<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as Permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SALEM CORPORATION
(Name of Registrant as Specified in its Charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------
[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
<PAGE> 2
[LETTERHEAD]
BOX 2222 - PITTSBURGH, PENNSYLVANIA 15230 -
April 12, 1995
To Our Shareholders:
On behalf of the Board of Directors and Management, I cordially invite you
to attend the Annual Meeting of Shareholders of the Company to be held on May 2,
1995 at 2:00 P.M., local time, at the Sheraton Bal Harbour, 9701 Collins Avenue,
Bal Harbour, Florida.
We look forward to seeing you at the meeting. Should you be unable to
attend, however, it is important that your shares be represented, regardless of
the number of shares you own. Accordingly, whether or not you plan to attend,
please sign and promptly return your proxy card in the enclosed envelope which
requires no postage if mailed in the United States. If you should attend and
wish to vote in person, you may, of course, revoke your proxy at that time.
Sincerely,
A. A. FORNATARO
President and
Chief Operating Officer
<PAGE> 3
SALEM CORPORATION
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 1995
------------------------------
The Annual Meeting of Shareholders of Salem Corporation will be held at the
Sheraton Bal Harbour, 9701 Collins Avenue, Bal Harbour, Florida on Tuesday, May
2, 1995 at 2:00 P.M., local time, for the following purposes:
(1) To elect five directors of the class whose term will expire with
the annual meeting of shareholders in 1998, as specified in the
accompanying Proxy Statement;
(2) To approve an amendment to the Company's Bylaws which will limit
the personal liability of the Company's directors for monetary
damages;
(3) To ratify the selection of Arthur Andersen LLP as independent
auditors to examine the financial statements of the Company; and
(4) To transact any and all other business which may properly come
before the meeting or any adjournment thereof.
The close of business on March 31, 1995 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
annual meeting or any adjournment thereof.
Whether or not you plan to attend the meeting in person, please complete
and return the enclosed proxy in the envelope furnished for that purpose.
MARCO B. LOFFREDO, JR.
Secretary
April 12, 1995
(See accompanying Proxy Statement)
<PAGE> 4
SALEM CORPORATION
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 2, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Salem Corporation (the "Company") to be
voted at the Annual Meeting of Shareholders of the Company which has been
scheduled for May 2, 1995 at 2:00 P.M., local time, at the Sheraton Bal Harbour,
9701 Collins Avenue, Bal Harbour, Florida and at any adjournment of the meeting.
It is expected that this Proxy Statement and the accompanying form of proxy will
be first mailed to shareholders on or about April 12, 1995.
The shares represented by each proxy received by the Company in the form
solicited will be voted on the proposals listed in the notice of the meeting as
specified by the shareholder on the proxy. If no such specification is made,
such shares will be voted for the election of the nominees for election as
directors named herein and in favor of Proposals (2) and (3). Any such proxy may
be revoked at any time before it is voted by giving written notice of such
revocation to the Secretary of the Company, by submitting a subsequently dated
proxy or by attending the meeting and withdrawing the proxy.
Only shareholders of record at the close of business on March 31, 1995 will
be entitled to notice of, and to vote at, the meeting. On such record date,
there were outstanding 1,864,882 shares of the Company's Common Stock.
Shareholders are entitled to one vote per share and may vote in person or by
proxy. A majority of such shares outstanding on the record date will constitute
a quorum for the transaction of business.
In the election of directors, shareholders have cumulative voting rights,
which means that every shareholder of record entitled to vote has the right to
multiply the number of votes to which he or she is entitled by the total number
of directors to be elected and to cast the whole number of such votes for one
nominee or distribute them among any two or more nominees. For example, if a
shareholder owns one share of the Company's Common Stock and does not wish to
vote cumulatively and does not withhold authority to vote for any nominee for
director, such shareholder will, in effect, have cast one vote for each of the
five nominees; if on the other hand, a shareholder who owns one share of the
Company's Common Stock wishes to vote cumulatively, he or she may cast all five
votes for one nominee for director by withholding authority to vote for all
other nominees. A shareholder may also distribute his or her available votes in
any proportion among two or more nominees. Unless authority is withheld, the
persons named in the enclosed proxy will allocate the votes represented by the
proxies in the manner they deem proper in their best judgment.
The Company understands that the 917,634 shares of the Company's Common
Stock owned by Victor Posner have been deposited in a voting trust (the "Voting
Trust") pursuant to a trust order entered by the United States District Court
for the Southern District of New York. Pursuant to the terms of the Voting
Trust, in the election of directors such shares are to be voted to the greatest
extent possible in proportion to the votes cast for those nominees who would
have been elected had Mr. Posner's shares not been voted. In the case of all
other matters submitted for a vote by the Company's shareholders, Mr. Posner's
shares are to be voted in proportion to the votes cast by all of the Company's
other shareholders in favor of, or against each such proposal. Notwithstanding
the foregoing, George H. Heyman, as trustee of the Voting Trust (the "Trustee")
may, in his discretion, vote the shares otherwise. See "Involvement in Certain
Legal Proceedings--Actions Involving Fischbach" for a description of the terms
of the Voting Trust.
The mailing address of the Company's principal executive office is P.O. Box
2222, Pittsburgh, Pennsylvania 15230.
<PAGE> 5
POSSIBLE CHANGE IN CONTROL
The Company has received several unsolicited offers to acquire all of its
issued and outstanding stock through a cash merger. The Company has engaged
Donaldson, Lufkin & Jenrette Securities Corporation, a New York-based investment
banking firm, to assist it in evaluating those offers and in the consideration
of all available strategic alternatives to maximize shareholder value including
a possible sale of the Company. The Company has entered into confidentiality
agreements with a number of bidders and potential bidders and has provided
information concerning the Company and its subsidiaries to them. Although at
this time the Company is not actively engaged in negotiations with any party for
the sale of the Company, it is likely that negotiations with one or more
potential bidders for the Company will take place in the near future.
If a merger offer is received by the Company and approved by its Board of
Directors, it will then be submitted to the Company's shareholders for their
approval. Under Pennsylvania law, the affirmative vote of a majority of the
votes cast by all holders of the Company's Common Stock entitled to vote will be
required to approve a merger. Shareholders will be entitled to exercise
dissenters' rights of appraisal. The Company's officers and directors
collectively own 27,725 shares of the Company's Common Stock constituting
approximately 1.5% of the shares outstanding.
Under the Voting Trust described above, the 917,634 shares of the Company's
Common Stock owned by Victor Posner, constituting 49.2% of the outstanding
shares, are to be voted on all proposals submitted for the vote of shareholders
in the same proportion as the votes cast by all other shareholders. The terms of
the Voting Trust do not specifically address the voting of shares with respect
to a proposed merger. While counsel for the Company believes the Voting Trust
will require Mr. Posner's shares to be voted with respect to a merger proposal
in the same proportion as the votes cast by the Company's other shareholders, it
is possible Mr. Posner will assert that he, rather than the Trustee, is entitled
to direct the voting of his shares on a proposal involving their sale or
exchange. Although Mr. Posner advised the Company's Board of Directors on
November 2, 1994 that he had no interest in selling his shares of the Company's
stock, the Company is unable to predict what action Mr. Posner will take if a
merger proposal is submitted to shareholders. See "Involvement in Certain Legal
Proceedings--Actions Involving Fischbach" for a description of the terms of the
Voting Trust.
If a merger or other proposal to acquire some or all of the Company's stock
is accepted and a transaction resulting in the acquisition of the Company by a
third party is consummated, the Company's stock may thereafter no longer be
considered to be publicly held. In such event, the Company would no longer be
subject to reporting requirements under the Securities Exchange Act of 1934. In
addition, the shares of Common Stock owned by Mr. Posner, if sold to an
unrelated third party, will then no longer be subject to the Voting Trust. See
"Involvement in Certain Legal Proceedings--Actions Involving Fischbach." Changes
may also be made in the Company's management including, among other things, the
replacement of some or all of the Company's directors and executive officers. It
is therefore possible that nominees named herein to become directors to serve in
office until 1998 will not serve their entire three-year terms if elected.
Although the Company anticipates that any acquisition offer, if made, will be to
acquire all of the Company's outstanding Common Stock, it is possible, depending
on the form of the proposed transaction, some shares will remain outstanding.
1. ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
It is recommended that the five nominees herein named be elected directors
of the Company for the terms specified herein. The Bylaws of the Company provide
that the Board of Directors shall be divided into three classes, that the
directors of each class shall serve for a term of three years and that at each
Annual Meeting the shareholders shall elect successors to the directors of the
class whose terms expire with such annual meeting. At the forthcoming annual
meeting, the shareholders will elect five directors to serve until the annual
meeting in 1998, with each to serve until his or her successor is elected and
qualified or until his or her prior death, resignation or removal. Because of a
disparity in class size due to the resignation of Victor Posner as a director,
two of the nominees, Vincent J. Schafmeister, Jr. and Leo L. Wallberg, Jr. whose
terms as
2
<PAGE> 6
directors would have otherwise expired in 1997 and 1996, respectively, have been
nominated to serve as directors until 1998. Unless otherwise specified on the
proxy, the shares represented by the proxy will be voted for the election of the
five nominees. Although the Company is unaware of any reason why any of these
nominees would be unwilling or unable to serve if elected, if such contingency
should occur, such shares will be voted, in the absence of a contrary direction,
for the other nominees named below and may be voted for alternative nominees in
the judgment of the persons named in the proxies.
