OMB APPROVAL
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 23 )*
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Salem Corporation
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(Name of Issuer)
Common Stock, par value $.50 per share
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(Title of Class of Securities)
794099 10 1
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(CUSIP Number)
Glen E. Hess
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
(212) 446-4800
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Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 3,1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ ]. (A fee
is not required only if the filing person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-a(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP No. 794099 10 1 13D Page of __
--
Pages
NAME OF REPORTING PERSON
1
Victor Posner - ###-##-####
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
2
(b) [ ]
SEC USE ONLY
3
SOURCE OF FUNDS*
4
PF, 00
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) [ ]
5
CITIZENSHIP OR PLACE OF ORGANIZATION)
6
United States
SOLE VOTING POWER
7
NUMBER -0-
OF SHARED VOTING POWER
SHARES 8
BENEFICI -0-
ALLY SOLE DISPOSITIVE POWER
OWNED BY 9
EACH 917,633 Common Shares
REPORTIN SHARED DISPOSITIVE POWER
G PERSON 10
-0-
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
917,633 Common Shares
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
12
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
49.2%
TYPE OF REPORTING PERSON
14
IN
<PAGE>
Item 1. Security and Issuer
- ----------------------------
This Amendment No. 23 dated April 3, 1996 to Schedule 13D is filed by
Victor Posner, an individual, to restate to current information and reflects
information required pursuant to Rule 13d-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
relating to the shares of common stock, par value $.50 per share (the "Salem
Common Shares"), of Salem Corporation, Pennsylvania corporation (the "Issuer"
or "Salem"). Except as otherwise defined herein, all terms are used herein as
defined in said Rules and Regulations.
Item 2. Identity and Background
- --------------------------------
This Schedule 13D is filed on behalf of Victor Posner, an individual. His
business address is 6917 Collins Avenue, Miami Beach, Florida 33141. His
present principal occupation or employment and the name, principal business and
address of any organization in which such employment is conducted are Chairman
of the Board and Chief Executive Officer of Security Management Corp.
Victor Posner is a citizen of the United States.
During the last five (5) years, Victor Posner has not been convicted in a
criminal proceeding.
During the last five (5) years, Victor Posner was not a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws, except as follows.
In September, 1988 the Securities and Exchange Commission (the "SEC")
commenced a civil action in the United States District Court for the Southern
District of New York titled SEC v. Drexel Burnham, Lambert, Inc. et. al. in
--------------------------------------------
which Pennsylvania Engineering Corporation ("PEC"), Victor Posner and Steven
Posner, among others, were named as defendants. The
<PAGE>
complaint in such action alleged numerous claims against PEC, Victor Posner and
Steven Posner, including, but not limited to, filing purportedly false and
incomplete Schedule 13Ds and various acts purportedly constituting securities
fraud, record-keeping and margin law violations, or aiding and abetting those
violations, in connection with the acquisition of control of Fischbach
Corporation in 1985 by PEC, a corporation which, at such time, may have been
deemed to be controlled by Victor Posner, and an alleged agreement with Ivan
Boesky in connection therewith (the "Fischbach Claims"), and alleged various
similar violations of federal securities laws in connection with the possible
acquisition of control by Victor Posner of Burnup & Sims in 1983 (the "Burnup &
Sims Claims"). A trial was held on the claims against Victor Posner and Steven
Posner in June 1993.
On December 29, 1993, the District Court entered a final judgment ("Final
Judgment") against Victor Posner and Steven Posner based on the Opinion And
Findings (in part) and Supplemental Findings And Conclusions Of Law dated
December 1, 1993. The District Court determined that the SEC had sustained its
burden of proof as to the Fischbach Claims against Victor Posner and Steven
Posner but had failed to prove the Burnup & Sims Claims against Victor Posner
and Steven Posner. The District Court dismissed the Burnup & Sims Claims. In
its Opinion And Findings and Supplemental Findings And Conclusions Of Law, the
District Court concluded that Victor Posner violated Sections 10(b) and 13(d) of
the Exchange Act by failing to amend their Schedule 13D with respect to their
beneficial ownership of Fischbach securities owned by Ivan Boesky and concluded
that Steven Posner aided and abetted these violations. The District Court
determined that Ivan Boesky had violated the record-keeping requirements of
Section 17(a)(1) of the Exchange Act and Rules 17a-3 and 17a-4 thereunder
<PAGE>
with respect to Boesky's purchases of Fischbach stock by failing to reflect that
the Posners had a beneficial interest in such securities and the Court concluded
that Victor Posner and Steven Posner directly violated Regulation X and aided
and abetted Boesky's violations of Regulation T. In addition, the District
Court concluded that Ivan Boesky violated the margin and credit requirements of
Section 7 of the Exchange Act and Regulations T and X in connection with
Boesky's purchases of Fischbach stock and the Court concluded that Victor Posner
and Steven Posner aided and abetted Boesky's violations. The foregoing
description of the District Court's Findings Of Fact And Conclusions of Law are
qualified in their entirety by reference to the terms and provisions of the
District Court's Opinion And Findings (in part) and Supplemental Findings Of
Fact And Conclusions Of Law attached as Exhibit 2 to Amendment No. 22 to this
Schedule 13D.
The Final Judgment (a) permanently enjoined Victor Posner and Steven Posner
and their respective agents, servants, employees, and attorneys, and those
persons in active concert or participation with them from directly or indirectly
violating or aiding and abetting a violation of Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act"); (b) permanently enjoined Victor
Posner and Steven Posner and their respective agents, servants, employees, and
attorneys, and those persons in active concert or participation with them from
directly or indirectly violating or aiding and abetting a violation of Section
13(d) of the Exchange Act; (c) permanently enjoined Victor Posner and Steven
Posner and their respective agents, servants, employees, and attorneys, and
those persons in active concert or participation with them from directly or
indirectly violating or aiding and abetting a violation of Section 7(c) of the
Exchange Act; (d) permanently enjoined Victor Posner and Steven Posner and their
respective agents,
<PAGE>
servants, employees, and attorneys, and those persons in active concert or
participation with them from directly or indirectly violating or aiding and
abetting a violation of Section 17 (a)(1) of the Exchange Act; (e) permanently
enjoined Victor Posner and Steven Posner and their respective agents, servants,
employees, and attorneys, and those persons in active concert or participation
with them from directly or indirectly violating or aiding and abetting a
violation of Section 7 (f) of the Exchange Act; (f) permanently prohibited
Victor Posner and Steven Posner from acting as officers or directors of any
issuer that has a class of securities registered pursuant to Section 12 of the
Exchange Act or that is required to file reports pursuant to Section 15(d) of
the Exchange Act; (g) ordered that Victor Posner and Steven Posner, upon further
order of the District Court, place all voting securities they owned, directly or
indirectly, in any company that they controlled (as that term is defined in
Exchange Act Rule 12b-2) in a voting trust; (h) appointed George H. Heyman, Jr.
as the trustee of the voting trust (the "Trustee"); (i) ordered that,
immediately upon acquiring control (as that term is defined in Exchange Act Rule
12b-2), either individually or jointly with others, of any company that has a
class of securities registered pursuant to Section 12 of the Exchange Act or
that is required to file reports pursuant to Section 15(d) of the Exchange Act,
Victor Posner and Steven Posner endorse over and deliver to the Trustee all of
such voting securities in such companies that they controlled; (j) ordered that
until such time as they endorse over and deliver to the trustee any securities
subject to the order, Victor Posner and Steven Posner be prohibited from
selling, pledging, transferring, or voting any such securities without the
court's prior approval; (k) ordered that Victor Posner disgorge the sum
$3,601,761.00, plus a per diem fee for every day between December 13, 1993 and
the date of entry of the
<PAGE>
judgment and a per diem fee for every day between the date of entry of the
judgment and the date that the full amount of disgorgement is paid; (l) ordered
that Steven Posner disgorge the sum $385,353.00, plus a per diem fee for every
day between December 13, 1993 and the date of entry of the judgment and a per
diem fee for every day between the date of entry of the judgment and the date
that the full amount of disgorgement is paid; (m) specified the manner in which
the disgorgements would be paid; (n) ordered that the disgorgements comprise a
"qualified settlement fund"; and (o) ordered that all creditors of or persons
asserting claims against Victor Posner or Steven Posner be restrained and
enjoined from pursuing such claims in any way against the qualified settlement
fund or in any way interfering with the administration of the fund. A copy of
the Final Judgment was filed as Exhibit 3 to Amendment No. 22 to this Schedule
13D.
On December 30, 1993, Victor Posner and Steven Posner filed a notice of
appeal from the Final Judgment. The appeal was heard by the United States Court
of Appeals for the Second Circuit (the "Court of Appeals") in February 1994. On
February 24, 1994, the Court of Appeals affirmed the Final Judgment.
On March 2, 1994, the District Court (hereinafter the "Court") issued a
trust order (the "Trust Order"), which incorporated by reference a declaration
of trust (the "Declaration of Trust" or the "Declaration") for the voting trust.
A copy of the Declaration of Trust is filed as Exhibit 1 to this Amendment. The
Trustee has filed a Schedule 13D amendment with regard to his rights under the
Declaration of Trust.
On March 28, 1994, pursuant to the Trust Order, stock certificates for
690,462 shares of Salem Common Shares were delivered
<PAGE>
to the custodian for the Trustee (the "Custodian") on behalf of Victor Posner.
Subsequently, (i) an additional 224,266 shares of Salem Common Shares were
delivered to the Custodian on behalf of Victor Posner and (ii) replacements for
lost certificates for 2,900 additional shares were delivered to the Custodian on
behalf of Victor Posner. Pursuant to the Declaration of Trust, all securities
at any time deposited in Trust under the Declaration are called "Trust
Securities" and, upon deposit of Trust Securities, a certificate evidencing such
deposit of Trust Securities (a "Voting Trust Certificate") is provided to the
person depositing the Trust Securities or on whose behalf the Trust Securities
were deposited.
