Nov. 1st, 1910. Mr. Edward L. Burton, Salt Lake City, Utah. Dear Sir:- As you have already been advised, Mr. W. B. Thomas, President of the American Sugar Refining Company, has referred your letter to him under date of Oct. 14th, to the officers of the Amalgamated Sugar Company for answer. In compliance with the wishes of Mr. Thomas, I therefore take pleasure in so answering your letter, only regretting that you found it necessary to trouble Mr. Thomas with matters relating to corporate affairs, more easily discussed with the individual Directors of the Sugar Company here in Utah, all of whom, I always supposed you considered your personal and business friends, and each one of whom have a well earned reputation in this community for being both honest and just. In the outset let me say that I shall not attempt to discuss the legal status of this question, or whether this matter should be taken into Court, because it would be difficult to find any legal proposition that could not receive the endorsement of some competent counsel on both sides of the controversy. Suffice it to say, that as President of this Company, I feel myself under obligation to guard the rights of each stockholder as much as every other, and that I do not intend to take any important corporate step without the guidance of competent counsel. I suppose also that if the Courts should determine that the present plan is not feasible,E. L. B. #2 some legal plan can be devised by which 96% or 97% of the stockholders will be able to effect the best corporate interests for the benefit of the entire Company. In discussing this matter with Mr. Thomas and the Board of Directors, we unanimously agreed upon the plan presented as the most equitable and just solution of a problem that has long confronted us. The gradually rising value of our Common stock has become a menace to the industry, and we therefore felt that an increased number of equal dividend bearing shares would be beneficial and remedial. To be forced to increase the price of raw material, especially in view of the present rapid decline in the price of the manufactured article, coupled withthreatened Congression al adverse legislation, would hurt every stockholder and would probably reduce both stocks below their present market value. At the same time we recognized that all of the legitimate excess earnings up to date of right belong to the Common stockholders, and should be paid to them; but a dividend-distribution would not restrain, but rather enhance the objections mentioned. To obviate this condition, and having in mind the welfare of the whole corporation and the entire industry, we thought the present plan would more than compensate the Common stockholders for all their earnings. It proposes to give them cash sufficient to purchase an equal number of Preferred shares to the number of Common shares now held by them, and in
E. L. B. #3 addition thereto give them an equal number of shares under the new plan as they now possess in the old corporation. Thereafter, the entire earnings of the corporation could annually be distributed among its stockholders without justifiable adverse comment, or without exciting adverse legislation. It seems to me that ever stockholder should see the advantage of this condition, unless a desire for immediate personal gain should cause him to sacrifice the welfare of the whole industry, with almost a certainty that sooner or later his individual holdings would also be disadvantageously affected. This, and this only, was the motive that induced us to present the present plan to the stockholders. Let me state to you in passing, that out of 15% of Common stockholders, situated as you are (myself among them), 11% have already acquiesed in the plan, and have seen the justice of surrendering present personal views in deference to the good of the entire corporation and the general industry. Now as to the three plans proposed by you. I shall not discuss your third plan, because it is merely a protest against any solution whatever. The other two proposed methods are really only a single plan for buying up the Preferred stock using in both instances the surplus money of the corporation, and in one case letting the Common stockholders furnish the remaining cash, and in the other, letting the corporation borrow money to furnish the necessary purchase price. Apart from the fact that the stock is non-assessable, and that E. L. B. #4 therefore we could not compel any stockholder to pay the proposed assessment, I desire to advise you that by far the largest number of our Common stockholders are persons not as financially able as you are to raise a few thousand or even a few hundred dollars; consequently it would be unjust confiscation to ask them to do so. Besides, instead of making our corporation a popular institution of many stockholders, it would have the contrary effect of making it a very close corporation, and more than ever make us the victim of anarchistic outcries and undeserved legislative punishment. In my opinion, such plan would be considered as impracticable as I think it cruel and as ruinous as it seems selfish. In solving the problem of avoiding the injuries resulting from distributing the means gathered up by careful management of our corporate affairs, we must constantly keep in mind two things: First: The public effect upon the industry and our own corporation; and second: The treatment of our stockholders in the most equitable manner that the circumstances will permit. To do nothing at all, is out of the question. It would be unpardonable to permit a further continuance of the serious menace of a rising value of the Common stock. That must be avoided. If it can not be accomplished in the way the Board of Directors have suggested, we must devise some other plan; and if none of them are feasible, I see no other way than to dissolve the corporation, sell the property to another company, have a more equit-
E. L. B. #5 able charter, and then distribute all the assets among the present stockholders. This last method I know to be perfectly legal, but one that I should dislike to resort to until all other plans have been thoroughly investigated. I note also that you complain of sharing the voting pwer with the Preferred stock. Of course, that is simply a technical objection, because the voting power of your stock and that held by the gentlemen you represent, is to all practical purposes as great under the new plan as it is under the present charter. Whether under the present conditions you cast three or four per cent of the entire vote, or only one or two per cent under the new plan, would not make such material difference as to justify serious discussion. Now, Mr. Burton, I have fully and frankly stated to you the position of the Board of Directors upon this proposition. We have suggested the plan which after much consideration we thought would best serve the entire corporation, and which we therefore imagined would commend itself to the individual stockholders. It pleases me to know that it has the approval of all the stockholders, excepting 21 shares, (mostly held by Estates) and the Salt Lake interests who join you in opposition. I write this letter in confidence, as one stockholder to another, and I shall therefore expect you to treat it as such. With best personal regards, I remain, Yours very truly,
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