 t i 0 n Picture News 23 New Option Plan on Stock Bonus Is Made Amendment to Banker Proposal Seeking New Deals Dropping or re-negotiation of several theatre deals is provided tor in reorganizat on plans of Fox. These are said to include the M. B. Shanberg chain in Kansas, Missouri, Iowa and Nebraska; Libson chain in Ohio and iVIichigan, and the Hoblitzelie chain in the South. These deals previously were announced as closed, but the owners are still operating them. Adolph Zukor made an unsuccessful hid for the Libson chain. Harold B. Franklin has been in Kansas City in connection with reported resumption of the Fox-Shanberg deal. one week from such record date, to subscribe for debentures ; and said notice of meeting shall be accompanied by appropriate forms for the exercise by stockholders of such right of subscription, but unless we shall otherwise determine, no warrants of certificates evidencing such right shall be issued. The rights to subscribe to preferred stock shall be evidenced by warrants or certificates issuable to stockholders of record of Film on the day after the preferred stock is authorized by the stockholders of Film, and said rights shall expire twenty days after said date. The Theatres debentures shall be ofTered for subscription at their principal amount to the holders of the Class A common stock and Class B common stock of Theatres in proportion to their holdings thereof. The rights to subscribe for the Theatres debentures shall be evidenced by warrants or certificates which shall be issued to stockholders of Theatres of record on a date not more than ten days following the authorization of their issue by the stockholders of Theatres, and said rights to subscribe shall expire one year from said date or on the earlier call of the debentures for redemption. m. Underwriting We will endeavor, on the terms and conditions hereinafter set forth, to organize a syndicate or syndicates (of which we may be managers and members) to underwrite said offerings to stockholders of Film of the Film debentures and preferred stock at the offering prices. The compensation of these syndicates and their syndicate managers shall aggregate an amount in cash equal to 9 per cent of the aggregate principal amount and par value of the respective offerings, and in addition thereto, 65,000 shares* of Class A common stock of Film, fully paid and non-assessable, provided, however, that if by reason of the non-fulfillment of any condition herein set forth other than that set forth in Clause 10 of paragraph X hereof or for any other reason other than a default on the part of ourselves or any syndicate which we may cause to be organized hereunder, said Film debentures or preferred stock shall not be created or tendered to or accepted by the syndicate in accordance with the terms and conditions hereof, Film shall pay to us, in case we shall have organized a syndicate or syndicates for the purposes of the plan and so notified Film in writing, in full payment for our services and of the services of any syndicates which we may have caused to be organized, an amount in cash equal to IJ^ per cent of the aggregate principal amount and par value of said proposed offerings. The offering of the Theatres debentures to the stockholders of Theatres shall be underwritten by Film at the offering price, and as compensation therefor Film shall receive an amount in cash equal to 9 per cent of the principal amount of the Theatres debentures of fered. In view of the long period of time during which the Theatres stockholders are to be entitled to subscribe for the Theatres debencures and the immediate need of Theatres for cash, Film shall on the date of delivery of the Film debentures and preferred stock, take up the Theatres debentures, subject to the subscription rights of the Theatres stockholders. We may, if we so determine, cause to be issued and sold at any time interim receipts or certificates calling for the delivery of any of the new securities if, as and when issued and delivered to us, and Film shall pay all expenses in connection with the printing and delivery thereof and shall make the usual adjustment for loss of interest in connection therewith. Film shall, at our request, make application to list the Film debentures and preferred stock on such exchanges as we may designate. Film shall also furnish us with such information, and shall take such action as we may reasonably request in order to qualify the Film debentures and preferred stock for public issue under the so-called blue sky laws in the states where we may desire to offer said debentures and preferred stock. IV. Voting Trusts Inasmuch as the new money to be provided by the financing is approximately twice the present market value of the equity of Film, based on current quotations of its Class A common stock, it is imperative that the holders of the new securities shall be assured of continuity of satisfactory management. To that end at least a majority of the outstanding shares of Class B common stock of Film and all the shares of the Class B common stock of Theatres shall be deposited under voting trusts, the voting trustees under both of which shall be satisfactory to us. Both voting trusts shall continue for a period of 5 years and thereafter so long as any of the Film debentures or Film preferred stock shall be outstanding, but not exceeding an additional 5 years. During the continuance of the voting trusts the entire voting power of the deposited stock shall be vested in the voting trustees, provided, however, that the voting trustees shall not, without the consent of at least a majority in interest of the voting trust certificates exercise their voting power : (a) to make any alteration or amendment of any provision of the certificate of incorporation of either of the corporations which would tend to change or diminish the voting power of the deposited Class B common stock, except as contemplated by the foregoing plan ; (b) to sell or convey substantially all the property, rights, privileges and franchises of either of the corporations, except to the other of them, or, in the case of Film, unless the net earnings available for dividends on stock and sinking fund on the debentures shall in each of two consecutive years be less than $5,000,000; Dropping or Re-negotiating of Number of Theatre Deals Demanded ((-) to merge or consolidate either corporation into or with, another corporation, except into, or with, the other of the corporations, or, in the case of Film, unless the net earnings available for dividends on stock and sinking fund on the debentures shall in each of two consecutive years be less than $5,000,000; or id) to dissolve either of the corporations. Prior to the delivery of the Film debentures and preferred stock there shall have been elected twelve directors of Film, all of whom shall be satisfactory to us, and a full board of directors of Theatres, which may include directors of Film, all of whom shall also be satisfactory to us, and the resignations of all officers of Film and Theatres shall be placed in the hands of the voting trustees. Prior to the delivery of the Film debentures and preferred stock there shall have been elected a chairman of the board, president, treasurer and comptroller of Film and Theatres satisfactory to us. V. Disposition of Proceeds Theatres shall apply the net proceeds of the Theatres debentures approximately as follows : $18,000,000 to the payment of Theatres' existing indebtedness to Film, $15,000,000 to the payment of indebtedness to Electrical Research Products, Inc., and $3,400,000 to miscellaneous corporate purposes. Film shall apply the net proceeds of the offerings of the Film debentures and preferred stock approximately as follows : $18,000,000, or such part thereof as may be necessary, to the payment of its underwriting obligations to Theatres, $12,000,000, to the payment of the $12,000,000, principal amount, of 6% gold notes of Film dated April 1, 1929, due April 1, 1930, $14,300,000 to the payment of obligations incurred in connection with the acquisition of an interest in Gaumont-British Picture Corp., Ltd., $5,800,000 to the payment of unsecured bank loans, and $9,050,000, and any part of the above-mentioned $18,000,000 not required to meet said underwriting obligations, for payment of indebtedness, construction requirements and miscellaneous corporate purposes. VI. Adjustment with Mr. Fox We understand that Mr. Fox has voluntarily offered and agreed to assign to Film all of his interest in Fox-Hearst Corp. You have also advised us that Mr. Fox has personally paid for and now personally owns ninety per cent of the stock of American Tri-Ergon Corporation and fifty per cent of the stock of Grandeur Corporation and that he has made the following agreements with you : 1. That on or before February 13 he will cause American Tri-Ergon Corp., on behalf of itself and any successor corporation by merger, consolidation or sale of substantially all its assets, and its subsidiaries, to execute and deposit with Hon. Frank J. Coleman, for delivery to Film and Theatres on the date of delivery of the Film debentures and preferred stock.