Paragraph 5 of the Declaration provides, among other things, that, except
as otherwise provided therein, in respect of any proposal other than the
election of directors submitted to the shareholders of a company whose
securities are subject to the Trust or submitted by a third party for
shareholder vote, written consent in lieu of a meeting of shareholders
("Consent"), or authorization, the Trustee shall instruct the Custodian to vote
Trust Securities, or give or withhold Consents or authorizations, in proportion
to the votes, Consents or authorizations of the other shareholders voting on the
proposal or giving or withholding Consents or authorizations for such proposal.
For example, if 51% of the votes cast by the other shareholders are for a
proposal and 49% against, the Custodian shall be instructed to vote 51% of the
Trust Securities for the proposal and 49% against. However, the Trustee, in his
sole discretion, may, upon consideration of the purposes of the Final Judgment
and the Trust Order (together, the "Orders"), depart from the proportionate
voting provisions in any manner he deems necessary to act in accordance with
those purposes, unless otherwise ordered by the Court. Before doing so, the
Trustee must give ten days' advance written notice to the Court, the Securities
and Exchange Commission and the holders of Voting Trust Certificates.
<PAGE>
Paragraph 5 of the Declaration also provides that, subject to the
foregoing, in the election of directors where cumulative voting is not provided
for, the Trustee shall instruct the Custodian to vote or furnish Consents with
respect to the Trust Securities in the same proportion for each nominee as the
other holders of the securities present in person or by proxy at the meeting and
entitled to vote on the election of directors vote or give Consents for the
election of directors.
Paragraph 5 of the Declaration further provides that where cumulative
voting is permitted in the election of the directors, the Trustee, subject to
the foregoing, shall instruct the Custodian, to the greatest extent possible, to
vote the Trust Securities or provide Consents in proportion to the votes cast or
Consents provided for those nominees equal in number to the number of vacancies
on the board of directors to be filled by the election who would have been
elected had the Custodian not voted the Trust Securities. In the election of
directors, holders of Common Stock have cumulative voting rights.
The provisions of paragraph 5 of the Declaration apply regardless of
whether any matter submitted to holders of Trust Securities is contested and,
subject to further order of the Court, regardless of whether persons other than
holders of Voting Trust Certificates are identified to the Trustee as
purportedly sharing beneficial ownership or having an economic interest in any
Trust Securities. Trust Securities shall be voted by the Custodian in a manner
that assures Trust Securities are present at the meeting for quorum purposes and
that proportionate voting of Trust Securities is effective and the Custodian
shall provide any Consents or authorizations with respect to Trust Securities in
a manner and form that assures the proportionality of such Consent or
authorization in accordance with these provisions.
<PAGE>
Subject to the foregoing, the Trustee or the Custodian, as the case may be,
may vote Trust Securities or execute written Consents or authorizations with
respect to such Trust Securities by any means authorized by applicable law or
the governing instruments of the issuer of the Trust Securities, including
voting in person by its designated agent or by proxy to any other person or
persons or to his or their substitute or substitutes, provided that no such
person or substitute may be an Affiliate or Associate (as those terms are
defined in 17 C.F.R. Sec. 240.12b-2) of a holder of Voting Trust Certificates,
the issuer of the Trust Securities or any person submitting a proposal for the
vote, Consent or authorization of the holders of such securities, and provided
further that any such person may only vote or provide a Consent or authorization
in accordance with specific instructions given by Trustee.
Under paragraph 6 of the Declaration, holders of Voting Trust Certificates,
including Victor Posner, remain entitled to dividends and distributions on the
Trust Securities, provided that any dividends or distributions in the form of
voting securities of the Company would be subject to the Trust and would be
voted by the Trustee in accordance with the provisions of paragraph 5 of the
Declaration.
Subject to the provisions of paragraph 7 of the Declaration, Victor Posner
may transfer the Voting Trust Certificates for any purpose. Subject to the
provisions of paragraphs 6 and 8 of the Declaration, Victor Posner may dispose
of, pledge or transfer securities subject to the Trust. The terms of paragraph
8 prohibit sales, transfers or pledges of Trust Securities by Victor Posner to
his Affiliates or Associates or to any person that has an agreement,
arrangement, or understanding with Victor Posner with respect to acquiring,
holding, voting or disposing of such Trust Securities. Paragraph 8 further
provides that, upon notice from the SEC to the Trustee that
<PAGE>
an issuer of Trust Securities has ceased to be a Reporting Company (a company
subject to 15 U.S.C. Sec. 781 or 15 U.S.C. Sec. 780(d)), the Trustee shall so
notify the holder of Voting Trust Certificates in respect of such Trust
Securities and, upon surrender of the Voting Trust Certificates, the Custodian
shall deliver the Trust Securities to the holder of the Voting Trust
Certificates. Upon delivery, the Securities shall no longer be subject to the
Trust.
Paragraph 9 of the Declaration pertains to legends on Trust Securities and
Voting Trust Certificates, and paragraph 10 provides for the appointment of a
Custodian that is a Manhattan-based bank. Paragraph 11 of the Declaration
governs termination of the Trust. Unless sooner terminated by agreement of
Victor Posner, Steven Posner and the SEC and an order of the Court, the Trust
will terminate as to the Trust Securities of Victor Posner upon the death of
Victor Posner.
Paragraph 12 of the Declaration orders that the Trustee maintain
independence by not exercising control over the voting securities of any
Reporting Company whose securities are subject to the Trust, by not having any
representative on the board of directors of any such company, by not having any
business dealings with any such company or any Certificateholder or Affiliate or
Associate of a Certificateholder of such a company other than dealings
pertaining to the establishment of the Trust and carrying out the Declaration,
the Trust Order or the Final Judgment, and by having no participation in the
administration of the Disgorgement Fund.
In a letter dated June 26, 1995, the Trustee advised the Court, counsel to
the Securities and Exchange Commission, and counsel to Victor Posner that,
should an agreement and plan of merger be submitted to the shareholders of Salem
for their approval, the Trustee would probably give notice of his intention to
depart from the proportionate voting provisions of the Declaration,
<PAGE>
based upon his interpretation of the Orders and their intended purpose. He
indicated that, pursuant to his reading of the Orders, he would probably
ascertain Mr. Posner's position on any such merger and vote his shares in
accordance with that position, unless otherwise instructed by the Court. It was
his position that so doing would protect the economic value of Mr. Posner's
shares, in compliance with the letter and spirit of the Orders. The Trustee
further stated that a meeting to discuss this matter among him and his counsel,
the parties and their counsel, and the Court might be appropriate, since the SEC
apparently had a different view than he of the relevant provisions of the Trust
Order.
The Court called a meeting in New York for noon the following day, June 27,
1995. Mr. Posner's counsel did not attend, as he was in Washington, D.C., and
was unable to come to New York on such short notice. Several informal telephone
conversations among the court, counsel for the SEC, and counsel for Mr. Posner
followed, but no resolution was reached.
On June 30, 1995, the Court entered an order (the "Supplemental Order")
stating that as to Salem, (a) the Trustee has, "in all cases, the right and the
duty to vote Victor Posner's shares proportionately, which Victor Posner may not
question," (b) Mr. Posner "is under a duty not to instruct, question, or
otherwise interfere with the Trustee's proportionate voting of his shares," and
(c) "Victor Posner continues to retain the right to bid for himself or to make
his own offer with respect to any such transaction." A copy of the Supplemental
Order is filed as Exhibit 2 to this Amendment.
On August 28, 1995, Victor Posner filed a notice of appeal from the
Supplemental Order to the United States Court of Appeals for the Second Circuit.
The Second Circuit affirmed the Supplemental Order on March 8, 1996.
<PAGE>
Item 3. Sources and Amount of Funds or Other Consideration
- -----------------------------------------------------------
All shares of Salem Common Shares beneficially owned by Mr. Posner (other
than those acquired in the stock split referred to in Item 5) were acquired in a
variety of transactions in 1986 and prior years. As discussed in Items 4 and 6
below, Victor Posner has proposed a transaction in which he would become the
sole shareholder of Salem and each shareholder of Salem other than Mr. Posner
would receive $20.00 per share in cash. The transaction as proposed would be
structured as a merger between Salem and a new corporation to be formed by Mr.
Posner and is described in the letter dated April 3, 1996, from Mr. Posner to
Marco Loffredo (the "Proposal Letter") filed as Exhibit 3 to this Amendment.
The total amount of funds necessary to pay the merger consideration to the Salem
shareholders would be approximately $18,950,000. These funds would be provided
by Mr. Posner from his personal funds, including proceeds from the possible sale
of marketable securities or other assets owned by Mr. Posner. Although Mr.
Posner currently has available to him adequate cash and marketable securities or
other assets to provide all funds required for the transaction, Mr. Posner may
provide some or all of the funds from borrowings by him under existing or new
credit facilities.
Whether to borrow any required funds (and the extent of such borrowings, if
any) will depend on his analysis, prior to the time the proposed merger becomes
effective, of the financing alternatives available to him.
Item 4. Purpose of Transaction
- -------------------------------
Victor Posner has proposed to become the sole shareholder of Salem in a
transaction structured as a merger between Salem and a corporation to be formed
by Mr. Posner. In the
<PAGE>
transaction, each holder of Salem Common Shares other than Mr. Posner would
receive $20.00 per share in cash. The proposal is set forth in the Proposal
Letter.
