<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 1-2493
NEW VALLEY CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-5482050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
(305) 579-8000
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
----- ----
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES X NO
----- ----
AS OF NOVEMBER 10, 1995, THERE WERE OUTSTANDING 191,601,437 OF THE
REGISTRANT'S COMMON SHARES, $.01 PAR VALUE.
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<PAGE> 2
NEW VALLEY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three months
and nine months ended September 30, 1995 and 1994 . . . . 4
Consolidated Statement of Changes in Non-Redeemable
Preferred Shares, Common Shares and Other Capital
(Deficit) for the nine months ended September 30, 1995 . 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 . . . . . . . . . . . . 6
Notes to the Quarterly Consolidated Financial Statements . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 17
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 17
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<PAGE> 3
NEW VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- -------------
(Thousands, except par value)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,731 $ 376,170
Investment securities 241,758 ---
Contract receivable --- 300,000
Restricted assets 23,325 354,639
Receivable from clearing brokers 22,850 ---
Other current assets 4,144 8,400
------------ -----------
Total current assets 296,808 1,039,209
------------ -----------
Investment securities 517 ---
Assets of discontinued operations held for sale 4,172 5,400
Restricted assets 30,596 25,000
Long-term loans and investments 65,550 ---
Other assets 5,961 282
------------ -----------
Total assets $ 403,604 $ 1,069,891
============ ===========
LIABILITIES AND CAPITAL (DEFICIT)
Current liabilities:
Current portion of long-term obligations $ 10,167 $ 16,619
Accounts payable and accrued liabilities 23,614 10,931
Short-term loan 54,945 ---
Prepetition claims and restructuring accruals 47,992 619,833
Dividend payable --- 75,070
Income taxes 20,461 31,907
Securities sold not yet purchased 24,056 ---
------------ -----------
Total current liabilities 181,235 754,360
------------ -----------
Deferred income taxes payable --- 19,572
------------ -----------
Long-term obligations 15,496 16,605
------------ -----------
Redeemable preferred shares 215,599 317,798
------------ -----------
Non-redeemable preferred shares, Common Shares and
capital (deficit):
Cumulative preferred shares 279 279
Common Shares, $.01 par value; 850,000,000 shares
authorized; 191,601,437 and 188,725,550 shares
outstanding 1,916 1,887
Additional paid-in capital 689,855 692,001
Accumulated deficit (716,597) (732,611)
Unrealized appreciation on investment securities, net of
taxes of $1,758 15,821 ---
------------ -----------
Total non-redeemable preferred shares, Common
Shares and other capital (deficit) (8,726) (38,444)
------------ -----------
Total liabilities and capital (deficit) $ 403,604 $ 1,069,891
============ ===========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 4
NEW VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------
1995 1994 1995 1994
---- ---- ---- ----
(Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Brokerage services $ 17,292 $ -- $ 22,689 $ --
Interest income 3,947 662 14,516 1,411
Other income 275 256 2,010 319
-------- --------- -------- ----------
Total revenues 21,514 918 39,215 1,730
-------- --------- -------- ----------
Cost and expenses:
Cost of brokerage services 15,633 -- 20,430 --
General and administrative expenses 2,803 432 7,803 1,034
-------- --------- -------- ----------
18,436 432 28,233 1,034
-------- --------- -------- ----------
Income from continuing operations before income taxes
and reorganization 3,078 486 10,982 696
Reversal of restructuring accruals -- -- 2,044 --
Financial restructuring costs -- (7,065) -- (25,411)
Income tax expense (294) -- (1,327) --
-------- --------- -------- ----------
Income (loss) from continuing operations 2,784 (6,579) 11,699 (24,715)
Discontinued operations:
Income from discontinued operations,
net of income taxes 235 26,071 4,315 72,884
-------- --------- -------- ----------
Net income 3,019 19,492 16,014 48,169
Dividends on preferred shares - undeclared (17,597) (20,475) (56,656) (58,813)
Excess of carrying value of redeemable preferred
shares over cost of shares purchased 6,718 --- 40,342 ---
-------- --------- -------- ----------
Net loss applicable to Common Shares $ (7,860) $ (983) $ (300) $ (10,644)
======== ========= ======== ==========
Income (loss) per common and equivalent share:
From continuing operations $ (.04) $ (.15) $ (.02) $ (.45)
Discontinued operations --- .14 .02 .39
-------- --------- -------- ----------
Net income (loss) per Common Share (.04) $ (.01) $ --- $ (.06)
======== ========= ======== ==========
Number of shares used in computation 191,563 188,231 190,865 188,153
======== ========= ======== ==========
Supplemental information:
Additional interest absent Chapter 11 filing $ 11,732 $ 35,195
========= ==========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 5
NEW VALLEY CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NON-REDEEMABLE PREFERRED
SHARES, COMMON SHARES AND OTHER CAPITAL (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
$3.00 Class B
Preferred Shares Common Shares Additional Retained
---------------- ------------- Paid In Earnings Unrealized
Shares Amount Shares Amount Capital (Deficit) Appreciation
------ ------ ------ ------ ------- ------- ------------
(Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 2,791 $ 279 188,726 $ 1,887 $692,001 $(732,611) --
Net income -- -- -- -- -- 16,014 --
Undeclared dividends on redeemable
preferred shares -- -- -- -- (43,024) -- --
Purchase of redeemable preferred
shares -- -- -- -- 40,342 -- --
Exercise of stock options -- -- 2,875 29 536 -- --
Unrealized appreciation in marketable
securities, net of taxes -- -- -- -- -- -- $15,821
----- ----- ------- ------- -------- --------- -------
Balance, September 30, 1995 2,791 $ 279 191,601 $ 1,916 $689,855 $(716,597) $15,821
===== ===== ======= ======= ======== ========= =======
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 6
NEW VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1995 1994
---- ----
(Thousands)
<S> <C> <C>
Cash provided from (used for) operating activities:
Net income $ 16,014 $ 48,169
Adjustments to reconcile net income to net
cash provided from (used for) operating activities:
Income from discontinued operations (4,315) (72,884)
Reversal of restructuring accruals (2,044) --
Financial restructuring costs -- 25,411
Decrease in receivable and other assets 1,925 822
Decrease in income taxes payable and deferred taxes (30,996) --
Increase (decrease) in accounts payable and accrued
liabilities 8,197 (9,987)
-------- --------
Net cash used for operating activities (11,219) (8,469)
-------- --------
Cash used for investing activities:
Payment of prepetition claims (571,841) --
Collection of contract receivable 300,000 --
Decrease in restricted assets 325,718 --
Sale or maturity of investment securities 95,796
Purchase of investment securities (293,518) --
Purchase of long-term investments (65,550) --
Payment for purchase of Ladenburg, net of cash acquired (25,853) --
-------- --------
Net cash used for investing activities (235,248) --
-------- --------
Cash used for financing activities:
Payment of preferred dividends (132,162) --
Purchase of Class A preferred stock (47,761) --
Increase in short-term borrowings 54,945 --
Repayment of other obligations (7,561) (643)
Exercise of stock options 565 --
-------- --------
Net cash used for financing activities (131,974) (643)
-------- --------
Expenses of financial restructuring -- (25,411)
-------- --------
Net cash provided from discontinued operations 7,002 126,207
-------- --------
Net (decrease) increase in cash and cash equivalents (371,439) 91,684
Cash and cash equivalents, beginning of period 376,170 176,366
-------- --------
Cash and cash equivalents, end of period $ 4,731 $268,050
======== ========
Supplemental Cash Flow Information:
Cash payments for income taxes $ 33,025 $ 2,653
======== ========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 7
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consolidated financial statements include the accounts of New Valley
Corporation (the "Company") and its subsidiaries. The consolidated
financial statements as of September 30, 1995 presented herein have been
prepared by the Company without an audit. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position as of September 30,
1995 and the results of operations and cash flows for all periods
presented have been made. Results for the interim periods are not
necessarily indicative of the results for an entire year. Certain amounts
in the 1994 financial statements have been reclassified to conform to the
1995 presentation.
These financial statements should be read in conjunction with the
Consolidated Financial Statements in the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
1. REORGANIZATION
On November 15, 1991, an involuntary petition under Chapter 11 of Title 11
of the United States Code (the "Bankruptcy Code") was commenced against
the Company in the United States Bankruptcy Court for the District of New
Jersey (the "Bankruptcy Court"). On March 31, 1993, the Company consented
to the entry of an order for relief placing it under the protection of
Chapter 11 of the Bankruptcy Code.
On November 1, 1994, the Bankruptcy Court entered an order confirming the
First Amended Joint Chapter 11 Plan of Reorganization, as amended (the
"Joint Plan"). The terms of the Joint Plan provided for, among other
things, the sale of Western Union Financial Services Company, Inc.
("FSI"), a wholly-owned subsidiary of the Company, and certain other
Company assets related to FSI's money transfer business, payment in cash
of all allowed claims, payment of postpetition interest in the amount of
$178 million to certain creditors, a $50 per share cash dividend to the
holders of the Company's $15.00 Class A Increasing Rate Cumulative Senior
Preferred Shares ($100 Liquidation Value), $.01 par value per share (the
"Class A Senior Preferred Shares"), a tender offer by the Company for up
to 150,000 shares of the Class A Senior Preferred Shares, at a price of
$80 per share, and the reinstatement of all of the Company's equity
interests.
On November 15, 1994, pursuant to the Asset Purchase Agreement, dated as
of October 20, 1994, as amended (the "Purchase Agreement"), by and between
the Company and First Financial Management Corporation ("FFMC"), FFMC
purchased all of the common stock of FSI and other assets relating to
FSI's money transfer business for $1,193 million (the "Purchase Price").
The Purchase Price consisted of $593 million in cash, $300 million
representing the assumption of the Western Union Pension Plan obligation,
and $300 million paid on January 13, 1995 for certain intangible assets of
FSI. Pursuant to the Purchase Agreement, the Purchase Price is subject to
adjustment based on the resolution of certain disputed items contained in
the Pro Forma Balance Sheet prepared as of June 30, 1994. As discussed in
Note 9, the parties have reached agreement on the adjustment to the
Purchase Price. The Purchase Agreement contained various terms and
conditions, including the escrow of $45 million of the Purchase Price, a
put option by the Company to sell to FFMC, and a call option by FFMC to
purchase, Western Union Data Services Company, Inc., a wholly-owned
subsidiary of the Company engaged in the messaging service business (the
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<PAGE> 8
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
"Messaging Services Business"), for $20 million, exercisable during the
first quarter of 1996, and various services agreements between the Company
and FFMC.
On January 18, 1995, the effective date of the Joint Plan, the Company
paid approximately $550 million on account of allowed prepetition claims
and emerged from bankruptcy. At September 30, 1995, the Company had
accrued approximately $48.0 million for unsettled prepetition claims and
restructuring accruals (see Note 8).
As a result of recent asset dispositions pursuant to the Joint Plan, the
Company has accumulated a significant amount of cash and cash
equivalents, and investment securities, which it may be required to
reinvest in operating companies in the near future in order to avoid
potentially burdensome regulation under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Investment Company
Act and the rules and regulations thereunder require the registration of,
and impose various substantive restrictions on, companies that engage
primarily in the business of investing, reinvesting or trading in
securities or engage in the business of investing, reinvesting, owning,
holding or trading in securities and own or propose to acquire "investment
securities" having a value in excess of 40% of a company's "total assets".
The Company, which is now above this threshold as a result of the
dispositions of its operating businesses pursuant to the Joint Plan, is
relying on the temporary exemption from registration under the Investment
Company Act provided by Rule 3a-2 thereunder. The Company will attempt to
be engaged, within the one-year period prescribed by Rule 3a-2, primarily
in a business or businesses other than that of investing, reinvesting,
owning, holding or trading securities, or in the alternative, if the
Company is unable to accomplish this, it will seek to obtain an extension
of such date or an exemption from the Securities and Exchange Commission
("SEC") or no-action position from the SEC staff with respect to
registration under the Investment Company Act. However, no assurance can
be given that the Company will be successful in becoming engaged in such
business or in obtaining an extension of such one-year period, and
accordingly, there may be risk that the Company will become subject to the
Investment Company Act. If the Company were required to register under
the Investment Company Act, it would be subject to a number of severe
substantive restrictions on its operations, capital structure and
management, including without limitation entering into transactions with
affiliates.
2. ACQUISITION
On May 31, 1995, the Company consummated its acquisition of Ladenburg,
Thalmann & Co. Inc. ("Ladenburg"), a registered broker-dealer and
investment bank, for $25.8 million, net of cash acquired, subject to
post-closing adjustments. The acquisition was treated as a purchase
for financial reporting purposes and, accordingly, these consolidated
financial statements include the operations of Ladenburg from the date of
acquisition.
Unaudited pro-forma data giving effect to the acquisition of Ladenburg
as if it had been consummated as of January 1, 1994 is shown below. The
unaudited pro-forma data does not purport to be indicative of what would
have occurred had the acquisition been consummated as of such date. The
unaudited pro-forma data for the nine months ended September 30, 1995 and
1994 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1995 1994
---- ----
<S> <C> <C>
Revenues $ 64,557 $52,425
Net income $ 16,170 $51,800
Net loss applicable to common shares $ (144) $(7,013)
Net income per common share $ --- $ (.04)
</TABLE>
3. DISCONTINUED OPERATIONS
As noted above, the Company sold FSI during the fourth quarter of 1994 and
sold the Messaging Services Business effective October 1, 1995 (see Note
9). Accordingly, the financial statements reflect the financial position
and the results of operations of the discontinued operations of FSI and
the Messaging Services Business separately from the continuing operations
which currently principally consist of the brokerage and investment
banking services of Ladenburg.
Operating results of the discontinued operations, as shown below, include
the operations of the Messaging Services Business for the three months
and nine months ended September 30, 1995 and the operations of FSI and
Messaging Services Business for the three months and nine months ended
September 30, 1994.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------
1995 1994 1995 1994
---- ---- ---- ----
(Thousands)
<S> <C> <C> <C> <C>
Revenues $11,109 $155,217 $37,771 $276,650
======= ======== ======= ========
Operating Income $ 260 $ 26,709 $ 4,795 $ 74,197
======= ======== ======= ========
Income before income taxes $ 260 $ 26,709 $ 4,795 $ 74,197
Provision for income taxes 25 638 480 1,313
------- -------- ------- --------
Net income $ 235 $ 26,071 $ 4,315 $ 72,884
======= ======== ======= ========
</TABLE>
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<PAGE> 9
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Net assets of the discontinued business held for sale at September 30,
1995 consisted of current assets of $8.0 million, noncurrent assets of
$1.2 million, and total liabilities of $5.0 million. These net assets
held for sale represent the carrying value of the Messaging Services
Business.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows. The Company considers as cash equivalents all
highly liquid investments with an original maturity of three months or
less.
Investment Securities. The Company follows the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" which requires certain
investments in debt and marketable equity securities be classified as
either trading, available for sale, or held to maturity. Trading
securities are carried at fair value, with unrealized gains and losses
included in income. Investments classified as available for sale are
carried at fair value, with net unrealized gains and losses included as a
separate component of stockholders' equity (deficit). Debt securities
classified as held to maturity are carried at amortized cost. Realized
gains and losses are included in other income, except for those relating
to the Company's brokerage subsidiary which are included in brokerage
services revenues. The cost of securities sold is determined based on
average cost.
Restricted Assets. At September 30, 1995, the current and noncurrent
portions of restricted assets consist primarily of the $45 million
(reduced by $20 million on October 31, 1995 as described in Note 9) held
in escrow pursuant to the sale of FSI to FFMC, which have been classified
based on the terms of the Purchase Agreement and the anticipated release
of the escrow. At December 31, 1994, restricted assets consisted of
$334.6 million held in escrow for certain debenture holders, which monies
were released on January 18, 1995, in addition to the $45 million held in
escrow pursuant to the Purchase Agreement. In addition, pursuant to
certain provisions contained in the Joint Plan, the Company's cash and
cash equivalents held at December 31, 1994 were restricted to short-term
high grade marketable securities until January 18, 1995.
Long-Term Loans and Investments. At September 30, 1995, long-term loans
and investments included investments in limited partnerships of $34.2
million, corporate loans of $17.7 million, equity investments in a foreign
corporation for $12.7 million and a software company for $1.0 million.
These investments are carried at cost. The principle business of the
limited partnerships is investing in marketable securities. The Company's
investments in these limited partnerships had an estimated fair value of
$38.8 million at September 30, 1995. The estimate of fair value was
provided by the partnerships based on the indicated market values of the
underlying investment portfolio. The Company invested $18.3 million in
corporate loans which were sold on October 4, 1995 for $17.7 million. The
carrying value of these loans was written down to the $17.7 million
selling price as of September 30, 1995. It was not practicable to estimate
the fair value of the investment in the foreign corporation without
incurring excessive cost. The Company's estimate of the fair value of its
long-term loans and investments are subject to judgment and are not
necessarily indicative of the amounts that could be realized in a current
market exchange.
-9-
<PAGE> 10
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Income Taxes. At December 31, 1994, the Company had $45.8 million of
unrecognized net deferred tax assets, comprised primarily of net
operating loss carryforwards, available to offset future taxable income
for federal tax purposes. A valuation allowance has been provided against
this amount as a result of uncertainty as to the realization of this
deferred tax asset at this time. The Company continues to evaluate the
realizability of its deferred tax assets. The provision for income taxes,
which represented the effect of the Alternative Minimum Tax and state
income taxes, for the three and nine months ended September 30, 1995 and
1994, does not bear a customary relationship with pre-tax accounting
income principally as a consequence of the reduction in the valuation
allowance relating to deferred tax assets.
5. INVESTMENT SECURITIES
Investment securities classified as available for sale are carried at fair
value, with net unrealized gains of $17.6 million ($17.7 million of
unrealized gains and $.1 million of unrealized losses) included as a
separate component of stockholders' equity (deficit). Net unrealized
gains on investment securities classified as available for sale increased
$11.3 million during the three months ended September 30, 1995. The
Company had net realized gains on sales of investment securities available
for sale of $1.0 million for the nine months ended September 30, 1995.
In August 1995, the Company received approval from the Federal Trade
Commission to purchase up to 15% of the voting securities of RJR Nabisco
Holdings Corp. ("RJR Nabisco"). As of September 30, 1995, the Company,
through a wholly-owned subsidiary, held approximately 3.3 million shares
of RJR Nabisco common stock, par value $.01 per share (the "RJR Nabisco
Common Stock"), with a market value of $106.0 million (cost of $97.0
million). The Company's investment in RJR Nabisco collateralizes margin
loan financing of $54.9 million at September 30, 1995. This margin loan
bears interest at .25% below the broker's call rate (6.5% at September
30, 1995).
At September 30, 1995, investment securities consisted of the following:
<TABLE>
<S> <C>
Securities available for sale $202,589
Securities held to maturity 6,888
Trading securities 32,798
--------
Total $242,275
========
</TABLE>
The details of the investment categories by type of security at September
30, 1995 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
------------------------------
(Thousands)
<S> <C> <C>
Available for Sale:
Marketable equity securities $136,002 $153,477
U.S. government securities 48,490 48,595
Marketable debt securities (long-term) 517 517
-------- --------
Total securities available for sale 185,009 202,589
-------- --------
Held to Maturity:
Foreign government debt 6,888 6,888
-------- --------
Trading Securities:
Marketable equity securities 29,642 32,798
-------- --------
Total Investment securities 221,539 242,275
Less long-term portion of investment securities 517 517
-------- --------
Investment securities - current portion $221,022 $241,758
======== ========
</TABLE>
-10-
<PAGE> 11
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The $.5 million long-term portion of investment securities at cost
consists of marketable debt securities which mature in three years.
6. REDEEMABLE PREFERRED SHARES
At September 30, 1995, the Company had authorized and outstanding
2,000,000 and 1,107,566, respectively, of its Class A Senior Preferred
Shares. At December 31, 1994, there were 1,501,411 Class A Senior
Preferred Shares outstanding. At September 30, 1995 and December 31,
1994, respectively, the carrying value of such shares amounted to
$215,599,000 and $317,798,000, including undeclared dividends of
$111,221,000 and $176,701,000, or $100.42 and $117.69 per share.
Pursuant to the Joint Plan, the Company made an $80 per share cash tender
offer for a maximum of 150,000 Class A Senior Preferred Shares. This
tender offer expired February 17, 1995 and resulted in a payment of
$4,355,600 for 54,445 shares tendered.
On April 6, 1995, the Company's Board of Directors (the "Board")
authorized the Company to repurchase as many as 200,000 shares of its
Class A Senior Preferred Shares. The Company completed the repurchase for
an aggregate consideration of $18.7 million and thereafter, on June 21,
1995, the Board authorized the Company to repurchase as many as 300,000
additional shares. The Company repurchased in the open market 33,000 of
such shares in July 1995 and 106,400 of such shares in September 1995.
The repurchase of the Class A Senior Preferred Shares increased the
Company's additional paid-in capital by $26.3 million for the 200,000
shares acquired and $6.7 million for the 139,400 shares acquired.
The holders of Class A Senior Preferred Shares are currently entitled to
receive a quarterly dividend, as declared by the Board, payable at the
rate of $19.00 per annum. The Class A Senior Preferred Shares are
mandatorily redeemable on January 1, 2003 at $100 per share plus accrued
dividends. The Class A Senior Preferred Shares were recorded at their
market value ($80 per share) at December 30, 1987, the date of issuance.
The discount from the liquidation value is accreted, utilizing the
interest method, as a charge to additional paid-in capital and an increase
to the recorded value of the Class A Senior Preferred Shares, through the
redemption date. As of September 30, 1995, the unamortized discount on
the Class A Senior Preferred Shares was $6.4 million.
Pursuant to the Joint Plan, the Company declared a cash dividend in
December 1994 on the Class A Senior Preferred Shares of $50 per share
which was paid in January 1995. The Company declared and paid cash
dividends on the Class A Senior Preferred Shares of $12.50 per share in
July 1995 and $37.50 per share in September 1995. Undeclared dividends
are accrued quarterly and such accrued and unpaid dividends shall accrue
additional dividends in respect thereof compounded monthly at the rate of
$19% per annum, both of which accruals are included in the carrying
amount of redeemable preferred shares, offset by a charge to additional
paid-in capital.
-11-
<PAGE> 12
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
7. PREFERRED SHARES NOT SUBJECT TO REDEMPTION REQUIREMENTS
The holders of the $3.00 Class B Cumulative Convertible Preferred Shares
($25 Liquidation Value), $.10 par value per share (the "Class B Preferred
Shares"), 12,000,000 shares authorized and 2,790,776 shares outstanding as
of September 30, 1995 and December 31, 1994, are entitled to receive a
quarterly dividend, as declared by the Board, at a rate of $3.00 per
annum.
No dividends on the Class B Preferred Shares have been declared since the
fourth quarter of 1988. The undeclared dividends, as adjusted for
conversions of Class B Preferred Shares into Common Shares, cumulatively
amounted to $90.3 million and $76.7 million at September 30, 1995 and
December 31, 1994, respectively. These undeclared dividends represent
$32.34 and $27.46 per share as of the end of each period. No accrual was
recorded for such undeclared dividends as the Class B Preferred Shares are
not mandatorily redeemable.
8. PREPETITION CLAIMS UNDER CHAPTER 11 AND RESTRUCTURING ACCRUALS
Those liabilities that are expected to be resolved as part of the Joint
Plan are classified in the Consolidated Balance Sheets as prepetition
claims. On January 18, 1995, approximately $550 million of prepetition
claims were paid pursuant to the Joint Plan. Another $22 million of
prepetition claims have been settled and paid since January 18, 1995. The
remaining prepetition claims may be subject to future adjustments
depending on pending discussions with the various parties and the
decisions of the Bankruptcy Court.
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------------------------------
(Thousands)
<S> <C> <C>
Debentures and notes(a) $ -- $304,172
Accrued interest - prepetition(a) -- 44,512
Accrued interest - postpetition(b) 3,634 178,000
Restructuring accruals(c) 32,688 74,166
Payable to connecting carriers 4,076 7,648
Money transfer payable(d) 7,444 8,645
Other, miscellaneous 150 2,690
------- --------
Total $47,992 $619,833
======= ========
</TABLE>
(a) The Company's debentures and notes, and accrued interest thereon,
listed above were paid in full on January 18, 1995.
(b) Prior to the Joint Plan being confirmed on November 1, 1994, no
interest expense was accrued on prepetition claims since December 31,
1992. The terms of the Joint Plan provided for the payment of
postpetition interest in the amount of $178 million.
-12-
<PAGE> 13
NEW VALLEY CORPORATION
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(c) Restructuring accruals at September 30, 1995 consisted of $15.6
million of disputed claims, primarily related to leases and $17.1
million of other restructuring accruals.
(d) Represents unclaimed money transfers issued by the Company prior to
January 1, 1990. The Company is currently in litigation in
Bankruptcy Court seeking a determination that these monies are an
asset of the Company. There can be no assurance as to the outcome of
the litigation.
9. SUBSEQUENT EVENTS
On October 17, 1995, the Company entered into an agreement, as amended
(the "Agreement"), with High River Limited Partnership ("High River"),
an entity owned by Carl C. Icahn. Pursuant to the Agreement, the
Company sold approximately 1.6 million shares of RJR Nabisco Common
Stock to High River for an aggregate purchase price of $51 million and
the parties agreed that the Company and High River would each invest
up to approximately $250 million in shares of RJR Nabisco Common
Stock, subject to certain conditions and limitations. Any party to the
Agreement may terminate it at any time, although under certain
circumstances, the terminating party will be required to pay a fee of
$50 million to the nonterminating party. The Agreement also provides
for the parties to pay certain other fees to each other under certain
circumstances, including a fee to High River equal to 20% of the
Company's profit on its RJR Nabisco Common Stock, after certain
expenses as defined in the Agreement. As of November 1, 1995, the
Company held approximately 4.9 million shares of RJR Nabisco Common
Stock. The Company's cost for such shares and the amount of related
margin loan financing were approximately $148.9 million and
approximately $74.2 million, respectively, at November 1, 1995. The
Company's investment in RJR Nabisco decreased from a $9.5 million
unrealized gain at September 30, 1995 to a $.9 million unrealized loss
at November 1, 1995.
On October 31, 1995, the Company finalized the adjustment to the
Purchase Price with FFMC. The Company paid to FFMC $11.0 million (and
received a waiver of its obligation to pay $1.8 million of fees under
certain of the services agreements) to settle certain disputed items
contained in the Pro Forma Balance Sheet dated as of June 30, 1994.
As a result of agreement on adjustments to the Purchase Price, $20
million of the $45 million held in escrow pursuant to the Purchase
Agreement was released from escrow. The $11.0 adjustment to the
Purchase Price was fully accrued as of September 30, 1995.
Also on October 31, 1995, the Company completed the sale of
substantially all of the assets (exclusive of certain contracts), and
conveyed substantially all of the liabilities of the Messaging
Services Business to FFMC for $20.0 million in cash. The sale of the
Messaging Services Business was effective as of October 1, 1995, and
the Company estimates that it will recognize a pre-tax gain on the
sale of such business of approximately $13 million during the fourth
quarter of 1995.
-13-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
On November 1, 1994, the Bankruptcy Court confirmed the Joint Plan
and, thereafter, on January 18, 1995, the Company emerged from bankruptcy.
The Joint Plan provided for, among other things, the sale of the Company's
money transfer business, the payment of all allowed claims, a $50 per share
cash dividend to holders of Class A Senior Preferred Shares and a tender
offer by the Company for up to 150,000 Class A Senior Preferred Shares at a
purchase price of $80 per share.
Pursuant to the Joint Plan, the Company sold its interest in the money
transfer business during the fourth quarter of 1994 to FFMC. In addition,
the Company received an option to sell to FFMC, and FFMC received an
option to purchase, the Messaging Services Business for $20 million in
cash, exercisable during the first quarter of 1996 (the "Put-Call Option").
As a result of the sale of the money transfer business and the option to sell
the Messaging Services Business, the Company's results of operations were
reclassified to reflect these operations as discontinued. These
discontinued operations generated virtually all of the previously reported
revenues of the Company.
On May 31, 1995, the Company consummated its acquisition of all of the
outstanding shares of Ladenburg for $25.8 million, net of cash acquired,
subject to post-closing adjustments. The acquisition was accounted for as
a purchase for financial reporting purposes, and accordingly, the operations
of Ladenburg subsequent to May 31, 1995 are included in the operations of the
Company.
RESULTS OF OPERATIONS
THIRD QUARTER AND FIRST NINE MONTHS: 1995 COMPARED WITH 1994
Continuing Operations. For the third quarter of 1995, the Company's
continuing operations consisted of revenues and expenses from brokerage
services through the Ladenburg subsidiary, interest and other income, general
and administrative expenses, and income taxes. For the third quarter of 1994,
the Company's continuing operations consisted of only interest and other
income, general and administrative expenses, reorganization items and income
taxes.
Interest income was $3.9 million and $14.5 million for the third quarter
and the first nine months of 1995, respectively, as compared to $.7 million
and $1.4 million for the third quarter and the first nine months of 1994. The
increase in interest income in 1995 resulted from the interest earned on the
cash received from the sale of the money transfer business in November 1994
and January 1995. Other income was $.3 million and $2.0 million for the third
quarter and the first nine months of 1995, respectively, due primarily to $.7
million in royalty fees received from FFMC pursuant to the Purchase Agreement
during the first quarter of 1995 and net realized gains on the sale of
investments of $1.0 million during the first nine months of 1995.
General and administrative expenses were $2.8 million and $7.8 million
during the third quarter and first nine months of 1995. General and
administrative expense for the first nine months of 1995 consist primarily of
compensation costs of $3.2 million and investment related expenses of $1.9
million. For the first nine months of 1995, the Company incurred $.4 million
of expenses which includes office rent and legal services under a cost sharing
agreement with an affiliate.
-14-
<PAGE> 15
RESULTS OF OPERATIONS (continued)
Reorganization items consisted of a $2.0 million reversal of
restructuring accruals during the first nine months of 1995 as compared to a
$25.4 million accrual for financial restructuring costs during the same
period of 1994. The reversal of restructuring accruals in 1995 resulted
from the Company settling certain claims at amounts below the accrued claim
liability.
Income tax expense for the third quarter and the first nine months of
1995 was $.3 million and $1.3 million, respectively, or approximately 10%
of the income before income taxes and discontinued operations. This
effective tax rate represented the alternative minimum tax rate of 2% for
federal tax purposes and an 8% state income tax rate. No income tax benefit
was recorded during the first nine months of 1994 due to the uncertainty
about the realizability of the Company's net operating loss carryforwards.
Discontinued Operations. Income from discontinued operations decreased
from $72.9 million during the first nine months of 1994 to $4.3 million
during the first nine months of 1995 as a result of the sale of the money
transfer business in the fourth quarter of 1994. Income from
discontinued operations during the first nine months of 1995 represented the
operations of the Messaging Services Business. Revenues of the Messaging
Services Business decreased from $12.5 million during the third quarter of
1994 to $11.1 million during the third quarter of 1995 primarily as a
result of the overall decline in the messaging services business. The
Messaging Services Business was sold effective October 1, 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1995, the Company paid $571.8 million
in allowed prepetition claims, purchased investments of $263.3 million,
acquired Ladenburg for a net cash payment of $25.9 million, and paid
dividends of $132.2 million on the Class A Senior Preferred Shares from the
$893 million received from the sale of the money transfer business and other
cash held at December 31, 1994.
