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COLONIAL EMPLOYEES MUTUAL FUND, INC.

March 31, 1955

Dear Fellow Stockholders:

During the past several weeks your "Colonial Employees Mutual Fund" has been participating in conferences with individuals interested in the future of Colonial Airlines and has been making a study of information and material relative to this matter. Your directors met on the evening of March 25, 1955 to examine and evaluate the information thus made available. By a unanimous vote they disapproved of this proposed sale of Colonial's assets to Eastern Airlines. The reasons were as follows:

1. The circumstances surrounding this proposed sale to Eastern Airlines are such that, even assuming an approval by the stockholders of the proposed sale at their annual meeting, the consummation of this sale may well be delayed for a long period of time. The original sale was disapproved, despite favorable action by the CAB, by the President of the United States on the ground that Eastern Airlines had in violation of the law acquired control of Colonial. This occurred on March 1, 1954, almost two years after the signing of the original contract with Eastern Airlines on July 18, 1952.

It cannot be assumed that approval of such an acquisition will be had if Eastern Airlines is still in control of Colonial. This issue is still in the litigation stage. An examiner of the CAB has found that Eastern Airlines is no longer in control of Colonial. His finding is subject to review by the CAB. Even if the CAB concurs in his finding, that decision is subject to review by the courts, and we are informed that an appeal will be taken from any such decision by the CAB.

There must then be a further finding by the CAB, after hearing, that such acquisition is in the public interest before it can be consummated. That finding is subject to review by the President of the United States and possibly by the courts.

Acquisition of the assets of Colonial is thus subject to prolonged delay, and delay could prove disastrous to Colonial. The offer by Eastern in 1952 was on the basis of two shares of Eastern for three shares of Colonial. The present offer is one share of Eastern for two shares of Colonial.

If ultimate disapproval should result or sufficient time should elapse to permit Eastern to renegotiate the existing contract, Colonial's trading position will continue to deteriorate. For Colonial its equipment during this interim is subject completely to the mercy of Eastern. The existing contract with Eastern provides:

"Colonial represents that between the date of this agreement and the closing date, it will not make additional investments in or commitments for the purchase and/or lease of aircraft or other major facilities in excess of an annual aggregate of one million dollars ($1,000,000.00) except with the concurrence of purchaser in writing....."