<PAGE> 1
===============================================================================
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 JUNE 30, 1996
COMMISSION FILE NUMBER 1-2493
NEW VALLEY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 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 AUGUST 9, 1996, THERE WERE OUTSTANDING 9,577,686 OF THE REGISTRANT'S
COMMON SHARES, $.01 PAR VALUE.
===============================================================================
<PAGE> 2
NEW VALLEY CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995......................................... 3
Consolidated Statements of Operations for the three months
and six months ended June 30, 1996 and 1995............... 4
Consolidated Statement of Changes in Non-Redeemable
Preferred Shares, Common Shares and Other Capital
(Deficit) for the six months ended June 30, 1996.......... 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995.............................. 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......................................... 19
Item 3. Defaults Upon Senior Securities........................... 19
Item 4. Submission of Matters to a Vote of Security-Holders....... 19
Item 5. Other Information......................................... 19
Item 6. Exhibits and Reports on Form 8-K.......................... 20
SIGNATURE............................................................ 21
</TABLE>
- 2 -
<PAGE> 3
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 65,621 $ 51,742
Investment securities 200,223 241,526
Restricted assets 10,391 22,919
Receivable from clearing brokers 17,582 13,752
Other current assets 20,982 3,546
--------- -----------
Total current assets 314,799 333,485
--------- -----------
Investment in real estate 183,122
Investment securities 517 517
Restricted assets 7,423 15,086
Long-term investments 11,506 29,512
Other assets 15,091 7,222
--------- -----------
Total assets $ 532,458 $ 385,822
========= ===========
LIABILITIES AND CAPITAL (DEFICIT)
Current liabilities:
Margin loans payable $ 82,525 $ 75,119
Accounts payable and accrued liabilities 40,331 27,712
Prepetition claims and restructuring accruals 26,737 33,392
Income taxes 16,954 20,283
Securities sold, not yet purchased 17,276 13,047
Current portion of long-term obligations 3,538 8,367
--------- -----------
Total current liabilities 187,361 177,920
--------- -----------
Notes payable 159,574
Other long-term obligations 16,366 11,967
Redeemable preferred shares 222,288 226,396
Non-redeemable preferred shares, Common Shares and
capital (deficit):
Cumulative preferred shares; liquidation preference of
$69,769, dividends in arrears; $105,170 and $95,118 279 279
Common Shares, $.01 par value; 850,000,000 shares
authorized; 9,577,624 and 191,551,586 shares
outstanding 96 1,916
Additional paid-in capital 664,101 679,058
Accumulated deficit (724,010) (714,364)
Unrealized appreciation on investment
securities, net of taxes 6,403 2,650
--------- -----------
Total non-redeemable preferred shares, Common
Shares and other capital (deficit) (53,131) (30,461)
--------- -----------
Total liabilities and capital (deficit) $ 532,458 $ 385,822
========= ===========
</TABLE>
-3-
<PAGE> 4
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Principal transactions, net $ 6,172 $ 2,601 $ 14,910 $ 2,601
Commissions 4,820 1,738 8,683 1,738
Real estate leasing 5,958 11,664
Computer sales and service 4,098 8,797
Interest and dividends 4,642 3,938 9,826 10,569
Other income 8,857 1,755 17,351 2,793
-------- -------- -------- --------
Total revenues 34,547 10,032 71,231 17,701
-------- -------- -------- --------
Cost and expenses:
Operating, general and administrative 34,170 7,455 71,314 9,797
Interest 4,739 9,263
Reversal of restructuring accruals (2,044)
-------- -------- -------- --------
Total costs and expenses 38,909 7,455 80,577 7,753
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes (4,362) 2,577 (9,346) 9,948
Provision for income taxes 400 293 300 1,033
-------- -------- -------- --------
Income (loss) from continuing operations (4,762) 2,284 (9,646) 8,915
Discontinued operations:
Income from discontinued operations,
net of income taxes 2,682 4,080
-------- -------- -------- --------
Net income (loss) (4,762) 4,966 (9,646) 12,995
Dividends on preferred shares - undeclared (15,646) (18,647) (31,108) (39,059)
Excess of carrying value of redeemable preferred
shares over cost of shares purchased 26,266 4,279 33,624
-------- -------- -------- --------
Net income (loss) applicable to Common Shares $(20,408) $ 12,585 $(36,475) $ 7,560
======== ======== ======== ========
Income (loss) per common and equivalent share:
From continuing operations $ (2.13) $ 1.03 $ (3.81) $ .36
Discontinued operations .28 .43
--------- -------- --------- --------
Net income (loss) per Common Share $ (2.13) $ 1.31 $ (3.81) $ .79
======== ======== ======== ========
Number of shares used in computation 9,578 9,572 9,578 9,526
========= ========= ======== ========
Supplemental information:
Additional interest absent Chapter 11 filing $ 2,314
=========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
- 4 -
<PAGE> 5
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NON-REDEEMABLE PREFERRED
SHARES, COMMON SHARES AND OTHER CAPITAL (DEFICIT)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
$3.00 Class B
Preferred Shares Common Shares Additional
---------------- ---------------- Paid-In Accumulated Unrealized
Shares Amount Shares Amount Capital Deficit Appreciation
------ ------ -------- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 2,791 $279 191,551 $1,916 $679,058 $(714,364) $2,650
Net loss (9,646)
Undeclared dividends and accretion
on redeemable preferred shares (21,056)
Purchase of redeemable preferred
shares 4,279
Unrealized appreciation in marketable
securities 3,753
Effect of 1-for-20 reverse stock split (181,974) (1,820) 1,820
Conversion of preferred shares 1
------ ----- --------- ------ -------- --------- ------
Balance, June 30, 1996 2,791 $279 9,578 $ 96 $664,101 $(724,010) $6,403
====== ===== ========= ====== ======== ========= ======
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
-5-
<PAGE> 6
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (9,646) $ 12,995
Adjustments to reconcile net income to net
cash used for operating activities:
Income from discontinued operations (4,080)
Depreciation and amortization 2,332
Reversal of restructuring accruals (2,044)
Changes in assets and liabilities, net of effects
from acquisition:
Decrease (increase) in receivables and other assets (11,873) 7,170
Decrease in income taxes (3,329) (29,074)
Increase in accounts payable and accrued liabilities 10,234 399
-------- --------
Net cash used for operating activities (12,282) (14,634)
-------- --------
Cash flows from investing activities:
Purchase of real estate and related improvements (24,882)
Payment of prepetition claims (6,655) (568,997)
Collection of contract receivable 300,000
Decrease in restricted assets 20,191 326,537
Sale or maturity of investment securities 60,899
Purchase of investment securities (15,843) (198,902)
Sale or liquidation of long-term investments 14,500
Purchase of long-term investments (1,269) (70,421)
Payment for acquisition, net of cash acquired 1,915 (25,853)
-------- --------
Net cash provided from (used for) investing activities 48,856 (237,636)
-------- --------
Cash flows from financing activities:
Payment of preferred dividends (10,354) (90,628)
Purchase of Class A preferred stock (10,530) (23,029)
Increase in margin loans payable 7,406
Repayment of other obligations (9,217) (7,357)
Exercise of stock options 535
-------- --------
Net cash used for financing activities (22,695) (120,479)
-------- --------
Net cash provided from discontinued operations 2,421
-------- --------
Net increase (decrease) in cash and cash equivalents 13,879 (370,328)
Cash and cash equivalents, beginning of period 51,742 376,170
-------- --------
Cash and cash equivalents, end of period $ 65,621 $ 5,842
======== ========
Supplemental Cash Flow Information:
Cash payments for income taxes $ 3,729 $ 31,194
======== ========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
-6-
<PAGE> 7
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. PRINCIPLES OF REPORTING
The consolidated financial statements include the accounts of New Valley
Corporation and Subsidiaries (the "Company"). The consolidated financial
statements as of June 30, 1996 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 June 30, 1996 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 the entire
year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
as filed with the Securities and Exchange Commission.
Reincorporation and Reverse Stock Split. On July 29, 1996, the Company
completed its reincorporation from the State of New York to the State of
Delaware and effected a one-for-twenty reverse stock split of the Company's
common shares. These changes were approved by the Company's shareholders at
the annual shareholders' meeting held on June 25, 1996. In connection with
the reverse stock split, all per share data have been restated to reflect
retroactively the reverse stock split and a total of $1,820 was reclassified
from the Company's common shares account to the Company's additional paid-in
capital account.
Real Estate Leasing Revenues. The real estate properties are being leased
to tenants under operating leases. Base rental revenue is generally
recognized on a straight-line basis over the term of the lease. The lease
agreements for certain properties generally contain provisions which provide
for reimbursement of real estate taxes and operating expenses over base year
amounts, and in certain cases as fixed increases in rent. In addition, the
lease agreements for certain tenants provide additional rentals based upon
revenues in excess of base amounts.
Revenue Recognition of Computer Sales and Services. Product revenues are
recognized when the equipment is shipped or, in certain circumstances, upon
product acceptance by the customer if it occurs prior to shipment. Contract
revenues are recognized as the related costs are incurred. Service revenues
are recognized over the period in which the services are provided.
2. ACQUISITIONS
On January 10 and January 11, 1996, the Company acquired four commercial
office buildings (the "Office Buildings") and eight shopping centers (the
"Shopping Centers") for an aggregate purchase price of $183,900, consisting
of $23,900 in cash and $160,000 in
-7-
<PAGE> 8
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
non-recourse mortgage financing. In addition, the Company has capitalized
approximately $800 in costs related to the acquisitions. The Company paid
$11,400 in cash and executed four promissory notes aggregating $100,000 for
the Office Buildings. The Office Building notes bear interest at 7.5% and
have terms of ten to fifteen years. The Shopping Centers were acquired for
an aggregate purchase price of $72,500, consisting of $12,500 in cash and
$60,000 in eight promissory notes. Each Shopping Center note has a term of
five years, and bears interest at the rate of 8% for the first two and
one-half years and at the rate of 9% for the remainder of the term.
The components of the Company's investment in real estate at June 30, 1996
are as follows:
<TABLE>
<S> <C>
Land $ 38,921
Buildings 145,939
Construction-in-progress 22
--------
Total 184,882
Less: accumulated depreciation (1,760)
--------
Net investment in real estate $183,122
========
</TABLE>
On January 11, 1996, the Company provided a $10,600 convertible bridge loan
to finance Thinking Machines Corporation ("TMC"), a developer and marketer
of parallel software of high-end and networked computer systems. In
February 1996, the bridge loan was converted into a controlling interest in
a partnership which holds 3.3 million common shares of TMC which represent
61.4% of the outstanding shares. The acquisition of TMC through the
conversion of the bridge loan was accounted for as a purchase for financial
reporting purposes, and accordingly, the operations of TMC subsequent to
January 31, 1996 are included in the operations of the Company. Subject to
final determination, the fair value of assets acquired, including goodwill
of $1,726, was $27,301 and liabilities assumed totaled $16,705, including
minority interests of $9,082.
The following table presents unaudited pro forma and actual results of
continuing operations as if the acquisitions of Ladenburg, Thalmann & Co.,
Inc., TMC, and the Office Buildings and Shopping Centers, had occurred on
January 1, 1995. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had each of these acquisitions been consummated as of such date.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- -----------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- --------- ----------- ----------
Actual Pro Forma
----------- ----------------------------------
<S> <C> <C> <C> <C>
Revenues $ 34,547 $31,795 $ 72,662 $69,504
======== ======= ======== =======
Net (loss) income $ (4,762) $ 2,457 $(10,030) $ 9,377
======== ======= ======== =======
Net (loss) income applicable to
common shares $(20,408) $10,076 $(36,859) $ 3,942
======== ======= ======== =======
Net (loss) income per common share $ (2.13) $ 1.05 $ (3.85) $ .41
======== ======= ======== =======
</TABLE>
-8-
<PAGE> 9
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
3. DISCONTINUED OPERATIONS
Effective October 1, 1995, the Company sold its messaging services business.
Accordingly, the financial statements reflect the financial position and the
results of operations of the messaging services business as discontinued
operations for the periods prior to the sale.
Operating results of the messaging services business for the three months
ended June 30, 1995 were as follows: revenues - $14,635, operating income -
$2,982, and net income - $2,682. Operating results of the messaging services
business for the six months ended June 30, 1995 were as follows: revenues -
$26,662, operating income - $4,535, and net income - $4,080.
4. INCOME TAXES
At June 30, 1996, the Company had net operating loss carryforwards of
approximately $190,000 which expire at various dates through 2007. A
valuation allowance has been provided against the amount as it is deemed more
likely than not that the benefit of the tax asset will not be utilized. The
Company continues to evaluate the realizability of the deferred tax assets.
The provision for income taxes, which represented the effects of the
alternative minimum tax and state income taxes, for the three and six months
ended June 30, 1996 and 1995, does not bear a customary relationship with
pre-tax accounting income principally as a consequence of the change 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 $6,403 ($6,824 of unrealized gains and
$421 of unrealized losses) included as a separate component of stockholders'
equity (deficit). The Company had net realized gains on sales of investment
securities available for sale of $58 and $3,192 for the three and six months
ended June 30, 1996, respectively.
As of June 30, 1996, the Company, through a wholly-owned subsidiary, held
approximately 5.16 million shares of RJR Nabisco Holdings Corp. ("RJR
Nabisco") common stock, par value $.01 per share (the "RJR Nabisco Common
Stock"), with a market value of $163,886 (cost of $158,225). The Company's
investment in RJR Nabisco collateralizes margin loan financing of $82,525 at
June 30, 1996. This margin loan bears interest at .25% below the broker's
call rate (6.0% at June 30, 1996).
During 1996, the Company has expensed $10,367 relating to the RJR Nabisco
investment. Included in this amount was $220 owed to Brooke Group Ltd.
("Brooke"), an affiliate of the Company, pursuant to the December 27, 1995
agreement with Brooke in which the Company agreed, among other things, to pay
directly or reimburse Brooke and its subsidiaries for out-of-pocket expenses
in connection with Brooke's solicitation of consents and proxies from the
shareholders of RJR Nabisco. At June 30, 1996, the Company owed Brooke and
its subsidiaries a total of $1,200 pursuant to the Brooke agreement, which
amount was paid in July 1996. The Company's investment in RJR Nabisco Common
Stock decreased from a $5,661 unrealized gain at June 30, 1996 to a $20,794
unrealized loss at August 13, 1996.