The Company's working capital decreased from $284.9 million at
December 31, 1994 to $115.6 million at September 30, 1995 primarily as a
result of the Company's acquisition of $65.6 million of long-term
investments and the payment of preferred dividends of $132.2 million. During
the fourth quarter of 1995, the Company intends to liquidate much of
its $34.2 million investment in limited partnerships and in October 1995
the Company sold its investment in corporate loans for $17.7 million.
The Company anticipates making further investments in Ladenburg and is
actively seeking opportunities in the business of owning and operating real
estate. The Company did not have any material commitments for capital
expenditures at September 30, 1995.
On April 6, 1995, the Company's Board of Directors authorized the
Company to repurchase as many as 200,000 shares of its Class A Senior
Preferred Shares. The Company completed the repurchase for an aggregate
consideration of $18.7 million and thereafter, on June 21, 1995, the Board
authorized the Company to repurchase as many as 300,000 additional shares.
The Company repurchased in the open market 33,000 of such shares in July
1995 and 106,400 of such shares in September 1995.
-15-
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES (Continued)
As a result of recent asset dispositions pursuant to the Joint Plan, the
Company has accumulated a significant amount of cash and cash equivalents,
and investment securities, which it may be required to reinvest in operating
companies in the near future in order to avoid potentially burdensome
regulation under the Investment Company Act of 1940, as amended ("the
Investment Company Act"). The Investment Company Act and the rules and
regulations thereunder require the registration of, and impose various
substantive restrictions on, companies that engage primarily in the business
of investing, reinvesting or trading in securities or engage in the business
of investing, reinvesting, owning, holding or trading in securities and own
or propose to acquire investment securities having a value in excess of 40%
of a company's "total assets". The Company, which is now above this
threshold as a result of the dispositions of its operating businesses
pursuant to the Joint Plan, is relying on the temporary exemption from
registration under the Investment Company Act provided by Rule 3a-2
thereunder. The Company will attempt to be engaged, within the one-year
period prescribed by Rule 3a-2, primarily in a business or businesses other
than that of investing, reinvesting, owning, holding or trading securities,
or in the alternative, if the Company is unable to accomplish this, it will
seek to obtain an extension of such date or an exemption from the Securities
and Exchange Commission ("SEC") or no-action position from the SEC staff with
respect to registration under the Investment Company Act. However, no
assurance can be given that the Company will be successful in becoming
engaged in such business or in obtaining an extension of such one-year
period, and accordingly, there may be risk that the Company will become
subject to the Investment Company Act. If the Company were required to
register under the Investment Company Act, it would be subject to a number of
severe substantive restrictions on its operations, capital structure and
management, including without limitation entering into transactions with
affiliates.
On October 17, 1995, the Company entered into an agreement, as amended
(the "Agreement"), with High River Limited Partnership ("High River"), an
entity owned by Carl C. Icahn. Pursuant to the Agreement, the Company
sold approximately 1.6 million shares of RJR Nabisco Common Stock to High
River for an aggregate purchase price of $51 million and the parties agreed
that the Company and High River would each invest up to approximately $250
million in shares of RJR Nabisco Common Stock, subject to certain
conditions and limitations. Any party to the Agreement may terminate it at
any time, although under certain circumstances, the terminating party will
be required to pay a fee of $50 million to the nonterminating party. The
Agreement also provides for the parties to pay certain other fees to each
other under certain circumstances, including a fee to High River equal to
20% of the Company's profit on its RJR Nabisco Common Stock, after
certain expenses as defined in the Agreement. As of November 1, 1995, the
Company held approximately 4.9 million shares of RJR Nabisco Common Stock.
The Company's cost for such shares and the amount of related margin loan
financing were approximately $148.9 million and approximately $74.2 million,
respectively, at November 1, 1995.
On October 31, 1995, the Company consummated the sale of the Messaging
Services Business to FFMC for $20 million in cash, prior to the exercise of
the Put-Call Option. The parties agreed to consummate the sale early in
connection with their definitive resolution of certain post-closing
adjustments to the Purchase Price, as prescribed by the Purchase Agreement.
-16-
<PAGE> 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to pending claims which have arisen in
the ordinary course of its business. Management, after review and
consultation with counsel, considers that any liability from the
disposition of such lawsuits in the aggregate would not have a material
adverse effect on the consolidated financial position, results of
operations, or cash flows of the Company.
See Note 8 to the "Notes to the Quarterly Consolidated Financial
Statements" in Part I, Item 1 to this Report.
Item 3. Defaults Upon Senior Securities
See Notes 6 and 7 to the "Notes to the Quarterly Consolidated
Financial Statements" in Part I, Item 1 to this Report.
Item 5. Other Information
As previously announced in the Company's Press Release dated
September 27, 1995, the Nasdaq Hearing Review Committee affirmed the
Nasdaq Listing Qualifications Committee's denial of the Company's
application to list its equity securities (the Common Stock, Class A
Senior Preferred Shares and Class B Preferred Shares) on the NASDAQ
National Market because of the Company's inability to satisfy certain
minimum listing standards.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Exhibit Title
------ -------------
10(a) Expense Sharing Agreement made and entered into
as of January 18, 1995, by and between Brooke
Group Ltd. and the Company.
10(b) Asset Purchase Agreement dated as of September
30, 1995 among New Valley Corporation, Western
Union Data Services Company Inc. and First
Financial Management Corporation.
10(c) Employment Agreement dated as of October 1,
1995, by and between the Company and Richard J.
Lampen.
10(d) Agreement among the Company, ALKI Corp. and High
River Limited Partnership, dated October 17, 1995.
10(e) Letter Amendment, dated October 17, 1995, to the
Agreement among the Company, ALKI Corp. and High
River Limited Partnership, dated October 17, 1995.
10(f) Letter Amendment, dated November 5, 1995, to the
Agreement among the Company, ALKI Corp. and High
River Limited Partnership, dated October 17, 1995.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
No current reports on Form 8-K were filed during the third quarter of
1995.
-17-
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW VALLEY CORPORATION
(Registrant)
Date: November 14, 1995 By: /S/Gerald E. Sauter
----------------------- ----------------------------
Gerald E. Sauter
Vice President, Treasurer
and Chief Financial Officer
(Duly Authorized Officer and
Chief Accounting Officer)
-18-
<PAGE> 1
EXHIBIT 10(a)
EXPENSE SHARING AGREEMENT
THIS AGREEMENT, is made and entered into as of January 18, 1995 (the
"Agreement"), by and between Brooke Group Ltd., a Delaware corporation
("Brooke") and New Valley Corporation, a New York corporation ("New Valley")
(collectively, the "Parties").
R E C I T A L S :
WHEREAS, Brooke is the sublessee of 12,356 square feet of office space,
on the 32nd floor in the office building now known as International Place,
located at 100 S.E. 2nd Street, Miami, Florida (the "Premises"), pursuant to
that certain Sublease dated July 27, 1992 (the "Sublease") by and between Brooke
and Carnival Cruise Lines, Inc. (the "Sublessor"); and
WHEREAS, the Sublease expires on February 28, 1999 (the "Expiration
Date") and provides, among other things, for the payment of rent by Brooke, to
Sublessor, in the amount of $21,716.91 per month (the "Rent") (escalating over
the duration of the Sublease); and
WHEREAS, the Sublease also requires a security deposit of $492,000.00
(the "Security Deposit"), which amount has been paid by Brooke and is currently
held in an interest bearing escrow account by Sublessor (the "Security Deposit
Account"); and
WHEREAS, Brooke, in connection with its use and occupancy of the
Premises, incurs ordinary and customary expenses, including but not limited to
expenses for, office supplies and equipment, telephone, maintenance, insurance
and taxes (collectively, the "Operating Expenses"); and
WHEREAS, Brooke, in connection with the operation of its business and
affairs, employs an in-house legal staff and various other support personnel
(the "Personnel") which Personnel spend approximately fifty percent (50%) of
their working day on New Valley matters; and
WHEREAS, New Valley has relocated its principal offices to the
Premises, effective January 18, 1995, and in order to achieve certain economies,
desires to share in and reimburse Brooke for, the Rent, Operating Expenses and
utilization of Personnel.
1
<PAGE> 2
NOW THEREFORE, the Parties hereto, for good and adequate consideration,
agree as follows:
1. The Parties shall equally divide all Rent and Operating Expenses
from the date of this Agreement through the Expiration Date.
2. New Valley shall, via wire transfer, reimburse Brooke for
$263,369.40, which sum represents fifty percent (50%) of the Security Deposit,
with accrued interest, through May 26, 1995. From the date hereof, the Parties
shall jointly own all proceeds in the Security Deposit Account and shall share
in all distributions, if any, equally.
3. Brooke shall be responsible for payment, on a current basis, of
one hundred percent (100%) of the Rent, Personnel and monthly Operating
Expenses.
4. New Valley shall reimburse Brooke for fifty percent (50%) of the
cost of the Rent, Personnel and monthly Operating Expenses, within one (1) day
of invoice by Brooke.
5. Brooke shall reimburse New Valley for twenty-five percent (25%)
of salaries, wages and benefits of certain New Valley officers and employees
performing services for Brooke, which percentage represents the estimate of time
spent by New Valley personnel on Brooke matters, within one (1) day of invoice
by New Valley to Brooke.
6. New Valley has read and agrees to be bound by the terms,
conditions and restrictions contained in the Sublease, (including those
contained in the Master Lease, as defined in the Sublease) and shall be fully
and completely responsible for any and all breaches of the terms, conditions and
restrictions contained therein.
7. Both New Valley and Brooke represent and warrant that they have
full authority to enter into this Agreement.
8. This Agreement contains the entire agreement between the Parties
and supersedes all previous negotiations and understandings leading thereto.
This Agreement may be modified only by an agreement, in writing, signed by both
parties. This Agreement shall be governed by Florida law and shall bind and
inure to the benefit of the parties and their respective successors and assigns.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have, this date, set their hands and
seals
BROOKE GROUP LTD.
BY:_______________________
NEW VALLEY CORPORATION
BY:_______________________
3
<PAGE> 1
EXHIBIT 10(b)
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
NEW VALLEY CORPORATION,
WESTERN UNION DATA SERVICES COMPANY, INC.
AND
FIRST FINANCIAL MANAGEMENT CORPORATION
DATED AS OF
SEPTEMBER 30, 1995
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I. PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES . . . . . . . 2
1.1. Purchase of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4. Deferred Assets; Consents of Third Parties . . . . . . . . . . . . . . 3
1.5. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II. PURCHASE PRICE; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. Purchase Price and Adjustments . . . . . . . . . . . . . . . . . . . . 5
2.2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . 6
3.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. Capital Stock of DSC . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3. Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 7
3.7. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8. Leases of Real Property . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.12. Consents and Approvals of Governmental Authorities. . . . . . . . . . . 11
3.13. No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.14. Good Title Conveyed, Etc. . . . . . . . . . . . . . . . . . . . . . . . 11
3.15. Government Licenses, Permits. . . . . . . . . . . . . . . . . . . . . . 12
3.16. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.19. No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . 13
3.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.24. Date of Representations and Warranties. . . . . . . . . . . . . . . . . 15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . 16
4.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4. Consent and Approvals of Governmental Authorities . . . . . . . . . . . 16
4.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7. Representations of Sellers; Current Net
Assets Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V. COVENANTS AND AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . . 17
5.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2. Instruments of Conveyance and Assumption . . . . . . . . . . . . . . . 17
5.3. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI. EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1. Covered Employees; Prior Service . . . . . . . . . . . . . . . . . . . 19
6.2. Benefits and Prior Service Credit . . . . . . . . . . . . . . . . . . . 19
6.3. Vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4. Severance Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5. Specific Benefit Plan Agreements . . . . . . . . . . . . . . . . . . . 20
6.6. Plans Subject to Collective Bargaining Agreements . . . . . . . . . . . 22
6.7. Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8. Worker Adjustment and Retraining Notification Act . . . . . . . . . . . 22
6.9. Certain Limitations on Purchaser's Obligations . . . . . . . . . . . . 23
ARTICLE VII. DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1. Documents to be Delivered by Sellers . . . . . . . . . . . . . . . . . 23
7.2. Documents to be Delivered by Purchaser. . . . . . . . . . . . . . . . . 23
7.3 Agreements to be Executed by the Parties. . . . . . . . . . . . . . . . 23
ARTICLE VIII. SURVIVAL, INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 24
8.1. Survival of Representations and Warranties . . . . . . . . . . . . . . 24
8.2. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1. Public Announcements; Notices . . . . . . . . . . . . . . . . . . . . . 26
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.3. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.4. Binding Effect; No Assignment; No Third Party Beneficiary . . . . . . . 27
9.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6. Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.7 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.8 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBITS
Exhibit A Form of Sales, Marketing and Services
Agreement
Exhibit B 1994 Net Assets Statement and
Current Net Assets Statement
Exhibit C General Assignment and Bill of Sale
Exhibit D Assumption Agreement
Exhibit E Opinion of Marc N. Bell,
Counsel of New Valley
Exhibit F Officers' Certificate of Sellers
Exhibit G Opinion of Legal Officer
Exhibit H Officer's Certificate of Purchaser
</TABLE>
ii
<PAGE> 4
SCHEDULES
<TABLE>
<S> <C>
Schedule 3.7(a) Intellectual Property
Schedule 3.7(b) Intellectual Property Agreements
Schedule 3.7(c) Intellectual Property -- Claims
Schedule 3.11 Benefit Plans
Schedule 3.16 Conduct of Business
Schedule 3.17 Litigation
Schedule 3.20 Material Contracts
Schedule 6.1 Covered Employees
</TABLE>
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT (this "Agreement") dated as of September 30,
1995 among NEW VALLEY CORPORATION, a New York corporation ("New Valley"),
WESTERN UNION DATA SERVICES COMPANY, INC., a Delaware corporation and a wholly
owned subsidiary of New Valley ("DSC", and together with New Valley, "Sellers"),
and FIRST FINANCIAL MANAGEMENT CORPORATION, a Georgia corporation ("Purchaser").
RECITALS:
WHEREAS, New Valley owns all of the issued and outstanding shares of
capital stock of DSC;
WHEREAS, DSC owns substantially all of the assets related to and is
engaged in the business of providing messaging services to individuals and high
volume commercial users including, without limitation, Mailgram, Telegram,
Cablegram, Priority Letter, Action Hotline, Automated Voice Telegram, Commercial
Telegram, Custom Letter, and Opiniongram, and New Valley owns or leases certain
assets used therein (the "Messaging Business");
WHEREAS, New Valley and Purchaser entered into a Trademark Agreement
(the "Trademark Agreement") dated as of November 15, 1994, which was one of the
agreements entered into in connection with the sale by New Valley to Purchaser
of all the stock of Western Union Financial Services, Inc. ("FSI") pursuant to
that certain Purchase Agreement dated as of October 20, 1994 between New Valley
and Purchaser, as amended (the "1994 Purchase Agreement"), which provided in
Section 11 thereof (l) for the contribution of the Messaging Business to DSC,
(2) for DSC to conduct the Messaging Business in the ordinary course of
business, subject to certain restrictions set forth therein and (3) the right of
Purchaser to cause New Valley to sell the capital stock of DSC for $20 million
and the right of New Valley to cause Purchaser to purchase the capital stock of
DSC for $20 million (such proposed purchase and sale of the capital stock of DSC
being referred to herein as the "Proposed Option Sale");
WHEREAS, Purchaser is familiar with DSC, its assets and liabilities and
the Messaging Business as conducted by DSC (i) from and after November 15,
1994, through its provision of services to DSC and New Valley under the Related
Agreements (as defined in the 1994 Purchase Agreement) and (ii) prior to
November 15, 1994, from the fact that the Messaging Business was operated by
former executive officers of New Valley, certain of which executive officers
became employees of Purchaser and/or FSI, as the case may be, in connection with
the transactions contemplated by the 1994 Purchase Agreement;
<PAGE> 6
WHEREAS, Sellers desire to sell and transfer, and Purchaser desires to
purchase and acquire, all of the assets of DSC and the assets of New Valley used
in connection with the Messaging Business, to the extent specified in Section
1.1, all with the intention that the Acquisition (as defined in Section 1.5)
have substantially the same effect as if Purchaser and New Valley had
consummated the Proposed Option Sale (assuming such assets of New Valley had
been transferred to DSC prior to the Closing (as defined below));
WHEREAS, Sellers desire to transfer to Purchaser, and Purchaser has
agreed to assume, all of the liabilities of DSC, the liabilities of New Valley
relating to the Messaging Business or relating to the assets transferred to
Purchaser hereunder, to the extent specified in Section 1.5, all with the
intention that Acquisition have substantially the same effect as if Purchaser
and New Valley had consummated the Proposed Option Sale (assuming such
liabilities of New Valley had been transferred to DSC prior to the Closing);
WHEREAS, in conjunction with this Agreement, Purchaser, Seller, and FSI
have entered into an agreement dated as of the date hereof, (the "Release and
Termination Agreement"), which, among other things, provides for (i) the
termination of the Ancillary Agreements (as defined in the Release and
Termination Agreement), (ii) the settlement of certain purchase price
adjustments with respect to the Audited Pro Forma Balance Sheet under the 1994
Purchase Agreement and (iii) the release from escrow of certain monies under the
Escrow Agreement (as defined in the 1994 Purchase Agreement); and
WHEREAS, Purchaser and Sellers have received regulatory clearance for
the consummation of the Acquisition with respect to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
NOW, THEREFORE, in consideration of the respective premises, mutual
covenants and agreements of the parties hereto, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I. PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES.
1.1. PURCHASE OF ASSETS. Upon the terms and subject to the
conditions of this Agreement, on October 31, 1995 (the "Closing Date"), Sellers
shall sell and transfer to Purchaser, or its designated affiliates (any
references herein to Purchaser being deemed to include such designated
affiliates unless the context indicates otherwise), and Purchaser shall purchase
and acquire from Sellers (1) all of the assets, rights and properties of
whatever nature owned, leased or held by DSC; (2) the trademarks, tradenames,
trade dress, purchase orders, licenses,
2
<PAGE> 7
contracts, books and records and leases owned or held by New Valley that
are used in or related to the Messaging Business; and (3) without duplication,
the assets currently used in the Messaging Business listed on Schedules 1.2 and
1.3 of the 1994 Purchase Agreement (the assets described in clauses (1), (2) and
(3) being referred to herein as the "Assets"), in each case free and clear of
any lien, encumbrance, claim, security interest, mortgage, pledge, charge,
license, option, judgment, order, decree, or interest, in each case, of any kind
or nature (collectively, "Liens"), other than Permitted Liens (as defined in
Section 3.14). The assets of New Valley described in clause (2) above
constitute the only types of assets owned or held by it that are used in and
material to the Messaging Business. The consummation of the Acquisition on the
Closing Date is referred to herein as the "Closing".
1.2. EXCLUDED ASSETS. Notwithstanding any provision
hereof, all books and records with respect to the Messaging Business that
Sellers are required to retain pursuant to any statute, rule, regulation or
ordinance, and general books of account, books of original entry and other books
and records relating to the foregoing (the "Excluded Assets") shall be retained
by Sellers and shall not be transferred to Purchaser, provided that copies
thereof shall be provided to Purchaser upon request.
1.3. OTHER AGREEMENTS. The Mailgram Agreement, as amended,
between the United States Postal Service and DSC, as assignee of New Valley,
formerly known as The Western Union Telegraph Company, dated January 3, 1976 and
the FCC Section 214 Authorization held by DSC relating to, among other things,
the Cablegram service (the license and agreement described in this Section 1.3
being referred to herein as the "Other Agreements") shall be retained by DSC in
accordance with the terms and conditions of a separate agreement, in the form of
Exhibit A (the "Sales, Marketing and Services Agreement") to be entered into by
and between DSC and Purchaser on the Closing Date, unless otherwise agreed by
the parties.
1.4. DEFERRED ASSETS; CONSENTS OF THIRD PARTIES. If, on the
Closing Date, Sellers have not obtained one or more authorizations, approvals or
consents required to transfer all of their right, title or interest in or to any
of the Assets, other than the Excluded Assets (a "Consent"), or if an attempt to
transfer any of the Assets would be ineffective or commercially impractical,
then such Assets shall constitute "Deferred Assets", and shall not be
transferred to Purchaser at the Closing; but thereafter (a) each of the parties
hereto will (i) continue to use all commercially reasonable efforts to obtain
all such Consents and/or to remove any other impediments to the transfer of each
Deferred Asset to Purchaser, and Sellers will transfer same to Purchaser as soon
as reasonably practicable after the receipt of each such Consent and/or removal
of such impediment and (ii) until such transfer is accomplished, the parties
hereto will cooperate in any lawful arrangement reasonably acceptable to
3
<PAGE> 8
New Valley and/or DSC, as appropriate, (including performance by New
Valley and/or DSC, as the case may be, as agent, after having received such
assurances and/or additional indemnities from Purchaser as the applicable Seller
may reasonably require) to provide Purchaser with the benefits of such Deferred
Asset and New Valley and/or DSC, as the case may be, will enforce, at the
request and for the account of Purchaser, any of their interests therein against
any other parties thereto (including the right to terminate any such Deferred
Asset in accordance with its terms); provided, however, that, notwithstanding
any other provision in this Agreement, (i) Sellers shall not incur any liability
to Purchaser as a result of any failure to so obtain any Consent or to transfer
any Deferred Asset to Purchaser as a result of the failure to so obtain a
Consent or if such transfer would be ineffective or commercially impractical
(notwithstanding Sellers' good faith efforts to do so) and (ii) the obligations
of Sellers under this Section 1.4 shall terminate 18 months following the
Cut-Off Date (as defined in Section 1.5(b)). Purchaser shall promptly reimburse
Sellers for any costs and expenses reasonably incurred (including, without
limitation, the cost of providing the services of any employee or affiliate of
New Valley or DSC requested by Purchaser), additional fees, damages and any and
all other costs, fees or other expenses incurred by Sellers in connection with
any action taken by them under this Section 1.4. The parties hereto shall
cooperate and act in good faith from and after the Closing to effect the
transfers and other actions specified in this Section 1.4. Notwithstanding any
provision hereof, Sellers shall execute such documents or instruments as
Purchaser may reasonably request to perfect Purchaser's title in and to the
Assets (including the Deferred Assets) transferred to Purchaser hereunder.
1.5. ASSUMPTION OF LIABILITIES. (a) Purchaser shall assume
all of the liabilities and obligations whether known or unknown, tangible or
intangible, contingent, fixed, liquidated or otherwise ("Liabilities") (i) of
DSC, (ii) of the Messaging Business, (iii) of New Valley, insofar as such
Liabilities arise out of or are related to the Messaging Business or the Assets
(including, without limitation, the McLean Lease (as defined in Section 3.8) and
the Deferred Assets) and (iv) otherwise arising out of the Assets (including the
Deferred Assets) (collectively, the "Assumed Liabilities"), other than the
Excluded Liabilities (as defined in Section 1.5(b)). The purchase and sale of
the Assets (including the transfer of the Deferred Assets pursuant to Section
1.4) and the transfer and assumption of the Assumed Liabilities is sometimes
referred to herein as the "Acquisition"). Notwithstanding any provision hereof:
(b) Except as provided in Section 9.5, Purchaser
shall not assume any Liability for Federal, state, local or foreign taxes
relating to the Messaging Business or the Assets or assessed against or
payable by New Valley or DSC with respect to any period ending on or before
September 30, 1995 (the "Cut-Off Date"); provided, that any taxes relating to
the Messaging Business or the Assets (other than income or franchise taxes)
4
<PAGE> 9
that are imposed for a taxable period that includes the Cut-Off Date
shall be allocated pro rata per day between the period ending on the Cut-Off
Date and the period commencing after the Cut-Off Date, and Purchaser shall be
liable for such taxes allocable to the period commencing after the Cut-Off Date;
and
(c) Purchaser shall not assume any Liability which arises
out of or is due to the breach of any covenant, representation or warranty
made by Sellers in this Agreement to which Purchaser is entitled to
indemnification. The Liabilities described in clauses (a) and (b) hereof
(other than in the proviso of clause (a) above) shall be referred to herein as
the "Excluded Liabilities".
ARTICLE II. PURCHASE PRICE; CLOSING.
2.1. PURCHASE PRICE AND ADJUSTMENTS.
(a) At the Closing, in consideration of the transfer and sale
of the Assets by Sellers and the assumption of the Assumed Liabilities by
Purchaser, Purchaser shall pay to Sellers $20 million in cash (the "Purchase
Price"), subject to adjustment as provided in paragraph (b) below. The
Purchase Price shall be paid to Sellers by wire transfer of immediately
available funds, to such accounts as may be designated by New Valley.
(b) The Purchase Price shall be subject to adjustment as
follows:
(1) New Valley has caused FSI to prepare an unaudited
Statement of Net Assets of DSC as of November 1, 1994 (the "1994
Net Assets Statement").
(2) New Valley has caused FSI to prepare and deliver to New
Valley an unaudited Statement of Net Assets of DSC as of September
30, 1995 (the "Current Net Assets Statement"), which (i) has been
prepared using the historical accounting practices of New Valley,
(ii) other than with respect to the treatment of taxes, has been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") and (iii) fairly
presents the assets and liabilities of DSC at September 30, 1995.
The 1994 Net Assets Statement and the Current Net Assets Statement
are each set forth on Exhibit B.
(3) Because the excess of DSC's assets over its liabilities
as reflected on the Current Net Assets Statement is $2.46 million
less than the excess of DSC's assets over its liabilities as
reflected on the 1994 Net Assets Statement, the Purchase Price
payable at Closing shall be $17.54 million.
5
<PAGE> 10
2.2. CLOSING. The Closing shall take place at the offices
of Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York
10005 at 9:00 a.m. on October 31, 1995 or at such other time or place as the
parties may agree.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers hereby represent, covenant and warrant to Purchaser as follows:
3.1. CORPORATE ORGANIZATION. New Valley is a corporation
duly organized and validly existing under the laws of the State of New York.
DSC is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as it is now being conducted and to own the properties and
assets it now owns; and is duly qualified or licensed to do business as a
foreign corporation in good standing in every jurisdiction in which ownership of
property or the conduct of its business require such qualification, except
jurisdictions in which its failure to qualify to do business would not have a
material adverse effect on the business, prospects, operations, properties,
assets or financial condition of the Messaging Business (a "Material Adverse
Effect"). The certified copies of the Certificate of Incorporation and the
By-Laws of New Valley and DSC heretofore made available to Purchaser are
complete and correct copies of such instruments as are presently in effect.
3.2. CAPITAL STOCK OF DSC. All of the issued and
outstanding shares of capital stock of DSC are owned beneficially and of record
solely by New Valley.
3.3. SUBSIDIARIES AND AFFILIATES. DSC has no subsidiaries.
New Valley does not own, directly or indirectly, any capital stock or other
equity interest in any corporation or other entity which has any equity, debt or
similar interest in the Messaging Business.
3.4. AUTHORIZATION. Sellers have full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Boards of Directors of Sellers, and New Valley as the
sole shareholder of DSC, have taken all necessary action to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and this Agreement is a legal, valid and
binding agreement of New Valley and DSC, enforceable in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and (iii)
6
<PAGE> 11
enforceability of the indemnification provisions of this Agreement may
be subject to limitations of public policy under Federal or state laws.
3.5. FINANCIAL STATEMENTS. The Current Net Assets Statement
(i) has been prepared using the historical accounting practices of New Valley,
(ii) other than with respect to the treatment of taxes, has been prepared in
accordance with GAAP and (iii) fairly presents the assets and liabilities of DSC
at September 30, 1995.
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in this Agreement (including the Schedules hereto):
(a) since November 15, 1994, the Messaging Business has
been conducted in the ordinary course consistent with the restrictions
contained in Section 11 of the Trademark Agreement (after giving effect to the
adjustments in Section 2.1) and there has not been:
(i) any material adverse change in the financial position or
results of operations of the Messaging Business or of DSC from that
reflected in the 1994 Net Assets Statement;
(ii) any material adverse change in the Messaging Business or
the assets or financial condition of DSC; or
(iii) any event or events that could, individually or in the
aggregate, be reasonably expected to have a Material Adverse
Effect; and
(b) since September 30, 1995, to New Valley's knowledge, no
event has occurred (whether by action of New Valley or DSC or otherwise) that
would cause the representations and warranties of Sellers contained in this
Article III, taken as a whole, to be untrue or inaccurate in any material
respect.
3.7. INTELLECTUAL PROPERTY.
(a) Schedule 3.7(a) sets forth all interests of Sellers in
all material trademarks, service marks and trade names, whether or not
registered and including all common law rights, all registrations therefor in
the United States and throughout the world and all attendant rights used (or,
as scheduled, intended to be used) in the Messaging Business ("Marks"). All
Marks and computer software owned or used by New Valley or DSC in, and that are
material to, the Messaging Business, as presently conducted by DSC, and all
applications for any of the foregoing (collectively, "Intellectual Property"),
have previously been, or are in the process of being, contributed to DSC.
Schedule 3.7(b), which has been prepared by Purchaser with Sellers' assistance,
contains a list of all licenses,
7
<PAGE> 12
sublicenses and other agreements ("Intellectual Property Agreements")
relating to the Intellectual Property.
(b) (i) Upon the Closing and after giving effect to
the transactions contemplated hereby, Purchaser (A) shall own, free
and clear of all Liens (other than restrictions contained in the
Intellectual Property Agreements and Permitted Liens, and assuming
that all required Consents have been obtained), all right, title
and interest in and to the Marks, and the goodwill relating
thereto, (B) shall receive or own all right, title and interest in
and to, or other non-proprietary rights to the use of, all other
Intellectual Property and the goodwill relating thereto, and (C) as
a result of the foregoing, shall receive or own or will be licensed
or otherwise have the right to use, all Intellectual Property
licensed by New Valley or DSC, in each case excepting Liens or
other impediments created by Purchaser or other actions required to
be taken by Purchaser to register or otherwise perfect its interest
in the Marks;
(ii) except as set forth in Schedule 3.7(c), to the
knowledge of Sellers, the use by Sellers of the Intellectual
Property does not infringe upon the rights of any third party
anywhere in the world, nor are there any infringing or diluting
uses of the Marks by any third party anywhere in the world;
(iii) Schedule 3.7(c) contains a list of all material
adverse claims, disputes, demands, proceedings, or litigation that
have been asserted or, to the knowledge of Sellers, threatened,
against New Valley or DSC, by any person anywhere in the world,
to the use, ownership or validity of the Marks and Sellers do not
know of any other valid basis for any such claims, disputes,
demands, proceedings, or litigation, the original files relating
to which have been previously delivered to Purchaser by New
Valley; and
(iv) except for the Intellectual Property Agreements,
to the knowledge of Sellers, there is no outstanding order, decree,
stipulation, written restriction, undertaking, administrative or
judicial decision or judgment, or any other kind of agreement,
against New Valley or DSC or to which either of them is a party,
materially limiting or restricting the use or licensing of the
Marks or declaring any abandonment thereof anywhere in the world.
(c) Notwithstanding any provision of this Agreement,
Sellers shall not have any Liability to Purchaser under this Section 3.7 or
otherwise with respect to the Intellectual Property or Intellectual Property
Agreements, and Purchaser shall not be entitled to any indemnification for any
8
<PAGE> 13
Loss relating to the foregoing, except where such Loss
arose out of actions taken or not taken, as the case may
be, by Sellers during the period commencing on November
15, 1994 and ending on the Closing Date.