The purpose of the proposed transaction is to enable Mr. Posner to become
the sole shareholder of Salem and thereby to cause the Salem Common Shares to
cease to be listed for trading on the American Stock Exchange or any other stock
exchange and to cease to be registered under Section 12 of the Securities
Exchange Act of 1934. Under the Final Judgment, Mr. Posner's rights as
beneficial owner of the Salem Common Shares are limited in various respects and
the right to vote such Common Shares has been transferred to the Trustee. See
Item 2 above. If the Common Shares cease to be registered under Section 12 of
the Securities Exchange Act of 1934, they will no longer be subject to the Final
Judgment or Trust Declaration and Mr. Posner will be able to exercise all rights
as a shareholder.
If Mr. Posner acquires the entire equity interest of Salem and is thereby
able to control such corporation, he will consider causing changes to be made in
the present board of directors and management of Salem and may also consider
proposing other transactions including a sale of assets and changes in Salem's
business, corporate structure and dividend policy. However, Mr. Posner
currently does not have any present plans or proposals with respect to any such
changes.
Item 5. Interest in Securities of the Issuer
- ---------------------------------------------
(a) In January, 1994, Salem effected a 3 for 2 stock split and Victor
Posner received, together with other Salem shareholders, additional Salem
Common Shares in proportion to his relative ownership of Salem's outstanding
Salem Common Shares. At March 31, 1996, Mr. Posner beneficially owned 917,633
Salem Common Shares constituting approximately 49.18% of the Salem Common
<PAGE>
Shares outstanding (based on 1,864,882 Salem Common Shares outstanding). All
Salem Common Shares beneficially owned by Mr. Posner (other than those acquired
in such stock split) have been beneficially owned by him in 1986 and prior
years.
(b) Victor Posner's right to vote or to direct the vote of the Salem
Common Shares beneficially owned by him has been transferred to the Trustee
pursuant to the terms of the Final Judgment and Trust Declaration referred to in
Item 2 above. Mr. Posner has the sole power to dispose or to direct the
disposition of the Salem Common Shares beneficially owned by him subject to the
provisions of the Final Judgment and the Trust Declaration described in Item 2
above.
(c) During the 60-day period ending on the date of this amendment, Victor
Posner did not effect any transactions in any Salem Common Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
- ------------------------------------------------------------------------------
to Securities of the Issuer
- ---------------------------
The voting rights and certain other rights of Victor Posner with respect to
the Salem Common Shares beneficially owned by him are subject to the terms of
the Final Judgment, the Trust Declaration and the Supplemental Order referred to
in Item 2 above.
Item 7. Material To Be Filed as Exhibits
- -----------------------------------------
1. Declaration of Voting Trust (the "Trust Declaration") Pursuant to
Trust Order dated March 2, 1994 with George H. Heyman, Jr., as Trustee (the
"Trustee");
2. Supplemental Order of the Southern District of New York dated June 30,
1995; and
3. Letter dated April 3, 1996 ("Proposal Letter") from Victor Posner to
Marco B. Loffredo, Jr., Chairman of the Board of Salem Corporation.
<PAGE>
SIGNATURE
---------
After reasonable inquiry to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
/s/ Victor Posner
-----------------
VICTOR POSNER
Dated: April 3, 1996
Exhibit 1
to Amendment 23
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Plaintiff, 88 Civ. 6209 (MP)
-against-
DREXEL BURNHAM LAMBERT, INC. TRUST ORDER
-----------
et al.,
Defendants.
- -----------------------------------------------
In accordance with paragraph VIII of the Final Judgment as to
Defendants Victor Posner and Steven Posner entered in this action on
December 29, 1993, defendants Victor Posner and Steven Posner shall endorse
over and deliver to George H. Heyman, Jr., Trustee, all voting securities
they own, directly or indirectly, in any company they control (as that term
is defined in Exchange Act Rule 12b-2 [17 C.F.R. Sec. 240.12b-2]) that has a
class of securities registered pursuant to section 12 of the Exchange Act
[15 U.S.C. Sec. 781] or that is required to file reports pursuant to section
15(d) of the Exchange Act [15 U.S.C. Sec. 780(d)]. The Trustee's duties, the
rights retained by the defendants in the securities held in trust for them,
and the mechanics by which the trust shall operate are set forth in the
attached Declaration of Trust which is incorporated herein by reference and
the terms of which are made a part of this Order.
IT IS SO ORDERED. /s/ Milton Pollack
--------------------------------------
SENIOR UNITED STATES DISTRICT JUDGE
Dated: February 15, 1994
New York, New York
<PAGE>
Declaration of Voting Trust
pursuant
to Trust Order
dated February _, 1994
entered by the
United States District Court
Southern District of New York in
Securities and Exchange Commission
----------------------------------
v.
Drexel Burnham Lambert Inc., et al.
-----------------------------------
88 Civ. 6209 (MP)
WHEREAS, George H. Heyman, Jr. has been appointed trustee of the trust
created by this Declaration of Trust pursuant to the Final Judgment as to
Defendants Victor Posner and Steven Posner entered December 29, 1993 by the
United States District Court for the Southern District of New York, The
Honorable Milton Pollack, Senior United States District Judge ("Final
Judgment");
WHEREAS, under the Final Judgment, Victor Posner and Steven Posner were
ordered to endorse over to and deliver to the Trustee all voting securities
they Beneficially Own, either individually or jointly with others, in any
company they Control that has a class of securities registered under
Section 12 of the Exchange Act [15 U.S.C. Sec. 781] or that is required to
file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. Sec.
780(d)];
WHEREAS the Final Judgment vested in the Trustee the authority to hold and
vote all Trust Securities so delivered to the Trustee pursuant to the Trust
Order in accordance with the terms of the Trust;
Now, Therefore, it is declared pursuant to the Trust order as follows:
-2-
<PAGE>
1. Definitions. The following capitalized terms have
-----------
the following respective meanings for purposes of this Declaration:
"Affiliate": as defined in Exchange Act Rule 12b-2
(17 C.F.R. Sec. 240.12b-2].
"Associate": as defined in Exchange Act Rule 12b-2
[17 C.F.R. Sec. 240.12b-2].
"Bank": as defined in Exchange Act Section 3(a)(6)
[15 U.S.C. Sec. 78a(6)].
"Beneficial Owner": as that term and its
derivatives are defined in Exchange Act Rule 13d-3
[17 C.F.R. Sec. 240.13d-3].
"Certificateholder": a holder of Voting Trust
Certificates.
"Compliance Hearing": as defined in paragraph 8
hereof.
"Consent": as defined in paragraph 5 hereof.
"Control": as defined in Exchange Act Rule 12b-2
[17 C.F.R. Sec. 240.12b-2].
"Court": the United States District Court for the
Southern District of New York.
"Custodian": the custodian for the Trust
Securities designated by the Trustee.
"Custody Agreement": as defined in paragraph 11
hereof.
"Declaration": the declaration of voting trust
order by the Trust Order.
"Default Notice": as defined in paragraph 8(b)
hereof.
"Disgorgement Fund": as defined in paragraph 10
hereof.
"Economic Interest": any interest in Trust
Securities other than the right to vote Trust
Securities and the shared power to dispose of
Trust Securities granted to the Trustee hereunder.
-3-
<PAGE>
"Exchange Act": The Securities Exchange Act of
1934, as amended.
"Final Judgment": The final judgment as to
defendants Victor Posner and Steven Posner entered
by the Court on December 29, 1993 in Securities
----------
Exchange Commission v. Drexel Burnham Lambert
--------------------------------------------------
Inc., et al., 88 Civ. 6209 (MP).
------------
"Fund Administrator": as defined in paragraph
XIII(F) of the Final Judgment.
"Notice Period": as defined in paragraph 8 hereof.
"Reporting Company": a company with a class of
securities registered pursuant to Section 12(g) of
the Exchange Act [15 U.S.C. Sec. 781] or that is
required to file reports pursuant to Section 15(d)
of the Exchange Act [15 U.S.C. Sec. 780(d)].
"Securities": voting securities of a Reporting
Company to be deposited in the Trust pursuant to
the Trust Order.
"Securities Act": The Securities Act of 1933, as
amended.
"SEC": The Securities and Exchange Commission.
"Trust": the trust created by this Declaration.
"Trustee": the trustee under this Declaration.
"Trust Order": The order of the Court ordering
this Declaration.
"Trust Securities": as defined in paragraph 3
hereof.
"Voting Trust Certificate": as defined in
paragraph 4 hereof.
2. Designation of Trustee. George H. Heyman, Jr.,
-----------------------
has been appointed Trustee under the Final Judgment and has accepted the
appointment and agreed to act as the Trustee under this Declaration as
provided herein.
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<PAGE>
3. Commencement of Trust. This Declaration of Trust and the
----------------------
Trust shall become effective immediately upon the entry of the Trust Order.
At such time, Victor Posner and Steven Posner shall deliver to the
Custodian designated by the Trustee pursuant to paragraph 7 hereof the
certificates representing any of the Securities, duly endorsed or
accompanied by proper instruments duly executed for transfer thereof to the
nominee of the Custodian. All such Securities when so delivered and
received shall become subject to and be deemed deposited in the Trust. All
Securities at any time deposited in Trust hereunder shall hereafter be
called "Trust Securities". Upon a class of voting securities becoming
subject to the Trust, the Trustee shall give notice to the issuer of such
Trust Securities that such Trust Securities are subject to the Trust and
provide such issuer with a copy of the Final Judgment, the Trust Order and
this Declaration.