-9-
<PAGE> 10
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The details of the investment categories by type of security at June 30,
1996 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
--------- ---------
<S> <C> <C>
Available for sale:
Marketable equity securities:
RJR Nabisco Common Stock $158,225 $163,886
Other marketable securities 2,080 2,822
-------- --------
Total marketable securities 160,305 166,708
Marketable debt securities (long-term) 517 517
-------- --------
Total securities available for sale 160,822 167,225
-------- --------
Trading securities (Ladenburg):
Marketable equity securities 24,090 24,429
Equity and index options 7,041 6,739
Other securities 2,684 2,347
-------- --------
Total trading securities 33,815 33,515
-------- --------
Total investment securities 194,637 200,740
Less long-term portion of investment securities (517) (517)
-------- --------
Investment securities - current portion $194,120 $200,223
======== ========
</TABLE>
The long-term portion of investment securities at cost consists of
marketable debt securities which mature in three years.
Long-Term Investments. At June 30, 1996, long-term investments included
investments in limited partnerships of $5,625, equity in a joint venture of
$3,796, an equity investment in a foreign corporation of $2,000, and other
investments of $85. During the first quarter of 1996, the Company
liquidated its position in two limited partnerships with an aggregate
carrying amount of $14,500 and recognized a gain on such liquidations of
$4,086. In July 1996, the Company sold its investment in a Brazilian
airplane manufacturer (the "Brazilian Investment") for $8,285 in cash,
which included $1,300 as reimbursement of the Company's expenses
related to this investment. The Company, after writing down this investment
by $8,698 in 1995, recognized a gain on the sale of the Brazilian Investment
of $4,285 in July 1996 representing a partial recovery of the impaired
carrying value. The Company reclassified this investment to other current
assets as of June 30, 1996. In June 1996, the Company determined that an
other than temporary impairment in the value of its minority equity interest
in a computer software company had occurred and, accordingly, $1,001 was
provided as an impairment charge.
The fair value of the Company's long-term investments approximates its
carrying amount. The Company's estimate of the fair value of its long-term
investments are subject to judgment and are not necessarily indicative of
the amounts that could be realized in the current market.
RJR Nabisco Equity Swap. On February 29, 1996, the Company entered into a
total return equity swap transaction (the "Swap") with an unaffiliated
company (the "Counterparty") relating to 1,000,000 shares of RJR Nabisco
Common Stock (reduced to 750,000 shares of RJR Nabisco Common Stock as of
August 13, 1996). The transaction is for a period of up to six months,
subject to earlier termination at the election of the Company, and provided
for the Company to make a payment to the Counterparty of $1,537 upon
commencement of the
-10-
<PAGE> 11
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Swap. At the termination of the transaction, if the price of the RJR
Nabisco Common Stock during a specified period prior to such date (the
"Final Price") exceeds $34.42, the price of the RJR Nabisco Common Stock
during a specified period following the commencement of the Swap (the
"Initial Price"), the Counterparty will pay the Company an amount in cash
equal to the amount of such appreciation with respect to the shares of RJR
Nabisco Common Stock subject to the Swap plus the value of any dividends
with a record date occurring during the Swap period. If the Final Price is
less than the Initial Price, then the Company will pay the Counterparty at
the termination of the transaction an amount in cash equal to the amount of
such decline with respect to the shares of RJR Nabisco Common Stock subject
to the Swap, offset by the value of any dividends, provided that, with
respect to approximately 225,000 shares of RJR Nabisco Common Stock, the
Company will not be required to pay any amount in excess of an approximate
25% decline in the value of the shares. The potential obligations of the
Counterparty under the Swap are being guaranteed by the Counterparty's
parent, a large foreign bank, and the Company has pledged certain collateral
in respect of its potential obligations under the Swap and has agreed to
pledge additional collateral under certain conditions. The Company marks its
obligation with respect to the Swap to fair value which resulted in a charge
to operations for the unrealized loss on the Swap of $3,231 for the six
months ended June 30, 1996. Based on the market price of the RJR Nabisco
Common Stock at August 13, 1996, the Company would take a charge to
operations for the loss on the Swap of approximately $4,000 for the three
months ended September 30, 1996. The Company had pledged U.S. government
securities of $8,569 and $10,687 at June 30, 1996 and August 13, 1996,
respectively, as collateral for this transaction. These amounts are
classified as current restricted assets.
6. REDEEMABLE PREFERRED SHARES
At June 30, 1996, the Company had authorized and outstanding 2,000,000 and
1,035,462, respectively, of its Class A Senior Preferred Shares. At June
30, 1996 and December 31, 1995, respectively, the carrying value of such
shares amounted to $222,288 and $226,396, including undeclared dividends of
$124,339 and $121,893, or $120.08 and $110.06 per share.
In January and February, 1996, the Company repurchased 72,104 of such shares
for $10,530. The repurchase of the Class A Senior Preferred Shares increased
the Company's additional paid-in capital by $4,279 for the 72,104 shares
acquired.
As of June 30, 1996, the unamortized discount on the Class A Senior Preferred
Shares was $5,597.
In March 1996 and July 1996, the Company declared and paid dividends on the
Class A Senior Preferred Shares of $10.00 and $30.00 per share, respectively.
7. PREFERRED SHARES NOT SUBJECT TO REDEMPTION REQUIREMENTS
The undeclared dividends, as adjusted for conversions of Class B Preferred
Shares into Common Shares, cumulatively amounted to $105,170 and $95,118 at
June 30, 1996 and December 31, 1995, respectively. These undeclared
dividends represent $37.68 and $34.08 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.
-11-
<PAGE> 12
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
8. RESTRICTED ASSETS
Restricted assets at June 30, 1996 consisted primarily of the $8,569 pledged
as collateral for the RJR Nabisco equity swap as described in Note 5, and
$5,223 pledged as security for a long-term lease of commercial office space.
In May 1996, the Company reached an agreement with First Financial
Management Corporation ("FFMC") whereby FFMC released all of the remaining
$28,742 held in escrow pursuant to the Asset Purchase Agreement, dated as of
October 20, 1994, between the Company and FFMC, relating to the sale of the
Company's money transfer business. In addition, the agreement required the
Company to pay FFMC $7,000 in connection with the termination of the various
service agreements the Company had with FFMC. The Company recognized a
gain on the termination of these service agreements of $1,317.
9. PREPETITION CLAIMS UNDER CHAPTER 11 AND RESTRUCTURING ACCRUALS
Those liabilities that are expected to be resolved as part of the Company's
First Amended Joint Chapter 11 Plan of Reorganization, as amended (the
"Joint Plan") are classified in the Consolidated Balance Sheets as
prepetition claims and restructuring accruals. On January 18, 1995,
approximately $550 million of prepetition claims were paid pursuant to the
Joint Plan. As of June 30, 1996 and December 31, 1995, the Company had
$26,737 and $33,392, respectively, of prepetition claims and restructuring
accruals. The prepetition claims remaining as of June 30, 1996 may be
subject to future adjustments depending on pending discussions with the
various parties and the decisions of the Bankruptcy Court.
10. CONTINGENCIES
Litigation
The Company is a defendant in various lawsuits and may be subject to
unasserted claims primarily in connection with its activities as a
securities broker-dealer and participation in public underwritings. These
lawsuits involve claims for substantial or indeterminate amounts and are in
varying stages of legal proceedings. In the opinion of management, after
consultation with counsel, the ultimate resolution of these matters will not
have a material adverse effect on the Company's consolidated financial
position or results of operations.
Investment Company Act
The Investment Company Act of 1940, as amended (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" (exclusive
of Government securities and cash items) on an unconsolidated basis.
Following dispositions of its then operating businesses pursuant to the
Joint Plan, the Company was above this threshold and relied on the one-year
exemption from registration under the Investment Company Act provided by
Rule 3a-2 thereunder, which exemption expired on January 18, 1996. Prior to
such date, through the Company's acquisition of the investment banking and
brokerage business of Ladenburg and its acquisition of the Office Buildings
and Shopping Centers (see
-12-
<PAGE> 13
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Note 2), the Company was engaged primarily in a business or businesses other
than that of investing, reinvesting, owning, holding or trading in
securities, and the value of its investment securities was below the 40%
threshold. Under the Investment Company Act, the Company is required to
determine the value of its total assets for purposes of the 40% threshold
based on "market" or "fair" values, depending on the nature of the asset, at
the end of the last preceding fiscal quarter and based on cost for assets
acquired since that date. If the Company were required to register under
the Investment Company Act, it would be subject to a number of material
restrictions on its operations, capital structure and management, including
without limitation its ability to enter into transactions with affiliates.
-13-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTRODUCTION
The Company's Consolidated Financial Statements include the accounts of
Ladenburg, Thalmann & Co. Inc. ("Ladenburg"), Thinking Machines Corporation
("TMC") and other subsidiaries.
On January 19, 1995, the Company emerged from bankruptcy reorganization
proceedings and completed substantially all distributions to creditors under
its First Amended Joint Chapter 11 Plan of Reorganization, as amended (the
"Joint Plan"). 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 on November 15, 1994 to First
Financial Management Corporation ("FFMC"). In addition, the Company received
an option to sell to FFMC, and FFMC received an option to purchase, the
Company's messaging services business for $20,000 in cash, which was exercised
during the fourth quarter of 1995. In May 1996, FFMC released the balance of
monies held in the escrow account established in connection with the Company's
sale of the money transfer business.
On July 29, 1996, the Company completed its reincorporation from the State of
New York to the State of Delaware and effected a one-for-twenty reverse stock
split of the Company's common shares. These changes were approved by the
Company's shareholders at the annual shareholders' meeting held on June 25,
1996. In connection with the reverse stock split, all per share data have been
restated to retroactively reflect the reverse stock split and a total of $1,820
was reclassified from the Company's common shares account to the Company's
additional paid-in capital account.
ACQUISITIONS
On May 31, 1995, the Company consummated its acquisition of all of the
outstanding shares of Ladenburg for $25,750, net of cash acquired. 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 .
On January 10 and January 11, 1996, the Company acquired four commercial office
buildings (the "Office Buildings") and eight shopping centers (the "Shopping
Centers") for an aggregate purchase price of $183,900, consisting of $23,900 in
cash and $160,000 in non-recourse mortgage financing. In addition, the Company
has capitalized approximately $800 in costs related to the acquisitions. The
Company paid $11,400 in cash and executed four promissory notes aggregating
$100,000 for the Office Buildings. The Office Building notes each bear
interest at 7.5% and have terms of ten to fifteen years. The Shopping Centers
were acquired for an aggregate purchase price of $72,500, consisting of $12,500
in cash and $60,000 in eight promissory notes. Each Shopping Center note has a
term of five years, and bears interest at the rate of 8% for the first two and
one-half years and at the rate of 9% for the remainder of the term. The Office
Buildings and Shopping Centers are operated by New Valley Realty, a division of
the Company formed to manage the Company's real estate operations.
On January 11, 1996, the Company, through Ladenburg's merchant banking
affiliate, provided a $10,600 convertible bridge loan to finance TMC, a
developer and marketer of parallel software of high-end and networked computer
systems, in connection with its emergence from bankruptcy proceedings. Effective
February 1, 1996, the bridge loan was converted into a controlling interest
-14-
<PAGE> 15
in a partnership which holds 3.3 million common shares of TMC which represent
61.4% of the outstanding shares. The acquisition of TMC through the conversion
of the bridge loan was accounted for as a purchase for financial reporting
purposes, and accordingly, the operations of TMC subsequent to January 31, 1996
are included in the operations of the Company. Subject to final determination,
the fair value of assets acquired, including goodwill of $1,726, was $27,301
and liabilities assumed totaled $16,705, including minority interest of $9,082.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Consolidated total revenues were $34,547 for the three months ended June 30,
1996 versus $10,032 for the same period last year. The increase in revenues is
attributable primarily to the acquisitions of Ladenburg, the Office Buildings
and Shopping Centers, and TMC. For the three months ended June 30, 1995, the
Company's revenues consisted of interest and other income, and revenues of
$5,365 related to Ladenburg for the month of June.
For the three months ended June 30, 1996, the results of operations of the
Company's primary operating units, which include Ladenburg (broker-dealer), New
Valley Realty (real estate operations), and TMC (computer sales and service),
were as follows:
<TABLE>
<CAPTION>
Computer
Three Months Ended Broker Real Estate Sales Corporate
June 30, 1996 Dealer Operations and Service and Other Total
------------- ------ ---------- ----------- --------- ------
<S> <C> <C> <C> <C> <C>
Revenues $19,635 $5,958 $ 4,184 $ 4,770 $34,547
Expenses 18,906 6,041 5,348 8,614 38,909
------- ------ ------- ------- -------
Operating income (loss)
before taxes $ 729 $ (83) $(1,164) $(3,844) $(4,362)
======= ====== ======= ======= =======
</TABLE>
Ladenburg's revenues for the second quarter of 1996 consisted of principal
transactions of $6,172, commissions of $4,820, corporate finance fees of $4,407,
syndicate and underwriting income of $2,107, and other income of $2,129.
Expenses of Ladenburg consisted of employee compensation and benefits of $12,221
and other expenses of $6,685.
Revenues from the Office Buildings and Shopping Centers for the three months
ended June 30, 1996 were $3,685 and $2,273, respectively. Expenses of the
Office Buildings and Shopping Centers included interest of $1,874 and $1,213,
respectively, and depreciation of $579 and $323, respectively.
TMC had contract and service revenues of $3,801 and product and software sales
of $297 for the three months ended June 30, 1996. Direct costs of these
revenues were $2,485 for the same period. Operating expenses of TMC consisted
of selling, general and administrative of $1,332 and research and development
of $1,531.
For the three months ended June 30, 1996, the Company's revenues related to
corporate and other activities consisted primarily of interest and dividend
income of $3,534.
-15-
<PAGE> 16
Corporate expenses for the three months ended June 30, 1996 of $8,614 consisted
primarily of expenses related to the RJR Nabisco investment of $4,304, employee
compensation and benefits of $1,564, and interest expense of $1,248. Expenses
for the three months ended June 30, 1995 consisted of Ladenburg expenses for
the month of June of $5,459 and corporate expenses of $1,996. Corporate
expenses for 1995 consisted primarily of employee compensation and benefits of
$1,056.
The provision for income taxes for the three months ended June 30, 1996 was
$400 as compared to $293 for the same period in the prior year. The provision
for income taxes of $400 in 1996 relates principally to state income taxes of
Ladenburg. The effective tax rate does not bear a customary relationship with
pre-tax accounting income principally as a consequence of the change in the
valuation allowance relating to deferred tax assets.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Consolidated total revenues were $71,231 for the six months ended June 30, 1996
versus $17,701 for the same period last year. The increase in revenues of
$53,530 is attributable primarily to the acquisitions described above. For the
six months ended June 30, 1995, the Company's revenues consisted of interest
and other income, and revenues of $5,365 related to Ladenburg for the month of
June.