3.8. LEASES OF REAL PROPERTY. To the
knowledge of Sellers, the Lease dated August 25, 1987, as
amended by the First Amendment dated March 10, 1988 and
the Second Amendment dated December 31, 1991 between New
Valley and Westgate, a Virginia Limited Partnership,
relating to premises at McLean, Virginia (the "McLean
Lease"), other than the sublease with Purchaser for the
Paramus office space, is the only real property lease
pursuant to which New Valley or DSC leases real property
used in connection with the Messaging Business or to which
DSC is a party. The McLean Lease is in full force and
effect and constitutes a valid and binding obligation of
New Valley and, to Sellers' knowledge, the other party
thereto; and (b) at the Closing Date, there will be no
default under the McLean Lease by New Valley, or, to
Sellers' knowledge, the other party thereto. To Sellers'
knowledge, no event has occurred which (whether with or
without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default
under such lease entitling either party to terminate the
McLean Lease, and, assuming all required Consents have
been obtained, the continuation, validity and
effectiveness of the McLean Lease under the current terms
thereof will in no way be affected, altered or impaired by
the consummation of the Acquisition. A true and complete
copy of the McLean Lease, including all amendments
thereto, has been made available to Purchaser. DSC does
not now own, and has not owned since November 15, 1994,
any real property, and New Valley does not own any real
property used in the Messaging Business.
3.9. TAXES. As used in this
Agreement, "taxes" or "tax liability" means all taxes
(including but not limited to income taxes, excise taxes,
sales taxes, gross receipts or any other taxes), including
applicable interest, additions to tax and penalties.
Sellers hereby represent and warrant that:
(a) DSC has filed all required
material tax returns, and has paid all material taxes
shown thereon as owing.
(b) DSC has withheld and paid all
material taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other
third party.
(c) Neither New Valley nor any
current director, officer, or employee responsible for tax
matters of New Valley or DSC is aware of any proposed tax
assessment by any tax authority for additional taxes of
DSC for any period for which tax returns have been filed,
and there is no currently pending proposed assessment
relating to the Messaging Business concerning any tax
liability of New Valley's affiliated group or DSC of which
such persons have knowledge.
9
<PAGE> 14
(d) DSC has not been a member of an
affiliated group filing a consolidated federal income tax
return, or any consolidated or combined or unitary group
filing a state tax return, other than a group the common
parent of which is New Valley.
(e) New Valley has on behalf of its
affiliated group, including DSC, filed all material
required tax returns for any period during which DSC has
been a member of the group, and has paid all material
taxes shown thereon as owing. Such returns are correct
and complete in all material respects insofar as they
relate to DSC, the Assets or the Messaging Business.
3.10. INSURANCE. Assuming the full performance
by FSI of its obligations under Section 6(F) of the
Services Agreement dated as of November 15, 1994, by and
among FSI, New Valley and DSC, to the knowledge of
Sellers, all material policies of fire, liability,
workmen's compensation and other forms of insurance owned
or held by DSC relating to the Messaging Business are in
full force and effect, all remiums with respect thereto
covering all periods up to and including the date of this
Agreement have been paid, and no notice of cancellation or
termination has been received with respect to any such
policy.
3.11. BENEFIT PLANS. (a) Schedule 3.11
contains a true and complete list of New Valley's and
DSC's "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and all stock option,
deferred compensation, incentive and similar plans (i) of
DSC and (ii) of New Valley, insofar as such plans relate
to the Messaging Business or individuals employed thereby
on September 30, 1995 (collectively, the "Benefit Plans").
Each Benefit Plan is in writing, and New Valley has
previously made available to Purchaser a true and correct
copy of each Benefit Plan, together with a true and
complete copy of the relevant trust instruments, the most
recently filed Internal Revenue Service ("IRS") Form 5500
and the most recently received IRS determination letter.
No Benefit Plan subject to Title IV of ERISA has been
terminated and no proceeding has been initiated to
terminate any Benefit Plan with respect to which Purchaser
would be expected to incur any liability, direct or
indirect, contingent or otherwise, under Title IV of
ERISA. To the knowledge of Sellers, no action or claims
(other than routine claims for benefits made in the
ordinary course of administration of the Benefit Plans)
are pending, threatened or imminent against or with
respect to any Benefit Plan, or any sponsor or fiduciary
(as defined in Section 3(21) of ERISA) of any Benefit
Plan. Neither New Valley nor DSC has engaged in a
transaction described in Section 4069 of ERISA. Neither
New Valley, DSC nor any Benefit Plan has engaged in any
prohibited transaction (as defined in Section 406 or 407
of ERISA or Section 4975 of the Internal Revenue Code, as
amended (the "Code")) for which a statutory exemption is
not available. No Benefit Plan under which New Valley or
DSC has any liability or other obligation is or was a
"multiple employer plan" within the meaning of Section
413(c) of
10
<PAGE> 15
the Code, or a "multiemployer plan" as defined in Section
3(37) of ERISA.
(b) Each Benefit Plan which is
intended to qualify under Section 401(a) of the Code has
been determined to be so qualified by the IRS, and nothing
has occurred since the date of the last such determination
which has resulted or is likely to result in the
revocation of such determination. Each Benefit Plan has
been operated and administered in all material respects in
accordance with its respective terms and applicable law.
3.12. CONSENTS AND APPROVALS OF GOVERNMENTAL
AUTHORITIES. To the knowledge of Sellers, except for the
Other Agreements and non-material government contracts, no
material consent, approval or authorization of, or
declaration, filing or registration with, any governmental
or regulatory authority is required in connection with the
execution, delivery and performance by Sellers of this
Agreement or the consummation of the transactions
contemplated hereby (other than such consents, approvals
authorizations, declarations, filings or registrations
that are required as a result of the legal or regulatory
status of Purchaser or any of its affiliates).
3.13. NO VIOLATION. To the knowledge of
Sellers, neither the execution and delivery by Sellers of
this Agreement nor the consummation by Sellers of the
transactions contemplated hereby will violate any
provision of the certificate of incorporation or by-laws
of New Valley or DSC, or violate, or be in conflict with,
or constitute a default under, or cause the acceleration
of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any Lien, other
than Permitted Liens, or adverse interest of any kind or
nature whatsoever on the Assets pursuant to any agreement
or commitment to which the Sellers are bound or any of the
Assets are subject, or violate any statute or law or any
judgment, decree, order, regulation or rule of any court
or governmental authority, except for (i) any Consents
required to be obtained in connection with the Deferred
Assets and (ii) such violations, conflicts, defaults or
other events as would not individually or in the aggregate
have a Material Adverse Effect (other than such
violations, defaults or other events that would occur as a
result of the legal or regulatory status of Purchaser or
any of its affiliates).
3.14. GOOD TITLE CONVEYED, ETC. At the Closing
Date, Sellers will transfer to Purchaser good and valid
title to the Assets owned by Sellers free and clear of all
Liens, other than (i) Permitted Liens, (ii) Liens known to
Purchaser or any of its affiliates or (iii) the
Intellectual Property Agreements. The instruments to be
executed and delivered to Purchaser by the Sellers at the
Closing will be legal, valid and binding obligations of
the Sellers, enforceable in accordance with their terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating
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to or affecting creditors' rights and to general equity
principles and will effectively vest in Purchaser good and
valid title to the Assets (other than with respect to the
Excluded Assets, the Other Agreements and the Deferred
Assets, but only to the extent specified in Article I)
free and clear of all Liens, other than Permitted Liens.
As used in this Agreement, "Permitted Lien" shall mean (i)
any Lien for taxes not yet due or delinquent, (ii) any
statutory Lien arising in the ordinary course of business
by operation of law with respect to a Liability that is
not yet due or delinquent, (iii) any minor imperfection of
title or similar Lien which individually or in the
aggregate with other such Liens could not reasonably be
expected to have a Material Adverse Effect and (iv) any
Liens created by Purchaser or any affiliate thereof.
3.15. GOVERNMENT LICENSES, PERMITS AND RELATED
AUTHORIZATIONS. To the knowledge of Sellers, DSC has all
licenses, permits, consents, approvals, authorizations,
qualifications and orders (collectively, "Authorizations")
of any applicable Federal, state and local United States
and foreign governmental agencies and authorities
("Governmental Agencies") necessary to enable DSC to
conduct the Messaging Business as presently conducted,
except where the failure to have any such Authorization
would not, individually or in the aggregate, have a
Material Adverse Effect, and all such Authorizations are
valid and in full force and effect.
3.16. CONDUCT OF BUSINESS. In reliance upon
the representations, warranties and covenants of Purchaser
and FSI in the Related Agreements relating to the conduct
of the Messaging Business, the Messaging Business is, and
since November 15, 1994 has been, except as set forth in
Schedule 3.16, operated and maintained in compliance with
each applicable law, regulation, ordinance and code
promulgated by any Governmental Agency and the
restrictions on the operation of the Messaging Business
specified in Section 11 of the Trademark Agreement, except
for those instances of noncompliance which would not,
individually or in the aggregate, have a Material Adverse
Effect. Except as set forth in the adjustments to the
Current Net Assets Statement or where any such monies were
transferred with the actual knowledge and consent of
Purchaser, since the Cut-Off Date, no cash receipts of the
Messaging Business have been removed by or paid to New
Valley or any of its affiliates from any bank account
relating to the Messaging Business.
3.17. LITIGATION. Except as set forth in
Schedule 3.17, to the knowledge of Sellers, no action,
suit, proceeding or investigation is pending or threatened
against New Valley and/or DSC relating to or affecting the
Messaging Business except (i) for any actions, suits,
proceedings or investigations that individually or in the
aggregate, would not reasonably be expected to have a
Material Adverse Effect or (ii) which could reasonably be
expected to result in the issuance of any judgment,
decree, injunction or similar order (whether preliminary
or final) of a governmental or regulatory authority
restraining,
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enjoining or otherwise prohibiting or making illegal the
execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
3.18. ENVIRONMENTAL MATTERS.
(a) The Messaging Business, the
Assets and all other properties owned, leased, used or
operated by DSC in the Messaging Business have been
operated in compliance in all material respects with all
applicable environmental laws except where the failure to
do so would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) DSC has obtained, maintained
and complied with all permits, licenses, approvals and
other authorizations which are required for the operation
of the Messaging Business pursuant to applicable
environmental laws, except where the failure to do so
would not, individually or in the aggregate, have a
Material Adverse Effect, and has maintained all material
records and made all material filings required by
applicable environmental laws.
(c) To the knowledge of Sellers,
Sellers have not received any notice of any pending or
threatened investigation, proceeding or claim relating to
the Messaging Business or the Assets to the effect that
either of them is or may be liable to any person, or
responsible or potentially responsible for the costs of
any remedial or removal action or other cleanup costs, as
a result of noncompliance with any applicable
environmental laws or arising out of the presence,
generation, storage, treatment or disposal of hazardous
substances, solid or hazardous wastes, petroleum or toxic
materials, including liability under the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended, or any similar state superfund law.
(d) The performance by Sellers
hereunder does not require compliance with, and/or is
exempt from the requirements of any state superfund or
other environmental law relating to the transfer of real
property or leasehold interest, or disclosure of actual or
potential environmental liabilities.
3.19. NO UNDISCLOSED LIABILITIES. Except (i)
as otherwise disclosed in (x) this Agreement (including
any Exhibit or Schedule hereto) or (y) the Current Net
Assets Statement, (ii) for any Liabilities of the
Messaging Business that were not recorded on the 1994 Net
Assets Statement but were incurred on or prior to November
1, 1994 and (x) of which Sellers do not have knowledge or
(y) are not material and (iii) for Liabilities incurred in
the ordinary and usual course of the Messaging Business
since November 1, 1994 not required to be recorded on the
Current Net Assets Statement under GAAP, Sellers have no
knowledge of any material Liability relating to or arising
in connection with the Messaging Business or the Assets
(including the Deferred Assets).
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3.20. CONTRACTS.
(a) Except as disclosed in Schedule
3.20, all material contracts to which New Valley or DSC
(or any division of New Valley) is a party relating to the
Messaging Business or the Assets (each a "Material
Agreement") are legally valid and binding, except to the
extent specified in clauses (i) through (iii) of Section
3.4 or where the invalidity or nonbinding nature of any
Material Agreement would not have a Material Adverse
Effect; and neither New Valley nor DSC, nor, to Sellers'
knowledge, any other party thereto, is in default in the
performance of any of its obligations under any Material
Agreement, except for defaults which would not,
individually or in the aggregate, have a Material Adverse
Effect. Sellers have delivered to Purchaser a list
containing certain material contracts, purchase orders,
revenue sources, accounts payable and other agreements of
the Messaging Business that are being transferred to
Purchaser hereunder. To the knowledge of Sellers, no
event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other
event) would constitute a default by New Valley, DSC or
the other parties thereto, under any Material Agreement
entitling the non-defaulting party to terminate any such
Material Agreement, and, assuming that the required
Consents are obtained, the continuation, validity and
effectiveness of all such Material Agreements under the
current terms thereof will in no way be affected, altered
or impaired by the consummation of the Acquisition.
(b) No Material Contract is an (i)
agreement which provides for the provision of management
or similar services by or to the Messaging Business
(except for the Sales, Marketing and Services Agreement),
(ii) agreement which restricts the Messaging Business or
any party contracting therewith from entering into any
line of business or which contains geographic restrictions
on the ability to conduct business activities, (iii)
agreement with a governmental authority outside of the
ordinary course of business, (iv) agreement, other than
the Related Agreements, between DSC or New Valley (or any
of their affiliates), on the one hand, and the Messaging
Business on the other hand or (v) agreement with any
broker, distributor, dealer or with respect to any
franchise or agency relationship outside of the ordinary
course of business.
(c) Since November 15, 1994, neither
New Valley nor DSC has entered into any contract,
agreement or commitment relating to the Messaging Business
that would be prohibited under the terms of Section 11 of
the Trademark Agreement.
3.21. BROKERS AND FINDERS. None of New Valley,
DSC, or any of their officers, directors or employees has
employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this
Agreement.
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3.22. LABOR RELATIONS. (a) Each of New
Valley (relating solely to its conduct of the Messaging
Business) and DSC is in compliance in all material
respects with all applicable laws respecting employment
and employment practices, terms and conditions of
employment and wages and hours with respect to the
Messaging Business, except for such noncompliance as would
not individually or in the aggregate have a Material
Adverse Effect; (b) as of the date hereof, there are no
charges, known investigations, administrative proceedings
or formal complaints of discrimination pending or, to
Sellers' knowledge, threatened before the Equal Employment
Opportunity Commission or any other Governmental Agency
against New Valley or DSC in connection with the Messaging
Business; (c) there have been no governmental audits of
the equal employment opportunity practices of DSC or New
Valley relating to the Messaging Business; (d) as of the
date hereof, there is no unfair labor practice complaint
or charge against or involving New Valley (relating solely
to its conduct of the Messaging Business) or DSC, or to
Sellers' knowledge, threatened before the National Labor
Relations Board or any other Governmental Agency in
respect of the Messaging Business; (e) there is no ongoing
(and since November 15, 1994 has not been any) material
labor strike, dispute, organizing effort, slow down,
stoppage or other concerted labor difficulty pending,
involving or threatened against or affecting the Messaging
Business which resulted in a Material Adverse Effect, and
(f) no "representation" question exists (or has existed
since November 15, 1994) respecting employees of the
Messaging Business. Certain employees of the Messaging
Business are covered by the Communications Workers of
America Collective Bargaining Agreement, a copy of which
has been delivered to Purchaser.
3.23. FULL DISCLOSURE.
(a) Except as specifically disclosed
in this Agreement (including any Schedule or Exhibit
hereto), Sellers are not aware of any facts pertaining to
the Messaging Business which could, individually or in the
aggregate, have a Material Adverse Effect, or that could
be expected to impair the ability of Sellers to perform
this Agreement and the transactions contemplated hereby.
(b) To the knowledge of Sellers, no
representation or warranty of Sellers in this Agreement,
nor any financial or other written statement (considered
together with all other financial or other written
statements) or certificate furnished or to be furnished to
Purchaser pursuant to this Agreement, or in connection
with the transactions contemplated by this Agreement,
contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements
contained herein or therein not misleading.
3.24. DATE OF REPRESENTATIONS AND
WARRANTIES. Each of the representations and warranties of
Sellers contained in this Article III is given as of the
Cut-Off Date, other than the representations and
warranties contained in Section 3.1, 3.2,
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3.3, 3.4 and 3.6(b), each of which is given as of the
Closing Date.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Sellers as follows:
4.1. CORPORATE ORGANIZATION.
Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state
of Georgia.
4.2. AUTHORIZATION. Purchaser has
full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated
hereby. Purchaser has taken all necessary action to
authorize the execution and delivery of this Agreement and
the transactions contemplated hereby, and this Agreement
is a legal, valid and binding agreement of Purchaser
enforceable in accordance with its terms except that (i)
such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, (ii)
the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought, and
(iii) enforceability of the indemnification provisions of
this Agreement may be subject to limitations of public
policy under Federal and state securities laws.
4.3. NO VIOLATION. Neither the
execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will
violate any provisions of the certificate of incorporation
or by-laws of Purchaser, or violate, or be in conflict
with, or constitute a default under, or cause the
acceleration of the maturity of any debt or obligation
pursuant to, any agreement or commitment to which
Purchaser is a party or by which Purchaser is bound, or
violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority,
except for such violations, conflicts or defaults as would
not have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated by
this Agreement.
4.4. CONSENT AND APPROVALS OF
GOVERNMENTAL AUTHORITIES. No consent, approval or
authorization of, or declaration, filing or registration
with, any Governmental Agency is required in connection
with the execution, delivery and performance of this
Agreement or the consummation of the transactions
contemplated hereby.
4.5. LITIGATION. No action, suit,
proceeding or investigation is pending or, to the
knowledge of Purchaser, threatened, against, relating to
or affecting Purchaser or any of its assets or properties
which could reasonably be expected to result in the
issuance of any judgment, decree, injunction or
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similar order (whether preliminary or final) of a
governmental or regulatory authority restraining,
enjoining or otherwise prohibiting or making illegal the
execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
4.6. BROKERS AND FINDERS. Neither
Purchaser nor any of its officers, directors or employees
has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated by
this Agreement.
4.7. REPRESENTATIONS OF SELLERS;
CURRENT NET ASSETS STATEMENT. Purchaser is not aware of
any facts or circumstances that would (i) render untrue or
inaccurate in any material respect any representation or
warranty of Sellers contained in Article III (other than
in Sections 3.1, 3.2, 3.3, 3.4, 3.14, 3.21, and 3.23),
including all information scheduled in connection
therewith or (ii) indicate that, assuming the accuracy of
Sellers' representation in Section 3.19, the financial
information contained in the Current Net Assets Statement
does not fairly present the assets and liabilities of DSC
at September 30, 1995.
4.8. FULL DISCLOSURE. To the
knowledge of Purchaser and FSI, no representation or
warranty of Purchaser in this Agreement, nor any financial
or other written statement (considered together with all
other financial or other written statements) or
certificate furnished or to be furnished to Sellers
pursuant to this Agreement, contains any untrue statement
of a material fact, or omits to state a material fact
necessary to make the statements contained herein or
therein not misleading.
ARTICLE V. COVENANTS AND AGREEMENTS OF THE PARTIES.
5.1. CONFIDENTIALITY. Each party
hereto will hold all information described as
"confidential information" in the Letter Agreement dated
June 30, 1994 between New Valley and Purchaser
confidential in accordance with the terms thereof which
agreement shall remain in full force and effect after the
Closing as provided therein.
5.2 INSTRUMENTS OF CONVEYANCE AND ASSUMPTION.
(a) At the Closing (i) Sellers shall
execute and deliver to Purchaser the General Assignment
and Bill of Sale attached as Exhibit C (the "Bill of
Sale"), pursuant to which Sellers will transfer the Assets
to Purchaser and (ii) Purchaser shall execute and deliver
to Sellers the Assumption Agreement attached as Exhibit D
(the "Instrument of Assumption"), pursuant to which
Purchaser will assume all of the Assumed Liabilities.
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(b) Following the Closing (i) Seller
shall execute such other documents and instruments as
Purchaser may reasonably request to vest in Purchaser good
and valid title, free and clear of all Liens, other than
Permitted Liens, to the Assets, including the Deferred
Assets, and all interests owned, licensed or otherwise
held by Sellers directly or indirectly in such Assets or
the Marks and (ii) Purchaser shall execute such other
documents and instruments as Sellers may reasonably
request to effectively assume all Liabilities relating to
or arising from the Deferred Assets transferred to
Purchaser pursuant to Section 1.4.
5.3. NONCOMPETITION.
(a) From and after the Closing Date
until October 31, 1997 (the "Restricted Period"), New
Valley (and any subsidiary or affiliate of New Valley,
including DSC) shall not engage, directly or indirectly,
in the Messaging Business (as such business is conducted
on the Cut-Off Date) anywhere in the world or, directly or
indirectly, own an interest in, manage, operate, join,
control, or participate in or be connected with, as a
partner, stockholder or otherwise, any natural person or
entity that competes with the Messaging Business (as
conducted on the Cut-Off Date); provided, however, that
for the purposes of this Section 5.3, ownership of
securities having no more than 5% of the outstanding
voting power of any such competitor, which are listed on
any national securities exchange or traded in the national
over-the-counter market (National Association of
Securities Dealers' National Market System) shall not be
deemed to be a violation of this Section 5.3, so long as
New Valley has no other material relationship with such
competitor; and provided, further, that (i) such 5%
threshold shall not be deemed to apply to any securities
owned by (x) Ladenburg, Thalmann & Co., Inc., an affiliate
of New Valley ("Ladenburg"), in the ordinary course of
business consistent with past practice, and (y) customers
or clients of Ladenburg that are not affiliates of Sellers
and (ii) the prohibitions of this Section 5.3(a) shall not
apply to customary investment banking activities of
Ladenburg provided on an arms'-length basis in the
ordinary course of business consistent with past practice,
in each case so long as it does not control the issuer of
such securities or such customers or clients.
Notwithstanding any provision of this Agreement, nothing
contained in this Section 5.3 shall be deemed to prohibit
Sellers or any affiliate of either of them from owning or
acquiring any interest in a commercial bank or savings
institution that, on an arms'-length basis and in the
ordinary course of its business and, lends money or
provides other banking services to any entity involved in
the Messaging Business (as conducted on the Cut-Off Date),
so long as such commercial bank or savings institution, as
the case may be, does not control such entity.
(b) As a separate and independent
covenant, New Valley agrees with Purchaser that, during
the Restricted Period, New Valley (and any subsidiary or
affiliate controlled by New
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Valley) will not in any way, directly or indirectly, for
the purpose of conducting or engaging in the Messaging
Business, call upon, solicit, advise or otherwise do, or
attempt to do, business with any customers of the
Messaging Business with whom New Valley (or any subsidiary
or affiliate thereof controlled by New Valley) had any
dealings prior to the Cut-Off Date, or take away or
interfere or attempt to interfere with any custom, trade,
business or patronage of the Messaging Business.
(c) At the Closing, New Valley and
Purchaser shall enter into a side letter providing for
certain modifications of Section 5.6 of the 1994 Purchase
Agreement (the "Side Letter").
ARTICLE VI. EMPLOYEE MATTERS.
6.1 COVERED EMPLOYEES; PRIOR SERVICE.
(a) On the Closing Date, Purchaser,
or an affiliate controlled by Purchaser, shall offer
employment, effective as of October 1, 1995 (the "Transfer
Date"), to all individuals named in Schedule 6.1 (such
employees listed therein being referred to herein as
"Covered Employees"), which Schedule shall be prepared by
Purchaser (with the assistance of Sellers if needed). Any
such offer of employment shall carry cash compensation
substantially the same as the cash compensation to which
such employees were entitled immediately prior to the
Transfer Date.
(b) There are no employment,
severance or similar agreements or arrangements covering
or otherwise relating to any Covered Employee.
6.2. BENEFITS AND PRIOR SERVICE
CREDIT. Effective as of the Transfer Date, all Covered
Employees shall cease to participate in all Benefit Plans
and shall be immediately entitled to participate in
employee benefit and welfare plans established by
Purchaser or an affiliate of Purchaser, each of which,
other than the Western Union Financial Services Inc.
Retirement Savings Plan, shall be the same in all material
respects to the respective Benefit Plan under which they
were covered immediately prior to the Transfer Date.
Periods of employment with DSC or any affiliate of DSC
(including, without limitation, any predecessor in
interest of DSC or an affiliate of DSC), to the extent
recognized under Benefit Plans immediately prior to the
Transfer Date, shall be taken into account for purposes of
determining, as applicable, eligibility for participation,
eligibility for benefits, distributions and vesting of any
Covered Employee under Purchaser's employee benefit and
welfare plans.
6.3. VACATION. Without limiting the
generality of Purchaser's obligations under Section 6.2,
Purchaser shall establish a vacation pay plan covering all
Covered Employees, effective as of the Transfer Date,
which plan shall be the same
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in all material respects to the vacation pay plan covering
Covered Employees immediately prior to the Transfer Date.
Under such vacation pay plan, Purchaser shall recognize
any vacation accrued by Covered Employees under the
vacation pay plan that remained unused as of the Closing
Date.
6.4. SEVERANCE MATTERS.
(a) The employment by Purchaser or
an affiliate thereof of the Covered Employees effective as
of the Transfer Date shall not be considered a severance
of employment by Sellers.
(b) Purchaser shall indemnify and
hold harmless Sellers and their respective affiliates,
directors, officers, employees and other agents of New
Valley or DSC (collectively, "Seller Affiliates"), in
accordance with Section 8.2, from and against any Losses
(as defined in Section 8.2) that may be suffered or
incurred by New Valley, DSC or any Seller Affiliate in
connection with any termination of employment (voluntary
or involuntary) or change in the terms and conditions of
employment of any Covered Employee.
6.5 SPECIFIC BENEFIT PLAN AGREEMENTS.
(a) Sellers shall cause the benefits
of Covered Employees that have accrued under the Western
Union Retirement Savings Plan and the Western Union
Retirement Savings Plan for Bargaining Unit Employees
(together, the "Seller Savings Plans") as of the Transfer
Date (the "Accrued Savings Benefits") to be fully vested
and non-forfeitable as of such date. Without limiting the
generality of Purchaser's obligations under Section 6.2,
effective as of the Transfer Date, all Covered Employees
shall become participants under the Western Union
Financial Services Inc. Retirement Savings Plan or the
Western Union Financial Services Inc. Retirement Savings
Plan for Bargaining Unit Employees (together, the
"Purchaser Savings Plans"). Each of the Purchaser Savings
Plans shall (i) provide for the transfer to the trust
thereunder of the assets attributable to the accounts of
Covered Employees under the respective Seller Savings Plan
and the crediting and maintenance of such accounts under
the applicable Purchaser Savings Plan, (ii) provide that
any accounts of Covered Employees transferred thereto from
Seller Savings Plans shall be fully vested at all times,
(iii) preserve for Covered Employees all benefits required
to be preserved under Section 411(d)(6) of the Code with
respect to their accounts transferred thereto from Seller
Savings Plans and (iv) provide that periods of employment
with DSC or any affiliate of DSC (including, without
limitation, any predecessor in interest of DSC or an
affiliate of DSC), to the extent recognized under either
Seller Savings Plan immediately prior to the Transfer
Date, shall be taken into account for purposes of
determining eligibility for participation, distributions,
vesting and amount of employer contributions of any
Covered Employee under the applicable Purchaser Savings
Plan. Provided that Sellers and
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Purchaser have each complied with the foregoing
requirements of this Section 6.5(a), as soon as
practicable after the Transfer Date, Sellers shall cause
the trustee of each Seller Savings Plan to transfer to the
trustee of each Purchaser Savings Plan an amount equal to
the fair market value of the Accrued Savings Benefits
determined as of the valuation date of the Seller Savings
Plans coinciding with or first following the Transfer
Date, and Purchaser shall cause the trustee of each
Purchaser Savings Plan to accept such transfer.
(b) Without limiting the generality
of Purchaser's obligations under Section 6.2, effective as
of the Transfer Date, all Covered Employees shall become
participants in employee welfare plans established by
Purchaser or an affiliate of Purchaser, each of which
shall be the same in all material respect to the
respective Benefit Plan covering Covered Employees as in
effect immediately prior to the Transfer Date. Purchaser
shall cause each such employee welfare plan (i) to be
available to each Covered Employee (and his or her
eligible dependents) without any waiting period, (ii) to
waive any limitation of Covered Employees (and their
eligible dependents) due to pre-existing conditions and
any physical examination and actively-at-work requirements
and (iii) to credit each Covered Employee with all
deductible payments and co-payments paid by such Covered
Employee under the Benefit Plans during the 1995 calendar
year for all relevant purposes. Sellers shall be
responsible for all claims incurred prior to the Transfer
Date in respect of Covered Employees which are payable
under the terms and conditions of any Benefit Plan that is
an employee welfare plan. Claims incurred on or after the
Transfer Date in respect of Covered Employees shall be the
sole responsibility of Purchaser in accordance with the
terms and conditions of any of Purchaser's employee
welfare plans. For purposes of this Section 6.5(b), a
claim shall be deemed incurred when (A) with respect to
medical or dental benefits, the medical or dental services
giving rise to such claim are performed and (B) with
respect to life insurance or disability benefits, the
event giving rise to such claim occurs. Notwithstanding
anything to the contrary in this Section 6.5(b), claims of
any Covered Employee who is hospitalized on the Transfer
Date will remain the responsibility of Sellers until the
hospitalization is ended.
(c) Purchaser shall indemnify and
hold harmless Sellers and any Seller Affiliate, in
accordance with Section 8.2, from and against any Losses
incurred by Sellers or any Seller Affiliate in connection
with the provision of health care continuation coverage
for any Covered Employee under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
(d) Sellers shall remain
responsible for all Liabilities arising under any worker's
compensation arrangement in connection with the foregoing,
to the extent such Liability relates to events occurring
solely prior to the Transfer Date (other than Liabilities
reflected on the Current Net Assets
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Statement), and Purchaser shall have responsibility for
all other worker's compensation Liabilities with respect
to the Covered Employees.
6.6. PLANS SUBJECT TO COLLECTIVE BARGAINING AGREEMENTS.
(a) Prior to the Transfer Date,
Sellers shall have paid, in respect of each
Covered Employee who is a participant in Seller
Savings Plans, three-fourths of the annual $600 per
participant cash special contribution under such plan.
Purchaser shall be responsible for making, in a timely
manner, the remainder of such contribution to the
Purchaser Savings Plans, and Purchaser shall indemnify and
hold harmless Sellers and any Seller Affiliate, in
accordance with Section 8.2, from and against any Losses
that may be suffered or incurred by Sellers or any
affiliate of Sellers as a result of Purchaser's failure to
make such contribution.
(b) Nothing contained in this
Agreement shall require Sellers or any affiliate of New
Valley or DSC to breach any collective bargaining
agreement.