4. Voting Trust Certificates. Upon deposit of Securities with
--------------------------
the Custodian pursuant to paragraph 3 hereof, or the deposit of Securities
issued as dividends on Trust Securities pursuant to paragraph 6 hereof, the
Custodian shall issue to each person depositing securities or on whose
behalf securities are deposited a certificate (a "Voting Trust
Certificate") to evidence the deposit of Securities hereunder by such
Certificateholder. Each Voting Trust Certificate shall be registered on
the books of the Custodian or such other person as the Trustee shall
designate, which may be the Trustee, to be kept by it or its agent, in the
-5-
<PAGE>
name of the Certificateholder to whom it is issued, and shall be in
substantially the form attached hereto as Exhibit A. Upon presentation by
a Certificateholder of evidence satisfactory to the Trustee that a Voting
Trust Certificate to held by such Certificateholder has been lost, stolen
or mutilated, including the mutilated Voting Trust Certificate, the
Custodian shall issue replacement Voting Trust Certificates to such
Certificateholder and reflect or cause to be reflected cancellation of such
lost, stolen or mutilated Voting Trust Certificates on the books of the
Custodian or other person designated by the Trustee to maintain
such records.
5. Trustee's Exercise of Voting Rights. Except as hereinafter
------------------------------------
provided, in respect of any proposal other than the election of directors
submitted by a Reporting Company whose Securities are subject to the Trust
to the holders of such Securities or submitted by a third party for their
vote, written consent in lieu of a meeting of shareholders ("Consent") or
authorization, the Trustee shall instruct the Custodian to vote the Trust
Securities or give or withhold Consents or authorization in proportion to
the votes, Consents or authorizations of the other holders of such
Securities who cast votes for or against the proposal or give or withhold
Consents or authorizations for such proposal. For example, if 51% of the
votes cast by the other holders of the Securities are for the proposal and
49% are against, the Custodian shall be instructed to vote 51% of the Trust
-6-
<PAGE>
Securities for the proposal and 49% of the Trust Securities against the
proposal. Provided that, the Trustee, in his sole discretion, upon
--------
consideration of the purposes for the Final Judgment, as reflected in the
Opinion and Findings (in part) in 88 Civ. 6209 (MP) , dated December 1,
1993, and the Supplemental Findings of Fact and Conclusions of Law in that
case, of the same date, and the Trust Order, on 10 days advance written
notice to the Court, the Securities Exchange Commission and the
Certificateholders, and unless otherwise ordered by the Court, may, but is
in no manner obligated to, depart from the proportionate voting provisions
of this paragraph 5 in any manner he deems necessary to act in accordance
with those purposes.
Election of directors. Subject to the foregoing Proviso, in the election
- --------------------- -------
of directors where cumulative voting is not provided for, the Trustee shall
instruct the Custodian to vote or furnish Consents with respect to, the
Trust Securities in the same proportion for each nominee as the other
holders of the Securities present in person or by proxy at the meeting and
entitled to vote on the election of directors vote or give Consents for the
election of directors. Cumulative voting. Where cumulative voting is
------------------
permitted in the election of the directors, the Trustee, subject to the
foregoing Proviso, shall instruct the Custodian, to the greatest extent
-------
possible, to vote the Trust Securities or provide Consents in proportion to
the votes cast or Consents provided for those nominees equal in number to
the number of vacancies on the
-7-
<PAGE>
board of directors to be filled by the election who would have been elected
had the Custodian not voted the Trust Securities. The provisions of this
paragraph 5 shall apply regardless of whether any matter submitted to
holders of Trust Securities is contested and, subject to further order of
the Court, regardless of whether persons other than Certificateholders are
identified to the Trustee as purportedly sharing Beneficial ownership or
having an Economic Interest in any Trust Securities. Trust Securities
shall be voted by the Custodian in a manner that assures Trust Securities
are present at the meeting for quorum purposes and that proportionate
voting of such Trust Securities is effective and the Custodian shall
provide any Consents or authorizations with respect to such Trust
securities in a manner and form that assures the proportionality of such
Consent or authorization in accordance with the provision of this paragraph
5.
Subject to the foregoing, the Trustee or the Custodian, as the case
may be, may vote Trust Securities or execute written Consents or
authorizations with respect to such Trust Securities by any means
authorized by applicable law or the governing instruments of the issuer of
the Trust Securities, including voting in person by its designated agent or
by proxy to any other person or persons or to his or their substitute or
substitutes, provided that no such person or substitute may be an Affiliate
--------
or Associate of a Certificateholder, the issuer of the Trust Securities or
any person submitting a proposal for the vote, consent or authorization of
the
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<PAGE>
holders of such Securities, and provided further that any such person may
----------------
only vote or provide a Consent or authorization in accordance with specific
instructions given by Trustee.
6. Treatment of Dividends and Stock Splits. Prior to the
------------------------------------------
termination of the Trust as hereinafter provided, the Custodian shall, as
soon as practicable following the receipt of each cash dividend, other
monetary distribution or distribution in kind (other than voting securities
of a Reporting Company controlled by a Certificateholder), as may be
declared and paid on the Trust Securities, pay the same over to or as
directed by the person holding Voting Trust Certificates in respect of such
Trust Securities as then shown on the books of the Custodian or other
person designated by the Trustee to maintain such records. It shall be the
responsibility of the Certificateholder to provide such direction to the
Custodian. The Custodian may rely absolutely on any such direction and
shall not be liable in any manner in so doing. Absent such direction, the
Custodian shall distribute any money or property so received by the Trust
to the Certificateholder at the address of the Certificateholder shown on
the books of the Custodian or other person designated by the Trustee to
maintain such books. Any such money or property returned to the Custodian
as undeliverable shall be held by the Custodian, subject to instruction
from the Certificateholder or, in the absence thereof, further order of the
Court, without investing the same and no interest shall accrue or be
payable thereon. The Custodian shall
-9-
<PAGE>
receive and hold dividends in the form of voting securities of a Reporting
Company controlled by a Certificateholder, as identified to it by the
Trustee, or voting securities issued as the result of a stock split
affected by such a Company with respect to Trust Securities, and issue
Voting Trust Certificates in respect thereof, upon the same terms and
conditions as with respect to other Trust Securities. Certificates for
Trust Securities affected by a reverse stock split may be surrendered by
the Custodian to the issuer or its transfer agent for cancellation, if such
surrender is a condition imposed by the issuer to the delivery of a
certificate representing a lesser number of Securities as the result of the
reverse stock split.
7. Transfer of Voting Trust Certificates. Voting Trust
-------------------------------------------
certificates shall bear the legends required by paragraph 10 hereof and
shall not be transferred without compliance with the registration or
qualifications provisions of any applicable state securities laws and
registration under the Securities Act or pursuant to an available exemption
from such registrations. A person requesting transfer of a Voting Trust
Certificate shall present the Voting Trust Certificate to the Trustee
endorsed for transfer and provide the Trustee with evidence satisfactory to
the Trustee with respect to such compliance or registration or the
availability of an exemption from such registration, which shall include an
opinion of counsel satisfactory to the Trustee as to the availability of
any such exemption so claimed and an original
-10-
<PAGE>
executed copy of the transferee's agreement to be bound by the terms of
this Declaration in the form of Exhibit B hereto. As soon as practicable
after receipt of such evidence, the Trustee shall direct the Custodian to
transfer the Voting Trust Certificate and issue any replacement Voting
Trust Certificate bearing the legends required by paragraph 9 hereof in
accordance with the instruction of the Certificateholder. The Trust and
the Custodian shall be entitled to rely absolutely on the instruction of
the Certificateholder in transferring Voting Trust Certificates subject to
such instructions and shall incur no liability in doing so. Subject to the
foregoing, Voting Trust Certificates may be transferred for any purpose.
Transfer of Trust Securities shall be governed by paragraph 8 hereof.
8. Disposition of Trust Securities. Subject to the provisions
--------------------------------
of paragraph 6 hereof and this paragraph 8, neither the Trustee nor the
Custodian shall dispose of or in any manner encumber the Trust Securities.
Trust Securities may be sold, transferred or pledged only in accordance
with the Final Judgment, this paragraph 8, and paragraph 6 hereof, as it
applies to certificates for Trust Securities affected by a reverse stock
split.