For the six months ended June 30, 1996, the results of operations of the
Company's primary operating units, which include Ladenburg (broker-dealer), New
Valley Realty (real estate operations), and TMC (computer sales and service),
were as follows:
<TABLE>
<CAPTION>
Computer
Six Months Ended Broker Real Estate Sales Corporate
June 30, 1996 Dealer Operations and Service and Other Total
------------- ------ ---------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
Revenues $38,752 $11,664 $ 8,959 $11,856 $71,231
Expenses 37,529 11,948 10,181 20,919 80,577
------- ------- ------- ------- -------
Operating income (loss)
before taxes $ 1,223 $ (284) $(1,222) $(9,063) $(9,346)
======= ======= ======= ======= =======
</TABLE>
Ladenburg's revenues for the six months ended June 30, 1996 consisted of
principal transactions of $14,910, commissions of $8,683, corporate finance
fees of $7,278, syndicate and underwriting income of $3,640, and other income
of $4,241. Expenses of Ladenburg consisted of employee compensation and
benefits of $24,437 and other expenses of $13,092.
Revenues from the Office Buildings and Shopping Centers for the six months
ended June 30, 1996 were $7,334 and $4,330, respectively. Expenses of the
Office Buildings and Shopping Centers included interest of $3,748 and $2,427,
respectively, and depreciation of $1,152 and $608, respectively.
TMC had product and software sales of $2,700 and contract and service revenues
of $6,097 for the five months ended June 30, 1996. Direct costs of these
revenues were $5,019 for the same period. Operating expenses of TMC consisted
of selling, general and administrative of $2,875 and research and development
of $2,287.
For the six months ended June 30, 1996, the Company's revenues of $11,856
related to corporate and other activities consisted primarily of interest and
dividend income of $7,364 and a net gain on investments of $3,161 as compared
to interest and dividend income of $10,569 for the same period in the prior
year. The net gain on investments consisted of gains on sales of investment
securities held for sale of $3,192 and the liquidation of two limited
partnerships for a gain
-16-
<PAGE> 17
of $4,201, net of an unrealized loss on the RJR Nabisco equity swap of $3,231
and a write-down of the Company's investment in a computer software company of
$1,001.
Corporate expenses for the six months ended June 30, 1996 of $20,919 consisted
primarily of expenses related to the RJR Nabisco investment of $10,367, employee
compensation and benefits of $3,207, and interest expense of $2,408. Expenses
for the six months ended June 30, 1995 consisted of Ladenburg expenses for the
month of June of $5,459 and corporate expenses of $4,338. Corporate expenses
for 1995 consisted primarily of employee compensation and benefits of $2,051.
The reversal of restructuring accruals of $2,044 in the 1995 period resulted
from the Company settling certain claims at amounts below the accrued liability.
The provision for income taxes for the six months ended June 30, 1996 was $300
as compared to $1,033 for the same period in the prior year. The provision for
income taxes of $300 in 1996 relates principally to state income taxes of
Ladenburg. The effective tax rate does not bear a customary relationship with
pre-tax accounting income principally as a consequence of the change in the
valuation allowance relating to deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased from $155,565 at December 31, 1995 to
$127,438 at June 30, 1996 primarily as a result of the purchase of and capital
improvements to the Office Building and Shopping Centers for $24,882, the
repurchase of Class A Senior Preferred Shares for $10,530, and the payment of
preferred dividends of $10,354, offset by the liquidation of long-term
investments of $14,500.
During the first six months of 1996, the Company's cash and cash equivalents
increased from $51,742 to $65,621 due primarily to the liquidation of current
and long-term investments, and the release of certain restricted escrow
accounts, offset by the acquisitions during the period, and dividends on and
repurchases of the Class A Senior Preferred Shares. The Company expects to
fund any cash requirements of the operating businesses and possible future
acquisitions primarily through the sale or maturity of its investment
securities. In July 1996, the Company paid a $30 per share dividend on the
Class A Senior Preferred Shares which totaled approximately $31,000.
The Company holds approximately 5.2 million shares of RJR Nabisco Common Stock
with a market value of $163,886 at June 30, 1996 and $137,432 at August 13,
1996. In addition, the Company had pledged U.S. government securities of
$10,687 at August 13, 1996 as collateral for an equity swap relating to 750,000
shares of RJR Nabisco Common Stock. The Company's working capital could be
materially affected by a significant change in the market value of RJR Nabisco
Common Stock.
In 1995, the Company's Board of Directors authorized the Company to repurchase
as many as 500,000 shares of its Class A Senior Preferred Shares. As of June
30, 1996, the Company had repurchased 411,504 of such shares.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company and its representatives may from time to time make oral or written
"forward-looking statements" within the meaning of the Private Securities
Reform Act of 1995 (the "Reform Act"), including any statements that may be
contained in the foregoing "Management's Discussion and Analysis of Financial
Condition and Results of Operations", in this report and in other filings with
the Securities and Exchange Commission and in its reports to shareholders,
which represent the Company's expectations or beliefs with respect to future
events and financial performance. These forward-looking statements are subject
to certain risks and uncertainties and, in connection with
-17-
<PAGE> 18
the "safe-harbor" provisions of the Reform Act, the Company is hereby
identifying important factors that could cause actual results to differ
materially from those contained in any forward-looking statements made by or on
behalf of the Company. Each of the Company's operating businesses, Ladenburg,
TMC, and New Valley Realty, are subject to intense competition, changes in
consumer preferences, and local economic conditions. Ladenburg is further
subject to uncertainties endemic to the securities industry including, without
limitation, the volatility of domestic and international financial, bond and
stock markets, governmental regulation and litigation. TMC is also subject to
uncertainties relating to, without limitation, the development and marketing of
computer products, including customer acceptance and required funding,
technological changes, capitalization, and the ability to utilize and exploit
its intellectual property and propriety software technology. New Valley Realty
is additionally subject to the uncertainties relating to, without limitation,
required capital improvements to its facilities, local real estate market
conditions and federal, state, city and municipal laws and regulations
concerning, among others, zoning and environmental matters. Uncertainties
affecting the Company generally include, without limitation, the effect of
market conditions on the salability of the Company's investment securities and,
thus, the uncertainty of other potential acquisitions and investments by the
Company, developments relating to the Company's investments in RJR Nabisco,
the effects of governmental regulation on the Company's ability to target
and/or consummate any such acquisitions and the effects of limited management
experience in areas in which the Company may become involved. Results
actually achieved may differ materially from expected results included in
these statements as a result of these or other factors. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date on which such
statements are made. The Company does not undertake to update any
forward-looking statement that may be made from time to time on behalf of the
Company.
-18-
<PAGE> 19
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 10 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 4. Submission of Matters to a Vote of Security-Holders
During the second quarter of fiscal 1996, the Company submitted
certain matters to a vote of security holders at its Annual Meeting of
Shareholders held on June 25, 1996 (the "Annual Meeting"). Proxies
for the Annual Meeting were solicited pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended. Reference is made to
Exhibit 99 of this Report which embodies a brief description of the
matters voted upon at the Annual Meeting and a tabulation of the
results.
Item 5. Other Information
As of the close of business on July 29, 1996 (the "Effective Time"),
the Company completed its reincorporation from the State of New York
to the State of Delaware and effected a one-for-twenty reverse stock
split of its Common Shares (the "Reverse Split"), as a result of
effectuating two mergers with wholly-owned subsidiaries (the "Merger
Transaction"). The Merger Transaction was approved at the Annual
Meeting.
Holders of the pre-split Common Shares as of the Effective Time are
entitled to receive, for every such share held as of the Effective
Time, one-twentieth of a share of the post-split Common Shares, in
whole shares only. Such holders are required to exchange their
pre-split Common Shares for post-split Common Shares by surrendering
and delivering their pre-split Common Share certificates, together
with completed transmittal documents to the Exchange Agent, American
Stock Transfer & Trust Company.
No fractional post-split Common Shares will be issued. At the
Effective Time, the Company deposited with the Exchange Agent the
number of post-split Common Shares equal to the aggregate whole number
of all fractional interests otherwise resulting from the Reverse
Split. On July 30, 1996, the Exchange Agent aggregated and sold
(through its nominee) such shares at prevailing market prices for the
post-split Common Shares, and each holder entitled to such fractional
interests shall receive, upon delivering transmittal documents to the
Exchange Agent, its pro rata portion in cash of the aggregate sale
proceeds thereof, net of commissions.
The Company commenced mailing transmittal documents to record holders
of the pre-split Common Shares on July 31, 1996.
The reverse split reduced the Company's number of outstanding Common
Shares to approximately 9,577,624 shares from 191,552,476 shares.
-19-
<PAGE> 20
Pursuant to the Merger Transaction, the Company's Class A Senior
Preferred Shares and Class B Preferred Shares were each automatically
converted on a one-for-one basis into Preferred Shares of the
Company's Delaware successor (which has been renamed "New Valley
Corporation"). Neither the par value nor the number of issued and
outstanding Preferred Shares were affected by the Merger Transaction.
In addition, the rights, designations, limitations and preferences of
the Preferred Shares after the Merger Transaction are the same as
before the Merger Transaction, except that (i) the voting rights of
the Preferred Shares were proportionately reduced by a factor of
twenty in order to reflect the decrease in outstanding post-split
Common Shares resulting from the Reverse Split and (ii) the conversion
price of the Class B Preferred Shares were increased by a factor of
twenty in order to clearly set forth the actual conversion price in
effect after the Reverse Split and the Merger Transaction. The Merger
Transaction effected the foregoing adjustments in order to restore the
same relative voting rights of the Preferred Shares and relative
conversion price of the Class B Preferred Shares as were in effect
before the Reverse Split and Merger Transaction.
The business, operations, assets, liabilities, properties, officers,
directors and management of the Company were not otherwise affected by
the Merger Transaction.
The Company's equity securities continue to trade on the OTC Bulletin
Board under the symbols NVYL, NVLYA and NVLYB. The Company intends to
apply to list the post-split Common Shares on the NASDAQ SmallCap
Market, or if possible, on the NASDAQ National Market System.
However, there is no assurance that the Company will be successful in
listing such Common Shares on either NASDAQ market.
For additional information concerning the Merger Transaction and
Reverse Split, reference is made to the Proxy Statement (as defined
below).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger dated as of May 22, 1996, by
and between New Valley Corporation and NV Delaware Inc.
(incorporated by reference to Annex II in the Company's
Definitive Proxy Statement dated May 22, 1996, as filed with
the Securities and Exchange Commission on May 22, 1996
pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended (the "Proxy Statement")).
2.2 Agreement and Plan of Merger dated as of May 22, 1996, by
and between NV Delaware Inc. and NV Merger Sub Inc.
(incorporated by reference to Annex V in the Proxy
Statement).
3(i) Restated Certificate of Incorporation dated July 24, 1996 of
New Valley Corporation.
3(ii) By-Laws of New Valley Corporation adopted July 29, 1996.
27 Financial Data Schedule (for SEC use only)
99 Brief description of matters voted upon and the results
thereof at the Company's Annual Meeting of Shareholders held
on June 25, 1996.
(b) Reports on Form 8-K
None
-20-
<PAGE> 1
EXHIBIT 3(I)
FOR INCLUSION IN NEW VALLEY CORPORATION'S QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
E-1
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW VALLEY CORPORATION
_____________________
FIRST: The name of the Corporation is New Valley Corporation.
SECOND: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "DGCL").
THIRD: The aggregate number of shares which the Corporation shall have
the authority to issue shall consist of (i) 850,000,000 shares, of the par
value of $.01 per share, designated as Common Shares (the "Common
Shares"), (ii) 2,000,000 shares, of the par value of $.01 per share,
designated as $15.00 Class A Increasing Rate Cumulative Senior Preferred
Shares ($100 Liquidation Value) (the "Class A Senior Preferred Shares"),
(iii) 12,000,000 shares, of the par value of $.10 per share, designated as
$3.00 Class B Cumulative Convertible Preferred Shares ($25 Liquidation
<PAGE> 3
2
Value) (the "Class B Preferred Shares"), and (iv) 10,000,000 shares, of
the par value of $1.00 per share, designated as Class C Preferred Shares
(the "Class C Preferred Shares").
The rights, preferences and limitations of said classes of stock are as
follows:
A. CLASS A SENIOR PREFERRED SHARES
(i) Ranking. All Class A Senior Preferred Shares (a) shall rank senior
to the Common Shares, the Class B Preferred Shares and Class C Preferred
Shares in respect of the right to receive dividends and the right to receive
payments out of the assets of the Corporation upon voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and (b) shall be of
equal rank regardless of series. The Class A Senior Preferred Shares shall be
identical with each other in all respects except as to the dates from and after
which dividends thereon shall be cumulative. In case the stated dividends or
the amounts payable on liquidation are not paid in full, the Class A Senior
Preferred Shares shall share ratably in the payment of dividends, including
accumulations, if any, in accordance with the sums which would be payable on
said shares if all dividends were declared and paid in full, and in any
distribution of assets other than by way of dividends in accordance with the
sums which would be payable on such distribution if all sums payable were
discharged in full. All Class A Senior Preferred Shares redeemed, purchased or
otherwise acquired by the Corporation shall be cancelled and thereupon restored
to the status of authorized but unissued Class A Senior Preferred Shares.
(ii) Dividend Rate. The holders of Class A Senior Preferred Shares shall
be entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available therefor, cumulative cash dividends payable
quarterly on the first days of January, April, July and October, respectively,
in each year with respect to the quarterly dividend period (or portion thereof)
ending on the day preceding such respective dividend payment date, to
shareholders of record on the respective date, not exceeding fifty days
preceding such dividend payment date, fixed for the purpose by the Board of
Directors in advance of payment of each particular dividend. Dividends shall
accrue on Class A Senior Preferred Shares at a
<PAGE> 4
3
dividend rate of 19% per annum. Dividends shall accrue on dividends on Class A
Senior Preferred Shares which are undeclared or unpaid on any dividend payment
date at a dividend rate of 19% per annum payable quarterly as additional
dividends on each dividend payment date.
(iii) Cumulative Dividends. Dividends on Class A Senior Preferred Shares
shall be cumulative as follows:
(1) if issued prior to the record date for the first dividend on shares of
such class, from the date of issue thereof;
(2) if issued during the period commencing immediately after a record date
for a dividend on shares of such class and ending on the payment date for
such dividend, from such dividend payment date; and
(3) otherwise from the first day of January, April, July and October
preceding the date of issue of such shares.