Information regarding each director and nominee, his or her principal
occupation during the last five years and current directorships, is set forth
below. Unless otherwise indicated, all nominees have had the indicated principal
occupations for the past five years or more. See "Information Concerning Certain
Related Corporations" and "Involvement in Certain Legal Proceedings" for
additional information regarding various corporations for which some of the
directors and nominees serve or have served as directors and executive officers.
NOMINEES TO SERVE IN OFFICE UNTIL 1998:
BRENDA N. CASTELLANO, 39, has been the Company's Senior Vice President
since July 1993 and Assistant Secretary since October 1989. She served as the
Company's Vice President from October 1989 until July 1993. She has been an
Executive Vice President of NVF Company ("NVF") since December 1990 and a
director of such corporation since March 1989. In addition, she has been Senior
Vice President and a director of APL Corporation ("APL") since September 1989.
From March 1988 until April 23, 1993, she was employed by DWG Corporation
("DWG") and certain of its subsidiaries. She was Executive Vice President and
Assistant Secretary of DWG from October 1990 until April 23, 1993 (Senior Vice
President and Assistant Secretary from July 1989 to October 1990 and a director
of such corporation from July 1988 to October 1990) and was Senior Vice
President and a director of Southeastern Public Service Company ("Southeastern")
from March 1989 until April 23, 1993. From April 23, 1993 until April 23, 1994,
Ms. Castellano served as a consultant to DWG's successor, Triarc Companies, Inc.
She is also President of Brenda Nestor Assoc., Inc., a real estate investment,
property management and sales firm and Executive Vice President, Secretary,
Assistant Treasurer and a director of Security Management Corp. ("SMC"). She has
been a director of the Company since March 1989.
MARCO B. LOFFREDO, JR., 45, is an attorney in North Miami, Florida. Mr.
Loffredo was elected Secretary of the Company in June 1993 and Chairman of the
Board in April 1994. Since October 1994, Mr. Loffredo has served as the
President of a subsidiary of SMC, Security Financial & Investment Corp. d/b/a
Riviera Cabinets. He has been a director of NVF since February 1987 and has been
its Acting Secretary since June 1993. Mr. Loffredo has been a director of APL
since November 1986 and served as its President, Chief Executive Officer and
Chairman since August 13, 1993. Until April 23, 1993, he was a director of
Southeastern, Graniteville Company, Wilson Brothers ("Wilson") and National
Propane Corporation ("National Propane") and was a director of DWG from December
1986 through December 1991. In addition, from April 1987 until its filing under
Chapter 7 of the Federal Bankruptcy Code (the "Bankruptcy Code") in February
1992 in the United States Bankruptcy Court for the Western District of
Pennsylvania, he was a director of Pennsylvania Engineering Corporation ("PEC")
and from September 1987 until its filing under Chapter 7 of the Bankruptcy Code
in February 1992 in the United States Bankruptcy Court for the Western District
of Pennsylvania he was a director of Birdsboro Corporation ("Birdsboro"). Mr.
Loffredo served two terms as Mayor of North Miami, Florida from 1983 to 1987.
Mr. Loffredo also served as a trustee of the North Shore Medical Center, Miami,
Florida, from November 1990 until August 1994. He has been a director of the
Company since March 1987.
ROBERT D. MCBRIDE, 67, has been Chairman of McLouth Steel (a manufacturer
of steel products) since April 1994. He was Chairman and Chief Executive Officer
of McLouth Steel from October 1992 until April 1994. Mr. McBride was President
and Chief Executive Officer of such company from December 1990 until October
1992 and has been a director of such company since May 1988. He retired as
President of National Steel Corporation (a manufacturer of steel products) in
July 1986, and worked as a management consultant until December 1990. He has
been a director of the Company since February 1990.
3
<PAGE> 7
VINCENT J. SCHAFMEISTER, JR., 71, is Chief Executive Officer and Vice
Chairman of the Board of the North Shore Medical Center Foundation and Division
Director of Development and Community Relations for the North Shore Medical
Center in Miami, Florida. Mr. Schafmeister is involved in numerous community
activities in the Miami Shores and Dade County, Florida areas. He has been a
director of the Company since July 1993.
LEO L. WALLBERG, JR., 62, is the owner of Wallberg Realty, which provides
real estate, financial and banking consulting services. Mr. Wallberg began his
banking career in 1958. From June 1972 until October 1973, he served as
director, Assistant President and Operating Manager of Peoples American Bank.
From October 1973 until January 1977, he served as President and Operating
Manager of Peoples American National Bank of North Miami Beach. From January
1977 until he retired in July 1991, Mr. Wallberg was President and Chairman of
the Board of Peoples First National Bank of North Miami Beach and Senior Vice
President, Comptroller and Vice Chairman of the Executive Committee of Peoples
Group of National Banks. Mr. Wallberg has been a director of the Company since
July 1993.
CONTINUING DIRECTORS WITH TERMS STATED TO EXPIRE IN 1996:
A. A. FORNATARO, 64, has been President of the Company since December 1992
and served as its Executive Vice President from July 1988 until such time. He
has been Chief Operating Officer of the Company since July 1988. For more than
five years prior thereto, he was Vice President of the Company. He has been a
director of the Company since July 1988 and has served the Company in various
management positions since 1965.
DONALD L. HOYLMAN, 65, is Group Vice President of the Company and has been
a director of the Company since 1971. He has served the Company in various
management positions since 1970.
PHILLIP H. SMITH, 68, is President and a director of a private consulting
company, Smith Yuill & Co., Inc., which advises on strategic planning and
turnaround-workout situations for major banks, governmental bodies and
corporations in the United States and abroad. He publishes the American Economic
Commentary, a monthly internationally distributed review and analysis of the
U.S. economy, and is also an advisor to the Pension Benefit Guaranty Corporation
on bankruptcy workout matters. Mr. Smith served as President and Chief Executive
Officer of Copperweld Corporation from 1967 to 1973 and Chairman of the Board of
such corporation from 1973 until 1977. He was President of North American
Operations of the Bekaert Group of Belgium from 1978 until 1982. He is a trustee
of Berea College and Grove City College. Mr. Smith is also a director of
Inroads, Inc. and Mitech Laboratories, Inc. Mr. Smith has been a director of the
Company since July 1993.
ALEXANDER STUART, 73, retired in 1991 as the Executive Vice President and a
director of Samuel, Son & Co. Ltd., Canada's largest flat-rolled metals
processing service center. He was active in the management of such service
centers for 30 years. Mr. Stuart has been a director of the Company since July
1993.
CONTINUING DIRECTORS WITH TERMS STATED TO EXPIRE IN 1997:
MELVIN R. COLVIN, 74, was Executive Vice President of SMC until his
resignation in December 1993. He was Senior Vice President of PEC, Birdsboro,
NVF, APL, DWG, Southeastern and Wilson and Vice President of National Propane
until his retirement on September 1, 1991. Mr. Colvin is a director of NVF and
APL. Until April 23, 1993, he was a director of DWG, Southeastern and Wilson. He
was also a director of PEC and Birdsboro until their bankruptcy filing in
February 1992. From October 1985 until its acquisition by American International
Group, Inc. in July 1990, Mr. Colvin was a director of Fischbach Corporation
("Fischbach"). Mr. Colvin was also a director of Sharon Steel Corporation
("Sharon") until December 1990, the effective date of the Plan of Reorganization
of Sharon (the "Sharon Reorganization Plan") under Chapter 11 of the Bankruptcy
Code and until April 1988, was Senior Vice President of such corporation. He has
been a director of the Company since 1984.
MILTON DEANER, 70, was President of the American Iron and Steel Institute
from 1987 through August 1993. Mr. Deaner was also a director of Alaska Gold
Company ("Alaska Gold") until December 1990. Mr. Deaner is now retired. He has
been a director of the Company since 1984.
4
<PAGE> 8
BERNARD I. POSNER, 78, was Senior Vice President of PEC, Birdsboro, NVF,
DWG, National Propane, APL, Southeastern and Wilson until September 1, 1991. He
is a director of NVF and APL. Until April 23, 1993, he was a director of DWG,
Southeastern and Wilson. He was also a director of PEC and Birdsboro until their
bankruptcy filing in February 1992. From October 1985 until July 1990, he was a
director of Fischbach. He was also a director of Sharon until December 1990 and,
until April 1988, was a Senior Vice President of such corporation. He served as
Vice President of SMC until December 1993. He has been a director of the Company
since 1984.
