IIILLSROROUGII ANDAT,1 ^ I ^P O0 EST X ILLSBROUGI'-D CICINCINATI ^1 ~ ~~ I 3o HL RSRAILR0O)AD COMPANYT K PRESENTED AT THI ELECTION FOR DIRECTORS, d' liYzI!~ 1^ ^^^^ ____ __________ (^l " To the Chairman of the Stock-holders' Meeting and the Judges of the Directors' Election of the Hillsborough and Cincinnati Railroad Company. GENTLEMEIN: I understand the following stock is about to be voted upon and counted at this election for Directors, to wit: 1. All the stock which has been subscribed for the purpose of extending the road of our Company east from Hillsborough to Parkersburg; 2. The stock which the contractors have agreed to take in the contract; 3. The stock which has been sold to William Sturgis, Esq.; 4. The stock which has been sold to F. Dunlevy, Esq.; and, 5. The $200,000 of stock which has been hypothecated with the city of Cincinnati as collateral security for the $100,000 which the Company owes said city. No part of this stock can be voted upon legally, and myself and those who act with me, and who are opposed to the extension of our road by said line, Do AOST SOLEMNLY PROTEST against any portion of this illegal stock being voted upon or counted against us, or in any other manner being used to perpetuate what we deem to be the unwise policy of the present Directors. We have the question as to the legality of this stock, and the right to use it, and all the questions affecting the right of the Directors to take any steps in relation to this extension, presented in the two injunction suits, which are now pending against the Directors; one in the Court of Common Pleas, in Warren County, and the other in the District Court for Highland County. The question as to this extension ought to be settled by those who are now interested and who own the stock which built the road, and the only road which was authorized by the original charter of the Company. For we claim that there exists no chartered right to make the proposed extension. We are the owners and holders of a majority of all the stock which has ever been issued by the Company, that has been paid for by the parties to whom it was issued, and as such stock-holders we are in favor of connecting our road with the road of the Marietta and Cincinnati Railroad Company, saving all existing interests in both Companies and at the same time opening but one Eastern and Western line of railroad through Southern Ohio. We have satisfactory information, that if our Company will consent, such a connection can be made. We believe that the will of our stock holders should be expressed in favor of such connection at this election, by the selection of a Board in favor of that policy. Two years ago, the majority of the then holders of stock in our Company, determined to extend our road from Hillsborough to Chillicothe, with a view of there connecting with the MIarietta and Cincinnati Company; and subsequently a portion of that line was put under contract,-but that contract and line has been abandoned by the present acting Board of Directors, without the consent and against the wishes of the stock-holders. It is alleged by the present acting Boald, that they abandoned the Chillicothe route because they could not procure sufficient means to build it —but at the very moment they abandon that line, which it was estimated would cost a half million of dollars, they undertake to construct another, (a line from Hillsborough to Parkersburgh,) for the construction of which they agree to pay five millions of dollars! The former would have been auxiliary to, and indeed would have formed part of a single through line, while the other is an attempt to construct a rival line for the entire distance. Such is the avowed policy of the present Board of Directors, and if they should be re-elected, they mill attempt to carry it out, until they are fairly arrested in their attempt by the action of the courts, or until they break down for want of funds and credit. To avert this evil and save the existing Road from utter ruin is the object we seek. We oppose the proposed extension for several reasons, which are evidenced by the records of the Company, and which are to our minds overwhelming. We invite attention to, 1. The basis and cost of the present road. 2. The estimated cost and the contract price of the proposed Eastern Extension. 3. The financial scheme of the Directors. 4. Some general remarks. By a statement of the financial condition of the Company, made by the President last summer, and about the time he was offering the Bonds of the Company for sale to the amount of about three hundred thousand dollars, it appeared the net earnings of the Road amounted to six percent upon its cost, although it had been but a few months in operation. The following briefly presents the BASIS AND COST OF THE PRESENT ROAD. The present running road extends from the Little Miami Road at Loveland to Hillsborough, being 37- miles in length, and cost about one half a million of dollars. One hundred thousand dollars of that sum was borrowed from the city of Cincinnati and remains unpaid, and the balance, as appears by the answer of the present Directors to my injunction bill, was raised as follows: They say that in the summer of 1852, "after every effort and investigation, it was ascertained that the stock of the Company, paid and unpaid, amounted to about $180,000, and nearly the whole of the stock had been ex '3 hausted in payments of work already done." Again they say, referring to the same date, " the debts amounted to about $235,000," referring to the then floating debt of the Company. To pay these debts they sold convertible Bonds of the Company to the amount of $300,000 for $200,000, which Bonds were at once converted into $300,000 of the stock of the Company. They thus show that to pay for the present running road, costing $500,000, stock has been issued to the amount of 8 480,000 Debt to the city of Cincinnati, 100,000 and floating debt. 35,000 Total, $615,000 ESTIMATED COST, AND) THE CONTRACT PRICE OF THE PROPOSED EASTERN EXTENSION. On the 28th day of June, 1852, E. Morris, Esq., the engineer in the employ of the Directors, reported that it would cost to extend the Road firom Hillsborough to Parkersburgh, including a bridge across the Ohio River, and a Branch to Pomroy, and another Branch to Bainbridge, $3,808,500. See page 24 of his Report. It is understood that the late letting extends only to the western bank of the Ohio, and does not embrace the Bridge across that river, nor the line from that point to Parkersburgh, being 7- miles in length, nor the Branch to Bainbridge, being 9- miles in length. These are estimated in said Report as follows: Bridge over the Ohio River, $ 320,81 0 Seven and a half miles from thence to Parkersburgh, at $25,200 per mile, exclusive of Iron, &c., 189,000 9 and I miles of Bainbridge Branch, at $7,390 per mile, exclusive of Iron and structure, 60,110 Iron and structure for 165 miles, at $8,000 per mile, 133,000 Total, $702,920 Deduct that sum from the estimated cost of the whole work as stated above, and it leaves the estimated cost of the work which the Directors profess to have put under contract, to amount to $3,105,580. The Deposition of this same Elwood Morris, Esq., engineer in the employ of the Directors, has been taken to be used in our judicial proceedings; and in that Deposition he states, that the Directors have contracted to pay for said work, including some machinery, the sum of $5,000,000-one million in the stock of the Company, and four millions in cash. Being in all, $1,894,420 above his own estimate. If we deduct the 1,000,000 in stock from the amount, and treat it as a mere bonus to the contractors, intended to enable them to control the elections and the future policy of the Company, still they have agreed to pay them in cash, $894,420 over and above the cost of the work. 4 True, there is to be deducted fiom this sum the value oft the machinery which said contractors are to furnish, but they have no where favored us with a statement of the amount, or value of the machinery to be furnished; but, we infer it cannot amount to a large sum, or they would readily have stated it as a justification of their contract. The Directors have no power to dispose of any of the stock of the Company, at a less rate than par, and most of us have been required to pay par for our stock; and we are not content to see lavished upon these contractors, as a mere eIratuity, one million of dollars in stock, and three quarters of a m:illion of dollars ins cash, simply to enable them to elect all future Directors, and to perpetually control the policy and destiny of the Company, about which we now propose to speak. THE FINANCIAL SCHEME OF THE DIRECTORS. From a recent inspection of the Company's Record, we have ascertained many startling facts, a portion of which are as follows: At a meeting of the Board of Directors, held at the Burnet [louse early in January, 1853, the President presented a financial statement and scheme, substantially as follows, which was approved by the Board and ordered to be entered upon the Records of the Company, to wit: Stock in the road now finished, say $500,000 Stock which is, and can be secured, to be subscribed on the line of the eastern extension, say 300,000 Stock which Jackson county will take, payable in the stock which the county now owns in the Portsmouth and Hocking Valley Railroad, 100,000 Value of the rights of way which have been and which will be donated, 100,000 Total, 81,000,000 There ought to be set apart of the stock of the Company to be taken up by the sale of plain convertible Bonds of the Company without interest, 8900,000 The contractors ought to be required to take stock in their contract, to the amount of $1,000,000 Making the whole Stock Basis $2,900,000 This statement is to be found on page 250 of the Company's Record. Upon this Basis there is to be issued seven percent -Mortgage Bonds, having -- years to run, all of one class, to the amount of three millions of dollars. Upon this financial basis it was determined by the Board of' Directors that the long and expensive extension of the Road could be built, and although my injunction was allowed on the 27th day of January, the Directors profess to have contracted on the 31st day of the same month-with the Chamberlins and William Sturcgis, Esqs.. for the construction