6.7. ACKNOWLEDGEMENT. Purchaser
acknowledges receipt of pertinent information from
personnel and employment records in respect of Covered
Employees that is required in order to carry out
Purchaser's obligations hereunder. Except as otherwise
provided in this Article VI or in any collective
bargaining agreement, Purchaser and Sellers acknowledge
that nothing in this Article VI shall be construed as (i)
requiring Purchaser to continue the employment of any
Covered Employee or prohibiting the termination of or
change in terms of employment of any Covered Employee,
(ii) vesting in any Covered Employee any right to
continued employment, (iii) requiring Purchaser to
continue any particular employee benefit plan, program,
policy or practice for any particular period of time after
the Transfer Date or (iv) prohibiting or in any way
limiting Purchaser from amending or terminating any such
plan, program, policy or practice after the Transfer Date,
it being understood, however, that, Purchaser shall assume
any and all Liabilities in connection with the foregoing.
6.8. WORKER ADJUSTMENT AND RETRAINING
NOTIFICATION ACT. Purchaser shall indemnify and hold
harmless Sellers and any Seller Affiliate, in accordance
with Section 8.2, from and against any Losses that may
arise (i) with respect to any obligations and liabilities
under the Worker Adjustment and Retraining Notification
Act of 1988, as amended, and each similar state law with
respect to any Covered Employees terminated by DSC on or
before the Transfer Date or Purchaser after the Transfer
Date, (ii) by reason of Purchaser's failure to employ, to
continue to employ or to employ other than on the terms
and conditions provided herein, any Covered Employee or
(iii) by reason of the severance from service of any
Covered Employee not offered, or continued in, employment
by Purchaser.
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6.9. CERTAIN LIMITATIONS ON PURCHASER'S
OBLIGATIONS. Notwithstanding any provision
of this Article VI, Purchaser (or its relevant affiliates)
shall not have any obligation to provide employee benefits
of any kind to Covered Employees that do not accept the
offers of employment referred to in the first sentence of
Section 6.1(a), except to the extent required by law;
provided, however, that this limitation shall in no way
reduce or affect Purchaser's obligation under this Article
VI to indemnify Sellers and any Seller Affiliate.
ARTICLE VII. DELIVERIES AT CLOSING.
7.1. DOCUMENTS TO BE DELIVERED BY SELLERS.
At the Closing:
(a) Sellers shall duly execute and deliver to Purchaser
the Bill of Sale.
(b) Sellers shall deliver to Purchaser
the opinion of Marc N. Bell, Counsel of New Valley,
addressed to Purchaser, substantially in the form attached
hereto as Exhibit E.
(c) Sellers shall deliver to Purchaser
an Officers' Certificate in the form attached hereto as
Exhibit F.
7.2. DOCUMENTS TO BE DELIVERED BY PURCHASER.
At the Closing:
(a) Purchaser shall duly execute and
deliver to Sellers the Instrument of Assumption.
(b) Purchaser shall deliver to
Sellers the opinion of a duly acknowledged legal officer
of Purchaser, addressed to Sellers, substantially in the
form attached hereto as Exhibit G.
(c) Purchaser shall deliver to Sellers
an Officer's Certificate in the form attached hereto as
Exhibit H.
7.3 AGREEMENTS TO BE EXECUTED BY THE PARTIES. At the
Closing:
(a) The Release and Termination
Agreement shall be duly executed and delivered by the
parties thereto, and all actions contemplated therein to
be taken at the Closing (including without limitation, the
transfer of certain monies under the Escrow Agreement to
Purchaser and New Valley) as provided therein, shall be
taken.
(b) The Sales, Marketing and Services
Agreement shall be duly executed and delivered by the
parties thereto.
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(c) The Side Letter shall be duly
executed and delivered by New Valley and Purchaser.
ARTICLE VIII. SURVIVAL, INDEMNIFICATION.
8.1. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. The representations and warranties contained
in Sections 3.1, 3.2, 3.4, 3.7, 3.9, 3.14, 3.18, 3.21,
4.1, 4.2, 4.6 and 4.7, and the covenant contained in
Section 9.5, shall survive until the applicable statute of
limitations has expired or six years from the Cut-Off
Date, whichever period is shorter; the covenants in the
provisions of Article V shall survive for the respective
time periods indicated therein; the provisions of Article
I and II, the covenants of Purchaser contained in Section
1.5, and of the parties contained in Article VI, shall
survive indefinitely; and the covenants of the parties in
Section 1.4, and all representations, warranties and
covenants not specifically described above set forth in
this Agreement shall survive for a period of eighteen
months following the Cut-Off Date.
8.2. INDEMNIFICATION.
(a) Subject to the limitations on
indemnification set forth in paragraph (b) below,
Purchaser, on the one hand, and Sellers, jointly and
severally, on the other hand, each agree to indemnify and
hold harmless the other party and its affiliates,
directors, officers, employees and agents ("Indemnified
Parties") from and against any loss, liability, damage or
deficiency, including, without limitation, costs,
interest, penalties and reasonable attorneys' fees
(collectively, "Losses") arising out of or due to any
breach of any covenant or any representation or warranty
made by such party in this Agreement. In addition,
Purchaser agrees to indemnify and hold harmless Sellers
and their respective Indemnified Parties from any Losses
arising out of or in connection with (i) the Assets, (ii)
any Assumed Liability, and (iii) the Deferred Assets
(whether or not transferred pursuant to Section 1.4) or
any actions taken by Purchaser or Sellers in respect of
the transfer (or attempted transfer) of the Deferred
Assets as provided in Section 1.4.
(b) Notwithstanding anything to the
contrary contained in this Agreement, no amounts of
indemnity shall be payable under Sections 8.2:
(i) in the case of a claim by a Purchaser or
its Indemnified Parties, (A) unless and until
Purchaser, together with its Indemnified Parties,
has incurred Losses under this Agreement in
excess of $200,000 in the aggregate (whereupon
all such Losses (x) other than with respect to
taxes, in excess of $200,000 in the aggregate and
(y) with respect to taxes, in excess of $50,000
in the aggregate, shall be covered hereby); or
(B) if the Purchaser, together with its
Indemnified Parties, has received payments in
respect of such Losses from Sellers of $1,500,000
in the aggregate, other than Losses in respect of
Sellers' breach
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of any representation, warranty or covenant in
this Agreement in respect of (x) taxes, which
shall not be subject to any limitation or (y) the
Intellectual Property and Intellectual Property
Agreements covered by the terms of Section
3.7(c), which shall be subject to a limitation of
$5,000,000 in the aggregate;
(ii) with respect to any claim for
indemnification under Section 8.2, if the
Indemnified Party has not given the person
against whom a claim for indemnification is being
sought under this Section 8.2 (an "Indemnifying
Party") a notice with respect to such claim
setting forth in reasonable detail the specific
facts and circumstances pertaining thereto (an
"Indemnity Notice"), (A) as soon as practicable
following the time at which the Indemnified Party
discovered such claim, provided that, and solely
to the extent that, the Indemnifying Party
establishes that the failure of an Indemnified
Party to give such an Indemnity Notice materially
prejudiced its ability to adequately defend the
claim and (B) in any event prior to the
applicable survival period as set forth in
Section 8.1; or
(iii) with respect to any Loss, to the extent
that (A) the Indemnified Party had a reasonable
opportunity, but failed, in good faith to
mitigate the Loss, including but not limited to
the failure to use commercially reasonable
efforts to recover under a policy of insurance or
under a contractual right of set-off or
indemnity; provided that no Indemnified Party
shall be required to commence litigation in order
to satisfy the provisions of this clause (iii);
(B) executive officers of any Indemnified Party
had, at the Closing Date, actual knowledge of
such Loss (or that a Loss in respect of any
potential material claim was reasonably likely to
occur); or (C) the Indemnified Party contributed
to such Loss, by breach of representation,
warranty or covenant herein or otherwise.
(c) In the event indemnification is
sought under this Section 8.2, then the Indemnified Party
shall promptly give an Indemnity Notice to the
Indemnifying Party. If the Indemnifying Party notifies
the Indemnified Party that it does not dispute the claim
described in the Indemnity Notice or fails to notify the
Indemnified Party within 30 days following receipt
thereof, the Loss in the amount specified in the Indemnity
Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 8.2 and the Indemnifying
Party shall pay to the Indemnified Party, on demand, the
amount of such Loss, together with interest thereon
accruing at the rate of 10% per annum from the 31st day
following receipt by the Indemnifying Party of such
Indemnity Notice until the amount of such Loss is paid in
full. If the Indemnifying Party has timely disputed its
liability with respect to a claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to
negotiate a resolution of the dispute during the ensuing
30-day period. The dispute, if not resolved through
negotiations during this period, will be deemed
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a liability of the Indemnifying Party, together with
interest thereon accruing at the rate of 10% per annum
from the date the Indemnity Notice was delivered until the
date such Loss became final as provided herein, upon the
issuance of a final non-appealable order of a court of
competent jurisdiction, payable by the Indemnifying Party
to the Indemnified Party on demand.
(d) In the event any claim is asserted
against an Indemnified Party for which indemnification may
be sought under this Section 8.2, then the Indemnified
Party shall promptly give an Indemnity Notice to the
Indemnifying Party with respect to the claim, action or
proceeding for which indemnity is sought. The
Indemnifying Party shall have the right to assume control
of or join in, at the Indemnifying Party's election, the
defense of the claim, action or proceeding by
representatives of its own choosing at the Indemnifying
Party's sole cost and expense; provided, however, that if
the Indemnifying Party fails to assume control of the
defense of the claim, action or proceeding as provided
above within 30 days after it has received an Indemnity
Notice, the Indemnified Party shall have the right to
undertake the defense, compromise or settlement of the
claim, action or proceeding on behalf of and at the
expense of the Indemnifying Party, with representatives of
its own choosing reasonably satisfactory to the
Indemnifying Party. If the Indemnifying Party has elected
to assume control of the defense of the claim, action or
proceeding, it shall not (i) settle or compromise any
action or proceeding or consent to the entry of any
judgment which does not include as a term thereof the
delivery by the claimant or plaintiff to the Indemnified
Party of a written release from all liability in respect
of any action or proceeding or (ii) settle or compromise
any action or proceeding or consent to the entry of a
judgment for other than solely monetary damages without
the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld.
8.3 EXCLUSIVITY. After the Closing,
to the extent permitted by law and except in respect of
any fraud of any party hereto, the indemnities set forth
in this Agreement shall be the exclusive remedies of
Purchaser and Sellers for any misrepresentation, breach of
warranty or nonfulfillment or failure to be performed of
any covenant or agreement contained in this Agreement, and
the parties shall not be entitled to a rescission of this
Agreement or to any further indemnification rights or
claims of any nature whatsoever in respect thereof, all of
which the parties hereto hereby waive.
ARTICLE IX. MISCELLANEOUS.
9.1. PUBLIC ANNOUNCEMENTS; NOTICES.
(a) The parties shall cooperate and
coordinate with one another on the form and substance of a
release announcing the consummation of the Acquisition.
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(b) Any notice or other communication
required or permitted hereunder shall be in writing and
shall be delivered personally (including by courier), sent
by facsimile transmission or sent by certified, registered
or express mail, postage prepaid. Any such notice shall
be deemed given when so delivered personally, or if sent
by facsimile transmission, when transmitted (together with
proof of sending), or, if mailed, when received, as
follows:
(i) if to Purchaser, to:
First Financial Management Corporation
5660 New Northside Drive, Suite 1400
Atlanta, Georgia 30328
Attention: John C. Walters, Esq.
Telephone: (770) 857-7139
Facsimile: (770) 857-0403
(ii) if to New Valley or DSC, to:
New Valley Corporation
International Place
100 S. E. Second Street
32nd Floor
Miami, Florida 33131
Attention: Marc N. Bell, Esq.
Telephone: (305) 579-8018
Facsimile: (305) 579-8016
Any party may, by notice given in accordance with this
Section 9.1 to the other party, designate another address
or person for receipt of notices hereunder.
9.2. ENTIRE AGREEMENT. This
Agreement (including all Schedules and Exhibits hereto),
together with the Bill of Sale, the Instrument of
Assumption, the Release and Termination Agreement and the
Sales, Marketing and Services Agreement (including the
side letter with respect thereto), constitutes the entire
agreement and understanding among the parties with respect
to the Acquisition and supersedes all prior discussions,
agreements and undertakings, written or oral, of any and
every nature with respect thereto.
9.3. GOVERNING LAW. This Agreement
shall be governed in all respects, including validity,
construction, interpretation and effect, by the internal
laws of the state of New York (without regard to
principles of conflicts of law).
9.4. BINDING EFFECT; NO ASSIGNMENT;
NO THIRD PARTY BENEFICIARY. This Agreement shall be
binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. This
Agreement is not assignable without the prior written
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<PAGE> 32
consent of each of the parties hereto; provided, however,
that Purchaser may assign its rights under this Agreement
to a wholly-owned subsidiary without such prior written
consent, but no such assignment shall relieve Purchaser of
any of its obligations hereunder. This Agreement does not
create any rights, claims or benefits inuring to any
person that is not a party hereto or create or establish
any third party beneficiary hereto.
9.5. TAXES.
(a) Purchaser shall bear and pay all
sales, transfer, stamp or other similar taxes imposed in
connection with the Acquisition.
(b) Except as provided in Section
9.5(a), Sellers will indemnify and hold Purchaser
harmless, in accordance with Section 8.2, against any and
all liability for Federal, state, local or foreign taxes
(including any interest, penalties or additions to tax
that may become payable in respect thereof, after taking
into account any tax benefits to Purchaser in respect of
the incurrence or payment of any such tax liabilities)
assessed against or payable by Sellers with respect to any
period ending on or before the Cut-Off Date or any period
ending on or before the last day of the taxable year of
New Valley's consolidated group in which the Closing
occurs; provided, that taxes other than income or
franchise taxes imposed for a taxable period that includes
the Cut-Off Date shall be allocated pro rata per day
between the period ending on the Cut-Off Date and the
period commencing after the Cut-Off Date and Purchaser
shall be liable for (and Sellers shall not indemnify
Purchaser for) the taxes allocable to the period
commencing after the Cut-Off Date; and provided further,
that Purchaser shall not be indemnified for any tax
liabilities properly accrued and reflected on the Current
Net Assets Statement.
9.6. WAIVERS AND AMENDMENTS; NON-CONTRACTUAL
REMEDIES; PRESERVATION OF REMEDIES. This Agreement
may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a
written instrument signed by authorized representatives of
each of the parties or, in the case of a waiver, by an
authorized representative of the party waiving compliance.
No such written instrument shall be effective unless it
expressly recites that it is intended to amend, supersede,
cancel, renew or extend this Agreement or to waive
compliance with one or more of the terms hereof, as the
case may be. No delay on the part of any party in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the
part of any party of any such right, power or privilege,
or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof of the
exercise of any other such right, power or privilege.
9.7 CHANGE OF NAME. Within 30 days
of the Closing Date, Sellers shall cause the name of DSC
to be changed to delete reference to "Western Union", the
documentation with respect to which shall be prepared by
Purchaser and reasonably satisfactory to Sellers.
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9.8 KNOWLEDGE. Except as otherwise
specifically provided in this Agreement, the "knowledge"
of any party means the knowledge of any executive officer,
division manager, or other management-level employee of
such party.
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<PAGE> 34
IN WITNESS WHEREOF, each of the parties
hereto has caused its duly authorized representative to
execute this Agreement as of the date first set forth
above.
NEW VALLEY CORPORATION
By__________________________
Name: Marc N. Bell
Title: Counsel and Secretary
WESTERN UNION DATA SERVICES
COMPANY, INC.
By__________________________
Name: Richard W. Gooding
Title: President
FIRST FINANCIAL MANAGEMENT
CORPORATION
By__________________________
Name: Randolph L. M. Hutto
Title: Senior Executive Vice
President
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EXHIBIT A
SALES, MARKETING AND SERVICES AGREEMENT
Sales, Marketing and Services Agreement (the
"Agreement") dated as of September 30, 1995, by and among
Western Union Financial Services, Inc., a Delaware
corporation ("FSI"), Western Union Communications, Inc., a
Delaware corporation ("WUC"), and Western Union Data
Services Company, Inc., a Delaware corporation ("DSC").
The effective date of this Agreement ("Effective Date")
shall be the Closing Date for the acquisition of certain
of DSC's assets and the assumption of the related
liabilities by First Financial Management Corporation, a
Georgia corporation ("FFMC"), pursuant to the Asset
Purchase Agreement among New Valley Corporation ("New
Valley"), DSC and FFMC, dated as of September 30, 1995
(the "Asset Purchase Agreement").
WHEREAS, pursuant to the Asset Purchase
Agreement, inter alia, FFMC is acquiring most of the
assets of DSC and is assuming most of the liabilities of
DSC in connection with the messaging services business
(the "Acquired Business"), and DSC has retained certain
assets, licenses and contracts relating thereto (the
"Retained Assets"; the Retained Assets together with the
Acquired Business are hereinafter referred to as the
"Messaging Business");
WHEREAS, the parties have agreed that FSI shall
provide certain sales and marketing services to DSC which
will assist DSC in utilizing the Retained Assets in the
same manner FSI provided similar services in respect to
the Messaging Business under the now terminated Sales and
Marketing Services Agreement ("First Marketing
Agreement"), dated as of November 15, 1994, among FSI, DSC
and New Valley;
WHEREAS, FSI previously provided certain
managerial information, customer service, accounting and
information services to DSC;
WHEREAS, FFMC intends to transfer certain of the
assets of the Acquired Business to WUC;
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WHEREAS, the parties have agreed that WUC and its
affiliates (including FSI) will provide to DSC all the
operational, management information, customer service,
accounting and information services necessary for DSC to
provide the Messaging Services (as hereinafter defined)
and to utilize the Retained Assets;
WHEREAS, DSC holds an authorization (the
"Authorization") issued by the Federal Communications
Commission (the "FCC") to provide international telegram
and Mailgram services pursuant to Section 214 of the
Commissions Act of 1934, as amended (the "Act");
WHEREAS, DSC desires the operation of its
international telegram and Mailgram service to be managed
by WUC; and
WHEREAS, DSC, WUC and FSI wish to enter into this
Agreement to ensure that WUC manages the international
telegram and Mailgram service in accordance with the
policies established by DSC, the Act and the rules and
regulations promulgated thereunder by the FCC.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained in this Agreement and
in the Asset Purchase Agreement, the receipt and
sufficiency of which are hereby acknowledged, FSI, WUC and
DSC agree as follows:
ARTICLE I
SALES AND MARKETING SERVICES
FSI shall, on behalf of DSC, and at FSI's sole
cost and expense, sell and market to customers and
prospective customers worldwide the current services of
DSC with respect to the Retained Assets, consisting of
Mailgram, Cablegram and such other messaging services as
shall be offered by DSC from time to time as agreed to by
the parties hereto (the "Messaging Services").
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A. Appointment of FSI.
FSI is hereby irrevocably appointed the
exclusive sales and marketing agent of
DSC for the Messaging Services, and,
subject to the provisions of this
Agreement shall enjoy exclusive control
of all sales and marketing activities
associated therewith, including the right
to take orders and subscriptions for DSC,
and to execute customer agreements and
subscriptions on behalf of DSC, subject
to final acceptance of such agreements
and subscriptions by DSC or DSC's agent,
WUC.
B. Western Union Services.
The Messaging Services shall be offered
as "Western Union" services and products
pursuant to the terms of a limited
trademark license granted hereunder from
FSI, as licensee of FFMC, to DSC.
C. Sales and Marketing Tools.
Sales and marketing tools may include,
but shall not be limited to, promotional
campaigns, advertising, participation in
trade shows, utilization of the direct
sales force and telemarketing sales
department of FSI, its authorized
remarketers and resellers, and strategic
cooperative development and marketing
alliances. The selection of sales and
marketing tools, including authorizations
of remarketers and resellers, and
development of strategic marketing
alliances shall, subject to the
provisions contained herein, be in the
sole discretion of FSI.
D. Customer Support.
FSI shall offer customer sales support
including providing customer training
related to automated messaging. FSI
shall cooperate with DSC to ensure that
the commercial messaging services
customer support provided by FSI pursuant
to this Section is consistent with past
commercial messaging services customer
support provided to DSC.
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ARTICLE II
TRADEMARK AND SERVICE MARK LICENSES
FSI, as licensee of FFMC, hereby grants for the
term of this Agreement a royalty-free, non-exclusive
limited license to DSC for the marks "Western Union" and
"Mailgram" (the "Marks") for use only in connection with
the conduct of the business for the Messaging Services.
The terms and conditions of the license are set forth in
Exhibit A hereto.
ARTICLE III
CHARGES AND PAYMENTS FOR FSI SERVICES
A. Fee to FSI.
DSC shall compensate FSI for all services
performed by FSI pursuant to Article I
hereof by payments of a monthly fee as
set forth in Attachment A hereto (the
"FSI Fee").
B. Payments to FSI.
Within fifteen (15) days after the end of
each month, DSC, through its agent WUC,
shall pay to FSI the FSI Fee as set forth
in Section 3 (A) above and Attachment A
hereto. Failure of DSC to pay any such
amount not subject to a bona fide
dispute, within thirty (30) days after
notice of deficiency, shall be deemed a
default under this Agreement, and FSI
shall have the right to terminate this
Agreement forthwith upon notice to DSC.
C. DSC's Right of Audit.
During the term of this Agreement, DSC
shall have the right to audit FSI's books
and records relating to FSI's services
hereunder. Any such audit shall be
conducted upon no less than five (5)
days' notice, during regular business
hours at FSI's offices, and in such
manner as to minimize any interference
with FSI's normal business activities.
DSC agrees to make available to FSI its
records and reports pertaining to each
such audit on similar terms and
conditions, subject to any claim of
privilege.
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ARTICLE IV
OPERATIONAL AND ADMINISTRATIVE SERVICES
A. WUC (WUC for purposes of Article IV shall
include all WUC affiliates), at its sole
cost and expense, shall provide all
necessary, operational, management
information, customer service, accounting
and administrative services necessary for
DSC to provide the Messaging Services, as
set forth in more detail herein.
1. Customer Service Center Services
("CSC Services"). WUC will
perform, or cause to be
performed, CSC Services for
Messaging Services listed below.
For purposes of this Section IV
(A) (1), WUC shall mean both WUC
and, as applicable, any
third-party contractors
providing such services on
behalf of WUC.
(a) Message Handling Services.
(1) WUC subscribes
to AT&T's In-WATS services utilizing
the telephone number 800-325-6000.
WUC (as assignee of DSC) subscribes
to AT&T's In-WATS services utilizing
the telephone number 800-336-3337,
which telephone number terminates at a
switch located at WUC's facility in McLean,
Virginia. WUC will accept In-WATS
calls to such number's from customers
and prospective customers of the Messaging
Services, and shall forward such calls via
live operator or voice response units
("VRU") recording and transmittal pursuant
to this Section IV (A) (1) (a).
(2) WUC customer services
representative operators (the "CSRs") shall
accept messages from Messaging Services customers,
record and confirm such messages and transmit
such messages to FSI's computers (pursuant to
Section 2.b. below) for processing
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preparatory to delivery. CSR services
shall also include provision of
customer relations and message
information services.
(b) Message Processing Services.
WUC shall provide message processing
services for the Messaging
Services utilizing messaging
applications software which is
integrated into the money
transfer system of FSI.
(c) MDC System.
WUC's consumer messaging services
business utilizes a computer
system known as the Message
Distribution Center system (the
"MDC System") resident on an IBM
System 36 computer located in
WUC's Customer Service Center in
Dallas, Texas. WUC shall
provide DSC with use of the MDC
System.
(d) Engineering Support and Consulting.
WUC shall provide DSC with the services
of WUC's engineering department
for developmental engineering
support of the Tandem and Unisys
systems which process the
Messaging Services (including
consulting services).
2. Field Accounting Services.
WUC shall provide DSC billing and
accounts receivable services for the
Messaging Services.
3. Administrative Services.
WUC shall perform for and provide to DSC,
the following administrative services,
subject to the terms and conditions of
this Agreement.
(a) Accounts Payable Services.
WUC shall process for payment and pay,
from funds derived from the
Messaging Services, pursuant to
its normal payment schedule
those
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invoices which it shall receive on
behalf of the DSC for goods
purchased, services received and
other miscellaneous third-party
Messaging Services operating
expenses.
(b) Tax Administration.
WUC shall prepare and, subject to the
review and approval of DSC,
shall file all tax returns and
qualifications or similar forms
required for DSC pursuant to
applicable state and local tax
and franchise laws, excluding
all federal and state income
tax.
(c) Purchasing and Materials
Management Processing. Upon the
request of DSC, WUC shall
provide the necessary personnel
and systems support to meet the
ongoing purchasing and materials
management requirements of the
Messaging Services. FSI shall,
to the degree practicable,
utilize the purchasing power of
WUC to afford DSC service and
product volume discounts.
(d) General Ledger.
WUC shall process Messaging Services
revenue and other financial data
through WUC's general ledger
system, and provide DSC with
detailed general ledger,
subledger and revenue accounting
reports.
(e) Insurance Administration.
WUC shall provide and maintain all
necessary insurance policies for
the Messaging Services.
(f) Corporate Administration.
WUC shall, at its sole cost and
expense, maintain all applicable
qualifications, including all
registered agent qualifications
for DSC in each state where DSC
is so required to qualify.
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B. WUC shall, on behalf of DSC, provide all
necessary services, in addition to those
provided in Section IV(A) above, for
receiving messaging information,
processing, formatting, addressing,
directing such information and producing
messages and arranging delivery of DSC
products, including Mailgrams and
Cablegrams, and such other Messaging
Services as shall be offered by DSC from
time to time as agreed to by the parties
hereto, as well as coordinating
purchasing, billing, receipt of payments
and all other activities previously
performed by DSC prior to the Effective
Date as are applicable to the Messaging
Services.
1. Appointment of WUC as Agent of DSC.
During the term of this Agreement, WUC
is hereby irrevocably appointed
the exclusive agent of DSC for
operating the Messaging
Services, and, subject to the
provisions of this Agreement and
the overall supervision and
concurrence of DSC, shall enjoy
exclusive control of all aspects
of the administration,
operations, production, billing,
accounting, planning and
budgeting for the Messaging
Services, except for all sales
and marketing activities (to be
performed by FSI under Article
I), and to coordinate all
aspects of DSC's business
related to the Messaging
Services on behalf of DSC.
DSC agrees not to terminate the agency
relationship under this
Agreement other than pursuant to
the terms of this Agreement.
2. Messaging Services.
The Messaging Services shall be offered
as "Western Union" products
pursuant to the terms of this
agreement.
3. Billing and Payments.
WUC shall have complete responsibility
for credit decisions and credit
risks, unless otherwise agreed
by WUC and DSC. WUC shall
render
8
<PAGE> 43
all billing on behalf of DSC and
receive all payments with
respect to the Messaging
Services.
4. Revenue and Disbursements.
WUC shall collect and hold all
revenues, pay all expenses,
including its own fees, any
capital expenses or expenditures
and all taxes except DSC income
taxes, and shall remit to DSC
only net revenues. DSC shall
have complete access to all
books and records pertaining to
the Messaging Services.
5. WUC Performance Standards.
WUC's performance hereunder shall at a
minimum be comparable to and
consistent with those services
provided by DSC for itself and
by FSI for DSC as of the
Effective Date except for such
service changes as a result of
differences between the Acquired
Business and the business of
providing Messaging Services, as
contemplated hereunder. All
changes in performance standards
shall be by mutual agreement of
the parties.
6. Control by DSC.
DSC shall at all times exercise
ultimate control over the
Authorization and the
international telegram and
Mailgram service, and WUC and
FSI shall operate the
international telegram and
Mailgram service in compliance
with the policies of DSC and the
FCC.
7. Compliance with Law.
DSC shall at all times operate the
international telegram and
Mailgram service in compliance
with the Act and all applicable
rules, regulations and policies
of the FCC and any other
governmental agency with
authority, as such laws, rules,
regulations and policies are in
effect from time to time.
9
<PAGE> 44
ARTICLE V
CHARGES AND PAYMENTS FOR WUC SERVICES
A. Fee to WUC.
WUC's fee for the foregoing services (as
specified below) shall be paid out of the
gross revenues from Messaging Services.
WUC shall be responsible for paying all
fees, expenses and liabilities of the
Messaging Services business under this
Agreement, except the FSI Fee hereunder,
from the WUC Fee (as hereinafter defined)
it receives hereunder. The FSI Fee shall
be paid out of the gross revenues from
the Messaging Services; WUC, as DSC's
agent, shall deduct the FSI Fee before
any other costs or expenses are deducted
from such gross revenues; provided,
however, that WUC shall not pay the FSI
Fee until all non-affiliate creditors of
DSC or the Messaging Services business in
the ordinary course of business have been
paid or provided for. WUC is hereby
granted the rights to alter standard
agreements and change operations, but in
consideration thereof, WUC shall, except
as specifically provided below, bear all
losses, if any, of or arising in
connection with the Messaging Services or
the Retained Assets (including all costs
and expenses with respect thereto), and
including the FSI Fee and the WUC Fee,
during the term of this Agreement.
WUC shall receive, to the extent of
available gross revenue, equal monthly
payments totaling up to $21,360,000 for
any twelve-month period (the "WUC Fee").
WUC shall report complete financial
results of the Messaging Services
quarterly, beginning on December 31,
1995, and pay DSC the gross revenues from
Messaging Services for such quarter, less
(i) the FSI Fee for such quarter and (ii)
the WUC Fee for such quarter. Such
payments to DSC shall be made
semi-annually, commencing six months
after the end of the first quarter of
1996.
If for any reason WUC does not wish to
continue to accept the aforementioned
losses, it shall provide three months'
prior notice to DSC of its termination of
10
<PAGE> 45
its duty to bear loses, and after such
three-month period, WUC shall have no
further liability with respect to the
Messaging Services (except as to
liabilities incurred or arising prior to
the expiration of such three-month
period). Upon receipt of any such
notice, DSC may terminate this Agreement,
with no liability to DSC.
B. DSC's Right of Audit.
During the term of this Agreement, DSC
shall have the right to audit WUC's books
and records relating to WUC's services
hereunder. Any such audit shall be
conducted upon no less than five (5)
days' notice, during regular business
hours at WUC's offices, and in such
manner as to minimize any interference
with WUC's normal business activities.
DSC agrees to make available to WUC its
records and reports pertaining to each
such audit on similar terms and
conditions, subject to any claim of
privilege.
ARTICLE VI
TERM AND TERMINATION
A. Term.
The term of this Agreement shall commence
on the Effective Date, and shall continue
until the earlier of March 31, 1997 or
the transfer or sale of DSC's assets
related to or derived from the Messaging
Services, as may be authorized or
permitted by WUC or FSI.
B. Termination.
1. This Agreement may be terminated
by FSI for default in the event
of non-payment by DSC of the
FSI Fee, in accordance with the
terms of Section 3 (B) above.
2. To the extent it affects them,
this Agreement may also be
terminated by FSI or WUC, on the
one hand, or DSC, on the other
hand, for
11
<PAGE> 46
breach or failure of the other (other
than non-payment by DSC) to
comply with any material term or
condition of this Agreement,
provided that such party shall
notify the other of its
intention to terminate by
written notice to the other
applicable party that such party
has failed to comply with, or
has breached, a material term or
condition of this Agreement
affecting the notifying party;
and provided further that such
notice shall specifically state
the term or condition claimed to
be breached, and shall provide
sixty (60) days in which the
breaching party may correct such
alleged breach, or take such
steps as to provide reasonable
assurance to the non-breaching
party of its intention and
ability to cure.
3. DSC may terminate this Agreement
pursuant to the last paragraph
of Section V (A) above.
