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3 The Fund believes Colonial has a real future, and that that future holds definite promise in the long run of Colonial's becoming a non-subsidized, self-sufficient and profit-making airline. 2. Certain Considerations in the Consummation of the Proposed Sale. Eastern's original "merger" proposal was accepted by Colonial on July 18, 1952. probably some months of negotiation proceeded that date. It was disapproved by the Present of the United States on March 1, 1954. the present proposal was accepted by the Directors of Colonial on January 28, 1955. The vote on its acceptance, as the Fund has been informed, was a four to three vote. There is now pending before the Civil Aeronautics Board a proceeding challenging the issues of whether Eastern was in control of Colonial as of the time that the present offer was accepted.* In the 1952 "merger" it was found by the Civil Aeronautics Board that Eastern as of that time was in control of Colonial and, because of the acquisition of this control in violation of Section 408 of the Civil Aeronautics Act, the Present of the United States disapproved the "merger." There are substantial issues involved in the consummation of the prosed sale, namely, whether Eastern is still in control of Colonial and whether the acquisition is in the public interest. Both of these issues have still to be resolved, and a favorable finding by the Civil Aeronautics Board on one (i.e., the question of control), if not both of these issues, is reviewable by the courts or the President of the United States. More than routine delay in the consummation of the proposed sale can thus be anticipated, particularly in view of the fact that National Airlines-a competitor of Easter-has strenuously opposed and is strenuously opposing the proposed sale. No one can guarantee the shortness or length of that delay. Delay to Colonial, in the opinion of the Fund, could be disastrous. So long as Colonial remains "merger-minded" or bound by a "merger" agreement, stagnation will characterize its operations. Indeed, the present agreement, provides that Colonial may make no commitments for the purchase and/or lease of aircraft or other major facilities in excess of an annual aggregate of $1,000,000, pending the consummation of the proposed sale unless with Eastern's approval. So long as the proposed sale is pending, Colonial must remain substantially status quo, except at Eastern's sufferance, for $1,000,000 cannot buy one single piece of modern four-engine equipment. One year from January 28, 1955, if the Civil Aeronautics Board has not issued an order (with the approval of the President to the extent required by law) approving the proposed sale, Eastern is relieved of its obligations to purchase Colonial's assets. In the opinion of the Fund, those assets are even now deteriorating rapidly. This deterioration has, in the opinion of the Fund, been one of the principal reasons for Colonial's dwindling share of the available traffic. Eastern's 1952 offer was two shares of Eastern for three of Colonial. Its 1955 offer has reduced that to one-half share of Eastern for one share of Colonial. Eastern's 1956 "offer," if delay should occasion such an offer and if Eastern should then choose to make an offer, is a matter of guess and speculation. But Colonial's bargaining position as of 1956, for the reasons above enumerated, may be even weaker. In the opinion of the Fund, as of 1956, Colonial may well no longer have a future as an independent airline and as such an appropriate bargaining position to consummate a "merger." 3. Basic Considerations. The Fund recognizes that its appeal as expressed above is not directed towards those stockholders whose only interest is to achieve a short-term gain on the basis of the tie-in that now patently exists between the market value of Eastern's common stock and that of COlonial. This appeal is directed towards those stockholders who have a long-term interest in Colonial and who have a concern for the future of aviation and for the preservation of the competitive system that the Civil Aeronautics Act envisaged. Over a period of time such a long-term interest may well result in more profit to the stockholders than would the proposed sale. The heart of Colonial Airlines is certainly not its physical assets; it is its personnel, who despite old equipment, have maintained a record of safety-unparalleled among airlines. The Fund is proud * A trial examiner at the Civil Aeronautics Board has found that such control no longer exists; arguments and briefs to the Civil Aeronautics Board have been made and submitted and the matter is now awaiting decision by the Civil Aeronautics Board.