(a) Sales. Upon receipt of a written request from a Certificateholder
-----
with respect to Trust Securities represented by Voting Trust
Certificates held by the Certificateholder, accompanied by such Voting
Trust Certificates endorsed in
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<PAGE>
blank and a copy of any agreement of sale, and evidence of delivery of
a written notice to the SEC in the form of a copy of such request, the
Trustee shall, upon confirmation of receipt of such notice by the SEC
and the expiration of 10 calendar days from the receipt by it of such
request (the "Notice Period"), direct the Custodian to submit
certificates) representing Trust Securities in the amount designated
by or on behalf of the Certificateholder for transfer into the name(s)
of the person(s) designated by the Certificateholder in the written
request for purpose of the sale of such amount of Trust Securities to
such person(s) and requesting the transfer agent for such Trust
Securities to notify the Custodian of the transfer of such Trust
Securities to such person(s) and shall cancel such Voting Trust
Certificates and reflect or cause to. be reflected such cancellation
on the records maintained by the Custodian or other person designated
by the Trustee, provided that: The SEC has not, prior to the
--------
expiration of the Notice Period, notified the Trustee in writing that
it intends to request a Court hearing to determine whether such sale
would be in compliance with the Final Judgment, the Trust Order or any
other applicable order of the Court (a "Compliance Hearing"); (ii) the
Certificateholder represents in the request that the Certificateholder
has the sole Economic Interest in the Trust Securities to be sold or
that Economic Interest in Trust
-12-
<PAGE>
securities is shared with other persons and, if so, evidence
satisfactory to the Trustee of the consent to, approval or
authorization of the proposed sale by such person(s), that the
person(s) to whom the Trust Securities are to be sold is not an
"Associate" or "Affiliate" of such Certificateholder and that, other
than the agreement for sale and purchase of the shares, if any, there
is no agreement, arrangement or understanding among the
Certificateholder or any Affiliates or Associates of the
Certificateholder and such person or any of such person's Affiliates
or Associates with respect to acquiring, holding, voting or disposing
of the Trust Securities to be sold to such person; (iii) the
Certificateholder submits with the request evidence satisfactory to
the Trustee that the Trust Securities are being sold in compliance
with the registration or qualification provisions of any applicable
state securities laws and have been registered under the Securities
Act of 1933 for purposes of such sale, or an opinion of counsel to the
effect that an exemption from such registration is available for such
sale and whether the certificate(s) representing the Trust Securities
to be sold to such person(s) are required to bear the legend required
by paragraph 9(b) hereof, which opinion shall be satisfactory to
counsel to the Trustee; (iv) the Certificateholder agrees in the
request to pay or arrange for payment by the purchasers of any
transfer or other
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<PAGE>
tax applicable to the requested transfer of the Trust Securities; and
(v) the Certificateholder represents that the sale will be in
compliance with the provisions of the Final Judgment, the Trust Order
and any other applicable order of the Court and this Declaration
Trust. The Trustee shall direct the Custodian to request the transfer
agent for the, Trust Securities to issue any certificates to the
purchasers with the legend required by paragraph 9(b) hereof, if the
Trustee's counsel so advises, and, if the Trustee's Counsel so
advises, to issue any replacement certificates for Trust Securities
that are not to be sold in the name of the Custodian's nominee, to
place the legends required by paragraph 9 hereof on such certificates
and to deliver such replacement certificates to the Custodian. Upon
receipt of such replacement certificates, the Custodian shall issue
replacement Voting Trust Certificates in respect thereof in accordance
with paragraph 7 hereof. Should the SEC, as provided herein, notify
the Trustee that it intends to apply to the Court for a Compliance
Hearing, the Trustee thereafter shall act upon the request of the
Certificateholder only if so ordered by the Court or upon notice by
the SEC that it no longer objects to such action. If the Trustee
directs the Custodian to submit Trust Securities for transfer for
purposes of sale as provided herein, he will have satisfied his
obligations as to such Trust Securities under this Declaration of
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<PAGE>
Trust and he shall have no further responsibility to cause the issuer
of the Trust Securities or its transfer agent to transfer such Trust
Securities or determine the legality of such transfer or, except for
certificates for Trust Securities redeposited with the Custodian,
determining whether the certificates issued to the purchasers of the
Trust Securities bear appropriate legends.
(b) Pledges. Upon receipt of a written request from or on behalf of a
-------
Certificateholder, if accompanied by evidence of the authority of the
person acting on his behalf satisfactory to the Trustee, and the
Voting Trust Certificate representing the Trust Securities to be
pledged is endorsed in blank and a copy of the pledge agreement with
respect to Trust Securities represented by such Voting Trust
Certificates and evidencing delivery of a written notice to the
Securities and Exchange Commission in the form of a copy of such
request, the Trustee shall, upon confirmation of receipt of the notice
by the Securities and Exchange Commission and expiration of the Notice
Period, direct the Custodian to submit certificate(s) representing the
Trust Securities identified in the request for transfer into the name
of the pledgee or its nominee identified in such request with
directions that the certificates for Trust Securities to be subject to
the pledge bear the legends required by paragraph 9 hereof and a
legend stating that such securities are subject to the agreement
-15-
<PAGE>
between the pledgor and the pledgee and to notify the Custodian upon
the transfer of such Trust Securities and shall instruct the Custodian
to cause the Voting Trust Securities representing such pledged Trust
Securities to be cancelled and to reflect such cancellation on the
books of the Custodian or other person designated by the Trust to
maintain such records; provided that: (i) The SEC has not, prior to
--------
the expiration of the Notice Period, notified the Trustee that it
intends to request a Compliance Hearing; (ii) the Certificateholder
represents in the request that the Certificateholder has the sole
Economic Interest in the Trust Securities to be pledged or that the
Economic Interest in such Trust Securities is shared with other
person(s) and, if so, evidence satisfactory to the Trustee of the
consent to, approval or authorization of the proposed pledge by such
person(s), that the pledge is a bona fide pledge, that the pledgee is
not an Associate or Affiliate of the Certificateholder and that, other
than the pledge agreement, there is no agreement, arrangement or
understanding among the Certificateholder or any of the
Certificateholder's Associates or Affiliates and the pledgee or any of
its Affiliates or Associates with respect to acquiring, holding,
voting or disposing of the Trust Securities to be subject to the
pledge, and that the pledge is not in violation of the Final Judgment,
the Trust Order or any other applicable order of the Court and this
Declaration of
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<PAGE>
Trust.; (iii) the pledge agreement provides that for so long as this
Declaration is in effect: (A) the Trust Securities subject to the
pledge and registered in the name of the pledgee or its nominee remain
subject to this Declaration; (B) the certificates for such Trust
Securities registered in the name of the pledgee or its nominee will
bear the legends required by paragraph 9 hereof; (C) upon release from
the pledge of any Trust Securities in accordance with the provisions
of the pledge agreement upon satisfaction of the Certificateholder's
obligations under that agreement, the pledgee will cause the
certificates for such Trust Securities registered in the name of the
pledgee or its nominee to be submitted to the transfer agent for such
Trust Securities with instructions that they be transferred into the
name of the nominee for the Custodian, that the legends required by
paragraph 9 hereof be placed on the certificates issued in the name of
the nominee for the Custodian and that such certificates be delivered
to the Custodian and upon receipt of such certificates, the Custodian
shall issue Voting Trust Certificates representing such Trust
Securities to the Certificateholder on whose behalf the transfer to
the pledgee was requested; and (D) upon default by the
Certificateholder under the pledge agreement, the pledgee will give
written notice (a "Default Notice") to the Trustee and the SEC that it
is exercising its rights under the pledge agreement with
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<PAGE>
respect to the Trust Securities identified in the Default Notice. If,
upon the expiration of a period of 10 calendar days after the receipt
by the Trustee of a Default Notice, the SEC has not notified the
Trustee that it intends to request a Compliance Hearing, the Trust
Securities identified in the Default Notice will be released from the
Trust and such release shall be reflected on the books of the
Custodian or other person designated by the Trustee to maintain such
books and the Trustee will have no duties, obligations or rights with
respect to their further disposition. If the SEC notifies the Trustee
prior to the expiration of the foregoing 10 day period that it intends
to request a Compliance Hearing, the Trust Securities that are
identified in the Default Notice will remain subject to the Trust
until further order of the Court or notice by the SEC that it no
longer objects to such release. The Trustee shall have no obligation
to advise the pledgee of any action or inaction of the SEC.
(c) Other Transfers by Certificateholders. Upon the written request of a
-------------------------------------
Certificateholder, or a person acting on behalf of a
Certificateholder, if accompanied by evidence of such person's
authority satisfactory to the Trustee and evidencing written notice to
the Securities and Exchange Commission in the form of a copy of such
request, and the Voting Trust Certificate representing the Trust
Securities to be transferred, endorsed in blank, the Trustee shall,
upon
-18-
<PAGE>
confirmation of receipt of such notice by the SEC and expiration of
the Notice Period, instruct the Custodian to submit to the transfer
agent for such Trust Securities certificates representing the amount
of Trust Securities identified in the request for transfer into the
names of the person(s) identified in the request for purposes of a
donation to a charitable organization or other person and that the
certificates representing the Trust Securities to be transferred to
the transferee bear the legend required by paragraph 9(b) hereof but
not the legends required by paragraph 9(a) hereof and to notify the
Custodian upon the transfer of such Trust Securities; provided that:
-------------
(i) The SEC shall not have notified the Trustee, prior to the
expiration of the Notice Period, that it intends to request a
compliance Hearing; and (ii) the Certificateholder represents in the
request that the Certificateholder has the sole Economic Interest in
the Trust Securities to be transferred or that the Economic Interest
in such Trust Securities is shared with other person(s) and, if so,
evidence satisfactory to the Trustee of the consent to, approval or
authorization of the proposed transfer by such persons, that the
transferees is not an Affiliate or Associate of the Certificateholder,
that there is no agreement, arrangement or understanding among the
Certificateholder and any Affiliates or Associates of the
Certificateholder and the transferees and any of the
-19-
<PAGE>
transferee's Affiliates or Associates with respect to acquiring,
holding, voting or disposing of such Trust Securities, and that the
transfer otherwise is in compliance with the Final Judgment, the Trust
Order and any other applicable order of the Court and this
Declaration. Upon receipt by the Custodian of the notice from the
transfer agent that the Trust Securities to be transferred have been
transferred in accordance with the instructions of the Custodian, such
Trust Securities shall cease to be subject to the Trust and the
Trustee shall have no further duties, rights or obligations with
respect to such Trust Securities. The Trustee also shall direct the
Custodian to instruct the transfer agent that any replacement
certificates for Trust Securities not being transferred should bear
the legends required by paragraph 9, hereof and that replacement
Voting Trust Certificates in respect thereof shall be issued in
accordance with the provisions of paragraph 7 hereof. Should the SEC
prior to expiration of the Notice period notify the Trustee that it
intends to request a Compliance Hearing, the Trust Securities that are
subject to the request shall not be transferred except upon further
order of the Court or notice by the SEC that it no longer objects to
the transfer.
(d) Transfers for Administrative Purposes. The Trustee or any successor
--------------------------------------
trustee may cause Trust Securities to be transferred into the name of
the nominee of any successor Custodian or the
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<PAGE>
Trustee or successor trustee or any nominee of the Trustee or any
successor trustee for purposes of the administration of the Trust.