4. Any such termination shall not
modify or reduce the rights or
obligations of any party with
respect to services due or
rendered prior to the effective
date of termination, or payments
with respect thereto.
ARTICLE VII
CONFIDENTIALITY
A. Information Deemed Confidential.
FSI and WUC both agree that all
information disclosed to FSI or WUC by
DSC regarding any aspect of the Messaging
Services will be and remain the sole and
exclusive property of DSC, and shall be
deemed "confidential" pursuant to the
terms of this Article VII. DSC agrees
that all information disclosed to it by
FSI or WUC (except for customer
information relating to the Messaging
Business) shall be and remain the sole
and exclusive property of FSI or WUC, as
the case may be, and shall be deemed
"confidential" pursuant to the terms of
this Article VII, for so long as FSI or
any of its affiliates owns (directly or
indirectly) or operates the Messaging
Services.
12
<PAGE> 47
B. Treatment of Confidential Information.
Such confidential information of the
receiving party shall be used solely for
the purposes of this Agreement. Each
party agrees to keep in strict confidence
the confidential information of the
disclosing party. Each party further
agrees that such confidential information
shall not be disclosed by the recipient
party, its agents or employees without
the prior written consent of the
disclosing party. The provisions of this
Article VII shall not apply to any
information which belongs to the
recipient party or is (1) publicly known
or becomes publicly known through no
unauthorized act of the recipient party,
(2) rightfully received from a third
party not otherwise bound by a
confidentiality agreement with the
disclosing party, (3) independently
developed by the recipient party without
use of the other party's confidential
information, (4) approved for disclosure
by the party owning the confidential
information, or (5) required to be
disclosed pursuant to a requirement of a
governmental agency or law of the United
States or a State thereof, or any
governmental or political subdivision
thereof, so long as the party required to
disclose the information provides the
other party with timely prior notice of
such requirement and takes appropriate
action to limit the scope of such
disclosure and to obtain confidential
treatment of the information disclosed.
The provisions of this Article VII shall
survive the expiration or termination of
this Agreement, for a period of three (3)
years after such expiration or
termination.
ARTICLE VIII
ADDITIONAL PERFORMANCE STANDARDS
FSI and WUC shall instruct their respective
employees performing services pursuant to this Agreement
to perform their responsibilities consistent with FSI's
performance of such services for DSC under the First
Marketing Agreement as of the Effective Date except as
such responsibilities may be modified, from time to time,
by the parties, pursuant to this Agreement. All such work
shall be in strict compliance with all applicable federal
and state laws and nothing contained herein shall be
deemed to create any liability for DSC for any acts or
omissions by WUC or FSI. In addition, the parties agree
that DSC shall not have any
13
<PAGE> 48
liability hereunder other than with respect to claims
resulting from the gross negligence or willful misconduct
of DSC.
ARTICLE IX
INDEMNITIES; LIMITS OF LIABILITY
A. Indemnities.
1. FSI agrees to indemnify, defend
and hold harmless DSC and its
affiliates and their directors,
officers and employees, from any
and all claims, losses and
expenses (including attorneys'
fees) relating to or arising
from this Agreement, the
business of the Messaging
Services or the Messaging
Services, except such claims
resulting from the gross
negligence or willful misconduct
of DSC.
2. WUC agrees to indemnify, defend
and hold harmless DSC and its
affiliates and their directors,
officers and employees from any
and all claims, losses and
expenses (including attorneys'
fees) relating to or arising
from this Agreement, the
business of the Messaging
Services or the Messaging
Services, except such claims
resulting from the gross
negligence or willful misconduct
of DSC.
B. Limitations of Warranty.
EXCEPT FOR THE FOREGOING, NO PARTY MAKES
ANY OTHER REPRESENTATIONS, WARRANTIES,
AGREEMENTS OR GUARANTEES, EXPRESSED OR
IMPLIED, INCLUDING, AND WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. THERE ARE NO
WARRANTIES WHICH EXTEND BEYOND THE FACE
OF THIS AGREEMENT.
C. Limitations of Liability
14
<PAGE> 49
UNDER NO CIRCUMSTANCES SHALL ANY PARTY BE
RESPONSIBLE FOR PUNITIVE DAMAGES,
CONSEQUENTIAL DAMAGES, LOST PROFITS OR
REVENUES.
Except for third-party indemnification as
set forth above, limitation of liability
pursuant to this Agreement shall be
limited to the other party's actual
direct damages (which shall include
attorney's fees and costs) or specific
performance. For purposes of the
limitation of damages set forth herein,
each party shall be deemed to include its
subsidiaries and their affiliates, and
the directors, officers, employees,
agents, representatives, subcontractors
and suppliers of any of them.
D. Insurance.
To the extent any party performs duties
itself, or through an agent (other than
another party to this Agreement), such
party shall carry and maintain, or cause
its agent to carry and maintain, at such
party's (or its agent's) own cost and
expense, comprehensive general liability
insurance and workers' compensation and
employer's liability insurance covering
its employees in accordance with the
statutory requirements applicable to the
location where services are to be
performed.
ARTICLE X
PERFORMANCE STANDARDS
DSC shall or shall instruct WUC to
perform its responsibilities consistent
with its performance with regard to DSC's
fulfillment of Messaging Services
obligations as of the Effective Date,
except as such responsibilities may be
modified, from time to time, by the
parties, pursuant to this Agreement.
15
<PAGE> 50
ARTICLE XI
DISPUTE RESOLUTIONS
A. Performance Reviews.
A designated representative of each of
DSC, FSI and WUC shall meet as often as
shall reasonably be requested by any
party to review the performance of any
other parties under this Agreement. In
the event of any dispute or disagreement
between any of those parties either with
respect to the interpretation of any
provision of this Agreement or with
respect to the performance by FSI or WUC
on the one hand, or DSC on the other hand
hereunder, then upon the written request
of the other party, each party shall each
appoint a designated officer whose task
it shall be to meet to resolve such
dispute or to negotiate for an adjustment
to such provision of this Agreement. The
designated officers shall meet as often
as the parties reasonably deem necessary.
Such officers shall discuss the problem
and/or negotiate in good faith in an
effort to resolve the dispute or
renegotiate the applicable provision
without the necessity of any formal
proceeding relating thereto. No
arbitration of such dispute may be
commenced until sixty (60) days after the
appointment of the designated officers
pursuant to this Section 11(A).
B. Arbitration.
Any dispute, controversy or claim arising
out of or relating to this Agreement
shall be settled by arbitration in
accordance with the then-prevailing
Commercial Arbitration Rules of the
American Arbitration Association. Such
arbitration shall be held before a panel
of three (3) arbitrators, one selected by
FSI and WUC, one selected by DSC and the
third selected by mutual agreement of the
first two arbitrators. Each arbitrator
shall be independent and impartial.
Judgment upon any award rendered by the
arbitrators may be entered into any court
of competent jurisdiction. The
determination of which party (or
combination of them) bears the costs and
expenses, including
16
<PAGE> 51
reasonable attorneys' fees, incurred in
connection with any such arbitration
proceeding shall be made by the
arbitrators.
ARTICLE XII
DISPOSITION OF ASSETS
A. In consideration of FFMC's payment of
$17.54 million under the Asset Purchase
Agreement and the transactions under this
Agreement, WUC may at any time during
the term hereof, subject to obtaining any
required government consents or
approvals, direct DSC to contribute the
Retained Assets and all other assets
relating to the Messaging Services,
including without limitation all cash,
checks, notes, obligations, bank
accounts, and receivables, to a
wholly-owned subsidiary of DSC, at the
sole cost and expense of WUC. WUC shall
have the right to purchase, subject to
obtaining any required regulatory
approvals, such subsidiary for $1 as soon
as practicable.
B. At any time prior to March 31, 1997, FFMC
or WUC may direct DSC to transfer or
attempt to transfer all or any part of
the Messaging Services and all or any
part of DSC's assets, subject to
obtaining any required regulatory
approvals, to WUC, FFMC or an affiliate
of FFMC.
C. Except as set forth in this Article XII
or the Asset Purchase Agreement, DSC may
not change, transfer, assign, encumber,
or grant any right in, any asset, money,
right, license or property of any kind
whatsoever of DSC during the term of this
Agreement.
D. In order to protect WUC's rights
hereunder, until all its assets are
transferred to a subsidiary as described
in the preceding Section 12(A) or to WUC
or FFMC, DSC shall not incur or assume
any obligation or liability or purchase
or accept any assets, except in the
ordinary course of the business of the
Messaging Services or as contemplated by
this Agreement.
17
<PAGE> 52
ARTICLE XIII
MISCELLANEOUS
A. Binding Nature and Assignment.
This Agreement shall be binding on the
parties hereto and their respective
successors and assigns. A party shall
have the right to assign all or a part of
its rights and obligations under this
Agreement to a company in which a party's
parent holds a controlling interest
("controlling interest" shall be defined
for purposes of this Agreement as the
ability to elect a majority of such
company's board of directors), to a
party's parent or to a party's subsidiary
without the consent of the other party.
Any other assignment of the rights in
this Agreement shall require the prior
written consent of the other party, which
may be granted or withheld in its
absolute discretion.
B. Notices.
Wherever under this Agreement either
party is required or permitted to give
notice to the other, such notice shall be
deemed given (i) when delivered by hand,
(ii) four days after the date of mailing
if mailed by United States mail,
registered or certified mail, return
receipt requested, postage prepaid, (iii)
when telecopied, provided that receipt of
such telecopy is confirmed by telephone
immediately thereafter, or (iv) on the
next business day after delivery to a
nationally recognized courier service
marked for overnight delivery, and
addressed as follows:
In the case of DSC:
Western Union Data Services Company, Inc.
International Place
100 S.E. Second Street, 32nd Floor
Miami, Florida 33131
Attention: Marc N. Bell, Esq.
18
<PAGE> 53
In the case of FSI or WUC:
Western Union Financial Services, Inc.
One Mack Centre Drive
Paramus, New Jersey 07652
Attention: General Counsel
Either party may from time to time change
its address for notification purposes by
giving the other prior written notice of
the new address and the date upon which
it shall become effective.
C. Headings.
The article and section headings used in
this Agreement are for convenience of
reference only and shall not enter into
the interpretation hereof.
D. Severability.
If any provision of this Agreement is
declared or found to be illegal,
unenforceable or void, then the parties
shall be relieved of all obligations
arising under such provision, but only to
the extent that such provision is
illegal, unenforceable or void, it being
the intent and agreement of the parties
that this Agreement shall be deemed
amended by modifying such provision to
the extent necessary to make it legal and
enforceable while preserving its intent
or, if that is not possible, by
substituting therefor another provision
that is legal and enforceable and
achieves the same objective. If such
illegal, unenforceable or void provision
does not relate to the payments to be
made under this Agreement and if the
remainder of this Agreement shall not be
affected by such declaration or finding
and is capable of substantial
performance, then each provision not so
affected shall be enforced to the extent
permitted by law.
19
<PAGE> 54
E. Waiver.
No delay or omission by a party to
exercise any right or power under this
Agreement shall impair such right or
power or be construed to be a waiver
thereof. All remedies provided for in
this Agreement shall be cumulative and in
addition to and not in lieu of any other
remedies available to any party at law,
in equity or otherwise.
F. Entire Agreement.
Except as specifically set forth herein,
this Agreement, together with the
Exhibits and Attachments hereto,
constitutes the entire agreement between
the parties with respect to the subject
matter of this Agreement. No change,
waiver, or discharge of this Agreement
shall be valid unless in writing and
signed by an authorized representative of
the party against which such change,
waiver or discharge is sought to be
enforced.
G. Governing Law
This Agreement shall be governed by and
construed in accordance with the laws,
other than choice of law rules, of the
State of New York.
20
<PAGE> 55
IN WITNESS WHEREOF, Western Union Data Services
Company, Inc., Western Union Communications, Inc., and
Western Union Financial Services, Inc. each has caused
this Sales, Marketing, and Services Agreement to be duly
executed and delivered in its name and on its behalf, all
as of the day and year first written.
WESTERN UNION DATA SERVICES COMPANY, INC.
By:
_____________________________________
Marc N. Bell, Esq.
Secretary
WESTERN UNION FINANCIAL SERVICES, INC.
By: ____________________________________
John C. Walters, Esq.
Executive Vice President
WESTERN UNION COMMUNICATIONS, INC.
By: ____________________________________
John C. Walters, Esq.
Executive Vice President
21
<PAGE> 56
ATTACHMENT A
TO SALES, MARKETING AND SERVICES AGREEMENT
FEES
The parties agree that DSC will pay FSI a monthly fee in
an amount equal to 27% of Messaging Services gross
revenues for such period, subject to the restrictions
contained in the Agreement.
1
<PAGE> 57
EXHIBIT A
The license granted by FSI to DSC herein
is subject to the following conditions and limitations:
A. DSC agrees to use the trademark
registration notice (R) (or "TM"
or "SM," as appropriate, in the
event the Mark is not
registered), in connection with
the first most prominent
appearance for each separate use
of the Mark if it is registered,
and agrees to include the
following notice on all
materials using the Marks:
"Western Union and Western Union
logos are trademarks of First
Financial Management
Corporation. Permission
granted."
B. All products and services
offered by FSI under the Marks
shall conform to all applicable
national, federal, state or
local statutes, rules,
regulations and orders as well
as voluntary industry standards.
C. The license granted herein shall apply within
North America.
D. It is recognized by the parties
hereto that the Marks are the
exclusive property of FFMC, and
that they connote to the public,
worldwide, a reputation for high
standards of quality and
service, which reputation and
goodwill are unique to FFMC.
Therefore, nothing in any way
related to or which contains any
of the Marks or makes reference
to FFMC shall be used to
sponsor, or in connection with,
any illegal, illicit or immoral
purpose or activity or in any
manner which would be
inconsistent with or damaging to
the Marks or to FFMC's name and
reputation.
2
<PAGE> 58
E. DSC shall not assign, license,
grant or convey to any other
person or entity any right
granted herein.
Trademark Ownership
DSC agrees that by virtue of this License
Agreement, FFMC does not give to DSC any right, title or
interest in the Marks.
3
<PAGE> 59
<TABLE>
<CAPTION>
DSC CASH WESTERN UNION DATA SERVICES COMPANY, INC. EXHIBIT B
STATEMENT OF NET ASSETS
DOLLARS IN THOUSANDS
AS OF NOVEMBER 1, 1994 AS OF SEPTEMBER 30, 1995
11/1/94 ADJUSTMENTS ADJUSTED 9/30/95 ADJUSTMENTS ADJUSTED
------- ----------- -------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH 641 (641) A 0 1,301 (732) E (35)
(604) F
ACCOUNTS RECEIVABLE 4,864 4,864 6,148 732 E 5,991
(889) G
RESERVE FOR BAD DEBTS (308) (308) (509) (509)
RECEIVABLE FROM NEW VALLEY 0 0 614 (614) H 0
RECEIVABLE FROM FSI 0 0 0 889 G 889
PREPAID ROYALTY 0 0 0 0
OTHER CURRENT ASSETS 1,079 1,079 1,036 1,036
------ ------ ------
TOTAL CURRENT ASSETS 6,276 (641) 5,635 8,590 (1,218) 7,372
------ ------ ------ ------ ---------- ------
PROPERTY AND EQUIPMENT 8,361 27 B 8,388 8,356 8,356
ACCUMULATED DEPRECIATION (5,422) (728) B (6,150) (7,266) (7,266)
------ ------ ------ ------ ------
NET PROPERTY AND EQUIPMENT 2,939 (701) 2,238 1,090 1,090
------ ------ ------ ------ ------
OTHER NON CURRENT ASSETS (3) (3) 136 136
------ ------ ------ ------
TOTAL ASSETS 9,212 (1,342) 7,870 9,816 (1,218) 8,598
====== ====== ====== ====== ========== ======
LIABILITIES
ACCOUNTS PAYABLE AND (2,075) I
ACCRUED LIABILITIES 258 51 C 309 3,977 (1,566,025) J 1,902
1,566,025 K
DEBT AND OTHER OBLIGATIONS 952 952 557 557
PAYABLE TO NEW VALLEY 0 0 0 0
PAYABLE TO FSI 0 85 D 85 0 2,075 I 2,075
------ ------ ------ ------ ---------- ------
TOTAL LIABILITIES 1,210 136 1,346 4,534 0 4,534
====== ====== ====== ====== ========== ======
NET ASSETS 8,002 (1,478) 6,524 5,282 (1,218) 4,064
====== ====== ====== ====== ========== ======
NOTES: A REMOVE OPENING CASH BALANCES AS NON DSC ASSETS
B ADDITIONAL ENTRIES NOT RECORDED ON NOVEMBER BALANCES OF DSC
C RECORD TAX ACCRUAL INCORRECTLY RECORDED ON NEW VALLEY
D RECORD PAYABLE FOR ASSETS PD BY NEW VALLEY BUT TREATED AS CAPITALIZATION
E RECLASSIFY BALANCE OF CASH DUE FROM FSI
F RECORD CASH REMOVED BY NEW VALLEY ON 10/2/95
G RECLASSIFY CONSUMER CASH RECD BY FSI BUT NOT PAID IN SEPT
H REMOVE RECEIVABLE FROM NEW VALLEY FROM ASSETS TRANSFERRED
I RECLASSIFY PAYABLE TO FSI
J RECORD PAYMENTS BY NEW VALLEY IN OCTOBER
K RECORD CASH RECEIVED BY NEW VALLEY IN OCTOBER
</TABLE>
<PAGE> 60
EXHIBIT C
GENERAL ASSIGNMENT AND BILL OF SALE
This GENERAL ASSIGNMENT AND BILL OF SALE
(this "Bill of Sale") is entered into as of the 30th day
of September, 1995 by and among FIRST FINANCIAL MANAGEMENT
CORPORATION, a Georgia corporation ("Purchaser"), NEW
VALLEY CORPORATION, a New York corporation ("New Valley")
and WESTERN UNION DATA SERVICES COMPANY, INC., a Delaware
corporation ("DSC", and together with New Valley,
"Sellers").
WHEREAS, Purchaser and Sellers have
entered into an Asset Purchase Agreement, dated as of
September 30, 1995 (the "Asset Purchase Agreement";
capitalized terms not defined herein shall have the
meanings ascribed to them in the Asset Purchase
Agreement);
WHEREAS, Sellers desire to sell and
transfer, and Purchaser desires to purchase and acquire,
pursuant to the Asset Purchase Agreement and this Bill of
Sale, all of the assets of DSC and the assets of New
Valley used in connection with the Messaging Business, to
the extent specified in Section 1.1 of the Asset Purchase
Agreement;
WHEREAS, Purchaser has agreed, in partial
consideration therefor, to assume all of the Liabilities
in connection with such assets and the Messaging Business,
to the extent specified in Section 1.5 of the Asset
Purchase Agreement, by executing an Assumption Agreement
of even date herewith; and
WHEREAS, pursuant to Section 5.2(a) of
the Asset Purchase Agreement, Sellers are required to
execute and deliver to Purchaser this Bill of Sale;
NOW, THEREFORE, for and in consideration
of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Sellers hereby irrevocably
sell, transfer, convey, assign and deliver to Purchaser
free and clear of all Liens, other than Permitted Liens,
Liens known to Purchaser or any of its affiliates or the
Intellectual Property Agreements, all of Sellers' right,
title and interest in and to the Assets (other than the
Excluded Assets, the Other Agreements and the Deferred
Assets, the treatment of which shall be governed by
Article I of the Asset Purchase Agreement), as the same
shall exist on the Closing Date, TO HAVE AND TO HOLD the
same unto Purchaser, its successors and assigns, forever.
Purchaser hereby accepts the sale,
transfer, conveyance, assignment and delivery of the
Assets.
<PAGE> 61
2
At any time or from time to time after
the Closing Date, but subject, in the case of the Deferred
Assets, to Section 1.4 of the Asset Purchase Agreement, at
Purchaser's request and without further consideration,
Sellers shall execute and deliver to Purchaser, such other
instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and
take such other actions as Purchaser may reasonably deem
necessary or desirable in order more effectively to
transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, any of the Assets (including the
Deferred Assets), and, to the full extent permitted by
law, to put Purchaser in actual possession and operating
control of the Assets (including the Deferred Assets) and
to assist Purchaser in exercising all rights with respect
thereto.
Sellers hereby constitute and appoint
Purchaser the true and lawful attorney-in-fact of Sellers,
with full power of substitution, in the name of the
applicable Seller or Purchaser, but on behalf of and for
the benefit of Purchaser: (i) to demand and receive from
time to time any and all of the Assets (including, but
subject to Section 1.4 of the Asset Purchase Agreement,
the Deferred Assets) and to make endorsements and give
receipts and releases for and in respect of the same and
any part thereof; (ii) to institute, prosecute, compromise
and settle any and all actions, claims or proceedings that
Purchaser may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the
Assets (including the Deferred Assets); (iii) to defend or
compromise any or all actions, claims or proceedings in
respect of any of the Assets (including the Deferred
Assets); and (iv) to do all such acts and things in
relation to the matters set forth in the preceding clauses
(i) through (iii) as Purchaser shall reasonably deem
necessary or desirable. Sellers hereby acknowledge that
the appointment hereby made and the powers hereby granted
are coupled with an interest and are not and shall not be
revocable by either of them in any manner or for any
reason. Purchaser shall indemnify and hold harmless
Sellers and their respective officers, directors,
employees, agents and affiliates from any and all Losses
incurred by New Valley or DSC arising out of Purchaser's
exercise of the aforesaid powers.
This Bill of Sale may be executed in any
number of counterparts, each of which will be deemed an
original, but all of which together will constitute one
and the same instrument.
This Bill of Sale shall be governed by
and construed in accordance with the laws of the State of
New York applicable to a contract executed and performed
in such State without giving effect to the conflicts of
laws principles thereof, except that if it is necessary in
any other jurisdiction to have the law of such other
jurisdiction govern this Bill of Sale in order for
<PAGE> 62
3
this Bill of Sale to be effective in any respect, then the
laws of such other jurisdiction shall govern this Bill of
Sale to such extent.
IN WITNESS WHEREOF, the undersigned have
caused their duly authorized officers to execute this Bill
of Sale as of the day and year first above written.
FIRST FINANCIAL MANAGEMENT CORPORATION
By:____________________________
Name: John C. Walters
Title: Executive Vice President
NEW VALLEY CORPORATION
By:____________________________
Name: Marc N. Bell
Title: Counsel and Secretary
WESTERN UNION DATA SERVICES COMPANY,INC.
By:____________________________
Name: Richard W. Gooding
Title: President
<PAGE> 63
EXHIBIT D
ASSUMPTION AGREEMENT
This ASSUMPTION AGREEMENT (this
"Assumption Agreement") is entered into as of the 30th day
of September, 1995 by and among FIRST FINANCIAL MANAGEMENT
CORPORATION, a Georgia corporation ("Purchaser"), NEW
VALLEY CORPORATION, a New York corporation ("New Valley")
and WESTERN UNION DATA SERVICES COMPANY, INC., a Delaware
corporation ("DSC", and together with New Valley,
"Sellers").
WHEREAS, Purchaser and Sellers have
entered into an Asset Purchase Agreement, dated as of
September 30, 1995 (the "Asset Purchase Agreement";
capitalized terms not defined herein shall have the
meanings assigned to them in the Asset Purchase Agreement)
and the Bill of Sale, pursuant to which Sellers have
agreed to sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser has agreed to purchase from
Sellers, all of the assets of DSC and the assets of New
Valley used in the Messaging Business, to the extent
specified in Section 1.1 of the Asset Purchase Agreement;
WHEREAS, Purchaser has agreed, in partial
consideration therefor, to assume all of the Liabilities
in connection with such assets and the Messaging Business,
to the extent specified in Section 1.5 of the Asset
Purchase Agreement, by executing this Assumption
Agreement; and
WHEREAS, pursuant to Section 5.2(a) of
the Asset Purchase Agreement, Purchaser is required to
execute and deliver to Sellers this Assumption Agreement;
NOW, THEREFORE, for and in consideration
of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Purchaser hereby undertakes
and agrees from and after the Cut-Off Date, subject to the
limitations contained herein or in the Asset Purchase
Agreement, to assume and to pay, perform and discharge
when due the Assumed Liabilities.
By this Assumption Agreement, Purchaser
does not assume any Liabilities of New Valley that do not
arise out of or relate to the Messaging Business or the
Assets, which Liabilities shall remain the sole obligation
of New Valley and its successors and assigns.
No Person other than Purchaser and
Sellers and their respective successors and assigns shall
have any rights under this Assumption Agreement or the
provisions contained herein.
<PAGE> 64
2
This Assumption Agreement may be executed
in any number of counterparts, each of which will be
deemed an original, but all of which together will
constitute one and the same instrument.
This Assumption Agreement shall be
governed by and construed in accordance with the laws of
the State of New York applicable to a contract executed
and performed in such State without giving effect to the
conflicts of laws principles thereof, except that if it is
necessary in any other jurisdiction to have the law of
such other jurisdiction govern this Assumption Agreement
in order for this Assumption Agreement to be effective in
any respect, then the laws of such other jurisdiction
shall govern this Assumption Agreement to such extent.
IN WITNESS WHEREOF, the undersigned have
caused their duly authorized officers to execute this
Assumption Agreement as of the day and year first above
written.
FIRST FINANCIAL MANAGEMENT CORPORATION
By:____________________________
Name: John C. Walters
Title: Executive Vice President
NEW VALLEY CORPORATION
By:____________________________
Name: Marc N. Bell
Title: Counsel and Secretary
WESTERN UNION DATA SERVICES COMPANY,INC.
By:____________________________
Name: Richard W. Gooding
Title: President
<PAGE> 65
EXHIBIT E
NEW VALLEY CORPORATION
MARC N. BELL
Counsel
October 31, 1995
First Financial
Management Corporation
5660 New Northwest Drive
Suite 1400
Atlanta, Georgia 30328
Re: Asset Purchase Agreement dated as of September
30, 1995 among New Valley Corporation, First
Financial Management Corporation and Western
Union Data Services Company, Inc.
Gentlemen:
I have acted as Counsel of New Valley
Corporation, a New York corporation ("New Valley"), in
connection with the consummation of the transactions
contemplated by the Asset Purchase Agreement by and among
New Valley, Western Union Data Services Company, Inc., a
Delaware corporation ("DSC", and together with New Valley,
"Sellers") and yourself, dated as of September 30, 1995
(the "Agreement"). This opinion is delivered to you
pursuant to Section 7.1(b) of the Agreement. Terms used
herein which are defined in the Agreement shall have the
respective meanings set forth therein, unless otherwise
defined herein.
In connection with this opinion, I, or
lawyers over whom I exercise general supervision, have
examined the Agreement, the Release and Termination
Agreement and all other agreements and instruments
contemplated by the Agreement, and such corporate records,
certificates, agreements and other documents and such
orders, rulings and certificates of public officials,
officers and representatives of Sellers, and have made
such investigations of law and fact, as I have deemed
necessary or appropriate for the purposes of this opinion.
In conducting such examinations and
investigations, I have assumed the authenticity of any
document submitted to me as an original, the conformity to
the original of any document submitted to me as a copy,
the authenticity of the original of any such copy, and the
genuineness of all signatures other than
<PAGE> 66
-2-
those of officers of New Valley or DSC. I have also
assumed the due authorization, execution and delivery of
all documents by parties other than New Valley or DSC, and
the enforceability of any agreements included in such
documents against parties thereto other than New Valley or
DSC.
When used in this opinion, the phrase "to
my knowledge" refers only to my current conscious
awareness of facts or other information. Such phrase does
not include constructive notice of information, or imply
that I have undertaken any independent investigation with
any other person or as to the accuracy or completeness of
any factual representation or other information furnished
in connection with the transactions. Furthermore, such
reference means only that I do not know of any fact or
circumstances contradicting the statement which follows.
Based upon the foregoing, I am of the
opinion that:
1. Each of New Valley and DSC is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of
incorporation. New Valley and DSC have all requisite
corporate power to own or lease and to operate the Assets
and to carry out the Messaging Business as it is currently
conducted.
2. DSC is duly qualified or licensed to
do business as a foreign corporation in good standing in
every jurisdiction in which its ownership of property or
the conduct of its business requires such qualification,
other than jurisdictions in which failure to so qualify
would not have a Material Adverse Effect.
3. All of the issued and outstanding
shares of capital stock of DSC are owned beneficially and
of record solely by New Valley.
4. Each Seller has the corporate power
to enter into the Agreement and the Release and
Termination Agreement and to carry out the transactions
contemplated thereby; all corporate and, as to New Valley,
shareholder proceedings required to be taken by Sellers to
authorize the execution, delivery and performance of the
Agreement and the Release and Termination Agreement have
been properly taken; each of the Agreement, the Release
and Termination Agreement and the Bill of Sale have been
duly executed and delivered by Sellers and constitutes a
valid and binding obligation of Sellers, enforceable
against Sellers in accordance with its terms, subject in
each case, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other
laws of general applicability relating to or affecting
creditors' rights and general equity principles.
<PAGE> 67
-3-
5. The Bill of Sale and the other
instruments of assignment, transfer and conveyance
delivered to Purchaser by Sellers pursuant to the
Agreement, insofar as the laws of the State of New York
and the federal laws of the United States are concerned,
are effective to vest in Purchaser, as applicable,
Sellers' right, title and interest in the Assets purported
to be assigned, transferred and conveyed thereby, subject
to the due and timely recording and filing of instruments
of assignment, transfer and conveyance where and to the
extent required to make said transfers effective and
subject to the obtaining of the consents to transfer
required by certain agreements which have not been
obtained, and provided that Purchaser has purchased the
Assets in good faith and without notice of any adverse
claim within the meaning of the New York Uniform
Commercial Code.
6. To my knowledge, neither the
execution and delivery by Sellers of this Agreement, the
Release and Termination Agreement and the Bill of Sale,
nor the consummation by Sellers of the transactions
contemplated thereby, will violate any provision of the
certificate of incorporation or by-laws of New Valley or
DSC, or violate, or be in conflict with, or constitute a
default under, or cause the acceleration of the maturity
of any debt or obligation pursuant to, or result in the
creation or imposition of any Lien, other than Permitted
Liens, Liens known to Purchaser or any of its affiliates
or with respect to the Intellectual Property Agreements,
or adverse interest of any kind or nature whatsoever on
the Assets pursuant to any agreement or commitment to
which the Sellers are bound or any of the Assets are
subject, or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or
governmental authority, except for (i) any Consents
required to be obtained in connection with the Deferred
Assets and (ii) such violations, defaults or other events
as would not individually or in the aggregate have a
Material Adverse Effect (other than such violations,
conflicts, defaults or other events that would occur as a
result of the legal or regulatory status of Purchaser or
any of its affiliates).
This opinion is rendered under and
limited to the law of the State of New York and the
corporation law of the State of Delaware. This opinion is
solely for your benefit and may not, without my express
written consent, be relied upon by any other person.
Very truly yours,
NEW VALLEY CORPORATION
By:_________________________
Marc N. Bell
Counsel
<PAGE> 68
EXHIBIT F
NEW VALLEY CORPORATION
WESTERN UNION DATA SERVICES COMPANY, INC.