So long as any Class A Senior Preferred Shares remain outstanding, no
dividend whatever shall be paid or declared and no distribution made on any
junior stock other than a dividend payable in junior stock, and no shares of
junior stock shall be purchased, redeemed or otherwise acquired for
consideration by the Corporation, directly or indirectly (other than as a result
of a reclassification of junior stock, or the exchange or conversion of one
junior stock for or into another junior stock, or other than through the use of
the proceeds of a substantially contemporaneous sale of other junior stock),
unless (a) all dividends on the Class A Senior Preferred Shares accrued for all
past quarter-yearly dividend periods shall have been paid and the full dividend
thereon for the then current quarter-yearly dividend period shall have been paid
or declared and set apart for payment, and (b) all prior mandatory redemption
requirements with respect to all Class A Senior Preferred Shares shall have been
complied with. Subject to the foregoing, and not otherwise, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on any junior stock from time to time out of
any funds legally available therefor, and the Class A Senior Preferred Shares
shall
<PAGE> 5
4
not be entitled to participate in any such dividends, whether payable in
cash, stock or otherwise.
(iv) Preference on Liquidation, etc. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class A Senior Preferred Shares shall be entitled,
before any distribution or payment is made to the holders of any junior stock,
to be paid in full an amount equal to $100 per share (which amount is
hereinafter referred to as the "liquidation amount"), together with accrued
dividends to such distribution or payment date whether or not earned or
declared.
If such payment shall have been made in full to all holders of Class A
Senior Preferred Shares, the remaining assets of the Corporation shall be
distributed among the holders of junior stock, according to their respective
rights and preferences and in each case according to their respective numbers
of shares. For the purposes of this subparagraph (iv), the consolidation or
merger of the Corporation with any other corporation shall not be deemed to
constitute a liquidation, dissolution or winding up of the Corporation, unless
any junior stock is redeemed or receives payment in cash or securities senior
to the Class A Senior Preferred Shares.
(v) Optional and Mandatory Redemption. Subject to subparagraph (viii),
the Corporation, at the option of the Board of Directors, may redeem the whole
or any part of the Class A Senior Preferred Shares at the time outstanding, at
any time, upon notice given as hereinafter specified, at the redemption price
as provided in this subparagraph (v), together with accrued dividends to the
redemption date. The redemption price for Class A Senior Preferred Shares
shall be $100 per share.
The Corporation shall, subject to subparagraph (viii), set aside in trust,
when and as appropriated by the Board of Directors out of funds legally
available therefor, on January 1, 2003, an amount in cash sufficient to redeem
on such date 100% of the Class A Senior Preferred Shares outstanding on such
date. Such amounts shall be applied on such date to the redemption of all the
outstanding Class A Senior Preferred Shares at the redemption price of $100 per
share together with accrued dividends to such redemption date. Notice of
redemption and the
<PAGE> 6
5
effect of depositing funds in trust for redemption shall be as set forth below.
Notice of every redemption of Class A Senior Preferred Shares shall be
given by publication at least once in a newspaper printed in the English
language and customarily published on each business day and of general
circulation in the Borough of Manhattan, The City of New York, such publication
to be at least 30 days and not more than 60 days prior to the date fixed for
redemption. Notice of every such redemption shall also be mailed by first
class mail, postage prepaid, addressed to the holders of record of the shares
to be redeemed at their respective last addresses as they shall appear on the
books of the Corporation. Such mailing shall be at least 30 days and not more
than 60 days prior to the date fixed for redemption but failure to mail such
notice or any defect therein or in the mailing thereof shall not affect the
validity of the proceeding for the redemption of any shares so to be redeemed.
In case of redemption of a part only of the Class A Senior Preferred
Shares at the time outstanding, the redemption may be either pro rata or by
lot. The Board of Directors shall have full power and authority, subject to
the provisions herein contained, to prescribe the terms and conditions upon
which Class A Senior Preferred Shares shall be redeemed from time to time.
If notice of redemption shall have been duly given, and if, on or before
the redemption date specified therein, all funds necessary for such redemption
shall have been set aside by the Corporation, separate and apart from its other
funds, in trust for the pro rata benefit of the holders of the shares called for
redemption, so as to be and continue to be available therefor, then,
notwithstanding that any certificate for shares so called for redemption shall
not have been surrendered for cancellation, all shares so called for redemption
shall no longer be deemed outstanding on and after such redemption date, and all
rights with respect to such shares shall forthwith on such redemption date cease
and terminate, except only the right of the holders thereof to receive the
amount payable on redemption thereof, without interest.
<PAGE> 7
6
If such notice of redemption shall have been duly given or if the
Corporation shall have given to the bank or trust company hereinafter referred
to irrevocable authorization promptly to give such notice, and if on or before
the redemption date specified therein the funds necessary for such redemption
shall have been deposited by the Corporation with such bank or trust company in
trust for the pro rata benefit of the holders of the shares called for
redemption, then, notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, from and after the
time of such deposit, all shares so called for redemption shall no longer be
deemed to be outstanding and all rights with respect to such shares shall
forthwith cease and terminate, except only the right of the holders thereof to
receive from such bank or trust company at any time after the time of such
deposit the funds so deposited, without interest, and the right to exercise, on
or before the date fixed for redemption, privileges of exchange or conversion,
if any, not theretofore expiring. The aforesaid bank or trust company shall be
organized and in good standing under the laws of the United States of America
or of the State of New York, shall be doing business in the Borough of
Manhattan, The City of New York, shall have capital surplus and undivided
profits aggregating at least $50,000,000 according to its last published
statement of condition, and shall be identified in the notice of redemption.
Any interest accrued on such funds shall be paid to the Corporation from time
to time.
(vi) Voting Rights. The holders of Class A Senior Preferred Shares shall
be entitled to .4645 of a vote per share and, except as hereinafter provided,
shall vote together with the holders of Common Shares (and holders of any other
class or series which may similarly be entitled to vote with the holders of
Common Shares) as a single class upon all matters upon which holders of Common
Shares are entitled to vote.
If and whenever six quarterly dividends (whether or not consecutive)
payable on Class A Senior Preferred Shares shall be in arrears in whole or in
part whether or not earned or declared, or if the Class A Senior Preferred
Shares are not redeemed when required, the number of directors then constituting
the Board of Directors shall be increased by two and the holders of Class A
Senior Preferred Shares, voting as a class, shall be entitled to elect the two
additional directors at any annual meeting of
<PAGE> 8
7
shareholders or special meeting held in place thereof, or at a special meeting
of the holders of the Class A Senior Preferred Shares called as hereinafter
provided. Whenever all arrears in dividends on the Class A Senior Preferred
Shares then outstanding shall have been paid and dividends thereon for the
current quarterly dividend period shall have been paid or declared and set apart
for payment, then the right of the holders of the Class A Senior Preferred
Shares to elect such additional two directors shall cease (but subject always to
the same provisions for the vesting of such voting rights in the case of any
similar future arrearages in dividends), and the terms of office of all persons
elected as directors by the holders of the Class A Senior Preferred Shares shall
forthwith terminate and the number of the Board of Directors shall be reduced
accordingly. At any time after such voting power shall have been so vested in
the holders of Class A Senior Preferred Shares, the Secretary of the Corporation
may, and upon the written request of any holder of Class A Senior Preferred
Shares (addressed to the Secretary at the principal office of the Corporation)
shall, call a special meeting of the holders of the Class A Senior Preferred
Shares for the election of the two directors to be elected by them as herein
provided, such call to be made by notice similar to that provided in the by-laws
for a special meeting of the shareholders or as required by law. If any such
special meeting required to be called as above provided shall not be called by
the Secretary within 20 days after receipt of any such request, then any holder
of Class A Senior Preferred Shares may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock books of the
Corporation. The directors elected at any such special meeting shall hold
office until the next annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously terminated as above
provided. In case any vacancy shall occur among the directors elected by the
holders of the Class A Senior Preferred Shares, a successor shall be elected by
the Board of Directors to serve until the next annual meeting of the
shareholders or special meeting held in place thereof upon the nomination of the
then remaining director elected by such holders or the successor of such
remaining director. If the holders of Class A Senior Preferred Shares become
entitled under the foregoing provisions to elect or participate in the election
of two directors as a result of dividend arrearages, this shall not affect the
right of such holders to vote as stated in the first paragraph of this
<PAGE> 9
8
subparagraph (vi), including the right to vote in the election of the remaining
directors.
(vii) Restrictions on Certain Actions. So long as any Class A Senior
Preferred Shares are outstanding, in addition to any other vote or consent of
shareholders required by law or by the Certificate of Incorporation, the
consent of the holders of at least 66-2/3% of the shares of Class A Senior
Preferred Shares entitled to vote upon the matters specified in this
subparagraph (vii), at the time outstanding, acting as a single class, given in
person or by proxy, either in writing without a meeting or by vote at any
meeting called for the purpose, shall be necessary for effecting or validating:
(1) Any amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation, or of the by-laws of the Corporation, which
affects adversely the voting powers, rights or preferences of the holders
of Class A Senior Preferred Shares; provided, however, that the amendment
of the provisions of the Certificate of Incorporation so as to authorize
or create, or to increase the authorized amount of, any junior stock or
any shares of any class ranking on a parity with Class A Senior Preferred
Shares shall not be deemed to affect adversely the voting powers, rights
or preferences of the holders of Class A Senior Preferred Shares;
(2) The authorization or creation of, or the increase in the authorized
amount of, any shares of any class or any security convertible into
shares of any class ranking prior to the Class A Senior Preferred Shares
in the distribution of assets on any liquidation, dissolution, or winding
up of the Corporation or in the payment of dividends; or
(3) The merger or consolidation of the Corporation with or into any other
corporation, unless the resulting corporation will thereafter have no
class of shares and no other securities either authorized or outstanding
ranking prior to Class A Senior Preferred Shares in the distribution of
its assets on liquidation, dissolution or winding up or in the payment of
dividends, except the same number of shares and the same amount of other
securities with the same rights and preferences as the shares and
securities of the Corporation
<PAGE> 10
9
respectively authorized and outstanding immediately preceding such merger
or consolidation, and each holder of Class A Senior Preferred Shares
immediately preceding such merger or consolidation shall receive the same
number of shares, with the same rights and preferences, of the resulting
corporation;
provided, however, that no such consent of the holders of Class A Senior
Preferred Shares shall be required if, at or prior to the time when such
amendment, alteration or repeal is to take effect or when the issuance of any
such prior shares or convertible security is to be made, or when such
consolidation or merger, purchase or redemption is to take effect, as the case
may be, provision is made for the redemption of all Class A Senior Preferred
Shares at the time outstanding.
(viii) Failure to Pay Dividends. If dividends for all past
quarter-yearly dividend periods shall not have been paid on all outstanding
Class A Senior Preferred Shares and the full dividends thereon for the then
current dividend period shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the consent of the holders of at
least 66-2/3% of the then outstanding Class A Senior Preferred Shares, given in
person or by proxy, either in writing without a meeting or by vote at any
meeting called for the purpose, shall be necessary as a condition to the
Corporation's right to purchase or redeem less than all of the then outstanding
Class A Senior Preferred Shares.
(ix) Consent to Issuance of Additional Shares. So long as any Class A
Senior Preferred Shares are outstanding, in addition to any other vote or
consent of shareholders required by law or by the Certificate of Incorporation,
the consent of the holders of at least a majority of Class A Senior Preferred
Shares, at the time outstanding, acting as a single class, given in person or
by proxy, either in writing without a meeting or by vote at any meeting called
for the purpose, shall be necessary for effecting or validating any increase in
the authorized amount of Class A Senior Preferred Shares, or the authorization
or creation of, or the increase in the authorized amount of, any shares of any
class or any security convertible into shares of any class, ranking on a parity
with the Class A Senior Preferred Shares in the distribution of assets on any
liquidation, dissolution, or winding up of the Corporation or in the payment
<PAGE> 11
10
of dividends; provided, however, that no such consent shall be required if, at
or prior to the time such increase, authorization or creation of parity shares
is to be made, provision is made for the redemption of all Class A Senior
Preferred Shares at the time outstanding.
(x) Definitions. As used herein with respect to Class A Senior Preferred
Shares, the following terms shall have the following meanings:
(1) The term "junior stock" shall mean the Common Shares, the Class B
Preferred Shares and Class C Preferred Shares and any other class or
series of shares of the Corporation hereafter authorized over which Class
A Senior Preferred Shares have preference or priority in the payment of
dividends or in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(2) The term "accrued dividends" with respect to any share of any class
or series, shall mean an amount computed at the annual dividend rate for
the class or series of which the particular share is a part, from the
date on which dividends on such share became cumulative to and including
the date to which such dividends are to be accrued, less the aggregate
amount of all dividends theretofore paid thereon. The amount accrued
subsequent to the most recent full quarterly dividend period shall be
computed by dividing the quarterly dividend payment by the actual number
of days in the uncompleted quarter, and thereafter multiplying this
figure by the number of days in such quarter up to and including the date
to which dividends are to be accrued. Accrued and unpaid dividends on
the Class A Senior Preferred Shares shall accrue additional dividends in
respect thereof, compounded monthly at the then applicable dividend rate
per annum.
(xi) Other. The Class A Senior Preferred Shares shall not have any
relative, participating, optional or other special rights and powers other than
as set forth herein.
<PAGE> 12
11
B. CLASS B PREFERRED SHARES
(i) Ranking. All Class B Preferred Shares (a) shall rank junior to the
Class A Senior Preferred Shares in respect of the right to receive dividends
and the right to receive payments out of the assets of the Corporation upon
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, (b) shall rank pari passu with the Class C Preferred Shares in
respect of the right to receive dividends and in respect of the right to
receive payments out of the assets of the Corporation upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, (c)
shall rank senior to the Common Shares in respect of the right to receive
dividends and the right to receive payments out of the assets of the
Corporation upon voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, and (d) shall be of equal rank regardless of series.
The Class B Preferred Shares shall be identical with each other in all respects
except as to the dates from and after which dividends thereon shall be
cumulative. In case the stated dividends or the amounts payable on liquidation
are not paid in full, the Class B Preferred Shares shall share ratably in the
payment of dividends, including accumulations, if any, in accordance with the
sums which would be payable on said shares if all dividends were declared and
paid in full, and in any distribution of assets other than by way of dividends
in accordance with the sums which would be payable on such distribution if all
sums payable were discharged in full. All Class B Preferred Shares redeemed,
purchased or otherwise acquired by the Corporation (including shares
surrendered for conversion) shall be cancelled and thereupon restored to the
status of authorized but unissued Class B Preferred Shares.