(e) Transfers upon Termination of an Issuer's Status as a Reporting
----------------------------------------------------------------------
Company. Upon the Trustee being notified in writing by the SEC that
-------
an issuer of Trust Securities has ceased to be a Reporting Company,
the Trustee shall so notify the holder of Voting Trust Certificates in
respect of such Trust Securities and, upon surrender of such Voting
Trust Certificates, shall cause the Custodian to cancel such Voting
Trust Certificate and deliver the Trust Securities in respect of which
such Voting Trust Certificates were issued to the transfer agent with
instruction for their transfer to the holder of the Trust Certificate
issued in respect of such Trust Securities as the holder's names shall
appear on the books of the Custodian or other person designated by the
Trustee to maintain such books. Upon such delivery, such Securities
shall no longer be subject to the Trust and neither the Trustee nor
the Custodian shall have any further responsibilities with respect to
such Securities, including the effecting of their transfer.
(f) Termination of Trust. Upon termination of the Trust in accordance
---------------------
with paragraph 11 hereof, the Trustee shall give notice of such
termination to each Certificateholder and instruct the Custodian upon
surrender of a Voting Trust Certificate to present the Trust
Securities represented by
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<PAGE>
such Certificate to the transfer agent for the issuer of such Trust
Securities in accordance with the instruction of the Certificateholder
and to cancel the Voting Trust Certificate so surrendered. Upon so
doing, neither the Trustee nor the Custodian shall have any further
responsibilities with respect to surrendered Securities.
The Trustee and the Custodian shall be entitled to rely in good
faith, without investigation, on the information in any request submitted
pursuant to this paragraph 8 and shall not be liable in any manner for so
relying or for any action taken by them or any failure to act, in
accordance with this Declaration, in response to such a request. It shall
be the responsibility of the Certificateholder submitting the request, and
not the Trustee, to identify to the Trustee any other persons who may have
an Economic Interest in the Trust Securities, to obtain any required
consents, authorization or approvals for any requested disposition of such
Trust securities in a form satisfactory to the Trustee. The Trustee shall
have no responsibility to determine how the interests of such persons are
to be recognized in connection with any such disposition.
9. Legends on Trust Securities and Voting Trust Certificates.
---------------------------------------------------------
(a) The certificates for Trust Securities and Voting Trust Certificates
shall bear the following legend: "The Securities represented by this
certificate are held in trust under and
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<PAGE>
subject to the provisions of, a Declaration of Trust pursuant to a
Trust Order entered by the United States District Court for the
Southern District of New York in Securities and Exchange Commission v.
-------------------------------------
Drexel Burnham Lambert Inc., et al., 88 Civil 6209 (MP) and may not be
-----------------------------------
transferred or otherwise disposed of except in compliance therewith.";
(b) Where applicable, the Trust certificates also shall bear the following
legend: "The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any applicable state
securities law and may not be transferred or otherwise disposed of
unless and until so registered or the transfer or disposition is
effected pursuant to an applicable exemption from such registration
and evidence may be required satisfactory to the person effecting any
such transfer, including an opinion of counsel, as to the availability
of any such exemption from registration."
x x x
The provisions of this paragraph 9 shall not preclude the issuer
of any Trust Securities or any third party from causing the transfer agent
for such Trust Securities to place additional appropriate legends on such
certificates.
10. The Custodian. The Trustee is authorized to appoint a
--------------
Custodian that is a Bank which has its principal office in the Borough of
Manhattan. The Custodian shall be engaged under an agreement between the
Trustee and the Custodian (the "Custody
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<PAGE>
Agreement") under which the Custodian will receive, hold, vote, present for
transfer, receive and disburse dividends upon and otherwise handle Trust
Securities in accordance with the instructions of the Trustee and the
provisions of this Declaration, which shall provide for reimbursement of
the fees and expenses of the Custodian and contain customary provisions for
exculpation and indemnification of the Custodian and other provisions
customary in such agreements. The fees, expenses of the custodian and any
indemnification payable to the Custodian under the Custody Agreement shall
be payable, subject to approval of the Court and in accordance with
procedures established by the Court, solely out of the fund created
pursuant to paragraph XI of the Final Judgment (the "Disgorgement Fund")
and shall not be the responsibility of the Trustee or the Trust. The
Custody Agreement, to the extent not inconsistent with any applicable order
of the Court, shall be governed by the law of the state of New York and the
Custody Agreement shall provide that any civil action or suits at law or in
equity arising under the Custody Agreement shall be submitted to the Court
for adjudication.
11. Termination of the Trust. Unless sooner. terminated by
--------------------------
agreement of Victor Posner, Steven Posner and the SEC and an order of the
Court, the Trust shall terminate upon the deaths of both Victor Posner and
Steven Posner. The termination of the Trust shall not affect the rights of
the Trustee for reimbursement of his fees and expenses, including fees and
expenses of his agents,
-24-
<PAGE>
attorneys and advisers, and indemnification payments (or payment of
premiums for appropriate insurance in lieu thereof) from the Disgorgement
Fund. Upon termination of the Trust, unless otherwise provided by order of
the Court, all Trust Securities and any dividends paid thereon and not then
distributed, upon instruction by the Trustee, shall be distributed by the
Custodian as directed by the Certificateholders as to Trust Securities
represented by Voting Trust Certificates held by such Certificateholders,
or their legal representatives, as the case may be. The Trustee shall give
notice of the termination of the Trust to each issuer of Trust Securities
that securities of such issuer are no longer subject to the Trust.
12. Trustee to Maintain Independence. Except as otherwise
----------------------------------
provided herein, in the Final Judgment or the Trust Order, neither the
Trustee nor any Affiliate or Associate of the Trustee shall exercise
control over the voting securities of any Reporting Company whose
securities are subject to the Trust, or have any representative on the
board of directors of any Reporting Company whose voting securities are
subject to the Trust or knowingly have any direct or indirect business
arrangements or dealings, financial or otherwise, with any such Public
Company or any Certificateholder or any Affiliate or Associate of a
Certificateholder known to the Trustee, other than dealings pertaining to
the establishment of the Trust and carrying out this Declaration, the Trust
Order or the Final Judgment. Neither the
-25-
<PAGE>
Trustee nor any Affiliate or Associate of the Trustee shall participate in
the administration of the Disgorgement Fund.
13. Compensation of Trustee. The Trustee shall be entitled to
------------------------
receive reasonable and customary compensation for all services rendered
hereunder as Trustee, including all reasonable fees and expenses of counsel
and the Custodian and any other agent or adviser to the Trustee, taxes (if
not payable out of any property of the Trust), filing fees or other
expenses reasonably incurred hereunder by the Trustee or the Trust, which
compensation and expenses shall be paid out of the Disgorgement Fund
pursuant to procedures established by the Court. "Reasonable and customary
compensation" shall mean, as to the Trustee, a fee at the rate of $350 per
hour; provided that, (i) as soon as practicable after the entry of the
--------
Trust Order, and upon application of the Trustee, the Trustee shall receive
from the Disgorgement Fund an advance payment in the amount of $50,000 on
account of such fees and any expenses for which the Trustee shall be
entitled to reimbursement, and (ii) so long as the Trust is in effect, the
Trustee shall be entitled to, upon quarterly application to the Court, his
reasonable and customary compensation for the time spent and expenses
incurred by him in performance of his duties hereunder. If circumstances
warrant, the Trustee may at any time apply to the Court for an additional
payment on account or an increase in the rate and/or manner of his
compensation. The fees and expenses of any agent of the Trustee, including
the Custodian, adviser or
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<PAGE>
counsel shall constitute permissible expenses of the Trustee payable out of
the Disgorgement Fund pursuant to procedures approved by the Court. Upon
his replacement as Trustee, or termination of the Trust, the Trustee, as
soon as practicable, shall return to the Disgorgement Fund any amount of
any payment on account not accounted for in accordance with procedures
established by the Court.
14. Delegation of Trustee's Duties; Engagement of Advisers. The
------------------------------------------------------
Trustee may at any time or from time to time appoint an agent or agents, in
addition to the Custodian, and may delegate to such agent or agents the
performance of any administrative duty of the Trustee hereunder. The
Trustee also may appoint such attorneys and other advisers as he deems
necessary to assist in carrying out his duties under this Declaration.
15. Standard of Care and Indemnification. The duties and
------------------------------------------
responsibilities of the Trustee shall be limited to those expressly set
forth in this Declaration. He shall have no duties or responsibilities to
the Certificateholders other than as set forth herein, and the Trustee
shall have no responsibilities or duties with respect to the Disgorgement
Fund. The Trustee shall incur no liability as a controlling shareholder of
any Reporting Company and shall not be deemed to be a controlling person of
any Reporting Company for purposes of Section 20(a) of the Exchange Act
[15 U.S.C. Sec. 78(t)(a)] or Section 15 of the Securities Act [15 U.S.C. Sec.
77(a)] or any similar provision of law. The Trustee
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<PAGE>
shall not be answerable for the default or misconduct of any agent,
attorney or other adviser appointed by him in the pursuance hereof if such
agent, attorney or other adviser shall have been selected with reasonable
care. The Trustee shall not be responsible for the sufficiency or accuracy
of the form, execution, validity or genuineness of the Voting Trust
Certificates or the Trust Securities, or of any documents, or of any
endorsements thereon, or for any lack of endorsement thereon, or for any
description therein, nor shall the Trustee be responsible or liable in any
respect on account of the identity, authority or rights of the persons
executing or delivering or purporting to execute or deliver, any such
Voting Trust Certificates, Trust Securities or documents submitted pursuant
to this Declaration. As to matters of law, the Trustee and his agents,
attorneys and advisers shall be fully protected from any personal liability
for acts or failure to act hereunder, to the extent that such act or
failure to act is in reliance, in good faith, upon an opinion of counsel
addressed to the Trustee or the agent, or adviser as the case may be. The
Trustee and his agents, attorneys and advisers shall at all times, to the
fullest extent permitted by law, be protected, indemnified and saved
harmless by the Disgorgement Fund f rom any loss, cost, or expense of any
kind or character whatsoever incurred by them in connection with this Trust
except those, if any, arising out of or resulting from their respective
gross negligence or willful misconduct, and the Disgorgement Fund will at
all times assume full
-28-
<PAGE>
responsibility for, and pay all costs and expenses of any suit or
litigation of any character with respect to Voting Trust Certificates,
Trust Securities or this Declaration and, if the Trustee or his agents,
attorneys or advisers shall be made a party thereto, the Disgorgement Fund
shall pay all costs and expenses, including reasonable counsel fees, to
which they may be subject by reason thereof. Upon receipt of notice by the
Trustee of any plan to terminate the Disgorgement Fund or to make any final
distribution of the property held by the Disgorgement Fund, the Trustee may
apply to the Court for an order directing the Fund Administrator to pay out
of the Disgorgement Fund the premium on a policy of insurance in favor of
the Trustee, his agents, attorneys and advisers in lieu of the foregoing
indemnification, the coverage of which policy of insurance shall, to the
fullest extent feasible, be equivalent to the coverage of the foregoing
indemnification provision.