MARTIN J. POSNER, 47, is Senior Vice President of the Company, a position
he has held since July 1993. He has also served as Executive Vice President of
NVF since June 1988. From January 1986 to June 1988 he was President and Chief
Operating Officer of Masury Steel Service Center Co., a wholly-owned subsidiary
of Sharon. He is also a director of NVF and, until April 23, 1993, was a
director of Southeastern and DWG. In addition, he was a director of Sharon until
December 1990. He has been a director of the Company since July 1988.
Eleven meetings of the full Board of Directors were held in 1994. Each
incumbent director attended more than 75% of such meetings of the Board, and of
all committees, that he or she was eligible to attend during such period.
Bernard I. Posner is the father of Martin J. Posner and the brother of
Victor Posner.
INFORMATION REGARDING CERTAIN STANDING COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing, audit, compensation and nominating committees.
The Company also has executive, intercompany and subsidiary transactions,
business development and long range planning and directors' affairs and board
governance committees.
The Audit Committee makes recommendations to the Board regarding the
selection of the Company's independent auditors, reviews with the independent
auditors the scope and results of their engagement, the accounting principles,
policies and practices and reporting policies and practices followed by the
Company, and the adequacy of the Company's internal accounting, financial and
operating controls and periodically reports the substance of such reviews to the
Board. During 1994, the Committee met six times. The current members of the
Audit Committee are Melvin R. Colvin, Phillip H. Smith and Leo L. Wallberg, Jr.
The Compensation and Human Resources Committee makes recommendations to the
Board concerning the compensation of the officers and directors of the Company
and also administers the Company's Management Incentive Plan. The Committee met
13 times during 1994. The current members of the Compensation Committee are
Marco B. Loffredo, Jr., Phillip H. Smith and Alexander Stuart.
The Nominating Committee recommends to the Board nominees for election to
the Company's Board of Directors. The Nominating Committee met twice during
1994. The current members of the Nominating Committee are Brenda N. Castellano,
Vincent J. Schafmeister, Jr. and Messrs. Colvin, Loffredo and Wallberg. The
Nominating Committee will consider suggestions for nominees received from
shareholders. Shareholders who wish to suggest nominees to be considered in
connection with the election of directors at the 1996 Annual Meeting must submit
their suggestions in writing to the Secretary of the Company. The shareholder
should specify the name of each proposed nominee and should set forth
information as to his or her qualifications for membership on the Board of
Directors.
The Executive Committee has the authority to take action between meetings
of the Board with respect to matters which a majority of the Committee votes to
be necessary to be addressed prior to the next meeting of the Board. The
Executive Committee met 15 times in 1994. The current members of the Executive
Committee are Messrs. Colvin, Loffredo, Smith and Wallberg.
At its meeting on April 26, 1994, the Board of Directors voted to abolish
the Intercorporate Transactions Committee and establish an Intercompany and
Subsidiary Transactions Committee. The Committee makes recommendations to the
Board concerning transactions between the Company and/or its subsidiaries and
other affiliated entities. The Committee met three times during 1994. The
current members of the Committee are Milton Deaner and Messrs. Colvin, Smith and
Stuart.
5
<PAGE> 9
The Business Development and Long Range Planning Committee monitors
business strategy and development opportunities for the Company. The Committee
met eight times in 1994. The current members of the Committee are Ms.
Castellano, A. A. Fornataro, Robert D. McBride, Martin J. Posner and Messrs.
Colvin, Smith and Loffredo.
At its April 26, 1994 meeting, the Board of Directors also established the
Directors' Affairs and Board Governance Committee. Among other things, the
Committee has been given the duties of performing an annual evaluation of the
Board's performance, addressing corporate social responsibility issues, working
with management on succession planning, proposing revisions to the Company's
Bylaws and reviewing issues concerning corporate ethics. The Committee met eight
times during 1994. The current members of the Committee are Ms. Castellano and
Messrs. Deaner, Loffredo, McBride and Smith.
At its meeting on November 11, 1994, the Board of Directors established an
ad hoc committee of three independent directors to establish a fair process with
respect to the evaluation of any offer to acquire the Company received from
third parties (the "Independent Committee"). The Independent Committee met six
times during 1994. The current members of the Independent Committee are Messrs.
McBride, Smith and Wallberg. See "Possible Change in Control."
COMPENSATION OF DIRECTORS
Each member of the Board of Directors of the Company, other than directors
who are also employed by, or are consultants to, the Company or any of its
affiliates, receives a monthly retainer of $1,000 plus $1,000 for each Board
meeting and $750 for each committee meeting attended in person or by telephone.
An additional retainer fee of $250 per month is paid to each director, other
than Company employees or consultants, serving as a committee chairperson.
2. AMENDMENT OF BYLAWS
Pennsylvania law permits corporations to limit the personal liability of
their directors for monetary damages. At its meeting held August 9, 1994, the
Board of Directors approved an amendment to the Company's Bylaws adding a new
Section 6.07 which would limit the personal liability of the Company's directors
for monetary damages for any action taken, or any failure to take any action,
unless the director has breached or failed to perform his or her duties as a
director and such breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. Consistent with Pennsylvania law, the proposed
section would not eliminate or limit the responsibility or liability of a
director pursuant to any criminal statute or the liability of a director for the
payment of taxes under local, state or federal law.
If adopted, the effect of the proposed Bylaw amendment will be to absolve
the Company's directors from monetary liability for damages arising as a
consequence of a breach of their duties as directors as long as their action or
failure to take action is not deemed to constitute self-dealing, willful
misconduct or recklessness. The amendment will not, however, limit the
availability of equitable remedies such as injunctions. The Bylaw amendment will
apply only to the monetary liability of directors arising from a breach of their
duties as directors and not to liability arising in any other capacity such as
an officer.
If adopted, the proposed amendment may reduce the likelihood of derivative
or other litigation against the Company's directors and may discourage or deter
the bringing of lawsuits against the directors for a breach of their duties even
though such an action, if successful, might otherwise have benefitted the
Company. The Company's directors therefore have a personal interest in the
adoption of the Bylaw amendment because they will receive the benefit of the
added protection it will provide.
The proposed amendment to the Bylaws will not limit the liability of
directors for acts or omissions occurring prior to its adoption. However, any
amendment or repeal of the proposed liability-limiting Bylaw provision, or
adoption of an inconsistent provision, will operate prospectively only.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING COMMON STOCK IS
REQUIRED FOR THE ADOPTION OF THIS AMENDMENT. The Company understands that the
917,634 shares owned by Victor Posner which have been deposited in the Voting
Trust are likely to be voted in the same proportion as the votes cast on this
proposal by
6
<PAGE> 10
all other shareholders. Consequently, if Mr. Posner's shares are voted in that
manner, the affirmative vote by shareholders owning at least 473,625 of the
remaining shares will be required to approve this amendment. See "Involvement in
Certain Legal Proceedings--Actions Involving Fischbach."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF THIS AMENDMENT TO THE COMPANY'S BYLAWS.
3. RATIFICATION OF THE SELECTION OF AUDITORS
The Audit Committee has selected and the Board of Directors has approved,
subject to ratification by the shareholders of the Company, Arthur Andersen LLP,
as independent auditors, to audit the financial statements of the Company.
Arthur Andersen LLP has served as the Company's auditors since 1962.
Representatives of Arthur Andersen LLP are expected to be present at the meeting
with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions. THE AFFIRMATIVE
VOTE OF THE HOLDERS OF A MAJORITY OF THE COMPANY'S COMMON STOCK PRESENT AT THE
MEETING IN PERSON OR BY PROXY IS REQUIRED FOR THE SELECTION OF ARTHUR ANDERSEN
LLP. The Company understands that the 917,634 shares owned by Victor Posner
which have been deposited in the Voting Trust are likely to be voted in the same
proportion as the votes cast by all other shareholders on the selection of
Arthur Andersen LLP. Consequently, if Mr. Posner's shares are voted in that
manner, the affirmative vote to shareholders owning at least 473,625 of the
remaining shares will be required to ratify the selection of Arthur Andersen LLP
as independent auditors for the Company. See "Involvement in Certain Legal
Proceedings--Actions Involving Fischbach."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership of each person known to the Company to be the
beneficial owner of more than five percent of any class of the Company's voting
securities, as of March 31, 1995, is as follows:
<TABLE>
<CAPTION>
PERCENT
TITLE OF CLASS NAME AND ADDRESS OF OWNER AMOUNT OF CLASS
-------------- ------------------------- ------ --------
<S> <C> <C> <C>
Common Stock Victor Posner(1) 917,634 shares 49.2%
6917 Collins Avenue
Miami Beach, FL 33141
Common Stock Heartland Advisors, Inc.(2) 155,750 shares 8.4%
790 North Milwaukee Street
Milwaukee, WI 53202
Common Stock Dimensional Fund Advisors, 126,257 shares 6.8%
Inc.(3)
1299 Ocean Avenue
Santa Monica, CA 90401
<FN>
- - ---------
(1) All of such shares are held in the Voting Trust pursuant to which the
Trustee exercises voting control. Victor Posner has retained sole
dispositive power with respect to such shares. See "Involvement in Certain
Legal Proceedings--Actions Involving Fischbach" for a description of the
terms of such trust.