(ii) Dividend Rate. The holders of Class B Preferred Shares shall be
entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available therefor, cumulative dividends payable in cash,
at the annual rate of $3.00 per share, and no more, payable quarterly on the
first days of January, April, July and October, respectively, in each year with
respect to the quarterly dividend period (or portion thereof) ending on the day
preceding such respective dividend payment date, to shareholders of record on
the respective date, not exceeding fifty days preceding such dividend payment
date, fixed for the purpose by the Board of Directors in
<PAGE> 13
12
advance of payment of each particular dividend. Dividends shall accrue on
dividends on Class B Preferred Shares that are undeclared or unpaid on any
dividend payment date at a dividend rate of 12% per annum payable quarterly as
additional dividends on each dividend payment date.
(iii) Cumulative Dividends. Dividends on Class B Preferred Shares shall
be cumulative as follows:
(1) if issued prior to the record date for the first dividend on shares
of such class, from the date of issue thereof;
(2) if issued during the period commencing immediately after a record
date for a dividend on shares of such class and ending on the payment
date for such dividend, from such dividend payment date; and
(3) otherwise from the first day of January, April, July and October
preceding the date of issue of such shares.
So long as any Class B Preferred Shares remain outstanding, no dividend
whatever shall be paid or declared and no distribution made on any junior stock
other than a dividend payable in junior stock, and no shares of junior stock
shall be purchased, redeemed or otherwise acquired for consideration by the
Corporation, directly or indirectly (other than as a result of a
reclassification of junior stock, or the exchange or conversion of one junior
stock for or into another junior stock, or other than through the use of the
proceeds of a substantially contemporaneous sale of other junior stock), unless
all dividends on the Class B Preferred Shares accrued for all past
quarter-yearly dividend periods shall have been paid and the full dividend
thereon for the then current quarter-yearly dividend period shall have been
paid or declared and set apart for payment. Subject to the foregoing, and not
otherwise, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid on any junior
stock from time to time out of any funds legally available therefor, and the
Class B Preferred Shares shall not be entitled to participate in any such
dividends, whether payable in cash, stock or otherwise.
<PAGE> 14
13
(iv) Preference on Liquidation, etc. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class B Preferred Shares shall be entitled, before
any distribution or payment is made to the holders of any junior stock, to be
paid in full an amount equal to $25 per share (which amount is hereinafter
referred to as the "liquidation amount"), together with accrued dividends to
such distribution or payment date whether or not earned or declared.
If such payment shall have been made in full to all holders of Class B
Preferred Shares, the remaining assets of the Corporation shall be distributed
among the holders of junior stock, according to their respective rights and
preferences and in each case according to their respective numbers of shares.
For the purposes of this subparagraph (iv), the consolidation or merger of the
Corporation with any other corporation shall not be deemed to constitute a
liquidation, dissolution or winding up of the Corporation, unless any junior
stock is redeemed or receives payment in cash or securities senior to the Class
B Preferred Shares.
(v) Optional Redemption. Subject to subparagraph (ix), the Corporation,
at the option of the Board of Directors, may redeem the whole or any part of
the Class B Preferred Shares at the time outstanding, at any time, in the event
that the closing price (as defined in clause (8) of subparagraph (vi) below) of
the Common Shares shall equal or exceed 140% of the conversion price during any
20 trading days within a period of 30 consecutive trading days ending on a date
not more than ten days prior to the date of notice of redemption, upon notice
given as hereinafter specified, at the redemption price as provided in this
subparagraph (v), together with accrued dividends to the redemption date. The
redemption price for Class B Preferred Shares shall be $25 per share.
Notice of every redemption of Class B Preferred Shares shall be given by
publication at least once in a newspaper printed in the English language and
customarily published on each business day and of general circulation in the
Borough of Manhattan, The City of New York, such publication to be at least 30
days and not more than 60 days prior to the date fixed for redemption. Notice
of every such redemption shall also be mailed
<PAGE> 15
14
by first class mail, postage prepaid, addressed to the holders of record of the
shares to be redeemed at their respective last addresses as they shall appear on
the books of the Corporation. Such mailing shall be at least 30 days and not
more than 60 days prior to the date fixed for redemption but failure to mail
such notice or any defect therein or in the mailing thereof shall not affect the
validity of the proceeding for the redemption of any shares so to be redeemed.
In case of redemption of a part only of the Class B Preferred Shares at
the time outstanding, the redemption may be either pro rata or by lot. The
Board of Directors shall have full power and authority, subject to the
provisions herein contained, to prescribe the terms and conditions upon which
Class B Preferred Shares shall be redeemed from time to time.
If notice of redemption shall have been duly given, and if, on or before
the redemption date specified therein, all funds necessary for such redemption
shall have been set aside by the Corporation, separate and apart from its other
funds, in trust for the pro rata benefit of the holders of the shares called
for redemption, so as to be and continue to be available therefor, then,
notwithstanding that any certificate for shares so called for redemption shall
not have been surrendered for cancellation, all shares so called for redemption
shall no longer be deemed outstanding on and after such redemption date, and
all rights with respect to such shares shall forthwith on such redemption date
cease and terminate, except only the right of the holders thereof to receive
the amount payable on redemption thereof, without interest.
If such notice of redemption shall have been duly given or if the
Corporation shall have given to the bank or trust company hereinafter referred
to irrevocable authorization promptly to give such notice, and if on or before
the redemption date specified therein the funds necessary for such redemption
shall have been deposited by the Corporation with such bank or trust company in
trust for the pro rata benefit of the holders of the shares called for
redemption, then, notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, from and after the
time of such deposit, all shares so called for redemption shall no longer be
deemed to be outstanding and all rights with respect to such
<PAGE> 16
15
shares shall forthwith cease and terminate, except only the right of the holders
thereof to receive from such bank or trust company at any time after the time of
such deposit the funds so deposited, without interest, and the right to
exercise, on or before the date fixed for redemption, privileges of exchange or
conversion, if any, not theretofore expiring. The aforesaid bank or trust
company shall be organized and in good standing under the laws of the United
States of America or of the State of New York, shall be doing business in the
Borough of Manhattan, The City of New York, shall have capital, surplus and
undivided profits aggregating at least $50,000,000 according to its last
published statement of condition, and shall be identified in the notice of
redemption. Any interest accrued on such funds shall be paid to the Corporation
from time to time.
Any funds set aside or deposited by the Corporation which shall not be
required for such redemption because of the exercise of any right of conversion
or exchange subsequent to the date of such deposit shall be released or repaid
to the Corporation forthwith. Any funds so set aside or deposited, as the case
may be, and unclaimed at the end of three years from such redemption date
shall, to the extent permitted by law, be released or repaid to the
Corporation, after which repayment, the holders of the shares so called for
redemption shall look only to the Corporation for payment thereof.
(vi) Conversion. The holders of Class B Preferred Shares shall have the
right, at their option, to convert such shares into Common Shares at any time
on and subject to the following terms and conditions:
(1) Class B Preferred Shares shall be convertible at the office of any
transfer agent for such shares, and at such other office or offices, if
any, as the Board of Directors may designate, into fully paid and
nonassessable Common Shares of the Corporation (calculated as to each
conversion to the nearest 1/100 of a share), at the conversion price,
determined as hereinafter provided, in effect at time of conversion, each
Class B Preferred Share being taken at $25 for the purpose of such
conversion. The price at which Common Shares shall be delivered upon
conversion (herein called the "conversion price") shall be $60.00 per
Common Share, subject to adjustment (it being understood, however,
<PAGE> 17
16
that no adjustment of the conversion price shall be made in respect of the
conversion of capital stock pursuant to (i) the Merger Agreement dated as
of May 22, 1996 between New Valley Corporation, a New York corporation,
and NV Delaware Inc., a Delaware corporation ("NV Delaware") or (ii) the
Merger Agreement dated as of May 22, 1996 between NV Delaware and NV
Merger Sub Inc., a Delaware corporation). The conversion price shall also
be adjusted in certain instances as provided in clauses (3), (4), (5), (6)
and (9) below.
(2) In order to convert Class B Preferred Shares into Common Shares, the
holder thereof shall surrender at any office hereinabove mentioned the
certificate or certificates therefor, duly endorsed or assigned to the
Corporation or in blank, and give written notice to the Corporation at
such office that such holder elects to convert such shares. Class B
Preferred Shares surrendered for conversion during the period from the
close of business on any record date for the payment of a dividend on the
Class B Preferred Shares to the opening of business on the date for
payment of such dividend shall (except in the case of Class B Preferred
Shares which have been called for redemption on a redemption date within
such period) be accompanied by payment of an amount equal to the dividend
payable on such dividend payment date on the Class B Preferred Shares
being surrendered for conversion. Except as provided in the preceding
sentence, no payment or adjustment shall be made upon any conversion on
account of any dividends accrued on Class B Preferred Shares surrendered
for conversion or on account of any dividends on the Common Shares issued
upon conversion.
Class B Preferred Shares shall be deemed to have been converted
immediately prior to the close of business on the day of the surrender of
such shares for conversion in accordance with the foregoing provisions,
and the person or persons entitled to receive the Common Shares issuable
upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Shares at such time. As promptly as
practicable on or after the conversion date, the Corporation shall issue
and shall deliver at such office a certificate or certificates for the
number of full Common
<PAGE> 18
17
Shares issuable upon such conversion, together with payment in lieu of any
fraction of a share, as hereinafter provided, to the person or persons
entitled to receive the same. In case Class B Preferred Shares are called
for redemption, the right to convert such Class B Preferred Shares shall
cease and terminate at the close of business on the date fixed for
redemption, unless default shall be made in payment of the redemption
price.
(3) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in Common
Shares, the conversion price in effect at the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced
by multiplying such conversion price by a fraction of which the numerator
shall be the number of Common Shares outstanding at the close of business
on the date fixed for such determination and the denominator shall be the
sum of such number of shares and the total number of shares constituting
such dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purposes of this clause (3), the
number of Common Shares at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of Common
Shares. The Corporation will not pay any dividend or make any
distribution on Common Shares held in the treasury of the Corporation.
(4) In case the Corporation shall issue rights or warrants to all
holders of its Common Shares entitling them to subscribe for or purchase
Common Shares at a price per share less than current market price per
share (determined as provided in clause (8) below) of the Common Shares
on the date fixed for the determination of stockholders entitled to
receive such rights or warrants, the conversion price in effect at the
opening of business on the day following the date fixed for such
determination shall be reduced by multiplying such conversion price by a
fraction of which the numerator shall be the number of Common Shares
outstanding
<PAGE> 19
18
at the close of business on the date fixed for such determination plus the
number of Common Shares which the aggregate of the offering price of the
total number of Common Shares so offered for subscription or purchase
would purchase at such current market price and the denominator shall be
the number of Common Shares outstanding at the close of business on the
date fixed for such determination plus the number of Common Shares so
offered for subscription or purchase, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purposes of this clause (4), the
number of Common Shares at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of Common
Shares. The Corporation will not issue any rights or warrants in respect
of Common Shares held in the treasury of the Corporation.
(5) In case outstanding Common Shares shall be subdivided into a greater
number of Common Shares, the conversion price in effect at the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case
outstanding Common Shares shall each be combined into a smaller number of
Common Shares, the conversion price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase,
as the case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or
combination becomes effective so that holders of Class B Preferred Shares
receive the proportionate number of Common Shares they would have been
entitled to receive prior to such subdivision or combination.
(6) In case the Corporation shall, by dividend or otherwise, distribute
to all holders of its Common Shares evidences of its indebtedness or
assets (including
securities, but excluding any rights or warrants referred to in clause (4)
above, any dividend or distribution paid in cash out of earned surplus of
the Corporation and any
<PAGE> 20
19
dividend or distribution referred to in clause (3) above), the conversion
price shall be adjusted so that the same shall equal the price determined
by multiplying the conversion price in effect immediately prior to the
close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator
shall be the current market price per Common Share (determined as provided
in clause (8) below) on the date fixed for such determination less the
then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed applicable to one Common Share
and the denominator shall be such current market price per Common Share,
such adjustment to become effective immediately prior to the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution.
(7) The reclassification (including any reclassification upon a merger
in which the Corporation is the continuing corporation) of Common Shares
into securities other than Common Shares shall be deemed to involve (a) a
distribution of such securities other than Common Shares to all holders
of Common Shares (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and "the date fixed for such
determination" within the meaning of clause (6) above), and (b) a
subdivision or combination, as the case may be, of the number of Common
Shares outstanding immediately prior to such reclassification into the
number of Common Shares outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day
upon which such subdivision becomes effective" or "the day upon which
such combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the
meaning of clause (5) above).
(8) For the purpose of any computation under clauses (4) and (6) above,
the "current market price" per Common Share on any date shall be deemed
to be the average of the daily closing prices for the 30 consecutive
business days selected
<PAGE> 21
20
by the Corporation commencing not be less than 30 nor more than 45
business days before the day in question. The closing price for each day
shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Shares are not listed or admitted to trading on
such exchange, on the principal national securities exchange on which the
Common Shares are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations National Market
System or, if the Common Shares are not listed or admitted to trading on
any national securities exchange or quoted on such National Market System,
the average of the closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected
from time to time by the Corporation for that purpose. For the purposes
of this clause (8), the term "business day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on such exchange or in such market.
(9) The Corporation may make such adjustments in the conversion price,
in addition to those required by clauses (3), (4), (5) and (6) above, as
it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be
taxable to the recipients. No adjustment in the conversion price shall
be required unless such adjustment (plus any adjustments not previously
made by reason of this sentence) would require an increase or decrease of
at least 1% in the number of Common Shares into which each Class B
Preferred Share is then convertible; provided, however, that any
adjustments which by reason of this sentence are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.
(10) Whenever the conversion price is adjusted as herein provided:
<PAGE> 22
21
(a) the Corporation shall compute the adjusted conversion price in
accordance with this subparagraph (vi) and shall prepare a
certificate signed by the Treasurer of the Corporation setting
forth the adjusted conversion price and showing in reasonable
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the transfer agent or
agents for the Class B Preferred Shares; and
(b) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith be
required, and as soon as practicable after it is required, such
notice shall be mailed to the holders of record of the outstanding
Class B Preferred Shares.
(11) In case:
(a) the Corporation shall declare a dividend (or any other
distribution) on its Common Shares payable otherwise than in cash
out of its surplus (whether or not earned surplus);
(b) the Corporation shall authorize the granting to the holders of
its Common Shares of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other
rights;
(c) of any reclassification of the capital stock of the
Corporation (other than a subdivision or combination of its
outstanding Common Shares), or of any consolidation or merger to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or of the sale or
transfer of all or substantially all of the assets of the
Corporation; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent or
agents for the Class B Preferred Shares, and shall cause to be mailed to
the holders of record of the
<PAGE> 23
22
outstanding Class B Preferred Shares, at least 20 days (or 10 days in any
case specified in clause (a) or (b) above) prior to the applicable record
date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of
which the holders of Common Shares of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Shares of record shall be entitled to exchange their Common Shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.