16. Filing of Reports and Disclosure of Information. The
----------------------------------------------------
Trustee shall file or cause to be filed with the SEC, any Reporting Company
whose Securities are subject to the Trust and any national securities
exchange on which Securities subject to the Trust are registered and listed
for trading, within 10 calendar days of the commencement of the Trust in
accordance with paragraph 3 hereof, appropriate reports of beneficial
ownership on Exchange Act Schedule 13D [17 C.F.R. Sec. 240.13d-101) to report
his power to vote such Securities and his shared power to dispose of such
-29-
<PAGE>
Securities and reports on Exchange Act Form 3 (17 C.F.R. Sec. 249.103], on
which he shall report no pecuniary interest in such Securities, and shall
file or cause to be filed promptly appropriate amendments to such Schedules
13D, when and as required by Exchange Act Rule 13d-2 [17 C.F.R. Sec. 240.13d-
2], and reports on Form 4 [17 C.F.R. Sec. 249.104] and Form 5 [17 C.F.R. Sec.
249.105], when and as required by Exchange Act Rule 16a-3 [17 C.F.R. Sec.
240.16a-3]. The Trustee also shall provide or cause to be provided a copy
of this Declaration of Trust to each Reporting Company whose securities
become subject to the Trust within 10 calendar days of such securities
becoming so subject and shall provide or cause to be provided information
concerning Trust Securities to the Reporting Company issuers of such Trust
Securities as reasonably requested in connection with their preparation of
registration statements to be filed under the Securities Act and reports,
proxy statements and other filings to be filed under the Exchange Act.
To the extent requested to do so by the Court, the Securities and
Exchange Commission or a Certificateholder the Trustee shall promptly
furnish or cause to be furnished to the party making such request
information with respect to (a) all Trust Securities and related property
theretofore delivered to him as Trustee hereunder, (b) all Trust Securities
and related property then held by him as Trustee hereunder, and (c) all
actions theretofore taken by him as Trustee hereunder.
The Trustee shall maintain a copy of this Declaration of
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<PAGE>
Trust at the office of the Trustee or the Custodian at the address for
notices set forth in paragraph 20 hereof.
17. Resignation and Replacement of Trustee. The Trustee may
----------------------------------------
only be removed by Order of the Court. The Trustee, or any trustee
hereafter appointed, may at any time resign by giving thirty (30) calendar
days' written notice of resignation to the Court. Upon receiving such
notice of resignation or upon being notified of the death or incapacity of
the Trustee, the Court shall appoint a successor trustee. Upon written
assumption by the successor trustee of the Trustee's powers and duties
hereunder, a copy of the assumption shall be delivered by the Trustee to
the Court, the SEC and to all Certificateholders, whereupon the Trustee
shall be discharged of his powers vested herewith. In the event of any
material violation by the Trustee of the terms and conditions of this
Declaration of Trust, the Trustee shall become disqualified from acting as
trustee hereunder as soon as a successor trustee shall have been appointed
in the manner provided by this paragraph 17.
18. Amendments. This Declaration of Trust may from time to time
----------
be modified or amended by order of the Court.
19. Governing Law. To the extent not inconsistent with the
--------------
Trust Order or any other applicable order of the Court, the provisions of
this Declaration of Trust and of the rights and obligations of the Trustee
shall be governed by and construed in accordance with, the laws of the
State of New York. All civil
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<PAGE>
actions or suits at law or equity regarding action or inaction taken by the
Trustee, the Custodian or their attorneys, agents or advisers pursuant to
or under the provisions of this Declaration of Trust shall be commenced in
the United States District Court for the Southern District of New York or,
in the event that Court lacks subject matter jurisdiction over the cause of
action, in a New York State Court located in the City and County of New
York. To the extent any provision hereof may be found inconsistent with
the Trust Order or any other applicable order of the Court, as the case may
be, the Trust Order or such other order shall control, and such provision
hereof shall be given effect only to the extent permitted by the Trust
Order or such other order. In the event that the Court shall by order at
any time hereafter find that compliance with the law requires any other or
different action by the Trustee than is provided for herein, the Trustee
shall act in accordance with such order instead of the provisions of this
Declaration. To the extent that any provision of this Declaration is held
to be invalid or unenforceable in whole or in part, neither the validity
nor enforceability of the remainder of this Declaration shall be in any way
affected.
20. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, or sent by facsimile, confirmed
by first-class mail (postage prepaid), or by class mail (postage prepaid),
or by overnight courier, as follows:
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<PAGE>
If to the Court:
Honorable Milton Pollack
Senior United States District Judge
United States District Court for the
Southern District of New York
United States Court House
Foley Square
New York, New York 10007
If to the SEC:
Securities and Exchange Commission
450 Fifth Street, N.W.
Mail Stop 4-1
Washington, D.C. 20549
Attn: Barry R. Goldsmith
Chief Litigation Counsel
With copies to:
Leo F. Orenstein, Esq.
Assistant Chief
Litigation Counsel
Securities and Exchange Commission
450 Fifth Street, N.W.
Mail Stop 4-2
Washington, D.C. 20549
If to Victor Posner:
c/o Dennis J. Block, Esq.
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
With copies to:
Martin Rosen, Esq.
Rosen & Reade
757 Third Avenue
New York, New York 10017
-33-
<PAGE>
Stuart Gordon, Esq.
Metzger, Hollis, Gordon
& Mortimer
1275 K Street, N.W.
Washington, D.C. 20005
If to Steven Posner:
c/o Dennis J. Block, Esq.
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
With copies to:
Martin Rosen, Esq.
Rosen & Reade
757 Third Avenue
New York, New York 10017
Stuart Gordon, Esq.
Metzger, Hollis, Gordon
& Mortimer
1275 K Street, N.W.
Washington, D.C. 20005
If to the Trustee:
George H. Heyman, Jr.
625 Madison Avenue
New York, New York 10022
With copies to:
Richard H. Rowe, Esq.
Proskauer Rose Goetz & Mendelsohn
Suite 800
1233 Twentieth Street, N.W.
Washington, D.C. 20036
Jerold Zieselman, Esq.
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
-34-
<PAGE>
If to the Custodian:
With copies to:
If to the Issuer of Trust Securities:
The address set forth on the facing page of
the issuer's latest Annual Report on Form l0-
K filed with the Securities and Exchange
Commission
If to a Certificateholder:
To the address of such Certificateholder on
the records maintained by or for the Trustee.
21. Headings. Paragraph headings used herein are for
--------
convenience of reference only and form no part of this Declaration of
Trust.
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<PAGE>
Exhibit A
to Declaration of Trust
pursuant
to Trust Order
dated February _, 1994
entered by the
United States District Court
Southern District of New York
in
88 C.V. 6209 (MP)
Form of Voting Trust Certificate
[Name issuer and jurisdiction of organization)
(A) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD IN TRUST
UNDER AND SUBJECT TO THE PROVISIONS OF, A DECLARATION OF TRUST
PURSUANT TO A TRUST ORDER, DATED FEBRUARY _, 1994, ENTERED BY THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK IN SECURITIES AND EXCHANGE COMMISSION V. DREXEL BURNHAM
--------------------------------------------------------
LAMBERT INC., ET.AL., 88 CIVIL 6205 (MP) AND MAY NOT BE
----------------------
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
THEREWITH.
[(B) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS AND UNTIL SO REGISTERED OR THE TRANSFER OR
DISPOSITION IS EFFECTED PURSUANT TO AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION AND EVIDENCE MAY BE REQUIRED SATISFACTORY TO
THE PERSON EFFECTING ANY SUCH TRANSFER, INCLUDING AN OPINION OF
COUNSEL, AS TO THE AVAILABILITY OF ANY SUCH EXEMPTION FROM
REGISTRATION.]
No. VOTING TRUST CERTIFICATE (Common] [Other Voting Securities]
________ Shares
THIS IS TO CERTIFY THAT:
[Name of Certificateholder] has deposited or caused to be deposited
________ [Common] [Other Voting Securities] Shares [name of issuer and
state of incorporation] with the Custodian for the Voting Trustee
hereinafter referred to, pursuant to the orders of
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<PAGE>
the United States District Court for the Southern District of New York (the
"Court") in 88 Civ. 6209 (MP), dated December 29, 1993 and February __,
1994 respectively (the latter order together with any amendments thereto or
modifications thereof to date, the "Trust Order") appointing George H.
Heyman, Jr. as trustee (the "Trustee") under the voting trust (the "Trust")
established under the Declaration of Voting Trust (the "Declaration")
ordered by the Trust Order.