(2) The Company has been advised that Heartland Advisors, Inc. is a registered
investment advisor and is deemed to have beneficial ownership of 155,750
shares of the Company's Common Stock as of December 31, 1994. Information
contained herein concerning Heartland Advisors, Inc. is based on a filing
made by it on Schedule 13G dated February 15, 1995.
(3) The Company has been informed that Dimensional Fund Advisors Inc.
("Dimensional"), a registered investment advisor, is deemed to have
beneficial ownership of 126,257 shares of the Company's Common Stock as of
December 31, 1994 all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
in series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional serves as
investment manager.
</TABLE>
7
<PAGE> 11
The Company has been informed that Dimensional disclaims beneficial
ownership of all such shares. Information contained herein with respect to
Dimensional is based on filings made by it on Schedule 13G as amended by
Amendment No. 6 thereto dated January 31, 1995.
The beneficial ownership as of March 31, 1995 of the Company's Common Stock
by each director of the Company or nominee who has such ownership, and by all
officers and directors of the Company as a group, is set forth in the following
table:
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
---------------- ----------------------- --------
<S> <C> <C>
A. A. Fornataro............................................... 7,125 shares(2) *
Donald L. Hoylman............................................. 11,500 shares(3) *
Martin J. Posner.............................................. 700 shares *
Phillip H. Smith.............................................. 8,250 shares(4) *
Officers and directors of the Company as a group (6
persons).................................................... 27,725 shares 1.5%
<FN>
- - ---------
* Constitutes less than one percent of the Company's outstanding Common Stock.
(1) Except as otherwise noted, to the best of the Company's knowledge, each
listed person has both sole voting power and sole investment power as to the
shares set forth opposite his name.
(2) Does not include 7 shares owned by Mr. Fornataro's daughter as to which he
disclaims any beneficial ownership.
(3) Does not include 3,000 shares owned by Mr. Hoylman's wife as to which he
disclaims any beneficial ownership.
(4) Includes 4,500 shares owned by Mr. Smith's wife; does not include 1,900
shares owned by Mr. Smith's children and grandchildren as to which he
disclaims any beneficial ownership.
</TABLE>
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's Common Stock to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock of the Company. Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all such forms they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1994, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with except that Phillip H. Smith filed
two reports late and A. A. Fornataro filed one report late. Mr. Smith's reports,
which were filed as amendments to an original report, related to three stock
purchase transactions during a single month. Mr. Fornataro's report related to a
single stock purchase transaction.
8
<PAGE> 12
EXECUTIVE OFFICERS
The executive officers of the Company are listed below.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME TITLE AGE OFFICER
---- ----- --- -------
<S> <C> <C> <C>
A. A. Fornataro*................ President and Chief Operating Officer 64 1977
Marco B. Loffredo, Jr.*......... Chairman of the Board and Secretary 45 1993
Martin J. Posner*............... Senior Vice President 47 1993
Brenda N. Castellano*........... Senior Vice President and Assistant Secretary 39 1989
Donald L. Hoylman*.............. Group Vice President 65 1971
George A. Douglas............... Corporate Controller and Treasurer 51 1988
David D. Struth................. Assistant Secretary 33 1988
</TABLE>
Those executive officers who are also directors of the Company are
designated by an asterisk (*) and their business experience during the past five
years is set forth above under the caption "Election of Directors." Each of the
persons named above who is an executive officer but not a director of the
Company has been employed by the Company for five years or more. Some of the
persons named above also perform services for, and hold offices with, other
corporations affiliated with the Company. See "Information Concerning Certain
Related Corporations" and "Involvement in Certain Legal Proceedings" for
additional information about such corporations. The term of office of each
executive officer is one year and until his or her successor is elected and
qualified or until his or her prior death, resignation or removal.
INFORMATION CONCERNING CERTAIN RELATED CORPORATIONS
Victor Posner owns approximately 49.2% of the outstanding Common Stock of
the Company. See "Security Ownership of Certain Beneficial Owners and
Management," "Involvement in Certain Legal Proceedings--Actions Involving
Fischbach" and "Certain Relationships and Business Transactions." He also owns
approximately 19.4% of the outstanding common stock of NVF (approximately 21.6%
assuming Mr. Posner's exercise of all rights to acquire such common stock and no
exercise by any other person of such rights) and SMC owns approximately 17% of
NVF's outstanding stock. All of the stock of SMC is owned by Victor Posner, a
foundation created by Victor Posner and trusts created for the benefit of Victor
Posner and his children. NVF owns approximately 68.1% and Victor Posner owns
approximately 2.7% of the outstanding common stock of APL (approximately 10.5%
assuming Mr. Posner's exercise of all rights to acquire such common stock and no
exercise by any other person of any such rights). APL owned approximately 52.9%
of the outstanding common stock of Fischbach until its acquisition by American
International Group, Inc. in July 1990. All of the shares of common stock of NVF
and APL owned by SMC, NVF (in the case of APL), Victor Posner and trusts created
for the benefit of Victor Posner and his children have been placed in trust. See
"Involvement in Certain Legal Proceedings--Actions Involving Fischbach."
Until December 1990, the effective date of the Sharon Reorganization Plan,
NVF owned approximately 74% of the outstanding common stock of Sharon (with an
additional approximately 12.2% owned by Chesapeake Insurance Company Limited).
All such stock was cancelled upon the effectiveness of such plan. Sharon owned
approximately 85% of the outstanding common stock of its subsidiary, Alaska
Gold. In connection with the Sharon Reorganization Plan, such stock was
transferred to a newly-formed entity owned by certain creditors of Sharon.
Sharon and its subsidiaries had previously ceased to be subsidiaries of NVF in
January 1988 by reason of the appointment of a trustee for Sharon in its
proceedings under the Bankruptcy Code.
Until April 23, 1993, Victor Posner and related entities owned 46% of the
voting stock of DWG. Half of such stock was sold on April 23, 1993 to an
unrelated entity and the remainder was exchanged for non-voting cumulative
preferred stock of DWG and on such date DWG and its subsidiaries ceased to be
affiliates of the Company. While controlled by Victor Posner, DWG was a holding
company which owned approximately 71.1% of its subsidiary, Southeastern, 58.6%
of its subsidiary, Wilson, 100% of its subsidiaries, National
9
<PAGE> 13
Propane, Citrus Acquisition Corporation and Home Furnishing Acquisition
Corporation, 51% of its subsidiary Graniteville Company (with the remaining 49%
owned by Southeastern) and 94.6% of CFC Holdings Corp. (with the remaining 5.4%
owned by Southeastern) which owned 100% of Royal Crown Corporation (formerly
Chesapeake Financial Corporation) and Chesapeake Insurance Company Limited.
Prior to the establishment of the voting trust herein described and the
transfer of the shares of the Company into the trust, Victor Posner could have
been deemed to be a "parent" of the Company, NVF, APL and their respective
subsidiaries, and all such companies could have been deemed to be "affiliates"
of each other. See "Involvement in Certain Legal Proceedings--Actions Involving
Fischbach."
The principal businesses of such corporations are or were as follows:
NVF has been a leader in the manufacture and sale of vulcanized fiber and
also manufactures industrial laminated plastics, material handling containers
and fine papers. In August 1993, NVF filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code. The NVF bankruptcy case is pending in the
United States Bankruptcy Court for the District of Delaware.
DWG was a holding company which, until April 23, 1993, provided certain
services for some of the affiliated companies listed herein, and whose principal
subsidiaries were Southeastern, Wilson, National Propane, Citrus Acquisition
Corporation, Home Furnishing Acquisition Corporation, Graniteville Company and
CFC Holdings Corp. Southeastern's principal activities were conducted by its
Utility and Municipal Services Group, which provided a variety of services to
electrical and telephone utilities and municipalities, including tree
maintenance services, installation of underground cable and conduit and
refurbishment of concrete structures, its Refrigeration Group, which operated
cold storage facilities and manufactured and sold ice, its LP Gas Group, which
distributed and sold liquified petroleum gas and its Natural Gas and Oil Group,
which had working and royalty interests in natural gas and oil producing
properties. Wilson was a holding company which, through its subsidiaries,
engaged in the specialty decoration of glass and ceramic items and the design,
manufacture and servicing of overhead industrial cranes. National Propane was a
distributor of liquified petroleum gas for residential and commercial use.
Citrus Acquisition Corporation owned grapefruit groves and, until the sale of
certain operations in December 1992, also processed and distributed citrus
products under ADAMS and VINTAGE labels. Home Furnishing Acquisition Corporation
manufactured and distributed FREDERICK COOPER and TYNDALE lamps and, until the
sales in July 1992 of the operations of two of its subsidiaries, also
manufactured and distributed NATIONAL picture frames and framed graphics and
ATHENS FURNITURE home furnishings. Graniteville Company manufactured, dyed and
finished cotton, synthetic and blended (cotton and polyester) fabrics, primarily
for the apparel trade. CFC Holdings Corp. was a diversified company whose
operations, through subsidiaries of Royal Crown Corporation, included its soft
drink business which produced and sold soft drink concentrates under the brand
names RC COLA, DIET RC COLA, DIET RITE, CHERRY RC, DIET CHERRY RC, NEHI and
UPPER 10, its fast food business which consisted of ARBY's, the largest roast
beef restaurant chain in the United States and, through its subsidiary,
Chesapeake Insurance Company Limited, its insurance business which provided
certain insurance coverage and the reinsurance of certain risks primarily for
affiliated companies.
