[LB030337], Letter from Alfred Ord Tate to Sherburne Blake Eaton, June 13th, 1889
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Title
[LB030337], Letter from Alfred Ord Tate to Sherburne Blake Eaton, June 13th, 1889
Editor's Notes
"Mr. Hutchinsen, the Attorney of the Edison Phonograph Toy M'f'g. Co., will call upon you to-morrow morning, and submit drafts of the new contracts which are to be entered into between Mr. Edison and that Company. I enclose herewith copy of the memorandum which is the basis of the contracts above referred to. I would call your attention to the following points:-- (1) The memorandum last named provides that Mr. Edison is to receive one-eighth (1/8) of the Capital Stock of the Toy Phono. Co., which proportion is to be maintained, with respect to any further increase, so long as Edison retains the stock so issued to him. It also provides that Mr. Edison's holding of stock is to be at least forty per cent (40%) greater than the number of shares issued to Madden and Gilliland, or sold to settle their claim. The Capital of the Toy Phono.Co. is to be increased to One Million Dollars, and one-eighth of which is $125,000. The claim of Madden and Gilliland, however, is to be settled by issuing to them 10,000 shares of stock, and Mr. Edison is, therefore, entitled to 1,500 shares in excess of the one-eighth of the Capital referred to, or in all, Fourteen thousand shares. In regard to that part of the memorandum which provides that Mr. Edison is entitled to one-eighth of any future increase, "So long as Edison retains the stock as issued to him," the contract which Mr. Hutchinson has preferred provides that Mr. Edison shall be entitled to this proportion of any increase of capital so long as Mr. Edison holds one-eighth of the whole capital stock of the Company. This leaves the 1500 shares above referred to free, which is very desirable, in order to enable Mr. Edison to qualify the representation whom he has the right to have on the Board of the Toy Phonograph Company. ### (2) Mr. Edison agrees to give the Toy Phono. Co. his future inventions pertaining to toy phonographs [unclear] a period of five years from the date of the execution of this agreement now contemplated. Mr. Hutchinson has prepared a new form of license, in which he covers this point, and he has also prepared a manufacturing contract. This manufacturing contract is to continue in force during the life of the license, [unclear] when Mr. Hutchinson [unclear] the manufacturing contract to me today, it struck me that that portion of it reliant to improvements in methods of manufacture &c., [unclear] broadly Mr. Edison's future inventions referred to above, which, if I am correct, would cover such inventions made during the life of the license, or in other words, for an indefinite period. This requires to be adjusted, so that the manufacturing contract and the license will [unclear], and cover Mr. Edison's future inventions for a period of five (5) years only. ### (3) In all negotiations with the Toy Phonograph Co., I have carefully avoided the discussion of their business so far as [unclear] to the United States. The deal which we are putting through for Foreign countries only, and the stock which Mr. Edison receives is given him in consideration of the new license which he grants for foreign countries. I mention this, so that care may be taken that Mr. Lippincott can in no way have a claim for any portion of those considerations. ### (4) In the manufacturing contract, Mr. Edison agrees to manufacture toy phono. Movements, the price to be charged for what shall include labor, material, general expenses, and a manufacturer's profit upon the [unclear] of those three of twenty per cent (20%). Mr. Edison is to have a royalty of 20% on this price. Mr. Hutchinson has expressed this improperly in the manufacturing contract, in which he has provided a royalty for Mr. Edison on the [unclear] cost of the movements—that is, the cost, less the manufacturer's profit of 30$. This clause should be changed to conform with our understanding, which is a royalty of twenty per cent (20%) on the price of which the movements are [unclear] to the Toy Phono. Co. ### (3) Mr. Edison desires to manufacture the various parts of those movements in the United States and ship them abroad to be assembled in a factory, or factories, which he will establish in Europe. I would call your attention to the first [unclear] of the contract between Mr. Edison and Lowell G. Brig[unclear] and Wm. W. Jacques, under date 1st of October, 1887. Mr. Edison's rights under this contract were assigned to the Edison Phonograph Co., and are now [unclear] in Mr. Lippincott. The claim referred to gives Briggen and Jacques "The sole and exclusive license and right to manufacture and sell within the United States for consumption and use therein, and to manufacture within the United States for use and consumption in foreign countries." ### The second clause of this contract secures to Mr. Edison (now Lippincott) "a royalty of ten per centum on the selling price, whether wholesale or retail, of each and every article manufactured and sold by them pursuant to this license." The question is, if Mr. Edison manufactures the parts of the toy phonograph movement in the United States and assembles them abroad, can Mr. Lippincott claim [insertion unclear] the royalty of ten per cent (10%) above referred to? ### (6) In the manufacturing contract prepared by Mr. Hutchinson, [unclear] a clause which provides that if any reliable manufacturer offers to make toy phonographs at a lower price than that charged by Mr. Edison, the Toy Phono. Co. will have the right to accept it and appeal the [unclear] given Edison. This provision is to be [unclear] ### (7) In stating the manner in which the price of movements is to be arrived at, Mr. Hutchinson had covered the ground [unclear] a great deal which is necessary. The contract would be more simple if it provided for labor, material, general expenses and a manufacturer's profit of 10%. It is impossible in a contract to define accurately all the charges which go to [unclear] general expense, and the right given the Toy Phono. Co. to inspect our books and arbitrate our methods of arriving at the [unclear], if they are found to be unsatisfactory, protects the Company fully from any possibility of overcharge. ### With the changes which I have suggested, and with such other changes that you consider desirable [unclear] to protect Mr. Edison, the contracts will be in form to [unclear] to the latter, and I shall be glad to receive copies of them from you. ### Mr. Hutchinson may [unclear] draft of an agreement [unclear] the manufacture of toy phonographs for sale in the United States. There is, I presume, no reason why this agreement should not be [unclear] at the present time, although Mr. Edison will not execute it until the foreign business has been settled, and until we know clearly what [unclear] are with Mr. Lippincott with respect to America." Yours very truly, AO Tate
Author
Recipient
Date
1889-06-13
Type
Subject
Folder/Volume ID
LB030-F
Microfilm ID
139:333
Document ID
LB030337
Publisher
Thomas A. Edison Papers, School of Arts and Sciences, Rutgers University