1. This Voting Trust Certificate has been issued pursuant to,
and the rights of the holder hereof are subject to the terms and conditions
of, the Declaration, a copy of which may be examined by the holder hereof
at the office of the Trustee, _________, New York, New York _____ or at
such other address as the Trustee shall have furnished in. writing to the
holder hereof. The Trustee may exercise rights and powers in respect of
shares from time to time deposited thereunder only in accordance with the
Declaration or further order of the Court.
2. As provided in the Declaration, this Voting Trust
Certificate is transferable only on the books of the Trustee to be kept by
him or his agent upon the surrender hereof by the registered holder in
person or by its attorney or duly authorized representative and upon
certain other conditions, all as provided in the Declaration. Unless and
until this Voting Trust Certificate has been surrendered for registration
of transfer in accordance with the Declaration, the Trustee may treat the
registered holder
-37-
<PAGE>
hereof as the absolute owner hereof for all purposes whatsoever and shall
not be affected by any notice to the contrary.
3. The holder of this Voting Trust Certificate, by the
acceptance hereof, agrees to be bound by the provisions of this Voting
Trust Certificate and the Declaration, the Trust Order and the Final
Judgment and, if such holder is not an original depositor under the
Declaration, agrees to execute a written instrument, in substantially the
form set forth as Exhibit B to the Declaration or in such other form as the
Trustee may request.
4. This Voting Trust Certificate is not valid unless signed by
the Trustee.
IN WITNESS WHEREOF, the undersigned Trustee has caused this
Certificate to be signed this ____ day of _________, 199_.
George H. Heyman, Jr.
as Trustee
* * *
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<PAGE>
[Form of Transfer]
FOR VALUE RECEIVED, [name of Certificateholder] hereby transfers
and assigns unto (name of transferee] the within Voting Trust Certificate
and all rights and interests represented thereby.
[Print Name]
[If executed by other than
a natural person] [Print Name and Title]
Dated:
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<PAGE>
EXHIBIT B
(Form of Transferee's Agreement]
[Name and Address of Transferee)
_____________, 19__
George H. Heyman, Jr.
c/o (Custodian)
____________________
Attention: (Title]
Declaration of Voting Trust, Pursuant to
Order of the United States District Court for
the Southern District of New York, dated
February __, 1994,
88 Civ. 6209(MP)
- ------------------------------------------------
Dear Sirs:
We refer to the above captioned Declaration of Voting Trust (as
amended to date, the "Declaration").
In connection with the proposed transfer to us by (name of
Certificateholder) of Voting Trust Certificates evidencing the deposit of
(number of shares) (Common] (other voting securities) Shares of [name of
issuer and state of incorporation], we hereby:
(a) acknowledge receipt of a conformed copy of the
Declaration,
(b) represent and warrant that we (i) understand that the
legends required by paragraph 10 of the Declaration are required
to be placed on the Voting Trust Certificates to be issued to us,
(ii) that we are
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<PAGE>
acquiring Voting Trust Certificates for investment and not with a
view to, or for resale in connection with, any distribution
thereof, nor with any present intention of distributing them and
(iii) that we have all necessary power and authority to agree to
be bound by the Declaration and to perform the obligations of a
Certificateholder thereunder, and
(c) upon such transfer of such Voting Trust Certificates to
us, expressly agree to be bound by the terms of the Declaration.
Notices to us under the Declaration should be sent to
[address].
Very truly yours,
[Print Name]
[If executed on behalf of a
transferee which is other
than a natural person] [Print Name and Title]
Dated:
-41-
Exhibit 2
to Amendment 23
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- -------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Plaintiff, 88 Civ. 6209 (MP)
-against-
DREXEL BURNHAM LAMBERT, INC. ORDER
-----
et al.,
Defendants.
- -------------------------------------
George Heyman, Jr., the court appointed Trustee in the Final Judgment
entered herein on December 29, 1993, has asked for guidance on the construction
of the Court's March 2, 1994 Trust Order. The question arises in connection
with the potential sale of Salem Corporation ("Salem"), a public company that
was controlled by defendant Victor Posner at the time judgment was entered. It
is hereby
ORDERED, that as to Salem, and with respect to all proposed transactions
that require shareholder approval, including but not limited to mergers, sales
of substantially all of the company's assets and all other extraordinary
transactions:
a. The Trustee has, in all cases, the right and the duty to vote Victor
Posner's shares proportionately, which Victor Posner may not question;
b. Victor Posner is under a duty not to instruct, question, or otherwise
interfere with the Trustee's proportionate voting of his shares; and
<PAGE>
c. Victor Posner continues to retain the right to bid for himself or to
make his own offer with respect to any such transaction.
Dated: Houston, TX
June 30, 1995
SO ORDERED
/s/ Milton Pollack
------------------
Milton Pollack
Senior U.S. District Judge
Exhibit 3
to Amendment 23
<PAGE>
Victor Posner
6917 Collins Avenue
Miami Beach, Florida 33141
April 3,1996
Marco B. Loffredo, Jr.
Chairman of the Board
Salem Corporation
Box 2222
Pittsburgh, PA 15230
Dear Mr. Loffredo:
Based upon recent developments affecting Salem and in view of the existing
order of the federal court in New York regarding the 917,634 common shares of
Salem which I own, I believe it is in the best interests of Salem and its other
common shareholders that I acquire complete equity ownership of Salem.
Consequently I hereby propose a negotiated merger transaction whereby Salem
would merge with a now corporation that I would cause to be formed. In such
merger each shareholder of Salem other than myself would receive $20,00 in cash
for each Salem common share.
I believe that the Salem shareholders will be enthusiastic about the
opportunity to realize immediately upon their investment in Salem. For more
than twelve months Salem's board actively sought a purchaser for Salem without
any apparent success.
With respect to the terms of the transaction that I propose, I am prepared
to agree generally to all terms of the draft of merger agreement which was
forwarded to me last July as the form of agreement being offered to other
potential buyers. However, I believe that many of the representations and other
protections that a third party would require are not necessary and, therefore, I
am willing to accept an agreement which is far less burdensome on Salem and more
certain of completion than would likely be acceptable to a third party. While I
do need the opportunity to conduct some due diligence, I will agree to be
obligated to proceed unless I discover a materially adverse condition or
development not fully disclosed in Salem's public filings or there is any
material change in Salem's business, assets or liabilities or Salem otherwise
breaches its covenants. In that regard, I will expect that during the due
diligence period and the time prior to the completion of this transaction, Salem
will continue to conduct its business in the ordinary course and that neither
the Board of Directors nor the management
<PAGE>
of Salem will cause Salem to sell, pledge or otherwise dispose of any of its
assets or increase its liabilities.
To expedite the Board's consideration of my proposal and our negotiations,
I have taken the liberty of sending a draft of agreement to you and Salem's
counsel and would be pleased to provide copies to other directors. You will
note that I do not propose a first step tender offer because it would be
unnecessary given an executed merger agreement binding upon me and approved by
the Salem board.
I am sure the Board will agree that my proposal is fair to and in the best
interests of Salem and the other Salem shareholders. My proposal is not subject
to any financing contingency. Moreover, I am prepared to have the proposal
subject to the approval by the holders of a majority of the common shares which
I do not beneficially own. Thus, if the shareholders believe that the proposed
transaction is not in their best interests, they will be able to veto the
transaction through their voting power. If the transaction is approved and
completed, statutory appraisal rights will be available for any shareholder who
properly dissents.
I wish to point out that my proposal has not been solicited by any agent,
broker or investment banker and that I am under no obligation to pay any
finder's, broker's or similar fee with respect to the transaction contemplated
by my proposal. In view of its recent announcement regarding Donaldson, Lufkin
and Jenrette, I expect that Salem will have no obligation to pay such a fee.
I believe it is important that the entire Salem board promptly consider my
proposal. My representatives are in a position to discuss and finalize the
proposal as soon as possible. Consequently I look forward to a favorable
response to this proposal no later than April 12, 1996. You may contact either
me or Donald Glazer. If we are not moving toward finalization of my proposal by
such date or have not reached a mutually accepted agreement within an acceptable
time frame thereafter, I am prepared to move forward with other alternatives, I
look forward to hearing from you,
Yours truly,
Victor Posner
cc: Directors of Salem
Paul Titus
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<PAGE>
PRESS RELEASE
April 3, 1996
Miami Beach, Florida
Victor Posner today announced that he has sent a letter to the Board of
Directors of Salem Corporation (ASE; SBS) proposing that he acquire the entire
equity interest in Salem in a transaction in which each Salem shareholder (other
than Mr. Posner) would receive $20.00 per share in cash. Salem currently has
1,864,882 outstanding common shares which are listed for trading on the American
Stock Exchange. Mr. Posner beneficially owns 917,633 of Salem's common shares
(approximately 49%) which are held in a voting trust and over which Mr. Posner
does not exercise voting control. Mr. Posner indicated that in view of the
existing voting trust arrangement (which would terminate if Salem is no longer a
public company), he believes it is desirable that he acquire complete equity
ownership of Salem. In the letter to the Salem Board, Mr. Posner wrote:
I believe that the Salem shareholders will be enthusiastic about
the opportunity to realize immediately upon their investment in Salem.
For more than twelve months Salem's board actively sought a purchaser
for Salem without any apparent success.
Mr. Posner stated that his proposal is not subject to any financing contingency
and would be subject to approval by the holders of the majority of the common
shares which he does not beneficially own. In making the proposal to the Salem
Board, Mr. Posner provided a draft agreement for merger which was based on the
form of agreement previously provided by Salem to other prospective purchasers
but which, in Mr. Posner's opinion, "is far less burdensome on Salem and more
certain of completion than would likely be acceptable to a third party."
Mr. Posner stated that he was looking forward to a favorable response to his
proposal no later than April 12 and would expect to negotiate a final agreement
shortly thereafter,
Contact Donald Glazer
(305) 866-7272
-3-