(12) The Corporation shall at all times reserve and keep available, free
from pre-emptive rights, out of its authorized but unissued Common
Shares, for the purpose of effecting the conversion of Class B Preferred
Shares, the full number of Common Shares then deliverable upon the
conversion of all Class B Preferred Shares then outstanding.
(13) No fractional Common Shares shall be issued upon conversion, but,
instead of any fraction of a share which would otherwise be issuable, the
Corporation shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of the market price per Common Share
(as determined by the Board of Directors or in any manner prescribed by
the Board of Directors) at the close of business on the day of
conversion.
(14) The Corporation will pay any and all taxes that may be payable in
respect of the issue or delivery of Common Shares on conversion of Class
B Preferred Shares pursuant hereto. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of Common Shares in a name
other than that in which the Class B Preferred Shares so converted were
registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid
<PAGE> 24
23
to the Corporation the amount of any such tax, or has established to the
satisfaction of the Corporation that such tax has been paid.
(15) For the purpose of this subparagraph (vi), the term "Common Shares"
shall include any stock of any class of the Corporation which has no
preference in respect of dividends and no preference in respect of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which is not subject to
redemption by the Corporation. However, shares issuable on conversion of
Class B Preferred Shares shall include only shares of the class
designated as Common Shares of the Corporation as of the date of this
Restated Certificate of Incorporation, or shares of any class or classes
resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends and no preference in
respect of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and which are
not subject to redemption by the Corporation; provided that if at any
time there shall be more than one such resulting class, the shares of
each such class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
(16) In the case of any consolidation of the Corporation with, or merger
of the Corporation into, any other corporation, or in case of any merger
of another corporation into the Corporation (other than a merger which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding Common Shares of the Corporation), or in case
of any sale or transfer of all or substantially all of the assets of the
Corporation, each holder of Class B Preferred Share then outstanding and
entitled to be converted after such consolidation, merger, sale or
transfer, shall have the right thereafter, to convert such Class B
Preferred Share into the kind and amount of securities, cash or other
property receivable upon such consolidation, merger, sale or transfer, by
a holder of a number of Common Shares into which such Class B Preferred
<PAGE> 25
24
Share might have been converted immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Common Shares failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of
securities, cash or other property receivable upon such consolidation,
merger, sale or transfer is not the same for each Common Share in respect
of which rights of election shall not have been exercised ("non-electing
share"), then for the purpose of this clause (16) the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the
non-electing shares). Adjustments for events subsequent to the effective
date of such consolidation, merger, sale or transfer, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
paragraph (vi); provided that adjustments which were not made prior to
such effective date because they were less than 1% shall be disregarded
and shall not be carried forward. The above provisions of this clause
(16) shall similarly apply to successive consolidations, mergers, sales or
transfers.
(vii) Voting Rights. The holders of Class B Preferred Shares shall be
entitled to one-twentieth of a vote per share and, except as hereinafter
provided, shall vote together with the holders of Common Shares (and holders of
any other class or series which may similarly be entitled to vote with the
holders of Common Shares) as a single class upon all matters upon which holders
of Common Shares are entitled to vote.
If and whenever six quarterly dividends (whether or not consecutive)
payable on Class B Preferred Shares shall be in arrears in whole or in part
whether or not earned or declared, the number of directors then constituting
the Board of Directors shall be increased by two and the holders of Class B
Preferred Shares and other classes of preferred stock similarly entitled to vote
for the election of two additional directors, voting together as a single class,
shall be entitled to elect the two additional directors at any annual meeting of
shareholders or special meeting held in place thereof, or at a special meeting
of
<PAGE> 26
25
the holders of Class B Preferred Shares and other classes of preferred stock, as
the case may be, called as hereinafter provided. Whenever all arrears in
dividends on the Class B Preferred Shares then outstanding shall have been paid
and dividends thereon for the current quarterly dividend period shall have been
paid or declared and set apart for payment, then the right of the holders of the
Class B Preferred Shares to elect such additional two directors shall cease (but
subject always to the same provisions for the vesting of such voting rights in
the case of any similar future arrearages in dividends), and the terms of office
of all persons elected as directors by the holders of the Class B Preferred
Shares shall forthwith terminate and the number of the Board of Directors shall
be reduced accordingly. At any time after such voting power shall have been so
vested in the holders of Class B Preferred Shares, the Secretary of the
Corporation may, and upon the written request of any holder of Class B Preferred
Shares (addressed to the Secretary at the principal office of the Corporation)
shall, call a special meeting of the holders of the Class B Preferred Shares and
other classes of preferred stock, as the case may be, for the election of the
two directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the by-laws for a special meeting of the
shareholders or as required by law. If any such special meeting required to be
called as above provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of Class B Preferred Shares
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors elected
at any such special meeting shall hold office until the next annual meeting of
the shareholders or special meeting held in place thereof if such office shall
not have previously terminated as above provided. In case any vacancy shall
occur among the directors elected by the holders of the Class B Preferred
Shares, a successor shall be elected by the Board of Directors to serve until
the next annual meeting of the shareholders or special meeting held in place
thereof upon the nomination of the then remaining director elected by such
holders or the successor of such remaining director. If the holders of Class B
Preferred Shares become entitled under the foregoing provisions to elect or
participate in the election of two directors as a result of dividend
arrearages, this shall not affect the right of such holders to vote as stated
in the first paragraph of this
<PAGE> 27
26
subparagraph (vii), including the right to vote in the election of the remaining
directors.
(viii) Restrictions on Certain Actions. So long as any Class B Preferred
Shares are outstanding, in addition to any other vote or consent of
shareholders required by law or by the Certificate of Incorporation, the
consent of the holders of at least 66-2/3% of the Class B Preferred Shares
entitled to vote upon the matters specified in this subparagraph (viii), at the
time outstanding, acting as a single class, gives in person or by proxy, either
in writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(1) Any amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation, or of the by-laws, of the Corporation,
which affects adversely the voting powers, rights or preferences of the
holders of Class B Preferred Shares; provided, however, that the
amendment of the provisions of the Certificate of Incorporation so as to
authorize or create, or to increase the authorized amount of, any junior
stock or any shares of any class ranking on a parity with Class B
Preferred Shares shall not be deemed to affect adversely the voting
powers, rights or preferences of the holders of Class B Preferred Shares;
(2) The authorization or creation of, or the increase in the authorized
amount of, any shares of any class or any security convertible into
shares of any class ranking prior to the Class B Preferred Shares in the
distribution of assets on any liquidation, dissolution, or winding up of
the Corporation or in the payment of dividends; or
(3) The merger or consolidation of the Corporation with or into any
other corporation, unless the resulting corporation will thereafter have
no class of shares and no other securities either authorized or
outstanding ranking prior to Class B Preferred Shares in the distribution
of its assets on liquidation, dissolution or winding up or in the payment
of dividends, except the same number of shares and the same amount of
other securities with the same rights and preferences as the shares and
securities of the Corporation respectively authorized and outstanding
immediately
<PAGE> 28
27
preceding such merger or consolidation, and each holder of Class B
Preferred Shares immediately preceding such merger or consolidation shall
receive the same number of shares, with the same rights and preferences,
of the resulting corporation;
provided, however, that no such consent of the holders of Class B Preferred
Shares shall be required if, at or prior to the time when such amendment,
alteration or repeal is to take effect or when the issuance of any such prior
shares or convertible security is to be made, or when such consolidation or
merger, purchase or redemption is to take effect, as the case may be, provision
is made for the redemption of all Class B Preferred Shares at the time
outstanding.
(ix) Failure to Pay Dividends. If dividends for all past quarter-yearly
dividend periods shall not have been paid on all outstanding Class B Preferred
Shares and the full dividends thereon for the then current dividend period
shall not have been paid or declared and a sum sufficient for the payment
thereof set apart, the consent of the holders of at least 66-2/3% of the then
outstanding Class B Preferred Shares, given in person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary as a condition to the Corporation's right to purchase or
redeem less than all of the then outstanding Class B Preferred Shares.
(x) Consent to Issuance of Additional Shares. So long as any Class B
Preferred Shares are outstanding, in addition to any other vote or consent of
shareholders required by law or by the Certificate of Incorporation, the
consent of the holders of at least a majority of Class B Preferred Shares, at
the time outstanding, acting as a single class, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating any increase in the
authorized amount of Class B Preferred Shares, or the authorization or creation
of, or the increase in the authorized amount of, any shares of any class or any
security convertible into shares of any class, ranking on a parity with the
Class B Preferred Shares in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation or in the payment of dividends;
provided, however, that no such consent shall be required if, at or prior to the
<PAGE> 29
28
time such increase, authorization or creation of parity shares is to be made,
provision is made for the redemption of all Class B Preferred Shares as the time
outstanding.
(xi) Definitions. As used herein with respect to Class B Preferred
Shares, the following terms shall have the following meanings:
(a) The term "junior stock" shall mean the Common Shares and any other
class or series of shares of the Corporation hereafter authorized over
which Class B Preferred Shares have preference or priority in the payment
of dividends or in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(b) The term "accrued dividends", with respect to any share of any class
or series, shall mean an amount computed at the annual dividend rate for
the class or series of which the particular share is a part from the date
on which dividends on such share became cumulative to and including the
date to which such dividends are to be accrued, less the aggregate amount
of all dividends theretofore paid thereon. The amount accrued subsequent
to the most recent full quarterly dividend period shall be computed by
dividing the quarterly dividend payment by the actual number of days in
the uncompleted quarter, and thereafter multiplying this figure by the
number of days in such quarter up to and including the date to which
dividends are to be accrued. Accrued and unpaid dividends on the Class B
Preferred Shares shall accrue additional dividends in respect thereof,
compounded monthly at the rate of 12% per annum.
(xii) Other. The Class B Preferred Shares shall not have any relative,
participating, optional or other special rights and powers other than as set
forth herein.
<PAGE> 30
29
C. CLASS C PREFERRED SHARES
(i) Issuance and Designation. The Class C Preferred Shares may be issued
from time to time by the Board of Directors as shares of one or more series of
Class C Preferred Shares, and the Board of Directors is expressly authorized,
prior to issuance, in the resolution or resolutions providing for the issue of
shares of each particular series, to fix the following:
(1) The distinctive serial designation of such series which shall
distinguish it from other series;
(2) The number of shares included in such series, which number may be
increased or decreased from time to time unless otherwise provided by the
Board of Directors in creating the series;
(3) The annual dividend rate (or method of determining such rate) for
shares of such series and the date or dates upon which such dividends
shall be payable;
(4) Whether dividends on the shares of such series shall be cumulative
and, in the case of shares of any series having cumulative dividend
rights, the date or dates or method of determining the date or dates from
which dividends on the shares of such series shall be cumulative;
(5) The amount or amounts which shall be paid out of the assets of the
Corporation to the holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(6) The price or prices at which, the period or periods within which and
the terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option of the Corporation;
(7) The obligation, if any, of the Corporation to purchase or redeem
shares of such series pursuant to a sinking fund or otherwise and the
price or prices at
<PAGE> 31
30
which, the period or periods within which and the terms and conditions
upon which the shares of such series shall be redeemed, in whole or in
part, pursuant to such obligation;
(8) The period or periods within which and the terms and conditions, if
any, including the price or prices or the rate or rates of conversion and
the terms and conditions of
any adjustments thereof, upon which the shares of such series shall be
convertible at the option of the holder into shares of any class of stock
or into shares of any other series of preferred shares, except into
shares of a class having rights or preferences as to dividends or
distribution of assets upon liquidation which are prior or superior in
rank to those of the shares being converted;
(9) The voting rights, if any, of the shares of such series in addition
to those required by law, including the number of votes per share and any
requirement for the approval by the holders of up to 66-2/3% of all Class
C Preferred Shares, or of the shares of one or more series, or of both,
as a condition to specified corporate action or amendments to the
Certificate of Incorporation; and
(10) Any other relative rights, preferences or limitations of the shares
of the series not inconsistent herewith or with applicable law.
(ii) Ranking. All Class C Preferred Shares (a) shall rank junior to the
Class A Senior Preferred Shares in respect of the right to receive dividends
and the right to receive payments out of the assets of the Corporation upon
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, (b) shall rank pari passu with the Class B Preferred Shares in
respect of the right to receive dividends and in respect of the right to
receive payments out of the assets of the Corporation upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, (c)
shall rank senior to the Common Shares and the Class B Common Share in respect
of the right to receive dividends and the right to receive payments out of the
assets of the Corporation upon voluntary or involuntary
<PAGE> 32
31
liquidation, dissolution or winding up of the Corporation, and (d) shall be of
equal rank regardless of series. The shares of any one series of the Class C
Preferred Shares shall be identical with each other in all respects except as to
the dates from and after which dividends thereon shall be cumulative. In case
the stated dividends or the amounts payable on liquidation are not paid in full,
the shares of all series of the Class C Preferred Shares shall share ratably in
the payment of dividends, including accumulations, if any, in accordance with
the sums which would be payable on said shares if all dividends were declared
and paid in full, and in any distribution of assets other than by way of
dividends in accordance with the sums which would be payable on such
distribution if all sums payable were discharged in full. All Class C Preferred
Shares redeemed, purchased or otherwise acquired by the Corporation (including
shares surrendered for conversion) shall be cancelled and thereupon restored to
the status of authorized but unissued Class C Preferred Shares undesignated as
to series.
D. COMMON SHARES
(i) Ranking. Subject to the rights of shares ranking senior to the
Common Shares, dividends may be paid upon the Common Shares, when and as
declared by the Board of Directors, but only out of funds legally available
therefor.
(ii) Liquidation, etc. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation and
after the stated amounts payable in such event on shares ranking senior to the
Common Shares shall have been paid in full or provision for the payment thereof
shall have been made, the remaining net assets of the Corporation shall be
distributed pro rata to the holders of Common Shares.
(iii) Voting Rights. Except as otherwise provided by law or as otherwise
expressly provided herein or in the certificate of amendment required by law
with respect to any series of shares established by the Board of Directors, the
holders of the Common Shares shall have the exclusive right
<PAGE> 33
32
to vote for the election of directors and for all other purposes.
FOURTH: No holder of shares of the Corporation of any class, now or
hereafter authorized, shall have any preferential or pre-emptive right to
subscribe for, purchase or receive any shares of the Corporation of any
class, now or hereafter authorized, or any options or warrants for such
shares, or any rights to subscribe for or purchase such shares, or any
securities convertible into or exchangeable for such shares, which may at
any time be issued, sold or offered for sale by the Corporation.