Officers' Certificate
We, Marc N. Bell and Richard W. Gooding,
the Counsel and Secretary of New Valley Corporation ("New
Valley") and the President of Western Union Data Services
Company, Inc. ("DSC"), respectively, pursuant to Section
7.2(c) of the Asset Purchase Agreement dated as of
September 30, 1995 among New Valley, DSC and Purchaser
(the "Asset Purchase Agreement"; capitalized terms not
defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement), DO HEREBY CERTIFY on behalf
of Sellers that, to the best of our knowledge:
(1) The representations and warranties
made by Sellers in the Asset Purchase Agreement, Release
and Termination Agreement, taken as a whole as to each
such agreement, and in any certificate, exhibit or
schedule or other document delivered by Sellers to
Purchaser in connection therewith, are true and correct in
all material respects, on and as of the Cut-Off Date as
though made on and as of such date or (i) in the case of
representations and warranties made by Sellers as of a
specified date earlier than the date hereof, on and as of
such earlier date and (ii) in the case of the
representations and warranties specified in Section 3.24
of the Asset Purchase Agreement and Section 2.01 of the
Release and Termination Agreement, as of the date hereof.
(2) The agreements, covenants and
obligations required by the Asset Purchase Agreement and
the Release and Termination Agreement to be performed or
complied with by Sellers at or before the Closing Date
have been duly performed or complied with in all material
respects.
<PAGE> 69
2
IN WITNESS WHEREOF, Sellers have caused
this Certificate to be executed on its behalf by the
undersigned on and as of the 31st day of October, 1995.
NEW VALLEY CORPORATION
By:________________________
Name: Marc N. Bell
Title: Counsel and Secretary
WESTERN UNION DATA SERVICES
COMPANY, INC.
By:_________________________
Name: Richard W. Gooding
Title: President
<PAGE> 70
EXHIBIT G
[FFMC LOGO]
FIRST FINANCIAL MANAGEMENT CORPORATION
5660 NEW NORTHSIDE DRIVE, SUITE 1400, ATLANTA, GEORGIA 30328
(770)857-0001
John C. Walters
Executive Vice President DIRECT DIAL: (770) 857-7139
Deputy General Counsel FACSIMILE: (770) 857-0403
October 31, 1995
New Valley Corporation
Western Union Data Services Company, Inc.
100 S.E. Second Street
Miami, Florida 33131
Gentlemen:
I have acted as counsel to First Financial Management Corporation
("FFMC") in connection with the Asset Purchase Agreement dated as of September
30, 1995 (the "Agreement"), among New Valley Corporation ("New Valley"),
Western Union Data Services Company, Inc. ("DSC") and FFMC. This opinion is
furnished to you pursuant to Section 7.2(b) of the Agreement. Unless otherwise
defined in this letter, capitalized terms used herein which are defined in the
Agreement have the same meanings ascribed to them in the Agreement.
In addition, I have examined or caused to be examined an executed copy
of the Agreement, the Release and Termination Agreement, the Bill of Sale, the
Instrument of Assumption and other documents and instruments relating to the
Agreement and to the closing of the transactions contemplated thereby, and have
examined such other documents, certificates and records and have made such
investigations as I have deemed necessary or appropriate to give this opinion.
As to factual matters, I have relied on representations made by New Valley and
DSC in the Agreement and in a certificate of officers of New Valley and DSC,
without any independent investigation of such factual matters. I have also
relied, to the extent I deemed appropriate, on certificates of and information
from public officials.
In conducting such examinations and investigations, I have assumed the
authenticity of any document submitted to me as an original, the conformity to
the original of any document submitted to me as a copy, the authenticity of the
original of any such copy, and the genuineness of all signatures other than
those of officers of FFMC. I have also assumed the due authorization,
execution and delivery of all documents by parties other than FFMC, and the
enforceability of any agreements included in such documents against parties
thereto other than FFMC.
When used in this opinion, the phrase "to my knowledge" refers only to
my current conscious awareness of facts or other information. Such phrase does
not include constructive notice
<PAGE> 71
Page 2
October 31, 1995
of information, or imply that I have undertaken any independent investigation
with any other person or as to the accuracy or completeness of any factual
representation or other information furnished in connection with the
transactions. Furthermore, such reference means only that I do not know of any
fact or circumstances contradicting the statement which follows.
Based upon the foregoing and having regard for such legal
considerations as I deem relevant, and subject to the assumptions,
qualifications and limitations set forth or referred to in this letter, I am of
the opinion that:
1. FFMC is a corporation duly organized, validly exiting and in
good standing under the laws of the State of Georgia.
2. FFMC has full corporate power and authority to enter into the
Agreement, the Instrument of Assumption and the Release and Termination
Agreement and to carry out the transactions contemplated thereby. FFMC has
taken all necessary action to authorize the execution and delivery of the
Agreement, the Instrument of Assumption and the Release and Termination
Agreement and the transactions contemplated thereby, and each of the Agreement,
the Instrument of Assumption and the Release and Termination Agreement is a
legal, valid and binding agreement of FFMC enforceable in accordance with its
terms except that (i) such enforcement may be subject to, and limited by,
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the Court before which any
proceeding therefor may be brought, and (iii) enforceability of the
indemnification provisions of the Agreement may be subject to limitations of
public policy under Federal and State securities laws.
3. Neither the execution and delivery of the Agreement, the
Instrument of Assumption or the Release and Termination Agreement nor the
consummation of the transactions contemplated thereby will violate any
provisions of the certificate of incorporation or by-laws of FFMC, or, to my
knowledge, violate, or be in conflict with, or constitute a default under, or
cause the acceleration of the maturity of any debt or obligation pursuant to,
any agreement or commitment to which FFMC is a party or by which FFMC is bound,
or, to my knowledge, violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority, except for such
violations, conflicts or defaults as would not have a material adverse effect
on the ability of FFMC to consummate the transactions contemplated by the
Agreement, the Instrument of Assumption or the Release and Termination
Agreement.
This opinion is rendered under and limited to the law of the State of
New York.
The opinions and confirmations of facts expressed in this letter (a)
are limited to the matters expressly stated in this letter and do not imply any
other opinions, and (b) speak only as of the date of this opinion. I am under
no obligation, and do not undertake, to advise New Valley, DSC
<PAGE> 72
Page 3
October 31, 1995
or any other person or entity of changes of law or fact that occur after the
date of this letter, even though the change may affect the legal analysis or a
legal conclusion in this letter.
This letter is delivered in connection with the consummation of the
transactions contemplated by the Agreement and the Release and Termination
Agreement, may be relied upon only by New Valley and DSC in connection with
such matters, may not be relied upon by New Valley or DSC for any other purpose
or by anyone else for any purpose, and may not be quoted, published or
otherwise disseminated, without, in each instance, my prior written consent.
Very truly yours,
John C. Walters
Deputy General Counsel
<PAGE> 73
EXHIBIT H
FIRST FINANCIAL MANAGEMENT CORPORATION
OFFICER'S CERTIFICATE
I, John C. Walters, Executive Vice President of First Financial
Management Corporation, a Georgia corporation ("FFMC"), pursuant to Section
7.2(c) of the Asset Purchase Agreement, dated as of September 30, 1995 (the
"Agreement"), among New Valley Corporation ("New Valley"), Western Union Data
Services Company, Inc. ("DSC") and FFMC, hereby certify that, to the best of my
knowledge:
1. The representations and warranties of FFMC contained
in the Agreement and in any statement, certificate, exhibit, schedule
or other document delivered by FFMC to New Valley and DSC pursuant to
the Agreement or in connection with the transactions contemplated
thereby, including the Release and Termination Agreement of even date
herewith among FFMC, Western Union Financial Services, Inc., New
Valley and DSC, are true and correct in all material respects as of
the date of the Agreement and as of the date hereof as though made on
and as of the date hereof.
2. FFMC has performed all of its agreements, covenants
and obligations under the Agreement and said Release and Termination
Agreement to be performed or complied with at or prior to the date
hereof in all material respects.
IN WITNESS WHEREOF, I have executed this Certificate on and as of
October 31, 1995.
FIRST FINANCIAL MANAGEMENT
CORPORATION
/s/ John C. Walters
---------------------------
John C. Walters
Executive Vice President
<PAGE> 74
SCHEDULES
TO THE
ASSET PURCHASE AGREEMENT
AMONG
NEW VALLEY CORPORATION,
WESTERN UNION DATA SERVICES COMPANY, INC.
AND
FIRST FINANCIAL MANAGEMENT CORPORATION
DATED AS OF SEPTEMBER 30, 1995
<PAGE> 75
2
Schedules
The attached Schedules are furnished by
New Valley Corporation ("New Valley") and Western Union
Data Services Company, Inc. ("DSC", and together with New
Valley, "Sellers") to First Financial Management
Corporation ("Purchaser") on the Closing Date pursuant to
and as part of the Asset Purchase Agreement dated as of
September 30, 1995 among Purchaser and Sellers (the
"Agreement"). The Schedules have been prepared by Sellers
with the assistance of Purchaser, other than Schedules
3.7(b) and 6.1, which have been prepared by Purchaser with
the assistance of Sellers. Capitalized terms not defined
herein shall have the meanings assigned to them in the
Agreement. The attached Schedules relate to certain
matters concerning the disclosures required and
transactions contemplated by the Agreement. The attached
Schedules are qualified in its entirety by reference to
specific provisions of the Agreement, and are not intended
to constitute, and shall not be construed as indicating
that such matter is required to be disclosed, nor shall
such disclosure be construed as an admission that such
information is material with respect to Sellers except to
the extent required by the Agreement. Matters disclosed
for the purpose of any Schedule hereof shall constitute
disclosure of such matters for the purposes of any other
Schedule attached hereto.
Headings have been inserted on the
attached Schedules for convenience of reference only and
shall to no extent have the effect of amending or changing
the express description of the Schedules as set forth in
the Agreement.
<PAGE> 76
3
CERTIFICATE OF SELLERS
I, Marc N. Bell, Counsel and Secretary of
New Valley Corporation, a New York corporation ("New
Valley") and Richard W. Gooding, President of Western
Union Data Services Company, Inc., a Delaware corporation
("DSC", and together with New Valley, "Sellers"), hereby
certify that these are the Schedules delivered pursuant to
the Asset Purchase Agreement, dated as of September 30,
1995, by and among Sellers and First Financial Management
Corporation, a Georgia corporation.
NEW VALLEY CORPORATION
By:___________________________
Name: Marc N. Bell
Title: Counsel and Secretary
WESTERN UNION DATA
SERVICES COMPANY, INC.
By:___________________________
Name: Richard W. Gooding
Title: President
<PAGE> 77
4
CERTIFICATE OF PURCHASER
I, John C. Walters, the Executive Vice
President of First Financial Management Corporation, a
Georgia corporation ("Purchaser"), hereby certify that (i)
Schedules 3.7(b) and 6.1 have been prepared by Purchaser
pursuant to the terms of the Asset Purchase Agreement (the
"Agreement") dated as of September 30, 1995 among
Purchaser, New Valley Corporation, a New York corporation
("New Valley") and Western Union Data Services Company,
Inc., a Delaware corporation ("DSC", and together with New
Valley, "Sellers") and (ii) Purchaser has reviewed the
Schedules delivered by Sellers, and is not aware of any
information presented thereon that is untrue or inaccurate
in any material respect or of any facts or circumstances
that would render untrue or inaccurate in any material
respect any representation or warranty of Sellers in the
Agreement covered by any such Schedule.
FIRST FINANCIAL MANAGEMENT
CORPORATION
By:___________________________
Name: John C. Walters
Title: Executive Vice President
<PAGE> 78
5
SCHEDULE 3.7(A) - INTELLECTUAL PROPERTY
Trademarks, Service Marks and Trade Names
<TABLE>
<CAPTION>
Application Application Registration Registration
Number Date Number Date
<S> <C> <C> <C> <C>
AUTOMATED VOICE TELEGRAM
BRAILLEGRAM 1,057,206 01/25/77
BUSINESS REPLY MAILGRAM 1,051,478 10/26/76
CUSTOMPAK
DATA GRAM 1,118,944 05/22/79
DESKMAIL 74/339,090 12/11/92
MAILGRAM 1,060,988 03/08/77
MANAGING THE UNEXPECTED 1,823,229 02/22/94
MICROPREP 1,734,572 11/24/92
SPEED*IMPACT*RESPONSE
TELEBOOK 1,035,028 03/02/76
TELEBOOK 1,028,915 12/30/75
WESTAR 1,054,085 12/07/76
OPINIONGRAM 74/398,330 06/03/93
WHEN YOUR MESSAGE MATTERS 1,670,540 12/31/91
TRADEMARK: MAILGRAM
Benelux 341107 08/05/76
Canada 203548 05/05/81
France 963,232 07/16/86
Italy 0547667 8/27/91
Norway 99625 09/29/77
Puerto Rico 6537 03/08/77
Spain 861302 01/17/79
Sweden 159001 04/15/87
United Kingdom 1069748 11/22/78
West Germany 1038234 09/10/82
967127 01/26/78
</TABLE>
Reference is made to the Marks licensed to DSC pursuant to the Trademark
Agreement.
<PAGE> 79
6
SCHEDULE 3.7(B) - INTELLECTUAL PROPERTY
License Agreements, etc.
Credit Control Service, Inc.
Reference is made to the Marks licensed to DSC pursuant
to the Trademark Agreement.
In addition, remaining items shall be scheduled by
Purchaser after the Closing Date, subject to New Valley's
reasonable approval.
<PAGE> 80
7
SCHEDULE 3.7(C) - CLAIMS CONCERNING INTELLECTUAL PROPERTY
1. Dispute with Postal Buddy L over their
use of Opiniongram. They allege
Opiniongram has been abandoned by DSC.
DSC has been granted an extension of
time, through November 27, 1995, to
oppose postal Buddy L's application for
Opiniongram for use with related
services.
2. Dispute with Cunard over their use of Mailgram.
3. Potential gap in chain of title from
Western Union Telegraph Company to
Western Union Corporation, and from
Western Union Corporation to New Valley
Corporation.
4. Abandonment of application to register PC TO
POST OFFICE.
5. Renewal of registrations of TELEBOOK by
December 30, 1995 and March 2, 1996 for
Nos. 1,028,915 and 1,035,028,
respectively.
6. Renewal of registration of WESTAR by December 7, 1996.
7. Chilean Mailgram Trademark was assigned to FFMC
on May 22, 1995.
8. Subject to proper transfer of Opiniongram
and When Your Message Matters by FSI to
DSC.
9. HFK Software dispute over Deskmail
Software.
10. Potential dispute over ownership of enhancements
for PLS Composition Software.
11. Abandonment or expiration of various Marks.
12. Reference is made to Schedule 3.17(10).
<PAGE> 81
8
SCHEDULE 3.11 - BENEFIT PLANS
APPLICABLE TO
MESSAGING BUSINESS EMPLOYEES
1. Western Union Comprehensive Medical Expense (CME)
Plan.
2. Health Maintenance Organizations.
a) Metropolitan Health Plan.
b) Physician's Care/Healthkeepers.
c) Sanus Health Plan.
d) U.S. Healthcare.
3. Western Union Dental Plan.
4. Plan for Employees' Benefits (Accident
and Sickness).
5. Long Term Disability Plan.
6. Life Insurance Plan.
7. Group Universal Life Insurance Plan.
8. Business Travel Accident Plan.
9. Accident Insurance Plan.
10. Western Union Retirement Savings Plan.
11. Western Union Retirement Savings Plan for
Bargaining Unit Employees.
12. Employee Assistance Plan.
13. Severance Pay Plan.
14. Termination Allowance Plan.
15. Tuition Assistance Plan.
16. Relocation Assistance Plan.
17. Flexible Spending Account for Employee
Contributions.
18. Medical Flex Account.
19. Dependent Flex Account.
20. Vision Care Plan.
21. Unemployment Insurance Plan.
22. Worker's Compensation.
23. Preservation Trust.
24. Conservation Trust.
<PAGE> 82
9
SCHEDULE 3.16 - CONDUCT OF BUSINESS
1. DSC has no written agreements with its Datagram
customers, no procedure to sign up new customers
to a binding contract and no other standard
contractual protections for its Datagram
business. Datagram does not have a tariff.
<PAGE> 83
10
SCHEDULE 3.17 - LITIGATION
1. HFK Software contract dispute with
Western Union Priority Services, division
of New Valley.
2. Lafern Chiles and NTS Marketing Inc.
3. Roger Meyers, American Telegram
Corporation and/or their affiliates v.
New Valley, a Federal Communications
Commission ("FCC") proceeding.
4. Trans Union Litigation, involving New Valley
and DSC as witnesses.
5. Coalition of Long Distance Carriers - Hotline for
long distance carriers.
6. District of Columbia workers compensation
assessment for 1995.
7. Possible violations of Fair Debt
Collection Practices Act due to the
Automatic Voice Telegram Services (AVT)
program.
8. Potential customer claims for AVT price differential.
9. Roger Meyers, American Telegram
Corporation and/or their affiliates v.
Purchaser and/or First Data Corporation
("FDC"), an FCC proceeding.
10. Potential proceeding, claim or action by
Roger Meyers, American Telegram
Corporation and/or their affiliates
regarding the transferability or
continued use of the Section 214
Authorization, by or to New Valley, DSC,
Purchaser or FDC or otherwise challenging
the sale of Assets to Purchaser.
11. Reference is made to Schedule 3.7(b).
<PAGE> 84
11
SCHEDULE 3.20 - MATERIAL CONTRACTS
1. Reference is made to Schedule 3.16.
<PAGE> 85
12
SCHEDULE 6.1 - COVERED EMPLOYEES
WESTERN UNION DATA SERVICES COMPANY NON-UNION EMPLOYEES
<TABLE>
<CAPTION>
EMPLOYEE NAME SOCIAL SECURITY NO.
------------- -------------------
<S> <C>
ARNESON, D. ###-##-####
BENNETT, P. ###-##-####
BROWN, L. ###-##-####
CAMPBELL, D. ###-##-####
COOK, W. ###-##-####
CUMMINGS, W. ###-##-####
HAVENER, T. ###-##-####
FRITTS, D. ###-##-####
GOLDMAN, R. ###-##-####
HOPKINS, T. ###-##-####
JACKSON, A. ###-##-####
JUNKINS, C. ###-##-####
KEISER, J. ###-##-####
LOFTIS, L. ###-##-####
MARTIN, D. ###-##-####
NELSON, W. ###-##-####
NEWMAN, S. ###-##-####
PELHAM, S. ###-##-####
POHLOD, M. ###-##-####
POZUN, D. ###-##-####
ROTH, D. ###-##-####
TRAWICK, K. ###-##-####
WESTFALL, D. ###-##-####
</TABLE>
WESTERN UNION DATA SERVICES COMPANY UNION EMPLOYEES
<TABLE>
<CAPTION>
EMPLOYEE NAME SOCIAL SECURITY NO.
------------- -------------------
<S> <C>
ADAMS, B. ###-##-####
BANKS, K. ###-##-####
BELL, J. ###-##-####
BELL, W. (PT) ###-##-####
COPP, M. ###-##-####
DUNFEE, D. ###-##-####
ELLENBERGER, K. ###-##-####
FERRIS, B. ###-##-####
FORD, S. ###-##-####
GLASCOCK, J. ###-##-####
</TABLE>
<PAGE> 86
13
<TABLE>
<S> <C>
HURD, T. ###-##-####
HUYNH, A. ###-##-####
INGRAM, T. ###-##-####
JORDAN, J. ###-##-####
JUNKINS, S. ###-##-####
LANMAN, J. ###-##-####
LASIK, L. ###-##-####
LIEU, A. ###-##-####
LIN, S. (PT) ###-##-####
LOWER, J. ###-##-####
PENG, M. ###-##-####
PRICE, D. ###-##-####
ROYER, D. ###-##-####
SCHONASKY, R. ###-##-####
SCOTT, D. ###-##-####
SEAL, J. ###-##-####
SEAMAN, A. ###-##-####
SHERMAN, M. ###-##-####
SIMMONS, B. ###-##-####
TAYLOR, D. ###-##-####
TECOTT, K. ###-##-####
TEDERICK, K. ###-##-####
TRAN, M. ###-##-####
TRAN, S. ###-##-####
VELASQUEZ, G. ###-##-####
WESTFALL, K. ###-##-####
WILSON, N. ###-##-####
WOODS, S. ###-##-####
</TABLE>
<PAGE> 1
EXHIBIT 10(c)
AGREEMENT
Agreement made as of the 22nd day of
September, 1995, by and between New Valley Corporation, a
corporation incorporated under the laws of the State of
New York, with its principal place of business at 100
Southeast Second Street, Miami, Florida 33131 (the
"Company"), and Richard J. Lampen, residing at 350 Costa
Brava Court, Coral Gables, Florida 33143 (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to employ
Executive as its Executive Vice President and General
Counsel and Executive is willing to serve in such
capacities;
WHEREAS, the Company and Executive desire
to set forth the terms and conditions of such employment.
NOW, THEREFORE, in consideration of the
premises and of the mutual covenants and agreements herein
contained, the Company and Executive agree as follows:
1. Employment.
The Company hereby agrees to employ
Executive, and Executive agrees to be employed by the
Company, on the terms and conditions herein contained as
its Executive Vice President and General Counsel and in
such other executive capacities with the Company and its
affiliated entities as assigned from time to time by more
senior executives of the Company. The
<PAGE> 2
Executive shall devote substantially all of his business
time, energy, skill and efforts to the performance of his
duties hereunder and shall faithfully and diligently serve
the Company. The foregoing shall not prevent Executive
from participating in not-for-profit activities or from
managing his passive personal investments provided that
these activities do not materially interfere with
Executive's obligations hereunder. The Executive shall be
entitled to remain as a director of the company set forth
in Exhibit A hereto provided that such activities do not:
(i) violate any law, (ii) limit the Company or its
affiliated entities' activities, (iii) create any conflict
between the Executive's fiduciary obligations to the
Company and its affiliated entities and such directorship;
or (iv) materially interfere with the performance of
Executive's duties hereunder. Furthermore, during the
initial three (3) months of his employment hereunder, the
Executive may on a voluntary basis, but not as a partner,
counsel or employee of his former law firm, assist in the
transition of his law practice and other matters provided
such activities do not materially interfere with
performance of his duties hereunder.
2. Term of Employment.
Executive's employment under this
Agreement shall be for a term commencing on October 1,
1995 (the "Effective Date") and, subject to earlier
termination as provided in Section 7 below, terminating on
December 31, 1997 (the "Initial Term"). The Initial Term
shall be extended for successive one-year periods (the
"Additional Terms") unless terminated at the end of the
Initial Term or any Additional Term by either party upon
ninety (90) days prior written notice given to the other
party (the Initial Term and any Additional Terms shall be
referred to as the "Employment Term"). Notwithstanding
anything else herein, the provisions of Section 8
2
<PAGE> 3
hereof shall survive and remain in effect notwithstanding
the termination of the Employment Term or a breach by the
Company of this Agreement or any of its terms.
3. Compensation.
(a) As compensation for his
services under this Agreement, the Company shall pay
Executive a salary at the rate of Six Hundred Thousand
Dollars ($600,000) per year (the "Base Salary"), payable
in equal installments (not less frequently than monthly)
and subject to withholding in accordance with the
Company's normal payroll practices. The Executive's Base
Salary shall be reviewed annually by the Company and may
be increased, but not decreased, in the Company's sole
discretion.
(b) In addition to the Base Salary,
the Company may, in its sole discretion, pay Executive
bonuses from time to time. Notwithstanding the foregoing,
the Company will pay Executive a minimum bonus for 1995 of
One Hundred Thousand Dollars ($100,000) in December 1995.
(c) The Company shall discuss with
the Executive prior to December 31, 1996 the purchase of
equity in the Company by the Executive with financing in
whole or in part by the Company or stock options.
Notwithstanding the foregoing, the Company shall have no
obligation to offer any such equity or to offer financing
of the equity or any stock options and shall have no
liability of any kind whatsoever for not doing so.
3
<PAGE> 4
4. Benefits and Fringes.
During the Employment Term, Executive
shall be entitled to such benefits and fringes, if any, as
are generally provided from time to time by the Company to
its executive employees of a comparable level, including
any life or medical insurance plans and pension and other
similar plans, provided that the Executive shall be
provided with life insurance at least equal to his Base
Salary (provided he is insurable at standard rates).
5. Expenses.
The Company shall reimburse Executive in
accordance with its expense reimbursement policy as in
effect from time to time for all reasonable expenses,
including first class airplane travel and other travel
expenses, incurred by Executive in connection with the
performance of his duties under this Agreement upon the
presentation by Executive of an itemized account of such
expenses and appropriate receipts.
6. Vacation.
During the Employment Term, Executive
shall be entitled to vacation in accordance with the
Company's practices, provided that Executive shall not be
entitled to less than five (5) weeks paid vacation in each
full contract year.
4
<PAGE> 5
7. Earlier Termination.
(a) Executive's employment under
this Agreement and the Employment Term shall terminate
prior to December 31, 1997 as follows:
(i) automatically on the date of
Executive's death.
(ii) Upon written notice given by
the Company to the Executive if Executive is unable to
perform his material duties hereunder for 180 days
(whether or not continuous) during any period of 360
consecutive days by reason of physical or mental
disability.
(iii) Upon written notice by the
Company to the Executive for Cause. Cause shall mean (A)
the Executive's conviction (treating a nolo contendere
plea as a conviction) of a felony (whether or not any
right of appeal has been or may be exercised); (B) willful
refusal to attempt to properly perform his obligations
under this Agreement, or follow the direction of the Board
of Directors of the Company (the "Board") or a more senior
executive of the Company, which in either case is not
remedied promptly after receipt by the Executive of
written notice from the Company specifying the details
thereof, provided the refusal to follow a direction shall
not be Cause if the Executive in good faith believes that
such direction is not legal or ethical and promptly
notifies the Company in writing of such belief; (C) the
Executive's gross negligence or willful misconduct with
regard to the Company or its affiliated entities, their
business, assets or employees; (D) the Executive's breach
of fiduciary duty owed to the Company or any subsidiary
thereof, including, without limitation the obligations set
forth in Section 8 hereof; or (E) any other breach by the
Executive of a material provision of this Agreement that
remains uncured for ten (10) days after written notice
thereof is given to the Executive. Upon a termination for
Cause, the Executive (and his representative) shall be
given the opportunity to
5
<PAGE> 6
appear before the Board to explain why the Executive
believes that Cause did not occur. Such appearance shall
be scheduled on no less than twenty (20) and no more than
forty (40) days notice to Executive. In the event the
Board agrees with the Executive, which shall be a
determination made in its sole discretion, the Executive
shall be retroactively reinstated in his position. (The
removal pending such Board meeting shall not be deemed
Good Reason under (vi) below).
(iv) Upon written notice by the Company
without Cause.
(v) Upon the voluntary resignation
of the Executive without Good Reason upon sixty (60) days
prior written notice to the Company (which the Company may
in its sole discretion make effective earlier).
(vi) Upon the written resignation
of the Executive for Good Reason stating with specificity
the details of the Good Reason, if the stated Good Reason
is not cured within thirty (30) days of the giving of such
notice. "Good Reason" shall mean (A) relocation of the
Executive's office from Dade County, Florida, (B) any
material reduction in duties or responsibilities or (C)
any other material breach of any provision of this
Agreement by the Company.
(b) Upon such earlier termination
of the Employment Term the Executive shall be entitled to
receive any unpaid salary and accrued vacation through his
date of termination and any benefits under any benefit
plan in accordance with the terms of said plan. In
addition, if the termination is pursuant to (a)(iv) or
(a)(vi) above or non-renewal of the Employment Term by the
Company pursuant to Section 2 above, the Executive shall
receive, provided he signs a release of all claims arising
out of his employment with the Company or
6
<PAGE> 7
termination thereof (other than his right to
indemnification, which shall survive) in such form as
reasonably requested by the Company, severance pay in a
lump sum equal to the amount of Base Salary he would have
received if he was employed until the later of December
31, 1997 or one year after termination of the Employment
Term. Such lump sum severance shall be paid within ten
(10) business days after the Executive's execution of the
aforesaid release. In the event termination is pursuant
to (a)(ii) alone, the Executive shall receive in monthly
payments for one (1) year thereafter his Base Salary
reduced by any disability benefits or worker's
compensation salary replacement he receives from any
program sponsored or made available by the Company or a
governmental entity. In addition, until the earlier of
(i) Executive commencing other full-time employment or
(ii) 12 months after the end of the Employment Term, to
the extent the Executive or his dependents are eligible
for COBRA coverage, the Company shall pay for such
coverage. The Company and its affiliated entities shall
have no other obligations to the Executive.
8. Confidential Information and Non-Competition.
(a) Executive acknowledges that as
a result of his employment by the Company, Executive will
obtain secret and confidential information as to the
Company and its affiliated entities, that the Company and
its affiliated entities will suffer substantial damage,
which would be difficult to ascertain, if Executive shall
enter into Competition, as defined below, with the Company
or any affiliated entity and that because of the nature of
the information that will be known to Executive it is
necessary for the Company to be protected by the
prohibition against Competition set forth herein, as well
as the Confidentiality restrictions set forth herein.
7
<PAGE> 8
Executive acknowledges that the provisions of this
Agreement are reasonable and necessary for the protection
of the business of the Company and its affiliated entities
and that part of the compensation paid under this
Agreement is in consideration for the agreements in this
Section 8.
(b) Competition shall mean:
(i) participating, directly or
indirectly, as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer,
investor, lender, consultant or in any capacity whatsoever
(within the United States of America, Canada, or in any
country where the Company or its affiliates do business)
in a business in competition with any operating business
conducted by the Company or its affiliated entities; with
regard to which Executive worked or otherwise had
responsibilities or had access to material Confidential
Information while employed by the Company or its
affiliated entities or an investment opportunity within
the provisions of subpart (E) below; provided, however,
that such participation shall not include: (A) the mere
ownership of not more than one percent (1%) of the total
outstanding stock of a publicly held company; (B) the
performance of services for any enterprise to the extent
such services are not performed, directly or indirectly,
for a business in the aforesaid Competition; (C) any
activity engaged in with the prior written approval of the
Chief Executive Officer of the Company; (D) the practicing
of law in a law firm that represents such competing
business provided that Executive does not personally
represent such competing business; or (E) investment
banking activities (including without limitation with an
investment entity for its own account or a fund operated
by it) provided such activities do not involve any
investment opportunity that the Company or any affiliated
entity is considering or advising on at the time
8
<PAGE> 9
of termination of the Employment Term either for its own
account, any fund managed by it or for any customer or
potential customer of the Company or such entity.
(ii) recruiting, soliciting or
inducing, of any nonclerical employee or employees of the
Company or its affiliated entities to terminate their
employment with, or otherwise cease their relationship
with, the Company or its affiliated entities or hiring or
assisting another person or entity to hire any nonclerical
employee of the Company or its affiliated entities or any
person who within six (6) months before had been a
nonclerical employee of the Company or any of its
affiliated entities. Notwithstanding the foregoing, if
requested by an entity with which Executive is not
affiliated, Executive may serve as a reference for any
person who at the time of the request is not an employee
of the Company or any of its affiliated entities.
(iii) If any restriction set forth
with regard to Competition is found by any court of
competent jurisdiction, or an arbitrator, to be
unenforceable because it extends for too long a period of
time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend
over the maximum period of time, range of activities or
geographic area as to which it may be enforceable.