APL is engaged in the design, production and sale of housewares and
giftware made of plastic and the manufacture of building products. On June 25,
1993, creditors of APL commenced an involuntary proceeding under Chapter 7 of
the Bankruptcy Code against APL in the United States Bankruptcy Court for the
Southern District of Florida. On July 27, 1993, the case was converted to a
proceeding under Chapter 11 of the Bankruptcy Code. On February 23, 1994, a
Trustee was appointed in such proceeding and, in accordance with Chapter 11 of
the Bankruptcy Code, assumed jurisdiction over APL's assets and all powers with
respect to APL's business. Upon such appointment, APL's Board of Directors and
officers ceased to have any power or authority over the management of APL's
business. Certain executive officers and directors of the Company are also
executive officers and/or directors of APL. ATEC South, Inc., a subsidiary of
APL, filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code on
September 2, 1994. A subsidiary of SMC has purchased certain assets of APL's
subsidiary, Riviera Cabinets, Inc. Approval by the Bankruptcy Court is pending
for the purchase of other operating assets of APL by a subsidiary of SMC. See
"Certain Relationships and Business Transactions."
SMC is a real estate developer and investor in real estate and securities.
10
<PAGE> 14
Sharon was, until the effectiveness of the Sharon Reorganization Plan in
December 1990, primarily a producer of hot and cold flat rolled steels in carbon
and alloy grades, carbon and alloy steels used by the forging industry and
coated flat rolled steel and was also engaged in the fabrication and sale of
copper and brass products, in natural resource operations, consisting
principally of coal mining, and in the manufacture and sale of welded stainless
steel pipe and tubing and steel strapping. Alaska Gold mined placer gold
principally in Nome, Alaska.
In addition, until they filed for relief under Chapter 7 of the Bankruptcy
Code in February 1992, PEC and Birdsboro may be deemed to have been "affiliates"
of the Company. Until such filings, PEC engaged primarily in the engineering and
construction of steel-making and processing facilities, the design, engineering
and supply of heavy capital equipment for the steel industry and the
construction of solid waste management disposal resource recovery facilities and
Birdsboro engaged in the sale of spare parts for metal processing machinery
equipment and, to a lesser extent, production of machine shop orders.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
SETTLEMENT OF DERIVATIVE ACTION
On July 7, 1993, an order was entered by the United States District Court
for the Western District of Pennsylvania approving the Stipulation of Settlement
entered into by the parties in connection with the shareholder derivative suit
filed in November 1989 on behalf of the Company against its directors. The full
Stipulation of Settlement is on file with the Clerk of Courts for the United
States District Court for the Western District of Pennsylvania, U.S. Post Office
and Courthouse, 8th Floor, Room 829, Seventh Avenue and Grant Street,
Pittsburgh, Pennsylvania 15219.
Pursuant to the Stipulation of Settlement, procedures have been adopted by
the Board of Directors to provide for annual review by the Compensation and
Human Resources Committee of the compensation of senior management, to ensure
that such compensation is competitive and to ensure that documentation of the
reviews is preserved. The Company also retained nationally recognized
compensation consultants which have assisted the Compensation and Human
Resources Committee and the Board in the setting of compensation. Procedures
also were implemented to ensure that regular shareholder meetings are held and
regular shareholder reports are issued.
Pursuant to the Stipulation of Settlement, Phillip H. Smith and Leo L.
Wallberg, Jr. have been appointed to the Company's Executive and Audit
Committees and Phillip H. Smith and Alexander Stuart have been appointed to the
Company's Compensation and Human Resources and Intercompany and Subsidiary
Transactions Committees.
The Stipulation of Settlement imposed a number of restrictions upon Victor
Posner's compensation. Upon the court's approval of the settlement on July 7,
1993, Mr. Posner's compensation was subjected to the following limitations for
the fiscal years 1993 through 1997: (i) base salary was not to exceed $350,000
in any one year; (ii) annual bonuses were not to exceed the lesser of (A)
$150,000 or (B) 5% of the Company's net profits before taxes and incentive
compensation, provided that the bonus could exceed $150,000 if the aggregate of
base salary and bonus for such year did not exceed $500,000; and (iii) Mr.
Posner could participate in duly recommended long-term incentive programs, but
only on a basis consistent with other senior management. Pursuant to the
Stipulation of Settlement, with the Compensation and Human Resources Committee's
concurrence, the Board could award additional compensation to Mr. Posner for
contributions that resulted in extraordinary performance by the Company and
materially increased value to the Company's shareholders. The Stipulation of
Settlement also provided that the amount of bonus to be paid to Mr. Posner in
1993 out of an existing pool under the Company's incentive compensation plan was
to be determined by the Compensation and Human Resources Committee and the newly
constituted Board of Directors and could be less or more than the $240,000
previously allocated to Mr. Posner. See "Executive Compensation." Mr. Posner,
however, resigned as an officer and director of the Company on January 4, 1994
and is no longer receiving any compensation from the Company. See "Actions
Involving Fischbach."
In accordance with the terms of the Settlement, the Company agreed to pay
the reasonable fees and expenses of counsel for the plaintiffs and the
plaintiffs' expenses. On April 8, 1994, an opinion was issued by
11
<PAGE> 15
the Court under which the Company was to pay plaintiffs approximately $8,300 and
to pay plaintiffs' counsel approximately $1,800,000, plus interest, for its fees
and expenses. The Company previously had reserved $1,000,000 for such fees. On
May 5, 1994, the parties agreed to a final settlement of all claims for fees,
expenses and interest for $1,675,000.
On February 22, 1995, Phillip H. Smith filed a motion to intervene in the
previously settled shareholder derivative suit. At that time he also filed a
motion for a preliminary injunction wherein he alleged Victor Posner, Brenda N.
Castellano, Milton Deaner, Bernard Posner, Martin J. Posner, Melvin Colvin, A.A.
Fornataro, Donald L. Hoylman and the Company's outside counsel, as agent for the
foregoing individuals, conspired to have Mr. Smith removed from the Company's
Board of Directors and the Independent Committee. Mr. Smith further alleged that
such persons conspired to thwart the intent of the Stipulation of Settlement and
interfered with his ability to govern the Company in an independent manner. Mr.
Smith sought an injunction prohibiting such individuals from "violating the
intent and spirit of the Stipulation of Settlement by removing him from the
Salem Board of Directors and any of the committees on which he currently serves"
or "by interfering with, or taking steps to prevent or limit, his ability to act
as an independent director on the Salem Board of Directors." Mr. Smith
acknowledged in his motion that counsel for the Company had previously stated in
a letter to Mr. Smith and other directors and in a conversation with his counsel
that it was their recommendation that the Board of Directors take no action to
remove Mr. Smith as a member.
On March 3, 1995, Mr. Smith withdrew without prejudice his motions for
preliminary injunction and leave to intervene after receiving written assurances
that (i) the directors named in Mr. Smith's motions agreed to continue to abide
by the terms of the Stipulation of Settlement, (ii) Mr. Smith retained the same
rights, privileges and protections under the Company's Bylaws and applicable
corporate law as the Company's other directors, and (iii) the named directors
would take steps to assure that Mr. Smith's legal expenses not in excess of
$13,000 incurred in connection with his motions for preliminary injunction and
leave to intervene be reimbursed by the Company upon formal approval by the
Company's Board of Directors.
ACTIONS INVOLVING FISCHBACH
On December 29, 1993, judgment was entered by the United States District
Court for the Southern District of New York in favor of the SEC and against
Victor Posner and his son, Steven Posner, in a civil action brought by the SEC
in September 1988 against the Posners, PEC and others. The United States Court
of Appeals for the Second Circuit affirmed the lower court's judgment. A
petition for certiorari was denied by the United States Supreme Court in October
1994.
Pursuant to the judgment, the Posners have been enjoined from violating
various provisions of the federal securities laws, barred from serving as
officers or directors of any reporting company under the Exchange Act, ordered
to disgorge approximately $4,000,000 which had been paid by Fischbach to the
Posners as compensation and to place certain securities owned by them into a
voting trust.