FIFTH: The address of the Corporation's registered office in the State
of Delaware is The Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
SIXTH: By-laws of the Corporation may be adopted, amended or repealed by
the Board of Directors of the Corporation by the vote of a majority of
the directors present at a meeting of the Board of Directors at which a
quorum is present.
SEVENTH: The Corporation shall, to the fullest extent now or hereafter
authorized or permitted by applicable law, indemnify any person who is or
was made, or threatened to be made, a party to, or is involved in, any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, whether involving any
actual or alleged breach of duty, neglect or error, any accountability, or
any actual or alleged misstatement, misleading statement or other act or
omission and whether brought or threatened in any court or administrative
or legislative body or agency, including an action by or in the right of
the Corporation to procure a judgment in its favor and an action by or in
the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan
or other enterprise, which any
<PAGE> 34
33
director or officer of the Corporation is serving, has served or has
agreed to serve in any capacity at the request of the Corporation, by
reason of the fact that he, his testator or intestate, is or was or has
agreed to become a director or officer of the Corporation, or is or was
serving or has agreed to serve such other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid or to be paid in settlement and
expenses (including attorneys' fees, costs and charges) incurred as a
result of such action, suit or proceeding, or appeal therein. The
Corporation may indemnify any person (including a person entitled to
indemnification pursuant to the previous sentence) to whom the Corporation
is permitted to provide indemnification or the advancement of expenses to
the fullest extent now or hereafter permitted by applicable law, whether
pursuant to rights granted pursuant to, or provided by, the DGCL, or any
other law, or other rights created by (i) a resolution of shareholders,
(ii) a resolution of directors, or (iii) an agreement providing for such
indemnification, it being expressly intended that this Article SEVENTH
authorizes the creation of other rights in any such manner. The rights to
indemnification set forth in this Article SEVENTH shall not be exclusive
of any other rights to which any person may now or hereafter be entitled
under any statute, provision of the Certificate of Incorporation, by-law,
agreement, contract, resolution, vote of shareholders or otherwise. No
amendment or repeal of this Article SEVENTH shall adversely affect any
right or protection of any person the Corporation has agreed to indemnify
existing hereunder in respect of any act or omission occurring prior to
such amendment or repeal.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
<PAGE> 35
34
(iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.
(4) This Restated Certificate of Incorporation was duly adopted in
accordance with Section 245 of the DGCL and will become effective as of
the close of business on July 29, 1996.
<PAGE> 1
EXHIBIT 3(ii)
FOR INCLUSION IN NEW VALLEY CORPORATION'S QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
E-36
<PAGE> 2
BY-LAWS
OF
NEW VALLEY CORPORATION
(a Delaware corporation)
----------------
Adopted
July 29, 1996
----------------
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meetings. The annual meeting of stockholders, for the
election of directors and the transaction of such other business as may
properly come before the meeting, shall be held on such date and at such place
as shall be fixed by the Board of Directors.
Section 2. Special Meetings. A special meeting of stockholders, other
than meetings regulated by statute, may be called at any time by resolution of
the Board of Directors, and shall be called by the Chairman of the Board or in
his absence the President and in his absence the Secretary on request in
writing of a majority of the directors or of any stockholder or stockholders
holding of record shares of capital stock of the Company entitled to at least
25% of the votes entitled to be cast at such meeting and shall be held at the
aforesaid principal office of the Company, or at such other place within the
United States and at such time as shall be fixed by the Board of Directors or
in such request of the directors or stockholder(s).
Section 3. Notice of Meetings. Notice of each meeting of stockholders
shall state the purpose or purposes for which, and the time when and place
where, the meeting is to be held. A copy of the notice shall be served either
personally or by mail, not less than ten or more than sixty days before the
meeting,
<PAGE> 3
2
upon each stockholder of record entitled to vote at the meeting. If mail, it
shall be directed to the stockholder at his address as it appears on the record
of stockholders of the Company, unless he shall have filed with the Secretary a
written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request.
Section 4. Quorum. At each meeting of stockholders there shall be
present, to constitute a quorum for the transaction at such meeting of any
business, except as otherwise provided by the statute, in person or by proxy,
stockholders of record of a majority of the outstanding shares of the Company
entitled to vote at the meeting. In the absence of a quorum, the stockholders
present, in person or by proxy and entitled to vote, by the vote of a majority
of those so present, may adjourn the meeting from time to time to another time
or place which shall be announced at the meeting at which the adjournment is
taken; and at any such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at the meeting as
originally called. Of such adjourned meeting no additional notice need be
given, except that if after the adjournment the Board of Directors fixes a new
record date for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record on the new record date entitled to
notice under Section 3 of these By-Laws.
Section 5. Voting. Stockholders of record entitled to vote any meeting
shall be determined, by fixing a record date as prescribed in Section 36 of
these By-Laws.
At each meeting of stockholders all matters, except the election of
directors and except as otherwise regulated by statute, which shall properly
come before the meeting shall be determined by a majority of the votes cast by
the holders of shares present in person or by proxy and entitled to vote
thereat, a quorum being present. A share vote shall be by ballot. In the
discretion of the chairman of the meeting, matters not requiring a share vote
may be determined by viva voce vote.
Every stockholder entitled to vote at a meeting may vote in person or by
proxy appointed by an instrument in writing executed by such stockholder or by
his duly authorized attorney,
<PAGE> 4
3
and filed with the Secretary. No instrument of proxy shall be valid after
three years from its date, unless the instrument provides that it shall remain
valid for a longer specified period.
Section 6. Inspectors of Election. The directors, prior to the annual
meeting of the stockholders each year, may appoint three inspectors of election
to act at such annual meeting and at all other meetings of stockholders held
during the ensuing year. In the event of the failure of the directors to make
such appointment, or if any inspector of election shall for any reason fail to
attend or to act at any meeting, an inspector or inspectors of election, as the
case may be, may be appointed by the chairman of the meeting. Each inspector,
before entering upon the discharge of his duties, shall take an oath according
to law.
Section 7. Organization of Meetings. At each meeting of stockholders,
the Chairman of the Board, or, in his absence, the President, or, in his
absence, a Vice President or a director or other person designated by the Board
of Directors, shall act as chairman of the meeting. The Secretary, or, in his
absence, or in the event of his acting as chairman of the meeting, an Assistant
Secretary, or a person designated by the chairman of the meeting shall act as
secretary of the meeting.
ARTICLE II
Board of Directors
Section 8. Powers. All of the corporate powers, except those expressly
reserved by statute to the stockholders, shall be vested in and may be
exercised by the Board of Directors of the Company.
Section 9. Number and Qualifications. The number of directors shall not
be more than nine and less than three as shall be determined from time to time
by resolution of the Board of Directors.
Section 10. Election and Removal. The directors shall be elected by
ballot annually, at the annual meeting of stockholders, by a plurality of the
votes cast at such election.
<PAGE> 5
4
Each director, unless removed by a vote of the stockholders, shall continue in
office until his successor shall have been elected and shall have qualified.
Except as otherwise provided by statute, any director may be removed, either
with or without cause, at any time, by the stockholders.
Section 11. Organization Meetings. After each annual election of
directors, the newly elected directors shall meet as soon as possible for the
purpose of organization, the appointment of officers, and the transaction of
other business.
Section 12. Regular Meetings. Regular meetings of the Board of Directors
shall be held on such dates and at such hour as may from time to time be fixed
by the Board of Directors or by the Chairman of the Board.
Section 13. Special Meetings. A special meeting of the Board of
Directors may be called at any time by the Chairman of the Board or by the
Executive Committee, and shall be held at such time as shall be fixed in the
call of the meeting.
Section 14. Place of Meetings. All meetings of the Board of Directors
shall be held at the principal office of the Company, in Miami, Florida, or at
such other place as may from time to time be fixed by the Board of Directors or
the Executive Committee or the Chairman of the Board.
Section 15. Notice of Meetings. Notice need not be given of any
organization meeting or regular meeting of the Board of Directors. Notice of
each special meeting shall state the time when and place where the meeting is
to be held, but need not state the purpose thereof. Notice of each such
special meeting shall be mailed to each director or delivered to him by
telephone, telegraph or any other means of electronic communication, in each
case addressed to his residence or usual place of business, or delivered to him
personally or given to him orally. A special meeting shall be a legal meeting
without any notice thereof, if all the directors shall be present or if, a
quorum being present, all absent directors shall have waived notice by
instrument in writing or by telegraph or other means of electronic
communication, filed with the Secretary before, at or after the holding of the
meeting.
<PAGE> 6
5
Section 16. Quorum and Manner of Acting. At each meeting of the Board of
Directors there shall be present, to constitute a quorum for the transaction at
such meeting of any business, except as otherwise provided by statute, at least
one-third of the directors. In the absence of a quorum, the directors present,
by the vote of a majority, may adjourn the meeting from time to time, and at
any such adjourned meeting at which a quorum shall be present any business may
be transacted which might have been transacted at the meeting as originally to
be held. Of such adjourned meeting no notice need be given.
Except as otherwise provided by statute or by these By-Laws, the act of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Any action required or permitted to be taken by the Board of Directors may
be taken without a meeting if all members of the Board of Directors consent in
writing to the adoption of a resolution authorizing the action. The resolution
and consents thereto shall be filed with the minutes of the proceedings of the
Board of Directors.
Any one or more members of the Board of Directors may participate in a
meeting of such Board means of a conference telephone or similar equipment
which allows all persons participating in the meeting to hear one another at
the same time. Participation by such means shall constitute presence in person
at such a meeting.
Section 17. Organization of Meetings. At each meeting of the Board of
Directors, the Chairman of the Board, or, in his absence, the President or, in
his absence, a director chosen by the directors present, shall preside. The
Secretary or, in his absence, an Assistant Secretary or, in the absence of both
of them, an appointee of the person presiding, shall act as secretary of the
meeting.
Section 18. Resignations. Any director may resign at any time by
instrument in writing filed with the Chairman of the Board or the Secretary.
Unless specifically contingent thereupon, the acceptance of such resignation
shall not be necessary to make it effective.
<PAGE> 7
6
Section 19. Vacancies. Newly created directorships resulting from an
increase in the number of directors and vacancies in the Board of Directors
occasioned by the death, resignation, removal or disqualification of a director
may, except as otherwise provided by statute, be filled, until successors shall
have been elected as prescribed in Section 10 of these By-Laws and shall have
qualified, by vote of a majority of the directors then in office, although less
than a quorum exists, or by the stockholders.
Section 20. Compensation of Directors. Directors may receive
compensation for services in any capacity, as from time to time fixed by the
Board of Directors.
ARTICLE III
Executive Committee and Other Committees
Section 21. Appointment and Powers. The Board of Directors, by the vote
of a majority of its members, may appoint an Executive Committee which, in the
intervals between meetings of the Board of Directors, shall have and may
exercise, except as otherwise regulated by statute, all the powers of the Board
of Directors in the management of the business and affairs of the Company in
all cases and to the extent to which specific direction shall not have been
given by the Board of Directors, and shall have power to authorize the seal of
the Company to be affixed to all papers which may require it.
The number of the directors who shall constitute the Executive Committee
shall be at least three, and shall include the Chairman of the Board and the
President. The number may be increased at any time by the Board of Directors.
The members of the Executive Committee shall serve during the pleasure of the
Board of Directors.
The Board of Directors, by the vote of a majority of its members, may also
appoint from, among its members such other committees, each consisting of three
or more directors who shall serve during the pleasure of the Board, and each of
which shall, except as otherwise regulated by statute, have such powers as
shall be provided by resolution of the Board of Directors.
<PAGE> 8
7
The Board of Directors may designate one or more directors as alternate
members of the Executive Committee or of any other committee, who may replace
any absent member or members at any meeting of the committee.
Any action required or permitted to be taken by the Executive Committee or
any other committee may be taken without a meeting if all members of the
Executive Committee or other committee consent in writing to the adoption of a
resolution authorizing the action. The resolution and consents thereto shall
be filed with the minutes of the proceedings of the Executive Committee or
other committee.
Any one or more members of the Executive Committee or any other committee
may participate in a meeting of such Executive Committee or other committee by
means of a conference telephone or similar equipment which allows all persons
participating in the meeting to hear one another at the same time.
Participation by such means shall constitute presence in person at such a
meeting.
Section 22. Meetings. Regular meetings of the Executive Committee shall
be held at such time and place as may from time to time be fixed by the
Executive Committee.
Special meetings of the Executive Committee may be called from time to
time by the Chairman of the Board or by the President or by any member of the
Executive Committee, and each special meeting shall be held at such time and
place as shall be fixed in the call of the meeting.
Notice need not be given of any regular meeting. Notice of each special
meeting shall state the time when and place where the meeting is to be held but
need not state the purpose thereof. Notice of the special meeting shall be
given to each member in the manner provided in Section 15 of these By-Laws. A
special meeting shall be a legal meeting without any notice thereof, if all the
members shall be present or, a quorum being present, if all absent directors
shall have waived notice in the manner provided in Section 15 of these By-Laws.
Section 23. Quorum and Manner of Acting. At each meeting of the
Executive Committee there shall be present, to constitute a quorum for the
transaction at such meeting of any
<PAGE> 9
8
business, at least two members. In the absence of a quorum, the member or
members present may adjourn the meeting from time to time until a quorum is
present. The member or members present at any meeting, whether constituting a
quorum or not, at his or their option, shall have the power to appoint a
replacement or replacements designated by the Board of Directors as
alternatives to act during the temporary absence of any member or members of
the Executive Committee.
The act of a majority of the members present at a meeting at which a
quorum is present shall be the act of the Executive Committee.
The Executive Committee shall keep a record of its proceedings, and report
the same to the Board of Directors at its next regular meeting. In the event
an Executive Committee exists, the Chairman of the Board shall be chairman of
that committee, and during the absence or disability of the Chairman of the
Board the President shall act as chairman of the committee and during the
absence or disability of the Chairman of the Board and the President the
committee shall designate a chairman from among its members.
Section 24. Resignations and Vacancies. Any member of the Executive
Committee or of any other committee may resign at any time by instrument in
writing filed with the Chairman of the Board or the Secretary; and any vacancy
may be filled in the manner prescribed in Section 21 of these By-Laws for the
original appointment of a member thereof.
ARTICLE IV
Officers
Section 25. Designation. The officers of the Company shall be the
Chairman of the Board, the President, each of whom shall be a director, as many
Vice Presidents, any one or more of whom may be designated Executive Vice
President or Senior Vice President, as the directors may appoint, a Treasurer,
a Secretary, a Comptroller, and such other officers as the directors may
appoint. No person holding the office of Chairman of the Board or President
shall at the same time hold the office
<PAGE> 10
9
of Treasurer, Secretary or Comptroller. The officers shall hold office during
the pleasure of the Board of Directors.
