Motion Picture News (Jan - Mar 1930)

44 Motion Picture News March 8, 1930 Can Save $31,850,000 and Clear Fox Financial Muddle, Trustee Plan Claims Theirs* Means Far More Cash, At Less Cost, Than Lehman Plan, They Assert (Continued from Page 27) offer to stockholders of Film of the Film debentures at 98% of the principal amount thereof and accrued interest. The compensation of the underwriters shall aggregate an amount in cash equal to eight per cent (8%) of the aggregate principal amount of said Film debentures. The underwriters will likewise procure others to purchase at $28 per share all such shares of said Class A common stock of Film as are not subscribed for by stockholders pursuant to the aforesaid offering. No compensation or commissions shall be payable to the underwriters in respect of shares of Class A common stock subscribed for by the stockholders or otherwise except as above expressly stated. 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 offered. Film shall on the date of delivery of the Film debentures and Class A common stock, take up the Theatres debentures, subject to the subscription rights of the Theatres stockholders if not then expired. The underwriters may, if they 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 them, 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 request of the underwriters, make application to list the Film debentures and additional shares of Class A common stock on such exchanges as they may designate. Film shall also furnish the underwriters with such information, and shall take such action, as they may reasonably request in order to qualify the Film debentures and additional shares of Class A common stock for public issue under the so-called blue sky laws in the states where they may desire to offer said Film debentures and Class A common. IV. Voting Trusts To assure the holders of the new securities of continuity of satisfactory management, 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, under which there shall be five (5) voting trustees, of whom one (1) shall be William Fox or his nominee during such period as he shall be the owner of a substantial amount of the Class B common stock of Film and Theatres, as the case may be, and the remaining four (4) voting trustees shall be selected by the trustees under a certain Trust Agreement dated Dec. 3, 1929 or a majority of the said trustees under said trust agreement. Both voting trusts shall continue for a period of 5 years and thereafter so long as any of the Film debentures 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 Fox-Dwight Tilt An interesting tilt occurred early in the ses.sion between William Fox and R. E. Dwight, counsel for the trustees, when it was stated that only the Lehman plan could be voted upon. Dwight rose to a point of order, citing corporation law to back his contention that a stockholders' meeting could consider and vote upon any plan of reorganization. When overruled by Fox, Dwight rose to a second point of order, citing parliamentary law stating a chairman could overrule him without submitting the point to the entire body. (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 Film debentures shall in each of two consecutive years be less than $5,000,000; (c) 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 Film debentures shall in each of two consecutive years be less than $5,000,000; or (d) to dissolve either of the corporations. Prior to the delivery of the Film debentures and Class A common stock there shall be elected twelve directors of Film, all of whom shall be satisfactory to the underwriters, and a full board of directors of Theatres, which may include directors of Film, all of whom shall also be satisfactory to the underwriters, 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 Class A common stock there shall be elected a chairman of the board, president, treasurer and comptroller of Film and Theatres satisfactory to the underwriters. 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 applv the net proceeds of the offerings of the Film debentures and Class A common stock approximately as follows: $18,000,000, or such part thereof as may he 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, 19.TO, $14,-300,000 to the payment of obligations incurred in connection with the acquisition of an interest in Gaumont-British Picture Corporation Limited, Would Save $20,000,000 in Debt and 100,000 Shares of Class A, Is Claim $5,800,000 to the payment of unsecured bank loans, and $18,100,000, and any part of the abovementioned $18,000,000 not required to meet said_ underwriting obligations, for payment of interest on maturing obligations, indebtedness, construction requirements and miscellaneous corporate purposes. VI. Adjustment with Mr. Fox Mr. Fox shall, prior to the date of the delivery of the debentures and Class A common stock of Film, assign to Film all of his interest in Fox-Hearst Corp. Mr. Fox shall make the same representations and agreements as are set forth in plan dated Feb. 11, 1930 heretofore submitted to the stockholders of Film and Theatres as follows, to wit, that: 1. On or before the date of delivery of the Film debentudes and Class A common stock of Film he will cause American TriErgon Corp., on behalf of itself and any successor corporation by merger, consolidation or sale of substantially all its assets, and its subdiaries 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 Class A common stock, an agreement granting and agreeing to grant to Film and Theatres, and their similar successors and subsidiaries, non-exclusive, non-assignable, royalty-free licenses under all patents or patent rights now owned or controlled by American Tri-Ergon Corp., its successors and subsidiaries, and under all patents and patent rights useful in connection with recording or reproducing sound or pictures which at any time within twenty-five years shall be owned or controlled by said American Tri-Ergon Corp., its sucessors and subsidiaries ; provided, however, that if it shall be necessary for the purpose of providing for the holders of the remaining ten per cent, of the stock of American Tri-Ergon Corp., Film and Theatres, their successors and subsidiaries, may be required to pay royalties at a rate not exceeding ten per cent, of the lowest rate from time to time charged by American Tri-Ergon Corp. to any other licensee ; and 2. On or before the date of delivery of the Film debentures and Class A common stock of Film he will cause to be vested in a new company to be organized under the laws of the State of New York, fifty per cent, of the stock of Grandeur, Inc.; that the new company shall have no power to enter into any business other than to hold said stock or any other securities or other property which it may receive as such stockholder ; that on or before such delivery date he will cause the new company to execute and deposit with Central Hanover Bank and Trust Co., for delivery to Film and Theatres on the date of delivery of the Film debentures and Class A common stock, an agreement with Film and Theatres for the benefit of themselves and anv successor corporations by merger, consolidation or sale of substantiallv all their assets, and their subsidiaries. (1) that it will indemnify Film and Theatres, their successors and subsidiaries, from and against (a) fifty per cent, of all amounts