On February 18, 1994, the District Court entered a trust order under which
Victor Posner and Steven Posner were required to deliver to the Trustee all
voting securities ("Trust Securities") they own, directly or indirectly, in any
company they control (as defined in the Exchange Act) which has a class of
securities registered under Section 12 of the Exchange Act or which is required
to file reports pursuant to Section 15(d) of the Exchange Act. Salem Corporation
is such a company. Under the terms of the Voting Trust, the Trustee is required
to vote all Trust Securities upon any proposal (other than the election of
directors) submitted to a vote of security holders in proportion to the votes
cast by the other holders. As an example, if 51% of the votes cast by the other
holders are in favor of a proposal and 49% are against it, 51% of the Trust
Securities are to be voted in favor of the proposal and 49% are to be voted
against the proposal. Similarly, in the election of directors where cumulative
voting is not provided for, the Trust Securities are to be voted in the same
proportion for each nominee as the other security holders vote. Where cumulative
voting is permitted (as is the case with the Company), to the greatest extent
possible, the Trust Securities are to be voted in proportion to the votes cast
for those nominees who would have been elected had the Trust Securities not been
voted. Notwithstanding the foregoing, unless otherwise ordered by the District
Court, the Trustee, in his sole discretion, may depart from the proportionate
voting provisions of the Voting Trust in any manner he deems
12
<PAGE> 16
necessary in order to act in accordance with the purposes of the District
Court's judgment. The Trustee must give ten days' advance written notice to the
District Court, the SEC, Victor Posner and Steven Posner before voting any of
the Trust Securities in such manner.
The Trustee is not permitted to sell, transfer or encumber the Trust
Securities. Victor Posner and Steven Posner, however, are not restricted in
their ability to direct that Trust Securities be sold, transferred or pledged to
unrelated parties. If an issuer of Trust Securities ceases to be a reporting
company under the Exchange Act, such securities are no longer to be subject to
the Voting Trust and are to be returned to the Posners. Unless sooner terminated
by the agreement of Victor Posner, Steven Posner and the SEC, and an order of
the District Court, the Voting Trust will terminate with respect to Trust
Securities owned by Victor Posner upon his death and with respect to Steven
Posner's Trust Securities upon his death.
On January 19, 1995 a Formal Order of Private Investigation was issued by
the SEC concerning the Company. The Order and the investigation were intended to
be confidential. All of the Company's directors have been deposed by the SEC and
were required to produce documents concerning, among other things, their
activities as directors of the Company and communications with Victor Posner, if
any. The Order states that information has been reported to the SEC tending to
show possible violations by the Company, its officers, directors, employees and
affiliates and others of Sections 10(b), 13(a) and 14(e) of the Exchange Act and
Rules 10b-5, 13a-1 and 13a-13 thereunder by failing to adequately disclose the
role of Victor Posner in the management of the Company and by conspiring to hold
down the price of the Company's Common Stock in order to enable Victor Posner to
take the Company private at a less expensive price. Management is unaware of
evidence that such violations have occurred but has been informed that the SEC
is continuing to monitor the Company.
ACTIONS INVOLVING PEC
On February 4, 1992, PEC and its subsidiaries, Birdsboro and Lectromelt
Corporation, filed petitions for relief under Chapter 7 of the Bankruptcy Code
in the United States Bankruptcy Court for the Western District of Pennsylvania.
A Trustee was appointed in such proceedings on February 7, 1992. In accordance
with Chapter 7 of the Bankruptcy Code, upon such appointment the Trustee assumed
jurisdiction over the assets and all powers with respect to the business of PEC
and its subsidiaries and their respective boards of directors and officers
ceased to have any power or authority with respect to the management of PEC.
Until the appointment of such Trustee and, as described elsewhere herein, Marco
B. Loffredo, Jr., Melvin R. Colvin and Bernard I. Posner were directors of PEC
and Birdsboro and Melvin R. Colvin and Bernard I. Posner served as Senior Vice
Presidents of PEC and Birdsboro.
On May 7, 1993, the United States District Court for the Southern District
of New York authorized the Trustee in the Chapter 7 proceeding of PEC to be
substituted for, and pursue a derivative action originally filed by, Sadie Rubin
and Julie Stone against Victor Posner and others. The action sought to recover
damages allegedly suffered by PEC as a result of the Fischbach transactions
described above. See "Actions Involving Fischbach."
On February 2, 1994, the Trustee in the Chapter 7 proceeding of PEC and its
subsidiaries filed a petition for an accounting in the Court of Chancery of the
State of Delaware in and for New Castle County. In that petition, the Trustee
asked the Court to order an accounting of the administration and termination of
the Stipulation of Settlement dated May 1, 1987, as amended, entered into by the
parties to a stockholders' derivative action filed on behalf of NVF, Sharon,
APL, Southeastern, Wilson, PEC, Birdsboro, DWG and their respective subsidiaries
against officers and directors of such corporations. Pursuant to such
settlement, the Ad Hoc Intercorporate Transaction and Common Officer
Compensation Committee was created and subsequently dissolved in April 1993. The
Committee had been charged with monitoring and approving Victor Posner's
compensation within specified limits and approving transactions among and
between Mr. Posner and such corporations. The Trustee alleged that PEC and
Birdsboro were entitled to recover funds due to the failure of the Committee to
function in accordance with the terms of the settlement and that a full
accounting was necessary.
On February 3, 1994, the Trustee in the Chapter 7 proceeding of PEC and its
subsidiaries commenced a civil action in the United States District Court for
the Western District of Pennsylvania against Victor Posner,
13
<PAGE> 17
the directors of PEC and others alleging, among other things, violations of the
Racketeer Influenced and Corrupt Organization Act and breach of fiduciary duties
in the management of PEC and its subsidiaries.
By agreement entered into in May 1994, all three of the above-described
actions involving PEC and its subsidiaries were settled. Under the terms of the
settlement, Victor Posner paid a total of $21,000,000 to the Trustee and
releases were given to all defendants by the Trustee. Such settlement has been
approved by the United States District Courts for the Southern District of New
York and the Western District of Pennsylvania and the petition for an accounting
has been withdrawn in the Court of Chancery of the State of Delaware.
ACTIONS INVOLVING NVF
On May 26, 1994, the Official Committee of Unsecured Creditors of NVF filed
a complaint in the United States Bankruptcy Court for the District of Delaware
against Victor Posner, other directors of NVF and others. The complaint alleges,
among other things, breaches of fiduciary duty, waste of corporate assets,
breach of contract and fraudulent conveyance. The complaint has been amended
numerous times and the court has not yet ruled on outstanding motions to
dismiss. A July 1995 trial date has been set.
See "Certain Relationships and Business Transactions" for a description of
legal proceedings involving APL and its subsidiary, ATEC South, Inc.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth compensation earned by
the former chief executive officer and each of the two other most highly
compensated executive officers of the Company (no other executive officer of the
Company having had total annual salary and bonus in excess of $100,000 in the
most recently completed fiscal year) during the fiscal years ended December 31,
1994, 1993 and 1992 for services rendered in all capacities to the Company and
its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION(1)
--------------------------------------- -----------------------------
OTHER LONG TERM
ANNUAL INCENTIVE PLAN ALL OTHER
NAME AND FISCAL BONUS COMPENSATION PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($)(2)(3) ($)(4) ($)(5) ($)(6)
- - ------------------ ------ --------- --------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Victor Posner.............. 1994 2,823 -- -- -- --
Chairman of the Board 1993 422,861 -- -- -- --
and Chief Executive 1992 490,000 240,000 -- -- --
Officer(7)
A. A. Fornataro............ 1994 203,500 78,200 -- -- 5,750
President and Chief 1993 170,833 75,000 -- -- 5,125
Operating Officer 1992 150,000 120,000 -- 19,759 4,500
Donald L. Hoylman.......... 1994 146,500 76,940 -- -- 4,335
Group Vice President 1993 132,667 46,588 -- -- 3,980
1992 126,000 52,803 -- 18,895 3,780
<FN>
- - ---------
(1) The section of the table entitled "Long-Term Compensation Awards," which is
designated for the reporting of restricted stock, options and stock
appreciation rights awards, has been omitted as no such compensation of a
type required to be reported thereunder was earned by any of the named
executive officers during the period covered by the table. See "Report of
the Compensation and Human Resources Committee."
(2) The Company has a Management Incentive Plan in which certain officers of the
Company participate. Such plan contains a formula based on operating
earnings and earnings from sales of assets providing for an annual accrual
under such formula of a bonus pool for management incentive awards.
Approximately
</TABLE>
14
<PAGE> 18
$625,000 was accrued under the Company's Management Incentive Plan in
respect of 1994 but has not yet been awarded or paid. Bonus awards under the
Management Incentive Plan are made at the discretion of the Compensation and
Human Resouces Committee subject to approval by the Board of Directors.
Other officers of the Company, who are also Presidents of the Company's
operating subsidiaries, participate in annual profit sharing plans for which
payments are based on the results of operations for the respective
subsidiaries. See "Report of the Compensation and Human Resources Committee
or Executive Compensation."
(3) Management Incentive Plan bonuses for the years 1989 through 1992,
inclusive, for Victor Posner and A. A. Fornataro had been accrued but were
not paid until 1993. Bonuses of $240,000 and $120,000, respectively, were
paid to Mr. Posner and Mr. Fornataro for each of such years. Mr. Posner was
not eligible to receive a bonus under the Management Incentive Plan for 1993
or 1994.