of the work. Let us analyze the above basis. Of the first one million of dollars, five hundred thousand dollars has been expended on the western division of the road, and cannot be again used, $500,000 The sum set apart for rights of way, do. 100,000 The Jackson County Stock has no market value and cannot be used, 100,000 Of the stock estimated along the line we have no doubt one-third or more is unavailable, 100,000 Making to be deducted, 8800,000 And leaving as available of the first one million, only the sum of "200,000 Of the one million of dollars to be taken by the contractors, we have shown above that it is but a part of a bonus and cannot be considered as any legitimate basis of credit. We may add to the $200,000 shown above, whatever is realized from the 8900,000 of stock, which, in their estimate, was set apart to be absorbed by plain convertible bonds. The Record throws light upon that branch of our subject, and I invite attention to some extracts from it: On page 255 of the Record and onward, you will find the proceedings of the Board at Hillsborough, January 31st, 1853, and amongst other things the following, to wit: The President further laid before the Board a contract this day entered into by him with Wim. Sturgis, Esq., of Zanesville, O., to sell and deliver to said Sturgis a plain convertible Bond of this Company, without interest, of seven hundred and fifty thousand dollars: in amount: for the sum of five hundred and twenty-one tlousand six hundred and sixty-seven dollars, payable on the call of the Companv."' On nmotion of AMr. Byrd, seconded by Mr. Barrere, the above named contract with William Sturgis, Esq., was unlanimously approved and confirmed, and the Bond ordered to be drawn up forthwith, as it is understood IMr. Sturgis desires to leave town to-lorrow." " The Board then took a recess, and upon re-assembling, the Secretary laid before the Board the Bond drawn up for delivery to William Sturgis, Esq., and on motion of Mr. Byrd, seconded by Mr. Barrere, the said Bond was approved, and ordered to be executed and delivered to the President, who was authorized by Mr. Sturgis to receive it for him, which was done." Hlillsborough, Ohio, January 1, 1853. JAMES i. TRIMIBLE,E iu, t. re-siient. Dear Sir: — I herebv elect to conlvert seven hundred and fifty thousand dollars, tl.e amountt of a coivertible Bond of the Hillsborough and Cincinlati Railroad Coimpaany, held by mIe, into the stock of said Company, at par. Resnpeettlly, (Signed) WNl.L r, S r;G I, It was then, inttnedlitely, uIponl the same dt a 6 Resolved, That said stock should be issued and delivered to Wim. H. Trimble, Esq., (the brother of the President) as the fiiend of Mr. Sturgis, and the record of their proceedings of the first day of February 1853, shows that 15,000 shares, or $750,000 of stock was issued and delivered to said Trimble for said Sturgis in lieu of said Bond, which was taken up and cancelled. Thus we see $750,000 of the $900,000 of stock, disposed of for $521,667, or at a loss of $228,333, and that without the receipt of any money-but simply upon the agreement of Mr. Sturgis to pay upon the calls of the Company. What secret agreement exists between him and the Board as to the time and method of making said calls, does not appear. On the first day of March 1853, the Board approve of the sale of a similar Bond calling for $125,000 to F. Dunlevy, Esq., for which he agrees to pay $100,000, and stock to the amount of $125,000 was issued to said Dunlevy. Thus we see all the stock which they propose to have absorbed by convertible Bonds disposed of, except $25,000, for which the Company only have the promise of $621,567, and showing a loss in the two transactions of $253,333, or more than half the cost of our present finished road. These transactions are mere sales of stock, the use of the Bonds is too flimsey a pretext to deceive any one. These extraordinary transactions are wholly without authority of law. Is it wise to submit to them? Can a road requiring so much means to construct it, be built when such enormous sacrifices are made by its managers at the very commencement? Will any sane man take stock in it at par? Will capitalists, when advised of the facts, purchase its Bonds at any price, and if they will not, must not the whole enterprise fail? To me it seems as sure as that causes produce their legitimate effects, well informed sober-minded capitalists, will avoid such securities as they would avoid any other instrument which they were certain would produce the inevitable destruction of their property. But to return to the subject of the Basis, for the Mortgage Bonds which it is proposed to issue. The stock sold to Mr. Dunlevy was as their record says, for the purpose of raising money to ballast the western division of the road, and not to aid the eastern extension. We have then applicable lo the extension, the stock subscribed along the line, about $200,000 The amount which Mr. Sturgis agrees to pay for the Bond sold to him as shown above, 521,000 Total, $721,000 That is all the actual means, but it is said the Company can use its credit to the amount of the Basis, and it so, the Mortgage Basis would