The sun. [volume] (New York [N.Y.]) 1833-1916, 1904-10-12
WON'T STOP TOBACCO MERGER
vICE-CHANCELLOR PASSES CASE
TO COURT or APPEALS.
lie Refuses 10 Grant Temporary In.
Juncti on, but VIII Continue the stay
IntiI the Higher Court Acts-Awaits
Report on Ownership OF Securities.

Iuncti on, but VIII Continue the stay
IntiI the Higher Court Acts-Awaits
Report on Ownership OF Securities.
II was estimated that interests involving
over 5000, OOO, 900 were represented In Newark
Yesterday when the gigantic tobacco merger
came up in the Chancery Chambers yester-
dav before Vice. Chancellor Pitney.
The proceedings which were brought by
Julius b. Ickelheimer and others to secure
an Injunction to prevent the proposed
merger Of the Consolidated Tobacco Com
pany. the American Tobacco Company
and the Continental Tobacco Company.
The defendant companies were represented
by Richard V. Lindabury of Newark, and
W " Fuller and Junius Parker OF this city
with Attorney General Robert H. McCarty
Of New Jersey and Charles l.. Corbin OF
Jersey City
cts Counsel Joseph Coult and Edward
Day OF Newark as counsel for Jacob Samek'
a bondholder in the Consolidated company,
asked that their client be admitted TO the
suit as complainant, before argument was
begun, and the request was granted, no
objection being made by the defense
Mr.. Ickelhemer was represented by
Alan H Strong, who laid stress on the
allegations in the bill of complaint,
that notwithstanding the covenant con-
tanned in the trust indenture that the prop
erty of the Consolidated should never be
,nortgaged, the proposed merger plan con-
templated placing $50 100000 per cent
bonds, which it is proposed to issue in sub
stitution Of $40, 600 preferred stock
of the American and Continental Tobacco
companies, as first lien upon the earn
ines and assets of the proposed new COM
panv. Mr.. Strong argued that the COM
claimants would be injured by reason OF
the substitution Of $50 600 900 in bonds for
$4,000 600 in preferred stock, since the e1-
cess of slO,OOO.OOo Of bonds would create
greater charge upon the earnings OF the
new company.
Mr.. IIndabury disputed this assertion
bv the explanation that the S46OOo,ooo
preferred stock which was to be retired
consisted of per cent. preferred stock OF
the American Tobacco Company and OF
per cent preferred stock OF the Con-
tnental company, and said that by SUD-
stitutinp for such stock $50 900 900 per
cent. bonds the excess Of $40 900 900 would
serve merely to make the income from
the bonds equal the income from the pre-.
ferred stocks, which bear higher rate OF
interest. =,
Mr.. Lindabury denied that the Consoll-
dated Tobacco Company owes 500 900,
and said that on the contrary 1t owes put
2,COo, 900. and that there is not dollar
of Indebtedness which it cannot pay on de-
mand; that it has not embarked in schemes
which endanger the interests Of the COM
painants; that the company's surplus
which Ia 1t December amounted to $40 900 900
has since been increased to between sic ,O00,-
600 and sl7, 0OO, 900, and that, further. the
S4O,OO0.000 of Consolidated STOCK Issued
was paid for in cash.
Mr.. Strong raised question as to the
nenuiness OF the ownership of the bends
said to be the property OF the defendants
and Mr.. Lindabury said that the deience
on its own Fart did not admit the ownership
Of the bonds claimed by the compliments
The Vice-C Chancellor admitted that an i'm
portant point had been raised but did not
go into that matter at once. He deputized
Halsey NJ. Parrctt, who was an Interested
listener. to come to this city and examine
:hs bonds Of all the parties to the SUIT MI.
Corbin said that he renresented T.. A. B.
Widener and Thomas F. Ryan, who each
owned several millions of the bonds in ques-
ZION. and that their bonds would be sub
mitted to the inspection OF Mr.. Barrett;
Mr.. indabury said that his clients owned
bonds to the value Of So, 100000 and that
proof of ownership could be produced at
short notice Attorney General Mct'arter
said that the merger plan could not, by any
construction that might be put upon 1t. he
made to appear as working to the dsadvan-
tage of the complainants, and that In effect,
they were placed by the present pioceeu,
ings in the light OF asking for a stone and
receiving bread. Mr.. Corbin, following
Nr. Mc( arter, ar gued that the ger agree
ment gives value to the bonds. and that
it was neither right nor fair for the COM
plainants. who held but a small minority
Of the at ocks and bonds, to attempt to thwart
the carrying out OF so advantageous an
agreement,
5 in the trust indenture as follows
a. ttYtla hn hnl n " a m
iority in amount of all the bonds hereby
secured for the time being outstanding.
nv their vote at q meeting OF the bond
holders. held as provided in Section OF
ills article. or by an instrument or ipstru-
n crts in writing. signed by such holders.
shall have power to assent to and authorize
the release of any part of the property
deposited with or held by the trustee under
this indenture; to assent to and anuthorize
any modification or compromise OF the
rights of the ondholders and of the trustee
against tho Consolidated company or
against any property subject to this in
clenture. whether such rights shall arise
under these presents or otherwise; and to
assent TO and authorize any modification
~ anv Of the provisions of this indenture
that shall he proposed by the Consolidated
company and recommended by the trustee;
He said that the defendants we're merely
avaiiinp themselves OF this provision.
Mr.. strong then said that when he drew
I'D TIE bill of complaint he had no knowl-
edge Of this Article 8, but bad been guided
nv the circular issued ny W. W, Fuller over
his signature, and that made no mention
Of this provision for setting aside the in
denture and putting the merger into effect
But Mr. Strong said modification
does not mean abrogation, and the intent
Of the defendant companies was to com
petolv al rogate the mortgage indenture,
10 cancel the mortgage altogether
Mr. Corrin said that the reasons the
minority stockholders might have for OPP
posing The majority might e attributed to
ignorance. -, picion or disability.
Hold on" exclaimed Vice Chancellor
Pitney. Let us examine this question
of modification. What is the security
YOU have now?" addressing Mr.. tStrong)
and continued:
1T ia the security Of the stockholders
Of the two companies and the obligations
Of Tho holding companies. The mortgage
is a mere she'll We will look at the sub
stance Of things The substance Is. you
have the security OF e majority OF the stock
holders Of the two companies and what
may come to them. You are offered in its
place the security Of the debt of the COM
panies themselves. You rise from the
position Of mere creditor of ockholders
to one of creditor Of the companies them