(4) Does not include any perquisite or other personal benefit to any named
executive officer because the aggregate amount of such compensation did not
exceed the lesser of either $50,000 or 10% of the total annual salary and
bonus reported in the table.
(5) Represents distributions under the Company's terminated Deferred
Compensation Plan.
(6) Represents Company contributions to the Company's defined contribution
salaried retirement savings plan.
(7) Pursuant to court order, Victor Posner resigned as Chairman of the Board and
Chief Executive Officer of the Company on January 4, 1994 and no longer
receives any compensation from the Company or any of its subsidiaries. See
"Involvement in Certain Legal Proceedings--Actions Involving Fischbach." He
has also resigned as the Chairman, President and Chief Executive Officer of
NVF, APL and DWG and as an executive officer and director of certain of
their respective subsidiaries. Certain of such companies which, prior to the
establishment of the Voting Trust, could have been deemed to have been
affiliates of the Company have paid compensation to Mr. Posner and may have
provided him with pension and retirement benefits. See "Information
Concerning Certain Related Corporations" and "Involvement in Certain Legal
Proceedings--Actions Involving Fischbach."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Marco B. Loffredo, Jr. is a member of the Compensation and Human Resources
Committee of the Company's Board of Directors. He was elected Chairman of the
Board of Directors on April 26, 1994 and has served as the Secretary of the
Company since June 1993.
PENSION PLANS
Certain of the individuals named in the Summary Compensation Table set
forth above (other than Victor Posner), and certain other executive officers of
the Company were covered by the Company's defined benefit retirement plan which
was terminated effective June 1, 1987. The Company purchased non-participating
annuity contracts from an insurance company which provide for the payment of
terminated plan benefits.
The following table sets forth the amount of the accrued and fully vested
lifetime benefit payable at age 65 or at their respective retirement dates as of
the date of plan termination for each of the individuals named in the Summary
Compensation Table set forth above who participated in such terminated plan:
<TABLE>
<CAPTION>
ACCRUED MONTHLY
BENEFIT
---------------
<S> <C>
A. A. Fornataro............................................ $ 2,853
Donald L. Hoylman.......................................... $ 3,544
</TABLE>
The Company has a Retirement Savings Plan, (401(k) defined contribution
plan) for all salaried employees who are eligible to participate. Employees may
contribute from 1% to 17% of their pre-tax total compensation, excluding
overtime, bonuses and other special compensation. The Company makes a
contribution of 3% of base compensation of employees participating in such plan
and may make an additional contribution equal to 2% of base compensation of all
eligible employees. Employer contributions are immediately vested. Benefits are
paid in cash lump-sum amounts or under various annuity options. Company
15
<PAGE> 19
contributions credited to the named executive officers in 1994 have been
included in the Summary Compensation Table set forth above.
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Human Resources Committee (the "Committee") of the
Board of Directors is composed of the Company's Chairman and two non-employee
directors who were appointed to the Committee in accordance with the terms of
settlement of a shareholders' derivative suit on July 7, 1993 in the United
States District Court for the Western District of Pennsylvania. Under the
settlement, the Committee is charged with the responsibility of, among other
things, reviewing the compensation of senior management to insure that it
remains competitive. The Committee considers and makes recommendations to the
Board of Directors concerning general compensation policies and benefit plans
and specifically recommends salary levels and bonus awards for executive
officers of the Company. The Committee's salary and bonus recommendations during
1994 were approved by the Board without modification.
The Company's executive compensation program is designed to promote the
following objectives:
- To provide competitive compensation that will attract, retain and
motivate qualified executives.
- To align management's interests with the success of the Company by making
a significant portion of executive compensation dependent upon the
Company's performance.
The Committee believes the Company's executive compensation program
provides an overall level of compensation that is competitive within its
industry and among companies of comparable size. To ensure that the Company's
compensation remains competitive, working with an independent compensation
consultant, the Committee regularly compares its compensation practices with
those of similar companies.
At this time, the Company's executive compensation program consists of base
salary and cash bonuses. In addition, the Company's executives are eligible to
participate in all employee benefit programs generally available to other
full-time employees of the Company including the Company's 401(k) retirement
savings plan. The Committee has carefully evaluated a number of types of
long-term incentive compensation programs and possible modifications to the
Company's short-term bonus plans. The Committee presented its final
recommendations concerning short-term and long-term compensation plans to the
Board of Directors at its meeting held December 9, 1994. The Board elected to
defer consideration of such matters.
SALARIES
It is the Committee's policy to review executive salaries during the fourth
quarter of each year. In its review, the Committee considers the appraisal by
the Company's President and Chief Operating Officer of his own performance
during the year and the performance of the other senior executives and his
recommendations for any adjustments to their base salaries. The Committee
attempts to set base salaries within the mid-range of salaries of executive
officers with comparable qualifications, responsibilities and experience at
other companies of similar size and in similar businesses. Many of the companies
included in the Dow Jones Industrial Diversified Index which is used to compare
shareholder returns in the Stock Performance Graph set forth below are
substantially larger than the Company and do not necessarily represent the
Company's direct competition for executive talent. As a result, the survey data
used by the Committee does not correspond to such index.
Using the independent survey data as a reference point, salary
determinations are made based upon the Company's financial performance and upon
a subjective evaluation of the individual's performance. Using this process, the
Committee recommended, and the Board of Directors approved, a 7% increase in the
base salaries of A.A. Fornataro and Donald L. Hoylman effective October 1, 1994.
BONUSES
The Company and its subsidiaries maintain short-term incentive compensation
plans. Under each of the subsidiary plans in which members of senior management
participate, a bonus pool is distributed quarterly and
16
<PAGE> 20
is in an amount equal to (i) 5% of the subsidiary's "pre-tax net income" (prior
to profit sharing provisions and corporate overhead expense allocations) until a
20% return on average net assets is achieved, plus (ii) 15% of earnings in
excess of the 20% return on average net assets, subject to an overall limitation
of 10% of pre-tax net income. Most of the plans also provide that no bonuses
will be paid until the quarterly pre-tax net income of the respective subsidiary
exceeds $25,000. Under each of the plans, 25% of the bonus pool is allocated to
the subsidiary's president, subject to review by the Company's President and
Chief Operating Officer. In no event, however, may the bonus under these plans
exceed 50% of an individual's base salary.
The Company also maintains a Management Incentive Plan. The stated
objectives of the Management Incentive Plan are (i) to encourage the development
of aggressive growth-oriented business plans and strategies consistent with the
philosophies of the Board of Directors, (ii) to motivate exemplary commitment
and performance of managerial personnel, (iii) to provide a competitive level of
remuneration to managerial personnel who have made a meaningful contribution to
the Company's financial results and business objectives, and (iv) to provide the
Company's shareholders with an optimum return on their investment by maximizing
the long-term growth and profitability of the Company. Subject to Board approval
and considering the recommendations of the Company's President and Chief
Operating Officer, the Committee determines the employees who will participate
in the Plan.
Under the Management Incentive Plan, the bonus pool consists of two classes
as established by the Board of Directors. One of the classes is based on the
Company's operating earnings (not to exceed 10% of such earnings) and the other
is based upon earnings, if any, from asset sales or other dispositions of assets
not in the ordinary course of business (not to exceed 10% of such earnings).
Amounts awarded under the Plan are subject to Board approval following review
and recommendation by the Committee. During 1994, the Company awarded bonuses
from the bonus pool which had been accrued for 1993. In making such awards, the
Committee considered the Company's performance, performance appraisals and award
recommendations given by the Company's President and Chief Operating Officer,
job responsibilities and cash compensation and other perquisites of the
individuals eligible to receive awards. The Company's President and Chief
Operating Officer also serves as President of the Company's subsidiary,
Herr-Voss Corporation. In making an award to him, the Committee also considered
the bonus he would have been eligible to receive if he had participated in the
Herr-Voss Corporation short-term incentive compensation plan.
During 1994, the Committee set four specific objectives upon which the 1994
bonus of the Company's President and Chief Operating Officer will be determined.
Based on his achievement of these goals in whole or in part, within the
Committee's discretion he may be eligible to receive up to 50% of the Management
Incentive Plan 1994 bonus pool and for outstanding performance results his share
of the bonus pool may be increased to 66 2/3%. In addition, he may receive 25%
of the 1994 bonus pool under Herr-Voss Corporation's short-term incentive plan.
The Committee also informed other members of management that their 1994 bonuses
under the Management Incentive Plan will be determined in part upon their
completion of certain specified projects. During 1994, a bonus pool of
approximately $625,000 was accrued under the Plan but no bonuses have yet been
awarded or paid. The Committee plans to consider bonus awards at its meeting in
May, 1995.
CHIEF EXECUTIVE OFFICER
Victor Posner resigned as the Company's Chief Executive Officer on January
4, 1994 and the position was not filled during the year. Under the terms of the
Company's Management Incentive Plan, because Mr. Posner was no longer employed
by the Company, he was not entitled to receive, and did not receive, any bonus
payments for 1993 or 1994.