be the above and the actual interests of the stock-holders in the present running road, which is $380,000 Making a Bond Ba-is cf $1,101,000 7 Suppose an issue of Bonds to that amount could be sold for 90 cents on the dollar, it would yield the sum of $990,900 Add available means as stated above, 721,000 And you have the sum of $1,711,900 Being $3,2sS.100 less than the contract price of the work let, and $2,288,100 less than the CASH which the Directors have agreed to pay by said contract. By this statement we have given them the benefit of all the actual means and all the credit which said means, together with our present road can give them, and still they are short TWO AND A QUARTER MILLIONS OF DOLLARS. How can that sum be raised? This subject leads us to a few GENERAL REMARKS. I invite serious attention to the facts stated above. I am not seeking office or place in, or from the Company. I declined one year ago being a candidate for re-election, in pursuance of a determination which I had formed and expressed on becoming the President of the Company in May 1851. I speak then merely as a stock-holder, on behalf of myself and others. We feel very confident that if the policy which the present Directors propose should be continued, the whole of our present investment in the Road will be lost. The credit of the Company was so bad in 1852, that to pay $200,000 of debt upon that portion of the Road which was then in operation, the Directors sacrificed one hundred thousand dollars, and claim that they were right in doing so. Their records show that in the very incipient steps of the extension, to raise the first instalment of the $4,000,000 of cask which they have contracted to pay, they have sacrificed in the Bond transaction with MIr. Sturgis 8228,333,-that when all their means and all the legitimate credit of the Company shall be exhausted, they will not have the extension half completed, and will be deficient in means to the very large amount of $2,288,100. How is it possible in the face of these facts, for the Company to escape bankruptcy and utter ruin? Can their stock Basis be enlarged-will any man take stock at par when Mr. Sturgis gets $750,000 of it at 69 cents on the dollar, and the Chamberlins and Sturgis get $1, 000,000 of it as a mere bonus? It is understood that the Directors in their anxiety to retain their power, hold out the idea that the Baltimore and Ohio Railroad Company will help them-but is that probable? The truth is, Baltimore has no motive to induce her or her Railroad Company to aid our Company when they know they are insured an earlier and as short a connection with Cincinnati and St. Louis through the line of the Marietta and Cincinnati Railroad, which is now under contract to Parkersburg, and will be completed sooner than our Road could be to that point, if the Company had the money. The Marietta Company have the means to press their work to a speedy completion, and Baltimore 8 will not pay money to build a road to Cincinnati, when she can get there as well by a Road already built. The only safety for our Company, is to abandon this impracticable rival project and by negotiation secure the business of the Marietta Company to pass over our Road to the City, and thereby obviate the necessity of their western extension-and secure a uniformity of value of the stock in the two Companies, as forming but one through line. This can only be done by removing the present Directors and electing such as favor our views. In this we have a legal right to, and would succeed, if the illegal stock against which we protest should not be voted-but if it is voted and treated by you as bona fide stock, it will be in the power of any unscrupulous Board of Directors to issue such stock at pleasure and perpetuate their power indefinitely. We PROTEST in the most SOLEMN manner against the admission of this stock, and claim that the owners of the stock, issued to pay for the present running Road shall settle the election and determine the policy of the Company. To determine otherwise will be to convert the form of an election into a mere farce-to set up the Directors above the stock-holders —to convert the former into dictational masters and the latter into submissive slaves. All these fiauds and impositions are set out in the Injunction Bill which is pending in Warren County, and we do not doubt but that whenever the case shall be reached and heard, all these parties will be perpetually enjoined. If we have, as we confidently believe, a imajority of all the legal stock of the Company with us, we will persevere in this matter until we succeed, for if we fail and they succeed we know our whole stock will be sacrificed. If it should be determined at this election to reject this illegal stock, all further expense and litigation would be avoided-but if the views expressed in this Protest, should be disregarded by you, 1 respectfully claim as the right of a stock-holded-for the benefit of myself and others who act with me, to have this Protest published as a part of your proceedings and entered at length upon the Records of the Company. Very respectfully submitted, W. H. BALDWIN. Hillsborough, 0., May 9, 1853.