Section 26. (a) Chairman of the Board. The Chairman of the Board shall
preside at meetings of the directors and of the stockholders and shall be the
chief executive officer of the Company. He shall have the responsibility to
carry out the policies of the Board of Directors and, subject to the direction
of the Board of Directors, shall have general supervision over the business and
policies of the Company.
(b) President. The President shall be the chief operating officer of the
Company. During the absence or disability of the Chairman of the Board, the
President shall perform the duties of the Chairman of the Board. The President
shall also perform such other duties as the Board of Directors or the Chairman
of the Board may from time to time prescribe.
The Chairman of the Board and the President shall each from time to time
bring before the Board of Directors or Executive Committee in the event it
exists such information as he may think appropriate touching the business and
property of the Company.
Section 27. Vice President. During the absence or disability of the
Chairman of the Board and the President, one or more Vice Presidents may be
designated by the Board of Directors or the Executive Committee to exercise all
the powers and perform the duties of the Chairman of the Board and of the
President.
The powers and duties of the Vice Presidents shall be as designated from
time to time by the Chairman of the Board or the President.
Section 28. Treasurer. The Treasurer shall receive all the funds of the
Company, and shall keep and disburse the same under the direction of the Board
of Directors or the Executive Committee, or the Chairman of the Board or the
President.
He shall give security to the Company for the faithful discharge of his
duties, in such form and to such amount as shall be prescribed by the Board of
Directors.
<PAGE> 11
10
He shall keep regular books and full accounts, showing all his receipts
and disbursements, which books and accounts shall be open at all times to the
inspection of the Chairman of the Board or of the President or of any director.
He shall also, from time to time, as required, make reports to the Chairman of
the Board and the President as to the financial condition of the Company and
submit detailed statements of his receipts and disbursements, and perform such
other duties as may, from time to time, be required of him by the Chairman of
the Board or the President, the Board of Directors or the Executive Committee.
All the funds of the Company shall be deposited daily, in the corporate
name of the Company, in such banks as shall be designated, from time to time,
by the Board of Directors or the Executive Committee. Such funds shall be
disbursed by the Treasurer or Assistant Treasurer, under the directions of the
Board of Directors or the Executive Committee, or the Chairman of the Board or
the President, by checks signed by them as Treasurer or Assistant Treasurer.
Section 29. Secretary. The Secretary shall keep the records of meetings
of stockholders, the Board of Directors, the Executive Committee and any other
committees of the Board of Directors. He shall give notice of meetings.
He shall have charge of the seal of the Company.
Section 30. Comptroller. The Comptroller shall receive and audit the
accounts of all officers and agents of the Company who receive or disburse its
funds, and all other accounts of receipts or disbursements of the Company, and
keep a proper record of the same.
He shall keep an account of all contracts, leases or agreements, by the
terms of which moneys are receivable or payable by the Company, as well as of
all debts due or liabilities incurred by the Company, and make timely
periodical reports to the Chairman of the Board and the President of all
payments coming due and all balances past due to or from the Company.
He shall properly classify the receipts and disbursements of the Company,
and make monthly reports of the same to the Chairman of the Board and the
President and perform such other
<PAGE> 12
11
duties as the Board of Directors or the Executive Committee, or the Chairman of
the Board or the President may from time to time direct.
Section 31. Subordinate Officers. Such Assistant Treasurers, Assistant
Secretaries, and other officers as may be appointed by the Board of Directors,
shall have such powers and perform such duties as are provided in these By-Laws
or as the Board of Directors or the Executive Committee, or the Chairman of the
Board or the President, may from time to time direct.
ARTICLE V
Indemnification
Section 32. Indemnification of Directors and Officers. Any person made,
or threatened to be made, a party to any action or proceeding, whether civil or
criminal, by reason of the fact that he, his testator or intestate, is or was a
director or officer of the Company or serves or served any other corporation in
any capacity at the request of the Company, shall be indemnified by the
Company, and the Company may advance his related expenses, to the fullest
extent permitted by law. All directors or officers of the Company who also
serve as directors or officers of subsidiaries of the Company shall be deemed
to serve as such at the request of the Company.
ARTICLE VI
Seal
Section 33. Corporate Seal. The seal of the Company shall bear the words
"NV Delaware Inc." arranged in a circle, and the word "Seal" across the center
of the space thus enclosed.
ARTICLE VII
Capital Shares
Section 34. Certificates of Shares. Certificates of shares of the
Company shall be in such form as shall be approved
<PAGE> 13
12
by the Board of Directors. They shall be signed in the name and on behalf of
the Company by the Chairman of the Board or the President or a Vice President
and by the Secretary or an Assistant Secretary, and the seal of the Company
shall be affixed hereto. The seal may be facsimile, engraved or printed. The
signatures of said officers of the Company may be facsimile, engraved or
printed when such certificate is signed by a transfer agent or transfer clerk
and by a registrar.
Section 35. Lost, Stolen or Destroyed Certificates. Before the issue of
a new certificate of shares in lieu of a certificate theretofore issued and
alleged to have been lost, stolen or destroyed, the Board of Directors may, in
its discretion, require the owner of any such certificate alleged to have been
lost, stolen or destroyed, or his legal representatives, to give the Company a
bond, with such surety or sureties as it may be direct, to indemnify the
Company, its transfer agents and registrars, if any, against any claim which
may be made against them or any of them on account of such certificate.
Section 36. Fixing Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
be not less than ten nor more than sixty, days before the date of such meeting
nor more than sixty days prior to any other action.
<PAGE> 14
13
ARTICLE VIII
Continuity of Management in Emergencies
Section 37. Election of Directors. In the event of a calamity resulting
in casualties to the members of the Board of Directors which reduces their
number to less than a quorum required by Section 16 of these By-Laws, all
vacancies in the Board, whether caused by death or otherwise, may be filled,
for the unexpired portions of the terms of office of the directors whose
offices have become vacant, by the vote, at any regular or special meeting of a
majority of the directors then in office. Meetings of the Board may be held at
any place directed by the Board.
Section 38. Chairmanship. In the event of such calamity resulting in the
incapacity or inability of the Chairman of the Board to serve then until the
Board is reconstituted as provided herein and a new Chairman of the Board
elected by the Board, the President shall act as Chairman of the Board, and if
he is incapacitated or unable to serve the Vice President who shall have the
greatest seniority as a Vice President among the surviving Vice Presidents
shall act as Chairman of the Board and as President.
ARTICLE IX
Amendments; Changes in Size of Board
Section 39. Manner of Amending. These By-Laws may be amended or repealed
and new By-Laws made at any stockholders' meeting by the vote of a majority
interest of the stockholders present in person or by proxy thereat, a quorum
being present; provided notice of the proposed amendment or alteration was
included in the notice of such meeting. The Board of Directors, by resolution
adopted by a majority of the entire Board at any meeting, may also amend these
By-Laws, or repeal these By-Laws and adopt new By-Laws.
Section 40. Changes in Size of Board. The Board of Directors may from
time to time increase the number of directors above the maximum specified in
Section 9 of these By-Laws by such number as may at any time be required under
the provisions of the
<PAGE> 15
14
certificate of incorporation entitling the holders of shares of any class or
series, because dividends on such shares are in arrears to an increase in the
number and to elect additional directors; and the Board of Directors may
correspondingly reduce the number as so increased, at any time when under the
provisions of the certificate of incorporation the holders of shares of any
class or series have been divested of such right of election and the directors
elected by them have therefore ceased to be directors.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 65,621
<SECURITIES> 210,614
<RECEIVABLES> 17,582
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 314,799
<PP&E> 183,122
<DEPRECIATION> 0
<TOTAL-ASSETS> 532,458
<CURRENT-LIABILITIES> 187,361
<BONDS> 0
222,288
279
<COMMON> 96
<OTHER-SE> (53,506)
<TOTAL-LIABILITY-AND-EQUITY> 532,458
<SALES> 0
<TOTAL-REVENUES> 71,231
<CGS> 0
<TOTAL-COSTS> 80,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,346)
<INCOME-TAX> 300
<INCOME-CONTINUING> (9,646)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,646)
<EPS-PRIMARY> (3.81)
<EPS-DILUTED> (3.81)
</TABLE>
<PAGE> 1
EXHIBIT 99
FOR INCLUSION IN NEW VALLEY CORPORATION'S QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
E-51
<PAGE> 2
Page 1 of 3
EXHIBIT 99
At the Annual Meeting, every holder of record of $15.00 Class A Increasing
Rate Cumulative Senior Preferred Shares ($100 Liquidation Value), $.01 par
value (the "Class A Senior Preferred Shares"), $3.00 Class B Cumulative
Convertible Preferred Shares ($25 Liquidation Value), $.10 par value (the
"Class B Preferred Shares") and Common Shares, $.01 par value (the "Common
Shares"), of the Company at the close of business on May 20, 1996 (the "Record
Date") was entitled to vote, in person or by proxy, 9.29 votes for each Class A
Senior Preferred Share, one vote for each Class B Preferred Share and one vote
for each Common Share, as the case may be, held by such holder. As of the
Record Date, the Company had outstanding 1,035,462 Class A Senior Preferred
Shares, 2,790,776 Class B Preferred Shares and 191,552,476 Common Shares.
The holders of a majority of the outstanding shares entitled to vote at
the Annual Meeting were either present in person or represented by proxy, and
constituted a quorum for the transaction of business at the Annual Meeting, as
indicated in the following table:
<TABLE>
<CAPTION>
Present in Person or Represented by Proxy
Shares Votes Votes No. of No. of Percent
Outstanding Per Share Outstanding Shares Votes of Class
----------- --------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Common Shares 191,552,476 1 191,552,476 172,363,673 172,363,673 89.9%
Class A Senior
Preferred Shares 1,035,462 9.29 9,619,442 992,362 9,219,043 95.8%
Class B
Preferred Shares 2,790,776 1 2,790,776 2,461,195 2,461,195 88.2%
Combined 195,378,714 203,962,694 175,817,230 184,043,911 90.2%
</TABLE>
The following constitutes a brief description of the matters voted upon at
the Annual Meeting and a tabulation of the results:
1. Seven nominees were elected as directors of the Company by more than
the required plurality of affirmative votes of the holders of Common Shares,
Class A Senior Preferred Shares and Class B Preferred Shares, voting together
as a single class, to serve until the next annual stockholders' meeting:
<TABLE>
<CAPTION>
VOTED FOR DIRECTORS VOTE WITHHELD
------------------- -------------
No. of Votes % of Outstanding No. of Votes % of Outstanding
------------ Votes ------------ Votes
----- -----
<S> <C> <C> <C> <C>
Arnold I. Burns 178,730,529 87.6 5,313,375 2.6
Ronald J. Kramer 178,737,252 87.6 5,308,652 2.6
Richard J. Lampen 178,714,275 87.6 5,329,629 2.6
Bennett S. LeBow 178,416,946 87.5 5,626,958 2.8
Howard M. Lorber 178,717,996 87.6 5,325,908 2.6
Paul L. McDermott 178,739,712 87.6 5,304,169 2.6
Richard S. Ressler 178,643,500 87.6 5,310,404 2.6
</TABLE>
<PAGE> 3
Page 2 of 3
2. Two nominees were elected as directors of the Company by more than the
required plurality of affirmative votes of the holders of Class A Senior
Preferred Shares, voting as a class, to serve until the earlier of the date on
which dividend arrearages have been eliminated on such class of preferred
shares or the date of the next annual stockholders' meeting:
<TABLE>
<CAPTION>
VOTED FOR DIRECTORS VOTE WITHHELD
------------------- -------------
No. of Votes % of Outstanding No. of Votes % of Outstanding
------------ Votes ------------ Votes
----- -----
<S> <C> <C> <C> <C>
Henry C. Beinstein 9,118,451 94.8 100,592 1.0
Barry W. Ridings 9,118,451 94.8 100,583 1.0
</TABLE>
3. Two nominees were elected as directors of the Company by more than the
required plurality of affirmative votes of the holders of Class B Preferred
Shares and Class A Senior Preferred Shares, voting together as a single class,
to serve until the earlier of the date on which dividend arrearages have been
eliminated on the Class B Preferred Shares or the date of the next annual
stockholders' meeting:
<TABLE>
<CAPTION>
VOTED FOR DIRECTORS VOTE WITHHELD
------------------- -------------
No. of Votes % of Outstanding No. of Votes % of Outstanding
------------ Votes ------------ Votes
----- -----
<S> <C> <C> <C> <C>
Henry C. Beinstein 11,507,739 92.3 172,499 1.4
Barry W. Ridings 11,507,681 92.7 172,557 1.4
</TABLE>
4. The appointment of Coopers & Lybrand L.L.P. as independent auditors
for the year 1996, was ratified by more than the required affirmative vote of
the holders of a majority of all the outstanding classes of shares:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
No. of Votes % of Outstanding No. of Votes % of Outstanding No. of Votes % of Outstanding
------------ Votes -------------- Votes ------------ Votes
----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Common Shares 164,265,224 85.8 3,183,161 1.6 4,915,279 2.6
Class A Senior
Preferred Shares 9,192,213 95.6 20,875 .20 5,955 .06
Class B Preferred Shares 2,379,175 85.3 64,067 2.3 17,953 .6
Combined 175,836,612 86.2 3,268,103 1.6 4,939,187 2.42
</TABLE>
<PAGE> 4
Page 3 of 3
5. The proposal to change the Company's jurisdiction of incorporation
from the State of New York to the State of Delaware (the "Reincorporation"), to
be effected pursuant to a merger agreement that provides for, among other
things, (i) the merger of the Company with and into a wholly owned Delaware
subsidiary (in order to effect the Reincorporation) and (ii) a "reverse stock
split" of the Common Shares to reduce the number of such Common Shares
outstanding on a one-for-twenty basis, was approved by more than the required
affirmative vote of (i) the holders of two-thirds of all the outstanding
classes of shares and (ii) the holders of a majority of all of the outstanding
Common Shares, voting as a separate class:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
No. of Votes % of Outstanding No. of Votes % of Outstanding No. of Votes % of Outstanding
------------ Votes ------------ Votes ------------ Votes
----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Common Shares 128,612,158 67.1 10,380,072 5.4 679,517 .4
Class A Senior
Preferred Shares 7,464,710 77.6 151,027 1.6 22,259 .2
Class B Preferred Shares 934,801 33.5 97,996 3.5 16,446 .6
Combined 137,011,669 67.2 10,629,095 5.2 718,222 .4
</TABLE>