LIMITATION ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation in excess of $1,000,000 to the chief executive officer and the four
most highly paid executive officers. "Performance-based compensation," as
defined in the Internal Revenue Code, is not subject to the deductibility
limitation provided that certain shareholder approval requirements are met. The
Committee anticipates that amounts paid as
17
<PAGE> 21
compensation will continue to be fully deductible because they are expected to
remain below the $1,000,000 threshold.
Phillip H. Smith, Chairman
Marco B. Loffredo, Jr.
Alexander Stuart
STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly change in the cumulative
total shareholder return on the Company's Common Stock for the years 1989
through 1994 with the cumulative total returns of the Standard & Poor's 500
Index ("S&P 500") and the Dow Jones Industrial Diversified Index ("Dow
Industrial"). The graph assumes $100 was invested on December 31, 1989 in the
Company's Common Stock and each of the indices and that all dividends were
reinvested.
SALEM CORPORATION
5 YEAR CUMULATIVE SHAREHOLDER RETURN
FISCAL YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD SALEM INDUSTRIAL
(FISCAL YEAR COVERED) CORPORATION DIVERSIFIED S&P 500
<S> <C> <C> <C>
1989 100 100 100
1990 63 93 97
1991 114 115 126
1992 173 134 136
1993 290 164 150
1994 351 150 152
</TABLE>
18
<PAGE> 22
CERTAIN RELATIONSHIPS AND BUSINESS TRANSACTIONS
The Company, in 1986, purchased for $78,000 a 65% ownership interest in
Essex Insurance Co., Ltd. ("Essex") from Chesapeake Insurance Company Limited,
which was in turn wholly-owned by CFC Holdings, Corp., a subsidiary of DWG. The
remaining 35% of Essex is owned by SMC, which is controlled by Victor Posner.
The share capital of Essex was subsequently increased to $350,000 with the
Company investing an additional $149,500, bringing the total cost of its 65%
ownership to $227,500. Essex is registered under the Bermuda Insurance Act which
requires compliance with various provisions regarding the maintenance of
statutory capital and surplus and liquidity. Essex reinsures up to $350,000 per
claim for the Company's general liability and workers compensation claims and up
to $250,000 per claim for automobile accident claims. In 1994, reinsurance
premiums ceded to Essex were $890,000. In July 1994, Essex received claims for
property damage on residences for which Victor Posner is the insured. The claims
currently aggregate approximately $885,000. Mr. Posner is the Chairman of the
Board of Essex. Questions have arisen concerning the amount and validity of the
claims. The claims are being assessed by an independent claims adjuster and
independent counsel is being retained to review the claims. Reserves considered
adequate by the Company's management have been established for Mr. Posner's
claims.
In November 1988, the Company acquired, by assignment from Mellon Bank,
N.A., industrial revenue bonds totaling $2.4 million in principal amount which
are the obligation of ATEC South, Inc. ("ATEC"), a wholly-owned subsidiary of
APL, which may be deemed to be an affiliate of the Company. Equal payments of
principal and interest on the unpaid balance were to be made monthly until March
1, 1993 with a balloon payment of $1.1 million due on that date. Interest is
calculated at 72% of the Mellon Bank, N.A. prime rate (adjusted by formula for
any changes in the corporate federal income tax rate from 1982 to the current
year). The bonds are secured by promissory notes which, in turn, are secured by
first lien rights on the real property, furniture, fixtures, machinery and
equipment of ATEC. No payments of principal or interest have been received by
the Company since May 1992 and the balloon payment is past due. The Company
received $35,000 in March 1992 and an additional $418,000 in May 1992 from the
sale, by ATEC, of equipment the proceeds of which were applied to accrued and
unpaid interest on such bonds. Valuation reserves were previously established on
account of such investment. Interest due and owing on such bonds is fully
reserved. At December 31, 1994, approximately $1.5 million of principal and
approximately $286,000 of accrued interest (including late charges) was past due
on such bonds. The bonds were guaranteed by APL. APL filed for protection under
Chapter 11 of the Bankruptcy Code in July 1993 and a Trustee in such proceeding
was appointed in February 1994. In February 1994, the Committee of Unsecured
Creditors in the APL bankruptcy proceeding filed a complaint seeking to
subordinate any claim of the Company to payment from APL or ATEC. On September
2, 1994, ATEC filed for bankruptcy protection under Chapter 11 of the Bankruptcy
Code. In November 1994, an order was entered by the bankruptcy court granting
the Trustee's motion to compromise the controversy among APL, ATEC and the
Company. Pursuant to the order, the Company was dismissed from the action
brought by the Committee of Unsecured Creditors and withdrew its claims against
APL and ATEC. In return, APL and ATEC have abandoned their interest in the real
property securing the bonds. The Company is currently assessing the
environmental condition of the property before determining whether to resume
foreclosure proceedings.
MISCELLANEOUS
SHAREHOLDER'S PROPOSAL FOR NEXT ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Company's
next Annual Meeting must comply with all of the requirements of the rules of the
SEC promulgated under the Exchange Act and must be received by the Company for
inclusion in the Proxy Statement and form of proxy for that meeting no later
than December 5, 1995 or, if the date of such meeting is changed by more than 30
days from such anticipated date, a reasonable time before the solicitation of
proxies for such meeting is made.
19
<PAGE> 23
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. Following the
original mailing of proxy soliciting material, regular employees of the Company,
for no additional compensation, may solicit proxies by mail, telephone,
telegraph and personal interview. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries which are holders of
record of the Company's stock to forward proxy soliciting material and annual
reports to the beneficial owners of such stock, and the Company may reimburse
such holders for their reasonable expenses incurred in such forwarding.
OTHER MATTERS
As of the date of this Proxy Statement, the management of the Company does
not intend to present, and has no knowledge that others will present, any
business other than as stated in the notice of the meeting. If any other
business is properly presented to the meeting, the persons named as proxies in
the accompanying proxy card will vote upon such business according to their best
judgment, so long as the proxy card is in substantially the form accompanying
the Proxy Statement.
THE COMPANY HAS MAILED HEREWITH TO SHAREHOLDERS OF RECORD ON MARCH 31, 1995
THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER
31, 1994, WHICH INCLUDES THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR SUCH
FISCAL YEAR AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING
FINANCIAL STATEMENTS. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHO
IS A BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK, AS OF MARCH 31, 1995, ON
THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE ANNUAL REPORT OF THE
COMPANY ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO. ALL SUCH REQUESTS SHOULD BE DIRECTED TO MARCO B. LOFFREDO,
JR., SECRETARY, SALEM CORPORATION, P.O. BOX 2222, PITTSBURGH, PENNSYLVANIA
15230. EACH SUCH REQUEST MUST CONTAIN A REPRESENTATION THAT, AS OF MARCH 31,
1995, THE PERSON MAKING SUCH REQUEST WAS A BENEFICIAL OWNER OF COMMON STOCK OF
THE COMPANY ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS.
By Order of the Board of
Directors
SALEM CORPORATION
MARCO B. LOFFREDO, JR.
Secretary
April 12, 1995.
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<PAGE> 24
SALEM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Phillip H. Smith, Alexander Stuart
and Milton Deaner and each of them, with full power of substitution,
attorneys and proxies to represent and to vote all shares of Common Stock
of Salem Corporation which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of Salem Corporation to be held at the
Sheraton Bal Harbour, 9701 Collins Avenue, Bal Harbour, Florida on May 2,
1995 at 2:00 P.M., local time, and at any adjournments thereof:
1. ELECTION OF DIRECTORS:
<TABLE>
<S> <C>
/ / FOR all nominees listed below
(except as otherwise instructed / / AUTHORITY WITHHELD to vote
below). for all nominees listed below.
</TABLE>
TO SERVE UNTIL 1998: Brenda N. Castellano, Marco B. Loffredo, Jr., Robert
D. McBride, Vincent J. Schafmeister, Jr. and Leo L.
Wallberg, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME
IN SPACE BELOW:
--------------------------------------------------------------------------
2. AMEND BYLAWS TO LIMIT DIRECTORS' MONETARY LIABILITY:
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed on the reverse side)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
4. In their discretion, upon such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors recommends a vote FOR the election of the nominees
for directors named herein and FOR Proposals 2 and 3. This proxy when
properly executed will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted
FOR the election of Directors, with discretionary authority to cumulate
votes, except to the extent authority to do so is withheld as to any one
or more Directors, and FOR Proposals 2 and 3.
.......................... [SEAL]
.......................... [SEAL]
THIS PROXY SHOULD BEAR YOUR
SIGNATURE(S) EXACTLY AS YOUR
NAME(S) APPEAR(S) IN THE STENCIL
TO THE LEFT. WHEN SIGNING AS
ATTORNEY, EXECUTOR,
ADMINISTRATOR, PERSONAL
REPRESENTATIVE, TRUSTEE, GUARDIAN
OR CORPORATE OFFICER, PLEASE GIVE
FULL TITLE. FOR JOINT ACCOUNTS,
EACH JOINT OWNER SHOULD SIGN.
DATE ......................, 1995
PLEASE DATE, SIGN AND RETURN
TODAY IN THE ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
