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March 2, when the President turned down the merger, I seem to recall that Mr. Armstrong of Eastern had sent a telegram to Colonial directors stating that they are prepared to continue negotiating on the same basis at three for two.

MR. HANARAHAN: You are right.

MR. KURLAND: Subsequent to that, they saw fit to grant a 200,000 share option to the employees of Eastern, which ash wet red the Eastern stock by 10%; and they also increased the dividends by 50% which has taken away a million and a quarter dollars from the accrued assets of Eastern which Colonial has not participated in all.

Now they come around with the inflated price of the stock and cut the offer one for two. I was just wondering whether Armstrong's telegram at that time couldn't have been accepted at that time as desire to renew the same offer, or why the directors of Colonial saw fit to accept the lesser offer.

MR. HANARAHAN: We couldn't. They were under a quarantine order to bid. That meant nothing.

MR. KURLAND: They were still under the quarantine when they made the offer because the hearings weren't concluded until the 30th of December, and they made the offer on the 20th of December.

Mr. HANARAHAN: The answer to that is that they were not. We took it up with the Civil Aeronautics Board whether they could bid or not and we weren't told they couldn't bid. We did dispose of it from October to December 20.

MR. KURLAND: Assuming the hearings would be concluded at that time--but the fact that the hearings weren't concluded, I think it was inadvisable to accept the offer at that time because if they were interested in it they would probably have gone for another 30-day extension.

I THINK National took a stand very well when they refused to bid because the decision was still in doubt as to whether Eastern was under quarantine or not.

MR. HANARAHAN: That is all amatter of judgment and reasonable men can differ on that.

MR. KURLAND: Not an attorney.

MR. HANRAHAN: You don't have to be an attorney to come to that conclusion, or disagree with me.

MR KURLAND: When Eastern made the offer on December 20, I don't think it was in order at that time, despite what CAB said.

MR. HANRAHAN: I gave an opinion, and in my opinion even as a layman, they were permitted to.

MR. KURLAND: You were permitted to accept it and you saw fit to accept the lesser amount.

MR. HANRAHAN: Yes, sir, to have you people have a voice and a vote to determine whether that was right or not.

MR. KURLAND: Have you had a chance to vote on it?

MR HANRAHAN: You are voting on it right now.

MR. KURLAND: The gentleman before asked for some summarization of the Board meeting at the time that the offer was accepted so that they could better form an opinion as to why the three men objected to it. What reasons had they? They are better versed in the mechanics of air transport lines than we are and they apparently had good reasons for not wanting to vote for it. By clarifying that matter I think we would be better versed on the future procedure.

MR HANRAHAN: I thought we all knew what we were waiting here for. They are tallying the vote on that proposal right now. The ballots have all been picked up and the polls closed. They are just counting right now. That is why we have been in recess for nearly an hour, for a very full and frank discussion here.
 
DR. F. A. MOSS: My name is F. A. Moss, of Washington, D. C. I have followed this through for sometime and I think without doubt Colonial is getting much the better of the deal if they do succeed in merging with Eastern at the present time. The mere fact that Eastern stock has gone up is not an unusual thing for Eastern.

If you look at United, they are selling at new highs and American is selling at new highs, and most of the better line stock has gone up. The airline stock has in general gone up, so has Colonial gone up; but Colonial's selling at 20¢ is going to be rather advantageously placed if it can get the high shares of Eastern which is selling at 48; for 20 you are getting 24. That is what it really amounts to.

I think Colonial is in not too good a position for bargaining. I think the position is relatively weak as compared to what it was a few years ago.

MR. KURLAND: On the contrary, in view of the fact that Colonial is the underdog, they have been pushed around by both National 

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