(c) During and after the Employment
Term, Executive shall hold in a fiduciary capacity for the
benefit of the Company and its affiliated entities all
secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their
respective businesses, including any confidential
information as to customers of the Company or its
affiliated entities, (i) obtained by Executive during his
employment by the Company or its affiliated entities and
(ii) not otherwise public knowledge or known within the
Company's or affiliated entity's industry. Executive
shall not, without prior written consent of the Company,
9
<PAGE> 10
unless compelled pursuant to the order of a court or other
governmental or legal body having jurisdiction over such
matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and
those designated by it. In the event Executive is
compelled by order of a court or other governmental or
legal body to communicate or divulge any such information,
knowledge or data to anyone other than the Company and
those designated by it, Executive shall promptly notify
the Company of any such order and shall cooperate fully
with the Company in protecting such information to the
extent possible under applicable law.
(d) Upon termination of Executive's
employment with the Company and its affiliated entities,
or at any other time as the Company may request, Executive
will promptly deliver to the Company all documents
(whether prepared by the Company, an affiliated entity,
Executive or a third party) relating to the Company or an
affiliated entity or any of their businesses or property
which Executive may possess or have under his direction or
control.
(e) During the Employment Term and
for one (1) year thereafter, Executive will not enter into
Competition with the Company or its affiliated entities.
(f) In the event of a breach or
potential breach of this Section 8, Executive acknowledges
that the Company and its affiliated entities will be
caused irreparable injury and that money damages may not
be an adequate remedy and agree that the Company and its
affiliated entities shall be entitled to injunctive relief
(in addition to its other remedies at law) to have the
provisions of this Section 8 enforced.
10
<PAGE> 11
9. Executive Representation
Executive represents and warrants that he
is under no contractual or other limitation from entering
into this Agreement and performing his obligations
hereunder.
10. Indemnification
The Executive shall be entitled to be
indemnified by the Company for his actions as an officer,
director, employee, agent or fiduciary of the Company or
its affiliated entities to the fullest extent permitted by
applicable law and shall have legal fees and other
expenses paid to him in advance of final disposition of a
proceeding provided he executes an undertaking to repay
such amounts if, and to the extent, required to do so by
applicable law. The Company shall cover the Executive
under any directors and officers liability insurance
policy to the same extent as its other senior officers.
11. Entire Agreement; Modification.
This Agreement constitutes the full and
complete understanding of the parties hereto and will
supersede all prior agreements and understandings, oral or
written, with respect to the subject matter hereof. Each
party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral
or otherwise, have been made by either party, or anyone
acting on behalf of either party, which are not embodied
herein and that no other agreement, statement or promise
not contained in this Agreement shall be valid or binding.
This Agreement may not be modified or amended except by an
instrument in writing signed by the party against whom or
which enforcement may be sought.
11
<PAGE> 12
12. Severability.
Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or affecting the validity or
enforceability of any of the terms of provisions of this
Agreement in any other jurisdiction.
13. Waiver of Breach.
The waiver by any party of a breach of
any provisions of this Agreement, which waiver must be in
writing to be effective, shall not operate as or be
construed as a waiver of any subsequent breach.
14. Notices
All notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered
by hand, or one day after sending by express mail or other
"overnight mail service," or three days after sending by
certified or registered mail, postage prepaid, return
receipt requested. Notice shall be sent as follows: if
to Executive, to the address as listed in the Company's
records; and if to the Company, to the Company at its
office or set forth at the head of this Agreement, to the
attention of the Chairman with a copy to Proskauer Rose
Goetz & Mendelsohn, at 1585 Broadway, New York, New York
10036, Attn: Arnold I. Burns, Esq. Either party may
change the notice address by notice given as aforesaid.
12
<PAGE> 13
15. Assignability; Binding Effect.
This Agreement shall be binding upon and
inure to the benefit of Executive and Executive's legal
representatives, heirs and distributees, and shall be
binding upon and inure to the benefit of the Company, its
successors and assigns. This Agreement may not be
assigned by the Executive. This Agreement may not be
assigned by the Company except in connection with a merger
or a sale by the Company of all or substantially all of
its assets and then only provided the assignee
specifically assumes in writing all of the Company's
obligations hereunder.
16. Governing Law.
(a) All issues pertaining
to the validity, construction, execution and performance
of this Agreement shall be construed and governed in
accordance with the laws of the State of Florida, without
giving effect to the conflict or choice of law provisions
thereof.
(b) Any dispute or
controversy with regard to this Agreement, other then
injunctive relief pursuant to Section 8, shall be settled
by arbitration in Miami, Florida before the American
Arbitration Association ("AAA") in accordance with the
rules of Commercial Arbitration of the AAA. The decision
of the arbitrators shall be final and binding upon the
parties hereto and may be entered in any court having
jurisdiction. The parties shall each bear fifty (50)
percent of the cost of the AAA and the arbitrators, but
each party shall bear its or his own legal expenses.
13
<PAGE> 14
17. Headings.
The headings in this Agreement are
intended solely for convenience or reference and shall be
given no effect in the construction or interpretation of
this Agreement.
18. Counterparts.
This Agreement may be executed in several
counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the Company has
caused this Agreement to be duly executed and Executive
has hereunto set his hand as of the date first set forth
above.
NEW VALLEY CORPORATION
By:________________________________
Name:
Title:
___________________________________
Richard J. Lampen
14
<PAGE> 15
EXHIBIT A
Roland International Corporation
<PAGE> 1
EXHIBIT 10(d)
AGREEMENT
This AGREEMENT among New Valley
Corporation, a New York corporation ("New Valley"), ALKI
Corp., a Delaware corporation and a direct wholly owned
subsidiary of New Valley ("NV Sub"), and High River
Limited Partnership, a Delaware limited partnership ("High
River"), dated October 17, 1995
W I T N E S S E T H:
WHEREAS, each of the parties hereto,
directly or indirectly, is a stockholder of RJR Nabisco
Holdings Corp., a Delaware corporation ("RJRN");
WHEREAS, the parties hereto believe that
the value of RJRN stockholders' investment can be
substantially increased through a spinoff (the "Spinoff")
of all or substantially all of RJRN's remaining investment
in Nabisco Holding Corp., a Delaware corporation
("Nabisco");
WHEREAS, New Valley and NV Sub desire to
obtain the assistance and advice of High River with
respect to measures designed to effectuate the Spinoff at
the earliest possible date;
WHEREAS, High River is willing to give
such assistance and advice to New Valley and NV Sub (the
"New Valley Group") in consideration of the agreements by
the New Valley Group set forth herein;
NOW, THEREFORE, in consideration of the
foregoing and of the mutual promises set forth herein, the
parties hereto, intending to be legally bound, agree as
follows:
Section 1. Investment. (a) High River
hereby agrees to purchase from New Valley and NV Sub, and
New Valley and NV Sub hereby agree to sell, assign,
transfer and deliver to High River, at the Closing (as
defined below), 1,611,550 shares of common stock, par
value $.01 per share ("Shares"), of RJRN (the "Purchased
Shares"). The closing of the purchase and sale of the
Purchased Shares (the "Closing") shall occur at 10:00 a.m.
on October 23, 1995 (the "Closing Date") at the offices of
Milbank, Tweed, Hadley & McCloy, One Chase Manhattan
Plaza, New York, New York. At the Closing, High River
will pay to New Valley $50,976,921 (the "Purchase Price"),
by wire transfer of
<PAGE> 2
immediately available funds to an account designated by
New Valley, against delivery to High River of the
Purchased Shares in a commercially customary manner such
that, upon the payment of the Purchase Price for such
Purchased Shares, High River shall have acquired good and
marketable title to such Shares, free and clear of all
encumbrances and liens whatsoever.
(b) It is the intention of the New
Valley Group and High River to cooperate to invest a
minimum of at least $300 million ($150 million each) in
Shares, and they may further increase their investment to
a minimum of at least $500 million in Shares ($250 million
each), in accordance with the following plan:
(i) Each of the New Valley Group and
High River and its affiliates (the "High River
Group") is expected to make a minimum equity
investment in Shares of $75 million (the "First
Stage Equity Investments").
(ii) In addition to their respective
First Stage Equity Investments, each of the New
Valley Group and the High River Group is expected
to invest in Shares at least a minimum additional
amount (the "First Stage Margin Investments" and,
together with the First Stage Equity Investments,
the "First Stage Investments") equal to the
lesser of (A) $75 million and (B) the maximum
additional amount that such group would lawfully
have been able to invest in Shares if (I) the
Shares acquired pursuant to such group's First
Stage Equity Investment had been acquired with
funds not obtained from the proceeds of "purpose
credit" secured directly or indirectly by "margin
stock" (as such terms are defined in Regulation T
and Regulation U promulgated by the Board of
Governors of the Federal Reserve System (the
"Margin Rules")) ("Margin Loans") and (II) such
group had used its best efforts to borrow
additional funds by pledging the Shares so
acquired as collateral to secure Margin Loans to
the extent that such Margin Loans could have been
obtained lawfully and on reasonable commercial
terms and had used the proceeds of such Margin
Loans to acquire additional Shares, which had
been similarly pledged to secure additional
Margin Loans and to acquire further Shares, and
so forth until no further such Margin Loans had
been lawfully available.
(iii) Following the completion of the
First Stage Investments, each of the New Valley
Group and the High River Group may make a further
investment in Shares of up to the sum of (A) $50
million of equity (the "Second Stage Equity
Investment") plus (B) an additional amount (the
"Second Stage Margin Investments" and, together
with the Second
2
<PAGE> 3
Stage Equity Investments, the "Second Stage
Investments") equal to the lesser of (I) $50
million and (II) the maximum amount that such
group would lawfully have been able to invest in
Shares, in the manner described in Section
1(b)(ii)(B), using the Shares acquired through
the Second Stage Equity Investment as collateral.
(c) In order to effectuate the
objectives of the parties hereto described in Section
1(b), each of the New Valley Group and High River agrees
that it shall (or shall cause its affiliates to) make the
following investments in Shares:
(i) Promptly after the close of
business on each business day during the term of
this Agreement, each of New Valley and High River
shall notify the other of (A) the number of
Shares acquired or sold by the New Valley Group
and the High River Group, respectively, since the
last such notice, (B) the purchase price or sale
price of each Share so acquired or sold and (C)
the amount of brokerage fees or commissions
incurred in acquiring or selling each such Share.
(ii) On the last business day of each
second calendar week (commencing with the end of
the second full calendar week following the date
of this Agreement) prior to such time as the High
River Group has made an investment in Shares
equal to at least the Second Stage Investment
(the "Second Stage Completion Date"), promptly
after the exchange of notices described in
Section 1(c)(i), the parties hereto shall
calculate the aggregate number and the average
price of all Shares acquired during such two
calendar weeks by either the New Valley Group or
the High River Group at a price per Share equal
to the Hurdle Price (as defined below in this
paragraph (ii)) or less (exclusive of brokerage
fees and commissions incurred in such
acquisition) ("Qualifying Shares"). Thereupon,
each party shall make or cause to be made to the
other party (or the other party's designee) such
transfers of Shares and such payments in
immediately available funds (in each case in the
manner described in Section 1(c)(iv)) as would
have been necessary so that, after giving effect
to such transfers and payments, the New Valley
Group and the High River Group would have
acquired the same number of Qualifying Shares
during such two calendar weeks and the aggregate
investment (excluding brokerage fees and
commissions incurred in the acquisition of
Shares) of the New Valley Group and the High
River Group in Qualifying Shares during such week
would have been identical. For purposes of this
Agreement, "Hurdle Price" means (x) prior to the
time that both the New Valley Group
3
<PAGE> 4
and the High River Group have made investments in
Shares equal to at least the First Stage
Investment (the "First Stage Completion Date"),
$35.50 per Share and (y) at all times from and
after the First Stage Completion Date and prior
to the Second Stage Completion Date, $31.00 per
Share.
(iii) In addition to the obligations
of the parties hereto under Section 1(c)(ii), for
each business day prior to the Second Stage
Completion Date, New Valley may, in its sole
discretion, by notice to High River promptly
after the exchange of the notices with respect to
such business day described in Section 1(c)(i),
put to High River a number of Shares equal to or
less than one-half of the excess, if any, of (A)
the aggregate number of Shares other than
Qualifying Shares ("Non-Qualifying Shares")
acquired by the New Valley Group since the close
of business on the previous business day over (B)
the number of Non-Qualifying Shares acquired by
the High River Group since the close of business
on the previous business day. The put price per
Share shall be equal to the Hurdle Price.
Thereupon, the New Valley Group shall sell and
transfer or cause to be sold and transferred to
High River or another member of the High River
Group designated by High River the number of
Shares so put to High River, and High River shall
purchase or cause such designee to purchase such
Shares and shall pay or cause to be paid to New
Valley or New Valley's designee a purchase price
equal to the put price of such Shares, in each
case in the manner described in Section 1(c)(iv).
(iv) All payments required to be made
under Section 1(c)(ii) or Section 1(c)(iii) shall
be made in immediately available funds before the
opening of business on the fourth New York Stock
Exchange trading day after (A) in the case of
Section 1(c)(ii), the last business day of each
second calendar week in which the exchange of
notices referred to therein is made and (B) in
the case of Section 1(c)(iii), the last business
day of the calendar week in which New Valley
delivers the notice referred to therein. All
transfers of Shares required by Section 1(c)(ii)
and Section 1(c)(iii) shall be made
simultaneously with such payment in a
commercially customary manner such that upon the
payment of the purchase price for such Shares,
the transferee shall have acquired good and
marketable title to such Shares, free and clear
of all encumbrances and liens whatsoever.
(v) As promptly as practicable
following the close of business on November 27,
1995 (in the case of the First Stage Investments)
and January 11, 1996 (in the case
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<PAGE> 5
of the Second Stage Investments), but in each
case prior to the close of business on the next
business day, each of New Valley and High River
shall notify the other of (A) the date of
purchase of any Shares acquired by the New Valley
Group and the High River Group, respectively,
since the date of this Agreement, (B) the number
of Shares purchased on each such date and (C) the
purchase price of each Share so acquired. If
prior to January 17, 1996, either New Valley or
High River believes that the other has breached
any of its obligations under Section 1(c)(ii) or
Section 1(c)(iii), such party (the "Notifying
Party") shall deliver to the other party (the
"Receiving Party") a notice setting forth in
reasonable detail the nature of the breach and
the reasons for such belief (the "Notice of
Breach"). The Notice of Breach shall
specifically describe the number of Shares that
the Receiving Party must transfer to the
Notifying Party, or that the Notifying Party must
transfer to the Receiving Party, and the amount
of the payments that the Receiving Party must
make to the Notifying Party, or that the
Notifying Party must make to the Receiving Party,
in order to cure such breach, and shall demand
performance of such transfers and payments. Prior
to the close of business on the third business
day after receiving the Notice of Breach, the
Receiving Party shall either (x) pay the amounts
and transfer the Shares described in the Notice
of Breach, against receipt of the amounts to be
paid and/or the Shares to be transferred by the
Notifying Party as described in the Notice of
Breach or (y) deliver to the Notifying Party a
notice stating that the Receiving Party disputes
the demand made in the Notice of Breach (the
"Notice of Dispute"). In the event that the
Receiving Party delivers a Notice of Dispute,
then prior to the close of business on the next
business day, the parties hereto shall by mutual
agreement choose an independent, nationally
recognized public accounting firm, which shall be
retained by the parties hereto to arbitrate the
dispute (the "Arbitrator"), or if they cannot
agree, each of New Valley and High River shall
choose one such accounting firm, and such firms
shall choose a third such accounting firm to
serve as Arbitrator. The fees and expenses of
the Arbitrator shall be shared equally by New
Valley and High River. The parties hereto shall
make available to the Arbitrator all information
which the Arbitrator may reasonably request for
the purpose of arbitrating the dispute. Prior to
the close of business on the fifth business day
after being retained, the Arbitrator shall make
its own independent calculations and shall notify
New Valley and High River in writing of its
decision, indicating the amounts to be paid and
the number of Shares to be transferred by each of
the parties hereto to cure any breach
5
<PAGE> 6
of Section 1(c)(ii) or 1(c)(iii), identified by
the Arbitrator as having occurred. Prior to the
close of business on the third business day after
receiving the notice of such decision, each party
hereto shall make payments and transfer Shares in
accordance with such decision. In each case
where a party is required to make any payment
pursuant to this Section 1(c)(v) by reason of any
breach by such party of Section 1(c)(ii) or
Section 1(c)(iii), the amount of such payment
shall be based on a purchase price per Share,
without interest, equal to the Hurdle Price in
effect at the time that the relevant transfer of
Shares would have originally occurred if not for
the relevant breach.
(d) (i) Except as provided in subpart
(ii) of this subparagraph (d), until the
termination of this Agreement, (i) the New Valley
Group shall not make or agree to make any sale,
transfer or other disposition (a "Transfer") of
Shares beneficially owned by it, if following
such Transfer the New Valley Group's total
investment in Shares would be less than the sum
of the First Stage Investment plus the Second
Stage Investment and (ii) High River shall not
(and shall cause the High River Group not to)
make or agree to make any Transfer of Shares
beneficially owned by it, if following such
Transfer the High River Group's total investment
in Shares would be less than the sum of the First
Stage Investment plus the Second Stage
Investment; provided, however, that (x) the New
Valley Group and the High River Group may sell
Shares to an unaffiliated third party on an
arms'-length basis if (1) such sale is made
solely in response to a demand for repayment or
additional collateral (other than Shares) of the
sort usually made by a lender extending Margin
Loans secured by such Shares, which demand
results from a decline in the market price of the
Shares so that the account with the lender falls
below the lender's pre-established maintenance
requirement for the New Valley Group or the High
River Group, as the case may be, (2) the proceeds
of such sale are used solely to repay Margin
Loans, (3) the total number of Shares sold does
not exceed the minimum number that must be sold
in order to satisfy such demand and (y) in the
event the New Valley Group or the High River
Group (each, a "Group") sells any Shares pursuant
to clause (x) of this proviso and following such
sale such first Group's investment in Shares is
less than the second Group's investment in
Shares, then the second Group may Transfer Shares
so long as following such Transfer the second
Group's investment in Shares is equal to or
greater than the first Group's investment in
Shares; and provided further that each member of
the New Valley Group and the High River Group may
Transfer Shares to any other member of
6
<PAGE> 7
the New Valley Group or the High River Group (but
only if, in the case of a Transfer to another
member of the High River Group, such member
agrees to be bound by the provisions of this
Agreement to the same extent as High River).
Following a sale by either the New Valley Group
or the High River Group pursuant to clause (x) of
the first proviso to the preceding sentence,
neither Group shall be obligated to purchase any
additional Shares pursuant to Section 1(c)(ii) or
Section 1(c)(iii), but the provisions of Section
1(c)(v) shall continue to be applicable with
respect to any purchases that were required to be
made prior to such sale pursuant to Section
1(c)(ii) or Section 1(c)(iii).
(ii) In addition, notwithstanding the
terms of subpart (i) of this subparagraph (d), in
the event that the lender extending Margin Loans
to a member of the New Valley Group or the High
River Group, as the case may be (the "Borrower"),
for any reason other than as set forth in clause
(x) of the first proviso to the first sentence of
subpart (i) of this subparagraph (d), terminates
or reduces the loan facility or otherwise
requires the sale of Shares by Borrower (such
Shares required as a result to be sold, together
with a number of Shares equal to the number of
Shares (if any) sold pursuant to such clause (x),
during the thirty consecutive calendar days
immediately following the date that the Borrower
is informed of such required sale, being
hereinafter referred to as the "Selloff Shares")
and after exercise of best efforts to replace
such loan facility Borrower is unable to do so,
then the Borrower shall irrevocably offer to the
other party hereto the right for a five business
day period, at the election of the other party,
either (A) to acquire the Selloff Shares at a
price equal to the lower (such lower price being
referred to herein as the "Selloff Price") of (I)
90% of the Weighted-Average Cost (calculated as
set forth in Section 4(h) but without giving
effect to the interest factor described in
Section 4(h)(i) or Section 4(h)(ii)(B)) of the
Selloff Shares, and (II) 90% of the then current
market price of the Selloff Shares, as measured
by the average closing sales price of Shares on
the New York Stock Exchange in the five business
days preceding said offer, or (B) to receive
payment from the Borrower in immediately
available funds in an amount equal to the excess
of the then current market price of the Selloff
Shares, as so measured, over the Selloff Price.
In the event the other party exercises its right
to acquire the Selloff Shares, the closing shall
take place prior to the close of business on the
third business day after such party exercises its
right to purchase the Selloff Shares, and the
party electing to exercise its right to purchase
shall be entitled to an order of specific
7
<PAGE> 8
performance in the event of a failure by the
Borrower to close as hereinabove provided. In
the event the other party does not exercise its
right to acquire the Selloff Shares within such
five business day period, or shall affirmatively
elect to receive payment from the Borrower, the
Borrower shall thereafter have the right to sell
the Selloff Shares to an unaffiliated third party
on an arms'-length basis. In the event the other
party exercises its right to receive payment from
the Borrower, such payment shall be made within
five business days of notice to the Borrower of
the other party's election to exercise its right
thereto.
(e) For purposes of this Section 1 and
Section 4(c), in calculating the amount of the investment
in Shares by the New Valley Group and the High River Group
at any time, (i) each Group's acquisition of Shares shall
be deemed to increase such Group's investment by the
actual cost, including all brokerage fees and commissions
incurred in the acquisition of such Shares, and (ii) each
Group's sale of Shares shall be deemed to decrease such
Group's investment by the actual price realized, net of
all brokerage fees and commissions incurred in such sale.
(f) In addition to the investments
required by Section 1(c), each of the parties hereto and
its affiliates may, in its sole discretion, invest
additional amounts from time to time to acquire additional
Shares. Notwithstanding any other provision of this
Agreement, the funds invested by any party hereto or its
affiliates in Shares, either pursuant to Section 1(c) or
to this Section 1(f), may be obtained through any lawful
method, including, without limitation, Margin Loans and
other loans or borrowings subject to the Margin Rules.
(g) Notwithstanding anything in this
Agreement to the contrary, (i) all Shares acquired by any
party hereto shall be held by it for its own account and
not for the account of any other party hereto, (ii) except
as set forth in Section 5(d), no party hereto shall have
any right or obligation to share in the profits or losses
of any other party hereto arising from the acquisition,
holding or disposition of Shares beneficially owned by
such other party or its affiliates and (iii) all transfers
of Shares pursuant to Section 1(c)(ii) or Section
1(c)(iii), and all payments in respect of such Shares
pursuant to Section 1(c)(ii) or Section 1(c)(iii), shall
be made simultaneously on the respective dates such
transfers and payments are required to be made pursuant to
Section 1(c)(iv), and no party hereto shall be deemed to
own or to have any rights of ownership in any such Shares
(including, without limitation, any right to vote such
Shares or to receive dividends paid in respect of such
Shares) until such transfer and payment are made.
8
<PAGE> 9
Section 2. Agreement to Vote. In the
event that Brooke Group Ltd. ("BGL") or BGLS Inc. ("BGLS")
determines to solicit Stockholder Demands, Written
Consents or Proxies (as such terms are defined in the
Agreement dated as of October 17, 1995 among BGL, BGLS and
High River (the "BGL Agreement")), the New Valley Group
shall execute and deliver to BGL or BGLS a valid
Stockholder Demand, Written Consent or Proxy, as the case
may be (and not withdraw such Stockholder Demand, Written
Consent or Proxy) with respect to all of the Shares, and
all of the depositary shares representing Series C
Conversion Preferred Stock, par value $.01 per share, of
RJRN, that it beneficially owns or has the right to vote.
Section 3. Termination. (a) This
Agreement shall automatically terminate upon the earlier
of (i) the first anniversary of the date hereof and (ii)
the termination of the BGL Agreement by High River, and
any party hereto may terminate this Agreement sooner at
any time in its sole discretion by written notice to the
other parties hereto; provided, however, that if BGL or
BGLS terminates the BGL Agreement, then New Valley and NV
Sub shall be deemed to have simultaneously terminated this
Agreement.
(b) If this Agreement is terminated
pursuant to this Section 3, this Agreement shall forthwith
become null and void, and there shall be no liability or
obligation on the part of any party hereto, except that
(i) the obligations of the parties hereto pursuant to
Section 5 and Section 6 shall remain in full force and
effect following any termination of this Agreement for the
periods set forth therein and (ii) if (A) either the New
Valley Group or the BGL Group sells any Shares under the
circumstances described in clause (x) of the first proviso
to the first sentence of Section 1(d)(i) of this
Agreement, or is required to offer any Shares to another
party pursuant to the first sentence of Section 1(d)(ii)
of this Agreement, and (B) a party hereto which is not a
member of such Group thereafter terminates this Agreement
prior to or on the tenth day after the first date that
such party becomes aware that such event has occurred,
then the obligations of any member of such Group pursuant
to Section 1(d)(ii) shall remain in full force and effect
following such termination until the later of (I) the end
of the 30-day period set forth in Section 1(d)(ii) or (II)
the time that the Selloff Shares are delivered at the
closing described in the second sentence of Section
1(d)(ii), or the time when payment is made pursuant to the
fourth sentence of Section 1(d)(ii), as the case may be.
Section 4. Certain Definitions. For
purposes of this Agreement, the following terms shall have
the meanings indicated below:
9
<PAGE> 10
(a) "Termination Event" shall have the
meaning assigned to it in the BGL Agreement.
(b) "Other Securities" means any
securities or assets (other than cash) received by the New
Valley Group from RJRN in respect of any Shares held by
the New Valley Group, whether by way of a dividend or
other distribution in respect of such Shares, in exchange
for such Shares, pursuant to a reclassification of such
Shares, or otherwise.
(c) The "Trading Profit" realized in any
sale of any Shares or any Other Securities of any class or
series by any member of the New Valley Group or by BGL,
BGLS or any of their affiliates (the "BGL Group") means
the excess, if any, of the actual price realized in such
sale, net of all brokerage fees and commissions incurred
in such sale, over the Weighted-Average Cost (as defined
below in Section 4(h) and Section 4(i)) of the Shares or
the Other Securities of such class or series sold. The
"Trading Profit" existing on the Reference Date (as
defined below in Section 5(a)) in respect of any Shares or
Other Securities of any class or series held by the New
Valley Group or the BGL Group as of such date means the
excess, if any, of the Market Value (as defined below in
Section 4(j) and Section 4(k)) as of the Reference Date of
the Shares or the Other Securities of such class or series
so held over the Weighted-Average Cost of such Shares or
such Other Securities. Notwithstanding the foregoing, if
the aggregate investment in Shares and Other Securities
made at any time, either before or after the date of
termination of this Agreement, by the New Valley Group,
before giving effect to any sales of Shares and Other
Securities held by the New Valley Group (the "Aggregate
New Valley Investment"), exceeds the greater of (x) the
sum of the First Stage Investment plus the Second Stage
Investment and (y) the aggregate investment of the High
River Group in Shares and Other Securities made prior to
the date of the termination of this Agreement (the greater
of such amounts being referred to herein as the "Target
Investment"), then the "Trading Profit" realized on any
sale of Shares or any Other Securities of any class or
series, or existing on the Reference Date in respect of
any Shares or any Other Securities of any class or series
held by the New Valley Group on the Reference Date, means
the product of (x) the "Trading Profit," calculated as set
forth in the previous two sentences, multiplied by (y) a
fraction, the numerator of which is the Target Investment
and the denominator of which is the Aggregate New Valley
Investment.
(d) The "New Valley Expenses" means the
out-of-pocket costs and expenses incurred by the New
Valley Group or the BGL Group in connection with the
preparation, negotiation and execution of this Agreement
and the BGL Agreement, the
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<PAGE> 11
consummation of the transactions contemplated hereby or
thereby and the solicitation of Stockholder Demands,
Written Consents and Proxies from the stockholders of RJRN
(including without limitation, to the extent incurred in
connection therewith, (i) all registration and filing fees
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the Securities Act of 1933, as amended
(the "Securities Act"), (ii) all printing, messenger,
telephone and delivery expenses, (iii) all fees and
disbursements of counsel and (iv) all fees and
disbursements of public relations firms, proxy
solicitation firms, investment bankers and other financial
advisors), plus an amount equivalent to simple interest on
each such cost and expense at the rate of 10% per annum
from the date of payment thereof; provided, however, that
"New Valley Expenses" shall exclude, without duplication,
(x) all costs and expenses relating to the acquisition of
the Shares beneficially owned or hereafter acquired by the
New Valley Group, (y) all internal costs and expenses
(including, without limitation, all salaries and expenses
of its officers and employees performing duties relating
to the transactions contemplated by this Agreement and the
BGL Agreement) and (z) all costs and expenses paid to the
New Valley Group, or the BGL Group, except as
reimbursement for out-of-pocket costs and expenses
incurred by the New Valley Group or the BGL Group to
unaffiliated third parties.
(e) The "Net Profit" realized on any
sale of Shares or any Other Securities of any class or
series, or existing on the Reference Date in respect of
any Shares or any Other Securities of any class or series
held by the New Valley Group or the BGL Group on the
Reference Date, means the excess, if any, of (i) the
Trading Profit realized on such sale or existing on the
Reference Date with respect to such Shares or such class
or series of Other Securities, as the case may be,
together with the aggregate Trading Profit realized on all
previous or simultaneous sales (if any) of any Shares or
any Other Securities of such class or series, over (ii)
the sum of (A) the aggregate New Valley Expenses incurred
on or prior to such sale or the Reference Date, as the
case may be, and (B) five times the excess, if any of (I)
the aggregate percentage payments (if any) that High River
would have been entitled to receive under Section 5(d) of
this Agreement and Section 4(c) of the BGL Agreement with
respect to such previous or simultaneous sales if not for
the effect of clauses (x) and (y) of the provisos to such
Sections over (II) any repayment that New Valley or BGLS
would have been entitled to receive under clause (z) of
such provisos.
(f) The "Net Loss" realized on any sale
of Shares or any Other Securities of any class or series,
or existing on the Reference Date in respect of any Shares
or any Other Securities of any class or series held by the
New Valley Group or the BGL
11
<PAGE> 12
Group on the Reference Date, means the excess, if any, of
(i) the sum of (A) the aggregate New Valley Expenses
incurred on or prior to such sale or the Reference Date,
as the case may be, and (B) five times the excess, if any
of (I) the aggregate percentage payments (if any) that
High River would have been entitled to receive under
Section 5(d) of this Agreement and Section 4(c) of the BGL
Agreement with respect to any previous or simultaneous
sale of Shares or any Other Securities of such class or
series if not for the effect of clauses (x) and (y) of the
provisos to such Sections over (II) any repayment that New
Valley or BGLS would have been entitled to receive under
clause (z) of such provisos over (ii) the Trading Profit
realized on such sale or existing on the Reference Date
with respect to such Shares or such class or series of
Other Securities, as the case may be, together with the
aggregate Trading Profit realized on all previous or
simultaneous sales (if any) of any Shares or any Other
Securities of such class or series, as the case may be.
(g) The "Net Profit Override" on any
sale of Shares or any Other Securities of any class or
series, or existing on the Reference Date in respect of
any Shares or any Other Securities of any class or series
held by the New Valley Group or the BGL Group on the
Reference Date, means 20% of the Net Profit, if any, on
such sale or existing on such date.
(h) The "Weighted-Average Cost" of any
Shares means (i) the weighted-average cost of all Shares
owned by the New Valley Group and the BGL Group as of the
date hereof, or acquired by the New Valley Group and the
BGL Group hereafter prior to or at the time that the
aggregate investment of the New Valley Group in Shares
first exceeds the Target Investment (including in each
case all brokerage fees and commissions incurred in the
acquisition of such Shares and including an amount
equivalent to simple interest on the cost of any Shares at
the rate of 8-1/2% per annum from the date of payment for
such Shares, but excluding any other interest, fees,
premiums and other costs of any loans or borrowings
incurred or maintained to acquire or carry such Shares),
calculated in accordance with generally accepted
accounting principles, reduced by (ii) the sum of (A) the
amount of any cash dividends or distributions received in
respect of such Shares and the Market Value (as of the
date received) of any Other Securities received in respect
of such Shares by way of any dividend or distribution,
plus (B) an amount equivalent to simple interest on such
amount and such Market Value at the rate of 8-1/2% per
annum from such date received; provided, however, that any
exchange of Shares for Other Securities or
reclassification of Shares into Other Securities shall be
treated for purposes of calculating the Weighted-Average
Cost of the remaining Shares as a sale of the Shares so
exchanged or reclassified at a price equal to their
Weighted-Average Cost.
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<PAGE> 13
(i) The "Weighted-Average Cost" of any
Other Securities received by the New Valley Group and the
BGL Group means (i) in the case of any Other Securities
received by way of any dividend or distribution, the
Market Value of such Other Securities as of the date
received, plus an amount equivalent to simple interest on
such Market Value at the rate of 8-1/2% per annum from the
date of receipt of such Other Securities, but excluding
any other interest, fees, premiums and other costs of any
loans or borrowings incurred or maintained to carry such
Other Securities and (ii) in the case of any Other
Securities received by the New Valley Group and the BGL
Group by way of any exchange of Shares for Other
Securities or reclassification of Shares into Other
Securities, an amount equal to the Weighted-Average Cost
of the Shares so exchanged or reclassified, plus an amount
equivalent to simple interest on such amount at the rate
of 8-1/2% per annum from the date of receipt of such Other
Securities, but excluding any other interest, fees,
premiums and other costs of any loans or borrowings
incurred or maintained to carry such Other Securities;
provided, however, that the Weighted-Average Cost of any
Other Securities shall be reduced by the sum of (A) the
amount of any cash dividends or distributions received by
the New Valley Group and the BGL Group in respect of such
Other Securities and the Market Value (as of the date
received) of any securities or assets (other than cash)
received by the New Valley Group and the BGL Group in
respect of such Other Securities by way of any dividend or
distribution plus (B) an amount equivalent to simple
interest on the amount of such cash or the Market Value of
such securities or other assets at the rate of 8-1/2% per
annum from the date received.
(j) The "Market Value" of any securities
as of any date means the product obtained by multiplying
(i) the number or amount of such securities by (ii) the
average of the daily closing prices per share or other
unit of such securities for the ten consecutive trading
days (or, if such securities have not traded for ten
consecutive trading days, such lesser number of trading
days as they have traded) on or prior to such date. For
this purpose, the "closing price" of any securities as of
any date means, the closing sale price, regular way, or,
in case no such sale takes place on such day, the average
of the closing bid and asked prices per share or other
unit for such securities, regular way, in either case as
reported in the principal consolidated transaction
reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if
such securities are not then listed or admitted to trading
on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which such securities are listed or
admitted to trading or, if such securities are not then
listed or admitted to
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<PAGE> 14
trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high
bid and low asked prices, per share or other unit for such
securities in the over-the-counter market, as reported by
the NASDAQ system or, if such system is not in use, any
other similar system then in use, or, if on any such date
such securities are not then quoted by any such system,
the average of the closing bid and asked prices per share
or other unit for such securities as furnished by a
professional market maker making a market in such
securities selected by mutual agreement of New Valley and
High River or, if no such person then makes a market in
such securities, the fair market value of such securities,
as determined by an independent, nationally recognized
investment banking or appraisal firm selected by mutual
agreement of New Valley and High River; provided, however,
that if any dividend or distribution shall have been
declared but not paid in respect of such securities as of
the date in question, and the ex-dividend date for the
determination of the holders of securities entitled to
receive such dividend or distribution shall occur prior to
the date of valuation, the "Market Value" of such
securities shall be appropriately increased by the value
of such dividend or distribution (as determined by mutual
agreement of New Valley and High River, or if they cannot
agree, by an independent, nationally recognized investment
banking or appraisal firm selected by mutual agreement of
New Valley and High River, or if they cannot agree,
selected by the American Arbitration Association).
(k) The "Market Value" of any assets
other than securities means the fair market value of such
assets, as determined by an independent, nationally
recognized investment banking or appraisal firm selected
by mutual agreement of New Valley and High River, or if
they cannot agree, selected by the American Arbitration
Association).
Section 5. Certain Fees and Percentage
Payments. (a) Subject to Section 5(c), New Valley shall
pay or cause to be paid to High River the sum of $50
million promptly upon
(i) any termination of this Agreement
by High River at a time when (A) no Termination
Event has occurred, (B) New Valley or NV Sub is
in material breach of its obligations (the "New
Valley Obligations") under Section 1(a), the
fourth sentence of Section 1(c)(v), the ninth
sentence of Section 1(c)(v), Section 1(d)(i) or
Section 2 of this Agreement and (C) High River is
not in material breach of its obligations (the
"High River Obligations") under Section 1(a), the
fourth sentence of Section 1(c)(v), the ninth
sentence of Section 1(c)(v) or Section 1(d)(i) of
this
14
<PAGE> 15
Agreement or Section 1(c)(iii) or Section 8 of
the BGL Agreement;
(ii) any termination of this Agreement
by New Valley or NV Sub at a time when (A) no
Termination Event has occurred and (B) High River
is not in material breach of the High River
Obligations; or
(iii) the consummation of any Business
Combination (as defined in the BGL Agreement),
including any Permitted Business Combination (as
defined in the BGL Agreement), with respect to
the New Valley Group, if (A) such Business
Combination is consummated prior to the later of
(I) the date of RJRN's annual meeting of
stockholders for 1997 and (II) the first
anniversary of the date of termination of this
Agreement (the later of such dates being referred
to herein as the "Reference Date"), or (B) a
legally binding agreement to enter into such
Business Combination or any other Business
Combination is entered into prior to the
Reference Date and such Business Combination is
consummated prior to the second anniversary of
the date of such agreement or (C) the BGL
Nominees (as such term is defined in the BGL
Agreement) are elected to constitute a majority
of the Board of Directors of RJRN and such
Business Combination is consummated prior to the
fifth anniversary of the date of such election;
provided, however, that (x) High River shall not be
entitled to more than one fee under this Section 5(a), (y)
High River shall not be entitled to any fee under this
Section 5(a) if New Valley shall have previously or shall
concurrently become entitled to the fee described in
Section 5(b) of this Agreement or if BGL shall have
previously become entitled to the fee described in Section
4(b) of the BGL Agreement and (z) the amount of any fee to
which High River may be entitled at any time pursuant to
this Agreement shall be reduced by the amount of any fee
which High River shall theretofore have been paid pursuant
to Section 4(a) of the BGL Agreement and by the amounts of
any percentage payments which High River shall theretofore
have been paid pursuant to Section 5(d) of this Agreement
or pursuant to Section 4(c) of the BGL Agreement.
(b) Subject to Section 5(c), High River
shall pay or cause to be paid to New Valley the sum of $50
million promptly upon:
(i) any termination of this Agreement
by High River at a time when (A) no Termination
Event has occurred, (B) New Valley and NV Sub are
not in material breach of the New Valley
Obligations and (C) BGL and BGLS are not in
15
<PAGE> 16
material breach of their obligations under
Section 1(c)(iii) of the BGL Agreement (the "BGL
Obligations"); or
(ii) any termination of this Agreement
by New Valley or NV Sub at a time when (A) no
Termination Event has occurred, (B) High River is
in material breach of its obligations under
Section 1(a), the fourth sentence of Section
1(c)(v), the ninth sentence of Section 1(c)(v) or
Section 1(d)(i) of this Agreement, (C) New Valley
and NV Sub are not in material breach of the New
Valley Obligations and (D) BGL and BGLS are not
in material breach of the BGL Obligations;
provided, however, that (x) New Valley shall not be
entitled to more than one fee under this Section 5(b), (y)
New Valley shall not be entitled to any fee under this
Section 5(b) if High River shall have previously or shall
concurrently become entitled to the fee described in
Section 5(a) of this Agreement or the fee described in
Section 4(a) of the BGL Agreement and (z) the amount of
any fee to which New Valley may be entitled at any time
pursuant to this Agreement shall be reduced by the amount
of any fee which BGL shall theretofore have been paid
pursuant to Section 4(b) of the BGL Agreement.
(c) Each of New Valley and High River
shall give notice to the other promptly upon becoming
aware that any Termination Event has occurred, or that any
event has occurred that would be a Termination Event but
for the giving of notice or the termination of this
Agreement. Such notice shall specify in reasonable detail
the facts giving rise to such Termination Event.
(d) Notwithstanding anything in this
Agreement or the BGL Agreement to the contrary,
(i) if the New Valley Group or the BGL
Group sells any Shares or any Other Securities of
any class or series prior to the Reference Date,
then New Valley shall pay or cause to be paid to
High River promptly upon the consummation of such
sale a percentage payment equal to the product of
(A) the Net Profit Override realized in such
sale, multiplied by (B) a fraction (the "Sale
Fraction," which shall be calculated separately
for the Shares and for each class or series of
Other Securities), the numerator of which is the
number of Shares or such Other Securities (as the
case may be) held as of the date hereof, or
hereafter acquired prior to such sale, by the New
Valley Group and the denominator of which is the
number of Shares or such Other Securities (as the
case may be) held as of the date hereof,
16
<PAGE> 17
or hereafter acquired prior to such sale, by the
New Valley Group and the BGL Group; and
(ii) if the New Valley Group or the BGL
Group holds any Shares or any Other Securities of
any class or series on the Reference Date, then
New Valley shall pay or cause to be paid to High
River promptly upon the Reference Date a
percentage payment equal to the product of (A)
the Net Profit Override existing on the Reference
Date in respect of such Shares or such Other
Securities, multiplied by (B) a fraction (the
"Holdings Fraction," which shall be calculated
separately for the Shares and for each class or
series of Other Securities), the numerator of
which is the number of Shares or such Other
Securities (as the case may be) held as of the
date hereof, or hereafter acquired prior to the
Reference Date, by the New Valley Group and the
denominator of which is the number of Shares or
such Other Securities (as the case may be) held
as of the date hereof, or hereafter acquired
prior to the Reference Date, by the New Valley
Group and the BGL Group;
provided, however, that (x) the amount of any percentage
payment to which High River is entitled at any time under
this Section 5(d) shall be reduced by the product of (1)
the amount of any fee which High River shall have
theretofore been paid by New Valley under Section 5(a) of
this Agreement or by BGLS under Section 4(a) of the BGL
Agreement, multiplied by (2) the Sale Fraction or the
Holdings Fraction, as the case may be, (y) in the event
that (1) the New Valley Group or the BGL Group realizes a
Net Loss on any sale of Shares or any Other Securities of
any class or series, or a Net Loss exists on the Reference
Date in respect of any Shares or any Other Securities of
any class or series held by the New Valley Group or the
BGL Group on the Reference Date, and (2) High River has
theretofore received any percentage payments from New
Valley pursuant to this Section 5(d) or from BGLS pursuant
to Section 4(c) of the BGL Agreement, then in each such
event High River shall repay or cause to be repaid to New
Valley promptly upon receipt of notice from New Valley an
amount equal to the product of (1) the excess, if any, of
(X) 20% of such Net Loss over (Y) the aggregate amount of
such percentage payments theretofore received by High
River, multiplied by (2) a fraction, the numerator of
which is the aggregate amount of such percentage payments
theretofore paid by New Valley and the denominator of
which is the aggregate amount of such percentage payments
theretofore paid by New Valley and BGLS and (z) High River
shall not be entitled to any percentage payment under this
Section 5(d) if New Valley shall have previously become
entitled to the fee described in Section 5(b) of this
Agreement or if BGL shall have previously become entitled
to the fee described in Section 4(b) of the BGL Agreement.
New Valley and NV Sub shall use their
17
<PAGE> 18
reasonable best efforts to provide to High River (x) once
each calendar week, commencing with the date of this
Agreement, a report containing a reasonably detailed
calculation of the number of Shares and the amount of
Other Securities then held by the New Valley Group and the
Weighted-Average Cost of such Shares and Other Securities,
as well as a reasonably detailed estimate prepared in good
faith of the New Valley Expenses incurred to that date and
(y) promptly after the close of business on each business
day on which any Shares are sold by the New Valley Group,
a report setting forth the number of Shares or Other
Securities sold since the close of business on the
previous business day, the aggregate price realized in
such sales and the aggregate commissions paid in such
sales; provided, however, that New Valley and NV Sub shall
not incur any liability or suffer any prejudice as a
result of its provision of any such estimate.
(e) The parties hereto hereby
acknowledge and agree that the arrangements in Section
5(d) with respect to percentage payments constitute a
partnership for Federal income tax purposes and that the
parties hereto shall file income tax returns in a
consistent manner.
Section 6. Costs and Expenses. Each
party hereto shall be solely responsible for all of its
costs and expenses relating to this Agreement and the
transactions contemplated hereby.
Section 7. Required Filings; Publicity.
(a) Each of the parties hereto shall (and shall cause
each of its affiliates to) (i) take all actions necessary
to comply promptly with all legal requirements which may
be imposed on such party (or its affiliates) as a result
of this Agreement or any of the transactions contemplated
hereby, and (ii) without limiting the foregoing, make all
required filings pursuant to the Securities Act and the
Exchange Act.
(b) To the extent reasonably
practicable, the parties hereto shall consult with each
other prior to all public statements or filings to be
issued or made by any of them or their affiliates with
respect to this Agreement and the transactions
contemplated hereby.
Section 8. Representations and
Warranties. (a) Each of the parties hereto hereby
represents and warrants to the other parties hereto as
follows:
(i) Such party is a corporation or
partnership duly organized, validly existing and
in good standing under the laws of the state of
its incorporation or organization, has full
corporate or partnership power and authority to
18
<PAGE> 19
execute and deliver this Agreement and to perform
its obligations hereunder and to consummate the
transactions contemplated hereby.
(ii) The execution and delivery by
such party of this Agreement and the performance
by such party of its obligations hereunder have
been duly and validly authorized by all necessary
corporate or partnership action. This Agreement
has been duly and validly executed and delivered
by such party and constitutes a legal, valid and
binding obligation of such party enforceable
against such party in accordance with its terms.
(iii) The execution and delivery by
such party of this Agreement do not, and the
performance by such party of its obligations
under this Agreement will not, conflict with or
result in a violation or breach of any of the
provisions of the certificate of incorporation,
bylaws or other organizational documents of such
party, any law or order applicable to such party
or any of such party's contractual obligations to
other persons, in each case, in any manner that
would prevent or materially impede such party
from fulfilling its obligations hereunder.
(b) New Valley and NV Sub hereby
represent and warrant to High River that as of the date
hereof the New Valley Group owns beneficially and of
record 4,278,700 Shares, free and clear of all liens and
encumbrances whatsoever, which Shares were purchased by
the New Valley Group at an aggregate cost (exclusive of
all brokerage fees and commissions incurred in the
acquisition of such Shares) of $129,572,796, and in
respect of which New Valley and NV Sub received dividends
of $37,500 on July 3, 1995 and dividends of $298,387.50 on
October 2, 1995. New Valley and NV Sub further represent
that, upon the consummation of the purchase and sale of
Purchased Shares contemplated by Section 1(a), High River
will acquire title to the Purchased Shares, free and clear
of all encumbrances and liens whatsoever.
(c) High River hereby represents and
warrants to New Valley and NV Sub that as of the date
hereof the High River Group owns beneficially and of
record 1,205,900 Shares, free and clear of all liens and
encumbrances whatsoever, which Shares were purchased by
the High River Group at an aggregate cost (including all
brokerage fees and commissions incurred in the acquisition
of such Shares) of $33,173,434.30, and in respect of which
High River received dividends of $452,212.50 on October 2,
1995. High River further represents and warrants that it
has as of the date hereof, and will have on each date
prior to the termination of this Agreement, net
stockholders' or partners' equity of at least $22 million.
19
<PAGE> 20
Section 9. Miscellaneous. (a) For
purposes of this Agreement, (i) the terms "affiliate" and
"associate" have the meanings assigned to them in Rule
12b-2 promulgated under the Exchange Act, provided that
the BGL Group shall not be deemed to be "affiliates" or
"associates" of the New Valley and NV Sub for any purpose
of this Agreement, (ii) the term "shall" is used herein to
refer to actions which are compulsory and thus to create
binding obligations among the parties hereto, (iii) the
terms "will," "expect," "expectation," "intend" and
"intention," and other terms of similar import, are used
herein solely to refer to the aspirations and objectives
of the parties hereto and thus are not used herein to
create binding obligations among the parties hereto and
(iv) the term "may" is used herein solely to refer to
conduct which is optional and not compulsory and thus is
not used herein to create binding obligations among the
parties hereto.
(b) The parties hereto shall have no
rights, powers or duties except as specified herein, and
no such rights, powers or duties shall be implied.
Nothing herein shall give any party hereto the power to
bind any other party hereto to any contract, agreement or
obligation to any third party.
(c) All notices and other communications
hereunder shall be in writing and shall be deemed given
when received by the parties hereto at the following
addresses (or at such other address for a party as shall
be specified by like notice):
If to New Valley or NV Sub:
100 S.E. Second Street
Miami, Florida 33131
Attention: Bennett S. LeBow
Telecopy: (305) 579-8001
With a copy to:
Michael L. Hirschfeld, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005-1413
Telecopy: (212) 530-5219
20
<PAGE> 21
If to High River:
c/o/ Icahn Associates Corp.
114 West 47th Street
19th Floor
New York, New York 10036
Attention: Carl C. Icahn
Telecopy: (212) 921-3359
With a copy to:
Marc Weitzen, Esq.
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
20th Floor
New York, New York 10036
Telecopy: (212) 626-0799
(d) This Agreement may be executed in
two or more counterparts, all of which shall be considered
one and the same agreement.
(e) This Agreement constitutes the
entire agreement among the parties hereto and supersedes
all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed and
construed in accordance with the laws of the state of New
York applicable to a contract executed and performed in
such State, without giving effect to the conflicts of laws
principles thereof.
(g) Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written
consent of the other parties hereto; provided, however,
that High River may assign any of its rights and interests
hereunder to (i) any corporation incorporated in any state
of the United States or in the District of Columbia if at
least 98.5% of the shares of each class of capital stock
of such corporation are owned by Carl C. Icahn (a
"wholly-owned Icahn subsidiary"), either directly or
through one or more wholly-owned Icahn subsidiaries or
(ii) any partnership, the partners of which are all
wholly-owned Icahn subsidiaries; and provided further that
no such assignment shall relieve High River of any of its
obligations hereunder. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their
respective successors and assigns.
21
<PAGE> 22
(h) This Agreement may be amended,
supplemented or modified only by a written instrument duly
executed by or on behalf of each party hereto. No waiver
of any term or condition in this Agreement shall be
effective unless set forth in writing and signed by or on
behalf of the waiving party. No waiver by any party
hereto of any term or condition of this Agreement shall be
deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future
occasion.
(i) The terms and provisions of this
Agreement are intended solely for the benefit of the
parties hereto and their successors and permitted assigns
and are not intended to confer upon any other person any
rights or remedies hereunder.
(j) In the event that any party hereto
prevails in any action or proceeding alleging a breach of
this Agreement, such party shall be entitled to recover
all reasonable attorney's fees and other costs of
prosecuting such action or proceeding and, in addition,
shall be entitled to receive simple interest on any
damages awarded in such action or proceeding at the rate
of 10% per annum from the date of such breach.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their representatives thereunto duly authorized, all as of the date
first above written.
NEW VALLEY CORPORATION
By:_______________________________
ALKI CORP.
By:_______________________________
HIGH RIVER LIMITED PARTNERSHIP
By:_______________________________
[Signature page to Agreement among New Valley Corporation, ALKI
Corp. and High River Limited Partnership dated October 17, 1995]
23
<PAGE> 1
EXHIBIT 10(e)
Bennett S. LeBow
100 S.E. Second Street
Miami, Florida 33131
October 17, 1995
High River Limited Partnership
100 South Bedford Road
Mount Kisco, New York 10549
Attn: Carl C. Icahn
Dear Carl:
By executing this letter in the space provided below, New Valley
Corporation, a New York corporation ("New Valley"), ALKI Corp., a Delaware
corporation and a direct wholly owned subsidiary of New Valley ("NV Sub") and
High River Limited Partnership, a Delaware limited partnership ("High River"),
each hereby agree as follows:
1. Notwithstanding the terms of Sections 1(c)(ii)-(iv) of
the Agreement by and among New Valley, NV Sub and High River, dated
October 17, 1995 (the "New Valley Agreement"), New Valley and NV Sub
("New Valley Group") and High River and its affiliates ("High River
Group") will calculate the aggregate number and the average price of
all shares of common stock, par value $.01 per share, of RJR Nabisco
Holding Corp. ("Shares") owned by New Valley Group and High River
Group, respectively, on a periodic basis, with emphasis on doing so
when the parties own a similar number of Shares, and make payments to
one another in immediately available funds, so that after giving effect
to such payments, the New Valley Group and the High River Group will
have invested the same amount in Shares (exclusive of brokerage fees
and commissions incurred in such acquisitions).
2. Strict compliance with Section 1(c)(ii)-(iv) of the New
Valley Agreement is not required, notwithstanding the terms thereof.
3. Nothing herein contained shall be construed to
otherwise abrogate the rights and obligations of the parties to this
letter agreement with respect to all other provisions of the New Valley
Agreement.
If the foregoing reflects your understanding, please sign this
letter below. Upon your execution hereof, this letter agreement will become a
binding contract between us.
Very truly yours,
Bennett S. LeBow
<PAGE> 2
Accepted and Agreed to:
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
General Partner
By:__________________________________
Edward E. Mattner
President
[Signature page for letter agreement by and
among New Valley Corporation, ALKI Corp.
and High River Limited Partnership]
<PAGE> 1
EXHIBIT 10(f)
High River Limited Partnership
100 South Bedford Road
Mount Kisco, New York 10549
November 5, 1995
New Valley Corporation
ALKI Corp.
100 S.E. Second Street
Miami, Florida 33131
Attn: Bennett S. LeBow
Dear Bennett:
By executing this letter in the space provided below, New Valley
Corporation, a New York corporation ("New Valley"), ALKI Corp., a Delaware
corporation and a direct wholly-owned subsidiary of New Valley ("NV Sub") and
High River Limited Partnership, a Delaware limited partnership ("High River"),
each hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Agreement by and among
New Valley, NV Sub and High River, dated October 17, 1995 (the "New Valley
Agreement").
2. Section 1(b)(iii) of the New Valley Agreement is hereby
amended to add the following to the end of the subsection:
"; provided, however, that neither High River nor the New Valley Group
shall have any obligation to make a Second Stage Investment unless and
until the New Valley Group gives notice ("Second Stage Notice") to High
River of the New Valley Group's intention to proceed with and make its
Second Stage Investment."
3. Notwithstanding the terms of Sections 1(c)(ii)-(iv) of the New
Valley Agreement and the letter agreement by and among New Valley, NV Sub and
High River, dated October 17, 1995 (the "Letter Agreement"), following the
First Stage Completion Date and prior to the earlier of (i) such time that New
Valley, NV Sub and any assignee of the foregoing ("New Valley Group")
beneficially own a number of shares of common stock, par value $.01 per share,
of RJR Nabisco Holdings Corp. ("Shares") equal to or greater than the number of
Shares beneficially owned by High River and its affiliates ("High River Group")
(the "Catch Up Date") and (ii) both New Valley Group and High River Group have
made investments in Shares equal to at least the Second Stage Investment (the
"Second Stage Completion Date"), neither High River Group nor New Valley Group
shall be obligated to make or cause to be made to the other party:
<PAGE> 2
(i) such transfer of Shares and such payments as would have been
necessary so that, after giving effect to such transfers and payments, New
Valley Group and High River Group would have acquired the same number of
Qualifying Shares;
(ii) such payments as would have been necessary so that, after giving
effect to such payments, New Valley Group and High River Group would have
invested the same amount in Qualifying Shares (exclusive of brokerage fees
and commissions incurred in such acquisitions); or
(iii) such transfer of Non-Qualifying Shares or payment for
Non-Qualifying Shares in accordance with Section 1(c)(iii) of the New
Valley Agreement.
In the event that the Catch Up Date precedes the Second Stage Completion Date
and following the Catch Up Date (but prior to the Second Stage Completion Date)
New Valley Group purchases Shares, then (x) the parties shall calculate the
aggregate number and the average price of all Qualifying Shares acquired after
the Catch Up Date by New Valley Group and High River Group, respectively, on a
periodic basis, with emphasis on doing so when the parties own a similar number
of Shares, and make payments to one another in immediately available funds, so
that after giving effect to such payments, New Valley Group and High River
Group will have invested the same amount in Qualifying Shares acquired after
the Catch Up Date (exclusive of brokerage fees and commissions incurred in such
acquisitions); (y) New Valley Group may, in accordance with Section 1(c)(iii)
of the New Valley Agreement, put to High River Non-Qualifying Shares at the
Hurdle Price; and (z) the parties shall follow the even up procedures set forth
in Section 1(c)(v) of the New Valley Agreement. In the event that following
the Catch Up Date, New Valley does not purchase Shares, then clauses (i)-(iii)
of this Paragraph 3 shall remain in effect.
4. Section 1(d)(i) of the New Valley Agreement is hereby amended
to delete the first two lines in their entirety and to substitute in lieu
thereof the following:
"Except as provided in subpart (ii) of this subparagraph (d)
and except as provided in Section 9(g) of this Agreement, until the
termination of this Agreement,"
5. Notwithstanding Section 1(d) of the New Valley Agreement, if
at any time subsequent to the First Stage Completion Date but prior to the
Second Stage Completion Date, High River Group beneficially owns more Shares
than New Valley Group, then High River Group may sell, transfer or otherwise
dispose of ("Transfer") Shares beneficially owned by it, provided that
following such Transfer, the number of Shares beneficially owned by High River
Group would not be less than the number of Shares beneficially owned by New
Valley Group, as reflected in
2
<PAGE> 3
New Valley Group's last written notice to High River Group in accordance with
Section 1(c)(i) of the New Valley Agreement.
6. Section 3(b)(ii)(B) of the New Valley Agreement is hereby
amended to delete the subsection in its entirety and to substitute in lieu
thereof the following:
"(B) a party hereto which is not a member of such selling or offering
Group thereafter terminates this Agreement prior to or on the tenth day
after the first date that such party becomes aware that such event has
occurred,"
7. New Valley Group shall promptly make any payments due under
Section 5(d) of the New Valley Agreement and Section 4(c) of the Agreement
among Brooke Group Ltd., BGLS Inc. and High River dated October 17, 1995 (the
"BGL Agreement"). In the event that High River Group believes that New Valley
Group has breached any of its obligations under Section 5(d) of the New Valley
Agreement or Section 4(c) of the BGL Agreement, the parties shall promptly
follow the procedures set forth in Section 1(c)(v) of the New Valley Agreement
in order to resolve the dispute. If the Arbitrator determines that (i) New
Valley Group is required to make a payment pursuant to Section 5(d) of the New
Valley Agreement and/or Section 4(c) of the BGL Agreement, New Valley Group
shall make or cause to be made such payment within twenty (20) days after
receiving the Arbitrator's notice of decision. In the event that New Valley
Group fails to make such payment within twenty (20) days after receipt of the
Arbitrator's notice of decision, New Valley Group shall immediately pay or
cause to be paid to High River Group an additional sum in the amount of $50
million.
8. The first sentence of Section 9(g) of the New Valley Agreement
is hereby amended to add the following to the end of the sentence:
"; and provided, however, that the New Valley Group may assign any of
its rights and interests hereunder to (i) any corporation incorporated in
any state of the United States or in the District of Columbia if 100% of
the shares of each class of capital stock of such corporation are owned by
New Valley (a "wholly-owned New Valley subsidiary"), either directly or
through one or more wholly-owned New Valley subsidiaries or (ii) any
partnership, the partners of which are all wholly-owned New Valley
subsidiaries; and provided, further, that no such assignment shall relieve
the New Valley Group of any of its obligations hereunder."
9. In the event that prior to February 1, 1996 (i) New Valley
Group provides High River Group with notice of termination of the New Valley
Agreement or BGL Group provides High River with notice of termination of the
BGL Agreement at a time when a Termination Event (as defined in the BGL
Agreement) set forth in Section 3(c)(vii) or 3(c)(viii) of the BGL Agreement
has occurred or (ii) High River Group provides New Valley Group
3
<PAGE> 4
with notice of termination of the New Valley Agreement or provides BGL Group
with notice of termination of the BGL Agreement at a time when a Termination
Event set forth in Section 3(c)(ix)(A) of the BGL Agreement has occurred, New
Valley Group shall not transfer any Shares beneficially owned by New Valley
Group until February 1, 1996 in consequence of or in reliance upon such notice
of termination. If the notice of termination specified in clause (i) of the
preceding sentence is provided after January 16, 1996, and the aggregate number
of Shares beneficially owned by High River Group exceeds the aggregate number
of Shares beneficially owned by New Valley Group plus BGL Group (collectively,
the "Aggregate LeBow Shares"), New Valley Group shall not Transfer any Shares
beneficially owned by New Valley Group for fifteen (15) days following receipt
by High River Group of New Valley Group's or BGL Group's notice of termination;
provided, however, that on such date not before February 1, 1996 that the
aggregate number of Shares beneficially owned by High River Group is equal to
or less than the Aggregate Lebow Shares, and thereafter, New Valley Group may
Transfer any Shares beneficially owned by New Valley Group.
10. In the event that High River Group provides New Valley Group
with notice of termination of the New Valley Agreement or provides BGL Group
with notice of termination of the BGL Agreement at a time when a Termination
Event under any of Sections 3(c)(ix)(B) through (E) of the New Valley Agreement
has occurred and the aggregate number of shares beneficially owned by High
River Group exceeds the Aggregate LeBow Shares, New Valley Group shall not
Transfer any Shares beneficially owned by New Valley Group in consequence of or
in reliance upon such notice of termination until the earlier of (i) fifteen
(15) days following receipt by New Valley Group or BGL Group of High River
Group's notice of termination specified in the preceding sentence and (ii) the
date that the aggregate number of Shares beneficially owned by High River Group
is equal to or less than the Aggregate LeBow Shares.
11. Nothing herein contained shall be construed to otherwise
abrogate the rights and obligations of the parties to this letter agreement
with respect to all other provisions of the New Valley Agreement, the BGL
Agreement and the Letter Agreement.
4
<PAGE> 5
If the foregoing reflects your understanding, please sign this letter
below. Upon your execution hereof, this letter agreement will become a binding
contract between us.
Very truly yours,
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
Its: General Partner
By: /s/
--------------------------------
Name:
Title:
Agreed to and Accepted:
NEW VALLEY CORPORATION
By: /s/
-----------------------------------
Name:
Title:
ALKI CORP.
By: /s/
-----------------------------------
Name:
Title:
[Signature page for letter agreement by and among New Valley Corporation, ALKI
Corp. and High River Limited Partnership, dated November 5, 1995]
5
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